As filed with the Securities and Exchange Commission on September 6, 1996
Registration No. 333-09487
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington , D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FIRST MERCHANTS AUTO TRUSTS
(Issuer with respect to the Securities)
FIRST MERCHANTS ACCEPTANCE
CORPORATION
(Sponsor of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
Delaware 36-3759045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
570 Lake Cook Road, Suite 126
Deerfield, IL 60015
(847) 948-9300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Mitchell C. Kahn
President and Chief Executive Officer
First Merchants Acceptance Corporation
570 Lake Cook Road, Suite 126
Deerfield, IL 60015
(847) 948-9300
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Mitchell L. Hollins, Esq. Jack M. Costello, Esq.
Sonnenschein Nath & Rosenthal Brown & Wood LLP
8000 Sears Tower One World Trade Center
Chicago, Illinois 60606 New York, New York 10048
(312) 876-8000 (212) 839-5300
------------------------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / -------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / -------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to Be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
to Be Registered Registered Price Per Unit (1) Aggregate Offering Price (1) Registration Fee (2)
<S> <C> <C> <C>
Asset Backed Securities $625,000,000 100% $625,000,000 $215,517.25
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating
the registration fee.
(2) Of which, $344.83 has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
==============================================================================
INTRODUCTORY NOTE
This Registration Statement contains a form of Prospectus relating to
the offering of
series of Asset Backed Notes and/or Asset Backed Certificates by various
First Merchants
Auto Trusts created from time to time by First Merchants Acceptance
Corporation and two
forms of Prospectus Supplement relating to the offering by a First
Merchants Auto Trust of
the particular series of Asset Backed Certificates or of Asset Backed
Notes and/or Asset
Backed Certificates described therein. Each form of Prospectus Supplement
relates only to
the securities described therein and is a form that may be used, among
others, by First
Merchants Acceptance Corporation to offer Asset Backed Notes and/or Asset
Backed
Certificates under this Registration Statement.
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 supplement and the accompanying
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.
Subject to Completion, dated September 6, 1996
Prospectus Supplement to Prospectus Dated , 1996
FIRST MERCHANTS AUTO TRUST 199 -
$ (Floating Rate)(%) Asset Backed Certificates, Class A
$ (Floating Rate)(%) Asset Backed Certificates, Class B
FIRST MERCHANTS ACCEPTANCE CORPORATION, Depositor and Servicer
First Merchants Auto Trust 199 - (the "Trust") will be formed
pursuant to a Pooling and Servicing Agreement dated as of , 199
, among First Merchants Acceptance Corporation, a Delaware corporation, as
seller and servicer, ("First Merchants", the "Depositor" or in its capacity
as Servicer, the "Servicer"), , a
corporation, as backup servicer (the "Backup Servicer") and
, a banking
corporation, as trustee (the "Trustee"), and will issue $
aggregate principal amount of (Floating Rate)(%) Asset Backed Certificates,
Class A (the "Class A Certificates") and $ aggregate
principal amount of (Floating Rate)(%) Asset Backed Certificates, Class B
(the "Class B Certificates" and, with the Class A Certificates, the
"Certificates").
The assets of the Trust will include an initial pool of motor vehicle
retail installment sale contracts (the "Initial Receivables" and, with the
Subsequent Receivables referred to below, the "Receivables") secured by new
or used automobiles, light trucks, vans and minivans financed thereby,
certain monies due or received thereunder on and after , 199
, and certain other property, as described herein. The assets of the Trust
also will include security interests in the vehicles financed through the
Receivables; proceeds from certain insurance policies relating to the
Receivables; a Transfer Agreement dated as of , 199 from the
Depositor in favor of the Trust (the "Transfer Agreement") pursuant to which
the Depositor will undertake to transfer additional motor vehicle retail
installment contracts (the "Subsequent Receivables") to the Trust; rights
under a Security Agreement dated as of , 199 , in favor of the Trust
securing the Depositor's obligation to purchase Subsequent Receivables and
transfer and assign such Subsequent Receivables to the Trust through the
pledge of monies on deposit in a collateral account (the "Pre-Funding
Account") established thereunder; and certain other property as more fully
described herein. The Certificates also will have the benefit of a financial
guaranty insurance policy issued by (the "Security
Insurer"). The Initial Receivables and the Subsequent Receivables were or
will be originated by motor vehicle dealers, from whom they were acquired by
First Merchants. The Depositor will sell and assign the Receivables to the
Trust pursuant to the Pooling and Servicing Agreement and the Transfer
Agreement. The Trust may also draw on funds on deposit in a Reserve Account,
to the extent described herein, to meet shortfalls in amounts due to
Certificateholders on any Distribution Date. The Reserve Account will not
be part of the Trust.
(Continued on following page)
The full and timely payment of interest on and principal of the Class
A Certificates is unconditionally and irrevocably guaranteed pursuant to a
Security Insurance Policy issued by
(Security Insurer)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" ON PAGE S-14 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 12 OF THE
ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN FIRST MERCHANTS ACCEPTANCE
CORPORATION OR ANY OF THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to the Underwriting Proceeds to the
Public(1) Discount Depositor (1)(2)
------------ ------------ -----------------
Per Class A
Certificate. . . . % % %
Per Class B
Certificate. . . . % % %
Total $ $ $
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
___________________
The Certificates are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is expected
that delivery of the Certificates will be made through the Same Day Funds
System of the Depository Trust Company on or about , 199
- --------------------
SALOMON BROTHERS INC
________________________________________________________________________
The date of this Prospectus Supplement is , 199 .
The Class A Certificates will evidence in the aggregate an undivided
ownership interest in approximately % of the Trust. The Class B
Certificates will evidence in the aggregate an undivided ownership interest
in approximately % of the Trust. Principal and interest at the
applicable Pass-Through Rate generally will be distributed to
Certificateholders on the day of each month, commencing
, 199 . The rights of the Class B Certificateholders to receive
distributions are subordinated to the rights of the Class A
Certificateholders to the extent described herein. The outstanding principal
amount, if any, of the Certificates will be due and payable on
, 199 .
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES
MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT
CONTAINS INFORMATION THAT IS SPECIFIC TO THE TRUST AND THE SECURITIES OFFERED
HEREBY AND, TO THAT EXTENT, SUPPLEMENTS AND REPLACES THE MORE GENERAL
INFORMATION PROVIDED IN THE PROSPECTUS. INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT MAY ALSO REFLECT LEGAL, ECONOMIC AND OTHER
DEVELOPMENTS SINCE THE DATE OF THE PROSPECTUS. TO THE EXTENT INFORMATION IN
THIS PROSPECTUS SUPPLEMENT CONFLICTS WITH THAT CONTAINED IN THE PROSPECTUS,
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.,
as nominee of The Depository Trust Company and registered holder of the
Certificates. See "Certain Information Regarding the Securities --
Book-Entry Registration" and "-- Reports to Securityholders" in the
accompanying Prospectus (the "Prospectus"). Such reports will not constitute
financial statements prepared in accordance with generally accepted
accounting principles. The Servicer will file with the Securities and
Exchange Commission (the "Commission") such periodic reports as are required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus.
Certain capitalized terms used herein are defined elsewhere in this
Prospectus Supplement on the pages indicated in the "Index of Terms" or, to
the extent not defined herein, have the meanings assigned to such terms in
the Prospectus.
Issuer . . . . . . . . . . . . . First Merchants Auto Trust 199
-
, a trust to be formed pursuant
to a Pooling and Servicing
Agreement
to be dated as of
, 199 (the "Pooling
and Servicing Agreement"), among
the
Depositor, the Servicer, the
Backup
Servicer and the Trustee.
Depositor . . . . . . . . . . . . First Merchants Acceptance
Corporation, a Delaware
corporation
("First Merchants" or the
"Depositor").
Servicer . . . . . . . . . . . . First Merchants, as servicer under
the Pooling and Servicing
Agreement
(the "Servicer").
Trustee . . . . . . . . . . . .
,
a banking
corporation, as trustee under the
Pooling and Servicing Agreement
(the
"Trustee").
Backup Servicer . . . . . . . . ,
a
corporation,
as backup servicer under the
Pooling
and Servicing Agreement (the
"Backup
Servicer").
Security Insurer . . . . . . . . ,
a
financial
guaranty insurance company (the
"Security Insurer"). See
"Security
Insurer."
The Certificates . . . . . . . . The Certificates will be issued on
(the
"Closing Date") pursuant to the
Pooling and Servicing Agreement
and
will represent fractional
undivided
interests in the Trust. The Class
A Certificates will be issued in
an
initial aggregate principal amount
of $ (the
"Initial
Class A Certificate Balance") and
will evidence in the aggregate an
undivided ownership interest in
% of the Trust (the "Class A
Percentage"). The "Class A
Certificate Balance" on any date
of
determination will equal the
Initial
Class A Certificate Balance
reduced
by all distributions made to the
Class A Certificateholders and
allocable to principal.
The Class B Certificates will be
issued in an initial aggregate
principal amount of $
(the "Initial Class
B
Certificate Balance") and will
evidence in the aggregate an
undivided ownership interest in
approximately % of the
Trust (the "Class B Percentage").
The "Class B Certificate Balance"
on
any date of determination will
equal
the Initial Class B Certificate
Balance reduced by all
distributions
made to the Class B
Certificateholders and allocable
to principal.
The Class B Certificates will be
subordinated to the Class A
Certificates to the extent
described
herein.
See "Description of the
Certificates" herein.
Each class of Certificates will be
represented initially by one or
more
certificates registered in the
name
of Cede & Co., as the nominee of
DTC. No person acquiring a
beneficial interest in a Class A
Certificate or a Class B
Certificate
will be entitled to receive a
definitive certificate
representing
such person's interest in the
Trust
except in the limited
circumstances
described in the Prospectus.
Under
the terms of the Pooling and
Servicing Agreement, unless and
until the Certificates are issued
in
definitive form, the beneficial
owners thereof will not be
recognized as Certificateholders
and
will be permitted to exercise the
rights of Certificateholders only
indirectly through DTC. See
"Certain Information Regarding the
Securities -- Book-Entry
Registration" and "-- Definitive
Securities" in the Prospectus.
The Receivables . . . . . . . . On the Closing Date, the Depositor
will sell or transfer Receivables
(the "Initial Receivables") to the
Trust having an aggregate
principal
balance of approximately $
as of
, 199 (the "Initial Cutoff
Date"). The Trust, in turn, will
purchase the Initial Receivables
on
the Closing Date from the
Depositor,
and the Servicer will agree to
service the Receivables, pursuant
to
the Pooling and Servicing
Agreement.
In addition, the Depositor will be
obligated to sell (subject only to
the availability thereof), and the
Trust will be obligated to
purchase
(subject only to the satisfaction
of
certain conditions set forth
therein), additional Receivables
(the "Subsequent Receivables")
having an aggregate principal
balance of approximately $
, which is the amount
to
be deposited to the Pre-Funding
Account on the Closing Date (the
"Pre-Funded Amount"). The
Depositor
will designate as a cutoff date
(each, a "Subsequent Cutoff Date")
each date as of which particular
Subsequent Receivables are
conveyed
by the Depositor to the Trust.
Each
date during the Funding Period on
which Subsequent Receivables will
be
conveyed to the Trust is referred
to herein as a "Subsequent Transfer
Date". See "The Receivables Pool"
herein and "Description of the
Transfer and Servicing Agreements
--
Sale and Assignment of
Receivables"
and "The Receivables Pools" in the
Prospectus.
The Receivables will consist of
sub-prime motor vehicle retail
installment sale contracts (the
"Contracts") secured by new or
used automobiles, light trucks, vans
and minivans financed thereby,
including the right to receive certain
payments in respect thereof,
security interests in the vehicles
financed thereby (the "Financed
Vehicles") and the proceeds
thereof.
The Receivables arise, or will
arise, from Contracts originated
or acquired from motor vehicle
dealers
(the "Dealers") by the Depositor in
the ordinary course of business.
The Obligors on the Contracts are
primarily consumers with limited
access to traditional sources of
credit ("sub-prime" borrowers),
who
are generally relatively higher
credit risks due to various
factors,
including their past credit
experience and the absence or
limited extent of their credit
history. See "Risk Factors --
Nature of Obligors and Financed
Vehicles; Servicing" in the
Prospectus.
The Initial Receivables have been
selected, and the Subsequent
Receivables will be selected, from
the Contracts owned by the
Depositor
based on the criteria specified in
the Pooling and Servicing
Agreement
and described herein under "The
Receivables Pool" and in the
Prospectus under "The Receivables
Pools". As of the Initial Cutoff
Date, the weighted average APR of
the Initial Receivables was
approximately %, the
weighted average remaining term to
maturity of the Initial
Receivables
was approximately months
and the weighted average original
term to maturity of the Initial
Receivables was approximately
months. No Initial Receivable
has,
and no Subsequent Receivable will
have, a scheduled maturity later
than (the
"Final Scheduled Maturity Date").
Subsequent Receivables may be
originated or acquired from
Dealers
by First Merchants, and
subsequently
by the Depositor, at a later date
using credit criteria that differ
from those that were applied to
the
Initial Receivables and may be of
a
different credit quality and
seasoning. In addition, following
the transfer of Subsequent
Receivables to the Trust, the
characteristics of the entire pool
of Receivables included in the
Trust
may vary significantly from those
of
the Initial Receivables. See
"Risk
Factors -- The Pre-Funding
Account",
"-- Conveyance of Subsequent
Receivables to the Trust" and "The
Receivables Pool" herein and
"Description of the Transfer and
Servicing Agreements -- Sale and
Assignment of Receivables" in the
Prospectus.
The Depositor will make certain
representations and warranties
with
respect to the Receivables in the
Pooling and Servicing Agreement
and
will undertake to repurchase any
Receivable with respect to which
an
uncured breach of any such
representation or warranty exists
if
such breach materially and
adversely
affects the rights therein of the
Trustee and the
Certificateholders,
if such breach is not cured by the
Depositor in a timely manner. See
"Description of the Transfer and
Servicing Agreements -- Sale and
Assignment of Receivables" in the
Prospectus.
Terms of the Certificates
A. Distribution Dates . . . . Distributions of interest and
principal on the Certificates will
be made on the day of each
month or, if any such day is not a
Business Day, on the next
succeeding Business Day (each, a
"Distribution
Date"), commencing , 199 .
Distributions will be made
to holders of record
of the Certificates (the
"Certificateholders") as of the
day immediately preceding such
Distribution Date (each, a "Record
Date"). A "Business Day" is a day
other than a Saturday, a Sunday or
day on which banking institutions
or trust companies in the City of New
York or the city in which the
corporate trust office of the
Trustee is located are authorized
by law, regulation or executive order
to be closed.
B. Pass-Through Rates . . . . Interest will accrue on the Class
A
Certificates at the rate of
(Floating Rate)(%) per annum (the
"Class A Pass-Through Rate") and
on
the Class B Certificates at the
rate
of (Floating Rate)(%) per annum
(the
"Class B Pass-Through Rate"),
calculated on the basis of a 360-
day
year consisting of twelve 30-day
months.
C. Distributions . . . . . . Interest. On each Distribution
Date, the Trustee will distribute
interest (i) to holders of record
of
the Class A Certificates (the
"Class
A Certificateholders"), pro rata,
in
a maximum amount equal to the
Class
A Interest Distributable Amount
and
(ii) to holders of record of the
Class B Certificates (the "Class B
Certificateholders"), pro rata, in
a maximum amount equal to the
Class
B Interest Distributable Amount.
The "Class A Interest
Distributable
Amount" for each Distribution Date
will equal the sum of (A) 30 days'
interest at theClass A Pass-Through
Rate on the Class A Certificate
Balance on the previous
Distribution
Date (or, in the case of the first
Distribution Date, on the Closing
Date) after giving effect to all
distributions to
Certificateholders
on such date and (B) any accrued
and
unpaid interest due to Class A
Certificateholders from previous
Distribution Dates. The Class A
Interest Distributable Amount
generally will be payable to the
Class A Certificateholders on each
Distribution Date to the extent of
funds available therefor from, in
the following order of priority,
(i)
the Class A Percentage of the
Interest Distribution Amount (as
reduced by Servicing Fees paid to
the Servicer on such date), (ii)
funds, if any, available in the
Reserve Account and (iii) that
portion of the Total Distribution
Amount otherwise distributable on
such date to Class B
Certificateholders.
The "Class B Interest
Distributable
Amount" for each Distribution Date
will equal the sum of (A) 30 days'
interest at the Class B Pass-
Through
Rate on the Class B Certificate
Balance on the previous
Distribution
Date (or, in the case of the first
Distribution Date, on the Closing
Date) after giving effect to all
distributions to
Certificateholders
on such date and (B) any accrued
and
unpaid interest due to Class B
Certificateholders from previous
Distribution Dates. The Class B
Interest Distributable Amount
generally will be payable to the
Class B Certificateholders on each
Distribution Date to the extent of
funds available therefor from, in
the following order of priority,
(i)
the Class B Percentage of the
Interest Distribution Amount (as
reduced by Servicing Fees paid to
the Servicer and amounts
distributed
as interest to the Class A
Certificateholders on such date)
and
(ii) funds, if any, available in
the
Reserve Account on such date after
distribution to the Class A
Certificateholders of the Class A
Interest Distributable Amount.
The rights of the Class B
Certificateholders to receive
distributions of interest will be
subordinated to the rights of the
Class A Certificateholders to
receive interest to the extent
described herein. See
"Description
of the Certificates --
Distributions" and "--
Subordination
of the Class B Certificates;
Reserve
Account".
Principal. Principal of the Class
A Certificates will be payable on
each Distribution Date, pro rata to
the Class A Certificateholders, in
a maximum amount equal to the
Class
A Principal Distributable Amount for
such date. The "Class A Principal
Distributable Amount" for any
Distribution Date will equal the
sum of (i) the Class A Percentage of
the Principal Distribution Amount
for the related Collection Period
and (ii) any outstanding principal
amounts due but not distributed to
Class A Certificateholders on
previous Distribution Dates. The
Class A Principal Distributable
Amount generally will be payable to
Class A Certificateholders to the
extent of funds available therefor
from (i) the Class A Percentage of
the Principal Distribution Amount
(exclusive of the portion thereof
attributable to Realized Losses),
(ii) funds, if any, available in the
Reserve Account on such date after
payment of the Class A Interest
Distributable Amount and the Class
B Interest Distributable Amount
and (iii) the Total Distribution
Amount remaining after the payment
on such
date of the Class A Interest
Distributable Amount and Class B
Interest Distributable Amount.
Principal of the Class B
Certificates will be payable on
each
Distribution Date, pro rata to the
Class B Certificateholders, in a
maximum amount equal to the Class
B
Principal Distributable Amount for
such date. The "Class B Principal
Distributable Amount" for any
Distribution Date will equal the
sum
of (i) the Class B Percentage of
the
Principal Distribution Amount for
the related Collection Period and
(ii) any outstanding principal
amounts due but not distributed to
Class B Certificateholders on
previous Distribution Dates. The
Class B Principal Distributable
Amount generally will be payable
to
Class B Certificateholders on each
Distribution Date to the extent of
funds available therefor from, in
the following order of priority
(i)
any remaining portion of the Total
Distribution Amount and (ii)
funds,
if any, remaining in the Reserve
Account on such date after payment
of the Class A Interest
Distributable Amount, the Class A
Principal Distributable Amount and
the Class B Interest Distributable
Amount.
The "Collection Period" with
respect
to each Distribution Date will be
the calendar month immediately
preceding the month in which such
Distribution Date occurs (or, in
the
case of the first Distribution
Date,
the period from and including the
Initial Cutoff Date through and
including ,
199
).
The outstanding principal amount
of
the Class A Certificates and the
Class B Certificates, if any, will
be payable in full on the Final
Scheduled Distribution Date.
See "Description of the
Certificates
-- Distributions".
Credit Enhancement
A. The Security
Insurance Policy . . . . . Concurrently with the issuance of
the Class A Certificates, the
Security Insurer will issue the
Security Insurance Policy to the
Trustee pursuant to an insurance
agreement to be dated as of ,
199 (the "Insurance Agreement"),
among the Security Insurer, First
Merchants and the Depositor.
Under
the Security Insurance Policy, the
Security Insurer will
unconditionally and irrevocably
guarantee (i) the full, complete
and
timely payment to the Class A
Certificateholders of the Class A
Interest Distributable Amount and
the Class A Principal
Distributable
Amount due on each Distribution
Date
(the aggregate of such amounts
with
respect to each Distribution Date,
the "Guaranteed Distribution") and
(ii) the full and complete payment
of any portion of a Class A
Interest
Distributable Amount or Class A
Principal Distributable Amount
that
is distributed to Class A
Certificateholders and
subsequently
recovered from any such holder
pursuant to a final, nonappealable
order of a court of competent
jurisdiction under applicable
bankruptcy or insolvency laws.
See
"Security Insurance Policy"
herein.
B. Subordination of
the Class B
Certificates . . . . . . The rights of the Class B
Certificateholders to receive
distributions with respect to the
Receivables will be subordinated
to
the rights of the Class A
Certificateholders to the extent
described herein. This
subordination is intended to
enhance
the likelihood of timely receipt
by
the Class A Certificateholders of
the full amount of interest and
principal payable to them and to
afford the Class A
Certificateholders limited
protection against losses in
respect
of the Receivables.
No distribution of interest will
be
made to the Class B
Certificateholders on any
Distribution Date until the full
amount of interest payable on the
Class A Certificates on such
Distribution Date has been
distributed to the Class A
Certificateholders, and no
distribution of principal will be
made to the Class B
Certificateholders on any
Distribution Date until the full
amount of interest on and
principal
of the Class A Certificates
payable
on such Distribution Date has been
distributed to the Class A
Certificateholders. Distributions
of interest on the Class B
Certificates, to the extent of
collections on or in respect of
the
Receivables allocable to interest
and amounts, if any, available in
the Reserve Account, will not be
subordinated to distributions of
principal of the Class A
Certificates.
The protection afforded to the
Class
A Certificateholders by the
subordination feature described
above will be effected both by the
preferential right of the Class A
Certificateholders to receive, to
the extent described herein,
current
distributions from collections on
or
in respect of the Receivables and
by
the establishment on the Closing
Date of a segregated collateral
account held by and pledged to the
Trustee, as collateral agent, for
the benefit of the
Certificateholders (the "Reserve
Account"). The Reserve Account
will
not be a part of the Trust.
C. Reserve Account . . . . . . The Reserve Account will be funded
by the Depositor (i) on the
Closing
Date with a deposit of cash and/or
Eligible Investments having a
value
of approximately $
and (ii) on each
Subsequent Transfer Date by a
deposit of cash and/or Eligible
Investments having a value equal
to
% of the outstanding
principal amount of the Subsequent
Receivables conveyed to the Trust
on
such date (collectively, the
"Reserve Account Initial
Deposit").
In addition, any portion of the
Total Distribution Amount
remaining
in the Collection Account on each
Distribution Date after payment of
the Servicing Fee, Trustee Fee,
the
Class A Distributable Amount,
Security Insurer Fee and the Class
B Distributable Amount will be
transferred to the Reserve
Account.
On each Distribution Date, funds
will be withdrawn from the Reserve
Account for distribution, first,
to
Class A Certificateholders to the
extent of any shortfalls in the
Class A Interest Distributable
Amount, second, to Class B
Certificateholders to the extent
of
any shortfalls in the Class B
Interest Distributable Amount,
third, to Class A
Certificateholders
to the extent of any shortfalls in
the Class A Principal
Distributable
Amount and, fourth, to Class B
Certificateholders to the extent
of
any shortfalls in the Class B
Principal Distributable Amount.
On
each Distribution Date, after
giving
effect to all withdrawals from and
deposits to the Reserve Account on
such date, any amounts remaining
in
the Reserve Account in excess of
the
greater of (i) % of the
Pool Balance as of the close of
business on the last day of the
related Collection Period and (ii)
$ (the
"Specified Reserve Account
Balance")
will be distributed to the
Depositor, and upon such
distribution the
Certificateholders
will have no further rights in, or
claims to, such amounts.
See "Description of the
Certificates
-- Subordination of the Class B
Certificates; Reserve Account".
Optional Prepayment . . . . . . . If the Servicer exercises its
option
to purchase the Receivables, which
it may do after the aggregate
principal balance of the
Receivables
(the "Pool Balance") declines to
10%
or less of the Initial Pool
Balance,
the Class A Certificateholders
will
receive an amount equal to the
Class
A Certificate Balance together
with
accrued interest at the Class A
Pass-Through Rate, the Class B
Certificateholders will receive an
amount equal to the Class B
Certificate Balance together with
accrued interest at the Class B
Pass-Through Rate, and the
Certificates will be retired. The
"Initial Pool Balance" will equal
the sum of (i) the aggregate
principal amount of the Initial
Receivables as of the Initial
Cutoff
Date plus (ii) the aggregate
principal balances of all
Subsequent
Receivables added to the Trust as
of
their respective Subsequent Cutoff
Dates. See "Description of the
Certificates -- Optional
Prepayment"
herein.
Mandatory Prepayment . . . . . . The Certificates will be prepaid,
in
part, pro rata on the basis of
their
initial principal amounts, on the
Distribution Date on or
immediately
following the last day of the
Funding Period in the event that
any
amount remains on deposit in the
Pre-Funding Account after giving
effect to the purchase of all
Subsequent Receivables, including
any such purchase on such date.
The
aggregate principal amount of
Certificates to be prepaid will be
an amount equal to the amount
remaining on deposit in the
Pre-Funding Account. See "-- Pre-
Funding Account" in this Summary
of
Terms and "Risk Factors -- The
Pre-Funding Account" and "--
Conveyance
of Subsequent Receivables to the
Trust" herein and "Description of
the Transfer and Servicing
Agreements -- Sale and Assignment
of
Receivables" in the Prospectus.
Trust Accounts . . . . . . . . . The property of the Trust will
include all amounts on deposit
from
time to time in the Collection
Account and a security interest in
the Pre-Funding Account. See
"Description of the Transfer and
Servicing Agreements -- Accounts"
in the Prospectus.
The Depositor will maintain the
Reserve Account with the Trustee
as
a segregated trust account;
however,
the Reserve Account will not be
property of the Trust. See
"Description of the Certificates -
-
Subordination of the Class B
Certificates; Reserve Account" in
this Prospectus Supplement.
Pre-Funding Account . . . . . . During the period (the "Funding
Period") from and including the
Closing Date until the earliest to
occur of (a) the date on which the
amount on deposit in the Pre-
Funding
Account is equal to $100,000 or
less, (b) an Event of Default
under
the Pooling and Servicing
Agreement,
(c) certain events of insolvency
with respect to First Merchants or
(d) the
Distribution Date, the Pre-Funded
Amount will be maintained in a
separate collateral account (the
"Pre-Funding Account"), which will
be established by the Depositor on
the Closing Date pursuant to a
Security Agreement dated as of
, 199 (the "Security
Agreement"), between the Depositor
and the Trustee, as collateral
agent. Amounts on deposit in the
Pre-Funding Account will be
pledged
to the Trustee for the benefit of
the Certificateholders and will be
used to purchase Subsequent
Receivables from time to time
during
the Funding Period in accordance
with the Pooling and Servicing
Agreement and the Purchase
Agreement. See "Description of
the
Transfer and Servicing Agreements
--
Accounts" and "- Sale and
Assignment
of Receivables" in the Prospectus.
Funds on deposit in the Pre-
Funding
Account will be invested by the
Trustee, as collateral agent,
during
the Funding Period in Eligible
Investments, and any Investment
Income with respect to such
Eligible
Investments will be treated as
interest collections on the
Receivables and distributed on the
following Distribution Date. The
Certificates will be prepaid, in
part, pro rata on the basis of
their
initial principal amounts, on the
Distribution Date on or
immediately
following the last day of the
Funding Period in the event that
any
amount remains on deposit in the
Pre-Funding Account after giving
effect to the purchase of all
Subsequent Receivables, including
any such purchase on such date.
The aggregate principal amount of
Certificates to be prepaid will be
an amount equal to the amount then
on deposit in the Pre-Funding
Account. See "Risk Factors -- The
Pre-Funding Account" herein and
"Description of the Transfer and
Servicing Agreements -- Accounts"
and "- Sale and Assignment of
Receivables" in the Prospectus.
Backup Servicer . . . . . . . . . If a Servicer Termination Event
occurs under the Pooling and
Servicing Agreement, the rights
and
obligations of the Servicer may be
terminated by the Trustee or the
holders of Certificates evidencing
a majority of the aggregate
outstanding principal amount of
the
Certificates. If the rights and
obligations of the Servicer are so
terminated while First Merchants
is
the Servicer, or if First
Merchants
resigns as Servicer,
has agreed to act as successor
Servicer. The Backup Servicer
will
receive a portion of the Servicing
Fee for each Collection Period as
compensation for agreeing to stand
by as successor Servicer and for
performing certain other
functions.
Tax Status . . . . . . . . . . . In the opinion of Brown & Wood
LLP,
the Trust will be treated as a
grantor trust for federal income
tax
purposes and will not be subject
to federal income tax. Owners of
beneficial interests in the
Certificates will report their pro
rata share of all income earned on
the Receivables (other than
amounts, if any, treated as "stripped
coupons") and, subject to certain
limitations in the case of such
owners who are individuals, trusts
or estates, may deduct their pro
rata share of reasonable servicing
and other fees.
See "Certain Federal Income Tax
Consequences" in the Prospectus
for
additional information concerning
the application of federal income
tax laws to the Trust and the
Certificates. Persons considering
a purchase of Class B Certificates
should also consider and discuss
with their tax advisors the
information set forth in the
Prospectus under "Certain Federal
Income Tax Consequences -- Grantor
Trusts -- Subordinated
Certificates".
ERISA Considerations . . . . . . During the Funding Period, not
more
than 24.9% of the Class A
Certificates may be held by
"employee benefit plans" as
defined
in Section 3 of the Employee
Retirement Income Security Act of
1974, as amended ("ERISA"). After
the termination of the Funding
Period and subject to the
considerations discussed under
"ERISA Considerations" herein and
in the Prospectus, the Class A
Certificates will be eligible for
purchase by employee benefit plans
subject to ERISA.
Because the Class B Certificates
are subordinated to the Class A
Certificates, employee benefit
plans
subject to ERISA will not be
eligible to purchase Class B
Certificates.
Any benefit plan fiduciary
considering a purchase of
Certificates should, among other
things, consult with experienced
legal counsel in determining
whether
all required conditions for such
purchase have been satisfied. See
"ERISA Considerations" herein and
in the Prospectus.
Ratings of the Certificates . . It is a condition to the issuance
of
the Certificates that the Class A
Certificates be rated at least
by (the
"Rating Agencies") and that the
Class B Certificates be rated at
least by .
The ratings of the Class A
Certificates will be based
primarily
on the issuance of the policy by
the
Security Insurer, the credit
quality
of the Receivables, the
subordination of the Class B
Certificates and the availability
of
the Reserve Account. The ratings
of
the Class B Certificates will be
based primarily on the credit
quality of the Receivables and the
availability of the Reserve
Account.
A rating is not a recommendation
to
purchase, hold or sell the
Certificates, inasmuch as such
rating does not comment as to
market
price or suitability for a
particular investor. The ratings
address the likelihood that
principal of and interest on the
Certificates will be paid pursuant
to their terms. There can be no
assurance that a rating will not
be
lowered or withdrawn by a rating
agency if circumstances so
warrant.
See "Risk Factors -- Ratings of
the
Certificates" herein.
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully
consider the following risk factors before investing in the Certificates.
Limited Liquidity. There is currently no secondary market for the Class
A Certificates or the Class B Certificates. The Underwriter currently
intends to make a market in the Class A Certificates and the Class B
Certificates, but is under no obligation to do so. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide Certificateholders with liquidity of investment or that
it will continue for the life of the Certificates.
The Pre-Funding Account. On the Closing Date, the Trustee will deposit
the Pre-Funded Amount into the Pre-Funding Account. The Pre-Funding Account
will be established in the name of the Trustee as collateral agent and all
amounts deposited thereto will be pledged to the Trustee for the benefit of
the Certificateholders. The Pre-Funded Amount will be used only to purchase
Subsequent Receivables, and prior to withdrawal from the Pre-Funding Account
as payment for the Subsequent Receivables, funds on deposit in the Pre-
Funding Account will be invested in Eligible Investments. Any Investment
Income from the investment of the Pre-Funded Amount in Eligible Investments
will be included in the Interest Distribution Amount and distributed on the
following Distribution Date pursuant to payment priorities described in this
Prospectus Supplement.
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of Subsequent Receivables by the end
of the Funding Period, the Certificateholders will receive, on the
Distribution Date on or immediately following the last day of the Funding
Period, a prepayment of principal in an amount equal to the Pre-Funded Amount
remaining in the Pre-Funding Account following the purchase of any Subsequent
Receivables on such Distribution Date. It is anticipated that the principal
amount of the Subsequent Receivables sold to the Trust will not be exactly
equal to the amount on deposit in the Pre-Funding Account and, therefore,
that there will be at least a nominal amount of principal prepaid to the
Certificateholders. See "Description of the Certificates -- Mandatory
Prepayment".
Conveyance of Subsequent Receivables to the Trust. On the Closing Date,
the Depositor will transfer Initial Receivables to the Trust having an
aggregate principal balance of $ , which Initial
Receivables the Trust will purchase from the Depositor in exchange for the
Certificates. The Depositor will pledge $
, i.e., the Certificate proceeds in excess of the aggregate principal
balance of the Initial Receivables (representing the Pre-Funded Amount)
pursuant to the Security Agreement in favor of the Trust, and such amount
will be deposited into the Pre-Funding Account. The Pre-Funded Amount will
be used during the Funding Period to purchase Subsequent Receivables from
First Merchants. If the principal amount of eligible Receivables originated
or acquired by First Merchants prior to the termination of the Funding Period
is less than the Pre-Funded Amount, First Merchants will have insufficient
Receivables to sell to the Trust, thereby resulting in a prepayment of
principal to the Certificateholders as described above. In addition, any
conveyance of Subsequent Receivables by First Merchants to the Trust will be
subject to the satisfaction, on or before the applicable Subsequent
Transfer Date, of the following conditions, among others: (i) each such
Subsequent Receivable must satisfy the eligibility criteria specified in the
Pooling and Servicing Agreement; (ii) First Merchants shall not have selected
such Subsequent Receivable in a manner that it believes is adverse to the
interests of the Certificateholders; (iii) as of the related Subsequent
Cutoff Date, the Receivables in the Trust, including the Subsequent
Receivables to be conveyed to the Trust on such date, must satisfy the
parameters described under "The Receivables Pool" herein and under "The
Receivables Pools" in the Prospectus; (iv) the applicable Reserve Account
Initial Deposit for such Subsequent Transfer Date shall have been made; (v)
First Merchants shall have executed and delivered to the Trustee, a written
assignment conveying such Subsequent Receivables to the Trust, respectively
(including a schedule identifying such Subsequent Receivables); (vi) the
Depositor shall have delivered certain opinions of counsel to the Trustee and
the Rating Agencies with respect to the validity of the conveyance of the
Subsequent Receivables to the Trust; (vii) the Trustee shall have received
written confirmation from a firm of certified public accountants that the
Receivables, including such Subsequent Receivables, meet the criteria
described herein under "The Receivables Pool" and in the Prospectus under
"The Receivables Pools"; and (viii) the Rating Agencies shall have notified
the Depositor in writing that, following the conveyance of all the Subsequent
Receivables to the Trust, the Certificates will continue to be rated by the
Rating Agencies in the same rating categories in which they were rated on the
Closing Date. Such confirmation of the ratings of the Certificates may
depend on factors other than the characteristics of the Subsequent
Receivables, including the delinquency, repossession and net loss experience
on the automobile, van and light duty truck receivables in the portfolio
serviced by the Servicer.
First Merchants is obligated under the Pooling and Servicing Agreement
to repurchase any Subsequent Receivable that fails to satisfy the conditions
listed in the preceding paragraph at a purchase price equal to the Repurchase
Amount therefor.
Each Subsequent Receivable, at the time it is conveyed to the Trust,
must satisfy the eligibility criteria specified in the Pooling and Servicing
Agreement. However, Subsequent Receivables may have been originated or
acquired by First Merchants after the Closing Date using credit criteria
different from those that were applied to the Initial Receivables and may be
of a different credit quality and seasoning. Therefore, following the
transfer of Subsequent Receivables to the Trust, the characteristics of the
entire Receivables Pool included in the Trust may vary significantly from
those of the Initial Receivables. See "The Receivables Pool" herein and
"Description of the Transfer and Servicing Agreements -- Sale and Assignment
of Receivables" and "The Receivables Pools" in the Prospectus.
Subordination. On each Distribution Date, distributions of interest on
the Class B Certificates will be subordinated to distributions of interest
on the Class A Certificates, and distributions of principal of the Class B
Certificates will be subordinated to distributions of interest and principal
due on the Class A Certificates. Consequently, the Class B
Certificateholders will not receive any distributions of interest on a
Distribution Date until the full amount of interest payable on the Class A
Certificates on such Distribution Date has been distributed to the Class A
Certificateholders, and Class B Certificateholders will not receive any
distributions of principal on a Distribution Date until the
full amount of interest on and principal of the Class A Certificates payable
on such Distribution Date has been distributed to the Class A
Certificateholders.
Limited Assets of the Trust. The Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds
other than the Receivables, its security interest in the Pre-Funding Account
and certain rights with respect to the Reserve Account, and
Certificateholders generally must rely on payments on the Receivables for
distributions of interest and principal on the Certificates. The Pre-Funding
Account will be available only during the Funding Period and is designed
solely to cover obligations of the Trust relating to funds not invested in
Receivables on the Closing Date and is not designed to cover losses on the
Receivables. Similarly, although funds in the Reserve Account will be
available on each Distribution Date to cover shortfalls in distributions of
interest and principal on the Certificates, amounts to be deposited in the
Reserve Account are limited in amount. If the Reserve Account is exhausted,
the Trust will depend solely on current distributions on the Receivables to
make distributions on the Certificates.
Limited Obligations of the Depositor. The Certificates are obligations
of the Trust only, and the Depositor is not obligated to make any payments
on the Certificates.
Ratings of the Certificates. It is a condition to the issuance of the
Certificates that the Class A Certificates be rated at least or its
equivalent by , and the Class B Certificates be rated
at least or its equivalent by . A
rating is not a recommendation to purchase, hold or sell the Certificates,
inasmuch as a rating does not comment as to market price or suitability for
a particular investor. The ratings of the Certificates address the
likelihood that principal of and interest on the Certificates will be paid
pursuant to their terms. There can be no assurance that a rating will remain
for any given period of time or that a rating will not be lowered or
withdrawn entirely by a Rating Agency if in its judgment circumstances in the
future so warrant. In the event that a rating is subsequently lowered or
withdrawn, no person or entity will be required to provide any additional
credit enhancement.
The ratings of the Class A Certificates will be based primarily on the
issuance of the Security Insurance Policy and the rating of the Security
Insurer. If a Security Insurer Default should occur, the ratings on the
Class A Certificates might be lowered or withdrawn entirely. If any rating
initially assigned to the Class A Certificates is subsequently lowered or
withdrawn for any reason, including by reason of a downgrading of the
Security Insurer's claims-paying ability, no person or entity will be
obligated to provide any additional credit enhancement with respect to the
Class A Certificates. Any reduction or withdrawal of a rating might have an
adverse effect on the liquidity and market price of the Class A Certificates.
FIRST MERCHANTS' AUTOMOBILE FINANCING PROGRAM
GENERAL
First Merchants is a specialty finance company primarily engaged in
financing the purchase of used automobiles by acquiring dealer-originated
finance contracts. Since First Merchants' incorporation in March 1991, it
has targeted its marketing efforts on dealers that sell automobiles to
consumers who have limited access to traditional sources of credit ("non-
prime" borrowers). First Merchants serves two customers, the dealer and,
indirectly, the dealer's customer, the "non-prime" borrower. As of June 30,
1996, First Merchants operated dealer service centers ("Dealer Service
Centers") servicing Dealers in 35 states. First Merchants' total finance
contract portfolio (net finance receivables, including receivables sold or
held-for-sale, before deducting the allowance for credit losses and reserves
attributable to Contracts sold or held for sale) increased to $479 million
at June 30, 1996 from $284 million at December 31, 1995 and $94 million at
December 31, 1994, while maintaining net charge-offs as a percentage of
average net finance receivables of under 6.0%.
The automobile dealer business is highly fragmented and includes
businesses selling principally new automobiles, but also operating a used
automobile business, that are franchised by an automobile manufacturer
("franchised dealers") and businesses selling exclusively used automobiles
that are not affiliated with an automobile manufacturer ("independent
dealers"). During 1996, approximately 80% (by aggregate principal balance)
of the finance contracts purchased by First Merchants are originated by
franchised dealers and the remainder are originated by independent dealers.
THE INDUSTRY
At December 31, 1995 there were approximately 22,750 franchised dealers
and approximately 63,750 independent dealers. According to industry data,
the used automobile finance market grew from approximately $141 billion in
1987 to approximately $281 billion in 1995. The automobile finance market
that provides financing to "non-prime" borrowers is highly fragmented and
primarily served by small and locally oriented companies. Many large
financial service entities, such as commercial banks, credit unions, savings
and loans and financing arms of automobile manufacturers do not solicit
business in this segment of the market. First Merchants also believes that
increased regulatory oversight and capital requirements imposed by
governmental agencies have limited the activities of many commercial banks
and savings and loans in the automobile finance market. In many cases, those
organizations electing to remain in the automobile finance business have
migrated toward higher credit quality customers to allow reductions in their
overhead cost structures and to maintain higher levels of credit quality.
First Merchants believes that demographic and economic trends favor
increased growth in the non-prime segment of the automobile finance industry.
Currently, the average American family must spend a significantly higher
percentage of its income to purchase an automobile than it did several years
ago. According to industry data, the average price of a new automobile in
1994 represented approximately 59.3% of the U.S. median family income for
that year, an increase from approximately 51.5% in 1986. This increase,
combined with increases in the average useful life of automobiles and the
number of late-model used automobiles available for sale (including rental
car and cars that were formerly leased), have led industry analysts to
believe that the market for retail sales of used automobiles will continue
to expand.
BUSINESS STRATEGY
First Merchants' business strategy is to focus its resources on dealers
that sell automobiles to "non-prime" borrowers. The key elements of First
Merchants' business strategy are as follows:
Providing Superior Service to Quality Dealers. By providing prompt,
flexible service and a reliable source of financing for "non-prime"
borrowers, First Merchants helps to expand the dealers' customer base,
thereby increasing the efficiency and effectiveness of their used car sales
operations. First Merchants believes that its guidelines and procedures
allow it to respond quickly to the dealers. First Merchants typically
responds to credit applications on the date received, in many cases within
2 to 3 hours, and generally pays the dealer within 24 hours after First
Merchants has received required documentation from the dealer. Management
believes that because of its prompt and reliable response time and geographic
proximity to dealers, many dealers conduct business with First Merchants.
As of June 30, 1996, First Merchants serviced approximately 3,000 dealers,
with no single dealer accounting for more than 2% of First Merchants' finance
contract portfolio. Using a hub and spoke strategy, First Merchants solicits
business from automobile dealers through the business development efforts of
its sales force and Dealer Service Centers. First Merchants evaluates each
dealer with which it establishes a financing relationship to endeavor to
ensure that First Merchants purchases finance contracts from only reputable
automobile dealers carrying an inventory of high quality used automobiles.
First Merchants evaluates historical financial information on prospective
dealers to determine the financial viability of each dealer and assesses the
length of service and reputation of prospective dealers through the local
Better Business Bureau and state regulatory authorities. Each dealer with
which First Merchants establishes a financing relationship enters into a non-
exclusive written dealer agreement (a "Dealer Agreement") with First
Merchants governing First Merchants' finance contract purchases from the
dealer. First Merchants periodically reviews each dealer's financial
information and inspects its physical premises and automobile inventory to
determine whether such dealer appears to be operating its business
satisfactorily and maintaining consistently high quality inventory. First
Merchants' management information systems track the monthly performance of
borrowers' accounts by dealer, allowing First Merchants to review and
evaluate the quality of finance contracts purchased from each dealer.
Attracting and Retaining Experienced Management Personnel. First
Merchants actively recruits experienced management personnel at the
executive, supervisory and managerial levels. First Merchants believes that
the hiring and retention of such experienced management personnel is
important in maintaining credit quality, supervising its operations and
formulating and implementing its growth strategy. The executive officers of
First Merchants have an average of over 15 years of experience in the
financial services industry. In addition, First Merchants' Directors of
Operations and Directors of Account Services, and the managers of its Dealer
Service Centers and Account Service Centers have an average of over 15 years
of experience in the consumer or automobile finance industries. In addition
to recruiting experienced management personnel, First Merchants places an
emphasis on retaining such personnel through professional development
programs, competitive compensation and equity incentives.
Efficient Operational Structure. First Merchants' operational
structure is designed to maximize dealer service and finance contract
originations, thereby directly contributing to the growth of First Merchants'
finance contract portfolio. First Merchants' sales, credit and collection
functions are organized as follows: (i) a national sales force dedicated to
developing new dealer relationships and expanding the geographic scope of
Dealer Service Centers; (ii) local Dealer Service Centers, which coordinate
with the sales force to build and nurture dealer relationships through a
local market presence, underwrite and process credit applications and
disburse funds to dealers; (iii) "Account Service Centers", which perform all
account servicing functions such as finance contract verification, payment
processing, delinquency follow-ups and cost-effective recovery of charged-off
account balances; and (iv) the Asset Disposition Group ("ADG"), which
arranges the disposition of repossessed collateral.
First Merchants establishes Dealer Service Centers in locations that
allow First Merchants personnel to provide personalized service to dealers,
while covering a wide geographical area. By utilizing a hub and spoke
strategy, First Merchants through either its Dealer Service Center managers
or its sales professionals meet individually with local dealers to negotiate
dealer agreements, quickly resolve problems as they develop and respond to
the competitive conditions of a particular market. Management believes that
this structure significantly enhances First Merchants' operations and
competitive advantage.
Each Dealer Service Center functions independently of the other centers
and is operated by a full-time Dealer Service Center manager who reports to
a Director of Operations. The Account Service Centers are primarily
responsible for collections, including recoveries of charged-off account
balances, and payment processing. Each Account Service Center is operated
by a Director of Account Services. The ADG arranges the disposition of
repossessed collateral and is under the responsibility of a Director of Asset
Disposition. First Merchants' nine Directors of Operations are responsible
for reviewing compliance with First Merchants' guidelines and procedures and
conducting periodic on-site reviews of First Merchants' Dealer Service
Centers. In addition, Directors of Operations provide day-to-day guidance
to Dealer Service Center managers in making credit decisions. The Directors
of Operations report directly to the Vice-President -- Operations. The
Directors of Account Services and the Director of Asset Disposition report
to the Vice-President -- Account Services.
Utilizing Uniform Guidelines and Procedures for Credit Evaluation. To
mitigate the higher risks often associated with "non-prime" borrowers, First
Merchants has developed uniform guidelines and procedures for evaluating
credit applications in connection with the purchase of automobile finance
contracts from dealers. First Merchants' guidelines and procedures relate
to such matters as the borrower's stability of residence, employment history,
credit history, capacity to pay, income, discretionary income, debt ratio,
and credit bureau score, as well as the value of the collateral. First
Merchants has also developed a credit scoring system with a leading credit
evaluating company that is used as an additional objective guideline for
evaluating a "non-prime" borrower's creditworthiness. In addition, First
Merchants has assigned each Dealer Service Center manager a maximum credit
authority per finance contract based on various factors, including such
manager's experience level. Within the guidelines and procedures established
by First Merchants, each Dealer Service Center manager is authorized to
approve or reject credit applications and to
supplement objective credit criteria with subjective judgment and knowledge
of local conditions in making credit decisions. If the proposed financing
amount exceeds the Dealer Service Center manager's maximum credit authority
or does not meet First Merchants' guidelines, the Dealer Service Center
manager must obtain the approval of a Director of Operations.
First Merchants has a risk based pricing system of interest rates
representing the varying degrees of risk assigned to different ranges of
credit risks.
Proactive Collection Management. First Merchants pursues a policy of
proactive collection management through its Account Service Centers with
respect to both current and delinquent accounts, including activities related
to monthly billing and collections, borrower inquiries and repossessions.
Previously these responsibilities were performed solely at the Dealer Service
Centers. In order to allow Dealer Service Centers to operate more
efficiently, First Merchants operates two Account Service Centers to perform
these tasks. These Account Service Centers service the Dealer Service
Centers. Shortly after First Merchants purchases a finance contract,
personnel at an Account Service Center typically contact the borrower by
telephone to verify the terms of the sale. First Merchants also sends the
borrower a letter which describes the procedures and schedules for repaying
the finance contract and explains First Merchants' delinquency and
repossession policies. The Company utilizes predictive dialing technology
to complement its calling efforts. Any finance contract for which a payment
is one day overdue is treated as a past due account for collection purposes,
and First Merchants typically contacts a borrower within two days after such
borrower's account becomes past due. First Merchants typically commences
repossession procedures before an account is more than two payments past due.
Management believes that proactive collection management is critical in
maintaining a low level of delinquencies and charge-offs.
Monitoring and Supervising the Operational Structure. First Merchants
has instituted the following three independent control functions that monitor
and review the operations of First Merchants and report their findings to
senior management: (i) Risk Management, which analyzes trends in the finance
contract portfolio and performs daily analyses of new finance contracts
purchased by First Merchants to ensure that such finance contracts meet First
Merchants' credit guidelines and were purchased in compliance with First
Merchants' operational procedures; (ii) Internal Audit, which performs on-
site audits of each Dealer Service Center and Account Service Center at least
annually to ensure compliance with First Merchants' guidelines and procedures
and maintenance of First Merchants' credit quality standards; and
(iii) Directors of Operations, who typically visit and review the operations
of each Dealer Service Center throughout the year in order to evaluate
compliance with First Merchants' policies and procedures, measure the
effectiveness of business development efforts, and review general portfolio
credit and performance quality and office profitability. Each control
function actively utilizes First Merchants' management information system,
which provides real time, on-line reports on a daily basis and which contains
operational information from each of First Merchants' Dealer Service Centers,
Account Service Centers and the ADG. These functions complement the daily
reviews of the volume of finance contracts purchased, aging of accounts,
repossession activities, and other operating data conducted by all levels of
management. See "First Merchants' Automobile Financing Program -- Management
Information Systems".
CREDIT LOSS EXPERIENCE
The following table summarizes data relating to First Merchants' charge-
off experience and includes Receivables sold or held for sale. The charge-
off experience includes estimated losses to be incurred upon the sale of
repossessed collateral. An account is charged-off at the earliest of the
time the account's collateral is repossessed, the account is 91 days or more
past due or the account is otherwise deemed to be uncollectible.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- ------------------------------
1996 1995 1995 1994 1993
------ ----- ------- ------- -------
(Dollars in thousands)
<s) <C> <C> <C> <C> <C>
Average finance
receivables serviced.....$384,497 $128,000 $171,737 $62,898 $22,005
Net charge-offs
serviced............... 11,204 3,051 8,969 2,820 1,016
Net charge-offs as a
percentage of average
net finance receivables
serviced - twelve
months preceding the
date set forth above 5.7% 4.7% 5.2% 4.5% 4.6%
</TABLE>
___________________
DELINQUENCY EXPERIENCE
A payment is considered past due if the borrower fails to make any full
payment on or before the due date as specified by the terms of the finance
contract. First Merchants typically contacts borrowers whose payments are not
received by the due date within two days after such due date.
For a discussion of First Merchants' delinquency control and collection
strategy, see "First Merchants' Automobile Financing Program -- Delinquency
Control and Collection".
The following table summarizes First Merchants' delinquency
experience for accounts with payments 31 days or more past due on
both a number and dollar basis for its finance contract portfolio
and includes Receivables sold or held for sale as of June 30, 1996
and December 31, 1995, 1994 and 1993. The delinquency experience data
excludes contracts where the collateral has been repossessed.
<TABLE>
<CAPTION> As of June 30, As of December 31,
1996 1995 1994 1993
------------------ ------------------ ------------------- -------------------
Number of Number of Number of Number of
DOLLARS Contracts Dollars Contracts Dollars Contracts Dollars Contracts
------- --------- ------- --------- ------- --------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net finance receivables
serviced . . . . . . . . $479,243 49,287 $284,173 31,082 $94,090 12,670 $33,563 6,194
Past due accounts:
31 - 60 days . . . . . . 11,171 1,253 5,163 595 446 85 178 42
61 days or more . . . . . 4,323 494 2,021 251 177 29 24 7
------- ------ ------- ----- ------ ------ ------- -----
Total . . . . . $15,494 1,747 $7,184 846 $623 144 $ 202 49
======= ====== ======= ===== ====== ====== ======= =====
Accounts with payments 31
days or more past due as
a percentage of net
finance receivables and
number of contracts 3.2% 3.5% 2.5% 2.7% 0.7% 0.9% 0.6% 0.8%
====== ====== ======= ====== ====== ======= ======= =====
</TABLE>
________________________
REPOSSESSED COLLATERAL
First Merchants commences repossession procedures against the underlying
collateral when it determines that collection efforts are likely to be
unsuccessful. Repossession generally occurs before a borrower has missed
more than two consecutive monthly payments. In such cases, the net amount
due under the finance contract is reduced to the estimated fair value of the
collateral, less the cost of disposition. Repossessed collateral included
786, 505, 150 and 69 automobiles at June 30, 1996, December 31, 1995,
December 31, 1994 and December 31, 1993, respectively.
CONTRACT ACQUISITION PROCESS
The following is a summary of the process that First Merchants typically
follows in connection with its acquisition of an automobile finance contract.
Dealer Relations. Each dealer with which First Merchants establishes
a financing relationship enters into a non-exclusive written Dealer Agreement
with First Merchants, which governs First Merchants' finance contract
purchases from the dealer. A Dealer Agreement generally provides that the
dealer shall indemnify First Merchants against any damages or liabilities,
including reasonable attorneys' fees, arising out of (i) any breach of a
representation or warranty of the dealer set forth in the Dealer Agreement
or (ii) any claim or defense that a borrower may have against a dealer
relating to a finance contract. Representations and warranties in a Dealer
Agreement generally relate to such
matters as whether (i) the financed automobile is free of all liens, claims
and encumbrances except First Merchants' lien, (ii) the down payment
specified in the finance contract has been paid in full and no part of the
down payment was loaned to the borrower by the dealer and (iii) the dealer
has complied with applicable law. If the dealer violates the terms of the
Dealer Agreement with respect to any finance contract, the dealer must
repurchase such contract on demand for the unpaid balance and all other
indebtedness due to First Merchants from the borrower.
Credit Evaluation Procedures. If a "non-prime" borrower elects to
finance the purchase of an automobile through a dealer, the dealer will
submit the borrower's credit application to First Merchants for review of the
borrower's creditworthiness and the proposed transaction terms. Dealer
Service Center personnel conduct such review in accordance with First
Merchants' guidelines and procedures, which generally take into account,
among other things, the individual's stability of residence, employment
history, credit history, ability to pay, income, discretionary income, debt
ratio, and credit bureau score, as well as the value of the collateral. In
addition, Dealer Service Center personnel evaluate a credit bureau report in
order to determine if (i) the individual's credit quality is deteriorating,
(ii) the individual's credit history suggests a high probability of default
or (iii) the individual's credit experience is too limited for First
Merchants to assess the probability of performance. First Merchants has also
developed a credit scoring system with a leading credit evaluation company
that is used as an additional objective guideline for evaluating a "non-
prime" borrower's creditworthiness. Dealer Service Center personnel may also
require verification of certain applicant or dealer provided information
prior to making the credit decision. Such verification typically requires
submission of supporting documentation, such as a paycheck stub or other
substantiation of income, and is performed solely by First Merchants'
personnel. First Merchants has assigned each Dealer Service Center manager
a maximum credit authority per finance contract based on various factors,
including such manager's experience level. Within the guidelines and
procedures established by First Merchants, each Dealer Service Center manager
is authorized to approve or reject credit applications within such manager's
maximum credit authority and to supplement objective credit criteria with
subjective judgment and knowledge of local conditions in making credit
decisions. If the proposed financing exceeds the Dealer Service Center
manager's maximum credit authority or does not meet First Merchants'
guidelines, the Dealer Service Center manager must also obtain the approval
of a Director of Operations.
After reviewing the credit application and the terms of the sale, the
Dealer Service Center notifies the dealer whether or not First Merchants
would be willing to purchase the finance contract upon sale of the automobile
to the applicant. First Merchants typically responds to submitted dealer
applications on the date received, in many cases within 2 to 3 hours. First
Merchants is selective in its approval process. First Merchants historically
has approved approximately 25% of all submitted credit applications, and
approximately 52% of those approved finance contracts have been purchased by
First Merchants. The difference between the number of applications approved
and the number of finance contracts entered into is due primarily to industry
practice whereby the dealer typically submits the credit application to more
than one finance company and then selects the finance company that is willing
to provide the most favorable terms. In cases where First Merchants is
unwilling to purchase a finance contract from a dealer under the proposed
terms but believes the applicant has
the capacity to meet other repayment obligations, the Dealer Service Center
personnel will work with the dealer to restructure the terms of the financing
or suggest the sale of an alternative automobile with a price more suited to
the applicant's financial means.
Approval Process. When First Merchants approves the purchase of a
finance contract, the Dealer Service Center notifies the dealer by facsimile
or telephone. Such notice specifies all pertinent information relating to
the terms of the approval, including the interest rate, the term, information
about the automobile to be sold, a list of ancillary products purchased by
the borrower and the amount of discount that First Merchants will take from
the principal amount of the finance contract. Generally, a borrower is
required to make a down payment of at least 10% of the purchase price. First
Merchants' guidelines and procedures require that the advance to the dealers
on the underlying collateral cannot exceed 110% of the wholesale value.
Generally, advances to dealers have not exceeded 100% of the automobile's
wholesale value.
Contract Purchase. Upon final confirmation of the terms by the
borrower, the dealer completes the sale of the automobile to the borrower.
After the dealer delivers all required documentation to First Merchants,
First Merchants remits funds to the dealer, generally within 24 hours. Upon
purchase of the finance contract, First Merchants acquires a perfected
security interest in the financed automobile. Each finance contract requires
that the automobile be properly insured and that First Merchants be named as
a loss payee, and compliance with these requirements is verified prior to the
remittance of funds to the dealer. Additionally, First Merchants maintains
a blanket insurance policy covering physical property damages in the event
that the borrower does not maintain insurance.
CONTRACT SERVICING AND ADMINISTRATION
First Merchants' contract servicing and administration activities have
been specifically tailored to the unique challenges of servicing finance
contracts of the "non-prime" borrower. Each Account Service Center
(i) collects payments, (ii) accounts for and posts all payments received,
(iii) responds to borrower inquiries, (iv) takes all necessary action to
maintain the security interest granted in the financed automobile,
(v) investigates delinquencies and communicates with the borrower to obtain
timely payments and (vi) monitors the finance contract and its related
collateral. When necessary, the ADG contracts with third parties to
repossess and dispose of the financed automobile.
First Merchants' activities incorporate proactive procedures and
systems. For example, First Merchants has established a process through
which it attempts to educate borrowers, both in writing and by telephone,
upon First Merchants' purchase of their finance contracts. This process is
designed to ensure that borrowers clearly understand their obligations and
includes a review of the terms of the finance contract with particular
emphasis on the amount and due date of each payment obligation, First
Merchants' expectations as to the timely receipt of payments and maintenance
of insurance coverage and First Merchants' delinquency and repossession
policies.
First Merchants utilizes a monthly billing statement system (rather than
payment coupon books) to remind borrowers of their monthly payment
obligations. This system also serves as an early warning mechanism in the
event that a
borrower has failed to notify First Merchants of an address change. First
Merchants typically contacts borrowers whose payments are not received by the
due date earlier than it believes is customary in the industry, commencing
within one to two days after a borrower's due date and continuing until
payment has been received. First Merchants believes that early and frequent
contact with the borrower reinforces the borrower's recognition of his or her
obligation and First Merchants' expectation of timely payment.
DELINQUENCY CONTROL AND COLLECTION
Personnel at each Account Service Center review accounts that are past
due to assess collection efforts to date and to define the appropriate
collection strategy, if appropriate. Each Account Service Center designs a
collection strategy that includes a specific deadline before which each
delinquent obligation should be collected. Accounts that have not been
collected during such period are again reviewed and, unless there are
specific circumstances which warrant further collection efforts, such
accounts are assigned to an outside agency for repossession. Repossessed
automobiles are generally resold through wholesale auctions. The elapsed
time between repossession and resale is generally 30 to 45 days, including
passage of the period during which the law of the applicable jurisdiction
permits the borrower to redeem the automobile. Since its inception, First
Merchants has, on average, recovered approximately 52% of the principal
amount of the finance contracts relating to its repossessed automobiles.
Typically, after repossession, the borrower will be pursued by recovery
specialists based in the Account Service Centers for any deficiency, subject
to applicable legal limitations.
MANAGEMENT INFORMATION SYSTEMS
Management believes that a high level of information flow and analysis
is essential to control First Merchants' decentralized organizational
structure and to maintain First Merchants' competitive position. First
Merchants has contracted with a third party, Norwest Financial Information
Services Group ("Norwest"), to provide data processing for First Merchants'
portfolio of finance contracts. Norwest provides on-line, real-time
information processing services with terminals located in each of First
Merchants' offices that are connected to Norwest's main computer center in
Des Moines, Iowa. This system allows for the complete processing of First
Merchants' finance contracts, including application processing, the retrieval
of credit bureau reports and the processing of finance contract purchases,
payments to dealers, payment posting and all other credit and collection
monitoring activity. In addition, each Dealer Service Center and Account
Service Center has the ability to create its own specialized daily
informational reports, such as automatic retrieval of delinquency and
collection work lists.
By utilizing third party processing, management believes that it can
focus on the performance of First Merchants' Dealer Service Centers, Account
Service Centers and ADG. Management uses the Norwest system to track and
monitor Dealer Service Center activity on a real-time basis, allowing senior
management, Directors of Operations, Directors of Account Services, Directors
of the ADG and Dealer Service Center managers to retrieve information for
tracking and analysis. In addition, management uses customized reports,
along with a download of information to databases maintained on personal
computers, to analyze First Merchants' portfolio on a monthly basis.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations
with respect to the Securities is set forth under "Weighted Average Life of
the Securities" in the Prospectus. As the rate of payment of principal of
each class of Certificates depends on the rate of payment (including
prepayments) of the principal balance of the Receivables, final payment of
the Class A Certificates or the Class B Certificates could occur
significantly earlier than the Class A Final Scheduled Distribution Date or
the Class B Final Scheduled Distribution Date, as applicable.
Securityholders will bear the risk of being able to reinvest principal
payments on the Securities at yields at least equal to the yield on their
respective Securities.
THE TRUST
GENERAL
The Depositor will establish the Trust by selling and assigning the
Trust property, as described below, to the Trustee in exchange for the
Certificates. The Servicer will service the Receivables pursuant to the
Pooling and Servicing Agreement and will be compensated for acting as the
Servicer. See "Description of the Transfer and Servicing Agreements --
Servicing Compensation and Payment of Expenses" in the Prospectus. To
facilitate servicing and to minimize administrative burden and expense, the
Servicer will be appointed custodian of the Receivables and the related
documents by the Trustee, but will not stamp the Receivables or amend the
certificates of title of the Financed Vehicles to reflect the sale and
assignment of the Receivables by First Merchants to the Depositor or by the
Depositor to the Trust. In the absence of amendments to the certificates of
title, the Trustee may not have perfected security interests in the Financed
Vehicles securing the Receivables in some states. See "Certain Legal Aspects
of the Receivables" in the Prospectus.
If the protection provided to Certificateholders by the Reserve Account
and, in the case of the Class A Certificateholders, the subordination of the
Class B Certificates is insufficient, if a security Insurer Default exists,
the Trust will look only to the Obligors on the Receivables and the proceeds
from the repossession and sale of Financed Vehicles that secure defaulted
Receivables to fund distributions of principal and interest on the
Certificates. In such event, certain factors, such as the Trust's not having
first priority perfected security interests in some of the Financed Vehicles,
may affect the Trust's ability to realize on the collateral securing the
Receivables and thus may reduce the proceeds to be distributed to
Certificateholders with respect to the Certificates. See "Description of the
Certificates -- Distributions" and "-- Subordination of the Class B
Certificates; Reserve Account" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
Each Certificate represents a fractional undivided ownership interest
in the Trust. The Trust property includes the Receivables (including any
Subsequent Receivables) transferred by First Merchants to the Depositor and
by the Depositor to the Trust and all payments due thereunder, in the case
of Precomputed Receivables, or received thereunder, in the case of Simple
Interest Receivables,
on or after the Initial Cutoff Date or related Subsequent Cutoff Date, as
applicable. The Trust property also includes (i) such amounts as from time
to time may be held in the Collection Account; (ii) security interests in the
Financed Vehicles and any accessions thereto; (iii) the rights to proceeds
with respect to the Receivables from claims on physical damage, credit life
and disability insurance policies covering the Financed Vehicles or the
Obligors, as the case may be; (iv) any property that shall have secured a
Receivable and that shall have been acquired by the Trustee; (v) a security
interest in all amounts on deposit in the Pre-Funding Account; (vi) a
Security Insurance Policy issued by Security Insurer; and (vii) any and all
proceeds of the foregoing. The Reserve Account will be maintained by the
Trustee for the benefit of the Certificateholders, but will not be part of
the Trust.
THE TRUSTEE
is Trustee under the Pooling and Servicing Agreement.
is a banking corporation, and its principal
offices are located at . The Depositor and its affiliates
may maintain normal commercial banking relations with the Trustee and its
affiliates.
THE RECEIVABLES POOL
The pool of Receivables conveyed to the Trust (the "Receivables Pool")
will include the Initial Receivables purchased as of the Initial Cutoff Date
and any Subsequent Receivables purchased as of the applicable Subsequent
Cutoff Dates (the Initial Cutoff Date or any Subsequent Cutoff Date being
individually referred to herein as a "Cutoff Date").
The Initial Receivables were, and the Subsequent Receivables were or
will be, originated or acquired from Dealers by First Merchants in the
ordinary course of business, and were or will be selected from First
Merchants' portfolio for inclusion in the Receivables Pool based on several
criteria, including the following: (i) as of the applicable Cutoff Date each
Receivable had, or will have, an outstanding gross balance of at least $
; (ii) as of the applicable Cutoff Date, none of the
Receivables shall be more than days past due; and (iii) as of the
applicable Cutoff Date, no Obligor on any Receivable was noted in the records
of First Merchants as being the subject of a bankruptcy proceeding. Certain
additional criteria that each Receivable must meet are set forth in the
Prospectus under "The Receivables Pools". No selection procedures believed
by either First Merchants or the Depositor to be adverse to
Certificateholders were or will be used in selecting the Receivables.
The obligation of the Trust to purchase Subsequent Receivables on a
Subsequent Transfer Date will be subject to the Receivables in the Trust,
including the Subsequent Receivables to be conveyed to the Trust on such
Subsequent Transfer Date, meeting the following criteria: (i) the weighted
average APR of the Receivables shall not be less than %; and (ii)
the weighted average remaining term of the Receivables shall not be greater
than months. Such criteria will be based on the characteristics of
the Initial Receivables on the Initial Cutoff Date and any Subsequent
Receivables on the related Subsequent Cutoff Dates.
The Initial Receivables will represent approximately % of the
aggregate initial principal balance of the Certificates. However, except for
the criteria described in the preceding paragraphs, the Subsequent
Receivables are not required to have any specific characteristics; therefore,
following the transfer of Subsequent Receivables to the Trust, the aggregate
characteristics of the entire Receivables Pool, including the composition of
the Receivables, the distribution by APR and the geographic distribution, may
vary significantly from those of the Initial Receivables. The composition,
distribution by APR and geographic distribution of the Initial Receivables
as of the Initial Cutoff Date are as set forth in the following tables.
<TABLE>
COMPOSITION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<CAPTION>
Weighted Aggregate Number of Weighted Average Weighted Average Average
Average APR Principal Balance Receivables Remaining Term Original Term Principal Balance
- ------------- ------------------- ------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
<TABLE>
DISTRIBUTION OF INITIAL RECEIVABLES BY APR AS OF THE INITIAL CUTOFF DATE
<CAPTION>
Percentage of
Number of Aggregate Aggregate
APR Range Receivables Principal Balance Principal Balance/(1)/
- ------------------ ------------- ------------------- ---------------------
<S> <C> <C> <C>
$ %
---------------- ------------------ -------------------
$ 100.00%
Total ================ ================== ===================
</TABLE>
- ---------------------
/(1)/ Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY REMAINING PRINCIPAL OF THE INITIAL RECEIVABLES AS OF THE
INITIAL CUTOFF DATE
Percentage of
Remaining Principal Number of Aggregate Aggregate
Range of balance Receivables Principal Balance Principal Balance/(1)/
- ------------------ ------------- ------------------- ---------------------
$ %
---------------- ------------------ -------------------
$ 100.00%
Total ================ ================== ===================
_____________
/(1)/ Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY REMAINING TERM OF THE INITIAL RECEIVABLES AS OF THE
INITIAL CUTOFF DATE
Percentage of
Range of Number of Aggregate Aggregate
Remaining Terms Receivables Principal Balance Principal Balance/(1)/
- ------------------ ------------- ------------------- ---------------------
$ %
---------------- ------------------ -------------------
$ 100.00%
Total ================ ================== ===================
- ------------------------
/(1)/ Percentages may not add to 100.00% because of rounding.
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES AS OF THE
INITIAL CUTOFF DATE
Percentage of
Number of Aggregate Aggregate
State(1) Receivables Principal Balance Principal Balance/(1)/
- ------------------ ------------- ------------------- ----------------------
$ %
---------------- ------------------ -------------------
$ 100.00%
Total ================ ================== ===================
_____________
(/(1)/ Based on billing addresses of the Obligors.)
/(2)/ Percentages may not add to 100.00% because of rounding.
As of the Initial Cutoff Date, approximately % of the Initial
Receivables, by aggregate principal balance, constitute Precomputed
Receivables and approximately % of the Initial Receivables
constitute Simple Interest Receivables. See "The Receivables Pools" in the
Prospectus for a description of the characteristics of Precomputed
Receivables and Simple Interest Receivables. As of the Initial Cutoff Date,
approximately % of the Initial Receivables by aggregate principal
balance, constituting approximately % of the number of Initial
Receivables, represent used vehicles.
THE DEPOSITOR
Information regarding the Depositor is set forth under "The Seller" in
the Prospectus.
BACKUP SERVICER
If a Servicer Termination Event occurs under the Pooling and Servicing
Agreement while First Merchants is Servicer, or if First Merchants is
terminated as Servicer by the Security Insurer or resigns as Servicer, the
Backup Servicer will serve as successor Servicer. The Backup Servicer will
receive a fee on each Distribution Date for agreeing to stand by as successor
Servicer and for performing certain other functions. Such fee will be
payable to the Backup Servicer from the Servicing Fee payable to First
Merchants.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will
be filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Certificates and the Pooling and Servicing Agreement. The
following summary supplements the description of the general terms and
provisions of the Certificates of any given Series and the related Pooling
and Servicing Agreement set forth in the Prospectus, to which description
reference is hereby made.
The Class A Certificate Balance initially will equal $
and, as of any date of determination thereafter, will equal the Initial
Class A Certificate Balance less all amounts previously distributed to Class
A Certificateholders and allocable to principal. The Class B Certificate
Balance initially will equal $ and, as of any date of
determination thereafter, will equal the Initial Class B Certificate Balance
less the sum of all amounts previously distributed to Class B
Certificateholders and allocable to principal and any Realized Losses
allocable to the Class B Certificates. The Class A Certificates will
evidence in the aggregate an undivided ownership interest in approximately
% of the Trust, and the Class B Certificates will evidence in the
aggregate an undivided ownership interest in approximately % of the
Trust.
DISTRIBUTIONS
Collection of Receivables and Calculation of Distributable Amounts. On
or about the day of each month, the Servicer will provide the
Trustee and Backup Servicer with certain information with respect to the
immediately preceding Collection Period, including the aggregate amount of
collections on the Receivables, Advances and Repurchase Amounts, the Total
Distribution Amount, the Interest Distribution Amount, the Principal
Distribution Amount, the Class A Interest Distributable Amount, the Class A
Principal Distributable Amount, the Class B Interest Distributable Amount and
the Class B Principal Distributable Amount.
On or before each Distribution Date, the Servicer will cause the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for any Distribution Date will equal the sum of the
Interest Distribution Amount plus the Principal Distribution Amount for such
date (other than the portion thereof attributable to Realized Losses).
"Realized Losses" means the excess of the principal balance of a Liquidated
Receivable over Liquidation Proceeds with respect thereto, to the extent
allocable to principal.
The "Interest Distribution Amount" for a Distribution Date generally
will equal the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to interest in accordance with the Servicer's customary servicing
procedures; (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligors on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures; (iii) all recoveries in
respect of Liquidated Receivables that were written off in prior Collection
Periods; (iv) all Advances made by the Servicer of amounts allocable to
interest; (v) the Purchase Amount of each Receivable that was repurchased by
the Depositor during the related Collection Period, to the extent
attributable to accrued interest thereon; and (vi) Investment Earnings, if
any, on amounts on deposit in the Collection Account and the Pre-Funding
Account.
The "Principal Distribution Amount" for a Distribution Date generally
will equal the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal in accordance with the Servicer's customary servicing
procedures; (ii) all Liquidation Proceeds attributable to the principal
amount of Receivables that became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such
Liquidated Receivables; (iii) all Advances made by the Servicer on
Precomputed Receivables that are allocable to principal and (iv) the
Repurchase Amount of each Receivable that was repurchased by the Depositor
or purchased by the Servicer during the related Collection Period, to the
extent attributable to principal.
On each Distribution Date the Trustee will distribute, pro rata, to the
Class A Certificateholders (i) interest on the Class A Certificates in a
maximum amount equal to the Class A Interest Distributable Amount and (ii)
principal in a maximum amount equal to the Class A Principal Distributable
Amount. In addition, on each Distribution Date the Trustee will distribute,
pro rata, to the Class B Certificateholders (i) interest on the Class B
Certificateholders in a maximum amount equal to the Class B Interest
Distributable Amount and (ii) principal in a maximum amount equal to the
Class B Principal Distributable Amount.
The "Class A Interest Distributable Amount" for each Distribution Date
will equal the sum of the Class A Monthly Interest Distributable Amount for
such date plus any Class A Interest Carryover Shortfall on such date. The
"Class A Monthly Interest Distributable Amount" on each Distribution Date
will equal the product of (i) one-twelfth, (ii) the Class A Pass-Through Rate
and (iii) the Class A Certificate Balance on the previous Distribution Date
(or, in the case of the first Distribution Date, on the Closing Date) after
giving effect to all distributions to Certificateholders on such date. The
"Class A Interest Carryover Shortfall" on each Distribution Date will equal
the excess, if any, of the sum of the Class A Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Class A
Interest Carryover Shortfall on such preceding Distribution Date over the
amount of interest actually distributed to Class A Certificateholders on such
preceding Distribution Date.
The "Class A Principal Distributable Amount" on each Distribution Date
will equal the Class A Monthly Principal Distributable Amount plus any Class
A Principal Carryover Shortfall on such Distribution Date. The "Class A
Monthly
Principal Distributable Amount" on each Distribution Date will be the Class
A Percentage of the Principal Distribution Amount. The "Class A Principal
Carryover Shortfall" on each Distribution Date will equal the amount, if any,
by which the Class A Monthly Principal Distributable Amount for the preceding
Distribution Date, plus any Class A Principal Carryover Shortfall on such
preceding Distribution Date, exceeded the amount of principal actually
distributed to Class A Certificateholders on such date. In addition, on the
Final Scheduled Distribution Date, the Class A Principal Distributable Amount
will include the lesser of (a) the Class A Percentage of the outstanding
principal amount, if any, of the Receivables remaining in the Trust as of the
Final Scheduled Maturity Date and (b) the amount that is necessary (after
giving effect to the other amounts to be distributed to Class A
Certificateholders on such Distribution Date and allocable to principal) to
reduce the Class A Certificate Balance to zero.
The "Class B Interest Distributable Amount" for each Distribution Date
will equal the sum of the Class B Monthly Interest Distributable Amount for
such date plus any Class B Interest Carryover Shortfall on such date. The
"Class B Monthly Interest Distributable Amount" on each Distribution Date
will equal the product of (i) one-twelfth, (ii) the Class B Pass-Through Rate
and (iii) the Class B Certificate Balance on the previous Distribution Date
(or, in the case of the first Distribution Date, on the Closing Date) after
giving effect to all distributions to Certificateholders on such date. The
"Class B Interest Carryover Shortfall" on each Distribution Date will equal
the excess, if any, of the sum of the Class B Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Class B
Interest Carryover Shortfall on such preceding Distribution Date over the
amount of interest actually distributed to Class B Certificateholders on such
preceding Distribution Date.
The "Class B Principal Distributable Amount" on each Distribution Date
will equal the Class B Monthly Principal Distributable Amount plus any Class
B Principal Carryover Shortfall on such Distribution Date. The "Class B
Monthly Principal Distributable Amount" on each Distribution Date will equal
the Class B Percentage of the Principal Distribution Amount. The "Class B
Principal Carryover Shortfall" on each Distribution Date will equal the
amount, if any, by which the Class B Monthly Principal Distributable Amount
for the preceding Distribution Date, plus any Class B Principal Carryover
Shortfall on such preceding Distribution Date, exceeded the amount of
principal actually distributed to Class B Certificateholders on such date.
In addition, on the Final Scheduled Distribution Date, the Class B Principal
Distributable Amount will include the lesser of (a) the Class B Percentage
of the outstanding principal amount, if any, of the Receivables remaining in
the Trust as of the Final Scheduled Maturity Date and (b) the amount that is
necessary (after giving effect to the other amounts to be distributed to
Class B Certificateholders on such Distribution Date and allocable to
principal) to reduce the Class B Certificate Balance to zero.
Distributions to Certificateholders. On each Distribution Date, the
Trustee will make the following distributions, in the priority indicated,
from the Total Distribution Amount and, if necessary and to the extent
provided below, from amounts on deposit in the Reserve Account:
(i) to the Servicer, from the Interest Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection Periods;
(ii) to the Class A Certificateholders, from the Class A Percentage
of the Interest Distribution Amount (after payment therefrom of amounts due
to the Servicer pursuant to clause (i) above), the Class A Interest
Distributable Amount; provided, that, if the Class A Percentage of the
Interest Distribution Amount is less than the Class A Interest Distributable
Amount for such date, such deficiency shall be paid, to the extent of
available funds, first from the Reserve Account, then from that portion of
the Total Distribution Amount otherwise distributable to Class B
Certificateholders;
(iii) to the Class A Certificateholders, from the Class A
Percentage of the Principal Distribution Amount (exclusive of the portion
thereof attributable to Realized Losses), an amount equal to the Class A
Principal Distributable Amount; provided, that, if the Class A Percentage of
such Principal Distribution Amount is less than the Class A Principal
Distributable Amount for such date, such deficiency shall be paid, to the
extent of available funds, first from amounts available in the Reserve
Account on such date after payment of the Class A Interest Distributable
Amount and then from the Total Distribution Amount remaining after payment
therefrom of amounts due to the Servicer and the Class A Interest
Distributable Amount;
(iv) to the Class B Certificateholders, from the Class B Percentage
of the Interest Distribution Amount (after payment therefrom of amounts due
to the Servicer and to the Class A Certificateholders pursuant to clauses (i)
and (iii) above), the Class B Interest Distributable Amount; provided, that,
if the Class B Percentage of the Interest Distribution Amount is less than
the Class B Interest Distributable Amount for such date, such deficiency
shall be paid, to the extent of available funds (after payment of the Class
A Interest Distributable Amount and the Class A Principal Distributable
Amount), from the Reserve Account;
(v) to the Security Insurer, the premium and certain other amounts
owing to the Security Insurer; and
(vi) to the Class B Certificateholders, from any remaining portion
of the Total Distribution Amount, an amount equal to the Class B Principal
Distributable Amount; provided, that, if such remaining portion of the Total
Distribution Amount is less than the Class B Principal Distributable Amount
for such date, such deficiency shall be paid from amounts, if any, available
in the Reserve Account after payment of the Class A Distributable Amount and
the Class B Interest Distributable Amount on such date;
(vii) after the payment of the amounts described in clauses (i)
through (vi) above, any portion of the Total Distribution Amount remaining
in the Collection Account on any Distribution Date shall be deposited into
the Reserve Account.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
The rights of the Class B Certificateholders to receive distributions
with respect to the Receivables will be subordinated to such rights of the
Class A Certificateholders to the extent described herein. This subordi-
nation is intended to enhance the likelihood of timely receipt by the Class
A Certificateholders of the full amount of interest and principal
distributable to them on each Distribution Date, and to afford the Class A
Certificateholders limited protection against losses in respect of the
Receivables.
No distribution of interest will be made to the Class B
Certificateholders on any Distribution Date until the full amount of
principal and interest payable on the Class A Certificates on such
Distribution Date has been distributed to the Class A Certificateholders.
Because the rights of the Class B Certificateholders to receive distributions
of interest and principal will be subordinated to the rights of the Class A
Certificateholders to receive distributions of interest and principal, the
Class B Certificates will be more sensitive than the Class A Certificates to
losses on the Receivables. If the aggregate amount of losses on the
Receivables exceeds the amount on deposit in the Reserve Account, Class B
Certificateholders may not recover their initial investment in the Class B
Certificates.
In the event of delinquencies or losses on the Receivables, the
protection afforded to the Class A Certificateholders will be effected both
by the preferential right of the Class A Certificateholders to receive
distributions on the Receivables in the manner and to the extent described
above and by the establishment of the Reserve Account.
The Reserve Account will be established on the Closing Date by the
Depositor and will be held by the Trustee, as collateral agent for the
Depositor, but will not be a part of or otherwise includible in the Trust.
On the Closing Date, the Depositor will deposit the Reserve Account Initial
Deposit into the Reserve Account, which shall consist of cash and/or Eligible
Investments having a value of approximately $ . On
each Subsequent Transfer Date, the Depositor will direct the Trustee to
transfer an amount equal to % of the aggregate principal amount of
the Subsequent Receivables to be transferred to the Trust on such date from
the Pre-Funding Account to the Reserve Account. In addition, on each
Distribution Date thereafter, the Reserve Account Initial Deposit will be
augmented by the deposit thereto of any funds remaining in the Distribution
Account on such date after the payment of the Servicing Fee, the Class A
Distributable Amount and the Class B Distributable Amount. The Specified
Reserve Account Balance with respect to any Distribution Date will equal the
greater of (i) % of the Pool Balance as of the close of business
on the last day of the related Collection Period and (ii) $
. In no event will the Specified Reserve Account Balance
exceed the sum of the Class A Certificate Balance and the Class B Certificate
Balance.
On each Distribution Date, funds available in the Reserve Account will
be withdrawn for distribution, first, to Class A Certificateholders to the
extent of shortfalls in the amounts available to make required distributions
of interest on the Class A Certificates, second, to Class A
Certificateholders to the extent of shortfalls in the amounts available to
make required distributions of principal of the Class A Certificates, third,
to Class B Certificateholders to
the extent of shortfalls in the amounts available to make required
distributions of interest on the Class B Certificates and, fourth, to Class
B Certificateholders to the extent of shortfalls in the amounts available to
make required distributions of principal of the Class B Certificates.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits thereto or withdrawals therefrom on such
date) is greater than the Specified Reserve Account Balance, the Trustee will
release and distribute such excess to the Depositor. Upon the release to the
Depositor on any Distribution Date of amounts from the Reserve Account in
excess of the Specified Reserve Account Balance, the Certificateholders will
have no further rights in, or claims to, such amounts.
OPTIONAL PREPAYMENT
On any Distribution Date following the Determination Date on which the
Pool Balance is determined to be 10% or less of the Initial Pool Balance, the
Servicer may elect to exercise its option to purchase all of the Receivables
for a purchase price equal to the aggregate Purchase Amounts of all the
outstanding Receivables. Any such exercise of its option by the Servicer
will result in the prepayment of the Certificates and the early termination
of the Trust. See "Description of the Transfer and Servicing Agreements --
Termination" in the Prospectus.
MANDATORY PREPAYMENT
Principal distributions to Certificateholders will be made, on a pro
rata basis, on the Distribution Date on or immediately following the last day
of the Funding Period in the event that any amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables, including any such purchase on such date. The aggregate
principal amount of the Certificates to be repurchased will be the amount
then on deposit in the Pre-Funding Account.
SECURITY INSURANCE POLICY
( )
SECURITY INSURER
( )
ERISA CONSIDERATIONS
During the Funding Period, not more than 24.9% of the Class A
Certificates may be held by "employee benefit plans" as defined in Section
3 of ERISA. After the termination of the Funding Period and subject to the
considerations set forth under "ERISA Considerations -- Senior Certificates
Issued By Grantor Trusts" in the Prospectus, the Class A Certificates may be
purchased by employee benefit plans or individual retirement accounts (each,
a "Plan") subject to ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"). A fiduciary of a Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties
under ERISA and will not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Code. For additional information regarding treatment of
the Class A Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.
Because the Class B Certificates are subordinated to the Class A
Certificates, the Class B Certificates may not be purchased by Plans.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement relating to the Certificates (the "Underwriting Agreement") between
the Depositor and Salomon Brothers Inc (the "Underwriter"), the Depositor has
agreed to cause the Trust to sell to the Underwriter, and the Underwriter has
agreed to purchase, the Certificates:
The Depositor has been advised by the Underwriter that the Underwriter
proposes to offer the Class A Certificates and the Class B Certificates to
the public initially at the public offering prices set forth on the cover
page of this Prospectus Supplement, and to certain dealers at such price less
a concession of % per Class A Certificate and % per Class
B Certificate; that the Underwriter and such dealers may allow a discount of
% per Class A Certificate and % per Class B Certificate on
sales to certain other dealers; and that after the initial public offering
of the Certificates, the public offering price and the concessions and
discounts to dealers may be changed by the Underwriter.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter against certain liabilities under applicable securities laws,
or contribute to payments the Underwriter may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds in the Collection
Account in Eligible Investments acquired from the Underwriter.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter or a request by
such investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Depositor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and First
Merchants by Richard P. Vogelman, General Counsel of First Merchants.
Certain legal matters relating to the Securities will be passed upon for the
Trust and the Depositor by Sonnenschein Nath & Rosenthal, Chicago, Illinois.
Certain legal matters with respect to the federal income tax matters
discussed under "Certain Federal Income Tax Consequences" herein will be
passed upon by Brown & Wood LLP, New York, New York, special tax counsel to
the Trust, and certain matters with respect to the validity of the Class A
Certificates will be passed upon for the Depositor by Sonnenschein Nath &
Rosenthal, New York, New York. Certain legal
matters will be passed upon for the Underwriter by Brown & Wood LLP. It is
anticipated that Sonnenschein Nath & Rosenthal will from time to time render
legal services to the Seller, the Servicer and their affiliates.
INDEX OF TERMS
ADG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-18
Backup Servicer . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Class A Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . S-4
Class A Certificateholders . . . . . . . . . . . . . . . . . . . . . . . S-7
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Class A Interest Carryover Shortfall . . . . . . . . . . . . . . . . . S-29
Class A Interest Distributable Amount . . . . . . . . . . . . . . . S-7, S-29
Class A Monthly Interest Distributable Amount . . . . . . . . . . . . . S-29
Class A Monthly Principal Distributable Amount . . . . . . . . . . . . S-29
Class A Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . S-7
Class A Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Class A Principal Carryover Shortfall . . . . . . . . . . . . . . . . . S-29
Class A Principal Distributable Amount . . . . . . . . . . . . . . S-8, S-29
Class B Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . S-4
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . . S-7
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Class B Interest Carryover Shortfall . . . . . . . . . . . . . . . . . S-29
Class B Interest Distributable Amount . . . . . . . . . . . . . . . S-7, S-29
Class B Monthly Interest Distributable Amount . . . . . . . . . . . . . S-29
Class B Monthly Principal Distributable Amount . . . . . . . . . . . . S-29
Class B Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . S-7
Class B Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Class B Principal Carryover Shortfall . . . . . . . . . . . . . . . . . S-29
Class B Principal Distributable Amount . . . . . . . . . . . . . . S-8, S-29
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Dealer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . S-17
Dealer Service Centers . . . . . . . . . . . . . . . . . . . . . . . . S-16
Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Final Scheduled Maturity Date . . . . . . . . . . . . . . . . . . . . . . S-6
Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
First Merchants . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
franchised dealers . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Guaranteed Distribution . . . . . . . . . . . . . . . . . . . . . . . . . S-9
independent dealers . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Initial Class A Certificate Balance . . . . . . . . . . . . . . . . . . . S-4
Initial Class B Certificate Balance . . . . . . . . . . . . . . . . . . . S-4
Initial Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Initial Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Initial Receivables . . . . . . . . . . . . . . . . . . . . . . . Cover, S-5
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Interest Distribution Amount . . . . . . . . . . . . . . . . . . . . . S-28
Liquidated Receivables . . . . . . . . . . . . . . . . . . . . . . . . S-28
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . S-28
non-prime borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Norwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . S-4
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . Cover, S-11
Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . S-28
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Receivables Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Reserve Account Initial Deposit . . . . . . . . . . . . . . . . . . . . S-10
Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Security Insurer . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Specified Reserve Account Balance . . . . . . . . . . . . . . . . . . . S-10
stripped coupons . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
sub-prime borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Subsequent Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Subsequent Receivables . . . . . . . . . . . . . . . . . . . . . Cover, S-5
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . S-5
Total Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . S-28
Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . S-32
============================================================================
No dealer, salesperson or other
person has been authorized to give
any information or to make any
representations other than those
contained or incorporated by
reference in this Prospectus
Supplement and the Prospectus in FIRST MERCHANTS AUTO TRUST
connection with the offer made by 199 -
this Prospectus Supplement and the
Prospectus and, if given or made, Issuer
such information or representations
must not be relied upon as having $
been authorized. This Prospectus
Supplement and the Prospectus do not
constitute an offer or solicitation (FLOATING RATE) (%) ASSET BACKED
by anyone in any state in which such CERTIFICATES, CLASS A
offer or solicitation is unauthorized
or in which the person making such $
offer or solicitation is not
qualified to do so or to anyone to (FLOATING RATE) (%) ASSET
whom it is unlawful to make such BACKED CERTIFICATES, CLASS B
offer or solicitation. Neither the
delivery of this Prospectus
Supplement and the Prospectus nor any
sale made hereunder shall, under any FIRST MERCHANTS ACCEPTANCE
circumstances, create any implication CORPORATION,
that the information contained herein
or therein is correct as of any time Depositor and Servicer
subsequent to the date of this
Prospectus Supplement or Prospectus.
TABLE OF CONTENTS Page
PROSPECTUS SUPPLEMENT
Reports to Certificateholders . S-3
Summary of Terms . . . . . . . S-4
Risk Factors . . . . . . . . . S-14
First Merchants'
Automobile Financing Program . . S-16 PROSPECTUS SUPPLEMENT
Weighted Average Life of
the Certificates . . . . . . . . S-23
The Trust . . . . . . . . . . . . S-24
The Receivables Pool . . . . . S-25
The Depositor . . . . . . . . . S-27
Backup Servicer . . . . . . . S-27
Description of the Certificates S-27
_________________________________
Security Insurance Policy . . . S-32
______________________
Security Insurer . . . . . . . S-32
ERISA Considerations . . . . . S-32 SALOMON BROTHERS INC
________________________
Underwriting . . . . . . . . . S-32
Legal Matters . . . . . . . . . S-33
Index of Terms . . . . . . . . S-34
PROSPECTUS
Available Information . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . 2
Summary of Terms . . . . . . . . 3
Risk Factors . . . . . . . . . . 12
The Trusts . . . . . . . . . . . 18
The Receivables Pools . . . . . 20
Weighted Average Life of the
Securities . . . . . . . . . . . 22
Pool Factors and Trading Information
22
Use of Proceeds . . . . . . . . . 23
The Company and the Seller . . . . 23
Description of the Notes . . . . 24
Description of the Certificates . 28
Certain Information Regarding the
Securities . . . . . . . . . . . 29
Description of the Transfer
and Servicing Agreements. . . . 36
Certain Legal Aspects of
the Receivalbes . . . . . . . . 46
Certain Federal Income Tax
Consequences. . . . . . . . . . 50
Certain State Tax Consequences
with respect to Owner Trusts . . . 61
ERISA Considerations. . . . . . . 62
Plan of Distribution. . . . . . . 64
Legal Matters . . . . . . . . . . 65
Index of Terms. . . . . . . . . . 66
-----------------
Until 90 days after the date of this
Prospectus Supplement, all dealers
effecting transactions in the Certificates
described in this Prospectus Supplement,
whether or not participating in this
distribution, may be required to deliver this
Prospectus Supplement and the Prospectus.
This is in addition to the obligation of dealers
to deliver this Prospectus Supplement and the
Prospectus when acting as underwriters and with
respect to their unsold allotments of
subscriptions.
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 supplement and the accompanying
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.
Subject to Completion, dated September 6, 1996
Prospectus Supplement to Prospectus dated , 1996
FIRST MERCHANTS AUTO TRUST 199 -
$ (Floating Rate)( %) Asset Backed Notes, Class A-1
$ (Floating Rate)( %) Asset Backed Notes, Class A-2
$ (Floating Rate)( %) Asset Backed Certificates
( ), Seller
FIRST MERCHANTS ACCEPTANCE CORPORATION, Servicer
First Merchants Auto Trust 199 - (the "Trust") will be formed
pursuant to a Trust Agreement, to be dated as of
, 199 (the "Closing Date") between ( ),
a Delaware corporation (the "Seller"), as depositor, and
, a banking
corporation, as Owner Trustee. The Trust will issue $
aggregate principal amount of (Floating Rate)( %) Asset Backed
Notes, Class A-1 (the "Class A-1 Notes") and $ aggregate
principal amount of (Floating Rate)( %) Asset Backed Notes, Class A-2 (the
"Class A-2 Notes" and, with the Class A-1 Notes, the "Notes") pursuant to
an Indenture, to be dated as of the Closing Date, between the Trust and
, a banking corporation, as
Indenture Trustee. The Trust also will issue $
aggregate principal amount of (Floating Rate)( %) Asset Backed
Certificates (the "Certificates"). The assets of the Trust will include a
pool of motor vehicle retail installment sale contracts (the
"Receivables") secured by the motor vehicles financed thereby and certain
monies due or received thereunder on or after , 199 .
The Receivables will be transferred to the Trust by the Seller as
described herein. The Notes will be secured by the assets of the Trust
pursuant to the Indenture.
(Continued on following page)
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT
BENEFICIAL INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS
OF, OR INTERESTS IN, ( ), FIRST MERCHANTS
ACCEPTANCE CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE
NOTES, THE CERTIFICATES OR THE RECEIVABLES ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 12 OF
THE ACCOMPANYING PROSPECTUS.
Price to the Underwriting Proceeds to the
Public(1) Discount Seller(1)(2)
------------ ------------ ---------------
Per Class A-1 Note . . . . . % % %
Per Class A-2 Note . . . . . % % %
Per Certificate . . . . . . % % %
Total . . . . . . . . . . . $ $ $
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
__________________________________
The Notes and the Certificates are offered subject to prior sale,
and subject to the Underwriter's right to reject orders in whole or in
part. It is expected that delivery of the Notes and the Certificates will
be made through the Same Day Funds System of The Depository Trust Company
on or about , 199 .
Salomon Brothers Inc
The date of this Prospectus Supplement is , 199 .
Interest on the classes of Notes will accrue at the respective (fixed
per annum ((floating) rates specified above and generally will be payable
on the day of each month, commencing , 199
(each, a "Distribution Date"). Principal of the Notes will be payable on
each Distribution Date to the extent described herein; however, no
principal will be paid on the Class A-2 Notes until the Class A-1 Notes
have been paid in full. The Certificates represent fractional undivided
interests in the Trust. Interest, at the Pass-Through Rate of % per
annum, will be distributed to Certificateholders on each Distribution
Date. No distributions of principal will be made on the Certificates
until all of the Notes have been paid in full.
To the extent not previously paid, the Class A-1 Notes will be
payable in full on , the Class A-2 Notes will be payable
in full on , and the Certificates will be payable
in full on ; however, one or both classes of Notes
or the Certificates may be paid in full prior to the final scheduled
Distribution Date therefor, as described herein and in the Prospectus. In
addition, the Class A-2 Notes will be subject to early redemption, and the
Certificates will be subject to prepayment, in whole but not in part, on
any Distribution Date on which the Servicer exercises its option to
purchase the Receivables. The Servicer may purchase the Receivables when
the aggregate principal balance thereof is reduced to 10% or less of the
initial aggregate principal balance thereof.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL
INFORMATION IS CONTAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE
URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
SALES OF THE NOTES OR CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT CONTAINS INFORMATION THAT IS SPECIFIC TO THE
TRUST AND THE SECURITIES OFFERED HEREBY AND, TO THAT EXTENT, SUPPLEMENTS
THE MORE GENERAL INFORMATION PROVIDED IN THE PROSPECTUS. INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT MAY ALSO REFLECT LEGAL, ECONOMIC
AND OTHER DEVELOPMENTS SINCE THE DATE OF THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
NOTES AND THE CERTIFICATES AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are
issued, monthly and annual unaudited reports containing information
concerning the Receivables will be prepared by the Servicer and sent on
behalf of the Trust only to Cede & Co., as nominee of The Depository Trust
Company and registered holder of the Notes and the Certificates. See
"Certain Information Regarding the Securities -- Book-Entry Registration"
and "-- Reports to Securityholders" in the accompanying Prospectus (the
"Prospectus"). Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Seller, as originator of the Trust, will file with the Securities and
Exchange Commission (the "Commission") such periodic reports as are
required under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference
to the detailed information appearing elsewhere herein and in the
Prospectus. Certain capitalized terms used herein are defined elsewhere
in this Prospectus Supplement on the pages indicated in the "Index of
Terms" or, to the extent not defined herein, have the meanings assigned to
such terms in the Prospectus.
Issuer . . . . . . . . . . . . . First Merchants Auto Trust 199
- (the "Trust"), a Delaware
business trust to be formed
pursuant to a Trust Agreement to
be dated as of ,
supplemented from time to time,
the "Trust Agreement"), between
the Seller, as depositor, and the
Owner Trustee.
Seller . . . . . . . . . . . . . ( ),
a Delaware corporation (the
"Seller").
Servicer . . . . . . . . . . . . First Merchants Acceptance
Corporation, a Delaware
corporation ("First Merchants" or,
in its capacity as servicer of the
Receivables, the "Servicer"). The
Servicer is referred to in the
Prospectus as the Master Servicer.
Indenture Trustee . . . . . . . . , a
banking corporation, as trustee
under the Indenture (the
"Indenture Trustee").
Owner Trustee . . . . . . . . . . , a
banking corporation, as
trustee under the Trust Agreement
(the "Owner Trustee").
The Notes . . . . . . . . . . . . The Trust will issue the (Floating
Rate)( %) Asset Backed Notes,
Class A-1 in an aggregate
principal amount of $
(the "Class A-1 Notes") and the
(Floating Rate)( %) Asset Backed
Notes, Class A-2 in an aggregate
principal amount of $
(the "Class A-2 Notes" and,
with the Class A-1 Notes, the
"Notes") pursuant to an Indenture
to be dated as of ,
199 (as amended and
supplemented from time to time,
the "Indenture"), between the
Trust and the Indenture Trustee.
Under the terms of the Indenture,
the Notes will be secured by the
assets of the Trust.
The Certificates . . . . . . . . The Trust will issue (Floating
Rate)( %) Asset-Backed
Certificates (the "Certificates"
and, together with the Notes, the
"Securities") with an aggregate
initial Certificate Balance of
$ . The
Certificates represent fractional
undivided interests in the Trust
and will be issued pursuant to the
Trust Agreement.
The Receivables . . . . . . . . . On , 199
(the "Closing Date"), the Seller
will purchase from First Merchants
pursuant to a Receivables Purchase
Agreement dated as of ,
199 (the "Receivables
Purchase Agreement"), by and
between First Merchants and the
Seller, Receivables having an
aggregate principal balance of
approximately $
as of ,
199 (the "Cutoff Date"). The
Trust, in turn, will acquire the
Receivables from the Seller
pursuant to a Sale and Servicing
Agreement to be dated as of
, 199 (as
amended and supplemented from time
to time, the "Sale and Servicing
Agreement"), among the Trust, the
Seller, the Servicer, the
Indenture Trustee and the Back-up
Servicer, and the Servicer will
agree to service the Receivables
upon the terms set forth in the
Sale and Servicing Agreement.
First Merchants will make certain
representations and warranties
concerning the Receivables in the
Receivables Purchase Agreement,
and the Seller will, in the Sale
and Servicing Agreement, assign
its rights under the Receivables
Purchase Agreement to the Trust,
including its right to cause First
Merchants to repurchase
Receivables with respect to which
First Merchants is in breach of
any such representation and
warranty as of the Cutoff Date, if
such breach has a material and
adverse effect on the rights of
the Trust in such Receivables and
such breach is not cured in a
timely manner. The Seller will
have no obligation to repurchase
from the Trust any Receivable with
respect to which First Merchants
is in breach of a representation
or warranty, nor will it have any
other obligation with respect to
the Receivables or the Securities.
The Receivables will consist of
sub-prime motor vehicle retail
installment sale contracts (the
"Contracts") secured by new or
used automobiles, light trucks,
vans and minivans financed thereby
(the "Financed Vehicles"),
including the right to receive
certain payments in respect
thereof, security interests in the
vehicles financed thereby and the
proceeds thereof. The Receivables
arise, or will arise, from
Contracts originated or acquired
from motor vehicle dealers (the
"Dealers") by First Merchants in
the ordinary course of business.
The Obligors on the Contracts are
primarily consumers with limitedy
access to traditional sources of
credit ("sub-prime" borrowers),
who are generally relatively
higher credit risks due to various
factors, including their past
credit experience and the absence
or limited extent of their credit
history. See "Risk Factors --
Nature of Obligors and Financed
Vehicles; Servicing" in the
Prospectus.
The Receivables have been selected
from First Merchants' portfolio of
motor vehicle installment sale
contracts and motor vehicle
installment loan agreements based
on the criteria specified in the
Sale and Servicing Agreement and
described herein under "The
Receivables Pool" and in the
Prospectus under "The Receivables
Pools". As of the Cutoff Date,
the weighted average annual
percentage rate of the Receivables
was approximately %, the
weighted average remaining
maturity of the Receivables was
approximately months and
the weighted average original
maturity of the Receivables was
approximately months.
No Receivable has a scheduled
maturity later than
(the "Final
Scheduled Maturity Date").
The "Pool Balance" at any time
will equal the aggregate principal
balance of all of the outstanding
Receivables owned by the Trust at
the end of the preceding
Collection Period after giving
effect to (i) all payments
received from Obligors during such
Collection Period and (ii) all
losses realized on Receivables
that were liquidated during such
Collection Period.
Terms of the Notes
A. Distribution Dates . . . . Payments of interest and principal
on the Notes will be made on the
day of each month or, if
any such day is not a Business
Day, on the next succeeding
Business Day (each, a
"Distribution Date") commencing
, 199 .
Payments will be made to holders
of record of the Notes (the
"Noteholders") as of the day
immediately preceding such
Distribution Date (each, a "Record
Date"). As used herein, "Business
Day" means a day that in New York
City or in the city in which the
corporate trust office of the
Indenture Trustee is located is
neither a legal holiday nor a day
on which banking institutions are
authorized by law, regulation or
executive order to be closed.
B. Interest Rates . . . . . . Interest will be paid on the Class
A-1 Notes at a per annum rate of
(Floating Rate)( %) (the "Class
A-1 Rate") and on the Class A-2
Notes at a per annum rate of
(Floating Rate)( %) (the "Class A-
2 Rate"). The Class A-1 Rate and
the Class A-2 Rate are sometimes
referred to herein collectively as
the "Interest Rates".
C. Interest . . . . . . . . . Interest on the outstanding
principal amount of the Class A-1
Notes and the Class A-2 Notes in
respect of any Distribution Date
will accrue at the Class A-1 Rate
and the Class A-2 Rate,
respectively, from and including
the most recent Distribution Date
on which interest payments were
distributed to Noteholders (or, in
the case of the first Distribution
Date, from and including the
Closing Date) to but excluding
such Distribution Date. Interest
on the Notes will be calculated on
the basis of a 360-day year
consisting of twelve 30-day
months. See "Description of the
Notes -- Payments of Interest"
herein.
D. Principal . . . . . . . . For as long as the Class A-1 Notes
are outstanding, principal of the
Class A-1 Notes will be payable on
each Distribution Date in an
amount equal to 100% of the Total
Distribution Amount remaining
following payment of the Servicing
Fee and the Noteholders' Interest
Distributable Amount on such date.
On each Distribution Date from and
including the Distribution Date on
which the Class A-1 Notes are paid
in full and for as long as the
Class A-2 Notes are outstanding,
principal of the Class A-2 Notes
will be payable in an amount equal
to 100% of the Total Distribution
Amount remaining following payment
of the Servicing Fee, the
Noteholders' Interest
Distributable Amount and, on the
Distribution Date on which the
Class A-1 Notes are paid in full,
any amount distributed as
principal to holders of the Class
A-1 Notes. No principal payment
will be made on the Class A-2
Notes until the Class A-1 Notes
have been paid in full.
The outstanding principal amount,
if any, of the Class A-1 Notes
will be payable in full on
(the "Class
A-1 Final Scheduled Payment Date")
and the outstanding principal
amount, if any, of the Class A-2
Notes will be payable in full on
(the "Class A-2
Final Scheduled Payment Date").
See "Description of the Notes --
Payments of Principal" and
"Description of the Transfer and
Servicing Agreements --
Distributions" herein.
E. Optional Redemption . . . The Class A-2 Notes may be
redeemed in whole, but not in
part, on any Distribution Date on
which the Servicer exercises its
option to purchase the
Receivables. Under the terms of
the Sale and Servicing Agreement,
the Servicer may purchase the
Receivables when the aggregate
principal amount thereof has been
reduced to 10% or less of the
original Pool Balance. The
redemption price for the Class A-2
Notes will equal the unpaid
principal amount of the Class A-2
Notes plus accrued and unpaid
interest thereon. See
"Description of the Notes --
Optional Redemption" herein.
Terms of the Certificates
A. Distribution Dates . . . . Distributions with respect to the
Certificates will be made on each
Distribution Date, commencing
, 199 .
Distributions will be made to
holders of record of the
C e r t i f i c a t e s ( t h e
"Certificateholders", and,
together with the Noteholders, the
"Securityholders") as of the
related Record Date.
B. Pass-Through Rate . . . . (Floating Rate)( %) per annum (the
"Pass-Through Rate").
C. Interest . . . . . . . . . On each Distribution Date, the
Owner Trustee will distribute pro
rata to Certificateholders accrued
interest at the Pass-Through Rate
on the Certificate Balance as of
the preceding Distribution Date
(after giving effect to
distributions made on such
preceding Distribution Date)
generally to the extent of funds
available following payment of the
Servicing Fee and the Noteholders'
Distributable Amount from the
Total Distribution Amount and the
Reserve Account. Interest on the
Certificates in respect of any
Distribution Date will accrue from
the most recent Distribution Date
on which interest payments were
distributed to Certificateholders
(or, in the case of the first
Distribution Date, the Closing
Date) to but excluding such
Distribution Date and will be
calculated on the basis of a
360-day year consisting of twelve
30-day months. See "Description
of the Certificates --
Distributions of Interest" herein.
D. Principal . . . . . . . . On each Distribution Date on and
after the date on which the Class
A-2 Notes are paid in full,
principal of the Certificates will
be payable in an amount generally
equal to the Total Distribution
Amount remaining after payment of
the Servicing Fee, the
Noteholders' Distributable Amount
(on the Distribution Date on which
the outstanding principal amount
of the Class A-2 Notes is reduced
t o z e r o ) a n d t h e
Certificateholders' Interest
Distributable Amount.
The outstanding principal amount,
if any, of the Certificates will
be payable in full on
(the "Final
Scheduled Distribution Date").
See "Description of the
Certificates -- Distributions of
Principal" and "Description of the
Transfer and Servicing Agreements
-- Distributions" herein.
E. Optional Prepayment . . . If the Servicer exercises its
option to purchase the
Receivables, which it may do when
the aggregate principal amount of
the Receivables is 10% or less of
the original Pool Balance, the
Certificateholders will receive an
amount in respect of the
Certificates equal to the
Certificate Balance plus accrued
interest at the Pass-Through Rate,
and the Certificates will be
retired. See "Description of the
Certificates -- Optional
Prepayment" herein.
Reserve Account . . . . . . . . . On the Closing Date, the Seller
will establish a separate reserve
account (the "Reserve Account")
with the Indenture Trustee and
will make an initial deposit
thereto of $ .
Funds will be withdrawn from
the Reserve Account on any
Distribution Date on which, and to
the extent that, the Total
Distribution Amount for the
related Collection Period
remaining after payment of the
Servicing Fee is less than the
Noteholders' Distributable Amount
and will be deposited in the Note
Distribution Account for
distribution to the Noteholders.
In addition, funds will be
withdrawn from the Reserve Account
to the extent that the portion of
the Total Distribution Amount
remaining after payment of the
Servicing Fee and the Noteholders'
Distributable Amount is less than
the Certificateholders'
Distributable Amount and will be
deposited in the Certificate
Distribution Account for
distribution to the
Certificateholders. On each
Distribution Date, the amount
available in the Reserve Account
will be reinstated up to the
Specified Reserve Account Balance
by the deposit thereto of amounts
remaining in the Collection
Account after payment on such date
of the Servicing Fee, the
Noteholders' Distributable Amount
and the Certificateholders'
Distributable Amount. Amounts on
deposit in the Reserve Account on
any Distribution Date (after
giving effect to all distributions
to be made on such Distribution
Date) in excess of the Specified
Reserve Account Balance will be
released to the Company. The
Reserve Account will be maintained
as an account in the name of the
Indenture Trustee. See
"Description of the Transfer and
Servicing Agreements -- Reserve
Account" herein.
Collection Account . . . . . . . Except under certain conditions
described herein, the Servicer
will be required to remit
collections received with respect
to the Receivables within two
Business Days of receipt thereof
to one or more accounts in the
name of the Indenture Trustee (the
"Collection Account"). Pursuant
to the Sale and Servicing
Agreement, the Servicer will have
the revocable power to instruct
the Indenture Trustee to withdraw
funds on deposit in the Collection
Account and to apply such funds on
each Distribution Date to the
following (in the priority
indicated): (i) the Servicing Fee
for the prior Collection Period
and any overdue Servicing Fees to
the Servicer, (ii) the
Noteholders' Interest
Distributable Amount and the
Noteholders' Principal
Distributable Amount to the Note
Distribution Account, (iii) the
Certificateholders' Interest
Distributable Amount and, after
the Class A-2 Notes have been paid
in full, the Certificateholders'
Principal Distributable Amount to
the Certificate Distribution
Account, and (iv) the remaining
balance, if any, to the Reserve
Account. See "Description of the
Transfer and Servicing Agreements
-- Distributions" and "-- Reserve
Account" herein.
Tax Status . . . . . . . . . . . In the opinion of Brown & Wood
LLP, for federal income tax
purposes, the Notes will be
characterized as debt and the
Trust will not be characterized as
an association (or a publicly
traded partnership) that is
taxable as a corporation. In the
opinion of Sonnenschein Nath &
Rosenthal, special Illinois tax
counsel, the same characterization
will apply for state income tax
purposes. Each Noteholder, by the
acceptance of a Note, will agree
to treat the Notes as
indebtedness, and each
Certificateholder, by the
acceptance of a Certificate, will
agree to treat the Trust as a
partnership in which the
Certificateholders are partners
for federal income and state
income tax purposes. Alternative
characterizations of the Trust and
the Certificates are possible, but
would not result in materially
adverse tax consequences to
Certificateholders. See "Certain
Federal Income Tax Consequences"
in the Prospectus for additional
information concerning the
application of federal income tax
laws to the Trust and the
Securities.
ERISA Considerations . . . . . . Subject to the considerations
discussed under "ERISA
Considerations" herein and in the
Prospectus, the Notes are eligible
for purchase by employee benefit
plans. The Certificates may not
be acquired by any employee
benefit plan subject to the
Employee Retirement Income
Security Act of 1974, as amended,
or by an individual retirement
account. See "ERISA
Considerations" herein and in the
Prospectus.
Rating of the Securities . . . . It is a condition to the issuance
of the Notes and Certificates that
the Notes be rated in the highest
rating category and the
Certificates be rated at least
" " or its equivalent, in
each case by at least two
nationally recognized statistical
rating agencies.
A rating is not a recommendation
to purchase, hold or sell the
Notes or Certificates, inasmuch as
such rating does not comment as to
market price or suitability for a
particular investor. A rating
addresses the likelihood that
principal of and interest on the
particular class of Notes or the
Certificates, as applicable, will
be paid pursuant to its terms.
There can be no assurance that a
rating will not be lowered or
withdrawn by a rating agency if
circumstances so warrant. See
"Risk Factors -- Ratings of the
Securities" herein.
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, prospective investors should carefully
consider the following risk factors before investing in the Securities.
Limited Liquidity. There is currently no secondary market for the
Securities. The Underwriter currently intends to make a market in the
Securities, but is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market
does develop, that it will provide Securityholders with liquidity of
investment or that it will continue for the life of the Securities.
Servicer Default. If a Servicer Default occurs, the Indenture
Trustee or the Noteholders may remove the Servicer without the consent of
the Owner Trustee or the Certificateholders, in the manner described in
the Prospectus under "Description of the Transfer and Servicing Agreements
-- Rights upon Servicer Default". Neither the Owner Trustee nor the
Certificateholders will have the ability to remove the Servicer if a
Servicer Default occurs. In addition, the Noteholders have the ability,
with certain specified exceptions, to waive defaults by the Servicer,
including defaults that might have a materially adverse effect on
Certificateholders. See "Description of the Transfer and Servicing
Agreements -- Waiver of Past Defaults" in the Prospectus.
Subordination of the Class A-2 Notes. Payments of principal of the
Class A-2 Notes will be subordinated in priority of payment to principal
due on the Class A-1 Notes. Consequently, Class A-2 Noteholders will not
receive any payments of principal until after the Class A-1 Notes have
been paid in full. See "Description of the Transfer and Servicing
Agreements -- Distributions" herein.
Subordination of the Certificates. Distributions of interest on and
principal of the Certificates will be subordinated in priority of payment
to interest and principal due on the Notes. Consequently,
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of
the Notes distributable on such Distribution Date has been deposited in
the Note Distribution Account. The Certificateholders will not receive
any distributions of principal until after the Notes have been paid in
full. See "Description of the Transfer and Servicing Agreements --
Distributions" herein.
Limited Assets of the Trust. The Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds
other than the Receivables and certain rights with respect to the Reserve
Account; therefore, holders of the Securities must rely for repayment upon
payments on the Receivables and, if and to the extent available, amounts
on deposit in the Reserve Account. Although any funds available in the
Reserve Account on each Distribution Date will be applied to cover
shortfalls in distributions of interest and principal on the Notes and the
Certificates, the funds to be deposited in the Reserve Account are limited
in amount. If the Reserve Account is exhausted, the Trust will have to
rely solely on current distributions on the Receivables to make payments
on the Notes and the Certificates. See "The Trust" and "Description of
the Transfer and Servicing Agreements -- Reserve Account" herein.
Ratings of the Securities. It is a condition to the issuance of the
Notes and the Certificates that the Notes be rated in the highest rating
category and the Certificates be rated " " or its equivalent, in each
case by at least two nationally recognized statistical rating agencies
(the "Rating Agencies"). A rating is not a recommendation to purchase,
hold or sell Securities, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of the
Securities address the likelihood of the timely payment of interest on,
and the ultimate repayment of principal of, the Securities pursuant to
their terms. There can be no assurance that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn
entirely by a Rating Agency if in its judgment circumstances in the future
so warrant. In the event that a rating is subsequently lowered or
withdrawn, no person or entity will be required to provide any additional
credit
enhancement. The ratings of the Notes are based primarily on the credit
quality of the Receivables, the subordination provided by the Certificates
and the availability of funds in the Reserve Account. The ratings of the
Certificates are based primarily on the credit quality of the Receivables
and the availability of funds in the Reserve Account.
Limited Obligations of the Seller and First Merchants. Neither the
Seller nor First Merchants is generally obligated to make any payments in
respect of the Notes, the Certificates or the Receivables. In connection
with its sale of the Receivables to the Seller, First Merchants will make
certain representations and warranties and, in certain circumstances, will
be required to repurchase Receivables with respect to which such
representations and warranties are not true as of the date made. There
can be no assurance, however, that First Merchants will have the financial
ability to effect any such repurchase. If First Merchants fails to
repurchase any Receivable with respect to which it is in breach of a
representation or warranty, the Seller will have no obligation to purchase
such Receivable from the Trust.
THE SELLER
Information regarding the Seller is set forth under "The Seller" in
the Prospectus. (Additional information regarding the applicable Seller
will be provided in each related Prospectus Supplement)
FIRST MERCHANTS' AUTOMOBILE FINANCING PROGRAM
GENERAL
First Merchants is a specialty finance company primarily engaged in
financing the purchase of used automobiles by acquiring dealer-originated
finance contracts. Since First Merchants' incorporation in March 1991, it
has targeted its marketing efforts on dealers that sell automobiles to
consumers who have limited access to traditional sources of credit ("non-
prime" borrowers). First Merchants serves two customers, the dealer and,
indirectly, the dealer's customer, the "non-prime" borrower. As of June
30, 1996, First Merchants operated dealer service centers ("Dealer Service
Centers") servicing Dealers in 35 states. First Merchants' finance
contract portfolio (net finance receivables, including receivables sold or
held-for-sale, before deducting the allowance for credit losses and
reserves attributable to contracts sold or held for sale) increased to
$479 million at June 30, 1996 from $284 million at December 31, 1995 and
$94 million at December 31, 1994, while maintaining net charge-offs as a
percentage of average net finance receivables of under 6.0%.
The automobile dealer business is highly fragmented and includes
businesses selling principally new automobiles, but also operating a used
automobile business, that are franchised by an automobile manufacturer
("franchised dealers") and businesses selling exclusively used automobiles
that are not affiliated with an automobile manufacturer ("independent
dealers"). During 1996, approximately 80% (by aggregate principal
balance) of the finance contracts purchased by First Merchants were
originated by franchised dealers and the remainder were originated by
independent dealers.
THE INDUSTRY
At December 31, 1995 there were approximately 22,750 franchised
dealers and approximately 63,750 independent dealers. According to
industry data, the used automobile finance market grew from approximately
$141 billion in 1987 to approximately $281 billion in 1995. The
automobile finance market that provides financing to "non-prime" borrowers
is highly fragmented and primarily served by small and locally oriented
companies. Many large financial service entities, such as commercial
banks, credit unions, savings and loans and financing arms of automobile
manufacturers do not solicit business in this segment of the market.
First Merchants also believes that increased regulatory oversight and
capital requirements imposed by governmental agencies have limited the
activities of many commercial banks and savings and loans in the
automobile finance market. In many cases, those organizations electing to
remain in the automobile finance business have migrated toward higher
credit quality customers to allow reductions in their overhead cost
structures and to maintain higher levels of credit quality.
First Merchants believes that demographic and economic trends favor
increased growth in the non-prime segment of the automobile finance
industry. Currently, the average American family must spend a
significantly higher percentage of its income to purchase an automobile
than it did several years ago. According to industry data, the average
price of a new automobile in 1994 represented approximately 59.3% of the
U.S. median family income for that year, an increase from approximately
51.5% in 1986. This increase, combined with increases in the average
useful life of automobiles and the number of late-model used automobiles
available for sale (including rental car and cars that were formerly
leased), have led industry analysts to believe that the market for retail
sales of used automobiles will continue to expand.
BUSINESS STRATEGY
First Merchants' business strategy is to focus its resources on
dealers that sell automobiles to "non-prime" borrowers. The key elements
of First Merchants' business strategy are as follows:
Providing Superior Service to Quality Dealers. By providing prompt,
flexible service and a reliable source of financing for "non-prime"
borrowers, First Merchants helps to expand the dealers' customer base,
thereby increasing the efficiency and effectiveness of their used car
sales operations. First Merchants believes that its guidelines and
procedures allow it to respond quickly to the dealers. First Merchants
typically responds to credit applications on the date received, in many
cases within 2 to 3 hours, and generally pays the dealer within 24 hours
after First Merchants has received required documentation from the dealer.
Management believes that because of its prompt and reliable response time
and geographic proximity to dealers, many dealers conduct business with
First Merchants. As of December 31, 1995, First Merchants serviced
approximately 2,000 dealers, with no single dealer accounting for more
than 3% of First Merchants' finance contract portfolio. Using a hub and
spoke strategy, First Merchants solicits business from automobile dealers
through the business development efforts of its sales force and Dealer
Service Centers. First Merchants evaluates each dealer with which it
establishes a financing relationship to endeavor to ensure that First
Merchants purchases finance contracts from only reputable automobile
dealers carrying an inventory of high quality used automobiles. First
Merchants evaluates historical financial information on prospective
dealers to determine the financial viability of each dealer and assesses
the length of service and reputation of prospective dealers through the
local Better Business Bureau and state regulatory authorities. Each
dealer with which First Merchants establishes a financing relationship
enters into a non-exclusive written dealer agreement (a "Dealer
Agreement") with First Merchants governing First Merchants' finance
contract purchases from the dealer. First Merchants periodically reviews
each dealer's financial information and inspects its physical premises and
automobile inventory to determine whether such dealer appears to be
operating its business satisfactorily and maintaining consistently high
quality inventory. First Merchants' management information systems track
the monthly performance of borrowers' accounts by dealer, allowing First
Merchants to review and evaluate the quality of finance contracts
purchased from each dealer.
Attracting and Retaining Experienced Management Personnel. First
Merchants actively recruits experienced management personnel at the
executive, supervisory and managerial levels. First Merchants believes
that the hiring and retention of such experienced management personnel is
important in maintaining credit quality, supervising its operations and
formulating and implementing its growth strategy. The executive officers
of First Merchants have an average of over 15 years of experience in the
financial services industry. In addition, First Merchants' Directors of
Operations and Directors of Account Services, and the managers of its
Dealer Service Centers and Account Service Centers have an average of over
15 years of experience in the consumer or automobile finance industries.
In addition to recruiting experienced management personnel, First
Merchants places an
emphasis on retaining such personnel through professional development
programs, competitive compensation and equity incentives.
Efficient Operational Structure. First Merchants' operational
structure is designed to maximize dealer service and finance contract
originations, thereby directly contributing to the growth of First
Merchants' finance contract portfolio. First Merchants' sales, credit and
collection functions are organized as follows: (i) a national sales force
dedicated to developing new dealer relationships and expanding the
geographic scope of Dealer Service Centers; (ii) local Dealer Service
Centers, which coordinate with the sales force to build and nurture dealer
relationships through a local market presence, underwrite and process
credit applications and disburse funds to dealers; (iii) "Account Service
Centers", which perform all account servicing functions such as finance
contract verification, payment processing, delinquency follow-ups and
cost-effective recovery of charged-off account balances; and (iv) the
Asset Disposition Group ("ADG"), which arranges the disposition of
repossessed collateral.
First Merchants establishes Dealer Service Centers in locations that
allow First Merchants personnel to provide personalized service to
dealers, while covering a wide geographical area. By utilizing a hub and
spoke strategy, First Merchants through either its Dealer Service Center
managers or its sales professionals meet individually with local dealers
to negotiate dealer agreements, quickly resolve problems as they develop
and respond to the competitive conditions of a particular market.
Management believes that this structure significantly enhances First
Merchants' operations and competitive advantage.
Each Dealer Service Center functions independently of the other
centers and is operated by a full-time Dealer Service Center manager who
reports to a Director of Operations. The Account Service Centers are
primarily responsible for collections, including recoveries of charged-off
account balances, and payment processing. Each Account Service Center is
operated by a Director of Account Services. The ADG arranges the
disposition of repossessed collateral and is under the responsibility of a
Director of Asset Disposition. First Merchants' nine Directors of
Operations are responsible for reviewing compliance with First Merchants'
guidelines and procedures and conducting periodic on-site reviews of First
Merchants' Dealer Service Centers. In addition, Directors of Operations
provide day-to-day guidance to Dealer Service Center managers in making
credit decisions. The Directors of Operations report directly to the Vice
President -- Operations. The Directors of Account Services and the
Director of Asset Disposition report to the Vice President -- Account
Services.
Utilizing Uniform Guidelines and Procedures for Credit Evaluation. To
mitigate the higher risks often associated with "non-prime" borrowers,
First Merchants has developed uniform guidelines and procedures for
evaluating credit applications in connection with the purchase of
automobile finance contracts from dealers. First Merchants' guidelines
and procedures relate to such matters as the borrower's stability of
residence, employment history, credit history, capacity to pay, income,
discretionary income, debt ratio, and credit bureau score, as well as the
value of the collateral. First Merchants has also developed a credit
scoring system with a leading credit evaluating company that is used as an
additional objective guideline for evaluating a "non-prime" borrower's
creditworthiness. In addition, First Merchants has assigned each Dealer
Service Center manager a maximum credit authority per finance contract
based on various factors, including such manager's experience level.
Within the guidelines and procedures established by First Merchants, each
Dealer Service Center manager is authorized to approve or reject credit
applications and to supplement objective credit criteria with subjective
judgment and knowledge of local conditions in making credit decisions. If
the proposed financing amount exceeds the Dealer Service Center manager's
maximum credit authority or does not meet First Merchants' guidelines, the
Dealer Service Center manager must obtain the approval of a Director of
Operations.
First Merchants has a risk based pricing system of interest rates
representing the varying degrees of risk assigned to different ranges of
credit risks.
Proactive Collection Management. First Merchants pursues a policy of
proactive collection management through its Account Service Centers with
respect to both current and delinquent accounts, including activities
related to monthly billing and collections, borrower inquiries and
repossessions. Previously these responsibilities were performed solely at
the Dealer Service Centers. In order to allow Dealer Service Centers to
operate more efficiently, First Merchants operates two Account Service
Centers to perform these tasks. These Account Service Centers service the
Dealer Service Centers. Shortly after First Merchants purchases a finance
contract, personnel at an Account Service Center typically contact the
borrower by telephone to verify the terms of the sale. First Merchants
also sends the borrower a letter which describes the procedures and
schedules for repaying the finance contract and explains First Merchants'
delinquency and repossession policies. The Company utilizes predictive
dialing technology to complement its calling efforts. Any finance
contract for which a payment is one day overdue is treated as a past due
account for collection purposes, and First Merchants typically contacts a
borrower within two days after such borrower's account becomes past due.
First Merchants typically commences repossession procedures before an
account is more than two payments past due. Management believes that
proactive collection management is critical in maintaining a low level of
delinquencies and charge-offs.
Monitoring and Supervising the Operational Structure. First
Merchants has instituted the following three independent control functions
that monitor and review the operations of First Merchants and report their
findings to senior management: (i) Risk Management, which analyzes trends
in the finance contract portfolio and performs daily analyses of new
finance contracts purchased by First Merchants to ensure that such finance
contracts meet First Merchants' credit guidelines and were purchased in
compliance with First Merchants' operational procedures; (ii) Internal
Audit, which performs on-site audits of each Dealer Service Center and
Account Service Center at least annually to ensure compliance with First
Merchants' guidelines and procedures and maintenance of First Merchants'
credit quality standards; and (iii) Directors of Operations, who typically
visit and review the operations of each Dealer Service Center throughout
the year in order to evaluate compliance with First Merchants' policies
and procedures, measure the effectiveness of business development efforts,
and review general portfolio credit and performance quality and office
profitability. Each control function actively utilizes First Merchants'
management information system, which provides real time, on-line reports
on a daily basis and which contains operational information from each of
First Merchants' Dealer Service Centers, Account Service Centers and the
ADG. These functions complement the daily reviews of the volume of
finance contracts purchased, aging of accounts, repossession activities,
and other operating data conducted by all levels of management. See
"First Merchants' Automobile Financing Program -- Management Information
Systems".
CREDIT LOSS EXPERIENCE
The following table summarizes data relating to First Merchants'
charge-off experience and includes Receivables sold or held for sale. The
charge-off experience includes estimated losses to be incurred upon the
sale of repossessed collateral. An account is charged-off at the earliest
of the time the account's collateral is repossessed, the account is 91
days or more past due or the account is otherwise deemed to be
uncollectible.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------------------- ---------------------------------------
1996 1995 1995 1994 1993
------------ -------------- ------------ ----------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Average finance receivables serviced $384,497 $128,000 $171,737 $62,898 $22,005
Net charge-offs managed . . . . . . 11,204 3,051 8,969 2,820 1,016
Net charge-offs as a percentage of
average net finance receivables
serviced - twelve months
preceding the date
set forth above . . . . . . . . . 5.7% 4.7% 5.2% 4.5% 4.6%
</TABLE>
DELINQUENCY EXPERIENCE
A payment is considered past due if the borrower fails to make any
full payment on or before the due date as specified by the terms of the
finance contract. First Merchants typically contacts borrowers whose
payments are not received by the due date within two days after such due
date. For a discussion of First Merchants' delinquency control and
collection strategy, see "First Merchants' Automobile Financing Program --
Delinquency Control and Collection".
The following table summarizes First Merchants' delinquency
experience for accounts with payments 31 days or more past due on both a
number and dollar basis for its finance contract portfolio and includes
Receivables sold or held for sale as of June 30, 1996 and December 31,
1995, 1994 and 1993. The delinquency experience data excludes contracts
where the collateral has been repossessed.
<TABLE>
<CAPTION>
AS OF JUNE 30, As of December 31,
1996 1995 1994 1993
------------------- ------------------- -------------------- -------------------
NUMBER Number Number Number
OF of of of
DOLLARS CONTRACTS Dollars Contracts Dollars Contracts Dollars Contracts
-------- --------- -------- --------- --------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net finance receivables
serviced . . . . . . . $479,243 49,287 $284,173 31,082 $94,090 12,670 $ 33,563 6,194
Past due accounts:
31 - 60 days . . . . . 11,171 1,253 5,163 595 446 85 178 42
61 days or more . . . . 4,323 494 2,021 251 177 29 24 7
--------- --------- -------- --------- --------- --------- -------- ---------
Total . . . . $15,494 1,747 $ 7,184 846 $ 623 114 $ 202 49
========= ========= ======== ========= ========= ========= ======== =========
Accounts with payments
31 days
or more past due as a
percentage of net
finance
receivables and number
of contracts 3.2% 3.5% 2.5% 2.7% 0.7% 0.9% 0.6% 0.8%
========= ========= ======== ========= ========= ========= ======== =========
</TABLE>
REPOSSESSED COLLATERAL
First Merchants commences repossession procedures against the
underlying collateral when it determines that collection efforts are
likely to be unsuccessful. Repossession generally occurs before a
borrower has missed more than two consecutive monthly payments. In such
cases, the net amount due under the finance contract is reduced to the
estimated fair value of the collateral, less the cost of
disposition. Repossessed collateral included 786, 505, 150 and 69
automobiles at June 30, 1996, December 31, 1995, December 31, 1994 and
December 31, 1993, respectively.
CONTRACT ACQUISITION PROCESS
The following is a summary of the process that First Merchants
typically follows in connection with its acquisition of an automobile
finance contract.
Dealer Relations. Each dealer with which First Merchants establishes
a financing relationship enters into a non-exclusive written Dealer
Agreement with First Merchants, which governs First Merchants' finance
contract purchases from the dealer. A Dealer Agreement generally provides
that the dealer shall indemnify First Merchants against any damages or
liabilities, including reasonable attorneys' fees, arising out of (i) any
breach of a representation or warranty of the dealer set forth in the
Dealer Agreement or (ii) any claim or defense that a borrower may have
against a dealer relating to a finance contract. Representations and
warranties in a Dealer Agreement generally relate to such matters as
whether (i) the financed automobile is free of all liens, claims and
encumbrances except First Merchants' lien, (ii) the down payment specified
in the finance contract has been paid in full and no part of the down
payment was loaned to the borrower by the dealer and (iii) the dealer has
complied with applicable law. If the dealer violates the terms of the
Dealer Agreement with respect to any finance contract, the dealer must
repurchase such contract on demand for the unpaid balance and all other
indebtedness due to First Merchants from the borrower.
Credit Evaluation Procedures. If a "non-prime" borrower elects to
finance the purchase of an automobile through a dealer, the dealer will
submit the borrower's credit application to First Merchants for review of
the borrower's creditworthiness and the proposed transaction terms.
Dealer Service Center personnel conduct such review in accordance with
First Merchants' guidelines and procedures, which generally take into
account, among other things, the individual's stability of residence,
employment history, credit history, ability to pay, income, discretionary
income, debt ratio, and credit bureau score, as well as the value of the
collateral. In addition, Dealer Service Center personnel evaluate a
credit bureau report in order to determine if (i) the individual's credit
quality is deteriorating, (ii) the individual's credit history suggests a
high probability of default or (iii) the individual's credit experience is
too limited for First Merchants to assess the probability of performance.
First Merchants has also developed a credit scoring system with a leading
credit evaluation company that is used as an additional objective
guideline for evaluating a "non-prime" borrower's creditworthiness.
Dealer Service Center personnel may also require verification of certain
applicant or dealer provided information prior to making the credit
decision. Such verification typically requires submission of supporting
documentation, such as a paycheck stub or other substantiation of income,
and is performed solely by First Merchants' personnel. First Merchants
has assigned each Dealer Service Center manager a maximum credit authority
per finance contract based on various factors, including such manager's
experience level. Within the guidelines and procedures established by
First Merchants, each Dealer Service Center manager is authorized to
approve or reject credit applications within such manager's maximum credit
authority and to supplement objective credit criteria with subjective
judgment and knowledge of local conditions in making credit decisions. If
the proposed financing exceeds the Dealer Service Center manager's maximum
credit authority or does not meet First Merchants' guidelines, the Dealer
Service Center manager must also obtain the approval of a Director of
Operations.
After reviewing the credit application and the terms of the sale, the
Dealer Service Center notifies the dealer whether or not First Merchants
would be willing to purchase the finance contract upon sale of the
automobile to the applicant. First Merchants typically responds to
submitted dealer applications on the date received, in many cases within 2
to 3 hours. First Merchants is selective in its approval process. First
Merchants historically has approved approximately 25% of all submitted
credit applications, and approximately 52% of those approved finance
contracts have been purchased by First Merchants. The difference between
the number of applications approved and the number of finance contracts
entered into is due primarily to industry practice whereby the dealer
typically submits
the credit application to more than one finance company and then selects
the finance company that is willing to provide the most favorable terms.
In cases where First Merchants is unwilling to purchase a finance contract
from a dealer under the proposed terms but believes the applicant has the
capacity to meet other repayment obligations, the Dealer Service Center
personnel will work with the dealer to restructure the terms of the
financing or suggest the sale of an alternative automobile with a price
more suited to the applicant's financial means.
Approval Process. When First Merchants approves the purchase of a
finance contract, the Dealer Service Center notifies the dealer by
facsimile or telephone. Such notice specifies all pertinent information
relating to the terms of the approval, including the interest rate, the
term, information about the automobile to be sold, a list of ancillary
products purchased by the borrower and the amount of discount that First
Merchants will take from the principal amount of the finance contract.
Generally, a borrower is required to make a down payment of at least 10%
of the purchase price. First Merchants' guidelines and procedures require
that the advance to the dealers on the underlying collateral cannot exceed
110% of the wholesale value. Generally, advances to dealers have not
exceeded 100% of the automobile's wholesale value.
Contract Purchase. Upon final confirmation of the terms by the
borrower, the dealer completes the sale of the automobile to the borrower.
After the dealer delivers all required documentation to First Merchants,
First Merchants remits funds to the dealer, generally within 24 hours.
Upon purchase of the finance contract, First Merchants acquires a
perfected security interest in the financed automobile. Each finance
contract requires that the automobile be properly insured and that First
Merchants be named as a loss payee, and compliance with these requirements
is verified prior to the remittance of funds to the dealer. Additionally,
First Merchants maintains a blanket insurance policy covering physical
property damages in the event that the borrower does not maintain
insurance.
CONTRACT SERVICING AND ADMINISTRATION
First Merchants' contract servicing and administration activities
have been specifically tailored to the unique challenges of servicing
finance contracts of the "non-prime" borrower. Each Account Service
Center (i) collects payments, (ii) accounts for and posts all payments
received, (iii) responds to borrower inquiries, (iv) takes all necessary
action to maintain the security interest granted in the financed
automobile, (v) investigates delinquencies and communicates with the
borrower to obtain timely payments and (vi) monitors the finance contract
and its related collateral. When necessary, the ADG contracts with third
parties to repossess and dispose of the financed automobile.
First Merchants' activities incorporate proactive procedures and
systems. For example, First Merchants has established a process through
which it attempts to educate borrowers, both in writing and by telephone,
upon First Merchants' purchase of their finance contracts. This process
is designed to ensure that borrowers clearly understand their obligations
and includes a review of the terms of the finance contract with particular
emphasis on the amount and due date of each payment obligation, First
Merchants' expectations as to the timely receipt of payments and
maintenance of insurance coverage and First Merchants' delinquency and
repossession policies.
First Merchants utilizes a monthly billing statement system (rather
than payment coupon books) to remind borrowers of their monthly payment
obligations. This system also serves as an early warning mechanism in the
event that a borrower has failed to notify First Merchants of an address
change. First Merchants typically contacts borrowers whose payments are
not received by the due date earlier than it believes is customary in the
industry, commencing within one to two days after a borrower's due date
and continuing until payment has been received. First Merchants believes
that early and frequent contact with the borrower reinforces the
borrower's recognition of his or her obligation and First Merchants'
expectation of timely payment.
DELINQUENCY CONTROL AND COLLECTION
Personnel at each Account Service Center review accounts that are
past due to assess collection efforts to date and to define the
appropriate collection strategy, if appropriate. Each Account Service
Center designs a collection strategy that includes a specific deadline
before which each delinquent obligation should be collected. Accounts
that have not been collected during such period are again reviewed and,
unless there are specific circumstances which warrant further collection
efforts, such accounts are assigned to an outside agency for repossession.
Repossessed automobiles are generally resold through wholesale auctions.
The elapsed time between repossession and resale is generally 30 to 45
days, including passage of the period during which the law of the
applicable jurisdiction permits the borrower to redeem the automobile.
Since its inception, First Merchants has, on average, recovered
approximately 52% of the principal amount of the finance contracts
relating to its repossessed automobiles. Typically, after repossession,
the borrower will be pursued by recovery specialists based in the Account
Service Centers for any deficiency, subject to applicable legal
limitations.
MANAGEMENT INFORMATION SYSTEMS
Management believes that a high level of information flow and
analysis is essential to control First Merchants' decentralized
organizational structure and to maintain First Merchants' competitive
position. First Merchants has contracted with a third party, Norwest
Financial Information Services Group ("Norwest"), to provide data
processing for First Merchants' portfolio of finance contracts. Norwest
provides on-line, real-time information processing services with terminals
located in each of First Merchants' offices that are connected to
Norwest's main computer center in Des Moines, Iowa. This system allows
for the complete processing of First Merchants' finance contracts,
including application processing, the retrieval of credit bureau reports
and the processing of finance contract purchases, payments to dealers,
payment posting and all other credit and collection monitoring activity.
In addition, each Dealer Service Center and Account Service Center has the
ability to create its own specialized daily informational reports, such as
automatic retrieval of delinquency and collection work lists.
By utilizing third party processing, management believes that it can
focus on the performance of First Merchants' Dealer Service Centers,
Account Service Centers and ADG. Management uses the Norwest system to
track and monitor Dealer Service Center activity on a real-time basis,
allowing senior management, Directors of Operations, Directors of Account
Services, Directors of the ADG and Dealer Service Center managers to
retrieve information for tracking and analysis. In addition, management
uses customized reports, along with a download of information to databases
maintained on personal computers, to analyze First Merchants' portfolio on
a monthly basis.
THE TRUST
GENERAL
The Trust is a business trust formed under the laws of the State of
Delaware pursuant to the Trust Agreement for the transactions described in
this Prospectus Supplement. After its formation, the Trust will not
engage in any activity other than (i) acquiring, holding and managing the
Receivables and the other assets of the Trust and the proceeds therefrom,
(ii) issuing the Notes and the Certificates, (iii) making payments on the
Notes and the Certificates and (iv) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or that are
incidental thereto or connected therewith.
The Trust initially will be capitalized with equity equal to $
, excluding amounts in the Reserve Account.
Certificates with an original principal balance of $
(which represents approximately (1)% of the initial Certificate Balance)
will be sold to the Seller and the
remaining Certificates will be sold to third party investors that are
expected to be unaffiliated with the Seller, First Merchants, the Servicer
and the Trust. The proceeds from the initial sale of the Notes and
Certificates will be used by the Trust to purchase the Receivables from
the Seller pursuant to the Sale and Servicing Agreement. The Servicer
will service the Receivables pursuant to the Sale and Servicing Agreement
and will be compensated for acting as Servicer. See "Description of the
Transfer and Servicing Agreements -- Servicing Compensation" herein. To
facilitate servicing and to minimize administrative burden and expense,
the Servicer will be appointed custodian of the Receivables by the Owner
Trustee, but will not stamp the Receivables to reflect their sale and
assignment by First Merchants to the Seller or by the Seller to the Trust,
or amend the certificates of title of the related Financed Vehicles. In
the absence of amendments to the certificates of title, the Trust may not
have perfected security interests in the Financed Vehicles securing the
Receivables in some states. See "Certain Legal Aspects of the
Receivables" in the Prospectus.
If the protection provided to the investment of the Securityholders
by the Reserve Account is insufficient, the Trust will look only to the
Obligors on the Receivables and the proceeds from the repossession and
sale of Financed Vehicles that secure defaulted Receivables to fund
distributions of principal and interest on the Securities. In such event,
certain factors, such as the Trust's not having a first priority perfected
security interest in some of the Financed Vehicles, may affect the Trust's
ability to realize on the collateral securing the Receivables and thus may
reduce the proceeds to be distributed to Securityholders with respect to
the Securities. See "Description of the Transfer and Servicing Agreements
-- Distributions" and "-- Reserve Account" herein and "Certain Legal
Aspects of the Receivables" in the Prospectus.
The Trust's principal offices are located in
, Delaware, in care of
, as Owner Trustee, at the address listed below under "--
The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Cutoff Date, as if the issuance and sale of the Notes and the
Certificates had taken place on such date:
Class A-1 Notes . . . . . . . . . . . . . . . . . . . . . $
Class A-2 Notes . . . . . . . . . . . . . . . . . . . . .
Certificates . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . $
==========
THE OWNER TRUSTEE
is the Owner Trustee under the Trust Agreement.
is a banking corporation and
its principal offices are located at . The
Owner Trustee's liability in connection with the issuance and sale of the
Notes and Certificates is limited solely to the express obligations of the
Owner Trustee set forth in the Trust Agreement and the Sale and Servicing
Agreement. The Seller and its affiliates may maintain normal commercial
banking relations with the Owner Trustee and its affiliates.
THE RECEIVABLES POOL
The Receivables were originated or purchased from Dealers by First
Merchants in the ordinary course of business, and were selected from First
Merchants' portfolio for inclusion in the Receivables Pool based on
several criteria, including the following: (i) on the Cutoff Date, each
Receivable had an outstanding gross balance of at least $
, (ii) as of the Cutoff Date, none of the Receivables was more than
days past due and (iii) as of the Cutoff Date, no Obligor on any
Receivable was noted in First Merchant's records as being the subject of a
bankruptcy proceeding.
Certain additional criteria that each Receivable must meet are set forth
in the Prospectus under "The Receivables Pools". No selection procedures
believed by either First Merchants or the Seller to be adverse to
Securityholders were used in selecting the Receivables.
The composition and distribution of the Receivables Pool as of the
Cutoff Date are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES POOL AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Weighted Aggregate Number of Weighted Average Weighted Average Average
Average APR Principal Balance Receivables Remaining Term Original Term Principal Balance
----------- ----------------- ----------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
% $ months months $
DISTRIBUTION BY APR OF THE RECEIVABLES POOL AS OF THE CUTOFF DATE
</TABLE>
<TABLE>
<CAPTION>
Percentage of
Number of Aggregate Aggregate
APR Range Receivables Principal Balance Principal Balance/(1)/
- ----------------------- ----------- ----------------- ----------------------
<S> <C> <C> <C>
(Dollars in Thousands)
0.00% to 15.00% $ %
15.01% to 16.00%
16.01% to 17.00%
17.01% to 18.00%
18.01% to 19.00%
19.01% to 20.00%
20.01% to 21.00%
21.01% to 22.00%
22.01% to 23.00%
23.01% to 24.00%
24.01% to 25.00%
Greater than 25.00%
----------- ----------------- ----------------------
$ 100%
=========== ================= ======================
</TABLE>
___________________
/(1)/ Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES POOL AS OF
THE CUTOFF DATE
<TABLE>
<CAPTION>
Percentage of
Range of Remaining Number of Aggregate Aggregate
Principal Balances Receivables Principal Balance Principal Balance/(1)/
------------------ ----------- ----------------- ----------------------
<S> <C> <C> <C>
(Dollars in Thousands)
$ 1,000 to $ 2,499 . . . $ %
$ 2,500 to $ 4,999 . . .
$ 5,000 to $ 7,499 . . .
$ 7,500 to $ 9,999 . . .
$10,000 to $12,499 . . .
$12,500 to $14,999 . . .
$15,000 to $17,499 . . .
$17,500 to $19,999 . . .
$20,000 to $22,499 . . .
$22,500 to $24,999 . . .
$25,000 to $27,499 . . .
$27,500 to $29,999 . . .
$30,000 to $39,999 . . .
$40,000 to $49,999 . . .
----------- ----------------- ----------------------
Total $ 100.00%
=========== ================= ======================
</TABLE>
_____________
/(1)/ Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES POOL AS OF THE CUTOFF
DATE
<TABLE>
<CAPTION>
Percentage of
Number of Aggregate Aggregate
Range of Remaining Terms Receivables Principal Balances Principal Balance/(1)/
------------------------ ------------- ------------------ -----------------------
<S> <C> <C> <C>
(Dollars in Thousands)
3 to 11 months . . . $ %
12 to 17 months . . .
18 to 23 months . . .
24 to 29 months . . .
30 to 35 months . . .
36 to 41 months . . .
42 to 47 months . . .
48 to 53 months . . .
54 to 59 months . . .
60 to 65 months . . .
66 to 72 months . . .
------------- ------------------ -----------------------
Total $ 100.00%
============= ================== =======================
</TABLE>
-------------------
/(1)/ Percentages may not add to 100.00% because of rounding.
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Percentage of
Number of Aggregate Aggregate
State/(1)/ Receivables Principal Balance Principal Balance/(2)/
------------ ----------- ----------------- ----------------------
<S> <C> <C> <C>
(Dollars in Thousands)
----------- ----------------- ----------------------
Total $ 100.00%
=========== ================= ======================
</TABLE>
_____________
/(1)/ Based on billing addresses of the Obligors.
/(2)/ Percentages may not add to 100.00% because of rounding.
As of the Cutoff Date, approximately % of the Receivables,
by aggregate principal balance, constitute Precomputed Receivables and
% of the Receivables constitute Simple Interest Receivables. See
"The Receivables Pools" in the Prospectus for a description of the
characteristics of Precomputed Receivables and Simple Interest
Receivables. As of the Cutoff Date, approximately % of the
aggregate principal balance of the Receivables, constituting % of
the number of Receivables, represent used vehicles.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations
with respect to the Securities is set forth under "Weighted Average Life
of the Securities" in the Prospectus. In addition, holders of the Class
A-2 Notes will not receive any principal payments until the Class A-1
Notes are paid in full, and holders of the Certificates will not receive
any principal payments until the Class A-1 Notes and the Class A-2 Notes
have been paid in full. See "Description of the Notes -- Payments of
Principal" and "Description of the Certificates -- Distributions of
Principal" herein. As the rate of payment of principal of each class of
Notes and the Certificates depends on the rate of payment (including
prepayments) of the principal balance of the Receivables, final payment of
the Class A-1 Notes or the Class A-2 Notes and the final distribution in
respect of the Certificates could occur significantly earlier than the
Class A-1 Final Scheduled Payment Date, the Class A-2 Final Scheduled
Payment Date or the Final Scheduled Distribution Date, as applicable.
Securityholders will bear the risk of being able to reinvest principal
payments on the Securities at yields at least equal to the yield on their
respective Securities.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement.
A copy of the Indenture will be filed with the Commission following the
issuance of the Securities. The following summary describes certain terms
of the Notes and the Indenture. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Notes and the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference
as part of this summary. The following summary supplements the
description of the general terms and provisions of the Notes of any given
Series and the description
of the related Indenture set forth under the headings "Description of the
Notes" and "Certain Information Regarding the Securities" in the
Prospectus, to which descriptions reference is hereby made.
, a banking corporation,
will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
Interest on the principal balance of the Class A-1 Notes and the
Class A-2 Notes will accrue at the Class A-1 Rate and Class A-2 Rate,
respectively, and will be payable to the holders of the Class A-1 Notes
and the Class A-2 Notes monthly on each Distribution Date commencing
, 199 . Interest with respect to any Distribution Date
will accrue from and including the most recent Distribution Date on which
interest was distributed to Noteholders (or, with respect to the first
Distribution Date, from and including the Closing Date) to but excluding
such Distribution Date. Interest on each class of Notes will be
calculated on the basis of a 360-day year of twelve 30-day months.
Interest accrued as of any Distribution Date but not paid on such
Distribution Date will be due on the next Distribution Date, together with
interest on such amount at the applicable Interest Rate (to the extent
lawful). Interest payments on the Notes will generally be made out of the
Total Distribution Amount remaining after the payment of the Servicing Fee
and the Reserve Account. See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" herein. Interest
payments to holders of both classes of Notes will have the same priority.
Under certain circumstances, the amount available for such payments could
be less than the amount of interest payable on the Notes on any
Distribution Date, in which case the holders of each class of Notes will
receive their ratable share (based on the aggregate amount of interest due
on each class of Notes) of the aggregate amount available for distribution
in respect of interest on the Notes.
PAYMENTS OF PRINCIPAL
On each Distribution Date for as long as the Class A-1 Notes are
outstanding, principal of the Class A-1 Notes will be distributed to
holders of the Class A-1 Notes in an amount equal to the Total
Distribution Amount remaining after payment of the Servicing Fee and the
Noteholders' Interest Distributable Amount for such date. On each
Distribution Date from and including the Distribution Date on which the
Class A-1 Notes are paid in full and for as long as the Class A-2 Notes
are outstanding, principal will be distributed to holders of the Class A-2
Notes in an amount equal to the Total Distribution Amount remaining after
payment of the Servicing Fee, the Noteholders' Interest Distributable
Amount and, on the Distribution Date on which the outstanding principal
amount of the Class A-1 Notes is reduced to zero, any amounts distributed
as principal to holders of the Class A-1 Notes and funds available, if
any, in the Reserve Account. No principal will be paid on the Class A-2
Notes until the Class A-1 Notes have been paid in full. See "Description
of the Transfer and Servicing Agreements -- Distributions" and "-- Reserve
Account" herein.
The principal balance of the Class A-1 Notes, to the extent not
previously paid, will be due on the Class A-1 Final Scheduled Payment Date
and the principal balance of the Class A-2 Notes, to the extent not
previously paid, will be due on the Class A-2 Final Scheduled Payment
Date. The actual date on which the aggregate outstanding principal amount
of either the Class A-1 Notes or the Class A-2 Notes is paid in full may
be earlier than the applicable Final Scheduled Payment Date set forth
above due to a variety of factors, including those described under
"Weighted Average Life of the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class A-2 Notes may be redeemed in whole, but not in part, on any
Distribution Date on which the Servicer exercises its option to purchase
the Receivables, which the Servicer may do after the aggregate outstanding
principal amount of the Receivables is reduced to 10% or less of the
original Pool Balance. See "Description of the Transfer and Servicing
Agreements -- Termination" in the
Prospectus. The redemption price for the Class A-2 Notes will equal the
unpaid principal amount of the Class A-2 Notes plus accrued and unpaid
interest thereon.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Trust Agreement will be filed with
the Commission following the issuance of the Securities. The following
summary describes certain terms of the Certificates and the Trust
Agreement. This summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of
the Certificates and the Trust Agreement. The following summary
supplements the description of the general terms and provisions of the
Certificates of any given Series and the description of the related Trust
Agreement set forth in the Prospectus, to which descriptions reference is
hereby made.
DISTRIBUTIONS OF INTEREST
Certificateholders will be entitled to distributions of interest on
each Distribution Date beginning on , 199 .
Interest will accrue on the Certificates at the Pass-Through Rate on the
Certificate Balance as of the preceding Distribution Date (or with respect
to the first Distribution Date, on the Closing Date) after giving effect
to distributions on such Distribution Date. Interest distributable with
respect to the Certificates on a Distribution Date will accrue from and
including the most recent Distribution Date on which interest was
distributed to Certificateholders (or, with respect to the first
Distribution Date, from and including the Closing Date) to but excluding
such Distribution Date and will be calculated on the basis of a 360-day
year of twelve 30-day months. Interest distributions due but not
distributed on any Distribution Date will be due on the next Distribution
Date, with interest on such overdue interest at the Pass-Through Rate (to
the extent lawful). Interest distributions with respect to the
Certificates generally will be funded from the portion of the Total
Distribution Amount and funds in the Reserve Account remaining after the
distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "Description of the Transfer and Servicing Agreements --
Distributions" and "-- Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will not be entitled to distributions of principal
on any Distribution Date until the Notes have been paid in full. On each
Distribution Date on and after the Distribution Date on which the Class A-
2 Notes are paid in full, the Certificateholders will be entitled to
distributions of principal in a maximum amount equal to the lesser of (i)
the Total Distribution Amount plus any funds in the Reserve Account
remaining after payment of the Servicing Fee, the Noteholders'
Distributable Amount (on the Distribution Date on which the outstanding
principal amount of the Class A-2 Notes is reduced to zero) and the
Certificateholders' Interest Distributable Amount and (ii) the outstanding
Certificate Balance. See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" herein.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables,
which it may do when the aggregate outstanding principal amount of the
Receivables is reduced to 10% or less of the original Pool Balance, the
Certificateholders will receive an amount in respect of the Certificates
equal to the outstanding Certificate Balance, together with accrued
interest thereon at the Pass-Through Rate, which distribution shall effect
an early retirement of the Certificates. See "Description of the Transfer
and Servicing Agreements -- Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Receivables
Purchase Agreement, the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement (collectively, the "Transfer and
Servicing Agreements"). Forms of the Transfer and Servicing Agreements
have been filed as exhibits to the Registration Statement. A copy of the
Transfer and Servicing Agreements will be filed with the Commission
following the issuance of the Securities. This summary does not purport
to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements.
The following summary supplements the description of the general terms and
provisions of the Transfer and Servicing Agreements (as such term is used
in the Prospectus) set forth under the heading "Description of the
Transfer and Servicing Agreements" in the Prospectus, to which description
reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables
on the Closing Date by First Merchants to the Seller pursuant to the
Receivables Purchase Agreement and by the Seller to the Trust pursuant to
the Sale and Servicing Agreement is set forth under "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables"
in the Prospectus. See also "The Receivables Pool" herein and "The
Receivables Pools" in the Prospectus for additional information regarding
the Receivables and certain obligations of First Merchants and the
Servicer with respect to the Receivables.
ACCOUNTS
In addition to the Accounts referred to under "Description of the
Transfer and Servicing Agreements -- Trust Accounts" in the Prospectus,
the Seller will also establish and maintain the Reserve Account with the
Indenture Trustee, in the name of the Indenture Trustee on behalf of the
Noteholders and the Certificateholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to % per annum of the Pool
Balance as of the first day of such Collection Period. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from
prior Distribution Dates) will be paid on each Distribution Date solely
out of the Interest Distribution Amount; however, the Servicing Fee will
be paid to the Servicer prior to the distribution of any portion of the
Interest Distribution Amount to Noteholders and Certificateholders. See
"Description of the Transfer and Servicing Agreements -- Servicing
Compensation and Payment of Expenses" in the Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or about the Business Day
of each month, the Servicer will provide the Indenture Trustee with
certain information with respect to the related Collection Period,
including the amount of aggregate collections on the Receivables and the
aggregate Repurchase Amount of Receivables to be repurchased by First
Merchants or to be purchased by the Servicer.
On or before each Distribution Date, the Servicer will cause the
Total Distribution Amount to be deposited into the Collection Account.
The "Total Distribution Amount" for a Distribution Date will equal the sum
of the Interest Distribution Amount and the Principal Distribution Amount
(other than the portion thereof attributable to Realized Losses) for such
Distribution Date. "Realized Losses" means the excess of the principal
balance of any Liquidated Receivable over Liquidation Proceeds to the
extent allocable to principal.
The "Interest Distribution Amount" for a Distribution Date will equal
the sum of the following amounts with respect to the related Collection
Period: (i) that portion of all collections on the Receivables allocable
to interest; (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the related Obligor ("Liquidation Proceeds"), to the extent
attributable to interest due thereon in accordance with the Servicer's
customary servicing procedures, and all recoveries in respect of
Liquidated Receivables that were written off in prior Collection Periods;
(iii) the Repurchase Amount of each Receivable that was repurchased by
First Merchants or purchased by the Servicer during the related Collection
Period, to the extent attributable to accrued interest thereon; and (iv)
Investment Earnings for such Distribution Date.
The "Principal Distribution Amount" for a Distribution Date will
equal the sum of the following amounts with respect to the related
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables that became Liquidated Receivables during
such Collection Period in accordance with the Servicer's customary
servicing procedures, plus all Realized Losses with respect to such
Liquidated Receivables; (iii) to the extent attributable to principal, the
Repurchase Amount received with respect to each Receivable repurchased by
First Merchants or purchased by the Servicer during the related Collection
Period; (iv) losses caused by the issuance of an order by a court in any
insolvency proceeding reducing the amount owed under a Receivable and (v)
partial prepayments relating to refunds of extended warranty protection
plan costs or of physical damage, credit life or disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligor as of the date of the original Contract.
The Interest Distribution Amount and the Principal Distribution
Amount on any Distribution Date shall exclude all payments and proceeds
(including Liquidation Proceeds) of any Receivables the Repurchase Amount
of which has been included in the Total Distribution Amount in a prior
Collection Period.
Deposits to the Distribution Accounts. On each Distribution Date,
the Servicer will instruct the Indenture Trustee to make the following
deposits and distributions, to the extent of the Total Distribution
Amount, in the following order of priority:
(i) to the Servicer, from the Interest Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i),
the Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
and (ii), the Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Certificateholders' Interest Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distributable Amount;
and
(vi) to the Reserve Account, the Total Distribution Amount
remaining after the application of clauses (i) through (v).
For purposes hereof, the following terms shall have the following
meanings:
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal
Distributable Amount and the Noteholders' Interest Distributable
Amount.
"Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Noteholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Noteholders' Interest Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 30 days of interest (or, in the
case of the first Distribution Date, interest accrued from and
including the Closing Date to but excluding such Distribution Date)
on the Class A-1 Notes and the Class A-2 Notes at the Class A-1 Rate
and the Class A-2 Rate, respectively, on the respective outstanding
principal balance of the Notes of such class on the immediately
preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date) after giving effect to all
payments of principal to the Noteholders of such class on or prior to
such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect
to any Distribution Date, (i) the excess of the Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date,
plus any outstanding Noteholders' Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account
on such preceding Distribution Date, plus (ii) interest on the amount
of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the respective
Interest Rates borne by each class of the Notes from such preceding
Distribution Date to but excluding such current Distribution Date.
"Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Noteholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Noteholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Noteholders'
Principal Distributable Amount shall not exceed the outstanding
principal balance of the Notes. In addition, (i) on the Class A-1
Final Scheduled Payment Date, the Noteholder's Principal
Distributable Amount will not be less than the amount that is
necessary (after giving effect to all other amounts to be deposited
in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance
of the Class A-1 Notes to zero; and (ii) on the Class A-2 Final
Scheduled Payment Date the Noteholders' Principal Distributable
Amount will not be less than the amount that is necessary (after
giving effect to all other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal balance of the Class
A-2 Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date for as long as the Class A-1
Notes or the Class A-2 Notes are outstanding, 100% of the Principal
Distribution Amount; provided, however, that on the Distribution Date
on which the principal balance of the Class A-2 Notes is reduced to
zero, the portion, if any, of the Principal Distribution Amount that
is not applied to the principal of the Class A-2 Notes will be
applied to the Certificate Balance.
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Noteholders'
Monthly Principal Distributable Amount and any outstanding
Noteholders' Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is
actually deposited in the Note Distribution Account.
"Certificateholders' Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders'
Principal Distributable Amount and the Certificateholders' Interest
Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders'
Monthly Interest Distributable Amount for such Distribution Date and
the Certificateholders' Interest Carryover Shortfall for such
Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount"
means, with respect to any Distribution Date, 30 days of interest
(or, in the case of the first Distribution Date, interest accrued
from and including the Closing Date to but excluding such
Distribution Date) at the Pass-Through Rate on the Certificate
Balance on the last day of the preceding Collection Period (or, in
the case of the first Distribution Date, on the Closing Date) after
giving effect to all distributions of principal to the
Certificateholders on or prior to such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the
Certificateholders' Monthly Interest Distributable Amount for the
preceding Distribution Date and any outstanding Certificateholders'
Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in
the Certificate Distribution Account on such preceding Distribution
Date, plus interest on such excess, to the extent permitted by law,
at the Pass-Through Rate from such preceding Distribution Date to but
excluding such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders'
Monthly Principal Distributable Amount for such Distribution Date and
the Certificateholders' Principal Carryover Shortfall as of the close
of the preceding Distribution Date; provided, however, that the
Certificateholders' Principal Distributable Amount shall not exceed
the Certificate Balance. In addition, on the Final Scheduled
Distribution Date, the principal required to be distributed to
Certificateholders will include the lesser of (a) the sum of (i) any
scheduled payments of principal due and remaining unpaid on each
Precomputed Receivable and (ii) any principal due and remaining
unpaid on each Simple Interest Receivable, in each case, owned by the
Trust as of the Final Scheduled Maturity Date or (b) the amount that
is necessary (after giving effect to the other amounts to be
deposited in the Certificate Distribution Account on such
Distribution Date and allocable to principal) to reduce the
Certificate Balance to zero.
"Certificateholders' Monthly Principal Distributable Amount"
means, with respect to any Distribution Date prior to the
Distribution Date on which the Notes are paid in full, zero; and with
respect to any Distribution Date commencing on the Distribution Date
on which the Notes are paid in full, 100% of the Principal
Distribution Amount (less, on the Distribution Date on which the
Notes are paid in full, the portion thereof payable as principal of
the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of
the close of any Distribution Date, the excess of the
Certificateholders' Monthly Principal Distributable Amount and any
outstanding Certificateholders' Principal Carryover Shortfall from
the preceding Distribution Date, over the amount in respect of
principalthatis actuallydepositedintheCertificate DistributionAccount.
"Certificate Balance" equals, initially, $
and, thereafter, equals the initial Certificate Balance,
reduced by all amounts allocable to principal previously distributed
to Certificateholders and all Realized Losses allocable to the
Certificates.
On each Distribution Date, all amounts on deposit in the Note
Distribution Account generally will be paid in the following order of
priority:
(i) to the applicable Noteholders, accrued and unpaid interest
on the outstanding principal balance of the applicable class of Notes
at the applicable Interest Rate;
(ii) to the Class A-1 Noteholders in reduction of principal
until the principal balance of the Class A-1 Notes has been reduced
to zero; and
(iii) to the Class A-2 Noteholders in reduction of principal
until the principal balance of the Class A-2 Notes has been reduced
to zero.
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders, first,
on account of the Certificateholders Interest Distributable Amount and
second, on account of the Certificateholder's Principal Distributable
Amount.
RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of
the Noteholders in the event of defaults or delinquencies on the
Receivables, as provided in the Sale and Servicing Agreement. The
protection afforded to the Noteholders through subordination will be
effected both by the preferential right of the Noteholders to receive
current distributions with respect to the Receivables and by the
establishment of the Reserve Account. The Reserve Account will be created
with an initial deposit by the Seller on the Closing Date of $
. In addition, on each Distribution Date until the amount on
deposit in the Reserve Account equals (state amount or formula for
determining amount) (the "Specified Reserve Account Balance"), all amounts
remaining in the Collection Account after payment of the Servicing Fee,
the Noteholders' Distributable Amount and the Certificateholders'
Distributable Amount will be deposited into the Reserve Account.
Thereafter, the amount available in the Reserve Account will be reinstated
on each Distribution Date up to the Specified Reserve Account Balance by
the deposit thereto of any portion of the Total Distribution Amount
remaining after payment on such date of the Servicing Fee, the
Noteholders' Distributable Amount and the Certificateholders'
Distributable Amount. If the amount on deposit in the Reserve Account on
any Distribution Date (after giving effect to all deposits or withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve
Account Balance for such Distribution Date, the Servicer will instruct the
Indenture Trustee to distribute an amount equal to such excess to the
Seller, subject to certain limitations set forth in the Sale and Servicing
Agreement. Upon any distribution to the Seller of amounts from the
Reserve Account, neither the Noteholders nor the Certificateholders will
have any rights in, recourse against or claims to, such amounts.
Except as provided in the previous paragraph, amounts held from time
to time in the Reserve Account will continue to be held for the benefit of
the Noteholders and Certificateholders. Funds will be withdrawn from cash
in the Reserve Account to the extent that the Total Distribution Amount
(after the payment of the Servicing Fee) with respect to any Collection
Period is less than the Noteholders' Distributable Amount and will be
deposited to the Note Distribution Account for distribution to the
Noteholders. In addition, funds will be withdrawn from cash in the
Reserve Account to the extent that the portion of the Total Distribution
Amount remaining after the payment of the Servicing Fee and the deposit of
the Noteholders' Distributable Amount to the Note Distribution Account is
less than the Certificateholders' Distributable Amount and will be
deposited to the Certificate Distribution Account for distribution to the
Certificateholders.
If on any Distribution Date the entire Noteholders' Distributable
Amount for such Distribution Date (after giving effect to any amounts
withdrawn from the Reserve Account) is not deposited in the Note
Distribution Account, the Certificateholders generally will not receive
any distributions.
The subordination of the Certificates and the Reserve Account are
intended to enhance the likelihood of receipt by Noteholders of the full
amount of principal and interest due to them and to
decrease the likelihood that the Noteholders will experience losses. In
addition, the Reserve Account is intended to enhance the likelihood of
receipt by Certificateholders of the full amount of principal and interest
due to them and to decrease the likelihood that the Certificateholders
will experience losses. However, in certain circumstances, the Reserve
Account could be depleted.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an employee benefit plan or an
individual retirement account (a "Plan") subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A
fiduciary of a Plan must determine that the purchase of a Note is
consistent with its fiduciary duties under ERISA and will not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Code. For additional information regarding treatment
of the Notes under ERISA, see "ERISA Considerations" in the Prospectus.
THE CERTIFICATES
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e) (1) of the Code
or (c) any entity whose underlying assets include plan assets by reason of
a plan's investment in the entity. By its acceptance of a Certificate,
each Certificateholder will be deemed to have represented and warranted
that it is not subject to the foregoing limitations. For additional
information regarding treatment of the Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement relating to the Notes and the Certificates (the "Underwriting
Agreement"), the Seller has agreed to cause the Trust to sell to Salomon
Brothers Inc (the "Underwriter"), and the Underwriter has agreed to
purchase, all of the Securities.
The Seller has been advised by the Underwriter that it proposes to
offer the Securities to the public initially at the public offering prices
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such prices less a concession of % per Class A-1 Note,
% per Class A-2 Note and % per Certificate; that the
Underwriter and such dealers may allow a discount of % per Class
A-1 Note, % per Class A-2 Note and % per Certificate on
sales to certain other dealers; and that after the initial public offering
of the Securities, the public offering prices and the concessions and
discounts to dealers may be changed by the Underwriter.
The Underwriting Agreement provides that the Seller will indemnify
the Underwriter against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriter may
be required to make in respect thereof.
The Trust may, from time to time, invest the funds in the Trust
Accounts in Eligible Investments acquired from the Underwriter.
The closing of the sale of the Certificates is conditioned on the
closing of the sale of the Notes, and the closing of the sale of the Notes
is conditioned on the closing of the sale of the Certificates.
Upon receipt of a request by an investor who has received an
electronic Prospectus Supplement and Prospectus from the Underwriter or of
such investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Seller
or the Underwriter will promptly deliver, or cause to be delivered,
without charge, a paper copy of the Prospectus Supplement and the
Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon
for the Trust and the Seller by Sonnenschein Nath & Rosenthal, Chicago,
Illinois. Certain federal income tax and other matters will be passed
upon for the Trust by Brown & Wood LLP, New York, New York and certain
state income and business tax matters will be passed upon for the Trust by
Sonnenschein Nath & Rosenthal. It is anticipated that Sonnenschein Nath &
Rosenthal will from time to time render legal services to the Seller, the
Servicer and their affiliates.
INDEX OF TERMS
ADG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Certificateholders' Distributable Amount . . . . . . . . . . . . . . S-26
Certificateholders' Interest Carryover Shortfall . . . . . . . . . . S-27
Certificateholders' Interest Distributable Amount . . . . . . . . . . S-27
Certificateholders' Monthly Interest Distributable Amount . . . . . . S-27
Certificateholders' Monthly Principal Distributable Amount . . . . . S-27
Certificateholders' Principal Carryover Shortfall . . . . . . . . . . S-27
Certificateholders' Principal Distributable Amount . . . . . . . . . S-27
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Class A-1 Final Scheduled Payment Date . . . . . . . . . . . . . . . S-5
Class A-1 Notes . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Class A-1 Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Class A-2 Final Scheduled Payment Date . . . . . . . . . . . . . . . S-5
Class A-2 Notes . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Class A-2 Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Dealer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Dealer Service Centers . . . . . . . . . . . . . . . . . . . . . . . S-10
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-5
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29
Final Scheduled Distribution Date . . . . . . . . . . . . . . . . . . S-6
Final Scheduled Maturity Date . . . . . . . . . . . . . . . . . . . . S-4
Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
First Merchants . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
franchised dealers . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
independent dealers . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Interest Distribution Amount . . . . . . . . . . . . . . . . . . . . S-25
Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Liquidated Receivables . . . . . . . . . . . . . . . . . . . . . . . S-25
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . S-25
non-prime borrowers . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Norwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-17
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Noteholders' Distributable Amount . . . . . . . . . . . . . . . . . . S-26
Noteholders' Interest Carryover Shortfall . . . . . . . . . . . . . . S-26
Noteholders' Interest Distributable Amount . . . . . . . . . . . . . S-26
Noteholders' Monthly Interest Distributable Amount . . . . . . . . . S-26
Noteholders' Monthly Principal Distributable Amount . . . . . . . . . S-26
Noteholders' Principal Carryover Shortfall . . . . . . . . . . . . . S-26
Noteholders' Principal Distributable Amount . . . . . . . . . . . . . S-26
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . S-25
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Receivables Purchase Agreement . . . . . . . . . . . . . . . . . . . S-3
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-4
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . S-4
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Specified Reserve Account Balance . . . . . . . . . . . . . . . . . . S-28
Sub-prime Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Total Distribution Amount . . . . . . . . . . . . . . . . . . . . . . S-24
Transfer and Servicing Agreements . . . . . . . . . . . . . . . . . . S-24
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover, S-3
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29
Underwriting Agreements . . . . . . . . . . . . . . . . . . . . . . . S-29
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations other than those contained or
incorporated by reference in this Prospectus
Supplement and the Prospectus in connection with
the offer made by this Prospectus Supplement and FIRST MERCHANTS AUTO TRUST
the Prospectus and, if given or made, such 199 -
information or representations must not be relied
upon as having been authorized. This Prospectus
Supplement and the Prospectus do not constitute an $ (Floating Rate)( %)
offer or solicitation by anyone in any state in ASSET BACKED NOTES, CLASS A-1
which such offer or solicitation is unauthorized
or in which the person making such offer or $ (Floating Rate)( %)
solicitation is not qualified to do so or to ASSET BACKED NOTES, CLASS A-2
anyone to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this $
Prospectus Supplement and the Prospectus nor any ASSET BACKED CERTIFICATES
sale made hereunder shall, under any
circumstances, create any implication that the
information contained herein or therein is correct
as of any time subsequent to the date of this
Prospectus Supplement or Prospectus.
( )
Seller
TABLE OF CONTENTS Page
PROSPECTUS SUPPLEMENT
Reports to Securityholders . . . . . . . . S-2
Summary of Terms . . . . . . . . . . . . . S-3
Risk Factors . . . . . . . . . . . . . . . . S-9 FIRST MERCHANTS ACCEPTANCE CORPORATION
The Seller . . . . . . . . . . . . . . . . S-10 Servicer
First Merchants Automobile Financing Program S-10
The Trust . . . . . . . . . . . . . . . . . S-17
The Receivables Pool . . . . . . . . . . . S-18
Weighted Average Life of the Securities . . S-21
Description of the Notes . . . . . . . . . S-21
Description of the Certificates . . . . . S-23 PROSPECTUS SUPPLEMENT
Description of the Transfer and Servicing
Agreements . . . . . . . . . . . . . . . . S-24 ___________________________________
ERISA Considerations . . . . . . . . . . . S-29
Underwriting . . . . . . . . . . . . . . . S-29 Salomon Brothers Inc
Legal Matters . . . . . . . . . . . . . . . S-30 ___________________________________
Index of Terms . . . . . . . . . . . . . . S-31
PROSPECTUS
Available Information . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference 2
Summary of Terms . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . 12
The Trusts . . . . . . . . . . . . . . . . . . 18
The Receivables Pools . . . . . . . . . . . . 20
Weighted Average Life of the Securities . . . 22
Pool Factors and Trading Information. . . . . 22
Use of Proceeds . . . . . . . . . . . . . . . 23
The Company and the Seller . . . . . . . . . 23
Description of the Notes . . . . . . . . . . . 24
Description of the Certificates . . . . . . . 28
Certain Information Regarding the Securities . 29
Description of the Transfer and Servicing
Agreements . . . . . . . . . . . . . . . . . 36
Certain Legal Aspects of the Receivables . . . 46
Certain Federal Income Tax Consequences . . . . 50
Certain State Tax Consequences with respect
to Owner Trusts . . . . . . . . . . . . . . . 61
ERISA Considerations . . . . . . . . . . . . . 62
Plan of Distribution . . . . . . . . . . . . . 64
Legal Matters . . . . . . . . . . . . . . . . . 65
Index of Principal Terms . . . . . . . . . . . 66
Until 90 days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates described in
this Prospectus Supplement, whether or not participating in
this distribution, may be required to deliver this Prospectus
Supplement and the Prospectus. This is in addition to the
obligation of dealers to deliver this Prospectus Supplement
and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
</TABLE>
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.
Subject to Completion, dated September 6, 1996
PROSPECTUS
- ----------
FIRST MERCHANTS AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
-------------------------
FIRST MERCHANTS ACCEPTANCE CORPORATION
-------------------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates
(the "Certificates"
and, together with the Notes, the "Securities") described herein may be
sold from time to time
in one or more series, in amounts, at prices and on terms to be determined
at the time of sale
and to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). Each
series of Securities, which will include one or more classes of
Certificates and may also
include one or more classes of Notes, will be issued by a trust to be
formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to
either (i) a Trust
Agreement to be entered into between either First Merchants Acceptance
Corporation (the "Company") or a special-purpose finance subsidiary
of the Company organized and
established by the Company (each such special-purpose finance subsidiary,
a "Transferor"), as
depositor, and the Trustee specified in the related Prospectus Supplement
(the "Trustee") or
(ii) a Pooling and Servicing Agreement to be entered into among the
Trustee, either the Company
or a Transferor, as seller, and the Company, as servicer (the "Servicer").
If a series of
Securities includes Notes, such Notes will be issued and secured pursuant
to an Indenture
between the Trust and the Indenture Trustee specified in the related
Prospectus Supplement (the
"Indenture Trustee") and will represent indebtedness of the related Trust.
The Certificates
of a series will represent fractional undivided interests in the related
Trust. Each
Prospectus Supplement will specify which class or classes of Notes, if
any, and/or which class
or classes of Certificates of the related series are being offered
thereby. The property of
each Trust will include a pool of motor vehicle retail installment sale
contracts and
installment loans secured by new or used automobiles, light duty trucks,
vans and minivans (the
"Receivables"), certain monies due or received thereunder on and after the
applicable Cutoff
Date set forth in the related Prospectus Supplement, security interests in
the vehicles
financed thereby and certain other property all as described herein and in
such Prospectus
Supplement (the "Trust Property"). In addition, if so specified in the
related Prospectus
Supplement, the property of the Trust will include monies on deposit in a
trust account (the
"Pre-Funding Account") and/or monies on deposit in a trust account (the
"Collateral
Reinvestment Account") to be established with the Indenture Trustee, which
will be used to
purchase additional motor vehicle retail installment sale contracts and
installment loans (the
"Subsequent Receivables") from the Seller (as defined herein) from time to
time during the
Funding Period or Revolving Period specified in such Prospectus
Supplement.
Except as otherwise provided in the related Prospectus Supplement,
each class of
Securities of any series will represent the right to receive a specified
amount of payments
of principal and interest on the related Receivables, at the rates, on the
dates and in the
manner described herein and in such Prospectus Supplement. If a series
includes multiple
classes of Securities, the rights of one or more classes of Securities to
receive payments may
be senior or subordinate to the rights of one or more of the other classes
of such series.
Distributions on Certificates of a series may be subordinated in priority
to payments due on
the Notes, if any, of such series to the extent described herein and in
the related Prospectus
Supplement. A series may include one or more classes of Notes and/or
Certificates which differ
from the other classes of such series as to the timing and priority of
payment, interest rate
or amount of distributions in respect of principal or interest or both. A
series may include
one or more classes of Notes or Certificates entitled to distributions in
respect of principal
with disproportionate, nominal or no interest distributions, or to
interest distributions, with
disproportionate,
nominal or no distributions in respect of principal. The
rate of payment in
respect of principal of any class of Notes and the rate of distributions
in respect of the Certificate Balance of the Certificates of any class
will depend on the priority of payment
of such class and the rate and timing of payments (including prepayments,
defaults, liquidations and repurchases of Receivables) on the related
Receivables. A rate of payment
lower or higher than that anticipated may affect the weighted average life
of each class of
Securities in the manner described herein and in the related Prospectus
Supplement.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE
12 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT,
THE NOTES OF A SERIES
WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES WILL
REPRESENT BENEFICIAL
INTERESTS IN, THE RELATED TRUST ONLY AND WILL NOT REPRESENT OBLIGATIONS OF
OR INTERESTS IN,
AND ARE NOT GUARANTEED OR INSURED BY, FIRST MERCHANTS ACCEPTANCE
CORPORATION OR ANY OF ITS
AFFILIATES OR ANY GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities offered hereby unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is September __, 1996.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, the Servicer will prepare
and forward to
the Applicable Trustee (as defined herein), for distribution to the
related
Securityholders, certain monthly and annual reports concerning such
Securities and the
related Trust. In addition, within the prescribed period of time for tax
reporting
purposes after the end of each calendar year during the term of each
Trust, the Applicable
Trustee will mail to each person who at any time during such calendar year
has been a
registered Securityholder with respect to such Trust and received any
payment thereon a
statement containing certain information for the purposes of such
Securityholder's
preparation of federal income tax returns. See "Certain Federal Income
Tax Consequences"
and "Certain Information Regarding the Securities -- Reports to
Securityholders" herein.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission")
a Registration Statement on Form S-3 (together with all amendments and
exhibits thereto,
the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities
Act"), with respect to the Securities being offered hereby. This
Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of
which have been omitted in accordance with the rules and regulations of
the Commission.
For further information, reference is made to the Registration Statement,
which is
available for inspection without charge at the public reference facilities
of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and the
regional offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400,
Chicago, Illinois 60661-2511, and Seven World Trade Center, Suite 1300,
New York, New York
10048. Copies of such information can be obtained from the Public
Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at
prescribed rates. The Commission maintains a Web site at
http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants,
including the Company, that file electronically with the Commission.
UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO HAS RECEIVED AN
ELECTRONIC PROSPECTUS
SUPPLEMENT AND PROSPECTUS FROM AN UNDERWRITER OR A REQUEST BY SUCH
INVESTOR'S
REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS AN OBLIGATION TO
DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS, THE SELLER OR THE UNDERWRITERS WITH
RESPECT TO THE
RELATED TRUST WILL PROMPTLY DELIVER, OR CAUSE TO BE DELIVERED, WITHOUT
CHARGE, TO SUCH
INVESTOR A PAPER COPY OF THE PROSPECTUS SUPPLEMENT AND PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company on behalf of the Trust referred to
in the
accompanying Prospectus Supplement with the Commission pursuant to Section
13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the
date of this
Prospectus and prior to the termination of the offering of the Securities
offered by such
Trust shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from
the dates of
filing of such documents. Any statement contained herein or in a document
incorporated or
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in the
accompanying Prospectus Supplement) or in any subsequently filed document
that also is or
is deemed to be incorporated by reference herein modifies or supersedes
such statement.
Any such statement so modified or superseded shall not be deemed, except
as so modified or
superseded, to constitute a part of this Prospectus.
The Company on behalf of any Trust will provide without charge to each
person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, on the
written or oral request of such person, a copy of any or all of the
documents incorporated
herein by reference, except the exhibits to such documents (unless such
exhibits are
specifically incorporated by reference into the documents incorporated
herein by
reference). Requests for such copies should be directed to Secretary,
First Merchants
Acceptance Corporation, 570 Lake Cook Road, Suite 126, Deerfield, Illinois
60015; telephone
(847) 948-9300.
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed
information appearing elsewhere in this Prospectus and by reference to the
information with
respect to the Securities of any series contained in the related
Prospectus Supplement to
be prepared and delivered in connection with the offering of such
Securities. Certain
capitalized terms used in this summary are defined elsewhere in this
Prospectus on the
pages indicated in the "Index of Terms".
Issuer . . . . . . . . . . . . . With respect to each series of
Securities,
the Trust to be formed pursuant to
either
a Trust Agreement (as amended and
supplemented from time to time, a
"Trust
Agreement") between the Seller and
the
Trustee for such Trust or a
Pooling and
Servicing Agreement (a "Pooling
and
Servicing Agreement") among the
Trustee,
the Seller and First Merchants
Acceptance
Corporation, as servicer (the
"Servicer")
for such Trust. Each Trust that
is taxable
as a partnership will be referred
to herein
as an "Owner Trust" and each Trust
that is
taxable as a grantor trust under
subpart E,
Part I of subchapter J of the Code
(as
hereinafter defined) will be
referred to
herein as a "Grantor Trust".
Company . . . . . . . . . . . . . First Merchants Acceptance
Corporation
("First Merchants" or the
"Company"), a
Delaware corporation. The
Company's
principal executive offices are
located at
570 Lake Cook Road, Suite 126,
Deerfield,
Illinois 60015, and its telephone
number is
(847) 948-9300. See "The Company
and the
Seller".
Seller . . . . . . . . . . . . . With respect to each series of
Securities,
either the Company or a special-
purpose
finance subsidiary of the Company
(each
such special-purpose finance
subsidiary, a
"Transferor").
Servicer . . . . . . . . . . . . First Merchants Acceptance
Corporation (the
"Servicer" or "First Merchants").
Trustee . . . . . . . . . . . . . With respect to each series of
Securities,
the Trustee specified in the
related
Prospectus Supplement.
Indenture Trustee . . . . . . . . With respect to any series of
Securities
that is issued by an Owner Trust
and
includes one or more classes of
Notes, the
Indenture Trustee specified in the
related
Prospectus Supplement.
Securities Offered . . . . . . . Each series of Securities issued
by an
Owner Trust will include one or
more
classes of Certificates and may
also
include one or more classes of
Notes. Each
series of Securities issued by a
Grantor
Trust will include one or more
classes of
Certificates, but will not include
any
Notes. Each class of Notes will
be issued
pursuant to an indenture (each, an
"Indenture") between the related
Owner
Trust and the Indenture Trustee
specified
in the related Prospectus
Supplement. Each
class of Certificates will be
issued
pursuant to the related Trust
Agreement or
the related Pooling and Servicing
Agreement. The related Prospectus
Supplement will specify which
class or
classes of Notes and/or
Certificates of the
related series are being offered
thereby.
The Notes . . . . . . . . . . . . Unless otherwise specified in the
related
Prospectus Supplement, Notes will
be
available for purchase in
denominations of
$1,000 and integral multiples
thereof and
will be available in book-entry
form only.
Unless otherwise specified in the
related
Prospectus Supplement, Noteholders
will be
able to receive Definitive Notes
(as
defined herein) only in the
limited
circumstances described herein or
in such
Prospectus Supplement. See
"Certain
Information Regarding the
Securities -- Definitive
Securities".
Unless otherwise specified in the
related
Prospectus Supplement, each class
of Notes
will have a stated principal
amount and
will accrue interest thereon at a
specified
rate (with respect to each class
of Notes,
the "Interest Rate"). Each class
of Notes
may have a different Interest
Rate, which
may be a fixed, variable or
adjustable
Interest Rate, or any combination
of the
foregoing. The related Prospectus
Supplement will specify the
Interest Rate
for each class of Notes, or the
method for
determining such Interest Rate.
With respect to a series that
includes two
or more classes of Notes, each
such class
may differ from the other class or
classes
of such series as to the timing
and
priority of payments, seniority,
allocations of losses, Interest
Rate or
amount of payments of principal or
interest, or payments of principal
or
interest in respect of any such
class or
classes may or may not be made
upon the
occurrence of specified events or
on the
basis of collectionsfrom designated
portions of the Receivables Pool
(as
defined herein).
In addition, a series may include
one or
more classes of Notes ("Strip
Notes")
entitled to (i) principal payments
with
disproportionate, nominal or no
interest
payments or (ii) interest payments
with
disproportionate, nominal or no
principal
payments.
If the Servicer exercises its
option to
purchase the Receivables of a
Trust (or, if
not, to the extent provided in the
related
Prospectus Supplement, if
satisfactory bids
for the purchase of such
Receivables are
received) in the manner and on the
respective terms and conditions
described
under "Description of the Transfer
and
Servicing Agreements --
Termination", the
outstanding Notes will be redeemed
as set
forth in such Prospectus
Supplement. In
addition, if the related
Prospectus
Supplement provides that the
property of a
Trust will include monies in a
Pre-Funding
Account or Collateral Reinvestment
Account
that will be used to purchase
additional
Receivables after the Closing
Date, one or
more classes of the outstanding
Notes will
be subject to partial redemption
at or
immediately following the end of
the
Funding Period or Revolving Period
(each as
defined herein and in such
Prospectus
Supplement), as applicable, in an
amount
and in the manner specified in
such
Prospectus Supplement. In the
event of
such partial redemption, the
Noteholders
may be entitled to receive a
prepayment
premium from the Trust, in the
amount and
to the extent provided in the
related
Prospectus Supplement.
The Certificates . . . . . . . . Unless otherwise specified in the
related
Prospectus Supplement,
Certificates will be
available for purchase in a
minimum
denomination of $1,000 and
integral
multiples thereof and will be
available in
book-entry form only. Unless
otherwise
specified in the related
Prospectus
Supplement, Certificateholders
will be able
to receive Definitive Certificates
(as
defined herein) only in the
limited
circumstances described herein or
in such
Prospectus Supplement. See
"Certain
Information Regarding the
Securities -- Definitive
Securities".
Unless otherwise specified in the
related
Prospectus Supplement, each class
of
Certificates will have a stated
Certificate
Balance specified in such
Prospectus
Supplement (the "Certificate
Balance") and
will accrue interest on such
Certificate
Balance at a specified rate (with
respect
to each class of Certificates, the
"Pass
Through Rate"). Each class of
Certificates
may have a different Pass Through
Rate,
which may be a fixed, variable or
adjustable Pass Through Rate, or
any
combination of the foregoing. The
related
Prospectus Supplement will specify
the Pass
Through Rate for each class of
Certificates
or the method for determining such
Pass
Through Rate.
With respect to a series that
includes two
or more classes of Certificates,
each such
class may differ from the other
class or
classes of such series as to the
timing and
priority of distributions,
seniority,
allocations of losses, Pass
Through Rate or
amount of distributions in respect
of
principal or interest, or
distributions in
respect of principal or interest
in respect
of any such class or classes may
or may not
be made upon the occurrence of
specified
events or on the basis of
collections from
designated portions of the
Receivables
Pool.
In addition, a series may include
one or
more classes of Certificates
("Strip
Certificates") entitled to (i)
distributions in respect of
principal with
disproportionate, nominal or no
interest
distributions or (ii) interest
distributions with
disproportionate,
nominal or no distributions in
respect of
principal.
If a series of Securities includes
classes
of Notes, distributions on the
Certificates
of such series may be subordinated
in
priority of payment to payments on
such
Notes to the extent specified in
the
related Prospectus Supplement.
If the Servicer exercises its
option to
purchase the Receivables of a
Trust (or, if
not, and if and to the extent
provided in
the related Prospectus Supplement,
if
satisfactory bids for the purchase
of such
Receivables are received) in the
manner and
on the respective terms and
conditions
described under "Description of
the
Transfer and Servicing Agreements
-- Termination",
Certificateholders will
receive as a prepayment in respect
of the
Certificates an amount specified
in such
Prospectus Supplement. In
addition, if the
related Prospectus Supplement
provides that
the property of a Trust will
include monies
in a Pre-Funding Account or
Collateral
Reinvestment Account that will be
used to
purchase additional Receivables
after the
Closing Date, one or more classes
of the
outstanding Certificates may
receive a
partial prepayment of principal at
or
immediately following the end of
the
Funding Period or Revolving
Period, as
applicable, in an amount and in
the manner
specified in such Prospectus
Supplement.
In the event of such partial
prepayment,
the Certificateholders may be
entitled to
receive a prepayment premium from
the
Trust, in the amount and to the
extent
provided in the related Prospectus
Supplement.
Master Trusts; Issuance of
Additional Series . . . . . . . . If so provided in the related
Prospectus
Supplement, the Seller may cause
one or
more of the Trusts (any such
Trust, a
"Master Trust") to issue
additional series
of Securities from time to time.
Under
each Trust Agreement relating to a
Master
Trust (each, a "Master Trust
Agreement"),
the Seller may determine the terms
of any
such new series. See "The Trusts-
Master
Trusts".
The Seller may cause the related
Trustee to
offer any such new series to the
public or
other investors, in transactions
either
registered under the Securities
Act or
exempt from registration
thereunder,
directly or through one or more
underwriters or placement agents,
in
fixed-price offerings or in
negotiated
transactions or otherwise.
A new series to be issued by a
Master Trust
which has a series outstanding may
be
issued only upon satisfaction of
the
conditions described herein under
"The
Trusts-Master Trusts". Securities
secured
by Receivables held by a Master
Trust shall
be entitled to monies received
relating to
such Receivables on a pari passu
basis with
other Securities issued pursuant
to the
other Trust Agreements or Pooling
and
Servicing Agreements, as
applicable by such
Master Trust.
Cross-Collateralization . . . . . As described in the related Trust
Agreement or Pooling and Servicing
Agreement, as applicable, and the
related
Prospectus Supplement, the source
of
payment for Securities of each
series will
be the assets of the related Trust
Property
only.
However, as may be described in
the related
Prospectus Supplement, a series or
class of
Securities may include the right
to receive
monies from a common pool of
credit
enhancement which may be available
for more
than one series of Securities,
such as a
master reserve account, master
insurance
policy or a master collateral pool
consisting of similar Receivables.
Notwithstanding the foregoing, and
as
described in the related
Prospectus
Supplement, no payment received on
any
Receivable held by any Trust may
be applied
to the payment of Securities
issued by any
other Trust (except to the limited
extent
that certain collections in excess
of the
amounts needed to pay the related
Securities may be deposited in a
common
master reserve account or an
overcollateralization account that
provides
credit enhancement for more than
one series
of Securities issued pursuant to
the
related Trust Agreement or Pooling
and
Servicing Agreement, as
applicable).
The Trust Property . . . . . . . The property of each Trust will
include a
pool of motor vehicle retail
installment
sale contracts and installment
loans
secured by new or used
automobiles, light
duty trucks, vans and minivans
(the
"Receivables"), certain monies due
or
received thereunder on and after
the
applicable Cutoff Date set forth
in the
related Prospectus Supplement,
security
interests in the vehicles financed
thereby
(the "Financed Vehicles"), certain
accounts
andtheproceedsthereofandanyproceeds
from claims under certain related
insurance
policies. On the Closing Date
specified in
the related Prospectus Supplement
with
respect to a Trust, the Seller
will, if so
specified in such Prospectus
Supplement,
sell or transfer Receivables (the
"Initial
Receivables") having an aggregate
principal
balance specified in such
Prospectus
Supplement as of the date
specified therein
(the "Initial Cutoff Date") to
such Trust
pursuant to either, in the case of
certain
Owner Trusts, a Sale and Servicing
Agreement among the Seller, the
Servicer
and the Owner Trust (a "Sale and
Servicing
Agreement") or, in the case of
Grantor
Trusts and certain other Owner
Trusts, the
related Pooling and Servicing
Agreement
among the Seller, the Servicer and
the
Trustee. The property of each
Trust will
also include amounts on deposit in
certain
trust accounts, including the
related
Collection Account, any Pre-
Funding
Account, any Collateral
Reinvestment
Account, any Reserve Account (as
defined
herein) and any other account
identified in
the applicable Prospectus
Supplement and
such other property as is
specified in such
Prospectus Supplement, including
notes or
other securities evidencing or
backed by
Receivables, security interests in
the
Financed Vehicles and related
property
("Receivables Backed Assets").
To the extent provided in the
related
Prospectus Supplement, from time
to time
(as frequently as daily) during
the period
(the "Funding Period") specified
in such
Prospectus Supplement, the Seller
will be
obligated (subject only to the
availability
thereof) to sell, and the related
Trust
will be obligated to purchase
(subject to
the satisfaction of certain
conditions
described in the applicable Sale
and
Servicing Agreement or Pooling and
Servicing Agreement), additional
Receivables (the "Subsequent
Receivables")
having an aggregate principal
balance
approximately equal to the amount
on
deposit (the "Pre-Funded Amount")
in an
account (the "Pre-Funding
Account") on the
related Closing Date.
In addition, if so provided in the
related
Prospectus Supplement, in lieu of
a Funding
Period, during the period (the
"Revolving
Period") from the Closing Date
until the
first to occur of (i) such event
or events
as are described in such
Prospectus
Supplement (each, an "Early
Amortization
Event") or (ii) the last day of
the
Collection Period (as defined
herein)
preceding a Distribution Date
specified in
such Prospectus Supplement, an
account will
be maintained in the name of the
related
Trustee or Indenture Trustee (the
"Collateral Reinvestment
Account"). The
amount on deposit in the
Collateral
Reinvestment Account on the
Closing Date
may, if so specified in the
related
Prospectus Supplement, include an
amount to
be deposited out of the net
proceeds of the
sale of the related Securities.
During the
Revolving Period, principal will
not be
distributed on the Securities of
the
related series. Instead,
principal
collections, together with (if and
to the
extent described in the related
Prospectus
Supplement) interest collections
on the
Receivables that are in excess of
amounts
required to be distributed
therefrom, will
be deposited from time to time in
the
Collateral Reinvestment Account
and will be
used to purchase Subsequent
Receivables.
As used in this Prospectus, the
term
Receivables will include the
Initial
Receivables transferred to a Trust
on the
Closing Date as well as any
Subsequent
Receivables transferred to such
Trust
during the related Funding Period
or
Revolving Period, if any.
Amounts on deposit in any Pre-
Funding
Account during the related Funding
Period
or in any Collateral Reinvestment
Account
during the related Revolving
Period will be
invested by the applicable Trustee
(as
directed by the Servicer) in
Eligible
Investments, and any resultant
investment
income, less any related
investment
expenses ("Investment Income"),
will be
added, on the Distribution Date
immediately
following the date on which such
Investment
Income is paid to the Trust, to
interest
collections on the Receivables for
the
related Collection Period and
distributed
in the manner specified in the
related
Prospectus Supplement. Any funds
remaining
in a Pre-Funding Account at the
end of the
related Funding Period or in a
Collateral
Reinvestment Account at the end of
the
related Revolving Period will be
distributed as a prepayment or
early
distribution of principal to
holders of one
or more classes of the Notes
and/or
Certificates of the related series
of
Securities, in the amounts and in
accordance with the payment
priorities
specified in the related
Prospectus
Supplement. In no event will a
Funding
Period continue for more than one
year
after the related Closing Date.
See "Risk
Factors -- Pre-Funding Accounts",
"-- Sales
of Subsequent Receivables" and
"Description
of the Transfer and Servicing
Agreements --
Accounts".
The Company will acquire the
Receivables
from one or more motor vehicle
dealers
("Dealers"), pursuant to
agreements with
the Dealers, or from financial
institutions
or other holders of the
Receivables that
have originated the Receivables or
have
purchased them from Dealers or
other
originating entities. The
Receivables for
any given Receivables Pool will be
sold by
the Company to the Trust or to a
Transferor
(which will in turn sell the
Receivables to
the Trust) and will be selected
from the
contracts and loans owned by the
Seller
based on the criteria specified in
the
related Sale and Servicing
Agreement or
Pooling and Servicing Agreement,
as
applicable, and described herein
and in the
related Prospectus Supplement.
Credit and Cash Flow
Enhancement . . . . . . . . . . . If and to the extent specified in
the
related Prospectus Supplement,
credit
enhancement with respect to a
Trust or any
class or classes of Securities may
include
any one or more of the following:
subordination of one or more other
classes
of Securities, reserve funds, a
Reserve
Account, spread accounts,
overcollateralization, insurance
policies,
letters of credit, credit or
liquidity
facilities, cash collateral
accounts,
surety bonds, guaranteed
investment
contracts, swaps or other interest
rate
protection agreements, repurchase
obligations, yield supplement
agreements,
other agreements with respect to
third
party payments or other support,
cash
deposits or other arrangements.
To the
extent specified in the related
Prospectus
Supplement, a form of credit
enhancement
will be subject to certain
limitations and
exclusions from coverage
thereunder.
Reserve Account . . . . . . . . . If and to the extent specified in
the
related Prospectus Supplement, a
Reserve
Account will be created for a
Trust with an
initial deposit by the Seller of
cash or
certain investments having a value
equal to
the amount specified in such
Prospectus
Supplement. To the extent
specified in the
related Prospectus Supplement,
funds in the
Reserve Account will thereafter be
supplemented by the deposit of
amounts
remaining on any Distribution Date
after
making all other distributions
required on
such date and any amounts
deposited from
time to time from the Pre-Funding
Account
or Collateral Reinvestment Account
in
connection with a purchase of
Subsequent
Receivables. Amounts in the
Reserve
Account, if any, will be available
to cover
shortfalls in amounts due to the
holders of
those classes of Securities
specified in
the related Prospectus Supplement
in the
manner and under the circumstances
specified therein. The related
Prospectus
Supplement will also specify to
whom and
the manner and circumstances under
which
amounts on deposit in the Reserve
Account
(after giving effect to all other
required
distributions to be made by the
applicable
Trust) in excess of the Specified
Reserve
Account Balance (as defined in
such
Prospectus Supplement) will be
distributed.
Transfer and Servicing
Agreements . . . . . . . . . . . With respect to each Trust, the
Seller will
sell the related Receivables and
such other
Trust Property as is specified in
the
related Prospectus Supplement to
such Trust
pursuant to a Sale and Servicing
Agreement
or a Pooling and Servicing
Agreement, as
applicable. The rights and
benefits of an
Owner Trust under any Sale and
Servicing
Agreement will, if such Owner
Trust issues
Notes, be assigned to the related
Indenture
Trustee as collateral for such
Notes
pursuant to the related Indenture.
The
Servicer will agree with each
Trust to be
responsible for servicing,
managing,
maintaining custody of and making
collections on the Receivables.
The
Company will undertake certain
administrative duties under an
Administration Agreement with
respect to
each Owner Trust that is formed
pursuant to
a Trust Agreement.
If so provided in the related
Prospectus
Supplement, the Servicer will
advance
scheduled payments not timely made
with
respect to Precomputed Receivables
(a
"Precomputed Advance") and will
advance
shortfalls in interest payments
with
respect to Simple Interest
Receivables (a
"Simple Interest Advance"), in
each case to
the extent that the Servicer, in
its sole
discretion, expects to be able to
recoup
such Precomputed Advance or Simple
Interest
Advance from subsequent payments
on or with
respect to the Receivables or from
any
other source identified in such
Prospectus
Supplement. As used herein,
"Advance"
means any Precomputed Advance or
Simple
Interest Advance. The Servicer
will be
entitled to reimbursement of
Advances from
subsequent payments on or with
respect to
the Receivables or from other
sources to
the extent described in the
related
Prospectus Supplement.
Unless otherwise provided in the
related
Prospectus Supplement, the Seller
will be
obligated to repurchase any
Receivable in
which the interest of the
applicable Trust
is materially and adversely
affected as a
result of a breach of any
representation or
warranty made by the Seller in the
related
Sale and Servicing Agreement or
Pooling and
Servicing Agreement, as
applicable, if such
breach is not cured in a timely
manner
following the discovery by or
notice to the
Seller thereof.
Unless otherwise provided in the
related
Prospectus Supplement, the
Servicer will be
obligated to purchase any
Receivable if,
among other things, it extends the
date for
final payment by the Obligor (as
defined
herein) of such Receivable beyond
the last
day of the Collection Period
relating to
the applicable Final Scheduled
Maturity
Date (as defined in such
Prospectus
Supplement), changes the annual
percentage
rate ("APR") or amount of a
scheduled
payment of such Receivable or
fails to
maintain a perfected security
interest in
the related Financed Vehicle.
Unless otherwise specified in the
related
Prospectus Supplement, the
Servicer will be
entitled to receive a fee for
servicing the
Receivables of each Trust equal to
a
specified percentage of the
aggregate
principal balance of the related
Receivables Pool, as set forth in
such
Prospectus Supplement, plus
certain late
fees, prepayment charges and other
administrative fees or similar
charges.
See "Description of the Transfer
and
Servicing Agreements -- Servicing
Compensation and Payment of
Expenses"
herein and in the related
Prospectus
Supplement.
Certain Legal Aspects of the
Receivables; Repurchase
Obligations . . . . . . . . . . . In connection with the sale of the
Receivables, security interests in
the
Financed Vehicles securing the
Receivables
will be assigned by the Company to
(i) the
related Trust pursuant to either a
Sale and
Servicing Agreement or a Pooling
and
Servicing Agreement and may be
pledged by
the Trust pursuant to an Indenture
as
security for the Notes, if any, or
(ii) a
Transferor pursuant to a
Receivables
Purchase Agreement, which
Transferor will,
in turn, assign such security
interests to
the Trust pursuant to either a
Sale and
Servicing Agreement or a Pooling
and
Servicing Agreement. Due to the
administrative burden and expense,
however,
the certificates of title to the
Financed
Vehicles will not be amended or
reissued to
reflect the sale of the
Receivables to
either a Transferor or the Trust
or the
pledge pursuant to any Indenture.
In the
absence of such amendments, either
the
related Trust, the Applicable
Trustee or
both may not have a perfected
security
interest in the Financed Vehicles
securing
the Receivables in some states.
The
Company will be obligated to
repurchase any
Receivables sold to the related
Trust or to
a Transferor (and subsequently
sold by such
Transferor to such Trust) as to
which there
did not exist on the Closing Date
a first
priority perfected security
interest in the
name of the Company in the related
Financed
Vehicle if such failure materially
and
adversely affects the interest of
the
Transferor or such Trust in such
Receivable
and if such failure is not cured
in a
timely manner.
To the extent their respective
security
interests in a Financed Vehicle
are
perfected, the related Trust and
the
Applicable Trustee will have a
prior claim
over subsequent purchasers of such
Financed
Vehicle and holders of
subsequently
perfected security interests
therein.
However, as against liens for
repairs or
storage of a Financed Vehicle or
for taxes
unpaid by the related Obligor, or
through
fraud or negligence, the related
Trust or
the Applicable Trustee could lose
its
security interest or the priority
of its
security interest in a Financed
Vehicle.
The Company will not have any
obligation to
repurchase a Receivable with
respect to
which the related Trust or the
Applicable
Trustee loses its security
interest or the
priority of its security interest
in the
related Financed Vehicle after the
Closing
Date due to any such lien for
repairs,
storage or taxes or the negligence
or fraud
of a third party.
Federal and state consumer
protection laws
impose requirements upon creditors
in
connection with extensions of
credit and
collections of retail installment
loans,
and certain of these laws make an
assignee
of such a loan liable to the
obligor
thereon for any violation by the
lender.
Unless otherwise
specified in the related
Prospectus Supplement, the Seller
will be
obligated to repurchase from the
applicable
Trust any Receivable that fails to
comply
with such requirements.
Tax Status . . . . . . . . . . . Unless the Prospectus Supplement
specifies
that the related Trust will be a
Grantor
Trust and, except as otherwise
provided in
such Prospectus Supplement, upon
the
issuance of the related series of
Securities, (a) Federal Tax
Counsel (as
defined herein) to such Trust will
deliver
an opinion to the effect that, for
federal
income tax purposes: (i) any Notes
of such
series will be characterized as
debt and
(ii) such Trust will not be
characterized
as an association (or a publicly
traded
partnership) taxable as a
corporation and
(b) Illinois Tax Counsel (as
defined
herein) to such Trust will deliver
an
opinion to the effect that the
same
characterizations should apply for
Illinois
income tax purposes as for
federal income tax purposes. In
respect of
any such series, each Noteholder,
if any,
by the acceptance of a Note of
such series,
will agree to treat such Note as
indebtedness, and each
Certificateholder,
by the acceptance of a Certificate
of such
series, will agree to treat such
Trust as
a partnership in which such
Certificateholder is a partner for
federal
income and Illinois income tax
purposes. Alternative
characterizations of
such Trust and such Certificates
are
possible, but would not result in
materially adverse tax
consequences to
Certificateholders.
If a Prospectus Supplement
specifies that
the related Trust will be a
Grantor Trust
and, except as otherwise provided
in such
Prospectus Supplement, upon the
issuance of
the related series of
Certificates, Federal
Tax Counsel to such Trust will
deliver an
opinion to the effect that such
Trust will
be treated as a grantor trust for
federal
income tax purposes and will not
be subject
to federal income tax.
See "Certain Federal Income Tax
Consequences" and "Certain State
Tax
Consequences with Respect to Owner
Trusts"
for additional information
concerning the
application of federal and
Illinois tax
laws.
ERISA Considerations . . . . . . Subject to the considerations
discussed
under "ERISA Considerations"
herein and in
the related Prospectus Supplement,
and
unless otherwise specified
therein, any
Notes of a series issued by an
Owner Trust
and any Certificates that are
issued by a
Grantor Trust and that meet
certain
Department of Labor requirements
are
eligible for purchase by employee
benefit
plans.
Unless otherwise specified in the
related
Prospectus Supplement, the
Certificates of
any series that are subordinate to
any
other Security of that series may
not be
acquired by any employee benefit
plan
subject to the Employee Retirement
Income
Security Act of 1974, as amended
("ERISA"),
or by any individual retirement
account.
See "ERISA Considerations" herein
and in
the related Prospectus Supplement.
Ratings . . . . . . . . . . . . It is a condition to the issuance
of the
Securities to be offered hereunder
that
they be rated in one of the four
highest
rating categories by at least one
nationally recognized statistical
rating
organization. A rating is not a
recommendation to purchase, hold
or sell
Securities inasmuch as such rating
does not
comment as to market price or
suitability
for a particular investor.
Ratings of
Securities will address the
likelihood of
the payment of principal and
interest
thereon pursuant to their terms.
The
ratings of Securities will not
address the
likelihood of an Early
Amortization Event.
There can be no assurance that a
rating
will remain for a given period of
time or
that a rating will not be lowered
or
withdrawn entirely by a rating
agency if in
its judgment circumstances in the
future so
warrant. For more detailed
information
regarding the ratings assigned to
any class
of a particular series of
Securities, see
"Summary of Terms -- Rating of the
Securities" or " -- Ratings of
the
Certificates", as applicable, and
"Risk
Factors -- Ratings of the
Securities" or "
-- Ratings of the Certificates",
as
applicable, in the related
Prospectus
Supplement.
RISK FACTORS
In addition to the other information contained in this Prospectus and
in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of any
series of Securities, prospective investors should carefully consider the
following risk
factors before investing in any class or classes of Securities of any such
series.
Pre-Funding Accounts and Collateral Reinvestment Accounts. If so
provided in the
related Prospectus Supplement, on the Closing Date the Pre-Funded Amount
specified in such
Prospectus Supplement will be deposited into the Pre-Funding Account. In
no event will the
Pre-Funded Amount exceed 40% of the initial aggregate principal amount of
the Notes and/or
Certificates of the related series of Securities. In addition, if so
specified in the
related Prospectus Supplement, on the Closing Date specified amounts will
be deposited into
the Collateral Reinvestment Account. During the Revolving Period,
principal will not be
distributed on the Securities of the related series, and principal
collections, together
with (if and to the extent described in the related Prospectus Supplement)
interest
collections on the Receivables that are in excess of amounts required to
be distributed
therefrom, will be deposited from time to time in the Collateral
Reinvestment Account. The
Pre-Funded Amount and the amounts on deposit in the Collateral
Reinvestment Account will
be used to purchase Subsequent Receivables from the Seller (which, if not
the Company, in
turn, will acquire such Subsequent Receivables from the Company) from time
to time during
the related Funding Period or Revolving Period, as applicable. During
such Funding Period
or Revolving Period and until such amounts are applied by the Trustee to
purchase
Subsequent Receivables, amounts on deposit in the Pre-Funding Account or
the Collateral
Reinvestment Account will be invested by the Applicable Trustee (as
instructed by the
Servicer) in Eligible Investments. Any investment income with respect
thereto (net of any
related investment expenses) will be added to amounts received on or in
respect of the
Receivables during the related Collection Period (as defined herein) and
allocated to
interest. Such amounts will be distributed on the Distribution Date
pursuant to the
payment priorities specified in the related Prospectus Supplement. No
Funding Period will
end more than one year after the related Closing Date.
To the extent that the entire Pre-Funded Amount or the entire amount
on deposit in the
CollateralReinvestment Accounthasnotbeen appliedtothe purchaseofSubsequent
Receivables by the end of the related Funding Period or Revolving Period,
any amounts
remaining in the Pre-Funding Account or the Collateral Reinvestment
Account will be
distributed as a prepayment of principal to Noteholders and
Certificateholders
(collectively, the "Securityholders") on the Distribution Date at or
immediately following
the end of such Funding Period or Revolving Period, in the amounts and
pursuant to the
priorities set forth in the related Prospectus Supplement.
Sales of Subsequent Receivables. If so provided in the related
Prospectus Supplement,
the Seller will be obligated pursuant to the Pooling and Servicing
Agreement or Sale and
Servicing Agreement, as applicable, to sell Subsequent
Receivables to the Trust, and the Trust will be obligated to purchase such
Subsequent
Receivables, subject only to the satisfaction of certain conditions set
forth in the
Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable, and
described in such Prospectus Supplement. If the principal amount of the
eligible
Subsequent Receivables acquired by the Company from Dealers or other
originators during a
Funding Period or Revolving Period is less than the Pre-Funded Amount or
the amount on
deposit in the Collateral Reinvestment Account, as the case may be, the
Company may have
insufficient Subsequent Receivables to transfer to a Trust. As a result,
holders of one
or more classes of the related series of Securities may receive a
prepayment or early
distribution of principal at the end of the Funding Period or Revolving
Period as described
above under "--Pre-Funding Accounts and Collateral Reinvestment Accounts".
Any conveyance of Subsequent Receivables to a Trust is subject to the
satisfaction,
on or before the related transfer date (each, a "Subsequent Transfer
Date"), of the
following conditions precedent, among others: (i) each such Subsequent
Receivable must
satisfy the eligibility criteria specified in the related Pooling and
Servicing Agreement
or Sale and Servicing Agreement, as applicable; (ii) the Seller shall not
have selected
such Subsequent Receivables in a manner that is adverse to the interests
of holders of the
related Securities; (iii) as of the respective Cutoff Dates (as such term
is defined in the
related Prospectus Supplement) for such Subsequent Receivables, all of the
Receivables in
the Trust, including the Subsequent Receivables to be conveyed to the
Trust as of such
date, must satisfy the parameters described under "The Receivables Pools"
herein and "The
Receivables Pool" in such Prospectus Supplement; and (iv) the Seller must
execute and
deliver to such Trust a written assignment conveying such Subsequent
Receivables to such
Trust. In addition, as and to the extent specified in the related
Prospectus Supplement,
the conveyance of Subsequent Receivables to a Trust is subject to the
satisfaction of the
condition subsequent, among others, which must be satisfied within the
applicable time
period specified in such Prospectus Supplement, that the Seller deliver
certain legal
opinions to the related Trustee with respect to the validity of the
conveyance of the
Subsequent Receivables to the Trust. If any such conditions precedent or
conditions
subsequent are not met with respect to any Subsequent Receivables within
the time period
specified in the related Prospectus Supplement, the Seller will be
required to repurchase
such Subsequent Receivables from the related Trust, at a purchase price
equal to the
related Purchase Amounts (as defined herein) therefor.
Except as described herein and in the related Prospectus Supplement,
there will be no
other required characteristics of Subsequent Receivables. Therefore, the
characteristics
of the entire Receivables Pool included in any Trust may vary
significantly as Subsequent
Receivables are conveyed to such Trust from time to time during the
Funding Period or
Revolving Period. See "The Receivables Pools" herein.
Certain Legal Aspects - Security Interests in Financed Vehicles. In
connection with
the sale and assignment of the Receivables by the Company to either the
related Trust or
a Transferor, if any, and by such Transferor to such Trust and any
pledge of the Receivables by such Trust to the related Indenture Trustee,
the security
interests in the related Financed Vehicles granted to the Company by the
Obligors on such
Receivables will be transferred and assigned by the Company to either such
Trust or such
Transferor and by such Transferor, if any, to such Trust and may be
pledged by such Trust
to the Indenture Trustee as security for the Notes, if any. Due to the
administrative
burden and expense, however, the certificates of title to the Financed
Vehicles will not
be amended or reissued to reflect the assignment of such security
interests by the Company
to the related Trust or related Transferor, if any, or by such Transferor
to such Trust or
any pledge pursuant to an Indenture. In the absence of such amendments,
either the Trust,
the Applicable Trustee or both may not have a perfected security interest
in the Financed
Vehicles securing the Receivables in some states. In addition, by not
identifying the
related Trust as the secured party on the certificate of title, the
security interest of
either such Trust, the Indenture Trustee or both could be defeated through
the negligence
or fraud of the Company or as a result of the imposition of a lien for
repairs or storage
of a Financed Vehicle or for taxes unpaid by the related Obligor. The
Company will make
certain representations and warranties in the related Receivables Purchase
Agreement (in
the case of a sale of the Receivables from the Company to a Transferor) or
in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement (in the
case of a sale of
the Receivables from the Company to the related Trust) with respect to its
conveyance of
a perfected security interest in the Financed Vehicles and will be
obligated to repurchase
from the Trust any Receivable with respect to which the interest of either
the Trust, the
Applicable Trustee or both is materially and adversely affected by (1) the
failure to amend
or reissue the certificate of title of the Financed Vehicle to reflect the
Trust's interest
therein or (2) the failure of the Company to have a first priority
perfected security
interest in its name in the Financed Vehicle on the Closing Date if such
failure is not
cured in a timely manner. The Servicer also will be obligated under the
related Sale and
Servicing Agreement or Pooling and Servicing Agreement to purchase from
the Trust any
Receivable with respect to which the Servicer fails to maintain a
perfected security
interest in the name of the Company in the related Financed Vehicle if
such failure (i) is
not cured in a timely manner and (ii) materially and adversely affects the
interest of the
Trust in such Receivable. The repurchase obligations of the Company and
the Servicer will
constitute the sole remedy available to the Trust with respect to the
Company or the
Servicer for any such uncured breach or failure.
To the extent that the Trust's and the Indenture Trustee's security
interest in a
Financed Vehicle is perfected, the Trust and the Indenture Trustee will
have a prior claim
under applicable state laws over subsequent purchasers of such Financed
Vehicle and holders
of subsequently perfected security interests therein. However, as against
liens for
repairs or storage of a Financed Vehicle or taxes unpaid by the Obligor on
the Receivable
secured thereby, the Trust and the Applicable Trustee could lose their
respective security
interests or the priority of such security interests in a Financed
Vehicle. In addition,
even if the Seller, the Trust or the Applicable Trustee were to be
identified as the
secured party on the certificate of title of a
Financed Vehicle, such secured party's security interest could be defeated
by the fraud or
forgery of the vehicle owner or by administrative errors by applicable
state or local
agencies responsible for titling vehicles. The Company will not have any
obligation to
repurchase a Receivable with respect to which the Trust or the Applicable
Trustee loses its
security interest in the related Financed Vehicle after the Closing Date
due to any such
lien for repairs, storage or taxes or due to the negligence or fraud of a
third party.
Certain Legal Aspects--Consumer Protection Laws. Federal and state
consumer
protection laws impose requirements on creditors in connection with
extensions of credit
and collections of retail installment loans, and certain of these laws
make an assignee of
such a loan liable to the obligor thereon for any violation by the lender.
Unless
otherwise specified in the related Prospectus Supplement, the Seller will
be obligated to
repurchase from the applicable Trust any Receivable that does not comply
with such consumer
protection law requirements.
Most states impose requirements and restrictions relating to
foreclosure sales of
vehicles and on obtaining deficiency judgments relating to such sales. A
Trust may not
realize the full amount due on a Receivable because of the application of
those
requirements and restrictions, or because of depreciation, damage or loss
of a Financed
Vehicle or other factors. Federal bankruptcy laws and related state laws
also may
interfere with or affect the ability of a secured party to realize upon
collateral or
enforce a deficiency judgment. For example, in a Chapter 13 proceeding
under the federal
bankruptcy law, a court may prevent a creditor from repossessing a
Financed Vehicle and,
as part of the rehabilitation plan, reduce the amount of the secured
indebtedness to the
market value of the Financed Vehicle at the time of the bankruptcy,
leaving the creditor
as a general unsecured creditor for the remainder of the indebtedness.
Certain Legal Aspects--Insolvency Considerations. The Company will
take steps in
structuring the transactions contemplated hereby that are intended to
ensure that the
voluntary or involuntary application for relief by the Company under the
United States
Bankruptcy Code or similar applicable state laws ("Insolvency Laws") will
not result in the
consolidation of the assets and liabilities of any Transferor with those
of the Company.
These steps include the creation of such Transferor, if any, as a
separate,
limited-purpose entity pursuant to a certificate of incorporation
containing certain
limitations (including restrictions on the nature of its business, the
requirement that an
independent director be on its Board of Directors and a restriction on its
ability to
commence a voluntary case or proceeding under any Insolvency Law without
the prior
unanimous affirmative vote of all its directors). In connection with the
issuance of the
Securities, counsel to the Company will deliver its opinion to the effect
that the assets
and liabilities of the related Trust and the related Transferor, if any,
would not be
consolidated with those of the Company in the case of a proceeding under
any Insolvency Law
in respect of the Company. However, there can be no assurance that the
assets and
liabilities of the related Trust and the related Transferor, if any, would
not be
consolidated with those of the Company in a
proceeding under an Insolvency Law. See "The Company and the Seller".
First Merchants will warrant either (i) to a Transferor, if any, in
the related
Receivables Purchase Agreement or (ii) to the related Trust in the related
Sale and
Servicing Agreement or Pooling and Servicing Agreement that the sale of
the related
Receivables to such Transferor or Trust, respectively, by the Company will
be a valid sale.
In addition, the Company will treat the transactions described herein as
sales of the
Receivables to such Transferor or such Trust and will commit to take all
actions that are
required to perfect such Transferor's or such Trust's ownership interests
in the
Receivables, and the related Transferor, if any, will treat the
transactions described
herein as sales to such Trust of all of such Transferor's right, title and
interest in and
to the Receivables and will take all actions required to protect such
Trust's ownership
interest in the Receivables. Notwithstanding the foregoing, if the
Company or any
Transferor were to become a debtor in a bankruptcy case, and if a creditor
or
trustee-in-bankruptcy of such debtor or such debtor itself were to take
the position that
the sales of the Receivables to such Transferor or Trust, as applicable,
should be
recharacterized as pledges of the Receivables to secure a borrowing of the
debtor, then
delays in payments to such Trust of collections on the Receivables could
occur or (should
the court rule in favor of any such trustee, debtor or creditor)
reductions in the amounts
of such payments could result. If the sales of Receivables to any
Transferor or Trust are
recharacterized as pledges, a tax or government lien arising before the
transfer of such
Receivables to such Transferor or Trust, as applicable, might have
priority over such
Trust's interest in such Receivables. Each Trust will receive an opinion
of counsel to the
effect that the transactions contemplated herein will be treated as sales
and the
Receivables would not be part of the Company's or any Transferor's
bankruptcy estate and
would not be available to the Company's or any Transferor's creditors or,
in the
alternative, that the transferor will have a perfected first priority
security interest in
the Receivables.
The U.S. Court of Appeals for the Tenth Circuit in its decision in
Octagon Gas
Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May 27,
1993) determined
that "accounts," a defined term under the Uniform Commercial Code, would
be included in the
bankruptcy estate of a transferor regardless of whether the transfer is
treated as a sale
or a secured loan. Although the Receivables are likely to be viewed as
"chattel paper,"
as defined under the Uniform Commercial Code, rather than as accounts, the
Octagon holding
is equally applicable to chattel paper. The circumstances under which the
Octagon ruling
would apply are not fully known and the extent to which the Octagon
decision will be
followed in other courts or outside the Tenth Circuit is not certain. If
the holding in
the Octagon case were applied in a bankruptcy of the Company or any
Transferor, even if the
transfer of Receivables were treated as a sale, the Receivables would be
part of the
Company's or such Transferor's bankruptcy estate and would be subject to
claims of certain
creditors, and delays and reductions in payments to the Securityholders
could result.
Unless otherwise provided in the related Prospectus Supplement, with
respect to each
Trust that is not a grantor trust, if an Insolvency Event occurs with
respect to the
Seller, the Indenture Trustee or Trustee for such Trust will promptly
sell, dispose of or
otherwise liquidate the related Receivables in a commercially reasonable
manner on
commercially reasonable terms, except under certain limited circumstances.
The proceeds
from any such sale, disposition or liquidation of Receivables will be
treated as
collections on the Receivables and deposited in the Collection Account of
such Trust. If
the proceeds from the liquidation of the Receivables and any amounts on
deposit in the
Reserve Account, if any, the Note Distribution Account, if any, and the
Certificate
Distribution Account with respect to any such Trust and any amounts
available from any
credit enhancement are not sufficient to pay any Notes and the
Certificates of the related
series in full, the amount of principal returned to any Noteholders or the
Certificateholders will be reduced and such Noteholders and
Certificateholders will incur
a loss. See "Description of the Transfer and Servicing Agreements-
Insolvency Event".
Nature of Obligors and Financed Vehicles; Servicing. The Obligors on
the Receivables
are primarily "non-prime" borrowers who are generally relatively higher
credit risks due
to various factors, including their past credit experience and the absence
or limited
extent of their credit history. Typical "non-prime" borrowers include
young borrowers (18
to 25 years old) who are trying to establish an initial credit history,
previously bankrupt
borrowers who desire to re-establish their credit history, slow payers of
credit cards and
department store accounts and borrowers who desire payment terms slightly
longer than the
maximum term permitted by traditional sources of consumer credit. The
average interest
rate charged by the Company to such "non-prime" borrowers is generally
higher than that
charged by commercial banks, financing arms of automobile manufacturers
and other
traditional sources of consumer credit, which typically impose more
stringent credit
requirements. The payment experience on receivables of obligors with this
credit profile
is likely to be different from that on receivables of traditional auto
financing sources
in that default and delinquency rates are likely to be higher. In
addition, the payment
experience on such receivables is likely to be more sensitive to changes
in the economic
climate in the areas in which such obligors reside. As a result of the
credit profile of
the Obligors and the APRs of the Receivables, the historical credit loss
and delinquency
rates on the Receivables may be higher than those experienced by banks and
the captive
finance companies of the automobile manufacturers. In the event of a
default under a
Receivable, the only source of repayment may be liquidation proceeds from
the related
Financed Vehicle; the Financed Vehicles securing the Receivables will
consist primarily of
used vehicles which may not have a liquidation value sufficient to pay in
full the amount
financed by the related Receivable. See "First Merchants' Automobile
Financing Program --
Credit Loss Experience" and "-- Delinquency Experience" in the related
Prospectus
Supplement.
The servicing of receivables of customers with such credit profiles
requires special
skill and diligence. The Servicer believes that its credit loss and
delinquency experience
reflect
in part its trained staff and collection procedures. If the Company is
removed as
Servicer, or if the Company resigns or is terminated as Servicer by the
Security Insurer
(as defined in the related Prospectus Supplement), if any, then a backup
servicer, if any,
or other successor servicer will agree to assume the obligations of
successor servicer
under the related Sale and Servicing Agreement or the related Pooling and
Servicing
Agreement. There can be no assurance, however, that collections with
respect to the
Receivables would not be adversely affected by a change in servicer.
Trust's Relationship to the Seller, the Company and their Affiliates.
None of the
Company, any Transferor or any of their affiliates is generally obligated
to make any
payments in respect of any Notes, the Certificates or the Receivables of a
given Trust.
However, in connection with the sale of Receivables by the Seller to a
given Trust,
the Seller will make representations and warranties with respect to the
characteristics of
such Receivables and, in certain circumstances, the Seller may be required
to repurchase
Receivables with respect to which such representations and warranties have
been breached.
See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of
Receivables". In addition, under certain circumstances, the Servicer may
be required to
purchase Receivables or to advance amounts with respect to payments due on
the Receivables.
See "Description of the Transfer and Servicing Agreements -- Servicing
Procedures".
Moreover, if the Company were to cease acting as Servicer, delays in
processing payments
on the Receivables and information in respect thereof could occur and
result in delays in
payments to the Securityholders.
The related Prospectus Supplement may set forth certain additional
information
regarding the Company and any Transferor. In addition, the Company is
subject to the
information requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange
Act"), and in accordance therewith files reports and other information
with the Securities
and Exchange Commission (the "Commission"). For further information
regarding the Company,
reference is made to such reports and other information, which are
available as described
under "Available Information".
Subordination of Certain Classes of Securities. To the extent
specified in the
related Prospectus Supplement, distributions of interest and principal on
one or more
classes of Notes or Certificates of a series may be subordinated in
priority of payment to
interest and principal due on certain of the Notes, if any, of such series
or one or more
classes of Certificates of such series.
Limited Assets of the Trust. None of the Trusts will have, nor will
any Trust be
permitted or expected to have, any significant assets or sources of funds
other than the
Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding
Account, a Collateral Reinvestment Account, a Reserve Account and any
other credit
enhancement or Trust Property. The Notes of any series will represent
obligations solely
of, and the Certificates of any series will represent interests solely in,
the related
Trust, and neither the Notes nor
the Certificates of any series will be insured or guaranteed by the
Seller, the Servicer,
the applicable Trustee, any Indenture Trustee or any other person or
entity. Consequently,
holders of the Securities of any series must rely for repayment upon
payments on the
related Receivables and, if and to the extent available, amounts on
deposit in the Pre-Funding Account (if any), the Collateral Reinvestment
Account (if any), the Reserve Account
(if any) and any other credit enhancement, all as specified in the related
Prospectus
Supplement.
Master Trusts. As may be described in the related Prospectus
Supplement, a Master
Trust may issue from time to time more than one series. While the terms
of any additional
series will be specified in a supplement to the related Master Trust
Agreement, the
provisions of such supplement and, therefore, the terms of such additional
series, will not
be subject to prior review by, or consent of, holders of the Securities of
any series
previously issued by such Master Trust. Such terms may include methods
for determining
applicable investor percentages and allocating collections, provisions
creating different
or additional security or credit enhancements and any other provisions
which are made
applicable only to such series. The obligation of the related Trustee to
issue any new
series is subject to the condition, among others, that such issuance will
not result in any
Rating Agency (as such term is defined in the related Prospectus
Supplement) reducing or
withdrawing its rating of the Securities of any outstanding series (any
such reduction or
withdrawal is referred to herein as a "Ratings Effect"). There can be no
assurance,
however, that the terms of any series might not have an impact on the
timing or amount of
payments received by a Securityholder of another series issued by the same
Master Trust.
See "The Trusts -- Master Trusts".
Maturity and Prepayment Considerations. All the Receivables are
prepayable at any
time. (For this purpose, the term "prepayments" includes prepayments in
full, partial
prepayments (including those related to rebates of extended warranty
contract costs and
insurance premiums), liquidations due to default, losses caused by the
issuance of an order
by a court in any insolvency proceeding reducing the amount owed under a
Receivable, as
well as receipts of proceeds from physical damage, credit life and
disability insurance
policies and certain other Receivables repurchased for administrative
reasons.) 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 generally may not sell
or transfer the
Financed Vehicle securing a Receivable without the consent of the Seller.
The rate of
prepayment on the Receivables may also be influenced by the structure of
the loan. In
addition, under certain circumstances, the Seller will be obligated to
repurchase
Receivables pursuant to a Sale and Servicing Agreement or Pooling and
Servicing Agreement
as a result of breaches of representations and warranties and, under
certain circumstances,
the Servicer will be obligated to purchase Receivables pursuant to a Sale
and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of
certain covenants.
See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of
Receivables". Any reinvestment risks resulting from a faster or slower
incidence of
prepayment of Receivables held by a given Trust will be borne entirely by
the
Securityholders of the related series of Securities. See also
"Description of the Transfer
and Servicing Agreements -- Termination" regarding the Servicer's option
to purchase the
Receivables of a given Receivables Pool and "-- Insolvency Event"
regarding the sale of the
Receivables owned by an Owner Trust if an Insolvency Event with respect to
the Seller
occurs.
Holders of Notes and Certificates should consider, in the case of
Securities purchased
at a discount, the risk that a slower than anticipated rate of principal
payments on the
Receivables could result in an actual yield that is less than the
anticipated yield and,
in the case of any Securities purchased at a premium, the risk that a
faster than
anticipated rate of principal payments on the Receivables could result in
an actual yield
that is less than the anticipated yield.
Risk of Commingling. With respect to each Trust, the Servicer will
deposit all
payments on the related Receivables (from whatever source) and all
proceeds of such
Receivables collected during each Collection Period into the Collection
Account of such
Trust within two business days of receipt thereof. However, if so
provided in the related
Prospectus Supplement, in the event that the Company satisfies certain
requirements for
monthly or less frequent remittances and the Rating Agencies affirm their
ratings of the
related Securities at the initial level, then for so long as the Company
is the Servicer
and provided that (i) there exists no Servicer Default (as defined herein)
and (ii) each
other condition to making such monthly or less frequent deposits as may be
specified by the
Rating Agencies and described in such Prospectus Supplement is satisfied,
the Servicer will
not be required to deposit such amounts into the Collection Account of
such Trust until on
or before the business day preceding each Distribution Date. The Servicer
will deposit the
aggregate Purchase Amount of Receivables purchased by the Servicer into
the applicable
Collection Account on or before the business day preceding each
Distribution Date. Pending
deposit into such Collection Account, collections may be invested by the
Servicer at its
own risk and for its own benefit and will not be segregated from funds of
the Servicer.
If the Servicer were unable to remit such funds, the applicable
Securityholders might incur
a loss. To the extent set forth in the related Prospectus Supplement, the
Servicer may,
in order to satisfy the requirements described above, obtain a letter of
credit or other
security for the benefit of the related Trust to secure timely remittances
of collections
on the related Receivables and payment of the aggregate Purchase Amount
with respect to
Receivables purchased by the Servicer.
Servicer Default. Unless otherwise provided in the related Prospectus
Supplement with
respect to a series of Securities issued by an Owner Trust that includes
Notes, in the
event a Servicer Default occurs, the related Indenture Trustee or the
Noteholders with
respect to such series, as described under "Description of the Transfer
and Servicing
Agreements -- Rights upon Servicer Default", may remove the Servicer
without the consent
of the Trustee or any of the Certificateholders with respect to such
series. The Trustee
or the Certificateholders with respect to such series will not have the
ability to remove
the Servicer if a Servicer Default occurs. In addition, the Noteholders
of such series
have the ability, with certain
specified exceptions, to waive defaults by the Servicer, including
defaults that could
materially adversely affect the Certificateholders of such series. See
"Description of the
Transfer and Servicing Agreements -- Waiver of Past Defaults".
Ratings of the Securities. It is a condition to the issuance of the
Securities to be
offered hereunder that they be rated in one of the four highest rating
categories by at
least one nationally recognized statistical rating organization. A rating
is not a
recommendation to purchase, hold or sell Securities inasmuch as such
rating does not
comment as to market price or suitability for a particular investor.
Ratings of Securities
will address the likelihood of the payment of principal and interest
thereon pursuant to
their terms. The ratings of Securities will not address the likelihood of
an Early
Amortization Event. There can be no assurance that a rating will remain
for a given period
of time or that a rating will not be lowered or withdrawn entirely by a
rating agency if
in its judgment circumstances in the future so warrant. For more detailed
information
regarding the ratings assigned to any class of a particular series of
Securities, see
"Summary of Terms -- Rating of the Securities" and "Risk Factors --
Ratings of the
Securities" in the related Prospectus Supplement.
Book-Entry Registration. Unless otherwise specified in the related
Prospectus
Supplement, each class of Securities of a given series will be initially
represented by one
or more certificates registered in the name of Cede & Co. ("Cede"), or any
other nominee
for The Depository Trust Company ("DTC") set forth in such Prospectus
Supplement (Cede, or
such other nominee, "DTC's Nominee"), and will not be registered in the
names of the
holders of the Securities of such series or their nominees. Because of
this, unless and
until Definitive Securities (as defined herein) for such series are
issued, holders of such
Securities will not be recognized by the applicable Trustee or any
applicable Indenture
Trustee as "Certificateholders", "Noteholders" or "Securityholders", as
the case may be (as
such terms are used herein or in the related Pooling and Servicing
Agreement or related
Indenture and Trust Agreement, as applicable). Hence, until Definitive
Securities are
issued, holders of such Securities will be able to exercise the rights of
Securityholders
only indirectly through DTC and its participating organizations. See
"Certain Information
Regarding the Securities -- Book-Entry Registration" and "-- Definitive
Securities".
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust
pursuant to the respective Trust Agreement or Pooling and Servicing
Agreement, as
applicable, for the transactions described herein and in the related
Prospectus Supplement.
The property of each Trust will include a pool (a "Receivables Pool") of
motor vehicle
retail installment sales contracts and installment loans generally between
dealers (the
"Dealers") and purchasers (the "Obligors") of new and used automobiles,
light duty trucks,
vans and minivans and, unless otherwise provided in the related Prospectus
Supplement, all
payments due thereunder on and after the applicable Cutoff Date in the
case of Precomputed
Receivables (as defined herein) and all payments received thereunder on
and after the
applicable
Cutoff Date in the case of Simple Interest Receivables (as defined
herein). The Company
will acquire the Receivables of each Receivables Pool from Dealers,
pursuant to agreements
with the Dealers ("Dealer Agreements"), or from financial institutions or
other holders of
the Receivables that have originated the Receivables or have purchased
them from Dealers
or other originating entities. Such Receivables will subsequently be sold
to the Seller
and will continue to be serviced by the Servicer. On the applicable
Closing Date, after
the issuance of the Certificates and any Notes of a given series, the
Seller will sell the
Initial Receivables of the applicable Receivables Pool to the Trust to the
extent, if any,
specified in the related Prospectus Supplement. If and to the extent so
provided in the
related Prospectus Supplement, Subsequent Receivables will be conveyed to
the Trust as
frequently as daily during the Funding Period. In addition, if so
provided in the related
Prospectus Supplement, the property of a Trust may also include monies
deposited into the
Collateral Reinvestment Account on the Closing Date. During the Revolving
Period,
principal will not be distributed on the Securities of the related series,
and principal
collections on the Receivables of such series, together with (if and to
the extent
described in the related Prospectus Supplement) interest collections on
such Receivables
that are in excess of amounts required to be distributed therefrom, will
be deposited from
time to time in the Collateral Reinvestment Account and will be used by
the Trust to
purchase Subsequent Receivables during such Revolving Period. Any
Subsequent Receivables
so conveyed will also be assets of the applicable Trust, subject, in the
case of any Owner
Trust that issues Notes, to the prior rights of the related Indenture
Trustee and the
Noteholders, if any, in such Subsequent Receivables. The property of each
Trust will also
include (i) such amounts as from time to time may be held in separate
trust accounts
established and maintained pursuant to the related Sale and Servicing
Agreement or Pooling
and Servicing Agreement and the proceeds of such accounts, as described
herein and in the
related Prospectus Supplement; (ii) security interests in the Financed
Vehicles and any
other interest of the Seller in such Financed Vehicles; (iii) the rights
to proceeds from
claims on certain physical damage, credit life and disability insurance
policies covering
the Financed Vehicles or the Obligors, as the case may be; (iv) the
interest of the Seller
in any proceeds from recourse to Dealers or other originators on
Receivables or Financed
Vehicles with respect to which the Servicer has determined that eventual
repayment in full
is unlikely; (v) any property that shall have secured a Receivable and
that shall have been
acquired by the applicable Trust; and (vi) any and all proceeds of the
foregoing. To the
extent specified in the related Prospectus Supplement, a Pre-Funding
Account, a Collateral
Reinvestment Account, a Reserve Account or other form of credit
enhancement or such other
property, including Receivables Backed Assets, may be a part of the
property of any given
Trust or may be held by the Trustee or an Indenture Trustee for the
benefit of holders of
the related Securities. Additionally, pursuant to contracts between the
Company and the
Dealers or lenders, the Dealers or lenders have an obligation after
origination to
repurchase Receivables as to which they have made certain
misrepresentations.
The Servicer will continue to service the Receivables held by each
Trust and will
receive fees for such services. See
"Description of the Transfer and Servicing Agreements -- Servicing
Compensation and Payment
of Expenses" herein and in the related Prospectus Supplement. To
facilitate the servicing
of the Receivables, the Seller and each Trustee will authorize the
Servicer to retain
physical possession of the Receivables held by each Trust and other
documents relating
thereto as custodian for each such Trust. Due to the administrative
burden and expense,
the certificates of title to the Financed Vehicles will not be amended to
reflect the sale
and assignment of the security interest in the Financed Vehicles to each
Trust. In the
absence of such an amendment, any Trust may not have a perfected security
interest in the
Financed Vehicles in all states. See "Certain Legal Aspects of the
Receivables" and
"Description of the Transfer and Servicing Agreements -- Sale and
Assignment of
Receivables".
If the protection provided to any Noteholders of a given series by the
subordination
of the related Certificates and by the Reserve Account, if any, or other
credit enhancement
for such series or the protection provided to Certificateholders by any
such Reserve
Account or other credit enhancement is insufficient, such Noteholders or
Certificateholders, as the case may be, would have to look principally to
the Obligors on
the related Receivables, the proceeds from the repossession and sale of
Financed Vehicles
which secure defaulted Receivables and the proceeds from any recourse
against Dealers or
other originators with respect to such Receivables. In such event,
certain factors, such
as the applicable Trust's not having perfected security interests in the
Financed Vehicles
in all states, may affect the Servicer's ability to repossess and sell the
collateral
securing the Receivables, and thus may reduce the proceeds to be
distributed to the holders
of the Securities of such series. See "Description of the Transfer and
Servicing
Agreements -- Distributions", "-- Credit and Cash Flow Enhancement" and
"Certain Legal
Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the
applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement.
The Trustee's liability in connection with the issuance and sale of the
related Securities
will be limited solely to the express obligations of such Trustee set
forth in the related
Trust Agreement and the Sale and Servicing Agreement or the related
Pooling and Servicing
Agreement, as applicable. A Trustee may resign at any time, in which
event the Servicer,
or its successor (or, in the case of an Owner Trust that issues Notes, the
Administrator
(as defined herein) thereof), will be obligated to appoint a successor
trustee. The
Administrator of any Owner Trust that issues Notes and the Servicer in
respect of any
Grantor Trust may also remove the Trustee if the Trustee ceases to be
eligible to continue
as Trustee under the related Trust Agreement or Pooling and Servicing
Agreement, as
applicable, or if the Trustee becomes insolvent. In such circumstances,
the Administrator
or Servicer, as applicable, will be obligated to appoint a successor
trustee. Any
resignation or removal of a Trustee and appointment of a
successor trustee will not become effective until acceptance of the
appointment by the
successor trustee.
MASTER TRUSTS
If so provided in the related Prospectus Supplement, each Trust
Agreement or Pooling
and Servicing Agreement, as applicable, may provide that, pursuant to any
one or more
supplements thereto, the Seller may direct the related Trustee to issue
from time to time
new series subject to the conditions described below (each such issuance,
a "Master Trust
New Issuance"). Each Master Trust New Issuance will have the effect of
decreasing the
residual interest in the related Master Trust. Under each such Master
Trust Agreement, the
Seller may designate, with respect to any newly issued series: (i) its
name or designation;
(ii) its initial principal amount (or method for calculating such amount);
(iii) its
Interest Rate (or a formula for the determination thereof); (iv) the
Distribution Dates and
the date or dates from which interest shall accrue; (v) the method for
allocating
collections to Securityholders of such series; (vi) any bank accounts to
be used by such
series and the terms governing the operation of any such bank accounts;
(vii) the
percentage used to calculate monthly servicing fees; (viii) the provider
and terms of any
form of credit enhancement with respect thereto; (ix) the terms on which
the Securities of
such series may be repurchased or remarketed to other investors; (x) the
number of classes
of Securities of such series and, if such series consists of more than one
class, the
rights and priorities of each such class; (xi) the extent to which the
Securities of such
series will be issuable in book-entry form; (xii) the priority of such
series with respect
to any other series; and (xiii) any other relevant terms. None of the
Seller, the
Servicer, the related Trustee or any Master Trust is required or intends
to obtain the
consent of any Securityholder of any outstanding series to issue any
additional series.
Each Master Trust Agreement provides that the Seller may designate
terms such that
each Master Trust New Issuance has an amortization period which may have a
different length
and begin on a different date than such periods for any series previously
issued by the
related Master Trust and then outstanding. Moreover, each Master Trust New
Issuance may
have the benefits of credit enhancements issued by enhancement providers
different from the
providers of the credit enhancement, if any, with respect to any series
previously issued
by the related Master Trust and then outstanding. Under each Master Trust
Agreement, the
related Trustee shall hold any such credit enhancement only on behalf of
the
Securityholders to which such credit enhancement relates. The Seller will
have the option
under each Master Trust Agreement to vary among series the terms upon
which a series may
be repurchased by the Issuer or remarketed to other investors. As more
fully described in
a related Prospectus Supplement, there is no limit to the number of Master
Trust New
Issuances that the Seller may cause under a Master Trust Agreement. Each
Master Trust will
terminate only as provided in the related Master Trust Agreement. There
can be no
assurance that the terms of any Master Trust New Issuance might not have
an impact on the
timing and amount of payments received by Securityholders of another
series issued by the
same Master Trust.
Under each Master Trust Agreement and pursuant to a related
supplement, a Master Trust
New Issuance may occur only upon the satisfaction of certain conditions
provided in each
such Master Trust Agreement. The obligation of the related Trustee to
authenticate the
Securities of any such Master Trust New Issuance and to execute and
deliver the supplement
to the related Master Trust Agreement is subject to the satisfaction of
the following
conditions: (a) on or before the date upon which the Master Trust New
Issuance is to occur,
the Seller shall have given the related Trustee, the Servicer, the Rating
Agencies and
certain related providers of credit enhancement, if any, written notice of
such Master
Trust New Issuance and the date upon which the Master Trust New Issuance
is to occur; (b)
the Seller shall have delivered to such Trustee a supplement to such
Master Trust
Agreement, in form satisfactory to such Trustee, executed by each party to
such Master
Trust Agreement other than such Trustee; (c) the Seller shall have
delivered to such
Trustee any related credit enhancement agreement; (d) such Trustee shall
have received
confirmation from the Rating Agency that such Master Trust New Issuance
will not result in
any Rating Agency reducing or withdrawing its rating with respect to any
other series or
class of such Trust (any such reduction or withdrawal is referred to
herein as a "Ratings
Effect"); (e) the Seller shall have delivered to such Trustee, the Rating
Agency and
certain providers of credit enhancement, if any, an opinion of counsel
acceptable to such
Trustee that for federal income tax purposes (i) following such Master
Trust New Issuance
the related Master Trust will not be deemed to be an association (or
publicly traded
partnership) taxable as a corporation, (ii) such Master Trust New Issuance
will not affect
the tax characterization as debt of Securities of any outstanding series
or class issued
by such Master Trust that were characterized as debt at the time of their
issuance and
(iii) such Master Trust New Issuance will not cause or constitute an event
in which gain
or loss would be recognized by any Securityholders or such Master Trust;
and (f) any other
conditions specified in any supplement. Upon satisfaction of the above
conditions, the
related Trustee shall execute the supplement to the related Master Trust
Agreement and
issue the Securities of such new series.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool have been or will be
purchased by the Company
from Dealers or lenders in the ordinary course of business through the
Company's branches
located in the United States. The retail installment sale contracts and
installment loans
are purchased pursuant to the Dealer Agreements or other lender
agreements. The Company
purchases contracts and loans in accordance with its credit standards,
which are based upon
the vehicle buyer's ability and willingness to repay the obligation as
well as the value
of the vehicle being financed. The Company will sell retail installment
sale contracts and
installment loans that it acquires to either (i) the related Trust
pursuant to a Sale and
Servicing Agreement or a Pooling and Servicing Agreement or (ii) a
Transferor pursuant to
a Receivables Purchase Agreement.
The Receivables to be held by each Trust will be selected from the
Company's portfolio
for inclusion in a Receivables Pool by several criteria, including that,
unless otherwise
provided in the related Prospectus Supplement, each Receivable (i) is
secured by a new or
used vehicle, (ii) was originated or acquired (either from a Dealer,
financial institution
or other holder of the Receivables) by the Company in the United States,
(iii) provides for
level monthly payments (except for the last payment, which may be
minimally different from
the level payments that fully amortize the amount financed over the
original term to
maturity of the related Receivable, (iv) is a Precomputed Receivable or a
Simple Interest
Receivable and (v) satisfies the other criteria, if any, set forth in such
Prospectus
Supplement. No selection procedures believed by the Seller to be adverse
to the
Securityholders of any series were or will be used in selecting the
related Receivables.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables
("Actuarial Receivables") or (ii) receivables that provide for allocation
of payments
according to the "sum of periodic balances" or "sum of monthly payments"
method ("Rule of
78's Receivables"). An Actuarial Receivable provides for amortization of
the loan over a
series of fixed level payment monthly installments. Each monthly
installment, including
the monthly installment representing the final payment on the Receivable,
consists of an
amount of interest equal to 1/12 of the APR of the loan multiplied by the
unpaid principal
balance of the loan, and an amount of principal equal to the remainder of
the monthly
payment. A Rule of 78's Receivable provides for the payment by the
obligor of a specified
total amount of payments, payable in equal monthly installments on each
due date, which
total represents the principal amount financed and add-on interest in an
amount calculated
at the stated APR for the term of the receivable. The rate at which such
amount of add-on
interest is earned and, correspondingly, the amount of each fixed monthly
payment allocated
to reduction of the outstanding principal are calculated in accordance
with the
"Rule of 78's".
"Simple Interest Receivables" are receivables that provide for the
amortization of the
amount financed under each receivable over a series of fixed level monthly
payments.
However, unlike the monthly payment under an Actuarial Receivable, each
monthly payment
consists of an installment of interest which is calculated on the basis of
the outstanding
principal balance of the receivable multiplied by the stated APR and
further multiplied by
the period elapsed (as a fraction of a calendar year) since the preceding
payment of
interest was made. As payments are received under a Simple Interest
Receivable, the amount
received is applied first to interest accrued to the date of payment and
the balance is
applied to reduce the unpaid principal balance. Accordingly, if 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, 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. In either case, the obligor pays a
fixed monthly
installment until the final scheduled payment date, at which time the
amount of the final
installment is increased or decreased as necessary to repay the then
outstanding principal
balance.
In the event of the prepayment in full (voluntarily or by
acceleration) of a Rule of
78's Receivable, under the terms of the contract or loan, a "refund" or
"rebate" will be
made to the obligor of the portion of the total amount of payments then
due and payable
under the contract or loan allocable to "unearned" add-on interest,
calculated in
accordance with a method equivalent to the Rule of 78's. If an Actuarial
Receivable is
prepaid in full, with minor variations based upon state law, the Actuarial
Receivable
requires that the rebate be calculated on the basis of a constant interest
rate. If a
Simple Interest Receivable is prepaid, rather than receive a rebate, the
obligor is
required to pay interest only to the date of prepayment. The amount of a
rebate under a
Rule of 78's Receivable generally will be less than the amount of a rebate
on an Actuarial
Receivable and generally will be less than the remaining scheduled
payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were
made on schedule.
Unless otherwise provided in the related Prospectus Supplement, each
Trust will
account for the Rule of 78's Receivables as if such Receivables were
Actuarial Receivables.
Amounts received upon prepayment in full of a Rule of 78's Receivable in
excess of the then
outstanding principal balance of such Receivable and accrued interest
thereon (calculated
pursuant to the actuarial method) will not be paid to the Noteholders, if
any, or passed
through to the Certificateholders of the applicable series but will be
paid to the Servicer
as additional servicing compensation.
Information with respect to each Receivables Pool will be set forth in
the related
Prospectus Supplement, including, to the extent appropriate, the
composition, the
distribution by APR and by the states of origination, the portion of such
Receivables Pool
consisting of Precomputed Receivables and of Simple Interest Receivables
and the portion
of such Receivables Pool secured by new vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of the Company
pertaining to
delinquencies, repossessions and net losses with respect to new and used
retail automobile,
light duty truck, van and minivan receivables (including receivables
previously sold which
the Company continues to service) will be set forth in each Prospectus
Supplement. There
can be no assurance that the delinquency, repossession and net loss
experience on any
Receivables Pool will be comparable to prior experience or to such
information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates
of any series
will generally be influenced by the rate at which the principal balances
of the related
Receivables are paid, which payment may be in the form of scheduled
amortization or
prepayments. (For this purpose, the term "prepayments" includes
prepayments in full,
partial prepayments (including those related to rebates of extended
warranty contract costs
and insurance premiums), liquidations due to default, losses caused by the
issuance of an
order by a court in any insolvency proceeding reducing the amount owed
under a Receivable,
as well as receipts of proceeds from physical damage, credit life and
disability insurance
policies and certain other Receivables repurchased by the Seller or the
Servicer for
administrative reasons.) All of the Receivables are prepayable at any time
without penalty
to the Obligor. The rate of prepayment of automotive receivables is
influenced by a
variety of economic, social and other factors, including the fact that an
Obligor generally
may not sell or transfer the Financed Vehicle securing a Receivable
without the consent of
the Seller. The rate of prepayment on the Receivables may also be
influenced by the
structure of the loan. In addition, under certain circumstances, the
Company or a
Transferor, if any, will be obligated to repurchase Receivables from a
given Trust pursuant
to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement as a result
of breaches of representations and warranties and, under certain
circumstances, the
Servicer will be obligated to purchase Receivables from such Trust
pursuant to such Sale
and Servicing Agreement or Pooling and Servicing Agreement as a result of
breaches of
certain covenants. See "Description of the Transfer and Servicing
Agreements -- Sale and
Assignment of Receivables" and "-- Servicing Procedures". See also
"Description of the
Transfer and Servicing Agreements -- Termination" regarding the Servicer's
option to
purchase the Receivables from a given Trust and "-- Insolvency Event"
regarding the sale
of the Receivables owned by an Owner Trust if an Insolvency Event with
respect to the
Seller applicable to such Trust occurs.
In light of the above considerations, there can be no assurance as to
the amount of
principal payments to be made on the Notes, if any, or the Certificates of
a given series
on each Distribution Date since such amount will depend, in part, on the
amount of
principal collected on the related Receivables Pool during the applicable
Collection
Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment
of Receivables will be borne entirely by the Noteholders, if any, and the
Certificateholders of a given series. The related Prospectus Supplement
may set forth
certain additional information with respect to the maturity and prepayment
considerations
applicable to the particular Receivables Pool and the related series of
Securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the
Servicer will compute prior to each distribution with respect to such
class of Notes
indicating the remaining outstanding principal balance of such class of
Notes, as of the
applicable Distribution Date (after giving effect to payments to be made
on such
Distribution Date), as a fraction of the initial outstanding principal
balance of such
class of Notes.
The "Certificate Pool Factor" for each class of Certificates will be a
seven-digit decimal
which the Servicer will compute prior to each distribution with respect to
such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates,
as of the applicable Distribution Date (after giving effect to
distributions to be made on
such Distribution Date), as a fraction of the initial Certificate Balance
of such class of
Certificates. Each Note Pool Factor and each Certificate Pool Factor will
initially be
1.0000000 and thereafter will decline to reflect reductions in the
outstanding principal
balance of the applicable class of Notes, or the reduction of the
Certificate Balance of
the applicable class of Certificates, as the case may be. A Noteholder's
portion of the
aggregate outstanding principal balance of the related class of Notes is
the product of
(i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool
Factor. A Certificateholder's portion of the aggregate outstanding
Certificate Balance for
the related class of Certificates is the product of (a) the original
denomination of such
Certificateholder's Certificate and (b) the applicable Certificate Pool
Factor.
Unless otherwise provided in the related Prospectus Supplement, the
Noteholders, if
any, and the Certificateholders will receive reports on or about each
Distribution Date
concerning, with respect to the Collection Period immediately preceding
such Distribution
Date, payments received on the Receivables, the Pool Balance (as such term
is defined in
such Prospectus Supplement), each Certificate Pool Factor or Note Pool
Factor, as
applicable, and various other items of information. In addition,
Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later
than the latest date permitted by law. See "Certain Information Regarding
the Securities -- Reports to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
net proceeds from
the sale of the Securities of a series will be applied by the applicable
Trust (i) to the
purchase of the Receivables from the Seller, (ii) to make the initial
deposit into the
Reserve Account, if any, (iii) to make the deposit, if any, of the Pre-
Funded Amount into
the Pre-Funding Account, if any, and (iv) to make the initial deposit, if
any, to the
Collateral Reinvestment Account, if any. Unless otherwise specified in
the related
Prospectus Supplement, the Seller will use that portion of such net
proceeds paid to it
with respect to any such Trust for general corporate purposes.
THE COMPANY AND THE SELLER
THE COMPANY
The Company is a specialty finance company primarily engaged in
financing the purchase of used automobiles by acquiring dealer-originated
retail installment contracts and installment loans. Since the Company's
incorporation in March 1991, it has expanded its operations by targeting and
servicing an under-served market -- financing used automobile purchases by
consumers who have limited access to traditional sources of credit.
In general, the Company serves two customers, the automobile dealer and,
indirectly, the dealer's customer, the "non-prime" borrower.
See "First Merchants' Automobile Financing Program -- General" in the related
Prospectus Supplement.
The Company is a Delaware corporation. The Company's principal
executive office and mailing address is 570 Lake Cook Road, Suite 126,
Deerfield, Illinois 60015 and its telephone number is (847) 948-9300.
The common stock of the Company is quoted on The Nasdaq Stock Market's
National Market under the symbol "FMAC". The Company is subject to
the informational requirements of the Exchange Act and in accordance
therewith files reports and other information with the Commission.
The Company will take steps in structuring the transactions
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by the Company under any Insolvency Laws
will not result in the consolidation of the assets and liabilities of the
related Transferor, if any, or the related Trust with those of the
Company. These steps include the creation of a Transferor as a
separate, limited-purpose subsidiary pursuant to a certificate of
incorporation containing certain limitations on its activities (including
restrictions on the nature of such Transferor's business, the requirement
of an independent director being on such Transferor's Board of Directors
and a restriction on such Transferor's ability to commence a voluntary
case or proceeding under any Insolvency Law without the prior
unanimous affirmative vote of all of its directors).
THE SELLER
With respect to each series of Securities, the Seller will be either
the Company or a Transferor. Each Transferor, if any, will be a
special-purpose finance subsidiary of the Company.
DESCRIPTION OF THE NOTES
GENERAL
Each Owner Trust may issue one or more classes of Notes pursuant to an
Indenture, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of
the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by one or more Notes,
in each case registered in the name of the nominee of DTC (together with
any successor depository selected by the Trust, the "Depository"), except as
set forth below. Unless otherwise specified in the related Prospectus
Supplement, the Notes will be available for purchase in denominations
of $1,000 and integral multiples thereof in book-entry form only. The
Company has been informed by DTC that DTC's nominee will be Cede, unless
another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Notes of each class. Unless and until Definitive Notes (as defined
herein) are issued under the limited circumstances described
herein or in the related Prospectus Supplement, no Noteholder will be entitled
to receive a physical certificate representing a Note. All references herein
and in the related Prospectus Supplement to actions by Noteholders refer to
actions taken by DTC upon instructions from its participating organizations
(the "Participants"), and all references herein and in the related
Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the Notes, for
distribution to Noteholders in accordance with DTC's procedures with respect
thereto. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal
and interest on each class of Notes of a given series will be described
in the related Prospectus Supplement. The right of holders of any class
of Notes to receive payments of principal and interest may be
senior or subordinate to the rights of holders of any other class or
classes of Notes of such series, as described in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
payments of interest on the Notes of such series will
be made prior to payments of principal thereon. If so provided in the
related Prospectus Supplement, a series may include one or more classes
of Strip Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payments or (ii) interest payments with
disproportionate, nominal or no principal payments. Each class of Notes
may have a different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate (and which may be zero for certain classes of
Strip Notes), or any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class of Notes of
a given series or the method for determining such Interest
Rate. See also "Certain Information Regarding the Securities -- Fixed
Rate Securities" and "-- Floating Rate Securities". One or more classes of
Notes of a series may be redeemable in whole or in part under the
circumstances specified in the related Prospectus Supplement, =
including, if a Pre-Funding Account or Collateral Reinvestment Account has
been established with respect to a related series, from amounts remaining in
the applicable account at the end of the Funding Period or Revolving Period,
as the case may be, or as a result of the Servicer's exercising its option to
purchase the related Receivables Pool.
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To the extent specified in any Prospectus Supplement, one or more
classes of Notes of a given series may have fixed principal payment schedules,
as set forth in such Prospectus Supplement; Noteholders of such Notes
would be entitled to receive as payments of principal
on any given Distribution Date the applicable amounts set forth on such schedule
with respect to such Notes, in the manner and to the extent set forth in the
related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
payments to holders of Notes of all classes within a series in respect of
interest will have the same priority.
Under certain circumstances, the amount available for such payments could
be less than the amount of interest payable on the Notes on any of the
dates specified for payments in the related Prospectus Supplement (each, a
"Distribution Date"), in which case each class of Noteholders will receive
its ratable share (based upon the aggregate amount of interest due
to the holders of such class of Notes) of the aggregate amount available
to be distributed in respect of interest on the Notes of such series. See
"Description of the Transfer and Servicing Agreements -- Distributions"
and "-- Credit and Cash Flow Enhancement".
In the case of a series of Securities which includes two or more
classes of Notes, the sequential order and priority of payment in respect
of principal and interest, and any schedule or formula or other provisions
applicable to the determination thereof, of each such class will be set
forth in the related Prospectus Supplement. Payments in respect of
principal of and interest on any class of Notes will be made on a pro rata
basis among all the Noteholders of such class. One or more classes of
Notes of a series may be redeemable in whole or in part under the
circumstances specified in the related Prospectus Supplement,
including, if a Pre-Funding Account or Collateral Reinvestment Account has
been established with respect to the related series, from amounts
remaining in the applicable account at the end of the Funding Period or
Revolving Period, as the case may be, or as a result of the
exercise by the Servicer, a subservicer or such other party as may be
specified in the related Prospectus Supplement of its option to purchase
the related Receivables Pool. See "Description of the Transfer and Servicing
Agreements -- Termination".
CERTAIN PROVISIONS OF THE INDENTURE
Events of Default; Rights upon Event of Default. With respect to the
Notes of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will include the
following: (i) a default for five days or more in the
payment of any interest on any such Note; (ii) a default in
the payment of the principal, or any installment of the principal, of any
such Note when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the applicable
Trust made in such Indenture and the continuation of any such default for
a period of 30 days after notice thereof is given to such Trust by
the applicable Indenture Trustee or to such Trust and such Indenture
Trustee by the holders of at least 25% in principal amount of such Notes
then outstanding; (iv) any representation or warranty made by such Trust
in such Indenture or in any certificate delivered pursuant
thereto or in connection therewith having been incorrect in a material
respect as of the time made, if such breach is not cured within 30 days after
notice thereof is given to such Trust by the applicable Indenture Trustee
or to such Trust and such Indenture Trustee by the holders of at least
25% in principal amount of such Notes then outstanding; or (v) certain
events of bankruptcy, insolvency, receivership or liquidation
of the applicable Trust. However, the amount of principal required to be
paid to Noteholders of such series under the related Indenture will
generally be limited to amounts available to be deposited in the applicable
Note Distribution Account. Therefore, unless otherwise specified in the
related Prospectus Supplement, the failure to pay principal on
a class of Notes generally will not result in the occurrence of an Event
of Default until the final scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes
of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal
of such Notes to be immediately due and payable. Unless otherwise specified
in the related Prospectus Supplement, such declaration may,
under certain circumstances, be rescinded by the holders of a majority in
principal amount of such Notes then outstanding.
If the Notes of any series are declared due and payable following an
Event of Default with respect thereto, the related Indenture Trustee
may institute proceedings to collect amounts due or foreclose on Trust
Property, exercise remedies as a secured party, sell the
related Receivables or elect to have the applicable Trust maintain
possession of such Receivables and continue to apply collections on such
Receivables as if there had been no declaration of acceleration. Unless
otherwise specified in the related Prospectus Supplement, however, such
Indenture Trustee is prohibited from selling such Receivables
following an Event of Default, other than a default in the payment of any
principal of, or a default for five days or more in the payment of any
interest on, any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued
interest on such outstanding Notes at the date of such sale or (iii) such
Indenture Trustee determines that the proceeds of the Receivables would not be
sufficient on an ongoing basis to make all payments on such Notes as such
payments would have become due if such obligations had not been declared
due and payable, and such Indenture Trustee obtains the
consent of the holders of a majority of the aggregate outstanding principal
amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such
Indenture at the request or direction of any of the holders
of such Notes if such Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which
might be incurred by it in complying with such request. Subject to
the provisions for indemnification and certain limitations contained in the
related Indenture, the holders of a majority in principal amount of the
outstanding Notes of a given series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to
the applicable Indenture Trustee, and the holders of a majority in principal
amount of such Notes then outstanding may, in certain cases, waive any
default with respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant or provision of
such Indenture that cannot be modified without the waiver or consent of all
the holders of each such outstanding Note.
Unless otherwise specified in the related Prospectus Supplement, no
holder of a Note of any series will have the right to institute any proceeding
with respect to the related Indenture, unless (i) such holder previously has
given to the applicable Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount
of the outstanding Notes of such series have made written request to such
Indenture Trustee to institute such proceeding in its own name as
Indenture Trustee, (iii) such holder or holders have offered such
Indenture Trustee reasonable indemnity, (iv) such Indenture Trustee has
for 60 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes.
In addition, unless otherwise specified in the related Prospectus
Supplement, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not at any time institute
against the Seller or the applicable Trust any bankruptcy, reorganization
or other proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor
the related Trustee in its individual capacity, nor any holder of a
Certificate representing an ownership interest in such Trust nor any of
their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of
an express agreement to the contrary, be personally liable for the payment
of the principal of or interest on the related Notes or for the agreements
of such Trust contained in the applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless, among such
other requirements as may be specified in the related Prospectus
Supplement, (i) the entity formed by or surviving such consolidation or
merger is organized under the laws of the United States,
any state or the District of Columbia, (ii) such entity expressly
assumes such Trust's obligation to make due and punctual payments upon the
Notes of the related series and to perform or observe every agreement
and covenant of such Trust under the Indenture, (iii) no Event of Default
shall have occurred and be continuing immediately after such merger or
consolidation, (iv) such Trust has been advised that the rating of the
Notes (and, if so provided in such Indenture, the Certificates) of such
series then in effect would not be reduced or withdrawn by the Rating Agencies
as a result of such merger or consolidation and (v) such Trust has received
an opinion of counsel to the effect that such consolidation or merger would
have no material adverse tax consequence to the Trust or to any related
Noteholder or Certificateholder.
No Owner Trust will, among other things, (i) except as expressly
permitted by the applicable Indenture, the applicable Transfer and Servicing
Agreements or certain related documents with respect to such Trust
(collectively, the "Related Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of such Trust, (ii) claim any
credit on or make any deduction from the principal and interest payable in
respect of the Notes of the related series (other than amounts properly
withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment
of taxes levied or assessed upon such Trust, (iii) permit the
validity or effectiveness of such Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect
to such Notes under such Indenture except as may be expressly permitted
thereby or (iv) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of such Trust or any part
thereof, or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as described herein or
in the Prospectus Supplement. No Trust will incur, assume or guarantee
any indebtedness other than indebtedness incurred pursuant to the related
Notes and the related Indenture, pursuant to any Advances made to it by
the Servicer or otherwise in accordance with the Related Documents.
Modification of Indenture. Each Owner Trust and the related Indenture
Trustee may, with the consent of the holders of a majority of the outstanding
Notes of the related series, execute a supplemental indenture to add
provisions to, change in any manner or eliminate any provisions of, the
related Indenture, or modify (except as provided below) in any manner the
rights of the related Noteholders.
However, unless otherwise specified in the related Prospectus
Supplement with respect to a series of Notes, without the consent of the
holder of each such outstanding Note affected thereby, no supplemental
indenture will: (i) change the due date of any installment of principal
of or interest on any such Note or reduce the principal amount
thereof, the interest rate specified thereon or the redemption price with
respect thereto or change any place of payment where or the coin or currency
in which any such Note or any interest thereon is payable; (ii) impair the
right to institute suit for the enforcement of certain provisions of
the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such
series, the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of such
Indenture or of certain defaults thereunder and their consequences as
provided for in such Indenture; (iv) modify or alter the provisions of such
Indenture regarding the voting of Notes held by the applicable Trust, any
other obligor on such Notes, the Seller or an affiliate of any of them;
(v) reduce the percentage of the aggregate outstanding amount of
such Notes, the consent of the holders of which is required to direct the
related Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series; (vi)
decrease the percentage of the aggregate principal amount of such Notes
required to amend the sections of such Indenture which specify the applicable
percentage of the aggregate principal amount of the Notes of such series
necessary to amend such Indenture or certain other related agreements; or
(vii) permit the creation of any lien ranking prior to or on a parity with
the lien of such Indenture with respect to any of the collateral for such
Notes or, except as otherwise permitted or contemplated in such Indenture,
terminate the lien of such Indenture on any such collateral or deprive the
holder of any such Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, an
Owner Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of
the related series, for the purpose of, among other things, adding any
provisions to or changing in any manner or eliminating any of the
provisions of the related Indenture or of modifying in any manner the
rights of such Noteholders; provided that such action will not materially
and adversely affect the interest of any such Noteholder.
Annual Compliance Statement. Each Owner Trust that issues Notes will
be required to file annually with the related Indenture Trustee a written
statement as to the fulfillment of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each
Owner Trust that issues Notes will be required to mail each year to all
related Noteholders a brief report relating to its eligibility and
qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by the
related Owner Trust to the applicable Indenture Trustee in its individual
capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects
the related Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be
discharged with respect to the collateral securing the related Notes upon
the delivery to the related Indenture Trustee for cancellation of all such
Notes or, with certain limitations, upon deposit with such Indenture Trustee of
funds sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may
resign at any time, in which event the related Owner Trust will be
obligated to appoint a successor trustee for such series. An Owner
Trust may also remove any such Indenture Trustee if such Indenture
Trustee ceases to be eligible to continue as such under the related
Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, such Owner Trust will be obligated to appoint a successor
trustee for the applicable series of Notes. Any
resignation or removal of the Indenture Trustee and appointment of a
successor trustee for any series of Notes does not become effective until
acceptance of the appointment by the successor trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement
or a Pooling and Servicing Agreement, a form of each of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all
the provisions of the Certificates and the Trust Agreement or Pooling and
Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
Seller, each class of Certificates will initially be represented by one or
more Certificates registered in the name of the Depository, except as set
forth below. Unless otherwise specified in the related Prospectus Supplement
and except for the Certificates, if any, of a given series purchased
by the Seller, the Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form
only. The Company has been informed by DTC that DTC's nominee will be Cede,
unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of
record of the Certificates of any series that are not purchased by the
Seller. Unless and until Definitive Certificates (as defined herein) are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the Seller) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants, and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with
DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities -- Book-Entry Registration" and " -- Definitive Securities".
Any Certificates of a given series owned by the Seller or its affiliates will
be entitled to equal and proportionate benefits under the applicable Trust
Agreement or Pooling and Servicing Agreement, except that such Certificates
will be deemed not to be outstanding for the purpose of determining
whether the requisite percentage of Certificateholders has given any
request, demand, authorization, direction, notice or consent or taken
any other action under the Related Documents (other than the commencement
by the related Trust of a voluntary proceeding in bankruptcy as described
under "Description of the Transfer and Servicing Agreements --
Insolvency Event").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, Pass Through Rate and amount of or method of determining
distributions with respect to principal of and interest on each class of
Certificates of a given series will be described in the
related Prospectus Supplement. Distributions of interest on such
Certificates will be made on the Distribution Dates specified in the related
Prospectus Supplement and will be made prior to distributions with respect to
principal of such Certificates. To the extent provided in the related
Prospectus Supplement, a series may include one or more classes of
Strip Certificatesentitled to (i) distributionsin respect ofprincipal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect
of principal. Each class of Certificates may have a different Pass Through
Rate, which may be a fixed, variable or adjustable Pass Through Rate (and
which may be zero for certain classes of Strip Certificates) or any
combination of the foregoing. The related Prospectus Supplement will
specify the Pass Through Rate for each class of Certificates of a given
series or the method for determining such Pass Through Rate. See also
"Certain Information Regarding the Securities -- Fixed Rate Securities"
and "-- Floating Rate Securities". Unless otherwise
provided in the related Prospectus Supplement, distributions in respect of
the Certificates of a given series that includes Notes may be subordinated
to payments in respect of the Notes of such series as more fully
described in such Prospectus Supplement. Unless otherwise provided
in the related Prospectus Supplement, distributions in respect of
interest on and principal of any class of Certificates will be made on a
pro rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more
classes of Certificates, the timing, sequential order, priority of payment
or amount of distributions in respect of interest and principal, and any
schedule or formula or other provisions applicable to the determination
thereof, of each such class shall be as set forth in the
related Prospectus Supplement. One or more classes of Certificates of a
series may be redeemable in whole or in part under the circumstances
specified in the related Prospectus Supplement, including, if a Pre-Funding
Account or Collateral Reinvestment Account has been established with respect
to the related series, from amounts remaining in the applicable
account at the end of the Funding Period or Revolving Period, as the case
may be, or as a result of the exercise by the Servicer, a subservicer or
such other party as may be specified in such Prospectus Supplement of its
option to purchase the related Receivables Pool. See "Description of
the Transfer and Servicing Agreements -- Termination".
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed
Rate Securities") or at a variable or adjustable rate per annum ("Floating
Rate Securities"), as more fully described below and in the applicable
Prospectus Supplement. Each class of Fixed Rate Securities will bear
interest at the applicable per annum Interest Rate or Pass Through Rate, as
the case may be, specified in the applicable Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement,
interest on each class of Fixed Rate Securities will be computed on the
basis of a 360-day year of twelve 30-day months. See "Description of the
Notes -- Principal and Interest on the Notes" and "Description of the
Certificates -- Distributions of Principal and Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities)
at a rate per annum determined by reference to an interest rate basis
(the "Base Rate"), plus or minus the Spread, if any,
or multiplied by the Spread Multiplier, if any, in each case as
specified in such Prospectus Supplement. The "Spread" is the number
of basis points (one basis point equals one one-hundredth of a
percentage point) that may be specified in the applicable Prospectus
Supplement as being applicable to such class, and the "Spread Multiplier"
is the percentage that may be specified in the applicable Prospectus
Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the
following Base Rates as applicable to a given Floating Rate Security:
(i) LIBOR (a "LIBOR Security"), (ii) the Commercial Paper Rate
(a "Commercial Paper Rate Security"), (iii) the Treasury Rate (a
"Treasury Rate Security"), (iv) the Federal Funds Rate (a "Federal Funds
Rate Security"), (v) the CD Rate (a "CD Rate Security") or (vi) such other
Base Rate as is set forth in such Prospectus Supplement. The "Index
Maturity" for any class of Floating Rate Securities is
the period of maturity of the instrument or obligation from which the Base
Rate is calculated. "H.15(519)" means the publication entitled
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve
System. "Composite Quotations" means the daily statistical release
entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities"
published by the Federal Reserve Bank of New York. "Interest Reset Date" will
be the first day of the applicable Interest Reset Period, or such other day as
may be specified in the related Prospectus Supplement with respect to a class
of Floating Rate Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following
(in each case expressed as a rate per annum): (i) a maximum limitation, or
ceiling, on the rate at which interest may accrue during any interest
period and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period. In addition to any maximum
interest rate that may be applicable to any class of Floating Rate
Securities, the interest rate applicable to any class of Floating Rate
Securities will in no event be higher than the maximum rate permitted by
applicable law, as the same may be modified by United States law of general
application.
Each Trust with respect to which a class of Floating Rate Securities
will be issued will appoint, and enter into agreements with, a calculation
agent (each, a "Calculation Agent") to calculate interest rates on each such
class of Floating Rate Securities issued with respect thereto. The
applicable Prospectus Supplement will set forth the identity of the
Calculation Agent for each such class of Floating Rate Securities of a
given series, which may be either the related Trustee or Indenture Trustee
with respect to such series. All determinations of interest by the
Calculation Agent shall, in the absence of manifest
error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with
five one-millionths of a percentage point rounded upward.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to
the CD Rate and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "CD Rate" for each Interest Reset Period shall be the rate as of the
second business day prior to the Interest Reset Date for such Interest
Reset Period (a "CD Rate Determination Date") for
negotiable certificates of deposit having the Index Maturity designated in
the applicable Prospectus Supplement as published in H.15(519) under the
heading "CDs (Secondary Market)". In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will
be the rate on such CD Rate Determination Date for negotiable certificates
of deposit of the Index Maturity designated in the applicable Prospectus
Supplement as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519)
or Composite Quotations, then the "CD Rate" for such Interest Reset Period
will be calculated by the Calculation Agent for such CD Rate Security and
will be the arithmetic mean of the secondary market offered rates as
of 10:00 a.m., New York City time, on such CD Rate Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for such
CD Rate Security for negotiable certificates of deposit of major United
States money center banks of the highest credit standing (in the market
for negotiable certificates of deposit) with a remaining maturity closest
to the Index Maturity designated in the related Prospectus Supplement
in a denomination of $5,000,000; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered
rates as mentioned in this sentence, the "CD Rate" for such Interest Reset
Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such CD
Rate Determination Date or, if such day is not a business day, the next
succeeding business day or (b) the second business day preceding the
date any payment is required to be made for any period following
the applicable Interest Reset Date.
Commercial Paper Rate Securities. Each Commercial Paper Rate Security
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Security
as of the second business day prior to the Interest Reset Date for such
Interest Reset Period (a "Commercial Paper Rate Determination Date") and
shall be the Money Market Yield (as defined below) on such Commercial
Paper Rate Determination Date of the rate for commercial paper having
the Index Maturity specified in the applicable Prospectus Supplement, as such
rate shall be published in H.15(519) under the heading "Commercial Paper".
In the event that such rate is not published prior to 3:00 p.m., New York
City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money
Market Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper".
If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money
Market Yield of the arithmetic mean of the offered rates, as of 11:00 a.m.,
New York City time, on such Commercial Paper Rate
Determination Date of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent for such Commercial
Paper Rate Security for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bonds are rated "AA"
or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the
"Commercial Paper Rate" for such Interest Reset Period will
be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with
the following formula:
D x 360
Money Market Yield = ------------- / X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal, and "M"
refers to the actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar
day after such Commercial Paper Rate Determination Date or, if such day
is not a business day, the next succeeding business day or (b) the second
business day preceding the date any payment is required to be made for
any period following the applicable Interest Reset Date.
Federal Funds Rate Securities. Each Federal Funds Rate Security will
bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Federal Funds Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Federal Funds Rate" for each Interest Reset Period shall be the effective
rate on the Interest Reset Date for such Interest Reset Period (a "Federal
Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Federal
Funds Rate Determination Date, the "Federal Funds Rate" for such Interest
Reset Period shall be the rate on such Federal Funds Rate Determination Date
as published in Composite Quotations under the heading "Federal
Funds/Effective Rate". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date made
publicly available by the Federal Reserve Bank of New York which is
equivalent to the rate which appears in H.15(519) under the heading "Federal
Funds (Effective)"; provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m.,
New York City time, on such Calculation Date, the "Federal Funds Rate" for
such Interest Reset Period will be the same as the Federal Funds Rate in
effect for the immediately preceding Interest Reset Period. In the case of
a Federal Funds Rate Security that resets daily, the interest rate on such
Security for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the Calculation Agent for such Security
on such second Monday (or, if not a business day, on the next succeeding
business day) to a rate equal to the average of the Federal Funds Rates in
effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate
Determination Date shall be the next succeeding business day.
LIBOR Securities. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to
LIBOR and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
with respect to LIBOR indexed to the offered rates for U.S. dollar deposits,
"LIBOR" for each Interest Reset Period will be established by the Calculation
Agent for any LIBOR Security and will equal the offered rate for United States
dollar deposits for one month that appears on Telerate Page 3750 as of 11:00
a.m., London time, on the second LIBOR Business Day prior to the Interest
Reset Date for such Interest Reset Period (the "LIBOR Determination Date").
"Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on
that service or such other service as may be nominated by the information
vendor for the purpose of displaying London interbank offered rates of major
banks). If such rate appears on Telerate Page 3750 on a LIBOR Determination
Date, LIBOR for the related Interest Reset Period will be such rate.
If on any LIBOR Determination Date such offered rate does not
appear on Telerate Page 3750, the Calculation Agent will request each of
the reference banks (which will be major banks that are engaged in
transactions in the London interbank market selected by the Calculation
Agent) to provide the Calculation Agent with its offered quotation for
United States dollar deposits for one month to prime banks in the
London interbank market as of 11:00 a.m., London time, on such date. If
at least two reference banks provide the Calculation Agent with such offered
quotations, LIBOR with respect to such date will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of one
percent) of all such quotations. If on such date fewer than two of the
reference banks provide the Calculation Agent with such offered quotations,
LIBOR with respect to such date will be the arithmetic mean (rounded upwards,
if necessary, to the nearest one-sixteenth of one percent) of the offered per
annum rates that one or more leading banks in The City of New York selected
by the Calculation Agent are quoting as of 11:00 a.m., New York City
time, on such date to leading European banks for United States dollar
deposits for one month; provided, however, that if such banks are not quoting
as described above, LIBOR with respect to such date will be LIBOR applicable
to the immediately preceding Interest Reset Period.
"LIBOR Business Day" as used herein means a day that is both a
Business Day and a day on which banking institutions in the City of London,
England are not required or authorized by law to be closed.
Treasury Rate Securities. Each Treasury Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Treasury Rate" for each Interest Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below)
for such Interest Reset Period of direct obligations of the United
States ("Treasury bills") having the Index Maturity specified in the
applicable Prospectus Supplement, as such rate shall be published in
H.15(519) under the heading "U.S. Government Securities -- Treasury bills
-- auction average (investment)" or, in the event that such rate is not
published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent
on the basis of a year of 365 or 366 days, as applicable, and applied on
a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of
the Treasury. In the event that the results of the auction of Treasury
bills having the specified Index Maturity are not published or reported
as provided above by 3:00 p.m., New York City time, on such Calculation Date,
or if no such auction is held on such Treasury Rate Determination Date,
then the "Treasury Rate" for such Interest Reset Period shall be
calculated by the Calculation Agent for such Treasury Rate Security and
shall be the yield to maturity (expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such
Treasury Rate Determination Date, of three leading primary United States
government securities dealers selected by such Calculation Agent for the
issue of Treasury bills with a remaining maturity closest to the specified
Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid
rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period
will be the day of the week in which the Interest Reset Date for such
Interest Reset Period falls on which Treasury bills would normally be
auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case
the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will
be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall
fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Security, then such Interest Reset Date shall instead be the
business day immediately following such auction date.
Unless otherwise specified in the applicable Prospectus Supplement,
the "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding
the date any payment is required to be made for any period following the
applicable Interest Reset Date.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, DTC
will act as securities depository for each class of Securities offered
hereby. Each class of Securities initially will be represented by one
or more certificates registered in the name of Cede, the nominee of DTC.
As such, it is anticipated that the only "Noteholder" and/or
"Certificateholder" with respect to a series of Securities
will be Cede, as nominee of DTC. Beneficial owners
of the Securities ("Security Owners") will not be recognized by the
related Indenture Trustee as "Noteholders", as such term is used
in each Indenture, or by the related Trustee as "Certificateholders", as
such term is used in each Trust Agreement and Pooling and Servicing
Agreement, and Security Owners will be permitted to exercise the rights of
Noteholders or Certificateholders only indirectly through DTC and its
Participants.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code as in effect
in the State of New York, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was
created to hold securities for the Participants and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Unless otherwise specified in the related Prospectus Supplement,
Security Owners that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or an interest in,
the Securities may do so only through Participants and Indirect Participants.
In addition, all Security Owners will receive all distributions of principal
and interest from the related Indenture Trustee or the related
Trustee, as applicable (the "Applicable Trustee"), through Participants.
Under a book-entry format, Security Owners may experience some delay in
their receipt of payments, since such payments will be forwarded by
the Applicable Trustee to DTC's nominee. DTC will then
forward such payments to the Participants, which thereafter will forward
them to Indirect Participants or Security Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry
transfers among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of
and interest on the Securities. Participants and Indirect
Participants with which Security Owners have accounts with respect to the
Securities similarly are required to make book-entry transfers and to
receive and transmit such payments on behalf of their respective Security
Owners. Accordingly, although Security Owners will not possess physical
certificates representing the Securities, the Rules provide a mechanism by
which Participants and Indirect Participants will receive payments
and transfer interests, directly or indirectly, on behalf of Security
Owners.
Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Security Owner to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to
such Securities, may be limited due to the lack of a physical
certificate representing such Securities.
DTC has advised the Company that it will take any action permitted to
be taken by a Security Owner under the Indenture, Trust Agreement or
Pooling and Servicing Agreement, as applicable, only at the direction of
one or more Participants to whose account with DTC the Securities are
credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Except as required by law, none of the Seller, the Servicer, the
related Administrator or the Applicable Trustee will have any liability
for any aspect of the records relating to or payments made on account
of beneficial ownership interests of Securities of any series held by
DTC's nominee, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Notes, if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive
Certificates", respectively, and collectively referred to herein as
"Definitive Securities") to Noteholders or Certificateholders or
their respective nominees, rather than to DTC or its nominee, only if
(i) the related Administrator of an Owner Trust or Trustee of a
Grantor Trust, as applicable, determines that DTC is no longer willing
or able to discharge properly its responsibilities as
depository with respect to such Securities and such Administrator
or Trustee is unable to locate a qualified successor (and if it is an
Administrator that has made such determination, such Administrator so
notifies the Applicable Trustee in writing), (ii) the
Administrator or Trustee, as applicable, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence
of an Event of Default or a Servicer Default with respect to such Securities,
Security Owners representing at least a majority of the outstanding
principal amount of the Notes or the Certificates, as
the case may be, of such series advise the Applicable Trustee through DTC
in writing that the continuation of a book-entry system through DTC
(or a successor thereto) with respect to such Notes or Certificates is no
longer in the best interest of the related Security Owners.
Upon the occurrence of any event described in the immediately
preceding paragraph, DTC or the Applicable Trustee will be required to
notify all applicable Security Owners of a given series through Participants
of the availability of Definitive Securities. Upon surrender by DTC
of the definitive certificates representing the corresponding
Securities and receipt of instructions for re-registration, the Applicable
Trustee will reissue such Securities as Definitive Securities to such
Security Owners.
Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the Applicable Trustee in
accordance with the procedures set forth in the related Indenture or the
related Trust Agreement or Pooling and Servicing Agreement, as
applicable, directly to holders of Definitive Securities in whose names
the Definitive Securities were registered at the close of business on
the applicable Record Date specified for such Securities in the
related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the
register maintained by the Applicable Trustee. The final payment on
any such Definitive Security, however, will be made only upon presentation
and surrender of such Definitive Security at the office or
agency specified in the notice of final distribution to the applicable
Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the Applicable Trustee or of a registrar named in a notice
delivered to holders of Definitive Securities. No service charge will
be imposed for any registration of transfer or exchange, but the
Applicable Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or
prior to each Distribution Date, the Servicer will prepare and provide
to the related Indenture Trustee a statement to be delivered to the
related Noteholders on such Distribution Date, and on or prior to each
Distribution Date, the Servicer will prepare and provide to the related
Trustee a statement to be delivered to the related Certificateholders.
With respect to each series of Securities, each such statement to be
delivered to Noteholders will include (to the extent applicable) the
following information (and any other information so specified in the
related Prospectus Supplement) as to the Notes of such series with
respect to such Distribution Date or the period since the previous
Distribution Date, as applicable, and each such statement to be delivered
to Certificateholders will include (to the extent applicable) the following
information (and any other information so specified in such Prospectus
Supplement) as to the Certificates of such series with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of
such Certificates;
(ii) the amount of the distribution allocable to interest on or
with respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last
day of the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note
Pool Factor for each class of such Notes, and the Certificate Balance
and the Certificate Pool Factor for each class of such Certificates,
each as of the related record date;
(v) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period or Collection Periods, as the
case may be;
(vi) the Interest Rate or Pass Through Rate for the next period
for any class of Notes or Certificates of such series with variable or
adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for
the related Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall (each such term, if applicable, as
defined in the related Prospectus Supplement), if any, in each case
as applicable to each class of Securities, and the change in such
amounts from the preceding statement;
(ix) the aggregate Purchase Amounts for receivables, if any, that
were repurchased in the related Collection Period;
(x) the balance of the Reserve Account (if any) on such date,
after giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xii) for the first such date that is on or immediately following
the end of the Funding Period (if any), the amount of any remaining
Pre-Funded Amount that has not been used to fund the purchase of
Subsequent Receivables and is being passed through as payments of
principal on the Securities of such series;
(xiii) for each such date during the Revolving Period (if any),
the remaining amount in the Collateral Reinvestment Account; and
(xiv) for the first such date that is on or immediately following
the end of the Revolving Period (if any), the amount remaining
in the Collateral Reinvestment Account that has not been used to fund
the purchase of Subsequent Receivables and is being passed through as
payments of principal on the Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii)
with respect to the Notes or the Certificates of any series will be
expressed as a dollar amount per $1,000 of the initial principal balance
of such Notes or the initial Certificate Balance of such Certificates,
as applicable.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of each Trust, the Applicable
Trustee will mail to each person who at any time during such calendar
year has been a registered Securityholder with respect to such Trust and
received any payment thereon a statement containing certain
information for the purposes of such Securityholder's preparation of
federal income tax returns. See "Certain Federal Income Tax Consequences".
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of
such series or one or
more holders of such Notes evidencing not less than 25% of the aggregate
outstanding principal balance of such Notes may, by written request
to the related Indenture Trustee, obtain access to the list of all
Noteholders maintained by such Indenture Trustee for the purpose of
communicating with other Noteholders with respect to their rights under
the related Indenture or under such Notes. Such Indenture
Trustee may elect not to afford the requesting Noteholders access to the
list of Noteholders if it agrees to mail the desired communication or
proxy, on behalf of and at the expense of the requesting Noteholders, to
all Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such
Certificates may, by written request to the related Trustee, obtain
access to the list of all Certificateholders maintained by such Trustee for
the purpose of communicating with other Certificateholders with respect to
their rights under the related Trust Agreement or Pooling and Servicing
Agreement or under such Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a
Trust will purchase Receivables and other Trust Property from the
Seller and the Servicer will agree to service such Receivables, each
Trust Agreement or Pooling and Servicing Agreement, as applicable,
pursuant to which a Trust will be created and Certificates will be issued
and each Administration Agreement pursuant to which the Company will
undertake certain administrative duties with respect to an Owner Trust
that issues Notes (collectively, the "Transfer and Servicing Agreements").
Forms of the Transfer and Servicing Agreements have been filed as exhibits
to the Registration Statement of which this Prospectus forms a part.
This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On the Closing Date specified with respect to any given Trust in the
related Prospectus Supplement (the "Closing Date"), the Seller will,
if so specified in such Prospectus Supplement, transfer and assign to
the applicable Trustee, without recourse, pursuant to a Sale and Servicing
Agreement or a Pooling and Servicing Agreement, as applicable, its entire
interest in the Initial Receivables, including its security interests
in the related Financed Vehicles. Each such Receivable will be identified
in a schedule appearing as an exhibit to such Pooling and Servicing
Agreement or Sale and Servicing Agreement (a "Schedule of
Receivables"). The applicable Trustee will, concurrently with such
transfer and assignment, execute and deliver the related Notes and/or
Certificates. Unless otherwise provided in the related Prospectus Supplement,
the net proceeds received from the sale of the Certificates and the Notes
of a given series will be applied to the purchase of the
related Receivables and other Trust Property from the Seller and, to the
extent specified in such Prospectus Supplement, to the deposit of the
Pre-Funded Amount into the Pre-Funding Account and the initial deposit into
the Collateral Reinvestment Account. The related Prospectus Supplement for
a given Trust will specify whether, and the terms, conditions and manner
under which, Subsequent Receivables will be sold by the Seller to the
applicable Trust from time to time during any Funding Period or Revolving
Period on each date specified as a transfer date in such Prospectus
Supplement (each, a "Subsequent Transfer Date").
In each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will represent and warrant to the applicable Trust,
among other things, that: (i) the information provided in the related
Schedule of Receivables is correct in all material respects as of the
applicable Cutoff Date; (ii) the Obligor on each related Receivable is
required to maintain physical damage insurance covering the Financed
Vehicle in accordance with the Seller's normal requirements; (iii) as of
the applicable Closing Date or the applicable Subsequent Transfer Date,
if any, to the best of its knowledge, the related
Receivables are free and clear of all security interests, liens, charges
and encumbrances and no offsets, defenses or counterclaims have
been asserted or threatened; (iv) as of the Closing Date or the applicable
Subsequent Transfer Date, if any, each of such Receivables
is or will be secured by a first priority perfected security interest in
favor of the Seller in the Financed Vehicle; and (v) each related
Receivable, at the time it was originated, complied and, as of the
Closing Date or the applicable Subsequent Transfer
Date, if any, complies in all material respects with applicable federal
and state laws, including, without limitation, consumer credit, truth in
lending, equal credit opportunity and disclosure laws; and the Seller will
make any other representations and warranties that may be set forth in the
related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of
the last day of the second (or, if the Seller elects, the first) month
following the discovery by or notice to the Seller of a breach of any
representation or warranty of the Seller that materially and adversely
affects the interests of the related Trust in any Receivable, the
Seller, unless the breach is cured, will repurchase such Receivable
from such Trust at a price equal to the unpaid principal balance owed by
the Obligor thereof plus interest thereon at the respective APR to the
last day of the month of repurchase (the "Purchase Amount"). The
repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee
in respect of such Trust for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables
and to reduce administrative costs, the Seller and each Trust will
designate the Servicer as custodian to maintain possession, as
such Trust's agent, of the related motor vehicle retail installment sale
contracts and installment loans and any other documents relating to the
Receivables. The Seller's and the Servicer's accounting records and
computer systems will reflect the sale and assignment
of the related Receivables to the applicable Trust, and Uniform Commercial
Code ("UCC") financing statements reflecting such sale and assignment will
be filed.
ACCOUNTS
With respect to Owner Trusts that issue Notes, the Servicer will
establish and maintain with the related Indenture Trustee one or more
accounts, in the name of the Indenture Trustee on behalf of the
related Noteholders and Certificateholders, into which all payments made
on or with respect to the related Receivables will be deposited (the
"Collection Account"). The Servicer will establish and maintain with such
Indenture Trustee an account, in the name of such Indenture Trustee on
behalf of such Noteholders, into which amounts released from the
Collection Account and any Pre-Funding Account, Collateral Reinvestment
Account, Reserve Account or other credit enhancement for payment
to such Noteholders will be deposited and from which all distributions to
such Noteholders will be made (the "Note Distribution Account"). With
respect to each Owner Trust and each Grantor Trust, the Servicer will
establish and maintain with the related Trustee an
account, in the name of such Trustee on behalf of such Certificateholders,
into which amounts released from the Collection Account and any Pre-Funding
Account, any Collateral Reinvestment Account, Reserve Account or other
credit or cash flow enhancement for distribution to such Certificateholders
will be deposited and from which all distributions to such Certificateholders
will be made (the "Certificate Distribution Account"). With
respect to each Grantor Trust and each Owner Trust that does not issue
Notes, the Servicer will also establish and maintain the Collection
Account and any other Trust Account (as defined herein) in the name of
the related Trustee on behalf of the related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series of Securities an additional account (the "Payahead
Account"), in the name of the related Indenture Trustee (in the case of
Owner Trusts that issue Notes) or Trustee (in the case of a Grantor Trust
or an Owner Trust that does not issue Notes), into which, to the extent
required in the related Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, early payments made by or on behalf
of Obligors on Precomputed Receivables will be deposited until such time as
such payments become due. Until such time as payments are transferred from
the Payahead Account to the Collection Account, they will
not constitute collected interest or collected principal and will not be
available for distribution to Noteholders or Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish and maintain a Pre-Funding Account, in the name of the related
Trustee on behalf of the related Securityholders, into which the
Seller will deposit the Pre-Funded Amount on the related Closing Date.
The Pre-Funded Amount will not exceed 40% of the initial aggregate
principal amount of the Notes and Certificates of the related series. In
addition, if so provided in the related Prospectus Supplement, the Servicer
will establish and maintain a Collateral Reinvestment Account, in
the name of the related Trustee on behalf of the related Securityholders,
into which the Seller will deposit the amount, if any, specified in
such Prospectus Supplement. During the Revolving Period, principal will
not be distributed on the Securities of the related
series, and principal collections, together with (if and to the extent
described in the related Prospectus Supplement) interest collections on
the Receivables that are in excess of amounts required to be distributed
therefrom, will be deposited from time to time in the Collateral Reinvestment
Account. The Pre-Funded Amount and the amounts on deposit in the
Collateral Reinvestment Account will be used by the related Trustee to
purchase Subsequent Receivables from the Seller from time to time during
the Funding Period and Revolving Period, respectively. The amounts on
deposit in the Pre-Funding Account during the Funding Period and the amount
on deposit in the Collateral Reinvestment Account will be invested
by the Trustee in Eligible Investments. Any Investment Income received on
the Eligible Investments during a Collection Period will be included in
the interest distribution amount on the following Distribution Date.
The Funding Period or Revolving Period, if any, for
a Trust will begin on the related Closing Date and will end on the date
specified in the related Prospectus Supplement, which, in the case of the
Funding Period, in no event will be later than the date that is one year
after such Closing Date. Any amounts remaining in the Pre-Funding Account
at the end of the Funding Period or in the Collateral Reinvestment
Account at the end of the Revolving Period will be distributed to the
related Securityholders in the manner and priority specified in the
related Prospectus Supplement, as a prepayment of principal of the related
Securities.
Any other accounts to be established with respect to a Trust,
including any Reserve Account, will be described in the related Prospectus
Supplement.
For any series of Securities, funds in the Collection Account, the
Note Distribution Account, if any, any Pre-Funding Account, any Collateral
Reinvestment Account, any Reserve Account and other accounts identified
as such in the related Prospectus Supplement (collectively, the "Trust
Accounts") will be invested as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible
Investments. "Eligible Investments" are generally limited to investments
acceptable to the Rating Agencies rating such Securities as being consistent
with the rating of such Securities and may include motor vehicle retail
installment sale contracts and installment loans. Except as described
below or in the related Prospectus Supplement, Eligible Investments are
limited to obligations or securities that mature on or before the date
of the next distribution for such series. However, to the extent permitted
by the Rating Agencies, funds in any Reserve Account may be invested
in securities that will not mature prior to the date of the next
distribution with respect to such Certificates or Notes and will not be
sold to meet any shortfalls. Thus, the amount of cash in
any Reserve Account at any time may be less than the balance of the Reserve
Account. If the amount required to be withdrawn from any Reserve Account
to cover shortfalls in collections on the related Receivables (as provided
in the related Prospectus Supplement) exceeds the amount of cash in the
Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result,
which could, in turn, increase the average life of the Notes or the
Certificates of such series. Except as otherwise specified in the related
Prospectus Supplement, investment earnings on funds deposited in
the Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be deposited in the applicable Collection
Account on each Distribution Date and shall be treated as collections of
interest on the related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with
the corporate trust department of a depository institution organized
under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a
foreign bank), having corporate trust powers and acting as trustee for
funds deposited in such account, so long as any of the securities of such
depository institution have a credit rating from each Rating Agency in one
of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate
trust department of the related Indenture Trustee or the related Trustee,
as applicable, or (b) a depository institution organized under the laws of
the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) which
has either (A) a long-term unsecured debt rating acceptable to the Rating
Agencies or (B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (ii) whose deposits
are insured up to applicable limits by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables held by any Trust and will, consistent with
the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, follow such collection procedures as it follows with respect
to comparable motor vehicle retail installment sale contracts and
installment loans it services for itself or others. Consistent with its
normal procedures, the Servicer may, in its discretion, arrange with
the Obligor on a Receivable to extend or modify the payment schedule, but
no such arrangement will, for purposes of any Sale and Servicing Agreement
or Pooling and Servicing Agreement, modify the original due dates or
the amount of the scheduled payments or extend the final payment date of
any Receivable beyond the last day of the Collection Period relating
to the Final Scheduled Maturity Date (as such term is defined with
respect to any Receivables Pool in the related Prospectus
Supplement). Some of such arrangements may result in the Servicer
purchasing the Receivable for the Purchase Amount, while others may result
in the Servicer making Advances. The Servicer may sell the Financed
Vehicle securing the respective Receivable at public or private sale, or
take any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables".
If so specified in the related Prospectus Supplement, a "backup
servicer" may be
appointed and assigned certain oversight servicing responsibilities with
respect to the
Receivables. The identity of any backup servicer, as well as a
description of its
responsibilities, of any fees payable to such backup servicer and the
source of payment of
such fees, will be included in the related Prospectus Supplement.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on
the related
Receivables (from whatever source) and all proceeds of such Receivables
collected during
each collection period specified in the related Prospectus Supplement
(each, a "Collection
Period") into the related Collection Account within two business days
after receipt
thereof.
Collections on a Precomputed Receivable made during a Collection
Period shall be
applied first to repay any outstanding Precomputed Advances made by the
Servicer with
respect to such Receivable (as described below), and to the extent that
collections on a
Precomputed Receivable during a Collection Period exceed the outstanding
Precomputed
Advances, the collections shall then be applied to the scheduled payment
on such
Receivable. If any collections remaining after the scheduled payment is
made are
insufficient to prepay the Precomputed Receivable in full, then, unless
otherwise provided
in the related Prospectus Supplement, generally such remaining collections
(the
"Payaheads") shall be transferred to and kept in the Payahead Account,
until such later
Collection Period as the collections may be transferred to the Collection
Account and
applied either to the scheduled payment or to prepay such Receivable in
full.
ADVANCES
If so provided in the related Prospectus Supplement, to the extent the
collections of
interest and principal on a Precomputed Receivable with respect to a
Collection Period fall
short of the respective scheduled payment, the Servicer will make a
Precomputed Advance of
the shortfall. The Servicer will be obligated to make a Precomputed
Advance on a
Precomputed Receivable only to the extent that the Servicer, in its sole
discretion,
expects to recoup such advance from subsequent collections or recoveries
on such Receivable
or other Precomputed Receivables in the related Receivables Pool or from
any other source
of funds identified in the related Prospectus Supplement. The Servicer
will deposit the
Precomputed Advance in the applicable Collection Account on or before the
business day
preceding the applicable Distribution Date. To the extent possible, the
Servicer will
recoup its Precomputed Advance from subsequent payments by or on behalf of
the respective
Obligor or from insurance or liquidation proceeds with respect to the
Receivable and will
release its right to reimbursement in conjunction with its purchase of the
Receivable as
Servicer, or,
upon the determination that reimbursement from the preceding sources is
unlikely, will
recoup its Precomputed Advance from any collections made on other
Precomputed Receivables
in the related Receivables Pool or from any other source of funds
identified in the related
Prospectus Supplement.
If so provided in the related Prospectus Supplement, on or before the
business day
prior to each applicable Distribution Date, the Servicer shall deposit
into the related
Collection Account as a Simple Interest Advance an amount equal to the
amount of interest
that would have been due on the related Simple Interest Receivables at
their respective
APRs for the related Collection Period (assuming that such Simple Interest
Receivables are
paid on their respective due dates) minus the amount of interest actually
received on such
Simple Interest Receivables during such Collection Period. If such
calculation results in
a negative number, an amount equal to such amount shall be paid to the
Servicer in
reimbursement of outstanding Simple Interest Advances. In addition, in
the event that a
Simple Interest Receivable becomes a Liquidated Receivable (as such term
is defined in the
related Prospectus Supplement), the amount of accrued and unpaid interest
thereon (but not
including interest for the then current Collection Period) shall be
withdrawn from the
Collection Account and paid to the Servicer in reimbursement of
outstanding Simple Interest
Advances. No advances of principal will be made with respect to Simple
Interest
Receivables. As used herein, "Advances" means both Precomputed Advances
and Simple
Interest Advances.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect
to any Trust, the
Servicer will be entitled to receive the Servicing Fee for each Collection
Period in an
amount equal to specified percentage per annum (as set forth in the
related Prospectus
Supplement, the "Servicing Fee Rate") of the Pool Balance as of the first
day of the
related Collection Period (the "Servicing Fee"). The Servicing Fee
(together with any
portion of the Servicing Fee that remains unpaid from prior Distribution
Dates) will be
paid solely to the extent of the Interest Distribution Amount. However,
unless otherwise
specified in the related Prospectus Supplement, the Servicing Fee will be
paid prior to the
distribution of any portion of the Interest Distribution Amount to the
Noteholders or the
Certificateholders of the given series.
Unless otherwise provided in the related Prospectus Supplement with
respect to a given
Trust, the Servicer will also collect and retain any late fees, prepayment
charges and
other administrative fees or similar charges allowed by applicable law
with respect to the
related Receivables and will be entitled to reimbursement from such Trust
for certain
liabilities. Payments by or on behalf of Obligors will be allocated to
scheduled payments
and late fees and other charges in accordance with the Servicer's normal
practices and
procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third
party servicer of motor vehicle receivables as an agent for their
beneficial owner,
including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies,
sending payment
coupons to Obligors, reporting tax information to Obligors, paying costs
of collections and
disposition of defaults and policing the collateral. The Servicing Fee
also will
compensate the Servicer for administering the particular Receivables Pool,
including making
Advances, accounting for collections and furnishing monthly and annual
statements to the
related Trustee and Indenture Trustee with respect to distributions and
generating federal
income tax information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer
for certain taxes,
the fees of the related Trustee and Indenture Trustee, if any, accounting
fees, outside
auditor fees, data processing costs and other costs incurred in connection
with
administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the
Distribution Date
specified in the related Prospectus Supplement, distributions of principal
and interest
(or, where applicable, of principal or interest only) on each class of
such Securities
entitled thereto will be made by the Applicable Trustee to the Noteholders
and the
Certificateholders of such series. The timing, calculation, allocation,
order, source and
priorities of, and the requirements for, all payments to the holders of
each class of
Notes, if any, and all distributions to the holders of each class of
Certificates of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on
the related
Receivables will be transferred from the Collection Account to the Note
Distribution
Account, if any, and the Certificate Distribution Account for distribution
to Noteholders,
if any, and Certificateholders to the extent provided in the related
Prospectus Supplement.
Credit enhancement, such as a Reserve Account, will be available to cover
any shortfalls
in the amount available for distribution on such date to the extent
specified in the
related Prospectus Supplement. As more fully described in the related
Prospectus
Supplement, and unless otherwise specified therein, distributions in
respect of principal
of a class of Securities of a given series will be subordinated to
distributions in respect
of interest on such class, and distributions in respect of one or more
classes of
Certificates of such series may be subordinated to payments in respect of
Notes, if any,
of such series or to distributions in respect of other classes of
Certificates of such
series. Distributions of principal on the Securities of a series may be
based on the amount
of principal collected or due, or the amount of Realized Losses incurred,
in a Collection
Period.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement
arrangements, if any, and
the provider thereof, if applicable, with respect to each class of
Securities of a given
series will be set forth in the related Prospectus Supplement. If and to
the extent
provided in the related Prospectus Supplement, credit and cash flow
enhancement may be in
the form of subordination of one or more classes of Securities, Reserve
Accounts, spread
accounts,
overcollateralization, letters of credit, credit or liquidity facilities,
surety bonds,
insurance policies, guaranteed investment contracts, swaps or other
interest rate
protection agreements, repurchase obligations, yield supplement
agreements, other
agreements with respect to third party payments or other support, cash
deposits or such
other arrangements as may be described in such Prospectus Supplement, or
any combination
of two or more of the foregoing. If specified in the applicable
Prospectus Supplement,
credit or cash flow enhancement for a class of Securities may cover one or
more other
classes of Securities of the same series, and credit or cash flow
enhancement for a series
of Securities may cover one or more other series of Securities.
The presence of a Reserve Account and other forms of credit
enhancement for the
benefit of any class or series of Securities is intended to enhance the
likelihood of
receipt by the Securityholders of such class or series of the full amount
of principal and
interest due thereon and to decrease the likelihood that such
Securityholders will
experience losses. Unless otherwise specified in the related Prospectus
Supplement, the
credit enhancement for a class or series of Securities will not provide
protection against
all risks of loss and will not guarantee repayment of the entire principal
balance and
interest thereon. If losses occur which exceed the amount covered by any
credit
enhancement or which are not covered by any credit enhancement,
Securityholders of any
class or series will bear their allocable share of deficiencies, as
described in the
related Prospectus Supplement. In addition, if a form of credit
enhancement covers more
than one series of Securities, Securityholders of any such series will be
subject to the
risk that such credit enhancement will be exhausted by the claims of
Securityholders of
other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller will
establish for a series or class of Securities an account, as specified in
such Prospectus
Supplement (the "Reserve Account"), which will be maintained with the
related Trustee or
Indenture Trustee, as applicable. Unless otherwise provided in the
related Prospectus
Supplement, the Reserve Account will be funded by an initial deposit by
the Seller on the
Closing Date in the amount set forth in such Prospectus Supplement and, if
the related
series has a Funding Period, will also be funded on each Subsequent
Transfer Date to the
extent described in such Prospectus Supplement. As further described in
the related
Prospectus Supplement, the amount on deposit in the Reserve Account will
be increased on
each Distribution Date thereafter up to the Specified Reserve Account
Balance (as defined
in such Prospectus Supplement) by the deposit therein of the amount of
collections on the
related Receivables remaining on each such Distribution Date after the
payment of all other
required payments and distributions on such date. The related Prospectus
Supplement will
describe the circumstances and the manner under which distributions may be
made out of the
Reserve Account, either to holders of the Securities covered thereby or to
the Seller or
to any other entity.
NET DEPOSITS
If so specified in the related Prospectus Supplement as an
administrative convenience,
unless the Servicer is required to remit collections daily (see "--
Collections" above),
the Servicer will be permitted to make the deposit of collections,
aggregate Advances and
Purchase Amounts for any Trust for or with respect to the related
Collection Period net of
distributions to be made to the Servicer for such Trust with respect to
such Collection
Period. The Servicer may cause to be made a single, net transfer from the
Collection
Account to the related Payahead Account, if any, or vice versa. The
Servicer, however,
will account to the Trustee, any Indenture Trustee, the Noteholders, if
any, and the
Certificateholders with respect to each Trust as if all deposits,
distributions and
transfers were made individually. With respect to any Trust that issues
both Certificates
and Notes, if the related Distribution Dates do not coincide with
Distribution Dates, all
distributions, deposits or other remittances made on a Distribution Date
will be treated
as having been distributed, deposited or remitted on the Distribution Date
for the
applicable Collection Period for purposes of determining other amounts
required to be
distributed, deposited or otherwise remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to each series of
Securities, the
Servicer will provide to the applicable Indenture Trustee, if any, and the
applicable
Trustee as of the close of business on the last day of the preceding
Collection Period a
statement setting forth substantially the same information as is required
to be provided
in the periodic reports provided to Securityholders of such series
described under "Certain
Information Regarding the Securities -- Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide
that a firm of independent public accountants will furnish annually to the
related Trust
and Indenture Trustee or Trustee, as applicable, a statement as to
compliance by the
Servicer during the preceding twelve months (or, in the case of the first
such statement,
from the applicable Closing Date) with certain standards relating to the
servicing of the
applicable Receivables, the Servicer's accounting records and computer
files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will also
provide for delivery to the related Trust and the Indenture Trustee or
Trustee, as
applicable, substantially simultaneously with the delivery of such
accountants' statement
referred to above, of a certificate signed by an officer of the Servicer
stating that the
Servicer has fulfilled its obligations under the Sale and Servicing
Agreement or Pooling
and Servicing Agreement, as applicable, throughout the preceding twelve
months (or, in the
case of the first such certificate, from the applicable Closing Date) or,
if there has been
a default in the fulfillment of any such obligation, describing each such
default. The
Servicer has agreed to give each Indenture Trustee and/or each Trustee
notice of certain
Servicer Defaults under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a
request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide
that the Company may not resign from its obligations and duties as
Servicer thereunder,
except upon determination that the Company's performance of such duties is
no longer
permissible under applicable law. No such resignation will become
effective until the
related Indenture Trustee or Trustee, as applicable, or a successor
servicer has assumed
the Company's servicing obligations and duties under such Sale and
Servicing Agreement or
Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will further
provide that neither the Servicer nor any of its directors, officers,
employees and agents
will be under any liability to the related Trust or the related
Noteholders or
Certificateholders for taking any action or for refraining from taking any
action pursuant
to such Sale and Servicing Agreement or Pooling and Servicing Agreement or
for errors in
judgment; except that neither the Servicer nor any such person will be
protected against
any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith
or negligence in the performance of the Servicer's duties thereunder or by
reason of
reckless disregard of its obligations and duties thereunder. In addition,
each Sale and
Servicing Agreement and Pooling and Servicing Agreement will provide that
the Servicer is
under no obligation to appear in, prosecute or defend any legal action
that is not
incidental to the Servicer's servicing responsibilities under such Sale
and Servicing
Agreement or Pooling and Servicing Agreement and that, in its opinion, may
cause it to
incur any expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement
and Pooling and
Servicing Agreement , any entity into which the Servicer may be merged or
consolidated, or
any entity resulting from any merger or consolidation to which the
Servicer is a party, or
any entity succeeding to the business of the Servicer or, with respect to
its obligations
as Servicer, any corporation 50% or more of the voting stock of which is
owned, directly
or indirectly, by the Company, which corporation or other entity in each
of the foregoing
cases assumes the obligations of the Servicer, will be the successor of
the Servicer under
such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the
Servicer may appoint a subservicer to perform all or any portion of its
obligations as
Servicer; however, in the event that the Servicer does appoint any such
subservicer, the
Servicer will remain obligated and liable to the related Trustee and
Securityholders for
servicing and administering the Receivables and will also be responsible
for any fees and
expenses of the subservicer.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default"
under each Sale and Servicing Agreement and Pooling and Servicing
Agreement will consist
of (i) any failure by the Servicer to deliver to the Applicable Trustee
for deposit in any
of the Trust Accounts or the Certificate Distribution Account any required
payment or to
direct the Applicable Trustee to make any required distributions
therefrom, which failure
continues unremedied for five business days after written notice from the
Applicable
Trustee is received by the Servicer or after discovery of such failure by
the Servicer;
(ii) any failure by the Servicer duly to observe or perform in any
material respect any
other covenant or agreement in such Sale and Servicing Agreement or
Pooling and Servicing
Agreement, which failure materially and adversely affects the rights of
the Noteholders or
the Certificateholders of the related series and which continues
unremedied for 60 days
after the giving of written notice of such failure (A) to the Servicer
by the Applicable Trustee or (B) to the Servicer and to the Applicable
Trustee by holders of Notes or Certificates of such
series, as applicable, evidencing not less than 25% in principal amount of
such outstanding
Notes or of such Certificate Balance; and (iii) the occurrence of an
Insolvency Event with
respect to the Servicer. "Insolvency Event" means, with
respect to any
person, any of the following events or actions: certain events of
insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings with
respect to such
person and certain actions by such person indicating its insolvency,
reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of Owner Trusts that issue Notes, unless otherwise
provided in the related
Prospectus Supplement, as long as a Servicer Default under a Sale and
Servicing Agreement
remains unremedied, the related Indenture Trustee or holders of Notes of
the related series
evidencing not less than 25% of the principal amount of such Notes then
outstanding may
terminate all the rights and obligations of the Servicer under such Sale
and Servicing
Agreement, whereupon such Indenture Trustee or a successor servicer
appointed by such
Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the
Servicer under such Sale and Servicing Agreement and will be entitled to
similar
compensation arrangements. In the case of any Grantor Trust and any Owner
Trust that does
not issue Notes, unless otherwise provided in the related Prospectus
Supplement, as long
as a Servicer Default under the related Pooling and Servicing Agreement
remains unremedied,
the related Trustee or holders of Certificates of the related series
evidencing not less
than 25% of the principal amount of such Certificates then
outstanding may terminate
all the rights and obligations of the Servicer under such Pooling and
Servicing Agreement,
whereupon such Trustee or a successor servicer appointed by such Trustee
will succeed to
all the responsibilities, duties and liabilities of the Servicer under
such Pooling and
Servicing Agreement and will be entitled to similar compensation
arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for
the Servicer, and
no Servicer Default other than such appointment has occurred, such trustee
or official may
have the power to prevent any such Indenture Trustee, Noteholders, Trustee
or
Certificateholders from effecting a transfer of servicing. In the event
that such
Indenture Trustee or Trustee is unwilling or unable to so act, it may
appoint, or petition
a court of competent jurisdiction for the appointment of, a successor with
a net worth of
at least $100,000,000 (or such other amount as is specified in the related
Prospectus
Supplement) and whose regular business includes the servicing of motor
vehicle receivables.
Such Indenture Trustee or Trustee may make such arrangements for
compensation to be paid,
which in no event may be greater than the servicing compensation to the
Servicer under such
Sale and Servicing Agreement or Pooling and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Owner Trust that issues Notes, unless otherwise
provided in the
related Prospectus Supplement, the holders of Notes evidencing at least a
majority in
principal amount of the then outstanding Notes of the related series (or
the holders of the
Certificates of such series evidencing not less than a majority of the
outstanding
Certificate Balance, in the case of any Servicer Default which does not
adversely affect
the related Indenture Trustee or such Noteholders) may, on behalf of all
such Noteholders
and Certificateholders, waive any default by the Servicer in the
performance of its
obligations under the related Sale and Servicing Agreement and its
consequences, except a
Servicer Default in making any required deposits to or payments from any
of the Trust
Accounts or to the Certificate Distribution Account in accordance with
such Sale and
Servicing Agreement. With respect to each Grantor Trust and each Owner
Trust that is
formed pursuant to a Pooling and Servicing Agreement, holders of
Certificates of such
series evidencing not less than a majority of the principal amount of such
Certificates
then outstanding may, on behalf of all such Certificateholders, waive any
default by the
Servicer in the performance of its obligations under the related Pooling
and Servicing
Agreement, except a Servicer Default in making any required deposits to or
payments from
the Certificate Distribution Account or the related Trust Accounts in
accordance with such
Pooling and Servicing Agreement. No such waiver will impair such
Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each
of the Transfer
and Servicing Agreements may be amended by the parties thereto, without
the consent of the
related Noteholders or Certificateholders, for the purpose of adding any
provisions to or
changing in any manner or eliminating any of the provisions of such
Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided that such action will not, in the opinion of
counsel
satisfactory to the related Trustee or Indenture Trustee, as applicable,
materially and
adversely affect the interest of any such Noteholder or Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and
Servicing Agreements may also be amended by the Seller, the Servicer, the
related Trustee
and any related Indenture Trustee with the consent of the holders of Notes
evidencing at
least a majority in principal amount of then outstanding Notes, if any, of
the related
series and the holders of the Certificates of such series evidencing at
least a majority
of the principal amount of such Certificates then outstanding, for the
purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of such
Transfer and Servicing Agreements or of modifying in any manner the rights
of such
Noteholders or Certificateholders; provided, however, that no such
amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of,
collections of payments on the related Receivables or distributions that
are required to
be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the
aforesaid percentage of the Notes or Certificates of such series which are
required to
consent to any such amendment, without the consent of the holders of all
the outstanding
Notes or Certificates, as the case may be, of such series.
INSOLVENCY EVENT
With respect to any Owner Trust that issues Notes, if an Insolvency
Event occurs with
respect to the Seller, the related Receivables of such Trust will be
liquidated and the
Trust will be terminated 90 days after the date of such Insolvency Event,
unless, before
the end of such 90-day period, the related Trustee shall have received
written instructions
from (i) holders of each class of Certificates (excluding any Certificates
held by the
Seller) with respect to such Trust representing more than 50% of the
aggregate unpaid
principal amount of each such class (not including the principal amount of
such
Certificates held by the Seller) and (ii) holders of each class of Notes,
if any, with
respect to such Trust representing more than 50% of the aggregate unpaid
principal amount
of each such class, to the effect that each such party disapproves of the
liquidation of
such Receivables and termination of such Trust. Promptly after the
occurrence of an
Insolvency Event with respect to the Seller, notice thereof is required to
be given to the
related Securityholders; provided that any failure to give such required
notice will not
prevent or delay termination of such Trust. Upon termination of any
Trust, the related
Trustee shall, or shall direct the related Indenture Trustee to, promptly
sell the assets
of such Trust (other than the Trust Accounts and the Certificate
Distribution Account) in
a commercially reasonable manner and on commercially reasonable terms.
The proceeds from
any such sale, disposition or liquidation of the Receivables of such Trust
will be treated
as collections on such Receivables and deposited in the related Collection
Account. With
respect to any Trust, if the proceeds from the liquidation of the related
Receivables and
any amounts on deposit in the Reserve Account (if any), the Payahead
Account (if any), the
Note Distribution Account (if any) and the Certificate Distribution
Account are not
sufficient to pay in full the Notes, if any, and the Certificates of the
related series,
the amount of principal returned to Noteholders and Certificateholders
thereof will be
reduced and some or all of such Noteholders and Certificateholders will
incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not
have the power
to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without
the unanimous prior approval of all Certificateholders (including the
Seller) of such Trust
and the delivery to such Trustee by each such Certificateholder (including
the Seller) of
a certificate certifying that such Certificateholder reasonably believes
that such Trust
is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series
and the
satisfaction and discharge of the related Indenture, the related Trustee
will succeed to
all the rights of the Indenture Trustee, and the Certificateholders of
such series will
succeed to all the rights of the Noteholders of such series, under the
related Sale and
Servicing Agreement, except as otherwise provided therein.
SELLER LIABILITY
In the case of each Owner Trust that issues Notes, under each Trust
Agreement, the
Seller will agree to be liable directly to an injured party for the entire
amount of any
losses, claims, damages or liabilities (other than those incurred by a
Noteholder or a
Certificateholder in the capacity of an investor with respect to such
Owner Trust) arising
out of or based on the arrangement created by such Trust Agreement as
though such
arrangement created a partnership under the Delaware Revised Uniform
Limited Partnership
Act in which the Seller was a general partner.
TERMINATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each
Trust, the obligations of the Servicer, the Seller, the related Trustee
and the related
Indenture Trustee, if any, pursuant to the Transfer and Servicing
Agreements will terminate
upon the earliest to occur of (i) the maturity or other liquidation of the
last related
Receivable and the disposition of any amounts received upon liquidation of
any such
remaining Receivables, (ii) the payment to Noteholders, if any, and
Certificateholders of
the related series of all amounts required to be paid to them pursuant to
the Transfer and
Servicing Agreements and (iii) the occurrence of either of the events
described in the two
immediately following paragraphs.
Unless otherwise provided in the related Prospectus Supplement, in
order to avoid
excessive administrative expense, the Servicer will be permitted at its
option to purchase
from each Trust, as of the end of any applicable Collection Period, if the
then outstanding
Pool Balance with respect to the Receivables held by such Trust is 10% or
less of the
Initial Pool Balance (as defined in such Prospectus Supplement, the
"Initial Pool
Balance"), all remaining related Receivables at a price equal to the
aggregate of the
Purchase Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement
with respect to a
Trust, the Applicable Trustee will,
within ten days following a Distribution Date as of which the Pool Balance
is equal to or
less than the percentage of the Initial Pool Balance specified in such
Prospectus
Supplement, solicit bids for the purchase of the Receivables remaining in
such Trust, in
the manner and subject to the terms and conditions set forth in such
Prospectus Supplement.
If the Applicable Trustee receives satisfactory bids as described in such
Prospectus
Supplement, then the Receivables remaining in such Trust will be sold to
the highest
bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes
of the related series will be redeemed concurrently with either of the
events specified
above, and the subsequent distribution to the related Certificateholders
of all amounts
required to be distributed to them pursuant to the applicable Trust
Agreement or Pooling
and Servicing Agreement will effect early retirement of the Certificates
of such series.
ADMINISTRATION AGREEMENT
The Company, in its capacity as administrator (the "Administrator"),
will enter into
an agreement (an "Administration Agreement") with each Owner Trust that
issues Notes and
the related Indenture Trustee pursuant to which the Administrator will
agree, to the extent
provided in such Administration Agreement, to provide the notices and to
perform other
administrative obligations required by the related Indenture. Unless
otherwise specified
in the related Prospectus Supplement with respect to any such Trust, as
compensation for
the performance of the Administrator's obligations under the applicable
Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be
entitled to a monthly administration fee (the "Administration Fee"), which
fee will be paid
by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
The Receivables in general evidence the credit sale of new and used
automobiles, light
duty trucks, vans and minivans by dealers to Obligors and also constitute
personal property
security agreements granting the holder of such Receivable a security
interest in the
Financed Vehicles under the applicable UCC. Perfection of security
interests in the
Financed Vehicles is generally governed by the motor vehicle registration
laws of the state
in which a Financed Vehicle is located. In almost all states in which the
Receivables have
been originated, a security interest in automobiles, light duty trucks,
vans and minivans
is perfected by notation of the secured party's lien on the vehicle's
certificate of title.
All of the Receivables purchased by the Company name the Company as
obligee (by
assignment or otherwise) and as the secured party. The Company also takes
all actions
necessary under the laws of the state in which the Financed Vehicle is
located to perfect
the Company's security interest in the Financed Vehicle, including, where
applicable,
having a notation of its lien recorded on such vehicle's certificate of
title.
The Company will sell its interests in Receivables and assign its
security interests
in the Financed Vehicles securing the Receivables to either (i) the
related Trust pursuant
to either a Sale and Servicing Agreement or a Pooling and Servicing
Agreement or (ii) a
Transferor pursuant to a Receivables Purchase Agreement, which Transferor
will, in turn,
sell such interests and assign such security interests to the Trust
pursuant to either a
Sale and Servicing Agreement or a Pooling and Servicing Agreement.
However, because of the
administrative burden and expense, the certificates of title to the
Financed Vehicles will
not be amended to reflect any Transferor or the Trust as the new secured
party on the
certificate of title relating to the Financed Vehicles. Each Sale and
Servicing Agreement
or Pooling and Servicing Agreement, as applicable, provides that the
Company, as custodian,
will hold any certificates of title and the documents and other items
relating to the
Financed Vehicles in its possession on behalf of the Trust and the
Indenture Trustee.
With respect to certain limitations on the enforceability of the
Indenture Trustee's
security interest, see "Risk Factors -- Certain Legal Aspects".
Under the laws of most states, the perfected security interest in a
Financed Vehicle
would continue for four months after such vehicle is moved to a state
other than the state
in which it is initially registered, and thereafter until the owner of the
Financed Vehicle
re-registers it in the new state. A majority of states generally require
surrender of a
certificate of title in connection with the re-registration of a vehicle;
accordingly, a
secured party must surrender possession if it holds the certificate of
title to the
vehicle, or, in the case of a vehicle registered in a state providing for
the notation of
a lien on the certificate of title but not possession by the secured
party, assuming no
fraud or negligence, the secured party noted on the certificate of title
would receive
notice of surrender if the security interest is noted on the certificate
of title. Thus,
the secured party would have the opportunity to re-perfect its security
interest in the
vehicle in the state of relocation. In states that do not require a
certificate of title
for registration of a motor vehicle, a re-registration could defeat
perfection. In the
ordinary course of servicing Receivables, the Servicer takes steps to
effect re-perfection
upon receipt of notice of re-registration or information from the Obligor
as to relocation.
Similarly, when an Obligor sells a Financed Vehicle, the Servicer must
surrender possession
of the certificate of title or will receive notice as a result of its lien
noted thereon
and, accordingly, will have an opportunity to require satisfaction of the
related
Receivable before release of the lien. Under each Sale and Servicing
Agreement or Pooling
and Servicing Agreement, as applicable, the Servicer is obligated to take
appropriate
steps, at its own expense, to maintain perfection of security interests in
such Financed
Vehicle and is obligated to repurchase the related Receivable if it fails
to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle, liens
for unpaid storage fees and liens for unpaid taxes take priority over even
a perfected
security
interest in a Financed Vehicle. The Company will represent that, as of
the date of
issuance of the Notes, each security interest in a Financed Vehicle is
prior to all other
present liens upon and security interests in such Financed Vehicle.
However, liens for
repairs, unpaid storage fees or taxes could arise at any time during the
term of a
Receivable. No notice will be given to the Indenture Trustee or the
Noteholders in the
event such a lien arises nor will the Company be obligated to repurchase
the related
Receivable if such a lien arises after the Closing Date.
REPOSSESSION
In the event of default by a vehicle purchaser, a holder of a retail
installment sale
contract or installment loan has all the remedies of a secured party under
the UCC, except
where specifically limited by other state laws. Among its UCC remedies,
the secured party
has the right to perform self-help repossession unless such act would
constitute a breach
of the peace. Self-help is the method employed by the Servicer in most
cases and is
accomplished simply by retaking possession of the Financed Vehicle. In
the event of
default by the Obligor, some jurisdictions require that the Obligor be
notified of the
default and be given a time period within which he or she may cure the
default prior to
repossession. Generally, the right to cure a default may be exercised on
a limited number
of occasions in any one-year period. In cases where the Obligor objects
or raises a
defense to repossession, if a Financed Vehicle cannot be retaken without a
breach of the
peace, or if otherwise required by applicable state law, a court order
must be obtained
from an appropriate court, and the Financed Vehicle must then be
repossessed in accordance
with that order.
NOTICE OF SALES; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
Obligor with
reasonable notice of the date, time and place of any public sale or the
date after which
any private sale or other intended disposition of the collateral may be
held. All aspects
of the disposition of the collateral, including the method, manner, time,
place and terms
must be commercially reasonable. The Obligor has the right to redeem the
collateral prior
to actual sale by paying the secured party the unpaid principal balance of
the obligation
plus reasonable expenses for repossessing, holding, and preparing the
collateral for
disposition and arranging for its sale plus, in some jurisdictions,
reasonable attorneys'
fees. In some states the Obligor may have a post-repossession right to
reinstate the terms
of the contract or loan and redeem the collateral by the payment of
delinquent installments
and expenses incurred by the secured party in repossessing the collateral.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds obtained upon repossession and resale of the Financed
Vehicles generally
will be applied first to the expenses of resale and repossession and then
to the
satisfaction of the indebtedness. While some states impose prohibitions
or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the
indebtedness, a deficiency judgment can be sought in those states that do
not
prohibit or limit such judgments, provided that certain procedures are
followed. However,
the deficiency judgment would be a personal judgment against the Obligor
for the shortfall,
and a defaulting Obligor can be expected to have very little capital or
sources of income
available following repossession. Therefore, in many cases, it may not be
useful to seek
a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of collateral and payment of all expenses
and all
indebtedness, there is a surplus of funds. In that case, the UCC requires
the secured
party to remit the surplus to any holder of a lien with respect to the
collateral or, if
no such lienholder exists or there are remaining funds, the UCC requires
the secured party
to remit the surplus to the former owner of the collateral. Certain other
statutory
provisions, including federal and state bankruptcy and insolvency laws,
may limit or delay
the ability of a lender to repossess and resell collateral or enforce a
deficiency
judgment.
CONSUMER PROTECTION LAWS
Courts have applied general equitable principles to limit and restrict
secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable
principles may have the effect of relieving an Obligor from some or all of
the legal
consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured
parties under the UCC and related laws violate the due process protection
provided under
the 14th Amendment of the Constitution of the United States. Courts have
generally upheld
the notice provisions of the UCC and related laws as reasonable or have
found that the
repossession and resale by the creditor do not involve sufficient state
action to afford
constitutional protection to consumers.
Numerous federal and state consumer protection laws and related
regulations impose
substantial requirements upon lenders and servicers involved in consumer
finance, including
requirements regarding the adequate disclosure of loan terms (including
finance charges and
deemed finance charges) and limitations on loan terms (including the
permitted finance
charge or deemed finance charge), collection practices and creditor
remedies. The
application of these laws to particular circumstances is not always
certain and some courts
and regulatory authorities have shown a willingness to adopt novel
interpretations of such
laws. These laws include the Truth in Lending Act, the Equal Credit
Opportunity Act, the
Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair
Credit Billing Act,
the Fair Debt Collection Procedures Act, the Moss-Magnuson Warranty Act,
the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act, state
adaptations of the Uniform Consumer Credit Code and state motor vehicle
retail installment
sales acts, retail installment sales acts, and other similar laws. State
laws generally
impose finance charge ceilings and other restrictions on consumer
transactions and often
require contract disclosure in addition to those required under federal
law. These
requirements impose specific statutory liabilities upon creditors who fail
to comply
with their provisions. In some cases, this liability could affect an
assignee's ability
to enforce consumer finance contracts or loans such as the Receivables.
Under the laws of certain states, finance charges with respect to
motor vehicle retail
installment contracts may include the additional amount, if any, that a
purchaser pays as
part of the purchase price for a vehicle solely because the purchaser is
buying on credit
rather than for cash (a "cash sale differential"). If a dealer charges
such a cash sale
differential, applicable finance charge ceilings could be exceeded.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC
Rule"), the provisions of which are generally duplicated by the Uniform
Consumer Credit
Code and other state laws, has the effect of subjecting an assignee of a
seller of goods
(and certain related creditors) to all claims and defenses that the
obligor in the
transaction could assert against the seller of the goods. With respect to
used automobiles
specifically, the FTC Rule requires that all sellers of used automobiles
prepare, complete
and display a Buyer's Guide that explains the warranty coverage for such
automobiles.
All of the Receivables will be subject to the requirements of the FTC
Rule.
Accordingly, the Trust, as holder of the Receivables, will be subject to
any claims or
defenses that the purchaser of the related Financed Vehicle may assert
against the seller
of the Vehicle. Such claims are limited to a maximum liability equal to
the amounts
actually paid by the Obligor on the Receivable. If an Obligor were
successful in asserting
any such claim or defense, such claim or defense would constitute a breach
of the Company's
representations and warranties under the related Receivables Purchase
Agreement and would
create an obligation of the Company to repurchase the related Receivable
unless the breach
were cured. The Seller will assign its rights under the related
Receivables Purchase
Agreement, including its right to cause the Company to repurchase
Receivables with respect
to which it is in breach of its representations and warranties, to the
Trust pursuant to
either the related Sale and Servicing Agreement or Pooling and Servicing
Agreement. See
"Description of the Transfer and Servicing Agreements -- Sale and
Assignment of
Receivables".
Under most state vehicle dealer licensing laws, sellers of
automobiles, minivans and
light duty trucks are required to be licensed to sell vehicles at retail
sale. In
addition, with respect to used vehicles, the Federal Trade Commission's
Rule on Sale of
Used Vehicles requires that all sellers of used vehicles prepare, complete
and display a
"Buyer's Guide" which explains the warranty coverage for such vehicles.
Furthermore,
Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost
Savings Act and the motor vehicle title laws of most states require that
all sellers of
used vehicles furnish a written statement signed by the seller certifying
the accuracy of
the odometer reading. If a seller is not properly licensed or if either a
Buyer's Guide
or Odometer Disclosure Statement was not provided to the purchaser of a
Financed Vehicle,
the Obligor may be able to assert a defense against the seller of the
Financed Vehicle.
If an Obligor on a Receivable were successful
in asserting any such claim or defense, the Servicer would pursue on
behalf of the Trust
any reasonable remedies against the seller or the manufacturer of the
vehicle, subject to
certain limitations as to the expense of any such action to be specified
in the Sale and
Servicing Agreement.
The Company will warrant under either a Receivables Purchase
Agreement, a Sale and
Servicing Agreement or a Pooling and Servicing Agreement that each
Receivable complies with
all requirements of law in all material respects. Accordingly, if an
Obligor has a claim
against the related Trust for violation of any law and such claim
materially and adversely
affects such Trust's interest in a Receivable, such violation would
constitute a breach of
the warranties of the Company under such Receivables Purchase Agreement,
Sale and Servicing
Agreement or Pooling and Servicing Agreement and would create an
obligation of the Company
to repurchase the Receivable from the Trust unless the breach were cured.
See "Description
of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other
statutory provisions, including federal bankruptcy laws and related state
laws, may
interfere with or affect the ability of a secured party to realize upon
collateral or
enforce a deficiency judgment. For example, in a Chapter 13 proceeding
under the federal
bankruptcy code, a court may prevent a secured party from repossessing an
automobile and,
as part of the rehabilitation plan, may reduce the amount of the secured
indebtedness to
the market value of the automobile 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 loan or change the rate of interest and time of repayment of
the indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the
purchase, ownership and disposition of the Notes and the Certificates.
The summary does
not purport to deal with federal income tax consequences applicable to all
categories of
holders, some of which may be subject to special rules. For example, it
does not discuss
the tax treatment of Noteholders or Certificateholders that are insurance
companies,
regulated investment companies or dealers in securities. Moreover, there
are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving
both debt and
equity interests issued by a trust with terms similar to those of the
Notes and the
Certificates. As a result, the IRS may disagree with all or a part of the
discussion
below. Prospective investors are urged to consult their own tax advisors
in determining
the federal, state, local, foreign and any other tax consequences to them
of the purchase,
ownership and disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code
of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder and
judicial or ruling authority, all of which are subject to change, which
change may be
retroactive. Each Trust will be provided with an opinion of special
Federal tax counsel
to each Trust specified in the related Prospectus Supplement ("Federal Tax
Counsel"),
regarding certain federal income tax matters discussed below. An opinion
of Federal Tax
Counsel, however, is not binding on the IRS or the courts. No ruling on
any of the issues
discussed below will be sought from the IRS. For purposes of the
following summary,
references to the Trust, the Notes, the Certificates and related terms,
parties and
documents shall be deemed to refer, unless otherwise specified herein, to
each Trust and
the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on
whether an election is made to treat the Trust as a partnership under the
Code or whether
the Trust will be treated as a grantor trust. The Prospectus Supplement
for each series
of Certificates will specify whether a partnership election will be made
or the Trust will
be treated as a grantor trust.
OWNER TRUSTS
TAX CHARACTERIZATION OF OWNER TRUSTS
Federal Tax Counsel will deliver its opinion that a Trust for which a
partnership
election is made will not be an association (or publicly traded
partnership) taxable as a
corporation for federal income tax purposes. This opinion will be based
on the assumption
that the terms of the Trust Agreement and related documents will be
complied with, and on
counsel's conclusions that (1) the Trust will not have certain
characteristics necessary
for a business trust to be classified as an association taxable as a
corporation and
(2) the nature of the income of the Trust will exempt it from the rule
that certain
publicly traded partnerships are taxable as corporations.
If an Owner Trust were taxable as a corporation for federal income tax
purposes, such
Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable
income would include all its income on the Receivables, possibly reduced
by its interest
expense on the Notes, if any. Any such corporate income tax could
materially reduce cash
available to make payments on the Notes, if any, and distributions on the
Certificates, and
Certificateholders could be liable for any such tax that is unpaid by the
Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
General. The following discussion only applies to a Trust which
elects to be treated
as a partnership and issues one or more classes of Notes. Furthermore,
the following
discussion assumes that all payments on the Notes are denominated in U.S.
dollars and that
any such Notes are sold to persons other than the Seller. If these
conditions are not
satisfied with respect to any given series of Notes, any additional tax
considerations
with respect to such Notes will be disclosed in the applicable Prospectus
Supplement.
Treatment of the Notes as Indebtedness. The Seller will agree, and
the beneficial
owners of the Notes (the "Note Owners") will agree by their purchase of
Notes, to treat the
Notes as debt for federal income tax purposes. Federal Tax Counsel will,
except as
otherwise provided in the related Prospectus Supplement, advise the Trust
that the Notes
will be classified as debt for federal income tax purposes. The
discussion below assumes
this characterization of the Notes is correct.
OID, etc. The discussion below assumes that all payments on the Notes
are denominated
in U.S. dollars and that the Notes are not Strip Notes. Moreover, the
discussion assumes
that the interest formula for the Notes meets the requirements for
"qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue
discount ("OID"), and that any OID on the Notes (i.e., any excess of the
principal amount
of the Notes over their issue price) does not exceed a de minimis amount
(i.e., 1/4% of
their principal amount multiplied by the number of full years included in
their term), all
within the meaning of the OID regulations. If these conditions are not
satisfied with
respect to any given series of Notes, additional tax considerations with
respect to such
Notes will be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except
as discussed in
the following paragraph, the Notes will not be considered issued with OID.
The stated
interest thereon will be taxable to a Noteholder as ordinary interest
income when received
or accrued in accordance with such Noteholder's method of tax accounting.
Under the OID
regulations, a holder of a Note issued with a de minimis amount of OID
must include such
OID in income, on a pro rata basis, as principal payments are made on the
Note. It is
believed that any prepayment premium paid as a result of a mandatory
redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A
purchaser who buys a Note for more or less than its principal amount will
generally be
subject, respectively, to the premium amortization or market discount
rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one
year from the
issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual
basis holder of a Short-Term Note (and certain cash method holders,
including regulated
investment companies, as set forth in Section 1281 of the Code) generally
would be required
to report interest income as interest accrues on a straight-line basis
over the term of
each interest period. Other cash basis holders of a Short-Term Note
would, in general, be
required to report interest income as interest is paid (or, if earlier,
upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note
reporting interest income as it is paid may be required to defer a portion
of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry
the Short-Term
Note until the taxable disposition of the Short-Term Note. A cash basis
taxpayer may elect
under Section 1281 of the Code to accrue interest income on all
nongovernment debt obligations with a term of one year or less, in which
case the taxpayer
would include interest on the Short-Term Note in income as it accrues, but
would not be
subject to the interest expense deferral rule referred to in the preceding
sentence.
Certain special rules apply if a Short-Term Note is purchased for more or
less than its
principal amount.
Sale or Other Disposition. If a Note Owner sells a Note, the holder
will recognize
gain or loss in an amount equal to the difference between the amount
realized on the sale
and the holder's adjusted tax basis in the Note. The adjusted tax basis
of a Note to a
particular Note Owner will equal the holder's cost for the Note, increased
by any market
discount, acquisition discount, OID and gain previously included by such
Note Owner in
income with respect to the Note and decreased by the amount of bond
premium (if any)
previously amortized and by the amount of principal payments previously
received by such
Note Owner with respect to such Note. Any such gain or loss will be
capital gain or loss
if the Note was held as a capital asset, except for gain representing
accrued interest and
accrued market discount not previously included in income. Capital losses
generally may
be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Note Owner
who is a
nonresident alien, foreign corporation or other non-United States person
(a "foreign
person") generally will be considered "portfolio interest", and generally
will not be
subject to United States federal income tax and withholding tax, if the
interest is not
effectively connected with the conduct of a trade or business within the
United States by
the foreign person and the foreign person (i) is not actually or
constructively a "10
percent shareholder" of the Trust or the Seller (including a holder of 10%
of the
outstanding Certificates) or a "controlled foreign corporation" with
respect to which the
Trust or the Seller is a "related person" within the meaning of the Code
and (ii) provides
the Trustee or other person who is otherwise required to withhold U.S. tax
with respect to
the Notes with an appropriate statement (on Form W-8 or a similar form),
signed under
penalties of perjury, certifying that the beneficial owner of the Note is
a foreign person
and providing the foreign person's name and address. If a Note is held
through a
securities clearing organization or certain other financial institutions,
the organization
or institution may provide the relevant signed statement to the
withholding agent; in that
case, however, the signed statement must be accompanied by a Form W-8 or
substitute form
provided by the foreign person that owns the Note. If such interest is
not portfolio
interest, then it will be subject to United States federal income and
withholding tax at
a rate of 30 percent, unless reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable
disposition of a Note by a foreign person will be exempt from United
States federal income
and withholding tax, provided that (i) such gain is not effectively
connected with the
conduct of a trade or business in the United States by the foreign person
and (ii) in the
case of an individual foreign person, the foreign person is not present in
the United
States for 183 days or more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt
holder such as a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust,
individual retirement account or nonresident alien who provides
certification as to status
as a nonresident) will be required to provide, under penalties of perjury,
a certificate
containing the holder's name, address, correct federal taxpayer
identification number and
a statement that the holder is not subject to backup withholding. Should
a nonexempt Note
Owner fail to provide the required certification, the Trust will be
required to withhold
31 percent of the amount otherwise payable to the holder, and remit the
withheld amount to
the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Federal
Tax Counsel, the IRS successfully asserted that one or more of the Notes
did not represent
debt for federal income tax purposes, the Notes might be treated as equity
interests in the
Trust. If so treated, the Trust might be taxable as a corporation with
the adverse
consequences described above (and the taxable corporation would not be
able to reduce its
taxable income by deductions for interest expense on Notes recharacterized
as equity).
Alternatively, and most likely in the view of Federal Tax Counsel, the
Trust might be
treated as a publicly traded partnership that would not be taxable as a
corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of
the Notes as
equity interests in such a publicly traded partnership could have adverse
tax consequences
to certain holders. For example, income to certain tax-exempt entities
(including pension
funds) would be "unrelated business taxable income", income to foreign
holders generally
would be subject to U.S. tax and U.S. tax return filing and withholding
requirements, and
individual holders might be subject to certain limitations on their
ability to deduct their
share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES ISSUED BY AN OWNER TRUST
Treatment of the Trust as a Partnership. The Seller and the Servicer
will agree, and
the beneficial owners of Certificates (the "Certificate Owners") will
agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes
of federal and
state income tax, franchise tax and any other tax measured in whole or in
part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the
partnership being the Certificate Owners (including the Seller in its
capacity as recipient
of distributions from the Reserve Account), and the Notes, if any, being
debt of the
partnership. However, the proper characterization of the arrangement
involving the Trust,
the Certificates, the Notes, if any, the Seller and the Servicer is not
clear because there
is no authority on transactions closely comparable to that contemplated
herein.
A variety of alternative characterizations are possible. For example,
because the
Certificates have certain features characteristic of debt, the
Certificates might be
considered debt of the Seller or the Trust. Any such characterization
would not result in
materially adverse tax consequences to Certificate
Owners as compared to the consequences from treatment of the Certificates
as equity in a
partnership, described below. The following discussion assumes that the
Certificates
represent equity interests in a partnership, that all payments on the
Certificates are
denominated in U.S. dollars, none of the Certificates are Strip
Certificates, and that a
series of Securities includes a single class of Certificates. If these
conditions are not
satisfied with respect to any given series of Certificates, additional tax
considerations
with respect to such Certificates will be disclosed in the applicable
Prospectus
Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal
income tax. Rather, each Certificate Owner will be required to separately
take into
account such holder's allocated share of income, gains, losses, deductions
and credits of
the Trust. The Trust's income will consist primarily of interest and
finance charges
earned on the Receivables (including appropriate adjustments for market
discount, OID and
bond premium) and any gain upon collection or disposition of Receivables.
The Trust's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing
and other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the
Code, Treasury regulations and the partnership agreement (here, the Trust
Agreement and
related documents). The Trust Agreement will provide, in general, that
the Certificate
Owners will be allocated taxable income of the Trust for each month equal
to the sum of
(i) the interest that accrues on the Certificates in accordance with their
terms for such
month, including interest accruing at the Pass Through Rate for such month
and interest on
amounts previously due on the Certificates but not yet distributed;
(ii) any Trust income
attributable to discount on the Receivables that corresponds to any excess
of the principal
amount of the Certificates over their initial issue price; (iii) any
prepayment premium
payable to the Certificate Owners for such month; and (iv) any other
amounts of income
payable to the Certificate Owners for such month. Such allocation will be
reduced by any
amortization by the Trust of premium on Receivables that corresponds to
any excess of the
issue price of Certificates over their principal amount. All remaining
taxable income of
the Trust will be allocated to the Seller. Based on the economic
arrangement of the
parties, this approach for allocating Trust income should be permissible
under applicable
Treasury regulations, although no assurance can be given that the IRS
would not require a
greater amount of income to be allocated to Certificate Owners. Moreover,
even under the
foregoing method of allocation, Certificate Owners may be allocated income
equal to the
entire Pass Through Rate plus the other items described above even though
the Trust might
not have sufficient cash to make current cash distributions of such
amount. Thus, cash
basis holders will in effect be required to report income from the
Certificates on the
accrual basis and Certificate Owners may become liable for taxes on Trust
income even if
they have not received cash from the Trust to pay such taxes. In
addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificate Owners
but Certificate Owners may be purchasing Certificates at different
times and at different prices, Certificate Owners may be required to
report on their tax
returns taxable income that is greater or less than the amount reported to
them by the
Trust.
All of the taxable income allocated to a Certificate Owner that is a
pension, profit
sharing or employee benefit plan or other tax-exempt entity (including an
individual
retirement account) will constitute "unrelated business taxable income"
generally taxable
to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including
fees to the
Servicer but not interest expense) would be miscellaneous itemized
deductions. Such
miscellaneous itemized deductions are allowed only to the extent they
exceed, in the
aggregate, 2% of an individual's adjusted gross income. Furthermore,
Section 68 of the
Code provides that itemized deductions otherwise allowable for a taxable
year of an
individual taxpayer whose adjusted gross income exceeds a specified amount
will be reduced
by the lesser of (i) 3% of the excess, if any, of adjusted gross income
over such amount,
or (ii) 80% of the amount of itemized deductions otherwise allowable for
such year.
Accordingly, such deductions might be disallowed to the individual in
whole or in part and
might result in such holder being taxed on an amount of income that
exceeds the amount of
cash actually distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to
Certificate Owners on an aggregate basis. If the IRS were to require that
such
calculations be made separately for each Receivable, the Trust might be
required to incur
additional expense but it is believed that there would not be a material
adverse effect on
Certificate Owners.
Discount and Premium. It is believed that the Receivables were not
issued with OID,
and, therefore, the Trust should not have OID income. However, the
purchase price paid by
the Trust for the Receivables may be greater or less than the remaining
principal balance
of the Receivables at the time of purchase. If so, the Receivables will
have been acquired
at a premium or discount, as the case may be. (As indicated above, the
Trust will make
this calculation on an aggregate basis, but might be required to recompute
it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium,
the Trust will
elect to include any such discount in income currently as it accrues over
the life of the
Receivables or to offset any such premium against interest income on the
Receivables. As
indicated above, a portion of such market discount income or premium
deduction may be
allocated to Certificate Owners.
Section 708 Termination. Under Section 708 of the Code, the Trust
will be deemed to
terminate for federal income tax purposes if 50% or more of the capital
and profits
interests in the Trust are sold or exchanged within a 12-month period. If
such a
termination occurs, the Trust will be considered to distribute its assets
to the partners,
who would then be treated as recontributing those assets to the Trust, as
a new
partnership. The Trust will not comply with certain technical
requirements
that might apply when such a constructive termination occurs. As a
result, the Trust may
be subject to certain tax penalties and may incur additional expenses if
it is required to
comply with those requirements. Furthermore, the Trust might not be able
to comply due to
lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on
a sale of Certificates in an amount equal to the difference between the
amount realized and
the seller's tax basis in the Certificates sold. A Certificate Owner's
tax basis in a
Certificate will generally equal the holder's cost increased by the
holder's share of Trust
income (includible in income) and decreased by any distributions received
with respect to
such Certificate. In addition, both the tax basis in the Certificates and
the amount
realized on a sale of a Certificate would include the holder's share of
the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different
prices may be
required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon
sale or other disposition of some of the Certificates, allocate a portion
of such aggregate
tax basis to the Certificates sold (rather than maintaining a separate tax
basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of
unrecognized accrued market discount on the Receivables would generally be
treated as
ordinary income to the holder and would give rise to special tax reporting
requirements.
The Trust does not expect to have any other assets that would give rise to
such special
reporting requirements. Thus, to avoid those special reporting
requirements, the Trust
will elect to include market discount in income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount of
income (not
including income attributable to disallowed itemized deductions described
above) over the
life of the Certificates that exceeds the aggregate cash distributions
with respect
thereto, such excess will generally give rise to a capital loss upon the
retirement of the
Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable
income and losses will be determined monthly and the tax items for a
particular calendar
month will be apportioned among the Certificate Owners in proportion to
the principal
amount of Certificates owned by them as of the close of the last day of
such month. As a
result, a holder purchasing Certificates may be allocated tax items (which
will affect its
tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by existing
regulations.
If a monthly convention is not allowed (or only applies to transfers of
less than all of
the partner's interest), taxable income or losses of the Trust might be
reallocated among
the Certificate Owners. The Seller is authorized to revise the Trust's
method of
allocation between transferors and transferees to conform to a method
permitted by future
regulations.
Section 754 Election. In the event that a Certificate Owner sells its
Certificates
at a profit (loss), the purchasing Certificate Owner will have a higher
(lower) basis in
the Certificates than the selling Certificate Owner had. The tax basis of
the Trust's
assets will not be adjusted to reflect that higher (or lower) basis unless
the Trust were
to file an election under Section 754 of the Code. In order to avoid the
administrative
complexities that would be involved in keeping accurate accounting
records, as well as
potentially onerous information reporting requirements, the Trust will not
make such
election. As a result, Certificate Owners might be allocated a greater or
lesser amount
of Trust income than would be appropriate based on their own purchase
price for
Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and
accurate books of the Trust. Such books will be maintained for financial
reporting and tax
purposes on an accrual basis and the fiscal year of the Trust will be the
calendar year.
The Trustee will file a partnership information return (IRS Form 1065)
with the IRS for
each taxable year of the Trust and will report each Certificate Owner's
allocable share of
items of Trust income and expense to holders and the IRS on Schedule K-1.
The Trust will
provide the Schedule K-1 information to nominees that fail to provide the
Trust with the
information statement described below and such nominees will be required
to forward such
information to the beneficial owners of the Certificates. Generally,
holders must file tax
returns that are consistent with the information return filed by the Trust
or be subject
to penalties unless the holder notifies the IRS of all such
inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any
time during a calendar year is required to furnish the Trust with a
statement containing
certain information on the nominee, the beneficial owners and the
Certificates so held.
Such information includes (i) the name, address and taxpayer
identification number of the
nominee and (ii) as to each beneficial owner (x) the name, address and
identification
number of such person, (y) whether such person is a United States person,
a tax-exempt
entity or a foreign government, an international organization, or any
wholly owned agency
or instrumentality of either of the foregoing, and (z) certain information
on Certificates
that were held, bought or sold on behalf of such person throughout the
year. In addition,
brokers and financial institutions that hold Certificates through a
nominee are required
to furnish directly to the Trust information as to themselves and their
ownership of
Certificates. A clearing agency registered under Section 17A of the
Exchange Act is not
required to furnish any such information statement to the Trust. The
information referred
to above for any calendar year must be furnished to the Trust on or before
the following
January 31. Nominees, brokers and financial institutions that fail to
provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the
related Trust
Agreement and, as such, will be responsible for representing the
Certificate Owners in any
dispute with the IRS. The Code provides for administrative examination of
a partnership
as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not
expire before three
years after the date on which the partnership information return is filed.
Any adverse
determination following an audit of the return of the Trust by the
appropriate taxing
authorities could result in an adjustment of the returns of the
Certificate Owners, and,
under certain circumstances, a Certificate Owner may be precluded from
separately
litigating a proposed adjustment to the items of the Trust. An adjustment
could also
result in an audit of a Certificate Owner's returns and adjustments of
items not related
to the income and losses of the Trust.
Tax Consequences to Foreign Certificate Owners. It is not clear
whether the Trust
would be considered to be engaged in a trade or business in the United
States for purposes
of federal withholding taxes with respect to non-U.S. persons because
there is no clear
authority dealing with that issue under facts substantially similar to
those described
herein. Although it is not expected that the Trust would be engaged in a
trade or business
in the United States for such purposes, the Trust will withhold as if it
were so engaged
in order to protect the Trust from possible adverse consequences of a
failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to
foreign Certificate Owners pursuant to Section 1446 of the Code, as if
such income were
effectively connected to a U.S. trade or business, at a rate of 35% for
foreign holders
that are taxable as corporations and 39.6% for all other foreign holders.
Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may
require the Trust to change its withholding procedures. In determining a
holder's
withholding status, the Trust may rely on IRS Form W-8, IRS Form W-9 or
the holder's
certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income
tax return (including, in the case of a corporation, the branch profits
tax) on its share
of the Trust's income. Each foreign holder must obtain a taxpayer
identification number
from the IRS and submit that number to the Trust on Form W-8 in order to
assure appropriate
crediting of the taxes withheld. A foreign holder generally would be
entitled to file with
the IRS a claim for refund with respect to taxes withheld by the Trust,
taking the position
that no taxes were due because the Trust was not engaged in a U.S. trade
or business.
However, interest payments made (or accrued) to a Certificate Owner who is
a foreign person
generally will be considered guaranteed payments to the extent such
payments are determined
without regard to the income of the Trust. If these interest payments are
properly
characterized as guaranteed payments, then the interest will not be
considered "portfolio
interest." As a result, Certificate Owners will be subject to United
States federal income
tax and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to
an applicable treaty. In such case, a foreign holder would only be
entitled to claim a
refund for that portion of the taxes in excess of the taxes that should be
withheld with
respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale
of the Certificates will be subject to
a "backup" withholding tax of 31% if, in general, the Certificate Owner
fails to comply
with certain identification procedures, unless the holder is an exempt
recipient under
applicable provisions of the Code.
GRANTOR TRUSTS
TAX CHARACTERIZATION OF GRANTOR TRUSTS
If a partnership election is not made, Federal Tax Counsel will
deliver its opinion
that the Trust will not be classified as an association taxable as a
corporation and that
such Trust will be classified as a grantor trust under subpart E, Part I
of subchapter J
of the Code. In this case, beneficial owners of Certificates (referred to
herein as
"Grantor Trust Certificate Owners") will be treated for federal income tax
purposes as
owners of a portion of the Trust's assets as described below. The
Certificates issued by
a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust
Certificates".
Characterization. Each Grantor Trust Certificate Owner will be
treated as the owner
of a pro rata undivided interest in the interest and principal portions of
the Trust
represented by the Grantor Trust Certificates and will be considered the
equitable owner
of a pro rata undivided interest in each of the Receivables and any other
assets in the
Trust. Any amounts received by a Grantor Trust Certificate Owner in lieu
of amounts due
with respect to any Receivable or other asset in the Trust because of a
default or
delinquency in payment will be treated for federal income tax purposes as
having the same
character as the payments they replace.
Each Grantor Trust Certificate Owner will be required to report on its
federal income
tax return in accordance with such Grantor Trust Certificate Owner's
method of accounting
its pro rata share of the entire income from the Receivables and any other
assets in the
Trust represented by Grantor Trust Certificates, including interest, OID,
if any,
prepayment fees, assumption fees, any gain recognized upon an assumption
and late payment
charges received by the Servicer. Under Sections 162 or 212 each Grantor
Trust Certificate
Owner will be entitled to deduct its pro rata share of servicing fees,
prepayment fees,
assumption fees, any loss recognized upon an assumption and late payment
charges retained
by the Servicer, provided that such amounts are reasonable compensation
for services
rendered to the Trust. Grantor Trust Certificate Owners that are
individuals, estates or
trusts will be entitled to deduct their share of expenses only to the
extent such expenses
plus all other Section 212 expenses exceed two percent of its adjusted
gross income. A
Grantor Trust Certificate Owner using the cash method of accounting must
take into account
its pro rata share of income and deductions as and when collected by or
paid to the
Servicer. A Grantor Trust Certificate Owner using an accrual method of
accounting must
take into account its pro rata share of income and deductions as they
become due or are
paid to the Servicer, whichever is earlier. If the servicing fees paid to
the Servicer are
deemed to exceed reasonable servicing compensation, the amount of such
excess could be
considered as an ownership interest retained by the Servicer (or any
person to whom the
Servicer assigned for value all or a portion of the servicing fees) in a
portion of the
interest payments on the Receivables. The Receivables would then be
subject to the "coupon
stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated
to such holder's undivided interest in each asset of the Trust based on
such asset's
relative fair market value, so that such holder's undivided interest in
each asset will
have its own tax basis. A Grantor Trust Certificate Owner that acquires
an interest in
Receivables or Receivables Backed Assets at a premium may elect to
amortize such premium
under a constant interest method. Amortizable bond premium will be
treated as an offset
to interest income on such Grantor Trust Certificate. The basis for such
Grantor Trust
Certificate will be reduced to the extent that amortizable premium is
applied to offset
interest payments. It is not clear whether a reasonable prepayment
assumption should be
used in computing amortization of premium allowable under Section 171. A
Grantor Trust
Certificate Owner that makes this election for a Grantor Trust Certificate
that is acquired
at a premium will be deemed to have made an election to amortize bond
premium with respect
to all debt instruments having amortizable bond premium that such Grantor
Trust Certificate
Owner acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption,
the holder of a Grantor Trust Certificate acquired at a premium should
recognize a loss if
a Receivable or Receivables Backed Asset prepays in full, equal to the
difference between
the portion of the prepaid principal amount of such asset that is
allocable to the Grantor
Trust Certificate and the portion of the adjusted basis of the Grantor
Trust Certificate
that is allocable to such asset. If a reasonable prepayment assumption is
used to amortize
such premium, it appears that such a loss would be available, if at all,
only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate.
It is not clear whether any other adjustments would be required to reflect
differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear,
based on recent
guidance by the IRS, each purchaser of a Grantor Trust Certificate will be
treated as the
purchaser of a stripped bond which generally should be treated as a single
debt instrument
issued on the day it is purchased for purposes of calculating any original
issue discount.
Generally, under recently issued Treasury regulations (the "Section 1286
Treasury
Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as
calculated for purposes of the OID rules of the Code) such stripped bond
will be considered
to have been issued with OID. See "- Original Issue Discount" below.
Based on the
preamble to the Section 1286 Treasury Regulations, Federal Tax Counsel is
of the opinion
that, although the matter is not entirely clear, the interest income on
the Certificates
at the sum of the Pass Through Rate and the portion of the Servicing Fee
Rate that does not
constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286
Treasury Regulations and
such income will be so treated in the Trustee's tax information reporting.
Original Issue Discount. The IRS has stated in published rulings
that, in
circumstances similar to those described herein, the special rules of the
Code relating to
"original issue discount" (currently Sections 1271 through 1273 and 1275)
will be
applicable to a Grantor Trust Certificate Owner's interest in those
Receivables or
Receivables Backed Assets meeting the conditions necessary for these
sections to apply.
Generally, a Grantor Trust Certificate Owner that acquires an undivided
interest in a
Receivable or Receivables Backed Asset issued or acquired with OID must
include in gross
income the sum of the "daily portions," as defined below, of the OID on
such asset for each
day on which it owns a Certificate, including the date of purchase but
excluding the date
of disposition. In the case of an original Grantor Trust Certificate
Owner, the daily
portions of OID with respect to a Receivable or a Receivables Backed Asset
generally would
be determined as follows. A calculation will be made of the portion of
OID that accrues
on such asset during each successive monthly accrual period (or shorter
period in respect
of the date of original issue or the final Distribution Date). This will
be done, in the
case of each full monthly accrual period, by adding (i) the present value
of all remaining
payments to be received on such asset under the prepayment assumption used
in respect of
such assets and (ii) any payments received during such accrual period, and
subtracting from
that total the "adjusted issue price" of such asset at the beginning of
such accrual
period. No representation is made that such assets will prepay at any
prepayment
assumption. The "adjusted issue price" of a Receivable or Receivables
Backed Asset at the
beginning of the first accrual period is its issue price (as determined
for purposes of the
OID rules of the Code) and the "adjusted issue price" of such asset at the
beginning of a
subsequent accrual period is the "adjusted issue price" at the beginning
of the immediately
preceding accrual period plus the amount of OID allocable to that accrual
period and
reduced by the amount of any payment (other than "qualified stated
interest") made at the
end of or during that accrual period. The OID accruing during such
accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID
for each day in the period. With respect to an initial accrual period
shorter than a full
monthly accrual period, the daily portions of OID must be determined
according to an
appropriate allocation under either an exact or approximate method set
forth in the OID
Regulations, or some other reasonable method, provided that such method is
consistent with
the method used to determine the yield to maturity of such assets.
With respect to the Receivables or Receivables Backed Assets, the
method of
calculating OID as described above will cause the accrual of OID to either
increase or
decrease (but never below zero) in any given accrual period to reflect the
fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used
in respect of such assets. Subsequent purchasers that purchase such
assets at more than
a de minimis discount should consult their tax advisors with respect to
the proper method
to accrue such OID.
Market Discount. A Grantor Trust Certificate Owner that acquires an
undivided
interest in Receivables or Receivables Backed Assets may be subject to the
market discount
rules of Sections 1276 through 1278 to the extent an undivided interest in
a Receivable or
Receivables Backed Asset is considered or to have been purchased at a
"market discount."
Generally, the amount of market discount is equal to the excess of the
portion of the
principal amount of such asset allocable to such holder's undivided
interest over such
holder's tax basis in such interest. Market discount with respect to a
Grantor Trust
Certificate will be considered to be zero if the amount allocable to the
Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price
at maturity multiplied by the weighted average maturity remaining after
the date of
purchase. Treasury regulations implementing the market discount rules
have not yet been
issued; therefore, investors should consult their own tax advisors
regarding the
application of these rules and the advisability of making any of the
elections allowed
under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a
prepayment) or any gain on disposition of a market discount bond shall be
treated as
ordinary income to the extent that it does not exceed the accrued market
discount at the
time of such payment. The amount of accrued market discount for purposes
of determining
the tax treatment of subsequent principal payments or dispositions of the
market discount
bond is to be reduced by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing
for the computation of accrued market discount on debt instruments, the
principal of which
is payable in more than one installment. While the Treasury Department
has not yet issued
regulations, rules described in the relevant legislative history will
apply. Under those
rules, the holder of a market discount bond may elect to accrue market
discount either on
the basis of a constant interest rate or according to one of the following
methods. If a
Grantor Trust Certificate is issued with OID, the amount of market
discount that accrues
during any accrual period would be equal to the product of (i) the total
remaining market
discount and (ii) a fraction, the numerator of which is the OID accruing
during the period
and the denominator of which is the total remaining OID at the beginning
of the accrual
period. For Grantor Trust Certificates issued without OID, the amount of
market discount
that accrues during a period is equal to the product of (i) the total
remaining market
discount and (ii) a fraction, the numerator of which is the amount of
stated interest paid
during the accrual period and the denominator of which is the total amount
of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of
calculating market discount under any of the above methods in the case of
instruments (such
as the Grantor Trust Certificates) that provide for payments that may be
accelerated by
reason of prepayments of other obligations securing such instruments, the
same prepayment
assumption applicable to calculating the accrual of OID will apply.
Because the
regulations described above have not been issued, it is impossible to
predict what effect
those regulations might have on the tax treatment of a Grantor Trust
Certificate purchased
at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be
required to defer a portion of its interest deductions for the taxable
year attributable
to any indebtedness incurred or continued to purchase or carry such
Grantor Trust
Certificate purchased with market discount. For these purposes, the de
minimis rule
referred above applies. Any such deferred interest expense would not
exceed the market
discount that accrues during such taxable year and is, in general, allowed
as a deduction
not later than the year in which such market discount is includible in
income. If such
holder elects to include market discount in income currently as it accrues
on all market
discount instruments acquired by such holder in that taxable year or
thereafter, the
interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificate Owner is
considered to have
purchased an undivided interest in a Receivable or Receivables Backed
Asset for an amount
that is greater than its stated redemption price at maturity of such
asset, such Grantor
Trust Certificate Owner will be considered to have purchased the such
asset with
"amortizable bond premium" equal in amount to such excess. A Grantor
Trust Certificate
Owner (who does not hold the Certificate for sale to customers or in
inventory) may elect
under Section 171 of the Code to amortize such premium. Under the Code,
premium is
allocated among the interest payments on the assets to which it relates
and is considered
as an offset against (and thus a reduction of) such interest payments.
With certain
exceptions, such an election would apply to all debt instruments held or
subsequently
acquired by the electing holder. Absent such an election, the premium
will be deductible
as an ordinary loss only upon disposition of the Certificate or pro rata
as principal is
paid on such assets.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust
Certificate Owner to elect to accrue all interest, discount (including de
minimis market
or original issue discount) and premium in income as interest, based on a
constant yield
method. If such an election were to be made with respect to a Grantor
Trust Certificate
with market discount, the Certificate Owner would be deemed to have made
an election to
include in income currently market discount with respect to all other debt
instruments
having market discount that such Grantor Trust Certificate Owner acquires
during the year
of the election or thereafter. Similarly, a Grantor Trust Certificate
Owner that makes
this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed
to have made an election to amortize bond premium with respect to all debt
instruments
having amortizable bond premium that such Grantor Trust Certificate Owner
owns or acquires.
See "-- Premium" herein. The election to accrue interest, discount and
premium on a
constant yield method with respect to a Grantor Trust Certificate is
irrevocable.
Subordinate Certificates. In the event the Trust issues two classes
of Grantor Trust
Certificates, one class being a subordinate class and the other being a
senior class
(referred to herein as the "Subordinate Certificates" and "Senior
Certificates",
respectively) the Trust will be deemed to have acquired the following
assets: (i) the
principal portion of each Receivable or Receivables Backed Asset plus a
portion of the
interest due on each such asset (the "Trust Stripped Bond"), and (ii) a
portion of the
interest due on each such asset equal to the difference between the pass-
through rate on
the Subordinate Certificates and the pass-through rate on the Senior
Certificates, if any,
which difference is then multiplied by the Subordinate Class Percentage
(the "Trust
Stripped Coupon"). The "Subordinate Class Percentage" equals the initial
aggregate
principal amount of the Subordinate Certificates divided by the sum of the
initial
aggregate principal amount of the Subordinate Certificates and the Senior
Certificates.
The "Senior Class Percentage" equals the initial aggregate principal
amount of the Senior
Certificates divided by the sum of the initial aggregate principal amount
of the
Subordinate Certificates and the Senior Certificates.
The Senior Certificateholders in the aggregate will own the Senior
Class Percentage
of the Trust Stripped Bond and accordingly each Senior Certificateholder
will be treated
as owning its pro rata share of such asset. The Senior Certificateholders
will not own any
portion of the Trust Stripped Coupon. The Subordinate Certificateholders
in the aggregate
own both the Subordinate Class Percentage of the Trust Stripped Bond plus
100% of the Trust
Stripped Coupon, if any, and accordingly each Subordinate
Certificateholder will be treated
as owning its pro rata share in both such assets. The Trust Stripped Bond
will be treated
as a "stripped bond" and the Trust Stripped Coupon will be treated as
"stripped coupons"
within the meaning of Section 1286 of the Code. Because the purchase
price paid by each
Subordinate Certificateholder will be allocated between that
Certificateholder's interest
in the Trust Stripped Bond and the Trust Stripped Coupon based on the
relative fair market
values of each asset on the date such Subordinate Certificate is
purchased, the Trust
Stripped Bond may be issued with original issue discount.
Trust Stripped Bond. Except to the extent modified below, the income
-------------------
of the Trust
Stripped Bond represented by a Certificate will be reported in the same
manner as described
generally above for holders of Certificates. The interest income on the
Subordinate
Certificates at the Senior Certificate pass-through rate and the portion
of the Servicing
Fee that does not constitute excess servicing will be treated as qualified
stated interest.
Trust Stripped Coupon. The Trust Stripped Coupon will be treated as a
---------------------
debt instrument
with original issued discount equal to the excess of the total amount
payable with respect
to such Trust Stripped Coupon (based on the prepayment assumption used in
pricing the
Certificates) over the portion of the purchase price allocated thereto.
The sum of the
daily portions of original issue discount on the Trust Stripped Coupon for
each day during
a year in which the Subordinate Certificateholder holds the Trust Stripped
Coupon will be
included in the Subordinate Certificateholder's income.
Effect of Subordination. If the Subordinate Certificateholders
-------------------------
receive distribution
of less than their share of the Trust's receipts of principal or interest
(the "Shortfall
Amount") because of the subordination of the Subordinate Certificates,
holders of
Subordinate Certificates would probably
be treated for federal income tax purposes as if they had (i) received as
distributions
their full share of such receipts, (ii) paid over to the Senior
Certificateholders an
amount equal to such Shortfall Amount and (iii) retained the right to
reimbursement of such
amounts to the extent such amounts are otherwise available as a result of
collections on
the Receivables or amounts available from a Reserve Account or other form
of credit
enhancement, if any.
Under this analysis, (a) Subordinate Certificateholders would be
required to accrue
as current income any interest or OID income of the Trust that was a
component of the
Shortfall Amount, even though such amount was in fact paid to the Senior
Certificateholders, (b) a loss would only be allowed to the Subordinate
Certificateholders
when their right to receive reimbursement of such Shortfall Amount became
worthless (i.e.,
when it becomes clear that amount will not be available from any source to
reimburse such
loss) and (c) reimbursement of such Shortfall Amount prior to such a claim
of worthlessness
would not be taxable income to Subordinate Certificateholders because such
amount was
previously included in income. Those results should not significantly
affect the inclusion
of income for Subordinate Certificateholders on the accrual method of
accounting, but could
accelerate inclusion of income to Subordinate Certificateholders on the
cash method of
accounting by, in effect, placing them on the accrual method. Moreover,
the character and
timing of loss deductions is unclear. Subordinate Certificateholders are
strongly urged
to consult their own tax advisors regarding the appropriate timing, amount
and character
of any losses sustained with respect to the Subordinate Certificates
including any loss
resulting from the failure to recover previously accrued interest or
discount income.
Sale or Exchange of a Grantor Trust Certificate. The sale or exchange
of a Grantor
Trust Certificate prior to its maturity will result in gain or loss equal
to the
difference, if any, between the amount received and the owner's adjusted
basis in the
Grantor Trust Certificate. Such adjusted basis generally will equal the
seller's purchase
price for the Grantor Trust Certificate, increased by the OID included in
the seller's
gross income with respect to the Grantor Trust Certificate, and reduced by
principal
payments on the Grantor Trust Certificate previously received by the
seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term
or short-term
depending on whether the Grantor Trust Certificate has been owned for the
long-term capital
gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of
Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust
Certificate by a bank or a thrift institution to which such section
applies will be treated
as ordinary income or loss.
Non-U.S. Persons. Generally, to the extent that a Grantor Trust
Certificate evidences
ownership in underlying Receivables that were issued on or before July 18,
1984, interest
or OID paid by the person required to withhold tax under Section 1441 or
1442 to (i) an
owner that is not a U.S. Person (as defined below) or
(ii) a Grantor Trust Certificate Owner holding on behalf of an owner that
is not a U.S.
Person will be subject to federal income tax, collected by withholding, at
a rate of 30%
or such lower rate as may be provided for interest by an applicable tax
treaty. Accrued
OID recognized by the owner on the sale or exchange of such a Grantor
Trust Certificate
also will be subject to federal income tax at the same rate. Generally,
such payments
would not be subject to withholding if such Grantor Trust Certificate
Owner complies with
certain identification requirements (including delivery of a statement,
signed by the
Grantor Trust Certificate Owner under penalties of perjury, certifying
that such Grantor
Trust Certificate Owner is not a U.S. Person and providing the name and
address of such
Grantor Trust Certificate Owner).
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a
corporation or a partnership organized in or under the laws of the United
States or any
political subdivision thereof or an estate or trust, the income of which
from sources
outside the United States is includible in gross income for federal income
tax purposes
regardless of its connection with the conduct of a trade or business
within the United
States.
Information Reporting and Backup Withholding. The Servicer will
furnish or make
available, within a reasonable time after the end of each calendar year,
to each person who
was a Grantor Trust Certificate Owner at any time during such year, such
information as may
be deemed necessary or desirable to assist Grantor Trust Certificate
Owners in preparing
their federal income tax returns, or to enable holders to make such
information available
to beneficial owners or financial intermediaries that hold Grantor Trust
Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial
intermediary or other recipient of a payment on behalf of a beneficial
owner fails to
supply a certified taxpayer identification number or if the Secretary of
the Treasury
determines that such person has not reported all interest and dividend
income required to
be shown on its federal income tax return, 31% backup withholding may be
required with
respect to any payments. Any amounts deducted and withheld from a
distribution to a
recipient would be allowed as a credit against such recipient's federal
income tax
liability.
CERTAIN STATE TAX CONSEQUENCES WITH RESPECT TO OWNER TRUSTS
The activities to be undertaken by the Servicer in servicing and
collecting the
Receivables will take place in Illinois. The State of Illinois imposes a
state income tax
on corporations, partnerships and other entities doing business in the
State of Illinois.
This discussion relates only to Owner Trusts, and is based upon present
provisions of
Illinois statutes and the regulations promulgated thereunder, and
applicable judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. No
ruling on any of the issues discussed below will be sought from the
Illinois Department of
Revenue.
Because of the variation in each state's tax laws based in whole or in
part upon
income, it is impossible to predict tax
consequences to holders of Notes and Certificates in all of the state
taxing jurisdictions
in which they are already subject to tax. Noteholders and Certificate
Owners are urged to
consult their own tax advisors with respect to state tax consequences
arising out of the
purchase, ownership and disposition of Notes and Certificates.
For purposes of the following summary, references to the Trust, the
Notes, the
Certificates and related terms, parties and documents shall be deemed to
refer, unless
otherwise specified herein, to each Owner Trust and the Notes,
Certificates and related
terms, parties and documents applicable to such Trust.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that special Illinois tax counsel to the Trust
("Illinois Tax Counsel")
will advise each such Trust that issues Notes that, assuming the Notes
will be treated as
debt for federal income tax purposes, the Notes will be treated as debt
for Illinois income
tax purposes. Accordingly, Note Owners not otherwise subject to taxation
in Illinois
should not become subject to taxation in Illinois solely because of a
holder's ownership
of Notes. However, a Note Owner already subject to Illinois's income tax
could be required
to pay additional Illinois tax as a result of the holder's ownership or
disposition of
Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY AN OWNER TRUST
If the arrangement created by the Trust Agreement is treated as a
partnership (not
taxable as a corporation) for federal income tax purposes, Illinois Tax
Counsel will
deliver its opinion that the same treatment should also apply for Illinois
tax purposes.
The Owner Trust will take the position that neither it nor the Certificate
Owners are, as
a result of the transactions described herein, doing business in Illinois
but rather that
the Owner Trust should be viewed as a passive holder of investments. As a
result, neither
the Owner Trust nor the Certificate Owners should be subject to Illinois
income taxes
(which, if applicable, could possibly result in reduced distributions to
Certificate
Owners). Alternative characterizations of the Owner Trust and the
Certificates are
possible but would not result in materially adverse tax consequences to
Certificate Owners.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATE
OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT
THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF
NOTES AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing
or other employee benefit plan, as well as individual retirement accounts
and certain types
of Keogh Plans (each a "Benefit Plan"), from engaging in certain
transactions with persons
that are "parties in interest" under ERISA or "disqualified persons" under
the Code with
respect to such Benefit Plan. A violation of these "prohibited
transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and
the Code for
such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited
transactions under ERISA and the Code with respect to a Benefit Plan that
purchased Notes
or Certificates if assets of the Trust were deemed to be assets of the
Benefit Plan. Under
a regulation issued by the United States Department of Labor (the "Plan
Assets
Regulation"), the assets of a Trust would be treated as plan assets of a
Benefit Plan for
the purposes of ERISA and the Code only if the Benefit Plan acquired an
"equity interest"
in the Trust and none of the exceptions contained in the Plan Assets
Regulation was
applicable. An equity interest is defined under the Plan Assets
Regulation as an interest
other than an instrument which is treated as indebtedness under applicable
local law and
which has no substantial equity features.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are
not subject to
ERISA requirements.
A plan fiduciary considering the purchase of Securities of a given
series should
consult its tax and/or legal advisors regarding whether the assets of the
related Trust
would be considered plan assets, the possibility of exemptive relief from
the prohibited
transaction rules and other issues and their potential consequences.
THE NOTES
Unless otherwise specified in the Prospectus Supplement, the Notes of
each series may
be purchased by an employee benefit plan (as defined in Section 3(3) of
ERISA) that is
subject to the provisions of Title I of ERISA or by a plan described in
Section 4975(e)(1)
of the Code, including an individual retirement account (a "Plan"). A
fiduciary of the
Plan must determine that the purchase of a Note is consistent with its
fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction (as
defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section
3(33) of ERISA) are
not subject to the fiduciary responsibility or prohibited transaction
provisions of ERISA
or the Code.
SENIOR CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
following
discussion applies only to nonsubordinate Certificates (referred to herein
as "Senior
Certificates") issued by a Grantor Trust or an Owner Trust.
The U.S. Department of Labor has granted to the lead Underwriter named
in the
Prospectus Supplement an exemption (the "Exemption") from certain of the
prohibited
transaction rules of ERISA with respect to the initial purchase, the
holding and the
subsequent resale by Benefit Plans of certificates representing interests
in asset-backed
pass-through trusts that consist of certain receivables, loans and other
obligations that
meet the conditions and requirements of the Exemption. The receivables
covered by the
Exemption include motor vehicle retail installment sales contracts and
installment loans
such as the Receivables. The Exemption will apply to the acquisition,
holding and resale
of the Senior Certificates by a Benefit Plan, provided that certain
conditions (certain of
which are described below) are met.
Among the conditions which must be satisfied for the Exemption to
apply to the Senior
Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan
is on terms
(including the price for the Senior Certificates) that are at least as
favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the
Benefit Plan are not subordinate to the rights and interests evidenced by
other
certificates of the Trust;
(3) The Senior Certificates acquired by the Benefit Plan have
received a rating
at the time of such acquisition that is in one of the three highest
generic rating
categories from either Standard & Poor's Corporation, Moody's Investors
Service, Inc., Duff
& Phelps Inc. or Fitch Investors Service, Inc.;
(4) The Trustee is not an affiliate of any other member of the
Restricted Group
(as defined below);
(5) The sum of all payments made to the Underwriters in
connection with the
distribution of the Senior Certificates represents not more than
reasonable compensation
for underwriting the Senior Certificates; the sum of all payments made to
and retained by
the Seller pursuant to the sale of the Receivables to the Trust represents
not more than
the fair market value of such Receivables; and the sum of all payments
made to and retained
by the Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the
Servicer's reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited
investor" as defined in Rule 501 (a)(1) of Regulation D of the Securities
and Exchange
Commission under the Securities Act of 1933.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of
interest or prohibited transactions only if, among other requirements,
(i) in the case of
the acquisition
of Senior Certificates in connection with the initial issuance, at least
fifty (50) percent
of the Senior Certificates are acquired by persons independent of the
Restricted Group (as
defined below), (ii) the Benefit Plan's investment in Senior Certificates
does not exceed
twenty-five (25) percent of all of the Senior Certificates outstanding at
the time of the
acquisition, and (iii) immediately after the acquisition, no more than
twenty-five (25)
percent of the assets of the Benefit Plan are invested in certificates
representing an
interest in one or more trusts containing assets sold or serviced by the
same entity. The
Exemption does not apply to Plans sponsored by the Seller, any
Underwriter, the Trustee,
the Servicer, any obligor with respect to Receivables included in the
Trust constituting
more than five percent of the aggregate unamortized principal balance of
the assets in the
Trust, or any affiliate of such parties (the "Restricted Group").
Unless otherwise specified in the Prospectus Supplement, the Company
believes that the
Exemption will apply to the acquisition and holding by Benefit Plans of
Senior Certificates
sold by the Underwriter or Underwriters named in the Prospectus Supplement
and that all
conditions of the Exemption other than those within the control of the
investors have been
met. In addition, as of the date hereof, no obligor with respect to
Receivables included
in the Trust constitutes more than five percent of the aggregate
unamortized principal
balance of the assets of the Trust.
SUBORDINATE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement, the
Certificates issued by
Owner Trusts that also issue Notes and Subordinate Certificates issued by
Grantor Trusts
may not be purchased by a Plan or by any entity whose underlying assets
include plan assets
by reason of a plan's investment in the entity. Such purchase of an
equity interest in the
Trust will result in the assets of the Trust being deemed assets of a
Benefit Plan for the
purposes of ERISA and the Code, and certain transactions involving the
Trust may then be
deemed to constitute prohibited transactions under Section 406 of ERISA
and Section 4975
of the Code. A violation of the "prohibited transaction" rules may result
in an excise tax
or other penalties and liabilities under ERISA and the Code for such
persons.
By its acceptance of such Certificate, each Certificateholder will be
deemed to have
represented and warranted that it is not a Benefit Plan.
If a given series of Certificates may be acquired by a Benefit Plan
because of the
application of an exception contained in the Plan Assets Regulation, such
exception will
be discussed in the related Prospectus Supplement.
A plan fiduciary considering the purchase of Securities of a given
series should
consult its tax and/or legal advisors regarding whether the assets of the
related Trust
would be considered plan assets, the possibility of exemptive relief from
the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement
with respect to the
Notes, if any, of a given series and an underwriting agreement with
respect to the
Certificates of such series (collectively, the "Underwriting Agreements"),
the Seller will
agree to cause the related Trust to sell to the underwriters named therein
and in the
related Prospectus Supplement, and each of such underwriters will
severally agree to
purchase, the principal amount of each class of Notes and Certificates, as
the case may be,
of the related series set forth in such underwriting agreements and in
such Prospectus
Supplement.
In each of the Underwriting Agreements with respect to any given
series of Securities,
the several underwriters will agree, subject to the terms and conditions
set forth therein,
to purchase all the Notes and Certificates, as the case may be, described
therein which are
offered hereby and by the related Prospectus Supplement if any of such
Notes and
Certificates, as the case may be, are purchased.
Each Prospectus Supplement will either (i) set forth the price at
which each class of
Notes and Certificates, as the case may be, being offered thereby will be
offered to the
public and any concessions that may be offered to certain dealers
participating in the
offering of such Notes and Certificates or (ii) specify that the related
Notes and
Certificates, as the case may be, are to be resold by the underwriters in
negotiated
transactions at varying prices to be determined at the time of such sale.
After the
initial public offering of any such Notes and Certificates, such public
offering prices and
such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will
indemnify the
underwriters against certain civil liabilities, including liabilities
under the Securities
Act, or contribute to payments the several underwriters may be required to
make in respect
thereof.
Each Trust may, from time to time, invest the funds in its Trust
Accounts in Eligible
Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series
of Securities,
the closing of the sale of any class of Securities subject to such
Underwriting Agreement
will be conditioned on the closing of the sale of all other such classes
of Securities of
that series.
The place and time of delivery for the Securities in respect of which
this Prospectus
is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Securities of any series will be
passed upon for
the related Trust, the Seller, the Servicer and the Administrator by
Sonnenschein Nath &
Rosenthal, New York, New York, and for the underwriters for such series by
Brown & Wood LLP, New York, New York. Certain federal income tax and
other matters will
be passed upon for each Trust by Brown & Wood LLP and certain Illinois
state tax and other
matters will be passed upon for each Trust by Sonnenschein Nath &
Rosenthal, Chicago, Illinois. It is
anticipated that Sonnenschein Nath & Rosenthal will from time to time
render legal services
to the Seller, the Servicer and their affiliates.
INDEX OF TERMS
Actuarial Receivables 21
Adjusted Issue Price 57
Administration Agreement 46
Administration Fee 46
Administrator 46
Advance 8
Advances 40
Applicable Trustee 34
APR 9
Base Rate 29
Benefit Plan 62
Calculation Agent 30
Calculation Date 31,32,33
CD Rate 30
CD Rate Determination Date 30
CD Rate Security 30
Cede 17
Certificate Balance 4
Certificate Distribution Account 38
Certificate Owners 52
Certificate Pool Factor 22
Certificateholders 17
Certificates 1
Closing Date 37
Code 50
Collateral Reinvestment Account 1,7
Collection Account 37
Collection Period 39
Commercial Paper Rate 31
Commercial Paper Rate
Determination Date 31
Commercial Paper Rate Security 30
Commission 2, 16
Company 1,3
Composite Quotations 30
Cutoff Date 18
Dealer Agreements 18
Dealers 7,18
Definitive Certificates 35
Definitive Notes 35
Definitive Securities 35
Depository 24
Distribution Date 25,29
DTC 18
DTC's Nominee 18
Early Amortization Event 6
Eligible Deposit Account 39
Eligible Institution 39
Eligible Investments 38
ERISA 10
Events of Default 25
Exchange Act 16
Exemption 62
Federal Funds Rate 31,32
Federal Funds Rate Determination Date 31
Federal Funds Rate Security 30
Federal Tax Counsel 50
Final Scheduled Maturity Date 9
Financed Vehicles 6
First Merchants 3
Fixed Rate Securities 29
Floating Rate Securities 29
Foreign Person 51
FTC Rule 49
Funding Period 4
Grantor Trust 3
Grantor Trust Certificate Owners 56
Grantor Trust Certificates 56
H.15(519) 30
Illinois Tax Counsel 61
Indenture 3
Indenture Trustee 1
Index Maturity 30
Indirect Participants 33
Initial Cutoff Date 6
Initial Pool Balance 46
Initial Receivables 6
Insolvency Event 43
Insolvency Laws 14
Interest Rate 4
Interest Reset Date 30
Interest Reset Period 29
Investment Earnings 39
Investment Income 7
IRS 50
LIBOR 32
LIBOR Business Day 32
LIBOR Determination Date 32
LIBOR Security 30
Master Trust 5
Master Trust Agreement 5
Master Trust New Issuance 19
Money Market Yield 31
Note Distribution Account 38
Noteholders 18,33
Note Owners 50
Note Pool Factor 22
Notes 1
Obligors 18
OID 51
OID Regulations 51
Owner Trust 3
Participants 25
Pass Through Rate 4
Payahead Account 38
Payaheads 40
Plan 62
Plan Assets Regulation 62
Pool Balance 23
Pooling and Servicing Agreement 3
Pre-Funded Amount 6
Pre-Funding Account 1
Precomputed Advance 8
Precomputed Receivables 21
Prepayments 16
Prospectus Supplement 1
Purchase Amount 37
Qualified Stated Interest 57
Rating Agencies 17
Ratings Effect 16,20
Receivables 1,6
Receivables Backed Assets 6
Receivables Pool 18
Registration Statement 2
Related Documents 27
Reserve Account 42
Restricted Group 63
Revolving Period 6
Rule of 78's Receivables 21
Rules 34
Sale and Servicing Agreement 6
Schedule of Receivables 37
Section 1286 Treasury Regulations 57
Securities 1
Securities Act 2
Security Owners 33
Securityholders 12,17
Seller 3
Senior Certificates 59,62
Senior Class Percentage 59
Servicer 1,3
Servicer Default 43
Servicing Fee 40
Servicing Fee Rate 40
Shortfall Amount 59
Short-Term Note 51
Simple Interest Advance 8
Simple Interest Receivables 21
Spread 29
Spread Multiplier 29
Strip Certificates 5
Strip Notes 4
Subordinate Certificates 59
Subordinate Class Percentage 59
Subsequent Receivables 1,6
Subsequent Transfer Date 12,37
Sum of Periodic Balances 21
Telerate Page 3750 32
Transfer and Servicing Agreements 36
Transferor 1,3
Treasury bills 32
Treasury Rate 32,33
Treasury Rate Determination Date 33
Treasury Rate Security 30
Trust 1
Trustee 1
Trust Accounts 38
Trust Agreement 3
Trust Property 1
Trust Stripped Bond 59
Trust Stripped Coupon 59
UCC 37
Underwriting Agreements 64
U.S. Person 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Expenses in connection with the offering of the Securities being
registered herein are
estimated as follows:
SEC registration fee . . . . . . . . . . . . . . . . $215,517
Legal fees and expenses . . . . . . . . . . . . . . . $135,000
Accounting fees and expenses . . . . . . . . . . . . . . $ 25,000
Blue sky fees and expenses . . . . . . . . . . $ 10,000
Rating agency fees . . . . . . . . . . . . . . . . . . $ 60,000
Trustee's fees and expenses . . . . . . . . . . . . . . $ 10,000
Printing . . . . . . . . . . . . . . . . . . . . . . . . $ 35,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . $ 20,000
Total . . . . . . . . . . . . . . . . . . $510,517
=============
* All amounts except the SEC Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and distribution
of a Series of Securities in an aggregate principal amount assumed for
these purposes to be equal to $150,000,000 of Securities registered
hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
First Merchants Acceptance Corporation has undertaken in its
certificate of
incorporation and bylaws to indemnify, to the maximum extent permitted by
the Delaware
General Corporation Law as from time to time amended, any currently acting
or former
director, officer, employee and agent of First Merchants Acceptance
Corporation against any
and all liabilities incurred in connection with their services in such
capacities.
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement for Owner Trusts
1.2 Form of Underwriting Agreement for Grantor Trusts
3.1 Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Pooling and Servicing Agreement (including form of
Certificates)
4.3 Form of Indenture (including form of Notes)
5.1 Opinion of Sonnenschein Nath & Rosenthal with respect to legality
8.1 Opinion of Brown & Wood LLP with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Receivables Purchase Agreement for Owner Trusts
10.4 Form of Receivables Purchase Agreement for Grantor Trusts
23.1 Consent of Sonnenschein Nath & Rosenthal (included in Exhibit
5.1)
23.2 Consent of Brown & Wood LLP (included in Exhibit 8.1)
24.1 Power of Attorney (included on Page II-3)*
25.1 Statement of Eligibility and Qualification of Indenture Trustee
99.1 Form of Transfer Agreement
99.2 Form of Security Agreement
- -----------------------------
* Filed previously with the Commission on August 2, 1996 as an exhibit
to the
Registration Statement on Form S-3 (No. 333-09487).
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective
date of the registration statement (or the most recent post-effective
amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information
set forth in the registration statement. Notwithstanding the foregoing,
any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered
would not exceed that which was registered) and any deviation from the low
or high and of
the estimated maximum offering range may be reflected in the form of
prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration
statement;
(iii) To include any material information with respect to the plan
of distribution
not previously disclosed in
the registration statement or any material change to such information in
the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement
relating to the securities offered therein, and the offering of such
securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the
securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any
liability under the Securities Act of 1933, each filing of the
registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the
registration statement shall be deemed to be a new registration statement
relating to the
securities offered therein, and the offering of such securities at that
time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised
that in the
opinion of the Securities and Exchange Commission such indemnification is
against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim
for indemnification against such liabilities (other than the payment by
the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant
in the successful defense of any action, suit or proceeding) is asserted
by such director,
officer or controlling person in connection with the securities being
registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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.
The undersigned registrant hereby undertakes that:
(2) 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.
The undersigned registrant hereby undertakes to file an application
for the purpose
of determining the eligibility of the trustee to act under subsection (a)
of Section 310
of the Trust Indenture Act in accordance with the rules and regulations
prescribed by the
Commission under Section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements
for filing on Form S-3 and has duly caused this Amendment No. 1 to Form S-
3 Registration
Statement (File No. 333-09487) to be signed on its behalf by the
undersigned, thereunto
duly authorized, in the City of Deerfield, the State of Illinois, on
September 6, 1996.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By: /s/ Thomas R. Ehmann
--------------------------------------
Name: Thomas R. Ehmann
Title: Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment
No. 1 to Form S-3 Registration Statement (File No. 333-09487) has been
signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- ---------------------------- President, Chief Executive Officer and Director September 6, 1996
Mitchell C. Kahn (Principal Executive Officer)
/s/ Thomas R. Ehmann
- ---------------------------- Vice President and Chief Financial Officer, September 6, 1996
Thomas R. Ehmann Assistant Secretary (Principal Financial
Officer and Principal Accounting Officer)
*
- ---------------------------- Director September 6, 1996
Thomas A. Hiatt
*
- ---------------------------- Director September 6, 1996
William N. Plamondon
*
- ---------------------------- Director September 6, 1996
Marcy H. Shockey
*
- ---------------------------- Director September 6, 1996
Richard J. Uhl
*
- ---------------------------- Director September 6, 1996
Solomon A. Weisgal
*
- ---------------------------- Director September 6, 1996
Stowe W. Wyant
</TABLE>
*By: /s/ Thomas R. Ehmann
_________________
Thomas R. Ehmann
Attorney-in-fact
Registration No. 333-09487
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
FIRST MERCHANTS AUTO TRUSTS
(Issuer with respect to the Securities)
FIRST MERCHANTS ACCEPTANCE CORPORATION
(Sponsor of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
_____________________
EXHIBIT VOLUME
==========================================================================
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
1.1 Form of Underwriting Agreement for Owner Trusts
1.2 Form of Underwriting Agreement for Grantor Trusts
3.1 Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Pooling and Servicing Agreement (including form of
Certificates)
4.3 Form of Indenture (including form of Notes)
5.1 Opinion of Sonnenschein Nath & Rosenthal with respect to legality
8.1 Opinion of Brown & Wood LLP with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Receivables Purchase Agreement for Owner Trusts
10.4 Form of Receivables Purchase Agreement for Grantor Trusts
23.1 Consent of Sonnenschein Nath & Rosenthal (included in Exhibit
5.1)
23.2 Consent of Brown & Wood LLP (included in Exhibit 8.1)
24.1 Power of Attorney (included on Page II-3)*
25.1 Statement of Eligibility and Qualification of Indenture Trustee
99.1 Form of Transfer Agreement
99.2 Form of Security Agreement
___________________________________
* Filed previously with the Commission on August 2, 1996 as an exhibit
to the
Registration Statement on Form S-3 (No. 333-09487).
Exhibit 1.1
Form of Underwriting Agreement
for Owner Trusts
FIRST MERCHANTS AUTO TRUST 199_-_
( )% (FLOATING RATE) ASSET BACKED NOTES
( )% ASSET BACKED CERTIFICATES
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION
UNDERWRITING AGREEMENT
----------------------
( ), 199_
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
1. Introduction. First Merchants Auto Receivables Corporation ( ),
------------
a Delaware corporation (the "Seller"), and a wholly-owned subsidiary of
First Merchants Acceptance Corporation, a Delaware corporation ("First
Merchants"), proposes to cause First Merchants Auto Trust 199_-_ (the
"Trust") to issue and sell $( ) principal amount of its ( )% (Floating
Rate) Asset Backed Notes, Class A( ) (the "Notes") and $( ) principal
amount of its ( )% Asset Backed Certificates (the "Certificates") to ( ),
(the "Underwriter"). The Notes and Certificates are sometimes referred to
collectively herein as the "Offered Securities."
The Trust Property will include, among other things, a pool of non-prime
precomputed and simple interest motor vehicle retail installment
sale contracts (the "Receivables"), the related security interests in the
motor vehicles financed thereby (the "Financed Vehicles"), certain monies
received thereon on and after ( ), 199_ (the "Cutoff Date"), all
insurance proceeds and liquidation proceeds with respect thereto, the
related Receivables files, the Trust Accounts, proceeds of the foregoing
and certain rights with respect to funds on deposit from time to time in
the Spread Account. The Receivables will be sold to the Trust by the
Seller. The Receivables will be serviced for the Trust by First Merchants
(in such capacity, the "Servicer"). The Notes will be issued pursuant to
an Indenture to be dated as of ( ), 199_ (as amended and supplemented from
time to time, the "Indenture"), between the Trust and ( ), as indenture
trustee (the "Indenture Trustee"). The Certificates will be issued
pursuant to the Amended and Restated Trust Agreement to be dated as of (
), 199_ (as amended and supplemented from time to time, the "Trust
Agreement"), among the Seller, as Depositor, First Merchants, and ( ), as
owner trustee (the "Owner Trustee").
The Seller acknowledges that it will have furnished to the
Underwriter, for distribution to potential investors in the Offered
Securities prior to the date on which the Prospectus (as defined in
Section 2(a) below) is made available to such potential investors, a term
sheet in the form of Exhibit A hereto (the "Collateral Materials").
Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Sale and Servicing Agreement to be
dated as of ( ), 199_ (as amended and supplemented from time to time, the
"Sale and Servicing Agreement"), between the Trust and First Merchants, as
seller and servicer, or, if not defined therein, in the Trust Agreement or
in the Indenture.
2. Representations and Warranties of First Merchants. First
-------------------------------------------------
Merchants represents and warrants to, and agrees with, the Underwriter that:
(a) First Merchants meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Commission (the "Commission") a registration statement
(Registration No. 333-09487) on such Form, including a related preliminary
base prospectus and a preliminary prospectus supplement, for the
registration under the Act of the offering and sale of the Offered
Securities. First Merchants may have filed one or more amendments
thereto, each of which amendments has previously been furnished to you.
First Merchants will next file with the Commission (i) prior to the
effectiveness of such registration statement, an amendment thereto
(including the form of final base prospectus and the form of final
prospectus supplement relating to the Offered Securities) or (ii) after
the effectiveness of such registration statement, either (A) a final base
prospectus relating to the Offered Securities in accordance with
Rules 430A and 424(b)(1) or (4) under the Act or (B) a final base
prospectus and a final prospectus supplement relating to the Offered
Securities in accordance with Rules 415 and 424(b)(2) or (5). First
Merchants has filed with the Commission in a report on Form 8-K the
Collateral Materials within two business days after they were first
delivered to the Underwriter.
In the case of clauses (ii) (A) and (B) above, First Merchants has
included in such registration statement, as amended at the Effective Date,
all information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in the Prospectus with respect to the
Offered Securities and the offering thereof. As filed, such amendment and
form of final prospectus supplement, or such final prospectus supplement,
shall include all Rule 430A Information, together with all other required
information, with respect to the Offered Securities and the offering
thereof and, except to the extent that the Underwriter shall agree in
writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest preliminary base prospectus and preliminary prospectus supplement,
if any, that have previously been furnished to you) as First Merchants has
advised you, prior to the Execution Time, will be included or made
therein. If the Registration Statement contains the undertaking specified
by Regulation S-K Item 512(a), the Registration Statement, at the
Execution Time, meets the requirements set forth in Rule 415(a)(1)(x).
For purposes of this Agreement, "Effective Time" means the date and
time as of which such registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the
Commission, and "Effective Date" means the date of the Effective Time.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. Such registration
statement, as amended at the Effective Time, including all information
deemed to be a part of such registration statement as of the Effective
Time pursuant to Rule 430A(b) under the Act, and including the exhibits
thereto and any material incorporated by reference therein, is hereinafter
referred to as the "Registration Statement." "Base Prospectus" shall mean
any prospectus referred to above contained in the Registration Statement
at the Effective Date, including any Preliminary Prospectus Supplement.
"Preliminary Prospectus Supplement" shall mean the preliminary prospectus
supplement, if any, to the Base Prospectus which describes the Offered
Securities and the offering thereof and is used prior to the filing of the
Prospectus. "Prospectus" shall mean the prospectus supplement relating to
the Offered Securities that is first filed pursuant to Rule 424(b) after
the Execution Time, together with the Base Prospectus, as amended at the
time of such filing, or, if no filing pursuant to Rule 424(b) is required,
shall mean the prospectus supplement relating to the Offered Securities,
including the Base Prospectus, included in the Registration Statement at
the Effective Date. "Rule 430A Information" means information with
respect to the Offered Securities and the offering of the Offered
Securities permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. "Rule 415", "Rule 424", "Rule
430A" and "Regulation S-K" refer to such rules or regulations under the
Act. Any reference herein to the Registration Statement, the Base
Prospectus, a Preliminary Prospectus Supplement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or
before the Effective Date of the Registration Statement or the issue date
of the Base Prospectus, such Preliminary Prospectus Supplement or the
Prospectus, as the case may be; and any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration
Statement, the Base Prospectus, any Preliminary Prospectus Supplement or
the Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement or the issue date of the Base Prospectus, any
Preliminary Prospectus Supplement or the Prospectus, as the case may be,
deemed to be incorporated therein by reference.
(b) On the Effective Date and on the date of this Agreement, the
Registration Statement did or will, and, when the Prospectus is first
filed (if required) in accordance with Rule 424(b) and on the Closing
Date, the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the respective rules and regulations of the
Commission thereunder (the "Rules and Regulations"); on the Effective
Date, the Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that First
Merchants makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or the Prospectus
or any supplement thereto in reliance upon and in conformity with
information furnished in writing to First Merchants by you specifically
for use in connection with the preparation of the Registration Statement
or the Prospectus or any supplement thereto. As of the Closing Date,
First Merchants' representations and warranties in the Sale and Servicing
Agreement and the Trust Agreement will be true and correct.
(c) This Agreement has been duly authorized, executed and delivered
by First Merchants.
(d) Under generally accepted accounting principles, First Merchants
will report its transfer of the Receivables to the Seller pursuant to the
Receivables Purchase Agreement as a sale of the Receivables. First
Merchants has been advised by Deloitte & Touche LLP, independent certified
public accountants, that the transfer will be so classified under
generally accepted accounting principles in accordance with Statement No.
77 of the Financial Accounting Standards Board (December 1983).
(e) None of First Merchants, any of its Affiliates or anyone acting
on behalf of First Merchants or any of its Affiliates has taken any action
that would require qualification of the Trust Agreement under the Trust
Indenture Act or registration of First Merchants, the Seller or the Trust
under the Investment Company Act, nor will First Merchants or any of its
Affiliates act, nor have they authorized or will they authorize any person
to act, in such manner.
3. Representations and Warranties of the Seller.
--------------------------------------------
(a) This Agreement has been duly authorized, executed and delivered
by the Seller.
(b) Immediately prior to the assignment of the Receivables to the
Trust as contemplated by the Sale and Servicing Agreement, the Seller
(i) had good title to, and was the sole owner of, each Receivable and the
other property purported to be transferred by it to the Trust pursuant to
the Sale and Servicing Agreement free and clear of any pledge, mortgage,
lien, security interest or other encumbrance (collectively, "Liens"),
(ii) had not assigned to any person any of its right, title or interest in
such Receivables or property or in the Receivables Purchase Agreement and
(iii) will have the power and authority to sell such Receivables and
property to the Trust, and upon the execution and delivery of the Sale and
Servicing Agreement by the Owner Trustee on behalf of the Trust, the Trust
will have acquired all of the Seller's right, title and interest in and to
such Receivables and property free and clear of any Lien (except for the
Lien of the Indenture).
(c) The Seller's assignment and delivery of the Receivables to the
Trust will vest in the Trust all of the Seller's right, title and interest
therein, subject to no prior lien, mortgage, security interest, pledge,
adverse claim, charge or other encumbrance.
(d) Upon the execution and delivery of the Receivables Purchase
Agreement, the Sale and Servicing Agreement and the Indenture by the
respective parties thereto and the filing with the Secretary of State of
Illinois of (i) the UCC-3 partial termination statements relating to the
release by First Merchants' secured lenders of their security interests in
the Receivables and (ii) UCC-1 financing statements evidencing the
conveyance of the Receivables (A) by First Merchants to the Seller, (B) by
the Seller to the Trust and (C) by the Trust to the Indenture Trustee for
the benefit of the Noteholders, the Trust's conveyance of the Trust
Property to the Indenture Trustee pursuant to the Indenture will vest in
the Indenture Trustee, for the benefit of the Noteholders, a first
priority perfected security interest therein, subject to no prior Lien.
(e) Neither the Seller nor anyone acting on behalf of the Seller has
taken any action that would require qualification of the Trust Agreement
under the Trust Indenture Act, or require registration of the Seller or
the Trust under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), nor will the Seller act, nor has the Seller
authorized any person to act, nor will the Seller authorize any person to
act in such manner.
(f) As of the Closing Date, the Seller's representations and
warranties in the Basic Documents (as defined herein) will be true and
correct.
4. Representations and Warranties of the Underwriter. The
-------------------------------------------------
Underwriter represents and warrants to, and agrees with, the Seller that:
(a) It has not offered or sold, and will not offer or sell, any
Offered Security to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances that do not constitute an offer
to the public in the United Kingdom for the purposes of the Public Offers
of Securities Regulation 1995.
(b) It has complied and will comply with all applicable provisions
of the Financial Services Act 1986 of Great Britain with respect to
anything done by it in relation to the Offered Securities in, from or
otherwise involving the United Kingdom.
(c) It has only issued or passed on and will only issue or pass on
in the United Kingdom any document in connection with the issue of the
Offered Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
5. Purchase, Sale, and Delivery of the Offered Securities. On the
------------------------------------------------------
basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the Seller
agrees to cause the Trust to sell to the Underwriter, and the Underwriter
agrees to purchase from the Trust, (i) at a purchase price of ( )% of the
principal amount thereof, the respective principal amount of the Notes and
(ii) at a purchase price of ( )% of the principal amount thereof, the
respective principal amount of the Certificates, each as set forth in
Schedule I hereto. Delivery of and payment for the Offered Securities
shall be made at the office of Brown & Wood LLP, One World Trade Center,
New York, New York 10048, on ( ), 199_ (the "Closing Date"). Delivery of
the Offered Securities shall be made against payment of the purchase price
in immediately available funds drawn to the order of the Seller. The
Offered Securities to be so delivered will be initially represented by one
or more Notes and Certificates registered in the name of Cede & Co., the
nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Offered Securities will be represented by book
entries on the records of DTC and participating members thereof.
Definitive Notes or definitive Certificates will be available only under
limited circumstances.
6. Offering by the Underwriter. It is understood that, after the
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Registration Statement becomes effective, the Underwriter proposes to
offer the Offered Securities for sale to the public (which may include
selected dealers), as set forth in the Prospectus.
7. Covenants of the Seller and First Merchants. The Seller and
-------------------------------------------
First Merchants covenant and agree with the Underwriter that:
(a) First Merchants and the Seller will use their respective best
efforts to cause the Registration Statement, and any amendment thereto, if
not effective at the Execution Time, to become effective. Prior to the
termination of the offering of the Offered Securities, First Merchants
will not file any amendment of the Registration Statement or supplement to
the Prospectus unless First Merchants has furnished you a copy for your
review prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. 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), First Merchants will file the Prospectus, properly
completed, and any supplement thereto, with the Commission pursuant to and
in accordance with the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to you of such
timely filing.
(b) First Merchants will advise you promptly of any proposal to
amend or supplement the Registration Statement, as filed, or the related
Prospectus and will not effect such amendment or supplement without your
consent, which consent will not unreasonably be withheld; First Merchants
will also advise you promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information; and First Merchants will also advise
you promptly of the effectiveness of the Registration Statement (unless
the Registration Statement has become effective prior to Execution Time)
and any amendment thereto, when the Prospectus, and any supplement
thereto, shall have been filed with the Commission pursuant to Rule 424(b)
and of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threat
of any proceeding for that purpose, and First Merchants will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible the lifting of any issued stop order.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act, any event occurs as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Registration Statement or supplement
the Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, First Merchants promptly will notify you and
will prepare and file, or cause to be prepared and filed, with the
Commission, subject to the second sentence of paragraph (a) of this
Section 5, an amendment or supplement that will correct such statement or
omission or effect such compliance. Any such filing shall not operate as
a waiver or limitation of any right of the Underwriter hereunder.
(d) As soon as practicable, but not later than sixteen months after
the Closing Date, the Seller will cause the Trust to make generally
available to holders of the Offered Securities an earning statement of the
Trust covering a period of at least twelve months beginning after the
Closing Date that will satisfy the provisions of Section 11(a) of the Act.
(e) First Merchants will furnish to the Underwriter copies of the
Registration Statement (one of which will be signed and will include all
exhibits), each related preliminary prospectus (including the Preliminary
Prospectus Supplement, if any), the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Underwriter requests. First Merchants will pay the
expenses of printing or other production of all documents relating to the
offering.
(f) First Merchants will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions in the
United States as you may reasonably designate and will continue such
qualifications in effect so long as required for the distribution.
(g) For a period from the date of this Agreement until the
retirement of the Offered Securities, or until such time as the
Underwriter shall cease to maintain a secondary market in the Offered
Securities, whichever occurs first, First Merchants will deliver to you
the monthly servicing report, the annual statements of compliance and the
annual independent certified public accountants' reports furnished to the
Indenture Trustee or the Owner Trustee pursuant to the Sale and Servicing
Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Owner Trustee.
(h) So long as any of the Offered Securities is outstanding, First
Merchants will furnish to you (i) as soon as practicable after the end of
the fiscal year all documents required to be distributed to holders of
Offered Securities 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 First Merchants or the Seller filed with
any government or regulatory authority that is otherwise publicly
available, as you may reasonably request.
(i) On or before the Closing Date, First Merchants shall cause its
computer records relating to the Receivables to be marked to show the
Trust's absolute ownership of the Receivables, and from and after the
Closing Date, neither First Merchants nor the Seller shall take any action
inconsistent with the Trust's ownership of such Receivables, other than as
permitted by the Sale and Servicing Agreement.
(j) To the extent, if any, that the ratings provided with respect to
the Offered Securities by the rating agency or agencies that initially
rate the Offered Securities are conditional upon the furnishing of
documents or the taking of any other actions by the Seller, the Seller
shall furnish such documents and take any such other actions.
(k) For the period beginning on the date of this Agreement and
ending on the Closing Date, unless waived by the Underwriter, neither the
Seller nor any trust originated, directly or indirectly, by the Seller
will offer to sell or sell notes (other than the Notes) collateralized by,
or certificates (other than the Certificates) evidencing an ownership
interest in, receivables generated pursuant to retail automobile or light
duty truck installment sale contracts in such a manner as would constitute
a public offering to persons in the United States.
(l) The Seller will cooperate with the Underwriter and use its best
efforts to permit the Offered Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(m) The Seller will enter into the Trust Agreement, First Merchants
will enter into the Administration Agreement, the Seller, First Merchants
and the Backup Servicer will enter into the Sale and Servicing Agreement
and First Merchants and the Seller will enter into the Receivables
Purchase Agreement on or prior to the Closing Date.
8. Payment of Expenses. The Seller will pay all expenses incident
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to the performance of its obligations under this Agreement, including (i) the
printing and filing of the Registration Statement as originally filed and
of each amendment thereto, (ii) the preparation of this Agreement,
(iii) the preparation, issuance and delivery of the Offered Securities to
the Underwriter, (iv) the fees and disbursements of the Seller's counsel
and accountants, (v) the qualification of the Offered Securities under
securities laws in accordance with the provisions of Section 6(f),
including filing fees and the fees and disbursements of counsel for you in
connection therewith and in connection with the preparation of any blue
sky or legal investment survey, (vi) the printing and delivery to the
Underwriter of copies of the Registration Statement as originally filed
and of each amendment thereto, (vii) the printing and delivery to the
Underwriter of copies of any blue sky or legal investment survey prepared
in connection with the Offered Securities, (viii) any fees charged by
rating agencies for the rating of the Offered Securities, (ix) the fees
and expenses, if any, incurred with respect to any filing with the
National Association of Securities Dealers, Inc., and (x) the fees and
expenses of Brown & Wood LLP incurred as a result of providing the
opinions required by Sections 9(h) and 9(i) hereof.
9. Conditions to the Obligations of the Underwriter. The
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obligations of the Underwriter to purchase and pay for the Offered Securities
will be subject to the accuracy of the representations and warranties on the
part of the Seller and First Merchants herein, to the accuracy of the
statements of officers of the Seller and First Merchants made pursuant to
the provisions hereof, to the performance by the Seller and First
Merchants of their respective obligations hereunder and to the following
additional conditions precedent:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Underwriter agrees in writing to a later
time, the Registration Statement shall have become effective not later
than (i) ( ) P.M. New York City time on the date of determination of the
public offering price, if such determination occurred at or prior to (
) P.M. New York City time on such date or (ii) ( ) A.M. New York City time
on the business day following the day on which the public offering price
was determined, if such determination occurred after ( ) P.M. New York City
time on such date.
(b) The Prospectus and any supplements thereto shall have been filed
(if required) with the Commission in accordance with the Rules and
Regulations and Sections 2(a) and 2(b) hereof, and prior to the Closing
Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Seller or you, shall be
contemplated by the Commission or by any authority administering any state
securities or blue sky law.
(c) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereto) and the Prospectus
(exclusive of any supplement thereto), 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 or the
Seller which, in the judgment of the Underwriter, materially impairs the
investment quality of the Offered Securities or makes it impractical or
inadvisable to market the Offered Securities; (ii) any suspension or
limitation of trading in securities generally on the New York Stock
Exchange or any setting of minimum prices for trading on such exchange;
(iii) any suspension of trading of any securities of the Seller on any
exchange or in the over-the-counter market; (iv) any banking moratorium
declared by federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved,
any declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of the
Underwriter, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Offered Securities.
(d) The Seller shall have furnished to the Underwriter the opinion
of ( ), counsel for the Seller, dated the Closing Date and satisfactory in
form and substance to the Underwriter and counsel for the Underwriter, to
the effect that:
(i) the Seller 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
do business as a foreign corporation and is in good standing under the laws
of the State of Illinois;
(ii) all the outstanding shares of capital stock of the Seller
have been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of the Seller are
owned by First Merchants free and clear of any security interest and, to the
knowledge of such counsel, after due inquiry, any other interests, claims,
liens or encumbrances (other than as shall be identified to you therein);
(iii) each of the Receivables Purchase Agreement, the Sale
and Servicing Agreement and the Trust Agreement has been duly authorized,
executed and delivered by the Seller, and constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(iv) the Master Spread Account Agreement and the Series 199_-_
Supplement to Master Spread Account Agreement dated as of ( ) (the
"Supplement") among the parties to the Master Spread Account Agreement have
each been duly authorized, executed and delivered by the Seller, and the
Spread Account Agreement constitutes a legal, valid and binding obligation of
the Seller enforceable against the Seller in accordance with
its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(v) the Insurance Agreement has been duly authorized, executed
and delivered by the Seller, and constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(vi) this Agreement has been duly authorized, executed and
delivered by the Seller;
(vii) the direction by the Seller to the Owner Trustee to
authenticate the Certificates has been duly authorized by the Seller and,
when the Certificates have been duly executed, authenticated and delivered
by the Owner Trustee in accordance with the Trust Agreement and delivered and
paid for to the Seller pursuant to the Sale and Servicing Agreement, the
Certificates will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement;
(viii) the direction by the Seller to the Indenture Trustee
to authenticate the Notes has been duly authorized by the Seller and, when
the Notes have been duly executed and delivered by the Owner Trustee and when
authenticated by the Indenture Trustee in accordance with the Indenture and
delivered and paid for pursuant to this Agreement, the Notes
will constitute legal, valid and binding obligations of the Trust (subject,
as to enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditor's rights generally
from time to time in effect) and will be entitled to the benefits of the
Indenture;
(ix) no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in the Receivables
Purchase Agreement, the Sale and Servicing Agreement, the Master Spread Account
Agreement, the Supplement, the Insurance Agreement, the Trust Agreement and
the Indenture (collectively, the "Basic Documents"), except such as may be
required under the blue sky or securities laws of any jurisdiction in
connection with the purchase and sale of the Offered Securities by the
Underwriter, the filing of the UCC-3 partial release statements relating to
the release of the existing liens on the Receivables of First Merchants'
secured lenders, the filing of the UCC-1 financing statements relating to the
conveyance of the Receivables by First Merchants to the Seller and of the
Receivables and the other Trust Property by the Seller to the Trust and by
the Trust to the Indenture Trustee on behalf of the
Noteholders and the filing of the UCC-1 financing statements relating to the
security interests created pursuant to the Spread Account Agreement, and such
other approvals (which shall be specified in such opinion) as have been
obtained and filings as have been made or are in the process of being made;
(x) none of the sale of the Receivables by First Merchants to
the Seller pursuant to the Receivables Purchase Agreement, the sale of the
Trust Property to the Trust pursuant to the Sale and Servicing Agreement, the
pledge of the Trust Property to the Indenture Trustee, the issue and sale of
the Offered Securities, the execution and delivery of this Agreement, the
Sale and Servicing Agreement, the Trust Agreement, the Receivables Purchase
Agreement, the Spread Account Agreement or the Insurance Agreement, the
consummation of any other of the transactions herein or therein contemplated
or the fulfillment of the terms hereof or thereof will conflict with, result
in a breach or violation of, or constitute a default under, any law binding
on the Seller or the charter or bylaws of the Seller or the terms of any
indenture or other agreement or instrument known to such counsel and to which
the Seller is a party or by which it is bound, or any judgment, order or
decree known to such counsel to be applicable to the Seller of any court,
regulatory body, administrative agency, governmental body, or arbitrator having
jurisdiction over the Seller;
(xi) there are no actions, proceedings or investigations pending
or, to the best of such counsel's knowledge after due inquiry, threatened
before any court, administrative agency or other tribunal (1) asserting the
invalidity of any of the Basic Documents, (2) seeking to prevent the
consummation of any of the transactions contemplated by any of the Basic
Documents or the execution and delivery thereof or (3) that might materially
and adversely affect the performance by the Seller of its obligations under,
or the validity or enforceability of, this Agreement or any Basic Document;
(xii) to the best knowledge of such counsel and except as
set forth in the Prospectus (and any supplement thereto), no default
exists and no event has occurred which, with notice, lapse of time or
both, would constitute a default in the due performance and observance of any
term, covenant or condition of any agreement to which the Seller is a party
or by which it is bound, which default is or would have a material adverse
effect on the financial condition, earnings, prospects, business, or
properties of the Seller, taken as a whole;
(xiii) the provisions of the Receivables Purchase Agreement
are effective to transfer to the Seller all right, title and interest of
First Merchants in and to the Receivables, and upon filing of the form UCC-3
partial release statements with respect to the interests of First Merchants'
secured lenders in the Receivables, the Receivables and, to the knowledge of
such counsel, the other Trust Property will be owned by the Seller free and
clear of any Lien except for the Lien of the Sale and Servicing Agreement and
the Indenture;
(xiv) the provisions of the Sale and Servicing Agreement are
effective to transfer to the Trust all right, title and interest of the
Seller in and to the Collateral, and upon filing of the form UCC-3 partial
termination statements with respect to the Collateral from First Merchant's
secured lenders, the Receivables and, to the knowledge of such counsel, the
other Collateral will be owned by the Issuer free and clear of any Lien
except for the Lien of the Indenture;
(xv) the provisions of the Indenture are effective to create, in
favor of the Indenture Trustee for the benefit of the Noteholders as
security for the Trust's obligations under the Notes, a valid security
interest in the Receivables and that portion of the other Collateral which
is subject to Article 9 of the New York Uniform Commercial Code (the "UCC
Collateral") and the proceeds thereof;
(xvi) the form UCC-1 financing statements naming (A) First
Merchants as seller and the Seller as purchaser, (B) the Seller as seller and
the Trust as purchaser and (C) the Trust, as debtor, and the Indenture
Trustee, as secured party are in appropriate form for filing with the
Secretary of State of the State of Illinois and the County Clerk of Lake
County, Illinois; the interest of the Indenture Trustee in the Receivables
and the proceeds thereof and, to the extent that the filing of a financing
statement is effective to perfect an interest in the other Trust Property
under Article 9 of the Illinois Uniform Commercial Code, the other Trust
Property will be perfected upon the filing of such financing statements in
such filing offices; and upon the filing of the form UCC-3 partial release
statements with respect to the interests of First Merchants' secured
lenders in such filing offices, no other interest of any other purchaser from
or creditor of First Merchants, the Seller or the Trust is equal or prior to
the interest of the Trustee in the Receivables and such other Trust Property;
(xvii) the Receivables are "chattel paper" under Article 9 of
the Illinois Uniform Commercial Code;
(xviii) the Basic Documents conform in all material respects
with the descriptions thereof contained in the Prospectus;
(xix) the statements in the Prospectus under the headings
"Risk Factors -- Certain Legal Aspects" and "Certain Legal Aspects of the
Receivables", to the extent they constitute matters of law or legal
conclusions with respect thereto, have been reviewed by such counsel and are
correct in all material respects;
(xx) the statements contained in the Prospectus under the
heading "Description of the Notes," "Description of the Certificates" and
"Description of the Transfer and Servicing Agreements", insofar as such
statements constitute a summary of the Notes, the Certificates and the Basic
Documents, constitute a fair summary of such instruments and documents;
(xxi) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein, no
qualification of the Trust Agreement under the Trust Indenture Act is
necessary, for the offer and sale by the Underwriter of the Offered
Securities in the manner contemplated by this Agreement;
(xxii) the Trust has been duly formed and is validly existing
as a statutory business trust and is in good standing under the laws of the
State of Delaware, with full power and authority to execute, deliver and
perform its obligations under the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, and the Notes and the Certificates;
(xxiii) the Indenture, the Sale and Servicing Agreement and
the Administration Agreement have been duly authorized and, when duly
executed and delivered by the Owner Trustee, will constitute the legal, valid
and binding obligations of the Trust, enforceable against the Trust in
accordance with their respective terms, except that (x) the enforceability
thereof may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights and (y) 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;
(xxiv) to the best knowledge of such counsel, the Seller has
obtained all material licenses, permits and other governmental
authorizations that are necessary to the conduct of its business; such
licenses, permits and other governmental authorizations are in full force and
effect, and the Seller is in all material respects complying therewith; and
the Seller is otherwise in compliance with all laws, rules,
regulations and statutes of any jurisdiction to which it is subject, except
where non-compliance would not have a material adverse effect on the Seller;
(xxv) all actions required to be taken and all filings
required to be made under the Act and the Exchange Act prior to the sale of
the Offered Securities have been duly taken or made;
(xxvi) the Trust is not required to be registered under the
Investment Company Act;
(xxvii) the Indenture has been duly qualified under the Trust
Indenture Act;
(xxviii) the Seller is not, and will not as a result of the
offer and sale of the Offered Securities as contemplated in the Prospectus
(and any supplement thereto) and this Agreement become, an "investment
company" as defined in the Investment Company Act or a company "controlled
by" an "investment company" within the meaning of the Investment Company Act;
(xxix) to the best of such counsel's knowledge and
information, there are no legal or governmental proceedings pending or
threatened that are required to be disclosed in the Registration
Statement, other than those disclosed therein;
(xxx) to the best of such counsel's knowledge and
information, there are no contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be described or
referred to in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed or incorporated by
reference as exhibits thereto, the descriptions thereof or
references thereto are correct, and no default exists in the due performance
or observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or other instrument so described, referred to, filed or incorporated by
reference;
(xxxi) the Registration Statement has become effective under
the Act, any required filing of the Base Prospectus, any preliminary Base
Prospectus, any Preliminary Prospectus Supplement and the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b), and, to the best knowledge of
such counsel, no stop order suspending the effectiveness
of the Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or contemplated under the Act,
and the Registration Statement and the Prospectus, and each amendment or
supplement thereto, as of their respective effective or issue dates, complied
as to form in all material respects with the requirements of the Act, the
Exchange Act, the Trust Indenture Act and the Rules and
Regulations; and
(xxxii) such counsel has examined the Registration Statement
and the Prospectus and nothing has come to such counsel's attention that
would lead such counsel to believe that the Registration Statement or the
Prospectus or any amendment or supplement thereto as of the respective dates
thereof (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need not
express any view) contains an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein not
misleading.
Such counsel shall also state that such counsel has no reason to
believe that at the Execution Time the Prospectus contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, at the Closing Date,
the Prospectus includes an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of Illinois, the State of New York, the State of Delaware or the United
States, to the extent such counsel deems proper and specifies in such
opinion, upon the opinion of other counsel of good standing whom such
counsel believes to be reliable and who are satisfactory to counsel for
the Underwriter and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of the Seller and
public officials.
All references in this Section 9(d) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(e) You shall have received the opinion of ( ), General Counsel for
First Merchants, dated the Closing Date and satisfactory in form and
substance to the Underwriter and to counsel for the Underwriter, to the
effect that:
(i) First Merchants and all of its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction wherein each of them owns or leases
material properties or conducts material business and which requires such
qualification;
((ii) First Merchants has no subsidiaries in any form,
whether wholly-owned or other than wholly-owned, direct or indirect, other
than the Seller and ( );)
(iii) First Merchants is not, and will not as a result of
the offer and sale of the Offered Securities as contemplated in the
Prospectus (and any supplement thereto) and this Agreement become, an
"investment company" as defined in the Investment Company Act or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act;
(iv) First Merchants has obtained all material licenses, permits
and other governmental authorizations that are necessary to the conduct of
its business; such licenses, permits and other governmental authorizations
are in full force and effect, and First Merchants is in all material respects
complying therewith; and First Merchants is otherwise in compliance with all
laws, rules, regulations and statutes of any jurisdiction to which it is
subject, except where non-compliance would not
have a material adverse effect on First Merchants; and
(v) none of the execution and delivery of this Agreement, the
Receivables Purchase Agreement or the Insurance Agreement, the
consummation of any of the transactions therein contemplated or the
fulfillment of the terms thereof will conflict with, result in a breach or
violation of, or constitute a default under, any law or the charter or bylaws
of First Merchants or the terms of any indenture or other agreement
or instrument known to such counsel and to which First Merchants or the
Seller is a party or by which it is bound or any judgment, order or decree
known to such counsel to be applicable to First Merchants or the Seller of
any court, regulatory body, administrative agency, governmental body, or
arbitrator having jurisdiction over First Merchants or the Seller.
Such counsel shall also state that such counsel has no reason to
believe that at the Execution Time the Prospectus contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, at the Closing Date,
the Prospectus includes an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of Illinois or the United States, to the extent such counsel deems proper
and specifies in such opinion, upon the opinion of other counsel of good
standing whom such counsel believes to be reliable and who are
satisfactory to Counsel for the Underwriter and (B) as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible
officers of First Merchants and public officials.
All references in this Section 9(e) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(f) The Underwriter shall have received the opinion of ( ), counsel
for First Merchants, dated the Closing Date and satisfactory in form and
substance to the Underwriter and to Counsel for the Underwriter, to the
effect that:
(i) First Merchants 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) this Agreement has been duly authorized, executed and
delivered by First Merchants;
(iii) the Sale and Servicing Agreement has been duly
authorized, executed and delivered by First Merchants and constitutes a
legal, valid and binding obligation of First Merchants, enforceable
against First Merchants in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium, or other laws affecting creditors' rights generally
from time to time in effect);
(iv) the Insurance Agreement has been duly authorized, executed
and delivered by First Merchants and constitutes a legal, valid and
binding obligation of First Merchants, enforceable against First Merchants
in accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium, or other
laws affecting creditors' rights generally from time to time in effect);
(v) the Receivables Purchase Agreement has been duly
authorized, executed and delivered by First Merchants and constitutes a
legal, valid and binding obligation of First Merchants, enforceable
against First Merchants in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium, or other laws affecting creditors' rights generally
from time to time in effect);
(vi) no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in any Basic
Document, except such as may be required under the blue sky or securities
laws of any jurisdiction in connection with the purchase and sale of the
Offered Securities by the Underwriter, the filing of the UCC-3 partial
termination statements relating to the release of the existing liens of First
Merchants' secured lenders on the Receivables, the filing of the UCC-1
financing statements relating to the conveyance of the Receivables by First
Merchants to the Seller pursuant to the Receivables Purchase Agreement and of
the Receivables and other Trust Property to the Trust and
of the Receivables and other Trust Property to the Indenture Trustee for the
benefit of the Noteholders pursuant to the Sale and Servicing Agreement, the
Trust Agreement and the Indenture, the filing of the UCC-1 financing
statements relating to the security interests created pursuant to the Spread
Account Agreement, and such other approvals (which shall be
specified in such opinion) as have been obtained and filings as have been
made or are in the process of being made; and
(vii) none of the execution and delivery of this Agreement,
the Sale and Servicing Agreement, the Receivables Purchase Agreement or the
Insurance Agreement, the consummation of any of the transactions therein
contemplated or the fulfillment of the terms thereof will conflict
with, result in a breach or violation of, or constitute a default under, the
charter or bylaws of First Merchants.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York, the State of Delaware, the State of Illinois or the United
States, to the extent such counsel deems proper and specifies in such
opinion, upon the opinion of other counsel of good standing whom such
counsel believes to be reliable and who are satisfactory to Counsel for
the Underwriter and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of First Merchants
and public officials.
All references in this Section 9(f) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(g) You shall have received an opinion of (Illinois tax counsel),
addressed to you and the Indenture Trustee, dated the Closing Date and
satisfactory in form and substance to you and your counsel, to the effect
that the statements in the Base Prospectus under the heading "Certain
State Tax Consequences with respect to Owner Trusts" and in the Prospectus
Supplement under the heading "Summary of Terms -- Tax Status" (to the
extent relating to Illinois tax consequences) accurately describe the
material Illinois tax consequences to holders of the Securities.
(h) You shall have received an opinion addressed to you of Brown &
Wood LLP, in its capacity as federal tax counsel to the Trust, to the
effect that the statements in the Base Prospectus under the heading
"Certain Federal Income Tax Consequences" and in the Prospectus Supplement
under the headings "Summary of Terms -- Tax Status" (to the extent
relating to federal income tax consequences), "- ERISA Considerations" and
"ERISA Considerations" to the extent that they constitute statements of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and accurately describe the material
federal income tax consequences to holders of the Notes.
(i) The Underwriter shall have received from Counsel for the
Underwriter such opinion or opinions, dated the Closing Date, with respect
to the issuance and sale of the Offered Securities, the Prospectus (as
amended or supplemented at the Closing Date) and other related matters as
the Underwriter may reasonably require, and the Seller shall have
furnished to such counsel such documents as they request for the purpose
of enabling them to pass upon such matters.
(j) You shall have received an opinion addressed to you and First
Merchants of ( ), counsel to the Indenture Trustee, dated the Closing Date
and satisfactory in form and substance to you and your counsel, to the
effect that:
(i) The Indenture Trustee is a banking corporation duly
incorporated and validly existing under the laws of the ( ).
(ii) The Indenture Trustee has the full corporate trust power to
accept the office of indenture trustee under the Indenture and backup
servicer under the Sale and Servicing Agreement and of collateral agent under
the Spread Account Agreement and to enter into and perform its obligations
under the Indenture, the Sale and Servicing Agreement, the Spread Account
Agreement and the Administration Agreement.
(iii) The execution and delivery of the Indenture and the
Administration Agreement and the acceptance of the Sale and Servicing
Agreement and the performance by the Indenture Trustee of its obligations
under the Indenture, the Sale and Servicing Agreement, the Master Spread
Account Agreement and the Administration Agreement have been duly authorized
by all necessary corporate action of the Indenture Trustee and each has been
duly executed and delivered by the Indenture Trustee.
(iv) The Indenture, the Sale and Servicing Agreement and the
Administration Agreement constitute valid and binding obligations of the
Indenture Trustee enforceable against the Indenture Trustee in accordance
with their terms under the laws of the State of New York and the federal law
of the United States.
(v) The execution and delivery by the Indenture Trustee of the
Indenture and the Administration Agreement and the acceptance of the Sale and
Servicing Agreement do not require any consent, approval or
authorization of, or any registration or filing with, any New York or
United States federal governmental authority, other than the qualification
of the Indenture Trustee under the Trust Indenture Act.
(vi) Each of the Notes has been duly authenticated by the
Indenture Trustee.
(vii) Neither the consummation by the Indenture Trustee of
the transactions contemplated in the Sale and Servicing Agreement, the
Indenture or the Administration Agreement nor the fulfillment of the terms
thereof by the Indenture Trustee will conflict with, result in a breach or
violation of, or constitute a default under any law or the charter, bylaws
or other organizational documents of the Indenture Trustee or the terms of
any indenture or other agreement or instrument known to such counsel to which
the Indenture Trustee or any of its subsidiaries is a party or is bound or
any judgment, order or decree known to such counsel to be applicable to the
Indenture Trustee or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Indenture Trustee or any of its subsidiaries.
(viii) To the knowledge of such counsel there is no action,
suit or proceeding pending or threatened against the Indenture Trustee (as
trustee under the Indenture or in its individual capacity) before or by any
governmental authority that, if adversely decided, would materially adversely
affect the ability of the Indenture Trustee to perform its obligations under
the Indenture, the Sale and Servicing Agreement or the Administration
Agreement.
(ix) The execution, delivery and performance by the Indenture
Trustee of the Sale and Servicing Agreement, the Indenture and the
Administration Agreement will not subject any of the property or assets of
the Trust or any portion thereof to any lien created by or arising under the
Indenture Trustee that is unrelated to the transactions contemplated in such
Agreements.
(k) You shall have received an opinion addressed to you and First
Merchants of ( ), counsel to the Owner Trustee, dated the Closing Date and
satisfactory in form and substance to you and your counsel, to the effect
that:
(i) The Owner Trustee is a banking corporation duly
incorporated and validly existing under the laws of the ( ).
(ii) The Owner Trustee has the full corporate trust power to
accept the office of owner trustee under the Trust Agreement and to enter
into and perform its obligations under the Trust Agreement and, on behalf of
the Trust, under the Indenture, the Sale and Servicing Agreement and the
Administration Agreement.
(iii) The execution and delivery of the Trust Agreement and,
on behalf of the Trust, of the Indenture, the Sale and Servicing
Agreement, the Administration Agreement, the Offered Securities and the
performance by the Owner Trustee of its obligations under the Trust
Agreement, the Indenture, the Sale and Servicing Agreement and the
Administration Agreement have been duly authorized by all necessary corporate
action of the Owner Trustee and each has been duly executed and delivered by
the Owner Trustee.
(iv) The Trust Agreement, the Sale and Servicing Agreement, the
Indenture and the Administration Agreement constitute valid and binding
obligations of the Owner Trustee enforceable against the Owner Trustee in
accordance with their terms under the laws of the State of New York, the
State of Delaware and the federal law of the United States.
(v) The execution and delivery by the Owner Trustee of the
Trust Agreement and, on behalf of the Trust, of the Indenture, the Sale and
Servicing Agreement and the Administration Agreement do not require any
consent, approval or authorization of, or any registration or filing with,
any Delaware or United States federal governmental authority.
(vi) Each of the Certificates has been duly executed and
delivered by the Owner Trustee as owner trustee and authenticating agent.
Each of the Notes has been duly executed and delivered by the Owner Trustee,
on behalf of the Trust.
(vii) Neither the consummation by the Owner Trustee of the
transactions contemplated in the Sale and Servicing Agreement, the
Indenture, the Trust Agreement or the Administration Agreement nor the
fulfillment of the terms thereof by the Owner Trustee will conflict with,
result in a breach or violation of, or constitute a default under any law or
the charter, bylaws or other organizational documents of the Owner Trustee or
the terms of any indenture or other agreement or instrument known to such
counsel to which the Owner Trustee or any of its subsidiaries is a party or
is bound, or any judgment, order or decree known to such counsel to be
applicable to the Owner Trustee or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Owner Trustee
or any of its subsidiaries.
(viii) To the knowledge of such counsel there is no action,
suit or proceeding pending or threatened against the Owner Trustee (as owner
trustee under the Trust Agreement or in its individual capacity) before or by
any governmental authority that, if adversely decided, would materially
adversely affect the ability of the Owner Trustee to perform its obligations
under the Trust Agreement.
(ix) The execution, delivery and performance by the Owner
Trustee (as trustee under the Trust Agreement or in its individual
capacity, as the case may be) of the Sale and Servicing Agreement, the
Indenture, the Trust Agreement or the Administration Agreement will not
subject any of the property or assets of the Trust or any portion thereof to
any lien created by or arising under the Owner Trustee that is unrelated to
the transactions contemplated in such Agreements.
(l) The Underwriter shall have received such opinions, addressed to
the Underwriter and dated the Closing Date, as are delivered to the Rating
Agencies.
(m) The Underwriter shall have received an opinion from ( ), counsel
for the Seller, dated the Closing Date and satisfactory in form and
substance to the Underwriter and counsel for the Underwriter regarding the
true-sale of the Receivables by First Merchants to the Seller and by the
Seller to the Trust and the conveyance by the Trust of the Receivables and
other Trust Property to the Indenture Trustee for the benefit of the
Noteholders.
(n) The Underwriter shall have received an opinion from ( ), counsel
for the Seller, dated the Closing Date and satisfactory in form and
substance to the Underwriter and counsel for the Underwriter regarding
substantive consolidation.
(o) The Underwriter shall have received an opinion from ( ),
Associate General Counsel for (security insurer), dated the Closing Date
and satisfactory in form and substance to the Underwriter and counsel for
the Underwriter, addressed to the Underwriter and the Seller.
(p) The Underwriter shall have received a certificate dated the
Closing Date of any of the Chairman of the Board, the President, the
Executive Vice President, any Vice President, the Treasurer, any Assistant
Treasurer, the principal financial officer or the principal accounting
officer of the Seller in which such officer shall state that, to the best
of his or her knowledge after reasonable investigation:
(i) the representations and warranties of the Seller contained
in this Agreement and the Basic Documents are true and correct; the Seller
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;
(ii) since the date of the most recent financial information
included in the Prospectus, no material adverse change, or any development
involving a prospective material adverse change, in or affecting particularly
the business or properties of the Seller or the Trust has occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission.)
(q) The Underwriter shall have received a certificate dated the
Closing Date of any of the Chairman of the Board, the President, the
Executive Vice President, any Vice President, the Treasurer, any Assistant
Treasurer, the principal financial officer or the principal accounting
officer of First Merchants in which such officer shall state that, to the
best of his or her knowledge after reasonable investigation:
(i) the representations and warranties of First Merchants
contained in this Agreement and the Basic Documents are true and correct;
First Merchants 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;
(ii) since the date of the most recent financial information
included in the Prospectus, no material adverse change, or any development
involving a prospective material adverse change, in or affecting particularly
the business or properties of First Merchants or the Trust has occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission.
(r) The Underwriter shall have received a fully executed Insurance
Agreement by and among the Seller, First Merchants and (security insurer),
dated as of ( ) (the "Insurance Agreement"), and all representations and
warranties thereunder or made pursuant thereto shall be true and correct,
and the Seller shall have performed its obligations thereunder.
(s) The Policy relating to the Offered Securities shall have been
duly executed and issued at or prior to the Closing Date and shall conform
in all material respects to the description thereof in the Prospectus.
(t) The Underwriter shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have been
or are being filed in the office of the Secretary of State of the State of
Illinois and the County Clerk of Lake County, Illinois reflecting the sale
of the Receivables by First Merchants to the Seller and of the Receivables
and other Trust Property by the Seller to the Trustee for the benefit of
the Certificateholders.
(u) The Notes shall have been rated ( ) and ( ) and the Certificates
shall have been rated ( ) and ( ) by ( ) and by ( ).
(v) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Underwriter a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date,
substantially in the forms of the drafts to which the Underwriter has
previously agreed and otherwise in form and substance satisfactory to the
Underwriter and to counsel for the Underwriter.
(w) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Prospectus, there shall not have been
any change or any development involving a prospective change in or
affecting the business or properties of First Merchants or the Seller the
effect of which is, in the judgment of the Underwriter, so material and
adverse as to make it impractical or inadvisable to market the Offered
Securities as contemplated by the Prospectus.
(x) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Seller's or First Merchants' debt
securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Securities Act) or any
notice given of any intended or potential decrease in any such rating or
of a possible change in any such rating that does not indicate the
direction of the possible change.
(y) On the Closing Date, $( ) aggregate principal amount of the
Notes and $( ) aggregate principal amount of the Certificates shall have
been issued and delivered to the Seller.
(z) On the Closing Date, the Seller shall have purchased and fully
paid for all of the Offered Securities.
Prior to the Closing Date, the Seller shall have furnished to the
Underwriter such further information, certificates and documents as the
Underwriter may reasonably request.
10. Indemnification and Contribution. (a) The Seller and First
--------------------------------
Merchants, jointly and severally, agree to indemnify and hold harmless the
Underwriter, the directors, officers, employees and agents of the
Underwriter and each person who controls the Underwriter within the
meaning of either the Securities Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the preliminary Base Prospectus,
the Collateral Materials, the Preliminary Prospectus Supplement (if any),
the Base Prospectus or the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein (in the case of Collateral Materials, when read
together with the Prospectus) a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Seller and First Merchants will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission from any of such documents, in
reliance upon and in conformity with written information furnished to the
Seller by the Underwriter specifically for inclusion therein. This
indemnity agreement will be in addition to any liability that the Seller
or First Merchants may otherwise have.
For all purposes contemplated hereby, First Merchants, the Seller and
the Underwriter each acknowledge that the Collateral Materials were
prepared by First Merchants.
(b) The Underwriter agrees to indemnify and hold harmless the Seller
and First Merchants, their directors, their officers and each person who
controls the Seller or First Merchants within the meaning of either the
Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Seller and First Merchants to the Underwriter, but only
with reference to written information relating to the Underwriter furnished
to the Seller by the Underwriter specifically for inclusion in the Registration
Statement, the preliminary Base Prospectus, the Preliminary Prospectus
Supplement (if any), the Base Prospectus or the Prospectus or any amendment
or supplement thereto. This indemnity agreement will be in addition to any
liability that the Underwriter may otherwise have. (The Seller and First
Merchants acknowledge that the statements set forth in the first sentence of
the next to the last paragraph and in the last paragraph of the cover page and
under the heading "Underwriting" in the Prospectus Supplement constitute
the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Prospectus (or in any amendment or
supplement thereto).)
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided,
however, that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties that are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 10 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Seller, First Merchants and the
Underwriter agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses")
to which the Seller, First Merchants and the Underwriter may be subject in
such proportion as is appropriate to reflect the relative benefits
received by the Seller and First Merchants on the one hand and by the
Underwriter on the other from the offering of the Offered Securities;
provided, however, that in no case shall the Underwriter be responsible
for any amount in excess of the purchase discount or commission applicable
to the Offered Securities purchased by the Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable
for any reason, the Seller, First Merchants and the Underwriter shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Seller and First
Merchants on the one hand and of the Underwriter on the other in
connection with the statements or omissions that resulted in such Losses
as well as any other relevant equitable considerations. Benefits received
by the Seller and First Merchants shall be deemed to be equal to the total
net proceeds from the offering (before deducting expenses), and benefits
received by the Underwriter shall be deemed to be equal to the total
purchase discounts and commissions received by the Underwriter from the
Seller in connection with the purchase of the Offered Securities
hereunder. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by
the Seller and First Merchants on the one hand or the Underwriter on the
other. The Seller, First Merchants and the Underwriter agree that it
would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 10, each person who controls the Underwriter within the meaning of
either the Securities Act or the Exchange Act and each director, officer,
employee and agent of the Underwriter shall have the same rights to
contribution as the Underwriter, and each person who controls the Seller
or First Merchants within the meaning of either the Securities Act or the
Exchange Act and each officer and director of the Seller or First
Merchants shall have the same rights to contribution as the Seller or
First Merchants, subject in each case to the applicable terms and
conditions of this paragraph (d).
11. Defaults of the Underwriter. If the Underwriter defaults in its
---------------------------
obligation to purchase the Offered Securities hereunder on the Closing
Date and arrangements satisfactory to the Underwriter and the Seller for
the purchase of such Offered Securities by other persons are not made
within 36 hours after such default, this Agreement will terminate without
liability on the part of the Seller, except as provided in Section 13. As
used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will
relieve the defaulting Underwriter from liability for its default.
12. No Bankruptcy Petition. The Underwriter 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.
13. Survival of Representations and Obligations. The respective
-------------------------------------------
indemnities, agreements, representations, warranties and other statements
of First Merchants, the Seller or any of their officers, and the
Underwriter set forth in or made pursuant to this Agreement or contained
in certificates of officers of First Merchants and the Seller submitted
pursuant hereto shall remain operative and in full force and effect,
regardless of any investigation or statement as to the results thereof
made by or on behalf of the Underwriter, First Merchants or the Seller or
any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the
Offered Securities. If for any reason the purchase of the Offered
Securities by the Underwriter is not consummated, the Seller shall remain
responsible for the expenses to be paid or reimbursed by the Seller
pursuant to Section 8 and the respective obligations of the Seller and the
Underwriter pursuant to Section 10 shall remain in effect. If for any
reason the purchase of the Offered Securities by the Underwriter is not
consummated (other than because of a failure to satisfy the conditions set
forth in items (ii), (iv) and (v) of Section 9(c)), the Seller will
reimburse the Underwriter, upon demand, for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by it in
connection with the offering of the Offered Securities. Nothing contained
in this Section 13 shall limit the recourse of the Seller against the
Underwriter.
14. Notices. All communications hereunder will be in writing and,
-------
if sent to the Underwriter, will be mailed, delivered or telegraphed and
confirmed to it at ( ); if sent to the Seller, will be mailed, delivered
or telegraphed, and confirmed to it at First Merchants Auto Receivables
Corporation ( ), 570 Lake Cook Road, Suite 126B, Deerfield, Illinois
60015, Attention: President. Any such notice will take effect at the time
of receipt.
15. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 10,
and no other person will have any right or obligations hereunder.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same Agreement.
17. Applicable Law. This Agreement will be governed by, and
--------------
construed in accordance with, the laws of the State of New York.
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 between the Seller and the
Underwriter in accordance with its terms.
Very truly yours,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION
( )
By:
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Name:
Title:
FIRST MERCHANTS ACCEPTANCE CORPORATION
By:
---------------------------------------
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first written above:
SALOMON BROTHERS INC
By:
--------------------------------------------
Name:
Title:
SCHEDULE I
CLASS OF NOTES PRINCIPAL AMOUNT
OF NOTES
----------------
CLASS OF CERTIFICATES PRINCIPAL AMOUNT
OF CERTIFICATES
-----------------
Exhibit 1.2
Form of Underwriting Agreement
for Grantor Trusts
FIRST MERCHANTS AUTO TRUST 199_-_
( )% ASSET BACKED CERTIFICATES
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION
UNDERWRITING AGREEMENT
----------------------
( ), 199_
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
1. Introduction. First Merchants Auto Receivables Corporation ( ),
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a Delaware corporation (the "Seller"), and a wholly-owned subsidiary of First
Merchants Acceptance Corporation, a Delaware corporation ("First Merchants"),
proposes to cause First Merchants Auto Trust 199_-_ (the "Trust") to issue
and sell $( ) principal amount of its ( )% Asset Backed Certificates (the
"Certificates") to ( ), (the "Underwriter"). The Certificates are sometimes
referred to herein as the "Offered Securities."
The Trust Property will include, among other things, a pool of non-prime
precomputed and simple interest motor vehicle retail installment sale
contracts (the "Receivables"), the related security interests in the motor
vehicles financed thereby (the "Financed Vehicles"), certain monies received
thereon on and after ( ), 199_ (the "Cutoff Date"), all insurance proceeds
and liquidation proceeds with respect thereto, the related Receivables files,
the Trust Accounts, proceeds of the foregoing and certain rights with respect
to funds on deposit from time to time in the Spread Account. The Receivables
will be sold to the Trust by the Seller. The Receivables will be serviced
for the Trust by First Merchants (in such capacity, the "Servicer"). The
Certificates will be issued pursuant to the Pooling and Servicing Agreement
to be dated as of ( ), 199_ (as amended and supplemented from time to time,
the "Pooling and Servicing Agreement"), among the Seller, as depositor, First
Merchants, as seller and servicer, and ( ), as trustee and backup servicer
(respectively, the "Trustee" and the "Backup Servicer").
The Seller acknowledges that it will have furnished to the Underwriter,
for distribution to potential investors in the Offered Securities prior to
the date on which the Prospectus (as defined in Section 2(a) below) is made
available to such potential investors, a term sheet in the form of Exhibit
A hereto (the "Collateral Materials").
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement .
2. Representations and Warranties of First Merchants. First Merchants
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represents and warrants to, and agrees with, the Underwriter that:
(a) First Merchants meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Commission (the "Commission") a registration statement
(Registration No. 333-09487) on such Form, including a related preliminary
base prospectus and a preliminary prospectus supplement, for the registration
under the Act of the offering and sale of the Offered Securities. First
Merchants may have filed one or more amendments thereto, each of which
amendments has previously been furnished to you. First Merchants will next
file with the Commission (i) prior to the effectiveness of such registration
statement, an amendment thereto (including the form of final base prospectus
and the form of final prospectus supplement relating to the Offered
Securities) or (ii) after the effectiveness of such registration statement,
either (A) a final base prospectus relating to the Offered Securities in
accordance with Rules 430A and 424(b)(1) or (4) under the Act or (B) a final
base prospectus and a final prospectus supplement relating to the Offered
Securities in accordance with Rules 415 and 424(b)(2) or (5). First
Merchants has filed with the Commission in a report on Form 8-K the
Collateral Materials within two business days after they were first delivered
to the Underwriter.
In the case of clauses (ii) (A) and (B) above, First Merchants has
included in such registration statement, as amended at the Effective Date,
all information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in the Prospectus with respect to the
Offered Securities and the offering thereof. As filed, such amendment and
form of final prospectus supplement, or such final prospectus supplement,
shall include all Rule 430A Information, together with all other required
information, with respect to the Offered Securities and the offering thereof
and, except to the extent that the Underwriter shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest preliminary base
prospectus and preliminary prospectus supplement, if any, that have
previously been furnished to you) as First Merchants has advised you, prior
to the Execution Time, will be included or made therein. If the Registration
Statement contains the undertaking specified by Regulation S-K Item 512(a),
the Registration Statement, at the Execution Time, meets the requirements set
forth in Rule 415(a)(1)(x).
For purposes of this Agreement, "Effective Time" means the date and time
as of which such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission, and
"Effective Date" means the date of the Effective Time. "Execution Time"
shall mean the date and time that this Agreement is executed and delivered
by the parties hereto. Such registration statement, as amended at the
Effective Time, including all information deemed to be a part of such
registration statement as of the Effective Time pursuant to Rule 430A(b)
under the Act, and including the exhibits thereto and any material
incorporated by reference therein, is hereinafter referred to as the
"Registration Statement." "Base Prospectus" shall mean any prospectus
referred to above contained in the Registration Statement at the Effective
Date, including any Preliminary Prospectus Supplement. "Preliminary
Prospectus Supplement" shall mean the preliminary prospectus supplement, if
any, to the Base Prospectus which describes the Offered Securities and the
offering thereof and is used prior to the filing of the Prospectus.
"Prospectus" shall mean the prospectus supplement relating to the Offered
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time, together with the Base Prospectus, as amended at the time of such
filing, or, if no filing pursuant to Rule 424(b) is required, shall mean the
prospectus supplement relating to the Offered Securities, including the Base
Prospectus, included in the Registration Statement at the Effective Date.
"Rule 430A Information" means information with respect to the Offered
Securities and the offering of the Offered Securities permitted to be omitted
from the Registration Statement when it becomes effective pursuant to
Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer
to such rules or regulations under the Act. Any reference herein to the
Registration Statement, the Base Prospectus, a Preliminary Prospectus
Supplement or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on or before the Effective Date of the Registration
Statement or the issue date of the Base Prospectus, such Preliminary
Prospectus Supplement or the Prospectus, as the case may be; and any
reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Registration Statement, the Base Prospectus, any Preliminary
Prospectus Supplement or the Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the Effective
Date of the Registration Statement or the issue date of the Base Prospectus,
any Preliminary Prospectus Supplement or the Prospectus, as the case may be,
deemed to be incorporated therein by reference.
(b) On the Effective Date and on the date of this Agreement, the
Registration Statement did or will, and, when the Prospectus is first filed
(if required) in accordance with Rule 424(b) and on the Closing Date, the
Prospectus (and any supplements thereto) will, comply in all material
respects with the applicable requirements of the Act, the Exchange Act and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
the respective rules and regulations of the Commission thereunder (the "Rules
and Regulations"); on the Effective Date, the Registration Statement did not
or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that First Merchants makes no representations or warranties as to the
information contained in or omitted from the Registration Statement or the
Prospectus or any supplement thereto in reliance upon and in conformity with
information furnished in writing to First Merchants by you specifically for
use in connection with the preparation of the Registration Statement or the
Prospectus or any supplement thereto. As of the Closing Date, First
Merchants' representations and warranties in the Pooling and Servicing
Agreement and the Trust Agreement will be true and correct.
(c) This Agreement has been duly authorized, executed and delivered by
First Merchants.
(d) Under generally accepted accounting principles, First Merchants
will report its transfer of the Receivables to the Seller pursuant to the
Receivables Purchase Agreement as a sale of the Receivables. First Merchants
has been advised by Deloitte & Touche LLP, independent certified public
accountants, that the transfer will be so classified under generally accepted
accounting principles in accordance with Statement No. 77 of the Financial
Accounting Standards Board (December 1983).
(e) None of First Merchants, any of its Affiliates or anyone acting on
behalf of First Merchants or any of its Affiliates has taken any action that
would require qualification of the Trust Agreement under the Trust Indenture
Act or registration of First Merchants, the Seller or the Trust under the
Investment Company Act, nor will First Merchants or any of its Affiliates
act, nor have they authorized or will they authorize any person to act, in
such manner.
3. Representations and Warranties of the Seller.
--------------------------------------------
(a) This Agreement has been duly authorized, executed and delivered by
the Seller.
(b) The Seller's assignment and delivery of the Receivables to the
Trust will vest in the Trust all of the Seller's right, title and interest
therein, subject to no prior lien, mortgage, security interest, pledge,
adverse claim, charge or other encumbrance.
(c) Upon the execution and delivery of the Receivables Purchase
Agreement and the Pooling and Servicing Agreement by the respective parties
thereto and the filing with the Secretary of State of Illinois of (i) the
UCC-3 partial termination statements relating to the release by First
Merchants' secured lenders of their security interests in the Receivables and
(ii) UCC-1 financing statements evidencing the conveyance of the Receivables
(A) by First Merchants to the Seller and, (B) by the Seller to the Trustee
for the benefit of the Certificateholders, the Trust's conveyance of the
Trust Property to the Trustee pursuant to the Pooling and Servicing Agreement
will vest in the Trustee, for the benefit of the Certificateholders, all
rights, title and interest of the Seller therein, subject to no prior lien,
mortgage, security interest, pledge, adverse claim, charge or other
encumbrance (other than as shall be identified to you prior to the Closing
Date).
(d) Neither the Seller nor anyone acting on behalf of the Seller has
taken any action that would require registration of the Seller or the Trust
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), nor will the Seller act, nor has the Seller authorized any person to
act, nor will the Seller authorize any person to act in such manner.
(e) As of the Closing Date, the Seller's representations and warranties
in the Basic Documents (as defined herein) will be true and correct.
4. Representations and Warranties of the Underwriter. The Underwriter
-------------------------------------------------
represents and warrants to, and agrees with, the Seller that:
(a) It has not offered or sold, and will not offer or sell, any Offered
Security to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that do not constitute an offer to the public in
the United Kingdom for the purposes of the Public Offers of Securities
Regulation 1995.
(b) It has complied and will comply with all applicable provisions of
the Financial Services Act 1986 of Great Britain with respect to anything
done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom.
(c) It has only issued or passed on and will only issue or pass on in
the United Kingdom any document in connection with the issue of the Offered
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
5. Purchase, Sale, and Delivery of the Offered Securities. On the
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basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Seller agrees to
cause the Trust to sell to the Underwriter, and the Underwriter agrees to
purchase from the Trust, at a purchase price of ( )% of the principal amount
thereof, the respective principal amount of the Certificates, as set forth
in Schedule I hereto. Delivery of and payment for the Offered Securities
shall be made at the office of Brown & Wood LLP, One World Trade Center, New
York, New York 10048, on ( ), 199_ (the "Closing Date"). Delivery of the
Offered Securities shall be made against payment of the purchase price in
immediately available funds drawn to the order of the Seller. The Offered
Securities to be so delivered will be initially represented by one or more
Certificates registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Offered Securities will be represented by book entries on the records of DTC
and participating members thereof. Definitive Certificates will be available
only under limited circumstances.
6. Offering by the Underwriter. It is understood that, after the
---------------------------
Registration Statement becomes effective, the Underwriter proposes to offer
the Offered Securities for sale to the public (which may include selected
dealers), as set forth in the Prospectus.
7. Covenants of the Seller and First Merchants. The Seller and First
-------------------------------------------
Merchants covenant and agree with the Underwriter that:
(a) First Merchants and the Seller will use their respective best
efforts to cause the Registration Statement, and any amendment thereto, if
not effective at the Execution Time, to become effective. Prior to the
termination of the offering of the Offered Securities, First Merchants will
not file any amendment of the Registration Statement or supplement to the
Prospectus unless First Merchants has furnished you a copy for your review
prior to filing and will not file any such proposed amendment or supplement
to which you reasonably object. 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), First
Merchants will file the Prospectus, properly completed, and any supplement
thereto, with the Commission pursuant to and in accordance with the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to you of such timely filing.
(b) First Merchants will advise you promptly of any proposal to amend
or supplement the Registration Statement, as filed, or the related Prospectus
and will not effect such amendment or supplement without your consent, which
consent will not unreasonably be withheld; First Merchants will also advise
you promptly of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for any
additional information; and First Merchants will also advise you promptly of
the effectiveness of the Registration Statement (unless the Registration
Statement has become effective prior to Execution Time) and any amendment
thereto, when the Prospectus, and any supplement thereto, shall have been
filed with the Commission pursuant to Rule 424(b) and of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threat of any proceeding for that purpose,
and First Merchants will use its best efforts to prevent the issuance of any
such stop order and to obtain as soon as possible the lifting of any issued
stop order.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time
to amend the Registration Statement or supplement the Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder, First
Merchants promptly will notify you and will prepare and file, or cause to be
prepared and filed, with the Commission, subject to the second sentence of
paragraph (a) of this Section 5, an amendment or supplement that will correct
such statement or omission or effect such compliance. Any such filing shall
not operate as a waiver or limitation of any right of the Underwriter
hereunder.
(d) As soon as practicable, but not later than sixteen months after the
Closing Date, the Seller will cause the Trust to make generally available to
holders of the Offered Securities an earning statement of the Trust covering
a period of at least twelve months beginning after the Closing Date that will
satisfy the provisions of Section 11(a) of the Act.
(e) First Merchants will furnish to the Underwriter copies of the
Registration Statement (one of which will be signed and will include all
exhibits), each related preliminary prospectus (including the Preliminary
Prospectus Supplement, if any), the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Underwriter requests. First Merchants will pay the
expenses of printing or other production of all documents relating to the
offering.
(f) First Merchants will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions in the United States
as you may reasonably designate and will continue such qualifications in
effect so long as required for the distribution.
(g) For a period from the date of this Agreement until the retirement
of the Offered Securities, or until such time as the Underwriter shall cease
to maintain a secondary market in the Offered Securities, whichever occurs
first, First Merchants will deliver to you the monthly servicing report, the
annual statements of compliance and the annual independent certified public
accountants' reports furnished to the Trustee pursuant to the Pooling and
Servicing Agreement, as soon as such statements and reports are furnished to
the Trustee.
(h) So long as any of the Offered Securities is outstanding, First
Merchants will furnish to you (i) as soon as practicable after the end of the
fiscal year all documents required to be distributed to holders of Offered
Securities 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 First Merchants or the Seller filed with any
government or regulatory authority that is otherwise publicly available, as
you may reasonably request.
(i) On or before the Closing Date, First Merchants shall cause its
computer records relating to the Receivables to be marked to show the Trust's
absolute ownership of the Receivables, and from and after the Closing Date,
neither First Merchants nor the Seller shall take any action inconsistent
with the Trust's ownership of such Receivables, other than as permitted by
the Pooling and Servicing Agreement.
(j) To the extent, if any, that the ratings provided with respect to
the Offered Securities by the rating agency or agencies that initially rate
the Offered Securities are conditional upon the furnishing of documents or
the taking of any other actions by the Seller, the Seller shall furnish such
documents and take any such other actions.
(k) For the period beginning on the date of this Agreement and ending
on the Closing Date, unless waived by the Underwriter, neither the Seller nor
any trust originated, directly or indirectly, by the Seller will offer to
sell or sell certificates (other than the Certificates) evidencing an
ownership interest in, receivables generated pursuant to retail automobile
or light duty truck installment sale contracts in such a manner as would
constitute a public offering to persons in the United States.
(l) The Seller will cooperate with the Underwriter and use its best
efforts to permit the Offered Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(m) First Merchants, the Seller and the Trustee and Backup Servicer
will enter into the Pooling and Servicing Agreement and First Merchants and
the Seller will enter into the Receivables Purchase Agreement on or prior to
the Closing Date.
8. Payment of Expenses. The Seller will pay all expenses incident to
-------------------
the performance of its obligations under this Agreement, including (i) the
printing and filing of the Registration Statement as originally filed and of
each amendment thereto, (ii) the preparation of this Agreement, (iii) the
preparation, issuance and delivery of the Offered Securities to the
Underwriter, (iv) the fees and disbursements of the Seller's counsel and
accountants, (v) the qualification of the Offered Securities under securities
laws in accordance with the provisions of Section 6(f), including filing fees
and the fees and disbursements of counsel for you in connection therewith and
in connection with the preparation of any blue sky or legal investment
survey, (vi) the printing and delivery to the Underwriter of copies of the
Registration Statement as originally filed and of each amendment thereto,
(vii) the printing and delivery to the Underwriter of copies of any blue sky
or legal investment survey prepared in connection with the Offered
Securities, (viii) any fees charged by rating agencies for the rating of the
Offered Securities, (ix) the fees and expenses, if any, incurred with respect
to any filing with the National Association of Securities Dealers, Inc., and
(x) the fees and expenses of Brown & Wood LLP incurred as a result of
providing the opinions required by Sections 9(h) and 9(i) hereof.
9. Conditions to the Obligations of the Underwriter. The obligations
------------------------------------------------
of the Underwriter to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of
the Seller and First Merchants herein, to the accuracy of the statements of
officers of the Seller and First Merchants made pursuant to the provisions
hereof, to the performance by the Seller and First Merchants of their
respective obligations hereunder and to the following additional conditions
precedent:
(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriter agrees in writing to a later time, the
Registration Statement shall have become effective not later than (i)
( ) P.M. New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to ( ) P.M. New
York City time on such date or (ii) ( ) A.M. New York City time on the business
day following the day on which the public offering price was determined, if
such determination occurred after ( ) P.M. New York City time on such date.
(b) The Prospectus and any supplements thereto shall have been filed
(if required) with the Commission in accordance with the Rules and
Regulations and Sections 2(a) and 2(b) hereof, and prior to the Closing Date,
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Seller or you, shall be contemplated
by the Commission or by any authority administering any state securities or
blue sky law.
(c) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereto) and the Prospectus (exclusive
of any supplement thereto), 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 or the Seller which, in the judgment
of the Underwriter, materially impairs the investment quality of the Offered
Securities or makes it impractical or inadvisable to market the Offered
Securities; (ii) any suspension or limitation of trading in securities
generally on the New York Stock Exchange or any setting of minimum prices for
trading on such exchange; (iii) any suspension of trading of any securities
of the Seller on any exchange or in the over-the-counter market; (iv) any
banking moratorium declared by federal or New York authorities; or (v) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of the
Underwriter, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Offered Securities.
(d) The Seller shall have furnished to the Underwriter the opinion of
( ), counsel for the Seller, dated the Closing Date and satisfactory in form
and substance to the Underwriter and counsel for the Underwriter, to the
effect that:
(i) the Seller 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 do business
as a foreign corporation and is in good standing under the laws of the State
of Illinois;
(ii) all the outstanding shares of capital stock of the Seller have
been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of the Seller are
owned by First Merchants free and clear of any security interest and, to the
knowledge of such counsel, after due inquiry, any other interests, claims,
liens or encumbrances (other than as shall be identified to you therein);
(iii) each of the Receivables Purchase Agreement and the
Pooling and Servicing Agreement has been duly authorized, executed and
delivered by the Seller, and constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(iv) the Master Spread Account Agreement and the Series 199_-_
Supplement to Master Spread Account Agreement dated as of ( ) (the
"Supplement") among the parties to the Master Spread Account Agreement have
each been duly authorized, executed and delivered by the Seller, and the
Spread Account Agreement constitutes a legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with its terms
(subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect);
(v) the Insurance Agreement has been duly authorized, executed and
delivered by the Seller, and constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(vi) this Agreement has been duly authorized, executed and
delivered by the Seller;
(vii) the direction by the Seller to the Trustee to
authenticate the Certificates has been duly authorized by the Seller and,
when the Certificates have been duly executed, authenticated and delivered
by the Trustee in accordance with and delivered and paid for to the Seller
pursuant to the Pooling and Servicing Agreement, the Certificates will be
validly issued and outstanding and entitled to the benefits of the Pooling
and Servicing Agreement;
(viii) no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in the Receivables
Purchase Agreement, the Pooling and Servicing Agreement, the Master Spread
Account Agreement, the Supplement and the Insurance Agreement (collectively,
the "Basic Documents"), except such as may be required under the blue sky or
securities laws of any jurisdiction in connection with the purchase and sale
of the Certificates by the Underwriter, the filing of the UCC-3 partial
release statements relating to the release of the existing liens on the
Receivables of First Merchants' secured lenders, the filing of the UCC-1
financing statements relating to the conveyance of the Receivables by First
Merchants to the Seller and of the Receivables and the other Trust Property
by the Seller to the Trust and by the Trust to the Trustee on behalf of the
Certificateholders and the filing of the UCC-1 financing statements relating
to the security interests created pursuant to the Spread Account Agreement,
and such other approvals (which shall be specified in such opinion) as have
been obtained and filings as have been made or are in the process of being
made;
(ix) none of the sale of the Receivables by First Merchants to the
Seller pursuant to the Receivables Purchase Agreement, the sale of the Trust
Property to the Trust pursuant to the Pooling and Servicing Agreement, the
pledge of the Trust Property to the Trustee, the issue and sale of the
Certificates, the execution and delivery of this Agreement, the Pooling and
Servicing Agreement, the Receivables Purchase Agreement, the Spread Account
Agreement or the Insurance Agreement, the consummation of any other of the
transactions herein or therein contemplated or the fulfillment of the terms
hereof or thereof will conflict with, result in a breach or violation of, or
constitute a default under, any law binding on the Seller or the charter or
bylaws of the Seller or the terms of any indenture or other agreement or
instrument known to such counsel and to which the Seller is a party or by
which it is bound, or any judgment, order or decree known to such counsel to
be applicable to the Seller of any court, regulatory body, administrative
agency, governmental body, or arbitrator having jurisdiction over the Seller;
(x) there are no actions, proceedings or investigations pending
or, to the best of such counsel's knowledge after due inquiry, threatened
before any court, administrative agency or other tribunal (1) asserting the
invalidity of any of the Basic Documents, (2) seeking to prevent the
consummation of any of the transactions contemplated by any of the Basic
Documents or the execution and delivery thereof or (3) that might materially
and adversely affect the performance by the Seller of its obligations under,
or the validity or enforceability of, this Agreement or any Basic Document;
(xi) to the best knowledge of such counsel and except as set forth
in the Prospectus (and any supplement thereto), no default exists and no
event has occurred which, with notice, lapse of time or both, would
constitute a default in the due performance and observance of any term,
covenant or condition of any agreement to which the Seller is a party or by
which it is bound, which default is or would have a material adverse effect
on the financial condition, earnings, prospects, business, or properties of
the Seller, taken as a whole;
(xii) the provisions of the Receivables Purchase Agreement are
effective to transfer to the Seller all right, title and interest of First
Merchants in and to the Receivables, and upon filing of the form UCC-3
partial release statements with respect to the interests of First Merchants'
secured lenders in the Receivables, the Receivables and, to the knowledge of
such counsel, the other Trust Property will be owned by the Seller free and
clear of any Lien except for the Lien of the Pooling and Servicing Agreement;
(xiii) the provisions of the Pooling and Servicing Agreement are
effective to transfer either an ownership interest or a security interest in
the Receivables and the other Trust Property and the proceeds thereof to the
Trustee for the benefit of the Certificateholders;
(xiv) the form UCC-1 financing statements naming (A) First
Merchants as seller and the Seller as purchaser and (B) the Seller as seller
and the Trust as purchaser are in appropriate form for filing with the
Secretary of State of the State of Illinois and the County Clerk of Lake
County, Illinois; the interest of the Trustee in the Receivables and the
proceeds thereof and, to the extent that the filing of a financing statement
is effective to perfect an interest in the other Trust Property under Article
9 of the Illinois Uniform Commercial Code, the other Trust Property will be
perfected upon the filing of such financing statements in such filing
offices; and upon the filing of the form UCC-3 partial release statements
with respect to the interests of First Merchants' secured lenders in such
filing offices, no other interest of any other purchaser from or creditor of
First Merchants, the Seller or the Trust is equal or prior to the interest
of the Trustee in the Receivables and such other Trust Property;
(xv) the Receivables are "chattel paper" under Article 9 of the
Illinois Uniform Commercial Code;
(xvi) the Basic Documents conform in all material respects with
the descriptions thereof contained in the Prospectus;
(xvii) the statements in the Prospectus under the headings "Risk
Factors -- Certain Legal Aspects" and "Certain Legal Aspects of the
Receivables", to the extent they constitute matters of law or legal
conclusions with respect thereto, have been reviewed by such counsel and are
correct in all material respects;
(xviii) the statements contained in the Prospectus under the
heading "Description of the Certificates" and "Description of the Transfer
and Servicing Agreements," insofar as such statements constitute a summary
of the Certificates and the Basic Documents, constitute a fair summary of
such instruments and documents;
(xix) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein, no
qualification of the Pooling and Servicing Agreement under the Trust
Indenture Act is necessary, for the offer and sale by the Underwriter of the
Certificates in the manner contemplated by this Agreement;
(xx) the Trust has been duly formed and is validly existing as a
statutory business trust and is in good standing under the laws of the State
of Delaware, with full power and authority to execute, deliver and perform
its obligations under the Pooling and Servicing Agreement and the
Certificates;
(xxi) the Pooling and Servicing Agreement has been duly
authorized and, when duly executed and delivered by the Trustee, will
constitute the legal, valid and binding obligations of the Trust, enforceable
against the Trust in accordance with its terms, except that (x) the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (y) 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;
(xxii) to the best knowledge of such counsel, the Seller has
obtained all material licenses, permits and other governmental authorizations
that are necessary to the conduct of its business; such licenses, permits and
other governmental authorizations are in full force and effect, and the
Seller is in all material respects complying therewith; and the Seller is
otherwise in compliance with all laws, rules, regulations and statutes of any
jurisdiction to which it is subject, except where non-compliance would not
have a material adverse effect on the Seller;
(xxiii) all actions required to be taken and all filings required
to be made under the Act and the Exchange Act prior to the sale of the
Offered Securities have been duly taken or made;
(xxiv) the Trust is not required to be registered under the
Investment Company Act;
(xxv) the Seller is not, and will not as a result of the offer
and sale of the Offered Securities as contemplated in the Prospectus (and any
supplement thereto) and this Agreement become, an "investment company" as
defined in the Investment Company Act or a company "controlled by" an
"investment company" within the meaning of the Investment Company Act;
(xxvi) to the best of such counsel's knowledge and information,
there are no legal or governmental proceedings pending or threatened that are
required to be disclosed in the Registration Statement, other than those
disclosed therein;
(xxvii) to the best of such counsel's knowledge and information,
there are no contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, the descriptions thereof or references thereto are correct,
and no default exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument so
described, referred to, filed or incorporated by reference;
(xxviii) the Registration Statement has become effective under the
Act, any required filing of the Base Prospectus, any preliminary Base
Prospectus, any Preliminary Prospectus Supplement and the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b), and, to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or contemplated under the Act, and the
Registration Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates, complied as to form
in all material respects with the requirements of the Act, the Exchange Act,
the Trust Indenture Act and the Rules and Regulations; and
(xxix) such counsel has examined the Registration Statement and
the Prospectus and nothing has come to such counsel's attention that would
lead such counsel to believe that the Registration Statement or the
Prospectus or any amendment or supplement thereto as of the respective dates
thereof (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need not
express any view) contains an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein
not misleading.
Such counsel shall also state that such counsel has no reason to believe
that at the Execution Time the Prospectus contained an untrue statement of
a material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading or that, at the Closing Date, the Prospectus
includes an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of Illinois, the State of New York, the State of Delaware or the United
States, to the extent such counsel deems proper and specifies in such
opinion, upon the opinion of other counsel of good standing whom such counsel
believes to be reliable and who are satisfactory to counsel for the
Underwriter and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Seller and public
officials.
All references in this Section 9(d) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(e) You shall have received the opinion of ( ), General Counsel for
First Merchants, dated the Closing Date and satisfactory in form and
substance to the Underwriter and to counsel for the Underwriter, to the
effect that:
(i) First Merchants and all of its subsidiaries are duly qualified
to do business as a foreign corporation and is in good standing under the
laws of each jurisdiction wherein each of them owns or leases material
properties or conducts material business and which requires such
qualification;
((ii) First Merchants has no subsidiaries in any form, whether
wholly-owned or other than wholly-owned, direct or indirect, other than the
Seller and ( );)
(iii) First Merchants is not, and will not as a result of the
offer and sale of the Offered Securities as contemplated in the Prospectus
(and any supplement thereto) and this Agreement become, an "investment
company" as defined in the Investment Company Act or a company "controlled
by" an "investment company" within the meaning of the Investment Company Act;
(iv) First Merchants has obtained all material licenses, permits
and other governmental authorizations that are necessary to the conduct of
its business; such licenses, permits and other governmental authorizations
are in full force and effect, and First Merchants is in all material respects
complying therewith; and First Merchants is otherwise in compliance with all
laws, rules, regulations and statutes of any jurisdiction to which it is
subject, except where non-compliance would not have a material adverse effect
on First Merchants; and
(v) none of the execution and delivery of this Agreement, the
Receivables Purchase Agreement or the Insurance Agreement, the consummation
of any of the transactions therein contemplated or the fulfillment of the
terms thereof will conflict with, result in a breach or violation of, or
constitute a default under, any law or the charter or bylaws of First
Merchants or the terms of any indenture or other agreement or instrument
known to such counsel and to which First Merchants or the Seller is a party
or by which it is bound or any judgment, order or decree known to such
counsel to be applicable to First Merchants or the Seller of any court,
regulatory body, administrative agency, governmental body, or arbitrator
having jurisdiction over First Merchants or the Seller.
Such counsel shall also state that such counsel has no reason to believe
that at the Execution Time the Prospectus contained an untrue statement of
a material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading or that, at the Closing Date, the Prospectus
includes an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of Illinois or the United States, to the extent such counsel deems proper and
specifies in such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are satisfactory to counsel
for the Underwriter and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of First Merchants and
public officials.
All references in this Section 9(e) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(f) The Underwriter shall have received the opinion of ( ), counsel for
First Merchants, dated the Closing Date and satisfactory in form and
substance to the Underwriter and to counsel for the Underwriter, to the
effect that:
(i) First Merchants 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) this Agreement has been duly authorized, executed and
delivered by First Merchants;
(iii) the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by First Merchants and constitutes a
legal, valid and binding obligation of First Merchants, enforceable against
First Merchants in accordance with its terms (subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium, or other laws affecting creditors' rights generally from time to
time in effect);
(iv) the Insurance Agreement has been duly authorized, executed and
delivered by First Merchants and constitutes a legal, valid and binding
obligation of First Merchants, enforceable against First Merchants in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium, or other laws
affecting creditors' rights generally from time to time in effect);
(v) the Receivables Purchase Agreement has been duly authorized,
executed and delivered by First Merchants and constitutes a legal, valid and
binding obligation of First Merchants, enforceable against First Merchants
in accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium, or other laws
affecting creditors' rights generally from time to time in effect);
(vi) no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in any Basic
Document, except such as may be required under the blue sky or securities
laws of any jurisdiction in connection with the purchase and sale of the
Certificates by the Underwriter, the filing of the UCC-3 partial termination
statements relating to the release of the existing liens of First Merchants'
secured lenders on the Receivables, the filing of the UCC-1 financing
statements relating to the conveyance of the Receivables by First Merchants
to the Seller pursuant to the Receivables Purchase Agreement and of the
Receivables and other Trust Property to the Trust and of the Receivables and
other Trust Property to the Trustee for the benefit of the Certificateholders
pursuant to the Pooling and Servicing Agreement, the filing of the UCC-1
financing statements relating to the security interests created pursuant to
the Spread Account Agreement, and such other approvals (which shall be
specified in such opinion) as have been obtained and filings as have been
made or are in the process of being made; and
(vii) none of the execution and delivery of this Agreement, the
Pooling and Servicing Agreement, the Receivables Purchase Agreement or the
Insurance Agreement, the consummation of any of the transactions therein
contemplated or the fulfillment of the terms thereof will conflict with,
result in a breach or violation of, or constitute a default under, the
charter or bylaws of First Merchants.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York, the State of Delaware, the State of Illinois or the United
States, to the extent such counsel deems proper and specifies in such
opinion, upon the opinion of other counsel of good standing whom such counsel
believes to be reliable and who are satisfactory to counsel for the
Underwriter and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of First Merchants and public
officials.
All references in this Section 9(f) to the Prospectus shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(g) You shall have received an opinion of (Illinois tax counsel),
addressed to you and the Indenture Trustee, dated the Closing Date and
satisfactory in form and substance to you and your counsel, to the effect
that the statements in the Base Prospectus under the heading "Certain State
Tax Consequences with respect to Owner Trusts" and in the Prospectus
Supplement under the heading "Summary of Terms -- Tax Status" (to the extent
relating to Illinois tax consequences) accurately describe the material
Illinois tax consequences to holders of the Securities.
(h) You shall have received an opinion addressed to you of Brown & Wood
LLP, in its capacity as federal tax counsel to the Trust, to the effect that
the statements in the Base Prospectus under the heading "Certain Federal
Income Tax Consequences" and in the Prospectus Supplement under the headings
"Summary of Terms -- Tax Status" (to the extent relating to federal income
tax consequences), "- ERISA Considerations" and "ERISA Considerations" to the
extent that they constitute statements of matters of law or legal conclusions
with respect thereto, have been prepared or reviewed by such counsel and
accurately describe the material federal income tax consequences to holders
of the Certificates.
(i) The Underwriter shall have received from Counsel for the
Underwriter such opinion or opinions, dated the Closing Date, with respect
to the issuance and sale of the Offered Securities, the Prospectus (as
amended or supplemented at the Closing Date) and other related matters as the
Underwriter may reasonably require, and the Seller shall have furnished to
such counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(j) You shall have received an opinion addressed to you and First
Merchants of ( ), counsel to the Trustee, dated the Closing Date and
satisfactory in form and substance to you and your counsel, to the effect
that:
(i) The Trustee is a banking corporation duly incorporated and
validly existing under the laws of the ( ).
(ii) The Trustee has the full corporate trust power to accept the
office of trustee under the Pooling and Servicing Agreement and to enter into
and perform its obligations under the Pooling and Servicing Agreement and,
on behalf of the Trust, under the Pooling and Servicing Agreement.
(iii) The execution and delivery, on behalf of the Trust, of
the Pooling and Servicing Agreement, the Offered Securities and the
performance by the Trustee of its obligations under the Pooling and Servicing
Agreement have been duly authorized by all necessary corporate action of the
Trustee and each has been duly executed and delivered by the Trustee.
(iv) The Pooling and Servicing Agreement constitutes a valid and
binding obligation of the Trustee enforceable against the Trustee in
accordance with its terms under the laws of the State of New York, the State
of Delaware and the federal law of the United States.
(v) The execution and delivery by the Trustee on behalf of the
Trust, of the Pooling and Servicing Agreement does not require any consent,
approval or authorization of, or any registration or filing with, any
Delaware or United States federal governmental authority.
(vi) Each of the Certificates has been duly executed and delivered
by the Trustee as trustee and authenticating agent.
(vii) Neither the consummation by the Trustee of the
transactions contemplated in the Pooling and Servicing Agreement, nor the
fulfillment of the terms thereof by the Trustee will conflict with, result
in a breach or violation of, or constitute a default under any law or the
charter, bylaws or other organizational documents of the Trustee or the terms
of any indenture or other agreement or instrument known to such counsel to
which the Trustee or any of its subsidiaries is a party or is bound, or any
judgment, order or decree known to such counsel to be applicable to the
Trustee or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Trustee or any of its subsidiaries.
(viii) To the knowledge of such counsel there is no action, suit
or proceeding pending or threatened against the Trustee (as trustee under the
Pooling and Servicing Agreement or in its individual capacity) before or by
any governmental authority that, if adversely decided, would materially
adversely affect the ability of the Trustee to perform its obligations under
the Pooling and Servicing Agreement.
(ix) The execution, delivery and performance by the Trustee (as
trustee under the Pooling and Servicing Agreement or in its individual
capacity, as the case may be) of the Pooling and Servicing Agreement will not
subject any of the property or assets of the Trust or any portion thereof to
any lien created by or arising under the Trustee that is unrelated to the
transactions contemplated in such Pooling and Servicing Agreement.
(k) The Underwriter shall have received such opinions, addressed to the
Underwriter and dated the Closing Date, as are delivered to the Rating
Agencies.
(l) The Underwriter shall have received an opinion from ( ), counsel
for the Seller, dated the Closing Date and satisfactory in form and substance
to the Underwriter and counsel for the Underwriter regarding the true-sale
of the Receivables by First Merchants to the Seller and by the Seller to the
Trust and the conveyance by the Trust of the Receivables and other Trust
Property to the Trustee for the benefit of the Certificateholders.
(m) The Underwriter shall have received an opinion from ( ), counsel
for the Seller, dated the Closing Date and satisfactory in form and substance
to the Underwriter and counsel for the Underwriter regarding substantive
consolidation.
(n) The Underwriter shall have received an opinion from ( ), Associate
General Counsel for (security insurer), dated the Closing Date and
satisfactory in form and substance to the Underwriter and counsel for the
Underwriter, addressed to the Underwriter and the Seller.
(o) The Underwriter shall have received a certificate dated the Closing
Date of any of the Chairman of the Board, the President, the Executive Vice
President, any Vice President, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of the Seller
in which such officer shall state that, to the best of his or her knowledge
after reasonable investigation:
(i) the representations and warranties of the Seller contained in
this Agreement and the Basic Documents are true and correct; the Seller 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;
(ii) since the date of the most recent financial information
included in the Prospectus, no material adverse change, or any development
involving a prospective material adverse change, in or affecting particularly
the business or properties of the Seller or the Trust has occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission.)
(p) The Underwriter shall have received a certificate dated the Closing
Date of any of the Chairman of the Board, the President, the Executive Vice
President, any Vice President, the Treasurer, any Assistant Treasurer, the
principal financial officer or the principal accounting officer of First
Merchants in which such officer shall state that, to the best of his or her
knowledge after reasonable investigation:
(i) the representations and warranties of First Merchants
contained in this Agreement and the Basic Documents are true and correct;
First Merchants 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;
(ii) since the date of the most recent financial information
included in the Prospectus, no material adverse change, or any development
involving a prospective material adverse change, in or affecting particularly
the business or properties of First Merchants or the Trust has occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission.
(q) The Underwriter shall have received a fully executed Insurance
Agreement by and among the Seller, First Merchants and (security insurer),
dated as of ( ) (the "Insurance Agreement"), and all representations and
warranties thereunder or made pursuant thereto shall be true and correct, and
the Seller shall have performed its obligations thereunder.
(r) The Policy relating to the Certificates shall have been duly
executed and issued at or prior to the Closing Date and shall conform in all
material respects to the description thereof in the Prospectus.
(s) The Underwriter shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have been or
are being filed in the office of the Secretary of State of the State of
Illinois and the County Clerk of Lake County, Illinois reflecting the sale
of the Receivables by First Merchants to the Seller and of the Receivables
and other Trust Property by the Seller to the Trustee for the benefit of the
Certificateholders.
(t) The Certificates shall have been rated ( ) and ( ) by ( ) and by
( ).
(u) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Underwriter a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date,
substantially in the forms of the drafts to which the Underwriter has
previously agreed and otherwise in form and substance satisfactory to the
Underwriter and to counsel for the Underwriter.
(v) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Prospectus, there shall not have been any
change or any development involving a prospective change in or affecting the
business or properties of First Merchants or the Seller the effect of which
is, in the judgment of the Underwriter, so material and adverse as to make
it impractical or inadvisable to market the Certificates as contemplated by
the Prospectus.
(w) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Seller's or First Merchants' debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act) or any notice
given of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the direction of
the possible change.
(x) On the Closing Date, $( ) aggregate principal amount of the
Certificates shall have been issued and delivered to the Seller.
(y) On the Closing Date, the Seller shall have purchased and fully paid
for all of the Certificates.
Prior to the Closing Date, the Seller shall have furnished to the
Underwriter such further information, certificates and documents as the
Underwriter may reasonably request.
10. Indemnification and Contribution. (a) The Seller and First
--------------------------------
Merchants, jointly and severally, agree to indemnify and hold harmless the
Underwriter, the directors, officers, employees and agents of the Underwriter
and each person who controls the Underwriter within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
preliminary Base Prospectus, the Collateral Materials, the Preliminary
Prospectus Supplement (if any), the Base Prospectus or the Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein (in the case of Collateral
Materials, when read together with the Prospectus) a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Seller and First Merchants will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission from any of such documents, in
reliance upon and in conformity with written information furnished to the
Seller by the Underwriter specifically for inclusion therein. This indemnity
agreement will be in addition to any liability that the Seller or First
Merchants may otherwise have.
For all purposes contemplated hereby, First Merchants, the Seller and
the Underwriter each acknowledge that the Collateral Materials were prepared
by First Merchants.
(b) The Underwriter agrees to indemnify and hold harmless the Seller
and First Merchants, their directors, their officers and each person who
controls the Seller or First Merchants within the meaning of either the
Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Seller and First Merchants to the Underwriter, but only
with reference to written information relating to the Underwriter furnished
to the Seller by the Underwriter specifically for inclusion in the
Registration Statement, the preliminary Base Prospectus, the Preliminary
Prospectus Supplement (if any), the Base Prospectus or the Prospectus or any
amendment or supplement thereto. This indemnity agreement will be in
addition to any liability that the Underwriter may otherwise have. (The
Seller and First Merchants acknowledge that the statements set forth in the
first sentence of the next to the last paragraph and in the last paragraph
of the cover page and under the heading "Underwriting" in the Prospectus
Supplement constitute the only information furnished in writing by or on
behalf of the Underwriter for inclusion in the Prospectus (or in any
amendment or supplement thereto).)
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 10, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except as set
forth below); provided, however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties that are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party.
An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 10 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Seller, First Merchants and the
Underwriter agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Seller, First Merchants and the Underwriter may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Seller and First Merchants on the one hand and by the Underwriter on the
other from the offering of the Offered Securities; provided, however, that
in no case shall the Underwriter be responsible for any amount in excess of
the purchase discount or commission applicable to the Offered Securities
purchased by the Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Seller,
First Merchants and the Underwriter shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Seller and First Merchants on the one hand and of the
Underwriter on the other in connection with the statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Seller and First Merchants shall
be deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Underwriter shall be deemed
to be equal to the total purchase discounts and commissions received by the
Underwriter from the Seller in connection with the purchase of the Offered
Securities hereunder. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information
provided by the Seller and First Merchants on the one hand or the Underwriter
on the other. The Seller, First Merchants and the Underwriter agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 10, each person
who controls the Underwriter within the meaning of either the Securities Act
or the Exchange Act and each director, officer, employee and agent of the
Underwriter shall have the same rights to contribution as the Underwriter,
and each person who controls the Seller or First Merchants within the meaning
of either the Securities Act or the Exchange Act and each officer and
director of the Seller or First Merchants shall have the same rights to
contribution as the Seller or First Merchants, subject in each case to the
applicable terms and conditions of this paragraph (d).
11. Defaults of the Underwriter. If the Underwriter defaults in its
---------------------------
obligation to purchase the Offered Securities hereunder on the Closing Date
and arrangements satisfactory to the Underwriter and the Seller for the
purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on
the part of the Seller, except as provided in Section 13. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve the defaulting
Underwriter from liability for its default.
12. No Bankruptcy Petition. The Underwriter 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.
13. Survival of Representations and Obligations. The respective
-------------------------------------------
indemnities, agreements, representations, warranties and other statements of
First Merchants and the Seller or any of their officers, and the Underwriter
set forth in or made pursuant to this Agreement or contained in certificates
of officers of First Merchants and the Seller submitted pursuant hereto shall
remain operative and in full force and effect, regardless of any
investigation or statement as to the results thereof made by or on behalf of
the Underwriter, First Merchants or the Seller or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If for any
reason the purchase of the Offered Securities by the Underwriter is not
consummated, the Seller shall remain responsible for the expenses to be paid
or reimbursed by the Seller pursuant to Section 8 and the respective
obligations of the Seller and the Underwriter pursuant to Section 10 shall
remain in effect. If for any reason the purchase of the Offered Securities
by the Underwriter is not consummated (other than because of a failure to
satisfy the conditions set forth in items (ii), (iv) and (v) of
Section 9(c)), the Seller will reimburse the Underwriter, upon demand, for
all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by it in connection with the offering of the Offered
Securities. Nothing contained in this Section 13 shall limit the recourse
of the Seller against the Underwriter.
14. Notices. All communications hereunder will be in writing and, if
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sent to the Underwriter, will be mailed, delivered or telegraphed and
confirmed to it at ( ); if sent to the Seller, will be mailed, delivered or
telegraphed, and confirmed to it at First Merchants Auto Receivables
Corporation ( ), 570 Lake Cook Road, Suite 126B, Deerfield, Illinois 60015,
Attention: President. Any such notice will take effect at the time of
receipt.
15. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 10, and
no other person will have any right or obligations hereunder.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
17. Applicable Law. This Agreement will be governed by, and construed
--------------
in accordance with, the laws of the State of New York.
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 between the Seller and the
Underwriter in accordance with its terms.
Very truly yours,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( )
By:
-----------------------------------------
Name:
Title:
FIRST MERCHANTS ACCEPTANCE CORPORATION
By:
-----------------------------------------
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first written above:
SALOMON BROTHERS INC
By:
--------------------------------------------
Name:
Title:
SCHEDULE I
CLASS OF CERTIFICATES PRINCIPAL AMOUNT
OF CERTIFICATES
-------------------
Exhibit 3.1
Restated Certificate of
Incorporation of the
Seller
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST MERCHANTS ACCEPTANCE CORPORATION
(INCORPORATED MARCH 22, 1991)
This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 245 and 242 of the Delaware General Corporation Law.
ARTICLE I
NAME
The name of the corporation is First Merchants Acceptance Corporation
(the "Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE; NAME OF REGISTERED AGENT
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 32
Loockerman Square, Suite L-100, Kent County, Dover, Delaware 19904; and the
name of the registered agent of the Corporation in the State of Delaware is
The Prentice-Hall Corporation System, Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. TOTAL NUMBER OF SHARES OF STOCK. The total number of
shares of all classes of capital stock that the Corporation shall have
authority to issue is 20,800,000 shares, consisting of 20,000,000 shares of
a class designated as voting common stock, par value $.01 per share ("Voting
Common Stock"), 300,000 shares of a class designated as Class B nonvoting
common stock, par value $.01 per share ("Nonvoting Common Stock") and
500,000 shares of Preferred Stock, par value $100 per share ("Preferred
Stock"). The Voting Common Stock and Nonvoting Common Stock are sometimes
collectively hereinafter referred to as "Common Stock."
SECTION 4.2. COMMON STOCK. The designations, and the powers,
preferences, rights, qualifications, limitations and restrictions of the
Voting Common Stock and Nonvoting Common Stock are as follows:
a. The Voting Common Stock and Nonvoting Common Stock shall have
identical rights and privileges in every respect, except as set
forth in clause (c) below.
----------
b. The holders of shares of Voting Common Stock and Nonvoting
Common Stock shall be entitled to receive such dividends, payable in
cash, property, stock or otherwise, as may be declared thereon by
the Board of Directors of the Corporation at any time and from time
to time out of any funds of the Corporation legally available therefor;
provided, however, that (i) except as provided in clause (b) (ii) below,
----------------- ---------------
all dividends (including, without limitation, any grant or distribution
of rights to subscribe for or purchase shares of capital stock or
securities or indebtedness convertible into shares of capital stock of
the Corporation) shall be shared equally and ratably by holders of
shares of Voting Common Stock and Nonvoting Common Stock as if all
such shares were of a single class, and (ii) dividends payable in
shares of Common Stock (or rights to subscribe for or purchase
shares of Common Stock or securities or indebtedness convertible into
shares of Common Stock) shall be paid
(x) in the form of Voting Common Stock (or rights to
subscribe for or purchase Voting common Stock or securities or
indebtedness convertible into Voting Common Stock) on outstanding
Voting Common Stock, and
(y) in the form of Nonvoting Common Stock (or rights to
subscribe for or purchase Nonvoting Common Stock or securities or
indebtedness convertible into Nonvoting Common Stock) on
outstanding Nonvoting Common Stock,
and the number of shares of Voting Common Stock (or rights to purchase shares
of Voting Common Stock or securities or indebtedness convertible into shares
of Voting Common Stock) payable as a dividend in respect of a share of Voting
Common Stock shall equal the number of shares of Nonvoting Common Stock (or
rights to purchase shares of Nonvoting Common Stock or securities or
indebtedness convertible into shares of Nonvoting common Stock)
contemporaneously payable as a dividend in respect of a share of Nonvoting
Common Stock.
c. The shares of Voting Common Stock shall be fully voting stock
at the rate of one vote for each share of Voting Common Stock held. The
holders of Nonvoting Common Stock shall not be entitled to vote on any
matters submitted to the stockholders of the Corporation except as
otherwise expressly required by law, in which case holders of Nonvoting
Common Stock shall vote (at the rate of one vote for each share of
Nonvoting Common Stock held) with holders of Voting Common Stock as a
single class on such matter unless otherwise required by law.
d. Upon any liquidation, dissolution, or winding up of the
affairs of the Corporation, the remaining assets and funds of the
Corporation shall be distributed among the holders of the Voting
Common Stock and Nonvoting Common Stock according to their respective
shares and treated as a single class. For the purpose of this
clause (d), neither the merger nor the consolidation of the Corporation
----------
into or with another corporation, or the merger or consolidation of any
other corporation into or with the Corporation, or the voluntary sale,
conveyance, exchange, transfer, or other disposition (for cash, shares
of stock, securities, or other consideration) of all or substantially
all of the property or assets of the Corporation, shall be deemed to be
a voluntary or involuntary liquidation, dissolution, or winding up of
the Corporation.
e. Each share of Nonvoting Common Stock shall be convertible into
one share (subject to appropriate adjustment if there shall be any stock
dividend, share combination, stock split, reverse stock split, or
similar change in Voting Common Stock or Nonvoting Common Stock after
date hereof) of Voting Common Stock, at any time and from time to time,
(i) if the holder thereof is not a "bank holding company" or an
affiliate of a "bank holding company" under the Bank Holding Company
Act of 1954, as amended (the "BHC Act"), then at the option of the
holder thereof, or (ii) if the holder thereof is a "bank holding
company" or an affiliate of a "bank holding company" under the BHC
Act, then upon delivery to the Corporation of a certificate signed by
or on behalf of such holder or holders to the effect that such holder
and its affiliates would hold less than 5% of the outstanding
Voting Common Stock after giving effect to such conversion,
assuming the conversion by the holder and its affiliates of all
securities convertible into Common Stock owned by them and the exercise
by the holder and its affiliates of all warrants, options and rights to
acquire Common Stock and without giving effect to the exercise of such
convertible securities, options, warrants or rights by any other party,
in form and substance reasonably acceptable to the Corporation. Any
conversion of shares of Nonvoting Common Stock into share of Voting
Common Stock pursuant to this clause (e) shall be effected by the
delivery to the Corporation at its principal executive office of the
certificates representing shares to be converted, duly endorsed,
together with written instructions that the shares are to be converted
and, in the case of clause (e) (ii) above, accompanied by the required
---------------
certificate described therein.
f. Each share of Voting Common Stock shall be convertible into
one share (subject to appropriate adjustment if there shall be any stock
dividend, share combination, stock split, reverse stock split, or
similar change in Voting Common Stock or Nonvoting Common Stock
after the date hereof) of Nonvoting Common Stock, at any time and
time to time, at the option of the holder thereof. Any conversion
of shares of Voting Common Stock into shares of Nonvoting Common Stock
pursuant to this clause (f) shall be effected by the delivery to the
----------
Corporation at its principal executive office of the certificates
representing shares to be converted, duly endorsed, together with
written instructions that the shares are to be converted.
g. If the Corporation effects a subdivision or consolidation of
shares or other capital readjustment or other increase or reduction in
the number of shares outstanding of Voting Common Stock or Nonvoting
Common Stock without receiving fair value therefor in money, services,
or property, the number of outstanding shares of the Voting Common
Stock and Nonvoting Common Stock of the Corporation outstanding shall
concurrently (a) in the event of an increase in the number of
outstanding shares, be proportionately increased, and (b) in the
event of a reduction in the number of outstanding shares, be
proportionately reduced.
SECTION 4.3. PREFERRED STOCK.
a. The shares of Preferred Stock of the Corporation may be
issued from time to time in one or more classes or series thereof,
the shares of each class or series thereof to have such voting powers,
full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special
rights, and qualifications,limitations or restrictions thereof, as are
stated and expressed in the resolution or resolutions providing for the
issue of such class or series, adopted by the Board of Directors as
hereinafter provided.
b. Authority is hereby expressly granted to the Board of
Directors of the Corporation, subject to the provisions of this
Article IV and to the limitations prescribed by the Delaware General
Corporation Law, to authorize the issuance of one or more classes,
or series thereof, of Preferred Stock and with respect to each
such class or series to fix by resolution or resolutions providing
for the issue of such class or series the voting powers, full or
limited, if any, of the shares of such class or series and the
designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof. The authority of the Board of Directors with respect to each
class or series thereof shall include, but not be limited to, the
determination or fixing of the following:
(i) the maximum number of shares to constitute such class or
series, which may subsequently be increased or decreased (but not
below the number of shares of that class or series then outstanding)
by resolution of the Board of Directors, the distinctive designation
thereof and the stated value thereof if different than the Par value
thereof;
(ii) the dividend rate of such class or series, the conditions
and dates upon which such dividends shall be payable, the relation
which such dividends shall bear to the dividends payable on any
other class or classes of stock or any other series of any class of
stock of the Corporation, and whether such dividends shall be
cumulative or noncumulative;
(iii) whether the shares of such class or series shall be
subject to redemption by the Corporation and, if made subject to
such redemption, the times, prices and other terms and
conditions of such redemption;
(iv) the terms and amount of any sinking fund established for
the purchase or redemption of the shares of such class or series;
(v) whether or not the shares of such class or series shall
be convertible into or exchangeable for shares of any other class
or classes of any stock or any other series of any class of stock
of the Corporation, and, if provision is made for conversion
or exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
(vi) the extent, if any, to which the holders of shares of
such class or series shall be entitled to vote with respect to the
election of directors or otherwise;
(vii) the restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(viii) the rights of the holders of the shares of such class or
series upon the dissolution of, or upon the distribution of assets
of, the Corporation; and
(ix) the manner in which any facts ascertainable outside the
resolution or resolutions providing for the issue of such
class or "cries shall operate upon the voting powers,
designations, preferences, rights and qualifications, limitations
or restrictions of such class or series.
c. The amendment of the terms of any certificate of designations
of any series of the Preferred Stock of which shares are outstanding
shall require only (i) that the Board of Directors adopt a resolution
setting forth the amendment proposed, declaring its advisability, and
either calling a special meeting of the holders of such series of
Preferred Stock for consideration of such amendment or directing that
the amendment proposed be considered at the next annual meeting of
stockholders by the holders of such series of Preferred Stock (in
either event, subject to the ability of such holders to act by written
consent in lieu of voting at a meeting if such ability is provided
in the certificate of designations of such series), and (ii) that the
holders of a majority (or such greater number as may be required
by the certificate of designations of such series) of the
outstanding shares of such series of Preferred Stock have voted in
favor of the amendment. Except for holders of a series of Preferred
Stock the terms of which are being amended, no holder of Common Stock
and no holder of any series of Preferred Stock shall be entitled to
vote upon such amendment unless the rights of such holders would
be adversely affected by such amendment or such vote shall
otherwise be required by law or by any certificate of designation
of any series of Preferred Stock.
ARTICLE V
PERPETUAL EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 6.1. NUMBER OF DIRECTORS. The number of directors of the
Corporation shall be such as from time to time shall be fixed by, or in the
manner provided in, the bylaws of the Corporation.
SECTION 6.2. VACANCIES. Any vacancies in the Board of Directors for
any reason and any newly created directorships resulting by reason of any
increase in the number of directors may be filled only by the Board of
Directors, acting by a majority of the remaining directors then in office,
although less than a quorum, or by a sole remaining director, and any
directors so appointed shall hold office until the next election of the class
for which such directors have been chosen and until their successors are
elected and qualified.
SECTION 6.3. REMOVAL OF DIRECTORS. Except as may be provided in a
resolution or resolutions providing for any class or series of Preferred
Stock pursuant to Article IV hereof with respect to any directors elected by
the holders of such class or series, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 66-2/3% of the voting
power of all of the shares of capital stock of the Corporation then entitled
to vote generally in the election of directors, voting together as a single
class.
ARTICLE VII
STOCKHOLDER ACTIONS AND MEETINGS OF STOCKHOLDERS
Except as may be provided in a resolution or resolutions providing for
any class or series of Preferred Stock pursuant to Article IV hereof, any
action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
such holders and may not be effected by any consent in writing by such
holders unless all of the Corporation's Common Stock is held of record by one
stockholder. Special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the members of the Board of Directors then in office.
Elections of directors need not be by written ballot, unless otherwise
provided in the bylaws of the Corporation.
ARTICLE VIII
LIMITATION ON LIABILITY OF DIRECTORS
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (i) for any breach of a director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the General Corporation Law of
the State of Delaware as it may from time to time be amended or any successor
provision thereto; or (iv) for any transaction from which a director derived
an improper personal benefit. If the General Corporation Law of the State
of Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then by virtue of this Article
VIII the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended. Any amendment, repeal or modification of
this Article VIII shall not adversely affect any right or protection of a
director of the Corporation existing at the time of amendment, repeal or
modification.
ARTICLE IX
AMENDMENT OF BYLAWS
The Board of Directors shall have power by the affirmative vote of the
majority of the members of the Board of Directors then in office to adopt,
amend, alter, change and repeal any bylaws of the Corporation. In addition
to any requirements of the Delaware General Corporation Law (and
notwithstanding the fact that a lesser percentage may be specified by the
Delaware General Corporation Law), the affirmative vote of the holders of at
least 66-2/3% of the voting power of all of the shares of capital stock of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class, shall be required for the stockholders of
the Corporation to adopt, amend, alter, change or repeal any bylaws of the
Corporation.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation. Except as may be provided in a resolution or resolutions
providing for any class or series of Preferred Stock pursuant to Article IV
hereof and which relate to such class or series of Preferred Stock, any such
amendment, alteration, change or repeal shall require the affirmative vote
of both (i) a majority of the members of the Board of Directors then in
office and (ii) the holders of at least 66-2/3% of the voting power of all
of the shares of capital stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class.
ARTICLE XI
SEVERABILITY
In the event that any of the provisions of this Amended and Restated
Certificate of Incorporation (including any provision within a single
Section, paragraph or sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the full extent permitted by law.
IN WITNESS WHEREOF, we have hereunto signed our names and affirm that
the statements set forth herein are true under the penalty of perjury this
21st day of September , 1994.
FIRST MERCHANTS
ATTEST ACCEPTANCE CORPORATION
___________________________ __________________________
Name: Name:
Title: Assistant Secretary Title: President
Exhibit 3.2
By laws of the Seller
FIRST MERCHANTS ACCEPTANCE CORPORATION
AMENDED AND RESTATED BYLAWS
ARTICLE I
GENERAL
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Section 1. Name.
----
The name of the corporation shall be
FIRST MERCHANTS ACCEPTANCE CORPORATION.
SECTION 2. OFFICE.
------
(a) The registered office of the corporation shall be at 32
Loockerman Square, Suite L-100, Kent County, Dover, Delaware, c/o The
Prentice Hall Corporation System, Inc.
(b) The corporation may, in addition to its registered office,
establish and maintain such an office or offices, at such place or places,
as the Board of Directors may deem necessary, desirable or expedient from
time to time.
ARTICLE II
STOCKHOLDERS
------------
SECTION 1. PLACE OF MEETINGS.
-----------------
Each meeting of the stockholders shall be held at the principal
office of the corporation or at such other place, within or without the
State of Delaware, as shall be designated by the Board of Directors in the
notice of meeting.
SECTION 2. ANNUAL MEETING.
--------------
The annual meeting of the stockholders shall be held pursuant to
notice and at such date and time as shall be designated by the Board of
Directors in the notice of meeting for the purpose of electing directors
and for the transaction of such other business as may come before the
meeting.
SECTION 3. SPECIAL MEETINGS.
----------------
Special meetings of stockholders for any purpose or purposes may be
called only by the Board of Directors, pursuant to a resolution adopted by
a majority of the members of the Board of Directors then in office.
Special meetings may be held at any place, within or without the State of
Delaware, as determined by the Board of Directors. The only business that
may be conducted at such a meeting, other than procedural matters and
matters relating to the conduct of the meeting, shall be the matter or
matters described in the notice of the meeting.
SECTION 4. NOTICE OF MEETINGS.
------------------
The Secretary or an Assistant Secretary of the corporation shall give
written notice of every meeting of the stockholders to each stockholder of
record entitled to vote at the meeting. Such notice shall be given not
less than ten days, nor more than 60 days, prior to the day named for the
meeting, unless a different period of notice is required by law. Such
notice shall be given either by regular mail, overnight courier, telegram
or facsimile transmission, or by any other means comparable to any of the
foregoing, to each stockholder at his address appearing on the books of
the corporation or supplied by him to the corporation for the purpose of
notice. Such notice shall specify the place, day and hour of the meeting
and, in the case of a special meeting, the general nature of the business
to be transacted.
SECTION 5. WAIVER OF NOTICE.
----------------
A waiver of notice in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted nor the purpose of the meeting need be specified
in the waiver of notice of such meeting. Attendance of the person either
in person or by proxy at any meeting shall constitute a waiver of notice
of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business because
the meeting was not lawfully called or convened.
SECTION 6. RECORD DATE.
-----------
In order that the corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any
adjournments thereof, (ii) to receive payment of any dividend or other
distribution, or allotment of any rights, or (iii) to exercise any rights
in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors, in advance,
may fix a date as the record date for any such determination, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date shall not
be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to the date of any other action.
A determination of the stockholders of record entitled to notice of or to
vote at a meeting of the stockholders shall apply to any adjournment of
the meeting taken pursuant to Article I, Section 8 hereof; provided,
--------
however, that the Board of Directors, in its discretion, may fix a new
- -------
record date for an adjourned meeting. Only stockholders determined to be
stockholders of record on the record date so fixed shall be entitled to
notice of, or to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend or other distribution, or allotment of
rights, or to exercise such rights in respect of such change, conversion
or exchange of stock, or to participate in any such other lawful action,
as the case may be, notwithstanding any transfer of any stock on the books
of the corporation after any such record date fixed as aforesaid.
SECTION 7. LIST OF STOCKHOLDERS.
--------------------
At least ten days before any meetings of the stockholders, the
officer or transfer agent in charge of the stock transfer books of the
corporation shall prepare and make a complete alphabetical list of the
stockholders entitled to vote at such meeting, which list shall show
the address of each stockholder and the number of shares registered
in the name of each stockholder. The list so prepared shall be
maintained at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held, and shall
be open for inspection by any stockholder, for any purpose germane to the
meeting, during ordinary business hours during a period of not less than
ten days prior to the meeting. The list shall also be produced and kept
open at the meeting (during the entire duration thereof) and, except as
otherwise provided by law, may be inspected by any stockholder or proxy of
a stockholder who is present at such meeting.
SECTION 8. QUORUM.
------
The presence in person or by proxy of the holders of a majority of
the votes represented by issued and outstanding shares entitled to vote at
a stockholders' meeting shall constitute a quorum, except that the
presence in person or by proxy of the holders of a majority of the issued
and outstanding shares of each class or series of stock which is entitled
to vote as a class or series at a stockholders' meeting shall constitute a
quorum for any vote in which a vote of such class or series is required.
If a quorum is not present at a meeting, those present may adjourn the
meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be obtained. At any such adjourned meeting
at which there is a quorum, any business may be transacted that might
have been transacted at the meeting originally called.
SECTION 9. STOCKHOLDER PROPOSALS.
---------------------
(a) Condition of Submission to Stockholders. No proposal for a
---------------------------------------
stockholder vote shall be submitted by a stockholder (a "Stockholder
Proposal") to the corporation's stockholders unless the stockholder
submitting such proposal (the "Proponent") shall have filed a written
notice (a "Proposal Notice") setting forth with particularity (i) the
names and business addresses of the Proponent and all persons or entities
(collectively, the "Persons" and singularly, a "Person") acting in concert
with the Proponent; (ii) the name and address of the Proponent and the
Persons identified in clause (i), as they appear on the corporation's
books (if they so appear); (iii) the class and number of shares of the
corporation beneficially owned by the Proponent and the Persons identified
in clause (i); (iv) a description of the Stockholder Proposal containing
all material information relating thereto; and (v) such other information
as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and stockholders of the
corporation to consider the Stockholder Proposal. The presiding officer
at any stockholders' meeting may determine that any Stockholder Proposal
was not made in accordance with the procedures prescribed in these Amended
and Restated Bylaws (the "Bylaws") or is otherwise not in accordance
with law, and if it is so determined, such officer shall so declare at
the meeting and the Stockholder Proposal shall be disregarded.
(b) Stockholder Proposal Notice. Proposal Notices shall be
---------------------------
delivered to the Secretary at the principal executive office of the
corporation not later than 120 days in advance of the anniversary date of
the corporation's proxy statement for the previous year's annual meeting
or, in the case of special meetings, at the close of business on the
seventh day following the date on which notice of such meeting is first
given to stockholders.
SECTION 10. VOTING POWER.
------------
Unless otherwise provided in a resolution or resolutions providing
for any class or series of Preferred Stock pursuant to Article IV of the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") or by the Delaware General Corporation Law (the "DGCL"),
every stockholder of record shall be entitled to vote, in person or by
proxy, the shares of voting stock of every share of each class or series
held of record by such stockholder. All questions shall be decided by the
vote of the majority of the capital stock present in person or represented
by proxy and entitled to vote at any meeting, or if the voting is by class
or series, a majority of the votes of each class or series of capital
stock present in person or represented by proxy and entitled to vote at
any meeting, unless otherwise specially provided by law or by the Certificate
of Incorporation or these Bylaws. Abstentions shall not be considered to
be votes cast.
SECTION 11. PROXIES.
-------
Every stockholder may vote either in person or by proxy. Every proxy
shall be executed in writing by the stockholder or by his duly authorized
attorney-in-fact. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in
the proxy to the contrary, but the revocation of a proxy shall not be
effective until notice thereof has been given to the Secretary of the
corporation. No proxy shall be valid after eleven months from the date of
its execution unless a longer time is expressly provided therein, but in
no event shall a proxy, unless coupled with an interest, be voted on after
three years from the date of its execution. A proxy shall not be revoked
by the death or incapacity of the maker unless before the vote is counted
or the authority is exercised, written notice of such death or incapacity
is given to the Secretary of the corporation.
SECTION 12. INSPECTORS.
----------
Elections for directors need not be by ballot, except upon demand
made by a stockholder at the election and before the voting begins. In
advance of any meeting of stockholders, the Board of Directors shall
appoint inspectors, who need not be stockholders, to act at such meeting
and make a written report thereof. Such inspectors may include
individuals who serve the corporation in other capacities,
including, without limitation, as officers, employees, agents or
representatives of the corporation. The number of inspectors shall be one
or three. One or more persons may be designated by the Board of Directors
as alternate inspectors to replace any inspector who fails to act. In
case any person appointed as inspector fails to appear or fails or refuses
to act, the vacancy may be filled by appointment made by the Board of
Directors in advance of the convening of the meeting, or at the meeting by
the person or officer acting as chairman. Each inspector, before
discharging his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to
the best of his or her ability. The inspectors shall have the duties
prescribed by the DGCL.
SECTION 13. PRESIDING OFFICERS AND ORDER OF BUSINESS.
----------------------------------------
All meetings of stockholders shall be called to order and presided
over by the President, or in his absence, by the highest ranking Vice
President, or in the absence of all of them, by the Treasurer, or if none
of these be present by a chairman designated by the Board of Directors.
The Secretary of the corporation shall act as secretary, but in the
absence of the Secretary, the presiding officer may appoint a secretary.
SECTION 14. PROCEDURAL MATTERS.
------------------
At each meeting of stockholders, the chairman of the meeting shall
fix and announce the date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at the meeting
and shall determine the order of business and all other matters of
procedure. Except to the extent inconsistent with any such rules and
regulations as adopted by the Board of Directors, the chairman of the
meeting may establish rules, which need not be in writing, to maintain
order for the conduct of the meeting, including, without limitation,
restricting attendance to bona fide stockholders of record and their
proxies and other persons in attendance at the invitation of the chairman
and making rules governing speeches and debates. The chairman of the
meeting acts in his or her absolute discretion and his or her rulings are
not subject to appeal.
ARTICLE III
DIRECTORS
---------
SECTION 1. POWERS; QUALIFICATIONS; NUMBER AND TERM.
---------------------------------------
The business and affairs of the corporation shall be managed by or
under the direction of the Board of Directors of the corporation. A
director need not be a stockholder, a citizen of the United States, or a
resident of the State of Delaware. The Board of Directors shall consist
of seven persons; provided, however, that such number of directors
-------- -------
may from time to time be increased and decreased by amendment of this
Article III, Section 1 but shall in no event be reduced to less than
three. Each director shall be elected for a term ending on the next
succeeding annual meeting of stockholders and shall hold office for
the term for which such director is elected or until a successor shall
have been duly elected and qualified.
SECTION 2. VACANCIES.
---------
Any vacancies in the Board of Directors for any reason and any newly
created directorships resulting of any increase in the number of directors
may be filled only by the Board of Directors, acting by a majority of the
remaining directors then in office, although less than a quorum, or by a
sole remaining director, and any directors so appointed shall hold office
until the next election of the class for which such directors have been
chosen and until their successors are elected and qualified.
SECTION 3. REMOVAL OF DIRECTORS.
--------------------
Except as may be provided in a resolution or resolutions providing
for any class or series of Preferred stock pursuant to Article IV of the
Certificate of Incorporation with respect to any directors elected by the
holders of such class or series, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 66 2/3% of the
voting power of all of the shares of capital stock of the corporation then
entitled to vote generally in the election of directors, voting together
as a single class.
SECTION 4. NOMINATION OF DIRECTORS.
-----------------------
(a) Eligibility. Only persons who are selected and recommended by
-----------
the Board of Directors or the committee of the Board of Directors
designated to make nominations, or who are nominated by stockholders in
accordance with the procedures set forth in this Article III, Section 4,
shall be eligible for election, or qualified to serve, as directors.
Nominations of individuals for election to the Board of Directors of the
corporation at any annual meeting or any special meeting of stockholders
at which directors are to be elected may be made by any stockholder of the
corporation entitled to vote for the election of directors at that meeting
by compliance with the procedures set forth in this Article III, Section
4. Nominations by stockholders shall be made by written notice (a
"Nomination Notice"), which shall set forth the following information:
(i) as to each individual nominated, (a) the name, date of birth, business
address and residence address of such individual, (b) the business
experience during the past five years of such nominee, including his or
her principal occupations and employment during such period, the name and
principal business of any corporation or other organization in which such
occupations and employment were carried on, and such other information as
to the nature of his or her responsibilities and level of professional
competence as may be sufficient to permit assessment of his or her prior
business experience, (c) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital
stock, partnership interests or other equity interest of any corporation,
partnership or other entity, (d) any directorships held by such nominee in
any company with a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or subject to the requirements of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company
Act of 1940, as amended; and (e) whether, in the last five years, such
nominee has been convicted in a criminal proceeding or has been subject to
a judgment, order, finding or decree of any federal, state or other
governmental entity, concerning any violation of federal, state or other
law, or any proceeding in bankruptcy, which conviction, order, finding,
decree or proceeding may be material to an evaluation of the ability or
integrity of the nominee; and (ii) as to the Person submitting the
Nomination Notice and any Person acting in concert with such Person,
(a) the name and business address of such Person, (b) the name and address
of such Person as they appear on the corporation's books (if they so
appear) and (c) the class and number of shares of the corporation that are
beneficially owned by such Person. A written consent to being named in a
proxy statement as a nominee, and to serve as a director if elected,
signed by the nominee, shall be filed with any Nomination Notice. If
the presiding officer at any stockholders' meeting determines that a
nomination was not made in accordance with the procedures prescribed by
these Bylaws, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(b) Stockholder Nomination Notice. Nomination Notices shall be
-----------------------------
delivered to the Secretary at the principal executive office of the
corporation not later than 120 days in advance of the anniversary date of
the corporation's proxy statement for the previous year's annual meeting
or, in the case of special meetings, at the close of business on the
seventh day following the date on which notice of such meeting is first
given to stockholders.
SECTION 5. PLACE OF MEETINGS.
-----------------
The Board of Directors may hold annual, regular and special meetings,
and have an office or offices, either within or outside the State of
Delaware, at such place as the Board of Directors from time to time deems
advisable.
SECTION 6. REGULAR MEETINGS.
----------------
The Board of Directors shall, without notice, hold an annual meeting
immediately after the annual meeting of the stockholders, or after the
last adjournment thereof, and shall hold other regular meetings at such
time and place as it may determine. No notice to the newly elected directors
of such meeting shall be necessary for such meeting to be lawful, provided
a quorum is Present.
SECTION 7. SPECIAL MEETINGS.
----------------
The Board of Directors shall hold such special meetings as shall be
called by the President, or Vice President, or Secretary, or any two
directors. Each such meeting shall be held at such time and place as
shall be designated in the notice of meeting.
SECTION 8. NOTICE OF MEETINGS.
------------------
Notice of the date, time and place of each meeting, except the annual
meeting, of the Board of Directors shall be mailed by regular mail to each
director, at his address appearing on the books of the corporation or
supplied by the director to the corporation for the purpose of notice
("designated address"), at least six days before the meeting; or sent by
overnight courier to each director at his designated address at least two
days before the meeting (with delivery scheduled to occur no later than
the day before the meeting); or given orally by telephone or other means,
or by telegraph or facsimile transmission, or by any other means
comparable to any of the foregoing, to each director at his designated
address at least 24 hours before the meeting; provided, however, that if
less than five days' notice is provided and one-third of the directors
then in office object in writing prior to or at the commencement of the
meeting, such meeting shall be postponed until five days after such notice
was given pursuant to this sentence (or such shorter period to which a
majority of those who objected in writing agree), provided that notice of
such postponed meeting shall be given in accordance with this Article III,
Section 8. The notice of the meeting shall state the general purpose of
the meeting, but other routine business may be conducted at the meeting
without such matter being stated in the notice.
SECTION 9. WAIVER OF NOTICE.
----------------
A waiver of written notice in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. Attendance of a
person at any meeting shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting was not
lawfully called or convened, and any such person so states his purpose in
attending such meeting and refrains from participation in the business of
the meeting.
SECTION 10. QUORUM.
------
A majority of the directors in office shall be necessary to
constitute a quorum for the transaction of business. The
affirmative vote of a majority of the directors in office shall be
required to constitute the act of the Board of Directors.
SECTION 11. PRESIDING OFFICER AND ORDER OF BUSINESS.
---------------------------------------
All meetings of the Board of Directors shall be called to order and
presided over by the President, or in his absence or if the President is
not a member of the Board of Directors, by a member of the Board of
Directors selected by the members present. The Secretary of the
corporation shall act as secretary, but in the absence of the Secretary,
the presiding officer may appoint a secretary.
SECTION 12. ACTION BY BOARD WITHOUT FORMAL MEETING.
--------------------------------------
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, any action required or permitted to be taken at any meeting
of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board of
Directors or committee, as the case may be.
SECTION 13. COMPENSATION.
------------
Directors, as such, shall receive such compensation and reimbursement
for expenses as the Board of Directors may by resolution allow. Directors
shall also be entitled to receive such compensation for services rendered
to the corporation in any capacity other than as directors, as may be
provided from time to time by resolution of the Board of Directors.
SECTION 14. RESIGNATION.
-----------
Any director, member of a committee, or other officer may resign at
any time by giving written notice to the Board of Directors, the President
or Secretary of the corporation. Such resignation shall be effective at
the time specified therein, or, if no time be specified, at the time of
its receipt by the Board of Directors or such officer, and the acceptance
of the resignation shall not be necessary to make it effective.
Resignations not submitted in writing may be evidenced by a written
acknowledgement of receipt thereof signed by the receiving director or
officer of the corporation or by acknowledgement of receipt thereof in the
minutes of a subsequent stockholders' or directors' meeting.
SECTION 15. TELEPHONIC MEETINGS AND PARTICIPATION.
-------------------------------------
Members of the Board of Directors or any committee designated thereby
may participate in any meeting of such Board of Directors or committee by
means of conference telephone or similar communications equipment by which
all persons participating can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE IV
COMMITTEES
----------
SECTION 1. COMMITTEES GENERALLY.
--------------------
The Board of Directors may, by resolutions passed by a majority of
the members of the Board of Directors then in office, designate members of
the Board of Directors to constitute committees that, except as otherwise
provided in Sections 2 and 3 of this Article IV, in each case, shall
consist of such number of directors, and shall have and may execute such
powers, as may be determined and specified in the respective resolutions
appointing them. Any such committee may fix its rules of procedure,
determine its manner of acting and the time and place, whether within or
without the State of Delaware, of its meetings and specify what notice
thereof, if any, shall be given, unless these Bylaws, or the Board of
Directors by resolution, shall provide otherwise. Unless otherwise
provided by the Board of Directors or such committee, the quorum, voting
and other procedures shall be the same as those applicable to actions
taken by the Board of Directors. A majority of the members of the Board
of Directors then in office shall have the power to change the membership
of any such committee at any time, to fill vacancies therein and to
discharge any such committee or to remove any member thereof, either with
or without cause, at any time.
SECTION 2. AUDIT COMMITTEE.
---------------
The Audit Committee shall consist of such number of directors, who
shall not be officers or employees of the corporation or any of its
affiliates, not less than three, as shall from time to time be determined
by the Board of Directors. The Audit Committee shall each year make a
recommendation, based on a review of qualifications, to the Board of
Directors for the appointment of independent public accountants to audit
the financial statements of the corporation and to perform such other
duties as the Board of Directors may from time to time prescribe. As part
of such review of qualifications, the Audit Committee shall consider
management's plans for engaging the independent public accountants for
management advisory services to determine whether such services could
impair the public accountants' independence. The Audit Committee shall
examine and make recommendations to the Board of Directors with respect to
the scope of audits conducted by the corporation's independent public
accountants and internal auditors. The Audit Committee shall review all
recommendations made by the corporation's independent public accountants
and internal auditors to the Audit Committee or the Board of Directors
with respect to the accounting methods and the system of internal control
used by the corporation, and shall advise the Board of Directors with
respect thereto. The Audit Committee shall review reports from the
corporation's independent public accountants and internal auditors
concerning compliance by management with governmental laws and regulations
and with the corporation's policies relating to ethics, conflicts of
interest and disbursements of funds. The Audit Committee shall meet with
the corporation's independent public accountants and/or internal auditors
without management present whenever the Audit Committee shall deem it
appropriate.
SECTION 3. COMPENSATION COMMITTEE.
----------------------
The Compensation Committee shall consist of such number of directors,
who shall not be officers or employees of the corporation or any of its
affiliates, not less than three, as shall from time to time be determined
by the Board of Directors. As authorized by the Board of Directors, the
Compensation Committee shall make recommendations to the Board of
Directors with respect to the administration of the salaries, bonuses, and
other compensation to be paid to the officers of the corporation,
including the terms and conditions of their employment, and shall
administer all stock option and other benefit plans (unless otherwise
specified in plan documents) affecting officers' direct and indirect
remuneration.
ARTICLE V
OFFICERS AND AGENTS
-------------------
SECTION 1. OFFICERS.
--------
The officers of the corporation shall be a President, one or more
Vice Presidents, a Treasurer and a Secretary, all of whom shall be elected
by the Board of Directors. In addition, the Board of Directors may elect
one or more Assistant Secretaries or Assistant Treasurers, or appoint such
other additional officers and agents as they may deem advisable. Any two
or more offices may be held by the same person except the offices of
President and Secretary. The officers shall be elected each year at the
annual meeting of the Board of Directors which shall be held each year
pursuant to Article III, Section 6 hereof.
SECTION 2. TERM.
----
Each officer and each agent shall hold office until his successor is
elected or appointed and qualified or until his death, resignation or
renewal by the Board of Directors.
SECTION 3. AUTHORITY, DUTIES AND COMPENSATION.
----------------------------------
All elected or appointed officers and agents shall have such
authority and perform such duties as may be provided in the Bylaws or as
may be determined by the Board of Directors or the President. They shall
receive such compensation for their services as may be determined by the
Board of Directors, or by the President with respect to all officers and
agents subordinate to him. Notwithstanding any other provisions of these
Bylaws, the Board of Directors shall have power from time to time by
resolution to prescribe by what officers or agents particular documents or
instruments or particular classes of documents or instruments shall be
signed, countersigned, endorsed or executed, provided, however, that any
person, firm or corporation shall be entitled to accept and to act upon
any document or instrument signed, countersigned, endorsed or executed
by officers or agents of the company pursuant to the provisions of these
Bylaws unless prior to receipt of such document or instrument such person,
firm or corporation has been furnished with a certified copy of a resolution
of the Board of Directors prescribing a different signature, counter-
signature, endorsement or execution.
SECTION 4. PRESIDENT.
---------
The President shall preside at all meetings of stockholders and of
the Board of Directors. The President shall be deemed the Chief Executive
Officer of the corporation and shall be the Chief Operating Officer of the
corporation. The President shall be charged with and have the direction
and supervision of all of its business and operations with the concurrence
of the other officers of the corporation.
SECTION 5. VICE PRESIDENTS.
---------------
In the absence or disability of the President, his duties shall be
performed by a Vice President, as authorized by the President. Such
officer or officers shall perform such other duties and have such other
powers as may be assigned by the President.
SECTION 6. TREASURER.
---------
The Treasurer shall keep and account for all moneys, funds and
property of the corporation which shall come into his hands, and shall
render such accounts and present such statements to the Board of Directors
as may be required of him. Unless the Board of Directors shall prescribe
otherwise, the Treasurer shall deposit all funds of the corporation which
may come into his hands in such bank or banks as the Board of Directors
may designate and in accounts in the name of the corporation, shall
endorse for collection bills, notes, checks and other negotiable
instruments of the corporation or cause them to be signed in facsimile or
otherwise as the Board of Directors may determine, and shall pay out money
as the business of the corporation may require, making proper vouchers
therefor. In the absence or disability of the Treasurer, any Assistant
Treasurer shall have the authority and perform the duties of the
Treasurer.
SECTION 7. SECRETARY.
---------
The Secretary shall give or cause to be given all required notices of
meetings of stockholders and of the Board of Directors, shall attend such
meetings when practicable, shall record and keep the minutes and all other
proceedings thereof, shall attest such records after every meeting by his
signature, shall safely keep all documents and papers which shall come
into his possession and shall truly keep the books and accounts of the
corporation appertaining to his office. In the absence or
disability of the Secretary, any Assistant Secretary shall have authority
and perform the duties of the Secretary.
SECTION 8. RESIGNATION AND REMOVAL OF OFFICERS.
-----------------------------------
Any executive officer of the corporation may be removed, either for
cause or without cause, by the affirmative vote of a majority of the full
Board of Directors. Other officers and agents may be removed either for
cause or without cause by the Board of Directors or the President.
Removal of an executive officer by the Board of Directors or by the
President, as the case may be, shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer may resign at any
time by written notice to the corporation. Unless otherwise stated in
such notice of resignation, the acceptance thereof shall not be necessary
to make it effective; and such resignation shall take effect at the time
specified therein or, in the absence of such specification, it shall take
effect upon the receipt thereof.
SECTION 9. VACANCIES.
---------
Vacancy in any office or position by reason of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
provided in Article V, Section 1 hereof for regular appointment to such
office.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
SECTION 1. RIGHT TO INDEMNIFICATION.
------------------------
Each person who was or is made a party or is threatened to be made a
party to or is involved in or called as a witness in any Proceeding (as
hereinafter defined) because he or she is an Indemnified Person (as
hereinafter defined) shall be indemnified and held harmless by the
corporation to the fullest extent permitted under the DGCL, as the same
now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than the DGCL permitted the
corporation to provide prior to such amendment). Such indemnification
shall cover all expenses incurred by an Indemnified Person (including, but
not limited to, attorneys' fees and other expenses of litigation) and all
liabilities and losses (including, but not limited to, judgments, fines,
ERISA and other excise taxes or penalties and amounts paid or to be paid
in settlement) incurred by such person in connection therewith.
Notwithstanding the foregoing, except with respect to indemnification
specified in this Article VI, the corporation shall indemnify an
Indemnified Person in connection with a Proceeding (or part thereof)
initiated by such person only if such Proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
For purposes of this Article VI:
(i) a "Proceeding" is an action, suit or proceeding, whether
civil, criminal, administrative or investigative, and any appeal
therefrom including, without limitation, any such action, suit,
proceeding or appeal by or in the right of the corporation;
(ii) an "Indemnified Person" is a person who is, was, or had
agreed to become a director, officer, employee, agent or a Delegate,
as defined herein, of the corporation or the legal representative of
any of the foregoing; and
(iii) a "Delegate" is a person serving at the request of the
corporation or a subsidiary of the corporation as a director, trustee,
fiduciary, or officer of such subsidiary or of another corporation,
partnership, joint venture, trust or other enterprise.
SECTION 2. EXPENSES.
--------
Expenses, including attorneys' fees, incurred by a person indemnified
pursuant to Article VI, Section 1 in defending or otherwise being involved
in a Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such
person to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the corporation; provided that
in connection with a Proceeding (or part thereof) initiated by such person,
except a Proceeding authorized by Article VI, Section 3, the corporation
shall pay said expenses in advance of final disposition only if such
Proceeding (or part thereof) was authorized by the Board of Directors.
A person to whom expenses are advanced pursuant hereto shall not be
obligated to repay pursuant to the Undertaking until the final determination
of any pending Proceeding in a court of competent jurisdiction concerning
the right of such person to be indemnified or the obligation of such person
to repay pursuant to the Undertaking.
SECTION 3. PROTECTION OF RIGHTS.
--------------------
If a claim under Article VI, Section 1 is not promptly paid in full
by the corporation after a written claim has been received by the
corporation or if expenses pursuant to Article VI, Section 2 of this
Article have not been promptly advanced after a written request for such
advancement accompanied by the Undertaking has been received by the
corporation, the claimant may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim or the
advancement of expenses. If successful, in whole or in part, in such
suit, such claimant shall also be entitled to be paid the reasonable
expense thereof (including, without limitation, attorneys' fees). It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any Proceeding in
advance of its final disposition where the required Undertaking has
been tendered to the corporation) that indemnification of
the claimant is prohibited by law, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the claimant is proper
in the circumstances, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that indemnification of the claimant is prohibited, shall be
a defense to the action or create a presumption that indemnification of
the claimant is prohibited.
SECTION 4. MISCELLANEOUS.
-------------
(a) Non-Exclusivity of Rights. The rights conferred on any person
-------------------------
by this Article VI shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors shall have
the authority, by resolution, to provide for such indemnification of
employees or agents of the corporation or others and for such other
indemnification of directors, officers or Delegates as it shall deem
appropriate.
(b) Insurance Contracts and Funding. The corporation may maintain
-------------------------------
insurance, at its expense, to protect itself and any director, officer,
employee, or agent of, or person serving in any other capacity with,
the corporation or another corporation, partnership, joint
venture, trust or other enterprise against an expenses, liabilities or
losses, whether or not the corporation would have the power to indemnify
such person against such expenses, liabilities or losses under the DGCL.
The corporation may enter into contracts with any director, officer or
Delegate of the corporation in furtherance of the provisions of this
Article VI and may create a trust fund, grant a security interest or use
other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect the advancing of
expenses and indemnification as provided in this Article VI.
(c) Contractual Nature. The provisions of this Article VI shall be
------------------
applicable to all Proceedings commenced or continuing after its adoption,
whether such arises out of events, acts or omissions which occurred prior
or subsequent to such adoption, and shall continue as to a person who has
ceased to be a director, officer or Delegate and shall inure to the
benefit of the heirs, executors and administrators of such person. This
Article VI shall be deemed to be a contract between the corporation and
each person who, at any time that this Article VI is in effect, serves or
agrees to serve in any capacity which entitles him to indemnification
hereafter and any repeal or other modification of this Article or any
repeal or modification of the DGCL or any other applicable law shall not
limit any Indemnified Person's entitlement to the advancement of expenses
or indemnification under this Article VI for Proceedings then existing or
later arising out of events, acts or omissions occurring prior to such
repeal or modification, including, without limitation, the right to
indemnification for Proceedings commenced after such repeal or modification
to enforce this Article VI with regard to Proceedings arising out of acts,
omissions or events occurring prior to such repeal or modification.
(d) Severability. If this Article VI or any portion hereof shall be
------------
invalidated or held to be unenforceable on any ground by any court of
competent jurisdiction, the decision of which shall not have been reversed
on appeal, such invalidity or unenforceability shall not affect the other
provisions hereof, and this Article VI shall be construed in all respects
as if such invalid or unenforceable provisions had been omitted therefrom.
ARTICLE VII
SHARES OF CAPITAL STOCK
-----------------------
SECTION 1. SHARE CERTIFICATES.
------------------
Every holder of stock in the corporation shall be entitled to a
certificate or certificates, to be in such form as the Board of Directors
may from time to time prescribe, signed by the President or a Vice
President and by the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer, and where signed by a transfer agent or an assistant
transfer agent by a registrar the signature of such officers of the
corporation may be facsimile. Each such certificate shall exhibit the
name of the registered holder thereof, the number and class of shares and
the designation of the series, if any, which the certificate represents
and the number of shares represented thereby. The Board of Directors may,
if it so determines, direct that certificates for shares of stock of the
corporation be signed by a transfer agent and/or registered by a registrar,
in which case such certificates shall not be valid until so signed and/or
registered. In case any officer of the corporation who shall have signed,
or whose facsimile signature shall have been used on any certificate for
shares of stock of the corporation, shall cease to be such officer, whether
because of death, resignation or otherwise, before such certificate shall
have been delivered, it may be delivered by the corporation as though the
person who signed such certificate or whose facsimile signature shall have
been used thereon had not ceased to be such officer.
SECTION 2. TRANSFERS OF SHARES.
-------------------
Transfers of shares of stock of the corporation shall be made only on
the books of the corporation by the registered holder thereof or by his
attorney thereunto authorized by an instrument duly executed and witnessed
and filed with the corporation, and on surrender of the certificate or
certificates for such shares properly endorsed and evidence of the payment
of all taxes imposed upon such transfer. Every certificate
surrendered for transfer shall be cancelled and no new certificate or
certificates shall be issued in exchange for any existing certificate
until such existing certificate shall have been so cancelled.
SECTION 3. TRANSFER AGENTS AND REGISTRARS.
------------------------------
The Board of Directors may appoint any one or more qualified banks,
trust companies or other corporations organized under any law of any state
of the United States or under the laws of the United States as agent or
agents for the corporation in the transfer of the stock of the corporation
and likewise may appoint any one or more qualified banks, trust companies
or other corporations as registrar or registrars of the stock of the
corporation.
SECTION 4. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES.
-------------------------------------------------
New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such terms and
conditions, which may but need not include the giving of a satisfactory
bond of indemnity, as the Board of Directors may from time to time
determine.
SECTION 5. HOLDERS OF RECORD.
-----------------
The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder and owner in fact thereof and
shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of the State of Delaware.
SECTION 6. TREASURY SHARES.
---------------
Shares of the corporation's stock held in its treasury shall not be
voted directly or indirectly, at any meeting.
ARTICLE VIII
GENERAL PROVISIONS
------------------
SECTION 1. CORPORATE SEAL.
--------------
The Board of Directors shall prescribe the form of a suitable
corporate seal, which shall contain the full name of the corporation and
the year and state of incorporation. Such seal may be used by causing it
or a facsimile or reproduction thereof to be affixed to or placed upon the
document to be sealed.
SECTION 2. FISCAL YEAR.
-----------
The fiscal year of the corporation shall end on the last day of
December in each year or shall begin and end on such other days as shall
be fixed by resolution of the Board of Directors.
ARTICLE IX
AMENDMENTS
----------
SECTION 1. AMENDMENTS.
----------
The Board of Directors shall have the power to amend, alter, change,
adopt or repeal the Bylaws of the corporation at any annual, regular or
special meeting. The stockholders also shall have the power to amend,
alter, adopt or repeal the Bylaws of the corporation at any annual or
special meeting, subject to the requirements of the Certificate of
Incorporation.
Exhibit 4.1
Form of Trust Agreement
-----------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TRUST AGREEMENT
between
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
as Depositor,
and
( ),
as Owner Trustee
Dated as of ( )
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
-----------
SECTION 1.01. Capitalized Terms . . . . . . . . . . . . . . . . . . . . 1
-----------------
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . . . 3
-----------------------------
ARTICLE II
Organization
------------
SECTION 2.01. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----
SECTION 2.02. Office . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------
SECTION 2.03. Purposes and Powers . . . . . . . . . . . . . . . . . . . 4
-------------------
SECTION 2.04. Appointment of Owner Trustee . . . . . . . . . . . . . . . 5
----------------------------
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate . . . . 5
--------------------------------------------------
SECTION 2.06. Declaration of Trust . . . . . . . . . . . . . . . . . . . 5
--------------------
SECTION 2.07. Liability of the Owners . . . . . . . . . . . . . . . . . 5
-----------------------
SECTION 2.08. Title to Trust Property . . . . . . . . . . . . . . . . . 6
-----------------------
SECTION 2.09. Situs of Trust . . . . . . . . . . . . . . . . . . . . . . 6
--------------
SECTION 2.10. Representations and Warranties of the Depositor . . . . . 6
-----------------------------------------------
SECTION 2.11. Maintenance of the Demand Note . . . . . . . . . . . . . . 7
------------------------------
SECTION 2.12. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 7
-------------
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership . . . . . . . . . . . . . . . . . . . . 7
-----------------
SECTION 3.02. The Trust Certificates . . . . . . . . . . . . . . . . . . 7
----------------------
SECTION 3.03. Authentication of Trust Certificates . . . . . . . . . . . 8
------------------------------------
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates
8
-----------------------------------------------------------
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates . 10
-------------------------------------------------------
SECTION 3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . 10
---------------------
SECTION 3.07. Access to List of Certificateholders' Names and Addresses 10
---------------------------------------------------------
SECTION 3.08. Maintenance of Office or Agency . . . . . . . . . . . . . 11
-------------------------------
SECTION 3.09. Appointment of Paying Agent . . . . . . . . . . . . . . . 11
---------------------------
SECTION 3.10. Ownership by Depositor of Trust Certificates . . . . . . . 12
--------------------------------------------
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice with Respect to Certain Matters . . . . . . . 12
--------------------------------------------
SECTION 4.02. Action by Owners with Respect to Certain Matters . . . . . 12
------------------------------------------------
SECTION 4.03. Action by Owners with Respect to Bankruptcy . . . . . . . 13
-------------------------------------------
SECTION 4.04. Restrictions on Owners' Power . . . . . . . . . . . . . . 13
-----------------------------
SECTION 4.05. Majority Control . . . . . . . . . . . . . . . . . . . . . 13
----------------
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account . . . . . . . . . . . . . . 13
------------------------------
SECTION 5.02. Application of Trust Funds . . . . . . . . . . . . . . . . 14
--------------------------
SECTION 5.03. Method of Payment . . . . . . . . . . . . . . . . . . . . 14
-----------------
SECTION 5.04. No Segregation of Moneys; No Interest . . . . . . . . . . 14
-------------------------------------
SECTION 5.05. Accounting and Reports to the Noteholders,
------------------------------------------
Owners, the Internal Revenue Service and Others . . . . 14
-----------------------------------------------
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority . . . . . . . . . . . . . . . . . . . . 15
-----------------
SECTION 6.02. General Duties . . . . . . . . . . . . . . . . . . . . . . 15
--------------
SECTION 6.03. Action upon Instruction . . . . . . . . . . . . . . . . . 15
-----------------------
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions . . . . . . . . . . . . . . . . . . . . . . 16
------------
SECTION 6.05. No Action Except Under Specified Documents or Instructions 16
----------------------------------------------------------
SECTION 6.06. Restrictions . . . . . . . . . . . . . . . . . . . . . . . 17
------------
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trusts and Duties . . . . . . . . . . . . . 17
-------------------------------
SECTION 7.02. Furnishing of Documents . . . . . . . . . . . . . . . . . 18
-----------------------
SECTION 7.03. Representations and Warranties . . . . . . . . . . . . . . 18
------------------------------
SECTION 7.04. Reliance; Advice of Counsel . . . . . . . . . . . . . . . 18
---------------------------
SECTION 7.05. Not Acting in Individual Capacity . . . . . . . . . . . . 19
---------------------------------
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Receivables . . . . . . . . . . . . . . . . . . . . . . 19
-----------
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes . . . . 20
--------------------------------------------------
SECTION 7.08. Pennsylvania Motor Vehicle Sales Finance Act Licenses . . 20
-----------------------------------------------------
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses . . . . . . . . . . . . 20
---------------------------------
SECTION 8.02. Indemnification . . . . . . . . . . . . . . . . . . . . . 20
---------------
SECTION 8.03. Payments to the Owner Trustee . . . . . . . . . . . . . . 20
-----------------------------
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement . . . . . . . . . . . . . . 21
------------------------------
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor . . . . . . . 22
--------------------------------------------
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee . . . . . 22
------------------------------------------
SECTION 10.02. Resignation or Removal of Owner Trustee . . . . . . . 22
---------------------------------------
SECTION 10.03. Successor Owner Trustee . . . . . . . . . . . . . . . 23
-----------------------
SECTION 10.04. Merger or Consolidation of Owner Trustee . . . . . . 23
----------------------------------------
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee . . . . 24
---------------------------------------------
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments . . . . . . . . . . . . . 25
--------------------------
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners . . . 26
----------------------------------------------
SECTION 11.03. Limitations on Rights of Others . . . . . . . . . . . 26
-------------------------------
SECTION 11.04. Notices . . . . . . . . . . . . . . . . . . . . . . . 26
-------
SECTION 11.05. Severability . . . . . . . . . . . . . . . . . . . . 27
------------
SECTION 11.06. Separate Counterparts . . . . . . . . . . . . . . . . 27
---------------------
SECTION 11.07. Successors and Assigns . . . . . . . . . . . . . . . 27
----------------------
SECTION 11.08. Covenants of the Depositor . . . . . . . . . . . . . 27
--------------------------
SECTION 11.09. No Petition . . . . . . . . . . . . . . . . . . . . . 27
-----------
SECTION 11.10. No Recourse . . . . . . . . . . . . . . . . . . . . . 28
-----------
SECTION 11.11. Headings . . . . . . . . . . . . . . . . . . . . . . 28
--------
SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 28
-------------
EXHIBIT A FORM OF TRUST CERTIFICATE . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B FORM OF CERTIFICATE OF TRUST OF FIRST MERCHANTS AUTO TRUST 199_-_
B-1
EXHIBIT C FORM OF ERISA CERTIFICATE . . . . . . . . . . . . . . . . . . . C-1
TRUST AGREEMENT dated as of ( ), between FIRST MERCHANTS AUTO
RECEIVABLES CORPORATION ( ), a Delaware corporation, as depositor (the
"Depositor"), and (owner trustee), a ( ) banking corporation, as owner
trustee (the "Owner Trustee").
The Depositor and the Owner Trustee hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
-----------------
the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated
------------------------
as of (date), among the Trust, the Indenture Trustee and First Merchants
Acceptance Corporation, as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
---------
and supplemented from time to time.
"Basic Documents" shall mean the Purchase Agreement, the Sale and
---------------
Servicing Agreement, the Indenture, the Administration Agreement, the Note
Depository Agreement, the Insurance Agreement, the Indemnification Agreement,
the Premium Letter, the Local/Collection Account Agreement and the other
documents, instruments and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in
------------
Section 11.13.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
----------------------
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
---- ----
from time to time.
"Certificate Distribution Account" shall have the meaning assigned to
--------------------------------
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
--------------------
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- ---------------------
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
----------------- ------
Trust Certificate is registered.
"Class A-1 Notes" shall mean the $( ) Floating Rate Asset Backed Notes,
---------------
Class A-1 issued pursuant to the Indenture.
"Class A-2 Notes" shall mean the $( ) ( )% Asset Backed Notes, Class A-2
---------------
issued pursuant to the Indenture.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
----------------------
the principal corporate trust office of the Owner Trustee located at ( ), or
at such other address as the Owner Trustee may designate by notice to the
Owners and the Depositor, or the principal corporate trust office of any
successor Owner Trustee at the address designated by such successor Owner
Trustee by notice to the Owners and the Depositor.
"Demand Note" shall mean the Demand Note dated ( ) from First Merchants
-----------
Acceptance Corporation to the Depositor.
"Depositor" shall mean First Merchants Auto Receivables Corporation
---------
( ) in its capacity as depositor hereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
--------
"Indemnified Parties" shall have the meaning assigned to such term in
-------------------
Section 8.02.
"Indenture" shall mean the Indenture dated as of (date) between the
---------
Trust and ( ), as Indenture Trustee.
"Initial Certificate Balance" shall mean $( ).
---------------------------
"Indemnification Agreement" shall mean the Indemnification Agreement
-------------------------
dated as of (date) among the Security Insurer, the Issuer and Salomon
Brothers Inc.
"Insurance Documents" shall mean the Insurance Agreement, the
-------------------
Indemnification Agreement and the Premium Letter.
"Note Depository Agreement" shall mean the agreement dated ( ) among the
-------------------------
Trust, the Indenture Trustee, the Administrator and The Depository Trust
Company, as the initial Clearing Agency, relating to the Class A-1 Notes and
the Class A-2 Notes, as the same may be amended and supplemented from time to
time.
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Estate" shall mean all right, title and interest of the
------------------
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from
time to time in the Trust Accounts and the Certificate Distribution Account
and all other property of the Trust from time to time, including any rights
of the Owner Trustee and the Trust pursuant to the Sale and Servicing
Agreement and the Administration Agreement.
"Owner Trustee" shall mean (owner trustee), a ( ) banking corporation,
-------------
not in its individual capacity but solely as owner trustee under this
Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09 and shall initially be ( ).
"Person" shall mean any individual, corporation, estate, partnership,
------
joint venture, association, joint stock company, limited liability company,
trust (including any beneficiary thereof), unincorporated organization, or
government or any agency or political subdivision thereof.
"Premium Letter" shall mean the letter agreement dated ( ) among the
--------------
Security Insurer, First Merchants Acceptance Corporation, the Depositor and
the Issuer.
"Record Date" shall mean, with respect to any Distribution Date, the day
-----------
immediately preceding such Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
----------------------------
Agreement dated as of (date), among the Trust, as issuer, the Depositor, as
seller, First Merchants Acceptance Corporation, as Servicer, and ( ), as
Indenture Trustee and Backup Servicer, as the same may be amended or
supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
--------------------
temporary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Certificate" shall mean a certificate evidencing the beneficial
-----------------
interest of an Owner in the Trust, substantially in the form attached hereto
as Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used and not otherwise defined herein have the meanings assigned to them in
the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as "First
----
Merchants Auto Trust 199_-_," in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
------
Owner Trustee at the Corporate Trust Office or at such other address in
(state) as the Owner Trustee may designate by written notice to the Owners
and the Depositor.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is
-------------------
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the
Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Receivables and to pay the organizational,
start-up and transactional expenses of the Trust;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant
to the terms of the Sale and Servicing Agreement any portion of the
Trust Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions to the Owners
and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
----------------------------
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
--------------------------------------------------
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date
hereof, of the foregoing contribution, which shall constitute the initial
Owner Trust Estate and shall be deposited in the Certificate Distribution
Account. The Depositor shall pay organizational expenses of the Trust as
they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
--------------------
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention
of the parties hereto that the Trust constitute a business trust under the
Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. Effective as of the date hereof, the
Owner Trustee shall have all rights, powers and duties set forth herein and
in the Business Trust Statute with respect to accomplishing the purposes of
the Trust.
SECTION 2.07. Liability of the Owners. (a) The Depositor shall be
-----------------------
liable directly to and will indemnify any injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses,
to the extent not paid out of the Owner Trust Estate) to the extent that the
Depositor would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Depositor were a general
partner; provided, however, that the Depositor shall not be liable for any
losses incurred by a Certificateholder in the capacity of an investor in the
Trust Certificates, or by a Noteholder in the capacity of an investor in the
Notes. In addition, any third party creditors of the Trust (other than in
connection with the obligations described in the preceding sentence for which
the Depositor shall not be liable) shall be deemed third party beneficiaries
of this paragraph and paragraph (c) below. The obligations of the Depositor
under this paragraph and paragraph (c) below shall be evidenced by the Trust
Certificates described in Section 3.10, which for purposes of the Business
Trust Statute shall be deemed to be a separate class of Trust Certificates
from all other Trust Certificates issued by the Trust; provided that the
rights and obligations evidenced by all Trust Certificates, regardless of
class, shall, except as provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a),
shall have any personal liability for any liability or obligation of the
Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
-----------------------
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-
trustee and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
--------------
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware or the State of New York. The Trust shall not have any employees in
any state other than Delaware; provided, however, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or
without the State of Delaware. Payments will be received by the Trust only
in Delaware or New York, and payments will be made by the Trust only from
Delaware or New York. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
-----------------------------------------------
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
(c) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties.
(e) There are no proceedings or investigations pending or
threatened before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Depositor or its properties: (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 Depositor of its obligations under, or the validity
or enforceability of, this Agreement.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
------------------------------
permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note.
SECTION 2.12. Tax Treatment. The Depositor and the Owner Trustee have
-------------
entered into this Agreement, and the Notes will be issued to and acquired by
the Noteholders, with the intention that, for federal, state, foreign and
local income and franchise tax and usury law purposes, the Notes will be non-
recourse indebtedness secured by the assets of the Trust. Each of the
Depositor and the Owner Trustee, by entering into this Agreement, and each
Noteholder, by the acceptance of its Note, agrees to treat the Notes for
purposes of federal, state, foreign and local income and franchise taxes and
for any other tax imposed on or measured by income and usury law purposes as
indebtedness secured by the assets of the Trust. In accordance with the
foregoing, the Owner Trustee hereby agrees to treat the Trust as a security
device only, for tax purposes, and shall not file tax returns or obtain an
employer identification number on behalf of the Trust (except as may be
required as a result of changes in law or as may otherwise be required in the
opinion of counsel for the Depositor).
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by
-----------------
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Depositor shall be the sole
beneficiary of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
----------------------
issued in minimum denominations of $( ) and in integral multiples of $( ) in
excess thereof; provided, however, that the Trust Certificates issued to the
Depositor pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be
so authorized prior to the authentication and delivery of such Trust
Certificates or did not hold such offices at the date of authentication and
delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section
3.04.
SECTION 3.03. Authentication of Trust Certificates. On the Closing
------------------------------------
Date, the Owner Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the Initial Certificate Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order
of the Depositor, signed by its chairman of the board, its president, any
vice president, secretary or any assistant treasurer, without further
corporate action by the Depositor, in authorized denominations. No Trust
Certificate shall entitle its Holder to any benefit under this Agreement or
be valid for any purpose unless there shall appear on such Trust Certificate
a certificate of authentication substantially in the form set forth in
Exhibit A, executed by the Owner Trustee or ( ), as the Owner Trustee's
authenticating agent, by manual signature; such authentication shall
constitute conclusive evidence that such Trust Certificate shall have been
duly authenticated and delivered hereunder. All Trust Certificates shall be
dated the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
----------------------------------------------
Certificates. The Certificate Registrar shall keep or cause to be kept, at
- ------------
the office or agency maintained pursuant to Section 3.08, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Owner Trustee shall provide for the registration of Trust
Certificates and of transfers and exchanges of Trust Certificates as herein
provided. ( ) shall be the initial Certificate Registrar.
No transfer of a Trust Certificate shall be made to any Person unless
the Owner Trustee has received (A) a certificate in the form of the ERISA
Certificate attached hereto as Exhibit C from such Person to the effect that
such Person is not (i) an employee benefit plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
that is subject to the provisions of Title I of ERISA, (ii) a plan described
in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity (each, a
"Benefit Plan"), (B) an Opinion of Counsel satisfactory to the Owner Trustee
and the Depositor to the effect that the purchase and holding of such Trust
Certificate will not constitute or result in the assets of the Trust being
deemed to be "plan assets" subject to the prohibited transactions provisions
of ERISA or Section 4975 of the Code and will not subject the Owner Trustee,
the Indenture Trustee or the Depositor to any obligation in addition to those
undertaken in the Basic Documents or (C) if such Person is an insurance
company, a representation that such Person is an insurance company that is
purchasing such Trust Certificates with funds contained in an "insurance
company general account" (as such term is defined in section v(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Trust Certificates and any deemed extension of
credit from a Certificateholder which is a party in interest to a Plan, the
assets of which are held by such "insurance company" are covered under PTCE
95-60; provided, however, that the Owner Trustee will not require such
-------- -------
certificate or opinion in the event that, as a result of a change of law or
otherwise, counsel satisfactory to the Owner Trustee has rendered an Opinion
of Counsel to the effect that the purchase and holding of a Trust Certificate
by a Benefit Plan or a Person that is purchasing or holding such a Trust
Certificate with the assets of a Benefit Plan will not constitute or result
in a prohibited transaction under ERISA or Section 4975 of the Code.
No transfer of a Trust Certificate shall be made to any Person unless
the Owner Trustee has received an Opinion of Counsel satisfactory to the
Owner Trustee and the Depositor to the effect that such transfer will not
cause the Trust to be treated as an association or publicly traded
partnership taxable as a corporation for federal income tax purposes and that
such transfer will not result in any materially adverse federal income tax
consequences to Noteholders.
The preparation and delivery of the certificate and opinions referred to
above shall not be an expense of the Trust, the Owner Trustee, the Indenture
Trustee, the Servicer or the Depositor.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause ( ) as its
authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days
preceding the due date for any payment with respect to the Trust
Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
-------------------------------------------------------
If (a) any mutilated Trust 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 Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Certificate has been acquired by a bona fide purchaser, the Owner Trustee on
behalf of the Trust shall execute and the Owner Trustee or ( ), as the Owner
Trustee's authenticating agent, shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Certificate, a new Trust Certificate of like tenor and denomination. In
connection with the issuance of any new Trust Certificate under this Section,
the Owner Trustee or the Certificate Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Trust Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name
any Trust Certificate is registered in the Certificate Register as the owner
of such Trust Certificate for the purpose of receiving distributions pursuant
to Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or any Paying Agent shall be bound by any
notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
- ---------
Servicer and the Depositor, within 15 days after receipt by the Owner Trustee
of a written request therefor from the Servicer or the Depositor, a list, in
such form as the Servicer or the Depositor may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record
Date. If three or more Certificateholders or one or more Holders of Trust
Certificates evidencing not less than 25% of the Certificate Balance apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their
rights under this Agreement or under the Trust Certificates and such
application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Trust
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic
Documents may be served. The Owner Trustee initially designates (address) as
its office for such purposes. The Owner Trustee shall give prompt written
notice to the Depositor and to the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
---------------------------
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke
such power and remove the Paying Agent if the Owner Trustee determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Paying Agent
initially shall be ( ), and any co-paying agent chosen by ( ) and acceptable
to the Owner Trustee. ( ) shall be permitted to resign as Paying Agent upon
30 days' written notice to the Owner Trustee. In the event that ( ) shall no
longer be the Paying Agent, the Owner Trustee shall appoint a successor to
act as Paying Agent (which shall be a bank or trust company). The Owner
Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner
Trustee an instrument in which such successor Paying Agent or additional
Paying Agent shall agree with the Owner Trustee that, as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of
the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in
its role as Paying Agent, for so long as the Owner Trustee shall act as
Paying Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Paying Agent
shall include any co-paying agent unless the context requires otherwise.
SECTION 3.10. Ownership by Depositor of Trust Certificates. The
--------------------------------------------
Depositor shall on the Closing Date retain Trust Certificates representing at
least 1% of the Initial Certificate Balance and shall thereafter retain
beneficial and record ownership of Trust Certificates representing at least
1% of the Certificate Balance. Any attempted transfer of any Trust
Certificate that would reduce such interest of the Depositor below 1% of the
Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the Depositor in respect of 1% of the Certificate
Balance to contain a legend stating "THIS CERTIFICATE IS NON-TRANSFERABLE".
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice with Respect to Certain Matters. With
--------------------------------------------
respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders and the Security Insurer (so long
as no Security Insurer Default shall have occurred and be continuing) in
writing of the proposed action and neither the Security Insurer (so long as
no Security Insurer Default shall have occurred and be continuing) nor the
Owners shall have notified the Owner Trustee in writing prior to the 30th day
after such notice is given that such Owners or the Security Insurer (so long
as a Security Insurer Default shall not have occurred and be continuing) have
withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Receivables) and
the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Receivables);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment would materially adversely affect the interests of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of
a successor Certificate Registrar, or the consent to the assignment by the
Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of
its obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
------------------------------------------------
Owner Trustee shall not have the power, except upon the written direction of
the Owners (with the consent of the Security Insurer (so long as no Security
Insurer Default shall have occurred and be continuing)), to (a) remove the
Administrator under the Administration Agreement pursuant to Section 8
thereof, (b) appoint a successor Administrator pursuant to Section 8 of the
Administration Agreement, (c) remove the Servicer under the Sale and
Servicing Agreement pursuant to Section 8.02 thereof or (d) except as
expressly provided in the Basic Documents, sell the Receivables after the
termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed
by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the Security Insurer (so long as no Security Insurer Default shall
have occurred and be continuing) and the delivery to the Owner Trustee by
each such Owner of a certificate certifying that such Owner reasonably
believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
-----------------------------
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner Trustee under this Agreement or any of the Basic Documents or would be
contrary to Section 2.03; nor shall the Owner Trustee be obligated to follow
any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
----------------
any action that may be taken by the Owners under this Agreement may be taken
by the Holders of Trust Certificates evidencing not less than a majority of
the Certificate Balance. Except as expressly provided herein, any written
notice of the Owners delivered pursuant to this Agreement shall be effective
if signed by Holders of Trust Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
------------------------------
the benefit of the Certificateholders, shall establish and maintain in the
name of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof. Except as otherwise expressly provided herein,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee for the benefit of the Certificateholders. If,
at any time, the Certificate Distribution Account ceases to be an Eligible
Deposit Account, the Owner Trustee (or the Depositor on behalf of the Owner
Trustee, if the Certificate Distribution Account is not then held by the
Owner Trustee or an affiliate thereof) shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Certificate Distribution Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
--------------------------
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Section 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee
by the Servicer pursuant to Section 5.11 of the Sale and Servicing Agreement
with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the
amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed
with respect to an Owner shall be treated as cash distributed to such Owner
at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a non-U.S. Owner),
the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Distribution
Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Distribution Date or, if such Holder does not provide
written instructions as aforesaid, by check mailed to such Certificateholder
at the address of such Holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
-------------------------------------
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need
not be segregated in any manner except to the extent required by law or the
Sale and Servicing Agreement and may be deposited under such general
conditions as may be prescribed by law, and the Owner Trustee shall not be
liable for any interest thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
------------------------------------------------------
Internal Revenue Service and Others. The Owner Trustee shall deliver to each
- -----------------------------------
Noteholder such information, reports or statements as may be required by the
Code and applicable Treasury Regulations and as may be required to enable
each Noteholder to prepare its federal and state income tax returns.
Consistent with the Trust's characterization for tax purposes, as a security
arrangement for the issuance of debt, no federal income tax return shall be
filed on behalf of the Trust unless either (i) the Owner Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the
Depositor permitted by Section 3.04, the Code requires such a filing or (ii)
the Internal Revenue Service shall determine that the Trust is required to
file such a return. In the event that the Trust is required to file tax
returns, the Owner Trustee 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 Depositor at least five (5) days before such returns are due to be filed.
The Depositor shall promptly sign such returns and deliver such returns after
signature to the Owner Trustee and such returns shall be filed by the Owner
Trustee with the appropriate tax authorities. In no event shall the Owner
Trustee or the Depositor be liable for any liabilities, costs or expenses of
the Trust or the Noteholders arising out of the application of any tax law,
including federal, state, foreign or local income or excise taxes or any
other tax imposed on or measured by income (or any interest, penalty or
addition with respect thereto or arising from a failure to comply therewith)
except for any such liability, cost or expense attributable to any act or
omission by the Owner Trustee or the Depositor, as the case may be, in breach
of its obligations under this Agreement.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
-----------------
directed to execute and deliver the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to
or contemplated by the Basic Documents to which the Trust is to be a party,
in each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to
take all actions required of the Trust pursuant to the Basic Documents. The
Owner Trustee is further authorized from time to time to take such action as
the Administrator recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner
--------------
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust
in the interest of the Owners, subject to the Basic Documents and in
accordance with the provisions of this Agreement. Notwithstanding the
foregoing, the Owner Trustee shall be deemed to have discharged its duties
and responsibilities hereunder and under the Basic Documents to the extent
the Administrator has agreed in the Administration Agreement to perform any
act or to discharge any duty of the Owner Trustee hereunder or under any
Basic Document, and the Owner Trustee shall not be held liable for the
default or failure of the Administrator to carry out its obligations under
the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and
-----------------------
in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
under any Basic Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best
interests of the Owners, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement
or the Basic Documents, as it shall deem to be in the best interests of the
Owners, and shall have no liability to any Person for such action or
inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as
expressly provided by the terms of this Agreement or in any document or
written instruction received by the Owner Trustee pursuant to Section 6.03;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or
file any Securities and Exchange Commission filing for the Trust or to record
this Agreement or any Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall not manage, control, use, sell,
- ------------
dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Basic Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal income
tax purposes. The Owners shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts, but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or negligence or (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.03
expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the
validity or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or
to any Owner, other than as expressly provided for herein or expressly agreed
to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Depositor, the Servicer, the Indenture Trustee or
the Backup Servicer under any of the Basic Documents or otherwise, and the
Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Depositor, the
Servicer or the Backup Servicer under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of
any of the Owners, unless such Owners have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby.
The right of the Owner Trustee to perform any discretionary act enumerated in
this Agreement or in any Basic Document shall not be construed as a duty, and
the Owner Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
-----------------------
to the Owners, promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
------------------------------
represents and warrants to the Depositor, for the benefit of the Owners,
that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of ( ). It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution or the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby, nor
compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding
on it, or constitute any default under its charter documents or bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
or by which any of its properties may be bound.
(d) It is a corporation satisfying the provisions of Section 3807(a) of
the Business Trust Statute; authorized to exercise corporate trust powers;
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authorities; and having (or
having a parent that has) time deposits that are rated at least A-1 by
Standard & Poor's and P-1 by Moody's.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee
---------------------------
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion,
bond, or other document or paper believed by it to be genuine and believed by
it to be signed by the proper party or parties. The Owner Trustee may accept
a certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the method of determination of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate, signed by the president or any vice president or by
the treasurer or other authorized officers of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith
in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such Persons and
not contrary to this Agreement or any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided
---------------------------------
in this Article VII, in accepting the trusts hereby created (owner trustee)
acts solely as Owner Trustee hereunder and not in its individual capacity,
and all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Receivables. The recitals contained herein and in the Trust Certificates
- -----------
(other than the signature and countersignature of the Owner Trustee on the
Trust Certificates) shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no responsibility for the correctness thereof.
Except as set forth in Section 7.03, the Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates) or the
Notes, or of any Receivable or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Receivable or the perfection and
priority of any security interest created by any Receivable in any Financed
Vehicle or the maintenance of any such perfection and priority, or for or
with respect to the sufficiency of the Owner Trust Estate or its ability to
generate the payments to be distributed to Certificateholders under this
Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed Vehicle;
the existence and enforceability of any insurance thereon; the existence and
contents of any Receivable on any computer or other record thereof; the
validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance
or enforcement of any Receivable; the compliance by the Depositor, the
Servicer or the Backup Servicer with any warranty or representation made
under any Basic Document or in any related document or the accuracy of any
such warranty or representation, or any action of the Administrator, the
Indenture Trustee, the Servicer or the Backup Servicer or any subservicer
taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
--------------------------------------------------
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
SECTION 7.08. Pennsylvania Motor Vehicle Sales Finance Act Licenses.
-----------------------------------------------------
The Owner Trustee, in its individual capacity, shall use its best efforts to
maintain, and the Owner Trustee, as Owner Trustee, shall cause the Trust to
use its best efforts to maintain, the effectiveness of all licenses required
under the Pennsylvania Motor Vehicle Sales Finance Act in connection with
this Agreement and the Basic Documents and the transactions contemplated
hereby and thereby until such time as the Trust shall terminate in accordance
with the terms hereof.
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Administrator
---------------------------------
shall pay to the Owner Trustee as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between
the Servicer and the Owner Trustee, and the Administrator shall reimburse the
Owner Trustee for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02. Indemnification. The Administrator shall be liable as
---------------
primary obligor for, and shall indemnify the Owner Trustee and its
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of
any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Administrator shall not be liable for or required to indemnify
an Indemnified Party from and against Expenses arising or resulting from any
of the matters described in the third sentence of Section 7.01. The
indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In
any event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section, the Owner Trustee's choice of legal counsel
shall be subject to the approval of the Administrator, which approval shall
not be unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
-----------------------------
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
------------------------------
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect (i) upon the final distribution by the Owner Trustee of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Sale and Servicing Agreement and
Article V or (ii) at the time provided in Section 9.02. The bankruptcy,
liquidation, dissolution, death or incapacity of any Owner, other than the
Depositor as described in Section 9.02, shall not (x) operate to terminate
this Agreement or the Trust or (y) entitle such Owner's legal representatives
or heirs to claim an accounting or to take any action or proceeding in any
court for a partition or winding up of all or any part of the Trust or Owner
Trust Estate or (z) otherwise affect the rights, obligations and liabilities
of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Depositor nor
any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholders mailed
within five Business Days of receipt of notice of such termination from the
Servicer given pursuant to Section 9.01(c) of the Sale and Servicing
Agreement, stating (i) the Distribution Date upon or with respect to which
final payment of the Trust Certificates shall be made upon presentation and
surrender of the Trust Certificates at the office of the Paying Agent therein
designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than
the Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant
to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to the remaining Certificateholders to surrender
their Trust Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the
Trust Certificates shall not have been surrendered for cancellation, the
Owner Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Owner Trustee to the Depositor, subject to applicable
escheat laws.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor. In the
--------------------------------------------
event that an Insolvency Event shall occur with respect to the Depositor,
this Agreement shall be terminated in accordance with Section 9.01 90 days
after the date of such Insolvency Event, unless, before the end of such 90-
day period, the Owner Trustee shall have received written instructions from
(a) Holders of Certificates (other than the Depositor) representing more than
50% of the Certificate Balance (not including the Certificate Balance of the
Trust Certificates held by the Depositor) and (b) each of the (i) Holders (as
defined in the Indenture) of Class A-1 Notes representing more than 50% of
the Outstanding Amount of the Class A-1 Notes, (ii) Holders (as defined in
the Indenture) of Class A-2 Notes representing more than 50% of the
Outstanding Amount of the Class A-2 Notes and (iii) the Security Insurer (so
long as no Security Insurer Default shall have occurred and be continuing),
to the effect that each such party disapproves of the termination of the
Trust. Promptly after the occurrence of any Insolvency Event with respect to
the Depositor, (A) the Depositor shall give the Indenture Trustee and the
Owner Trustee written notice of such Insolvency Event, (B) the Owner Trustee
shall, upon the receipt of such written notice from the Depositor, give
prompt written notice to the Certificateholders and the Indenture Trustee, of
the occurrence of such event and (C) the Indenture Trustee shall, upon
receipt of written notice of such Insolvency Event from the Owner Trustee or
the Depositor, give prompt written notice to the Noteholders of the
occurrence of such event; provided, however, that any failure to give a
notice required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.02.
Upon a termination pursuant to this Section, the Owner Trustee shall direct
the Indenture Trustee promptly to sell the assets of the Trust (other than
the Trust Accounts and the Certificate Distribution Account) in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Sale and Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The
------------------------------------------
Owner Trustee shall at all times be a corporation satisfying the provisions
of Section 3807(a) of the Business Trust Statute; authorized to exercise
corporate trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) time deposits that are
rated at least A-1 by Standard & Poor's and P-1 by Moody's. If such
corporation shall publish reports of condition at least annually pursuant to
law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Owner Trustee shall resign
immediately in the manner and with the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
---------------------------------------
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon
receiving such notice of resignation, the Administrator shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign
after written request therefor by the Administrator, or if at any time the
Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Administrator shall
promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee, and
shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Administrator shall provide notice
of such resignation or removal of the Owner Trustee to each Rating Agency and
the Security Insurer (so long as no Security Insurer Default shall have
occurred and be continuing).
SECTION 10.03. Successor Owner Trustee. Any successor Owner
-----------------------
Trustee appointed pursuant to Section 10.01 or 10.02 shall execute,
acknowledge and deliver to the Administrator and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective, and such successor Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like
effect as if originally named as Owner Trustee. The predecessor Owner
Trustee shall upon payment of its fees and expenses deliver to the successor
Owner Trustee all documents and statements and monies held by it under this
Agreement; and the Administrator and the predecessor Owner Trustee shall
execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders, the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing) and the Rating Agencies. If the Administrator shall fail to mail
such notice within 10 days after acceptance of such appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice
to be mailed at the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
----------------------------------------
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, that such corporation shall be eligible pursuant
to Section 10.01 and, provided, further, that the Owner Trustee shall mail
notice of such merger or consolidation to each Rating Agency and the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing).
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate or any Financed Vehicle may at the time be
located, the Administrator and the Owner Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Administrator and Owner Trustee to act as co-
trustee, jointly with the Owner Trustee, or as separate trustee or separate
trustees, of all or any part of the Owner Trust Estate, and to vest in such
Person, in such capacity, such title to the Trust or any part thereof and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Administrator and the Owner Trustee may
consider necessary or desirable. If the Administrator shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, the Owner Trustee alone shall have the power to make such appointment.
No co-trustee or separate trustee under this Agreement shall be required to
meet the terms of eligibility as a successor Owner Trustee pursuant to
Section 10.01 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by
the Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Owner Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be
--------------------------
amended by the Depositor and the Owner Trustee, with the consent of the
Security Insurer (so long as no Security Insurer Default shall have occurred
and be continuing) and with prior written notice to each Rating Agency,
without the consent of any of the Noteholders or the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement
or for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with the consent of the Security Insurer (so long as
no Security Insurer Default shall have occurred and be continuing) and with
prior written notice to each Rating Agency, with the consent of the
Noteholders evidencing not less than a majority of the Outstanding Amount of
the Notes and the consent of the Holders of Certificates evidencing not less
than a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificate Balance required to consent to any
such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each Rating
Agency.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust
Agreement or any amendment of any other agreement to which the Issuer is a
party, the Owner Trustee shall be entitled to receive and conclusively rely
upon an Opinion of Counsel to the effect that such amendment is authorized or
permitted by the Basic Documents and that all conditions precedent in the
Basic Documents for the execution and delivery thereof by the Issuer or the
Owner Trustee, as the case may be, have been satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners.
----------------------------------------------
Neither the Depositor, nor the Owners shall not have legal title to any part
of the Owner Trust Estate. The Owners shall be entitled to receive
distributions with respect to their undivided ownership interest therein only
in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Owners to and in their
ownership interest in the Owner Trust Estate shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting
or to the transfer to it of legal title to any part of the Owner Trust
Estate.
SECTION 11.03. Limitations on Rights of Others. Except for
-------------------------------
Section 2.07, the provisions of this Agreement are solely for the benefit of
the Owner Trustee, the Depositor, the Owners, the Administrator, the Security
Insurer and, to the extent expressly provided herein, the Indenture Trustee
and the Noteholders, and nothing in this Agreement (other than Section 2.07
hereof), whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified
-------
or permitted by the terms hereof, all notices shall be in writing and shall
be deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that
notice to the Owner Trustee shall be deemed given only upon actual receipt by
the Owner Trustee), if to the Owner Trustee, addressed to the Corporate Trust
Office; if to the Depositor, addressed to First Merchants Auto Receivables
Corporation ( ), 570 Lake Cook Road, Suite 126B, Deerfield, Illinois 60015,
Attention: Secretary; or, as to each party, at such other address as shall
be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by 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 receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be
---------------------
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and
----------------------
agreements contained herein shall be binding upon, and inure to the benefit
of, each of the Depositor and its permitted assignees, the Owner Trustee and
its successors and each Owner and its successors and permitted assigns, all
as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of
such Owner.
SECTION 11.08. Covenants of the Depositor. In the event that
--------------------------
(a) the Certificate Balance shall be reduced by Realized Losses and (b) any
litigation with claims in excess of $1,000,000 to which the Depositor is a
party which shall be reasonably likely to result in a material judgment
against the Depositor that the Depositor will not be able to satisfy shall be
commenced, during the period beginning immediately following the commencement
of such litigation and continuing until such litigation is dismissed or
otherwise terminated (and, if such litigation has resulted in a final
judgment against the Depositor, such judgment has been satisfied), the
Depositor shall not pay any dividend to First Merchants Acceptance
Corporation, or make any distribution on or in respect of its capital stock
to First Merchants Acceptance Corporation, or repay the principal amount of
any indebtedness of the Depositor held by First Merchants Acceptance
Corporation, unless (i) after giving effect to such payment, distribution or
repayment, the Depositor's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment. The Depositor will not at any time institute against the Trust
any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, the Trust Agreement or any of the Basic
Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into
-----------
this Agreement, each Certificateholder, by accepting a Trust Certificate, and
the Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting
-----------
a Trust Certificate acknowledges that such Certificateholder's Trust
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Depositor, the Servicer, the
Administrator, the Owner Trustee, the Indenture Trustee, the Backup Servicer
or any Affiliate thereof and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated in this
Agreement, the Trust Certificates or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as
of the day and year first above written.
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION (
), as Depositor
by: --------------------------------
Name:
Title:
(owner trustee),
not in its individual capacity but solely as
Owner Trustee
by: -------------------------------
Name:
Title:
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
THIS TRUST CERTIFICATE IS SUBORDINATE TO THE NOTES, AS SET FORTH IN THE SALE
AND SERVICING AGREEMENT.
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND
ONE DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST OR THE DEPOSITOR TO INVOKE THE PROCESS OF
ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A CASE AGAINST THE TRUST OR THE DEPOSITOR UNDER ANY FEDERAL OR
STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR APPOINTING A
RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR OTHER
SIMILAR OFFICIAL OF THE TRUST OR THE DEPOSITOR OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF THE
TRUST OR THE DEPOSITOR.
NO TRANSFER OF A TRUST CERTIFICATE SHALL BE MADE TO ANY PERSON UNLESS THE
OWNER TRUSTEE HAS RECEIVED (A) A CERTIFICATE IN THE FORM OF THE ERISA
CERTIFICATE ATTACHED TO THE TRUST AGREEMENT AS EXHIBIT C FROM SUCH PERSON TO
THE EFFECT THAT SUCH PERSON IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED
IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA,
(II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE CODE OR (III) ANY ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY (EACH, A "BENEFIT PLAN"), (B) AN OPINION OF COUNSEL
SATISFACTORY TO THE OWNER TRUSTEE AND THE DEPOSITOR TO THE EFFECT THAT THE
PURCHASE AND HOLDING OF SUCH TRUST CERTIFICATE WILL NOT CONSTITUTE OR RESULT
IN THE ASSETS OF THE TRUST BEING DEEMED TO BE "PLAN ASSETS" SUBJECT TO THE
PROHIBITED TRANSACTIONS PROVISIONS OF ERISA OR SECTION 4975 OF THE CODE AND
WILL NOT SUBJECT THE OWNER TRUSTEE, THE INDENTURE TRUSTEE OR THE DEPOSITOR TO
ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE BASIC DOCUMENTS OR (C)
IF SUCH PERSON IS AN INSURANCE COMPANY, A REPRESENTATION THAT SUCH PERSON IS
AN INSURANCE COMPANY THAT IS PURCHASING SUCH TRUST CERTIFICATES WITH FUNDS
CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED
IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-
60")) AND THAT THE PURCHASE AND HOLDING OF SUCH TRUST CERTIFICATES AND ANY
DEEMED EXTENSION OF CREDIT FROM A CERTIFICATEHOLDER WHICH IS A PARTY IN
INTEREST TO A PLAN, THE ASSETS OF WHICH ARE HELD BY SUCH "INSURANCE COMPANY"
ARE COVERED UNDER PTCE 95-60.
(THIS TRUST CERTIFICATE IS NONTRANSFERABLE.)/F1/
- --------------------
/F1/To be included only on the Certificates representing the 1% minimum
required to be retained by the Depositor and any Certificates issued in
exchange therefor.
NUMBER $_________
R- CUSIP NO. _________
FIRST MERCHANTS AUTO TRUST 199_-_
( )% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which consists of (a) the Receivables and all moneys
received thereon on or after the Cutoff Date; (b) the security interests in
the Financed Vehicles and any accessions thereto granted by Obligors pursuant
to the Receivables and any other interest of the Seller in such Financed
Vehicles; (c) any Liquidation Proceeds and any other proceeds with respect to
the Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors, including any
vendor's single interest or other collateral protection insurance policy; (d)
any property that shall have secured a Receivable and shall have been
acquired by or on behalf of the Seller, the Servicer or the Trust; (e) all
documents and other items contained in the Receivables Files; (f) all of the
Seller's rights (but not its obligations) under the Receivables Purchase
Agreement; (g) all right, title and interest in all funds on deposit from
time to time in the Trust Accounts and the Certificate Distribution Account,
and in all investments and proceeds thereof (including all income thereon);
and (h) the proceeds of any and all of the foregoing.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ), FIRST MERCHANTS ACCEPTANCE
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES.
THIS CERTIFIES THAT ________________ is the registered owner of
____________________________________________ DOLLARS nonassessable, fully-
paid, fractional undivided interest in FIRST MERCHANTS AUTO TRUST 199_-_ (the
"Trust"), formed by FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a
Delaware corporation (the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
(owner trustee), (owner trustee),
as Owner Trustee or as Owner Trustee
by: ( ), as
Authenticating Agent
by:
----------------------------
Authorized Signatory
by:
----------------------------------
Authorized Signatory
The Trust was created pursuant to a Trust Agreement dated as of (
), (as amended or supplemented from time to time, the "Trust Agreement"),
between the Depositor and (owner trustee), as owner trustee (the "Owner
Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Trust Agreement
or the Sale and Servicing Agreement dated as of (date) (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among
the Trust, the Depositor, as seller, First Merchants Acceptance Corporation,
as Servicer, and ( ), as Indenture Trustee and Backup Servicer, as
applicable.
This Trust Certificate is one of the duly authorized Trust
Certificates designated as "( )% Asset Backed Certificates" (herein called
the "Trust Certificates"). Also issued under an Indenture dated as of (date)
(the "Indenture"), between the Trust and ( ), as indenture trustee, are the
two classes of Notes designated as "Floating Rate Asset Backed Notes, Class
A-1" and "( )% Asset Backed Notes, Class A-2" (collectively, the "Notes").
This Trust Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement
the Holder of this Trust Certificate by virtue of its acceptance hereof
assents and by which such Holder is bound. The property of the Trust
consists of a pool of retail installment sale contracts for new and used
automobiles and light duty trucks (collectively, the "Receivables"), all
monies due under such Receivables on or after ( ), in the case of Precomputed
Receivables, or received on or after ( ), in the case of Simple Interest
Receivables, security interests in the vehicles financed thereby, certain
bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Trust Agreement and the
Sale and Servicing Agreement and all proceeds of the foregoing. The rights
of the Holders of the Trust Certificates are subordinated to the rights of
the Holders of the Notes, as set forth in the Sale and Servicing Agreement.
Under the Trust Agreement, there will be distributed on the ( )th
day of each month or, if such ( )th day is not a Business Day, the next
Business Day (each, a "Distribution Date"), commencing on ( ), to the Person
in whose name this Trust Certificate is registered at the close of business
on the last day of the immediately preceding month (the "Record Date"), such
Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date. No
distributions of principal will be made on any Trust Certificate until all of
the Floating Rate Asset Backed Notes, Class A-1 have been paid in full.
The Holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement and the Indenture.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local
income and single business tax and any other income taxes, the Trust
Certificates will represent the complete equity ownership of the Trust's
assets.
Each Certificateholder, by its acceptance of a Trust Certificate,
covenants and agrees that such Certificateholder will not at any time
institute against the Depositor or the Trust, or join in any institution
against the Depositor or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings
under any United States federal or state bankruptcy or similar law in
connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by the Owner Trustee by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Trust Certificate
will be made after due notice by the Owner Trustee of the pendency of such
distribution and only upon presentation and surrender of this Trust
Certificate at the office or agency maintained for that purpose by the Owner
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Trust Certificate to be duly
executed.
FIRST MERCHANTS AUTO TRUST 199_-_
by: (owner trustee), not in its
individual capacity but solely as
Owner Trustee
Dated: by:
---------------------------------------
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Owner Trustee or any affiliates
of any of them and no recourse may be had against such parties or their
assets, except as expressly set forth or contemplated herein or in the Trust
Agreement or the Basic Documents. In addition, this Trust Certificate is not
guaranteed by any governmental agency or instrumentality and is limited in
right of payment to certain collections and recoveries with respect to the
Receivables (and certain other amounts), all as more specifically set forth
herein and in the Sale and Servicing Agreement. A copy of each of the Sale
and Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any,
designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under
the Trust Agreement at any time by the Depositor and the Owner Trustee with
the consent of the Holders of the Trust Certificates and the Notes, each
voting as a class, evidencing not less than a majority of the Certificate
Balance and the outstanding principal balance of the Notes of each such
class. Any such consent by the Holder of this Trust Certificate shall be
conclusive and binding on such Holder and on all future Holders of this Trust
Certificate and of any Trust Certificate issued upon the transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such
consent is made upon this Trust Certificate. The Trust Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Trust Certificates of
authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate
Registrar appointed under the Trust Agreement is ( ).
Except as provided in the Trust Agreement, the Trust Certificates
are issuable only as registered Trust Certificates without coupons in
denominations of $( ) and in integral multiples of $( ) in excess thereof
provided, however, that the Trust Certificates issued to the Depositor
pursuant to Section 3.10 of the Trust Agreement may be issued in such
denomination as required to include any residual amount. As provided in the
Trust Agreement and subject to certain limitations therein set forth, Trust
Certificates are exchangeable for new Trust Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of
all property held as part of the Owner Trust Estate. The Servicer of the
Receivables may at its option purchase the Owner Trust Estate at a price
specified in the Sale and Servicing Agreement, and such purchase of the
Receivables and other property of the Trust will effect early retirement of
the Trust Certificates; however, such right of purchase is exercisable only
as of the last day of any Collection Period as of which the Pool Balance is
less than or equal to 10% of the Original Pool Balance.
Except as provided in Section 3.04 of the Trust Agreement, the
Trust Certificates may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or
(c) any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity or which uses plan assets to acquire Trust
Certificates (each, a "Benefit Plan"). By accepting and holding this Trust
Certificate, the Holder hereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
the within Trust Certificate, and all rights thereunder, and hereby
irrevocably constitutes and appoints
---------------------------------,
attorney, to transfer said Trust 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 Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT B
Form of Certificate of Trust of First Merchants Auto Trust 199_-_
-----------------------------------------------------------------
THIS Certificate of Trust of FIRST MERCHANTS AUTO TRUST 199_-_ (the
"Trust"), dated ( ), is being duly executed and filed by (owner trustee), a
Delaware banking corporation, as trustee, to form a business trust under the
Delaware Business Trust Act (12 Del. Code, Section 3801 et seq.).
---------
1. Name. The name of the business trust formed hereby is FIRST
----
MERCHANTS AUTO TRUST 199_-_.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware is (owner trustee), (address).
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
(owner trustee),
not in its individual capacity but solely
as owner trustee under a Trust Agreement
dated as of ( )
By:
-----------------------------------
Name:
Title:
EXHIBIT C
FORM OF ERISA CERTIFICATE
First Merchants Auto Receivables
Corporation ( ), as Depositor
570 Lake Cook Road
Suite 126B
Deerfield, IL 60015
(owner trustee), as Owner Trustee
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate
principal amount of ( )% Asset Backed Certificates (the "Certificates") of
First Merchants Auto Trust 199_-_ (the "Issuer"), we confirm that:
1. We are not (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or
(iii) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity (each, a "Benefit Plan"). We
hereby acknowledge that no transfer of any Certificate shall be
permitted to be made to any person unless the Owner Trustee has received
(i) a certificate from such transferee to the effect of the preceding
sentence, (ii) an opinion of counsel satisfactory to the Owner Trustee
to the effect that the purchase and holding of any such Certificate will
not constitute or result in the assets of the Issuer being deemed to be
"plan assets" and subject to the prohibited transaction provisions of
ERISA or Section 4975 of the Code and will not subject the Owner
Trustee, ( ), as Indenture Trustee or the Depositor to any obligation in
addition to those undertaken in the Basic Documents with respect to the
Certificates (provided, however, that the Owner Trustee will not require
such certificate or opinion in the event that, as a result of change of
law or otherwise, counsel satisfactory to the Owner Trustee has rendered
an opinion to the effect that the purchase and holding of any such
Certificate by a Benefit Plan or a Person that is purchasing or holding
any such Certificate with the assets of a Benefit Plan will not
constitute or result in a prohibited transaction under ERISA or Section
4975 of the Code) or (iii) if the transferee is an insurance company, a
representation that the transferee is an insurance company that is
purchasing such certificates with funds contained in an "Insurance
Company General Account" (as such term is defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60)) and that the
purchase and holding of such Certificates and any deemed extension of
credit from a Certificateholder which is a party in interest to a Plan,
the assets of which are held by such "Insurance Company" are covered
under PTCE 95-60.
2. We understand that the Depositor, the Owner Trustee, the
Issuer, Salomon Brothers Inc ("Salomon Brothers") and others will rely
upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements, and we agree that if any of the
acknowledgments, representations and warranties deemed to have been made
by us by our purchase of the Certificates, for our own account or for
one or more accounts as to each of which we exercise sole investment
discretion, are no longer accurate, we shall promptly notify the
Depositor the Owner Trustee and Salomon Brothers.
3. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
(NAME OF PURCHASER)
By: _________________________________
Name:
Title:
Date: ________________________________
Exhibit 4.2
Form of Pooling and
Servicing Agreement
___________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
POOLING AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
as Depositor,
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Servicer,
and
( ),
as Trustee and Backup Servicer
Dated as of ( ), 199_
FIRST MERCHANTS AUTO TRUST 199_-_
( )% Asset Backed Certificates, Class A
( )% Asset Backed Certificates, Class B
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitional Provisions . . . . . . . . . . . . 16
ARTICLE II Creation of the Trust; Conveyance of Receivables . . . . 16
Section 2.01. Creation of Trust . . . . . . . . . . . . . . . . . . 16
Section 2.02. Conveyance of Receivables . . . . . . . . . . . . . . 17
Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . 18
ARTICLE III The Receivables . . . . . . . . . . . . . . . . . . . . . 18
Section 3.01. Representations and Warranties of First Merchants . . 18
Section 3.02. Representations and Warranties of the Depositor . . . 18
Section 3.03. Repurchase upon Breach . . . . . . . . . . . . . . . 19
Section 3.04. Custody of Receivable Files . . . . . . . . . . . . . 19
Section 3.05. Duties of Servicer as Custodian . . . . . . . . . . . 19
Section 3.06. Instructions; Authority to Act . . . . . . . . . . . 20
Section 3.07. Custodian's Indemnification . . . . . . . . . . . . . 20
Section 3.08. Effective Period and Termination . . . . . . . . . . 21
ARTICLE IV Administration and Servicing of Receivables . . . . . . . 21
Section 4.01. Duties of the Servicer . . . . . . . . . . . . . . . 21
Section 4.02. Collection of Receivable Payments; Modifications of
Receivables . . . . . . . . . . . . . . . . . . . . 22
Section 4.03. Realization Upon Receivables . . . . . . . . . . . . 22
Section 4.04. Physical Damage Insurance . . . . . . . . . . . . . . 23
Section 4.05. Maintenance of Security Interests in Vehicles . . . . 23
Section 4.06. Covenants of the Servicer . . . . . . . . . . . . . . 24
Section 4.07. Purchase of Receivables Upon Breach of Covenant . . . 24
Section 4.08. Servicing Fee; Payment of Expenses . . . . . . . . . 25
Section 4.09. Servicer's Certificate . . . . . . . . . . . . . . . 25
Section 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event . . . . . . . . . . . . . . . . . 25
Section 4.11. Annual Independent Accountants' Report . . . . . . . 26
Section 4.12. Access to Certain Documentation and
Information Regarding Receivables . . . . . . . . . 26
Section 4.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . 26
Section 4.14. Retention and Termination of Servicer . . . . . . . . 27
ARTICLE V Accounts; Application of Funds . . . . . . . . . . . . . . . . 27
Section 5.01. Local Post Office Boxes . . . . . . . . . . . . . . . 27
Section 5.02. Accounts . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.03. Application of Collections . . . . . . . . . . . . . 29
Section 5.04. Application of Payaheads . . . . . . . . . . . . . . 30
Section 5.05. Advances . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.06. Purchase Amounts . . . . . . . . . . . . . . . . . . 30
Section 5.07. Transfers from the Spread Account . . . . . . . . . . 30
Section 5.08. Distributions. . . . . . . . . . . . . . . . . . . . 30
Section 5.09. Claims Upon the Policy; Policy Payments Account . . . 32
Section 5.10. Notices to the Security Insurer . . . . . . . . . . . 33
Section 5.11. Rights in Respect of Insolvency Proceedings . . . . . 33
Section 5.12. Effect of Payments by the Security Insurer;
Subrogation. . . . . . . . . . . . . . . . . . . . . 34
Section 5.13. Statements to Certificateholders . . . . . . . . . . 35
Section 5.14. Accounting and Tax Returns . . . . . . . . . . . . . 35
ARTICLE VI The Certificates . . . . . . . . . . . . . . . . . . . . 35
Section 6.01. The Certificates . . . . . . . . . . . . . . . . . . 35
Section 6.02. Authentication of Certificates . . . . . . . . . . . 35
Section 6.03. Registration of Transfer and Exchange . . . . . . . . 36
Section 6.04. Certain Transfer Restrictions . . . . . . . . . . . . 37
Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates . . 38
Section 6.06. Persons Deemed Owners . . . . . . . . . . . . . . . . 38
Section 6.07. Access to List of Certificateholders' Names and
Addresses. . . . . . . . . . . . . . . . . . . . . . 38
Section 6.08. Maintenance of Office or Agency . . . . . . . . . . . 38
Section 6.09. Book-Entry Certificates . . . . . . . . . . . . . . . 39
Section 6.10. Notices to Clearing Agency . . . . . . . . . . . . . 39
ARTICLE VII The Depositor . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.01. Depositor's Representations . . . . . . . . . . . . . 40
Section 7.02. Corporate Existence . . . . . . . . . . . . . . . . . 41
Section 7.03. Liabilities of Depositor . . . . . . . . . . . . . . 41
Section 7.04. Merger or Consolidation of, or Assumption of the
Obligations of, the Depositor . . . . . . . . . . . 41
Section 7.05. Limitation on Liability of Depositor and Others . . . 42
ARTICLE VIII The Servicer . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.01. Representations of Servicer . . . . . . . . . . . . . 42
Section 8.02. Liability of Servicer; Indemnities . . . . . . . . . 43
Section 8.03. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . 44
Section 8.04. Limitation on Liability of Servicer, Backup Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.05. Appointment of Subservicer . . . . . . . . . . . . . 45
Section 8.06. Servicer and Backup Servicer Not to Resign . . . . . 46
ARTICLE IX Servicer Termination Events . . . . . . . . . . . . . . . 46
Section 9.01. Servicer Termination Events . . . . . . . . . . . . . 46
Section 9.02. Consequences of a Servicer Termination Event . . . . 47
Section 9.03. Appointment of Successor . . . . . . . . . . . . . . 47
Section 9.04. Notification to Rating Agencies . . . . . . . . . . . 48
Section 9.05. Waiver of Past Defaults . . . . . . . . . . . . . . . 48
Section 9.06. Repayment of Advances . . . . . . . . . . . . . . . . 48
ARTICLE X The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.01. Duties of Trustee . . . . . . . . . . . . . . . . . . 49
Section 10.02. Certain Matters Affecting Trustee . . . . . . . . . . 50
Section 10.03. Trustee Not Liable for Certificates or Receivables . 50
Section 10.04. Trustee May Own Certificates . . . . . . . . . . . . 51
Section 10.05. Trustee's Fees and Expenses . . . . . . . . . . . . . 51
Section 10.06. Eligibility Requirements for Trustee . . . . . . . . 51
Section 10.07. Resignation or Removal of Trustee . . . . . . . . . . 51
Section 10.08. Successor Trustee . . . . . . . . . . . . . . . . . . 52
Section 10.09. Merger or Consolidation of Trustee . . . . . . . . . 52
Section 10.10. Appointment of Co-Trustee or Separate Trustee . . . . 52
Section 10.11. Representations and Warranties of Trustee . . . . . . 53
ARTICLE XI Termination . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.01. Termination of the Trust . . . . . . . . . . . . . . 54
Section 11.02. Optional Purchase of All Receivables . . . . . . . . 55
ARTICLE XII Miscellaneous Provisions . . . . . . . . . . . . . . . . 56
Section 12.01. Amendment . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.02. Protection of Title to Trust . . . . . . . . . . . . 56
Section 12.03. Separate Counterparts . . . . . . . . . . . . . . . . 58
Section 12.04. Limitation on Rights of Certificateholders . . . . . 58
Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . 58
Section 12.06. Notices . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.07. Severability of Provisions . . . . . . . . . . . . . 59
Section 12.08. Assignment . . . . . . . . . . . . . . . . . . . . . 59
Section 12.09. Third-Party Beneficiaries . . . . . . . . . . . . . . 59
Section 12.10. Certificates Nonassessable and Fully Paid . . . . . . 59
Section 12.11. Limitations on Rights of Others . . . . . . . . . . . 59
Section 12.12. Headings . . . . . . . . . . . . . . . . . . . . . . 60
SCHEDULE I Schedule of Receivables . . . . . . . . . . . . . . . . . I-1
SCHEDULE II Location of Receivables Files . . . . . . . . . . . . . II-1
Schedule III Locations of Local Post Office Boxes . . . . . . . . . . III-1
Schedule IV Locations of Local Collection Accounts . . . . . . . . . IV-1
EXHIBIT A Form of Class A Certificate . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Class B Certificate . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Depository Agreement . . . . . . . . . . . . . . . . C-1
EXHIBIT D Representations and Warranties of First Merchants . . . . . D-1
EXHIBIT E Form of Servicer's Certificate . . . . . . . . . . . . . . . . E-1
EXHIBIT F Form of Policy . . . . . . . . . . . . . . . . . . . . . . . . F-1
POOLING AND SERVICING AGREEMENT dated as of ( ), 199_, among FIRST
MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a Delaware corporation, as
depositor (the "Depositor"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a
Delaware corporation, as servicer (the "Servicer"), and ( ), a (state)
(banking) corporation, as trustee and backup servicer (in its capacity as
trustee, the "Trustee"; and in its capacity as backup servicer, the "Backup
Servicer").
RECITALS
WHEREAS the Depositor has purchased a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts acquired
by First Merchants Acceptance Corporation from retail motor vehicle dealers
in the ordinary course of its business;
WHEREAS the Depositor wishes to sell and assign such receivables to the
Trust (as defined herein); and
WHEREAS First Merchants Acceptance Corporation is willing to service
such receivables, and ( ) is willing to act as Backup Servicer with respect
to such receivables and as Trustee of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
___________
Section 1.01. Definitions. Whenever used in this Agreement, the
___________
following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Account Property" means the Collection Account, the Local Collection
________________
Accounts, the Local Post Office Boxes and all amounts and investments from
time to time deposited or transferred to or held in any of them for or on
behalf of the Trust, including any cash, checks, money orders, deposit
accounts, Physical Property, book-entry securities, or uncertificated
securities, and all proceeds of the foregoing.
"Advance" shall have the meaning specified in Section 5.05.
_______
"Affiliate" means, with respect to any specified Person, any other
_________
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Pooling and Servicing Agreement.
_________
"Amount Financed" means, with respect to any Receivable, the amount
_______________
advanced under the related Contract toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, and other
items customarily financed as part of retail automobile installment sale
contracts or promissory notes, but excluding any amount allocable to any
premium for force-placed physical damage insurance covering the Financed
Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
______________________ ___
of finance charges stated in the related Contract or, if such stated annual
rate of finance charge is reduced (i) as a result of an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, such reduced rate.
"Available Funds" means, with respect to any Determination Date or
_______________
Distribution Date, (i) all amounts received during the related Collection
Period (other than Payaheads received from Obligors during such Collection
Period and other than amounts that are transferred to the Collection Account
during such Collection Period in respect of the immediately preceding
Collection Period, as described in clauses (ii), (iii) and (iv) below), from
whatever source, on or in respect of the Receivables, including any Net
Liquidation Proceeds and insurance proceeds, (ii) all Advances made by the
Servicer during or with respect to such Collection Period, (iii) any amounts
transferred from the Payahead Account to the Collection Account as all or
part of a Scheduled Payment during or with respect to such Collection Period,
(iv) all amounts transferred to the Collection Account in respect of Purchase
Amounts for such Collection Period (v) any Recoveries for such Collection
Period and (vi) Investment Income for such Collection Period.
"Average Pool Balance" means, with respect to any Collection Period, the
____________________
average of the Pool Balance at the beginning of business on the first day of
such Collection Period and at the close of business on the last day of such
Collection Period.
"Backup Servicer" means ( ) or its successor in interest pursuant to
_______________
Section 8.03(b) or such other Person as shall have been appointed as Backup
Servicer pursuant to Section 9.03(b).
"Basic Documents" means the Receivables Purchase Agreement, this
_______________
Agreement and the Spread Account Agreement.
"Benefit Plan" shall have the meaning specified in Section 6.04(b).
____________
"Book-Entry Certificates" means beneficial interests in Class A
_______________________
Certificates, ownership and transfers of which shall be registered through
book entries by a Clearing Agency as described in Section 6.09.
"Business Day" means any day other than a Saturday, a Sunday, a legal
____________
holiday or any other day on which commercial banking institutions in The City
of New York, Chicago, Illinois or the city in which the Corporate Trust
Office is located are authorized or obligated by law, executive order or
governmental decree to be closed.
"Certificate" means either a Class A Certificate or a Class B
___________
Certificate.
"Certificate Balance" means the aggregate of the Class A Certificate
___________________
Balance and the Class B Certificate Balance.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
_________________
Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with the
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of the Clearing
Agency).
"Certificate Pool Factor" means, with respect to each class of
_______________________
Certificates as of the close of business on the last day of each Collection
Period, a seven-digit decimal figure equal to the outstanding principal
amount of such class of Certificates (after giving effect to any reduction
thereof to be made on the immediately following Distribution Date) divided
by the original outstanding principal amount of such class of Certificates.
The Certificate Pool Factor for each class of Certificates will be 1.0000000
as of the Closing Date and will decline thereafter to reflect reductions in
the outstanding principal amount of such class of Certificates.
"Certificate Register" and "Certificate Registrar" mean the register
____________________ _____________________
maintained and the registrar appointed pursuant to Section 6.03.
"Certificateholder" or "Holder" means a Person in whose name a
_________________ ______
Certificate is registered in the Certificate Register.
"Class A Certificate" means a ( )% Asset Backed Certificate, Class A,
___________________
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit A.
"Class A Certificate Balance" means, initially, $( ), and, as of any
___________________________
date of determination thereafter, such initial Class A Certificate Balance
reduced by all amounts previously distributed to Holders of the Class A
Certificates and allocable to principal.
"Class A Interest Carryover Shortfall" means, with respect to any
____________________________________
Distribution Date, the excess of the sum of the Class A Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Class A Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that Holders of the Class A
Certificates actually received on such preceding Distribution Date.
"Class A Interest Distributable Amount" means, with respect to any
_____________________________________
Distribution Date, the sum of the Class A Monthly Interest Distributable
Amount and the Class A Interest Carryover Shortfall.
"Class A Monthly Interest Distributable Amount" means, with respect to
_____________________________________________
any Distribution Date, an amount equal to the product of (i) one-twelfth,
(ii) the Pass-Through Rate and (iii) the Class A Certificate Balance on the
preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date) after giving effect to any amounts distributed to
Holders of the Class A Certificates on such preceding Distribution Date and
allocable to principal.
"Class A Monthly Principal Distributable Amount" means, with respect to
______________________________________________
any Distribution Date, the Class A Percentage of the Principal Distribution
Amount.
"Class A Percentage" means ( )%.
__________________
"Class A Principal Carryover Shortfall" means the amount, if any, as of
_____________________________________
the close of business on any Distribution Date, by which (i) the Class A
Monthly Principal Distributable Amount plus any outstanding Class A Principal
Carryover Shortfall from the preceding
Distribution Date exceeds (ii) the amount actually distributed to Holders of
the Class A Certificates and allocable to principal on such date.
"Class A Principal Distributable Amount" means, with respect to any
______________________________________
Distribution Date, the sum of the Class A Monthly Principal Distributable
Amount for such Distribution Date and the Class A Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided,
however, that the Class A Principal Distributable Amount shall not exceed the
Class A Certificate Balance. In addition, on the Final Scheduled
Distribution Date, the principal required to be included in the Class A
Principal Distributable Amount shall include the lesser of (a) the Class A
Percentage of any principal due and remaining unpaid on each Receivable in
the Trust as of the Final Scheduled Maturity Date and (b) the amount that is
necessary (after giving effect to the other amounts to be distributed to
Holders of the Class A Certificates on such Distribution Date and allocable
to principal) to reduce the Class A Certificate Balance to zero.
"Class B Certificate" means a ( )% Asset Backed Certificate, Class B,
___________________
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit B.
"Class B Certificate Balance" means, initially, $( ), and, as of any
___________________________
date of determination thereafter, will equal the amount by which the Pool
Balance exceeds the Class A Certificate Balance.
"Class B Interest Carryover Shortfall" means, with respect to any
____________________________________
Distribution Date, the excess of the sum of the Class B Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Class B Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that Holders of the Class B
Certificates actually received on such preceding Distribution Date.
"Class B Interest Distributable Amount" means, with respect to any
_____________________________________
Distribution Date, the sum of the Class B Monthly Interest Distributable
Amount and the Class B Interest Carryover Shortfall.
"Class B Monthly Interest Distributable Amount" means, with respect to
_____________________________________________
any Distribution Date, an amount equal to the product of (i) one-twelfth,
(ii) the Pass-Through Rate and (iii) the Class B Certificate Balance on the
preceding Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date) after giving effect to all distributions and losses
realized on such Distribution Date.
"Class B Monthly Principal Distributable Amount" means, with respect to
______________________________________________
any Distribution Date, the Class B Percentage of the Principal Distribution
Amount.
"Class B Percentage" means ( )%.
__________________
"Class B Principal Carryover Shortfall" means the amount, if any, as of
_____________________________________
the close of business on any Distribution Date, by which (i) the Class B
Monthly Principal Distributable Amount plus any outstanding Class B Principal
Carryover Shortfall from the preceding Distribution Date exceeds (ii) the
amount actually distributed to Holders of the Class B Certificates and
allocable to principal on such date.
"Class B Principal Distributable Amount" means, with respect to any
______________________________________
Distribution Date, the sum of the Class B Monthly Principal Distributable
Amount for such Distribution Date and
the Class B Principal Carryover Shortfall as of the close of the preceding
Distribution Date; provided, however, that the Class B Principal
Distributable Amount shall not exceed the Class B Certificate Balance. In
addition, on the Final Scheduled Distribution Date, the principal required
to be included in the Class B Principal Distributable Amount shall include
the lesser of (a) the Class B Percentage of any principal due and remaining
unpaid on each Receivable in the Trust as of the Final Scheduled Maturity
Date and (b) the amount that is necessary (after giving effect to the other
amounts to be distributed to Holders of the Class B Certificates on such
Distribution Date and allocable to principal) to reduce the Class B
Certificate Balance to zero.
"Clearing Agency" means an organization registered as a "clearing
_______________
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
___________________________
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means ( ), 199_.
____________
"Code" means the Internal Revenue Code of 1986, as amended from time to
____
time, and Treasury Regulations promulgated thereunder.
"Collateral Agent" means ( ) as collateral agent under the Spread
________________
Account Agreement and any successor Collateral Agent thereunder.
"Collection Account" means the account designated as such, established
__________________
and maintained pursuant to Section 5.02(b)(i).
"Collection Period" means a calendar month. As used herein, the
_________________
"related Collection Period" with respect to any Distribution Date or
Determination Date means the calendar month immediately preceding the
calendar month in which such Distribution Date or Determination Date, as
applicable, occurs.
"Contract" means a motor vehicle retail installment sale contract
________
between a Dealer and one or more Obligors.
"Controlling Party" means (i) as long as the Policy is in effect and no
_________________
Security Insurer Default has occurred and is continuing, the Security Insurer
and (ii) if a Security Insurer Default has occurred and is continuing or the
Policy is otherwise no longer in effect, the Trustee for the benefit of the
Certificateholders.
"Corporate Trust Office" means the office of the Trustee at which at any
______________________
particular time its corporate trust business shall be administered, which at
the time of execution of this agreement is located at ( ), or at such other
address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Servicer, the Collateral Agent, and
the Security Insurer, or the principal corporate trust office of any
successor Trustee (of which address such successor Trustee shall notify the
Certificateholders, the Depositor, the Servicer, the Collateral Agent, and
the Security Insurer).
"Cram Down Loss" means any loss resulting from an order issued by a
______________
court of appropriate jurisdiction in an insolvency proceeding that reduces
the amount owed on a
Receivable or otherwise modifies or restructures the Scheduled Payments to
be made thereon. The amount of any such Cram Down Loss will equal the excess
of (i) the Principal Balance of the Receivable immediately prior to such
order over (ii) the Principal Balance of such Receivable as so reduced,
modified or restructured. A Cram Down Loss will be deemed to have occurred
on the date of issuance of such order.
"Credit Enhancement Fee" means, with respect to any Distribution Date,
______________________
the fee paid to the Depositor, upon the terms and subject to the conditions
set forth in the Spread Account Agreement, in consideration of the pledge by
the Depositor of certain of its assets pursuant to the Spread Account
Agreement. The Credit Enhancement Fee shall be in an amount on each
Distribution Date equal to the funds remaining in the Collection Account on
such date after the distribution by the Trustee of all amounts required
pursuant to clauses (1) through (9) of Section 5.08.
"Cutoff Date" means ( ), 199_.
___________
"Dealer" means a dealer that sold a Financed Vehicle to an Obligor and
______
sold and assigned the related Receivable to First Merchants pursuant to a
Dealer Agreement.
"Dealer Agreement" means an agreement between First Merchants and a
________________
Dealer pursuant to which such Dealer sells Contracts to First Merchants.
"Default Rate" means, with respect to any Collection Period, the
____________
product, expressed as a percentage, of (i) twelve and (ii) a fraction, the
numerator of which equals the sum of (A) the aggregate Principal Balance of
all Receivables that became Defaulted Receivables during such Collection
Period and (B) the aggregate Principal Balance of all Receivables that became
Purchased Receivables during such Collection Period and that were delinquent
31 days or more under the related Contract, and the denominator of which
equals the Average Pool Balance for such Collection Period.
"Defaulted Receivable" means a Receivable with respect to which any of
____________________
the following shall have occurred: (i) a payment under the related Contract
is 120 or more days (or, if the related Obligor is a debtor under Chapter 13
of the U.S. Bankruptcy Code, 180 or more days) delinquent, (ii) the related
Financed Vehicle has been repossessed or (iii) the Servicer has determined
in good faith that payments under the related Contract are not likely to be
resumed.
"Deficiency Claim Date" means, with respect to each Distribution Date,
_____________________
the third Business Day preceding such Distribution Date.
"Definitive Certificates" shall have the meaning specified in Section
_______________________
6.09.
"Delinquency Ratio" means, with respect to each Collection Period, the
_________________
quotient, expressed as a percentage, of (i) the aggregate Principal Balance
of all Receivables with respect to which one or more payments are 31 or more
days past due as of the last day of such Collection Period and (ii) the Pool
Balance with respect to the Determination Date following such Collection
Period.
"Delivery" when used with respect to Account Property means:
________
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trustee or its nominee or
custodian by physical delivery to the Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated security
(as defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of
such certificated security endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank to a financial
intermediary (as defined in Section 8-313 of the UCC) and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or
custodian and the sending by such financial intermediary of a confirmation
of the purchase of such certificated security by the Trustee or its nominee
or custodian, or (ii) by delivery thereof to a "clearing corporation" (as
defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section 8-102(4)
of the UCC) or the nominee of either, subject to the clearing corporation's
exclusive control, the sending of a confirmation by the financial
intermediary of the purchase by the Trustee or its nominee or custodian of
such securities and the making by such financial intermediary of entries on
its books and records identifying such certificated securities as belonging
to the Trustee or its nominee or custodian (all of the foregoing, "Physical
Property"), and, in any event, any such Physical Property in registered form
shall be in the name of the Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Account Property to the
Trustee or its nominee or custodian, consistent with changes in applicable
law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that are book-entry securities held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures,
all in accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: book-entry registration of such
Account Property to an appropriate book-entry account maintained with a
Federal Reserve Bank by a financial intermediary that is also a "depository"
pursuant to applicable federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Trustee or its nominee or custodian of the
purchase by the Trustee or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in its books
and records identifying such book-entry securities held through the Federal
Reserve System pursuant to federal book-entry regulations as belonging to the
Trustee or its nominee or custodian and indicating that such custodian holds
such Account Property solely as agent for the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect complete transfer of ownership of any such
Account Property to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of a financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Trustee or
its nominee or custodian of such uncertificated security, and the making by
such financial intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the Trustee or its nominee or
custodian.
"Depositor" means First Merchants Auto Receivables Corporation ( ), a
_________
Delaware corporation, or its successors in interest to the extent permitted
hereunder.
"Depository Agreement" means the agreement dated ( ), 199_, between the
____________________
Trustee and The Depository Trust Company, as the initial Clearing Agency,
substantially in the form of Exhibit C.
"Determination Date" means, with respect to each Distribution Date, the
__________________
earlier of (i) the 14th day of the calendar month in which such Distribution
Date occurs (or if such 14th day is not a Business Day, the next succeeding
Business Day) and (ii) the 4th Business Day preceding such Distribution Date.
"Distribution Date" means, with respect to each Collection Period, the
_________________
( )th day of the following calendar month or, if such ( )th day is not a
Business Day, the next succeeding Business Day, commencing on ( ), 199_.
"Eligible Deposit Account" means a segregated trust account that is
________________________
maintained with a depository institution or trust company (a) the long-term
unsecured debt obligations of which are rated "AA" or higher by Standard &
Poor's and "Aa2" or higher by Moody's or (b) the commercial paper or other
short-term unsecured debt obligations of which are rated "A-1+" by Standard
& Poor's and "P-1" by Moody's or (c) that has been specifically approved by
the Controlling Party.
"Eligible Investments" means book-entry securities, negotiable
____________________
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) (i) direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States or any agency or
instrumentality of the United States the obligations of which are backed by
the full faith and credit of the United States and (ii) direct obligations
of, and obligations guaranteed as to the full and timely payment by, the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation, but only if, at the time of investment, such obligations are
assigned the highest credit rating by each Rating Agency (which in the case
of Standard & Poor's shall be AAA or A-1+);
(b) demand deposits, time deposits, certificates of deposit or demand
notes of, or bankers' acceptances issued by, any depository institution or
trust company incorporated under the laws of the United States of America or
any State (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the
investment or contractual commitment to invest therein, the commercial paper
or other short-term unsecured debt obligations thereof (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) shall have a credit rating from
each of the Rating Agencies in the highest investment category granted
thereby (which in the case of Standard & Poor's shall be A-1+);
(c) repurchase obligations with respect to any obligation described in
clause (a) above, entered into with a depository institution or trust company
(acting as principal) described in clause (b) above;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned the highest credit
rating by each Rating Agency at the time of such investment or contractual
commitment providing for such investment (which in the case of Standard &
Poor's shall be AAA);
(e) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby (which in the
case of Standard & Poor's shall be A-1+);
(f) investments in money market funds (including funds for which the
Trustee or any of its Affiliates is investment manager or advisor) having a
rating from each of the Rating Agencies in the highest investment category
granted thereby (which in the case of Standard & Poor's shall be AAAm-g or
AAAm); or
(g) any other investment with respect to which the Depositor or the
Servicer has received written notification from the Rating Agencies that the
acquisition of such investment as an Eligible Investment will not result in
a withdrawal or downgrading of the ratings of the Class A Certificates or
result in an increased capital charge to the Security Insurer.
"Eligible Servicer" means First Merchants Acceptance Corporation, the
_________________
Backup Servicer or any other Person which at the time of its appointment as
Servicer (i) is servicing a portfolio of motor vehicle retail installment
sale contracts and/or motor vehicle installment loans, (ii) is legally
qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability professionally and competently to service a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loans similar to the Receivables with reasonable skill
and care and (iv) has a minimum net worth of $100,000,000.
"Endorsement" shall have the meaning specified in the Policy.
___________
"ERISA" means the Employee Retirement Income Security Act of 1974, as
_____
amended.
"Final Scheduled Distribution Date" means (date).
_________________________________
"Final Scheduled Maturity Date" means (date).
_____________________________
"Financed Vehicle" means an automobile, light-duty truck, van or
________________
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
"First Merchants" means First Merchants Acceptance Corporation, a
_______________
Delaware corporation, and its successors.
"Fiscal Agent" shall have the meaning specified in the Policy.
____________
"FMARC ( )" means First Merchants Auto Receivables Corporation ( ), a
_________
Delaware corporation, and its successors.
"Guaranteed Distribution" means, with respect to each Distribution Date,
_______________________
an amount equal to the Class A Interest Distributable Amount plus the Class
A Principal Distributable Amount.
"Initial Pool Balance" means $( ).
____________________
"Insolvency Event" means, with respect to a specified Person, (a) the
________________
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by such Person to the entry
of an order for relief in an involuntary case under any such law, or the
consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors,
or the failure by such Person generally to pay its debts as such debts become
due, or the taking of action by such Person in furtherance of any of the
foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement dated
___________________
as of ( ), 199_, among the Security Insurer, First Merchants and the
Depositor.
"Insurance Agreement Event of Default" means any Event of Default, as
____________________________________
defined in the Insurance Agreement.
"Investment Income" means, with respect to any Distribution Date, the
_________________
investment earnings (net of related losses and investment expenses) for the
related Collection Period on amounts on deposit in the Collection Account or
the Spread Account, as applicable.
"Lien" means a security interest, lien, charge, pledge, equity, or
____
encumbrance of any kind, other than tax liens, mechanics' liens and other
liens that attach to a Receivable by operation of law as a result of any act
or omission by the related Obligor.
"Liquidated Receivable" means any Receivable with respect to which any
_____________________
of the following shall have occurred: (i) the related Financed Vehicle has
been repossessed for 90 days or more, (ii) such Receivable is a Defaulted
Receivable with respect to which the Servicer has determined in good faith
that all amounts it expects to recover have been received or (iii) a payment
under the related Contract is 150 or more days (or, if the related Obligor
is a debtor under Chapter 13 of the U.S. Bankruptcy Code, 210 or more days)
delinquent.
"Local Collection Accounts" shall have the meaning provided in Section
_________________________
5.02(a).
"Local Collection Account Agreement" means the letter agreement dated
__________________________________
as of ( ), 199_, among the Trustee, First Merchants, the Security Insurer,
FMARC ( ) and First Merchants Auto Trust 199_-_, as amended, supplemented or
otherwise modified from time to time.
"Local Post Office Box" shall have the meaning specified in Section
_____________________
5.01(a).
"Master Spread Account Agreement" means the Master Spread Account
_______________________________
Agreement dated as of ( ), 199_, among FMARC ( ), as depositor, the Security
Insurer and ( ), as trustee and collateral agent.
"Moody's" means Moody's Investors Service, Inc., or its successor.
_______
"Net Liquidation Losses" means, with respect to any Collection Period,
______________________
(i) the aggregate Principal Balance of all Receivables that became Liquidated
Receivables during such Collection Period plus interest due and unpaid
thereon under the related Contracts, minus (ii) Net Liquidation Proceeds
received during such Collection Period with respect to such Liquidated
Receivables and any Receivables that became Liquidated Receivables during
previous Collection Periods.
"Net Liquidation Proceeds" means, with respect to any Liquidated
________________________
Receivable, all amounts realized on or with respect to such Liquidated
Receivable, net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of the Receivable and the repossession and
disposition of the Financed Vehicle and (ii) amounts that are required by law
to be refunded to the Obligor on such Receivable.
"Net Loss Rate" means, with respect to any Collection Period, the
_____________
product, expressed as a percentage, of (i) Net Liquidation Losses for such
Collection Period and (ii) twelve divided by the Average Pool Balance.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
_______
Financed Vehicle and any other Person or Persons who are primarily or
secondarily obligated to make payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
_____________________
the board, the president, any executive vice president or any vice president
of the Depositor or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who
__________________
may (except in the case of Opinions of Counsel delivered pursuant to Section
12.02(i)) be an employee of or counsel to the Depositor or the Servicer,
which counsel shall be acceptable to the Trustee and, if the Security Insurer
is an addressee of such opinion, the Security Insurer, and which opinion
shall be in form and substance acceptable to the Trustee and, if the Security
Insurer is an addressee of such opinion, the Security Insurer.
"Outstanding Advances" means the sum, as of the close of business on the
____________________
last day of a Collection Period, of all unreimbursed Advances, reduced as
provided in Section 5.05.
"Pass-Through Rate" means ( )% per annum, computed on the basis of a
_________________
360-day year consisting of twelve 30-day months.
"Payahead" means that portion of any payment received during a
________
Collection Period from or on behalf of an Obligor on a Precomputed Receivable
that exceeds the Scheduled Payment but is less than the amount required to
prepay such Receivable in full.
"Payahead Account" means the account designated as such, established and
________________
maintained pursuant to Section 5.02(d).
"Person" means any legal person, including any individual, corporation,
______
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Physical Property" shall have the meaning assigned to such term in the
_________________
definition of "Delivery" above.
"Policy" means the financial guaranty insurance policy issued by the
______
Security Insurer with respect to the Class A Certificates, including any
endorsements thereto, in the form of Exhibit F.
"Policy Payments Account" shall have the meaning specified in Section
_______________________
5.09(b).
"Pool Balance" means, with respect to each Determination Date, the
____________
aggregate Principal Balance of the Receivables (excluding Purchased
Receivables and Liquidated Receivables) as of the close of business on the
last day of the related Collection Period, after giving effect to all
collections for such Collection Period.
"Portfolio Performance Test" means, with respect to any Distribution
__________________________
Date, the calculations performed by the Servicer on the related Determination
Date to determine whether (i) the arithmetic average of the Delinquency
Ratios for the three immediately preceding Collection Periods equals or
exceeds ( )%, (ii) the arithmetic average of the Default Rates for the three
immediately preceding Collection Periods equals or exceeds ( )% or (iii) the
arithmetic average of the Net Loss Rates for the three immediately preceding
Collection Periods equals or exceeds ( )%; provided, however, that, so long
as no Security Insurer Default shall have occurred and be continuing, (a) the
percentages set forth in clauses (i), (ii) and (iii) above may be modified
or amended by the Depositor and the Trustee with the consent of the Security
Insurer but without the consent of the Certificateholders and (b) the
Security Insurer may, with notice to the Rating Agencies but without the
consent of any Certificateholder, waive the requirement that the Portfolio
Performance Tests be met with respect to any Distribution Date. If, on any
Determination Date, any such arithmetic average as set forth in clause (i),
(ii) or (iii) above equals or exceeds the applicable percentage set forth in
such respective clauses (as such as such percentage may be modified or
amended from time to time hereunder), the Portfolio Performance Test for such
Distribution Date shall not have been met.
"Precomputed Receivable" means any Receivable which, (i) under the terms
______________________
of the related Contract, provides that the portion of each Scheduled Payment
allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and to the Amount Financed will be
determined according to the sum of periodic balances or the sum of monthly
balances or any equivalent method or (ii) is an actuarial receivable.
"Principal Balance" means, with respect to any Receivable and
_________________
Determination Date, the Amount Financed minus an amount equal to the sum, as
of the close of business on the last day of the related Collection Period,
of (1) that portion of all amounts (excluding Payaheads retained in the
Payahead Account, but including Payaheads that have been applied to Scheduled
Payments) received on or prior to such day with respect to such Receivable
and allocable to principal using the actuarial method (with respect to
Precomputed Receivables) or the Simple Interest Method (with respect to
Simple Interest Receivables), as applicable, and (2) any Cram Down Losses with
respect to such Receivable.
"Principal Distribution Amount" means, with respect to any Distribution
_____________________________
Date, the sum of the following amounts for the preceding Collection Period:
(a) that portion of all payments (other than Recoveries) by or on behalf of
Obligors on Receivables allocable to principal, including full and (with
respect to Simple Interest Receivables only) partial prepayments and
including, with respect to Precomputed Receivables, amounts required to be
withdrawn from the Payahead Account and transferred to the Collection Account
(but excluding amounts deposited into the Payahead Account during such
Collection Period); (b) the Principal Balance of all Receivables that became
Liquidated Receivables during such Collection Period; (c) the Principal
Balance of all Receivables that became Purchased Receivables during such
Collection Period; and (d) any Cram Down Losses incurred during such
Collection Period.
"Purchase Amount" means the amount, as of the close of business on the
_______________
last day of a Collection Period, required to prepay a Receivable in full
under the terms thereof, including interest to the end of the month of
purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
____________________
business on the last day of a Collection Period by the Depositor or First
Merchants pursuant to Section 3.03 or the Servicer pursuant to Section 4.07.
"Rating Agency" means either Moody's or Standard & Poor's or, when used
_____________
in the plural form, Moody's and Standard and Poor's. If none of Moody's,
Standard & Poor's or a successor to either of them remains in existence,
"Rating Agency" shall mean any nationally recognized statistical rating
organization or other comparable Person designated by the Depositor, notice
of which designation shall be given to the Trustee, the Servicer and the
Security Insurer.
"Rating Agency Condition" means, with respect to any action, that each
_______________________
Rating Agency shall have been given 10 days' (or such shorter period as shall
be acceptable to each Rating Agency) prior notice thereof and that each of
the Rating Agencies shall have notified the Depositor, the Servicer, the
Trustee and the Security Insurer in writing that such action will not result
in a reduction or withdrawal of the then current ratings of the Class A
Certificates and, if applicable, will not result in an increased capital
charge to the Security Insurer.
"Receivable" means any Contract transferred to the Trust on the Closing
__________
Date and listed on Schedule I.
"Receivable File" means the documents, electronic entries, instruments
_______________
and writings with respect to a Receivable specified in Section 3.04.
"Receivables Purchase Agreement" means the purchase agreement dated as
______________________________
of ( ), 199_, between First Merchants and the Depositor.
"Record Date" means, with respect to each Distribution Date, the close
___________
of business on the day immediately preceding such Distribution Date.
"Recoveries" means, with respect to any Receivable that becomes a
__________
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Responsible Officer" means the chairman of the board, the president,
___________________
any executive vice president, any vice president, the treasurer, any
assistant treasurer, the secretary, or any assistant secretary of the
Servicer.
"Scheduled Payment" means, with respect to each Receivable, the
_________________
scheduled monthly payment amount set forth in the related Contract and
required to be paid by the Obligor during each Collection Period. If, after
the Closing Date, an Obligor's scheduled monthly payment obligation under the
related Contract is modified (i) as a result of the order of a court in an
insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940 or (iii) as a result of modifications
or extensions of the Contract permitted by Section 4.02, "Scheduled Payment"
shall refer to the Obligor's scheduled monthly payment obligation as so
modified.
"Securities Act" means the Securities Act of 1933, as amended.
______________
"Security Insurer" means ( ), or its successor.
________________
"Security Insurer Default" means any one of the following events shall
________________________
have occurred and be continuing:
(a) the Security Insurer shall have failed to make a required
payment when due under the Policy;
(b) the Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the
benefit of its creditors or (iii) had an order for relief entered against it
under the United States Bankruptcy Code, the New York State Insurance Law or
any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization that is final and
nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent, or receiver for the Security Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession
by a custodian, trustee, agent, or receiver of the Security Insurer or of all
or any material portion of its property.
"Servicer" means First Merchants Acceptance Corporation, a Delaware
________
corporation, and each successor Servicer pursuant to Section 4.14, 8.03(a)
or 9.03(a).
"Servicer Termination Event" means any event specified in Section 9.01.
__________________________
"Servicer's Certificate" means the certificate required to be delivered
______________________
by the Servicer pursuant to Section 4.09, substantially in the form attached
hereto as Exhibit E.
"Servicer's Extension Notice" shall have the meaning specified in
___________________________
Section 4.14.
"Servicing Fee" means the fee payable to the Servicer for services
_____________
rendered during each Collection Period, determined pursuant to Section 4.08.
"Simple Interest Method" means the method of allocating the monthly
______________________
payments received with respect to a Receivable to interest in an amount equal
to the product of (i) the applicable APR, (ii) the period of time (expressed
as a fraction of a year, based on the actual number of days in the calendar
month and 365 days in the calendar year) elapsed since the preceding payment
was made under such Receivable and (iii) the outstanding principal amount of
the Receivable, and allocating the remainder of each such monthly payment to
principal.
"Simple Interest Receivable" means a Receivable with respect to which
__________________________
the portion of each payment allocable to interest or to principal under the
related Contract is determined in accordance with the Simple Interest Method.
"Spread Account" means the account designated as such, established and
______________
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" means the Master Spread Account Agreement
________________________
dated as of ( ), 199_ among FMARC ( ), as depositor, the Security Insurer and
( ), as trustee and collateral agent (, as supplemented by ( ), and as
amended by ( ), each among the parties to the Master Spread Account
Agreement,) as the same may be further supplemented or amended from time to
time.
"Spread Account Required Amount" means with respect to any Distribution
______________________________
Date, the greater of (i)(A) with respect to each related Determination Date
on which all of the Portfolio Performance Tests are met, ( )% of the Pool
Balance as of the end of business on the last day of the related Collection
Period, (B) with respect to any related Determination Date on which a
Portfolio Performance Test is not met or was not met on either of the two
immediately preceding Determination Dates, ( )% of the Pool Balance as of the
close of business on the last day of the related Collection Period and (C)
with respect to any related Determination Date following the occurrence of
an Insurance Agreement Event of Default, an amount equal to (x) the amount
on deposit in the Spread Account on such Determination Date plus (y) any
Available Funds remaining in the Collection Account after the distribution
by the Trustee on the related Distribution Date of all amounts required
pursuant to clauses (1) through (6) of Section 5.08 minus (z) any amounts
distributed to Holders of the Class A Certificates or the Security Insurer
from the Spread Account on such related Distribution Date and (ii) the lesser
of (A) ( )% of the Initial Pool Balance and (B) the Class A Certificate
Balance on such Distribution Date (after giving effect to distributions on
such date); provided, however, that in no event shall the Spread Account
Required Amount be less than $( ).
"Standard & Poor's" means Standard & Poor's Ratings Service, A Division
_________________
of The McGraw-Hill Company, or its successor.
"State" means any one of the 50 States of the United States of America
_____
or the District of Columbia.
"Trust" means the trust created by this Agreement.
_____
"Trustee" means ( ), a (state) banking corporation, its successors in
_______
interest and any successor Trustee hereunder.
"Trustee Officer" means any officer within the Corporate Trust Office
_______________
of the Trustee, including any vice president, any assistant vice president,
any senior trust officer, any trust officer or any other officer of the
Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"UCC" means the Uniform Commercial Code as in effect in the relevant
___
jurisdiction.
Section 1.02. Other Definitional Provisions. (a) All terms defined
_____________________________
in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined herein or
in any such certificate or other document, and accounting terms partly
defined herein or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under United States
generally accepted accounting principles. To the extent that the definitions
of accounting terms herein or in any such certificate or other document are
inconsistent with the meanings of such terms under United States generally
accepted accounting principles, the definitions contained herein or in any
such certificate or other document shall control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used herein shall refer to this Agreement as a whole and not to
any particular provision hereof; Article, Section, Schedule and Exhibit
references contained herein are references to Articles, Sections, Schedules
and Exhibits herein; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Creation of the Trust; Conveyance of Receivables
________________________________________________
Section 2.01. Creation of Trust. (a) Upon the execution of this
_________________
Agreement by the parties hereto, there is hereby created a separate trust,
which shall be known as First Merchants Auto Trust 199_-_ (the "Trust"). The
Trust shall be administered pursuant to the provisions of this Agreement.
(b) It is the intention of the Trustee and the Certificateholders, and
the Trustee and the Certificateholders agree, that the Trust will be treated
as a grantor trust for federal income
tax purposes, and all transactions contemplated by this Agreement will be
reported, to the extent applicable, on all applicable tax returns
consistently with such treatment. The provisions of this Agreement shall be
construed, and the affairs of the Trust shall be conducted, so as to achieve
treatment of the Trust as a grantor trust for federal income tax purposes.
Section 2.02. Conveyance of Receivables. In consideration of the
_________________________
Trustee's delivery on the Closing Date to or upon the order of the Depositor
of Class A Certificates in an initial aggregate principal amount of $( ) and
Class B Certificates in an initial aggregate principal amount of $( ), the
Depositor does hereby sell, transfer, assign, set over, and otherwise convey
to the Trustee in trust for the benefit of the Certificateholders, without
recourse (subject to the obligations set forth herein):
(a) all right, title and interest of the Depositor in and to the
Receivables and all payments received with respect thereto on and after the
Cutoff Date;
(b) all right, title and interest of the Depositor in and to the
security interests in the related Financed Vehicles and any accessions
thereto granted by Obligors pursuant to the Receivables and any other
interest of the Depositor in such Financed Vehicles;
(c) all right, title and interest of the Depositor in and to any
Net Liquidation Proceeds and any other proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors, including any
vendor's single interest or other collateral protection insurance policy;
(d) all right, title and interest of the Depositor in and to any
property that shall have secured a Receivable and that shall have been
acquired by or on behalf of the Depositor, the Servicer or the Trustee;
(e) all right, title and interest of the Depositor in and to all
documents and other items contained in the Receivable Files;
(f) all of the Depositor's rights (but not its obligations) under
the Receivables Purchase Agreement;
(g) all right, title and interest of the Depositor in and to the
Account Property; and
(h) the proceeds of any and all of the foregoing.
In addition, on or prior to the Closing Date, the Depositor shall cause the
Security Insurer to deliver the Policy to the Trustee for the benefit of the
Holders of the Class A Certificates.
Although the Depositor and the Trustee agree that the transfer of assets
to the Trust pursuant to this Agreement is intended to be a sale of such
assets to the Trust, rather than the granting of a security interest to
secure a borrowing, and that such assets shall not be property of the
Depositor, in the event such transfer is deemed not to be a sale and to be
of a mere security interest to secure a borrowing, the Depositor shall be
deemed to have granted to the Trustee for the benefit of the Trust a
perfected first priority security interest in all such assets, and this
Agreement shall constitute a security interest under applicable law.
Section 2.03. Acceptance by Trustee. The Trustee hereby acknowledges
_____________________
the sale, transfer and assignment by the Depositor pursuant to this Article
II and declares that the Trustee holds and will hold the Receivables and the
other assets of the Trust in trust, upon the terms herein set forth, for the
use and benefit of all present and future Certificateholders and, to the
extent provided herein, the Security Insurer.
ARTICLE III
The Receivables
_______________
Section 3.01. Representations and Warranties of First Merchants. (a)
_________________________________________________
First Merchants has made each of the representations and warranties set forth
in Exhibit D hereto under the Receivables Purchase Agreement and has
consented to the assignment by the Depositor to the Trust of the Depositor's
rights with respect thereto. Such representations and warranties speak as
of the execution and delivery of this Agreement and as of the Closing Date,
but shall survive the sale, transfer and assignment of the Receivables to the
Trust. Pursuant to Section 2.02 of this Agreement, the Depositor has sold,
assigned, transferred and conveyed to the Trust, as part of the assets of the
Trust, its rights under the Receivables Purchase Agreement, including the
representations and warranties of First Merchants therein as set forth in
Exhibit D, upon which the Trustee relies in accepting the Receivables and
delivering the Certificates and the Security Insurer relies in issuing the
Policy, together with all rights of the Depositor with respect to any breach
thereof, including the right to require First Merchants to repurchase
Receivables in accordance with the Receivables Purchase Agreement. It is
understood and agreed that the representations and warranties referred to in
this Section shall survive the delivery of the Receivable Files to the
Trustee or any custodian.
(b) First Merchants hereby agrees that the Trustee shall have the
right, on behalf of the Trust and the Certificateholders, to enforce any and
all rights under the Receivables Purchase Agreement assigned to the Trust
herein, including the right to cause First Merchants to repurchase any
Receivable with respect to which it is in breach of any of its
representations and warranties set forth in Exhibit D, directly against First
Merchants as though the Trustee, as trustee of the Trust, were a party to the
Receivables Purchase Agreement, and the Trustee shall not be obligated to
exercise any such rights indirectly through the Depositor.
Section 3.02. Representations and Warranties of the Depositor. The
_______________________________________________
Depositor makes the following representations and warranties as to the
Receivables on which the Trustee relies in accepting the Receivables and
delivering the Certificates and the Security Insurer relies in issuing the
Policy. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date, but shall survive the
sale, transfer and assignment of the Receivables by the Depositor to the
Trust.
(a) Title. It is the intention of the Depositor that (i) the transfer
_____
and assignment herein contemplated constitute a sale of the Receivables from
the Depositor to the Trust, conveying good title thereto, free and clear of
any Liens or rights of other Persons and (ii) the beneficial interest in and
title to the Receivables not be part of the debtor's estate in the event of
the filing of a bankruptcy petition by or against the Depositor under any
bankruptcy law. No Receivable has been sold, transferred, assigned or
pledged by the Depositor to any Person other than the Trust. Immediately
prior to the transfer and assignment herein contemplated, the Depositor had
good and marketable title to each Receivable, free and clear of all Liens
and rights of others and, immediately upon the transfer thereof, the
Trust shall have good and marketable title to each such Receivable, free
and clear of all Liens and rights of others; and the transfer has been
perfected under the UCC. Prior to delivery of the Receivables to First
Merchants, as custodian, the Receivables will be stamped to reflect the
sale and assignment of the Receivables to the Trust.
(b) All Filings Made. All filings (including UCC filings) necessary
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in any jurisdiction to give the Trust a first perfected ownership interest
in the Receivables shall have been made.
Section 3.03. Repurchase upon Breach. The Depositor and the Servicer
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shall inform the other parties to this Agreement and the Security Insurer
promptly, in writing, upon the discovery of any breach of First Merchants'
representations and warranties made pursuant to Section 3.01 of this
Agreement or Section 3.02 of the Receivables Purchase Agreement or of the
Depositor's representations and warranties made pursuant to Section 3.02
above. Unless any such breach shall have been cured by the last day of the
first Collection Period following the discovery or notice thereof by or to
the Depositor or the Servicer, the Depositor shall be obligated and, if
necessary, the Depositor or the Trustee shall enforce the obligation of First
Merchants under the Receivables Purchase Agreement, to repurchase as of such
last day any Receivable materially and adversely affected by any such breach.
In consideration of the repurchase of any such Receivable, the Depositor or
First Merchants, as the case may be, shall remit the Purchase Amount to the
Collection Account, in the manner specified in Section 5.06; provided,
however, that the obligation of the Depositor to repurchase any Receivable
arising solely as a result of a breach of First Merchants' representations
and warranties under Section 3.02 of the Receivables Purchase Agreement is
subject to the receipt by the Depositor of the Purchase Amount from First
Merchants. The sole remedy of the Trustee or the Certificateholders with
respect to a breach of representations and warranties pursuant to Sections
3.01 and 3.02 and the agreement contained in this Section shall be to require
the Depositor or First Merchants, as the case may be, to repurchase
Receivables pursuant to this Section, subject to the conditions contained
herein, or to enforce First Merchants' obligation to the Depositor to
repurchase such Receivables pursuant to the Receivables Purchase Agreement.
Section 3.04. Custody of Receivable Files. To assure uniform quality
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in servicing the Receivables and to reduce administrative costs, the Trustee
hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Trustee as custodian of the following
documents or instruments, which are hereby constructively delivered to the
Trustee with respect to the Receivables:
(a) the fully executed original of the Receivable (together with
any agreements modifying the Receivable, including any extension agreement);
(b) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(c) the original certificate of title or such other documents that
the Servicer or the Depositor shall keep on file in accordance with its
customary procedures evidencing the security interest of the Depositor in the
Financed Vehicle; and
(d) any and all other documents that the Servicer or the Depositor
shall keep on file in accordance with its customary procedures relating to
a Receivable, an Obligor or a Financed Vehicle.
Section 3.05. Duties of Servicer as Custodian. (a) Safekeeping. The
_______________________________ ___________
Servicer shall hold the Receivable Files as custodian on behalf of the
Trustee for the benefit of all present and future Certificateholders and, to
the extent provided herein, the Security Insurer, and shall maintain such
accurate and complete accounts, records and computer systems pertaining to
each Receivable File as shall enable the Trustee to comply with this
Agreement. In performing its duties as custodian, the Servicer shall act
with reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the receivable files relating to all
comparable automotive receivables that the Servicer services for itself or
others. The Servicer shall conduct, or cause to be conducted, periodic
audits of the Receivable Files held by it under this Agreement and of the
related accounts, records and computer systems, in such a manner as shall
enable the Trustee to verify the accuracy of the Servicer's record keeping.
The Servicer shall promptly report to the Trustee any failure on its part to
hold the Receivable Files and maintain its accounts, records and computer
systems as herein provided and shall promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
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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 and the related accounts, records and computer systems maintained by
the Servicer at such times during normal business hours as the Trustee shall
instruct.
(c) Release of Documents. Upon instruction from the Trustee, the
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Servicer shall release any Receivable File to the Trustee, the Trustee's
agent or the Trustee's designee, as the case may be, at such place or places
as the Trustee may designate, as soon as practicable, and upon the release
and delivery of any such document in accordance with the instructions of the
Trustee, the Servicer shall be released from any further liability and
responsibility under this Section 3.05 with respect to such documents, unless
and until such time as such documents shall be returned to the Servicer. In
no event shall the Servicer be responsible for any loss occasioned by the
Trustee's failure to return any Receivable File or any portion thereof in a
timely manner.
Section 3.06. Instructions; Authority to Act. The Servicer shall be
______________________________
deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trustee Officer.
Section 3.07. Custodian's Indemnification. The Servicer, as
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custodian, shall indemnify the Trustee and its officers, directors, employees
and agents for any and all liabilities, obligations, losses, compensatory
damages, payments, costs, or expenses of any kind whatsoever that may be
imposed on, incurred by or asserted against the Trustee or any of its
officers, directors, employees or agents as the result of any improper act
or omission in any way relating to the maintenance and custody by the
Servicer as custodian of the Receivable Files; provided, however, that the
Servicer shall not be liable to the Trustee or any such officer, director,
employee or agent of the Trustee for any portion of any such amount
resulting from the willful misfeasance, bad faith or negligence of the
Trustee or any such officer, director, employee or agent of the Trustee.
Indemnification under this Section shall survive the resignation or
removal of the Trustee or the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Custodian shall have made any indemnity payments pursuant to this Section and
the Person to or on behalf of whom such payments are made thereafter collects
any of such amounts from others, such Person shall promptly repay such
amounts to the Custodian, without interest.
Section 3.08. Effective Period and Termination. The Servicer's
________________________________
appointment as custodian shall become effective as of the Cutoff Date and
shall continue in full force and effect until terminated pursuant to this
Section 3.08. If First Merchants or any successor Servicer shall resign as
Servicer in accordance with the provisions of this Agreement or if all of the
rights and obligations of First Merchants or any successor Servicer shall
have been terminated under Section 4.14 or Section 9.02, the appointment of
such Servicer as custodian may be terminated by the Security Insurer, the
Trustee or by the Holders of Certificates evidencing not less than 25% of the
Certificate Balance, in the same manner as the Security Insurer, the Trustee
or such Holders may terminate the rights and obligations of the Servicer
under Section 9.02. The Trustee may terminate the Servicer's appointment as
custodian, with cause, at any time upon written notification to the Servicer
and without cause, only by written notification to the Servicer pursuant to
Section 9.02. As soon as practicable after any termination of such
appointment (but in no event more than 10 Business Days after any such
termination of appointment), the Servicer shall deliver the Receivable Files
to the Trustee or the Trustee's agent at such place or places as the Trustee
may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
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Section 4.01. Duties of the Servicer. The Servicer, for the benefit
______________________
of the Trust, shall manage, service, administer and make collections on the
Receivables and perform the other actions required by the Servicer under this
Agreement. The Servicer shall service the Receivables in accordance with its
customary and usual procedures and consistent with the procedures employed
by institutions that service motor vehicle retail installment sale contracts.
The Servicer's duties shall include the collection and posting of all
payments, responding to inquiries of Obligors, investigating delinquencies,
sending payment coupons to Obligors, reporting any required tax information
to Obligors, monitoring the collateral, accounting for collections,
furnishing monthly and annual statements to the Trustee and the Security
Insurer with respect to distributions, monitoring the compliance by Obligors
with the insurance requirements contained in the related Contracts, and
performing the other duties specified herein. The Servicer also shall
administer and enforce all rights of the holder of the Receivables under the
Contracts and the Dealer Agreements. To the extent consistent with the
standards, policies and procedures otherwise required hereby, the Servicer
shall follow its customary standards, policies and procedures and shall have
full power and authority, acting alone, to do any and all things in
connection with the managing, servicing, administration and collection of the
Receivables that it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered
by the Trustee to execute and deliver, on behalf of the Trustee, any and all
instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments with respect to the
Receivables and with respect to the Financed Vehicles; 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 due under any Receivable or waive the right to
collect the unpaid balance of any Receivable from an Obligor. The Servicer
is hereby authorized to commence, in its own name or in the name of the
Trustee, a legal proceeding to enforce a Receivable pursuant to Section 4.03
or to commence or participate in any other legal proceeding (including a
bankruptcy proceeding) relating to or involving a Receivable, an Obligor
or a Financed Vehicle. If the Servicer commences or participates in any
such legal proceeding in its own name, the Trustee shall thereupon be deemed
to have automatically assigned the applicable Receivable to the Servicer
solely for purposes of commencing or participating in such proceeding as
a party or claimant, and the Servicer is authorized and empowered by the
Trustee to execute and deliver in the Trustee's name any notices, demands,
claims, complaints, responses, affidavits, or other documents or instruments
in connection with any such proceeding. The Trustee shall furnish the
Servicer with any powers of attorney and other documents which the Servicer
may reasonably request and which the Servicer deems necessary or appropriate
and shall take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
Section 4.02. Collection of Receivable Payments; Modifications of
___________________________________________________
Receivables. (a) Consistent with the standards, policies and procedures
___________
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automotive
receivables that it services for itself or others and otherwise act with
respect to the Receivables in such manner as will, in the reasonable judgment
of the Servicer, maximize the amount to be received by the Trust with respect
thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment
of a Receivable in order to (i) change the date during each calendar month
when the related Scheduled Payment is due or (ii) reamortize the Scheduled
Payments on the Receivable following a partial prepayment of principal.
(c) The Servicer may grant payment extensions or other modifications
of or amendments with respect to a Receivable (in addition to those
modifications permitted by Section 4.02(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable and is otherwise in the best interests of the Trust; provided,
however, that:
(i) the aggregate period of all extensions on a Receivable shall
not exceed four months;
(ii) in no event may the final Scheduled Payment on a Receivable
be extended beyond the last day of the Collection Period related to the Final
Scheduled Distribution Date;
(iii) no more than two extensions may be granted with respect
to any Receivable in any one-year period; and
(iv) no more than ( )% of the aggregate Pool Balance may be subject
to extension or modification in any one-year period.
Section 4.03. Realization Upon Receivables. (a) Consistent with the
____________________________
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess or otherwise convert the ownership
of and liquidate any Financed Vehicle securing a Receivable with respect to
which the Servicer shall have determined that eventual payment in full is
unlikely. The Servicer shall begin such repossession and conversion
procedures as soon as practicable after default on such Receivable, but in
no event later than the date on which all or any portion of a Scheduled
Payment has become 91 days delinquent; provided, however, that the Servicer
may elect not to repossess a Financed Vehicle within such time period if in
its good faith judgment it determines that the proceeds ultimately
recoverable with respect to such Receivable would be increased by
forbearance. In repossessing or otherwise converting the ownership of a
Financed Vehicle and liquidating a Receivable, the Servicer is authorized to
follow such customary practices and procedures as it shall deem necessary or
advisable, consistent with the standard of care required by Section 4.01,
which practices and procedures may include reasonable efforts to realize upon
any recourse to Dealers, the sale of the related Financed Vehicle at public
or private sale, the submission of claims under an insurance policy and other
actions by the Servicer in order to realize on a Receivable; provided,
however, that, in any case in which the Financed Vehicle shall have suffered
damage, the Servicer shall not expend funds in connection with any repair or
towards the repossession of such Financed Vehicle unless it shall determine
in its discretion that such repair and/or repossession shall increase the
proceeds of liquidation of the related Receivable by an amount greater than
the expense for such repair or repossession. The Servicer shall be entitled
to recover all reasonable expenses incurred by it in the course of
repossessing and liquidating a Financed Vehicle into cash proceeds, but only
out of the cash proceeds of the sale of such Financed Vehicle, any deficiency
obtained from the Obligor or any amounts received from recourse to the
related Dealer.
(b) If the Servicer elects to commence a legal proceeding to enforce
any rights with respect to a Receivable, the Trustee shall thereupon be
deemed to have automatically assigned such Receivable to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce any such right with
respect to a Receivable, on the grounds that it is not a real party in
interest or a Person entitled to enforce such right, the Trustee, at the
Servicer's expense, shall take such steps as the Servicer deems necessary to
enforce such right, including bringing suit in its name.
Section 4.04. Physical Damage Insurance. The Servicer shall require,
_________________________
in accordance with its customary servicing policies and procedures, that each
Obligor obtain and maintain physical loss and damage insurance coverage
covering the Financed Vehicle.
Section 4.05. Maintenance of Security Interests in Vehicles.
_____________________________________________
(a) Consistent with the policies and procedures required by this Agreement,
the Servicer shall take such steps on behalf of the Trust as are necessary
to maintain perfection of the security interest created by each Receivable
in the related Financed Vehicle. The Servicer is hereby authorized to take
such steps as are necessary to reperfect such security interest on behalf of
the Trust in the event of the relocation of a Financed Vehicle or for any
other reason. In the event that the assignment of a Receivable to the Trust
is insufficient, without a notation on the related Financed Vehicle's
certificate of title, or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to perfect a security interest in the related Financed Vehicle in
favor of the Trust, the Servicer hereby agrees that the designation of First
Merchants as the secured party on the certificate of title is in its capacity
as agent of the Trust.
(b) The Depositor, the Trustee, the Servicer and the Backup Servicer
hereby agree that, upon the occurrence of a Servicer Termination Event, the
Controlling Party may take or cause to be taken such actions as may, in the
opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interests in the Financed Vehicles in the name of the
Trust, including by amending the title documents of the Financed Vehicles.
The Depositor hereby agrees to pay all expenses related to such perfection
or reperfection and to take all action necessary therefor. In addition, the
Controlling Party may at any other time instruct the Servicer to take or
cause to be taken such action as may, in the opinion of counsel to the
Controlling Party, be necessary to perfect or re-perfect the security
interest in the Financed Vehicles in the name of the Trust; provided,
however, that if the Controlling Party requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default,
the out-of-pocket expenses of the Servicer, the Depositor or any other entity
incurred in connection with any such action shall be reimbursed to the
Servicer, the Depositor or such other party by the Controlling Party.
Section 4.06. Covenants of the Servicer. By its execution and delivery
_________________________
of this Agreement, the Servicer hereby covenants as follows (on which
covenants the Trustee relies in accepting the Receivables and delivering the
Certificates and on which the Security Insurer relies in issuing the Policy):
(a) Liens in Force. No Financed Vehicle securing a Receivable shall
______________
be released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the rights
_____________
of the Trust in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend
_____________
the terms of any Receivable, except in accordance with Section 4.02; and
(d) Restrictions on Liens. The Servicer shall not (A) create, incur
_____________________
or suffer to exist, or agree to create, incur or suffer to exist, or consent
to or permit in the future (upon the occurrence of a contingency or
otherwise) the creation, incurrence or existence of any Lien on or
restriction on transferability of any Receivable except for the Lien in favor
of the Trust and the restrictions on transferability imposed by this
Agreement or (B) sign or file any UCC financing statements in any
jurisdiction that names First Merchants, the Servicer or the Depositor as a
debtor, and any Person other than the Depositor or the Trust as a secured
party, or sign any security agreement authorizing any secured party
thereunder to file any such financing statement with respect to the
Receivables.
Section 4.07. Purchase of Receivables Upon Breach of Covenant. Upon
_______________________________________________
discovery by any of the Servicer, the Depositor or the Trustee of a breach
of any of the covenants set forth in Section 4.05(a) or 4.06, the party
discovering such breach shall give prompt written notice to the other
parties; provided, however, that the failure to give any such notice shall
not affect any obligation of the Servicer under this Section 4.07. On or
before the last day of the first Collection Period following its discovery
or receipt of notice of any breach of any covenant set forth in Section
4.05(a) or 4.06 that materially and adversely affects the
interests of the Trust or the Security Insurer in any Receivable, the
Servicer shall, unless such breach shall have been cured in all material
respects by such date, purchase from the Trust the Receivable affected by
such breach. In consideration of the purchase of any such Receivable, the
Servicer shall remit the related Purchase Amount into the Collection Account
in the manner specified in Section 5.06. For purposes of this Section, the
Purchase Amount shall, whenever applicable, consist in part of a release by
the Servicer of all rights of reimbursement of Outstanding Advances with
respect to the related Receivable. It is understood and agreed that the
obligation of the Servicer to purchase any Receivable with respect to which
such a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against the Servicer for such breach
available to the Trustee.
Section 4.08. Servicing Fee; Payment of Expenses. The Servicing Fee
__________________________________
payable to the Servicer on each Distribution Date shall equal the product of
(i) one-twelfth, (ii) ( )% and (iii) the Pool Balance as of the first day of
the related Collection Period. The Servicing Fee shall be calculated on the
basis of a 360-day year comprised of twelve 30-day months. The Servicer also
shall be entitled to all late fees, prepayment charges (including, in the
case of a Receivable that provides for payments according to the "Rule of
78s" and that is prepaid in full, the difference between the Principal
Balance of such Receivable (plus accrued interest to the date of prepayment)
and the Principal Balance of such Receivable computed according to the "Rule
of 78s"), and other administrative fees or similar charges allowed by
applicable law with respect to the Receivables, collected (from whatever
source) on the Receivables.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed
on the Servicer and expenses incurred in connection with distributions and
reports made by the Servicer to the Trustee). The Servicer shall be liable
for the fees and expenses of the Backup Servicer.
Section 4.09. Servicer's Certificate. No later than 10:00 a.m. New
______________________
York City time on each Determination Date, the Servicer shall deliver to the
Trustee, the Backup Servicer, the Security Insurer and each Rating Agency,
a Servicer's Certificate executed by a Responsible Officer of the Servicer
containing among other things, all information necessary to enable the
Trustee to make payments on the Certificates and to perform its related
obligations pursuant to this Agreement. Receivables purchased by the
Servicer, the Depositor or First Merchants during the related Collection
Period and each Receivable that became a Liquidated Receivable or was paid
in full during the related Collection Period shall be identified by account
number in the Servicer's Certificate.
Section 4.10. Annual Statement as to Compliance; Notice of Servicer
_____________________________________________________
Termination Event. (a) The Servicer shall deliver to the Trustee, the
_________________
Backup Servicer, the Security Insurer and each Rating Agency, within 120 days
after the end of the Servicer's fiscal year (with the first such certificate
being delivered no later than April 30, 1997), an Officer's Certificate
signed by a Responsible Officer of the Servicer, stating that (i) a review
of the activities of the Servicer during the preceding 12-month period (or
such shorter period as shall have elapsed from the Closing Date to the end
of the first such fiscal year) and of the performance of its obligations
under this Agreement has been made under such officer's supervision and (ii)
to such officer's knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement throughout such period or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Backup Servicer, the
Security Insurer and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving
of notice or lapse of time or both would become a Servicer Termination Event
under Section 9.01(a). The Depositor or the Servicer shall deliver to the
Trustee, the Backup Servicer, the Security Insurer, the Servicer or the
Depositor (as applicable), and each Rating Agency promptly after having
obtained knowledge thereof, but in no event later than two Business Days
thereafter, written notice in an Officer's Certificate of any event which
with the giving of notice or lapse of time or both would become a Servicer
Termination Event under any other clause of Section 9.01.
Section 4.11. Annual Independent Accountants' Report. The Servicer
______________________________________
shall cause a firm of independent certified public accountants, which may
also render other services to the Servicer or its Affiliates, to deliver to
the Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, within 120 days after the end of each fiscal year (with the first
such report being delivered no later than April 30, 1997), a report addressed
to the Board of Directors of the Servicer, the Trustee, the Backup Servicer
and the Security Insurer, to the effect that such firm has audited the books
and records of the Servicer and issued its report thereon and that (1) such
audit was made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as such firm considered necessary in the circumstances;
(2) the firm is independent of the Depositor and the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants; and (3) a review in accordance with agreed upon
procedures was made of three randomly selected Servicer's Certificates,
including the delinquency, default and loss statistics required to be
specified therein and, except as disclosed in the accountants' report, no
exceptions or errors in the Servicer's Certificates were found.
Section 4.12. Access to Certain Documentation and Information Regarding
_________________________________________________________
Receivables. The Servicer shall provide to representatives of the Trustee,
___________
the Backup Servicer, the Certificateholders and the Security Insurer
reasonable access to the documentation regarding the Receivables. In each
case, such access shall be afforded without charge, but only upon reasonable
request and during normal business hours. Nothing in this Section shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure
of the Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.
Section 4.13. Monthly Tape. On or before the eighth Business Day, but
____________
in no event later than the tenth calendar day, of each month, the Servicer
shall deliver or cause to be delivered to the Trustee and the Backup Servicer
a computer tape and a diskette (or any other form of electronic transmission
acceptable to the Trustee and the Backup Servicer) in a format acceptable to
the Trustee and the Backup Servicer containing the information with respect
to the Receivables as of the last day of the preceding Collection Period and
necessary for preparation of the Servicer's Certificate for the immediately
succeeding Determination Date and to determine the application of collections
as provided herein. The Backup Servicer shall use such tape or diskette (or
other electronic transmission acceptable to the Trustee and the Backup
Servicer) to verify the Servicer's Certificate delivered by the Servicer, and
the Backup Servicer shall certify to the Trustee that it has verified the
Servicer's Certificate in accordance with this Section 4.13 and shall notify
the Servicer and the Trustee of any discrepancies, in each case, on or before
the third Business Day following the related Determination Date. In
the event that the Backup Servicer reports any discrepancies, the Servicer
and the Backup Servicer shall attempt to reconcile such discrepancies prior
to the related Distribution Date, but in the absence of a reconciliation, the
Servicer's Certificate shall control for the purpose of calculations and
distributions with respect to the related Distribution Date. In the event
that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Distribution Date, the Servicer shall cause a firm of nationally recognized
independent certified public accountants, at the Servicer's expense, to audit
the Servicer's Certificate and, prior to the third Business Day, but in no
event later than the fifth calendar day, of the following month, to reconcile
the discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for the next succeeding Determination
Date. In addition, upon the occurrence of a Servicer Termination Event the
Servicer shall, if so requested by the Trustee, deliver to the Backup
Servicer within 15 days after demand therefor its records relating to the
Receivables and a computer tape containing as of the close of business on the
date of demand all of the data maintained by the Servicer in computer format
in connection with servicing the Receivables. Other than the duties
specifically set forth in this Agreement, the Backup Servicer shall have no
obligations hereunder, including, without limitation, to supervise, verify
or monitor the performance of the Servicer. The Backup Servicer shall have
no liability for any actions taken or omitted by the Servicer.
Section 4.14. Retention and Termination of Servicer. The Servicer
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hereby covenants and agrees to act as Servicer under this Agreement for an
initial term commencing on the Closing Date and ending on ( ), 199_, which
term shall be extendible by the Security Insurer (or the Trustee, if there
is an existing Security Insurer Default or if the Policy is no longer in
effect) for successive quarterly terms ending on each successive December 31,
March 31, June 30 and September 30 (or pursuant to revocable written standing
instructions delivered from time to time to the Servicer and the Trustee, for
any specified number of terms), until the Class A Certificates are paid in
full. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Security Insurer or the Trustee,
as applicable, to the other parties to this Agreement. The Servicer hereby
agrees that, as of the date hereof and upon its receipt of any such Servicer
Extension Notice, the Servicer shall be bound for the duration of the initial
term or the term covered by such Servicer Extension Notice to act as the
Servicer, subject to and in accordance with the other provisions of this
Agreement. Until such time as a Security Insurer Default shall have occurred
and be continuing, the Servicer agrees that if as of the last day of the
calendar month preceding the last day of any such servicing term the Servicer
shall not have received a Servicer Extension Notice from the Security
Insurer, the Servicer shall, within five days thereafter, give written notice
of such non-receipt to the Trustee, the Security Insurer and the Backup
Servicer.
ARTICLE V
Accounts; Application of Funds
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Section 5.01. Local Post Office Boxes. On or prior to the Closing
_______________________
Date, the Servicer shall send revised payment statements (which statements
will indicate (by roman numeral) that such payments relate to Receivables
owned by the Trust) to each Obligor pursuant to which payments made by such
Obligor after the Closing Date will be addressed to a regional post office
box (each a "Local Post Office Box") separate from any post office box to
which receivables owned by the Seller are or will be sent. All payments and
other proceeds of any type and from any source on or with respect to the
Receivables that are delivered to one of the Local Post Office Boxes shall
be the property of the Trustee.
Section 5.02. Accounts. (a) The Servicer has established various
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accounts in the name of the Trustee (the "Local Collection Accounts"), at the
locations identified on Schedule IV. Each Local Collection Account shall be
maintained as an Eligible Deposit Account and shall bear a designation
clearly indicating that the amounts deposited thereto and held therein are
for the benefit of the Trust, as provided in the Local Collection Account
Agreement. All payments on the Receivables mailed by Obligors or any other
Person to the Local Post Office Boxes or otherwise delivered pursuant to the
Local Collection Account Agreement to the Servicer shall be deposited on a
daily basis into the applicable Local Collection Account, from which they
will be swept within two Business Days to the Collection Account. Amounts
on deposit in any Local Collection Account shall not be invested.
(b) (i) On or prior to the Closing Date, the Servicer shall
establish, or cause to be established, an account in the name of the Trustee
(the "Collection Account"), which shall be maintained as an Eligible Deposit
Account and shall bear a designation clearly indicating that the amounts
deposited thereto are held for the benefit of the Trust. The Servicer shall
deposit all amounts received by it, and shall cause the Trustee to sweep any
amounts deposited to any Local Collection Account, on or with respect to the
Receivables into the Collection Account as promptly as possible, but in no
event later than the second Business Day following receipt thereof by the
Servicer or in the Local Collection Accounts, as applicable.
(ii) Funds on deposit in the Collection Account shall be invested
by the Trustee in Eligible Investments selected in writing by the Servicer
or, if an Insurance Agreement Event of Default shall have occurred and be
continuing, the Security Insurer. All Investment Income received during each
Collection Period with respect to Eligible Investments on deposit in the
Collection Account shall be included in the interest portion of Available
Funds for such Collection Period and distributed by the Trustee on the
related Distribution Date pursuant to Section 5.08. Except as otherwise
permitted by the Rating Agencies, funds on deposit in the Collection Account
shall be invested in Eligible Investments that will mature not later than the
Business Day immediately preceding the next Distribution Date. Funds
deposited in the Collection Account on a day immediately preceding a
Distribution Date upon the maturity of an Eligible Investment are not
required to be invested overnight.
(iii) The Trustee shall not be held liable in any way by reason
of any insufficiency in the Collection Account resulting from any loss on an
Eligible Investment included therein, except for losses attributable to the
Trustee's failure to make payments on such Eligible Investments issued by the
Trustee, in its commercial capacity as principal obligor and not as Trustee,
in accordance with their terms.
(c) (i) The Trustee, for the benefit of the Certificateholders and,
to the extent provided herein, the Security Insurer, shall possess all right,
title and interest in and to all funds received on or in respect of the
Receivables from time to time in the Local Post Office Boxes, the Local
Collection Accounts and the Collection Account and in all proceeds thereof
(including all income thereon), subject to the Local Collection Account
Agreement. The Local Post Office Boxes, the Local Collection Accounts and
the Collection Account shall be under the sole dominion and control of the
Trustee for the benefit of the Certificateholders, subject to the Local
Collection Account Agreement. If, at any time, a Local Collection Account or
the Collection Account ceases to be an Eligible Deposit Account, the Trustee
(or the Servicer on its behalf) shall establish, within 10 Business Days (or
such longer period, not to exceed 30 calendar days, as to which each Rating
Agency may consent), a new Local Collection Account or Collection
Account, as applicable, as an Eligible Deposit Account and shall
transfer all amounts from the account that is no longer an Eligible
Deposit Account to the new Local Collection Account or Collection Account.
(ii) With respect to the Account Property, the Trustee agrees, by
its acceptance hereof, that:
(A) any Account Property that is held in deposit accounts
shall be held solely in Eligible Deposit Accounts, subject to the last
sentence of Section 5.02(c)(i); and each such Eligible Deposit Account shall
be subject to the exclusive custody and control of the Trustee, and the
Trustee shall have sole signature authority with respect thereto;
(B) any Account Property that constitutes Physical Property
shall be delivered to the Trustee in accordance with paragraph (a) of the
definition of "Delivery" and shall be held, pending maturity or disposition,
solely by the Trustee or a financial intermediary (as such term is defined
in Section 8-313(4) of the UCC) acting solely for the Trustee;
(C) any Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry regulations
shall be delivered in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued book-entry registration of such Account
Property as described in such paragraph; and
(D) any Account Property that is an "uncertificated security"
under Article VIII of the UCC and that is not governed by clause (C) above
shall be delivered to the Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued registration of the Trustee's (or
its nominee's) ownership of such security.
(d) The Servicer shall establish and maintain with the Trustee an
Eligible Deposit Account (the "Payahead Account"). The Payahead Account
shall not be property of the Trust. The Servicer shall, or shall cause the
Trustee to, transfer all Payaheads from the Collection Account to the
Payahead Account on or prior to the date on which Payaheads are transferred
to the Collection Account pursuant to Section 5.04.
Section 5.03. Application of Collections. All amounts received with
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respect to the Receivables during each Collection Period shall be applied by
the Servicer as follows:
With respect to each Simple Interest Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied, first,
to reduce Outstanding Advances to the extent described in Section 5.05, with
any excess amounts being applied to interest and principal in accordance with
the Simple Interest Method. In the case of Precomputed Receivables (other
than Purchased Receivables), payments by or on behalf of the Obligor shall be
applied, first, to the Scheduled Payment, with any excess amounts being
either (i) applied to prepay the Receivable in full or (ii) if such excess
amount is not sufficient to prepay the Receivable in full, transferred to
the Payahead Account as a Payahead.
Section 5.04. Application of Payaheads. Within two Business Days
________________________
following each Determination Date, the Trustee shall cause to be transferred
from the Payahead Account to the Collection Account, in immediately available
funds, the aggregate Payaheads from previous Collection Periods applicable
as all or part of any Scheduled Payment on a Precomputed Receivable due
during the related Collection Period, in the amounts set forth in the
Servicer's Certificate for such Distribution Date.
Section 5.05. Advances. On or prior to the Business Day preceding each
________
Distribution Date, the Servicer shall deposit into the Collection Account an
amount equal to the amount of interest due on the Simple Interest Receivables
at their respective APR's for the related Collection Period (assuming the
Simple Interest Receivables were paid on their respective due dates) minus
the amount of interest actually received on the Simple Interest Receivables
during the related Collection Period (such amount, an "Advance"); provided,
however, that in no event shall the aggregate amount of Advances made by the
Servicer on any Distribution Date exceed ( )% of the Pool Balance as of the
first day of the related Collection Period. If the calculation described in
the preceding sentence results in a negative number, an amount equal to the
absolute value of such negative number shall be paid to the Servicer to the
extent and as reimbursement of any Outstanding Advances. In addition, in the
event that a Simple Interest Receivable becomes a Liquidated Receivable, all
Net Liquidation Proceeds attributable to accrued and unpaid interest thereon
(but not including interest for the then current Collection Period) shall be
paid to the Servicer to the extent and as reimbursement of any Outstanding
Advances. The Servicer shall not make any advance with respect to principal
of Simple Interest Receivables or of interest or principal with respect to
Precomputed Receivables. Any Advances payable by the Servicer with respect
to a Collection Period may be paid net of any amounts due to the Servicer
from the Trust assets with respect to such Collection Period.
Section 5.06. Purchase Amounts. The Servicer and the Depositor shall
________________
deposit or cause to be deposited in the Collection Account, on or prior to
each Determination Date, the aggregate Purchase Amount with respect to
Purchased Receivables and the Servicer shall deposit therein all amounts to
be paid under Section 4.07.
Section 5.07. Transfers from the Spread Account. The Trustee shall
_________________________________
determine, no later than 11:00 A.M., New York City time, on each Deficiency
Claim Date whether a shortfall exists with respect to the distributions that
the Trustee is required to make on the upcoming Distribution Date pursuant
to clauses (1) through (6) of Section 5.08. In the event that the Trustee
determines that such a shortfall exists, the Trustee shall furnish to the
Collateral Agent and the Security Insurer, no later than 12:00 noon, New York
City time, on such Deficiency Claim Date, a written notice specifying the
amount of the shortfall and directing the Collateral Agent to remit an amount
equal to such shortfall (to the extent of funds available to be so
distributed pursuant to the Spread Account Agreement) to the Trustee for
deposit in the Collection Account. Upon receipt of any such funds, the
Trustee shall immediately deposit such amounts into the Collection Account
for distribution on the Distribution Date pursuant to Section 5.08.
Section 5.08. Distributions. On each Distribution Date, the Trustee
_____________
shall apply all Available Funds, plus all amounts transferred to the
Collection Account from the Spread Account, plus any amounts deposited
thereto from the Policy Payment Account pursuant to Section 5.09, to make
required payments and distributions on such date pursuant to clauses (1)
through (10) below, in the order and priority indicated:
(1) To the Servicer, as reimbursement of Outstanding Advances,
from moneys on deposit in the Collection Account in respect of (A) that
portion of payments made by or on behalf of Obligors on or in respect of
Simple Interest Receivables during the related Collection Period and
allocable to interest (but excluding Advances), (B) the interest portion of
any Receivable that became a Purchased Receivable during or with respect to
the related Collection Period and with respect to which the Servicer has made
an unreimbursed Advance (except to the extent the related Purchase Amount
consists of a waiver of the right to reimbursement for an Advance made in
respect of such Receivable pursuant to Section 4.07) and (C) the interest
portion of the Net Liquidation Proceeds of any Receivable that became a
Liquidated Receivable during the related Collection Period and with respect
to which the Servicer has made an unreimbursed Advance.
(2) To the Servicer, from that portion of the Available Funds
allocable to interest (but excluding any Advances), the Servicing Fee and all
unpaid Servicing Fees from prior Collection Periods. Shortfalls in amounts
due to the Servicer as Servicing Fees on any Distribution Date may be paid
using amounts transferred from the Spread Account only to the extent provided
in Section 3.03(b) of the Master Spread Account Agreement.
(3) To the Trustee, from that portion of the Available Funds
allocable to interest (but excluding any Advances) and remaining after
distribution by the Trustee of the amounts required pursuant to clauses (1)
and (2) above, any accrued and unpaid fees and expenses due pursuant to
Section 10.05, but only to the extent not previously paid by the Servicer.
Shortfalls in any such amounts due to the Trustee on any Distribution Date
may be paid using amounts transferred from the Spread Account only to the
extent provided in Section 3.03(b) of the Master Spread Account Agreement.
(4) To Holders of the Class A Certificates, the Class A Interest
Distributable Amount. The Class A Interest Distributable Amount shall be
paid from the Class A Percentage of that portion of the Available Funds
allocable to interest remaining after distribution by the Trustee of the
amounts required pursuant to clauses (1), (2) and (3) above and, if such
amount is less than the Class A Interest Distributable Amount, from the
following sources in the following order of priority: (A) from the Class B
Percentage of that portion of the Available Funds allocable to interest
remaining after distribution by the Trustee of the amounts required pursuant
to clauses (1), (2) and (3) above; (B) from the Class B Percentage of that
portion of the Available Funds allocable to principal; (C) from amounts, if
any, available in the Spread Account and (D) from amounts payable under the
Policy.
(5) To Holders of the Class A Certificates, the Class A Principal
Distributable Amount. The Class A Principal Distributable Amount shall be
paid from the Class A Percentage of that portion of the Available Funds
allocable to principal and, to the extent any shortfall exists in the Class
A Principal Distributable Amount after the application of such amounts, from
the following sources in the following order of priority: (A) from the Class
B Percentage of that portion of the Available Funds allocable to principal;
(B) from that portion of the Available Funds allocable to interest remaining
in the Collection Account after the distribution by the Trustee of the
amounts required pursuant to clauses (1) through (4) above, (C) from
amounts, if any, available in the Spread Account and (D) from amounts
payable under the Policy.
(6) To the Security Insurer, from that portion of the Available
Funds allocable to interest (but excluding any Advances) remaining after
distribution by the Trustee of the amounts required pursuant to clauses (1)
through (5) above, any amounts due to the Security Insurer under the
Insurance Agreement. Shortfalls in any amounts due to the Security Insurer
pursuant to this clause (6) on any Distribution Date may be paid using
amounts transferred from the Spread Account only to the extent provided in
Section 3.03(b) of the Spread Account Agreement.
(7) To the Collateral Agent, from any Available Funds remaining
after distribution by the Trustee of the amounts required pursuant to clauses
(1) through (6) above, for deposit to the Spread Account, an amount equal to
the discrepancy, if any, between the amount then on deposit in the Spread
Account and the Spread Account Required Amount.
(8) To Holders of the Class B Certificates, from that portion of
the Available Funds allocable to interest and remaining after distribution
by the Trustee of the amounts due on such Distribution Date pursuant to
clauses (1) through (7) above, the Class B Interest Distributable Amount.
Shortfalls in the Class B Interest Distributable Amount on any Distribution
Date shall be paid using amounts, if any, in the Spread Account in excess of
the Spread Account Required Amount after the distribution from the Spread
Account on such Distribution Date of all amounts required pursuant to
priorities FIRST through FOURTH of Section 3.03(b) of the Master Spread
Account Agreement.
(9) To Holders of the Class B Certificates, from any Available
Funds remaining after distribution by the Trustee of the amounts required
pursuant to clauses (1) through (8) above, the Class B Principal
Distributable Amount. Shortfalls in the Class B Principal Distributable
Amount on any Distribution Date shall be paid using amounts, if any, in the
Spread Account in excess of the Spread Account Required Amount after the
distribution from the Spread Account on such Distribution Date of all amounts
required pursuant to priorities FIRST through FOURTH of Section 3.03(b) of
the Master Spread Account Agreement.
(10) To the Collateral Agent, any Available Funds remaining after
distribution by the Trustee of the amounts required pursuant to clauses (1)
through (9) above, to pay the Credit Enhancement Fee to the Depositor
pursuant to the terms and subject to the conditions set forth in the Spread
Account Agreement.
The Depositor, as initial Holder of the Class B Certificates, hereby
irrevocably directs and authorizes the Trustee, for as long as no Security
Insurer Default shall have occurred and be continuing, to pay any amounts
otherwise distributable to the Depositor pursuant to clauses (8) and (9)
above to the Collateral Agent for deposit to the Spread Account, to be
applied by the Collateral Agent pursuant to the Spread Account Agreement.
Section 5.09. Claims Upon the Policy; Policy Payments Account. (a) If
_______________________________________________
on the third Business Day prior to a Distribution Date, the Available Funds
on deposit or to be deposited in the Collection Account for the related
Collection Period (after giving effect to all transfers thereto of any
amounts from the Payahead Account and the Spread Account and after giving
effect to distribution by the Trustee of amounts required pursuant to clauses
(1) through (3) of Section 5.08) are insufficient to pay the Guaranteed
Distribution on the related Distribution Date, then the Trustee shall give
notice to the Security Insurer by telephone or telecopy of the amount of such
deficiency. Such notice shall be confirmed in writing in the form set forth
as Exhibit A to the Endorsement of the Policy, to the Security Insurer and
the Fiscal Agent, if any, at or before 12:00 noon, New York City time, on the
second Business Day prior to such Distribution Date. Following receipt by
the Security Insurer of such notice in such form, the Security Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to
occur of (i) 12:00 noon, New York City time, on the second Business Day
following such receipt and (ii) 12:00 noon, New York City time, on the
Distribution Date to which such deficiency relates, as provided in the
Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Class A Certificates and the
Security Insurer, referred to herein as the "Policy Payments Account", over
which the Trustee shall have exclusive control and sole right of withdrawal.
The Trustee shall deposit any amount paid under the Policy in the Policy
Payments Account and distribute such amount only to pay to Holders of the
Class A Certificates the Guaranteed Distributions for which a claim has been
made, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer or the Trustee. Amounts paid under the Policy
shall be transferred to the Collection Account in accordance with the next
succeeding paragraph and disbursed by the Trustee to Holders of Class A
Certificates in accordance with Section 5.08. It shall not be necessary for
such payments to be made by checks or wire transfers separate from the checks
or wire transfers used to pay the Guaranteed Distribution with other funds
available to make such payment. However, the amount of any payment of
principal of or interest on the Class A Certificates to be paid from funds
transferred from the Policy Payments Account shall be noted as provided in
paragraph (c) below in the Note Register and in the statement to be furnished
to Holders of the Class A Certificates pursuant to Section 5.13. Funds held
in the Policy Payments Account shall not be invested by the Trustee.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result
of any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Collection Account and applied by the
Trustee, together with the other funds to be distributed from the Collection
Account pursuant to Section 5.08, directly to the payment in full of the
Guaranteed Distribution due with respect to the Class A Certificates. Any
funds remaining in the Policy Payments Account on the first Business Day
following a Distribution Date shall be remitted to the Security Insurer,
pursuant to the instructions of the Security Insurer, by the end of such
Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Class A Certificate from
moneys received under the Policy. The Security Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Trustee.
Section 5.10. Notices to the Security Insurer. All notices,
_______________________________
statements, reports, notes, or opinions required by this Agreement to be sent
to any other party hereto or to Holders of the Class A Certificates at any
time when the Security Insurer is the Controlling Party shall also be sent
to the Security Insurer.
Section 5.11. Rights in Respect of Insolvency Proceedings. (a) In the
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event that the Trustee has received a certified copy of a final,
nonappealable order of the appropriate court that any Guaranteed Distribution
has been voided in whole or in part as a preference payment under applicable
bankruptcy or insolvency law, the Trustee shall (i) deliver to the Security
Insurer a certified copy of such court order, an irrevocable assignment to
the Security Insurer of the Holders' rights with respect to any such
recovered payment and an instrument appointing the Security Insurer as agent
of the Holders with respect to any such recovered payments and (ii) notify
the Holders by mail that, in the event that any Guaranteed Distribution
distributed to a Holder is so recovered, such Holder will be entitled to
payment of such recovered amounts pursuant to the Policy.
(b) The Trustee shall promptly notify the Security Insurer of either
of the following as to which a Trustee Officer has actual knowledge: (i) the
commencement of any proceeding by or against the Depositor commenced under
the United States Bankruptcy Code or any other applicable United States
federal or state bankruptcy, insolvency, receivership, rehabilitation, or
similar law (an "Insolvency Proceeding") or (ii) the making of any claim in
connection with any Insolvency Proceeding seeking the avoidance as a
preferential transfer (a "Preference Claim") of any payment of principal of
or interest on the Class A Certificates. Each Holder, by its purchase of a
Class A Certificate, and the Trustee hereby agree that, so long as a Security
Insurer Default shall not have occurred and be continuing, the Security
Insurer may at any time during the continuation of an Insolvency Proceeding
direct all matters relating to such Insolvency Proceeding, including (i) all
matters relating to any Preference Claim, (ii) the direction of any appeal
of any order relating to any Preference Claim at the expense of the Security
Insurer and (iii) the posting of any surety, supersedeas or performance bond
pending any such appeal. In addition, and without limitation of the
foregoing, as set forth in Section 5.12, the Security Insurer shall be
subrogated to, and each Holder of a Class A Certificate and the Trustee
hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trustee and such Holder in the conduct of any Insolvency
Proceeding, including all rights of any party to an adversary proceeding
action with respect to any court order issued in connection with any such
Insolvency Proceeding.
(c) The Trustee shall furnish to the Security Insurer its records
evidencing the distributions of principal of and interest on the Class A
Certificates that have been made by the Trustee and subsequently recovered
from Holders and the dates on which such payments were made.
Section 5.12. Effect of Payments by the Security Insurer; Subrogation.
_______________________________________________________
(a) Anything herein to the contrary notwithstanding, any distribution of
principal of or interest on the Class A Certificates that is made with moneys
received pursuant to the terms of the Policy shall not be considered a
distribution by the Trustee, shall not discharge the Trust assets in respect
of such distribution and shall not result in the distribution of or the
provision for the distribution of principal of or interest on the Class A
Certificates hereunder. The Trustee acknowledges that, without the need for
any further action on the part of the Security Insurer, the Trustee or the
Registrar, (i) to the extent the Security Insurer makes payments, directly
or indirectly, on account of principal of or interest on the Class A
Certificates to the Holders thereof, the Security Insurer will be fully
subrogated to the rights of such Holders to receive such principal
and interest from distributions of the assets of the Trust and will be deemed
to the extent of the payments so made to be a Holder of Class A Certificates
and (ii) the Security Insurer shall be paid principal and interest in its
capacity as a Holder of Class A Certificates until all such payments by the
Security Insurer have been fully reimbursed, but only from the sources and
in the manner provided herein for the distribution of such principal and
interest and in each case only after the Holders of the Class A Certificates
have received all Guaranteed Distributions due to them under this Agreement.
(b) Without limiting the rights or interests of the Holders of Class
A Certificates as otherwise set forth herein and subject to Article X, so
long as no Security Insurer Default exists, the Trustee shall cooperate in
all respects with any reasonable request by the Security Insurer for action
to preserve or enforce the Security Insurer's rights or interests under this
Agreement, including, upon the occurrence and continuance of a Servicer
Termination Event, a request to take any one or more of the following
actions:
(i) institute proceedings for the collection of all amounts then
payable on the Class A Certificates or under this Agreement in respect of the
Class A Certificates, enforce any judgment obtained and collect moneys
adjudged due; and
(ii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Security Insurer hereunder.
Section 5.13. Statements to Certificateholders. On each Distribution
________________________________
Date, the Trustee shall provide to each Holder of record of a Certificate as
of the most recent Record Date a copy of the statement provided by the
Servicer to the Trustee on the related Determination Date, which shall be
substantially in the form of Exhibit E.
Section 5.14. Accounting and Tax Returns. The Trustee shall (a)
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maintain (or cause to be maintained) the books of the Trust on a calendar
year basis and the accrual method of accounting (or on such other basis or
method as may be required by the Code and applicable Treasury Regulations),
(b) file or cause to be filed, for each of its taxable years, an Internal
Revenue Service Form 1041 and any other federal and state income tax returns
and information statements required to be filed by a grantor trust, and (c)
deliver to each Holder an Internal Revenue Service Schedule K-1 (Form 1041)
or any successor schedule and supplemental or other information, if any,
required or permitted by law to enable each Holder to prepare its federal and
state income tax returns.
ARTICLE VI
The Certificates
________________
Section 6.01. The Certificates. The Class A Certificates and the
________________
Class B Certificates shall be substantially in the form of Exhibit A and
Exhibit B, respectively. The Certificates shall be issued in fully
registered form in minimum denominations of $( ) and integral multiples of
$( ) in excess thereof, except that one Class A Certificate and one Class B
Certificate may be issued in a denomination representing the remainder of the
Class A Certificate Balance or Class B Certificate Balance, as applicable.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Trustee. Certificates
bearing the manual or facsimile signatures of individuals who were, at the
time when such signatures were affixed, authorized to sign on behalf of the
Trustee shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding the fact that such individuals or any of them have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of authentication and
delivery of such Certificates.
Section 6.02. Authentication of Certificates. Concurrently with the
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conveyance of the Receivables to the Trust, the Trustee shall cause the
Certificates to be executed on behalf of the Trust by an authorized Trust
officer, and authenticated and delivered to or upon the written order of the
Depositor, without further corporate action by the Depositor, in authorized
denominations. No Certificate shall entitle its Holder to any benefit under
this Agreement or be valid for any purpose unless there shall appear on such
Certificate a certificate of authentication, executed by the Trustee by
manual signature. Such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 6.03. Registration of Transfer and Exchange. (a) The Trustee
_____________________________________
shall cause to be kept a register (the "Certificate Register") in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and the registration of
transfers of Certificates. The Trustee shall be the initial "Certificate
Registrar" for the purpose of registering Certificates and transfers of
Certificates as herein provided. Upon the resignation of any Certificate
Registrar, the Trustee shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Certificate Registrar.
If a Person other than the Trustee is appointed as Certificate
Registrar, the Trustee shall give prompt written notice of the appointment
of such Certificate Registrar and of the location, and any change in the
location, of the Certificate Register, and the Trustee shall have the right
to inspect the Certificate Register at all reasonable times, to obtain copies
thereof and to rely conclusively upon a certificate executed on behalf of the
Certificate Registrar by an authorized officer thereof as to the names and
addresses of the Certificateholders and the principal amounts and number of
the Certificates.
Upon surrender for registration of transfer of any Certificate at the
office or agency of the Trustee to be maintained as provided in Section 6.08,
the Trustee shall execute, authenticate and deliver to the designated
transferee or transferees, one or more new Certificates in any authorized
denominations of a like aggregate principal amount.
At the option of the Holder, Certificates may be exchanged for other
Certificates in any authorized denominations of a like aggregate principal
amount. Whenever any Certificates are so surrendered for exchange, the
Trustee shall execute, authenticate and deliver to the Holder the
Certificates that the Certificateholder making the exchange is entitled to
receive.
All Certificates issued upon any registration of transfer or exchange
of Certificates shall be the valid obligations of the Trust, evidencing the
same interest in the Trust and entitled to the same benefits under this
Agreement as the Certificates surrendered upon such registration of transfer
or exchange.
(b) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a
written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located or having a correspondent located in The City of New York or the city
in which the Corporate Trust Office is located or by a member firm of a
national securities exchange, and such other documents as the Trustee may
require.
(c) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any registration of transfer or exchange of
Certificates.
Section 6.04. Certain Transfer Restrictions. (a) (RESERVED)
_____________________________
(b) No transfer of a Class B Certificate shall be made or registered
unless the Trustee shall have received a representation from the transferee
of such Class B Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan, trust or account (each a "Benefit Plan") subject to
the fiduciary responsibility provisions of ERISA or Section 4975 of the Code
or a Person acting on behalf of any such Benefit Plan or using assets of a
Benefit Plan to acquire Class B Certificates. Any proposed transfer of a
Class B Certificate to or on behalf of a Benefit Plan subject to ERISA or the
Code without the delivery to the Trustee of an Opinion of Counsel
satisfactory to the Trustee shall be void and of no effect. The Trustee
shall be under no liability to any Person for any registration of transfer
of any Class B Certificate that is in fact not permitted by this Section
6.04(b) or for making any payments due on such Class B Certificate to the
Holder thereof or taking any other action with respect to such Holder under
the provisions of this Agreement so long as such transfer is registered by
the Trustee in accordance with the foregoing requirements. The Trustee shall
be entitled, but not obligated, to recover from any Holder of a Class B
Certificate that was in fact a Benefit Plan subject to Section 406 of ERISA
or Section 4975 of the Code, or a Person acting on behalf of any such Benefit
Plan at the time it became a Holder or that subsequently became such a
Benefit Plan or Person acting on behalf of such a Benefit Plan, all payments
made on such Class B Certificate at and after either such time. Any payments
so recovered by the Trustee shall be paid and delivered by the Trustee to the
last preceding Holder of such Certificate that is not, and was not at the
time it held such Certificate, a Benefit Plan or Person acting on behalf of
a Benefit Plan.
(c) No transfer of a Class B Certificate or any interest therein shall
be made unless prior to such transfer the Holder of such Class B Certificate
delivers to the Depositor and the Trustee either a ruling of the Internal
Revenue Service or an Opinion of Counsel to the effect that the proposed
transfer will not result in the arrangement contemplated by this Agreement
being treated as an association taxable as a corporation under either the
Code or the tax laws of the State of New York.
(d) The Trustee shall cause each Class B Certificate to contain a
legend setting forth the applicable restrictions on transfer set forth herein
and referring prospective purchasers of the Class B Certificates to this
Section 6.04 with respect to such restrictions.
Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates. If
_________________________________________________
(a) any mutilated Certificate shall be surrendered to the Certificate
Registrar or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Trustee such
security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Certificate has been
acquired by a bona fide purchaser, the Trustee on behalf of the Trust
shall execute, and the Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate,
a new Certificate of like tenor and denomination. In connection with the
issuance of any new Certificate under this Section, the Trustee and the
Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of ownership of a beneficial interest in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 6.06. Persons Deemed Owners. Prior to due presentation of a
_____________________
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate is registered
in the Certificate Register as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 5.08 and for all other
purposes whatsoever, and neither the Trustee nor the Certificate Registrar
shall be bound by any notice to the contrary.
Section 6.07. Access to List of Certificateholders' Names and
_______________________________________________
Addresses. The Certificate Registrar shall furnish or cause to be furnished
_________
to the Trustee and the Servicer, within 15 days after receipt by the
Certificate Registrar of a request therefor from the Trustee or the Servicer,
as applicable, in writing, a list, in such form as the Trustee or Servicer
may reasonably require, of the names and addresses of the Certificateholders
as of the most recent Record Date. If three or more Certificateholders, or
one or more Holders of Certificates evidencing not less than 25% of the
Certificate Balance apply in writing to the Trustee, and such application
states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current
list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed to hold neither the Servicer 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 6.08. Maintenance of Office or Agency. The Trustee shall
_______________________________
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Certificates and this Agreement may be served.
The Trustee initially designates its office located at ( ), for such
purposes. The Trustee shall give prompt written notice to the Servicer and
the Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
Section 6.09. Book-Entry Certificates. Unless the Holder thereof
_______________________
requests that Class A Certificates be delivered in definitive, fully
registered form ("Definitive Certificates"), the Class A Certificates, upon
original issuance, will be issued in the form of one or more typewritten
Certificates representing Book-Entry Certificates, to be delivered to the
Depository Trust Company, the initial Clearing Agency, by or on behalf of the
Trust. The Book-Entry Certificates shall be registered initially on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency. With respect to the Book-Entry Certificates:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Depositor, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Book-Entry Certificates) as the sole Holder
of such Book-Entry Certificates and shall have no obligation to the related
Certificate Owners;
(c) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control;
(d) the rights of such Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law
and agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants pursuant to the Depository Agreement. The
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal and
interest on the Book-Entry Certificates to such Clearing Agency Participants;
and
(e) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Book-Entry Certificates
and has delivered such instructions in writing to the Trustee.
Neither the Trustee nor the Certificate Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership
in any Certificate an interest in which is transferable through the
facilities of the Depository.
Section 6.10. Notices to Clearing Agency. Whenever a notice or other
__________________________
communication to Holders of the Book-Entry Certificates is required under
this Agreement, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of Certificates to the
Clearing Agency.
ARTICLE VII
The Depositor
_____________
Section 7.01. Depositor's Representations. The Depositor makes the
___________________________
following representations with respect to itself on which the Trustee relies
in accepting the Receivables in trust and delivering the Certificates and the
Security Insurer relies in issuing the Policy. The representations speak as
of the execution and delivery of this Agreement and as of the Closing Date,
but shall survive the transfer and assignment of the Receivables to the
Trust.
(a) Organization and Good Standing. The Depositor is duly organized
______________________________
and validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business
is presently conducted.
(b) Due Qualification. The Depositor is duly qualified to do business
_________________
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions where the failure to do so
would materially and adversely affect the Depositor's ability to transfer
the Receivables to the Trust pursuant to this Agreement or the validity or
enforceability of the Receivables.
(c) Power and Authority. The Depositor has the corporate power and
___________________
authority to execute and deliver this Agreement and the other Basic Documents
to which it is a party and to carry out their respective terms; the Depositor
has the corporate power, authority and legal right to acquire and own and to
sell, transfer and assign the Receivables to the Trust and has duly
authorized such sale, transfer and assignment to the Trust by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and the other Basic Documents to which the Depositor is a party
have been duly authorized by the Depositor by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement and the other
_______________________________
Basic Documents to which the Depositor is a party, when duly executed and
delivered by the other parties hereto and thereto, shall constitute legal,
valid and binding obligations of the Depositor, enforceable against the
Depositor in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, and similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and to general principles of equity
(whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions contemplated
____________
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents shall not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time, or both) a default
under, the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement, mortgage, deed of trust, or other instrument to which
the Depositor is a party or by which it is bound; or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust, or other
instrument, other than this Agreement, the other Basic Documents; or violate
any law, order, rule or regulation applicable to the Depositor of any court
or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or its
properties.
(f) No Proceedings. There are no proceedings or investigations pending
______________
or, to the Depositor's knowledge, threatened against the Depositor, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Depositor or its
properties: (1) asserting the invalidity of this Agreement or any other Basic
Document; (2) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement or any
other Basic Document; (3) seeking any determination or ruling that might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement or
any other Basic Document; or (4) seeking to adversely affect the federal
income tax attributes of the Trust or the Certificates.
(g) Chief Executive Office. The chief executive office of the
______________________
Depositor is located at 570 Lake Cook Road, Suite 126B, Deerfield, Illinois
60015.
(h) No Consents. The Depositor is not required to obtain the consent
___________
of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau
or agency in connection with the execution, delivery,
performance, validity, or enforceability of this Agreement or any other Basic
Document to which it is a party that has not already been obtained.
Section 7.02. Corporate Existence. During the term of this Agreement,
___________________
the Depositor shall keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the other Basic Documents and each other
instrument or agreement necessary or appropriate to the proper administration
of this Agreement and the other Basic Documents and the transactions
contemplated hereby or thereby.
Section 7.03. Liabilities of Depositor. The Depositor shall be liable
________________________
hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Depositor and the representations made by the
Depositor.
Section 7.04. Merger or Consolidation of, or Assumption of the
________________________________________________
Obligations of, the Depositor. The Depositor shall not merge or consolidate
_____________________________
with any other Person or permit any other Person to become the successor to
the Depositor's business without the prior written consent of the Security
Insurer. Any such successor corporation shall execute an agreement of
assumption of every obligation of the Depositor under this Agreement and the
other Basic Documents and, whether or not such assumption agreement is
executed, shall be the successor to the Depositor 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. The Depositor shall provide
prompt notice of any merger, consolidation or succession pursuant to this
Section 7.04 to the Trustee, the Security Insurer, the Certificateholders and
the Rating Agencies. Notwithstanding the foregoing, the Depositor shall not
merge or consolidate with any other Person or permit any other Person to
become a successor to the Depositor's business unless (x) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to Section 3.02 or 7.01 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse
of time or both, would become a Servicer Termination Event shall have
occurred and be continuing, (y) the Depositor shall have delivered to the
Trustee and the Security Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 7.04 and that all conditions
precedent provided for in this Agreement relating to such transaction have
been complied with and (z) the Depositor shall have delivered to the Trustee
and the Security Insurer an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Trust in the
Receivables and reciting the details of the filings or (B) no such action is
necessary to preserve and protect such interest.
Section 7.05. Limitation on Liability of Depositor and Others. The
_______________________________________________
Depositor and any director, officer, employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Depositor shall be under no
obligation to appear in, prosecute or defend any legal action that shall not
be related to its obligations as Depositor of the Receivables under this
Agreement and that in its opinion may involve it in any expense or liability.
ARTICLE VIII
The Servicer
____________
Section 8.01. Representations of Servicer. The Servicer makes the
___________________________
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates and
the Security Insurer relies in issuing the Policy. The representations speak
as of the execution and delivery of this Agreement and as of the Closing
Date, but shall survive the transfer and assignment of the Receivables to the
Trust.
(a) Organization and Good Standing. The Servicer has been duly
______________________________
organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or other organization, with power,
authority and legal right to own its properties and to conduct its business
as such properties are currently owned and such business is currently
conducted;
(b) Due Qualification. The Servicer is duly qualified to do business
_________________
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of its property or the conduct of its business (including the servicing of
the Receivables as required by this Agreement) require such qualifications;
(c) Power and Authority. The Servicer has the power and authority to
___________________
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their respective terms; and the execution,
delivery and performance of this Agreement and the other Basic Documents to
which it is a party have been duly authorized by the Servicer by all
necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents to
__________________
which it is a party constitute legal, valid and binding obligations of the
Servicer, enforceable against the Servicer in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions contemplated
____________
by this Agreement and the Basic Documents to which it is a party and the
fulfillment of their respective terms shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Servicer is a party
or by which it is bound; or 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 and the Basic Documents, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or any of its properties; and
(f) No Proceedings. There are no proceedings or investigations pending
______________
or, to the Servicer's knowledge, threatened against the Servicer before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties: (1) asserting the invalidity of this Agreement or any of the
Basic Documents; (2) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement or any of the Basic Documents; (3) seeking any determination or
ruling that might materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement or any of the Basic Documents; or (4) seeking to adversely
affect the federal income tax or other federal, state or local tax
attributes of the Trust or the Certificates.
(g) Information to Backup Servicer. The Servicer represents and
______________________________
warrants to the Backup Servicer that the database and information prepared
by the Servicer and furnished to the Backup Servicer hereunder concerning the
Receivables is accurate and complete in all material respects.
Section 8.02. Liability of Servicer; Indemnities. (a) The Servicer
__________________________________
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations
made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Trustee,
the Backup Servicer, the Security Insurer, their respective officers,
directors, agents and employees, and the Certificateholders from and against
any and all costs, expenses, losses, damages, claims, and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation
arising out of or resulting from the use, ownership or operation by the
Servicer or any Affiliate thereof of any Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the Trustee,
the Backup Servicer, the Security Insurer, their respective officers,
directors, agents and employees, and the Certificateholders from and against
any taxes that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement, including any
sales, gross receipts, tangible or intangible personal property, privilege
or license taxes (but not including any federal or other income taxes,
including franchise taxes asserted with respect to, and as of the date of,
the transfer of the Receivables to the Trust or the issuance and original
sale of the Certificates), and costs and expenses in defending against the
same.
(d) The Servicer shall indemnify, defend and hold harmless the Trustee,
the Backup Servicer, the Security Insurer, their respective officers,
directors, agents and employees, and the Certificateholders from and against
any and all costs, expenses, losses, claims, damages, and liabilities to the
extent that such cost, expense, loss, claim, damage, or liability arose out
of, or was imposed upon the Trustee, the Backup Servicer, the Security
Insurer or the Certificateholders by reason of a breach of this Agreement by
the Servicer, the negligence, misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of the Servicer's
reckless disregard of its obligations and duties under this Agreement.
(e) Indemnification under this Section shall survive the resignation
or removal of any indemnified party or the termination of this Agreement and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to this
Section and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay the amounts so collected to the
Servicer, without interest.
Section 8.03. Merger or Consolidation of, or Assumption of the
________________________________________________
Obligations of, the Servicer or Backup Servicer. (a) The Servicer shall not
_______________________________________________
merge or consolidate with any other person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease, or succession, the
successor or surviving entity shall be capable of fulfilling the duties of
the Servicer contained in this Agreement and shall be reasonably acceptable
to the Controlling Party. Any corporation (i) into which the Servicer may
be merged or consolidated, (ii) resulting from any merger or consolidation
to which the Servicer shall be a party, (iii) that acquires by conveyance,
transfer or lease substantially all of the assets of the Servicer or (iv)
succeeding to the business of the Servicer, which Person shall execute an
agreement of assumption to perform every obligation of the Servicer under
this Agreement, shall be the successor to the Servicer under this Agreement
without the execution or filing of any paper or any further act on the part
of any of the parties to this Agreement. The Servicer shall provide notice
of any merger, consolidation or succession pursuant to this Section 8.03(a)
to the Trustee, the Certificateholders, the Security Insurer and each Rating
Agency. Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business unless (x) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 8.01 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation
of such transaction) and no event that, after notice or lapse of time or
both, would become a Servicer Termination Event shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Trustee and the
Security Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 8.03(a) and that all conditions precedent
provided for in this Agreement relating to such transaction have been
complied with and (z) the Servicer shall have delivered to the Trustee and
the Security Insurer an Opinion of Counsel stating that either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Receivables and reciting the details of such
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance,
transfer or lease substantially all of the assets of the Backup Servicer or
(iv) succeeding to the business of the Backup Servicer, which Person shall
execute an agreement of assumption to perform every obligation of the Backup
Servicer under this Agreement, shall be the successor to the Backup Servicer
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties to this Agreement.
Section 8.04. Limitation on Liability of Servicer, Backup Servicer and
________________________________________________________
Others. (a) None of the Servicer, the Backup Servicer or any of their
______
respective directors, officers, employees or agents shall be under any
liability to the Trustee or the Certificateholders, except as provided in
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer, the Backup Servicer or any such person
against any liability that would otherwise be imposed by reason of a breach
of this Agreement or willful misfeasance, bad faith or negligence in the
performance of duties. The Servicer, the Backup Servicer and any director,
officer, employee or agent of the Servicer or Backup Servicer may rely in
good faith on the written advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Trustee, the
Depositor, the Security Insurer and the Holders of the Certificates shall
look only to the Servicer to perform such obligations. The Backup Servicer
and the Trustee shall have no responsibility and shall not be in default
hereunder or incur any liability for any failure, error, malfunction or any
delay in carrying out any of its duties under this Agreement if such failure
or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer
or the failure of any such other Person to prepare or provide such
information. The Backup Servicer shall have no responsibility, shall not be
in default and shall incur no liability for (i) any act or failure to act of
any third party, including the Servicer or the Controlling Party, (ii) any
inaccuracy or omission in a notice or communication received by the Backup
Servicer from any third party, (iii) the invalidity or unenforceability of
any Receivable under applicable law, (iv) the breach or inaccuracy of any
representation or warranty made with respect to any Receivable, or (v) the
acts or omissions of any successor Backup Servicer.
(c) The parties expressly acknowledge and consent to ( ) acting in the
capacity of Backup Servicer or successor Servicer and Trustee and as
collateral agent under the Spread Account Agreement and the Local Collection
Account Agreement. ( ) may, in such capacities, discharge its separate
functions fully, without hinderance or regard to conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties
to the extent that any such conflict or breach arises from the performance
by ( ) of express duties set forth in this Agreement in any of such
capacities.
Section 8.05. Appointment of Subservicer. The Servicer may at any
__________________________
time, with the Security Insurer's consent, appoint a subservicer to perform
all or any portion of its obligations as Servicer hereunder; provided,
however, that 10 days' prior notice of such appointment shall have been given
to the Rating Agencies and each Rating Agency shall have notified the
Servicer, the Backup Servicer and the Trustee in writing that such
appointment will not result in a reduction or withdrawal of the then current
rating of the Class A Certificates or result in an increased capital charge
to the Security Insurer; and, provided, further, that the Servicer shall
remain obligated and be liable to the Trustee, the Security Insurer and the
Holders of the Certificates for the servicing and administering of the
Receivables in accordance with the provisions hereof without diminution of
such obligation and liability by virtue of the appointment of such
subservicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Receivables.
The fees and expenses of any subservicer shall be as agreed between the
Servicer and such subservicer from time to time, and none of the Trustee, the
Trust, the Backup Servicer, the Security Insurer or the Holders of the
Certificates shall have any responsibility therefor.
Section 8.06. Servicer and Backup Servicer Not to Resign. Subject to
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the provisions of Section 8.03, neither the Servicer nor the Backup Servicer
shall resign from the obligations and duties imposed on it by this Agreement
as Servicer or Backup Servicer, as applicable, except upon a determination
that the performance of its duties under this Agreement shall no longer be
permissible under applicable law or, in the case of the Backup Servicer only,
if the Backup Servicer resigns or is removed as Trustee (in which case the
Backup Servicer may resign as Backup Servicer subject to the same conditions
applicable to the Trustee pursuant to Section 10.07). Notice of any
determination that the performance by either the Servicer or the Backup
Servicer of its duties hereunder is no longer permitted under applicable
law shall be communicated to the Trustee and the Security Insurer at the
earliest practicable time (and, if such communication is not in writing,
shall be confirmed in writing at the earliest practicable time) and any
such determination shall be evidenced by an Opinion of Counsel to such
effect delivered by the Servicer or Backup Servicer, as applicable, to
the Trustee and the Security Insurer concurrently with or promptly after
such notice. No resignation of the Servicer shall become effective until
the Backup Servicer or a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with
Section 9.03. No resignation of the Backup Servicer shall become effective
until an entity acceptable to the Controlling Party shall have assumed the
responsibilities and obligations of the Backup Servicer.
ARTICLE IX
Servicer Termination Events
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Section 9.01. Servicer Termination Events. For purposes of this
___________________________
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) any failure by the Servicer to deposit to any Local Collection
Account or the Collection Account any proceeds or payment required to be so
delivered under the terms of this Agreement that continues unremedied for a
period of two Business Days (one Business Day with respect to payments of
Purchase Amounts) after written notice is received by the Servicer or after
discovery of such failure by a Responsible Officer of the Servicer;
(b) failure by the Servicer to deliver to the Trustee, the Depositor
and (so long as the Security Insurer is the Controlling Party) the Security
Insurer the Servicer's Certificate by the applicable Determination Date, or
to observe any covenant or agreement set forth in Section 4.06;
(c) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement,
which failure (i) materially and adversely affects the rights of the
Certificateholders (determined without regard to the availability of funds
under the Policy) or of the Security Insurer (unless the Security Insurer is
no longer the Controlling Party) and (ii) continues unremedied for a period
of 30 days after knowledge thereof by the Servicer or after the date on which
written notice of such failure requiring the same to be remedied shall have
been given to the Servicer by the Trustee or the Security Insurer (or, if a
Security Insurer Default shall have occurred and be continuing, Holders of
Certificates evidencing 25% of the Certificate Balance);
(d) the occurrence of an Insolvency Event with respect to the Servicer
or, so long as First Merchants is the Servicer, the Depositor;
(e) so long as the Security Insurer is the Controlling Party, any
failure by the Security Insurer to have delivered a Servicer Extension Notice
pursuant to Section 4.14;
(f) so long as the Security Insurer is the Controlling Party, an
Insurance Agreement Event of Default shall have occurred and be continuing;
or
(g) the Servicer is terminated as servicer with respect to any other
entity that has issued one or more classes of asset backed securities with
respect to which the Security Insurer has issued a financial insurance
guaranty policy.
Section 9.02. Consequences of a Servicer Termination Event. If a
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Servicer Termination Event shall occur and be continuing, the Security
Insurer or, if the Security Insurer is no longer the Controlling Party, the
Trustee or Holders of Certificates evidencing a majority of the Certificate
Balance, by notice given in writing to the Servicer (and to the Trustee and
the Depositor if given by the Security Insurer or such Holders), may
terminate all of the rights and obligations of the Servicer under this
Agreement. On or after the receipt by the Servicer of such written notice
or upon termination of the Servicer pursuant to Section 4.14, all authority,
power, obligations and responsibilities of the Servicer under this Agreement
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Controlling Party); provided, however, that the successor
Servicer shall have no liability with respect to any obligation that was
required to be performed by the terminated Servicer prior to the date that
the successor Servicer becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The
successor Servicer is authorized and empowered by this Agreement to execute
and deliver, on behalf of the terminated Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents to show the Trustee as
lienholder or secured party on the related certificates of title of the
Financed Vehicles or otherwise. The terminated Servicer agrees to cooperate
with the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of
all money and property held by the Servicer with respect to the Receivables
and the delivery to the successor Servicer of all Receivable Files and other
records relating to the Receivables and a computer tape in readable form as
of the most recent Business Day containing all information necessary to
enable the successor Servicer to service the Receivables.
Section 9.03. Appointment of Successor. (a) On and after the time the
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Servicer receives a notice of termination pursuant to Section 9.02, upon
non-extension of the servicing term as referred to in Section 4.14, or upon
the resignation of the Servicer pursuant to Section 8.06, the Backup Servicer
(unless the Security Insurer shall have exercised its option pursuant to
Section 9.03(b) to appoint an alternate successor Servicer) shall be the
successor in all respects to the Servicer in its capacity as Servicer under
this Agreement and shall be subject to all the rights, responsibilities,
restrictions, duties, liabilities, and termination provisions relating to the
Servicer under this Agreement, except as otherwise stated herein. The
Depositor, the Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to term-to-term servicing as referred to in Section 4.14 and
to termination under Section 9.02 upon the occurrence of any Servicer
Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint
as Backup Servicer or as successor to the Servicer a Person other than the
Person serving as Backup Servicer at the time, and shall have no liability
to the Trustee, the Servicer, the Depositor, the Person then serving as
Backup Servicer, any Certificateholders or any other Person if it does
so. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer, and the Security Insurer is no longer
the Controlling Party, the Backup Servicer, the Trustee or Holders of
Certificates evidencing a majority of the Certificate Balance may petition
a court of competent jurisdiction to appoint any Eligible Servicer as the
successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue
to act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 8.06, no provision of this Agreement shall
be construed as relieving the Backup Servicer of its obligation to succeed
as successor Servicer upon the termination of the Servicer pursuant to
Section 9.02, the resignation of the Servicer pursuant to Section 8.06 or the
non-extension of the servicing term of the Servicer pursuant to Section 4.14.
If upon the termination of the Servicer pursuant to Section 9.02 or the
resignation of the Servicer pursuant to Section 8.06, the Controlling Party
appoints a successor Servicer other than the Backup Servicer, the Backup
Servicer shall not be relieved of its duties as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to receive the Servicing
Fee.
Section 9.04. Notification to Rating Agencies. Upon any termination
_______________________________
of, or appointment of a successor to, the Servicer pursuant to this Article
IX, the Depositor shall give prompt written notice thereof to each Rating
Agency and the Trustee.
Section 9.05. Waiver of Past Defaults. The Security Insurer or (if the
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Security Insurer is no longer the Controlling Party) Holders of Certificates
evidencing a majority of the Certificate Balance may, on behalf of the
Holders of all of the Certificates, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
Termination Event arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 9.06. Repayment of Advances. The Servicer, if it resigns or
_____________________
is removed pursuant to the terms of this Agreement, shall be entitled to
receive reimbursement for Outstanding Advances made by it pursuant to
Sections 5.05.
ARTICLE X
The Trustee
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Section 10.01. Duties of Trustee. (a) The duties and obligations of
_________________
the Trustee shall be determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement; provided,
however, that the Trustee shall examine such certificates and opinions to
determine whether or not they conform to the requirements of this Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as Schedule I to this Agreement and shall retain all
Servicer's Certificates identifying Receivables that become Purchased
Receivables or Liquidated Receivables.
(d) The Trustee shall not be liable for any action taken, suffered or
omitted to be taken in good faith in accordance with this Agreement or at the
direction of the Holders of Certificates evidencing not less than 25% of the
Certificate Balance relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee or the Trust, or
exercising any trust or power conferred upon the Trustee under this
Agreement, or for the acts or omissions of any successor Trustee.
(e) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent actions, its own negligent
failure to act or its own bad faith or willful misconduct; provided, however,
that the Trustee shall not be liable for any error of judgment made in good
faith by a Trustee Officer unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(f) No provision of this Agreement shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if the Trustee shall have reasonable grounds to believe that
repayment of such funds or indemnity reasonably satisfactory to it against
such risk or liability is not reasonably assured to it.
(g) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or to impair the value of
any Receivable.
(h) The Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with its obligations hereunder unless a Trustee
Officer obtains actual knowledge of such failure or receives written notice
of such failure from the Servicer or Holders of Certificates representing in
the aggregate not less than 25% of the Certificate Balance.
(i) None of the provisions contained in this Agreement shall in any
event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement,
except during the times, if any, when the Trustee shall be the successor to,
and be vested with the rights, duties, powers and privileges of, the Servicer
in accordance with the terms of this Agreement.
Section 10.02. Certain Matters Affecting Trustee. Except as otherwise
_________________________________
provided in Section 10.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in any such document.
(b) The Trustee may consult with counsel, and the written advice or
opinion of counsel with respect to legal matters or relating to this
Agreement or the Certificates shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted
by it under this Agreement in good faith and in accordance with such advice
or opinion of such counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement at the request, order or direction
of any of the Certificateholders pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that may be incurred therein or thereby.
(d) The Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith that it believes to be authorized or within its
rights or powers conferred upon it by this Agreement; provided, that such
conduct does not constitute willful misconduct, bad faith or negligence on
the part of the Trustee.
(e) The Trustee may execute any of the trusts or powers or perform any
duties hereunder either directly or by or through agents or attorneys or a
custodian and the Trustee shall not be responsible for any misconduct or
negligence of any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
Section 10.03. Trustee Not Liable for Certificates or Receivables. The
__________________________________________________
recitals contained herein and in the Certificates (other than the certificate
of authentication on the Certificates) shall be taken as the statements of
the Depositor or the Servicer, as the case may be, and the Trustee assumes
no responsibility for the correctness thereof. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the
Certificates) or of any Receivable or related document. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Receivable, or the perfection
or priority of any security interest created by any Receivable in any
Financed Vehicle or the maintenance of any such perfection and priority, or
for or with respect to the efficacy of the Trust or its ability to generate
the payments to be distributed to Certificateholders under this Agreement,
including: the existence, condition and ownership of any Financed Vehicle;
the existence and enforceability of any insurance thereon; the existence and
contents of any Receivable or any computer or other record thereof; the
validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance
or enforcement of any Receivable; the compliance by the Depositor or the
Servicer with any warranty or representation made under this Agreement or in
any related document or the accuracy of any such warranty or representation
before receipt of notice or other discovery of any breach thereof; or any
action of the Servicer taken in the name of the Trustee.
Section 10.04. Trustee May Own Certificates. The Trustee in its
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individual or any other capacity may become the owner or pledgee of
Certificates and may deal with the Depositor and the Servicer in banking
transactions with the same rights that it would have if it were not Trustee.
Section 10.05. Trustee's Fees and Expenses. The Servicer shall pay to
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the Trustee, and the Trustee shall be entitled to receive as compensation for
its services hereunder, such fees as have been separately agreed upon before
the date hereof between the Servicer and the Trustee, and the Trustee shall
be entitled to reimbursement by the Servicer for its reasonable expenses
under this Agreement, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the
Trustee may employ in connection with the exercise and performance of its
rights and duties under this Agreement, except any such expenses and fees
that may arise from the Trustee's negligence, willful misfeasance or bad
faith or that are the responsibility of Certificateholders under this
Agreement.
Section 10.06. Eligibility Requirements for Trustee. The Trustee shall
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at all times be a corporation having an office in the same state as the
location of the Corporate Trust Office; organized and doing business under
the laws of such state or the United States of America; authorized under such
laws to exercise corporate trust powers; having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authorities; and having (or having a parent that has) a
rating of at least Baa3 by Moody's. If such corporation shall publish
reports of condition at least annually pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 10.07.
Section 10.07. Resignation or Removal of Trustee. The Trustee may
_________________________________
resign at any time and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer and, if the Security Insurer is the
Controlling Party, the Security Insurer. Upon receiving such notice of
resignation, the Servicer or, if the Security Insurer is the Controlling
Party, the Security Insurer shall promptly appoint a successor Trustee, by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor Trustee.
If no successor Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 10.06 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
the Servicer or, if the Security Insurer is the Controlling Party, the
Security Insurer may remove the Trustee. If the Servicer or the Security
Insurer shall remove the Trustee under the authority of the immediately
preceding sentence, the Servicer or the Security Insurer, as applicable,
shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing
Trustee so removed and one copy to the successor Trustee, and shall pay all
fees owed to the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant
to Section 10.08. The Servicer shall provide notice of any resignation or
removal of the Trustee to each of the Rating Agencies.
Section 10.08. Successor Trustee. Any successor Trustee appointed
_________________
pursuant to Section 10.07 shall execute, acknowledge and deliver to the
Servicer and to its predecessor Trustee an instrument accepting its
appointment as successor Trustee under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally
named as Trustee. The predecessor Trustee shall deliver to the successor
Trustee all documents, statements and moneys held by it under this Agreement;
and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 10.06.
Upon acceptance of appointment by a successor Trustee pursuant to this
Section, the Servicer shall mail notice thereof to all Certificateholders,
the Rating Agencies and the Security Insurer. If the Servicer shall fail to
mail such notice within 10 days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed
at the expense of the Servicer.
Section 10.09. Merger or Consolidation of Trustee. Any corporation into
__________________________________
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee shall be the successor of the Trustee hereunder, provided that such
corporation is eligible to serve as Trustee pursuant to Section 10.06,
without the execution or filing of any instrument or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall mail notice of any such merger or
consolidation to the Rating Agencies and the Security Insurer.
Section 10.10. Appointment of Co-Trustee or Separate Trustee.
_____________________________________________
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or any Financed Vehicle may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved
by the Trustee to act as co-trustee, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest
in such Person, in such capacity and for the benefit of the
Certificateholders, such title to the Trust or any part thereof and, subject
to the other provisions of this Section, such powers, duties, obligations,
rights and trusts as the Servicer and the Trustee may consider necessary or
desirable. If the Servicer shall not have joined in any such appointment
within 15 days after the receipt by it of a request to do so, the Trustee
alone shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor Trustee pursuant to Section 10.06 and no notice
of the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 10.08.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or
imposed upon any such separate trustee or co-trustee shall be conferred upon
and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee joining
in such act), except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed, the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed
with the Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee
its agent or attorney-in-fact with full power and authority, to the extent
not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies, and trusts shall vest in and
be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
Section 10.11. Representations and Warranties of Trustee. The Trustee
_________________________________________
makes the following representations and warranties, on which the Depositor
and Certificateholders shall be deemed to rely:
(a) The Trustee is a (state) banking corporation, validly existing
and in good standing under the laws of the State of ( ).
(b) The Trustee has full corporate power, authority and legal
right to execute and deliver, and to perform its obligations under, this
Agreement and each Basic Document to which it is a party, and has taken all
necessary action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement and each Basic Document
to which it is a party.
(c) This Agreement and each Basic Document to which it is a party
have been duly executed and delivered by the Trustee and shall constitute
legal, valid and binding obligations of the Trustee, subject to applicable
bankruptcy, insolvency, reorganization and similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and to general
principles of equity (whether applied in a proceeding at law or in equity).
(d) The execution, delivery and performance by the Trustee of this
Agreement and each Basic Document to which the Trustee is a party (i) shall
not violate any provision of any law governing the banking and trust powers
of the Trustee or, to the best of the Trustee's knowledge, any order, writ,
judgment or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) shall not violate any
provision of the corporate charter or bylaws of the Trustee and (iii) shall
not violate any provision of, or constitute, with or without notice or lapse
of time, a default under, or result in the creation or imposition of any Lien
on any properties included in the Trust pursuant to the provisions of, any
mortgage, indenture, contract, agreement or other undertaking to which the
Trustee is a party, which violation, default or Lien could reasonably be
expected to materially and adversely affect the Trustee's performance or
ability to perform its duties under this Agreement or any Basic Document to
which it is a party or the transactions contemplated in this Agreement or any
such Basic Document.
(e) The execution, delivery and performance by the Trustee of this
Agreement and each Basic Document to which the Trustee is a party shall not
require the authorization, consent, approval of, or the giving of notice to,
or the filing or registration with, or the taking of any other action in
respect of, any governmental authority or agency regulating the banking and
corporate trust activities of the Trustee.
ARTICLE XI
Termination
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Section 11.01. Termination of the Trust. (a) The respective
________________________
obligations and responsibilities of the Depositor, the Servicer, the Backup
Servicer and the Trustee hereunder and the Trust created hereby shall
terminate upon the earlier to occur of (1) the payment to Certificateholders
of all amounts required to be paid to them pursuant to this Agreement and the
disposition of all property held as part of the Trust and (2) the time
provided in Section 11.02; provided, however, that in no event shall the
trust created by this Agreement continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy,
the late ambassador of the United States to the Court of St. James, living
on the date of this Agreement. The Servicer shall promptly notify the
Trustee and the Rating Agencies of any prospective termination pursuant to
this Section.
(b) Except as provided in Section 11.01(a), neither the Depositor nor
any Certificateholder or Certificate Owner shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Trustee and the Security Insurer as soon as practicable after
the Servicer has received notice thereof.
(d) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Certificates to the
Trustee for payment of the final distribution and cancellation of the
Certificates, shall be given by the Trustee by letter to Certificateholders
mailed within five Business Days of receipt of notice of such termination
from the Servicer given pursuant to Section 11.01(c), stating (1) the
Distribution Date upon which final payment of the Certificates will be made
upon presentation and surrender of the Certificates at the office of the
Trustee therein designated, (2) the amount of such final payment and (3)
that the Record Date otherwise applicable to such Distribution Date will
not be applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. The
Trustee shall give such notice to the Certificate Registrar (if other than
the Trustee) at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Trustee shall cause to
be distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to Section 5.08.
In the event that all of the Certificateholders shall not have
surrendered their Certificates for cancellation within six months after the
date specified in the above mentioned written notice, the Trustee shall give
a second written notice to the remaining Certificateholders requesting that
such Certificateholders surrender their Certificates for cancellation and
receive the final distribution with respect thereto. If within one year
after such second notice all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion
of such remedies shall be distributed by the Trustee to the Depositor.
Section 11.02. Optional Purchase of All Receivables. On each
____________________________________
Determination Date as of which the Pool Balance is equal to or less than 10%
of the Initial Pool Balance, the Servicer shall have the option to purchase
the Receivables (with the consent of the Security Insurer, if a claim has
previously been made under the Policy or if such purchase would result in a
claim on the Policy or if such purchase would result in any amount owing and
remaining unpaid under this Agreement or the Insurance Agreement to the
Security Insurer or any other Person). To exercise such option, the Servicer
shall deposit to the Collection Account pursuant to Section 5.06 an amount
equal to the aggregate Purchase Amount for the Receivables (including
Defaulted Receivables) and shall succeed to all interests in and to the
Receivables.
ARTICLE XII
Miscellaneous Provisions
________________________
Section 12.01. Amendment. This Agreement may be amended by the
_________
Depositor, the Servicer, the Backup Servicer and the Trustee, with the prior
written consent of the Security Insurer (so long as the Security Insurer is
the Controlling Party) but without the consent of the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement
or for the purpose of adding any provisions to, or changing in any manner or
eliminating any provision in, this Agreement or of modifying in any manner
the rights of the Certificateholders; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee,
adversely affect in any material respect the interests of any
Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Backup Servicer and the Trustee with the prior written
consent of the Security Insurer (so long as the Security Insurer is the
Controlling Party) and the consent of the Holders of Certificates evidencing
not less than a majority of the Certificate Balance, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Receivables or distributions that
are required to be made on any Certificate or (b) reduce the aforesaid
percentage of the Certificate Balance required to consent to any such
amendment without the consent of the Holders of all Certificates then
outstanding.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents (and any other
consents of Certificateholders provided for in this Agreement) and of
evidencing the authorization of any action by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement
and the Opinion of Counsel referred to in Section 12.02(i). The Trustee may,
but shall not be obligated to, enter into any such amendment that affects the
Trustee's own rights, duties or immunities under this Agreement or otherwise.
Section 12.02. Protection of Title to Trust. (a) The Depositor and the
____________________________
Servicer shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Certificateholders and the Trustee in the Receivables and
in the proceeds thereof. The Depositor and the Servicer shall deliver (or
cause to be delivered) to the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless the Depositor or the Servicer, as the
case may be, shall have given the Trustee at least five days' prior written
notice of such change and shall have promptly filed appropriate amendments
to all previously filed financing statements or continuation statements.
(c) The Depositor and the Servicer shall have an obligation to 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 its principal executive
office and each office from which it shall service Receivables within the
United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (1) the reader
thereof to know at any time the
status of such Receivable, including payments and recoveries made and
payments owing (and the nature of each) and (2) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the
amounts from time to time deposited in the Collection Account in respect of
such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of transfer of the Receivables under this Agreement, the
Servicer's master computer records (including any back-up archives) that
refer to any Receivable shall indicate clearly the interest of the Trust in
such Receivable and that such Receivable is owned by the Trust. Indication
of the Trust's ownership of a Receivables shall be deleted from or modified
on the Servicer's computer systems when, and only when, such Receivable shall
have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables to, any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (including any
restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been sold and is owned by the Trust.
(g) The Servicer shall permit the Trustee and its agents to inspect,
audit and make copies of and abstracts from the Servicer's records regarding
any Receivable at any time during normal business hours upon reasonable
notice.
(h) Upon request, the Servicer shall furnish to the Trustee, within
five Business Days, a list of all Receivables (by contract number and name
of Obligor) then held as part of the Trust, together with a reconciliation
of such list to Schedule I hereto and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the
Trust.
(i) The Servicer shall deliver to the Trustee, promptly after the
execution and delivery of this Agreement and of each amendment hereto, an
Opinion of Counsel stating that, in the opinion of such Counsel, either (A)
all financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Trust in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action is necessary to preserve and protect such interest.
Section 12.03. Separate Counterparts. This Agreement may be executed
_____________________
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 12.04. Limitation on Rights of Certificateholders. (a) The
__________________________________________
death or incapacity of any Certificateholder shall not operate to terminate
this Agreement or the Trust, or entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, or otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in Section 10.01(d) or 12.01) or in any manner otherwise to control
the operation and management of the Trust or the obligations of the parties
to this Agreement; nor shall any provision in this Agreement or contained in
the Certificates be construed to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken pursuant to any provision of this Agreement.
(c) No Certificateholder shall have any right to institute any suit,
action or proceeding in equity or at law upon or under or with respect to
this Agreement unless: (1) such Holder previously shall have given to the
Trustee written notice of a continuing Servicer Termination Event; (2) the
Holders of Certificates evidencing not less than 25% of the Certificate
Balance shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Agreement
and shall have offered the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein
or thereby; (3) the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute
any such action, suit or proceeding; and (4) during such 60-day period no
request or waiver inconsistent with such written request shall have been
given to the Trustee by Holders representing a majority of the Certificate
Balance. It is understood and intended that no one or more
Certificateholders shall have any right in any manner whatever by virtue of,
or by availing of, any provisions of this Agreement to affect, disturb or
prejudice the rights of any other Certificateholder, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner provided in this
Agreement.
Section 12.05. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
_____________
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 12.06. Notices. All demands, notices and communications upon
_______
or to the Depositor, the Servicer, the Backup Servicer, the Trustee, the
Security Insurer or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Depositor, to First Merchants Auto Receivables Corporation
( ), 570 Lake Cook Road, Suite 126B, Deerfield, Illinois 60015, Attention:
( ); (b) in the case of the Servicer, to First Merchants Acceptance
Corporation, 570 Lake Cook Road, Suite 126, Deerfield, Illinois 60015,
Attention: ( ); (c) in the case of the Backup Servicer or the Trustee, to (
); (d) in the case of the Security Insurer, to ( ); (e) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007; and (f) in the case of Standard &
Poor's, to Standard & Poor's Ratings Service, 25 Broadway - 15th Floor, New
York, New York 10004, Attention: Asset Backed Surveillance Department. Any
notice required or permitted to be mailed to a Certificateholder shall be
given by first class mail, postage prepaid, at the address of such Holder as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder shall receive such notice.
Section 12.07. Severability of Provisions. Any provision of this
__________________________
Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 12.08. Assignment. Notwithstanding anything to the contrary
__________
contained herein, except as provided in Sections 7.04 and 8.03 and as
provided in the provisions of this Agreement concerning the resignation of
the Servicer and the Backup Servicer, this Agreement may not be assigned by
the Depositor, the Servicer or the Backup Servicer without the prior written
consent of the Trustee and the Security Insurer.
Section 12.09. Third-Party Beneficiaries. The Security Insurer and its
_________________________
successors and assigns shall be third-party beneficiaries of the provisions
of this Agreement, and shall be entitled to rely upon and directly to enforce
the provisions of this Agreement so long as the Security Insurer is the
Controlling Party. Nothing in this Agreement, express or implied, shall give
to any Person, other than the parties hereto, the Security Insurer and their
successors hereunder and the Certificateholders any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 12.10. Certificates Nonassessable and Fully Paid.
_________________________________________
Certificateholders shall not be personally liable for obligations of the
Trust. The interests represented by the Certificates shall be nonassessable
for any losses or expenses of the Trust or for any reason whatsoever.
Section 12.11. Limitations on Rights of Others. The provisions of this
_______________________________
Agreement are solely for the benefit of the Depositor, the Servicer, the
Backup Servicer, the Trustee, the Security Insurer and the
Certificateholders, and nothing in this Agreement, whether express or
implied, shall be construed to give any other Person any legal or equitable
right, remedy or claim in respect of the Trust or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 12.12. Headings. The headings of the various Articles and
________
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
IN WITNESS WHEREOF, the Depositor, the Servicer, the Backup Servicer and
the Trustee have caused this Pooling and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
as Depositor
By:
_______________________________
Name:
Title:
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Servicer
By:
_______________________________
Name:
Title:
( ),
as Trustee and Backup Servicer
By:
_______________________________
Name:
Title:
SCHEDULE I
Schedule of Receivables
_______________________
SCHEDULE II
Location of Receivables Files
_____________________________
<TABLE>
<CAPTION> FIRST MERCHANTS ACCEPTANCE CORPORATION
FMAC# SUPREME # NAME ADDRESS PHONE NUMBER
<S> <C> <C> <C> <C>
101 3277 Chicago Suite 302, 17 W240 22nd Street (708) 279-0045
Oakbrook Terrace, Illinois 60181 Fax: (708) 278-0094
102 3278 Pensacola Bldg. #1, Suite 1, Office Park North (904) 478-9250
6425 North Pensacola Blvd. Fax: (904) 479-1907
Pensacola, Florida 32205
103 3279 Knoxville Suite 204, 9041 Executive Park Drive (615) 693-0741
Knoxville, Tennessee 37923 Fax: (615) 531-1472
104 3280 Nashville Suite 825, 545 Mariott Drive (815) 885-5540
Nashville, Tennessee 37214 Fax: (815) 5547-885
105 3281 Memphis Suite 2524, 5100 Poplar Avenue (901) 685-9200
Memphis, Tennessee 38137 Fax: (901) 685-9233
106 3282 Louisville Suite 710, 1930 Bishop Lane (502) 456-9300
Louisville, Kentucky 40218 Fax: (502) 456-9413
107 3283 Orlando Suite 440, 6355 MetroWest Blvd. (407) 298-4800
Orlando, Florida 32835 Fax: (407) 298-3600
109 285C harlotte Suite 205, 8510 McAlpine Park Drive (704) 365-4330
Charlotte, North Carolina 28211 Fax: (704) 365-4342
110 3286 Columbia Suite 200, 100 Executive Center Drive (803) 731-0093
Columbia, South Carolina 29210 Fax: (803) 731-9886
111 3287 Tampa Suite 334, 8950 Princess Palm Avenue (813) 623-8888
Tampa, Florida 33619 Fax: (813) 620-3223
112 3288 Virginia Beach Suite 210, 440 Viking Drive (804) 498-8800
Virginia Beach, Virginia 23452 Fax: (804) 498-0551
113 3289 Durham South Park Office Center (919) 493-5099
Suite 201, 3518 Westgate Drive Fax: (919) 493-3725
Durham, North Carolina 27707
114 3290 Roanoke Suite 350, 3959 Electric Road 703) 774-7300
Roanoke, Virginia 24018 Fax: (703) 989-0095
115 3291 Tri-Cities Suite 530, 100 Fifth Street 764-3003
Bristol, Tennessee 37620 Fax: (615) 764-1855
116 3292 Birmingham Suite 400, Two Chase Corporate Center 985-4001
Birmingham, Alabama 35244 Fax: (205) 985-4009
117 3293 Jacksonville Suite 303, 8130 Baymeadows Way West 448-5980
Jacksonville, Florida 32256 Fax: (904) 448-2490
118 3294 Denver Suite 106, 5990 Greenwood Plaza Blvd. 770-8340
Greenwood Village, Colorado 80111 Fax: (303) 770-8408
119 3296 San Antonio Suite 1002, 1777 N.E. Loop 410 (210) 805-9207
San Antonio, Texas 79217 Fax: (210) 805-9453
120 3297 Greensboro Suite 423, 706 Green Valley Road (910) 370-1060
Greensboro, North Carolina 27408 Fax: (910) 272-0708
121 3298 Greenville Suite 124, 535 North Pleasantburg Drive (803) 233-1225
Greenville, South Carolina 29607 Fax: (803) 233-1445
122 8760 St. Petersburg Suite 111, 8455 Koger Blvd. (813) 578-8920
St. Petersburg, Florida 33702 Fax: (813) 578-8924
123 8762 Kansas City Suite 825, 4240 Blue Ridge Blvd. (816) 353-7800
Kansas City, Missouri 64133 Fax: (816) 353-4415
124 8763 Charleston Suite 215, 4055 Faber Place Drive (803) 554-9100
North Charleston, South Carolina 29405 Fax: (803) 554-6040
125 8764 Atlanta Suite 205, 2849 dPacas Ferry Road (404) 437-1590
Atlanta, Georgia 30339 Fax: (404) 437-0489
126 8765 Cincinnati Suite 180, 144 Merchant Street (513) 771-6020
Cincinnati, Ohio 45246 Fax: (513) 771-8021
127 8766 Dallas Suite 610, 2300 Valley View Lane (214) 257-2296
Irving, Texas 75062 Fax: (214) 258-1927
128 8767 Cherry Hill Suite 260, 2 Eves Drive (609) 988-7772
Marlton, New Jersey 08053 Fax: (609) 988-7779
129 8768 Baltimore Executive Plaza 1 (410) 771-6441
Suite 406, 11350 McCormick Road Fax: (410) 771-6944
Hunt Valley, Maryland 21031
130 8769 Newport News Suite 460, 1919 Commerce Drive (804) 826-1053
Hampton, Virginia 23886 Fax: (804) 826-9644
131 8773 Phoenix Suite 221, 8125 N. 23rd Avenue (602) 864-7844
Phoenix, Arizona 85021 Fax: (602) 864-7848
132 8774 Jackson Suite 112, 800 Woodlands Parkway (601) 977-0810
Ridgeland, Mississippi 39157 Fax: (601) 977-0655
133 8776 Houston Suite 150, 2 Northpoint Drive (713) 931-1700
Houston, Texas 77060 Fax: (713) 931-1994
134 8777 Cleveland Suite 304, 26777 Lorain Road (216) 716-9112
North Olmsted, Ohio 44070 Fax: (216) 716-9208
135 8778 St.Louis Suite 155,
11960 Westline Industrial Drive (314) 205-2554
St. Louis, Missouri 63146 Fax: (314) 205-2527
136 8779 Ft. Worth Suite 626, 4100 International Plaza (817) 737-4770
Ft. Worth, Texas 78109 Fax: (817) 737-4779
137 8780 Salt Lake City Suite 975, 4 Triad Center (801) 322-4592
Salt Lake City, Utah 84180 Fax: (801) 322-4693
138 8782 Sacramento Suite 100, 2999 Douglas Blvd. (916) 789-0399
Roseville, California 95661 Fax: (916) 789-0411
139 8783 Oklahoma City Suite 875, 3030 Northwest Expressway (405) 947-7194
Oklahoma City, Oklahoma 73112 Fax: (405) 947-7296
140 8784 Seattle Suite 201, 18000 72nd Avenue South (206) 251-0582
Kent, Washington 98032 Fax: (206) 251-0673
141 Fresno Temporary Suite (209) 221-0134
Suite 310, 1318 East Shaw Avenue Fax: (209) 221-0883
Fresno, California 93710
142 Boston Ground Floor, 300 Unicom Park Drive (617) 938-9600
Woburn, Massachusetts 01801 Fax: (617) 938-9505
143 Indianapolis Temporary Suite (317) 241-4367
Suite 101 A, 2601 Fortune Circle East Fax: (317) 241-4577
Indianapolis, Indiana 46241
500 8761 Asset Disposition Bldg. #1, Suite 1, Office Park North (904) 479-2354
Group "ADG" 6425 North Pensacola Blvd. Fax: (904) 478-9962
Pensacola, Florida 32505
501 8770 RASC-Nashville Suite 825, 545 Mariott Drive (800) 392-3622
Nashville, Tennessee 37214 Fax: (615) 885-2715
P.O. Box 291887
Nashville, Tennessee 37228
502 8771 RASC-Orlando Suite 300, 6355 MetroWest Blvd. (800) 558-3622
Orlando, Florida 32835 Fax: (407) 299-1748
P.O. Box 616807
Orlando, Florida 32861
503 8775 RASC-Charlotte Suite 204 1/2,
8510 McAlpine Park Drive (704) 385-4699
Charlotte, North Carolina 28211 Fax: (704) 385-3471
504 878 RASC-Denver Suite 106, 5990 Greenwood Plaza Blvd. (303) 850-7856
Greenwood Village, Colorado 80111 Fax: (303) 770-8408
</TABLE>
Schedule III
Locations of Local Post Office Boxes
PO Box 618035
Orlando, FL 32861
PO Box 292165
Nashville, TN 37214
PO Box 10209
Charlotte, NC 28212
PO Box 460640
Aurora, CO 80046
Schedule IV
Locations of Local Collection Accounts
First Union Bank of North Carolina
1607 Sardis Road North
Charlotte, NC 28270
A/C # 2 000000 735 988
First American Bank
2409 Lebanon Road
Nashville, TN 37214
A/C # 100 197 099 2
Colorado National Bank
99 South Monaco Parkway
Denver, CO 80224
A/C # 1943 122 833 29
SunTrust Bank
Kirkman-Conroy Branch
4582 Kirkman Road
Orlando, FL 32811
A/C # 07 037 03 055 302
EXHIBIT A
Form Of Class A Certificate
___________________________
EACH CERTIFICATEHOLDER OR CERTIFICATE OWNER, BY ITS ACCEPTANCE OF
THIS CLASS A CERTIFICATE (OR INTEREST HEREIN), COVENANTS AND AGREES
THAT SUCH CERTIFICATEHOLDER OR CERTIFICATE OWNER, AS THE CASE MAY
BE, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY
AFTER THE TERMINATION OF THE POOLING AND SERVICING AGREEMENT,
ACQUIESCE, PETITION OR OTHERWISE INVOKE OR CAUSE THE DEPOSITOR TO
INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE
PURPOSE OF COMMENCING OR SUSTAINING A CASE AGAINST THE DEPOSITOR
UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR
SIMILAR LAW, OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE,
CUSTODIAN, SEQUESTRATOR, OR OTHER SIMILAR OFFICIAL OF THE DEPOSITOR
OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING
UP OR LIQUIDATION OF THE AFFAIRS OF THE DEPOSITOR.
(UNLESS THIS CLASS A CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.)
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS
A CERTIFICATE WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
NUMBER R- $
CUSIP NO.
FIRST MERCHANTS AUTO TRUST 199_-_
( )% ASSET BACKED CERTIFICATE, CLASS A
evidencing a fractional undivided interest in the Trust (as defined
below), the property of which includes a pool of motor vehicle retail
installment sale contracts (the "Contracts") secured by new and used
automobiles, light duty trucks, vans and minivans.
(This Class A Certificate does not represent an interest in, or an obligation
of, First Merchants Acceptance Corporation, First Merchants Auto Receivables
Corporation ( ) or any of their respective Affiliates, except to the extent
described below.)
THIS CERTIFIES THAT is the registered
_______________________________
owner of DOLLARS nonassessable, fully-
______________________________________
paid, fractional undivided interest in First Merchants Auto Trust 199_-_ (the
"Trust") formed pursuant to the Pooling and Servicing Agreement dated as of
( ), 199_ (the "Pooling and Servicing Agreement"), among First Merchants Auto
Receivables Corporation ( ), a Delaware corporation, as depositor (the
"Depositor"), First Merchants Acceptance Corporation, a Delaware corporation,
as servicer (the "Servicer"), and ( ), a (state) banking corporation, as
trustee (in such capacity, the "Trustee") and as backup servicer (in such
capacity, the "Backup Servicer"), 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 Pooling and Servicing Agreement.
This Certificate is one of a duly authorized series of Certificates,
designated as the ( )% Asset Backed Certificates, Class A (the "Class A
Certificates"), all issued under the Pooling and Servicing Agreement, to
which Pooling and Servicing Agreement reference is hereby made for a
statement of the respective rights and obligations thereunder of the
Depositor, the Servicer, the Trustee, the Backup Servicer and the
Certificateholders. The Class A Certificates are subject to all the terms
of the Pooling and Servicing Agreement.
The property of the Trust includes (i) a pool of motor vehicle retail
installment sale contracts secured by new and used automobiles, light duty
trucks, vans and minivans (the "Receivables"); (ii) all moneys (including
accrued interest) received thereunder on or after ( ), 199_; (iii) all
amounts and property from time to time held in or credited to the Local Post
Office Boxes, the Local Collection Accounts and the Collection Account; (iv)
security interests in the Financed Vehicles and any accessions thereto; (v)
the right to receive payments from the Spread Account, to the extent and
under the circumstances set forth in the Pooling and Servicing Agreement and
the Spread Account Agreement; (vi) the right to receive all proceeds from
claims on physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (vii) any
property that shall have secured a Receivable and that shall have been
acquired by or on behalf of the Depositor, the Servicer or the Trustee;
(viii) all of the Depositor's right to all documents contained in the
Receivable Files; and (ix) any and all proceeds of the foregoing. Holders
of the Class A Certificates also will have the benefit of a financial
guaranty insurance policy issued by (security insurer).
Under the Pooling and Servicing Agreement, there will be distributed on
the ( )th day of each month or, if such ( )th day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on (
), 199_, to the Person in whose name this Class A Certificate is registered
at the close of business on the day immediately preceding such Distribution
Date (the "Record Date"), such Certificateholder's fractional undivided
interest in the amount to be distributed to Class A Certificateholders on
such Distribution Date.
It is the intent of the Depositor, the Servicer, the Trustee, the Backup
Servicer, and the Certificateholders that, for purposes of federal income,
state and local income and single business tax and any other income taxes,
the Trust be treated as a grantor trust and the Certificates be treated as
interests in a grantor trust. The Depositor, the Servicer, the Trustee and
each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or of a beneficial interest in a Certificate, as the case may be,
agree to treat, and to take no action inconsistent with the treatment of, the
Certificates for such tax purposes as interests in a grantor trust.
Distributions on this Class A Certificate will be made as provided in
the Pooling and Servicing Agreement by the Trustee by wire transfer or check
mailed to the Person identified as the Holder of record thereof in the
Certificate Register, without the presentation or surrender of this Class A
Certificate or the making of any notation hereon, except that with respect
to Class A Certificates registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Except as otherwise provided in the
Pooling and Servicing 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.
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
Pooling and Servicing Agreement or be valid for any purpose.
THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
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.
Date: FIRST MERCHANTS AUTO TRUST 199_-_
By: ( ), not
in its individual capacity but solely as
Trustee
By: _______________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within-
mentioned Pooling and Servicing Agreement.
Date: ( ), not in its
individual capacity but solely as Trustee
By: ____________________________________
Authorized Signatory
(REVERSE OF CLASS A CERTIFICATE)
The Class A Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Backup Servicer, the Trustee
or any of their respective Affiliates, and no recourse may be had against
such parties or their assets except as expressly set forth or contemplated
herein or in the Pooling and Servicing Agreement. In addition, this Class
A Certificate is not guaranteed by the Depositor, the Servicer, the Trustee,
the Backup Servicer, or any governmental agency or instrumentality, and is
limited in right of payment to certain collections and recoveries with
respect to the Receivables, payments under the Policy and certain other
amounts, all as more specifically set forth herein and in the Pooling and
Servicing Agreement. A copy of the Pooling and Servicing Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Depositor and at such other places, if
any, designated by the Depositor.
The Pooling and Servicing Agreement permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights
and obligations of the Depositor, the Servicer, the Backup Servicer and the
Trustee and the rights of the Certificateholders at any time by the
Depositor, the Servicer, the Backup Servicer and the Trustee with the consent
of the Security Insurer and Holders of Certificates evidencing not less than
a majority of the Certificate Balance. Any such consent by the Holder of
this Class A Certificate shall be conclusive and binding on such Holder and
on all future Holders of this Certificate and of any Class A 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 Class A
Certificate. The Pooling and Servicing Agreement also permits the amendment
thereof, in certain limited circumstances, with the consent of the Security
Insurer but without the consent of the Holders of any of the Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Class A
Certificate is registerable in the Certificate Register upon surrender of
this Class A Certificate for registration of transfer at the offices or
agencies of the Certificate Registrar maintained by the Trustee 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 Class A
Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The
initial Certificate Registrar appointed under the Pooling and Servicing
Agreement is the Trustee.
Except as provided in the Pooling and Servicing Agreement, the Class A
Certificates are issuable only as registered certificates without coupons in
a minimum denomination of $( ) and integral multiples of $( ) in excess
thereof; provided that one Class A Certificate may be issued in such
denomination as is required to include any residual amount. As provided in
the Pooling and Servicing Agreement and subject to certain limitations
therein set forth, the Class A Certificates are exchangeable for new Class
A 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 or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge 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 none of
the Trustee, the Certificate Registrar or any such agent shall be affected
by any notice to the contrary.
The obligations and responsibilities created by the Pooling and
Servicing 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 Pooling and Servicing Agreement and the disposition of all
property held by the Trust. The Servicer of the Receivables may at its
option purchase the Trust property at a price specified in the Pooling and
Servicing Agreement, and such purchase of the Receivables and other property
of the Trust will effect early retirement of the Certificates; provided,
however, that such right of purchase is exercisable only after the Pool
Balance is less than or equal to 10% of the Initial Pool Balance.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
the within Class A Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________
, attorney, to transfer said Class A 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 on the face of the within Class A Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT B
Form Of Class B Certificate
___________________________
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY
PERSON THAT IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE,
OR ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN") OR ANY PERSON INVESTING THE ASSETS OF A
PLAN, EXCEPT AS PROVIDED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
SECTION 6.04 OF THE POOLING AND SERVICING AGREEMENT CONTAINS FURTHER
RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS CLASS B
CERTIFICATE. EACH TRANSFEREE OF THIS CLASS B CERTIFICATE, BY
ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CLASS B
CERTIFICATE SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
EACH CERTIFICATEHOLDER OR CERTIFICATE OWNER, BY ITS ACCEPTANCE OF
THIS CLASS B CERTIFICATE (OR INTEREST HEREIN), COVENANTS AND AGREES
THAT SUCH CERTIFICATEHOLDER OR CERTIFICATE OWNER, AS THE CASE MAY
BE, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY
AFTER THE TERMINATION OF THE POOLING AND SERVICING AGREEMENT,
ACQUIESCE, PETITION OR OTHERWISE INVOKE OR CAUSE THE DEPOSITOR TO
INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE
PURPOSE OF COMMENCING OR SUSTAINING A CASE AGAINST THE DEPOSITOR
UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR
SIMILAR LAW, OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE,
CUSTODIAN, SEQUESTRATOR, OR OTHER SIMILAR OFFICIAL OF THE DEPOSITOR
OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING
UP OR LIQUIDATION OF THE AFFAIRS OF THE DEPOSITOR.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS
B CERTIFICATE WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS B
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
NUMBER R- $
CUSIP NO.
FIRST MERCHANTS AUTO TRUST 199_-_
( )% ASSET BACKED CERTIFICATE, CLASS B
evidencing a fractional undivided interest in the Trust (as defined
below), the property of which includes a pool of motor vehicle retail
installment sale contracts secured by new and used automobiles, light duty
trucks, vans and minivans.
(This Class B Certificate does not represent an interest in, or an obligation
of, First Merchants Acceptance Corporation, First Merchants Auto Receivables
Corporation ( ) or any of their respective Affiliates, except to the extent
described below.)
THIS CERTIFIES THAT is the registered owner
_________________________
of DOLLARS nonassessable,
_____________________________________________
fully-paid, fractional undivided interest in First Merchants Auto Trust
199_-_ (the "Trust") formed pursuant to the Pooling and Servicing Agreement
dated as of ( ), 199_ (the "Pooling and Servicing Agreement"), among First
Merchants Auto Receivables Corporation ( ), a Delaware corporation, as
depositor (the "Depositor"), First Merchants Acceptance Corporation, a
Delaware corporation, as servicer (the "Servicer"), and ( ), a ( ) banking
corporation, as trustee (in such capacity, the "Trustee") and backup servicer
(in such capacity, the "Backup Servicer"), 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 Pooling and Servicing Agreement.
This Certificate is one of a duly authorized series of Certificates,
designated as the ( )% Asset Backed Certificates, Class B (the "Class B
Certificates"), all issued under the Pooling and Servicing Agreement, to
which Pooling and Servicing Agreement reference is hereby made for a
statement of the respective rights and obligations thereunder of the
Depositor, the Servicer, the Trustee, the Backup Servicer and the
Certificateholders. The Class B Certificates are subject to all the terms
of the Pooling and Servicing Agreement.
The property of the Trust includes (i) a pool of motor vehicle retail
installment sale contracts secured by new and used automobiles, light duty
trucks, vans and minivans (the "Receivables"); (ii) all moneys received
thereunder on or after ( ), 199_; (iii) all amounts and property from time
to time held in or credited to the Local Post Office Boxes, the Local
Collection Accounts or the Collection Account; (iv) security interests in the
Financed Vehicles and any accessions thereto; (v) the right to receive
payments from the Spread Account, to the extent and under the circumstances
set forth in the Pooling and Servicing Agreement and the Spread Account
Agreement; (vi) the right to receive all proceeds from claims on physical
damage, credit life and disability insurance policies covering the Financed
Vehicles or the Obligors, as the case may be; (vii) any property that shall
have secured a Receivable and that shall have been acquired by or on behalf
of the Depositor, the Servicer or the Trustee; (viii) all of the Depositor's
right to all documents contained in the Receivable Files; and (ix) any and
all proceeds of the foregoing.
Under the Pooling and Servicing Agreement, there will be distributed on
the ( )th day of each month or, if such ( )th day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on (
), 199_, to the Person in whose name this Class B Certificate is registered
at the close of business on the day immediately preceding such Distribution
Date (the "Record Date"), such Certificateholder's fractional undivided
interest in the amount to be distributed to Class B Certificateholders on
such Distribution Date. No principal or interest will be distributed to
Holders of the Class B Certificates on any Distribution Date unless the
Holders of the Class A Certificates have received the full Class A Interest
Distributable Amount and Class A Principal Distributable Amount for such date
and an amount equal to the Spread Account Required Amount is on deposit in
the Spread Account. The Holder of this Class B Certificate acknowledges and
agrees that its right to receive distributions in respect of this Certificate
are subordinated to the rights of Holders of the Class A Certificates to the
extent described herein and as set forth in the Pooling and Servicing
Agreement.
It is the intent of the Depositor, the Servicer, the Trustee, the Backup
Servicer, and the Certificateholders that, for purposes of federal income,
state and local income and business tax and any other income taxes, the Trust
be treated as a grantor trust and the Certificates be treated as interests
in a grantor trust. The Depositor, the Servicer, the Trustee, the Backup
Servicer, and each Certificateholder or Certificate Owner, by its acceptance
of a Certificate or of a beneficial interest in a Certificate, as the case
may be, agree to treat, and to take no action inconsistent with the treatment
of, the Certificates for such tax purposes as interests in a grantor trust.
Distributions on this Class B Certificate will be made as provided in
the Pooling and Servicing Agreement by the Trustee by wire transfer or check
mailed to the Person identified as the Holder of Record hereof 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 Pooling and Servicing 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
Pooling and Servicing Agreement or be valid for any purpose.
THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
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.
FIRST MERCHANTS AUTO TRUST 199_-_
By: ( ), not
in its individual capacity
but solely as Trustee
Date: By:
________________________________________
______________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to in the within-
mentioned Pooling and Servicing Agreement.
Date: ( ), not in its
individual capacity but solely as Trustee
By:
_________________________________________
______________________
Authorized Signatory
(REVERSE OF CLASS B CERTIFICATE)
The Class B Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Trustee, the Backup Servicer,
or any of their respective Affiliates, and no recourse may be had against
such parties or their assets except as expressly set forth or contemplated
herein or in the Pooling and Servicing Agreement. In addition, this Class
B Certificate is not guaranteed by the Depositor, the Servicer, the Trustee,
the Backup Servicer, or any governmental agency or instrumentality, and is
limited in right of payment to certain collections and recoveries with
respect to the Receivables, payments under the Policy and certain other
amounts, all as more specifically set forth herein and in the Pooling and
Servicing Agreement. A copy of the Pooling and Servicing Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Depositor and at such other places, if
any, designated by the Depositor.
The Pooling and Servicing Agreement permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights
and obligations of the Depositor, the Servicer, the Trustee and the Backup
Servicer and the rights of the Certificateholders at any time by the
Depositor, the Servicer, the Trustee and the Backup Servicer with the consent
of Security Insurer and the Holders of Certificates evidencing not less than
a majority of the Certificate Balance. Any such consent by the Holder of
this Class B Certificate shall be conclusive and binding on such Holder and
on all future Holders of this Class B Certificate and of any Class B
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 Class B
Certificate. The Pooling and Servicing Agreement also permits the amendment
thereof, in certain limited circumstances, with the consent of the Security
Insurer but without the consent of the Holders of any of the Certificates.
No registration of transfer of this Class B Certificate will be made
unless the Trustee first receives a representation letter, in the form
described in Section 6.04 of the Pooling and Servicing Agreement, stating
that the transferee is not a Benefit Plan and is not acting on behalf of a
Benefit Plan or using the assets of a Benefit Plan to effect such purchase.
Any transfer of this Class B Certificate that does not satisfy the
requirements set forth in Section 6.04 of the Pooling and Servicing Agreement
shall be void and of no effect.
Except as provided in the Pooling and Servicing Agreement, the Class B
Certificates are issuable only as registered certificates without coupons in
a minimum denomination of $( ) and integral multiples of $( ) in excess
thereof; provided that one Class B Certificate may be issued in such
denomination as is required to include any residual amount. As provided in
the Pooling and Servicing Agreement and subject to certain limitations
therein set forth and described in the preceding paragraph, Class B
Certificates are exchangeable for new Class B 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 or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge 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 none of
the Trustee, the Certificate Registrar or any such agent shall be affected
by any notice to the contrary.
The obligations and responsibilities created by the Pooling and
Servicing 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 Pooling and Servicing Agreement and the disposition of all
property held by the Trust. The Servicer of the Receivables may at its option
purchase the Trust property at a price specified in the Pooling and Servicing
Agreement, and such purchase of the Receivables and other property of the
Trust will effect early retirement of the Class B Certificates; provided,
however, that such right of purchase is exercisable only after the Pool
Balance is less than or equal to 10% of the Initial Pool Balance.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
the within Class B Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing ,
_____________________________________________
attorney, to transfer said Class B 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 on the face of the within Class B Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT C
Form Of Depository Agreement
Letter of Representations
(To be Completed by Issuer and Trustee)
______________________________________________________
(Name of Issuer)
______________________________________________________
(Name of Trustee)
______________________
(Date)
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: ------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act
as trustee with respect to the Securities pursuant to a trust indenture dated
, 199 (the "Document").
__________________ ___ _____________________________
(the "Underwriter") is distributing the Securities through The Depository
__
Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities,
Issuer and Trustee make the following representations to DTC:
1. Prior to closing on the Securities on ,
__________________________
199 , there shall be deposited with DTC one Security certificate registered
__
in the name of DTC's nominee, Cede & Co., for each stated maturity of the
Securities in the face amounts set forth on Schedule I hereto, the total of
which represents 100% of the principal amount of such Securities. If,
however, the aggregate principal amount of any maturity exceeds $150 million,
one certificate will be issued with respect to each $150 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount. Each $150 million certificate shall bear the
following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to 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 is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date
for such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent
to DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and
receipt of such notices shall be confirmed by telephoning (212) 709-6870.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall
be sent to DTC's Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be mailed to Security
holders or published (the "Publication Date"). Such notice shall be sent to
DTC by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice
is in DTC's possession no later than the close of business on the business
day before or, if possible, two business days before the Publication Date.
Issuer or Trustee shall forward such notice either in a separate secure
transmission for each CUSIP number or in a secure transmission for multiple
CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP
number submitted in that transmission. (The party sending such notice shall
have a method to verify subsequently the use of such means and the timeliness
of such notice.) The Publication Date shall be not less than 30 days nor more
than 60 days prior to the redemption date or, in the case of an advance
refunding, the date that the proceeds are deposited in escrow. Notices to
DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Call
Notification Department at (516) 227-4039 or (516) 227-4190. If the party
sending the notice does not receive a telecopy receipt from DTC confirming
that the notice has been received, such party shall telephone (516) 227-4070.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall
be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and
the Publication Date of such notice shall be sent to DTC by a secure means
in the manner set forth in the preceding Paragraph. Notices to DTC pursuant
to this Paragraph and notices of other corporate actions (including mandatory
tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt
of such notices shall be confirmed by telephoning (212) 709-6884. Notices
to DTC pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
5. All notices and payment advances sent to DTC shall contain the
CUSIP number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized
denomination if less than $1,000 face value) payable on each payment date
allocated as to the interest and principal portions thereof preferably 5, but
not less than 2, business days prior to such payment date. Such notices,
which shall also contain the current pool factor and Trustee contact's name
and telephone number, shall be sent by telecopy to DTC's Dividend Department
at (212) 709-1723, or if by mail or by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
7. (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT
_____ _________
THE OTHER:) (The interest accrual period is record date to record date.) (The
interest accrual period is payment date to payment date.)
8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee
of DTC, or its registered assigns in same-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Issuer or
Trustee and DTC). Such payments shall be made payable to the order of Cede
& Co. Absent any other existing arrangements, such payments shall be
addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
9. (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT
____ _________
THE OTHER:)
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS")
________________________________________________________________
System.
_______
Other principal payments (redemption payments) shall be made in same-day
funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS")
________________________________________________________________
System.
_______
Other principal payments (redemption payments) shall be made in next-day
funds by Trustee to Cede & Co., as nominee of DTC, or its registered assigns,
on each payment date. Such payments shall be made payable to the order of
Cede & Co., and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
10. DTC may direct Issuer or Trustee to use any other number or address
as the number or address to which notices or payments of interest or
principal may be sent.
11. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or
Trustee's invitation) necessitating a reduction in the aggregate principal
amount of Securities outstanding or an advance refunding of part of the
Securities outstanding, DTC, in its discretion: (a) may request Issuer or
Trustee to issue and authenticate a new Security certificate; or (b) may make
an appropriate notation on the Security certificate indicating the date and
amount of such reduction in principal except in the case of final maturity,
in which case the certificate will be presented to Issuer or Trustee prior
to payment, if required.
12. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer
or Trustee shall issue, transfer, and exchange certificates in appropriate
amounts, as required by DTC and others.
13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trustee (at which time DTC will confirm with Issuer or Trustee the
aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Trustee shall cooperate fully with
DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.
14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in
the Securities any information contained in the Security certificate(s); and
(b) acknowledges that neither DTC's Participants nor any person having an
interest in the Securities shall be deemed to have notice of the provisions
of the Security certificates by virtue of submission of such certificate(s)
to DTC.
15. Nothing herein shall be deemed to require Trustee to advance
funds on behalf of Issuer.
Notes: Very Truly yours,
_____
----------------------------------
A. If there is a Trustee (as defined (Issuer)
in this Letter of Representations),
Trustee as well as Issuer must sign By:--------------------------------
this Letter. If there is no Trustee, (Authorized Officer's Signature)
in signing this Letter Issuer itself
undertakes to perform all of the
obligations set forth herein. -----------------------------------
(Trustee)
B. Schedule B contains statements
that DTC believes accurately By:--------------------------------
describe DTC, the method of (Authorized Officer's Signature)
effecting book-entry transfers
of securities distributed
through DTC, and certain
related matters.
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:_________________________
cc: Underwriter
Underwriter's Counsel
SCHEDULE I
__________
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
_____ ________________ _____________ _____________
SCHEDULE B
__________
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
___________________________________
(PREPARED BY DTC--BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN ISSUES)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered pin the name of Cede
& Co. (DTC's partnership nominee). One fully-registered Security certificate
will be issued for (each issue of the Securities, (each) in the aggregate
principal amount of such issue, and will be deposited with DTC. (If,
however, the aggregate principal amount of (any) issue exceeds $(150)
million, one certificate will be issued with respect to each $(150) million
of principal amount and an additional certificate will be issued with respect
to any remaining principal amount of such issue.)
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system
is also available to others such as securities brokers and dealers, banks,
and trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities
on DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the
book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
(6. Redemption notices shall be sent to Cede & Co. If less than all
of the Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.)
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on payable
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on payable
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the
Agent, or the Issuer, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC
is the responsibility of the Issuer or the Agent, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
(9. A Beneficial Owner shall give notice to elect to have its
Securities purchased or tendered, through its Participant, to the
(Tender/Remarketing) Agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to the (Tender/Remarketing) Agent. The
requirement for physical delivery of Securities in connection with a demand
for purchase or a mandatory purchase will be deemed satisfied when the
ownership rights in the Securities are transferred by Direct Participants on
DTC's records.)
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Issuer or the Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered.
11. The Issuer may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be
reliable, but the Issuer takes no responsibility for the accuracy thereof.
EXHIBIT D
Representations and Warranties of First Merchants Acceptance Corporation
________________________________________________________________________
Under Section 3.02 of the Receivables Purchase Agreement
________________________________________________________
(a) Characteristics of Receivables. Each Receivable (A) was originated
______________________________
in the United States by a Dealer for the retail sale of a Financed Vehicle
in the ordinary course of such Dealer's business in accordance with the
Seller's credit policies, was fully and properly executed by the parties
thereto, was purchased by the Seller from such Dealer under an existing
Dealer Agreement and was validly assigned by such Dealer to the Seller, (B)
has created or shall create a valid, subsisting and enforceable first
priority security interest in favor of the Seller in the Financed Vehicle,
which security interest is assignable by the Seller to the Purchaser, and by
the Purchaser to the Trust, (C) contains customary and enforceable provisions
such that the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security and (D)
provides for level monthly payments (provided that the payment in the first
and last month of the term of the Receivable may be different from the level
payments) that fully amortize the Amount Financed by maturity and yield
interest at the APR.
(b) Compliance with Law. Each Receivable and the sale of the related
___________________
Financed Vehicle complied at the time it was originated or made, and at the
time of execution of this Agreement complies, in all material respects with
all requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act of 1940,
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.
(c) Binding Obligation. Each Receivable represents the genuine, legal,
__________________
valid and binding payment obligation of the Obligor thereon, enforceable by
the holder thereof in accordance with its terms, except (A) as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless
of whether such enforceability is considered in a proceeding in equity or at
law and (B) as such Receivable may be modified by the application after the
Closing Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(d) No Government Obligor. No Receivable is due from the United States
_____________________
of America or any State or any agency, department, subdivision or
instrumentality thereof.
(e) Obligor Bankruptcy. As of the Cutoff Date, no Obligor had been
__________________
identified on the records of the Seller as being the subject of a current
bankruptcy proceeding.
(f) Schedule of Receivables. The information set forth in Schedule I
_______________________
to this Agreement is true and correct in all material respects as of the
close of business on the Cutoff Date.
(g) Marking Records. By the Closing Date, the Seller will have caused
_______________
its records relating to each Receivable, including any computer records, to
be clearly and unambiguously marked to show that the Receivables have been
sold to the Purchaser by the Seller and transferred and assigned by the
Purchaser to the Trust in accordance with the terms of the Pooling and
Servicing Agreement.
(h) Computer Tape. The computer tape regarding the Receivables made
_____________
available by the Seller to the Purchaser is complete and accurate in all
respects as of the Cutoff Date.
(i) No Adverse Selection. No selection procedures believed by the
____________________
Seller to be adverse to the Certificateholders were utilized in selecting the
Receivables.
(j) Chattel Paper. The Receivables constitute chattel paper within the
_____________
meaning of the UCC as in effect in the State of Illinois.
(k) One Original. There is only one original executed copy of each
____________
Receivable.
(l) Receivables in Force. No Receivable has been satisfied,
____________________
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien of the related Receivable in whole or in part. None of the terms
of any Receivable has been waived, altered or modified in any respect since
its origination, except by instruments or documents identified in the related
Receivable File. No Receivable has been modified as a result of the
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(m) Lawful Assignment. No Receivable has been originated in, or is
_________________
subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or the Pooling and Servicing Agreement.
(n) Title. It is the intention of the Seller that the transfers and
_____
assignments herein contemplated constitute sales 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 debtor'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 to the Purchaser pursuant to this Agreement (or by the
Purchaser to the Trustee pursuant to the Pooling and Servicing Agreement).
Immediately prior to the transfers and assignments herein contemplated, the
Seller has good and marketable title to each Receivable free and clear of all
Liens (other than the Lien of the Seller's senior lenders identified in the
Consent to Fourth Amended and Restated Loan and Security Agreement dated as
of ( ), 199_, by and among the Seller and such secured lenders), which Lien
is being released simultaneously with the transfers and assignments herein
contemplated) and, immediately upon the transfer thereof, the Purchaser shall
have good and marketable title to each Receivable, free and clear of all
Liens.
(o) Security Interest in Financed Vehicle. Immediately prior to its
_____________________________________
sale, assignment and transfer to the Purchaser pursuant to this Agreement,
each 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, or all necessary and appropriate actions have been commenced
that will result in the valid perfection of a first priority security
interest in such Financed Vehicle in favor of the Seller as secured party.
(p) All Filings Made. All filings (including UCC filings) required to
________________
be made in any jurisdiction to give the Purchaser a first perfected ownership
interest in the Receivables have been made.
(q) No Defenses. No Receivable is subject to any right of rescission,
___________
setoff, counterclaim or defense, and no such right has been asserted or
threatened with respect to any Receivable.
(r) No Default. There has been no default, breach, violation or event
__________
permitting acceleration under the terms of any Receivable (other than payment
delinquencies of not more than 31 days), and no condition exists or event has
occurred and is continuing that with notice, the lapse of time or both would
constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle has been repossessed.
(s) Insurance. The Seller, in accordance with its customary
_________
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Vehicle and, under the terms of the related
Contract, the Obligor is required to maintain such insurance.
(t) Final Scheduled Maturity Date. No Receivable has a final scheduled
_____________________________
payment date after (date).
(u) Certain Characteristics of the Receivables. As of the Cutoff Date,
__________________________________________
(A) each Receivable had an original maturity of not more than 60 months; (B)
no Receivable was more than 31 days past due; and (C) no funds have been
advanced by the Seller, any Dealer or anyone acting on behalf of either of
them in order to cause any Receivable to qualify under clause (B) above.
EXHIBIT E
Form of Servicer's Certificate
______________________________
First Merchants Acceptance Corporation
Monthly Servicing Report
(Date)
First Merchants Auto Trust 199_-_
$ ( )% Asset Backed Certificates, Class A
$ ( )% Asset Backed Certificates, Class B
Distribution Date:
I. Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Initial Class A Balance
(C) Initial Class B Balance
(D) Pass-Through Rate
(E) Servicing Fee Rate
(F) Trustee Fee
(G) Security Insurer's Premium
(H) Original Weighted Average Coupon (WAC)
(I) Original Weighted Average Remaining Term (WAM)
(J) Number of Contracts
(K) Spread Account
i. Spread Account Initial Deposit
ii. Spread Account Required Amount
II. Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Current Class A Balance
(C) Current Class B Balance
(D) Class A Certificate Factor
(E) Class B Certificate Factor
(F) Spread Account Balance
(G) Weighted Average Coupon of Remaining Portfolio (WAC)
(H) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(I) Number of Contracts
III. Inputs from the System
(A) Simple Interest Loans
i. Principal Payments Received
ii. Interest Payments Received
iii. Repurchased Receivables
iv. Late Fees
(B) Spread Account Release to Collection Account
(C) Spread Account Release to Class B Certificateholders
(D) Spread Account Release to Depositor
(E) Liquidated Contracts
i. Gross Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(F) Weighted Average Coupon of Remaining Portfolio (WAC)
(G) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(H) Remaining Number of Contracts
(I) Receivable Balance of Vehicles in Repossession During the
Collection Period
(J) Number of Vehicles in Repossession During the Collection Period
(K) Aggregate Net Losses for Collection Period
(L) Delinquent Contracts
Contracts Amount
--------- ------
i. 31-60 Days Delinquent
ii. 61 Days or More Delinquent
IV. Inputs Derived from Other Sources
(A) Collection Account Investment Income
(B) Spread Account Investment Income
_________________________________________________
A. Monthly Collections
(1) Class A Interest Distributable Amount
(2) Class A Principal Distributable Amount
(3) Class B Interest Distributable Amount
(4) Class B Principal Distributable Amount
(5) Total Principal Payments Received
(a) Principal Payments on Receivables (includes Partial and
Full Prepayment)
(b) Repurchased Receivables
(c) Cram Down Loss
(6) Interest Payments Received
B. Draw on Credit Enhancements
(1) Withdrawal from Spread Account
(2) Draw on the Insurance Policy
(3) Total Draw on Credit Enhancements
C. Available Funds
(1) Available Funds
(2) Available Funds allocable to interest
(3) Available Funds allocable to principal
D. Liquidated Receivables, Net (includes repos repurchased in October)
(1) Gross Principal Balance of Liquidated Receivables
(2) Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(3) Liquidated Receivables, Net
E. Monthly Distributions
(1) Class A Principal Distributable Amount
(2) Class B Principal Distributable Amount
(3) Principal Distribution Amount
(a) Principal Payments on Receivables
(b) Repurchased Receivables
(c) Cram Down Loss
(4) Class A Interest Distributable Amount
(5) Class B Interest Distributable Amount
(6) Required Distributions
(a) Servicing Fee (Includes late fees collected)
(b) Fees Paid to Trustee and Collateral Agent
(c) Monthly Security Insurer's Premium
(d) Deposits into Spread Account
F. Pool Balances and Portfolio Information
Beginning End
of Period of Period
--------- ---------
(1) Total Pool Balance
(2) Total Pool Factor
(3) Certificate Balance
(4) Remaining
Overcollateralization
Amount
(5) Weighted Average
Coupon
(6) Weighted Average
Remaining Maturity
(7) Remaining Number
of Contracts
G. Spread Account
(1) Required Spread Account Balance
(2) Beginning Balance
(3) Amount Available for Deposit to the Spread Account
(4) Withdrawal from Spread Account
(5) Amount Released to Class B Certificateholders or Depositor
(6) Ending Balance
H. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
(2) Liquidated Receivables for the Collection Period
(3) Cumulative Net Losses
(4) Delinquent and Repossessed Receivables
(a) 60 Days Delinquent (Receivables Balance)
(b) 60 Days Delinquent (Number of Receivables)
(c) 61 Days or More (Receivables Balance)
(d) 91 Days or More (Number of Receivables)
(e) Receivables Balance of Vehicles in Repossession During
the Monthly Period
(f) Number of Vehicles in Repossession During the Collection
Period
I. Portfolio Performance Test
(1) Delinquency Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(2) Default Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(3) Net Loss Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(4) Delinquency Trigger Indicator
(5) Default Trigger Indicator
(6) Loss Trigger Indicator
J. (1) Amount of principal being paid to Class A Certificateholders:
(2) Per $1,000 original principal amount:
K. (1) Amount of principal being paid to Class B Certificateholders:
(2) Per $1,000 original principal amount:
L. (1) Amount of interest being paid to Class A Certificateholders:
(2) Per $1,000 original principal amount:
M. (1) Amount of interest being paid to Class B Certificateholders:
(2) Per $1,000 original principal amount:
N. Pool Balance at the end of the related Collection Period:
O. Outstanding Class A Balance:
Class A Pool Factor:
P. Outstanding Class B Balance:
Class B Pool Factor:
Q. (1) Amount of Servicing Fee:
(2) Per $1,000 original principal amount:
R. Aggregate Purchase Amounts for Collection Period:
S. Aggregate Amount of Realized Losses for the Collection Period:
T. Amount in Spread Account:
EXHIBIT F
Form of Policy
______________
Exhibit 4.3
Form of Indenture
-----------------
INDENTURE
between
FIRST MERCHANTS AUTO TRUST (199_-_),
as Issuer
and
( ),
as Indenture Trustee
Dated as of ( ), 199_
TABLE OF CONTENTS Page
----------------- ----
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. (a) Definitions . . . . . . . . . . . . . . . . . . 2
-----------
SECTION 1.02. Rules of Construction . . . . . . . . . . . . . . . . . . 8
---------------------
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . 9
-------------------------------------------------
ARTICLE II
The Notes
---------
SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . 9
----
SECTION 2.02. Execution, Authentication and Delivery . . . . . . . . . . 10
--------------------------------------
SECTION 2.03. Temporary Notes . . . . . . . . . . . . . . . . . . . . . 10
---------------
SECTION 2.04. Registration; Registration of Transfer and Exchange . . . 10
---------------------------------------------------
SECTION 2.05. (Reserved.) . . . . . . . . . . . . . . . . . . . . . . . 12
-----------
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . 12
------------------------------------------
SECTION 2.07. Persons Deemed Owner . . . . . . . . . . . . . . . . . . . 12
--------------------
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest . . 12
-----------------------------------------------------
SECTION 2.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 13
------------
SECTION 2.10. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . 14
----------------
SECTION 2.11. Notices to Clearing Agency . . . . . . . . . . . . . . . . 14
--------------------------
SECTION 2.12. Definitive Notes . . . . . . . . . . . . . . . . . . . . . 14
----------------
SECTION 2.13. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 15
-------------
SECTION 2.14. Determination of LIBOR . . . . . . . . . . . . . . . . . . 15
----------------------
SECTION 2.15. Initial Calculation Agent; Replacement of Calculation
-----------------------------------------------------
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal and Interest . . . . . . . . . . . . 16
---------------------------------
SECTION 3.02. Maintenance of Office or Agency . . . . . . . . . . . . . 16
-------------------------------
SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . . 16
--------------------------------------
SECTION 3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . 18
---------
SECTION 3.05. Protection of Trust Estate . . . . . . . . . . . . . . . . 18
--------------------------
SECTION 3.06. Opinions as to Trust Estate . . . . . . . . . . . . . . . 18
---------------------------
SECTION 3.07. Performance of Obligations; Servicing of Receivables . . . 19
----------------------------------------------------
SECTION 3.08. Negative Covenants . . . . . . . . . . . . . . . . . . . . 21
------------------
SECTION 3.09. Annual Statement as to Compliance . . . . . . . . . . . . 21
---------------------------------
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms . . . 21
---------------------------------------------------
SECTION 3.11. Successor or Transferee . . . . . . . . . . . . . . . . . 23
-----------------------
SECTION 3.12. No Other Business . . . . . . . . . . . . . . . . . . . . 23
-----------------
SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . 23
------------
SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . . 23
----------------------
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities . . . . 23
-------------------------------------------------
SECTION 3.16. Capital Expenditures . . . . . . . . . . . . . . . . . . . 24
--------------------
SECTION 3.17. Removal of Administrator . . . . . . . . . . . . . . . . . 24
------------------------
SECTION 3.18. Restricted Payments . . . . . . . . . . . . . . . . . . . 24
-------------------
SECTION 3.19. Notice of Events of Default . . . . . . . . . . . . . . . 24
---------------------------
SECTION 3.20. Further Instruments and Acts . . . . . . . . . . . . . . . 24
----------------------------
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture . . . . . . . . . 24
---------------------------------------
SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . . 25
--------------------------
SECTION 4.03. Repayment of Moneys Held by Paying Agent . . . . . . . . . 26
----------------------------------------
SECTION 4.04. Release of Collateral . . . . . . . . . . . . . . . . . . 26
---------------------
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . 26
-----------------
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment . . . . 27
--------------------------------------------------
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee; . . . . . . . . . . . . . . . . . . . 29
-----------------
SECTION 5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . 31
--------------------
SECTION 5.05. Optional Preservation of the Receivables . . . . . . . . . 33
----------------------------------------
SECTION 5.06. Limitation of Suits . . . . . . . . . . . . . . . . . . . 33
-------------------
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest . . . . . . . . . . . . . . . . . . . . . . 34
------------
SECTION 5.08. Restoration of Rights and Remedies . . . . . . . . . . . . 34
----------------------------------
SECTION 5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . 34
------------------------------
SECTION 5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . 34
------------------------------
SECTION 5.11. Control by Noteholders . . . . . . . . . . . . . . . . . . 34
----------------------
SECTION 5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 35
-----------------------
SECTION 5.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . 35
---------------------
SECTION 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 35
--------------------------------
SECTION 5.15. Action on Notes . . . . . . . . . . . . . . . . . . . . . 36
---------------
SECTION 5.16. Performance and Enforcement of Certain Obligations . . . . 36
--------------------------------------------------
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . 36
---------------------------
SECTION 6.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . 38
---------------------------
SECTION 6.03. Individual Rights of Indenture Trustee . . . . . . . . . . 38
--------------------------------------
SECTION 6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . 38
------------------------------
SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 39
------------------
SECTION 6.06. Reports by Indenture Trustee to Holders . . . . . . . . . 39
---------------------------------------
SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . 39
--------------------------
SECTION 6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . 39
--------------------------------
SECTION 6.09. Successor Indenture Trustee by Merger . . . . . . . . . . 40
-------------------------------------
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------
SECTION 6.11. Eligibility; Disqualification . . . . . . . . . . . . . . 42
-----------------------------
SECTION 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses . . 42
-----------------------------------------------------
SECTION 6.13. Preferential Collection of Claims Against Issuer . . . . . 42
------------------------------------------------
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders . . . . . . . . . . . . . . . . . . . . 42
--------------
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders . . . . . . . . . . . . . . . . . . . . . . 43
-----------
SECTION 7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . 43
-----------------
SECTION 7.04. Reports by Indenture Trustee . . . . . . . . . . . . . . . 43
----------------------------
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money . . . . . . . . . . . . . . . . . 44
-------------------
SECTION 8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . 44
--------------
SECTION 8.03. General Provisions Regarding Accounts . . . . . . . . . . 45
-------------------------------------
SECTION 8.04. Release of Trust Estate . . . . . . . . . . . . . . . . . 45
-----------------------
SECTION 8.05. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 46
------------------
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders . . 46
------------------------------------------------------
SECTION 9.02. Supplemental Indentures with Consent of Noteholders . . . 47
---------------------------------------------------
SECTION 9.03. Execution of Supplemental Indentures . . . . . . . . . . . 49
------------------------------------
SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . 49
--------------------------------
SECTION 9.05. Reference in Notes to Supplemental Indentures . . . . . . 49
---------------------------------------------
SECTION 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . 49
-----------------------------------
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . . 49
----------
SECTION 10.02. Form of Redemption Notice . . . . . . . . . . . . . . . . 50
-------------------------
SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . . 50
--------------------------------
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . . 50
-----------------------------------------
SECTION 11.02. Form of Documents Delivered to Indenture Trustee . . . . . 52
------------------------------------------------
SECTION 11.03. Acts of Noteholders . . . . . . . . . . . . . . . . . . . 53
-------------------
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies . . . . . . . . . . . . . . . . . . . . . . . . 53
--------
SECTION 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . . 54
------------------------------
SECTION 11.06. Alternate Payment and Notice Provisions . . . . . . . . . 55
---------------------------------------
SECTION 11.07. Effect of Headings and Table of Contents . . . . . . . . . 55
----------------------------------------
SECTION 11.08. Successors and Assigns . . . . . . . . . . . . . . . . . . 55
----------------------
SECTION 11.09. Separability . . . . . . . . . . . . . . . . . . . . . . . 55
------------
SECTION 11.10. Benefits of Indenture . . . . . . . . . . . . . . . . . . 55
---------------------
SECTION 11.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 55
--------------
SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 55
-------------
SECTION 11.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 55
------------
SECTION 11.14. Recording of Indenture . . . . . . . . . . . . . . . . . . 55
----------------------
SECTION 11.15. Trust Obligation . . . . . . . . . . . . . . . . . . . . . 56
----------------
SECTION 11.16. No Petition . . . . . . . . . . . . . . . . . . . . . . . 56
-----------
SECTION 11.17. Inspection . . . . . . . . . . . . . . . . . . . . . . . . 56
----------
SECTION 11.18. Conflict with Trust Indenture Act . . . . . . . . . . . . 56
---------------------------------
SCHEDULE A Schedule of Receivables
EXHIBIT A-1 Form of Class A-1 Note
EXHIBIT A-2 Form of Class A-2 Note
EXHIBIT B Form of the Note Depository Agreement
INDENTURE dated as of ( ), 199_, between FIRST MERCHANTS AUTO TRUST
(199_-_), a Delaware business trust (the "Issuer"), and ( ), an (state)
banking corporation, as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's (Floating Rate)
( %) Asset Backed Notes, Class A-1 (the "Class A-1 Notes") and ( )% Asset
Backed Notes, Class A-2 (the "Class A-2 Notes" and, together with the
Class A-1 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (a) the Receivables and all
moneys received thereon on or after (date); (b) the security interests in the
Financed Vehicles and any accessions thereto granted by Obligors pursuant to
the Receivables and any other interest of the Issuer in such Financed
Vehicles; (c) any Liquidation Proceeds and any other proceeds with respect to
the Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors, including any
vendor's single interest or other collateral protection insurance policy;
(d) any property that shall have secured a Receivable and that shall have
been acquired by or on behalf of the Seller, the Servicer, or the Issuer; (e)
all documents and other items contained in the Receivables Files; (f) all
funds on deposit from time to time in the Trust Accounts and in all
investments and proceeds thereof (including all income thereon); (g) the Sale
and Servicing Agreement (including the Issuer's right to cause the Seller to
repurchase Receivables from the Issuer under certain circumstances described
therein); and (h) all present and future claims, demands, causes of action
and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms
of obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that
the interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. (a) Definitions. Except as otherwise specified herein
-----------
or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
---
"Administration Agreement" means the Administration Agreement dated as
------------------------
of ( ), 199_, among the Administrator, the Issuer and the Indenture Trustee.
"Administrator" means First Merchants, or any successor Administrator
-------------
under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
------------------
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) and, so long as the Administration Agreement is in effect, any
Vice President or more senior officer of the Administrator who is authorized
to act for the Administrator in matters relating to the Issuer and to be
acted upon by the Administrator pursuant to the Administration Agreement and
who is identified on the list of Authorized Officers delivered by the
Administrator to the Indenture Trustee on the Closing Date (as such list may
be modified or supplemented from time to time thereafter).
"Book-Entry Notes" means a beneficial interest in the Notes, ownership
----------------
and transfers of which shall be made through book entries by a Clearing
Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in New York, New York,
(Chicago, Illinois) or the city in which the Corporate Trust office are
authorized or obligated by law, regulation or executive order to remain
closed.
"Calculation Agent" means the Indenture Trustee or any other Person
-----------------
authorized by the Issuer to make the calculations described in Section 2.12
on behalf of the Trust and the Noteholders. The Indenture Trustee shall be
the initial Calculation Agent.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Notes" means the (Floating Rate) ( %) Asset Backed Notes,
---------------
Class A-1, substantially in the form of Exhibit A-1.
"Class A-1 Rate" means a per annum rate equal to (LIBOR plus ( )%,
--------------
subject to a maximum rate with respect to any (Floating Rate) Interest
Accrual Period of ( )% per annum (computed on the basis of the actual number
of days in each Floating Rate Interest Accrual Period divided by 360)) ( %).
"Class A-2 Notes" means the ( )% Asset Backed Notes, Class A-2,
---------------
substantially in the form of Exhibit A-2.
"Class A-2 Rate" means ( )% per annum (computed on the basis of a 360
--------------
day year consisting of twelve 30-day months).
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means (date).
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
----------
Indenture.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business is
administered, which office at the date of execution of this Agreement is
located at ( ), or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Security
Insurer and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee at the address designated by such successor
Indenture Trustee by notice to the Noteholders, the Security Insurer and the
Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.10.
----------------
"Event of Default" has the meaning specified in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any
general partner thereof.
"Floating Rate Interest Accrual Period" means, with respect to the Class
-------------------------------------
A-1 Notes, the period from and including the most recent Distribution Date on
which interest has been paid (or, in the case of the first Distribution
Date, the Closing Date) to but excluding the following Distribution Date.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and
a security interest in and a right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of the Collateral and
all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party
is or may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means (a) a Person in whose name a Note is
------ ----------
registered on the Note Register or (b) if the Security Insurer has made a
payment under the Policy, the Security Insurer to the extent provided in
Section 2.08(c) of this Indenture, Section 5.10 of the Sale and Servicing
Agreement and the proviso to the definition of "Outstanding".
"Indenture Trustee" means ( ), an (state) banking corporation, as
-----------------
Indenture Trustee under this Indenture, or any successor Indenture Trustee
under this Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor
on the Notes, the Seller and any Affiliate of any of the foregoing Persons,
(b) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
-----------------------
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"Interest Accrual Period" means, with respect to any Distribution Date
-----------------------
and the Class A-2 Notes, the period from and including the ( )th day of the
month preceding the month of such Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) to, but excluding, the ( )th day
of the month of such Distribution Date.
"Interest Rate" means the Class A-1 Rate or the Class A-2 Rate.
-------------
"Issuance Date" means the date on which the Notes are first
-------------
authenticated and issued.
"Issuer" means First Merchants Auto Trust (199_-_) until a successor
------
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" or "Issuer Request" means a written order or request
------------ --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"LIBOR" means, with respect to the applicable Floating Rate Interest
-----
Accrual Period, the London interbank offered rate for U.S. dollar deposits
for one month determined by the Calculation Agent on the related LIBOR
Determination Date pursuant to Section 2.12.
"LIBOR Business Day" means any day that is both a Business Day and a day
------------------
on which banking institutions in the City of London, England are not required
or authorized by law to be closed.
"LIBOR Determination Date" means (i) with respect to the first Floating
------------------------
Rate Interest Accrual Period, the second LIBOR Business Day prior to the
Closing Date and (ii) with respect to each Floating Rate Interest Accrual
Period thereafter, the second LIBOR Business Day prior to the first day of
such Floating Rate Interest Accrual Period for so long as the Class A-1 Notes
are outstanding.
"Note" means a Class A-1 Note or a Class A-2 Note.
----
"Note Depository Agreement" means the agreement dated ( ), 199_, among
-------------------------
the Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency, relating to the Class A-1 Notes and
the Class A-2 Notes, substantially in the form of Exhibit B.
"Note Owner" means, with respect to a Book-Entry Note, the Person who
----------
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.04.
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered
to the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be an employee
of or counsel to the Issuer and who shall be satisfactory to the Indenture
Trustee and (if the Security Insurer is an addressee of such Opinion of
Counsel) to the Security Insurer, and which opinion or opinions shall be
addressed to the Indenture Trustee as Indenture Trustee, shall comply with
any applicable requirements of Section 11.01 and shall be in form and
substance satisfactory to the Indenture Trustee and (if the Security Insurer
is an addressee of such Opinion of Counsel) to the Security Insurer.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
provided, however, that Notes that have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Security Insurer has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement, as evidenced by a written notice from the
Security Insurer delivered to the Indenture Trustee, and the Security Insurer
shall be deemed to be the Holder of such Notes to the extent of any payments
made thereon by the Security Insurer; provided, further that in determining
whether the Holders of the requisite Outstanding Amount of the Notes have
given any request, demand, authorization, direction, notice, consent or
waiver hereunder or under any Basic Document, Notes owned by the Issuer, any
other obligor upon the Notes, the Seller or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Indenture Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Indenture Trustee knows to be so owned
shall be so disregarded. Notes so owned that have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means ( ), not in its individual capacity but solely as
-------------
Owner Trustee under the Trust Agreement, or any successor Owner Trustee under
the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 and is authorized by the Issuer to make payments to and
distributions from the Collection Account and the Note Distribution Account,
including payments of principal of or interest on the Notes on behalf of the
Issuer.
"Payment Date" means a Distribution Date.
------------
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Issuer and
(if the Security Insurer is the Controlling Party) the Security Insurer in
writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes and will not result in an increased capital
charge to the Security Insurer.
"Rating Agency" means each of Moody's and Standard & Poor's. If no such
-------------
organization or successor is any longer in existence, "Rating Agency" shall
be a nationally recognized statistical rating organization or other
comparable Person designated by the Issuer, notice of which designation shall
be given to the Indenture Trustee, the Owner Trustee and the Servicer.
"Record Date" means, with respect to a Distribution Date or Redemption
-----------
Date, the close of business on the day immediately preceding such
Distribution Date or Redemption Date.
"Redemption Date" means, in the case of a redemption of the Notes
---------------
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to
Section 10.01(b), the Distribution Date specified by the Servicer or the
Issuer pursuant to Section 10.01(a) or (b), as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
----------------
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount
of the Notes redeemed plus accrued and unpaid interest thereon at the Class
A-2 Rate for each Note being so redeemed to but excluding the Redemption
Date, or (b) in the case of a payment made to Noteholders pursuant to
Section 10.01(b), the amount on deposit in the Note Distribution Account, but
not in excess of the amount specified in clause (a) above.
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
----------------------------
dated as of ( ), 199_, among the Issuer, the Seller, the Servicer and the
Indenture Trustee, as Backup Servicer and Indenture Trustee.
"Schedule of Receivables" means the list of the Receivables set forth
-----------------------
in Schedule A (which Schedule may be in the form of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller" means FMARC ( ), in its capacity as seller under the Sale and
------
Servicing Agreement, and its successor in interest.
"Servicer" means First Merchants, in its capacity as servicer under the
--------
Sale and Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 states of the United States of America
-----
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
------------------
"Telerate Page 3750" means the page so designated on the Dow Jones
------------------
Telerate Service or such other page as may replace that page on that service,
or such other service as may be nominated as the information vendor, for the
purpose of displaying London interbank offered rates of major banks.
"Trust Estate" means all money, instruments, rights and other property
------------
that are subject or intended to be subject to the lien and security interest
of this Indenture for the benefit of the Noteholders (including, without
limitation, all property and interests Granted to the Indenture Trustee),
including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein
have the respective meanings set forth in the Sale and Servicing Agreement
for all purposes of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The Class A-1 Notes and the Class A-2 Notes, in
----
each case together with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit A-1
and Exhibit A-2, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without
steel engraved borders), all as determined by the officers executing such
Notes, as evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A-1 and Exhibit A-2 are part of the terms of
this Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall
--------------------------------------
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of $( )
and Class A-2 Notes for original issue in an aggregate principal amount of
$( ). The aggregate principal amount of Class A-1 Notes and Class A-2 Notes
outstanding at any time may not exceed such respective amounts except as
provided in Section 2.06.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $( ) and
in integral multiples of $( ) in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Issuer may execute, and upon receipt of an Issuer Order the
Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of
the tenor of the definitive Notes in lieu of which they are issued and with
such variations not inconsistent with the terms of this Indenture as the
officers executing such Notes may determine, as evidenced by their execution
of such Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes
to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive
Notes upon surrender of the temporary Notes at the office or agency of the
Issuer to be maintained as provided in Section 3.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes,
the Issuer shall execute, and the Indenture Trustee shall authenticate and
deliver in exchange therefor, a like principal amount of definitive Notes of
authorized denominations. Until so exchanged, the temporary Notes shall in
all respects be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange.
---------------------------------------------------
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe and the
restrictions on transfers of the Notes set forth herein, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to
conclusively rely upon a certificate executed on behalf of the Note Registrar
by an Executive Officer thereof as to the names and addresses of the Holders
of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes of the same Class in any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other
than exchanges pursuant to Section 2.03 or 9.05 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.05. (Reserved.)
-----------
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, and provided that the requirements of Section 8-405 of
the UCC are met, the Issuer shall execute, and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Note, a replacement Note of the
same Class; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven days shall
be due and payable, or shall have been called for redemption, instead of
issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the
Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee, the
Security Insurer and any agent of the Issuer, the Indenture Trustee or the
Security Insurer may treat the Person in whose name any Note is registered
(as of the day of determination) as the owner of such Note for the purpose of
receiving payments of principal of and interest, if any, on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and none
of the Issuer, the Indenture Trustee, the Security Insurer or any agent of
the Issuer, the Indenture Trustee or the Security Insurer shall be affected
by notice to the contrary.
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) The Class A-1 Notes and the Class A-2 Notes shall accrue interest at
the Class A-1 Rate and the Class A-2 Rate, respectively, as set forth in
Exhibits A-1 and A-2, respectively, and such interest shall be payable on
each Distribution Date as specified therein, subject to Section 3.01. Any
installment of interest or principal payable on a Note that is punctually
paid or duly provided for by the Issuer on the applicable Distribution Date
shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the Record Date (i) by check mailed
first-class postage prepaid to such Person's address as it appears on the
Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payment will be made by wire transfer in
immediately available funds to the account designated by such nominee;
provided, however, that the final installment of principal payable with
respect to such Note on a Distribution Date or on the Final Scheduled
Distribution Date (including the Redemption Price for any Note called for
redemption pursuant to Section 10.01) shall be payable as provided in
paragraph (b) below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit
A-1 and A-2. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes may be declared immediately due and payable, if not
previously paid, in the manner provided in Section 5.02 on the date on which
an Event of Default shall have occurred and be continuing by the Indenture
Trustee or Holders of Notes representing not less than a majority of the
Outstanding Amount; provided, however, that if on the date any such Event of
Default occurs or is continuing the Security Insurer is the Controlling
Party, the Security Insurer, in its sole discretion, may determine whether or
not to accelerate payments on the Notes. All principal payments on each
Class of Notes shall be made pro rata to the Noteholders of each Class
entitled thereto. The Indenture Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Issuer expects the final
installment of principal of and interest on such Note to be paid. Such
notice shall be mailed no later than five days prior to such final
Distribution Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify
the place where such Note may be presented and surrendered for payment of
such installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
(c) Promptly following the date on which all principal of and interest
on the Notes have been paid in full and the Notes have been surrendered to
the Indenture Trustee, the Indenture Trustee shall, if the Security Insurer
has paid any amount in respect of the Notes under the Policy that has not
been reimbursed to the Security Insurer, deliver such surrendered Notes to
the Security Insurer.
(d) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) at the applicable Interest Rate in any lawful manner on
the next Distribution Date.
SECTION 2.09. Cancellation. Subject to Section 2.08(c), all Notes
------------
surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly cancelled by the
Indenture Trustee. Subject to Section 2.08(c), the Issuer may at any time
deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in
any manner whatsoever, and all Notes so delivered shall be promptly cancelled
by the Indenture Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. Subject to Section 2.08(c), all
cancelled Notes may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at
the time unless the Issuer shall direct by an Issuer Order that they be
destroyed or returned to it; provided, that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture
Trustee.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Owner thereof will receive a
definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.12. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to such Note Owners pursuant
to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of
the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12,
the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect from
Note Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the
Book Entry Notes and the Administrator is unable to locate a
qualified successor, (ii) the Administrator at its option advises the
Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of an
Event of Default or a Servicer Default, Owners of the Book Entry Notes
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of such Notes advise the Clearing Agency in writing
that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of such Note Owners, then the Clearing
Agency shall notify all Note Owners and the Indenture Trustee of the
occurrence of any such event and of the availability of Definitive Notes
to Note Owners requesting the same. Upon surrender to the Indenture
Trustee of the typewritten Notes representing the Book Entry Notes by
the Clearing Agency, accompanied by registration instructions, the
Issuer shall execute and the Indenture Trustee shall authenticate
the Definitive Notes in accordance with the written instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the
Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
SECTION 2.13. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that, for
federal, state and local income, single business and franchise tax purposes,
the Notes will qualify as indebtedness secured by the Trust Estate. The
Issuer, by entering into this Indenture, and each Noteholder, by its
acceptance of a Note (and each Note Owner by its acceptance of an interest in
the applicable Book Entry Note), agree to treat the Notes for federal, state
and local income, single business and franchise tax purposes as indebtedness.
SECTION 2.14. Determination of LIBOR. On each LIBOR Determination
----------------------
Date, the Calculation Agent shall calculate LIBOR for the related Floating
Rate Interest Accrual Period using the following method. If the offered rate
for United States dollar deposits for one month appears on Telerate Page 3750
as of 11:00 A.M., London Time, on such LIBOR Determination Date, LIBOR for
the related Floating Interest Accrual Period shall be such rate as it appears
on Telerate Page 3750. If such rate does not appear on Telerate Page 3750 on
any LIBOR Determination Date, the Calculation Agent will request each of the
reference banks (which shall be major banks that are engaged in transactions
in the London interbank market selected by the Calculation Agent) to provide
the Calculation Agent with its offered quotation for United States dollar
deposits for one month to prime banks in the London interbank market as of
11:00 A.M., London time, on such date. If at least two reference banks
provide the Calculation Agent with such offered quotations, LIBOR on such
date will be the arithmetic mean, rounded upwards, if necessary, to the
nearest one-sixteenth (1/16) of 1% of all such quotations. If on such date
fewer than two reference banks provide the Calculation Agent with such
offered quotations, LIBOR on such date will be the arithmetic mean, rounded
upwards, if necessary, to the nearest one-sixteenth (1/16) of 1% of the
offered per annum rates that one or more leading banks in The City of New
York selected by the Calculation Agent are quoting as of 11:00 A.M., New York
City time, on such date to leading European banks for United States dollar
deposits for one month. If such banks in The City of New York are not
quoting as provided above, LIBOR for such date will be LIBOR applicable to
the immediately preceding Distribution Date.
SECTION 2.15. Initial Calculation Agent; Replacement of Calculation
-----------------------------------------------------
Agent. The Indenture Trustee shall be the initial Calculation Agent. If the
- -----
Calculation Agent is unable to perform its obligations under Section 2.14,
the Owner Trustee shall appoint a successor
Calculation Agent, which successor Calculation Agent shall be acceptable to
the Indenture Trustee and shall meet the eligibility requirements hereunder
for the Indenture Trustee.
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly
---------------------------------
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting
the foregoing, subject to Section 8.02(c), the Issuer will cause to be
distributed all amounts on deposit in the Note Distribution Account on a
Distribution Date deposited therein pursuant to the Sale and Servicing
Agreement (i) for the benefit of the Class A-1 Notes, to the Class A-1
Noteholders and (ii) for the benefit of the Class A-2 Notes, to the Class A-2
Noteholders. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of
the Notes and this Indenture may be served. Such office will initially be
located at ( ). The Issuer will give prompt written notice to the Indenture
Trustee and the Security Insurer of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail
to maintain any such office or agency or shall fail to furnish the Indenture
Trustee with the address thereof, such surrenders, notices and demands may be
made or served at the Corporate Trust Office, and the Issuer hereby appoints
the Indenture Trustee as its agent to receive all such surrenders, notices
and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
--------------------------------------
Section 8.02(a) and (b), all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.02(c) shall
be made on behalf of the Issuer by the Indenture Trustee or by another Paying
Agent, and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee in writing of its action
or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such
trust and be paid either (i) upon Issuer Request and with the consent of the
Security Insurer (if the Security Insurer is at any such time the Controlling
Party) to the Issuer or (ii) if such money or any portion thereof was paid by
the Security Insurer to the Trustee for the payment of principal of or
interest on such Note to the extent of such unreimbursed amounts, to the
Security Insurer in lieu of the Issuer; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the
Issuer), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, shall at the expense and direction of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer or the Security Insurer, as applicable. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the
Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying
Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States
of America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time
--------------------------
to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing Date,
---------------------------
the Issuer shall furnish to the Indenture Trustee and the Security Insurer an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the lien and security interest of this Indenture and reciting the
details of such action, or stating that, in the opinion of such counsel, no
such action is necessary to make such lien and security interest effective.
(b) On or before May 31, in each calendar year, beginning in 1997, the
Issuer shall furnish to the Indenture Trustee and the Security Insurer an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action, or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and
any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Indenture until May 31 in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables.
----------------------------------------------------
(a) The Issuer will not take any action and will use its best efforts not to
permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Sale and Servicing
Agreement or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Controlling Party to assist it in performing its duties under this Indenture,
and any performance of such duties by a Person identified to the Indenture
Trustee and the Security Insurer in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents
and in the instruments and agreements included in the Trust Estate, including
but not limited to filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this
Indenture and the Sale and Servicing Agreement in accordance with and within
the time periods provided for herein and therein. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document or any provision thereof without
the consent of the Security Insurer (so long as no Security Insurer Default
shall have occurred and be continuing) and either the Indenture Trustee or
the Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee, the Security Insurer (if the Security Insurer
is the Controlling Party at such time) and the Rating Agencies thereof, and
shall specify in such notice the action, if any, the Issuer is taking with
respect to such default. If a Servicer Default shall arise from the failure
of the Servicer to perform any of its duties or obligations under the Sale
and Servicing Agreement with respect to the Receivables, the Issuer shall
take all reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to Section 8.01
of the Sale and Servicing Agreement, the Issuer or, if the Security Insurer
is the Controlling Party, the Security Insurer shall appoint the Backup
Servicer as the successor servicer (the "Successor Servicer"), and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee and, if the Security Insurer is the
Controlling Party, the Security Insurer. In the event that a Successor
Servicer has not been appointed and accepted its appointment at the time when
the Servicer ceases to act as Servicer, the Indenture Trustee without further
action shall automatically be appointed the Successor Servicer. The
Indenture Trustee may resign as the Servicer by giving written notice of such
resignation to the Security Insurer (if the Security Insurer is the
Controlling Party) and the Issuer and in such event will be released from
such duties and obligations, such release not to be effective until the date
a new servicer enters into a servicing agreement with the Security Insurer or
the Issuer, as applicable, as provided below. Upon delivery of any such
notice to the Security Insurer or the Issuer, the Security Insurer or the
Issuer shall obtain a new servicer as the Successor Servicer under the Sale
and Servicing Agreement. Any Successor Servicer other than the Indenture
Trustee or the Backup Servicer shall (i) be an established financial
institution having a net worth of not less than $100,000,000 and whose
regular business includes the servicing of Contracts and (ii) enter into a
servicing agreement with the Security Insurer or the Issuer having
substantially the same provisions as the provisions of the Sale and Servicing
Agreement applicable to the Servicer. If within 30 days after the delivery
of the notice referred to above, the Security Insurer or the Issuer shall not
have obtained such a new servicer, the Indenture Trustee may appoint, or may
petition a court of competent jurisdiction to appoint, a Successor Servicer.
In connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, subject to the limitations set forth below and in the Sale and
Servicing Agreement, and in accordance with Section 8.02 of the Sale and
Servicing Agreement, the Security Insurer or the Issuer, as applicable,
shall enter into an agreement with such successor for the servicing of the
Receivables (such agreement to be in form and substance satisfactory to the
Indenture Trustee). If the Indenture Trustee shall succeed to the Servicer's
duties as servicer of the Receivables as provided herein, it shall do so in
its individual capacity and not in its capacity as Indenture Trustee and,
accordingly, the provisions of Article VI hereof shall be inapplicable to the
Indenture Trustee in its duties as the successor to the Servicer and the
servicing of the Receivables. In case the Indenture Trustee shall become
successor to the Servicer under the Sale and Servicing Agreement, the
Indenture Trustee shall be entitled to appoint as Servicer any one of its
affiliates, provided that it shall be fully liable for the actions and
omissions of such affiliate in such capacity as Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee and, if the Security Insurer is the Controlling Party, the
Security Insurer. As soon as a Successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee in writing and, if the Security Insurer is
the Controlling Party, the Security Insurer of such appointment, specifying
in such notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without
the prior written consent of the Security Insurer (if the Security Insurer is
the Controlling Party) and either the Indenture Trustee or the Holders of at
least a majority in Outstanding Amount of the Notes, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Collateral
(except to the extent otherwise provided in the Sale and Servicing Agreement)
or the Basic Documents, or waive timely performance or observance by the
Servicer or the Seller under the Sale and Servicing Agreement; and (ii) that
any such amendment shall not (A) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, distributions that are required to
be made for the benefit of the Noteholders or (B) reduce the aforesaid
percentage of the Notes that is required to consent to any such amendment,
without the consent of the Holders of all the Outstanding Notes. If the
Security Insurer and the Indenture Trustee or such Holders, as applicable,
agree to any such amendment, modification, supplement or waiver, the Issuer
agrees, promptly following a request by the Indenture Trustee or the Security
Insurer to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee or the Security Insurer may deem necessary or appropriate
in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the
Receivables Purchase Agreement or the Sale and Servicing Agreement,
sell, transfer, exchange or otherwise dispose of any of the properties
or assets of the Issuer, including those included in the Trust Estate,
unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Financed Vehicles
and arising solely as a result of an action or omission of the related
Obligor) or (C) permit the lien of this Indenture not to constitute a
valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee and the Security Insurer (if the Security
Insurer is the Controlling Party), within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year ( )), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year
and of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the
Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted (A) shall be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and
(E) expressly agrees by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation
-----------------------
or merger of the Issuer in accordance with Section 3.10(a), the Person formed
by or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under this Indenture with the same effect as if such Person
had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), First Merchants Auto Trust (199_-_)
will be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee
stating that First Merchants Auto Trust (199_-_) is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur,
------------
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the
----------------------
Servicer to comply with Sections 4.09, 4.10, 4.11 and Article IX of the Sale
and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing
or otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or
make any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Removal of Administrator. So long as any Notes are
------------------------
Outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection
with such removal.
SECTION 3.18. Restricted Payments. Except with respect to the
-------------------
proceeds from issuance of the Notes, the Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest
or security or (iii) set aside or otherwise segregate any amounts for any
such purpose; provided, however, that the Issuer may make, or cause to be
made, (x) distributions as contemplated by, and to the extent funds are
available for such purpose under, the Sale and Servicing Agreement or the
Trust Agreement and (y) payments to the Indenture Trustee pursuant to
Section 1(a)(ii) of the Administration Agreement. The Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account except in accordance with this Indenture and the Basic Documents.
SECTION 3.19. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee, the Security Insurer (if the Security Insurer is at such
time the Controlling Party) and the Rating Agencies prompt written notice of
each Event of Default hereunder, each default on the part of the Servicer or
the Seller of its obligations under the Sale and Servicing Agreement.
SECTION 3.20. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, or the Security Insurer (if the Security Insurer is at
such time the Controlling Party), the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
--------------------------------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon (including any
such right of the Security Insurer pursuant to Section 2.08(c), Section 5.10
of the Sale and Servicing Agreement and the proviso to the definition of
"Outstanding"), (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12 and 3.13,
(v) the rights, obligations and immunities of the Indenture Trustee hereunder
(including the rights of the Indenture Trustee under Section 6.07 and the
obligations of the Indenture Trustee under Section 4.02) and (vi) the rights
of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.06 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation and the Policy has
expired and been returned to the Security Insurer for cancellation and
the Policy has expired and been returned to the Security Insurer for
cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable,
b. will become due and payable at the Class A-2 Final
Scheduled Distribution Date within one year, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer, and the Issuer, in the case of a.,
b. or c. above, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are
payable), in trust for such purpose, in an amount sufficient
to pay and discharge the entire indebtedness on (a) such Notes
not theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable final scheduled Distribution Date or
Redemption Date (if Notes shall have been called for redemption
pursuant to Section 10.01(a)), as the case may be, and (b) all
amounts due to the Security Insurer pursuant to Section
5.06(b)(5) of the Sale and Servicing Agreement and as
subrogee to the rights of Holders of the Notes pursuant to
Section 5.10 of the Sale and Servicing Agreement;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate and, an Opinion of Counsel and (if required by the TIA or
the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements
of Section 11.01(a) and, subject to Section 11.02, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes
for the payment or redemption of which such moneys have been deposited with
the Indenture Trustee, of all sums due and to become due thereon for
principal and interest; but such moneys need not be segregated from other
funds except to the extent required herein or in the Sale and Servicing
Agreement or required by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.03 and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
SECTION 4.04. Release of Collateral. Subject to Section 11.01 and the
---------------------
terms of the Basic Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel and
Independent Certificates in accordance with TIA SectionSection 314(c) and
314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates
to the effect that the TIA does not require any such Independent
Certificates. The Trustee shall surrender the Policy to the Security Insurer
upon the expiration of the term of the Policy (as defined in Section 1 of the
Policy).
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days (solely for purposes of this clause, a payment on
the Notes funded by the Security Insurer shall be deemed to be a payment
made by the Issuer); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable (solely for purposes of this clause, a payment on the Notes
funded by the Security Insurer shall be deemed to be a payment made by
the Issuer); or
(iii) an Insurance Agreement Event of Default shall have occurred
at any time while the Security Insurer is the Controlling Party;
provided, however, that the occurrence of an Insurance Agreement Event
of Default may not form the basis of an Event of Default unless the
Security Insurer shall have delivered to the Issuer and the Trustee a
written notice specifying that such Insurance Agreement Event of Default
constitutes an Event of Default under this Indenture;
(iv) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition
in respect of which such misrepresentation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of
30 days after there shall have been given, by registered or certified
mail, to the Issuer by the Indenture Trustee or the Security Insurer (so
long as no Security Insurer Default shall have occurred and be
continuing) or to the Issuer and the Indenture Trustee by the Holders of
at least 25% of the Outstanding Amount of the Notes, a written notice
specifying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a notice of
Default hereunder; or
(v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the Trust Estate, or ordering the winding-up
or liquidation of the Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(vi) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the Issuer to the entry of
an order for relief in an involuntary case under any such law, or the
consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of any action by the
Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee and, if the Security
Insurer is the Controlling Party, the Security Insurer, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of
time would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. (a)
--------------------------------------------------
If an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than
a majority of the Outstanding Amount of the Notes may declare all the Notes
to be immediately due and payable, by a notice in writing to the Issuer (and
to the Indenture Trustee if given by Noteholders), and upon any such
declaration the unpaid principal amount of such Notes, together with accrued
and unpaid interest thereon through the date of acceleration, shall become
immediately due and payable; provided, however, that, if on the date any such
Event of Default occurs or is continuing, the Security Insurer is the
Controlling Party, then the Security Insurer, in its sole discretion, may
determine whether or not to accelerate payment on the Notes. In the event of
any acceleration of the Notes by operation of this Section 5.02, the
Indenture Trustee shall continue to be entitled to make claims under the
Policy pursuant to Section 5.07 of the Sale and Servicing Agreement for
Scheduled Payments on the Notes. Payments under the Policy following
acceleration of the Notes shall be applied by the Indenture Trustee:
FIRST: to the payment of amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any kind,
SECOND: to the payment of amounts due and unpaid on the
Class A-1 Notes for principal, ratably, without preference or
priority of any kind until the Class A-1 Notes are paid in full,
and
THIRD: to the payment of amounts due and unpaid on the Class A-2
Notes for principal, ratably, without preference or priority of any kind
until the Class A-2 Notes are paid in full.
(b) If an Event of Default occurs at any time when the Security Insurer
is the Controlling Party, the Security Insurer shall have the right, but not
the obligation, to make one or more accelerated payments on the Notes and to
prepay the Notes, in whole or in part, on any date or dates following the
occurrence of such Event of Default if the Security Insurer, in its sole
discretion, shall so elect. This right of the Security Insurer to make
accelerated payments on the Notes is in addition to its obligation to pay
Scheduled Payments on the Notes under the Policy, and in no event shall the
Security Insurer make a Scheduled Payment to the Indenture Trustee for
distribution to the Noteholders later than the date on which such amount is
due under the terms of the Notes and the Policy.
(c) If an Event of Default under this Indenture shall have occurred and
be continuing at any time when the Indenture Trustee is the Controlling
Party, the Indenture Trustee in its discretion may or, if so requested in
writing by Holders of Notes representing at least a majority of the
Outstanding Amount of the Notes, shall declare by written notice to the
Issuer all the Notes immediately due and payable, and upon any such
declaration, the unpaid principal amount of the Notes, together with accrued
interest thereon through the date of acceleration, shall become immediately
due and payable. Notwithstanding anything to the contrary in this paragraph
(c), if an Event of Default specified in clauses (v) and (vi) of Section 5.01
shall have occurred and be continuing at any time when the Indenture Trustee
is the Controlling Party, the Notes shall become immediately due and payable
at par, together with accrued interest thereon.
(d) At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has
been obtained by the Indenture Trustee as hereinafter in this Article V
provided, either the Security Insurer (so long as a Security Insurer Default
has not occurred and is continuing) or the Holders of Notes representing a
majority of the Outstanding Amount of the Notes (if a Security Insurer
Default has occurred and is continuing), by written notice to the Issuer and
the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay:
(A) all payments of principal of and interest on all Notes
and all other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel;
and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
(e) In the event of a sale of the assets of the Trust pursuant to
Section 9.01 of the Trust Agreement
(i) if, based on offers to purchase the Receivables accepted by
the Indenture Trustee, the Security Insurer would not be reimbursed in
full for all amounts due to it under the Insurance Agreement following
the distribution of the proceeds of such sale pursuant to 5.06(b) of the
Sale and Servicing Agreement and (ii) the Certificateholders have been
given prior written notice and five business days to bid therein, the
Security Insurer shall be permitted to request an assignment of
Receivables and all other assets of the Trust Estate in lieu of such a
distribution of such sale proceeds. In the event that the Security
Insurer elects to request such an assignment, promptly following receipt
by the Indenture Trustee of notice of such request, the Indenture
Trustee shall file with the Security Insurer a Notice of Claim in
accordance with the Policy in respect of the principal amount, if any,
of the Notes that are unpaid on the Distribution Date immediately
preceding the date of the receipt by the Indenture Trustee of such
notice plus accrued interest thereon. All amounts received by the
Indenture Trustee from the Security Insurer pursuant to this Section
5.02 shall be distributed to the Noteholders. Immediately upon payment
by the Security Insurer of all amounts required to be paid by the
Security Insurer pursuant to this Section 5.02, the Indenture Trustee
shall be deemed to have assigned the Receivables and all other assets of
the Trust Estate to the Security Insurer or its designee. To effect
such deemed assignment, the Indenture Trustee shall do and perform any
reasonable acts and execute any further instruments reasonably requested
by the Security Insurer.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee; Authority of the Controlling Party. (a) The Issuer
- -----------------------------------------------------
covenants that if (i) default is made in the payment of any interest on any
Note when the same becomes due and payable, and such default continues for a
period of five days, or (ii) default is made in the payment of the principal
of or any installment of the principal of any Note when the same becomes due
and payable, the Issuer will, upon demand of the Indenture Trustee, pay to
it, for the benefit of the Holders of the Notes, the whole amount then due
and payable on such Notes for principal and interest, with interest on the
overdue principal and, to the extent payment at such rate of interest shall
be legally enforceable, on overdue installments of interest at the rate borne
by the Notes and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, may (with the consent of the Security Insurer (so long as no
Security Insurer Default shall have occurred and be continuing)) institute a
Proceeding for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the
same against the Issuer or other obligor upon such Notes and collect in the
manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable. At any time when (i) the Security Insurer is the Controlling Party
or (ii) (A) the Security Insurer is the Holder of Notes pursuant to Section
2.08(c) or Section 5.10 of the Sale and Servicing Agreement and (B) all
amounts due to all other Holders of the Notes pursuant to the Notes and this
Indenture have been paid in full, the Security Insurer may, in its own name,
institute any Proceeding or take any other action permitted under this
section to collect amounts due hereunder from the Issuer or any other obligor
on the Notes.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its
discretion, proceed to protect and enforce its rights and the rights of the
Noteholders, by such appropriate Proceedings as the Indenture Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Indenture Trustee by this
Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Trust Estate, Proceedings under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, or liquidator, sequestrator or similar official shall have
been appointed for or taken possession of the Issuer or its property or such
other obligor or Person, or in case of any other comparable judicial
Proceedings relative to the Issuer or other obligor upon the Notes, or to the
creditors or property of the Issuer or such other obligor, the Indenture
Trustee, irrespective of whether the principal of any Notes shall then be due
and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered
but only at the written direction of the Security Insurer if the Security
Insurer is the Controlling Party, by intervention in such Proceedings or
otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any Proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders,
to pay to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall
be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default
--------------------
shall have occurred and be continuing and either (i) a Security Insurer
Default shall also have occurred or (ii) if the Security Insurer is the
Controlling Party and the Security Insurer so directs the Indenture Trustee
in writing, the Indenture Trustee may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained and collect from
the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that (x) if a Security Insurer Default shall have
occurred, the Indenture Trustee may not sell or otherwise liquidate the Trust
Estate following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of the
Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the Trust
Estate will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of Holders of 66 2/3% of the Outstanding Amount of the
Notes, (y) if the Security Insurer is the Controlling Party, the Security
Insurer may not direct the Indenture Trustee, and the Indenture Trustee shall
not comply with any such direction, to sell or otherwise liquidate the
Collateral following an Event of Default unless (1) the conditions set forth
in clause (x) are met or (2) the Security Insurer has paid the Notes in full
under the Policy. In determining such sufficiency or insufficiency with
respect to clause (B) and (C), the Indenture Trustee may, but need not,
obtain and conclusively rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of
such proposed action and as to the sufficiency of the Trust Estate for such
purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for interest (including any premium), ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Notes for interest (including any premium);
THIRD: to Holders of the Class A-1 Notes for amounts due and
unpaid on the Class A-1 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-1 Notes for principal, until the Outstanding Amount of the
Class A-1 Notes is reduced to zero;
FOURTH: to Holders of the Class A-2 Notes for amounts due and
unpaid on the Class A-2 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-2 Notes for principal, until the Outstanding Amount of the Class
A-2 Notes is reduced to zero;
FIFTH: to the Security Insurer pursuant to Section 5.06(b)(5) of
the Sale and Servicing Agreement and Section 5.10 of the Sale and
Servicing Agreement; and
SIXTH: distributed pursuant to Section 5.06 of the Sale and
Servicing Agreement.
The Indenture Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section. At least 15 days before such record
date, the Issuer shall mail to each Noteholder and the Indenture Trustee a
notice that states the record date, the payment date and the amount to be
paid.
SECTION 5.05. Optional Preservation of the Receivables. If the
----------------------------------------
Indenture Trustee is the Controlling Party and the Notes have been declared
to be due and payable under Section 5.02 following an Event of Default and
such declaration and its consequences have not been rescinded and annulled,
the Indenture Trustee may, but need not, elect to maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of
and interest on the Notes, and the Indenture Trustee shall take such desire
into account when determining whether or not to maintain possession of the
Trust Estate. In determining whether to maintain possession of the Trust
Estate, the Indenture Trustee may, but need not, obtain and conclusively rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to
the sufficiency of the Trust Estate for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings;
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Outstanding Amount of the Notes; and
(vi) the Indenture Trustee is the Controlling Party.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of
the Notes, the Indenture Trustee in its sole discretion may determine
what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had
been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission
------------------------------
of the Indenture Trustee, or any Holder of any Note or the Security Insurer
to exercise any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Default or Event of Default or an acquiescence therein. Every right and
remedy given by this Article V or by law to the Indenture Trustee, to the
Noteholders or the Security Insurer may be exercised from time to time, and
as often as may be deemed expedient, by the Indenture Trustee, the
Noteholders or the Security Insurer as the case may be.
SECTION 5.11. Control by Noteholders. If the Trustee is the
----------------------
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee with respect
to the Notes or exercising any trust or power conferred on the Indenture
Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be
by Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any written direction to the Indenture
Trustee by Holders of Notes representing less than 100% of the
Outstanding Amount of the Notes to sell or liquidate the Trust Estate
shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject
to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of
-----------------------
the acceleration of the maturity of the Notes as provided in Section 5.02, at
any time when the Security Insurer is not the Controlling Party, the Holders
of Notes of not less than a majority of the Outstanding Amount of the Notes
may waive any past Default or Event of Default and its consequences except a
Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Note. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of a Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to (a) any suit instituted
by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group
of Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on
or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion
of the Trust Estate or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance
with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so and at
the Administrator's expense, the Issuer shall take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Seller or the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement or the Receivables Purchase Agreement, as applicable, and to
exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement or the Receivables Purchase Agreement to the extent and in the
manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Seller or the Servicer thereunder and
the institution of legal or administrative actions or proceedings to compel
or secure performance by the Seller or the Servicer of each of their
obligations under the Sale and Servicing Agreement or the Receivables
Purchase Agreement.
(b) If an Event of Default has occurred and is continuing at any time
when the Security Insurer is not the Controlling Party, the Indenture Trustee
may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of
662/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller or
the Servicer under or in connection with the Sale and Servicing Agreement and
the Receivables Purchase Agreement including the right or power to take any
action to compel or secure performance or observance by the Seller or the
Servicer, as the case may be, of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement and the
Receivables Purchase Agreement, as the case may be, and any right of the
Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of
---------------------------
Default has occurred and is continuing of which a Responsible Officer of the
Indenture Trustee has actual knowledge, the Indenture Trustee shall exercise
the rights and powers vested in it by this Indenture and use the same degree
of care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
(i) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer or any other party under the Sale and Servicing Agreement, except
that ( ), solely in its capacity as Backup Servicer, shall perform and be
responsible for such obligations during such time, if any, as the Backup
Servicer shall be the successor to, and be vested with the rights, powers,
duties and privileges of, the Servicer in accordance with the terms of the
Sale and Servicing Agreement.
(j) The Indenture Trustee shall, and hereby agrees that it will, hold
the Policy in trust, and will hold any proceeds of any claim on the Policy in
trust solely for the use and benefit of the Noteholders. The Indenture
Trustee will deliver to the Rating Agency notice of any change made to the
Policy prior to the Termination Date.
For purposes of this Section 6.01 and Section 8.03(c), the Indenture
Trustee, or a Responsible Officer thereof, shall be charged with actual
knowledge of an Event of Default if the Indenture Trustee receives written
notice of such Event of Default from the Issuer, the Servicer, the Backup
Servicer, the Security Insurer or Noteholders owning Notes aggregating not
less than 10% of the Outstanding Amount of the Notes.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture
---------------------------
Trustee may conclusively rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee
shall not be responsible for any misconduct or negligence on the part of, or
for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided, that the Indenture Trustee's conduct does not
constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections
6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall mail to each Noteholder and the Security
Insurer notice of the Default within 30 days after it occurs. Except in the
case of a Default in payment of principal of or interest on any Note
(including payments pursuant to the mandatory redemption provisions of such
Note), the Indenture Trustee may withhold the notice to Noteholders if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall, or shall
--------------------------
cause the Administrator to, pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of
an express trust. The Issuer shall, or shall cause the Administrator to,
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture
Trustee's agents, counsel, accountants and experts. The Issuer shall, or
shall cause the Administrator to, indemnify the Indenture Trustee against any
and all loss, liability or expense (including attorneys' fees and expenses)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder or under the Sale and Servicing
Agreement. The Indenture Trustee shall notify the Issuer and the
Administrator promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer and the Administrator shall
not relieve the Issuer or the Administrator of its obligations hereunder.
The Issuer shall, or shall cause the Administrator to, defend any such claim,
and the Indenture Trustee may have separate counsel and the Issuer shall, or
shall cause the Administrator to, pay the fees and expenses of such counsel.
Neither the Issuer nor the Administrator need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee and the
Administrator's indemnities to the Indenture Trustee pursuant to this Section
shall survive the discharge of this Indenture or the earlier resignation or
removal of the Indenture Trustee. When the Indenture Trustee incurs expenses
after the occurrence of a Default specified in Section 5.01(iv) or (v) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer and (if the
Security Insurer is the Controlling Party) the Security Insurer. The Holders
of a majority in Outstanding Amount of the Notes may, with the consent of the
Controlling Party, remove the Indenture Trustee by so notifying the Indenture
Trustee and may appoint a successor Indenture Trustee. The Issuer shall,
with the consent of the Controlling Party, and at the request of the
Controlling Party, remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee acceptable (if the
Security insurer is the Controlling Party) to the Security Insurer. If the
Issuer fails to appoint such a successor Indenture Trustee and the Security
Insurer is the Controlling Party, the Security Insurer may appoint a
successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The
retiring Indenture Trustee shall be paid all amounts owed to it upon its
resignation or removal. The successor Indenture Trustee shall mail a notice
of its succession to Noteholders. The retiring Indenture Trustee shall
promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee. The retiring Indenture Trustee shall not be
liable for the acts or omissions of any Successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Security Insurer (if the Security Insurer is the
Controlling Party), the Issuer or the Holders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under
Section 6.07 shall continue for the benefit of the retiring Indenture
Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes
or in this Indenture provided that the certificate of the Indenture Trustee
shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
- -------
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee, with the consent of the Security Insurer (if the Security Insurer is
the Controlling Party), shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or co-
trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-
trustee or separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust Estate or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every provision
of this Indenture relating to the conduct of, affecting the liability of, or
affording protection to, the Indenture Trustee. Every such instrument shall
be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this 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 Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition, and the time deposits of the Indenture Trustee shall be rated at
least A-1 by Standard & Poor's and P-1 by Moody's. At any time that the
Security Insurer is the Controlling Party, the Indenture Trustee shall
provide copies of such reports to the Security Insurer upon request. The
Indenture Trustee shall comply with TIA Section 310(b), including the
optional provision permitted by the second sentence of TIA Section 310(b)(9);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth
in TIA Section 310(b)(1) are met.
SECTION 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses.
-----------------------------------------------------
The Indenture Trustee shall use its best efforts to maintain the
effectiveness of all licenses required under the Pennsylvania Motor Vehicle
Sales Finance Act in connection with this Indenture and the transactions
contemplated hereby until the lien and security interest of this Indenture
shall no longer be in effect in accordance with the terms hereof.
SECTION 6.13. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, and (b) at such
other times as the Indenture Trustee may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the
Note Registrar, no such list shall be required to be furnished. The
Indenture Trustee or, if the Indenture Trustee is not the Note Registrar, the
Issuer shall furnish to the Security Insurer (if the Security Insurer is the
Controlling Party) in writing on an annual basis and at such other times as
the Security Insurer may request a copy of the list of Noteholders.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form
- -----------
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of Holders of Notes
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished. The Indenture Trustee
shall make such list available to the Noteholders and the Security Insurer
(if the Security Insurer is the Controlling Party) on request.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required (if at all) to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
that the Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) and by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee. If required by TIA
----------------------------
Section 313(a), within 60 days after each (month/day) beginning with (date),
the Indenture Trustee shall mail to each Noteholder as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to
claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date,
--------------
the Issuer shall cause the Servicer to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 5.02 of the
Sale and Servicing Agreement.
(b) On or before each Distribution Date, the Total Distribution Amount
with respect to the preceding Collection Period will be deposited in the
Collection Account as provided in Section 5.02 of the Sale and Servicing
Agreement. On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding
Collection Period pursuant to Section 5.05 of the Sale and Servicing
Agreement will be transferred from the Collection Account and/or the Spread
Account to the Note Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture
Trustee shall distribute all amounts on deposit in the Note Distribution
Account to Noteholders in respect of the Notes to the extent of amounts due
and unpaid on the Notes for principal and interest (including any premium) in
the following amounts and in the following order of priority (except as
otherwise provided in Section 5.04(b)):
(i) accrued and unpaid interest on the Notes; provided, that if
there are not sufficient funds in the Note Distribution Account to pay
the entire amount of accrued and unpaid interest then due on the Notes,
the amount in the Note Distribution Account shall be applied to the
payment of such interest on the Notes pro rata on the basis of the total
such interest due on the Notes;
(ii) to the Holders of the Class A-1 Notes on account of
principal until the Outstanding Amount of the Class A-1 Notes is reduced
to zero; and
(iii) to the Holders of the Class A-2 Notes on account of
principal until the Outstanding Amount of the Class A-2 Notes is reduced
to zero.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long
-------------------------------------
as no Default or Event of Default shall have occurred and be continuing, all
or a portion of the funds in the Trust Accounts shall be invested in Eligible
Investments and reinvested by the Indenture Trustee (or the investment
manager referred to in the definition of "Eligible Investments" in the Sale
and Servicing Agreement) upon Issuer Order, subject to the provisions of
Section 5.02 of the Sale and Servicing Agreement. All income or other gain
from investments of moneys deposited in the Trust Accounts shall be deposited
by the Indenture Trustee in the Collection Account, and any loss resulting
from such investments shall be charged to such account. The Issuer will not
direct the Indenture Trustee to make any investment of any funds or to sell
any investment held in any of the Trust Accounts unless the security interest
Granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance
with their terms.
(c) If (i) the Issuer (or the Servicer or any investment manager
pursuant to Section 5.02 of the Sale and Servicing Agreement) shall have
failed to give investment directions for any funds on deposit in the Trust
Accounts to the Indenture Trustee by 11:00 a.m. Eastern Time (or such other
time as may be agreed by the Issuer and Indenture Trustee) on any Business
Day or (ii) a Default or Event of Default shall have occurred and be
continuing of which a Responsible Officer of the Indenture Trustee has actual
knowledge with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02 or (iii) if such Notes
shall have been declared due and payable following an Event of Default but
amounts collected or receivable from the Trust Estate are being applied in
accordance with Section 5.05 as if there had not been such a declaration,
then the Controlling Party shall, to the fullest extent practicable, invest
and reinvest funds in the Trust Accounts in one or more Eligible Investments.
SECTION 8.04. Release of Trust Estate. (a) Subject to the payment
-----------------------
of its fees and expenses pursuant to Section 6.07, the Indenture Trustee may,
and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey
the Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07
have been paid and all amounts due to the Security Insurer have been paid,
release any remaining portion of the Trust Estate that secured the Notes from
the lien of this Indenture and release to the Issuer or any other Person
entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA
SectionSection 314(c) and 314(d)(1) meeting the applicable requirements of
Section 11.01.
Issuer agrees, upon request by the Servicer and representation by the
Servicer that it has complied with the procedure in Section 9.01 of the Sale
and Servicing Agreement, to render the Issuer Request to the Indenture
Trustee in accordance with Section 4.04, and take such other actions as are
required in that Section.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days prior written notice when requested by the Issuer to take
any action pursuant to Section 8.04(a), accompanied by copies of any
instruments involved, and the Indenture Trustee shall also require, as a
condition to such action, an Opinion of Counsel, in form and substance
satisfactory to the Indenture Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding
that all conditions precedent to the taking of such action have been complied
with and such action will not materially and adversely impair the security
for the Notes or the rights of the Noteholders in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with the consent of
the Security Insurer (if the Security Insurer is the Controlling Party) and
prior notice to the Rating Agencies, the Issuer and the Indenture Trustee,
when authorized by an Issuer Order, at any time and from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that such action shall not adversely affect the interests of
the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but
with the consent of the Security Insurer (if the Security Insurer is the
Controlling Party) and prior notice to the Rating Agencies, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any Noteholder (including the interests of the
Security Insurer to the extent it is, or will become, upon payment in full of
all amounts due to any other Noteholder hereunder or pursuant to a Note, a
Noteholder pursuant to Section 2.08(c) or Section 5.10 or the Sale and
Servicing Agreement.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
The Issuer and the Indenture Trustee, when authorized by an Issuer Order,
also may, with prior notice to the Rating Agencies and with the consent of
(i) the Security Insurer (if the Security Insurer is the Controlling Party)
or (ii) of the Holders of not less than a majority of the Outstanding Amount
of the Notes (if the Security Insurer is not the Controlling Party), by Act
of such Holders delivered to the Issuer and the Indenture Trustee, enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair
the right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso in clause (ii)
to the definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution
--------------------------------
of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and shall be deemed to be modified and amended in
accordance therewith with respect to the Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities
and immunities under this Indenture of the Indenture Trustee, the Issuer and
the Holders of the Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of
this Indenture for any and all purposes.
SECTION 9.05. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
SECTION 9.06. Conformity with Trust Indenture Act. Every amendment
-----------------------------------
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Redemption. (a) The Class A-2 Notes are subject to
----------
redemption in whole, but not in part, at the direction of the Servicer
pursuant to Section 9.01(a) of the Sale and Servicing Agreement, on any
Distribution Date on which the Servicer exercises its option to purchase the
Trust Estate pursuant to said Section 9.01(a), for a purchase price equal to
the Redemption Price; provided, that the Issuer has available funds
sufficient to pay the Redemption Price. The Servicer or the Issuer shall
furnish the Security Insurer (if the Security Insurer is the Controlling
Party) and the Rating Agencies notice of such redemption. If the Class A-2
Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or
the Issuer shall furnish notice of such election to the Indenture Trustee not
later than 20 days prior to the Redemption Date and the Issuer shall deposit
by 10:00 A.M. New York City time on the Redemption Date with the Indenture
Trustee in the Note Distribution Account the Redemption Price of the Class A-
2 Notes to be redeemed, whereupon all such Class A-2 Notes shall be due and
payable on the Redemption Date upon the furnishing of a notice complying with
Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts
are to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer
or the Issuer shall, to the extent practicable, furnish notice of such event
to the Indenture Trustee not later than 20 days prior to the Redemption Date,
whereupon all such amounts shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice. (a) Notice of redemption
-------------------------
under Section 10.01(a) shall be given by the Indenture Trustee by first-class
mail, postage prepaid, or by facsimile mailed or transmitted not later than
10 days prior to the applicable Redemption Date to each Holder of Notes, as
of the close of business on the Record Date preceding the applicable
Redemption Date, at such Holder's address or facsimile number appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in
the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair
or affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required
to be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
--------------------------------
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), on
the Redemption Date become due and payable at the Redemption Price and
(unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on the Redemption Price for any period after the date
to which accrued interest is calculated for purposes of calculating the
Redemption Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc. (a) Upon
-----------------------------------------
any application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate
from a firm of certified public accountants meeting the applicable
requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis
for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed
in Section 11.01(a) or elsewhere in this Indenture, furnish to the
Indenture Trustee and the Security Insurer (if the Security Insurer is
the Controlling Party) an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value
(within 90 days of such deposit) to the Issuer of the Collateral or
other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee and the Security Insurer an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the Indenture Trustee
and the Security Insurer an Independent Certificate as to the same
matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant
to clause (i) above and this clause (ii), is 10% or more of the
Outstanding Amount of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's Certificate
is less than $25,000 or less than one percent of the Outstanding Amount
of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee and the Security Insurer (if the Security Insurer is
the Controlling Party) an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed
to be released and stating that in the opinion of such person the
proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee and the Security Insurer an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described in
clause (iii) above, the Issuer shall also furnish to the Indenture
Trustee and the Security Insurer an Independent Certificate as to the
same matters if the fair value of the property or securities and of all
other property, other than property as contemplated by clause (v) below
or securities released from the lien of this Indenture since the
commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals
10% or more of the Outstanding Amount of the Notes, but such certificate
need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or less than one percent of
the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 4.04 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the
other provisions of this Section, (A) collect, liquidate, sell or
otherwise dispose of Receivables and Financed Vehicles as and to the
extent permitted or required by the Basic Documents and (B) make cash
payments out of the Trust Accounts as and to the extent permitted or
required by the Basic Documents, so long as the Issuer shall deliver to
the Indenture Trustee every six months, commencing December 15, 1997, an
Officer's Certificate of the Issuer stating that all the dispositions of
Collateral described in clauses (A) or (B) above that occurred during
the preceding six calendar months were in the ordinary course of the
Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person,
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Servicer, the Seller, the Issuer or the
Administrator, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller, the Issuer or the
Administrator, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of
such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
SECTION 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except
as herein otherwise expressly provided such action shall become effective
when such instrument or instruments are delivered to the Indenture Trustee
and, where it is hereby expressly required, to the Issuer. Such instrument
or instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies. Any request, demand, authorization, direction, notice, consent,
- --------
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture shall be in writing and, if such request, demand, authorization,
direction, notice, consent, waiver or act of Noteholders is to be made upon,
given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer,
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office; or
(ii) the Issuer by the Indenture Trustee or by any Noteholder,
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the
Issuer addressed to: First Merchants Auto Trust (199_-_), in care of
(owner trustee), or at any other address previously furnished in writing
to the Indenture Trustee by the Issuer or the Administrator. The Issuer
shall promptly transmit any notice received by it from the Noteholders
to the Indenture Trustee;
(iii) the Security Insurer shall be sufficient for any purpose
hereunder if in writing and mailed by registered mail or personally
delivered or telexed or faxed to the Security Insurer at: ( ). (In each
case in which notice or other communication to the Security Insurer
refers to an Event of Default, a claim on the Policy or with respect to
which failure on the part of the Security Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice
or other communication should also be sent to the attention of ( )
"URGENT MATERIAL ENCLOSED".)
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) 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
and (ii) in the case of Standard & Poor's, at the following address:
Standard & Poor's Ratings Services, a Division of The McGraw Hill Companies,
Inc., 25 Broadway (15th Floor), New York, New York 10004, Attention of Asset
Backed Surveillance Department; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for
the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice nor any defect in any notice
so mailed to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have been duly
given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event
of Default.
SECTION 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for
in this Indenture for such payments or notices. The Issuer will furnish to
the Indenture Trustee a copy of each such agreement and the Indenture Trustee
will cause payments to be made and notices to be given in accordance with
such agreements.
SECTION 11.07. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience
only and shall not affect the construction hereof.
SECTION 11.08. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.09. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.10. Benefits of Indenture. The Security Insurer and its
---------------------
successors and assigns shall be third-party beneficiaries to the provisions
of this Indenture, and shall be entitled to rely upon and directly to enforce
the provisions of this Indenture so long as the Security Insurer is the
Controlling Party. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto, the
Security Insurer and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership
interest in any part of the Trust Estate, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 11.11. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.14. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is
to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any
other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.
SECTION 11.15. Trust Obligation. No recourse may be taken, directly
----------------
or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer, including
the Seller, or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Indenture Trustee or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in the Issuer,
the Owner Trustee or the Indenture Trustee or of any successor or assign of
the Indenture Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any
unpaid consideration for stock, unpaid capital contribution or failure to pay
any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the
benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.
SECTION 11.16. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Seller or the
Issuer, or join in any institution against the Seller or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents.
SECTION 11.17. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee or of the
Security Insurer (if the Security Insurer is the Controlling Party), during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall, and shall cause its representatives
to, hold in confidence all such information except to the extent disclosure
may be required by law (and all reasonable applications for confidential
treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 11.18. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of TIA Section Section 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto
duly authorized and duly attested, all as of the day and year first above
written.
FIRST MERCHANTS AUTO TRUST (199_-_),
by: ( ), not in its individual capacity but solely
as Owner Trustee,
by:
-----------------------------------------
Name:
Title:
( ),
not in its individual capacity but solely as
Indenture Trustee,
by:
------------------------------------------
Name:
Title:
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ___________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said FIRST
MERCHANTS AUTO TRUST (199_-_), a (Delaware business trust), and that s/he
executed the same as the act of said (business trust) for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ( ) day of (month), (year).
---------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
__________________________
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of
( ), an (state) banking corporation, and that s/he executed the same as the
act of said corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ( ) day of (month), (year).
----------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
_________________________
SCHEDULE A
(To be Provided on the Closing Date)
EXHIBIT A-1
(FORM OF CLASS A-1 NOTE)
(UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, 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 SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.)
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS NOTE (OR
INTEREST THEREIN), COVENANTS AND AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER,
AS THE CASE MAY BE, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY
AFTER THE TERMINATION OF THE INDENTURE, ACQUIESCE, PETITION OR OTHERWISE
INVOKE OR CAUSE THE ISSUER TO INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL
AUTHORITY FOR THE PURPOSE OF COMMENCING OR SUSTAINING A CASE AGAINST THE
ISSUER UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR
SIMILAR LAW OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE,
CUSTODIAN, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE ISSUER OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION
OF THE AFFAIRS OF THE ISSUER.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $ /F1/
-----------
No. R- CUSIP NO.
FIRST MERCHANTS AUTO TRUST (199_-_)
--------------------
/F1/ Denominations of $( ) and integral multiples of $( ) in excess thereof.
(FLOATING RATE) ( %) ASSET BACKED NOTE, CLASS A-1
FIRST MERCHANTS AUTO TRUST (199_-_), a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to
______________________, or registered assigns, the principal sum of
( ) DOLLARS, payable on each Distribution Date in an amount equal to
the result obtained by multiplying (i) a fraction the numerator of which is
$ (INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is
$( ) by (ii) the aggregate amount, if any, payable from the Note Distribution
Account in respect of principal on the Class A-1 Notes pursuant to
Section 3.01 of the Indenture dated as of ( ), 199_ (the "Indenture"),
between the Issuer and ( ), an (state) banking corporation, as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of
(date) (the "Class A-1 Final Scheduled Distribution Date") and the Redemption
Date, if any, pursuant to Section 10.01(a) of the Indenture. Capitalized
terms used but not defined herein are defined in the Indenture, which also
contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at a rate per annum equal to
(LIBOR plus ( )%, subject to a maximum rate of ( )% per annum) ( %), on each
Distribution Date until the principal of this Note is paid or made available
for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in Section 3.01 of the Indenture. (LIBOR for each Interest Reset
Period and related Distribution Date will be determined on the related LIBOR
Determination Date by the Calculation Agent as set forth in Section 2.14 of
the Indenture. All determinations of LIBOR by the Calculation Agent shall,
in the absence of manifest error, be conclusive for all purposes, and each
Holder of this Note, by accepting a Class A-1 Note, agrees to be bound by
such determination). Interest on this Note will accrue for each Distribution
Date from the Closing Date (in the case of the first Distribution Date) or
from the most recent Distribution Date on which interest has been paid to but
excluding such Distribution Date. Interest will be computed on the basis of
the actual number of days in each (Floating Rate) Interest Accrual Period
divided by 360. Such principal of and interest on this Note shall be paid in
the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Policy") issued by ( ) ("the Security Insurer"), pursuant to
which the Security Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Distributable Amount and the Noteholders' Principal
Distributable Amount on each Distribution Date (collectively, the "Scheduled
Payment"), all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: FIRST MERCHANTS AUTO TRUST (199_-_),
by: ( ), not in its individual capacity but
solely as Owner Trustee under the Trust
Agreement,
by: _________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date: ( ), not in its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory
(REVERSE OF CLASS A-1 NOTE)
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 (Floating Rate) ( %) Asset Backed Notes, (herein
called the "Class A-1 Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-1
Notes are subject to all terms of the Indenture.
The Class A-1 Notes and the Class A-2 Notes (collectively, the "Notes")
are and will be secured by the collateral pledged as security therefor as
provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means
the ( )th day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing ( ), 199_.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-1 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01
of the Indenture. Notwithstanding the foregoing, (i) if an Event of Default
occurs at a time when no Security Insurer Default has occurred under the
Policy, the Security Insurer may elect either to continue to make Scheduled
Payments on the Notes or to make one or more accelerated payments on the
Notes and (ii) if an Event of Default occurs at any time after a Security
Insurer Default has occurred under the Policy, the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable
in the manner provided in Section 5.02 of the Indenture. All principal
payments on the Class A-1 Notes shall be made pro rata to the Class A-1
Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not
in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Notes registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to
be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall
be mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without
requiring that this Note be submitted for notation of payment.. Any
reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining
unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Rate to the extent lawful.
As provided in Section 10.01 of the Indenture, the Notes may be redeemed
in whole, but not in part, at the option of the Servicer (with the consent of
the Security Insurer under certain circumstances), on any Distribution Date
on or after the date on which the Outstanding Amount of the Notes is less
than or equal to 10% of the original Outstanding Amount of the Notes.
As provided in the Indenture and subject to the limitations set forth
therein and on the face hereof, the transfer of this Note may be registered
on the Note Register upon surrender of this Note for registration of transfer
at the office or agency designated by the Issuer pursuant to the Indenture,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Issuer, or join in any institution
against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating
to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Security Insurer and any agent of the
Issuer, the Indenture Trustee or the Security Insurer may treat the Person in
whose name this Note (as of the day of determination or as of such other date
as may be specified in the Indenture) is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and none of the Issuer,
the Indenture Trustee, the Security Insurer or any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and the Holders
of Notes representing a majority of the Outstanding Amount of all Notes at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of Notes representing specified percentages of the Outstanding Amount
of the Notes, on behalf of the Holders of all the Notes, to waive compliance
by the Issuer with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof
or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture with the consent of the Security Insurer but without the
consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of (owner trustee) in its individual
capacity, (indenture trustee) in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal of or interest on this Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be
taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
__________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________________________________, attorney, to
transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
----------------------------
------------------------------*/
Signature Guaranteed:
-------------------------------*/
________________________
*/ NOTICE: The signature to this assignment must correspond with the name
-
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT A-2
(FORM OF CLASS A-2 NOTE)
(UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, 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 SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.)
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS NOTE (OR
INTEREST THEREIN), COVENANTS AND AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER,
AS THE CASE MAY BE, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY
AFTER THE TERMINATION OF THE INDENTURE, ACQUIESCE, PETITION OR OTHERWISE
INVOKE OR CAUSE THE ISSUER TO INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL
AUTHORITY FOR THE PURPOSE OF COMMENCING OR SUSTAINING A CASE AGAINST THE
ISSUER UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR
SIMILAR LAW OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE,
CUSTODIAN, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE ISSUER OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION
OF THE AFFAIRS OF THE ISSUER.
- ----------------------------------
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $
-----------
No. R- CUSIP NO.
FIRST MERCHANTS AUTO TRUST (199_-_)
( )% ASSET BACKED NOTE, CLASS A-2
FIRST MERCHANTS AUTO TRUST (199_-_), a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to
______________________, or registered assigns, the principal sum of
( ) DOLLARS, payable on each Distribution Date in an amount equal to
the result obtained by multiplying (i) a fraction the numerator of which is
$ (INSERT INITIAL PRINCIPAL AMOUNT OF NOTE) and the denominator of which is
$( ) by (ii) the aggregate amount, if any, payable from the Note Distribution
Account in respect of principal on the Class A-2 Notes pursuant to
Section 3.01 of the Indenture dated as of ( ), 199_ (the "Indenture"),
between the Issuer and ( ), an (state) banking corporation, as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of
(date) (the "Class A-2 Final Scheduled Distribution Date") and the Redemption
Date, if any, pursuant to Section 10.01(a) of the Indenture. No payments of
principal of the Class A-2 Notes shall be made until the Class A-1 Notes have
been paid in full. Capitalized terms used but not defined herein are defined
in the Indenture, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum set
forth above, on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on
this Note will accrue for each Distribution Date from and including the ( )th
day of the month preceding the month of such Distribution Date (in the case
of the first Distribution Date, from the Closing Date) to but excluding the (
)th day of the month of such Distribution Date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Policy") issued by ( ) ("the Security Insurer"), pursuant to
which the Security Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Distributable Amount and the Noteholders' Principal
Distributable Amount on each Distribution Date
(collectively, the "Scheduled Payment"), all as more fully set forth in the
Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: FIRST MERCHANTS AUTO TRUST (199_-_),
by: ( ), not in its individual capacity but
solely as Owner Trustee under the Trust
Agreement,
by: _________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date: ( ), not in its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory
(REVERSE OF CLASS A-2 NOTE)
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ( )% Asset Backed Notes, Class A-2 (herein called the
"Class A-2 Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Class A-2 Notes are
subject to all terms of the Indenture.
The Class A-1 Notes and the Class A-2 Notes (collectively, the "Notes")
are and will be secured by the collateral pledged as security therefor as
provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means
the ( )th day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing (date).
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01
of the Indenture. Notwithstanding the foregoing, (i) if an Event of Default
occurs at a time when no Security Insurer Default has occurred under the
Policy, the Security Insurer may elect either to continue to make Scheduled
Payments on the Notes or to make one or more accelerated payments on the
Notes and (ii) if an Event of Default occurs at any time after a Security
Insurer Default has occurred under the Policy, the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable
in the manner provided in Section 5.02 of the Indenture. All principal
payments on the Class A-1 Notes shall be made pro rata to the Class A-1
Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not
in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Notes registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to
be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall
be mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without
requiring that this Note be submitted for notation of payment.. Any
reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available,
as provided in the Indenture, for payment in full of the then remaining
unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Rate to the extent lawful.
As provided in Section 10.01 of the Indenture, the Notes may be redeemed
in whole, but not in part, at the option of the Servicer (with the consent of
the Security Insurer under certain circumstances), on any Distribution Date
on or after the date on which the Outstanding Amount of the Notes is less
than or equal to 10% of the original Outstanding Amount of the Notes.
As provided in the Indenture and subject to the limitations set forth
therein and on the face hereof, the transfer of this Note may be registered
on the Note Register upon surrender of this Note for registration of transfer
at the office or agency designated by the Issuer pursuant to the Indenture,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Issuer, or join in any institution
against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating
to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Security Insurer and any agent of the
Issuer, the Indenture Trustee or the Security Insurer may treat the Person in
whose name this Note (as of the day of determination or as of such other date
as may be specified in the Indenture) is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and none of the Issuer,
the Indenture Trustee, the Security Insurer or any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Security Insurer and the Holders
of Notes representing a majority of the Outstanding Amount of all Notes at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of Notes representing specified percentages of the Outstanding Amount
of the Notes, on behalf of the Holders of all the Notes, to waive compliance
by the Issuer with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof
or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture with the consent of the Security Insurer but without the
consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of (owner trustee) in its individual
capacity, (indenture trustee) in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors
or assigns shall be personally liable for, nor shall recourse be had to any
of them for, the payment of principal of or interest on this Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be
taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
__________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________________________________, attorney, to
transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
-------------------- ------------------------------ */
Signature Guaranteed:
-----------------------------*/
________________________
*/ NOTICE: The signature to this assignment must correspond with the name
-
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT B
FORM OF NOTE DEPOSITORY AGREEMENT
Exhibit 5.1
Opinion of Sonnenschein Nath & Rosenthal with Respect to Legality
September 6, 1996
First Merchants Acceptance Corporation
570 Lake Cook Road, Suite 126
Deerfield, Illinois 60015
Re: First Merchants Acceptance Corporation
Registration Statement on Form S-3 (No. 333-09487)
--------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to the trusts referred to below in
connection with the filing by First Merchants Acceptance Corporation, a
Delaware corporation (the "Registrant"), of a Registration Statement on Form
S-3 (such registration statement, together with the exhibits and any
amendments thereto, the "Registration Statement") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
for the registration under the Act of asset backed notes (the "Notes") and
asset backed certificates (the "Certificates") in an aggregate principal
amount of up to $625,000,000. As described in the Registration Statement,
the Notes and/or the Certificates will be issued from time to time in series.
Each series of asset-backed securities will be issued by either (a) a trust
(each, an "Owner Trust") formed by the Seller pursuant to a trust agreement
(each, a "Trust Agreement") between the Seller and a trustee or (b) a trust
(each, a "Grantor Trust") formed pursuant to a pooling and servicing
agreement (each, a "Pooling and Servicing Agreement") among the Seller, a
servicer, and a trustee. Each series of securities issued by an Owner Trust
may include one or more classes of Notes, which will be issued pursuant to
an indenture (each, an "Indenture") between the related Owner Trust and an
indenture trustee. Each series may include one or more classes of
Certificates, which will be issued pursuant to a Trust Agreement or a Pooling
and Servicing Agreement. The Certificates and the Notes will be sold from
time to time pursuant to certain underwriting agreements (the "Underwriting
Agreements") among the Registrant, the applicable Seller and the underwriter
or underwriters named therein.
We have examined and relied upon the Registration Statement and, in each
case as filed with the Registration Statement, the
form of Indenture (including the forms of Notes included as exhibits
thereto), the form of Trust Agreement or Pooling and Servicing Agreement
(including the forms of Certificates included as exhibits thereto and, with
respect to the Trust Agreement, the form of Certificate of Trust to be filed
pursuant to the Delaware Business Trust Act) and the forms of Underwriting
Agreements relating to the Notes and the Certificates (collectively, the
"Form Operative Documents"). In addition, we have examined and considered
executed originals or counterparts, or certified or other copies identified
to our satisfaction as being true copies of such certificates, instruments,
documents and other corporate records of the Registrant, and matters of fact
and law as we deem necessary for the purposes of the opinion expressed below.
Capitalized terms not otherwise defined herein have the meanings assigned to
them in the base prospectus included in the Registration Statement.
In our examination we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
documents. As to any facts material to the opinions expressed herein that
were not independently established or verified, we have relied upon
statements and representations of officers and other representatives of the
Registrant and others.
Based on and subject to the foregoing, we are of the opinion that, with
respect to the Notes and/or Certificates of any series, when (i) the
Registration Statement becomes effective pursuant to the provisions of the
Act, (ii) the amount, price, interest rate and other principal terms of such
Notes and/or Certificates have been duly approved by the respective Boards of
Directors of the Registrant and the Seller forming the related Owner Trust or
Grantor Trust, (iii) documents (the "Final Operative Documents") in the nature
of the applicable Form Operative Documents relating to such series have
each been duly completed, executed and delivered by the parties thereto
substantially in the form filed as an exhibit to the Registration Statement
reflecting the terms established as described above, (iv) with respect to
each Owner Trust, the related Certificate of Trust has been duly executed by
the trustee and timely filed with the Secretary of State of the State of
Delaware, (v) with respect to each series that includes Notes, the related
Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, and (vi) such Notes and/or Certificates have been duly executed and
issued by the related Owner Trust or Grantor Trust and authenticated by the
trustee or the indenture trustee, as applicable, and sold in accordance with
the terms and conditions of the related Operative Documents and in the manner
described in the Registration Statement, such Notes and/or Certificates will
have been duly authorized by all necessary action of the applicable Owner
Trust or Grantor Trust and will have been legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus supplements and the base prospectus included in
the Registration Statement.
Very truly yours,
/s/ Sonnenschein Nath &
Rosenthal
Exhibit 8.1
Opinion of Brown & Wood LLP
with respect to Tax Matters
September 6, 1996
First Merchants Acceptance Corporation
570 Lake Cook Road, Suite 126
Deerfield, Illinois 60015
Re: First Merchants Acceptance Corporation
Registration Statement on Form S-3 (No. 333-09487)
--------------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel to First Merchants
Acceptance Corporation, a Delaware corporation (the "Registrant"), in
connection with the proposed issuance and sale of its Asset Backed Notes (the
"Notes") and Asset Backed Certificates (the "Certificates" and, together with
the Notes, the "Securities"), to be issued from time to time in one or more
series. Each series of Securities will be issued by either (a) a trust
formed by the Registrant pursuant to a trust agreement (each, a "Trust
Agreement") between the Registrant and a trustee or (b) a trust formed
pursuant to a pooling and servicing agreement (each, a "Pooling and Servicing
Agreement") among the Registrant, a servicer, and a trustee. The property of
each trust will include motor vehicle retail installment sale contracts and
certain other property. Each series of securities issued under a Trust
Agreement may include one or more classes of Notes, which will be issued
pursuant to an indenture (each, an "Indenture") between the related trust and
an indenture trustee. Each series may include one or more classes of
Certificates, which will be issued pursuant to a Trust Agreement or a Pooling
and Servicing Agreement.
We have advised the Registrant with respect to certain federal income
tax consequences of the proposed issuance of the Securities. This advice is
summarized under the headings "Summary of Terms -- Tax Status" and "Certain
Federal Income Tax Consequences" in the prospectus relating to the Securities
(the "Prospectus"), all a part of the Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"),
for the registration of the Securities under the Act. Such description does
not purport to discuss all possible federal income tax ramifications of the
proposed issuance, but with respect to those tax consequences that are
discussed, in our opinion, the description is accurate in all material
respects. Furthermore, we hereby confirm that, as specified in the
Prospectus, we will provide an opinion to the trust specified in the related
prospectus supplement that (i) with respect to a trust as to which a
partnership election is made, the trust will not be classified as an
association taxable as a corporation or a publicly traded partnership taxable
as a corporation, (ii) with respect to a trust as to which no partnership
election is made, the trust will not be classified as an association taxable
as a corporation and that such trust will be classified as a grantor trust
under Internal Revenue Code of 1986, as amended, and (iii) unless otherwise
specified in the related prospectus supplement, the Notes will be classified
as debt for federal income tax purposes.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the headings "Summary of Terms -- Tax Status" and "Legal
Matters" in the Prospectus forming a part of the Registration Statement,
without implying or admitting that we are "experts" within the meaning of the
Act or the rules and regulations of the Commission issued thereunder, with
respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Brown & Wood LLP
Exhibit 10.1
Form of Sale and Servicing
Agreement
--------------------------
SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 199_-_,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
Seller,
and
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer
and
( ),
Indenture Trustee and Backup Servicer
Dated as of ( )
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . . . 20
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables . . . . . . . . . . . . . . . . 20
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants . . . . 21
SECTION 3.02. Representations and Warranties of the Seller . . . . . . . 21
SECTION 3.03. Repurchase upon Breach . . . . . . . . . . . . . . . . . . 22
SECTION 3.04. Custody of Receivable Files . . . . . . . . . . . . . . . 22
SECTION 3.05. Duties of Servicer as Custodian . . . . . . . . . . . . . 23
SECTION 3.06. Instructions; Authority to Act . . . . . . . . . . . . . . 23
SECTION 3.07. Custodian's Indemnification . . . . . . . . . . . . . . . 24
SECTION 3.08. Effective Period and Termination . . . . . . . . . . . . . 24
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.03. Realization upon Receivables . . . . . . . . . . . . . . . 26
SECTION 4.04. Physical Damage Insurance . . . . . . . . . . . . . . . . 27
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles . . 27
SECTION 4.06. Covenants of Servicer . . . . . . . . . . . . . . . . . . 27
SECTION 4.07. Purchase of Receivables upon Breach . . . . . . . . . . . 28
SECTION 4.08. Servicing Fee . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.09. Servicer's Certificate . . . . . . . . . . . . . . . . . . 28
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.11. Annual Independent Accountants' Report . . . . . . . . . . 29
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.14. Retention and Termination of Servicer . . . . . . . . . . 30
ARTICLE V
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Local Post Office Boxes . . . . . . . . . . . . . . . . . 31
SECTION 5.02. Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.03. Application of Collections . . . . . . . . . . . . . . . . 33
SECTION 5.04. Purchase Amounts . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.05. Transfers from the Spread Account . . . . . . . . . . . . 33
SECTION 5.06. Distributions . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.07. Claims Upon the Policy; Policy Payments Account . . . . . 35
SECTION 5.08. Notices to the Security Insurer . . . . . . . . . . . . . 36
SECTION 5.09. Rights in Respect of Insolvency Proceedings . . . . . . . 36
SECTION 5.10. Effect of Payments by the Security Insurer; Subrogation . 37
SECTION 5.11. Statements to Certificateholders and Noteholders . . . . . 37
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller . . . . . . . . . . . . . . . . 39
SECTION 6.02. Corporate Existence . . . . . . . . . . . . . . . . . . . 40
SECTION 6.03. Liability of Seller; Indemnities . . . . . . . . . . . . . 40
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller . . . . . . . . . . . . . . . . . 40
SECTION 6.05. Limitation on Liability of Seller and Others . . . . . . . 41
SECTION 6.06. Seller May Own Certificates or Notes . . . . . . . . . . . 41
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer . . . . . . . . . . . . . . . 41
SECTION 7.02. Indemnities of Servicer . . . . . . . . . . . . . . . . . 42
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer . . . . . . . . . . . . . . . . . 43
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.05. Appointment of Subservicer . . . . . . . . . . . . . . . . 45
SECTION 7.06. Servicer and Backup Servicer Not to Resign . . . . . . . . 45
ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events . . . . . . . . . . . . . . . 46
SECTION 8.02. Consequences of a Servicer Termination Event . . . . . . . 47
SECTION 8.03. Appointment of Successor . . . . . . . . . . . . . . . . . 47
SECTION 8.04. Notification to Noteholders and Certificateholders . . . . 48
SECTION 8.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 48
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables . . . . . . . . . . . 48
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.02. Protection of Title to Trust . . . . . . . . . . . . . . 51
SECTION 10.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.04. Assignment by the Seller or the Servicer . . . . . . . . 53
SECTION 10.05. Limitations on Rights of Others . . . . . . . . . . . . . 53
SECTION 10.06. Severability . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.07. Separate Counterparts . . . . . . . . . . . . . . . . . . 53
SECTION 10.08. Headings . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.10. Assignment by Issuer . . . . . . . . . . . . . . . . . . 53
SECTION 10.11. Nonpetition Covenants . . . . . . . . . . . . . . . . . . 53
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.13. Servicer Payment Obligation . . . . . . . . . . . . . . . 54
SCHEDULE A Schedule of Receivables
SCHEDULE B Location of Receivable Files
EXHIBIT A Representations and Warranties of First Merchants
EXHIBIT B Form of Distribution Date Statement to Certificateholders
EXHIBIT C Form of Distribution Date Statement to Noteholders
EXHIBIT D Form of Servicer's Certificate
EXHIBIT E Form of Policy
SALE AND SERVICING AGREEMENT dated as of ( ), among FIRST MERCHANTS
AUTO TRUST 199_-_, a Delaware business trust (the "Issuer"), FIRST
MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a Delaware corporation (the
"Seller"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation
(the "Servicer") and ( ), an (state) banking corporation as indenture trustee
(in such capacity, the "Indenture Trustee"), and as backup servicer (in such
capacity, the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with automobile retail installment sale contracts
generated by First Merchants Acceptance Corporation in the ordinary course
of business and sold by First Merchants Acceptance Corporation to the
Seller;
WHEREAS the Seller is willing to sell such receivables to the Issuer;
and
WHEREAS First Merchants Acceptance Corporation is willing to service
such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Whenever used in this Agreement, the
-----------
following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Accelerated Payment Date" means any Distribution Date (i) following
------------------------
the occurrence of a Security Insurer Default, until the Outstanding Amount of
the Notes is reduced to zero, or (ii) if a Security Insurer Default has
not occurred and the Security Insurer does not waive the obligation that
the Issuer pay accelerated principal amounts, (A) following the occurrence
of an Insurance Agreement Event of Default, until the Outstanding Amount
of the Notes is reduced to zero or (B) if (x) any of the Portfolio
Performance Tests was not met on any of the three immediately preceding
Determination Dates and (y) the Over-Collateralization Amount plus the
amount on deposit in the Spread Account is less than ( )% of the Pool
Balance as of such Distribution Date (after giving effect to distributions
on such date).
"Accelerated Principal Distribution Amount" means with respect to any
-----------------------------------------
Distribution Date that is also an Accelerated Payment Date, the portion,
if any, of the Total Distribution Amount for the related Collection Period
that remains after the payment of amounts in respect of 5.06(b)(1) through
(6); provided, however, that the Accelerated Principal Distribution Amount
shall not exceed the Outstanding Amount of the Notes.
"Amount Financed" means with respect to a Receivable, the amount
---------------
advanced under the Receivable toward the purchase price of the Financed
Vehicle and any related costs, exclusive of any amount allocable to the
premium of force-placed physical damage insurance covering the Financed
Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
---------------------- ---
rate of finance charges stated in the related Contract.
"Average Pool Balance" means, with respect to any Collection Period,
--------------------
the average of the Pool Balance at the beginning of business on the first day
of such Collection Period and at the close of business on the last day of
such Collection Period.
"Backup Servicer" means ( ) or its successor in interest pursuant to
---------------
Section 7.03 or such other Person as shall have been appointed as Backup
Servicer pursuant to Section 8.03(b).
"Basic Documents" means the Certificate of Trust, the Trust
---------------
Agreement, the Indenture, this Agreement, the Purchase Agreement, the
Receivables Purchase Agreement, the Administration Agreement, the Note
Depository Agreement, the Policy, the Insurance Agreement, the Indemnification
Agreement, the Premium Letter, the Local Collection Account Agreement and
other documents and certificates delivered in connection therewith.
"Certificate Balance" equals, initially, $( ) and, thereafter, equals
-------------------
the Initial Certificate Balance reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such
--------------------------------
term in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the
-----------------------
last day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be
made on the immediately following Distribution Date) divided by the
Initial Certificate Balance. The Certificate Pool Factor will be
1.0000000 as of the Closing Date; thereafter, the Certificate Pool Factor
will decline to reflect reductions in the Certificate Balance.
"Certificateholders" has the meaning assigned to such term in the
------------------
Trust Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
----------------------------------------
Distribution Date, the sum of the Certificateholders' Principal
Distributable Amount and the Certificateholders' Interest Distributable
Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with
------------------------------------------------
respect to any Distribution Date, the excess of the sum of the
Certificateholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Certificateholders' Interest Carryover
Shortfall on such preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Certificate Distribution Account on
such preceding Distribution Date, plus 30 days' interest on such excess, to the
extent permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with
-------------------------------------------------
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution
Date. Interest with respect to the Certificates shall be computed on the
basis of a 360-day year consisting of twelve 30-day months for all
purposes of this Agreement and the Basic Documents.
"Certificateholders' Monthly Interest Distributable Amount" means,
---------------------------------------------------------
with respect to any Distribution Date, 30 days of interest (or, in the case
of the first Distribution Date, interest accrued from and including the
Closing Date to but excluding (date)) at the Pass-Through Rate on the
Certificate Balance on the last day of the preceding Collection Period
(or, in the case of the first Distribution Date, on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means
----------------------------------------------------------
(i) with respect to any Distribution Date prior to the Distribution Date on
which the Class A-1 Notes are paid in full, zero, (ii) with respect to any
Distribution Date on or after the Distribution Date on which the Class A-1
Notes are paid in full, ( )% of the Regular Principal Distribution Amount
for such Distribution Date (less, on the Distribution Date on which the
Class A-1 Notes are paid in full, the portion thereof payable on the Class
A-1 Notes) or (iii) on any Distribution Date on or after the Distribution
Date on which the Class A-2 Notes are paid in full, 100% of the Regular
Principal Distribution Amount (less, on the Distribution Date on which the
Class A-2 Notes are paid in full, the portion thereof payable on the Class
A-2 Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
-------------------------------------------------
close of any Distribution Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding
Certificateholders' Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is
actually deposited in the Certificate Distribution Account on such current
Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
--------------------------------------------------
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the
Certificateholders' Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Final Scheduled Distribution
Date, the principal required to be included in the Certificateholders'
Principal Distributable Amount will include the lesser of (a) (i) any
Obligor's Scheduled Payments of principal due and remaining unpaid on each
Precomputed Receivable and (ii) any principal due and remaining unpaid on
each Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Maturity Date or (b) the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on such Distribution Date and allocable to principal)
to reduce the Certificate Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
------------
Agreement).
"Class" means any one of the classes of Notes.
-----
"Class A-1 Final Scheduled Distribution Date" means the (date)
-------------------------------------------
Distribution Date.
"Class A-1 Interest Carryover Shortfall" means, with respect to any
--------------------------------------
Distribution Date, the excess of the sum of the Class A-1 Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Class A-1 Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to the
Class A-1 Noteholders on the preceding Distribution Date, to the extent
permitted by law, at the Class A-1 Rate for the related Floating Rate
Interest Accrual Period.
"Class A-1 Interest Distributable Amount" means, with respect to any
---------------------------------------
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement
and the Basic Documents, interest with respect to the Class A-1 Notes
shall be computed on the basis of the actual number of days in each
applicable Floating Rate Interest Accrual Period.
"Class A-1 Monthly Interest Distributable Amount" means, with respect
-----------------------------------------------
to any Distribution Date, interest accrued for the related Floating Rate
Interest Accrual Period on the Class A-1 Notes at the Class A-1 Rate on
the Outstanding Amount of the Class A-1 Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, the
Closing Date), after giving effect to all distributions of principal to
the Class A-1 Noteholders on or prior to such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).
"Class A-1 Monthly Principal Distribution Amount" means, with respect
-----------------------------------------------
to any Distribution Date until Class A-1 Notes are paid in full, 100% of
the Regular Principal Distribution Amount.
"Class A-1 Noteholder" means the Person in whose name a Class A-1
--------------------
Note is registered in the Note Register.
"Class A-1 Principal Carryover Shortfall" means, as of the close of
---------------------------------------
any Distribution Date, the excess of the Class A-1 Monthly Principal
Distributable Amount and any outstanding Class A-1 Principal Carryover
Shortfall from the preceding Distribution Date, over the amount in respect
of principal that is actually deposited in the Note Distribution Account
on such current Distribution Date.
"Class A-1 Principal Distributable Amount" means, with respect to any
----------------------------------------
Distribution Date, the sum of (i) the Class A-1 Monthly Principal
Distributable Amount plus (ii) the Class A-1 Principal Carryover Shortfall
as of the close of the preceding Distribution Date; provided, however,
that the Class A-1 Principal Distributable Amount shall not exceed the
Outstanding Amount of the Class A-1 Notes. In addition, on the Class A-1
Final Scheduled Distribution Date, the principal required to be deposited
in the Note Distribution Account will include the amount necessary (after
giving effect to the other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal)
to reduce the Outstanding Amount of the Class A-1 Notes to zero.
"Class A-2 Additional Principal Distribution Amount" means, (i) with
--------------------------------------------------
respect to any Distribution Date prior to the Distribution Date on which
the Class A-1 Notes are paid in full and any Distribution Date after the
Distribution Date on which the Class A-2 Notes are paid in full, zero and
(ii) with respect to any Distribution Date on or after the Distribution
Date on which the Class A-1 Notes are paid in full, ( )% of the portion,
if any, of the Total Distribution Amount for the related Collection Period
that remains after the payment of amounts in respect of 5.06(b)(1) through
(9); provided, however, that the Class A-2 Additional Principal
Distribution Amount shall not exceed the Outstanding Amount of the Class
A-2 Notes.
"Class A-2 Final Scheduled Distribution Date" means the (date)
-------------------------------------------
Distribution Date.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
--------------------------------------
Distribution Date, the excess of the sum of the Class A-2 Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Class A-2 Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to the
Class A-2 Noteholders on the preceding Distribution Date, to the extent
permitted by law, at the Class A-2 Rate for the related Interest Accrual
Period.
"Class A-2 Interest Distributable Amount" means, with respect to any
---------------------------------------
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement
and the Basic Documents, interest with respect to the Class A-2 Notes
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months.
"Class A-2 Monthly Interest Distributable Amount" means, with respect
-----------------------------------------------
to any Distribution Date, interest accrued for the related Interest
Accrual Period on the Class A-2 Notes at the Class A-2 Rate on the
Outstanding Amount of the Class A-2 Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, the
Closing Date), after giving effect to all distributions of principal to
the Class A-2 Noteholders on or prior to such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).
"Class A-2 Monthly Principal Distribution Amount" means, with respect
-----------------------------------------------
to any Distribution Date (i) prior to the Distribution Date on which the
Class A-1 Notes are paid in full, zero and (ii) on or after the
Distribution Date on which the Class A-1 Notes are paid in full ( )% of
the Regular Principal Distribution Amount; provided, that, on the
Distribution Date on which the Class A-1 Notes are paid in full, the Class
A-2 Monthly Principal Distribution Amount will equal ( )% of the Regular
Principal Amount remaining after the Class A-1 Notes are paid in full.
"Class A-2 Noteholder" means the Person in whose name a Class A-2
--------------------
Note is registered in the Note Register.
"Class A-2 Principal Carryover Shortfall" means, as of the close of
---------------------------------------
any Distribution Date, the excess of the Class A-2 Monthly Principal
Distributable Amount and any outstanding Class A-2 Principal Carryover
Shortfall from the preceding Distribution Date, over the amount in respect
of principal that is actually deposited in the Note Distribution Account
on such current Distribution Date.
"Class A-2 Principal Distributable Amount" means, with respect to any
----------------------------------------
Distribution Date, the sum of (i) the Class A-2 Monthly Principal
Distributable Amount plus (ii) the Class A-2 Principal Carryover Shortfall
as of the close of the preceding Distribution Date; provided, however,
that the Class A-2 Principal Distributable Amount shall not exceed the
Outstanding Amount of the Class A-2 Notes. In addition, on the Class A-2
Final Scheduled Distribution Date, the principal required to be deposited
in the Note Distribution Account will include the amount necessary (after
giving effect to the other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal)
to reduce the Outstanding Amount of the Class A-2 Notes to zero.
"Collection Account" means the account designated as such,
------------------
established and maintained pursuant to Section 5.02(b)(i).
"Collection Period" means with respect to any Distribution Date other
-----------------
than the first Distribution Date, the calendar month preceding such
Distribution Date. The Collection Period with respect to the first
Distribution Date will be the period from and including the Cutoff Date to
and including (date). Any amount stated as of the last day of a
Collection Period or as of the first day of a Collection Period shall give
effect to the following calculations as determined as of the close of
business on such last day: (1) all applications of collections and (2)
all distributions to be made on the following Distribution Date.
"Contract" means a motor vehicle retail installment sale contract.
--------
"Controlling Party" means (i) as long as the Policy is in effect and
-----------------
no Security Insurer Default has occurred and is continuing, the Security
Insurer and (ii) if a Security Insurer Default has occurred and is
continuing or the Policy is otherwise no longer in effect, the Indenture
Trustee for the benefit of the Noteholders.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of the execution of this
Agreement is located at ( ); or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and
the Seller, or the principal corporate trust office of any successor
Indenture Trustee (of which address such successor Indenture Trustee will
notify the Noteholders and the Seller).
"Cram Down Loss" means any loss resulting from an order issued by a
--------------
court of appropriate jurisdiction in an insolvency proceeding that reduces
the amount owed on a Receivable or otherwise modifies or restructures the
Obligor's Scheduled Payments to be made thereon. The amount of any such
Cram Down Loss will equal the excess of (i) the Principal Balance of the
Receivable immediately prior to such order over (ii) the Principal Balance
of such Receivable as so reduced, modified or restructured. A Cram Down
Loss will be deemed to have occurred on the date of issuance of such
order.
"Credit Enhancement Fee" means, with respect to any Distribution
----------------------
Date, the fee paid to the Seller, upon the terms and subject to the conditions
set forth in the Spread Account Agreement, in consideration of the pledge
by the Seller of certain of its assets pursuant to the Spread Account
Agreement. The Credit Enhancement Fee shall be in an amount on each
Distribution Date equal to the funds remaining in the Collection Account
on such date after the distribution by the Indenture Trustee of all
amounts required pursuant to clauses (1) through (10) of Section 5.06(b).
"Cutoff Date" means (date).
-----------
"Dealer" means the dealer who sold a Financed Vehicle and who
------
originated and assigned the related Receivable to First Merchants pursuant to a
Dealer Agreement.
"Dealer Agreement" means an agreement between First Merchants and a
----------------
Dealer pursuant to which such Dealer sells Contracts to First Merchants.
"Default Rate" means, with respect to any Collection Period, the
------------
product, expressed as a percentage, of (i) twelve and (ii) a fraction, the
numerator of which equals the sum of (A) the aggregate Principal Balance
of all Receivables that became Defaulted Receivables during such
Collection Period and (B) the aggregate Principal Balance of all
Receivables that became Purchased Receivables during such Collection
Period and that were delinquent 31 days or more under the related
Contract, and the denominator of which equals the Average Pool Balance for
such Collection Period.
"Defaulted Receivable" means a Receivable with respect to which any
--------------------
of the following shall have occurred: (i) a payment under the related
Contract is 120 or more days (or, if the related Obligor is a debtor under
Chapter 13 of the U.S. Bankruptcy Code, 180 or more days) delinquent, (ii)
the related Financed Vehicle has been repossessed or (iii) the Servicer
has determined in good faith that payments under the related Contract are
not likely to be resumed.
"Deficiency Claim Date" means, with respect to each Distribution
---------------------
Date, the third Business Day preceding such Distribution Date.
"Delinquency Ratio" means, with respect to each Collection Period,
-----------------
the quotient, expressed as a percentage, of (i) the aggregate Principal
Balance of all Receivables with respect to which one or more payments are
31 or more days past due as of the last day of such Collection Period and
(ii) the Pool Balance.
"Delivery" when used with respect to Trust Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Indenture Trustee
or its nominee or custodian by physical delivery to the Indenture Trustee or
its nominee or custodian endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or custodian or endorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102 of
the UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank to a financial intermediary (as
defined in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of
a confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of the
UCC) and the making by such clearing corporation of appropriate entries on
its books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary by
the amount of such certificated security, the identification by the clearing
corporation of the certificated securities for the sole and exclusive account
of the financial intermediary, the maintenance of such certificated securities
by such clearing corporation or a "custodian bank" (as defined in
Section 8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by
the financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its nominee
or custodian (all of the foregoing, "Physical Property"), and, in any event,
any such Physical Property in registered form shall be in the name of the
Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property (as defined
herein) to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, 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 Trust Account Property 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 Indenture Trustee or its
nominee or custodian of the purchase by the Indenture Trustee or its nominee
or custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to Federal book-
entry regulations as belonging to the Indenture Trustee or its nominee or
custodian and indicating that such custodian holds such Trust Account
Property solely as agent for the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of the
issuer thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such uncertificated security, the
making by such financial intermediary of entries on its books and records
identifying such uncertificated certificates as belonging to the Indenture
Trustee or its nominee or custodian.
"Depositor" means the Seller in its capacity as Depositor under the
---------
Trust Agreement.
"Determination Date" means, with respect to each Distribution Date,
------------------
the earlier of (i) the ( )th day of the calendar month in which such
Distribution Date occurs (or if such ( )th day is not a Business Day, the
next succeeding Business Day) and (ii) the ( )th Business Day preceding
such Distribution Date.
"Distribution Date" means, with respect to each Collection Period,
-----------------
the ( )th day of the following month or, if such day is not a Business Day,
the immediately following Business Day, commencing on (date).
"Eligible Deposit Account" means either (a) a segregated account with
------------------------
an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the
laws of the United States of America or any one of the states thereof or
the District of Columbia (or any domestic branch of a foreign bank),
having corporate trust powers and acting as trustee for funds deposited in
such account, so long as any of the securities of such depository
institution shall have a credit rating from each Rating Agency in one of
its generic rating categories that signifies investment grade.
"Eligible Institution" means (a) the corporate trust department of
--------------------
the Indenture Trustee, the Owner Trustee or (owner trustee name) so long as it
shall be Paying Agent under the Trust Agreement or (b) a depository
institution organized under the laws of the United States of America or
any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank), which (i) has either (A) a long-term unsecured
debt rating of AAA or better by Standard & Poor's and A1 or better by
Moody's or (B) a certificate of deposit rating of A-1+ by Standard &
Poor's and P-1 or better by Moody's, or any other long-term, short-term or
certificate of deposit rating acceptable to the Rating Agencies and (ii)
whose deposits are insured by the FDIC. If so qualified, the Indenture
Trustee, the Owner Trustee or (owner trustee name) may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
"Eligible Investments" means book-entry securities, negotiable
--------------------
instruments or securities represented by instruments in bearer or
registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as
to the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the laws
of the United States of America or any state thereof (or any domestic branch
of a foreign bank) and subject to supervision and examination by Federal or
State banking or depository institution authorities; provided,
however, that at the time of the investment or contractual commitment to
invest therein, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based on the
credit of a Person other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in the
highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each
of the Rating Agencies in the highest investment category granted thereby
(including funds for which the Indenture Trustee or the Owner Trustee or any
of their respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is
a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b);
(g) repurchase obligations with respect to any security or
whole loan, entered into with (i) a depository institution or trust
company (acting as principal) described in clause (b) above (except that the
rating referred to in the proviso in such clause (b) shall be A-1 or higher
in the case of Standard & Poor's) (such depository institution or trust
company being referred to in this definition as a "financial institution"),
(ii) a broker/dealer (acting as principal) registered as a broker or dealer
under Section 15 of the Exchange Act (a "broker/dealer") the unsecured short-
term debt obligations of which are rated P-1 by Moody's and at least A-1 by
Standard & Poor's at the time of entering into such repurchase obligation
(a "rated broker/dealer"), (iii) an unrated broker/dealer (an "unrated
broker/dealer"), acting as principal, that is a wholly-owned subsidiary
of a non-bank holding company the unsecured short-term debt obligations
of which are rated P-1 by Moody's and at least A-1 by Standard & Poor's
at the time of entering into such repurchase obligation (a "Rated Holding
Company") or (iv) an unrated subsidiary (a "Guaranteed Counterparty"),
acting as principal, that is a wholly-owned subsidiary of a direct or
indirect parent Rated Holding Company, which guarantees such subsidiary's
obligations under such repurchase agreement; provided that the following
conditions are satisfied:
(A) the aggregate amount of funds invested in repurchase
obligations of a financial institution, a rated broker/dealer, an unrated
broker/dealer or Guaranteed Counterparty in respect of which the Standard &
Poor's unsecured short-term ratings are A-1 (in the case of an unrated
broker/dealer or Guaranteed Counterparty, such rating being that of the
related Rated Holding Company) shall not exceed 20% of the sum of the then
Outstanding Amount of the Notes and the Certificate Balance (there being no
limit on the amount of funds that may be invested in repurchase obligations
in respect of which such Standard & Poor's rating is A-1+ (in the case of an
unrated broker/dealer or Guaranteed Counterparty, such rating being that of
the related Rated Holding Company));
(B) the repurchase obligation must mature within 30 days
of the date on which the Indenture Trustee or the Issuer, as applicable,
enters into such repurchase obligation;
(C) the repurchase obligation shall not be subordinated to
any other obligation of the related financial institution, rated
broker/dealer, unrated broker/dealer or Guaranteed Counterparty;
(D) the collateral subject to the repurchase obligation is
held, in the appropriate form, by a custodial bank on behalf of the Indenture
Trustee or the Issuer, as applicable;
(E) the repurchase obligation shall require that the
collateral subject thereto shall be marked to market daily;
(F) in the case of a repurchase obligation of a Guaranteed
Counterparty, the following conditions shall also be satisfied:
(i) the Indenture Trustee or the Issuer, as
applicable, shall have received an opinion of counsel (which may be in-house
counsel) to the effect that the guarantee of the related Rated Holding
Company is a legal, valid and binding agreement of the Rated Holding Company,
enforceable in accordance with its terms, subject as to
enforceability to bankruptcy, insolvency, reorganization and moratorium or
other similar laws affecting creditors' rights generally and to general
equitable principles;
(ii) the Indenture Trustee or the Issuer, as
applicable, shall have received (x) an incumbency certificate for the signer
of such guarantee, certified by an officer of such Rated Holding Company and
(y) a resolution, certified by an officer of the Rated Holding
Company, of the board of directors (or applicable committee thereof) of the
Rated Holding Company authorizing the execution, delivery and performance of
such guarantee by the Rated Holding Company;
(iii) the only conditions to the obligation of
such Rated Holding Company to pay on behalf of the Guaranteed Counterparty
shall be that the Guaranteed Counterparty shall not have paid under such
repurchase obligation when required (it being understood that no notice to,
demand on or other action in respect of the Guaranteed Counterparty is
necessary) and that the Indenture Trustee or the Issuer shall make a demand
on the Rated Holding Company to make the payment due under such
guarantee;
(iv) the guarantee of the Rated Holding Company shall
be irrevocable with respect to such repurchase obligation and shall not be
subordinated to any other obligation of the Rated Holding Company; and
(v) each of Standard & Poor's and Moody's has
confirmed in writing to the Indenture Trustee or Issuer, as applicable, that
it has reviewed the form of the guarantee of the Rated Holding Company and
has determined that the issuance of such guarantee will not result in the
downgrade or withdrawal of the ratings assigned to the Notes
or result in an increased capital charge to the Security Insurer.
(G) the repurchase obligation shall require that the
repurchase obligation be overcollateralized and shall provide that, upon any
failure to maintain such overcollateralization, the repurchase obligation
shall become due and payable, and unless the repurchase obligation is
satisfied immediately, the collateral subject to the repurchase agreement
shall be liquidated and the proceeds applied to satisfy the unsatisfied
portion of the repurchase obligation; and
(H) any other investment with respect to which the Issuer
or the Servicer has received written notification from the Rating Agencies
that the acquisition of such investment as an Eligible Investment will not
result in a withdrawal or downgrading of the ratings on the Notes or result
in an increased capital charge to the Security Insurer.
"Eligible Servicer" means First Merchants Acceptance Corporation, the
-----------------
Backup Servicer or any other Person which at the time of its appointment
as Servicer (i) is servicing a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle installment loans, (ii) is
legally qualified and has the capacity to service the Receivables, (iii)
has demonstrated the ability professionally and competently to service a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loans similar to the Receivables with reasonable skill
and care and (iv) has a minimum net worth of $100,000,000.
"Endorsement" shall have the meaning specified in the Policy.
-----------
"Excess Cash Flow Ratio" means with respect to any Determination
----------------------
Date, the product, expressed as a percentage of (A) twelve and (B) a fraction,
(i) the numerator of which will equal the portion, if any, of the Total
Distribution Amount for the related Collection Period that remains after
the payment of amounts in respect of 5.06(b)(1) through (5) on the related
Distribution Date and (ii) the denominator of which is the Pool Balance as
of the end of the related Collection Period.
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Final Scheduled Distribution Date" means the (date) Distribution
---------------------------------
Date.
"Final Scheduled Maturity Date" means (date).
-----------------------------
"Financed Vehicle" means an automobile or light-duty truck, together
----------------
with all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.
"First Merchants" means First Merchants Acceptance Corporation, a
---------------
Delaware corporation, and its successors.
"Fiscal Agent" shall have the meaning specified in the Policy.
------------
"FMARC ( )" means First Merchants Auto Receivables Corporation ( ), a
---------
Delaware corporation, and its successors.
"Indenture" means the Indenture dated as of ( ), between the Issuer
---------
and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee
-----------------
under the Indenture, its successors in interest and any successor trustee under
the Indenture.
"Initial Certificate Balance" shall have the meaning set forth in the
---------------------------
Trust Agreement.
"Initial Pool Balance" means the aggregate principal balance of the
--------------------
Receivables as of the Cutoff Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
----------------
filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its
property in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such
Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or
for any substantial part of its property, or the making by such Person of
any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due, or the
taking of action by such Person in furtherance of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement
-------------------
dated as of ( ), among the Security Insurer, the Issuer, First Merchants and
the Seller.
"Insurance Agreement Event of Default" means any Event of Default, as
------------------------------------
defined in the Insurance Agreement.
"Interest Distribution Amount" means, with respect to any
----------------------------
Distribution Date, the sum of the following amounts, without duplication, with
respect to the Receivables in respect of the Collection Period preceding such
Distribution Date: (a) that portion of all collections on Receivables
allocable to interest, (b) Liquidation Proceeds with respect to the
Receivables to the extent allocable to interest due thereon in accordance
with the Servicer's customary servicing procedures, (c) the Purchase
Amount of each Receivable that became a Purchased Receivable during such
Collection Period to the extent attributable to accrued interest on such
Receivable, (d) Investment Earnings for the related Distribution Date and
(e) Recoveries for such Collection Period; provided, however, that in
calculating the Interest Distribution Amount the following will be
excluded: all payments and proceeds (including Liquidation Proceeds) of
any Purchased Receivables the Purchase Amount of which has been included
in the Interest Distribution Amount in a prior Collection Period.
"Investment Earnings" means, with respect to any Distribution Date,
-------------------
the investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account
on such Distribution Date pursuant to Section 5.02(b).
"Issuer" means First Merchants Auto Trust 199_-_.
------
"Lien" means a security interest, lien, charge, pledge, equity or
----
encumbrance of any kind, other than tax liens, mechanics' liens and any
liens that attach to the respective Receivable by operation of law as a
result of any act or omission by the related Obligor.
"Liquidated Receivable" means any Receivable with respect to which
---------------------
any of the following shall have occurred: (i) the related Financed Vehicle
has been repossessed for 90 days or more, (ii) such Receivable is a
Defaulted Receivable with respect to which the Servicer has determined in
good faith that all amounts it expects to recover have been received or
(iii) a payment under the related Contract is 150 or more days (or, if the
related Obligor is a debtor under Chapter 13 of the U.S. Bankruptcy Code,
210 or more days) delinquent.
"Liquidation Proceeds" means, with respect to any Liquidated
--------------------
Receivable, the moneys collected in respect thereof, from whatever source on
a Liquidated Receivable during the Collection Period in which such
Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer in connection with such liquidation and any
amounts required by law to be remitted to the Obligor on such Liquidated
Receivable.
"Local Collection Account" shall have the meaning provided in Section
------------------------
5.02.
"Local Collection Account Agreement" means the Local Collection
----------------------------------
Account Agreement, dated as of ( ), among ( ) as may be amended, supplemented
or otherwise modified from time to time.
"Local Post Office Box" shall have the meaning specified in Section
---------------------
5.01.
"Master Spread Account Agreement" means the Master Spread Account
-------------------------------
Agreement dated as of ( ), among ( ).
"Moody's" means Moody's Investors Service, Inc., or its successor.
-------
"Net Liquidation Losses" means, with respect to any Collection
----------------------
Period, (i) the aggregate Principal Balance of all Receivables that became
Liquidated Receivables during such Collection Period plus interest due and
unpaid thereon under the related Contracts, minus (ii) Liquidation
Proceeds received during such Collection Period with respect to such
Liquidated Receivables and any Receivables that became Liquidated
Receivables during previous Collection Periods.
"Net Loss Rate" means, with respect to any Collection Period, the
-------------
product, expressed as a percentage, of (i) Net Liquidation Losses for such
Collection Period and (ii) twelve divided by the Average Pool Balance.
"Note Distribution Account" means the account designated as such,
-------------------------
established and maintained pursuant to Section 5.02.
"Note Pool Factor" means, with respect to each Class of Notes as of
----------------
the close of business on the last day of a Collection Period, a seven-digit
decimal figure equal to the Outstanding Amount of such Class of Notes
(after giving effect to any reductions thereof to be made on the
immediately following Distribution Date) divided by the original
Outstanding Amount of such Class of Notes. The Note Pool Factor will be
1.0000000 as of the Closing Date; thereafter, the Note Pool Factor will
decline to reflect reductions in the Outstanding Amount of such Class of
Notes.
"Noteholders' Interest Distributable Amount" means, with respect to
------------------------------------------
any Distribution Date, the sum of the Class A-1 Interest Distributable Amount
for such Distribution Date and the Class A-2 Interest Distributable Amount
for such Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to
-------------------------------------------
any Distribution Date, the sum of the Class A-1 Principal Distributable Amount
for such Distribution Date and the Class A-2 Principal Distributable
Amount for such Distribution Date; provided, however, that the
Noteholders' Principal Distributable Amount shall not exceed the
Outstanding Amount of the Notes. In addition, (a) on the Class A-1 Final
Scheduled Distribution Date, the principal required to be deposited in the
Note Distribution Account will include the amount necessary (after giving
effect to the other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce
the Outstanding Amount of the Class A-1 Notes to zero; and on the Class
A-2 Final Scheduled Distribution Date, the principal required to be
deposited in the Note Distribution Account will include the amount
necessary (after giving effect to the other amounts to be deposited in the
Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class A-2 Notes to
zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
-------
Financed Vehicle and any other Person who owes payments under such
Receivable.
"Obligor's Scheduled Payment" means, with respect to each Receivable,
---------------------------
the scheduled monthly payment amount set forth in the related Contract and
required to be paid by the Obligor during each Collection Period. If,
after the Closing Date, an Obligor's scheduled monthly payment obligation
under the related Contract is modified (i) as a result of the order of a
court in an insolvency proceeding involving the Obligor, (ii) pursuant to
the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) as a result
of modifications or extensions of the Contract permitted by Section 4.02,
"Obligor's Scheduled Payment" shall refer to the Obligor's scheduled
monthly payment obligation as so modified.
"Officers' Certificate" means a certificate signed by (a) the
---------------------
chairman of the board, any vice president, the controller or any assistant
controller and (b) the president, a treasurer, assistant treasurer,
secretary or assistant secretary of the Seller or the Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel,
------------------
who may be an employee of or counsel to the Seller or the Servicer, which
counsel shall be acceptable to the Indenture Trustee, the Owner Trustee or
the Rating Agencies, as applicable.
"Original Pool Balance" means $( ).
---------------------
"Over-Collateralization Amount" means the amount, on any date of
-----------------------------
determination, by which the Pool Balance exceeds the Outstanding Amount of
the Notes.
"Owner Trust Estate" has the meaning assigned to such term in the
------------------
Trust Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the
Trust
-------------
Agreement, its successors in interest and any successor owner trustee
under the Trust Agreement.
"Pass-Through Rate" means ( )% per annum.
-----------------
"Payment Determination Date" means, with respect to any Distribution
--------------------------
Date, the Business Day immediately preceding such Distribution Date.
"Physical Property" has the meaning assigned to such term in the
-----------------
definition of "Delivery" above.
"Policy" means the financial guaranty insurance policy issued by the
------
Security Insurer with respect to the Notes, including any endorsements
thereto, in the form of Exhibit E.
"Policy Payments Account" shall have the meaning specified in Section
-----------------------
5.07(b).
"Pool Balance" means, with respect to each Determination Date, the
------------
aggregate Principal Balance of the Receivables (excluding Purchased
Receivables and Liquidated Receivables) as of the close of business on the
last day of the related Collection Period, after giving effect to all
Collections for such Collection Period.
"Portfolio Performance Test" means, with respect to any Distribution
--------------------------
Date, the calculations performed by the Servicer on the related
Determination Date to determine whether (i) the arithmetic average of the
Delinquency Ratios for the three immediately preceding Collection Periods
equals or exceeds ( )%, (ii) the arithmetic average of the Default Rates
for the three immediately preceding Collection Periods equals or exceeds (
)%, (iii) the arithmetic average of the Net Loss Rates for the three
immediately preceding Collection Periods equals or exceeds ( )% or (iv)
for as long as the Class A-1 Notes are outstanding, the arithmetic average
of the Excess Cash Flow Ratio with respect to the three previous
Collection Periods is less than ( )%; provided, however, that, so long as
no Security Insurer Default shall have occurred and be continuing, (a) the
percentages set forth in clauses (i), (ii), (iii) and (iv) above may be
modified or amended by the Seller and the Indenture Trustee with the
consent of the Security Insurer but without the consent of the Noteholders
and (b) the Security Insurer may, with notice to the Rating Agencies but
without the consent of any Noteholder, waive the requirement that the
Portfolio Performance Tests be met with respect to any Distribution Date.
"Precomputed Receivable" means any Receivable under which the portion
----------------------
of a payment allocable to earned interest (which may be referred to in the
related Contract as an add-on finance charge) and the portion allocable to
the Amount Financed is determined according to the sum of periodic
balances or the sum of monthly balances or any equivalent method or are
monthly actuarial receivables.
"Principal Balance" means, with respect to any Receivable and
-----------------
Determination Date, the Amount Financed minus an amount equal to the sum,
as of the close of business on the last day of the related Collection
Period, of (1) that portion of all amounts received on or prior to such
day with respect to such Receivable and allocable to principal using the
actuarial method (with respect to Precomputed Receivables) or the Simple
Interest Method (with respect to Simple Interest Receivables), as
applicable, and (2) any Cram Down Losses with respect to such Receivable.
"Purchase Amount" means, with respect to any Receivable, the unpaid
---------------
principal balance owed by the Obligor thereon plus interest on such amount
at the applicable APR to the last day of the month of repurchase.
"Purchased Receivable" means a Receivable purchased as of the close
--------------------
of business on the last day of a Collection Period by the Servicer pursuant
to Section 4.07 or by the Seller pursuant to Section 3.03.
"Rating Agency" means either Moody's or Standard & Poor's or, when
-------------
used in the plural form, Moody's and Standard and Poor's. If none of Moody's,
Standard & Poor's or a successor to either of them remains in existence,
"Rating Agency" shall mean any nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice
of which designation shall be given to the Owner Trustee, the Indenture
Trustee, the Servicer and the Security Insurer.
"Rating Agency Condition" means, with respect to any action, that
-----------------------
each Rating Agency shall have been given 10 days' (or such shorter period as
shall be acceptable to each Rating Agency) prior notice thereof and that
each of the Rating Agencies shall have notified the Seller, the Servicer,
the Owner Trustee and the Indenture Trustee in writing that such action
will not result in a reduction or withdrawal of the then current rating of
the Notes or result in an increased capital charge of the Security
Insurer.
"Realized Losses" means, with respect to any Receivable that becomes
---------------
a Liquidated Receivable, the excess of the Principal Balance of such
Liquidated Receivable over Liquidation Proceeds to the extent allocable to
principal.
"Receivable" means any Contract listed on Schedule A (which Schedule
----------
may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.04.
----------------
"Receivables Purchase Agreement" means the Receivables Purchase
------------------------------
Agreement dated as of ( ), between First Merchants, as seller and FMARC ( ),
as Purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
----------
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in
which such Receivable became a Liquidated Receivable, net of the sum of
any amounts expended by the Servicer for the account of the Obligor and
any amounts required by law to be remitted to the Obligor.
"Regular Principal Distribution Amount" means, with respect to any
-------------------------------------
Distribution Date, the sum of the following amounts, without duplication,
with respect to the Receivables in respect of the Collection Period
preceding such Distribution Date: (i) that portion of all collections on
Receivables allocable to principal, (ii) all Liquidation Proceeds
attributable to the principal amount of Receivables that became Liquidated
Receivables during such Collection Period in accordance with the
Servicer's customary servicing procedures, plus the amount of Realized
Losses with respect to such Liquidated Receivables (iii) to the extent
attributable to principal, any Cram Down Losses with respect to the
related Collection Period and (iv) to the extent attributable to
principal, the Purchase Amount of each Receivable that became a Purchased
Receivable during such Collection Period; provided, however, that in
calculating the Regular Principal Distribution Amount the following will
be excluded: (i) all payments and proceeds (including Liquidation
Proceeds) of any Purchased Receivables the Purchase Amount of which has
been included in the Regular Principal Distribution Amount in a prior
Collection Period and (ii) Recoveries.
"Responsible Officer" means the chairman of the board, the president,
-------------------
any executive vice president, any vice president, the treasurer, any
assistant treasurer, the secretary, or any assistant secretary of the
Servicer.
"Scheduled Payment" means, with respect to each Distribution Date, an
-----------------
amount equal to the Noteholders' Interest Distributable Amount plus the
Noteholders' Principal Distributable Amount.
"Securities" means the Notes and the Certificates.
----------
"Security Insurer" means ( ), or its successor.
----------------
"Security Insurer Default" means any one of the following events
------------------------
shall have occurred and be continuing:
(a) the Security Insurer shall have failed to make a required
payment when due under the Policy;
(b) the Security Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the
benefit of its creditors or (iii) had an order for relief entered against it
under the United States Bankruptcy Code, the New York State Insurance Law or
any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization that is final and nonappealable;
or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i) appointing
a custodian, trustee, agent, or receiver for the Security Insurer or for all
or any material portion of its property or (ii) authorizing the taking
of possession by a custodian, trustee, agent, or receiver of the Security
Insurer or of all or any material portion of its property.
"Seller" means FMARC ( ) and its successors in interest to the extent
------
permitted hereunder.
"Servicer" means First Merchants, as the servicer of the Receivables,
--------
and each successor to First Merchants (in the same capacity) pursuant to
Section 7.03 or 8.03.
"Servicer Termination Event" means an event specified in
--------------------------
Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the
----------------------
Servicer delivered pursuant to Section 4.09, substantially in the form of
Exhibit D.
"Servicer Extension Notice" shall have the meaning specified in
-------------------------
Section 4.14.
"Servicing Fee" means the fee payable to the Servicer for services
-------------
rendered during each Collection Period, determined pursuant to
Section 4.08.
"Simple Interest Method" means the method of allocating the monthly
----------------------
payments received with respect to a Receivable to interest in an amount
equal to the product of (i) the applicable APR, (ii) the period of time
(expressed as a fraction of a year, based on the actual number of days in
the calendar month and 365 days in the calendar year) elapsed since the
preceding payment was made under such Receivable and (iii) the outstanding
principal amount of the Receivable, and allocating the remainder of each
such monthly payment to principal.
"Simple Interest Receivable" means any Receivable, as applicable,
--------------------------
under which the portion of a payment allocable to interest and the portion
allocable to principal is determined in accordance with the Simple
Interest Method.
"Spread Account" means the account designated as such, established
--------------
and maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" means the Master Spread Account Agreement
------------------------
dated as of ( ), among FMARC ( ), as depositor, the Security Insurer and (
), as trustee and collateral agent, as may be supplemented or amended from
time to time.
"Spread Account Required Amount" means with respect to any
------------------------------
Distribution Date, the greater of (i) ( )% of the Pool Balance as of the end
of business on the last day of the related Collection Period and (ii) the
lesser of (x) ( )% of the Initial Pool Balance and (y) the Outstanding
Amount of the Notes (after giving effect to distributions on such
Distribution Date); provided, however, that in no event shall the Spread
Account Required Amount be less than $( ).
"Standard & Poor's" means Standard & Poor's Ratings Services, A
-----------------
Division of The McGraw-Hill Company, or its successor.
"State" means any one of the 50 States of the United States of
-----
America or the District of Columbia.
"Total Distribution Amount" means, for each Distribution Date, the
-------------------------
sum of the applicable Interest Distribution Amount and the applicable Regular
Principal Distribution Amount (other than the portion thereof attributable
to Realized Losses).
"Trust" means the Issuer.
-----
"Trust Account Property" means the Trust Accounts, all amounts and
----------------------
investments held from time to time in any Trust Account (whether in the
form of deposit accounts, Physical Property, book-entry securities,
uncertificated securities or otherwise), and all proceeds of the
foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.02.
--------------
"Trust Agreement" means the Trust Agreement dated as of ( ), between
---------------
the Seller, as Depositor, and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee or the
-------------
Backup Servicer, any Officer within the Corporate Trust Office of the
Indenture Trustee, including any Assistant Vice President, Assistant
Treasurer, Assistant Secretary or any other officer of the Indenture
Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject and,
with respect to the Owner Trustee, any officer in the Corporate Trust
Administration Department of the Owner Trustee with direct responsibility
for the administration of the Trust Agreement and the Basic Documents on
behalf of the Owner Trustee.
"UCC" means the Uniform Commercial Code as in effect in the relevant
---
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used herein and not otherwise defined herein have the meanings assigned to
them in the Indenture or, if not defined therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms
not defined in this Agreement or in any such certificate or other
document, and accounting terms partly defined in this Agreement or in any
such certificate or other document to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in
this Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in
any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Article,
Section, Schedule and Exhibit references contained in this Agreement are
references to Articles, Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
Conveyance of Receivables
-------------------------
SECTION 2.01. Conveyance of Receivables. In consideration of the
-------------------------
Issuer's delivery to or upon the order of the Seller of $( ) and the
Certificates in the aggregate principal amount of $( ), the Seller does
hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (subject to the obligations of the Seller set
forth herein), all right, title and interest of the Seller in and to:
(a) the Receivables and all moneys received thereon on or after
(date);
(b) the security interests in the Financed Vehicles and any
accessions thereto granted by Obligors pursuant to the Receivables and any
other interest of the Seller in such Financed Vehicles;
(c) any Liquidation Proceeds and any other proceeds with
respect to the Receivables from claims on any physical damage, credit life
or disability insurance policies covering Financed Vehicles or Obligors,
including any vendor's single interest or other collateral protection
insurance policy;
(d) any property that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Servicer or the
Trust;
(e) all documents and other items contained in the Receivables
Files;
(f) all of the Seller's rights (but not its obligations) under
the Receivables Purchase Agreement;
(g) all right, title and interest in all funds on deposit from
time to time in the Trust Accounts and the Certificate Distribution
Account, and in all investments and proceeds thereof (including all income
thereon); and
(h) the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
---------------
SECTION 3.01. Representations and Warranties of First Merchants.
-------------------------------------------------
(a) First Merchants has made each of the representations and warranties set
forth in Exhibit A hereto under the Receivables Purchase Agreement and has
consented to the assignment by the Seller to the Issuer of the Seller's
rights with respect thereto. Such representations and warranties speak as
of the execution and delivery of this Agreement and as of the Closing
Date, but shall survive the sale, transfer and assignment of the
Receivables to the Issuer. Pursuant to Section 2.01 of this Agreement,
the Seller has sold, assigned, transferred and conveyed to the Issuer, as
part of the assets of the Issuer, its rights under the Receivables
Purchase Agreement, including the representations and warranties of First
Merchants therein as set forth in Exhibit A, upon which the Issuer relies
in accepting the Receivables and delivering the Certificates and the
Security Insurer relies in issuing the Policy, together with all rights of
the Seller with respect to any breach thereof, including the right to
require First Merchants to repurchase Receivables in accordance with the
Receivables Purchase Agreement. It is understood and agreed that the
representations and warranties referred to in this Section shall survive
the delivery of the Receivable Files to the Issuer or any custodian.
(b) First Merchants hereby agrees that the Issuer shall have the
right to enforce any and all rights under the Receivables Purchase
Agreement assigned to the Issuer herein, including the right to cause
First Merchants to repurchase any Receivable with respect to which it is
in breach of any of its representations and warranties set forth in
Exhibit A, directly against First Merchants as though the Issuer were a
party to the Receivables Purchase Agreement, and the Issuer shall not be
obligated to exercise any such rights indirectly through the Seller.
SECTION 3.02. Representations and Warranties of the Seller. The
--------------------------------------------
Seller makes the following representations and warranties as to the Receivables
on which the Issuer relies in accepting the Receivables and delivering the
Securities and the Security Insurer relies in issuing the Policy. Such
representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date, but shall survive the sale,
transfer and assignment of the Receivables by the Seller to the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Seller that (i) the transfer
-----
and assignment herein contemplated constitute a sale of the Receivables from
the Seller to the Issuer, conveying good title thereto, free and clear of
any Liens or rights of other Persons and (ii) the beneficial interest in
and title to the Receivables not be part of the debtor'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 Issuer.
Immediately prior to the transfer and assignment herein contemplated, the
Seller had good and marketable title to each Receivable, free and clear of
all Liens and rights of others and, immediately upon the transfer thereof,
the Issuer shall have good and marketable title to each such Receivable,
free and clear of all Liens and rights of others; and the transfer has
been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary
----------------
in any jurisdiction to give the Issuer a first perfected ownership
interest in the Receivables have been made.
SECTION 3.03. Repurchase upon Breach. The Seller and the Servicer
----------------------
shall inform the other parties to this Agreement and the Security Insurer
promptly, in writing, upon the discovery of any breach of First Merchants'
representations and warranties made pursuant to Section 3.01 of this
Agreement or Section 3.02 of the Receivables Purchase Agreement or of the
Seller's representations and warranties made pursuant to Section 3.02
above. Unless any such breach shall have been cured by the last day of
the first Collection Period following the discovery or notice thereof by
or to the Seller or the Servicer, the Seller shall be obligated and, if
necessary, the Seller or the Issuer shall enforce the obligation of First
Merchants under the Receivables Purchase Agreement, to repurchase as of
such last day any Receivable materially and adversely affected by any such
breach. In consideration of the repurchase of any such Receivable, the
Seller shall remit the Purchase Amount to the Collection Account, in the
manner specified in Section 5.04; provided, however, that the obligation
of the Seller to repurchase any Receivable arising solely as a result of a
breach of First Merchants' representations and warranties under Section
3.02 of the Receivables Purchase Agreement is subject to the receipt by
the Seller of the Purchase Amount from First Merchants. The sole remedy
of the Issuer, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of representations and
warranties pursuant to Sections 3.01 and 3.02 and the agreement contained
in this Section shall be to require the Seller to repurchase Receivables
pursuant to this Section, subject to the conditions contained herein, or
to enforce First Merchants' obligation to the Seller to repurchase such
Receivables pursuant to the Receivables Purchase Agreement.
SECTION 3.04. Custody of Receivable Files. To assure uniform
---------------------------
quality in servicing the Receivables and to reduce administrative costs,
the Issuer hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act for the benefit of the Issuer and the
Indenture Trustee as custodian of the following documents or instruments,
which are hereby constructively delivered to the Indenture Trustee with
respect to the Receivables:
(a) the fully executed original of the Receivable (together
with any agreements modifying the Receivable, including any extension
agreement);
(b) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(c) the original certificate of title or such other documents
that the Servicer or the Seller shall keep on file in accordance with its
customary procedures evidencing the security interest of the Seller in the
Financed Vehicle; and
(d) any and all other documents that the Servicer or the Seller
shall keep on file in accordance with its customary procedures relating to
a Receivable, an Obligor or a Financed Vehicle.
SECTION 3.05. Duties of Servicer as Custodian. (a) Safekeeping.
------------------------------- -----------
The Servicer shall hold the Receivable Files as custodian for the benefit of
the Issuer, the Indenture Trustee and, to the extent provided herein, the
Security Insurer, and shall maintain such accurate and complete accounts,
records and computer systems pertaining to each Receivable File as shall
enable the Issuer to comply with this Agreement. In performing its duties
as custodian, the Servicer shall act with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to
the receivable files relating to all comparable automotive receivables
that the Servicer services for itself or others. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Receivable Files
held by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Issuer or the
Indenture Trustee to verify the accuracy of the Servicer's record keeping.
The Servicer shall promptly report to the Issuer and the Indenture Trustee
any failure on its part to hold the Receivable Files and maintain its
accounts, records and computer systems as herein provided and shall
promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review
by the Issuer or the Indenture 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 B to
this Agreement or at such other office as shall be specified to the Issuer and
the Indenture Trustee by written notice not later than 90 days after any
change in location. The Servicer shall make available to the Issuer and
the Indenture Trustee or their duly authorized representatives, attorneys
or auditors a list of locations of the Receivable Files and the related
accounts, records and computer systems maintained by the Servicer at such
times during normal business hours as the Issuer shall instruct.
(c) Release of Documents. Upon instruction from the Indenture
--------------------
Trustee, the Servicer shall release any Receivable File to the Indenture
Trustee, the Indenture Trustee's agent or the Indenture Trustee's
designee, as the case may be, at such place or places as the Indenture
Trustee may designate, as soon as practicable, and upon the release and
delivery of any such document in accordance with the instructions of the
Indenture Trustee, the Servicer shall be released from any further
liability and responsibility under this Section 3.05 with respect to such
documents, unless and until such time as such documents shall be returned
to the Servicer. In no event shall the Servicer be responsible for any
loss occasioned by the Indenture Trustee's failure to return any
Receivable File or any portion thereof in a timely manner.
SECTION 3.06. Instructions; Authority to Act. The Servicer shall
------------------------------
be deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trust Officer
of the Indenture Trustee.
SECTION 3.07. Custodian's Indemnification. The Servicer, as
---------------------------
custodian, shall indemnify the Trust, the Owner Trustee and the Indenture
Trustee and each of their officers, directors, employees and agents for
any and all liabilities, obligations, losses, compensatory damages,
payments, costs, or expenses of any kind whatsoever that may be imposed
on, incurred by or asserted against the Trust, the Owner Trustee or the
Indenture Trustee or any of their officers, directors, employees or agents
as the result of any improper act or omission in any way relating to the
maintenance and custody by the Servicer as custodian of the Receivable
Files; provided, however, that the Servicer shall not be liable to the
Owner Trustee or any such officer, director, employee or agent of the
Owner Trustee or Indenture Trustee for any portion of any such amount
resulting from the willful misfeasance, bad faith or negligence of the
Owner Trustee or Indenture Trustee, as the case may be, or any such
officer, director, employee or agent of the Owner Trustee or Indenture
Trustee, as the case may be.
Indemnification under this Section shall survive the resignation or
removal of the Servicer or 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 Person to or on behalf of whom such
payments are made thereafter collects any of such amounts from others,
such Person shall promptly repay such amounts to the Servicer, without
interest.
SECTION 3.08. Effective Period and Termination. The Servicer's
--------------------------------
appointment as custodian shall become effective as of the Cutoff Date and
shall continue in full force and effect unless and until terminated
pursuant to this Section 3.08. If First Merchants or any successor
Servicer shall resign as Servicer in accordance with the provisions of
this Agreement or if all of the rights and obligations of First Merchants
or any successor Servicer shall have been terminated under Section 8.02,
the appointment of such Servicer as custodian may be terminated by the
Security Insurer, the Issuer or by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount of the Notes, by the Owner Trustee
or by Certificateholders evidencing not less than 25% of the Certificate
Balance, in the same manner as the Security Insurer, the Indenture Trustee
or such Holders may terminate the rights and obligations of the Servicer
under Section 8.02. The Indenture Trustee or with the consent of the
Indenture Trustee, the Owner Trustee may terminate the Servicer's
appointment as custodian, with cause, at any time upon written
notification to the Servicer and without cause, only by written
notification to the Servicer pursuant to Section 8.02. As soon as
practicable after any termination of such appointment (but in no event
more than 10 Business Days after any such termination of appointment), the
Servicer shall deliver the Receivable Files to the Indenture Trustee or
the Indenture Trustee's agent at such place or places as the Indenture
Trustee may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
-------------------------------------------
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of
------------------
the Issuer, the Indenture Trustee and the Security Insurer, shall manage,
service, administer and make collections on the Receivables and perform
the other actions required by the Servicer under this Agreement. The
Servicer shall service the Receivables in accordance with its customary
and usual procedures and consistent with the procedures employed by
institutions that service motor vehicle retail installment sale contracts.
The Servicer's duties shall include the collection and posting of all
payments, responding to inquiries of Obligors, investigating
delinquencies, sending payment coupons to Obligors, reporting any required
tax information to Obligors, monitoring the collateral, accounting for
collections, furnishing monthly and annual statements to the Owner
Trustee, Indenture Trustee, and the Security Insurer with respect to
distributions, monitoring the compliance by Obligors with the insurance
requirements contained in the related Contracts, and performing the other
duties specified herein. The Servicer also shall administer and enforce
all rights of the holder of the Receivables under the Contracts and the
Dealer Agreements. To the extent consistent with the standards, policies
and procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with the
managing, servicing, administration and collection of the Receivables that
it may deem necessary or desirable. Without limiting the generality of
the foregoing, the Servicer is hereby authorized and empowered to execute
and deliver, on behalf of itself, the Issuer, the Owner Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders or any of
them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments
with respect to the Receivables and with respect to the Financed Vehicles;
provided, however, that, notwithstanding the foregoing, the Servicer shall
not, except pursuant to an order from a court of competent jurisdiction,
release an Obligor from payment of any unpaid amount due under any
Receivable or waive the right to collect the unpaid balance of any
Receivable from an Obligor. The Servicer is hereby authorized to
commence, in its own name or in the name of the Issuer, the Indenture
Trustee, the Certificateholders or the Noteholders, a legal proceeding to
enforce a Receivable pursuant to Section 4.03 or to commence or
participate in any other legal proceeding (including a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in any such
legal proceeding in its own name, the Indenture Trustee or the Issuer
shall thereupon be deemed to have automatically assigned the applicable
Receivable to the Servicer solely for purposes of commencing or
participating in such proceeding as a party or claimant, and the Servicer
is authorized and empowered by the Indenture Trustee or the Issuer to
execute and deliver in the Indenture Trustee's or the Issuer's name any
notices, demands, claims, complaints, responses, affidavits, or other
documents or instruments in connection with any such proceeding. If in
any enforcement suit or legal proceeding it shall be held that the
Servicer may not enforce a Receivable on the ground that it shall not be a
real party in interest or a holder entitled to enforce such Receivable,
the Owner Trustee shall, at the Servicer's expense and direction, take
steps to enforce such Receivable, including bringing suit in its name or
the name of the Issuer, the Indenture Trustee, the Certificateholders or
the Noteholders. The Owner Trustee and Indenture Trustee shall upon the
written request of the Servicer 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.
SECTION 4.02. Collection and Receivable Payments; Modifications of
----------------------------------------------------
Receivables. (a) Consistent with the standards, policies and procedures
- -----------
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable
automotive receivables that it services for itself or others and otherwise
act with respect to the Receivables in such manner as will, in the
reasonable judgment of the Servicer, maximize the amount to be received by
the Trust with respect thereto. The Servicer is authorized in its
discretion to waive any prepayment charge, late payment charge or any
other similar fees that may be collected in the ordinary course of
servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the date during each
calendar month when the related Obligor's Scheduled Payment is due or (ii)
reamortize the Obligor's Scheduled Payments on the Receivable following a
partial prepayment of principal.
(c) The Servicer may grant payment extensions or other modifications
of or amendments with respect to a Receivable (in addition to those
modifications permitted by Section 4.02(b)) in accordance with its
customary procedures if the Servicer believes in good faith that such
extension, modification or amendment is necessary to avoid a default on
such Receivable, will maximize the amount to be received by the Trust with
respect to such Receivable and is otherwise in the best interests of the
Trust; provided, however, that:
(i) the aggregate period of all extensions on a Receivable
shall not exceed four months;
(ii) in no event may the final Obligor's Scheduled Payment on a
Receivable be extended beyond the last day of the Collection Period
relating to the Final Scheduled Maturity Date;
(iii) no more than two extensions may be granted with
respect to any Receivable in any one-year period; and
(iv) no more than ( )% of the aggregate Pool Balance may be
subject to extension or modification in any one-year period.
SECTION 4.03. Realization upon Receivables. (a) Consistent with the
----------------------------
standards, policies and procedures required by this Agreement, the
Servicer shall use its best efforts to repossess or otherwise convert the
ownership of and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer shall have determined that eventual payment
in full is unlikely. The Servicer shall begin such repossession and
conversion procedures as soon as practicable after default on such
Receivable, but in no event later than the date on which all or any
portion of an Obligor's Scheduled Payment has become 91 days delinquent;
provided, however, that the Servicer may elect not to repossess a Financed
Vehicle within such time period if in its good faith judgment it
determines that the proceeds ultimately recoverable with respect to such
Receivable would be increased by forbearance. In repossessing or
otherwise converting the ownership of a Financed Vehicle and liquidating a
Receivable, the Servicer is authorized to follow such customary practices
and procedures as it shall deem necessary or advisable, consistent with
the standard of care required by Section 4.01, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private
sale, the submission of claims under an insurance policy and other actions
by the Servicer in order to realize on a Receivable; provided, however,
that, in any case in which the Financed Vehicle shall have suffered
damage, the Servicer shall not expend funds in connection with any repair
or towards the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Receivable by an
amount greater than the expense for such repair or repossession. The
Servicer shall be entitled to recover all reasonable expenses incurred by
it in the course of repossessing and liquidating a Financed Vehicle into
cash proceeds, but only out of the cash proceeds of the sale of such
Financed Vehicle, any deficiency obtained from the Obligor or any amounts
received from recourse to the related Dealer.
SECTION 4.04. Physical Damage Insurance. The Servicer shall, in
-------------------------
accordance with its customary servicing procedures, require that each
Obligor shall have obtained and maintain physical loss damage insurance
covering the Financed Vehicle as of the execution of the Receivable.
SECTION 4.05. Maintenance of Security Interests in Financed
------------------------------------------------------
Vehicles. (a) The Servicer shall, in accordance with its customary servicing
procedures, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed
Vehicle. The Servicer is hereby authorized to take such steps as are
necessary to re-perfect such security interest on behalf of the Issuer and
the Indenture Trustee in the event of the relocation of a Financed Vehicle
or for any other reason. In the event that the assignment of a Receivable
to the Issuer is insufficient, without a notation on the related Financed
Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the
Financed Vehicle is located, to perfect a security interest in the related
Financed Vehicle in favor of the Issuer, the Servicer hereby agrees that
the designation of First Merchants as the secured party on the certificate
of title is in its capacity as agent of the Issuer.
(b) The Seller, the Owner Trustee, the Indenture Trustee, the
Servicer and the Backup Servicer hereby agree that, upon the occurrence of
a Servicer Termination Event, the Controlling Party may take or cause to
be taken such actions as may, in the opinion of counsel to the Controlling
Party, be necessary to perfect or re-perfect the security interests in the
Financed Vehicles in the name of the Issuer, including by amending the
title documents of the Financed Vehicles. The Seller hereby agrees to pay
all expenses related to such perfection or reperfection and to take all
action necessary therefor. In addition, the Controlling Party may at any
other time instruct the Servicer to take or cause to be taken such action
as may, in the opinion of counsel to the Controlling Party, be necessary
to perfect or re-perfect the security interest in the Financed Vehicles in
the name of the Trust; provided, however, that if the Controlling Party
requests that the title documents be amended prior to the occurrence of an
Insurance Agreement Event of Default, the out-of-pocket expenses of the
Servicer, the Seller or any other entity incurred in connection with any
such action shall be reimbursed to the Servicer, the Seller or such other
party by the Controlling Party.
SECTION 4.06. Covenants of Servicer. By its execution and delivery
---------------------
of this Agreement, the Servicer hereby covenants as follows (on which
covenants the Issuer and Indenture Trustee rely in accepting the
Receivables and delivering the Securities and on which the Security
Insurer relies in issuing the Policy):
(a) Liens in Force. No Financed Vehicle securing a Receivable shall
--------------
be released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the
-------------
rights of the Trust in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend
-------------
the terms of any Receivable, except in accordance with Section 4.02; and
(d) Restrictions on Liens. The Servicer shall not (A) create, incur
---------------------
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to or permit in the future (upon the occurrence of a contingency
or otherwise) the creation, incurrence or existence of any Lien on or
restriction on transferability of any Receivable except for the Lien in
favor of the Trust and the restrictions on transferability imposed by this
Agreement or (B) sign or file any UCC financing statements in any
jurisdiction that names First Merchants, the Servicer or the Seller as a
debtor, and any Person other than the Seller or the Issuer as a secured
party, or sign any security agreement authorizing any secured party
thereunder to file any such financing statement with respect to the
Receivables.
SECTION 4.07. Purchase of Receivables upon Breach. Upon discovery
-----------------------------------
by any of the Servicer, the Seller, the Owner Trustee, the Indenture Trustee
or the Backup Servicer of a breach of any of the covenants set forth in
Sections 4.02(c), 4.05(a) or 4.06, the party discovering such breach shall
give prompt written notice to the other parties; provided, however, that
the failure to give any such notice shall not affect any obligation of the
Servicer under this Section 4.07. On or before the last day of the first
Collection Period following its discovery or receipt of notice of any
breach of any covenant set forth in Sections 4.02(c), 4.05(a) or 4.06 that
materially and adversely affects the interests of the Issuer, the
Indenture Trustee, the Certificateholders, the Noteholders or the Security
Insurer in any Receivable, the Servicer shall, unless such breach shall
have been cured in all material respects by such date, purchase from the
Issuer the Receivable affected by such breach. In consideration of the
purchase of any such Receivable, the Servicer shall remit the related
Purchase Amount into the Collection Account in the manner specified in
Section 5.04. Subject to Section 7.02, it is understood and agreed that
the obligation of the Servicer to purchase any Receivable with respect to
which such a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Issuer, the Owner Trustee, the Indenture
Trustee, the Certificateholders or the Noteholders.
SECTION 4.08. Servicing Fee. The Servicing Fee payable to the
-------------
Servicer on each Distribution Date shall equal the product of (i) one-twelfth,
(ii) ( )% and (iii) the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee shall be calculated on the basis of
a 360-day year comprised of twelve 30-day months. The Servicer also shall
be entitled to all late fees, prepayment charges (including, in the case
of a Receivable that provides for payments according to the "Rule of 78s"
and that is prepaid in full, the difference between the Principal Balance
of such Receivable (plus accrued interest to the date of prepayment) and
the Principal Balance of such Receivable computed according to the "Rule
of 78s"), and other administrative fees or similar charges allowed by
applicable law with respect to the Receivables, collected (from whatever
source) on the Receivables.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes
imposed on the Servicer and expenses incurred in connection with
distributions and reports made by the Servicer to the Owner Trustee and
Indenture Trustee). The Servicer shall be liable for the fees and
expenses of the Backup Servicer.
SECTION 4.09. Servicer's Certificate. Not later than 10:00 a.m.
----------------------
(New York time) on each Determination Date, the Servicer shall deliver to
the Owner Trustee, each Paying Agent, the Indenture Trustee the Back-up
Servicer, the Security Insurer and the Seller, with a copy to the Rating
Agencies, a Servicer's Certificate containing all information necessary to
make the distributions to be made on the related Distribution Date
pursuant to Section 5.06 for the related Collection Period. Receivables
to be purchased by the Servicer or to be repurchased by the Seller and
each Receivable that became a Liquidated Receivable shall be identified by
the Servicer by account number with respect to such Receivable (as
specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
-----------------------------------------------------
Termination Event. (a) The Servicer shall deliver to the Owner Trustee,
- -----------------
the Indenture Trustee, the Backup Servicer, the Security Insurer and each
Rating Agency, within 120 days after the end of the Servicer's fiscal year
(with the first such certificate being delivered no later than (date)), an
Officer's Certificate signed by a Responsible Officer of the Servicer,
stating that (i) a review of the activities of the Servicer during the
preceding 12-month period (or such shorter period as shall have elapsed
from the Closing Date to the end of the first such fiscal year) and of the
performance of its obligations under this Agreement has been made under
such officer's supervision and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer or the Seller shall deliver to the Owner Trustee,
the Indenture Trustee, the Backup Servicer, the Security Insurer and each
Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of notice or
lapse of time or both would become a Servicer Termination Event under
Section 8.01.
SECTION 4.11. Annual Independent Accountants' Report. The Servicer
--------------------------------------
shall cause a firm of independent certified public accountants, which may
also render other services to the Servicer or its Affiliates, to deliver
to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer and each Rating Agency, within 120 days after the end of
each fiscal year (with the first such report being delivered no later than
(date)), a report addressed to the Board of Directors of the Servicer, the
Owner Trustee, the Indenture Trustee, the Backup Servicer and the Security
Insurer, to the effect that such firm has audited the books and records of
the Servicer and issued its report thereon and that (1) such audit was
made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as such firm considered necessary in the
circumstances; (2) the firm is independent of the Seller and the Servicer
within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants; and (3) a review in accordance
with agreed upon procedures was made of three randomly selected Servicer's
Certificates, including the delinquency, default and loss statistics
required to be specified therein and, except as disclosed in the
accountants' report, no exceptions or errors in the Servicer's
Certificates were found.
SECTION 4.12. Access to Certain Documentation and Information
-----------------------------------------------
Regarding Receivables. The Servicer shall provide to representatives of the
- ---------------------
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing), the Certificateholders and Noteholders reasonable access to
the documentation regarding the Receivables. Access shall be afforded
without charge, but only upon reasonable request and during the normal
business hours at the offices of the Servicer. Nothing in this Section
shall affect the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors and the
failure of the Servicer to provide access to information as a result of
such obligation shall not constitute a breach of this Section.
SECTION 4.13. Monthly Tape. On or before the eighth Business Day,
------------
but in no event later than the tenth calendar day, of each month, the Servicer
shall deliver or cause to be delivered to the Indenture Trustee, Owner
Trustee and the Backup Servicer a computer tape and a diskette (or any
other form of electronic transmission acceptable to the Owner Trustee, the
Indenture Trustee and the Backup Servicer) in a format acceptable to the
Indenture Trustee, Owner Trustee and the Backup Servicer containing the
information with respect to the Receivables as of the last day of the
preceding Collection Period and necessary for preparation of the
Servicer's Certificate for the immediately succeeding Determination Date
and to determine the application of Collections as provided herein. The
Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee, Owner Trustee and the
Backup Servicer) to verify the mathematical accuracy of the Servicer's
Certificate delivered by the Servicer, and the Backup Servicer shall
certify to the Indenture Trustee and the Owner Trustee that it has
verified the mathematical accuracy of the Servicer's Certificate in
accordance with this Section 4.13 and shall notify the Servicer, the
Indenture Trustee and the Owner Trustee of any discrepancies, in each
case, on or before the third Business Day following the related
Determination Date. In the event that the Backup Servicer reports any
discrepancies, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies prior to the related Distribution Date, but
in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to
the related Distribution Date. In the event that the Backup Servicer and
the Servicer are unable to reconcile discrepancies with respect to a
Servicer's Certificate by the related Distribution Date, the Servicer
shall cause a firm of nationally recognized independent certified public
accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the third Business Day, but in no event later
than the fifth calendar day, of the following month, to reconcile the
discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for the next succeeding
Determination Date. In addition, upon the occurrence of a Servicer
Termination Event, the Servicer shall, if so requested by the Indenture
Trustee or the Owner Trustee, deliver to the Backup Servicer within 15
days after demand therefor its records relating to the Receivables and a
computer tape containing as of the close of business on the date of demand
all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables. Other than the duties
specifically set forth in this Agreement, the Backup Servicer shall have
no obligations hereunder, including, without limitation, to supervise,
verify or monitor the performance of the Servicer. The Backup Servicer
shall have no liability for any actions taken or omitted by the Servicer.
SECTION 4.14. Retention and Termination of Servicer. The Servicer
-------------------------------------
hereby covenants and agrees to act as Servicer under this Agreement for an
initial term commencing on the Closing Date and ending on (date), which
term shall be extendible by the Security Insurer (or the Indenture Trustee
for as long as the Notes are outstanding, if there is an existing Security
Insurer Default or if the Policy is no longer in effect) for successive
quarterly terms ending on each successive (month and day), (month and
day), (month and day) and (month and day) (or pursuant to revocable
written standing instructions delivered from time to time to the Servicer,
the Indenture Trustee and the Owner Trustee, for any specified number of
terms), until the Notes are paid in full; provided, however, that on the
date that the Notes are paid in full, the then current term of the
Servicer shall be automatically extended until the Certificates are paid
in full. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a
"Servicer Extension Notice") shall be delivered by the Security Insurer,
the Indenture Trustee or the Owner Trustee, as applicable, to the other
parties to this Agreement. The Servicer hereby agrees that, as of the
date hereof and upon its receipt of any such Servicer Extension Notice,
the Servicer shall be bound for the duration of the initial term or the
term covered by such Servicer Extension Notice to act as the Servicer,
subject to and in accordance with the other provisions of this Agreement.
Until such time as a Security Insurer Default shall have occurred and be
continuing, the Servicer agrees that if as of the last day of the calendar
month preceding the last day of any such servicing term the Servicer shall
not have received a Servicer Extension Notice from the Security Insurer,
the Servicer shall, within five days thereafter, give written notice of
such non-receipt to the Indenture Trustee, the Owner Trustee, the Security
Insurer and the Backup Servicer.
ARTICLE V
Distributions; Reserve Account;
-------------------------------
Statements to Certificateholders and Noteholders
------------------------------------------------
SECTION 5.01. Local Post Office Boxes. On or prior to the Closing
-----------------------
Date, the Servicer shall send revised payment statements (which statements
will indicate (by notation specific to this transaction) that such payments
relate to Receivables owned by the Issuer) to each Obligor pursuant to
which payments made by such Obligor after the Closing Date will be
addressed to a regional post office box (each a "Local Post Office Box")
separate from any post office box to which receivables owned by First
Merchants are or will be sent. All payments and other proceeds of any
type and from any source on or with respect to the Receivables that are
delivered to one of the Local Post Office Boxes shall be the property of
the Issuer, subject to the lien of the Indenture and the rights of the
Indenture Trustee thereunder.
SECTION 5.02. Accounts. (a) The Servicer has established various
--------
accounts in the name of the Indenture Trustee (the "Local Collection
Accounts"), at the locations identified on Schedule IV. Each Local
Collection Account shall be maintained as an Eligible Deposit Account and
shall bear a designation clearly indicating that the amounts deposited
thereto and held therein are for the benefit of the Issuer, as provided in
the Local Collection Account Agreement. All payments on the Receivables
mailed by Obligors or any other Person to the Local Post Office Boxes or
otherwise delivered to the Servicer shall be deposited on a daily basis
into the applicable Local Collection Account, from which they will be
swept within two Business Days to the Collection Account. Amounts on
deposit in any Local Collection Account shall not be invested.
(b) (i) On or prior to the Closing Date, the Servicer shall
establish, or cause to be established, an account in the name of the
Indenture Trustee (the "Collection Account"), which shall be maintained as
an Eligible Deposit Account and shall bear a designation clearly
indicating that the amounts deposited thereto are held for the benefit of
the Noteholders and Certificateholders. The Servicer shall cause the
Indenture Trustee to sweep any amounts deposited to any Local Collection
Account, on or with respect to the Receivables into the Collection Account
as promptly as possible, but in no event later than the second Business
Day following receipt thereof in the Local Collection Accounts.
(ii) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Note Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit
of the Noteholders.
(iii) Funds on deposit in the Collection Account and the
Note Distribution Account (collectively, the "Trust Accounts") shall be
invested by the Indenture Trustee in Eligible Investments selected in writing
by the Servicer or, if an Insurance Agreement Event of Default shall have
occurred and be continuing, the Security Insurer. All such Eligible
Investments shall be held by the Indenture Trustee for the benefit of the
Noteholders and the Certificateholders or the Noteholders, as applicable;
provided, on each Payment Determination Date all interest and other
investment income (net of losses and investment expenses) on funds on deposit
in the Trust Accounts shall be deposited into the Collection Account and
shall be deemed to constitute a portion of the Interest Distribution Amount
for the related Distribution Date. Other than as permitted by the Rating
Agencies, funds on deposit in the Collection Account and the Note
Distribution Account shall be invested in Eligible Investments that will
mature not later than the Business Day immediately preceding the next
Distribution Date. Funds deposited in a Trust Account on a day which
immediately precedes a Distribution Date upon the maturity of any Eligible
Investments are not required to be invested overnight.
(iv) The Indenture Trustee shall not be held liable in any way
by reason of any insufficiency in the Collection Account resulting from any
loss on an Eligible Investment included therein, except for losses
attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial
capacity as principal obligor and not as Indenture Trustee, in accordance
with their terms.
(c) (i) The Indenture Trustee and, to the extent provided
herein, the Security Insurer shall possess all right, title and interest in
all funds on deposit from time to time in the Local Post Office Boxes, the
Local Collection Accounts, the Collection Account and the Note Distribution
Account and in all proceeds thereof (including all income thereon), subject
to the Local Collection Account Agreement. The Local Post Office Boxes, the
Local Collection Accounts, the Collection Accounts and the Note Distribution
Account shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Noteholders or the Noteholders and the
Certificateholders, as the case may be subject to the Local Collection
Account Agreement. If, at any time, any Local Collection
Account or the Collection Account ceases to be an Eligible Deposit
Account, the Indenture Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) establish a new Local
Collection Account or Collection Account as applicable, as an Eligible
Deposit Account and shall transfer any cash and/or any investments from
the account that is no longer an Eligible Deposit Account to the new Local
Collection Account or Collection Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts, subject to
the last sentence of Section 5.02(c)(i); and each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Indenture Trustee or a financial
intermediary (as such term is defined in Section 8-313(4) of the UCC) acting
solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to federal book-
entry regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued book-entry registration of
such Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in accordance
with paragraph (c) of the definition of "Delivery" and shall be maintained
by the Indenture Trustee, pending maturity or disposition, through continued
registration of the Indenture Trustee's (or its nominee's) ownership of such
security.
(iii) The Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make withdrawals and
payments from the Trust Accounts for the purpose of permitting the Servicer
or the Owner Trustee to carry out its respective duties hereunder
or permitting the Indenture Trustee to carry out its duties under the
Indenture.
SECTION 5.03. Application of Collections. All amounts received with
--------------------------
respect to the Receivables during each Collection Period shall be applied
by the Servicer as follows:
With respect to each Simple Interest Receivable (other than a
Purchased Receivable), payments by or on behalf of the Obligor shall be
applied to interest and principal in accordance with the Simple Interest
Method. With respect to each Precomputed Receivable (other than a
Purchased Receivable), payments by or on behalf of the Obligor shall be
applied, first, to the Obligor's Scheduled Payment, with any excess
amounts being applied to future Obligor's Scheduled Payments.
SECTION 5.04. Purchase Amounts. The Servicer and the Seller shall
----------------
deposit or cause to be deposited in the Collection Account, on or prior to
each Determination Date, the aggregate Purchase Amount with respect to
Purchased Receivables and the Servicer shall deposit therein all amounts
to be paid under Section 4.07.
SECTION 5.05. Transfers from the Spread Account. The Indenture
---------------------------------
Trustee shall determine, no later than 11:00 A.M., New York City time, on
each Deficiency Claim Date whether a shortfall exists with respect to the
distributions that the Indenture Trustee is required to make on the
upcoming Distribution Date pursuant to clauses (1) through (5) of Section
5.06(b). In the event that the Indenture Trustee determines that such a
shortfall exists, the Indenture Trustee shall furnish to the Collateral
Agent and the Security Insurer, no later than 12:00 noon, New York City
time, on such Deficiency Claim Date, a written notice specifying the
amount of the shortfall and directing the Collateral Agent to remit an
amount equal to such shortfall (to the extent of funds available to be so
distributed pursuant to the Spread Account Agreement) to the Indenture
Trustee for deposit in the Collection Account. Upon receipt of any such
funds, the Indenture Trustee shall immediately deposit such amounts into
the Collection Account for distribution on the Distribution Date pursuant
to Section 5.06.
SECTION 5.06. Distributions. (a) On each Payment
-------------
Determination Date, the Servicer shall calculate all amounts required to be
deposited in the Note Distribution Account and the Certificate Distribution
Account.
(b) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee in writing (based on the information contained in the
Servicer's Certificate delivered on the related Payment Determination Date
pursuant to Section 4.09) to make the following deposits and distributions
for receipt by the Servicer or deposit in the applicable account by 11:00
a.m. (New York time), to the extent of the Total Distribution Amount plus all
amounts transferred to the Collection Account from the Spread Account,
plus any amounts deposited thereto from the Policy Payment Account pursuant
to Section 5.07(b), to make required payments and distributions on such date
pursuant to clauses (1) through (10) below, in the order and priority
indicated, in the following order of priority:
(1) To the Servicer, from the Interest Distribution
Amount, the Servicing Fee (and all unpaid Servicing Fees from prior
Collection Periods). Shortfalls in amounts due to the Servicer as Servicing
Fees on any Distribution Date may be paid using amounts transferred from the
Spread Account only to the extent provided in Section
3.03(b) of the Master Spread Account Agreement;
(2) To the Owner Trustee and the Indenture Trustee, from
the Interest Distribution Amount remaining after the application of (1)
above, any accrued and unpaid fees and expenses due, but only to the extent
not previously paid by the Servicer. Shortfalls in any such amounts due to
the Owner Trustee or the Indenture Trustee on any Distribution Date may be
paid using amounts transferred from the Spread Account only to the extent
provided in Section 3.03(b) of the Master Spread Account Agreement.
(3) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1) and (2)
above, the Noteholders' Interest Distributable Amount;
(4) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1) through
(3), the Noteholders' Principal Distributable Amount;
(5) to the Security Insurer, from the Total Distribution
Amount remaining after the application of clauses (1) through (4), any
amounts due to the Security Insurer under the Insurance Agreement;
(6) to the Spread Account, from the Total Distribution
Amount remaining after the application of clauses (1) through (5), an amount
up to the amount of any deficiency in the Spread Account Required Amount;
(7) to the Note Distribution Account on any Accelerated
Payment Date, from the Total Distribution Amount remaining after the
application of clauses (1) through (6), the Accelerated Principal
Distribution Amount;
(8) to the Certificate Distribution Account, from the
Total Distribution Amount remaining after the application of clauses (1)
through (7), the Certificateholders' Interest Distributable Amount;
(9) to the Certificate Distribution Account, from the
Total Distribution Amount remaining after the application of clauses (1)
through (8), the Certificateholders' Principal Distributable Amount;
(10) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1) through
(9), the Class A-2 Additional Principal Distribution Amount; and
(11) to the Collateral Agent, the portion, if any, of the
Total Distribution Amount remaining after the application of clauses (1)
through (10) above to pay the Credit Enhancement Fee to the Seller pursuant
to the terms and subject to the conditions set forth in the Spread Account
Agreement.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee shall continue to maintain the Collection Account hereunder until
the Certificate Balance is reduced to zero.
The Seller, as initial Holder of the Certificates, hereby irrevocably
directs and authorizes the Indenture Trustee, for as long as no Security
Insurer Default shall have occurred and be continuing, to pay any amounts
otherwise distributable to the Certificate Distribution Account pursuant
to clauses (8) and (9) above to the Collateral Agent for deposit to the
Spread Account, to be applied by the Collateral Agent pursuant to the
Spread Account Agreement.
SECTION 5.07. Claims Upon the Policy; Policy Payments Account.
-----------------------------------------------
(a) If on the third Business Day prior to a Distribution Date, the Total
Distribution Amount on deposit or to be deposited in the Collection
Account for the related Collection Period (after giving effect to all
transfers thereto of any amounts from the Spread Account) is insufficient
to pay the Scheduled Payment on the related Distribution Date, then the
Indenture Trustee shall give notice to the Security Insurer by telephone
or telecopy of the amount of such deficiency. Such notice shall be
confirmed in writing in the form set forth as Exhibit A to the Endorsement
of the Policy, to the Security Insurer and the Fiscal Agent, if any, at or
before 12:00 noon, New York City time, on the second Business Day prior to
such Distribution Date. Following receipt by the Security Insurer of such
notice in such form, the Security Insurer or the Fiscal Agent will pay any
amount payable under the Policy on the later to occur of (i) 12:00 noon,
New York City time, on the second Business Day following such receipt and
(ii) 12:00 noon, New York City time, on the Distribution Date to which
such deficiency relates, as provided in the Endorsement to the Policy.
(b) The Indenture Trustee shall establish a separate special purpose
trust account for the benefit of Holders of the Notes and the Security
Insurer, referred to herein as the "Policy Payments Account", over which
the Indenture Trustee shall have exclusive control and sole right of
withdrawal. The Indenture Trustee shall deposit any amount paid under the
Policy in the Policy Payments Account and distribute such amount only to
pay to Holders of the Notes the Scheduled Payments for which a claim has
been made, and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Servicer or the Indenture Trustee. Amounts
paid under the Policy shall be transferred to the Collection Account in
accordance with the next succeeding paragraph and disbursed by the
Indenture Trustee to Holders of the Notes in accordance with Section 5.06.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay the
Scheduled Payment with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the
Notes to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the Note Register and
in the statement to be furnished to Holders of the Notes pursuant to
Section 5.11. Funds held in the Policy Payments Account shall not be
invested by the Indenture Trustee.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Indenture
Trustee as a result of any claim under the Policy, to the extent required
to make the Scheduled Payment on such Distribution Date, shall be
withdrawn from the Policy Payments Account and deposited in the Collection
Account and applied by the Indenture Trustee, together with the other
funds to be distributed from the Collection Account pursuant to Section
5.06, directly to the payment in full of the Scheduled Payment due with
respect to the Notes. Any funds remaining in the Policy Payments Account
on the first Business Day following a Distribution Date shall be remitted
to the Security Insurer, pursuant to the instructions of the Security
Insurer, by the end of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Notes from
moneys received under the Policy. The Security Insurer shall have the
right to inspect such records at reasonable times during normal business
hours upon one Business Day's prior notice to the Indenture Trustee at the
expense of the Security Insurer.
SECTION 5.08. Notices to the Security Insurer. All notices,
-------------------------------
statements, reports, notes, or opinions required by this Agreement to be sent
to any other party hereto or to Holders of the Notes at any time when the
Security Insurer is the Controlling Party shall also be sent to the
Security Insurer.
SECTION 5.09. Rights in Respect of Insolvency Proceedings. (a) In
-------------------------------------------
the event that the Indenture Trustee has received a certified copy of a final,
nonappealable order of the appropriate court that any Scheduled Payment
has been voided in whole or in part as a preference payment under
applicable bankruptcy or insolvency law, the Indenture Trustee shall (i)
deliver to the Security Insurer a certified copy of such court order, an
irrevocable assignment to the Security Insurer of the Holders' rights with
respect to any such recovered payment and an instrument appointing the
Security Insurer as agent of the Holders with respect to any such
recovered payments and (ii) notify the Holders by mail that, in the event
that any Scheduled Payment distributed to a Holder is so recovered, such
Holder will be entitled to payment of such recovered amounts pursuant to
the Policy.
(b) The Indenture Trustee shall promptly notify the Security Insurer
of either of the following as to which a Trust Officer has actual
knowledge: (i) the commencement of any proceeding by or against the
Seller or the Issuer commenced under the United States Bankruptcy Code or
any other applicable United States federal or state bankruptcy,
insolvency, receivership, rehabilitation, or similar law (an "Insolvency
Proceeding") or (ii) the making of any claim in connection with any
Insolvency Proceeding seeking the avoidance as a preferential transfer (a
"Preference Claim") of any payment of principal of or interest on the
Notes. Each Holder, by its purchase of a Note, and the Indenture Trustee
hereby agree that, so long as a Security Insurer Default shall not have
occurred and be continuing, the Security Insurer may at any time during
the continuation of an Insolvency Proceeding direct all matters relating
to such Insolvency Proceeding, including (i) all matters relating to any
Preference Claim, (ii) the direction of any appeal of any order relating
to any Preference Claim at the expense of the Security Insurer and (iii)
the posting of any surety, supersedeas or performance bond pending any
such appeal. In addition, and without limitation of the foregoing, as set
forth in Section 5.10, the Security Insurer shall be subrogated to, and
each Holder of a Note and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the
Indenture Trustee and such Holder in the conduct of any Insolvency
Proceeding, including all rights of any party to an adversary proceeding
action with respect to any court order issued in connection with any such
Insolvency Proceeding.
(c) The Indenture Trustee shall furnish to the Security Insurer its
records evidencing the distributions of principal of and interest on the
Notes that have been made by the Indenture Trustee and subsequently
recovered from Holders and the dates on which such payments were made.
SECTION 5.10. Effect of Payments by the Security Insurer;
-------------------------------------------
Subrogation. (a) Anything herein to the contrary notwithstanding, any
- -----------
distribution of principal of or interest on the Notes that is made with moneys
received pursuant to the terms of the Policy shall not be considered payment
of the Notes by the Issuer and shall not discharge the Trust assets in respect
of such distribution. The Indenture Trustee acknowledges that, without the
need for any further action on the part of the Security Insurer, the
Indenture Trustee or the Note Registrar, (i) to the extent the Security
Insurer makes payments, directly or indirectly, on account of principal of
or interest on the Notes to the Holders thereof, the Security Insurer will
be fully subrogated to the rights of such Holders to receive such
principal and interest from distributions of the assets of the Trust and
will be deemed to the extent of the payments so made to be a Holder of
Notes and (ii) the Security Insurer shall be paid principal and interest
in its capacity as a Holder of Notes until all such payments by the
Security Insurer have been fully reimbursed, but only from the sources and
in the manner provided herein for the distribution of such principal and
interest and in each case only after the Holders of the Notes have
received all Scheduled Payments due to them under this Agreement.
(b) Without limiting the rights or interests of the Holders of Notes
as otherwise set forth herein and subject to Article X, so long as no
Security Insurer Default exists, the Indenture Trustee shall cooperate in
all respects with any reasonable request by the Security Insurer for
action to preserve or enforce the Security Insurer's rights or interests
under this Agreement, including, upon the occurrence and continuance of a
Servicer Termination Event, a request to take any one or more of the
following actions:
(i) institute proceedings for the collection of all amounts
then payable on the Notes or under this Agreement in respect of the Notes,
enforce any judgment obtained and collect moneys adjudged due; and
(ii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Security Insurer hereunder.
SECTION 5.11. Statements to Certificateholders and Noteholders. On
------------------------------------------------
each Distribution Date, the Servicer shall provide to the Indenture
Trustee (with a copy to the Rating Agencies and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most
recent Record Date and to the Owner Trustee (with a copy to each Paying
Agent) for the Owner Trustee to forward to each Certificateholder of
record as of the most recent Record Date a statement substantially in the
form of Exhibits B and C, respectively, setting forth at least the
following information as to the Notes and the Certificates to the extent
applicable:
(i) the amount of such distribution allocable to principal
allocable to each Class of Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest
allocable to each Class of Notes and to the Certificates;
(iii) the Outstanding Amount of each Class of Notes, the
Note Pool Factor for each such Class, the Certificate Balance and the
Certificate Pool Factor as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments allocated to
principal reported under clause (i) above;
(iv) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
(v) the amount of Realized Losses, if any, with respect to the
related Collection Period;
(vi) the amount, if any, of the distribution payable pursuant to
a claim under the Policy;
(vii) the amount of any Accelerated Principal Distribution
Amount paid to Noteholders on such date;
(viii) the balance of the Spread Account on such Payment
Determination Date after giving effect to deposits and withdrawals to be made
on the next following Distribution Date, if any; and
(ix) the Pool Balance as of the close of business on the last
day of the related Collection Period, after giving effect to payments
allocated to principal reported under clause (i) above.
Each amount set forth on the Distribution Date statement under
clauses (i), (ii) or (iv) above shall be expressed as a dollar amount per
$1,000 of original principal balance of a Certificate or Note, as
applicable.
ARTICLE VI
The Seller
----------
SECTION 6.01. Representations of Seller. The Seller makes the
-------------------------
following representations on which the Issuer relies in accepting the
Receivables and delivering the Securities and the Security Insurer relies
in issuing the Policy. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, but shall survive
the sale, transfer and assignment of the Receivables by the Seller to the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. The Seller is duly
------------------------------
organized and validly existing as a corporation in good standing under the
laws of the State of Delaware, with the corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(b) 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 where the failure
to do so would materially and adversely affect the Seller's ability to
transfer the Receivables to the Trust pursuant to this Agreement or the
validity or enforceability of the Receivables.
(c) Power and Authority. The Seller has the corporate power
-------------------
and authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out their respective terms;
the Seller has full power and authority to sell and assign the property to
be sold and assigned to and deposited with the Issuer, and the Seller
shall have duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of
this Agreement and the other Basic Documents to which the Seller is a
party have been duly authorized by the Seller by all necessary corporate
action.
(d) Binding Obligation. This Agreement and the other Basic
------------------
Documents to which the Seller is a party, when duly executed and delivered
by the other parties hereto and thereto, shall constitute legal, valid and
binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, and
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and to general principles of equity (whether
applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions
------------
contemplated by this Agreement and the other Basic Documents and the
fulfillment of the terms of this Agreement and the other Basic Documents
shall not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time, or
both) a default under, the certificate of incorporation or bylaws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it is bound; or
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust, or other instrument, other than this Agreement
and the other Basic Documents; or violate any law, order, rule or
regulation applicable to the Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties: (1) asserting the invalidity of this Agreement or any other
Basic Document; (2) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated
by this Agreement or any other Basic Document; (3) 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 any other Basic Document; or (4)
seeking to adversely affect the federal income tax attributes of the
Trust, the Notes or the Certificates.
(g) No Consents. The Seller is not required to obtain the
-----------
consent of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority,
bureau or agency in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement or any other Basic Document
to which it is a party that has not already been obtained.
SECTION 6.02. Corporate Existence. During the term of this
-------------------
Agreement, the Seller will keep in full force and effect its existence, rights
and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement,
the Basic Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the
transactions contemplated hereby. In addition, all transactions and
dealings between the Seller and its Affiliates will be conducted on an
arm's-length basis.
SECTION 6.03. 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 (which shall
not include distributions on account of the Notes or Certificates).
SECTION 6.04. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Seller. The Seller shall not merge or consolidate with
- ----------------------
any other Person or permit any other Person to become the successor to the
Seller's business without the prior written consent of the Security
Insurer. Any such successor Person shall execute an agreement of
assumption of every obligation of the Seller under this Agreement and the
other Basic Documents and, whether or not such assumption agreement is
executed, shall 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. The Seller shall provide
prompt notice of any merger, consolidation or succession pursuant to this
Section 6.04 to the Owner Trustee, the Indenture Trustee, the Security
Insurer, the Noteholders, the Certificateholders and the Rating Agencies.
Notwithstanding the foregoing, the Seller shall not merge or consolidate
with any other Person or permit any other Person to become a successor to
the Seller's business unless (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.02
or 6.01 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the
consummation of such transaction), (y) the Seller shall have delivered to
the Owner Trustee, the Indenture Trustee and the Security Insurer an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption
comply with this Section 6.04 and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied with
and (z) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Security Insurer an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing statements
and continuation statements and amendments thereto have been executed and
filed that are necessary to preserve and protect the interest of the Trust
in the Receivables and reciting the details of the filings or (B) no such
action is necessary to preserve and protect such interest.
SECTION 6.05. Limitation on Liability of Seller and Others. The
--------------------------------------------
Seller and any director, officer, employee or agent of the Seller may rely in
good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. 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 opinion may involve
it in any expense or liability.
SECTION 6.06. Seller May Own Certificates or Notes. The Seller and
------------------------------------
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would
have if it were not the Seller or an Affiliate thereof, except as
expressly provided herein or in any Basic Document.
ARTICLE VII
The Servicer
------------
SECTION 7.01. Representations of Servicer. The Servicer makes the
---------------------------
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables and the Security Insurer relies in issuing the
Policy. The representations speak as of the execution and delivery of
this Agreement and as of the Closing Date and shall survive the sale of
the Receivables to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly
------------------------------
organized and validly existing as a corporation in good standing under the
laws of the state of its incorporation, with the corporate power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted,
and had at all relevant times, and has, the corporate power, authority and
legal right to acquire, own, sell and service the Receivables and to hold
the Receivable Files as custodian.
(b) Due Qualification. The Servicer is duly qualified to do
-----------------
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) shall
require such qualifications.
(c) Power and Authority. The Servicer has the power and
-------------------
authority to execute and deliver this Agreement and the other Basic Documents
to which it is a party and to carry out their respective terms; and the
execution, delivery and performance of this Agreement and the other Basic
Documents to which it is a party have been duly authorized by the Servicer
by all necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents
------------------
to which it is a party constitute legal, valid and binding obligations of
the Servicer, enforceable against the Servicer in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions
------------
contemplated by this Agreement and the Basic Documents to which it is a
party and the fulfillment of their respective terms shall not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, the articles of incorporation or bylaws of the Servicer, or any
indenture, agreement, mortgage, deed of trust, or other instrument to
which the Servicer is a party or by which it is bound; or 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 and the Basic Documents, or
violate any law, order, rule or regulation applicable to the Servicer of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or any of its properties;
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Servicer's knowledge, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties: (i) asserting the invalidity of this Agreement or any of
the Basic Documents; (ii) seeking to prevent the issuance of the Notes or
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents; (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement or any of the Basic
Documents; or (iv) seeking to adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes or the
Certificates.
(g) No Insolvent Obligors. As of the related Cutoff Date, no
---------------------
Obligor on a Receivable is shown on the Receivable Files as the subject of
a bankruptcy proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable
-----------------------
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer and the representations made by the Servicer
under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Security Insurer, the Noteholders, the Certificateholders and the Seller and
any of the officers, directors, employees and agents of the Issuer, the Owner
Trustee, the Indenture Trustee, the Backup Servicer and the Security Insurer
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.
(b) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Seller, the Backup
Servicer, the Security Insurer, their respective officers, directors, agents
and employees, the Noteholders and the Certificateholders from and against
any taxes that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement, including any
sales, gross receipts, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes asserted with respect to, and as of the date of, the transfer
of the Receivables to the Trust or the issuance and original sale of the Notes
and the Certificates), and costs and expenses in defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Seller, the Backup
Servicer, the Security Insurer, the Certificateholders and the Noteholders
and any of the officers, directors, employees and agents of the Issuer, the
Owner Trustee and the Indenture Trustee from and against any and all costs,
expenses, losses, claims, damages and liabilities to the extent that such
cost, expense, loss, claim, damage or liability arose out of, or
was imposed upon any such Person through, the negligence, misfeasance or bad
faith of the Servicer in the performance of its duties under this Agreement
or by reason of reckless disregard of its obligations and duties
under this Agreement.
For purposes of this Section, in the event of the termination of the
rights and obligations of First Merchants (or any successor thereto
pursuant to Section 7.03) as Servicer pursuant to Section 8.02, or a
resignation by such Servicer pursuant to this Agreement, such Servicer
shall be deemed to be the Servicer pending appointment of a successor
Servicer (other than the Indenture Trustee) pursuant to Section 8.03.
Indemnification under this Section shall survive the resignation or
removal of any indemnified party or the termination of this Agreement and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such
payments are made thereafter collects any of such amounts from others,
such Person shall promptly repay such amounts to the Servicer, without
interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. (a) The Servicer shall not merge or
- ------------------------
consolidate with any other Person, convey, transfer or lease substantially all
its assets as an entirety to another Person, or permit any other Person to
become the successor to the Servicer's business unless, after the merger,
consolidation, conveyance, transfer, lease, or succession, the successor
or surviving entity shall be capable of fulfilling the duties of the
Servicer contained in this Agreement and shall be reasonably acceptable to
the Controlling Party. Any Person (i) into which the Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to
which the Servicer shall be a party, (iii) that acquires by conveyance,
transfer or lease substantially all of the assets of the Servicer or (iv)
succeeding to the business of the Servicer, which Person shall execute an
agreement of assumption to perform every obligation of the Servicer under
this Agreement, shall be the successor to the Servicer under this
Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement. The Servicer shall
provide notice of any merger, consolidation or succession pursuant to this
Section 7.03(a) to the Owner Trustee and the Indenture Trustee, the
Certificateholders, the Security Insurer and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or consolidate
with any other Person or permit any other Person to become a successor to
the Servicer's business unless (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 7.01
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such
transaction) and no event that, after notice or lapse of time or both,
would become a Servicer Termination Event shall have occurred and be
continuing, (ii) the Servicer shall have delivered to the Owner Trustee,
the Indenture Trustee and the Security Insurer an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section
7.03(a) and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) immediately
after giving effect to such transaction, the successor to the Servicer
shall become the Administrator under the Administration Agreement in
accordance with Section 8 of such Agreement and (iv) the Servicer shall
have delivered to the Owner Trustee, the Indenture Trustee and the
Security Insurer an Opinion of Counsel stating that either (A) all
financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect
the interest of the Owner Trustee and the Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings or (B) no such
action shall be necessary to preserve and protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance,
transfer or lease substantially all of the assets of the Backup Servicer
or (iv) succeeding to the business of the Backup Servicer, which Person
shall execute an agreement of assumption to perform every obligation of
the Backup Servicer under this Agreement, shall be the successor to the
Backup Servicer under this Agreement without the execution or filing of
any paper or any further act on the part of any of the parties to this
Agreement.
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer
----------------------------------------------------
and Others. (a) None of the Servicer, the Backup Servicer or any of their
- ----------
respective directors, officers, employees or agents shall be under any
liability to the Issuer, the Noteholders or the Certificateholders, except
as provided in this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer, the Backup Servicer or
any such person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful misfeasance, bad faith or
negligence in the performance of duties. The Servicer, the Backup
Servicer and any director, officer, employee or agent of the Servicer or
Backup Servicer may conclusively rely in good faith on the written advice
of counsel or on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising under this
Agreement.
(b) The Backup Servicer shall not be liable for any obligation of
the Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Owner
Trustee, the Indenture Trustee, the Seller, the Security Insurer, the
Holders of the Certificates, and the Holders of the Notes shall look only
to the Servicer to perform such obligations. The Backup Servicer, the
Owner Trustee and the Indenture Trustee shall have no responsibility and
shall not be in default hereunder or incur any liability for any failure,
error, malfunction or any delay in carrying out any of its duties under
this Agreement if such failure or delay results from the Backup Servicer
acting in accordance with information prepared or supplied by a Person
other than the Backup Servicer or the failure of any such other Person to
prepare or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability for
(i) any act or failure to act of any third party, including the Servicer
or the Controlling Party, (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii)
the invalidity or unenforceability of any Receivable under applicable law,
(iv) the breach or inaccuracy of any representation or warranty made with
respect to any Receivable, or (v) the acts or omissions of any successor
Backup Servicer.
(c) The parties expressly acknowledge and consent to ( )
simultaneously acting in the capacity of Backup Servicer or successor
Servicer and Indenture Trustee and as collateral agent under the Spread
Account Agreement and the Local Collection Account Agreement. ( ) may, in
such capacities, discharge its separate functions fully, without
hinderance or regard to conflict of interest principles, duty of loyalty
principles or other breach of fiduciary duties to the extent that any such
conflict or breach arises from the performance by ( ) of express duties
set forth in this Agreement in any of such capacities.
SECTION 7.05. Appointment of Subservicer. The Servicer may at any
--------------------------
time, with the Security Insurer's consent, appoint a subservicer to
perform all or any portion of its obligations as Servicer hereunder;
provided, however, that 10 days' prior notice of such appointment shall
have been given to the Rating Agencies and each Rating Agency shall have
notified the Servicer, the Backup Servicer, the Owner Trustee and the
Indenture Trustee in writing that such appointment will not result in a
reduction or withdrawal of the then current ratings of the Notes or result
in an increased capital charge to the Security Insurer; and, provided,
further, that the Servicer shall remain obligated and be liable to the
Owner Trustee, the Indenture Trustee, the Security Insurer, the
Noteholders and the Certificateholders for the servicing and administering
of the Receivables in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment
of such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of any subservicer shall be as agreed
between the Servicer and such subservicer from time to time, and none of
Owner Trustee, the Indenture Trustee, the Issuer, the Backup Servicer, the
Security Insurer, the Noteholders or the Certificateholders shall have any
responsibility therefor.
SECTION 7.06. Servicer and Backup Servicer Not to Resign. (a)
------------------------------------------
Subject to the provisions of Section 7.03(a), the Servicer shall not resign
from the obligations and duties imposed on it by this Agreement as Servicer
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law.
(b) Subject to the provisions of Section 7.03(b), the Backup Servicer
may resign from the obligations and duties imposed on it by this Agreement
as Backup Servicer (i) upon a determination that the performance of its
duties under this Agreement shall no longer be permissible under
applicable law, (ii) if the Backup Servicer resigns or is removed as
Indenture Trustee (in which case the Backup Servicer may resign as Backup
Servicer subject to the same conditions applicable to the Indenture
Trustee pursuant to Section 6.08 of the Indenture), or (iii) with the
prior written consent of the Rating Agency and the Controlling Party;
provided, that, the Rating Agency Condition shall have been satisfied.
(c) Notice of any determination that the performance by either the
Servicer or the Backup Servicer of its duties hereunder is no longer
permitted under applicable law shall be communicated to the Owner Trustee,
the Indenture Trustee and the Security Insurer at the earliest practicable
time (and, if such communication is not in writing, shall be confirmed in
writing at the earliest practicable time) and any such determination shall
be evidenced by an Opinion of Counsel to such effect delivered by the
Servicer or Backup Servicer, as applicable, to the Owner Trustee, the
Indenture Trustee and the Security Insurer concurrently with or promptly
after such notice. No resignation of the Servicer shall become effective
until the Backup Servicer or a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with
Section 8.03. No resignation of the Backup Servicer shall become
effective until an entity acceptable to the Controlling Party shall have
assumed the responsibilities and obligations of the Backup Servicer.
ARTICLE VIII
Default
-------
SECTION 8.01. Servicer Termination Events. For purposes of this
---------------------------
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) any failure by the Servicer to deposit into any Local Collection
Account or the Collection Account any proceeds or payment required to be
so delivered under the terms of this Agreement that continues unremedied
for a period of two Business Days (one Business Day with respect to
payments of Purchase Amounts) after written notice is received by the
Servicer or after discovery of such failure by a Responsible Officer of
the Servicer;
(b) failure by the Servicer to deliver to the Owner Trustee, the
Indenture Trustee, the Seller and (so long as the Security Insurer is the
Controlling Party) the Security Insurer the Servicer's Certificate by the
applicable Determination Date, or to observe any covenant or agreement set
forth in Section 4.06;
(c) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer set forth in this
Agreement, which failure (i) materially and adversely affects the rights
of the Noteholders or Certificateholders (determined without regard to the
availability of funds under the Policy) or of the Security Insurer (unless
the Security Insurer is no longer the Controlling Party) and (ii)
continues unremedied for a period of 30 days after knowledge thereof by
the Servicer or after the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Servicer by
any of the Owner Trustee, the Indenture Trustee or the Security Insurer
(or, if a Security Insurer Default shall have occurred and be continuing,
Holders of Holders of Notes evidencing not less than 25% of the
Outstanding Amounts of the Notes);
(d) the occurrence of an Insolvency Event with respect to the
Servicer or, so long as First Merchants is the Servicer, the Seller;
(e) so long as the Security Insurer is the Controlling Party, any
failure by the Security Insurer to have delivered a Servicer Extension
Notice pursuant to Section 4.14;
(f) so long as the Security Insurer is the Controlling Party, an
Insurance Agreement Event of Default shall have occurred and be
continuing; or
(g) the Servicer is terminated as servicer with respect to any other
trust that has issued one or more classes of asset backed securities with
respect to which the Security Insurer has issued a financial insurance
guaranty policy.
SECTION 8.02. Consequences of a Servicer Termination Event. If a
--------------------------------------------
Servicer Termination Event shall occur and be continuing, the Security
Insurer or, if the Security Insurer is no longer the Controlling Party,
the Indenture Trustee or Holders of Notes evidencing a majority of the
Outstanding Amount of the Notes, by notice given in writing to the
Servicer (and to the Indenture Trustee, the Owner Trustee and the Seller
if given by the Security Insurer or such Holders), may terminate all of
the rights and obligations of the Servicer under this Agreement. On or
after the receipt by the Servicer of such written notice or upon
termination of the Servicer pursuant to Section 4.14, all authority,
power, obligations and responsibilities of the Servicer under this
Agreement automatically shall pass to, be vested in and become obligations
and responsibilities of the Backup Servicer (or such other successor
Servicer appointed by the Controlling Party); provided, however, that the
successor Servicer shall have no liability with respect to any obligation
that was required to be performed by the terminated Servicer prior to the
date that the successor Servicer becomes the Servicer or any claim of a
third party based on any alleged action or inaction of the terminated
Servicer. The successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate
to effect the purposes of such notice of termination, whether to complete
the transfer and endorsement of the Receivables and related documents to
show the Indenture Trustee (or Owner Trustee if the Notes have been paid
in full) as lienholder or secured party on the related certificates of
title of the Financed Vehicles or otherwise. The terminated Servicer
agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all money and property held by the Servicer with
respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files and other records relating to the Receivables and a
computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to
service the Receivables.
SECTION 8.03. Appointment of Successor. (a) On and after the time
------------------------
the Servicer receives a notice of termination pursuant to Section 8.02, upon
non-extension of the servicing term as referred to in Section 4.14, or
upon the resignation of the Servicer pursuant to Section 7.06, the Backup
Servicer (unless the Security Insurer shall have exercised its option
pursuant to Section 8.03(b) to appoint an alternate successor Servicer)
shall be the successor in all respects to the Servicer in its capacity as
Servicer under this Agreement (including its appointment as Administrator
under the Administration Agreement as set forth in Section 8.03(c)) and
shall be subject to all the rights, responsibilities, restrictions,
duties, liabilities, and termination provisions relating to the Servicer
under this Agreement, except as otherwise stated herein. The Seller, the
Owner Trustee, the Indenture Trustee and such successor Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. If a successor Servicer is acting as
Servicer hereunder, it shall be subject to term-to-term servicing as
referred to in Section 4.14 and to termination under Section 8.02 upon the
occurrence of any Servicer Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other
than the Person serving as Backup Servicer at the time, and shall have no
liability to the Owner Trustee, the Indenture Trustee, the Servicer, the
Seller, the Person then serving as Backup Servicer, any Noteholders, any
Certificateholders or any other Person if it does so. Notwithstanding the
above, if the Backup Servicer shall be legally unable or unwilling to act
as Servicer, and the Security Insurer is no longer the Controlling Party,
the Backup Servicer, the Indenture Trustee or Holders of Notes evidencing
a majority of the Outstanding Amount of the Notes may petition a court of
competent jurisdiction to appoint any Eligible Servicer as the successor
to the Servicer. Pending appointment pursuant to the preceding sentence,
the Backup Servicer shall act as successor Servicer unless it is legally
unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 7.06, no provision of this Agreement
shall be construed as relieving the Backup Servicer of its obligation to
succeed as successor Servicer upon the termination of the Servicer
pursuant to Section 8.02, the resignation of the Servicer pursuant to
Section 7.06 or the non-extension of the servicing term of the Servicer
pursuant to Section 4.14. If upon the termination of the Servicer
pursuant to Section 8.02 or the resignation of the Servicer pursuant to
Section 7.06, the Controlling Party appoints a successor Servicer other
than the Backup Servicer, the Backup Servicer shall not be relieved of its
duties as Backup Servicer hereunder.
(c) Upon appointment, the successor Servicer (including the Backup
Servicer acting as successor Servicer) shall (i) be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating
thereto placed on the predecessor Servicer and shall be entitled to the
Servicing Fee and all the rights granted to the predecessor Servicer by
the terms and provisions of this Agreement and (ii) become the
Administrator under the Administration Agreement in accordance with
Section 8 of such Agreement.
SECTION 8.04. Notification to Noteholders and Certificateholders.
--------------------------------------------------
Upon any termination of, or appointment of a successor to, the Servicer
pursuant to this Article VIII, the Owner Trustee shall give prompt written
notice thereof to Certificateholders, and the Indenture Trustee shall give
prompt written notice thereof to Noteholders and the Rating Agencies.
SECTION 8.05. Waiver of Past Defaults. The Security Insurer or (if
-----------------------
the Security Insurer is no longer the Controlling Party) the Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes
or the Holders (as defined in the Trust Agreement) of Certificates
evidencing not less than a majority of the outstanding Certificate Balance
(in the case of any default which does not adversely affect the Indenture
Trustee or the Noteholders) may, on behalf of all Noteholders and
Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from any of the
Trust Accounts in accordance with this Agreement. Upon any such waiver of
a past default, such default shall cease to exist, and any Servicer
Termination Event arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
ARTICLE IX
Termination
-----------
SECTION 9.01. Optional Purchase of All Receivables. (a) On each
------------------------------------
Determination Date as of which the Pool Balance is equal to or less than
10% of the Original Pool Balance, the Servicer shall have the option to
purchase the Receivables (with the consent of the Security Insurer, if a
claim has previously been made under the Policy or if such purchase would
result in a claim on the Policy or if such purchase would result in any
amount owing and remaining unpaid under this Agreement or the Insurance
Agreement to the Security Insurer or any other Person). To exercise such
option, the Servicer shall deposit to the Collection Account pursuant to
Section 5.04 an amount equal to the aggregate Purchase Amount for the
Receivables (including Defaulted Receivables) and shall succeed to all
interests in and to the Receivables.
(b) Upon any sale of the assets of the Trust pursuant to
Section 9.02 of the Trust Agreement, the Servicer shall instruct the
Indenture Trustee in writing to deposit the proceeds from such sale after
all payments and reserves therefrom have been made (the "Insolvency
Proceeds") in the Collection Account. On the Distribution Date on which
the Insolvency Proceeds are deposited in the Collection Account (or, if
such proceeds are not so deposited on a Distribution Date, on the
Distribution Date immediately following such deposit), the Servicer shall
instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount
pursuant to Section 5.06) from the Insolvency Proceeds and any funds
remaining on deposit in the Spread Account (but only to the extent needed
to pay items (i), (ii) and (iii) below), including the proceeds of any
sale of investments therein as described in the following sentence:
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into the
Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Outstanding Amount of
the Notes (after giving effect to the reduction in the Outstanding Amount of
the Notes to result from the deposits made in the Note Distribution Account
on such Distribution Date and on prior Distribution Dates);
(iii) to pay any amount owed to the Security Insurer under
the Insurance Agreement;
(iv) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date; and
(v) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance to
result from the deposits made in the Certificate Distribution Account on such
Distribution Date).
Any investments on deposit in the Note Distribution Account which will not
mature on or before such Distribution Date shall be sold by the Indenture
Trustee at such time as will result in the Indenture Trustee receiving the
proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after
the deposits described above shall be paid to the Seller.
(c) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner
Trustee, the Indenture Trustee and the Security Insurer as soon as
practicable after the Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes and all
amounts owed to the Security Insurer, the Certificateholders will succeed
to the rights of the Noteholders hereunder other than Section 5.07(b) and
the Owner Trustee will succeed to the rights of, and assume the
obligations of, the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Amendment. This Agreement may be amended by the
---------
Seller, the Servicer, the Backup Servicer, the Indenture Trustee and the
Issuer, with the prior written consent of the Security Insurer (so long as
the Security Insurer is the Controlling Party), but without the consent of any
of the Noteholders or the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose
of adding any provisions to or changing in any manner or eliminating any
of the provisions in this Agreement or of modifying in any manner the
rights of the Noteholders or the Certificateholders; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee and the Indenture Trustee, adversely affect
in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Servicer and the Issuer, with the prior written consent of the
Indenture Trustee, the Security Insurer (so long as the Security Insurer
is the Controlling Party), the Holders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes and the Holders (as
defined in the Trust Agreement) of outstanding Certificates evidencing not
less than a majority of the outstanding Certificate Balance, for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that no such amendment shall (a) increase or reduce in any manner
the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce
the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding
Notes and the Holders (as defined in the Trust Agreement) of all the
outstanding Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and
each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in Section 10.02(i)(1). The Owner Trustee and the Indenture
Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Owner Trustee's or the Indenture Trustee's, as
applicable, own rights, duties or immunities under this Agreement or
otherwise.
SECTION 10.02. Protection of Title to Trust. (a) The Servicer
----------------------------
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places
as may be required by law fully to preserve, maintain and protect the
interest of the Issuer and of the Indenture Trustee in the Receivables and
in the proceeds thereof. The Servicer shall deliver (or cause to be
delivered) to the Owner Trustee and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above,
as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might
make any financing statement or continuation statement filed in accordance
with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Owner Trustee
and the Indenture Trustee at least five days' prior written notice thereof
and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements.
(c) Each of the Seller and the Servicer shall have an obligation to
give the Owner Trustee and the Indenture Trustee at least 60 days' prior
written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall
promptly file any such amendment 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.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each)
and (ii) reconciliation between payments or recoveries on (or with respect
to) each Receivable and the amounts from time to time deposited in the
Collection Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables, the
Servicer's master computer records (including any backup archives) that
refer to a Receivable shall indicate clearly the interest of the Issuer
and the Indenture Trustee in such Receivable and that such Receivable is
owned by the Issuer and has been pledged to the Indenture Trustee.
Indication of the Issuer's and the Indenture Trustee's interest in a
Receivable shall be deleted from or modified on the Servicer's computer
systems when, and only when, the related Receivable shall have been paid
in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any
restored from backup archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable
has been sold and is owned by the Issuer and has been pledged to the
Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee and the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing) and their 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.
(h) Upon request, the Servicer shall furnish to the Owner Trustee,
the Security Insurer (so long as no Security Insurer Default shall have
occurred and be continuing) or to the Indenture Trustee, within five
Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a 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 Owner Trustee, the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing) and the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement
and of each amendment hereto an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Owner Trustee and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such interest;
and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cutoff Date, an Opinion of Counsel, dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Owner
Trustee and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (B) no such action shall be necessary to preserve
and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
-------
instructions upon or to the Seller, the Servicer, the Owner Trustee, the
Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Seller, to First Merchants Auto Receivables Corporation
( ), 570 Lake Cook Road, Suite 126B, Deerfield, Illinois 60015, Attention:
( ); (b) in the case of the Servicer, to First Merchants Acceptance
Corporation, 570 Lake Cook Road, Suite 126, Deerfield, Illinois 60015,
Attention: ( ); (c) in the case of the Backup Servicer or the Indenture
Trustee, to ( ); (d) in the case of the Issuer or the Owner Trustee, at
the Corporate Trust Office (as defined in the Trust Agreement), (e) in the
case of the Security Insurer, to ( ); (f) in the case of Moody's, to
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007 and (g) in the case of Standard & Poor's,
to Standard & Poor's Ratings Services, a Division of The McGraw Hill
Companies, Inc., 25 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department; or, as to each of the
foregoing, at such other address as shall be designated by written notice
to the other parties. In addition, copies of such notices shall be sent
to the Security Insurer pursuant to Section 5.08.
SECTION 10.04. Assignment by the Seller or the Servicer.
----------------------------------------
Notwithstanding anything to the contrary contained herein, except as
provided in the remainder of this Section, as provided in Sections 6.04
and 7.03 herein 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.
SECTION 10.05. Limitations on Rights of Others. The Security
-------------------------------
Insurer is an intended third party beneficiary of this Agreement entitled to
enforce the provisions hereof as if a party hereto. The provisions of
this Agreement are solely for the benefit of the Seller, the Servicer, the
Issuer, the Owner Trustee, the Security Insurer, the Certificateholders,
the Indenture Trustee and the Noteholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person
any legal or equitable right, remedy or claim in the Owner Trust Estate or
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be
---------------------
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York, without reference to
its conflict of law provisions, and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Seller hereby acknowledges
--------------------
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Indenture Trustee pursuant to the Indenture
for the benefit of the Noteholders of all right, title and interest of the
Issuer in, to and under the Receivables and/or the assignment of any or
all of the Issuer's rights and obligations hereunder to the Indenture
Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any
---------------------
prior termination of this Agreement, the Servicer and the Seller shall not,
prior to the date which is one year and one day after the termination of
this Agreement with respect to the Issuer or the Seller, acquiesce,
petition or otherwise invoke or cause the Issuer or the Seller to invoke
the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Seller under any
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Seller or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of
the Issuer or the Seller.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date which is one year and one day after
the termination of this Agreement with respect to the Seller, acquiesce,
petition or otherwise invoke or cause the Seller to invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against the Seller under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Seller or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Seller.
SECTION 10.12. Limitation of Liability of Owner Trustee and
--------------------------------------------
Indenture Trustee. (a) Notwithstanding anything contained herein to the
- -----------------
contrary, this Agreement has been countersigned by (owner trustee) not in
its individual capacity but solely in its capacity as Owner Trustee of the
Issuer and in no event shall (owner trustee) in its individual capacity
or, except as expressly provided in the Trust Agreement, as beneficial
owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee
shall be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by ( ), not in its individual capacity but
solely as Indenture Trustee and in no event shall ( ) have any liability
for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall
be had solely to the assets of the Issuer.
SECTION 10.13. Servicer Payment Obligation. The Servicer shall be
---------------------------
responsible for payment of the Administrator's fees under the
Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder. In
addition, the Servicer shall be responsible for the payment of all fees
and expenses of the Trust, the Owner Trustee and the Indenture Trustee
paid by any of them in connection with any of their obligations under the
Basic Documents to obtain or maintain any required license under the
Pennsylvania Motor Vehicle Sales Finance Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first
above written.
FIRST MERCHANTS AUTO TRUST 199_-_
By: ( ), not in its individual capacity but
solely as Owner Trustee on behalf of the
Trust
By:
-----------------------------------
Name:
Title:
FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION ( ), Seller
By:
----------------------------------------
Name:
Title:
FIRST MERCHANTS ACCEPTANCE
CORPORATION, Servicer
By:
----------------------------------------
Name:
Title:
( ),
Indenture Trustee and Backup Servicer
By:
----------------------------------------
Name:
Title:
SCHEDULE A
Schedule of Receivables
-----------------------
(To be Delivered to the Trust at Closing)
SCHEDULE B
Location of Receivable Files
----------------------------
EXHIBIT A
Representations and Warranties of First Merchants Acceptance Corporation
- ------------------------------------------------------------------------
Under Section 3.02 of the Receivables Purchase Agreement
--------------------------------------------------------
(i) Characteristics of Receivables. Each Receivable (A) was
------------------------------
originated in the United States by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business in accordance with
the Seller's credit policies, was fully and properly executed by the parties
thereto, was purchased by the Seller from such Dealer under an existing
Dealer Agreement and was validly assigned by such Dealer to the Seller,
(B) has created or shall create a valid, subsisting and enforceable first
priority security interest in favor of the Seller in the Financed Vehicle,
which security interest is assignable by the Seller to the Purchaser, and
by the Purchaser to the Issuer, (C) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof are
adequate for realization against the collateral of the benefits of the
security and (D) provides for level monthly payments (provided that the
payment in the first and last month of the term of the Receivable may be
different from the level payments) that fully amortize the Amount Financed
by maturity and yield interest at the APR.
(ii) Compliance with Law. Each Receivable and the sale of the
-------------------
related Financed Vehicle complied at the time it was originated or made, and
at the time of execution of this Agreement complies, in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil
Relief Act of 1940, 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.
(iii) Binding Obligation. Each Receivable represents the
------------------
genuine, legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A)
as enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered
in a proceeding in equity or at law and (B) as such Receivable may be
modified by the application after the Closing Date of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended.
(iv) No Government Obligor. No Receivable is due from the United
---------------------
States of America or any State or any agency, department, subdivision or
instrumentality thereof.
(v) Obligor Bankruptcy. As of the Cutoff Date, no Obligor had been
------------------
identified on the records of the Seller as being the subject of a current
bankruptcy proceeding.
(vi) Schedule of Receivables. The information set forth in Schedule
-----------------------
I to this Agreement is true and correct in all material respects as of the
close of business on the Cutoff Date.
(vii) Marking Records. By the Closing Date, the Seller will have
---------------
caused its records relating to each Receivable, including any computer
records, to be clearly and unambiguously marked to show that the
Receivables have been sold to the Purchaser by the Seller and transferred
and assigned by the Purchaser to the Issuer in accordance with the terms
of the Sale and Servicing Agreement.
(viii) Computer Tape. The computer tape regarding the Receivables
-------------
made available by the Seller to the Purchaser is complete and accurate in
all respects as of the Cutoff Date.
(ix) No Adverse Selection. No selection procedures believed by the
--------------------
Seller to be adverse to the Certificateholders were utilized in selecting
the Receivables.
(x) Chattel Paper. The Receivables constitute chattel paper within
-------------
the meaning of the UCC as in effect in the State of Illinois.
(xi) One Original. There is only one original executed copy of each
------------
Receivable.
(xii) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien of the related Receivable in whole or in part. None of the terms
of any Receivable has been waived, altered or modified in any respect
since its origination, except by instruments or documents identified in
the related Receivable File. No Receivable has been modified as a result
of the application of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
(xiii) Lawful Assignment. No Receivable has been originated in,
-----------------
or is subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or the Sale and Servicing Agreement or the
pledge of such Receivables under the Indenture.
(xiv) Title. It is the intention of the Seller that the
-----
transfers and assignments herein contemplated constitute sales 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 debtor'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 to the Purchaser pursuant
to this Agreement (or by the Purchaser to the Issuer pursuant to the Sale
and Servicing Agreement). Immediately prior to the transfers and
assignments herein contemplated, the Seller has good and marketable title
to each Receivable free and clear of all Liens (other than the Lien of the
Seller's senior lenders identified in the Consent to Fourth Amended and
Restated Loan and Security Agreement dated as of (date), by and among the
Seller and such secured lenders), which Lien is being released
simultaneously with the transfers and assignments herein contemplated)
and, immediately upon the transfer thereof, the Purchaser shall have good
and marketable title to each Receivable, free and clear of all Liens.
(xv) Security Interest in Financed Vehicle. Immediately prior to its
-------------------------------------
sale, assignment and transfer to the Purchaser pursuant to this Agreement,
each 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, or all necessary and appropriate actions have been
commenced that will result in the valid perfection of a first priority
security interest in such Financed Vehicle in favor of the Seller as
secured party.
(xvi) All Filings Made. All filings (including UCC filings)
----------------
required to be made in any jurisdiction to give the Purchaser a first
perfected ownership interest in the Receivables have been made.
(xvii) No Defenses. No Receivable is subject to any right of
-----------
rescission, setoff, counterclaim or defense, and no such right has been
asserted or threatened with respect to any Receivable.
(xviii) No Default. There has been no default, breach, violation
----------
or event permitting acceleration under the terms of any Receivable (other
than payment delinquencies of not more than 31 days), and no condition
exists or event has occurred and is continuing that with notice, the lapse
of time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable, and there has
been no waiver of any of the foregoing. As of the Cutoff Date, no
Financed Vehicle has been repossessed.
(xix) Insurance. The Seller, in accordance with its customary
---------
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Vehicle and, under the terms of the
related Contract, the Obligor is required to maintain such insurance.
(xx) Final Scheduled Maturity Date. No Receivable has a final
-----------------------------
scheduled payment date after (date).
(xxi) Certain Characteristics of the Receivables. As of the
------------------------------------------
Cutoff Date, (A) each Receivable had an original maturity of not more than 60
months; (B) no Receivable was more than 31 days past due; and (C) no funds
have been advanced by the Seller, any Dealer or anyone acting on behalf of
either of them in order to cause any Receivable to qualify under clause
(B) above.
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 199_-_ Distribution Date Statement to
Certificateholders
- ----------------------------------------------------------------
Principal Distribution Amount
Principal Per $1,000 Certificate
Interest Distribution Amount
Interest Per $1,000 Certificate
Note Balance:
Class A-1 Notes:
Class A-2 Notes:
Note Pool Factor:
Class A-1 Notes:
Class A-2 Notes:
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Certificate
Pool Balance
Realized Losses
Spread Account Balance
EXHIBIT C
First Merchants Acceptance Corporation
First Merchants Auto Trust 199_-_ Distribution Date Statement to
Noteholders
- ----------------------------------------------------------------
Principal Distribution Amount
Class A-1 Notes: ($ per $1,000 original principal amount)
Class A-2 Notes: ($ per $1,000 original principal amount)
Interest Distribution Amount
Class A-1 Notes: ($ per $1,000 original principal amount)
Class A-2 Notes: ($ per $1,000 original principal amount)
Note Balance
Class A-1 Notes
Class A-2 Notes
Note Pool Factor
Class A-1 Notes
Class A-2 Notes
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 Note
Realized Losses
Spread Account Balance
EXHIBIT D
Form of Servicer's Certificate
------------------------------
First Merchants Acceptance Corporation
Monthly Servicing Report
(Date)
First Merchants Owner Trust 199_-_
$ (Floating Rate) ( %) Asset Backed Notes, Class A-1
$ % Asset Backed Notes, Class A-2
$ % Asset Backed Certificates
Distribution Date:
I. Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Initial Class A-1 Balance
(C) Initial Class A-2 Balance
(D) Initial Certificate Balance
(E) Class A-1 Rate
(F) Class A-2 Rate
(G) Pass-Through Rate
(E) Servicing Fee Rate
(F) Trustee Fee
(G) Security Insurer's Premium
(H) Original Weighted Average Coupon (WAC)
(I) Original Weighted Average Remaining Term (WAM)
(J) Number of Contracts
(K) Spread Account
i. Spread Account Initial Deposit
ii. Spread Account Required Amount
II. Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Current Class A-1 Note Balance
(C) Current Class A-2 Note Balance
(D) Current Certificate Balance
(D) Class A-1 Note Pool Factor
(E) Class A-2 Note Pool Factor
(F) Certificate Pool Factor
(G) Spread Account Balance
(H) Weighted Average Coupon of Remaining Portfolio (WAC)
(I) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(J) Number of Contracts
III. Inputs from the System
(A) Simple Interest Loans
i. Principal Payments Received
ii. Interest Payments Received
iii. Repurchased Receivables
iv. Late Fees
(B) Spread Account Release to Collection Account
(C) Spread Account Release to Depositor
(D) Liquidated Contracts
i. Gross Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(F) Weighted Average Coupon of Remaining Portfolio (WAC)
(G) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(H) Remaining Number of Contracts
(I) Receivable Balance of Vehicles in Repossession During the
Collection Period
(J) Number of Vehicles in Repossession During the Collection Period
(K) Aggregate Net Losses for Collection Period
(L) Delinquent Contracts
Contracts Amount
--------- ------
i. 31-60 Days Delinquent
ii. 61 Days or More Delinquent
IV. Inputs Derived from Other Sources
(A) Collection Account Investment Income
(B) Spread Account Investment Income
- -------------------------------------------------
A. Collections
(1) Total Principal Payments Received
(a) Principal Payments on Receivables (includes Partial
and Full Prepayments)
(b) Repurchased Receivables
(c) Cram Down Loss
(2) Interest Payments Received
B. Draw on Credit Enhancements
(1) Withdrawal from Spread Account
(2) Draw on the Insurance Policy
(3) Total Draw on Credit Enhancements
C. Total Distribution Amount
(1) Total Distribution Amount
(2) Interest Distribution Amount
(3) Regular Principal Distribution Amount
D. Liquidated Receivables, Net (includes repos repurchased in
October)
(1) Gross Principal Balance of Liquidated Receivables
(2) Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(3) Liquidated Receivables, Net
E. Monthly Distributions
(1) Noteholders' Principal Distributable Amount
(2) Certificateholders' Principal Distributable Amount
(3) Principal Distribution Amount
(a) Principal Payments on Receivables
(b) Repurchased Receivables
(c) Cram Down Loss
(4) Noteholders' Interest Distributable Amount
(a) amount allocated to Class A-1 Notes
(b) amount allocated to Class A-2 Notes
(5) Certificateholders' Interest Distributable Amount
(6) Required Distributions
(a) Servicing Fee (Includes late fees collected)
(b) Fees Paid to the Indenture Trustee and Owner Trustee
(c) Monthly Security Insurer's Premium
(d) Deposits into Spread Account
F. Pool Balances and Portfolio Information
Beginning End
of Period of Period
--------- ---------
(1) Total Pool Balance
(2) Total Pool Factor
(3) Note Balance
(4) Certificate Balance
(5) Remaining
Overcollateralization
Amount
(6) Weighted Average
Coupon
(7) Weighted Average
Remaining Maturity
(8) Remaining Number
of Contracts
G. Spread Account
(1) Required Spread Account Balance
(2) Beginning Balance
(3) Amount Available for Deposit to the Spread Account
(4) Withdrawal from Spread Account
(5) Amount Released to Seller
(6) Ending Balance
H. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
(2) Liquidated Receivables for the Collection Period
(3) Cumulative Net Losses
(4) Delinquent and Repossessed Receivables
(a) 60 Days Delinquent (Receivables Balance)
(b) 60 Days Delinquent (Number of Receivables)
(c) 61 Days or More (Receivables Balance)
(d) 91 Days or More (Number of Receivables)
(e) Receivables Balance of Vehicles in Repossession During
the Monthly Period
(f) Number of Vehicles in Repossession During the
Collection Period
I. Portfolio Performance Test
(1) Delinquency Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(2) Default Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(3) Net Loss Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(4) Delinquency Trigger Indicator
(5) Default Trigger Indicator
(6) Loss Trigger Indicator
J. (1) Amount of principal being paid to the Noteholders:
(2) Per $1,000 original principal amount:
K. (1) Amount of principal being paid to the Certificateholders:
(2) Per $1,000 original principal amount:
L. (1) Amount of interest being paid to the Noteholders:
(a) amount allocated to the Class A-1 Notes:
(b) amount allocated to the Class A-2 Notes:
(2) Per $1,000 original principal amount:
M. (1) Amount of interest being paid to Certificateholders:
(2) Per $1,000 original principal amount:
N. Pool Balance at the end of the related Collection Period:
O. Outstanding Amount of Notes:
(1) Outstanding Amount of the Class A-1 Notes:
(2) Outstanding Amount of the Class A-2 Notes:
Note Pool Factor:
(1) Class A-1 Note Pool Factor:
(2) Class A-2 Note Pool Factor:
P. Outstanding Certificate Balance:
Certificate Pool Factor:
Q. (1) Amount of Servicing Fee:
(2) Per $1,000 original principal amount:
R. Aggregate Purchase Amounts for Collection Period:
S. Aggregate Amount of Realized Losses for the Collection Period:
T. Amount in Spread Account:
EXHIBIT E
Form of Policy
--------------
Exhibit 10.2
Form of Administration
Agreement
----------------------
This ADMINISTRATION AGREEMENT dated as of (date), among FIRST
MERCHANTS AUTO TRUST 199_-_, a Delaware business trust (the
"Issuer"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware
corporation, as administrator (the "Administrator"), and ( ), an
(state) banking corporation), not in its individual capacity but
solely as Indenture Trustee (the "Indenture Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer is issuing $( ) Floating Rate Asset Backed Notes,
Class A-1 and $( ) ( )% Asset Backed Notes, Class A-2 (collectively, the
"Notes") pursuant to the Indenture dated as of (date) (as amended and
supplemented from time to time, the "Indenture"), between the Issuer and
the Indenture Trustee (capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and of certain beneficial ownership
interests in the Issuer, including (i) a Sale and Servicing Agreement
dated as of (date) (as amended and supplemented from time to time, the
"Sale and Servicing Agreement"), among the Issuer, First Merchants Auto
Receivables Corporation ( ), as seller (the "Seller"), First Merchants
Acceptance Corporation, as servicer, and the Indenture Trustee, as
Indenture Trustee and Backup Servicer, (ii) a Letter of Representations
dated ( ) (as amended and supplemented from time to time, the "Note
Depository Agreement"), among the Issuer, the Indenture Trustee, the
Administrator and The Depository Trust Company ("DTC") relating to the
Notes, (iii) the Indenture and (iv) the Insurance Documents (as defined in
the Trust Agreement) (the Sale and Servicing Agreement, the Note
Depository Agreement, the Indenture and the Insurance Documents being
referred to hereinafter collectively as the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (a) the
Notes and the collateral therefor pledged pursuant to the Indenture (the
"Collateral") and (b) the beneficial ownership interests in the Issuer
(the registered holders of such interests being referred to herein as the
"Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner
Trustee referred to in the preceding clause and to provide such additional
services consistent with the terms of this Agreement and the Related
Agreements as the Issuer and the Owner Trustee may from time to time
request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and
the Owner Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Duties of the Administrator. (a) Duties with Respect to the
---------------------------
Note Depository Agreement and the Indenture. (i) The Administrator
agrees to perform all its duties as Administrator and the duties of the
Issuer and the Owner Trustee under the Note Depository Agreement and the
Insurance Documents. In addition, the Administrator shall consult with
the Owner Trustee regarding the duties of the Issuer or the Owner Trustee
under the Indenture, the Note Depository Agreement and the Insurance
Documents. The Administrator shall monitor the performance of the Issuer
and shall advise the Owner Trustee when action is necessary to comply with
the Issuer's or the Owner Trustee's duties under the Indenture, the Note
Depository Agreement and the Insurance Documents. The Administrator shall
prepare for execution by the Issuer, or shall cause the preparation by
other appropriate persons of, all such documents, reports, filings,
instruments, certificates and opinions that it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Indenture, the Note Depository Agreement and the Insurance Documents. In
furtherance of the foregoing, the Administrator shall take all appropriate
action that is the duty of the Issuer or the Owner Trustee to take
pursuant to the Indenture including, without limitation, such of the fore-
going as are required with respect to the following matters under the
Indenture (references are to sections of the Indenture):
(A) the duty to cause the Note Register to be kept and to give
the Indenture Trustee notice of any appointment of a new Note
Registrar and the location, or change in location, of the Note
Register (Section 2.04);
(B) the notification of Noteholders of the final principal
payment on their Notes (Section 2.08(b));
(C) the fixing or causing to be fixed of any specified record
date and the notification of the Indenture Trustee and Noteholders
with respect to special payment dates, if any (Section 2.08(d));
(D) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery of
the same to the Indenture Trustee (Section 2.02);
(E) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the
release of collateral (Section 4.04);
(F) the maintenance of an office in the Borough of Manhattan,
City of New York, for registration of transfer or exchange of Notes
(Section 3.02);
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the
Indenture regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit moneys
with Paying Agents, if any, other than the Indenture Trustee (Sec-
tion 3.03);
(I) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each
other instrument and agreement included in the Trust Estate (Section
3.04);
(J) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking
of such other action as is necessary or advisable to protect the
Trust Estate (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing Date
and the annual delivery of Opinions of Counsel as to the Trust
Estate, and the annual delivery of the Officer's Certificate and
certain other statements as to compliance with the Indenture
(Sections 3.06 and 3.09);
(L) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to
perform its duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee, the Security
Insurer (so long as no Security Insurer Default shall have occurred
and be continuing) and the Rating Agencies of a Servicer Default
under the Sale and Servicing Agreement and, if such Servicer Default
arises from the failure of the Servicer to perform any of its duties
under the Sale and Servicing Agreement with respect to the
Receivables, the taking of all reasonable steps available to remedy
such failure (Section 3.07(d));
(N) the duty to cause the Servicer to comply with Sections
4.09, 4.10, 4.11 and Article IX of the Sale and Servicing Agreement
(Section 3.14);
(O) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b));
(P) the delivery of written notice to the Indenture Trustee,
the Security Insurer (so long as no Security Insurer Default shall
have occurred and be continuing) and the Rating Agencies of each
Event of Default under the Indenture and each default by the Servicer
or the Seller under the Sale and Servicing Agreement and by the
Seller or the Company under the Purchase Agreement (Section 3.19);
(Q) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officer's Certificate and the obtaining of the Opinion of Counsel and
the Independent Certificate relating thereto (Section 4.01);
(R) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Trust Estate in a
commercially reasonable manner if an Event of Default shall have
occurred and be continuing (Section 5.04);
(S) the preparation and delivery of notice to Noteholders of
the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate
trustee and any written instruments necessary in connection with the
resignation or removal of any co-trustee or separate trustee
(Sections 6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section 7.01);
(V) the preparation and, after execution by the Issuer, the
filing with the Commission, any applicable state agencies and the
Indenture Trustee of documents required to be filed on a periodic
basis with, and summaries thereof as may be required by rules and
regulations prescribed by, the Commission and any applicable state
agencies and the transmission of such summaries, as necessary, to the
Noteholders (Section 7.03);
(W) the opening of one or more accounts in the Issuer's name,
the preparation and delivery of Issuer Orders, Officer's Certificates
and Opinions of Counsel and all other actions necessary with respect
to investment and reinvestment of funds in the Trust Accounts
(Sections 8.02 and 8.03);
(X) the preparation of an Issuer Request and Officer's
Certificate and the obtaining of an Opinion of Counsel and
Independent Certificates, if necessary, for the release of the Trust
Estate (Sections 8.04 and 8.05);
(Y) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders of notices with respect
to such supplemental indentures (Sections 9.01, 9.02 and 9.03);
(Z) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.05);
(AA) the duty to notify Noteholders of redemption of the Notes
or to cause the Indenture Trustee to provide such notification (Sec-
tion 10.02);
(BB) the preparation and delivery of all Officer's Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action
under the Indenture (Section 11.01(a));
(CC) the preparation and delivery of Officer's Certificates and
the obtaining of Independent Certificates, if necessary, for the
release of property from the lien of the Indenture
(Section 11.01(b));
(DD) the notification of the Rating Agencies, upon the failure
of the Indenture Trustee to give such notification, of the
information required pursuant to Section 11.04 of the Indenture
(Section 11.04);
(EE) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (Section 11.06);
(FF) the recording of the Indenture, if applicable
(Section 11.14);
(GG) the preparation of Definitive Notes in accordance with the
instructions of the Clearing Agency (Section 2.10); and
(HH) the appointment of any successor Calculation Agent (Section
2.13).
(ii) The Administrator will:
(A) pay the Indenture Trustee (and any separate trustee or co-
trustee appointed pursuant to Section 6.10 of the Indenture (a
"Separate Trustee")) from time to time reasonable compensation for
all services rendered by the Indenture Trustee or Separate Trustee,
as the case may be, under the Indenture (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(B) except as otherwise expressly provided in the Indenture,
reimburse the Indenture Trustee or any Separate Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by the Indenture Trustee or Separate Trustee, as the
case may be, in accordance with any provision of the Indenture
(including the reasonable compensation, expenses and disbursements of
its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith;
(C) indemnify the Indenture Trustee and any Separate Trustee
and their respective agents for, and hold them harmless against, any
losses, liability or expense incurred without negligence or bad faith
on their part, arising out of or in connection with the acceptance or
administration of the transactions contemplated by the Indenture,
including the reasonable costs and expenses of defending themselves
against any claim or liability in connection with the exercise or
performance of any of their powers or duties under the Indenture; and
(D) indemnify the Owner Trustee and its agents for, and hold
them harmless against, any losses, liability or expense incurred
without willful malfeasance, negligence or bad faith on their part,
arising out of or in connection with the acceptance or administration
of the transactions contemplated by the Trust Agreement, including
the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of
any of their powers or duties under the Trust Agreement.
(b) Additional Duties. (i) In addition to the duties of the
-----------------
Administrator set forth above, the Administrator shall perform such calcu-
lations and shall prepare or shall cause the preparation by other
appropriate persons of, and shall execute on behalf of the Issuer or the
Owner Trustee, all such documents, reports, filings, instruments,
certificates and opinions that it shall be the duty of the Issuer or the
Owner Trustee to prepare, file or deliver pursuant to the Related
Agreements or Section 5.05 of the Trust Agreement, and at the request of
the Owner Trustee shall take all appropriate action that it is the duty of
the Issuer or the Owner Trustee to take pursuant to the Related
Agreements. In furtherance thereof, the Owner Trustee shall, on behalf of
itself and of the Issuer, execute and deliver to the Administrator and to
each successor Administrator appointed pursuant to the terms hereof, one
or more powers of attorney substantially in the form of Exhibit A hereto,
appointing the Administrator the attorney-in-fact of the Owner Trustee and
the Issuer for the purpose of executing on behalf of the Owner Trustee and
the Issuer all such documents, reports, filings, instruments, certificates
and opinions. Subject to Section 5 of this Agreement, and in accordance
with the directions of the Owner Trustee, the Administrator shall
administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Related Agreements) as
are not covered by any of the foregoing provisions and as are expressly
requested by the Owner Trustee and are reasonably within the capability of
the Administrator. Such responsibilities shall include the obtainment and
maintenance of any licenses required to be obtained or maintained by the
Trust under the Pennsylvania Motor Vehicle Sales Finance Act. In
addition, the Administrator shall promptly notify the Indenture Trustee
and the Owner Trustee in writing of any amendment to the Pennsylvania
Motor Vehicle Sales Finance Act that would affect the duties or
obligations of the Indenture Trustee or the Owner Trustee under any Basic
Document and shall assist the Indenture Trustee or the Owner Trustee in
its obtainment and maintenance of any licenses required to be obtained or
maintained by the Indenture Trustee or the Owner Trustee thereunder. In
connection therewith, the Administrator shall cause the Seller to pay all
fees and expenses under such Act.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to an Owner
as contemplated in Section 5.02(c) of the Trust Agreement. Any such
notice shall specify the amount of any withholding tax required to be
withheld by the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Related Agreements to the contrary, the Administrator shall be responsible
for performance of the duties of the Owner Trustee set forth in
Section 5.05 of the Trust Agreement, including with respect to, among
other things, accounting and reports to Owners.
(iv) The Administrator shall satisfy its obligations with
respect to clauses (ii) and (iii) above by retaining, at the expense of
the Trust payable by the Administrator, a firm of independent public
accountants (the "Accountants") acceptable to the Owner Trustee, which
shall perform the obligations of the Administrator thereunder. In
connection with paragraph (ii) above, the Accountants will provide prior
to (date), a letter in form and substance satisfactory to the Owner
Trustee as to whether any tax withholding is then required and, if
required, the procedures to be followed with respect thereto to comply
with the requirements of the Code. The Accountants shall be required to
update the letter in each instance that any additional tax withholding is
subsequently required or any previously required tax withholding shall no
longer be required.
(v) The Administrator shall perform the duties of the
Administrator including, without limitation, those specified in Sections
8.01, 8.02 and 10.02 of the Trust Agreement required to be performed in
connection with the fees, expenses and indemnification and the resignation
or removal of the Owner Trustee, and any other duties expressly required
to be performed by the Administrator under the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in
the Administrator's opinion, no less favorable to the Issuer than would be
available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in
-----------------------
the reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless within a reasonable time
before the taking of such action, the Administrator shall have notified
the Owner Trustee of the proposed action and the Owner Trustee shall have
withheld consent or provided an alternative direction. For the purpose of
the preceding sentence, "non-ministerial matters" shall include, without
limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables or Eligible Investment Receivables);
(C) the amendment, change or modification of the Related
Agreements;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the Inden-
ture or the appointment of successor Administrators or Successor
Servicers, or the consent to the assignment by the Note Registrar,
Paying Agent or Indenture Trustee of its obligations under the Inden-
ture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement,
the Administrator shall not be obligated to, and shall not, (x) make any
payments to the Noteholders under the Related Agreements, (y) sell the
Trust Estate pursuant to Section 5.04 of the Indenture or (z) take any
other action that the Issuer directs the Administrator not to take on its
behalf.
2. Records. The Administrator shall maintain appropriate books of
-------
account and records relating to services performed hereunder, which books
of account and records shall be accessible for inspection by the Issuer
and the Company at any time during normal business hours.
3. Compensation. As compensation for the performance of the
------------
Administrator's obligations under this Agreement and as reimbursement for
its expenses related thereto, the Administrator shall be entitled to $( )
per month paid annually which shall be solely an obligation of the
Servicer.
4. Additional Information To Be Furnished to the Issuer. The
----------------------------------------------------
Administrator shall furnish to the Issuer from time to time such
additional information regarding the Collateral as the Issuer shall
reasonably request.
5. Independence of the Administrator. For all purposes of this
---------------------------------
Agreement, the Administrator shall be an independent contractor and shall
not be subject to the supervision of the Issuer or the Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer
or the Owner Trustee in any way and shall not otherwise be deemed an agent
of the Issuer or the Owner Trustee.
6. No Joint Venture. Nothing contained in this Agreement
----------------
(i) shall constitute the Administrator and either of the Issuer or the
Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority
to incur any obligation or liability on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent
---------------------------------
the Administrator or its Affiliates from engaging in other businesses or,
in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or
entity may engage in business activities similar to those of the Issuer,
the Owner Trustee or the Indenture Trustee.
8. Term of Agreement; Resignation and Removal of Administrator.
-----------------------------------------------------------
(a) This Agreement shall continue in force until the dissolution of
the Issuer, upon which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written
notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of
termination from the Issuer to the Administrator if any of the following
events shall occur:
(i) the Administrator shall default in the performance of any
of its duties under this Agreement and, after notice of such default,
shall not cure such default within ten days (or, if such default cannot be
cured in such time, shall not give within ten days such assurance of cure
as shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a
decree or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect or appoint a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for the Administrator
or any substantial part of its property or order the winding-up or
liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, shall consent to the appointment
of a receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official for the Administrator or any substantial part of its
property, shall consent to the taking of possession by any such official
of any substantial part of its property, shall make any general assignment
for the benefit of creditors or shall fail generally to pay its debts as
they become due.
The Administrator agrees that if any of the events specified in
clauses (ii) or (iii) of this Section shall occur, it shall give written
notice thereof to the Issuer and the Indenture Trustee within seven days
after the happening of such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have
been appointed by the Issuer and (ii) such successor Administrator shall
have agreed in writing to be bound by the terms of this Agreement in the
same manner as the Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be
effective only after satisfaction of the Rating Agency Condition with
respect to the proposed appointment.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically become the Administrator under this
Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon
-----------------------------------------------
the effective date of termination of this Agreement pursuant to
Section 8(a) or the resignation or removal of the Administrator pursuant
to Section 8(b) or (c), respectively, the Administrator shall be entitled
to be paid all fees and reimbursable expenses accruing to it to the date
of such termination, resignation or removal. The Administrator shall
forthwith upon such termination pursuant to Section 8(a) deliver to the
Issuer all property and documents of or relating to the Collateral then in
the custody of the Administrator. In the event of the resignation or
removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall cooperate with the Issuer and take
all reasonable steps requested to assist the Issuer in making an orderly
transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication given
-------
hereunder shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
First Merchants Auto Trust 199_-_
In care of (owner trustee)
(b) if to the Administrator, to:
First Merchants Acceptance Corporation
570 Lake Cook Road
Suite 126
Deerfield, Illinois 60015
Attention: ( )
(c) if to the Indenture Trustee, to:
( )
(address)
or to such other address as any party shall have provided to the other
parties in writing. Any notice required to be in writing hereunder shall
be deemed given if such notice is mailed by certified mail, postage
prepaid, or hand-delivered to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by
----------
a written amendment duly executed and delivered by the Issuer, the
Administrator and the Indenture Trustee, with the written consent of the
Owner Trustee and the Security Insurer (so long as no Security Insurer
Default shall have occurred and be continuing), without the consent of the
Noteholders and the Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or Certificateholders; provided that such amendment will
not, in the Opinion of Counsel satisfactory to the Indenture Trustee,
materially and adversely affect the interest of any Noteholder or
Certificateholder. This Agreement may also be amended by the Issuer, the
Administrator and the Indenture Trustee with the written consent of the
Owner Trustee, the Security Insurer (so long as no Security Insurer
Default shall have occurred and be continuing) and the holders of Notes
evidencing at least a majority of the Outstanding Amount of the Notes and
the holders of Certificates evidencing at least a majority of the
Certificate Balance (excluding for purposes of this Section 11
Certificates held by the Seller or any of its affiliates) for the purpose
of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the
rights of Noteholders or the Certificateholders; provided, however, that
no such amendment may (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on
Receivables or distributions that are required to be made for the benefit
of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required to
consent to any such amendment, without the consent of the holders of all
the outstanding Notes and Certificates. Notwithstanding the foregoing,
the Administrator may not amend this Agreement without the permission of
the Seller, which permission shall not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by
----------------------
the Administrator unless such assignment is previously consented to in
writing by the Issuer and the Owner Trustee and subject to the
satisfaction of the Rating Agency Condition in respect thereof. An
assignment with such consent and satisfaction, if accepted by the
assignee, shall bind the assignee hereunder in the same manner as the
Administrator is bound hereunder. Notwithstanding the foregoing, this
Agreement may be assigned by the Administrator without the consent of the
Issuer or the Owner Trustee to a corporation or other organization that is
a successor (by merger, consolidation or purchase of assets) to the
Administrator; provided that such successor organization executes and
delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be
bound hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this
Agreement shall bind any successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT
OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
--------
convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts,
------------
each of which when so executed shall be an original, but all of which
together shall constitute but one and the same agreement.
16. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall be ineffective to
the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Not Applicable to First Merchants Acceptance Corporation in
-----------------------------------------------------------
Other Capacities. Nothing in this Agreement shall affect any obligation
----------------
First Merchants Acceptance Corporation may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee.
--------------------------------------------------------------
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by (owner trustee) not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in
no event shall (owner trustee) in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer
hereunder, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions
of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by ( ) not in its individual capacity but
solely as Indenture Trustee and in no event shall ( ) have any liability
for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall
be had solely to the assets of the Issuer.
19. Third-Party Beneficiary. The Owner Trustee and the Security
-----------------------
Insurer are third-party beneficiaries to this Agreement and are entitled
to the rights and benefits hereunder and may enforce the provisions hereof
as if each were a party hereto.
* * * * * * * * * * * * * * * * * * * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
FIRST MERCHANTS AUTO TRUST 199_-_
By: ( ), not in its
individual capacity but solely as Owner
Trustee
By: -----------------
Name:
Title:
( )
not in its individual capacity
but solely as Indenture Trustee
By: -------------------------
Name:
Title:
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Administrator
By: -------------------------
Name:
Title:
EXHIBIT A
POWER OF ATTORNEY
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
KNOW ALL MEN BY THESE PRESENTS, that (owner trustee), a (state)
banking corporation, not in its individual capacity but solely as owner
trustee (the "Owner Trustee") for First Merchants Auto Trust 199_-_ (the
"Trust"), does hereby make, constitute and appoint First Merchants
Acceptance Corporation, as administrator under the Administration
Agreement dated (date) (the "Administration Agreement"), among the Trust,
First Merchants Acceptance Corporation and ( ), as Indenture Trustee, as
the same may be amended from time to time, and its agents and attorneys,
as Attorneys-in-Fact to execute on behalf of the Owner Trustee or the
Trust all such documents, reports, filings, instruments, certificates and
opinions as it should be the duty of the Owner Trustee or the Trust to
prepare, file or deliver pursuant to the Basic Documents, or pursuant to
Section 5.05 of the Trust Agreement, including, without limitation, to
appear for and represent the Owner Trustee and the Trust in connection
with the preparation, filing and audit of federal, state and local tax
returns pertaining to the Trust, and with full power to perform any and
all acts associated with such returns and audits that the Owner Trustee
could perform, including without limitation, the right to distribute and
receive confidential information, defend and assert positions in response
to audits, initiate and defend litigation, and to execute waivers of
restrictions on assessments of deficiencies, consents to the extension of
any statutory or regulatory time limit, and settlements.
All powers of attorney for this purpose heretofore filed or executed
by the Owner Trustee are hereby revoked.
Capitalized terms that are used and not otherwise defined herein
shall have the meanings ascribed thereto in the Administration Agreement.
EXECUTED this ___ of _____, 199_.
( )
not in its individual capacity but
solely as Owner Trustee
----------------------------------------
Name:
Title:
STATE OF ___________}
}
COUNTY OF _________ }
Before me, the undersigned authority, on this day personally appeared
_______________________, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me that s/he
signed the same for the purposes and considerations therein expressed.
Sworn to before me this ___
day of _______, 199_.
-------------------------------------------------------------
Notary Public - State of ____________
Exhibit 10.3
Form of Receivables Purchase
Agreement for Owner Trusts
----------------------------
- -----------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
between
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller,
and
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
as Purchaser
Dated as of ( )
- --------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I Certain Definitions . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Conveyance of Receivables . . . . . . . . . . . . . . . . 2
SECTION 2.01. Conveyance of Receivables . . . . . . . . . . . . . . 2
SECTION 2.02. The Closing . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III Representations and Warranties . . . . . . . . . . . . . . 3
SECTION 3.01. Representations and Warranties of the Purchaser . . . 3
SECTION 3.02. Representations and Warranties of Seller . . . . . . 3
ARTICLE IV Conditions . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.01. Conditions to Obligation of the Purchaser . . . . . . 7
SECTION 4.02. Conditions to Obligation of the Seller . . . . . . . 7
ARTICLE V Covenants of the Seller . . . . . . . . . . . . . . . . . . . . 8
SECTION 5.01. Protection of Right, Title and Interest . . . . . . . 8
SECTION 5.02. Other Liens or Interests . . . . . . . . . . . . . . 8
SECTION 5.03. Costs and Expenses . . . . . . . . . . . . . . . . . 8
SECTION 5.04. Indemnification . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI Miscellaneous Provisions . . . . . . . . . . . . . . . . . 9
SECTION 6.01. Obligations of Seller . . . . . . . . . . . . . . . . 9
SECTION 6.02. Repurchase Events . . . . . . . . . . . . . . . . . . 9
SECTION 6.03. Purchaser Assignment of Repurchased Receivables . . . 9
SECTION 6.04. Transfer to the Issuer . . . . . . . . . . . . . . . 9
SECTION 6.05. Amendment . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.06. Waivers . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.07. Notices . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.08. Costs and Expenses . . . . . . . . . . . . . . . . . 10
SECTION 6.09. Representations of the Seller and the Purchaser . . . 10
SECTION 6.10. Confidential Information . . . . . . . . . . . . . . 10
SECTION 6.11. Headings and Cross-References . . . . . . . . . . . . 10
SECTION 6.12. Governing Law . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.13. Counterparts . . . . . . . . . . . . . . . . . . . . 10
EXHIBIT A Form of Assignment . . . . . . . . . . . . . . . . . . . . . . A-1
SCHEDULE I Schedule of Receivables . . . . . . . . . . . . . . . . . I-1
SCHEDULE II Location of Receivable Files . . . . . . . . . . . . . . II-1
RECEIVABLES PURCHASE AGREEMENT dated as of ( ), between FIRST
MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation, as seller (the
"Seller"), and FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a
Delaware corporation, as purchaser (the "Purchaser").
RECITALS
WHEREAS in the regular course of its business, the Seller has
purchased certain motor vehicle retail installment sale contracts secured
by new and used automobiles, light-duty trucks, vans and minivans from
motor vehicle dealers;
WHEREAS the Seller and the Purchaser wish to set forth the terms
pursuant to which such contracts are to be sold by the Seller to the
Purchaser; and
WHEREAS the Purchaser intends, concurrently with its purchase
hereunder, to convey all of its right, title and interest in and to such
contracts to First Merchants Auto Trust (199_-_) (the "Issuer") pursuant
to a Sale and Servicing Agreement dated as of ( ) (the "Sale and Servicing
Agreement"), by and among First Merchants Auto Trust (199_-_), as Issuer,
First Merchant Auto Receivables Corporation ( ), as Seller, First
Merchants Acceptance Corporation, as Servicer, and ( ), as Indenture
Trustee and Backup Servicer.
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration 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
thereto in the Sale 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 Receivables Purchase Agreement, as the
---------
same may be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in
----------
the form attached to this Agreement as Exhibit A.
"Purchaser" shall mean First Merchants Auto Receivables Corporation (
---------
), a Delaware corporation, its successors and assigns.
"Receivable" shall mean any Contract listed on Schedule I hereto
----------
(which Schedule may be in the form of microfiche).
"Repurchase Event" shall have the meaning specified in Section 6.02.
----------------
"Sale and Servicing Agreement" shall mean the Sale and Servicing
----------------------------
Agreement dated as of ( ), among First Merchants Auto Trust (199_-_), as
Issuer, First Merchants Auto Receivables Corporation ( ), as Seller, First
Merchants Acceptance Corporation, as Servicer, and ( ), as Indenture
Trustee and Backup Servicer.
"Schedule of Receivables" shall mean the list of Receivables annexed
-----------------------
hereto as Schedule I.
"Seller" shall mean First Merchants Acceptance Corporation, a
------
Delaware corporation, its successors and assigns.
ARTICLE II
Conveyance of Receivables
-------------------------
SECTION 2.01. Conveyance of Receivables. In consideration of the
-------------------------
Purchaser's delivery to or upon the order of the Seller on the Closing
Date of $( ), the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Purchaser, without recourse (subject to the
obligations herein) all right, title, and interest of the Seller in and
to:
(a) the Receivables and all monies due thereon on or after ( ), in
the case of the Precomputed Receivables, and all moneys received thereon
on and after ( ) in the case of the Simple Interest Receivables;
(b) the security interests in the Financed Vehicles and any
accessions thereto granted by Obligors pursuant to the Receivables and any
other interest of the Seller in such Financed Vehicles;
(c) any Liquidation Proceeds and any other proceeds with respect to
the Receivables from claims on any physical damage, credit life or
disability insurance policies covering Financed Vehicles or Obligors,
including any vendor's single interest or other collateral protection
insurance policy;
(d) any property that shall have secured a Receivable and that shall
have been acquired by or on behalf of the Seller;
(e) all documents and other items contained in the Receivable Files;
and
(f) the proceeds of any and all of the foregoing.
The Seller and the Purchaser intend that the transfer of assets by the
Seller to the Purchaser pursuant to this Agreement be a sale of the
ownership interest in such assets to the Purchaser, rather than the mere
granting of a security interest to secure a borrowing. In the event,
however, that such transfer is deemed not to be a sale but to be of a mere
security interest to secure a borrowing, the Seller shall be deemed to
have hereby granted to the Purchaser a perfected first priority security
interest in all such assets, and this Agreement shall constitute a
security agreement under applicable law. Pursuant to the Sale and
Servicing Agreement and Section 6.04 hereof, the Purchaser may sell,
transfer and reassign to the Issuer (i) all or any portion of the assets
assigned to the Purchaser hereunder, (ii) all or any portion of the
purchaser's rights against the Seller under this Agreement and (iii) all
proceeds thereof. Such reassignment may be made by the Purchaser with or
without a reassignment by the Purchaser of its rights under this
Agreement, and without further notice to or acknowledgement from the
Seller. The Seller waives, to the extent permitted under applicable law,
all claims, causes of action and remedies, whether legal or equitable
(including any right of setoff), against the Purchaser or any assignee of
the Purchaser relating to such action by the Purchaser in connection with
the transactions contemplated by the Sale and Servicing Agreement.
SECTION 2.02. The Closing. The sale and purchase of the Receivables
-----------
shall take place at a closing at the offices of Brown & Wood, One World
Trade Center, New York, New York 10048 on the Closing Date, simultaneously
with the closing under (a) the Sale and Servicing Agreement and (b) the
Indenture.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of the Purchaser. The
-----------------------------------------------
Purchaser hereby represents and warrants to the Seller as of the date
hereof and as of the Closing Date:
(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, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(b) Due Qualification. The Purchaser 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.
(c) Power and Authority. The Purchaser has the power and authority
-------------------
to execute and deliver this Agreement and to carry out its terms; the
Purchaser had at all relevant times, and has, the power, authority and
legal right to acquire and own the Receivables; and the execution,
delivery and performance of this Agreement have been duly authorized by
the Purchaser by all necessary corporate action.
(d) No Violation. The consummation of the transactions contemplated
------------
by this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, the articles of incorporation or bylaws of the Purchaser, or any
indenture, agreement or other instrument to which the Purchaser is a party
or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the Basic
Documents), or violate any law or, to the best of the Purchaser's
knowledge, any order, rule or regulation applicable to the Purchaser of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Purchaser or its properties.
(e) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Purchaser's knowledge, threatened against the Purchaser
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Purchaser of its
obligations under, or the validity or enforceability of, this Agreement.
SECTION 3.02. Representations and Warranties of Seller. (a) The
----------------------------------------
Seller hereby represents and warrants to the Purchaser as of the date
hereof and as of the Closing Date:
(1) 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 the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(2) 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.
(3) Power and Authority. The Seller has the power and
-------------------
authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out their respective terms;
the Seller had at all relevant times, and has, full power, authority and
legal right to sell, transfer and assign the property sold, transferred
and assigned to the Purchaser hereby and has duly authorized such sale,
transfer and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of this Agreement and
the other Basic Documents to which the Seller is a party have been duly
authorized by the Seller by all necessary corporate action.
(4) No Violation. Upon giving effect to the consent described
------------
in Section 3.02(b)(14), the consummation of the transactions contemplated
by this Agreement and the other Basic Documents to which the Seller is a
party and the fulfillment of their respective terms 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 or both) a default under, the
articles of incorporation or bylaws of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which
it is bound, or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement
or other instrument (other than this Agreement), or violate any law or, to
the best of the Seller's knowledge, any order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(5) No Proceedings. There are no proceedings or
--------------
investigations pending or, to the Seller's knowledge, threatened against
the Seller before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or
its properties (i) asserting the invalidity of this Agreement or any other
Basic Document to which the Seller is a party, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any other Basic Document to which the Seller is a party or (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or any other Basic Document to which the
Seller is a party.
(6) Valid Sale, Binding Obligations. This Agreement and the
-------------------------------
other Basic Documents to which the Seller is a party, when duly executed
and delivered by the other parties hereto and thereto, shall constitute
legal, valid and binding obligations of the Seller, enforceable against
the Seller in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization and similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and to general principles of equity
(whether applied in a proceeding at law or in equity).
(7) Chief Executive Office. The chief executive office of the
----------------------
Seller is located at 570 Lake Cook Road, Suite 126, Deerfield, Illinois
60015.
(8) No Consents. The Seller is not required to obtain the
-----------
consent of any other party or any consent, license, approval,
registration, authorization, or declaration of or with any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity, or enforceability of this Agreement or any other
Basic Document to which it is a party that has not already been obtained.
(b) The Seller makes the following representations and warranties
with respect to the Receivables, on which the Purchaser relies in
accepting the Receivables and in transferring the Receivables to the
Issuer under the Sale and Servicing Agreement, and on which the Issuer
relies in pledging the same to the Indenture Trustee. Such
representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date, but shall survive the sale,
transfer and assignment of the Receivables to the Purchaser, the
subsequent sale, transfer and assignment of the Receivables by the
Purchaser to the Issuer pursuant to the Sale and Servicing Agreement and
the Grant thereof pursuant to the Indenture.
(1) Characteristics of Receivables. Each Receivable (A) was
------------------------------
originated in the United States by a Dealer for the retail sale of a
Financed Vehicle in the ordinary course of such Dealer's business in
accordance with the Seller's credit policies, was fully and properly
executed by the parties thereto, was purchased by the Seller from such
Dealer under an existing Dealer Agreement and was validly assigned by such
Dealer to the Seller, (B) has created or shall create a valid, subsisting
and enforceable first priority security interest in favor of the Seller in
the Financed Vehicle, which security interest is assignable by the Seller
to the Purchaser, and by the Purchaser to the Issuer, (C) contains
customary and enforceable provisions such that the rights and remedies of
the holder thereof are adequate for realization against the collateral of
the benefits of the security and (D) provides for level monthly payments
(provided that the payment in the last month of the term of the Receivable
may be different from the level payments) that fully amortize the Amount
Financed by maturity and yield interest at the APR.
(2) Compliance with Law. Each Receivable and the sale of the
-------------------
related Financed Vehicle complied at the time it was originated or made,
and at the time of execution of this Agreement complies, in all material
respects with all requirements of applicable federal, state and local laws
and regulations thereunder, including usury laws, the Federal Truth-in-
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations "B" and "Z", the Soldiers' and
Sailors' Civil Relief Act of 1940, 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.
(3) Binding Obligation. Each Receivable represents the
------------------
genuine, legal, valid and binding payment obligation of the Obligor
thereon, enforceable by the holder thereof in accordance with its terms,
except (A) as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B)
as such Receivable may be modified by the application after the Closing
Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(4) No Government Obligor. No Receivable is due from the
---------------------
United States of America or any State or any agency, department,
subdivision or instrumentality thereof.
(5) Obligor Bankruptcy. As of the Cutoff Date, no Obligor had
------------------
been identified on the records of the Seller as being the subject of a
current bankruptcy proceeding.
(6) Schedule of Receivables. The information set forth in
-----------------------
Schedule I to this Agreement is true and correct in all material respects
as of the close of business on the Cutoff Date.
(7) Marking Records. By the Closing Date, the Seller will have
---------------
caused its records relating to each Receivable, including any computer
records, to be clearly and unambiguously marked to show that the
Receivables have been sold to the Purchaser by the Seller and transferred
and assigned by the Purchaser to the Issuer in accordance with the terms
of the Sale and Servicing Agreement and pledged by the Issuer to the
Indenture Trustee in accordance with the terms of the Indenture.
(8) Computer Tape. The computer tape regarding the Receivables
-------------
made available by the Seller to the Purchaser is complete and accurate in
all respects as of the Cutoff Date.
(9) No Adverse Selection. No selection procedures believed by
--------------------
the Seller to be adverse to the Noteholders or Certificateholders were
utilized in selecting the Receivables.
(10) Chattel Paper. The Receivables constitute chattel paper
-------------
within the meaning of the UCC as in effect in the State of Illinois.
(11) One Original. There is only one original executed copy of
------------
each Receivable.
(12) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien of the related Receivable in whole or in part. None of the terms
of any Receivable has been waived, altered or modified in any respect
since its origination, except by instruments or documents identified in
the related Receivable File. No Receivable has been modified as a result
of the application of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
(13) Lawful Assignment. No Receivable has been originated in,
-----------------
or is subject to the laws of, any jurisdiction the laws of which would
make unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or the Sale and Servicing Agreement or the
pledge of such Receivable under the Indenture.
(14) Title. It is the intention of the Seller that the
-----
transfers and assignments herein contemplated constitute sales 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 debtor'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 to
the Purchaser or pursuant to this Agreement (or by the Purchaser to the
Issuer pursuant to the Sale and Servicing Agreement). Immediately prior
to the transfers and assignments herein contemplated, the Seller has good
and marketable title to each Receivable free and clear of all Liens (other
than the Lien of the Seller's senior lenders identified in the (Consent to
Fourth Amended and Restated Loan and Security Agreement dated as of ( )),
by and among the Seller and such secured lenders), which Lien is being
released simultaneously with the transfers and assignments herein
contemplated) and, immediately upon the transfer thereof, the Purchaser
shall have good and marketable title to each Receivable, free and clear of
all Liens.
(15) Security Interest in Financed Vehicle. Immediately prior
-------------------------------------
to its sale, assignment and transfer to the Purchaser pursuant to this
Agreement, each 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, or all necessary and appropriate actions have
been commenced that will result in the valid perfection of a first
priority security interest in such Financed Vehicle in favor of the Seller
as secured party.
(16) All Filings Made. All filings (including UCC filings)
----------------
required to be made in any jurisdiction to give the Purchaser a first
perfected ownership interest in the Receivables have been made.
(17) No Defenses. No Receivable is subject to any right of
-----------
rescission, setoff, counterclaim or defense, and no such right has been
asserted or threatened with respect to any Receivable.
(18) No Default. There has been no default, breach, violation
----------
or event permitting acceleration under the terms of any Receivable (other
than payment delinquencies of not more than 31 days), and no condition
exists or event has occurred and is continuing that with notice, the lapse
of time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable, and there has
been no waiver of any of the foregoing. As of the Cutoff Date, no
Financed Vehicle has been repossessed.
(19) Insurance. The Seller, in accordance with its customary
---------
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Vehicle and, under the terms of the
related Contract, the Obligor is required to maintain such insurance.
(20) Final Scheduled Maturity Date. No Receivable has a final
-----------------------------
scheduled payment date after ( ).
(21) Certain Characteristics of the Receivables. As of the
------------------------------------------
Cutoff Date, (A) each Receivable had an original maturity of not more than
60 months; (B) no Receivable was more than 30 days past due; and (C) no
funds have been advanced by the Seller, any Dealer or anyone acting on
behalf of either of them in order to cause any Receivable to qualify under
clause (B) above.
ARTICLE IV
Conditions
----------
SECTION 4.01. 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 the
Seller's President, a Vice President or the Treasurer to be true, correct
and complete.
(c) Documents To Be Delivered by the Seller on the Closing Date.
-----------------------------------------------------------
(1) The Assignment. On the Closing Date, the Seller will
--------------
execute and deliver an Assignment with respect to the Receivables,
substantially in the form of Exhibit A hereto.
(2) 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 required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser, as
purchaser or secured party, describing the Receivables and the other
assets assigned to the Purchaser pursuant to Section 2.01 hereof, meeting
the requirements of the laws of each such jurisdiction and in such manner
as is necessary to perfect the sale, transfer, assignment and conveyance
of the Receivables and such other assets to the Purchaser. The Seller
shall deliver to the Purchaser a file-stamped copy or other evidence
satisfactory to the Purchaser of such filing on or prior to the Closing
Date.
(3) Other Documents. Such other documents as the Purchaser may
---------------
reasonably request.
(d) Other Transactions. The transactions contemplated by the Sale
------------------
and Servicing Agreement, the Indenture and the Trust Agreement to be
consummated on the Closing Date shall be consummated on such date.
SECTION 4.02. 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 Seller 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
--------------------------
shall have delivered to the Seller the purchase price specified in Section
2.01.
ARTICLE V
Covenants of the Seller
-----------------------
The Seller agrees with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings.
--------------------------------------- -------
The Seller shall cause all financing statements and continuation
statements and any other necessary documents covering the right, title and
interest of the Seller and the Purchaser, respectively, in and to the
Receivables and the other property included in the Owner Trust Estate to
be promptly filed and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law
fully to preserve and protect the right, title and interest of the
Purchaser hereunder in and to the Receivables and the other property
included in the Owner Trust Estate. The Seller shall deliver to the
Purchaser file stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available
following such recordation, registration or filing. The Purchaser shall
cooperate fully with the Seller in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this paragraph.
(b) Name Change. If the Seller makes any change in its name,
-----------
identity or corporate structure that would make any financing statement or
continuation statement filed in accordance with paragraph (a) above
seriously misleading within the applicable provisions of the UCC or any
title statute, the Seller shall give the Purchaser, the Indenture Trustee,
the Owner Trustee and the Security Insurer written notice thereof at least
5 days prior to such change and shall promptly file such financing
statements or amendments as may be necessary to continue the perfection of
the Purchaser's interest in the property included in the Owner Trust
Estate.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
------------------------
hereunder and pursuant to the Basic Documents, the Seller shall not sell,
pledge, assign or transfer to any Person, or grant, create, incur, assume,
or suffer to exist any Lien on, or any interest in, to or under the
Receivables, and the Seller shall defend the right, title and interest of
the Purchaser in, to and under the Receivables against all claims of third
parties claiming through or under the Seller; provided, however, that the
Seller's obligations under this Section shall terminate upon the
termination of the Issuer pursuant to the Trust Agreement.
SECTION 5.03. 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 and the Issuer's right,
title and interest in and to the Receivables.
SECTION 5.04. Indemnification. The Seller shall indemnify the
---------------
Purchaser, the Issuer and the Security Insurer for any liability resulting
from the failure of a Receivable to be originated in compliance with all
requirements of law and for any breach of any of its representations and
warranties contained herein. These indemnity obligations shall be in
addition to any obligation that the Seller may otherwise have.
ARTICLE VI
Miscellaneous Provisions
------------------------
SECTION 6.01. 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.
SECTION 6.02. Repurchase Events. The Seller hereby covenants and
-----------------
agrees with the Purchaser for the benefit of the Purchaser, the Indenture
Trustee, the Owner Trustee, the Certificateholders, the Noteholders and
the Security Insurer that the occurrence of a breach of any of the
Seller's representations and warranties contained in Section 3.02(b) shall
constitute an event obligating the Seller to repurchase the Receivables to
which the breach is applicable ("Repurchase Events"), at the Purchase
Amount, from the Purchaser or from the Issuer, as applicable, unless any
suchb reach shall have been cured by the last day of the first Collection
Period following the discovery or notice thereof by or to the Seller or
the Servicer. The repurchase obligation of the Seller shall constitute
the sole remedy available to the Purchaser, the Indenture Trustee, the
Owner Trustee, the Issuer, the Noteholders or the Certificateholders
against the Seller with respect to any Repurchase Event.
SECTION 6.03. Purchaser Assignment of Repurchased Receivables. With
-----------------------------------------------
respect to all Receivables repurchased by the Seller pursuant to this
Agreement, the Purchaser shall assign, without recourse, representation or
warranty, to the Seller all of the Purchaser's right, title and interest
in and to such Receivables and all security and documents relating
thereto.
SECTION 6.04. Transfer to the Issuer. The Seller acknowledges and
----------------------
agrees that (a) the Purchaser will, pursuant to the Sale and Servicing
Agreement, transfer and assign the Receivables and assign its rights under
this Agreement to the Issuer and the Issuer will pledge the foregoing to
the Indenture Trustee and (b) the representations and warranties contained
in this Agreement and the rights of the Purchaser under this Agreement,
including under Section 6.02, are intended to benefit the Issuer, the
Noteholders, the Certificateholders and the Security Insurer. The Seller
hereby consents to such transfers and assignments.
SECTION 6.05. Amendment. This Agreement may be amended from time to
---------
time, with prior written notice to the Rating Agencies and, so long as the
Security Insurer is the Controlling Party under the Sale and Servicing
Agreement, the prior written consent of the Security Insurer but without
the consent of the Noteholders or the Certificateholders, by a written
amendment duly executed and delivered by the Seller and the Purchaser, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of Noteholders or Certificateholders; provided that such
amendment shall not, as evidenced by an Opinion of Counsel, materially and
adversely affect the interest of any Noteholder or Certificateholder.
This Agreement may also be amended by the Seller and the Purchaser, with
prior written notice to the Rating Agencies and the prior written consent
of Holders of Notes evidencing at least a majority of the Outstanding
Amount of the Notes and Holders of Certificates evidencing at least a
majority of the Certificate Balance (excluding, for purposes of this
Section 6.05, Certificates held by the Seller or any of its affiliates)
and, so long as the Security Insurer is the Controlling Party under the
Sale and Servicing Agreement, the prior written consent of the Security
Insurer, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or
Certificateholders; provided, however, that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on
Receivables or distributions that are required to be made for the benefit
of Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the Notes or the Certificates that is required to consent to
any such amendment, without the consent of the Holders of all the
outstanding Notes and Certificates.
SECTION 6.06. 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.
SECTION 6.07. Notices. All demands, notices and communications
-------
under this Agreement shall be in writing, personally delivered or mailed
by certified mail, return receipt requested, to: (a) in the case of the
Seller, First Merchants Acceptance Corporation, 570 Lake Cook Road, Suite
126, Deerfield, Illinois 60015, Attention: ( ); (b) in the case of the
Purchaser, First Merchants Auto Receivables Corporation ( ), 570 Lake Cook
Road, Suite 126B, Deerfield, Illinois 60015, Attention: ( ); (c) in the
case of Moody's, Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007; (d) in the case of
Standard & Poor's, Standard & Poor's Ratings Service, 26 Broadway (20th
Floor), New York, New York 10004, Attention: Asset Backed Surveillance
Department; (e) in the case of the Security Insurer, (address); or as to
each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.08. Costs and Expenses. The Seller shall 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.
SECTION 6.09. Representations of the Seller and the Purchaser. The
-----------------------------------------------
respective agreements, representations, warranties and other statements by
the Seller and the Purchaser set forth in or made pursuant to this
Agreement shall remain in full force and effect and will survive the
closing under Section 2.02 and the transfers and assignments referred to
in Section 6.04.
SECTION 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 enforcement of the Purchaser's
rights hereunder, under the Receivables, under the Sale and Servicing
Agreement or any other Basic Document, or as required by any of the
foregoing or by law.
SECTION 6.11. Headings and Cross-References. The various headings
-----------------------------
in this Agreement are included for convenience only and shall not affect
the meaning or interpretation of any provision of this Agreement.
References in this Agreement to section names or numbers are to such
Sections of this Agreement.
SECTION 6.12. Governing Law. This Agreement and the Assignment
-------------
shall be construed in accordance with the laws of the State of New York,
without reference to its conflict of law provisions, and the obligations,
rights and remedies of the parties hereunder or thereunder shall be
determined in accordance with such laws.
SECTION 6.13. Counterparts. This Agreement may be executed in two
------------
or more counterparts and by different parties on separate counterparts,
each of which shall be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date
and year first above written.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By:
----------------------------------
Name:
Title:
FIRST MERCHANTS AUTO
RECEIVABLES CORPORATION ( )
By:
----------------------------------
Name:
Title:
EXHIBIT A
Form of Assignment
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of ( ) (the "Receivables Purchase Agreement"), between
the undersigned and First Merchants Auto Receivables Corporation ( ) (the
"Purchaser"), the undersigned does hereby sell, assign, transfer and
otherwise convey unto the Purchaser, without recourse, all right, title
and interest of the undersigned in and to (i) the Receivables and all
monies received on or after ( ); (ii) the security interests in the
Financed Vehicles and any accessions thereto granted by Obligors pursuant
to the Receivables and any other interest of the Seller in such Financed
Vehicles; (iii) any Liquidation Proceeds and any other proceeds with
respect to the Receivables from claims on any physical damage, credit life
or disability insurance policies covering Financed Vehicles or Obligors,
including any vendor's single interest or other collateral protection
insurance policy; (iv) any property that shall have secured a Receivable
and that shall have been acquired by or on behalf of the Seller; (v) all
documents and other items contained in the Receivable Files; and (vi) the
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, the 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
Receivables Purchase Agreement and is to be governed by the Receivables
Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have
the meaning assigned to them in the Receivables Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of ( ).
FIRST MERCHANTS ACCEPTANCE CORPORATION,
By:
-----------------------------------
Name:
Title:
SCHEDULE I
Schedule of Receivables
-----------------------
SCHEDULE II
Location of Receivable Files
----------------------------
Exhibit 10.4
Form of Receivables Purchase Agreement for Grantor Trusts
- --------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
between
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller,
and
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ),
as Purchaser
Dated as of ( )
- --------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I Certain Definitions . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II Conveyance of Receivables . . . . . . . . . . . . . . . . 5
SECTION 2.01. Conveyance of Receivables . . . . . . . . . . . . . . 5
SECTION 2.02. The Closing . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III Representations and Warranties . . . . . . . . . . . . . . 6
Section 3.01. Representations and Warranties of the Purchaser . . . 6
Section 3.02. Representations and Warranties of Seller . . . . . . 7
ARTICLE IV Conditions . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.01. Conditions to Obligation of the Purchaser . . . . . . 11
SECTION 4.02. Conditions to Obligation of the Seller . . . . . . . 11
ARTICLE V Covenants of the Seller . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.01. Protection of Right, Title and Interest . . . . . . . 12
SECTION 5.02. Other Liens or Interests . . . . . . . . . . . . . . 12
SECTION 5.03. Costs and Expenses . . . . . . . . . . . . . . . . . 12
SECTION 5.04. Indemnification . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI Miscellaneous Provisions . . . . . . . . . . . . . . . . . 13
SECTION 6.01. Obligations of Seller . . . . . . . . . . . . . . . . 13
SECTION 6.02. Repurchase Events . . . . . . . . . . . . . . . . . . 13
SECTION 6.03. Purchaser Assignment of Repurchased Receivables . . . 13
SECTION 6.04. Transfer to the Trust . . . . . . . . . . . . . . . . 13
SECTION 6.05. Amendment . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.06. Waivers . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.07. Notices . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.08. Costs and Expenses . . . . . . . . . . . . . . . . . 14
SECTION 6.09. Representations of the Seller and the Purchaser . . . 14
SECTION 6.10. Confidential Information . . . . . . . . . . . . . . 14
SECTION 6.11. Headings and Cross-References . . . . . . . . . . . . 14
SECTION 6.12. Governing Law . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.13. Counterparts . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT A Form of Assignment . . . . . . . . . . . . . . . . . . . . . . A-1
SCHEDULE I Schedule of Receivables . . . . . . . . . . . . . . . . . I-1
SCHEDULE II Location of Receivable Files . . . . . . . . . . . . . . II-1
RECEIVABLES PURCHASE AGREEMENT dated as of ( ), between FIRST MERCHANTS
ACCEPTANCE CORPORATION, a Delaware corporation, as seller (the "Seller"), and
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a Delaware corporation, as
purchaser (the "Purchaser").
RECITALS
WHEREAS in the regular course of its business, the Seller has purchased
certain motor vehicle retail installment sale contracts secured by new and
used automobiles, light-duty trucks, vans and minivans from motor vehicle
dealers;
WHEREAS the Seller and the Purchaser wish to set forth the terms
pursuant to which such contracts are to be sold by the Seller to the
Purchaser; and
WHEREAS the Purchaser intends, concurrently with its purchase hereunder,
to convey all of its right, title and interest in and to such contracts to
First Merchants Auto Trust (199_-_) (the "Trust") pursuant to a Pooling
and Servicing Agreement dated as of ( ) (the "Pooling and Servicing
Agreement"), by and among First Merchant Auto Receivables Corporation ( ), as
depositor, First Merchants Acceptance Corporation, as servicer, and ( ), as
trustee and backup servicer;
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration 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
thereto 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 Receivables Purchase Agreement, as the same
---------
may be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in the
----------
form attached to this Agreement as Exhibit A.
"Pooling and Servicing Agreement" shall mean the Pooling and Servicing
-------------------------------
Agreement dated as of ( ), among First Merchants Auto Receivables Corporation
( ), as Depositor, First Merchants Acceptance Corporation, as Servicer, and (
), as Trustee and Backup Servicer.
"Purchaser" shall mean First Merchants Auto Receivables Corporation (
---------
), a Delaware corporation, its successors and assigns.
"Receivable" shall mean any Contract listed on Schedule I hereto (which
----------
Schedule may be in the form of microfiche).
"Repurchase Event" shall have the meaning specified in Section 6.02
----------------
"Schedule of Receivables" shall mean the list of Receivables annexed
-----------------------
hereto as Schedule I.
"Seller" shall mean First Merchants Acceptance Corporation, a Delaware
------
corporation, its successors and assigns.
ARTICLE II
Conveyance of Receivables
-------------------------
SECTION 2.01. Conveyance of Receivables. In consideration of the
-------------------------
Purchaser's delivery to or upon the order of the Seller on the Closing Date
of $( ), the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Purchaser, without recourse (subject to the
obligations herein):
(a) all right, title and interest of the Seller in and to the
Receivables and all payments received with respect thereto on or after the
Cutoff Date;
(b) all right, title and interest of the Seller in and to the security
interests in the related Financed Vehicles and any accessions thereto granted
by Obligors pursuant to the Receivables and any other interest of the Seller
in such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any Net
Liquidation Proceeds and any other proceeds with respect to the Receivables
from claims on any physical damage, credit life or disability insurance
policies covering Financed Vehicles or Obligors, including any vendor's
single interest or other collateral protection insurance policy;
(d) all right, title and interest of the Seller in and to any property
that shall have secured a Receivable and that shall have been acquired by or
on behalf of the Seller;
(e) all right, title and interest of the Seller in and to all documents
and other items contained in the Receivable Files; and
(f) the proceeds of any and all of the foregoing.
The Seller and the Purchaser intend that the transfer of assets by the Seller
to the Purchaser pursuant to this Agreement be a sale of the ownership
interest in such assets to the Purchaser, rather than the mere granting of a
security interest to secure a borrowing. In the event, however, that such
transfer is deemed not to be a sale but to be of a mere security interest to
secure a borrowing, the Seller shall be deemed to have hereby granted to the
Purchaser a perfected first priority security interest in all such assets,
and this Agreement shall constitute a security agreement under applicable
law. Pursuant to the Pooling and Servicing Agreement and Section 6.04
hereof, the Purchaser may sell, transfer and reassign to the Trust (i) all or
any portion of the assets assigned to the Purchaser hereunder, (ii) all or
any portion of the purchaser's rights against the Seller under this Agreement
and (iii) all proceeds thereof. Such reassignment may be made by the
Purchaser with or without a reassignment by the Purchaser of its rights
under this Agreement, and without further notice to or acknowledgement
from the Seller. The Seller waives, to the extent permitted under applicable
law, all claims, causes of action and remedies, whether legal or equitable
(including any right of setoff), against the Purchaser or any assignee of
the Purchaser relating to such action by the Purchaser in connection with
the transactions contemplated by the Pooling and Servicing Agreement.
SECTION 2.02. The Closing. The sale and purchase of the Receivables
-----------
shall take place at a closing at the offices of Brown & Wood, One World Trade
Center, New York, New York 10048 on the Closing Date, simultaneously with the
closing under the Pooling and Servicing Agreement.
ARTICLE III
Representations and Warranties
------------------------------
Section 3.01. Representations and Warranties of the Purchaser. The
-----------------------------------------------
Purchaser hereby represents and warrants to the Seller as of the date hereof
and as of the Closing Date:
(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, with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted.
(b) Due Qualification. The Purchaser 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.
(c) Power and Authority. The Purchaser has the power and authority to
-------------------
execute and deliver this Agreement and to carry out its terms; the Purchaser
had at all relevant times, and has, the power, authority and legal right to
acquire and own the Receivables; and the execution, delivery and performance
of this Agreement have been duly authorized by the Purchaser by all necessary
corporate action.
(d) No Violation. The consummation of the transactions contemplated
------------
by this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under,
the articles of incorporation or bylaws of the Purchaser, or any indenture,
agreement or other instrument to which the Purchaser is a party or by which
it is bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents), or violate any
law or, to the best of the Purchaser's knowledge, any order, rule or
regulation applicable to the Purchaser of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Purchaser or its properties.
(e) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Purchaser's knowledge, threatened against the Purchaser
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that might materially
and adversely affect the performance by the Purchaser of its obligations
under, or the validity or enforceability of, this Agreement.
Section 3.02. Representations and Warranties of Seller. (a) The
----------------------------------------
Seller hereby represents and warrants to the Purchaser as of the date hereof
and as of the Closing Date:
(1) 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 the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted.
(2) 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.
(3) Power and Authority. The Seller has the power and authority
-------------------
to execute and deliver this Agreement and the other Basic Documents to which
it is a party and to carry out their respective terms; the Seller had at all
relevant times, and has, full power, authority and legal right to sell,
transfer and assign the property sold, transferred and assigned to the
Purchaser hereby and has duly authorized such sale, transfer and assignment
to the Purchaser by all necessary corporate action; and the execution,
delivery and performance of this Agreement and the other Basic Documents to
which the Seller is a party have been duly authorized by the Seller by all
necessary corporate action.
(4) No Violation. The consummation of the transactions
------------
contemplated by this Agreement and the other Basic Documents to which the
Seller is a party and the fulfillment of their respective terms 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 or both) a default under,
the articles of incorporation or bylaws of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which it
is bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement), or violate any law or, to the best of
the Seller's knowledge, any order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(5) No Proceedings. There are no proceedings or investigations
--------------
pending or, to the Seller's knowledge, threatened against the Seller before
any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of this Agreement or any other Basic Document to
which the Seller is a party, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or any other Basic
Document to which the Seller is a party or (iii) seeking any determination or
ruling that might materially and adversely affect the performance by the
Seller of its obligations under, or the validity or enforceability of, this
Agreement or any other Basic Document to which the Seller is a party.
(6) Valid Sale, Binding Obligations. This Agreement and the other
-------------------------------
Basic Documents to which the Seller is a party, when duly executed and
delivered by the other parties hereto and thereto, shall constitute legal,
valid and binding obligations of the Seller, enforceable against the Seller
in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization and similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and to general principles of equity (whether applied in a
proceeding at law or in equity).
(7) Chief Executive Office. The chief executive office of the
----------------------
Seller is located at 570 Lake Cook Road, Suite 126, Deerfield, Illinois
60015.
(8) No Consents. The Seller is not required to obtain the consent
-----------
of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau
or agency in connection with the execution, delivery, performance, validity,
or enforceability of this Agreement or any other Basic Document to which it
is a party that has not already been obtained.
(b) The Seller makes the following representations and warranties with
respect to the Receivables, on which the Purchaser relies in accepting the
Receivables and in transferring the Receivables to the Trust. Such
representations and warranties speak as of the execution and delivery of this
Agreement, but shall survive the sale, transfer and assignment of the
Receivables to the Purchaser and the subsequent sale, transfer and assignment
of the Receivables by the Purchaser to the Trust pursuant to the Pooling and
Servicing Agreement.
(1) Characteristics of Receivables. Each Receivable (A) was
------------------------------
originated in the United States by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business in accordance with
the Seller's credit policies, was fully and properly executed by the parties
thereto, was purchased by the Seller from such Dealer under an existing
Dealer Agreement and was validly assigned by such Dealer to the Seller, (B)
has created or shall create a valid, subsisting and enforceable first
priority security interest in favor of the Seller in the Financed Vehicle,
which security interest is assignable by the Seller to the Purchaser, and by
the Purchaser to the Trust, (C) contains customary and enforceable provisions
such that the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security and (D)
provides for level monthly payments (provided that the payment in the first
and last month of the term of the Receivable may be different from the level
payments) that fully amortize the Amount Financed by maturity and yield
interest at the APR.
(2) Compliance with Law. Each Receivable and the sale of the
-------------------
related Financed Vehicle complied at the time it was originated or made, and
at the time of execution of this Agreement complies, in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act
of 1940, 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.
(3) Binding Obligation. Each Receivable represents the genuine,
------------------
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law and (B) as such Receivable may be modified by
the application after the Closing Date of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
(4) No Government Obligor. No Receivable is due from the United
---------------------
States of America or any State or any agency, department, subdivision or
instrumentality thereof.
(5) Obligor Bankruptcy. As of the Cutoff Date, no Obligor had
------------------
been identified on the records of the Seller as being the subject of a
current bankruptcy proceeding.
(6) Schedule of Receivables. The information set forth in
-----------------------
Schedule I to this Agreement is true and correct in all material respects as
of the close of business on the Cutoff Date.
(7) Marking Records. By the Closing Date, the Seller will have
---------------
caused its records relating to each Receivable, including any computer
records, to be clearly and unambiguously marked to show that the Receivables
have been sold to the Purchaser by the Seller and transferred and assigned by
the Purchaser to the Trust in accordance with the terms of the Pooling and
Servicing Agreement.
(8) Computer Tape. The computer tape regarding the Receivables
-------------
made available by the Seller to the Purchaser is complete and accurate in all
respects as of the Cutoff Date.
(9) No Adverse Selection. No selection procedures believed by the
--------------------
Seller to be adverse to the Certificateholders were utilized in selecting the
Receivables.
(10) Chattel Paper. The Receivables constitute chattel paper
-------------
within the meaning of the UCC as in effect in the State of Illinois.
(11) One Original. There is only one original executed copy of
------------
each Receivable.
(12) Receivables in Force. No Receivable has been satisfied,
--------------------
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien of the related Receivable in whole or in part. None of the terms of
any Receivable has been waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the related
Receivable File. No Receivable has been modified as a result of the
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(13) Lawful Assignment. No Receivable has been originated in, or
-----------------
is subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or the Pooling and Servicing Agreement.
(14) Title. It is the intention of the Seller that the transfers
-----
and assignments herein contemplated constitute sales 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 debtor'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 to the Purchaser or pursuant to this Agreement (or
by the Purchaser to the Trustee pursuant to the Pooling and Servicing
Agreement). Immediately prior to the transfers and assignments herein
contemplated, the Seller has good and marketable title to each Receivable
free and clear of all Liens (other than the Lien of the Seller's senior
lenders identified in the (Consent to Fourth Amended and Restated Loan and
Security Agreement dated as of ( )), by and among the Seller and such secured
lenders), which Lien is being released simultaneously with the transfers and
assignments herein contemplated) and, immediately upon the transfer thereof,
the Purchaser shall have good and marketable title to each Receivable, free
and clear of all Liens.
(15) Security Interest in Financed Vehicle. Immediately prior to
-------------------------------------
its sale, assignment and transfer to the Purchaser pursuant to this
Agreement, each 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, or all necessary and appropriate actions have been
commenced that will result in the valid perfection of a first priority
security interest in such Financed Vehicle in favor of the Seller as secured
party.
(16) All Filings Made. All filings (including UCC filings)
----------------
required to be made in any jurisdiction to give the Purchaser a first
perfected ownership interest in the Receivables have been made.
(17) No Defenses. No Receivable is subject to any right of
-----------
rescission, setoff, counterclaim or defense, and no such right has been
asserted or threatened with respect to any Receivable.
(18) No Default. There has been no default, breach, violation or
----------
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 31 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the Cutoff Date, no Financed Vehicle has been
repossessed.
(19) Insurance. The Seller, in accordance with its customary
---------
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Vehicle and, under the terms of the related
Contract, the Obligor is required to maintain such insurance.
(20) Final Scheduled Maturity Date. No Receivable has a final
-----------------------------
scheduled payment date after ( ).
(21) Certain Characteristics of the Receivables. As of the Cutoff
------------------------------------------
Date, (A) each Receivable had an original maturity of not more than 60
months; (B) no Receivable was more than 31 days past due; and (C) no funds
have been advanced by the Seller, any Dealer or anyone acting on behalf of
either of them in order to cause any Receivable to qualify under clause (B)
above.
ARTICLE IV
Conditions
----------
SECTION 4.01. 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 receivables
created in connection with the Receivables have been sold to the Purchaser
pursuant to this Agreement and deliver to the Purchaser the Schedule of
Receivables, certified by the Seller's President, a Vice President or the
Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Seller on the Closing Date.
-----------------------------------------------------------
(1) The Assignment. On the Closing Date, the Seller will execute
--------------
and deliver an Assignment with respect to the Receivables, substantially in
the form of Exhibit A hereto.
(2) 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 required by applicable law, executed by the
Seller, as seller or debtor, and naming the Purchaser, as purchaser or
secured party, describing the Receivables and the other assets assigned to
the Purchaser pursuant to Section 2.01 hereof, meeting the requirements of
the laws of each such jurisdiction and in such manner as is necessary to
perfect the sale, transfer, assignment and conveyance of the Receivables and
such other assets to the Purchaser. The Seller shall deliver to the
Purchaser a file-stamped copy or other evidence satisfactory to the Purchaser
of such filing on or prior to the Closing Date.
(3) Other Documents. Such other documents as the Purchaser may
---------------
reasonably request.
(d) Other Transactions. The transactions contemplated by the Pooling
------------------
and Servicing Agreement to be consummated on the Closing Date shall be
consummated on such date.
SECTION 4.02. 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 Seller 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
--------------------------
shall have delivered to the Seller the purchase price specified in Section
2.01.
ARTICLE V
Covenants of the Seller
-----------------------
The Seller agrees with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings.
--------------------------------------- -------
The Seller shall cause all financing statements and continuation statements
and any other necessary documents covering the right, title and interest of
the Purchaser and the Trust in and to the Receivables and the other assets of
the Trust to be promptly filed and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be
required by law fully to preserve and protect the right, title and interest
of the Purchaser hereunder and of the Trust under the Pooling and Servicing
Agreement in and to the Receivables and the other property of the Trust. The
Seller shall deliver to the Purchaser file stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above,
as soon as available following such recordation, registration or filing. The
Purchaser shall cooperate fully with the Seller in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this paragraph.
(b) Name Change. If the Seller makes any change in its name, identity
-----------
or corporate structure that would make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the applicable provisions of the UCC or any title statute,
the Seller shall give the Purchaser, the Trustee and the Security Insurer
written notice thereof at least 5 days prior to such change and shall
promptly file such financing statements or amendments as may be necessary to
continue the perfection of the Purchaser's and the Trust's interest in the
Receivables and in the other property of the Trust.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
------------------------
hereunder and pursuant to the Basic Documents, the Seller shall not sell,
pledge, assign or transfer to any Person, or grant, create, incur, assume, or
suffer to exist any Lien on, or any interest in, to or under the Receivables,
and the Seller shall defend the right, title and interest of the Purchaser
in, to and under the Receivables against all claims of third parties claiming
through or under the Seller; provided, however, that the Seller's obligations
under this Section shall terminate upon the termination of the Trust pursuant
to the Pooling and Servicing Agreement.
SECTION 5.03. 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 and the Trust's right, title
and interest in and to the Receivables.
SECTION 5.04. Indemnification. The Seller shall indemnify the
---------------
Purchaser, the Trust and the Security Insurer for any liability resulting
from the failure of a Receivable to be originated in compliance with all
requirements of law and for any breach of any of its representations and
warranties contained herein. These indemnity obligations shall be in
addition to any obligation that the Seller may otherwise have.
ARTICLE VI
Miscellaneous Provisions
------------------------
SECTION 6.01. 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.
SECTION 6.02. Repurchase Events. The Seller hereby covenants and
-----------------
agrees with the Purchaser for the benefit of the Purchaser, the Trustee, the
Certificateholders, and the Security Insurer that the occurrence of a breach
of any of the Seller's representations and warranties contained in Section
3.02(b) shall constitute an event obligating the Seller to repurchase
Receivables hereunder ("Repurchase Events"), at the Purchase Amount, from the
Purchaser or from the Trust, as applicable. The repurchase obligation of the
Seller shall constitute the sole remedy available to the Purchaser, the
Trustee, the Trust, or the Certificateholders against the Seller with respect
to any Repurchase Event.
SECTION 6.03. Purchaser Assignment of Repurchased Receivables. With
-----------------------------------------------
respect to all Receivables repurchased by the Seller pursuant to this
Agreement, the Purchaser shall assign, without recourse, representation or
warranty, to the Seller all of the Purchaser's right, title and interest in
and to such Receivables and all security and documents relating thereto.
SECTION 6.04. Transfer to the Trust. The Seller acknowledges and
---------------------
agrees that (a) the Purchaser will, pursuant to the Pooling and Servicing
Agreement, transfer and assign the Receivables and assign its rights under
this Agreement to the Trust and (b) the representations and warranties
contained in this Agreement and the rights of the Purchaser under this
Agreement, including under Section 6.02, are intended to benefit the Trust,
the Certificateholders and the Security Insurer. The Seller hereby consents
to such transfers and assignments.
SECTION 6.05. Amendment. This Agreement may be amended from time to
---------
time, with prior written notice to the Rating Agencies and, so long as the
Security Insurer is the Controlling Party under the Pooling and Servicing
Agreement, the prior written consent of the Security Insurer but without the
consent of the Certificateholders, by a written amendment duly executed and
delivered by the Seller and the Purchaser, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of
Certificateholders; provided that such amendment shall not, as evidenced by
an Opinion of Counsel, materially and adversely affect the interest of any
Certificateholder. This Agreement may also be amended by the Seller and the
Purchaser, with prior written notice to the Rating Agencies and the prior
written consent of Holders of Certificates evidencing at least a majority of
the Certificate Balance and, so long as the Security Insurer is the
Controlling Party under the Pooling and Servicing Agreement, the prior
written consent of the Security Insurer, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions that are required to be made for the benefit of
Certificateholders or (ii) reduce the aforesaid percentage of the
Certificates that is required to consent to any such amendment, without the
consent of the Holders of all the outstanding Certificates.
SECTION 6.06. 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.
SECTION 6.07. Notices. All demands, notices and communications under
-------
this Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to: (a) in the case of the Seller,
First Merchants Acceptance Corporation, 570 Lake Cook Road, Suite 126,
Deerfield, Illinois 60015, Attention: ( ); (b) in the case of the Purchaser,
First Merchants Auto Receivables Corporation ( ), 570 Lake Cook Road, Suite
126B, Deerfield, Illinois 60015, Attention: ( ); (c) in the case of Moody's,
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007; (d) in the case of Standard & Poor's, Standard &
Poor's Ratings Service, 26 Broadway (20th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department; (e) in the case of the
Security Insurer, ( ); or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 6.08. Costs and Expenses. The Seller shall 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.
SECTION 6.09. Representations of the Seller and the Purchaser. The
-----------------------------------------------
respective agreements, representations, warranties and other statements by
the Seller and the Purchaser set forth in or made pursuant to this Agreement
shall remain in full force and effect and will survive the closing under
Section 2.02 and the transfers and assignments referred to in Section 6.04.
SECTION 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 enforcement of the Purchaser's rights
hereunder, under the Receivables, under the Pooling and Servicing Agreement
or any other Basic Document, or as required by any of the foregoing or by
law.
SECTION 6.11. Headings and Cross-References. The various headings in
-----------------------------
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in
this Agreement to section names or numbers are to such Sections of this
Agreement.
SECTION 6.12. Governing Law. This Agreement and the Assignment shall
-------------
be construed in accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder or thereunder shall be determined in
accordance with such laws.
SECTION 6.13. Counterparts. This Agreement may be executed in two or
------------
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date and year
first above written.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By:
-----------------------------------------
Name:
Title:
FIRST MERCHANTS AUTO
RECEIVABLES CORPORATION ( )
By:
-----------------------------------------
Name:
Title:
EXHIBIT A
Form of Assignment
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of ( ) (the "Receivables Purchase Agreement"), between the
undersigned and First Merchants Auto Receivables Corporation ( ) (the
"Purchaser"), the undersigned does hereby sell, assign, transfer and
otherwise convey unto the Purchaser, without recourse, all right, title and
interest of the undersigned in and to (i) the Receivables and all payments
received with respect thereto on or after the Cutoff Date; (ii) the security
interests in the Financed Vehicles and any accessions thereto granted by the
Obligors pursuant to the Receivables and any other interest of the Seller in
the Receivables; (iii) any Net Liquidation Proceeds and any other proceeds
from claims on any physical damage, credit life or disability insurance
policies covering the Financed Vehicles or Obligors, including any vendor's
single interest or other collateral protection insurance policy; (iv) any
property that shall have secured a Receivable and that shall have been
acquired by or on behalf of the Seller; (vi) all documents and other items
contained in the related Receivable Files; and (vii) the 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, the 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
Receivables Purchase Agreement and is to be governed by the Receivables
Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to them in the Receivables Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of ( ).
FIRST MERCHANTS ACCEPTANCE CORPORATION,
By:
-----------------------------------
Name:
Title:
SCHEDULE I
Schedule of Receivables
-----------------------
SCHEDULE II
Location of Receivable Files
----------------------------
Exhibit 25.1
Statement of Eligibility and
Qualification of Indenture
Trustee
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Keith R. Richardson, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2647
(Name, address and telephone number for agent for service)
First Merchants Auto Trusts
(Name of obligor)
Delaware 36-3759045
(State of Incorporation) (I.R.S. Employer Identification No.)
570 Lake Cook Road, Suite 126
Deerfield, IL 60015
(Address of principal executive offices)
Asset Backed Securities
(Title of indenture securities)
1. GENERAL INFORMATION. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West Jackson
Boulevard, Chicago, Illinois; Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of the Federal Reserve
System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the
Trustee, describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee is now in
effect which includes the authority of the trustee to commence business and
to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which constitutes
the articles of association of the Trustee as now in effect and includes the
authority of the Trustee to commence business and to exercise corporate trust
powers was filed in connection with the Registration Statement of Louisville
Gas and Electric Company, File No. 2-44295, and is incorporated herein by
reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Hillenbrand Industries, Inc., File No. 33-
44086, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Chicago, and State of Illinois, on the 16th day of August,
1996.
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------
Keith R. Richardson
Trust Officer
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents
that reports of examinations of said trustee by Federal and State authorities
may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------
Keith R. Richardson
Trust Officer
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of March 31, 1996, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank
of the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on March 31, 1996, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner
of Banks and Trust Companies of the State of Illinois and by the Federal
Reserve Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION> THOUSANDS
ASSETS OF
DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin...................................... $971,800
Interest bearing balances................................................................ $508,198
Securities:.............................................................................. $0
a. Held-to-maturity securities $2,925,091
b. Available-for-sale securities
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBF's:
Federal funds sold....................................................................... $304,450
Securities purchased under agreements to resell.......................................... $0
Loans and lease financing receivables:
Loans and leases, net of unearned income................................................. $7,653,290
LESS: Allowance for loan and lease losses.................... $97,833
---------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b)..................................................................... $7,555,457
Assets held in trading accounts.......................................................... $107,161
Premises and fixed assets (including capitalized leases)................................. $139,122
Other real estate owned.................................................................. $203
Investments in unconsolidated subsidiaries and associated companies...................... $200
Customer's liability to this bank on acceptances outstanding............................. $71,355
Intangible assets........................................................................ $18,251
Other assets............................................................................. $474,460
----------
TOTAL ASSETS $13,075,748
==========
LIABILITIES
Deposits:
In domestic offices...................................................................... $4,830,361
Non-interest bearing..................................................................... $2,390,307
Interest bearing......................................................................... $2,440,054
In foreign offices, Edge and Agreement subsidiaries, and IBF's........................... $2,990,031
Non-interest bearing..................................................................... $71,451
Interest bearing......................................................................... $2,918,580
Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds purchased.................................................................. $882,146
Securities sold under agreements to repurchase........................................... $2,020,913
Trading Liabilities...................................................................... $66,711
Other borrowed money:....................................................................
a. With remaining maturity of one year or less $897,852
b. With remaining maturity of more than one year $11,520
Bank's liability on acceptances executed and outstanding $71,355
Subordinated notes and debentures......................................................... $295,000
Other liabilities......................................................................... $186,774
-----------
TOTAL LIABILITIES $12,252,663
===========
EQUITY CAPITAL
Common stock.............................................................................. $100,000
Surplus................................................................................... $275,000
a. Undivided profits and capital reserves................................................ $470,392
b. Net unrealized holding gains (losses) on available-for-sale securities ($22,307)
--------
TOTAL EQUITY CAPITAL $823,085
========
Total liabilities, limited-life preferred stock, and equity capital....................... $13,075,748
</TABLE>
I, Steve Neudecker, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with
the instructions issued by the Board of Governors of the Federal Reserve
System and is true to the best of my knowledge and belief.
STEVE NEUDECKER
4/30/96
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of
our knowledge and belief, has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and the Commissioner of Banks and Trust Companies of the State of Illinois
and is true and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
MARIBETH S. RAHE
Directors.
Exhibit 99.1
Form of Transfer Agreement
TRANSFER AGREEMENT dated as of ________________, between FIRST
MERCHANTS AUTO RECEIVABLES CORPORATION ( ), a Delaware corporation, as
depositor (the "Depositor"), and , a
-------------------- ---------------
banking corporation, as trustee of First Merchants Auto Trust (199__-__)
(the "Trustee").
RECITALS
WHEREAS First Merchants Auto Trust (199 - ) (the "Trust") has
--- ---
been formed and has issued the % Asset Backed Certificates, Class A
-----
and the % Asset Backed Certificates, Class B (collectively, the
-----
"Certificates") pursuant to a Pooling and Servicing Agreement dated as of
(the "Pooling and Servicing Agreement"), among First
- ---------------
Merchants Auto Receivables Corporation
( ), as depositor, , as trustee and backup
--------------------------
servicer, and the Trustee has delivered the Certificates to the Depositor
pursuant to such Pooling and Servicing Agreement;
WHEREAS the Depositor has applied certain of the proceeds of the sale
of the Certificates to pay for its purchase of certain motor vehicle
retail installment sale contracts (the "Initial Receivables") from
, but will retain the remainder of the proceeds pending
- ----------------
their application to the purchase from of
--------------------------
additional motor vehicle retail installment sale contracts (the
"Subsequent Receivables");
WHEREAS the Depositor will, pursuant to the Pooling and Servicing
Agreement and concurrently with the execution and delivery hereof,
deposit, transfer, assign and set over the Initial Receivables to the
Trust in partial consideration of the Certificates and agree to acquire,
transfer, assign and set over the Subsequent Receivables to the Trust
during the Funding Period; and
WHEREAS the Depositor has agreed to secure the payment and
performance of its obligations relating to the acquisition and conveyance
to the Trust of the Subsequent Receivables by entering into the Security
Agreement with the Trustee;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositor and the Trustee agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. Capitalized terms used in this
Agreement and not specifically defined herein shall have the respective
meanings assigned to such terms in the Pooling and Servicing Agreement.
Whenever used in this Agreement, the following words and phrases shall
have the meanings set forth below:
("Carrying Charges" means the amount that the Depositor is obligated
to pay to the Trust pursuant to Section 3.01.)
"Collateral Agent" shall have the meaning set forth in the Security
Agreement dated as of , between the Depositor, the
---------------------
Trustee and , as collateral agent.
-------------------------
"Liquidated Damages" means the amount that is payable as liquidated
damages to the Trust hereunder in the event the Depositor fails to
transfer Subsequent Receivables having an aggregate Principal Balance
equal to the Pre-Funded Amount to the Trust during the Funding Period in
accordance with Section 2.02 below.
ARTICLE II
AGREEMENT TO TRANSFER SUBSEQUENT RECEIVABLES
Section 2.01. Transfer of Subsequent Receivables. The Depositor
hereby undertakes and agrees to acquire from First Merchants Acceptance
Corporation by purchase for cash pursuant to one or more Subsequent
Purchase Agreements and to transfer to the Trust pursuant to one or more
Subsequent Transfer Agreements, during the Funding Period, Subsequent
Receivables in an aggregate Principal Balance, as of their respective
Subsequent Cutoff Dates, of $ , which amount is
---------------------------
equal to the Pre-Funded Amount deposited to the Pre-Funding Account on the
Closing Date. The Depositor shall effect the purchases of Subsequent
Receivables from First Merchants Acceptance Corporation using funds on
deposit in the Pre-Funding Account in accordance with the terms of the
Security Agreement.
Section 2.02. Remedy for Breach. If the Depositor fails to perform
the obligation described in Section 2.01 in its entirety by the end of the
Funding Period, the Trustee shall take remedial action upon the expiration
of the Funding Period by giving written notice of non-performance to the
Depositor, accompanied by written demand upon the Depositor for payment of
liquidated damages ("Liquidated Damages") hereunder in respect of such
non-performance. The Liquidated Damages shall be in an amount equal to
(the amount then on deposit in the Pre-Funding Account) and shall be
payable immediately upon demand. The Trustee shall deposit all amounts
received in respect of Liquidated Damages into the Collection Account and
shall distribute such Liquidated Damages, pro rata, to the
Certificateholders as a prepayment of principal on the Distribution Date
occurring on or (if the Funding Period does not end on a Distribution
Date) immediately following the termination of the Funding Period.
(ARTICLE III
CARRYING CHARGES
Section 3.01. Payment of Carrying Charges. The Depositor hereby
agrees to pay to the Trustee for the benefit of the Trust, from, and only
to the extent of, funds on deposit in the Interest Reserve Account, an
amount with respect to each Distribution Date occurring during the Funding
Period equal to the amount (referred to herein as the "Carrying Charge"),
if any, by which (i) the product of (A) the weighted average of the Class
A Pass-Through Rate and the Class B Pass-Through Rate and (B) the Pre-Funded
Amount as of the first day of the related Collection Period exceeds
(ii) the amount of Investment Income received with respect to the Pre-Funded
Amount during such Collection Period.
The Trustee shall demand payment of any Carrying Charge required to
be paid by the Depositor with respect to a Distribution Date by making
demand on the Depositor pursuant to Section of the Pooling and
-------
Servicing Agreement and Section 3.03 of the Security Agreement. No such
Carrying Charges shall be payable on or after the second Distribution Date
following the termination of the Funding Period.
Section 3.02. Demand on Collateral Agent. The Depositor agrees
that the Trustee, as collateral agent under the Security Agreement, may
effect payment of any Carrying Charges on any Distribution Date by making
demand directly on the Collateral Agent instead of the Depositor, and
hereby consents to the payment of such Carrying Charges from amounts on
deposit in the Interest Reserve Account by the Collateral Agent directly
to the Trustee.)
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Amendments; Waivers. No amendment, modification or
waiver of or supplement to this Agreement or any provision of this
Agreement shall in any event be effective unless the same shall have been
made or consented to in writing by each of the parties hereto and each
Rating Agency shall have confirmed in writing that such amendment will not
cause a reduction or withdrawal of a rating of the Certificates.
Section 4.02. Severability. In the event that any provision of
this Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Agreement shall, to any
extent, be invalid or unenforceable under any applicable statute,
regulation or rule of law, then such provision shall be deemed inoperative
to the extent that it is invalid or unenforceable, and the remainder of
this Agreement, and the application of any such invalid or unenforceable
provisions to the parties and in jurisdictions or circumstances other than
those to whom or in which it is held invalid or unenforceable, shall not
be affected thereby nor shall the same affect the validity or
enforceability of any other provision of this Agreement.
Section 4.03. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of the parties hereto agrees that it
shall not, prior to the date that is one year and one day after the
Distribution Date first occurring following the final disbursement of
funds under the Security Agreement, acquiesce, petition or otherwise
invoke or cause the Depositor to invoke the process of the United States
of America, any State or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government for the purpose of commencing or
sustaining a case by or against the Depositor or the Trust under a federal
or state bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or other similar
official of the Depositor or the Trust or all or any part of its property
or assets, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may
be specifically enforced.
Section 4.04. Notices. All notices, demands, certificates,
requests and communications hereunder ("notices") shall be in writing and
shall be effective (a) upon receipt when sent through the U.S. mails,
registered or certified mail, return receipt requested, postage prepaid,
with such receipt to be effective the date of delivery indicated on the
return receipt, or (b) one business day after delivery to an overnight
courier or (c) on the date personally delivered to the party to which sent
or (d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as
follows:
(i) If to the Depositor:
First Merchants Auto Receivables
Corporation ( )
570 Lake Cook Road, Suite 126B
Deerfield, IL 60015
Attention:
-------------------------------------
Telecopier no.: (847) 948-9303
(ii) If to the Trustee:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------
Telecopier no.:
----------------
(iii) If to the Rating Agencies:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
---------------------
Telecopier no.:
----------------
Each party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address to
which subsequent notices shall be sent.
Section 4.05. Governing Law. This Agreement shall be governed by
and construed in accordance with, and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with, the laws
of the State of New York.
Section 4.06. Limitation of Trustee Responsibility. It is
expressly understood and agreed by the parties hereto that (a)
is executing this Agreement not in its individual capacity
- --------------
but solely in its capacity as Trustee of First Merchants Auto Trust (199
- - ) pursuant to the Pooling and Servicing Agreement and (b) in no case
---
whatsoever shall be personally liable on, or
--------------------------
for any loss in respect of, any of the statements, representations,
warranties, covenants, agreements, or obligations of the Trust (if any)
hereunder, all such liability, if any, being expressly waived by the
parties hereto, except and to the extent such loss is caused by the
negligence, bad faith or willful misconduct of the Trustee.
Section 4.07. Counterparts. This Agreement may be executed in two
or more counterparts by the parties hereto, and each such counterpart
shall be considered an original and all such counterparts shall constitute
but one and the same instrument.
Section 4.08. Headings. The headings of sections and paragraphs
and the Table of Contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not
affect its construction or interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date set forth on the first page hereof.
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION
( ), as Depositor
By:
--------------------
Name:
Title:
, as Trustee
-------------
By:
--------------------
Name:
Title:
Exhibit 99.2
Form of Security Agreement
THIS SECURITY AGREEMENT dated as of _______________ (this
"Agreement"), is by and between FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION ( ), a Delaware corporation, as depositor (the "Depositor"),
and ____________________, a _____________ banking corporation, in its
capacities as trustee under the Pooling and Servicing Agreement referred
to below (the "Trustee") and as Collateral Agent (as defined below).
RECITALS
1. First Merchants Auto Trust (199_-_) (the "Trust") is being
formed contemporaneously herewith pursuant to a Pooling and Servicing
Agreement dated as of _________________ (the "Pooling and Servicing
Agreement"), by and among the Depositor, _______________________, as
Trustee and Backup Servicer, and First Merchants Acceptance Corporation,
as Servicer.
2. Pursuant to the Pooling and Servicing Agreement, the Depositor
is transferring to the Trust all of its right, title and interest in and
to the Initial Receivables and certain other assets in exchange for the
Certificates.
3. Upon the sale of the Certificates, the Depositor will apply part
of the proceeds thereof to the purchase from First Merchants Acceptance
Corporation of the Initial Receivables (in an aggregate principal amount,
as of the Initial Cutoff Date, of $ ), which
-------------------------------
Initial Receivables will be conveyed to the Trust as of the Closing Date,
but will retain the remainder of the proceeds of such sale (in the amount
of $ ), which will be used to purchase
-------------------------------
Subsequent Receivables from First Merchants Acceptance Corporation during
the Funding Period.
AGREEMENTS
In consideration of the premises herein set forth, and for other good
and valuable consideration, the adequacy, receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used and not otherwise
-----------
defined in this Agreement (including in the recitals above) shall have the
respective meanings assigned to such terms in the Pooling and Servicing
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Account" means the Pre-Funding Account (or the Interest Reserve
Account and, when used in the plural, refers to both the Pre-Funding
Account and the Interest Reserve Account).
"Authorized Officer" means (i) with respect to the Trustee or the
Collateral Agent, any Vice President or Trust Officer thereof, (ii) with
respect to the Servicer, the President or any Vice President thereof and
(iii) with respect to the Depositor, the President or any Vice President
thereof.
"Collateral" has the meaning specified in Section 2.01(a) hereof.
"Collateral Agent" means, initially, _________________________, in
its capacity as collateral agent on behalf of the Trustee with respect to
the Pre-Funding Account (and the Interest Reserve Account), including its
successors in interest, until a successor Person shall have become the
Collateral Agent pursuant to Section 4.05 hereof; and thereafter
"Collateral Agent" shall mean such successor Person.
"Default" means, at any time during the Funding Period, any failure
by the Depositor to make payment or render performance when due hereunder.
("Interest Reserve Account" means the account designated as such,
established and maintained pursuant to Section 3.01.)
"Pre-Funding Account" means the account designated as such,
established and maintained pursuant to Section 3.01.
"Secured Obligations" means ((i)) the transfer and assignment to the
Trustee, for the benefit of the Certificateholders, of Subsequent
Receivables having an aggregate Principal Balance, as of their respective
Subsequent Cutoff Dates, of $___________ (and (ii) the payment to the
Trustee, for distribution to the Certificateholders, of any shortfall that
may occur in the Class A Interest Distributable Amount or the Class B
Interest Distributable Amount during the Funding Period due to the fact
that the Pre-Funded Amount is deposited in the Pre-Funding Account rather
than being invested in Receivables on the Closing Date).
"Secured Party" means the Trustee for the benefit of the
Certificateholders.
"Security Interests" means the security interests and Liens in the
Collateral granted pursuant to Section 2.01.
Section 1.02. Rules of Interpretation. (a) All terms defined in
-----------------------
this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein.
(b) The words "hereof", "herein", "hereunder" and words of similar
import when used herein shall refer to this Agreement as a whole and not
to any particular provision hereof; Article, Section, Schedule and Exhibit
references contained herein are references to Articles, Sections,
Schedules and Exhibits herein; and the term "including" shall mean
"including without limitation".
(c) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(d) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II.
THE COLLATERAL
Section 2.01. Grant of Security Interest by the Depositor. (a) In
-------------------------------------------
order to secure the performance of the Secured Obligations, the Depositor
hereby pledges, assigns, grants, transfers, and conveys to the Collateral
Agent, on behalf of and for the benefit of the Secured Party, a lien on
and security interest in (which lien and security interest is intended to
be prior to all other Liens) all of its right, title and interest in and
to the following (all being collectively referred to herein as the
"Collateral"):
(i) the Pre-Funding Account established pursuant to Section
3.01 hereof, including the Pre-Funded Amount deposited thereto on the
Closing Date (which initially will equal $_____________), and all
additional monies, checks, securities, investments, and other items or
documents at any time held in or evidencing the Pre-Funding Account;
((ii) the Interest Reserve Account established pursuant to
Section 3.01 hereof, including the initial deposit thereto by the
Depositor of $__________, and all additional monies, checks, securities,
investments, and other items or documents at any time held in or evidencing
the Interest Reserve Account;)
(iii) all of the Depositor's right, title and interest in
and to investments made with proceeds of the property described in
clause(s) (i) (and (ii)) above; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits, and proceeds, in whatever form, of any of the
foregoing.
(b) In order to effectuate the provisions and purposes of this
Agreement, including for the purpose of perfecting the security interests
granted hereunder, the Depositor represents and warrants that it has,
prior to the execution of this Agreement, executed and filed an
appropriate Uniform Commercial Code financing statement in the State of
____________ sufficient to assure that the Collateral Agent, as agent for
the Secured Party, has a first priority perfected security interest in all
Collateral that can be perfected by the filing of a financing statement.
Section 2.02. Priority. The Depositor intends the security
--------
interests in favor of the Secured Party to be prior to all other Liens in
respect of the Collateral, and the Depositor shall take all actions
necessary to obtain and maintain, in favor of the Collateral Agent, for
the benefit of the Secured Party, a first lien on and a first priority,
perfected security interest in the Collateral. Subject to the provisions
hereof, the Secured Party shall have all of the rights, remedies and
recourse with respect to the Collateral afforded a secured party under the
Uniform Commercial Code and all other applicable laws in addition to, and
not in limitation of, the other rights, remedies and recourse granted to
the Secured Party by this Agreement or any other law relating to the
creation and perfection of liens on, and security interests in, the
Collateral.
Section 2.03. Depositor Remains Liable. The Security Interests are
------------------------
granted as security only and shall not (i) transfer or in any way affect
or modify, or relieve the Depositor from, any obligation to perform or
satisfy every term, covenant, condition or agreement to be performed or
satisfied by the Depositor under or in connection with this Agreement, the
Pooling and Servicing Agreement or the Transfer Agreement or (ii) impose
any obligation on the Secured Party or the Collateral Agent to perform or
observe any such term, covenant, condition or agreement, or impose any
liability on the Secured Party or the Collateral Agent for any act or
omission on its part relative thereto or for any breach of any
representation or warranty on its part contained therein or made in
connection therewith, except, in each case, to the extent provided herein
or in the Pooling and Servicing Agreement or the Transfer Agreement.
Section 2.04. Maintenance of Collateral. The Collateral Agent
-------------------------
agrees to maintain the Collateral received by it (or evidence thereof, in
the case of book-entry securities in the name of the Collateral Agent) and
all records and documents relating thereto at the office of the Collateral
Agent specified in Section 7.06. The Collateral Agent shall keep all
Collateral and related documentation in its possession separate and apart
from all other property that it holds in its possession and from its own
general assets and shall maintain accurate records pertaining to the
Eligible Investments and the Accounts included in the Collateral in such a
manner as shall enable the Depositor and the Secured Party to verify the
accuracy of such record-keeping. The Collateral Agent's books and records
shall at all times show that the Collateral is held by the Collateral
Agent as agent of the Secured Party and is not the property of the
Collateral Agent. The Collateral Agent promptly shall report to the
Secured Party and the Depositor any failure on its part to hold the
Collateral as provided in this Section 2.04(a) and promptly shall take
appropriate action to remedy any such failure.
Section 2.05. Termination and Release of Rights. Upon the
---------------------------------
occurrence of (i) the termination of the Funding Period, (ii) the
application in full of the Pre-Funded Amount (A) to the purchase of
Subsequent Receivables, which shall have been transferred and assigned by
the Depositor to the Trust, and (B) the distribution of any remaining
portion of the Pre-Funded Amount as a prepayment of principal to the
Certificateholders pursuant to the terms of the Pooling and Servicing
Agreement (and (iii) the payment to the Trustee, for distribution to the
Certificateholders, of any shortfall occurring in the Class A Interest
Distributable Amount or the Class B Interest Distributable Amount as a
result of the deposit of the Pre-Funded Amount to the Pre-Funding
Account), the rights, remedies, powers, duties, authority, and obligations
conferred upon the Secured Party pursuant to this Agreement in respect of
the Collateral shall terminate and be of no further force and effect, and
all rights, remedies, powers, duties, authority, and obligations of the
Secured Party with respect to such Collateral shall be automatically
released. The Collateral Agent in such event agrees to execute and
deliver, at the expense of the Depositor, such instruments as the
Depositor may reasonably request to effectuate such release, and any such
instruments so executed and delivered shall be fully binding on the
Secured Party.
Section 2.06. Non-Recourse Obligations of Depositor.
-------------------------------------
Notwithstanding anything herein or in the Pooling and Servicing Agreement
or the Transfer Agreement to the contrary, the parties hereto agree that
the obligations of the Depositor hereunder (without limiting the
obligation to apply distributions from the Accounts hereunder in
accordance with Section 3.03) shall be recourse only to the extent of the
Collateral available hereunder. Nothing contained herein shall be deemed
to limit the rights of the Certificateholders under the Pooling and
Servicing Agreement or the Transfer Agreement.
ARTICLE III.
THE ACCOUNTS
Section 3.01. Establishment of Accounts; Initial Deposits into
------------------------------------------------
Accounts. (a) On or prior to the Closing Date, the Collateral Agent
- --------
shall establish, in its name and at its office or at another depository
institution or trust company, (an) (separate) Eligible Deposit Account(s),
designated (respectively) as the "Pre-Funding Account -- First Merchants
Auto Trust (199_-_) -- ________________________, as Collateral Agent for
the Trustee and Holders of the % Asset Backed Certificates, Class A
-----
and the ___% Asset Backed Certificates, Class B" (such account being the
"Pre-Funding Account") (and the "Interest Reserve Account -- First
Merchants Auto Trust (199_-_) -- ___________________________, as
Collateral Agent for the Trustee and Holders of the % Asset Backed
-----
Certificates, Class A and the ___% Asset Backed Certificates, Class B"
(such account being the "Interest Reserve Account")). All Accounts
established under this Agreement shall be maintained at the same
depository institution (which depository institution may be changed from
time to time in accordance with this Agreement).
(b) No withdrawals may be made of funds in any Account except as
provided in Section 3.03 of this Agreement. Except as specifically
provided in this Agreement, funds in any Account shall not be commingled
with funds in any other account or accounts established with respect to
the Certificates, any other series of securities or with any other moneys.
All moneys deposited from time to time in such Account and all investments
made with such moneys shall be held by the Collateral Agent as part of the
Collateral hereunder.
(c) On the Closing Date, the Collateral Agent shall deposit the
initial Pre-Funded Amount received from the Depositor into the Pre-Funding
Account (and shall deposit the amounts received from the Depositor for
deposit to the Interest Reserve Account into the Interest Reserve
Account).
(d) Each Account shall be separate from the Trust and amounts on
deposit therein shall not constitute a part of the assets of the Trust.
The Accounts shall be maintained by the Collateral Agent at all times
separate and apart from any other account of the Depositor, the Servicer
or the Trust. All income or loss on investments of funds in an Account
shall be reported by the Depositor as taxable income or loss of the
Depositor.
Section 3.02. Investments. (a) Funds that may at any time be held
-----------
in the Account shall be invested and reinvested by the Collateral Agent,
at the written direction (which may include, subject to the provisions
hereof, general standing instructions) of the Depositor or its designee
received by the Collateral Agent by 1:00 P.M. New York City time on the
business day prior to the date on which such investment shall be made, in
one or more Eligible Investments. If no written direction with respect to
any portion of such Account is received by the Collateral Agent, the
Collateral Agent shall invest such funds overnight in Eligible Investments
selected by the Collateral Agent, and the Collateral Agent shall not be
liable for any loss or absence of income resulting from such investment.
(b) Each investment made pursuant to this Section 3.02 on any date
shall mature not later than the business day immediately preceding a
Subsequent Transfer Date or, if later, the end of the Funding Period;
provided that any investment of funds held in the Account in any
investment as to which the Collateral Agent in its individual capacity is
the obligor (including any repurchase agreement on which the Collateral
Agent in its commercial capacity is liable as principal) may mature upon
the succeeding Subsequent Transfer Date or end of the Funding Period, as
the case may be, rather than on the business day immediately preceding
such dates.
(c) Subject to the other provisions hereof, the Collateral Agent
shall have sole control over each Eligible Investment and the income
thereon, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Collateral Agent or its
agent, together with each document of transfer, if any, necessary to
transfer title to such investment to the Collateral Agent.
(d) If amounts on deposit in the Account are at any time invested
in an Eligible Investment payable on demand, the Collateral Agent shall,
consistent with any notice required to be given thereunder, demand that
payment thereon be made on the last day such Eligible Investment is
permitted to mature under the provisions hereof.
(e) Subject to Section 4.03, the Collateral Agent shall not be
liable by reason of any insufficiency in any Account resulting from any
loss on an Eligible Investment included therein except for losses
attributable to the Collateral Agent's failure to make payments on
Eligible Investments as to which the Collateral Agent, in its commercial
capacity, is obligated.
Section 3.03. Distributions from Accounts. ((a)) All investment
---------------------------
earnings realized in respect of amounts in the Pre-Funding Account shall
be deposited when and as received in the (Collection Account) (Interest
Reserve Account), such that the Pre-Funded Amount shall never exceed the
amount initially deposited into the Pre-Funding Account on the Closing
Date. Following receipt, at any time during the Funding Period, from the
Depositor of an Addition Notice and a written demand for a disbursement of
funds from the Pre-Funding Account (which written demand must be delivered
not later than one business day prior to the requested date of funding),
the Collateral Agent shall disburse the amount demanded from the
Pre-Funding Account to First Merchants Acceptance Corporation upon the
order of the Depositor for the purpose of purchasing Subsequent
Receivables from First Merchants Acceptance Corporation. Any Pre-Funded
Amount remaining on deposit in the Pre-Funding Account on the date on
which the Funding Period ends shall be transferred immediately by the
Collateral Agent to the Trustee for deposit into the Collection Account,
provided that a timely written demand for funding as described in the
preceding sentence has not been received requesting funding on such date.
((b) The Collateral Agent shall disburse amounts on deposit in the
Interest Reserve Account to the Trustee immediately upon receipt of the
Trustee's written demand therefor pursuant to Section ____ of the Pooling
and Servicing Agreement, in the amount specified in such demand. In the
event that (i) the Funding Period has terminated, (ii) the Pre-Funded
Amount has been disbursed, (iii) a Distribution Date has elapsed following
the occurrence of both (i) and (ii), and (iv) all amounts referred to in
clause (ii) have been applied in accordance with the Pooling and Servicing
Agreement, then any amounts remaining in the Interest Reserve Account
shall be distributed to the Depositor free and clear of the Lien and
security interest established hereunder.)
Section 3.04. General Provisions Regarding Accounts. (a) Promptly
-------------------------------------
upon the establishment (initially or upon any relocation) of an Account
hereunder, the Collateral Agent shall advise the Depositor in writing of
the name and address of the depository institution or trust company where
such Account has been established (if not ______________________ or any
successor Collateral Agent in its commercial banking capacity), the name
of the officer of the depository institution who is responsible for
overseeing such Account, the account number and the individuals whose
names appear on the signature cards for such Account. The Collateral
Agent shall cause each such depository institution or trust company to
execute a written agreement waiving, and the Collateral Agent by its
execution of this Agreement hereby waives (except to the extent expressly
provided herein), in each case to the extent permitted under applicable
law, (i) any banker's or other statutory or similar Lien and (ii) any
right of set-off or other similar right under applicable law with respect
to such Account and any other Account and agreeing, and the Collateral
Agent by its execution of this Agreement hereby agrees, to notify the
Depositor and the Secured Party of any charge or claim against or with
respect to such Account. The Collateral Agent shall give the Depositor
and the Secured Party at least ten business days' prior written notice of
any change in the location of an Account or in any related account
information.
(b) Upon the written request of the Depositor, the Collateral Agent
shall cause the depository institution at which the Accounts are located
to forward to the Depositor, at the Depositor's expense, copies of all
monthly account statements for the Accounts.
(c) If at any time an Account ceases to be an Eligible Deposit
Account, the Collateral Agent shall establish within ______ business days
of such determination, in accordance with Section 3.01, a successor
Account thereto, which shall be an Eligible Deposit Account, at another
depository institution acceptable to the Secured Party.
Section 3.05. Reports by the Collateral Agent. The Collateral Agent
-------------------------------
shall report to the Depositor, the Trustee and the Servicer on a monthly
basis no later than each Distribution Date with respect to the amount on
deposit in each Account and the identity of the investments included
therein as of the last day of the related Collection Period, and shall
provide accountings of deposits into and withdrawals from the Accounts and
of the investments held therein, upon the request of the Servicer, the
Depositor or the Trustee.
ARTICLE IV.
COLLATERAL AGENT
Section 4.01. Appointment and Powers. Subject to the terms and
----------------------
conditions hereof, the Depositor hereby appoints
_____________________________ as the Collateral Agent with respect to the
Collateral, and _____________________________ hereby accepts such
appointment and agrees to act as Collateral Agent with respect to the
Collateral for the Secured Party, to maintain custody and possession of
the Collateral (except as otherwise provided hereunder) and to perform the
other duties of the Collateral Agent in accordance with the provisions of
this Agreement. The Secured Party hereby authorizes the Collateral Agent
to take such action on its behalf, and to exercise such rights, remedies,
powers and privileges hereunder, as the Secured Party may direct and as
are specifically authorized to be exercised by the Collateral Agent by the
terms hereof, together with such actions, rights, remedies, powers, and
privileges as are reasonably incidental thereto. The Collateral Agent
shall act upon and in compliance with the written instructions of the
Secured Party delivered pursuant to this Agreement promptly following
receipt of such written instructions; provided that the Collateral Agent
shall not act in accordance with any instructions (i) that are not
authorized by, or are in violation of the provisions of, this Agreement,
(ii) that are in violation of any applicable law, rule or regulation or
(iii) for which the Collateral Agent has not received reasonable
indemnity. Receipt of such instructions shall not be a condition to the
exercise by the Collateral Agent of its express duties hereunder, except
where this Agreement provides that the Collateral Agent is permitted to
act only following and in accordance with such instructions.
Section 4.02. Performance of Duties. The Collateral Agent shall
---------------------
have no duties or responsibilities except those expressly set forth in
this Agreement and the other Basic Documents or, subject to Section 4.01
above, as directed by the Secured Party in accordance with this Agreement.
Section 4.03. Limitation on Liability. Neither the Collateral Agent
-----------------------
nor any of its directors, officers or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Collateral Agent shall be liable for
its negligence, bad faith or willful misconduct; nor shall the Collateral
Agent be responsible for the validity, effectiveness, value, sufficiency,
or enforceability against the Depositor of this Agreement or any of the
Collateral (or any part thereof). Notwithstanding any term or provision
of this Agreement, the Collateral Agent shall incur no liability to the
Depositor or the Secured Party for any action taken or omitted by the
Collateral Agent in connection with the Collateral, except for the
negligence or willful misconduct of the Collateral Agent, and, further,
shall incur no liability to the Secured Party except for negligence or
willful misconduct in carrying out its duties to the Secured Party.
Subject to Section 4.04, the Collateral Agent shall be protected and shall
incur no liability to any party in relying upon the accuracy, acting in
reliance upon the contents and assuming the genuineness of any notice,
demand, certificate, signature, instrument, or other document reasonably
believed by the Collateral Agent to be genuine and to have been duly
executed by the appropriate signatory, and (absent actual knowledge to the
contrary) the Collateral Agent shall not be required to make any
independent investigation with respect thereto. The Collateral Agent
shall at all times be free independently to establish to its reasonable
satisfaction, but shall have no duty to independently verify, the
existence or nonexistence of facts that are a condition to the exercise or
enforcement of any right or remedy hereunder or under any of the Basic
Documents. The Collateral Agent may consult with counsel and shall not be
liable for any action taken or omitted to be taken by it hereunder in good
faith and in accordance with the written advice of such counsel. The
Collateral Agent shall not be under any obligation to exercise any of the
remedial rights or powers vested in it by this Agreement or to follow any
direction from the Secured Party unless it shall have received reasonable
security or indemnity satisfactory to the Collateral Agent against the
costs, expenses and liabilities that might be incurred by it.
Section 4.04. Reliance upon Documents. In the absence of bad faith
-----------------------
or negligence on its part, the Collateral Agent shall be entitled to rely
on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent
by the proper Person or Persons and shall have no liability in acting or
omitting to act, where such action or omission to act is in reasonable
reliance upon any statement or opinion contained in any such document or
instrument.
Section 4.05. Successor Collateral Agent. (a) Merger. Any Person
--------------------------
into which the Collateral Agent may be converted or merged, or with which
it may be consolidated, or to which it may sell or transfer its trust
business and assets as a whole or substantially as a whole, or any Person
resulting from any such conversion, merger, consolidation, sale or
transfer to which the Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Collateral Agent hereunder) be and
become the successor Collateral Agent hereunder and be vested with all of
the title to and interest in the Collateral and all of the trusts, powers,
discretions, immunities, privileges, and other matters as was its
predecessor, without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, except to the extent, if
any, that any such action is necessary to perfect, or continue the
perfection of, the security interest of the Secured Party in the
Collateral.
(b) Resignation. The Collateral Agent and any successor Collateral
Agent may resign only (i) upon a determination that by reason of a change
in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner
that would result in a material adverse effect on the Collateral Agent or
(ii) with the prior written consent of the Depositor. The Collateral
Agent shall give not less than 60 days' prior written notice of any such
permitted resignation by registered or certified mail to the Secured Party
and the Depositor; provided, that such resignation shall take effect only
upon the date that is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing
by such successor Collateral Agent of such appointment and of its
obligation to perform its duties hereunder in accordance with the
provisions hereof, (ii) delivery of the Collateral to such successor to be
held in accordance with the procedures specified in Article II hereof and
(iii) receipt by the Depositor of an Opinion of Counsel to the effect
described in Section 5.02. Notwithstanding the preceding sentence, if by
the contemplated date of resignation specified in the written notice of
resignation delivered as described above, no successor Collateral Agent or
temporary successor Collateral Agent has been appointed Collateral Agent
or become the Collateral Agent pursuant to subsection (d) hereof, the
resigning Collateral Agent may petition a court of competent jurisdiction
in New York, New York for the appointment of a successor.
(c) Removal. The Collateral Agent may be removed by the Depositor
at any time, with or without cause, by an instrument or concurrent
instruments in writing delivered to the Collateral Agent and the Secured
Party. A temporary successor may be removed at any time to allow a
successor Collateral Agent to be appointed pursuant to subsection (d)
below. Any removal pursuant to the provisions of this subsection (c)
shall take effect only upon the date that is the latest of (i) the
effective date of the appointment of a successor Collateral Agent and the
acceptance in writing by such successor Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in
accordance with the provisions hereof, (ii) delivery of the Collateral to
such successor to be held in accordance with the procedures specified in
Article II hereof and (iii) receipt by the Depositor of an Opinion of
Counsel to the effect described in Section 5.02.
(d) Acceptance by Successor. Every temporary or permanent successor
Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to the Secured Party and the Depositor an
instrument in writing accepting such appointment hereunder, and the
relevant predecessor shall execute, acknowledge and deliver such other
documents and instruments as will effectuate the delivery of all
Collateral to the successor Collateral Agent to be held in accordance with
the procedures specified in Article II hereof, whereupon such successor,
without any further act, deed or conveyance, shall become fully vested
with all the estates, properties, rights, powers, duties, and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written
request of the Secured Party or the Depositor, execute and deliver an
instrument transferring to such successor all the estates, properties,
rights and powers of such predecessor hereunder. In the event that any
instrument in writing from the Depositor or the Secured Party is
reasonably required by a successor Collateral Agent to more fully and
certainly vest in such successor the estates, properties, rights, powers,
duties, and obligations vested or intended to be vested hereunder in the
Collateral Agent, any and all such written instruments shall, at the
request of the temporary or permanent successor Collateral Agent, be
forthwith executed, acknowledged and delivered by the Depositor or the
Secured Party, as applicable. The instrument or instruments removing any
Collateral Agent and appointing a successor hereunder, together with all
other instruments provided for herein, shall be maintained with the
records relating to the Collateral and, to the extent required by
applicable law, filed or recorded by the successor Collateral Agent in
each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to perfect
or continue the perfection of the security interests granted hereunder.
Section 4.06. Indemnification. The Depositor shall indemnify the
---------------
Collateral Agent, its directors, officers, employees and agents for, and
hold the Collateral Agent, its directors, officers, employees and agents
harmless against, any loss, liability or expense (including the costs and
expenses of defending against any claim or liability) arising out of or in
connection with the Collateral Agent's acting as Collateral Agent
hereunder, except such loss, liability or expense as shall result from the
negligence, bad faith or willful misconduct of the Collateral Agent or its
directors, officers, employees or agents. The obligation of the Depositor
under this Section shall survive the termination of this Agreement and the
resignation or removal of the Collateral Agent. The Collateral Agent
covenants and agrees that the obligations of the Depositor hereunder and
under Section 4.07 shall be limited to the extent provided in Section
2.06, and further covenants not to take any action to enforce its rights
to indemnification hereunder with respect to the Depositor and to payment
under Section 4.07 except in accordance with the provisions of Section
7.05, or otherwise to assert any Lien or take any other action in respect
of the Collateral or the assets of the Trust.
Section 4.07. Compensation and Reimbursement. The Depositor agrees
------------------------------
for the benefit of the Secured Party and as part of the Secured
Obligations (a) to pay to the Collateral Agent, from time to time,
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a collateral trustee); and (b) to reimburse the Collateral
Agent upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Collateral Agent in accordance with any
provision of, or in carrying out its duties and obligations under, this
Agreement (including the reasonable compensation and fees and the expenses
and disbursements of its agents, any independent certified public
accountants and independent counsel), except any expense, disbursement or
advance as may be attributable to negligence, bad faith or willful
misconduct on the part of the Collateral Agent.
Section 4.08. Representations and Warranties of the Collateral
------------------------------------------------
Agent. The Collateral Agent represents and warrants to the Depositor and
- -----
to the Secured Party as follows:
(a) Due Organization. The Collateral Agent is a ____________
banking corporation, duly organized, validly existing and in good standing
under the laws of the State of _____________, and is duly authorized and
licensed under applicable law to conduct its business as presently conducted.
(b) Corporate Power. The Collateral Agent has all requisite
right, power and authority to execute and deliver this Agreement and to
perform all of its duties as Collateral Agent hereunder.
(c) Due Authorization. The execution and delivery by the
Collateral Agent of this Agreement and the other Basic Documents to which it
is a party and the performance by the Collateral Agent of its duties
hereunder and thereunder have been duly authorized by all necessary corporate
proceedings, and no further approvals or filings, including any governmental
approvals, are required for the valid execution and delivery by the
Collateral Agent, or the performance by the Collateral Agent, of this
Agreement and the other Basic Documents.
(d) Valid and Binding Agreement. The Collateral Agent has duly
executed and delivered this Agreement and each other Basic Document to which
it is a party, and each of this Agreement and each such other Basic Document
constitutes the legal, valid and binding obligation of the Collateral Agent,
enforceable against the Collateral Agent in accordance with its terms, except
as (i) such enforceability may be limited by bankruptcy, insolvency, reorgan-
ization and similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
Section 4.09. Waiver of Setoffs. The Collateral Agent hereby
-----------------
expressly waives any and all rights of setoff that the Collateral Agent
may otherwise at any time have under applicable law with respect to the
Accounts and agrees that amounts in the Accounts shall at all times be
held and applied solely in accordance with the provisions hereof.
ARTICLE V.
COVENANTS OF THE DEPOSITOR
Section 5.01. Preservation of Collateral. Subject to the rights,
--------------------------
powers and authorities granted to the Collateral Agent in this Agreement,
the Depositor shall take such action as is necessary and proper with
respect to the Collateral in order to preserve and maintain such
Collateral and to cause (subject to the rights of the Secured Party) the
Collateral Agent to perform its obligations with respect to such
Collateral as provided herein. The Depositor will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such instruments of transfer or take such other steps or
actions as may be necessary to perfect the Security Interest granted
hereunder in the Collateral, to ensure that such Security Interest ranks
prior to all other Liens and to preserve the priority of the Security
Interest and the validity and enforceability thereof. Upon any delivery
or substitution of Collateral, the Depositor shall be obligated to execute
such documents and perform such actions as are necessary to create in the
Collateral Agent for the benefit of the Secured Party a valid first Lien
on, and valid and perfected, first priority security interest in, the
Collateral so delivered and to deliver such Collateral to the Collateral
Agent free and clear of any other Lien, together with satisfactory
assurances thereof, and to pay any reasonable costs incurred by the
Secured Party or the Collateral Agent (including its agents) or otherwise
in connection with such delivery.
Section 5.02. Opinions as to Collateral. Not less than 10 days
-------------------------
prior to each date on which the Depositor proposes to take any action
contemplated by Section 5.06, the Depositor shall, at its own cost and
expense, furnish to the Secured Party and the Collateral Agent an Opinion
of Counsel stating that, in the opinion of such counsel, either (a) such
action has been taken with respect to the execution and filing of any
financing statements and continuation statements and other actions as are
necessary to perfect, maintain and protect the lien and security interest
of the Collateral Agent (and the priority thereof), on behalf of the
Secured Party, with respect to the Collateral against all creditors of and
purchasers from the Depositor and reciting the details of such action, or
(b) no such action is necessary to maintain such perfected lien and
security interest. Such Opinion of Counsel shall further describe each
execution and filing of any financing statements and continuation
statements and such other actions as will, in the opinion of such counsel,
be required to perfect, maintain and protect the lien and security
interest of the Collateral Agent, on behalf of the Secured Party, with
respect to the Collateral against all creditors of and purchasers from the
Depositor for a period specified in such Opinion that shall end earlier
than eighteen months from the date of such Opinion.
Section 5.03. Notices. In the event that the Depositor acquires
-------
knowledge of the occurrence and continuance of any event of default or
like event, howsoever described or called, under any of the Basic
Documents, the Depositor shall immediately give notice thereof to the
Collateral Agent and the Secured Party.
Section 5.04. Waiver of Stay or Extension Laws. The Depositor
--------------------------------
covenants, to the fullest extent permitted by applicable law, that it will
not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of any appraisement, valuation, stay,
extension or redemption law wherever enacted, now or at any time hereafter
in force, in order to prevent or hinder the enforcement of this Agreement;
and the Depositor, to the fullest extent permitted by applicable law, for
itself and all who may claim under it, hereby waives the benefit of all
such laws and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Collateral Agent, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
Section 5.05. Noninterference, etc. The Depositor shall not (i)
---------------------
waive or alter any of its rights under the Collateral (or any agreement or
instrument relating thereto) without the prior written consent of the
Secured Party; or (ii) fail to pay any tax, assessment, charge or fee
levied or assessed against the Collateral or to defend any action, if such
failure to pay or defend might adversely affect the priority or
enforceability of the Depositor's right, title or interest in and to the
Collateral or the Collateral Agent's lien on, and security interest in,
the Collateral for the benefit of the Secured Party; or (iii) take any
action, or fail to take any action, if such action or failure to take
action will interfere with the enforcement of any rights under the Basic
Documents.
Section 5.06. Depositor Changes. (a) Change in Name, Structure,
-----------------
etc. The Depositor shall not change its name, identity or corporate
structure unless it shall have given the Secured Party and the Collateral
Agent at least 10 days' prior written notice thereof, shall have effected
any necessary or appropriate assignments or amendments thereto and filings
of financing statements or amendments thereto, and shall have delivered to
the Collateral Agent and the Secured Party an Opinion of Counsel of the
type described in Section 5.02.
(b) Relocation of the Depositor. The Depositor shall not change the
location of its principal executive office unless it gives the Secured
Party and the Collateral Agent at least 10 days' prior written notice of
such relocation. If the Depositor relocates its principal executive
office or principal place of business from 570 Lake Cook Road, Suite 126B,
Deerfield, IL 60015, the Depositor shall give prior notice thereof to the
Collateral Agent and shall effect whatever appropriate recordations and
filings are necessary and shall provide an Opinion of Counsel to the
Collateral Agent to the effect that, upon the recording of any necessary
assignments or amendments to previously recorded assignments and the
filing of any necessary amendments to the previously filed financing or
continuation statements or upon the filing of one or more specified new
financing statements and the taking of such other actions as may be
specified in such opinion, the security interests in the Collateral shall
remain, after such relocation, valid and perfected.
ARTICLE VI.
REMEDIES UPON DEFAULT
Section 6.01. Remedies upon a Default. If an event of default or
-----------------------
similar event has occurred and is continuing, the Collateral Agent shall,
at the direction of the Secured Party, take whatever action at law or in
equity as may appear necessary or desirable in the judgment of the Secured
Party to collect and satisfy all outstanding Secured Obligations,
including foreclosure upon the Collateral and all other rights available
to secured parties under applicable law, or to enforce performance and
observance of any obligation, agreement or covenant under any of the Basic
Documents.
Section 6.02. Restoration of Rights and Remedies. If the Collateral
----------------------------------
Agent has instituted any proceeding to enforce any right or remedy under
this Agreement, and such proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Collateral Agent, then
and in every such case, the Depositor, the Collateral Agent and the
Secured Party shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder,
and thereafter all rights and remedies of the Secured Party shall continue
as though no such proceeding had been instituted.
Section 6.03. No Remedy Exclusive. No right or remedy herein
-------------------
conferred upon or reserved to the Collateral Agent or the Secured Party is
intended to be exclusive of any other right or remedy, and every right or
remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or
hereafter existing at law, in equity or otherwise (but, in each case,
shall be subject to the provisions of this Agreement limiting such
remedies), and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and
as often and in such order as may be deemed expedient by the Collateral
Agent, and the exercise of or the beginning of the exercise of any right
or power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy.
ARTICLE VII.
MISCELLANEOUS
Section 7.01. Further Assurances. Each party hereto shall take such
------------------
action and deliver such instruments to any other party hereto, in addition
to the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions
of this Agreement or to confirm or perfect any transaction described or
contemplated herein.
Section 7.02. Waiver. Any waiver by any party of any provision of
------
this Agreement or of any right, remedy or option hereunder shall only
prevent and stop such party from thereafter enforcing such provision,
right, remedy or option if such waiver is given in writing and only as to
the specific instance and for the specific purpose for which such waiver
was given. The failure or refusal of any party hereto to insist in any
one or more instances or in a course of dealing upon the strict
performance of any of the terms or provisions of this Agreement by any
party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of the
right to require the performance of any such term or provision, but the
same shall continue in full force and effect.
Section 7.03. Amendments; Waivers. No amendment, modification,
-------------------
waiver or supplement to this Agreement or any provision of this Agreement
shall in any event be effective unless the same shall have been made or
consented to in writing by each of the parties hereto and each Rating
Agency shall have confirmed in writing that such amendment will not cause
a reduction or withdrawal of a rating of the Certificates.
Section 7.04. Severability. In the event that any provision of this
------------
Agreement or the application thereof to any party hereto or to any
circumstance or in any jurisdiction governing this Agreement shall, to any
extent, be invalid or unenforceable under any applicable statute,
regulation or rule of law, then such provision shall be deemed inoperative
to the extent that it is invalid or unenforceable, and the remainder of
this Agreement, and the application of any such invalid or unenforceable
provision to the parties or in jurisdictions or circumstances other than
those to whom or in which it is held invalid or unenforceable, shall not
be affected thereby nor shall the same affect the validity or
enforceability of any other provision of this Agreement. The parties
hereto further agree that the holding by any court of competent
jurisdiction that any remedy pursued by the Collateral Agent or the
Secured Party hereunder is unavailable or unenforceable shall not affect
in any way the ability of the Collateral Agent or the Secured Party to
pursue any other remedy available to it (subject, however, to the
provisions of this Agreement limiting such remedies).
Section 7.05. Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Agreement, each of the parties hereto agrees that it
shall not, prior to one year and one day after the date on which the
Certificate Balance has been reduced to zero, acquiesce, petition or
otherwise invoke or cause the Depositor to invoke the process of the
United States of America, any State or other political subdivision thereof
or any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government for the purpose of
commencing or sustaining a case by or against the Depositor or the Trust
under a federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Depositor or the Trust or
all or any part of its property or assets, or ordering the winding up or
liquidation of the affairs of the Depositor or the Trust. The parties
agree that damages would be an inadequate remedy for breach of this
covenant and that this covenant may be specifically enforced.
Section 7.06. Notices. All notices, demands, certificates,
-------
requests, and communications hereunder ("notices") shall be in writing and
shall be effective (a) upon receipt when sent through the U.S. mails, by
registered or certified mail, return receipt requested, postage prepaid,
with such receipt to be effective the date of delivery indicated on the
return receipt, or (b) one business day after delivery to an overnight
courier or (c) on the date personally delivered to an Authorized Officer
of the party to which sent or (d) on the date transmitted by legible
telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Depositor:
First Merchants Auto Receivables
Corporation ( )
570 Lake Cook Road, Suite 126B
Deerfield, IL 60015
Attention: ________________________
Telecopier No.: (847) 948-9303
(ii) If to the Trustee:
__________________________________
__________________________________
__________________________________
Attention:________________________
Telecopier No.: ___________________
(iii) If to the Collateral Agent:
__________________________________
__________________________________
__________________________________
Attention:________________________
Telecopier No.: __________________
(iv) If to the Rating Agencies:
__________________________________
__________________________________
__________________________________
Telecopier No.: ___________________
A copy of each notice given hereunder to any party hereto shall also be
given to (without duplication) the Depositor, the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance
herewith to each of the other parties hereto, designate any further or
different address to which subsequent notices shall be sent.
Section 7.07. Term of this Agreement. This Agreement shall take
----------------------
effect on the Closing Date and shall continue in effect until the
Distribution immediately following the termination of the Funding Period.
On such date, this Agreement shall terminate, all obligations of the
parties hereunder shall cease and terminate, and the Collateral, if any,
held hereunder and not to be used or applied in discharge of any
obligations of the Depositor in respect of the Secured Obligations or
otherwise under this Agreement shall be released to and in favor of the
Depositor; provided that the provisions of Sections 4.06, 4.07 and 7.05
shall survive any termination of this Agreement and the release of any
Collateral upon such termination.
Section 7.08. Assignments; Third-Party Rights. This Agreement shall
-------------------------------
be a continuing obligation of the parties hereto and shall (i) be binding
upon the parties and their respective successors and assigns and (ii)
inure to the benefit of the Secured Party and be enforceable by the
Collateral Agent and by their respective successors, transferees and
assigns. The Depositor may not assign this Agreement or delegate any of
its duties hereunder without the prior written consent of the Secured
Party.
Section 7.09. Trial by Jury Waived. Each of the parties hereto
--------------------
waives, to the fullest extent permitted by law, any right it may have to a
trial by jury in respect of any litigation arising directly or indirectly
out of, under or in connection with this Agreement, any of the other Basic
Documents or any of the transactions contemplated hereunder or thereunder.
Each of the parties hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce
the foregoing waiver and (b) acknowledges that it has been induced to
enter into this Agreement and the other Basic Documents to which it is a
party, by among other things, this waiver.
Section 7.10. Governing Law. This Agreement shall be governed by
-------------
and construed, and the obligations, rights and remedies of the parties
hereunder shall be determined, in accordance with, the laws of the State
of New York.
Section 7.11. Consents to Jurisdiction. Each of the parties hereto
------------------------
irrevocably submits to the jurisdiction of the United States District
Court for the Southern District of New York, any court in the state of New
York located in the City of New York, and any appellate court from any
thereof, in any action, suit or proceeding brought against it and related
to or in connection with this Agreement, the other Basic Documents or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment, and each of the parties hereto irrevocably
and unconditionally agrees that all claims in respect of any such suit or
action or proceeding may be heard or determined in such New York State
court or, to the extent permitted by law, in such federal court. Each of
the parties hereto agrees that a final judgment in any such action, suit
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. To the extent permitted by applicable law, each of the parties
hereby waives and agrees not to assert by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Agreement or
any of the other Basic Documents or the subject matter hereof or thereof
may not be litigated in or by such courts.
Section 7.12. Counterparts. This Agreement may be executed in two
------------
or more counterparts by the parties hereto, and each such counterpart
shall be considered an original and all such counterparts shall constitute
one and the same instrument.
Section 7.13. Headings. The headings of sections and paragraphs and
--------
the Table of Contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not
affect its construction or interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date set forth on the first page hereof.
FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION ( )
as Depositor
By:
---------------------------
Name:
Title:
_____________________________,
as Trustee
By:
---------------------------
Name:
Title:
_____________________________,
as Collateral Agent
By:
---------------------------
Name:
Title:
