UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ________ to _______.
Commission File No. 0-24686
FIRST MERCHANTS ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
36-3759045
(I.R.S. Employer Identification Number)
570 Lake Cook Road, Suite 126, Deerfield, Illinois 60015
(Address of principal executive offices)
(847) 948-9300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.01 par value, 6,525,519 shares outstanding as of August
1, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
FIRST MERCHANTS ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands except par values)
<CAPTION>
June 30 December 31
1996 1995
------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Net finance receivables $ 313,606 $ 251,908
Allowance for credit losses (18,829) (14,301)
------------- -------------
Net receivables 294,777 237,607
------------- -------------
Finance receivables
held for sale, net 26,221 32,265
Excess servicing receivable 13,002 -
Cash 711 112
Restricted cash 17,774 6,808
Repossessed collateral 3,336 2,305
Property and equipment, net 3,618 1,624
Other assets 2,666 1,553
------------- -------------
Total assets $362,105 $ 282,274
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Borrowings under senior
revolving credit facility $ 69,825 $ 104,000
Notes payable-securitized pools 172,866 70,378
Accounts payable and
accrued expenses 10,372 5,765
Interest payable 966 471
Dealer reserves 415 553
Income taxes 3,241 2,932
------------- -------------
257,685 184,099
------------- -------------
Subordinated reset notes, net 13,953 13,896
------------- -------------
Total liabilities 271,638 197,995
------------- -------------
Stockholders' equity:
Preferred stock - $100 par value,
500 shares authorized,
no shares issued and outstanding - -
Common stock - $.01 par value:
Non-voting - 300 shares
authorized, no shares issued
and outstanding at June 30,
1996 and December 31, 1995 - -
Voting - 20,000 shares
authorized, 6,526 shares
issued and outstanding at June
30, 1996 and December 31, 1995 65 65
Additional paid-in-capital 75,078 75,102
Retained earnings 15,324 9,112
------------- -------------
Total stockholders' equity 90,467 84,279
------------- -------------
Total liabilities and
stockholders' equity $ 362,105 $ 282,274
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
FIRST MERCHANTS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Thousands except per share data)
<CAPTION> Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------ -----------------
<S> <C> <C>
Revenues:
Interest income-finance
contracts $ 18,330 8,276 $ 35,480 14,487
Other portfolio income 459 262 965 479
Gain on sale of finance
receivables 5,087 - 8,092 -
Servicing fee and other income 704 - 868 -
------- ------- ------ ------
Total Revenues 24,580 8,538 45,405 14,966
------- ------- ------ ------
Expenses:
Interest expense 5,107 2,584 9,671 4,367
Provision for credit losses 4,200 125 7,700 125
Operating expenses:
Employee compensation and related
costs 5,911 2,196 10,769 4,007
Other operating expenses 4,132 1,431 7,081 2,381
------ ----- ------ -----
Total Expenses 19,350 6,336 35,221 10,880
------ ----- ------ ------
Earnings before income taxes 5,230 2,202 10,184 4,086
Income taxes 2,040 837 3,972 1,553
----- ----- ------ -----
Net earnings $ 3,190 1,365 6,212 2,533
===== ===== ===== =====
Net earnings per share $ 0.47 0.31 0.92 0.57
===== ===== ===== =====
Weighted average number of common
and common equivalent shares
outstanding 6,780 4,470 6,754 4,463
====== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
FIRST MERCHANTS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
-----------------------------------------
<S> <C> <C>
Cash flows from operating
activities:
Interest income received -
finance contracts $ 18,550 8,448 $35,885 14,802
Servicing fees received 571 - 735 -
Ancillary and other operating
receipts 518 254 1,088 467
Purchases of finance
receivables, held for sale,
net (79,442) - (140,130) -
Proceeds from sale of finance
receivables, held for sale,
net 88,761 - 141,398 -
Payments for operating
expenses (8,207) (3,298) (16,122) (5,505)
Payments for interest and
borrowing fees (4,918) (1,593) (8,615) (2,834)
Income taxes paid (2,631) (66) (3,663) (199)
-------- ------- ------- -------
Net cash flows from operating
activities 13,202 3,745 10,576 6,731
-------- ------- ------- -------
Cash flows from investing
activities:
Purchases of
finance contracts, net (58,604) (51,285) (124,360) (93,632)
Principal payments received
on finance contracts, net 37,928 16,813 60,204 28,015
Purchases of property and
equipment (1,439) (304) (2,314) (560)
Increase in restricted cash (10,267) - (10,966) (490)
-------- ------- -------- -------
Net cash flows from investing
activities (32,382) (34,776) (77,436) (66,667)
--------- -------- -------- --------
Cash flows from
financing activities:
Proceeds from
issuance of subordinated
debt, net - - - 13,530
Proceeds from issuance of
notes payable- securitized
pools, net 124,989 124,989
Repayment of notes payable-
securitized pools (15,511) - (23,331) -
Net (decrease) increase in
borrowings under senior
revolving credit facility (89,700) 31,075 (34,175) 46,375
Other - (26) (24) (26)
------- -------- ------- ------
Net cash flows from financing
activities 19,778 31,049 67,459 59,879
------- -------- ------ ------
Net increase (decrease)
in cash 598 18 599 (57)
Cash balance beginning of
period 113 61 112 136
----- ------ ------ -----
Cash balance end of period $ 711 79 711 79
====== ====== ====== ======
<CAPTION>
Reconciliation of net earnings to net cash flows
from operating activities:
<S> <C> <C>
Net earnings $ 3,190 1,365 6,212 2,533
Amortization of contract
acquisition costs and
discounts, net 279 201 529 353
Provision for credit losses 4,200 125 7,700 125
Depreciation 199 99 319 153
Amortization of debt issuance
costs and other 274 251 757 388
Provision for deferred
income taxes 404 125 786 229
Increase in other
assets (234) (79) (965) (150)
Decrease in finance
receivables held for sale,
net 10,828 - 6,044 -
Gain on sale of finance
receivables and other increases
in excess servicing fee
receivables (6,730) - (13,002) -
Increase in accounts payable
and accrued expenses 1,787 243 2,178 756
Increase in interest payable - 769 495 1,219
Increase (Decrease)
in income taxes (995) 646 (477) 1,125
------ ------ ------ ------
Net cash flows from operating
activities $ 13,202 3,745 10,576 6,731
======== ======== ====== =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST MERCHANTS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
First Merchants Acceptance Corporation and its wholly owned subsidiaries (the
"Company") operate as a specialty consumer finance company engaged in
financing the purchase of automobiles through the acquisition of dealer-
originated retail installment contracts ("finance contracts") collateralized
by the underlying automobiles. The Company was incorporated on March 22,
1991 in Delaware and commenced operations on June 1, 1991.
The unaudited interim consolidated financial statements of the Company, in
the opinion of management, reflect all necessary adjustments, consisting only
of normal recurring adjustments, for a fair presentation of results as of
the dates and for the interim periods covered by the financial statements.
The results for the interim periods are not necessarily indicative of the
results of operations to be expected for the entire year.
The unaudited interim consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and reporting
practices. Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission; however the Company
believes the disclosures are adequate to make the information not misleading.
The unaudited interim consolidated financial statements contained herein
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report to Stockholders for the year
ended December 31, 1995.
Certain amounts in the December 31, 1995 financial statements have been
reclassified to conform with current financial statement presentation.
The consolidated financial statements include accounts of the Company and its
wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
2. Finance Receivables
The finance contracts generally have terms of 18 to 60 months. Net finance
receivable balances consisted of the following at June 30, 1996 and December
31, 1995:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
------------------------------
(Dollars in Thousands)
<S> <C> <C>
Precomputed interest
contracts, net $259,462 $222,931
Simple interest contracts 54,144 28,977
---------- ----------
Net finance receivables $313,606 $251,908
=========== ===========
</TABLE>
Precomputed interest contracts are shown net of unearned finance charges of
$101,218 and $89,319 at June 30, 1996 and December 31, 1995, respectively.
Activity in the allowance for credit losses and contract acquisition discount
for the three months ended and six months ended June 30, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
(Dollars in Thousands)
1996 1995 1996 1995
<S> <C> <C>
Allowance for Credit Losses:
Balance - beginning
of period $17,947 $7,422 $ 14,301 $ 4,489
Discounts allocated to
allowance for credit
losses, net 2,424 3,798 7,456 6,935
Provision for credit losses 4,200 125 7,700 125
Charge-offs, net (5,742) (1,550) (10,628) (1,754)
--------- -------- -------- -------
Balance-end of period $18,829 $9,795 $18,829 $9,795
======= ======= ======= ======
Contract Acquisition
Discount:
Balance-beginning
of period $ - $ 433 $ - $1,401
Amortized to interest
income - - - (13)
Charge-offs, net - (374) - (1,297)
Other - - - (32)
-------- ------- ------ -------
Balance-end of period $ - $ 59 $ - $ 59
======== ======== ======= =========
Summary of Net Charge-offs:
Charge-offs - allowance
for credit losses $6,231 $1,673 11,449 1,964
Recoveries - allowance for
credit losses (489) (123) (821) (210)
------- ------ ----- ------
Charge-offs, net 5,742 1,550 10,628 1,754
Charge-offs - contract
acquisition discount - 374 - 1,297
-------- ------- ------- ------
Total net charge-offs $5,742 $1,924 $10,628 $3,051
======== ======== ======= ======
</TABLE>
3. Excess Servicing Receivable
Excess servicing receivable includes the Company's subordinated interest in
the First Merchants Grantor Trust 1996-1 (the "Trust 1996-1") and First
Merchants Grantor Trust 1996-2 (the "Trust 1996-2") together known as
(the "Trusts"). The excess servicing receivable is equal to the present value
of estimated future collections and recoveries on the finance receivables
sold to the Trusts, less the present value of required principal and interest
payments to the investors, base servicing fees payable to the Company at an
annual rate of 2.5% of finance receivables serviced and certain other fees.
The calculation of excess servicing includes estimates of future credit
losses and prepayment rates for the remaining term of the finance receivables
sold because these factors impact the amount and timing of future collections
and recoveries on the pool of finance receivables. If future credit losses
and prepayment rates exceed the Company's estimates, the excess servicing
receivable will be adjusted through a charge to operations. Favorable
credit loss and prepayment experience compared to the Company's estimates
would result in additional servicing fee income. The excess servicing
receivable is amortized using the interest method against realized excess
servicing fee income.
Excess servicing receivable consists of the following:
<TABLE>
<CAPTION>
June 30,
1996
------------
(Dollars in
Thousands)
<S> <C> <C>
Estimated future net cash flows before
allowance for credit losses $30,635
Allowance for credit losses (14,140)
---------
Estimated future net cash flows 16,495
Unamortized discount (3,493)
---------
Balance at June 30, 1996 $13,002
==========
</TABLE>
4. Senior Revolving Credit Facility
As of June 30, 1996, the Company had a $205.0 million senior revolving credit
facility (the "Senior Revolving Credit Facility") with a group of nine banks.
Borrowings under the Senior Revolving Credit Facility are secured by
certain assets of the Company. The Company has the option to either borrow at
LIBOR plus 1.60% or at the reference prime rate. The average interest rate on
the Senior Revolving Credit Facility was 7.33%, 8.26%, 7.32% and 8.42% for
the three months ended and six months ended June 30, 1996 and 1995,
respectively. At June 30, 1996 and December 31, 1995 the interest rate on
these borrowings was 7.14% and 7.39%, respectively. The Senior Revolving
Credit Facility expires June 30, 1997. The Senior Revolving Credit Facility
requires the Company to maintain specified financial ratios and to comply with
other covenants. The Company was in compliance with these ratios and covenants
at June 30, 1996.
5. Notes Payable - Securitized Pool
On November 17, 1995, the Company completed a $75.1 million debt financing
consisting of 6.20% automobile receivable-backed notes, Series 1995-A. The
Series 1995-A notes were issued by First Merchants Auto Receivable
Corporation, a wholly-owned special purpose subsidiary of First Merchants
Acceptance Corporation.
On May 21, 1996, the Company completed a $125.9 million debt financing
consisting of automobile receivable-backed notes, Series 1996-A. Of these
notes, $85.0 million have a floating interest rate of 0.17% over the one-month
LIBOR and the remaining $40.9 million have a fixed interest rate of 6.70%.
The Series 1996-A notes were issued by First Merchants Auto Trust 1996-A, a
trust formed specifically for purposes of the securitization structure.
In an effort to reduce the Company's exposure to increases in borrowing costs,
on May 21, 1996, the Company entered into an interest rate swap agreement with
an initial notional amount of $85.0 million, whereby the Company pays a fixed
rate of 5.98% and receives a variable rate of one month LIBOR. The notional
amount declines, as specified in the swap agreement, at each month-end during
the term of the agreement, which expires May, 1998. At June 30, 1996, the
notional amount was $76.7 million and one month LIBOR was 5.50%.
The proceeds the Company received from the issuance of notes under Series
1995-A and Series 1996-A were used to repay indebtedness under the Senior
Revolving Credit Facility. Principal and interest on the notes are payable
monthly from collections and recoveries in the pools of finance receivables.
Financial Security Assurance Inc. ("FSA")issued a financial guaranty
insurance policy for the benefit of the noteholders.
The Company is required to establish and maintain cash reserve and collection
accounts with a trustee with respect to the securitized pools of finance
receivables. The amounts set aside would be used to supplement certain
shortfalls in payments, if any, to investors. These balances are subject to
an increase up to a maximum amount as specified in the securitization indentures
and are invested in certain instruments as permitted by the trust agreements.
To the extent balances on deposit exceed specified levels, distributions are
made to the Company and, at the termination of the transaction, any
remaining amounts on deposit are distributed to the Company. The indentures
require the Company to maintain delinquency and credit loss covenants. The
Company was in compliance with these covenants at June 30, 1996.
6. Sale and Securitization of Finance Contracts
On March 12, 1996, the Company completed a sale of finance receivables to
Trust 1996-1 and the issuance of $55.8 million of automobile receivables-backed
certificates of Trust 1996-1. The proceeds the Company received were used to
repay borrowings under the Senior Revolving Credit Facility. The Company
retained a subordinated interest in Trust 1996-1. The certificates have a pass
through interest rate of 5.90%. FSA issued a financial guaranty insurance
policy for the benefit of the investors.
On June 26, 1996, the Company completed a sale of finance receivables to
Trust 1996-2 and the issuance of $90.4 million of automobile receivables-backed
certificates of Trust 1996-2. The proceeds the Company received were used to
repay borrowings under the Senior Revolving Credit Facility. The Company
retained a subordinated interest in Trust 1996-2. The certificates have a pass
through interest rate of 6.85%. FSA issued a financial guaranty insurance
policy for the benefit of the investors.
The Company recognized a gain on the sale of finance receivables to the Trust
1996-1 and Trust 1996-2. The gains represent the difference between the sales
proceeds, net of the transaction costs, and the Company's carrying value of
the receivables sold, plus the present value of the excess servicing rights.
7. Common Stock Options
Stock option activity for the six months ended June 30, 1996 was as follows:
<TABLE>
<CAPTION>
Number of Exercise Price
Shares Range Per Share
---------- ---------------
<S> <C> <C>
Balance at
December 31, 1995 311,017 $0.04-19.00
Granted 285,400 $19.00-24.25
Canceled (25,208) $4.40-19.50
--------
Balance at June 30, 1996 571,209
Options exercisable 223,397 $0.04-19.00
======== ===========
Options available for
future grant 561,250
========
</TABLE>
At the Annual Meeting held on May 14, 1996, the Company's stockholders voted to
amend the 1994 Equity Incentive Plan (the"Plan") to increase the aggregate
number of shares of Common Stock available under the Plan from 300,000 to
750,000 and made certain other modifications.
Statement of Financial Accounting Standards No.123, "Accounting for Stock-
based Compensation" ("SFAS 123" ), provides an alternative method of
accounting for stock-based compensation and requires certain disclosures
regarding the fair value of stock-based compensation. The Company did not
adopt the alternative method of accounting for stock-based compensation and,
accordingly, the adoption of SFAS 123 will not have any effect on the
Company's financial position or results of operations. The Company expects
to expand its disclosure of stock-based compensation plans to include
proforma fair value information in 1996 Annual Report to Stockholders.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the financial
condition of the Company at June 30, 1996 as compared with December 31, 1995
and the results of operations for the three months ended and six months ended
June 30, 1996 and 1995. The financial information provided below has been
rounded in order to simplify its presentation. The ratios and percentages
provided below are calculated using the detailed financial information
contained in the unaudited interim consolidated financial statements, the
notes thereto and the financial data elsewhere in this report.
General
The Company is a specialty finance company engaged in financing the purchase
of automobiles through the acquisition of dealer-originated retail
installment contracts ("finance contracts"), collateralized by the underlying
automobiles. The Company has experienced significant annual growth in its
finance contract portfolio since it commenced operations in June 1991. The
Company derives its revenues from its finance contract portfolio and from the
sale of finance receivables.
In order to adjust for credit risks and achieve an acceptable rate of return,
the Company typically purchases finance contracts from dealers at a discount
from the principal amounts of such contracts. This discount is non-
refundable to the dealer. The discount is allocated to the allowance for
credit losses. Prior to 1995, a portion of the discount was being amortized into
interest income. Beginning in 1995, the remaining unamortized contract
acquisition discounts were used to absorb credit losses.
Results of Operations
The following table sets forth certain financial data relating to the Company:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------ ------------------
(Dollars in thousands)
<S> <C> <C>
Average net finance
receivables-owned (1) $335,911 $146,395 $319,948 $128,000
Average net finance
receivables-serviced (1) 434,723 146,395 384,497 128,000
Average indebtedness (2) 262,793 106,546 241,258 90,621
Income from finance
contract portfolio 18,789 8,538 36,445 14,966
Interest expense 5,107 2,584 9,671 4,367
Net interest income 13,682 5,954 26,774 10,599
Gross portfolio yield (3) 22.4% 23.3% 22.8% 23.4%
Average cost of borrowed
funds (2) 7.8% 9.7% 8.0% 9.6%
------ ------ ----- -----
Net interest spread (4) 14.6% 13.6% 14.8% 13.8%
Net portfolio yield (3) 16.3% 16.3% 16.7% 16.6%
Total states served 42 21 42 21
<FN>
- - - -----------------------------
(1) Net finance receivables-owned represents those net finance
receivables that have been retained by the Company. Net
finance receivables-serviced represents net finance
receivables sold and net finance receivables owned. Net
finance receivables owned and serviced represents the total
contractual payments due under finance contracts less the
related unearned finance charges on those contracts. Net
finance receivables owned and serviced have not been reduced
by unamortized contract acquisition discounts, unearned
ancillary income, unamortized contract acquisition costs and
the allowance for credit losses. Average net finance
receivables-owned and serviced are calculated based on the
month-end balances.
(2) Indebtedness includes the borrowings outstanding under the
senior revolving credit facility, notes payable-securitized
pools and subordinated notes. The average indebtedness is
based on daily balances. Average cost of borrowed
funds represents interest expense as a percentage of average
indebtedness.
(3) Gross portfolio yield represents income from finance
contract portfolio as a percentage of average finance
receivables-owned. Net portfolio yield represents net
interest income as a percentage of average finance
receivables-owned.
(4) Net interest spread represents the gross portfolio yield
less the average cost of borrowed funds.
</FN>
</TABLE>
Three Months Ended June 30, 1996 Compared to the Three Months Ended June 30,
1995
Revenues
The Company purchased 11,382 finance contracts having an aggregate initial
principal amount of $129.6 million in the three months ended June 30, 1996,
increases of 113.1% and 145.8%, respectively, from the 5,340 finance contracts
having an initial principal amount of $52.7 million purchased in the three
months ended June 30, 1995.
Interest income from finance contracts-owned increased $10.3 million, or
120.1%, to $18.8 million in the three months ended June 30, 1996 from $8.5
million in the three months ended June 30, 1995. The growth in income from
finance contract portfolio resulted from an increase in the number of finance
contracts purchased by Dealer Service Centers in operation at June 30, 1995,
as well as the purchase of finance contracts by new Dealer Service Centers
opened after June 30, 1995.
Average net finance receivables-owned increased $189.5 million, or 129.5%, to
$335.9 million in the three months ended June 30, 1996 from $146.4 million in
the three months ended June 30, 1995. Income from the owned finance contract
portfolio as a percentage of average net finance receivables ("gross portfolio
yield") decreased to 22.4% in the three months ended June 30, 1996 from 23.3%
in the three months ended June 30, 1995. The decrease in the gross portfolio
yield was primarily attributable to general competition in the marketplace
and the purchase of a higher percentage of finance contracts covering later
model automobiles, which generally have a lower interest rate.
The Company may experience further reductions in its gross portfolio yield
and decreases in interest income from finance contracts. However, the
increases in the Company's total revenues attributable to increases in the
volume of finance contracts purchased and securitization and related servicing
activities is expected to offset any decreases in interest income attribitable
to decreases in the Company's portfolio yield.
For the three months ended June 30, 1996, the Company recognized a $5.1
million gain on sale of receivables resulting from the sale of finance
receivables to the First Merchants Grantor Trust 1996-2 (the "Trust 1996-2")
in June 1996 and the issuance to investors of $90.4 million of automobile
receivble-backed certificates of the Trust 1996-2. Because the Company
intends to structure future issuances of automobile receivables-backed
securities in a manner which will result in the recognition of both a gain on
sale of receivables and issuance debt, the amount and timing of such future
transactions could impact the Company's net earnings in any given financial
reporting period. No gain on sale of finance receivables was recorded for the
three months ended June 30, 1995. See "Liquidity and Capital Resources."
Servicing fee income represents the Company's base servicing fee on the
finance receivables sold to the Trusts 1996-2 and 1996-1 and amortization of
the excess servicing receivable. Servicing fee income was $0.7 million for
the three months ended June 30, 1996. No servicing fee income was recorded for
the three months ended June 30, 1995.
Expenses
Interest expense increased $2.5 million, or 97.6%, to $5.1 million in the
three months ended June 30, 1996 from $2.6 million in the three months ended
June 30, 1995. The increase in interest expense resulted primarily from an
increase in borrowings under the senior revolving credit facility, (the
"Senior Revolving Credit Facility"), and proceeds from the issuance of notes
payable - securitized pools. Such increased borrowings were used to fund the
growth of the Company's finance contract portfolio. Average indebtedness,
including borrowings under the Senior Revolving Credit Facility, notes
payable-securitized pools and the 11% Subordinated Reset Notes, increased
$156.3 million, or 146.6%, to $262.8 million in the three months ended June
30, 1996 from $106.5 million in the three months ended June 30, 1995.
Interest expense, including the amortization of fees, as a percentage of
average indebtedness ("average cost of borrowed funds") was 7.77% in the
three months ended June 30, 1996 compared to 9.70% in the three months ended
June 30, 1995.
For the three months ended June 30, 1996 the provision for credit losses
increased $4.1 million to $4.2 million from $0.1 million charged against
earnings in the three months ended June 30, 1995. For the three months
ended June 30, 1996 and 1995 discounts as a percentage of the principal
amount financed were 3.7% and 7.2%, respectively. Non-refundable discounts
collected from dealers are supplemented by the provision for credit losses and,
are used to absorb future credit losses. The declining discounts combined
with a 145.8% increase in the initial principal amount financed were factors
in determining the increase in the provision for credit losses. The Company
expects to continue recording provision for credit losses in light of these
declining discounts. See "Credit Loss Experience."
Operating expenses increased $6.4 million, or 177.0%, to $10.0 million in the
three months ended June 30, 1996 from $3.6 million in the three months ended
June 30, 1995. Operating expenses in the three months ended June 30, 1996
included a $600,000 expense for costs associated with consolidating thirteen
of the smaller Dealer Service Centers to improve certain operating
efficiencies. Although operating expenses increased during the three months
ended June 30, 1996, the Company's finance contract portfolio grew at a
faster rate than the rate of increase in operating expenses. As a result,
operating expenses as a percentage of average finance receivables-serviced
decreased to 9.2% in the three months ended June 30, 1996 from 9.9% in the
three months ended June 30, 1995.
Employee compensation and related costs, such as group insurance and payroll
taxes, represented 58.9% and 60.5% of total operating expenses in the three
months ended June 30, 1996 and 1995, respectively. Employee compensation
expense increased $3.7 million, or 169.2%, to $5.9 million in the three
months ended June 30, 1996 from $2.2 million in the three months ended June
30, 1995. Both employee compensation and total operating expenses increased
due to expanding operations and growth in the serviced finance receivable
portfolio.
Income Taxes
Income taxes were recorded at an effective rate of 39.0% and 38.0% in the
three months ended June 30, 1996 and 1995, respectively.
Net Earnings
Net earnings increased $1.8 million, or 133.7%, to $3.2 million
in the three months ended June 30, 1996 from $1.4 million in the
three months ended June 30, 1995. The increase in net earnings
is directly attributable to the growth in the finance contract
portfolio and related factors discussed above.
Six Months Ended June 30, 1996 Compared to the Six Months
Ended June 30, 1995
Revenues
The Company purchased 23,958 finance contracts having an aggregate initial
principal amount of $265.3 million in the six months ended June 30, 1996,
increases of 142.5% and 168.1%, respectively, from the 9,879 finance contracts
having an aggregate initial principal amount of $99.0 million purchased in the
six months ended June 30, 1995.
Interest and other income from finance contracts-owned portfolio increased
$21.5 million, or 143.5%, to $36.4 million in the six months ended June 30,
1996 from $14.9 million in the six months ended June 30, 1995. The growth in
income from finance contract portfolio resulted from an increase in the
number of finance contracts purchased by Dealer Service Centers in operation
at June 30, 1995 as well as the purchase of finance contracts by new Dealer
Service Centers opened after June 30, 1995.
Average net finance receivables-owned increased $191.9 million, or
150.0%, to $319.9 million in the six months ended June 30,
1996 from $128.0 million in the six months ended June 30,
1995. The gross portfolio yield decreased to 22.8% in the six months ended
June 30, 1996 from 23.4% in the six months ended June 30, 1995. The decrease
in the gross portfolio yield was primarily attributable to general competition
in the marketplace and the purchase of a higher percentage of finance
contracts covering later model automobiles, which generally have a lower
interest rate.
For the six months ended June 30, 1996, the Company recognized $8.1 million in
gains on sales of receivables resulting from the sale of finance receivables to
the First Merchants Grantor Trust 1996-1 (the "Trust 1996-1") and the Trust
1996-2 together known as (the "Trusts") in March 1996 and June 1996
respectively, and the issuance to investors of $55.8 million and $90.4 million
of automobile receivable-backed certificates of the Trusts. No gain on sale of
finance receivables was recorded for the six months ended June 30, 1995. See
"Liquidity and Capital Resources."
Servicing fee income represents the Company's base servicing fee on the finance
receivables sold to the Trusts and amortization of the excess servicing fee
receivable. Servicing fee income totaled $0.9 million for the six months
ended June 30, 1996. No servicing fee income was recorded for the six months
ended June 30, 1995.
Expenses
Interest expense increased $5.3 million, or 121.5%, to $9.7
million in the six months ended June 30, 1996 from $4.4
million in the six months ended June 30, 1995. Average indebtedness,
including borrowings under the Senior Revolving Credit Facility, notes
payable-securitized pools and 11% Subordinated Reset Notes, increased $150.7
million, or 166.2%, to $241.3 million in the six months ended
June 30, 1996 from $90.6 million in the six months ended June 30,
1995. The average cost of borrowed funds was 8.02% in the
six months ended June 30, 1996 compared to 9.64% in the six
months ended June 30, 1995. See "Liquidity and Capital Resources."
For the six months ended June 30, 1996 the provision for credit
losses increased $7.6 to $7.7 million from $0.1 million charged
against earnings in the six months ended June 30, 1995. For the six months
ended June 30, 1996 and 1995, discounts as a percentage of the princpal
amount financed were 4.3% and 7.1%, respectively. Non-refundable discounts
collected from dealers are supplemented by the provision for credit losses and
are used to absorb future credit losses. See "Credit Loss Experience."
Operating expenses increased $11.5 million, or 179.4%, to $17.9
million in the six months ended June 30, 1996 from $6.4
million in the six months ended June 30, 1995. Operating expenses
in the six months ended June 30, 1996 include a $600,000 charge for
costs associated with consolidating thirteen of the smaller Dealer
Service Centers to improve operating efficiencies. Operating expenses as a
percentage of average finance receivables-serviced decreased to 9.3% in the
six months ended June 30, 1996 from 10.0% in the six months ended June 30,
1995.
Employee compensation and related costs, such as group insurance
and payroll taxes, represented 60.3% and 62.7% of total operating
expenses in the six months ended June 30, 1996 and 1995,
respectively. Employee compensation expense increased $6.8
million, or 168.8%, to $10.8 million in the six months ended
June 30, 1996 from $4.0 million in the six months ended June 30, 1995.
Both employee compensation and total operating expenses increased due to
expanding operations and growth in the serviced finance receivable
portfolio.
Income Taxes
Income taxes were recorded at an effective rate of 39.0% and
38.0% in the six months ended June 30, 1996 and 1995,
respectively.
Net Earnings
Net earnings increased $3.7 million, or 145.2%, to $6.2 million
in the six months ended June 30, 1996 from $2.5 million in the
six months ended June 30, 1995. The increase in net earnings
is directly attributable to the growth in the finance contract
portfolio and related factors discussed above.
Credit Loss Experience
The Company maintains an allowance for credit losses at a level
management believes adequate to absorb potential losses in the
owned finance contract portfolio. Management evaluates the
adequacy of the allowance for credit losses by reviewing credit
loss experience, delinquencies, the value of the underlying
collateral, the level of the finance contract portfolio and
general economic conditions and trends. An account is charged
off at the earliest of the time the account's collateral is
repossessed, the account is 91 or more days past due, or the
account is otherwise deemed to be uncollectible.
The allowance for credit losses is initially established through
an allocation of contract acquisition discounts based upon
management's estimate of credit losses. A provision for credit
losses is charged against earnings in addition to the contract
acquisition discounts allocated to the allowance for credit
losses.
The following table summarizes data relating to the Company's charge-off
experience. The charge-off experience includes estimated losses to be
incurred upon the sale of repossessed collateral.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------ ------------------
(Dollars in thousands)
<S> <C> <C>
Average net finance
receivables-serviced $434,723 $146,395 $384,497 $128,000
Net charge-offs
serviced 6,309 1,924 11,204 3,051
Net charge-offs as a
percentage of average
net finance receivables
-serviced (annualized) 5.8% 5.3% 5.8% 4.8%
<CAPTION>
The following table summarizes data relating to the Company's allowance for
credit losses.
June 30, December 31,
As of: 1996 1995
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Net finance receivables-
owned $313,606 $251,908
Allowance for credit
losses 18,829 14,301
Allowance for credit
losses as a percentage
of net finance receivables 6.0% 5.7%
</TABLE>
Net finance receivables held for sale totaled $26.2 million and $32.3
million, net of contract acquisition discounts of $0.6 and $0.4 million at
June 30, 1996 and December 31, 1995, respectively. Net finance receivables
held for sale are not included above as they are recorded at the lower of
aggregate cost or market value.
At June 30, 1996, the excess servicing receivable is reported net of $14.1
million allowance for estimated credit losses on finance receivables sold to
Trust 1996-1 and 1996-2. There was no excess servicing receivable at
December 31, 1995.
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. The Company typically contacts
borrowers whose payments are not received by the due date within
two days after such due date. The following table summarizes the
Company's delinquency experience for accounts with payments 31 or
more days past due on both a number and dollar basis for its
serviced finance contract portfolio as of June 30, 1996 and
1995. The delinquency experience data exclude contracts where
the collateral has been repossessed.
<TABLE>
<CAPTION>
As of: June 30, December 31,
1996 1995
---------------------------------------
Number of Number of
Dollars Contracts Dollars Contracts
---------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net finance
receivables-serviced(1) $479,243 49,287 $284,173 31,082
Past due accounts:
31 - 60 days(2) $ 11,171 1,253 $ 5,163 595
61 days or more(3) 4,323 494 2,021 251
--------------------------------------
Total $ 15,494 1,747 $ 7,184 846
======================================
Accounts with payments 31
or more days more past
due as a percentage of
total finance receivables
and number of
contracts-serviced(4) 3.2% 3.5% 2.5% 2.7%
=======================================
<FN>
____________________
(1) Includes finance receivables sold or held for sale, net
(2) Customers in this category have missed two consecutive
monthly payments.
(3) Customers in this category have missed three or more
consecutive monthly payments.
(4) Customers in this category have missed two or more
consecutive monthly payments.
</FN>
</TABLE>
Repossessed Collateral
The Company commences repossession procedures against the
underlying collateral when it determines that collection efforts
are likely to be unsuccessful. Repossession generally occurs
before a borrower misses 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, and this reduction is reported as a
credit loss. Repossessed collateral included 786 and 505 automobiles at June
30, 1996 and December 31,1995, respectively. At June 30, 1996, the 786
automobiles had been held as repossessed collateral for an average of 33 days.
Liquidity and Capital Resources
Since inception, the Company has funded its operations, the
regional Dealer Service Center openings and finance contract
portfolio growth through the following: funds provided from
principal and interest payments received under finance contracts,
borrowings under the Senior Revolving Credit Facility, proceeds
from the issuance of subordinated debt and securitization of
finance receivables and from the sale of shares of common stock.
Net cash flows provided by operating activities were $13.2 million,
$3.7 million, $10.6 million and $6.7 million in the three months ended
and six months ended June 30, 1996 and 1995, respectively. The
increased cash flows from operating activities primarily resulted
from increases in net earnings.
Net cash used in investing activities were $32.4 million, $34.8 million,
$77.4 million and $66.7 in the three months ended and six months ended
June 30, 1996 and 1995 respectively and was primarily atttributable to
the finance contract portfolio growth.
Net cash provided by financing activities was primarily used to
support finance contract portfolio growth. Financing activities
for the three months ended and six months ended June 30, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
-----------------------------------------------
(In Thousands)
<S> <C> <C>
Proceeds from issuance of
subordinated debt, net $ - - - $13,530
Proceeds from issuance of
notes payable - securitized
pools 124,989 - 124,989 -
Repayment of notes payable
-securitized pools (15,511) - (23,331) -
Net (decrease) increase in
borrowings under senior
revolving credit facility (89,700) 31,075 (34,175) 46,375
Other - (26) (24) (26)
---------------------------------------------
Net cash flows from
financing activities $19,778 $31,049 $67,459 $59,879
=============================================
</TABLE>
The Company maintains a $205.0 million Senior Revolving Credit Facility with
a group of nine banks. The Senior Revolving Credit Facility expires June 30,
1997 and borrowings are secured by certain assets of the Company. The
Company has options to borrow at either (i) the reference prime
rate or (ii) LIBOR plus 1.60% per annum for maturities of one,
two, three or six months. Also the Company is a party to an
interest rate protection agreement aggregating a notional amount
of $15.0 million, which limits the exposure to increases in
borrowing costs.
On May 21, 1996, the Company completed a $125.9 million debt financing
consisting of automobile receivable-backed notes, Series 1996-A.
Of these notes, $85.0 million have a floating interest rate of 0.17%
over the one month LIBOR and the remaining $40.9 million have a
fixed rate of 6.70%. In an effort to reduce the Company's exposure to increases
in borrowing costs on May 21, 1996 the Company entered into an interest rate
swap agreement with an initial notional amount of $85.0 million, whereby the
Company pays a fixed rate of 5.98% and receives a variable rate of one-month
LIBOR. The notional amount declines, as specified in the swap agreement, at
each month-end during the term of the agreement, which expires in May, 1998.
At June 30, 1996 the notional amount was $76.7 million and one month LIBOR
was 5.50%. The Notes were issued by First Merchants Auto Receivable
Trust 1996-A, a trust formed specifically for purposes of the securitization
structure. Principal and interest on the notes are payable monthly commencing
June 15, 1996 from collections and recoveries on the pool of finance
receivables. Financial Security Assurance Inc. ("FSA") issued a financial
guaranty policy for the benefit of the noteholders. The proceeds the
Company received from the securitization of finance receivables
were used to repay indebtedness under the Senior Revolving Credit
Facility.
On June 26, 1996, the Company completed a $90.4 million asset
securitization through the sale of 6.85% automobile receivables-backed Class A
Certificates. The Company recorded a $5.1 million gain on sale of net finance
receivables in the three months ended June 30, 1996. The certificates were
issued by Trust 1996-2. Principal and interest on the certificates are payable
monthly commencing July 15, 1996 from collections and recoveries on the pool
of finance receivables. FSA issued a financial guaranty insurance policy for
the benefit of the noteholders. Net proceeds from the sale and securitization
of finance receivables were used to repay indebtedness under the Company's
Senior Revolving Credit Facility.
The Senior Revolving Credit Facility, the indenture relating to the
Subordinated Reset Notes due 2005, and the indentures relating to the notes
payable-securitized pools contain several financial and other covenants,
including interest coverage requirements, leverage tests, delinquency, credit
losses tests, a dividend prohibition and minimum net worth requirements. The
Company believes these covenants will not materially limit its business or
expansion strategy. The Company was in compliance with all such covenants at
June 30, 1996.
Management believes that in order to meet its 1996 funding needs,
the Company will require additional capital resources to
supplement its expected cash flows from operations, the principal
payments on finance contracts, and anticipated borrowings under
its Senior Revolving Credit Facility. The Company is expecting
to complete additional securitizations of finance receivables in
1996, and is exploring other sources of liquidity to satisfy
its needs for additional capital resources.
Impact of Inflation and Changing Prices
Although the Company does not believe that inflation directly has
a material adverse effect on its financial condition or results
of operations, increases in the inflation rate generally are
associated with increased interest rates. Because the Company
borrows a portion of its funds on a floating rate basis and
purchases finance contracts bearing a fixed interest rate, increased costs
of borrowed funds could have a material adverse impact on the
Company's profitability. Inflation also can affect the Company's
operating expenses.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
Date of meeting - May 14, 1996
Type of meeting - Annual Meeting of Stockholders
Matters voted upon:
1)- Election of Directors
2)- Approval of the Company's amended 1994 Equity Incentive Plan.
The amendment (i) increases the aggregate number of shares of
Common Stock of the Company available under the Plan from
300,000 to 750,000, (ii) changes the minimum exercise price for
options and stock appreciation rights granted under the Plan from
not less than 85% to not less than 100% and (iii) contains
certain other immaterial modifications and clarifications.
3)- Approval of the Company's amended 1994 Employee Stock
Purchase Plan. The amendment (i) reduces the service
requirement for eligibility to participate in the Plan from one
year to six months of employment, (ii) permits employees who have
not satisfied the six month service requirement prior to the
beginning of the enrollment period to begin participation in the
Plan at the next quarterly period after six months of service and
(iii) contains certain other immaterial modifications and
clarifications.
Votes Cast
-----------------------
1) Names of
Directors Voted For Withheld
---------------- ------- --------
Mitchell C. Kahn 5,248,023 7,343
Thomas A. Hiatt 5,248,024 7,342
William A. Plamondon 5,248,024 7,342
Marcy H. Shockey 5,248,024 7,342
Richard J. Uhl 5,248,024 7,342
Solomon A. Weisgal 5,248,024 7,342
Stowe W. Wyant 5,248,024 7,342
There were no votes against, abstentions or broker non-votes in the election
of Directors.
2) Amendments to the Company's 1994 Equity Incentive Plan were
approved with 3,105,894 votes for, 911,757 votes against, 7,875
votes withheld, 7,065 abstentions and 1,222,685 broker non-votes.
3) Amendments to the Company's 1994 Employee Stock Purchase Plan were
approved with 3,987,671 votes for, 60,547 votes against, 6,075
votes withheld, 5,625 abstentions and 1,195,073 broker non-votes.
Item 5. Other Information - Not Applicable
Item 6. (a) Exhibits - See exhibit index following the
signature page.
(b) Reports on Form 8-K - On June 26, 1996 the
Company filed an 8-K regarding an $90.4 million
securitization.
The following items were reported:
Item 2. Acquisition or Disposition of
Assets
Item 7. Financial Statements and
Exhibits
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By: /s/ Mitchell C. Kahn
Its: President and Chief Executive
Officer
By: /s/ Thomas R. Ehmann
Its: Vice President and Chief Financial
Officer
Date: August 14, 1996
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
10.1 Amended and Restated First Merchants Acceptance
Corporation 1994 Employee Stock Purchase Plan,
dated May 15, 1996 is filed herewith.
10.2 Amended and Restated First Merchants Acceptance
Corporation 1994 Equity Incentive Plan,
dated May 15, 1996 is filed herewith.
10.3 Purchase Agreement, dated May 10, 1996, among First
Merchants Acceptance Corporation, First Merchants Auto
Receivable Corporation II and Salomon Brothers Inc.,
filed herewith.
10.4 Receivables Purchase Agreement, dated May 1, 1996,
among First Merchants Acceptance Corporation and First
Merchants Auto Receivable Corporation II, filed herewith.
10.5 Sale and Servicing Agreement, dated May 1, 1996,
among First Merchants Auto Trust 1996-A as Issuer, First
Merchants Auto Receivables Corporation II, as seller,
First Merchants Acceptance Corporation, as Servicer, and
Harris Trust and Savings Bank, as Trustee and backup
servicer filed herewith.
10.6 Administrative Agreement, dated May 1, 1996,
among First Merchants Auto Trust 1996-A, First Merchants
Acceptance Corporation and First and Harris Trust and
Savings Bank filed herewith.
10.7 Amended and Restated Trust Agreement, dated May 1, 1996
among First Merchants Auto Receivables Corporation II as
Depositor and Chemical Bank Delaware as Owner Trustee
filed herewith.
10.8 Indenture between First Merchants Auto Trust 1996-A as
Issuer and Harris Trust and Savings as Indenture Trustee
is filed herewith.
10.9 Purchase Agreement, dated June 28, 1996, among First
Merchants Acceptance Corporation, First Merchants Auto
Receivable Corporation II and Salomon Brothers Inc.,
filed with the Commission as Exhibit 2 to the Company's
Form 8-K dated June 26, 1996, is incorporated herein by
reference.
10.10 Receivables Purchase Agreement, dated as of June 1, 1996
between First Merchants Acceptance Corporation and First
Merchants Auto Receivable Corporation II, filed with the
Commission as Exhibit 3 to the Company's Form 8-K dated
June 26, 1996, is incorporated herein by reference.
10.11 Pooling and Servicing Agreement, dated June 19, 1996,
among First Merchants Acceptance Corporation, as
servicer, First Merchants Acceptance Corporation II, as
depositor and Harris Trust and Savings Bank, as
Trustee and backup servicer filed with the Commission
as Exhibit 4 to the Company's Form 8-K dated June 26,
1996, is incorporated herein by reference.
10.12 Form of Third Amendment to Amended and Restated Registration Rights
Agreement dated June 15, 1996 among First Merchants Acceptance
Corporation and other parties named therein is filed herewith.
10.13 Stockholders Termination Agreement among First Merchants Acceptance
Corporation and other parties named therein is filed herewith.
11. Statement Regarding Computation of Per Share Earnings filed
herewith.
27. Financial Data Schedule filed herewith.
FIRST MERCHANTS ACCEPTANCE CORPORATION
1994 EMPLOYEE STOCK PURCHASE PLAN
I. Purpose and History
1.1 The First Merchants Acceptance Corporation 1994 Employee Stock
Purchase Plan (the "Plan") as established by First Merchants
Acceptance Corporation (the "Company") effective on the
Effective Date (as described below) is hereby amended and
restated as set forth herein effective March 29, 1996, subject
to the approval of the Company's stockholders within one year
before or after the date this amended and restated Plan is
approved by the Board of Directors. Notwithstanding any other
provision of this Plan, if the amendment and restatement is
not approved by stockholders, all options granted pursuant to
the terms of this amendment and restatement shall become void,
no further grants shall be made pursuant to this amendment and
restatement, this amendment and restatement shall immediately
terminate, and the Plan shall immediately revert to its
provisions in effect prior to March 29, 1996.
1.2 The purpose of the Plan is to provide an opportunity for
eligible employees to acquire a proprietary interest in the
Company through the purchase of shares of common stock of the
Company. No option shall be granted under the Plan after the
tenth anniversary of the Effective Date.
1.3 The Company intends the Plan to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"). The provisions of the Plan
shall be construed in a manner consistent with the
requirements of Section 423 of the Code.
II. Definitions
The following words and phrases, when used in this Plan,
unless their context clearly indicates otherwise, shall have
the following respective meanings:
2.1 "Base Earnings" means all compensation received by a
Participant from the Company or a Participating Subsidiary,
including salary deferrals by the Participant under Sections
401(k) and 125 of the Code, bonuses and overtime pay, but
excluding short-term disability, long-term disability or
workers compensation payments and similar amounts.
2.2 "Board" means the board of directors of the Company.
2.3 "Code" -- see Section 1.1.
2.4 "Committee" means the committee of the Board appointed
pursuant to Section 3.1.
2.5 "Common Stock" means the Company's common stock, $.01 par
value.
2.6 "Company" -- see Section 1.1.
2.7 "Cut-Off Date" means the date established by the Committee
from time to time by which enrollment forms must be received
prior to an Enrollment Date.
2.8 "Effective Date" means the IPO Date.
2.9 "Eligible Employee" means an Employee eligible to participate
in the Plan in accordance with Article V.
2.10 "Employee" means an individual who performs services for the
Company or a Participating Subsidiary pursuant to an
employment relationship described in Treasury Regulations
Section 31.3401(c)-1 or any successor provision.
2.11 "Enrollment Date" means (a) for any Employee who has completed
the service requirement for participation in the Plan prior to
the first trading day of an Enrollment Period, the first
trading day of such Enrollment Period, (b) for any Employee
who has not completed the service requirement prior to the
first trading day of an Enrollment Period, the first trading
day coinciding with or following the February 1, May 1 or
August 1 following the date on which the Employee completes
the service requirement (but not earlier than the effective
date (as described in Section 12.9)) of this amendment and
restatement, and (c) such other trading days established by
the Committee from time to time. A trading day means any day
on which securities are traded on the Nasdaq National Market.
2.12 "Enrollment Period" means, as to the Company or a
Participating Subsidiary, a period of six months or such other
duration not in excess of 27 months as shall be established
from time to time by the Committee with respect to the
Employees of the Company or such Participating Subsidiary, as
applicable. Each Enrollment Period shall commence on a date
specified by the Committee. Enrollment Periods and the
commencement dates for Enrollment Periods may, but need not,
be different for the Company and each Participating
Subsidiary. Unless otherwise specified by the Committee, the
initial Enrollment Period shall be the 12-month period
commencing on the first day of the month that begins at least
30 days after the IPO Date. Succeeding Enrollment Periods
shall, unless otherwise specified by the Committee, be 12-
month periods beginning on each successive anniversary of the
first day of the initial Enrollment Period.
2.13 "Exchange Act" means the Securities Exchange Act of 1934.
2.14 "Fair Market Value" means, as of any applicable date:
(a) if the security is listed on a national securities
exchange or authorized for quotation on the National
Association of Securities Dealers Inc.'s NASDAQ National
Market ("NASDAQ/NMS"), the closing price, regular way, of the
security on such exchange or NASDAQ/NMS, as the case may be,
or if no such reported sale of the security shall have
occurred on such date, on the latest preceding date on which
there was such a reported sale, or
(b) if the security is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS, the average of the closing bid and asked prices as
reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or, if no such prices
shall have been so reported for such date, on the latest
preceding date for which such prices were so reported, or
(c) if the security is not listed for trading on a
national securities exchange or is not authorized for
quotation on NASDAQ/NMS or NASDAQ, the fair market value of
the security as determined in good faith by the Board.
2.15 "Grant Date" means a date on which an Eligible Employee is
granted options under the Plan.
2.16 "including" means "including without limitation".
2.17 "IPO" means the initial public offering of Common Stock as
contemplated in the registration statement on Form S-1 filed
by the Company with the SEC on July 1, 1994, and as
subsequently amended.
2.18 "IPO Date" means September 30, 1994.
2.19 "Participant" means an Eligible Employee who has enrolled in
the Plan pursuant to Article VI.
2.20 "Participating Subsidiary" means a Subsidiary which has been
designated by the Committee in accordance with Section 3.2(d)
as covered by the Plan.
2.21 "Purchase Date" means such one or more trading days during an
Enrollment Period as may be established by the Committee from
time to time prior to the beginning of the Enrollment Period
for all options to be granted during such Enrollment Period on
which shares of Common Stock are purchased in accordance with
Article IX of the Plan.
2.22 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
Exchange Act.
2.23 "SEC" means the Securities and Exchange Commission.
2.24 "Securities Act" means the Securities Act of 1933.
2.25 "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company, if as of the
applicable Enrollment Date, each of the corporations other
than the last corporation in the chain owns stock representing
50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
III. Administration
3.1 The Plan shall be administered by a Committee which shall
consist of not less than two persons who are directors of the
Company. Membership on the Committee shall be subject to such
limitations as the Board deems appropriate to permit
transactions in Common Stock pursuant to the Plan to be exempt
from liability under Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 of the SEC thereunder.
3.2 The Committee shall have the power, subject to the express
provisions of the Plan:
(a) to determine from time to time the time or times
when options shall be granted;
(b) to construe and interpret the Plan and options
granted under it, and to establish, amend and revoke rules for
its administration. The Committee in the exercise of this
power may correct any defect, or supply any omission, or
reconcile any inconsistency in the Plan, in a manner and to
the extent it shall deem necessary or appropriate to carry out
the intent of the Plan;
(c) to prescribe the terms and provisions for
participation in the Plan;
(d) to designate from time to time which Subsidiaries
of the Company shall be Participating Subsidiaries; and
(e) to determine all questions of policy and
expediency that may arise in the administration of the Plan,
and, generally, to exercise such powers and perform such acts
as are deemed necessary or expedient to promote the best
interests of the Company.
3.3 This Article III relating to the administration of the Plan
may be amended by the Board from time to time as may be
desirable to satisfy any requirements of or under the federal
securities and/or other applicable laws of the United States,
or to obtain any exemption under such laws.
IV. Number of Shares
4.1 One hundred thousand (100,000) shares of Common Stock are
reserved for sales and authorized for issuance pursuant to the
Plan. Subject to the foregoing limitation, shares sold under
the Plan may be newly-issued shares or outstanding shares that
have been reacquired by the Company. If any option granted
under the Plan shall for any reason terminate without having
been exercised, the shares not purchased under such option
shall again become available for the Plan.
4.2 In the event of any reorganization, recapitalization, stock
split, reverse stock split, stock dividend, combination of
shares, merger, consolidation, acquisition of property or
shares, separation, asset spin-off, stock rights offering,
liquidation or other similar change in the capital structure
of the Company, the Committee shall make such adjustment, if
any, as it deems appropriate in the number, kind and purchase
price of the shares available for purchase under the Plan. In
the event that, after a Grant Date, there occurs a dissolution
or liquidation of the Company, except pursuant to a
transaction to which Section 424(a) of the Code applies, each
option to purchase Common Stock shall terminate, but the
Participant holding such option shall have the right to
exercise his option prior to such dissolution or liquidation.
V. Eligibility Requirements
5.1 Except as provided in Section 5.2, each Employee shall become
eligible to participate in the Plan in accordance with Article
VI on the first Enrollment Date following the Employee's
completion of six months of employment by the Company or a
Participating Subsidiary, as applicable. Participation in the
Plan is voluntary.
5.2 The following Employees are not eligible to participate in the
Plan:
(a) Employees who would, immediately upon enrollment in
the Plan, own directly or indirectly, or hold options or
rights to acquire, an aggregate of 5% or more of the total
combined voting power or value of all outstanding shares of
all classes of the Company or any Subsidiary (without giving
effect to the exercise of any outstanding options);
(b) Employees who are customarily employed by the
Company or a Participating Subsidiary for not more than five
months in any calendar year; and
(c) Employees who are customarily employed by the
Company or a Participating Subsidiary for 20 hours or less per
week.
5.3 Employees who are also directors or officers (as defined in
Rule 16a-1(f) under the Exchange Act, as such rule may be
amended from time to time) of the Company may participate only
in accordance with the requirements of Rule 16b-3. The Plan
is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and all
regulations and rules promulgated by the SEC thereunder,
including Rule 16b-3. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the options
shall be granted and may be exercised, only in such a manner
as to conform to such laws, rules and regulations. To the
extent permitted by applicable law, the Plan and the options
granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
VI. Enrollment
6.1 Any Eligible Employee may enroll in the Plan as of an
Enrollment Date. In order to enroll with respect to any
Enrollment Period, an Eligible Employee must complete, sign
and submit to the Company an enrollment form in such form as
provided by the Committee which shall include, among other
items, the Eligible Employee's contribution election. Any
enrollment form received by the Company before the Cut-Off
Date will be effective as of the Enrollment Date to which it
relates.
VII. Grant of Options on Enrollment
7.1 Enrollment by an Eligible Employee in the Plan as of an
Enrollment Date will constitute the grant by the Company to
such Participant on the Enrollment Date of an option to
purchase shares of Common Stock from the Company pursuant to
the Plan.
7.2 Each option granted under the Plan shall have the following
terms:
(a) whether or not all shares subject thereto have been
purchased, the option will expire on the earliest to occur of
(A) the completion of the purchase of shares on the last
Purchase Date occurring within 27 months of the Grant Date for
such option, or such shorter option period as may be
established by the Committee from time to time prior to an
Enrollment Period for all options to be granted during such
Enrollment Period, or (B) the date on which participation of
such Participant in the Plan terminates for any reason;
(b) payment for shares purchased under the option will
be made only in accordance with Article VIII;
(c) purchase of shares upon exercise of the option will
be accomplished only in accordance with Article IX;
(d) the purchase price per share under the option will
be determined as provided in Article IX;
(e) notwithstanding Section 8.1, no Participant shall
be granted an option which permits the Participant's rights to
purchase shares under all employee stock purchase plans under
Section 423 of the Code of the Company and any Subsidiary to
accrue at a rate which exceeds $25,000 of Fair Market Value of
such shares (determined at the time such option is granted)
for each calendar year in which such option is outstanding at
any time as determined in accordance with Section 423(b)(8) of
the Code and the treasury regulations thereunder;
(f) the option will in all respects be administered so
as to comply with Section 423 of the Code; and
(g) the option will in all respects be subject to the
terms and conditions of the Plan, as amended from time to time
and as interpreted by the Committee from time to time.
VIII. Contributions
8.1 Each Participant may elect to make contributions at a rate
equal to any whole percentage (not in excess of 10%) of his or
her Base Earnings for each Enrollment Period (or, if the
Participant's Enrollment Date occurs during an Enrollment
Period, for the remainder of the Enrollment Period), or such
other lower maximum percentage of Base Earnings as the
Committee may establish from time to time before the beginning
of an Enrollment Period for all options to be granted during
such Enrollment Period. The rate of contribution shall be
designated by the Participant in the enrollment form.
Contributions shall be made only through an Employee's
authorizing payroll withholding on the enrollment form. A
Participant may elect to increase or decrease the rate of
contribution for any future Enrollment Period by delivery to
the Company not later than the related Cut-Off Date of a new
enrollment form indicating the revised rate of contribution.
8.2 Contributions shall be credited to a recordkeeping account for
each Participant as soon as administratively feasible after
withholding of Base Earnings. The Company shall be entitled
to use of the contributions and shall have no obligation to
set aside or pay interest on the contributions to any
Participant.
8.3 During an Enrollment Period, no Participant may elect to
reduce or to cease future contributions to the Plan, but any
Participant may withdraw from the Plan for the remainder of
such Enrollment Period pursuant to Article X.
8.4 Neither the Company nor any Participating Subsidiary shall
make contributions to the Plan.
IX. Purchase of Shares
9.1 On each Purchase Date, the Company shall apply the funds
credited to each Participant's account as of such Purchase
Date to the purchase of whole shares of Common Stock. The
purchase price for any shares purchased under any option
shall, unless the Committee in its discretion establishes a
higher price, be 85% of the lower of:
(a) the Fair Market Value on the Grant Date for such option;
or
(b) the Fair Market Value on the Purchase Date.
9.2 Within a reasonable time after the Purchase Date, the Company
shall cause to be delivered to the Participant a certificate
or certificates for the number of shares purchased by the
Participant unless the Company has made arrangements to have
the shares held at a bank or other appropriate institution in
non-certificated form. If any law or applicable rule or
regulation of the SEC or other body having jurisdiction shall
require that the Company or the Participant take any action in
connection with the shares being purchased under the option,
delivery of the certificate or certificates for such shares
shall be postponed until the necessary action shall have been
completed, which action shall be taken by the Company at its
own expense, without unreasonable delay.
9.3 Any amount less than the price of a whole share of Common
Stock which remains credited to a Participant's account on a
Purchase Date shall be carried forward in such account for
application on the next Purchase Date.
9.4 In the case of Participants employed by a Participating
Subsidiary, the Committee may provide for Common Stock to be
sold through the Subsidiary to such Participants, to the
extent consistent with Section 423 of the Code.
9.5 If the aggregate number of shares of Common Stock for which an
option is exercised on any Purchase Date in accordance with
this Article IX, when aggregated with all shares of Common
Stock previously granted under this Plan, would exceed the
maximum number of shares reserved in Section 4.1, the Company
shall make a pro rata allocation of the shares available for
delivery and distribution in as nearly a uniform manner as
shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to
the account of each Participant under the Plan shall be
returned to him as promptly as possible.
9.6 The maximum number of shares of Common Stock which a
Participant shall be permitted to purchase under the Plan on a
Purchase Date shall, subject to Section 7.2(e), be the number
calculated by dividing (a) the total amount of contributions
projected to be made by the Participant pursuant to Article
VIII as contributions for such an Enrollment Period by (b) 20%
of the Fair Market Value of a share of Common Stock on the
Grant Date. If the payroll deductions credited to the account
of the Participant exceeds the cost of the maximum number of
shares that can be purchased by the Participant, the excess
shall be returned to him as promptly as possible. The number
of shares which a Participant is permitted to purchase shall
be further limited by the amount of payroll deductions
withheld as of the Purchase Date.
9.7 If a Participant or former Participant sells, transfers, or
otherwise disposes of Common Stock purchased pursuant to an
option granted under the Plan within two years after the date
such option is granted or within one year after the Purchase
Date to which such option relates, such Participant or former
Participant shall notify the Company in writing of such sale,
transfer or other disposition within 10 days of the
consummation of such sale, transfer or other disposition, and
shall remit to the Company or authorize the Company to
withhold from other sources such amount as the Company may
determine to be necessary to satisfy any federal, state or
local tax withholding obligations of the Company or
Participating Subsidiary. The Committee may from time to time
establish rules and procedures (including postponing delivery
of shares until the expiration of the two-year or one-year
period) to cause the withholding requirements to be satisfied.
X. Withdrawal From the Plan; Termination of
Employment and Leave of Absence
10.1 Withdrawal from the Plan. A Participant may withdraw from the
Plan in full (but not in part) with respect to any Enrollment
Period at any time up to four weeks prior to a Purchase Date
upon delivery to the Company of a notice of withdrawal, or
such shorter time in advance of a Purchase Date as the
Committee may permit. If notice is timely received, all funds
credited to a Participant's account shall not be used to
purchase Common Stock, but shall instead be distributed to him
without interest as soon as administratively feasible. An
Employee who has withdrawn during an Enrollment Period may not
return funds to the Company during the same Enrollment Period
and require the Company to apply those funds to the purchase
of Common Stock. Any Eligible Employee who has withdrawn from
the Plan may, however, re-enroll in the Plan on the next
subsequent Enrollment Date following withdrawal in accordance
with the provisions of Article VI.
10.2 Termination of Employment. Participation in the Plan
terminates immediately when a Participant ceases to be
employed by the Company for any reason whatsoever (including
death or disability) or otherwise ceases to be an Eligible
Employee. As soon as administratively feasible after
termination of participation, the Company shall pay to the
Participant or his or her beneficiary or legal representative
all amounts credited to the Participant's account, without
interest.
10.3 Leave of Absence. Unless a Participant has voluntarily
withdrawn from the Plan, Common Stock will be purchased for
that Participant's account on the Purchase Date next following
commencement of a leave of absence by such Participant.
Participation in the Plan will terminate immediately after the
purchase of shares on such Purchase Date, unless:
(a) the leave of absence is due to illness,
injury or other reason approved by the Committee; or
(b) the Participant's right to return to active
employment after such leave is guaranteed by contract or
statute.
XI. Designation of Beneficiary
11.1 Each Participant may designate in writing one or more
beneficiaries to receive the amount in his account in the
event of death and may, in his or her sole discretion, change
such designation in writing at any time. Any such designation
shall be effective upon receipt by the Company and shall
control over any disposition by will or otherwise.
11.2 As soon as administratively feasible after the death of a
Participant, amounts credited to his or her account shall be
paid (without interest) in cash to the designated
beneficiaries or, in the absence of a designation, to the
executor, administrator or other legal representative of the
Participant's estate. Such payment shall relieve the Company
of further liability with respect to the Plan on account of
the deceased Participant. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of
the account unless the Participant has given express contrary
instructions.
XII. Miscellaneous
12.1 Restrictions on Transfer. Options granted hereunder may not
be transferred otherwise than by will or the laws of descent
and distribution. An option may not be exercised during a
Participant's lifetime other than by the Participant. A
Participant may direct the Company in the enrollment form to
issue share certificates to the Participant in the
Participant's name, or if the Participant so indicates in the
enrollment form, in the Participant's name together with the
name of one or more other persons, in joint tenancy with right
of survivorship or spousal community property, or in certain
forms of trusts approved by the Committee. The rights of a
Participant under the Plan shall not be assignable by such
Participant by operation of law or otherwise.
12.2 Administrative Assistance. If the Committee in its discretion
so elects, it may retain a brokerage firm, bank or other
financial institution to assist in the purchase of shares,
delivery of reports or other administrative aspects of the
Plan. If the Committee so elects, each Participant shall
(unless prohibited by applicable law) be deemed upon
enrollment in the Plan to have authorized the establishment of
an account on his or her behalf at such institution. Shares
purchased by a Participant under the Plan shall be held in the
account in the Participant's name, or if the Participant so
indicates in the enrollment form, in the Participant's name
together with the name of one or more other persons, in joint
tenancy with right of survivorship or spousal community
property, or in certain forms of trusts approved by the
Committee.
12.3 Costs. All costs and expenses incurred in administering the
Plan shall be paid by the Company, except that any stamp
duties, transfer taxes and any brokerage fees applicable to
participation in the Plan shall be charged to the account of
such Participant by the Company.
12.4 Equal Rights and Privileges. All Eligible Employees shall
have equal rights and privileges with respect to the Plan so
that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision
of the Code and the related regulations. Notwithstanding any
term of the Plan, any provision of the Plan which is
inconsistent with Section 423 or any successor provision shall
automatically be reformed to comply with the requirements of
Section 423.
12.5 Applicable Law. The Plan shall be governed by the substantive
laws (excluding the conflict of laws rules) of the State of
Delaware.
12.6 Amendment and Termination. The Board may amend, alter or
terminate the Plan at any time. No amendment shall be
effective unless within one year after it is adopted by the
Board it is approved by the holders of a majority of the
voting power of the Company's outstanding shares, if such
amendment would require stockholder approval under Section 423
of the Code, Rule 16b-3, or the requirements of any securities
exchange or quotation system on which the Common Stock is
listed.
If the Plan is terminated, the Board may elect to
terminate all outstanding options either prior to their
expiration or upon completion of the purchase of shares on the
next Purchase Date, or may elect to permit options to expire
in accordance with their terms (and participation to continue
through such expiration dates). If the options are terminated
prior to expiration, all funds contributed to the Plan that
have not been used to purchase shares shall be returned to the
Participants without interest as soon as administratively
feasible.
12.7 No Right of Employment. Neither the grant nor the exercise of
any rights to purchase shares under this Plan nor anything in
this Plan shall impose upon the Company or any Participating
Subsidiary any obligation to employ or continue to employ any
employee. The right of the Company and the Participating
Subsidiaries to terminate any employee shall not be diminished
or affected because any rights to purchase shares have been
granted to such employee.
12.8 Requirements of Law. The Company shall not be required to
sell, issue, or deliver any shares of Common Stock under this
Plan if such sale, issuance, or delivery might constitute a
violation by the Company or the Participant of any provision
of applicable law. Unless a registration statement or
qualification under the Securities Act or any applicable state
securities law is in effect with respect to the shares of
Common Stock proposed to be delivered under the Plan, the
Company shall not be required to deliver such shares if, in
the opinion of the Company's counsel, such issuance could
reasonably be expected to violate the Securities Act or such
state securities law, as applicable.
To the extent that such shares of Common Stock have not
been registered or qualified under the Securities Act or any
applicable state securities laws, the Company may impose
restrictions upon the hypothecation or further sale or
transfer of such shares (including the placement of
appropriate legends on stock certificates) if, in the judgment
of the Company's counsel, such restrictions are necessary or
desirable to achieve compliance with the Securities Act or the
securities laws of any state. If, in the opinion of the
Company's counsel, any legend placed on a stock certificate
for shares of Common Stock issued under the Plan is no longer
required by applicable securities or other laws, the holder of
such certificate shall be entitled to exchange such
certificate for an unlegended certificate for a like number of
shares.
The Company shall use all reasonable efforts to register
or qualify the Common Stock to be sold pursuant to the Plan
under the Securities Act and any applicable state securities
laws. The Company shall not be obligated to take any other
action to cause the grant or exercise of any right or the
issuance, sale, or deliver of shares pursuant to the exercise
of any right to comply with any law.
12.9 Board Approval. This amended and restated Plan was approved
by the Board of Directors on January 17, 1996 and shall be
effective on March 29, 1996.
Executed this __________ day of , 1996.
FIRST MERCHANTS ACCEPTANCE
CORPORATION
By:
Title:
August 8, 1996
FIRST MERCHANTS ACCEPTANCE CORPORATION
1994 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
1. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Scope of the Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Conditions to Grants . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) General Conditions. . . . . . . . . . . . . . . . . . . . . . 9
(b) Grant of Options and Option Price . . . . . . . . . . . . . . 9
(c) Grant of Incentive Stock Options. . . . . . . . . . . . . . . 10
(d) Grant of Restricted Stock . . . . . . . . . . . . . . . . . . 11
(e) Grant of Stock Appreciation Rights. . . . . . . . . . . . . . 13
(f) Grant of Performance Units and Performance
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Grant of LSARs. . . . . . . . . . . . . . . . . . . . . . . . 14
(h) Grant of Stock Bonuses. . . . . . . . . . . . . . . . . . . . 14
(I) Grant of Reload Options.. . . . . . . . . . . . . . . . . . . 14
7. Grantee's Agreement to Serve . . . . . . . . . . . . . . . . . . . . 15
8. Non-transferability. . . . . . . . . . . . . . . . . . . . . . . . . 15
9. Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Exercise of Options . . . . . . . . . . . . . . . . . . . . . 15
(b) Exercise of Stock Appreciation Rights . . . . . . . . . . . . 16
(c) Exercise of Performance Units . . . . . . . . . . . . . . . . 17
(d) Payment of Performance Shares.. . . . . . . . . . . . . . . . 19
(e) Exercise of LSARs . . . . . . . . . . . . . . . . . . . . . . 19
(f) Special Rules for Section 16 Persons. . . . . . . . . . . . . 20
(g) Full Vesting upon Change of Control . . . . . . . . . . . . . 20
10. Loans and Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 20
11. Notification under Section 83(b). . . . . . . . . . . . . . . . . . 21
12. Mandatory Tax Withholding . . . . . . . . . . . . . . . . . . . . . 21
13. Elective Share Withholding. . . . . . . . . . . . . . . . . . . . . 22
14. Termination of Employment . . . . . . . . . . . . . . . . . . . . . 22
(a) For Cause . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) On Account of Death or Disability . . . . . . . . . . . . . . 23
(c) On Account of Retirement. . . . . . . . . . . . . . . . . . . 24
(d) Any Other Reason. . . . . . . . . . . . . . . . . . . . . . . 24
(e) Exception for LSARs . . . . . . . . . . . . . . . . . . . . . 24
(f) Extension of Term . . . . . . . . . . . . . . . . . . . . . . 24
15. Equity Incentive Plans of Foreign Subsidiaries. . . . . . . . . . . 25
16. Substituted Awards. . . . . . . . . . . . . . . . . . . . . . . . . 25
17. Securities Law Matters. . . . . . . . . . . . . . . . . . . . . . . 25
18. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
19. No Employment Rights. . . . . . . . . . . . . . . . . . . . . . . . 26
20. Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . . 26
21. Nature of Payments. . . . . . . . . . . . . . . . . . . . . . . . . 26
22. Non-uniform Determinations. . . . . . . . . . . . . . . . . . . . . 26
23. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
24. Amendment of the Plan . . . . . . . . . . . . . . . . . . . . . . . 27
25. Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . 27
26. No Illegal Transactions . . . . . . . . . . . . . . . . . . . . . . 27
27. Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . 28
28. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
Introduction. The First Merchants Acceptance Corporation 1994
Equity Incentive Plan (the "Plan"), as established by First Merchants
Acceptance Corporation, a Delaware corporation (the "Company"),
effective on the Effective Date (as defined below) is hereby amended
and restated as set forth herein subject to the approval of the holders
of a majority of the shares of Stock (as defined below) present or
represented and entitled to vote at the Company's 1996 annual meeting
of stockholders. If such approval is not obtained, the Plan shall
immediately terminate.
XIII. Purpose.
The purpose of the Plan is to advance the interest of the Company
by encouraging and enabling the acquisition of a larger personal
financial interest in the Company by those employees upon whose
judgment and efforts the Company is largely dependent for the success-
ful conduct of its operations. An additional purpose of the Plan is
to provide a means by which employees of the Company and its Subsidiar
ies can acquire and maintain Stock ownership, thereby strengthening
their commitment to the success of the Company and their desire to
remain employed by the Company and its Subsidiaries. It is anticipated
that the acquisition of such financial interest and Stock ownership
will stimulate the efforts of such employees on behalf of the Company,
strengthen their desire to continue in the service of the Company and
encourage shareholder and entrepreneurial perspectives through employee
stock ownership. It is also anticipated that the opportunity to obtain
such financial interest and Stock ownership will prove attractive to
promising new employees and will assist the Company in attracting such
employees.
XIV. Definitions.
As used in the Plan, terms defined parenthetically immediately
after their use shall have the respective meanings provided by such
definitions and the terms set forth below shall have the following
meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
(1) "Award" means options, reload options, shares of restricted
Stock, stock appreciation rights, LSARs, performance units, performance
shares, or stock bonuses granted under the Plan.
(2) "Award Agreement" has the meaning specified in Sec-
tion 4(c)(v)(I).
(3) "Board" means the Board of Directors of the Company.
(4) "Cause" means conviction of the Grantee of a felony which
is, in the opinion of the Committee, likely to result in injury of a
material nature to the Company or a Subsidiary; the material violation
by the Grantee of written policies of the Company or a Subsidiary; the
gross and habitual negligence by the Grantee in the performance of the
Grantee's duties to the Company or its Subsidiaries; or the willful and
intentional action or omission to act in connection with the Grantee's
duties to the Company or a Subsidiary resulting, in the opinion of the
Committee, in injury of a material nature to the Company or a
Subsidiary.
(5) "Change of Control" means any of the following:
(I) the acquisition or holding by any person, entity or
"group" within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act (other than by the Company or any of its subsid-
iaries or any employee benefit plan of the Company or its
subsidiaries) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of 20% or more of
either the then-outstanding Stock or the combined voting power
of the Company's then-outstanding voting securities entitled to
vote generally in the election of directors ("Voting Power");
except that no such person, entity or group shall be deemed to
own beneficially (1) any securities held by the Company or a
Subsidiary or any employee benefit plan (or any related trust)
of the Company or a Subsidiary, (2) any securities acquired
pursuant to a benefit plan of the Company or a Subsidiary,
(3) any securities issuable pursuant to an option, warrant or
right owned by such person, entity or group as of the close of
business on the business day immediately preceding the IPO Date,
(4) any security that would otherwise be beneficially owned by
such person, entity or group as of the close of business on the
business day immediately preceding the IPO Date and (5) any
securities issued in connection with a stock split, stock
dividend or similar recapitalization or reorganization with
respect to shares covered by the foregoing exceptions; provided,
however, that no Change of Control shall be deemed to have
occurred solely by reason of any such acquisition (A) by a
corporation with respect to which, after such acquisition, more
than 60% of both the then-outstanding common shares of such
corporation and the Voting Power of such corporation are then-
beneficially owned, directly or indirectly, by the persons who
were the beneficial owners of the Stock and voting securities of
the Company immediately before such acquisition in substantially
the same proportions as their respective ownership, immediately
before such acquisition, of the then-outstanding Stock or the
Voting Power of the Company, as the case may be; or (B) solely
with in connection with the exercise of LSARs pursuant to Sec-
tion 9(e), pursuant to a tender offer unless at least a majority
of the outstanding securities subject to the tender offer are
tendered by persons who are not Section 16 Persons and not
withdrawn from such tender offer; or
(ii) individuals who, as of the Effective Date, consti-
tute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided that any
individual who becomes a director after the Effective Date whose
election or nomination for election by the Company's stockhold
ers was approved by at least a majority of the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Company (as such terms are used in Rule 14a-11
under the 1934 Act)) shall be deemed to be members of the
Incumbent Board; or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect to
which persons who were the respective beneficial owners of the
Stock and Voting Power of the Company immediately before such
merger, reorganization or consolidation do not, immediately
thereafter, beneficially own, directly or indirectly, more than
60% of, respectively, the then-outstanding common shares and the
Voting Power of the corporation resulting from such merger,
reorganization or consolidation, (B) a liquidation or dissolu
tion of the Company or (C) the sale or other disposition of all
or substantially all of the assets of the Company; provided,
however, that for the purposes of this Section the votes of all
Section 16 Persons shall be disregarded in determining whether
stockholder approval has been obtained.
Notwithstanding the foregoing, (a) a Change of Control shall be deemed
not to have occurred with respect to any Section 16 Person if such
Section 16 Person is, by agreement (written or otherwise), a partici
pant on such Section 16 Person's own behalf in a transaction which
causes the Change of Control to occur and (b) the IPO shall not be
deemed to be a Change of Control.
(6) "Change of Control Value" means the Fair Market Value of a
share of Stock on the date of a Change of Control.
(7) "Code" means the Internal Revenue Code of 1986, as amended,
and regulations and rulings thereunder. References to a particular
section of the Code shall include references to successor provisions.
(8) "Committee" means the committee of the Board appointed
pursuant to Section 4(a).
(9) "Company" has the meaning set forth in the introductory
paragraph.
(10) "Disability" means, for purposes of the exercise of an
incentive stock option after termination of employment, a disability
within the meaning of Section 22(e)(3) of the Code, and for all other
purposes, a mental or physical condition which, in the opinion of the
Committee, renders a Grantee unable or incompetent to carry out the job
responsibilities which such Grantee held or the tasks to which such
Grantee was assigned at the time the disability was incurred, and which
is expected to be permanent or for an indefinite duration exceeding one
year.
(11) "Effective Date" means the IPO Date;
(12) "Fair Market Value" means, as of any applicable date (other
than on the IPO Date with respect to the Stock):
(I) if the security is listed for trading on the New York
Stock Exchange, the closing price, regular way, of the security
as reported on the New York Stock Exchange Composite Tape, or if
no such reported sale of the security shall have occurred on
such date, on the next preceding date on which there was such a
reported sale, or
(ii) if the security is not so listed, but is listed on
another national securities exchange or authorized for quotation
on the National Association of Securities Dealers Inc.'s NASDAQ
National Market ("NASDAQ/NMS"), the closing price, regular way,
of the security on such exchange or NASDAQ/NMS, as the case may
be, or if no such reported sale of the security shall have
occurred on such date, on the next preceding date on which there
was such a reported sale, or
(iii) if the security is not listed for trading on a
national securities exchange or authorized for quotation on
NASDAQ/NMS, the average of the closing bid and asked prices as
reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or, if no such prices
shall have been so reported for such date, on the next preceding
date for which such prices were so reported, or
(iv) if the security is not listed for trading on a
national securities exchange or is not authorized for quotation
on NASDAQ/NMS or NASDAQ, the fair market value of the security
as determined in good faith by the Board.
Solely as of the IPO Date, Fair Market Value of the Stock
means the price to the public pursuant to the form of final
prospectus used in connection with the IPO, as indicated on the
cover page of such prospectus or otherwise.
(13) "Grant Date" means the date on which an Award shall be duly
granted, as determined in accordance with Section 6(a)(I).
(14) "Grantee" means an individual who has been granted an
Award.
(15) "including" or "includes" means "including, without
limitation," or "includes, without limitation", respectively.
(16) "IPO" means the initial public offering of Stock as
contemplated in the registration statement on Form S-1 filed by the
Company with the Securities and Exchange Commission on July 1, 1994,
and as subsequently amended.
(17) "IPO Date" means September 30, 1994.
(18) "LSAR" means limited stock appreciation right.
(19) "Measuring Period" has the meaning specified in Section
6(f)(I)(B).
(20) "Minimum Consideration" means $.01 per share of Stock or
such other amount that is from time to time considered to be capital
for purposes of Section 154 of the Delaware General Corporation Law.
(21) "1934 Act" means the Securities Exchange Act of 1934.
References to a particular section of, or rule under, the 1934 Act
shall include references to successor provisions.
(22) "Option Price" means the per share purchase price of Stock
subject to an option.
(23) "Performance Percentage" has the meaning specified in
Section 6(f)(I)(C).
(24) "Plan" has the meaning set forth in the introductory
paragraph.
(25) "Reload Option" has the meaning specified in Section 6(I).
(26) "Retirement" means a termination of employment with the
Company and its Subsidiaries other than for Cause at any time after
attaining age 65.
(27) "SEC" means the Securities and Exchange Commission.
(28) "Section 16 Person" means a person, whether or not a
Grantee, who is subject to potential liability under Section 16(b) of
the 1934 Act with respect to transactions involving equity securities
of the Company.
(29) "Stock" means the common stock, $.01 par value, of the
Company.
(30) "Subsidiary" means, for purposes of grants of incentive
stock options, a corporation as defined in Section 424(f) of the Code
(with the Company being treated as the employer corporation for
purposes of this definition) and, for all other purposes, a corporation
with respect to which the Company owns, directly or indirectly, 25% or
more of the then-outstanding common shares.
(31) "10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than
10% of the total combined voting power of all classes of stock of the
Company.
XV. Scope of the Plan.
(1) Subject to Section 23, an aggregate of 750,000 shares of
Stock are hereby made available and are reserved for delivery on
account of the grant and exercise of Awards (including restricted
Stock) and the payment of benefits in connection with Awards under the
Plan. Such shares may be treasury shares or newly-issued shares, as
may be determined from time to time by the Board or the Committee.
(2) Subject to Section 3(a) (as to the maximum number of shares
of Stock available for delivery in connection with Awards), up to an
aggregate of 100,000 shares of restricted Stock and bonus shares of
Stock may be granted under the Plan.
(3) The aggregate number of LSARs which may from time to time
be outstanding under the Plan shall not exceed the aggregate number of
shares of Stock subject to options and stock appreciation rights
(excluding tandem stock appreciation rights) then outstanding.
(4) If and to the extent an Award shall expire or terminate for
any reason without having been exercised in full (including a
cancellation and regrant of an option pursuant to Section 16), or shall
be forfeited, without, in either case, the Grantee having enjoyed any
of the benefits of stock ownership (other than dividends that are
likewise forfeited or voting rights), the shares of Stock (including
restricted Stock) associated with such Award shall become available for
other Awards. To the extent that the benefit in connection with an
Award is paid in cash, there shall be deducted from the share limit
provided in Section 3(a) a number of shares equal to the amount of the
cash paid divided by the Fair Market Value of a share of Stock on the
date of such payment.
XVI. Administration.
(1) Subject to Section 4(b), the Plan shall be administered by
a committee ("Committee") which shall consist of not less than three
persons who are directors of the Company, qualify as "outside
directors" as defined for purposes of the regulations under Code
Section 162(m) and satisfy the conditions of Rule 16b-3 in respect of
the exemption of grants to Section 16 Persons from potential liability
under Section 16(b) of the 1934 Act. The number of members of the
Committee shall from time to time be increased or decreased, and shall
be subject to such conditions, in each case as the Board deems
appropriate to permit transactions in Stock pursuant to the Plan to
satisfy such conditions of Rule 16b-3 as then in effect.
(2) The Board may reserve to itself or delegate to another
committee of the Board any or all of the authority and responsibility
of the Committee with respect to Awards to Grantees who are not
Section 16 Persons at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two
or more directors who may, but need not be, officers or employees of
the Company or of any of its Subsidiaries. To the extent that the
Board has reserved to itself or delegated to such other committee the
authority and responsibility of the Committee, all references to the
Committee in the Plan shall be to the Board or such other committee.
(3) The Committee shall have full and final authority and sole
discretion, but subject to the express provisions of the Plan, as
follows:
(1) to grant Awards and determine the Grant Date and term
thereof;
(2) to determine (A) when and to whom Awards may be
granted, (B) the terms and conditions applicable to each Award,
including the Option Price of an option, whether an option shall
qualify as an incentive stock option and the benefit payable
under any stock appreciation right, performance unit or perfor-
mance share, and (C) whether or not specific Awards shall be
identified with other specific Awards, and if so whether they
shall be exercisable cumulatively with, or alternatively to,
such other specific Awards;
(3) to determine the amount, if any, that a Grantee shall
pay for shares of restricted stock, whether to permit or require
the payment of cash dividends thereon to be deferred and the
terms related thereto, when restricted stock (including re
stricted stock acquired upon the exercise of an option) shall be
forfeited and whether such shares shall be held in escrow;
(4) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
(5) to prescribe, amend, and rescind rules relating to
the Plan, including rules with respect to the exercisability and
nonforfeitability of Awards upon the termination of employment
of a Grantee;
(6) to determine the terms and provisions and any
restrictions or conditions (including specifying such perfor-
mance criteria, Measuring Period, and Performance Percentages as
the Committee deems appropriate and imposing restrictions with
respect to stock acquired upon exercise of an option, which
restrictions may continue beyond the Grantee's termination of
employment) of the written agreements by which all Awards shall
be evidenced ("Award Agreements") which need not be identical
and, with the consent of the Grantee, to modify any such Award
Agreement at any time;
(7) to cancel, with the consent of the Grantee, outstand
ing Awards and to grant new Awards in substitution therefor;
(8) to authorize foreign Subsidiaries to adopt plans as
provided in Section 15;
(9) to accelerate the exercisability (including exer
cisability within a period of less than one year after the Grant
Date) of, and to accelerate or waive any or all of the restric
tions and conditions applicable to, any Award or any group of
Awards for any reason and at any time, including in connection
with a termination of employment (other than for Cause);
(10) subject to Section 6(a)(ii) and 6(c)(ii), to extend
the time during which any Award or group of Awards may be
exercised;
(11) to make such adjustments or modifications to Awards
to Grantees working outside the United States as are necessary
and advisable to fulfill the purposes of the Plan;
(12) to amend Award Agreements with the consent of the
Grantee; provided that the consent of the Grantee shall not be
required for any amendment which (A) does not adversely affect
the rights of the Grantee, or (B) is necessary or advisable (as
determined by the Committee) to carry out the purpose of the
Award as a result of any new or change in existing applicable
law, regulation, ruling or judicial decision; provided that any
such change shall be applicable only to Awards which have not
been exercised;
(13) to take any action at any time before the exercise
of an option (whether or not an incentive stock option), without
the consent of the Grantee, to prevent such option from being
treated as an incentive stock option;
(14) to impose such additional conditions, restrictions,
and limitations upon the grant, exercise or retention of Awards
as the Committee may, before or concurrently with the grant
thereof, deem appropriate, including requiring simultaneous
exercise of related identified Awards, and limiting the percent
age of Awards which may from time to time be exercised by a
Grantee;
(15) to certify in writing before the payment of any
performance based Awards (except for a payment that is attribut
able solely to the increase in the price of the Stock of the
Company) that the underlying performance goals and any other
material terms have been satisfied;
(16) to permit an employee to elect, prior to earning
compensation, to acquire options pursuant to Section 6(b) of the
Plan in lieu of receiving such compensation, determine the terms
and conditions of such options and determine the value of such
options on the Grant Date in accordance with Section 6(b) of the
Plan;
(17) to specify the manner of designating a beneficiary
to exercise Awards after the Grantee's death or transferring an
option (other than an incentive stock option), stock apprecia
tion right, performance unit or performance share to a revocable
inter vivos trust;
(18) to approve the manner of payment and determine the
terms related thereto by a Grantee in connection with an Award,
including use of restricted stock to pay the Option Price,
deferral of the payment or guarantee of the payment by the
Company pursuant to Section 10 and elective share withholding
pursuant to Section 13;
(19) to prohibit a Grantee from making an election under
Section 83(b) of the Code in accordance with Section 11;
(20) to require a written investment representation by a
Grantee as provided in Section 17;
(21) to make equitable adjustment of Awards as provided
in Section 23;
(22) to cancel stock appreciation rights and LSARs or to
pay such benefits in stock rather than cash as provided in
Sections 9(b) and 9(e); and
(23) to take any other action with respect to any matters
relating to the Plan for which it is responsible.
The determination of the Committee on all matters relating to the Plan
or any Award Agreement shall be conclusive and final. No member of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Award.
XVII. Eligibility. Awards may be granted to any full-time
employee (including any officer) of the Company or any of its domestic
or foreign Subsidiaries. In selecting the individuals to whom Awards
may be granted, as well as in determining the number of shares of Stock
subject to, and the other terms and conditions applicable to, each
Award, the Committee shall take into consideration such factors as it
deems relevant in promoting the purposes of the Plan.
XVIII. Conditions to Grants.
(1) General Conditions.
(1) The Grant Date of an Award shall be the date on which
the Committee grants the Award or such later date as specified
in advance by the Committee.
(2) The term of each Award (subject to Section 6(c)(ii)
and 6(I) with respect to incentive stock options and Reload
Options, respectively) shall be a period of not more than
10 years from the Grant Date, and shall be subject to earlier
termination as herein provided.
(3) A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
(4) To the extent not set forth in the Plan, the terms
and conditions of each Award shall be set forth in an Award
Agreement.
(2) Grant of Options and Option Price.
(1) No later than the Grant Date of any option, the
Committee shall determine the Option Price of such option. The
Option Price of an option shall not be less than 100% of the
Fair Market Value of the Stock on the Grant Date. The Award
Agreement may provide that the option shall be exercisable for
restricted Stock.
(2) The Committee may, in its discretion, permit an
employee eligible to receive Awards under Section 5 of the Plan
to elect, prior to earning compensation, to be granted an option
or options under the Plan in lieu of receiving such compensa-
tion. Subject to the express terms of the Plan, such options
shall have such terms and conditions as the Committee in its
discretion specifies; provided that, in the judgment of the
Committee, the value of such options on the Grant Date equals
the amount of compensation foregone by such employee, and
provided further, that except to the extent such condition may
be waived by the securities law counsel to the Company, a
Section 16 Person must irrevocably elect to forego such compen
sation and acquire such option at least six months prior to the
Grant Date of such option.
(3) The number of shares for which options may be
granted to any Grantee in any calendar year shall not exceed
60,000, subject to adjustment as provided in Section 23.
(3) Grant of Incentive Stock Options. At the time of the grant
of any option, the Committee may designate that such option shall be
made subject to additional restrictions to permit it to qualify as an
"incentive stock option" under the requirements of Section 422 of the
Code. Any option designated as an incentive stock option:
(1) shall not be granted to a 10% Owner;
(2) shall be for a period of not more than 10 years from
the Grant Date, and shall be subject to earlier termination as
provided herein or in the applicable Award Agreement;
(3) shall not have an aggregate Fair Market Value
(determined for each incentive stock option at its Grant Date)
of Stock with respect to which incentive stock options are
exercisable for the first time by such Grantee during any
calendar year (under the Plan and any other employee stock
option plan of the Grantee's employer or any parent or Subsid
iary thereof ("Other Plans")), determined in accordance with the
provisions of Section 422 of the Code, which exceeds $100,000
(the "$100,000 Limit");
(4) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to the portion of
such grant which is exercisable for the first time during any
calendar year ("Current Grant") and all incentive stock options
previously granted under the Plan and any Other Plans which are
exercisable for the first time during a calendar year ("Prior
Grants") would exceed the $100,000 Limit, be exercisable as
follows:
(A) the portion of the Current Grant which would,
when added to any Prior Grants, be exercisable with
respect to Stock which would have an aggregate Fair Market
Value (determined as of the respective Grant Date for such
options) in excess of the $100,000 Limit shall, notwith
standing the terms of the Current Grant, be exercisable
for the first time by the Grantee in the first subsequent
calendar year or years in which it could be exercisable
for the first time by the Grantee when added to all Prior
Grants without exceeding the $100,000 Limit; and
(B) if, viewed as of the date of the Current Grant,
any portion of a Current Grant could not be exercised
under the preceding provisions of this Section 6(c)(iv)
during any calendar year commencing with the calendar year
in which it is first exercisable through and including the
last calendar year in which it may by its terms be
exercised, such portion of the Current Grant shall not be
an incentive stock option, but shall be exercisable as a
separate option at such date or dates as are provided in
the Current Grant;
(5) shall be granted within 10 years from July 27, 1994,
the earlier of the date the Plan was initially adopted or the
date the Plan was initially approved by the stockholders of the
Company;
(6) shall require the Grantee to notify the Committee of
any disposition of any Stock issued pursuant to the exercise of
the incentive stock option under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition;
(7) shall by its terms not be assignable or transferable
other than by will or the laws of descent and distribution and
may be exercised, during the Grantee's lifetime, only by the
Grantee; provided, however, that the Grantee may, to the extent
provided in the Plan in any manner specified by the Committee,
designate in writing a beneficiary to exercise his incentive
stock option after the Grantee's death; and
(8) shall have an Option Price of not less than 100% of
the Fair Market Value of the Stock on the Grant Date.
Notwithstanding the foregoing and Section 4(c)(vi), the Committee may,
without the consent of the Grantee, at any time before the exercise of
an option (whether or not an incentive stock option), take any action
necessary to prevent such option from being treated as an incentive
stock option.
(4) Grant of Restricted Stock.
(1) The Committee may grant shares of restricted Stock to
any individual eligible under Section 5 to receive Awards.
(2) The Committee shall determine the amount, if any,
that a Grantee shall pay for shares of restricted Stock, subject
to the following sentence. Except with respect to shares of
restricted Stock that are treasury shares, for which no payment
need be required, the Committee shall require the Grantee to pay
at least the Minimum Consideration for each share of restricted
Stock granted to such Grantee. Such payment shall be made in
full by the Grantee before the delivery of the shares and in any
event no later than 10 days after the Grant Date for such
shares. In the discretion of the Committee and to the extent
permitted by law, payment may also be made in accordance with
Section 10.
(3) The Committee may, but need not, provide that all or
any portion of a Grantee's Award of restricted Stock, or
restricted Stock acquired upon exercise of an option shall be
forfeited:
(A) except as otherwise specified in the Award
Agreement, upon the Grantee's termination of employment
for reasons other than death, disability or any other
reason specified in the Award Agreement within a specified
time period after the Grant Date, or
(B) if the Company or the Grantee does not achieve
specified performance goals (if any) within a specified
time period after the Grant Date and before the Grantee's
termination of employment, or
(C) upon failure to satisfy such other restrictions
as the Committee may specify in the Award Agreement;
provided that, subject to Section 4(c)(ix), in no case
shall such Award become nonforfeitable before the first
anniversary of the Grant Date.
(4) If a share of restricted Stock is forfeited, then if
the Grantee was required to pay for such share or acquired such
restricted Stock upon the exercise of an option, the Grantee
shall be deemed to have resold such share of restricted Stock to
the Company at a price equal to the lesser of (1) the amount
paid or, if the restricted Stock was acquired on exercise of an
option, the Option Price paid by the Grantee for such share of
restricted Stock, or (2) the Fair Market Value of a share of
Stock on the date of such forfeiture. The Company shall pay to
the Grantee the required amount as soon as is administratively
practical. Such share of restricted Stock shall cease to be
outstanding, and shall no longer confer on the Grantee thereof
any rights as a stockholder of the Company, from and after the
later of the date the event causing the forfeiture occurred or
the date of the Company's tender of the payment specified above,
whether or not such tender is accepted by the Grantee.
(5) The Committee may provide that any share of re-
stricted Stock shall be held (together with a stock power
executed in blank by the Grantee) in escrow by the Secretary of
the Company until such shares become nonforfeitable or are
forfeited. Any share of restricted Stock shall bear an appro
priate legend specifying that such share is non-transferable and
subject to the restrictions set forth in the Plan and the Award
Agreement. If any shares of restricted Stock become nonforfeit
able, the Company shall cause certificates for such shares to be
issued or reissued without such legend.
(5) Grant of Stock Appreciation Rights. When granted, stock
appreciation rights may, but need not, be identified with shares of
Stock subject to a specific option, specific shares of restricted
Stock, or specific performance units or performance shares of the
Grantee (including any option, shares of restricted Stock, performance
units, or performance shares granted on or before the Grant Date of the
stock appreciation rights) in a number equal to or different from the
number of stock appreciation rights so granted. If stock appreciation
rights are identified with shares of Stock subject to an option, with
shares of restricted Stock, or with performance units or performance
shares, then, unless otherwise provided in the applicable Award
Agreement, the Grantee's associated stock appreciation rights shall
terminate upon (I) the expiration, termination, forfeiture or cancella-
tion of such option, shares of restricted Stock, performance units, or
performance shares, (ii) the exercise of such option, performance
units, or performance shares or (iii) the date such shares of
restricted Stock become nonforfeitable. The number of stock apprecia
tion rights which may be granted to any Grantee in any calendar year
shall not exceed 60,000, subject to adjustment as provided in Section
23.
(6) Grant of Performance Units and Performance Shares.
(1) Before the grant of any performance unit or perfor-
mance share, the Committee shall:
(A) determine objective performance goals (which
may consist of any one or more of the following: the
attainment by a share of a specified Fair Market Value for
a specified period of time, earnings per share, return to
stockholders (including dividends), return on equity,
earnings of the Company, growth in revenues, market share,
cash flow or cost reduction goals, or any combination of
the foregoing), and the amount of compensation under the
goals applicable to such grant;
(B) designate a period, of not less than one year
nor more than seven years, for the measurement of the
extent to which performance goals are attained, which
period may begin prior to the Grant Date (the "Measuring
Period"); and
(C) assign a "Performance Percentage" to each level
of attainment of performance goals during the Measuring
Period, with the percentage applicable to minimum attain
ment being zero percent (0%) and the percentage applicable
to maximum attainment to be determined by the Committee
from time to time, but not in excess of 150%.
(2) If a Grantee is promoted, demoted or transferred to
a different business unit of the Company during a Measuring
Period, then, to the extent the Committee determines the
performance goals or Measuring Period are no longer appropriate
and if permitted under the terms of the grant, the Committee may
adjust, change or eliminate the performance goals or the
applicable Measuring Period as it deems appropriate in order to
make them appropriate and comparable to the initial performance
goals or Measuring Period.
(3) When granted, performance units and performance
shares may, but need not, be identified with shares of Stock
subject to a specific option, specific shares of restricted
Stock or specific stock appreciation rights of the Grantee
granted under the Plan in a number equal to or different from
the number of the performance units or performance shares so
granted. If performance units or performance shares are
identified with shares of Stock subject to an option, shares of
restricted Stock or stock appreciation rights, then, unless
otherwise provided in the applicable Award Agreement, the
Grantee's associated performance units shall terminate upon
(A) the expiration, termination, forfeiture or cancellation of
such option, shares of restricted Stock or stock appreciation
rights, (B) the exercise of such option or stock appreciation
rights or (C) the date such shares of restricted Stock become
nonforfeitable.
(4) The performance units or performance shares awarded
under the Plan to any Grantee for any Measuring Period shall not
have a value in excess of the Grantee's base annual salary in
effect at the time of the grant of the Award multiplied by the
number of years in the Measuring Period. The value of perfor
mance shares awarded under the Plan to any Grantee for purposes
of the limitations contained in this subparagraph shall be
determined by valuing the Stock at its Fair Market Value on the
date the performance shares are granted.
(5) The performance goals and the amount of compensation
under the goals applicable to the grant of any performance
shares or performance units shall be set forth in a written
document not later than 90 days after the commencement of the
Grantee's services to which the performance goals relate and
while the outcome is substantially uncertain.
(6) The Committee shall certify in writing prior to
payment of compensation related to any performance unit or
performance share that the performance goals and any other
material terms were satisfied.
(7) Grant of LSARs. LSARs shall automatically be granted to
each Grantee upon the grant of any option or stock appreciation right
under the Plan, except as otherwise provided by the Committee in such
grant. Each LSAR shall be identified with a share of Stock subject to
an option or a stock appreciation right of the Grantee. The number of
LSARs granted to a Grantee shall equal the sum of the number of shares
of Stock subject to the option and the number of stock appreciation
rights with which such LSARs are identified. The Committee may also
grant an LSAR with respect to any share of Stock subject to an option
or stock appreciation right previously granted hereunder. Upon the
exercise, expiration, termination, forfeiture, or cancellation of a
Grantee's option or stock appreciation rights, as the case may be, the
Grantee's associated LSARs shall terminate.
(8) Grant of Stock Bonuses.
(1) The Committee may grant shares of stock as a bonus to
any individual eligible under Section 5 to receive Awards.
(2) Before the grant of any stock bonus, the Committee
shall determine objective performance goals (which may consist
of any one or more of the following: the attainment by a share
of a specified Fair Market Value for a specified period of time,
earnings per share, return to stockholders (including divi-
dends), return on equity, earnings of the Company, growth in
revenues, market share, cash flow or cost reduction goals, or
any combination of the foregoing), and the amount of compensa-
tion under the goals applicable to such grant.
(3) The value of stock bonuses awarded to a Grantee for
each calendar year shall not exceed the Grantee's base annual
salary in effect at the time of the grant of the Award. The
value of stock bonuses awarded for purposes of this limitation
shall be determined by valuing the stock at its Fair Market
Value on the date the stock bonuses are granted.
(4) The performance goals and the amount of compensation
under the goals applicable to the grant of any stock bonuses
shall be set forth in a written document not later than 90 days
after the commencement of the Grantee's services to which the
performance goals relate and while the outcome is substantially
uncertain.
(5) The Committee shall certify in writing prior to
payment of compensation related to any stock bonus that the
performance goals and any other material terms were satisfied.
The Committee may grant shares of Stock as a bonus to any
individual eligible under Section 5 to receive Awards.
(9) Grant of Reload Options. The Committee may provide either
in an Award Agreement or by resolution adopted on or after the Grant
Date, that a Grantee who exercises an option for shares of Stock which
have a Fair Market Value equal to not less than 100% of the Option
Price for such options ("Exercised Options") and pays the Option Price
or tax withholding requirements with shares of Stock shall be granted,
subject to Article 3, additional options ("Reload Options") in an
amount equal to the sum ("Reload Number") of the number of shares of
Stock tendered to exercise the Exercised Options plus, if so provided
by the Committee, the number of shares of Stock, if any, retained by
the Company in connection with the exercise of the Exercised Options
to satisfy any federal, state or local tax withholding requirements.
Reload Options shall be subject to the following terms and
conditions:
(1) the Grant Date for each Reload Option shall be the
date of exercise of the Exercised Option to which it relates;
(2) subject to Section 6(I)(iii), the Reload Option may
be exercised at any time during the unexpired term of the
Exercised Option (subject to earlier termination thereof as
provided in the Plan and in the applicable Award Agreement); and
(3) the terms of the Reload Option shall be the same as
the terms of the Exercised Option to which it relates, except
that (A) the Option Price shall be the Fair Market Value of the
Stock on the Grant Date of the Reload Option and (B) subject to
Section 4(c)(ix), no Reload Option may be exercised within one
year after its Grant Date.
XIX. Grantee's Agreement to Serve. Each Grantee who is granted
an Award shall, by executing such Grantee's Award Agreement, agree that
such Grantee will remain in the employ of the Company or any of its
Subsidiaries for at least one year after the Grant Date. No obligation
of the Company or any of its Subsidiaries as to the length of any
Grantee's employment shall be implied by the terms of the Plan, any
grant of an Award hereunder or any Award Agreement. The Company and
its Subsidiaries reserve the same rights to terminate employment of any
Grantee as existed before the Effective Date.
XX. Non-transferability. Each Award (other than restricted
Stock and stock bonuses) granted hereunder shall not be assignable or
transferable other than by will or the laws of descent and distribution
and may be exercised, during the Grantee's lifetime, only by the
Grantee; provided, however, that a Grantee may in a manner specified
by the Committee and to the extent provided in the Plan (a) designate
in writing a beneficiary to exercise his Award after the Grantee's
death and (b) transfer an option (other than an incentive stock
option), stock appreciation right, performance unit or performance
share to a revocable, inter vivos trust as to which the Grantee is both
the settlor and trustee, but in no event shall any transfer to such a
trust by or on behalf of a Section 16 Person be effective unless
Company shall have received an opinion of counsel or the staff of the
SEC shall have issued an interpretive or "no action" letter, in either
case to the effect that such a transfer is not inconsistent with the
requirements of Rule 16b-3 under the 1934 Act. Each share of
restricted Stock shall be non-transferable until such share becomes
nonforfeitable.
XXI. Exercise.
(1) Exercise of Options. Subject to Section 4(c)(ix) and such
terms and conditions as the Committee may impose, each option shall
become exercisable with respect to 25% of the shares subject thereto
on each of the first four annual anniversaries of the Grant Date of
such option unless the Committee provides otherwise in the Award
Agreement.
Each option shall be exercised by delivery to the Company of
written notice of intent to purchase a specific number of shares of
Stock subject to the option. The Option Price of any shares of Stock
or shares of restricted Stock as to which an option shall be exercised
shall be paid in full at the time of the exercise. Payment may, at the
election of the Grantee, be made in any one or any combination of the
following:
(I) cash;
(ii) Stock held by the Grantee for at least 6 months
prior to exercise of the option, valued at its Fair Market Value
on the date of exercise;
(iii) with the approval of the Committee, shares of
restricted Stock held by the Grantee for at least 6 months prior
to exercise of the option, each valued at the Fair Market Value
of a share of Stock on the date of exercise; or
(iv) through simultaneous sale through a broker of shares
acquired on exercise, as permitted under Regulation T of the
Federal Reserve Board.
In the discretion of the Committee and to the extent permitted by law,
payment may also be made in accordance with Section 10.
If restricted Stock ("Tendered Restricted Stock") is used to pay
the Option Price for Stock subject to an option, then the Committee
may, but need not, specify that (I) all the shares of Stock acquired
on exercise of the option shall be subject to the same restrictions as
the Tendered Restricted Stock, determined as of the date of exercise
of the option, or (ii) a number of shares of Stock acquired on exercise
of the option equal to the number of shares of Tendered Restricted
Stock shall, unless the Committee provides otherwise, be subject to the
same restrictions as the Tendered Restricted Stock, determined as of
the date of exercise of the option.
(2) Exercise of Stock Appreciation Rights. Subject to
Section 4(c)(ix) and such terms and conditions as the Committee may
impose, (I) each stock appreciation right not affiliated with any other
Award shall become exercisable with respect to 25% of the shares
subject thereto on each of the first four annual anniversaries of the
Grant Date of such stock appreciation right unless the Committee
provides otherwise in the Award Agreement and (ii) each stock
appreciation right affiliated with any other Award shall become
exercisable not earlier than the first anniversary of the Grant Date
of such stock appreciation right, to the extent that (A) the option
with which it is identified may be exercised, (B) the restricted Stock
with which it is identified is nonforfeitable or (C) the performance
unit with which it is identified may be exercised. Stock appreciation
rights shall be exercised by delivery to the Company of written notice
of intent to exercise a specific number of stock appreciation rights.
Unless otherwise provided in the applicable Award Agreement, the
exercise of stock appreciation rights which are identified with shares
of Stock subject to an option, shares of restricted Stock or perfor
mance units shall result in the cancellation or forfeiture of such
option, shares of restricted Stock or performance units, as the case
may be, to the extent of such exercise.
The benefit for each stock appreciation right exercised shall be
equal to:
(I) the Fair Market Value of a share of Stock on the date
of such exercise, reduced by
(ii) an amount equal to:
(A) for any stock appreciation right identified
with shares of Stock subject to an option, the Option
Price of such option, unless the Committee in the grant of
the stock appreciation right specified a higher amount or
(B) for any other stock appreciation right, the
Fair Market Value of a share of Stock on the Grant Date of
such stock appreciation right, unless the Committee in the
grant of the stock appreciation right specified a higher
amount;
provided that the Committee may provide that the benefit for any stock
appreciation right shall not exceed such percentage of the Fair Market
Value of a share of Stock on such Grant Date as the Committee shall
specify. The benefit upon the exercise of a stock appreciation right
shall be payable in cash, except that the Committee, may provide in the
Award Agreement that benefits, with respect to any particular exercise,
may be paid wholly or partly in Stock. Notwithstanding the foregoing,
if the Committee in its discretion determines that the exercise of the
stock appreciation rights would preclude the use of pooling of
interests accounting following a sale of the Company which is
reasonably likely to occur and that such preclusion of pooling would
have a material adverse effect on the sale of the Company, the
Committee, in its discretion may either unilaterally preclude stock
appreciation rights from being exercised upon the occurrence of a
Change of Control by canceling the stock appreciation rights prior to
the Change of Control or cause the Company to pay the stock apprecia
tion rights benefit in Stock if it determines that such payment would
not cause the transaction to be ineligible for pooling.
(3) Exercise of Performance Units.
(I) Subject to Section 4(c)(ix) and such terms and
conditions as the Committee may impose, if, with respect to any
performance unit, the minimum performance goals have been
achieved during the applicable Measuring Period, then such
performance unit shall be exercisable commencing on the later of
(A) the first anniversary of the Grant Date or (B) the first day
after the end of the applicable Measuring Period. Performance
units shall be exercised by delivery to the Company of written
notice of intent to exercise a specific number of performance
units; provided, however, that performance units not identified
with shares of Stock subject to an option, shares of restricted
Stock or stock appreciation rights shall be deemed exercised on
the date on which they first become exercisable. Unless
otherwise provided in the applicable Award Agreement, the
exercise of performance units which are identified with shares
of Stock subject to an option, shares of restricted Stock or
stock appreciation rights shall result in the cancellation or
forfeiture of such shares of Stock subject to option, shares of
restricted Stock or stock appreciation rights, as the case may
be, to the extent of such exercise.
(ii) The benefit for each performance unit exercised
shall be an amount equal to the product of:
(A) the Unit Value (as defined below)
multiplied by
(B) the Performance Percentage attained during the
Measuring Period for such performance unit.
(iii) The Unit Value shall be, as specified by the
Committee,
(A) a dollar amount, or
(B) an amount equal to the Fair Market Value of a
share of Stock on the Grant Date.
(iv) The benefit upon the exercise of a performance unit
shall be payable as soon as is administratively practicable
after the later of (A) the date the Grantee exercises or is
deemed to exercise such performance unit, or (B) the date (or
dates in the event of installment payments) as provided in the
applicable Award Agreement. Such benefit shall be payable in
cash, except that the Committee may provide in the Award
Agreement that benefits, with respect to any particular exer
cise, may be paid wholly or partly in Stock. Notwithstanding
the foregoing, if the Committee in its discretion determines
that the exercise of performance units would preclude the use of
pooling of interests accounting following a sale of the Company
which is reasonably likely to occur and that such preclusion of
pooling would have a material adverse effect on the sale of the
Company, the Committee, in its discretion may either unilater
ally bar the exercise of performance units by canceling the
performance units prior to the Change of Control or cause the
Company to pay the performance units rights benefit in Stock if
it determines that such payment would not cause the transaction
to be ineligible for pooling. If the Award Agreement provides
that the benefit may be paid wholly in Stock unless the Commit
tee specifies at the time of exercise that the benefit shall be
paid partly or wholly in cash, the number of shares of Stock
payable in lieu of cash shall be determined by valuing the Stock
at its Fair Market Value on the date such benefit is to be paid.
(4) Payment of Performance Shares. Subject to Section 4(c)(ix),
and such terms and conditions as the Committee may impose, if, with
respect to any performance share, the minimum performance goals have
been achieved during the applicable Measuring Period, then the Company
shall pay to the Grantee of such Award shares of Stock equal in number
to the product of the number of performance shares specified in the
applicable Award Agreement (together with, if so provided in the Award
Agreement, the number of additional shares of Stock that would have
accrued if an amount equal to the dividends actually paid on each share
of Stock during the Measuring Period had been paid on each such
performance share and invested in additional shares of Stock as of each
respective dividend payment date) multiplied by the Performance
Percentage achieved during such Measuring Period, except to the extent
that the Committee in its discretion determines that cash be paid in
lieu of some or all of such shares of Stock. The amount of cash
payable in lieu of a share of Stock shall be determined by valuing such
share at its Fair Market Value on the business day next preceding the
date such cash is to be paid. Payments pursuant to this Section 9(d)
shall be made as soon as administratively practical after the end of
the applicable Measuring Period. Any performance shares with respect
to which the performance goals have not been achieved by the end of the
applicable Measuring Period shall expire.
(5) Exercise of LSARs. Notwithstanding Sections 7 and 10, but
subject to the provisions of Section 14, each LSAR shall automatically
be exercised upon the occurrence of a Change of Control; provided that
at the time of the Change of Control, the Grantee must be a Section 16
Person; and further provided that if the Committee in its discretion
determines that the exercise of the LSARs would preclude the use of
pooling of interests accounting following a sale of the Company which
is reasonably likely to occur and that such preclusion of pooling would
have a material adverse effect on the sale of the Company, the
Committee, in its discretion may either unilaterally preclude LSARs
from being automatically exercised upon the occurrence of a Change of
Control by canceling the LSARs prior to the Change of Control or cause
the Company to pay the LSARs benefit in Stock if it determines that
such payment would not cause the transaction to be ineligible for
pooling. The exercise of LSARs shall result in the cancellation of the
option or stock appreciation rights with which such LSARs are
identified, to the extent of such exercise.
Within three business days after the exercise of any LSAR, the
Company shall pay the Grantee, in cash, an amount equal to:
(1) in the case of an LSAR identified with an option, the
difference between (A) the Change of Control Value, and (B) the
Option Price of the option,
(2) in the case of an LSAR identified with a stock
appreciation right, the difference between (A) the Change of
Control Value, and (B) unless the Committee in the grant of the
stock appreciation right specified a higher price, an amount
equal to
(1) in the case of a stock appreciation right
identified with an option, the Option Price of such
option, or
(2) in the case of any other stock appreciation
right, the Fair Market Value of a share of Stock on the
Grant Date of such stock appreciation right;
provided that the amount determined under this Section 9(d)(ii)
shall not exceed any maximum benefit provided in the applicable
Award Agreement.
(6) Special Rules for Section 16 Persons. No option, stock
appreciation right, LSAR, performance unit, or performance share (if
the benefit payable with respect to such performance unit or perfor
mance share is to be determined by reference to the Fair Market Value
of the Stock on the date the performance unit or performance share is
exercised) shall be exercisable by a Section 16 Person during the first
six months after its Grant Date, except as exempted from Section 16 of
the 1934 Act under Rule 16a-2(d) under the 1934 Act or as may from time
to time be permitted by the Committee.
(7) Full Vesting upon Change of Control. In the event of a
Change of Control, all unvested Awards shall become immediately vested
and exercisable; provided that the benefit payable with respect to any
performance unit or performance share with respect to which the
Measuring Period has not ended as of the date of such Change of Control
shall be equal to the product of the Unit Value multiplied successively
by each of the following:
(1) a fraction, the numerator of which is the
number of months (including as a whole month any partial
month) that have elapsed since the beginning of such
Measuring Period until the date of such Change of Control
and the denominator of which is the number of months
(including as a whole month any partial month) in the
Measuring Period; and
(2) a percentage equal to the greater of the target
percentage, if any, specified in the applicable Award
Agreement or the maximum percentage, if any, that would be
earned under the terms of the applicable Award Agreement
assuming that the rate at which the performance goals have
been achieved as of the date of such Change of Control
would continue until the end of the Measuring Period.
XXII. Loans and Guarantees. The Committee may:
(1) allow a Grantee to defer payment to the Company of
all or any portion of (I) the Option Price of an option,
(ii) the purchase price of a share of restricted Stock, or
(iii) any taxes associated with a benefit hereunder which is not
a cash benefit at the time such benefit is so taxable, or
(2) cause the Company to guarantee a loan from a third
party to the Grantee, in an amount equal to all or any portion
of such Option Price, purchase price, or any related taxes.
Any such payment deferral or guarantee by the Company pursuant to this
Section 10 shall be on such terms and conditions as the Committee may
determine; provided that the interest rate applicable to any such
payment deferral shall not be more favorable to the Grantee than the
terms applicable to funds borrowed by the Company from time to time.
Notwithstanding the foregoing, a Grantee shall not be entitled to defer
the payment of such Option Price, purchase price or any related taxes
unless the Grantee (I) enters into a binding obligation to pay the
deferred amount and (ii) except with respect to treasury shares, pays
upon exercise of an option or grant of shares of restricted Stock, as
the case may be, an amount equal to or greater than the Minimum
Consideration therefor. If the Committee has permitted a payment
deferral or caused the Company to guarantee a loan pursuant to this
Section 10, then the Committee may require the immediate payment of
such deferred amount or the immediate release of such guarantee upon
the Grantee's termination of employment or if the Grantee sells or
otherwise transfers the Grantee's shares of Stock purchased pursuant
to such deferral or guarantee. The Committee may at any time in its
discretion forgive the repayment of any or all of the principal of or
interest on any such deferred payment obligation.
XXIII. Notification under Section 83(b). The Committee may, on
the Grant Date or any later date, prohibit a Grantee from making the
election described below. If the Committee has not prohibited such
Grantee from making such election, and the Grantee, in connection with
the exercise of any option, or the grant of any share of restricted
Stock, makes the election permitted under Section 83(b) of the Code
(i.e., an election to include in such Grantee's gross income in the
year of transfer the amounts specified in Section 83(b) of the Code),
such Grantee shall notify the Company of such election within 10 days
of filing notice of the election with the Internal Revenue Service, in
addition to any filing and notification required pursuant to regula
tions issued under the authority of Section 83(b) of the Code.
XXIV. Mandatory Tax Withholding.
(1) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or upon a share of
restricted Stock becoming nonforfeitable, or any other event with
respect to rights and benefits hereunder, the Company shall be entitled
to require as a condition of delivery (I) that the Grantee remit an
amount sufficient to satisfy all federal, state, and local tax
withholding requirements related thereto, (ii) the withholding of such
sums from compensation otherwise due to the Grantee or from any shares
of Stock due to the Grantee under the Plan or (iii) any combination of
the foregoing.
(2) If any disqualifying disposition described in Sec-
tion 6(c)(vi) is made with respect to shares of Stock acquired under
an incentive stock option granted pursuant to the Plan or any election
described in Section 11 is made, then the person making such disquali
fying disposition or election shall remit to the Company an amount
sufficient to satisfy all federal, state, and local tax withholding
requirements thereby incurred; provided that, in lieu of or in addition
to the foregoing, the Company shall have the right to withhold such
sums from compensation otherwise due to the Grantee or from any shares
of Stock due to the Grantee under the Plan.
XXV. Elective Share Withholding.
(1) Subject to Section 13(b), a Grantee may elect the withhold
ing ("Share Withholding") by the Company of a portion of the shares of
Stock otherwise deliverable to such Grantee upon the exercise or
payment of an Award or upon a share of restricted Stock becoming non-
forfeitable (each a "Taxable Event") having a Fair Market Value equal
to:
(1) the minimum amount necessary to satisfy required
federal, state, or local tax withholding liability attributable
to the Taxable Event; or
(2) with the Committee's prior approval, a greater
amount, not to exceed the estimated total amount of such
Grantee's tax liability with respect to the Taxable Event.
(2) Each Share Withholding election by a Grantee shall be
subject to the following restrictions:
(1) any Grantee's election shall be subject to the
Committee's right to revoke such election of Share Withholding
by such Grantee at any time before the Grantee's election if the
Committee has reserved the right to do so in the Award Agree
ment;
(2) if the Grantee is a Section 16 Person, such Grantee's
election shall be subject to the disapproval of the Committee at
any time, whether or not the Committee has reserved the right to
do so;
(3) the Grantee's election must be made before the date
(the "Tax Date") on which the amount of tax to be withheld is
determined;
(4) the Grantee's election shall be irrevocable;
(5) a Section 16 Person may not elect Share Withholding
within six months after the grant of the related option, LSAR or
stock appreciation rights (except if the Grantee dies or incurs
a Disability before the end of the six-month period); and
(6) except to the extent such condition may be waived by
the securities law counsel to the Company, a Section 16 Person
must elect Share Withholding either six months before the Tax
Date or during the 10-business day period beginning on the third
business day after the release of the Company's quarterly or
annual summary statement of sales and earnings.
XXVI. Termination of Employment. Except as otherwise provided
by the Committee in the Award Agreement or otherwise:
(1) For Cause. If a Grantee has a termination of employment for
Cause,
(I) the Grantee's shares of restricted Stock that are
forfeitable shall thereupon be forfeited, subject to the
provisions of Section 6(d)(iv) regarding repayment of certain
amounts to the Grantee; and
(ii) any unexercised option, stock appreciation right,
LSAR, performance unit or performance share shall thereupon
terminate.
(2) On Account of Death or Disability. If a Grantee has a
termination of employment on account of the Grantee's death or
Disability, then, except as otherwise provided in the Award Agreement,
(I) the Grantee's shares of restricted stock that were
forfeitable shall thereupon become nonforfeitable;
(ii) any unexercised option or stock appreciation right,
whether or not exercisable on the date of such termination of
employment on account of death or Disability may be exercised,
in whole or in part, at any time within 180 days after such
termination of employment by the Grantee, or after the Grantee's
death, by (A) his personal representative or by the person to
whom the option or stock appreciation right is transferred by
will or the applicable laws of descent and distribution, (B) the
Grantee's beneficiary designated in accordance with Sections
6(c)(vii) or 8, or (C) the then-acting trustee of the trust
described in Section 8; and
(iii) any unexercised performance unit or performance
share may be exercised in whole or in part, at any time within
180 days after such termination of employment on account of
death or Disability by the Grantee or, after the Grantee's
death, by (A) his personal representative or by the person to
whom the performance unit or performance share is transferred by
will or the applicable laws of descent and distribution, (B) the
Grantee's beneficiary designated in accordance with Section 8,
or (C) the then-serving trustee of the trust described in
Section 8; provided that the benefit payable with respect to any
performance unit or performance share with respect to which the
Measuring Period has not ended as of the date of such termina
tion of employment on account of death or Disability shall be
equal to the product of the Unit Value multiplied successively
by each of the following:
(1) a fraction, the numerator of which is the
number of months (including as a whole month any partial
month) that have elapsed since the beginning of such
Measuring Period until the date of such termination of
employment and the denominator of which is the number of
months (including as a whole month any partial month) in
the Measuring Period; and
(2) a percentage determined in the discretion of
the Committee that would be earned under the terms of the
applicable Award Agreement assuming that the rate at which
the performance goals have been achieved as of the date of
such termination of employment would continue until the
end of the Measuring Period, or, if the Committee elects
to compute the benefit after the end of the Measuring
Period, the Performance Percentage, as determined by the
Committee, attained during the Measuring Period for the
performance unit or performance share.
(3) On Account of Retirement. If a Grantee has a termination
of employment on account of Retirement, any unexercised option or stock
appreciation right (other than a stock appreciation right identified
with a share of restricted Stock, a performance unit or performance
share) to the extent then exercisable, may be exercised, in whole or
in part, at any time within 90 days after such Retirement. The
nonforfeitability and exercisability of the Grantee's restricted Stock,
performance units and performance shares (and any stock appreciation
rights identified therewith) shall be determined under Section 14(d).
(4) Any Other Reason. If a Grantee has a termination of
employment for a reason other than for Cause, death, Disability, or
Retirement,
(I) the Grantee's shares of restricted Stock (and any
stock appreciation rights identified therewith), to the extent
forfeitable on the date of the Grantee's termination of employ
ment, shall be forfeited on such date;
(ii) any unexercised option or stock appreciation right
(other than a stock appreciation right identified with a share
of restricted Stock, performance unit or performance share) to
the extent exercisable on the date of the Grantee's termination
of employment, may be exercised in whole or in part, not later
than the 90th day following the Grantee's termination of
employment; provided, however, that (x) if such 90th day is not
a business day, such option or stock appreciation right may be
exercised not later than the first business day following such
90th day and (y) if the Grantee has entered into an agreement
with the Company not to sell any shares of Stock (or the capital
stock of a successor to the Company) for a specified period
following the consummation of a business combination between the
Company and another corporation or entity (the "Specified
Period"), such option or stock appreciation right may be
exercised in whole or in part until the later of such 90th day
following the termination of the Grantee's employment or 10
business days following the expiration of the Specified Period;
and
(iii) the Grantee's performance units and performance
shares (and any stock appreciation rights identified therewith)
shall become non-forfeitable and may be exercised in whole or in
part, but only if and to the extent determined by the Committee.
(5) Exception for LSARs. Notwithstanding the foregoing, but
subject to Section 6(a), any LSAR which has not been deemed exercised
on or before the Grantee's termination of employment shall thereupon
terminate.
(6) Extension of Term. In the event of termination of the
Grantee's employment other than for Cause, the term of any Award
(whether or not exercisable on the date of the Grantee's termination
of employment) which by its terms would otherwise expire after the
Grantee's termination of employment but prior to the end of the period
following the Grantee's termination of employment described in
Sections 14(b), (c), (d) and (e) above for exercise of Awards may, in
the discretion of the Committee, be extended so as to permit any
unexercised portion thereof to be exercised at any time within such
period. The Committee may further extend the period of exercisability
to permit any unexercised portion thereof to be exercised with a
specified period provided by the Committee. However, in no event may
the term of any Award expire more than 10 years after the Grant Date
of such Award.
XXVII. Equity Incentive Plans of Foreign Subsidiaries. The
Committee may authorize any foreign Subsidiary to adopt a plan for
granting Awards ("Foreign Equity Incentive Plan"). All awards granted
under such Foreign Equity Incentive Plans shall be treated as grants
under the Plan. Such Foreign Equity Incentive Plans shall have such
terms and provisions as the Committee permits not inconsistent with the
provisions of the Plan and which may be more restrictive than those
contained in the Plan. Awards granted under such Foreign Equity
Incentive Plans shall be governed by the terms of the Plan except to
the extent that the provisions of the Foreign Equity Incentive Plans
are more restrictive than the terms of the Plan, in which case such
terms of the Foreign Equity Incentive Plans shall control.
XXVIII. Substituted Awards. If the Committee cancels any Award
(granted under this Plan or any plan of any entity acquired by the
Company or any of its Subsidiaries), and a new Award is substituted
therefor, then the Committee may determine the terms and conditions of
such new Award; provided that (a) the Option Price of any new option
shall not be less than 100% of the Fair Market Value of a share of
Stock on the date of grant of the new Award; (b) no Award shall be
canceled without the consent of the Grantee if the terms and conditions
of the new Award to be substituted are not at least as favorable as the
terms and conditions of the Award to be canceled (and the Grant Date
of the new Award shall be the date on which such new Award is granted);
and (c) no Section 16 Person may exercise a substituted stock
appreciation right or a substituted option (or substituted performance
unit or performance share) identified with a stock appreciation right
within six months after the Grant Date (calculated without reference
to this Section 16) of such substituted option, unless the Company
shall have received an opinion of counsel for the Company or the staff
of the SEC shall have issued a "no action" or interpretive letter, in
either case to the effect that such limitation is not necessary in
order to avoid potential liability under Section 16(b) of the 1934 Act.
XXIX. Securities Law Matters.
(1) If the Committee deems necessary to comply with the
Securities Act of 1933, the Committee may require a written investment
intent representation by the Grantee and may require that a restrictive
legend be affixed to certificates for shares of Stock.
(2) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any
applicable provision of (I) federal or state securities laws or
(ii) the listing requirements of any national securities exchange or
national market system on which are listed any of the Company's equity
securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company
shall use its best efforts to cause such exercise, nonforfeitability
or delivery to comply with all such provisions at the earliest
practicable date.
XXX. Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment
of, benefits under the Plan.
XXXI. No Employment Rights. Neither the establishment of the
Plan, nor the granting of any Award shall be construed to (a) give any
Grantee the right to remain employed by the Company or any of its
Subsidiaries or to any benefits not specifically provided by the Plan
or (b) in any manner modify the right of the Company or any of its
Subsidiaries to modify, amend, or terminate any of its employee benefit
plans.
XXXII. Rights as a Stockholder. A Grantee shall not, by reason
of any Award (other than restricted Stock) have any right as a
stockholder of the Company with respect to the shares of Stock which
may be deliverable upon exercise or payment of such Award until such
shares have been delivered to him. Shares of restricted Stock held by
a Grantee or held in escrow by the Secretary of the Company shall
confer on the Grantee all rights of a stockholder of the Company,
except as otherwise provided in the Plan. The Committee at the time
of grant of restricted Stock, may permit or require the payment of cash
dividends thereon to be deferred and, if the Committee so determines,
reinvested in additional restricted Stock to the extent shares are
available under Section 3 or otherwise reinvested. Stock dividends and
deferred cash dividends issued with respect to restricted Stock shall
be subject to the same restrictions and other terms as apply to the
shares with respect to which such dividends are issued. The Committee
may provide for crediting to and payment of interest on deferred cash
dividends.
XXXIII. Nature of Payments. Any and all grants, payments of
cash, or deliveries of shares of Stock hereunder shall constitute
special incentive payments to the Grantee and shall not be taken into
account in computing the amount of salary or compensation of the
Grantee for the purposes of determining any pension, retirement, death
or other benefits under (a) any pension, retirement, profit-sharing,
bonus, life insurance or other employee benefit plan of the Company or
any of its Subsidiaries or (b) any agreement between the Company or any
Subsidiary, on the one hand, and the Grantee, on the other hand, except
as such plan or agreement shall otherwise expressly provide.
XXXIV. Non-uniform Determinations. Neither the Committee's nor
the Board's determinations under the Plan need be uniform and may be
made by the Committee or the Board selectively among persons who
receive, or are eligible to receive, Awards (whether or not such
persons are similarly situated). Without limiting the generality of
the foregoing, the Committee shall be entitled, among other things, to
make non-uniform and selective determinations, to enter into non
- - - -uniform and selective Award Agreements as to (a) the identity of the
Grantees, (b) the terms and provisions of Awards, and (c) the
treatment, under Section 14, of terminations of employment. Notwith-
standing the foregoing, the Committee's interpretation of Plan
provisions shall be uniform as to similarly situated Grantees.
XXXV. Adjustments. The Committee shall make equitable
adjustment of:
(a) the numbers of shares of Stock, shares of restricted Stock,
and bonus stock, and the numbers of stock appreciation rights,
performance units, and performance shares available under Sections 3(a)
and 3(b);
(b) the number of shares of Stock, shares of restricted Stock,
LSARs, stock appreciation rights, performance units, or performance
shares covered by an Award;
(c) the Option Price of all outstanding options; and
(d) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of LSARs, stock apprecia
tion rights, performance units, or performance shares
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of
property or shares, asset spin-off, split-off, reorganization, stock
rights offering, liquidation or similar event, of or by the Company.
Notwithstanding the foregoing, upon the approval by the stockholders
of the Company of a plan of liquidation for the Company, any unexer
cised options, stock appreciation rights, performance units, and
performance shares theretofore granted shall thereupon become
exercisable, and any shares of restricted Stock that have not become
nonforfeitable shall become nonforfeitable.
XXXVI. Amendment of the Plan. The Board may from time to time
in its discretion amend or modify the Plan without the approval of the
stockholders of the Company, except as such stockholder approval may
be required (a) to permit the grant of Awards under, and transactions
in Stock pursuant to, the Plan to be exempt from potential liability
under Section 16(b) of the 1934 Act or (b) under the listing require
ments of any national securities exchange or national market system on
which are listed any of the Company's equity securities.
XXXVII. Termination of the Plan. The Plan shall terminate on
the tenth (10th) anniversary of the Effective Date or at such earlier
time as the Board may determine. Any termination, whether in whole or
in part, shall not affect any Award then outstanding under the Plan.
XXXVIII. No Illegal Transactions. The Plan and all Awards
granted pursuant to it are subject to all laws and regulations of any
governmental authority which may be applicable thereto; and notwith
standing any provision of the Plan or any Award, Grantees shall not be
entitled to exercise Awards or receive the benefits thereof and the
Company shall not be obligated to deliver any Stock or pay any benefits
to a Grantee if such exercise, delivery, receipt or payment would
constitute a violation by the Grantee or the Company of any such law
or regulation.
XXXIX. Controlling Law. The law of Delaware, except its law
with respect to choice of law, shall be controlling in all matters
relating to the Plan.
XL. Severability. If all or any part of the Plan is declared
by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion
of the Plan not declared to be unlawful or invalid. Any Section or
part of a Section so declared to be unlawful or invalid shall, if
possible, be construed in a manner which will give effect to the terms
of such Section or part of a Section to the fullest extent possible
while remaining lawful and valid.
Executed this day of __________, 1996.
FIRST MERCHANTS ACCEPTANCE CORPORA-
TION
By:
Title:
1119276.9
<PAGE>
EXECUTION COPY
FIRST MERCHANTS AUTO TRUST 1996-A
$85,000,000 FLOATING RATE ASSET BACKED NOTES, CLASS A-1
$40,897,000 6.70% ASSET BACKED NOTES, CLASS A-2
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer
PURCHASE AGREEMENT
May 10, 1996
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
First Merchants Auto Receivables Corporation II, 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 1996-A (the
"Trust") to issue and sell to you (the "Initial Purchaser") $85,000,000
principal amount of its Floating Rate Asset Backed Notes, Class A-1
(the "Class A-1 Notes") and $40,897,000 principal amount of its 6.70%
Asset Backed Notes, Class A-2 (the "Class A-2 Notes" and, collectively
with the Class A-1 Notes, the "Notes"). The assets of the Trust will
include a pool of non-prime precomputed and simple interest motor
vehicle retail installment sale contracts (the "Receivables"), certain
monies received thereon on and after April 1, 1996 (the "Cutoff Date"),
all insurance proceeds and liquidation proceeds with respect thereto,
security interests in the motor vehicles financed thereby, 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 serviced for the Trust by
First Merchants. The Notes will be issued pursuant to the Indenture
to be dated as of May 1, 1996 (as amended and supplemented from time
to time, the "Indenture") between the Trust and Harris Trust and
Savings Bank, as indenture trustee (the "Indenture Trustee"). The
Notes will be secured by the assets of the Trust pursuant to the
Indenture. Holders of the Notes also will have the benefit of a
financial guaranty insurance policy issued by the Security Insurer (the
"Policy"). In addition, simultaneously with the issuance and sale of
the Notes, the Trust will also issue $9,476,823.72 principal amount of
its 6.70% Asset Backed Certificates (the "Certificates"). The
Certificates will be issued pursuant to the Amended and Restated Trust
Agreement to be dated as of May 1, 1996 (as amended and supplemented
from time to time, the "Trust Agreement"), between the Seller and
Chemical Bank Delaware, as owner trustee (the "Owner Trustee"). The
Certificates will represent fractional undivided interests in the
Trust. The Certificates will be issued to and retained by the Seller.
The Notes and the Certificates are hereinafter referred to collectively
as the "Securities."
The Trust will acquire the Receivables from the Seller pursuant
to a Sale and Servicing Agreement to be dated as of May 1, 1996 (as
amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Trust, the Seller, First Merchants, as servicer,
and Harris Trust and Savings Bank, as Indenture Trustee and Backup
Servicer. First Merchants will also agree to perform certain
administrative functions on behalf of the Trust pursuant to the
Administration Agreement, dated as of May 1, 1996 (as amended and
supplemented from time to time, the "Administration Agreement") among
First Merchants, as administrator, the Trust and the Indenture Trustee.
The Seller will acquire the Receivables from First Merchants on the
Closing Date (as defined herein) pursuant to a Receivables Purchase
Agreement to be dated as of May 1, 1996 (as amended and supplemented
from time to time, the "Receivables Purchase Agreement") among the
Seller, as purchaser, and First Merchants, as seller. All of the
assets conveyed to the Trust pursuant to Section 2.01 of the Sale and
Servicing Agreement are referred to herein as the "Trust Property".
Capitalized terms that are used and not otherwise defined herein shall
have the respective meanings assigned thereto in the Sale and Servicing
Agreement.
In connection with the sale of the Notes, the Seller and First
Merchants have prepared a preliminary offering memorandum dated May 6,
1996 (including any and all exhibits thereto, the "Preliminary
Memorandum"), and a final offering memorandum, dated May 10, 1996
(including any and all exhibits thereto, the "Final Memorandum"). Each
of the Preliminary Memorandum and the Final Memorandum sets forth
certain information concerning the Seller, First Merchants, the Trust
and the Notes. The Seller and First Merchants hereby confirm that they
have authorized the use of the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Notes by the Initial Purchaser. Unless
stated to the contrary, all references herein to the Final Memorandum
are to the Final Memorandum at the Execution Time (as defined below)
and are not meant to include any amendment or supplement subsequent to
the Execution Time.
The sale of the Notes to the Initial Purchaser will be made
without registration of the Notes under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the
Seller and First Merchants that you will offer and sell the Notes
purchased by you hereunder in accordance with Section 5 hereof as soon
as you deem advisable.
6. Representations and Warranties of the Seller. The Seller
represents and warrants to the Initial Purchaser as set forth below in
this Section 1:
(a) The Preliminary Memorandum, at the date thereof, did
not contain any 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. The Final Memorandum, at the date hereof,
does not, and at the Closing Date (as defined below) will not
(and any amendment or supplement thereto, at the date thereof
and at the Closing Date, will not), contain any 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;
provided, however, that the Seller makes no representation or
warranty as to the information contained in or omitted from the
Preliminary Memorandum or the Final Memorandum, or any amendment
or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Seller by or on behalf
of the Initial Purchaser specifically for inclusion therein.
(b) None of the Seller, any of its affiliates, as
defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D") (such affiliates, including First Merchants,
being hereinafter referred to as "Affiliates"), or any person
acting on its or their behalf has, directly or indirectly, made
offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the
registration of the Notes under the Securities Act.
(c) None of the Seller, any of its Affiliates or any
person acting on its or their behalf has engaged in any form of
general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the
Notes.
(d) The Notes satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(e) It is not necessary to qualify the Indenture or the
Trust Agreement under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(f) 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).
(g) 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.
(h) Neither the Seller nor the Trust is, and neither the
issuance and sale of the Securities nor the activities of the
Trust pursuant to the Indenture or the Trust Agreement will
cause the Seller or the Trust to be, an "investment company" or
under the "control" of an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(i) The Seller has not paid or agreed to pay to any
person any compensation for soliciting another to purchase any
Notes (except as contemplated by this Agreement).
(j) As of the Closing Date, the Seller's representations
and warranties in the Basic Documents (as defined herein) will
be true and correct.
(k) This Agreement has been duly authorized, executed
and delivered by the Seller.
(l) None of the Seller, its Affiliates or any person
acting on behalf of the Seller or its Affiliates has engaged in
any directed selling efforts (as the term is defined in
Regulation S under the Securities Act ("Regulation S")) with
respect to the Notes, and the Seller and its Affiliates and any
person acting on its or their behalf have complied with the
offering restrictions requirement of Regulation S.
(m) None of the Seller, any of its Affiliates or anyone
acting on behalf of the Seller or any of its Affiliates has
taken any action that would require registration of the Notes
under the Securities Act, qualification of the Trust Agreement
or the Indenture under the Trust Indenture Act or registration
of the Seller under the Investment Company Act, nor will the
Seller or any of its Affiliates act, nor have they authorized or
will they authorize any person to act, in such manner.
7. Representations and Warranties of First Merchants. First
Merchants represents and warrants to the Initial Purchaser as set forth
below in this Section 2.
(a) The Preliminary Memorandum, at the date thereof, did
not contain any 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. The Final Memorandum, at the date hereof,
does not, and at the Closing Date (as defined below) will not
(and any amendment or supplement thereto, at the date thereof
and at the Closing Date, will not), contain any 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;
provided, however, that First Merchants makes no representation
or warranty as to the information contained in or omitted from
the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in
conformity with information furnished in writing to the Seller
by or on behalf of the Initial Purchaser specifically for
inclusion therein.
(b) As of the Closing Date, First Merchants'
representations and warranties in the Basic Documents (as
defined herein) 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
any person acting on its or their behalf has, directly or
indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would
require the registration of the Notes under the Securities Act.
(f) None of First Merchants, any of its Affiliates or
any person acting on its or their behalf has engaged in any form
of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of
the Notes.
(g) The Notes satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(h) None of First Merchants, its Affiliates or any
person acting on behalf of First Merchants or its Affiliates has
engaged in any directed selling efforts (as the term is defined
in Regulation S under the Act ("Regulation S")) with respect to
the Notes, and First Merchants and its Affiliates and any person
acting on its or their behalf have complied with the offering
restrictions requirement of Regulation S.
(i) 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 registration
of the Notes under the Securities Act, qualification of the
Trust Agreement or the Indenture under the Trust Indenture Act
or registration of the Seller 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.
8. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth,
the Seller agrees to sell to the Initial Purchaser, and the Initial
Purchaser agrees to purchase from the Seller, (I) the Class A-1 Notes,
at a purchase price of 99.500% of the principal amount thereof, and
(ii) the Class A-2 Notes, at a purchase Price of 99.446% of the
principal amount thereof.
9. Delivery and Payment. Delivery of and payment for the
Notes shall be made at 10:00 AM, New York City time, on May 21, 1996,
or such later date (not later than May 29, 1996) as the Initial
Purchaser shall designate, which date and time may be postponed by
agreement between the Initial Purchaser and the Seller (such date and
time of delivery and payment for the Notes being herein called the
"Closing Date"). Delivery of the Notes shall be made to the Initial
Purchaser for the account of the Initial Purchaser against payment by
the Initial Purchaser of the purchase price thereof payable in same day
funds wired to such bank as may be designated by the Seller, or such
other manner of payment as may be agreed by the Seller and the Initial
Purchaser. Delivery of the Notes shall be made at such location as the
Initial Purchaser shall reasonably designate at least one business day
in advance of the Closing Date, and payment for the Notes shall be made
at the office of Brown & Wood ("Counsel for the Initial Purchaser"),
One World Trade Center, New York, New York. The Notes shall be
registered in such names and in such denominations as the Initial
Purchaser may request not less than three full business days in advance
of the Closing Date.
The Seller agrees to authorize and direct the Trustee to have the
Notes available for inspection, checking and packaging by the Initial
Purchaser in New York, New York, not later than 1:00 PM on the business
day prior to the Closing Date.
10. Offering of Notes: The Initial Purchaser represents and
warrants to and agrees with the Seller that:
(a) It has not solicited and will not solicit any offer
to buy or offer to sell the Notes by means of any form of
general solicitation or general advertising (within the meaning
of Regulation D) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act or, with respect
to Notes sold in reliance on Regulation S, by means of any
directed selling efforts.
(b) It has solicited and will solicit offers to buy the
Notes only from, and has offered and will offer, sell or deliver
the Notes only to, (A) persons who it reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under
the Securities Act) or, if any such person is buying for one or
more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it
that each such account is a qualified institutional buyer, to
whom notice has been given that such sale or delivery is being
made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A, (B) persons who it reasonably
believes to be institutional "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D), and who
provide to it a letter in the form of Exhibit A hereto or (C)
persons to whom, and under circumstances which, it reasonably
believes offers and sales of Notes may be made without
registration of the Notes under the Act in reliance upon
Regulation S thereunder.
(c) It has not offered or sold and will not offer or
sell any Notes to persons in the United Kingdom prior to the
expiration of the period six months from the date of their
issuance, 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 which have not and will not result in
an offer to the public in the United Kingdom within the meaning
of the Public Offers of Securities Regulations 1995 or the
Financial Services Act 1986; (ii) it has complied and will
comply with all applicable provisions of the Financial Services
Act 1986 with respect to anything done by it in relation to the
Notes in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in
connection with the issue of the Notes 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 the document may otherwise lawfully be issued
or passed on.
11. Agreements. The Seller and First Merchants agree with the
Initial Purchaser that:
(a) The Seller will furnish to the Initial Purchaser and
to Counsel for the Initial Purchaser, without charge, during the
period referred to in paragraph (c) below, as many copies of the
Final Memorandum and any amendments and supplements thereto as
the Initial Purchaser may reasonably request. The Seller will
pay the expenses of printing or other production of all
documents relating to the offering.
(b) The Seller will not amend or supplement the Final
Memorandum without the prior written consent of the Initial
Purchaser, which consent shall not be unreasonably withheld.
(c) If at any time prior to the completion of the sale
of the Notes by the Initial Purchaser (as determined by the
Initial Purchaser), any event occurs as a result of which the
Final Memorandum, as then amended or supplemented, would include
any 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 should be necessary to amend or supplement
the Final Memorandum to comply with applicable law, the Seller
will promptly notify the Initial Purchaser of the same and,
subject to the requirements of paragraph (b) of this Section 6,
will prepare and provide to the Initial Purchaser pursuant to
paragraph (a) of this Section 6 an amendment or supplement that
will correct such statement or omission or effect such
compliance.
(d) The Seller will arrange for the qualification of the
Notes for sale by the Initial Purchaser under the laws of such
jurisdictions as the Initial Purchaser may designate and will
maintain such qualifications in effect so long as required for
the sale of the Notes. The Seller will promptly advise the
Initial Purchaser of the receipt by the Seller of any
notification with respect to the suspension of the qualification
of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(e) The Seller will not, and will not permit any of its
Affiliates to, resell any Notes that have been acquired by any
of them.
(f) None of the Seller, any of its Affiliates or any
person acting on its or their behalf will, directly or
indirectly, make offers or sales of any security, or solicit
offers to buy any security, under circumstances that would
require the registration of the Notes under the Securities Act.
(g) None of the Seller, any of its Affiliates or any
person acting on its or their behalf will engage in any form of
general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the
Notes.
(h) So long as any of the Notes are "restricted
securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Seller will, unless it becomes subject to
and complies with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), provide to each
holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective
purchaser, any information required to be provided by Rule
144A(d)(4) under the Securities Act. This covenant is intended
to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such
restricted securities.
(i) The Seller will cooperate with the Initial Purchaser
and use its best efforts to permit the Notes to be eligible for
clearance and settlement through The Depository Trust Company.
(j) Neither the Seller nor any of its Affiliates will
sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the
Securities Act) the offering of which security will be
integrated with the sale of the Notes in a manner which would
require the registration of the Notes under the Securities Act.
(k) In connection with any disposition of the Notes
pursuant to a transaction made in compliance with paragraph 1 of
Exhibit A, the Seller will reissue certificates evidencing such
Notes (provided, in the case of a transaction as to which a
legal opinion referred to therein is requested such legal
opinion so permits).
(l) For a period from the date of this Agreement until
the retirement of the Notes, the Servicer 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, the
Indenture, the Trust Agreement or the Administration Agreement,
as soon as such statements and reports are furnished to the
Indenture Trustee or the Owner Trustee.
(m) To the extent, if any, that the rating provided with
respect to the Notes by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Service ("S&P" and
together with Moody's, the "Rating Agencies") is conditional
upon the furnishing of documents or the taking of any actions by
the Seller, the Seller shall furnish such documents and take
such actions.
(n) Until 30 days following the Closing Date, neither
the Seller nor any trust or other entity originated, directly or
indirectly, by the Seller will, without the prior written
consent of the Initial Purchaser, offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any asset-backed securities (other
than the Notes).
(o) The information provided by the Seller or First
Merchants, pursuant to Section 6(h) hereof will not, at the date
thereof, contain any 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.
(p) None of the Seller, its Affiliates nor any person
acting on behalf of the Seller or its Affiliates will engage in
any directed selling efforts with respect to the Notes within
the meaning of Regulation S, and the Seller, its Affiliates and
each such person acting on its or their behalf will comply with
the offering restrictions requirement of Regulation S.
(q) 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.
12. Payment of Expenses, Etc. If the transactions contemplated
by this Agreement are consummated or this Agreement is terminated
pursuant to Section 11, the Seller will pay all expenses incident to
the performance of its obligations under this Agreement, including (I)
the printing of the Preliminary Memorandum, the Final Memorandum and
each amendment thereto, (ii) the fees of the Trustee and its counsel,
(iii) the preparation, issuance and delivery of the Notes to the
Initial Purchaser, (iv) the fees and disbursements of the Seller's
accountants, (v) the qualification of the Notes under securities laws
in accordance with the provisions of Section 6(d), including filing
fees and the fees and disbursements of Brown & Wood in connection
therewith and in connection with the preparation of any blue sky or
legal investment survey, (vi) the printing and delivery to the Initial
Purchaser of copies of the Final Memorandum and of each amendment
thereto, (vii) the printing and delivery to the Initial Purchaser of
copies of any blue sky or legal investment survey prepared in
connection with the Notes, (viii) any fees charged by Rating Agencies
for the rating of the Notes, and (ix) subject to the provisions of
Section 11 hereof, the portion of the fees and disbursements of Brown
& Wood as agreed upon.
13. Conditions to the Obligation of the Initial Purchaser. The
obligation of the Initial Purchaser to purchase the Notes shall be
subject to the accuracy of the representations and warranties on the
part of the Seller and First Merchants contained herein at the date and
time that this Agreement is executed and delivered by the parties
hereto (the "Execution Time") and the Closing Date, to the accuracy of
the statements of the Seller and First Merchants made in any
certificates 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:
(a) The Seller shall have furnished to the Initial
Purchaser the opinion of Sonnenschein Nath & Rosenthal, counsel
for the Seller, dated the Closing Date and satisfactory in form
and substance to the Initial Purchaser and Counsel for the
Initial Purchaser, 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 Final Memorandum, 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
have 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 1996-A Supplement to Master Spread Account
Agreement dated as of May 1, 1996 (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 Notes by the Initial Purchaser, 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 Notes or the Certificates, 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 Final Memorandum (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 Contracts 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 Contracts 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 Contracts 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 Final Memorandum;
(xix) the statements in the Final Memorandum under
the headings "Risk Factors of 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 Final
Memorandum under the heading "Description of the Notes"
and "Description of the Transaction Documents", insofar as
such statements constitute a summary of the Notes and the
Basic Documents, constitute a fair summary of such
documents;
(xxi) assuming the accuracy of the representations
and warranties and compliance with the agreements
contained herein, no registration of the Notes under the
Securities Act is required, and no qualification of the
Pooling and Servicing Agreement under the Trust Indenture
Act is necessary, for the offer and sale by the Initial
Purchaser of the Notes 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 terms, except (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) the Seller is not, nor will the Seller
become as a result of the offer and sale of the Notes as
contemplated in the Final Memorandum and the Basic
Documents, 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; and
(xxv) 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.
Such counsel shall also state that such counsel has no reason to
believe that at the Execution Time the Final Memorandum 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 Final Memorandum 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 Initial Purchaser 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 8(a) to the Final Memorandum shall
be deemed to include any amendment or supplement thereto at the Closing
Date.
(b) The Initial Purchaser shall have received the
opinion of Richard P. Vogelman, Esquire, General Counsel for
First Merchants, dated the Closing Date and satisfactory in form
and substance to the Initial Purchaser and to Counsel for the
Initial Purchaser, to the effect that:
(i) First Merchants is duly qualified to do
business as a foreign corporation and is in good standing
under the laws of each jurisdiction wherein it 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 First
Merchants Auto Receivables Corporation, a Delaware
corporation and wholly-owned subsidiary of First
Merchants;
(iii) 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
(iv) 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 Final Memorandum 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 Final Memorandum 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 Initial Purchaser
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 8(b) to the Final Memorandum shall
be deemed to include any amendment or supplement thereto at the Closing
Date.
(c) The Initial Purchaser shall have received the
opinion of Sonnenschein Nath & Rosenthal, counsel for First
Merchants, dated the Closing Date and satisfactory in form and
substance to the Initial Purchaser and to Counsel for the
Initial Purchaser, 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 Final Memorandum;
(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 Notes by the Initial Purchaser, 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 Initial Purchaser 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 8(c) to the Final Memorandum shall
be deemed to include any amendment or supplement thereto at the Closing
Date.
(d) The Initial Purchaser shall have received an opinion
addressed to it of Brown & Wood, in its capacity as federal tax
counsel for the Seller, to the effect that the statements in the
Final Memorandum under the headings "Summary of Certain Federal
Income Tax Consequences" and "Certain Federal Income Tax
Consequences" accurately describe the material federal income
tax consequences to holders of the Notes. Brown & Wood, in its
capacity as special ERISA counsel to the Seller, shall have
delivered an opinion to the effect that the statements in the
Final Memorandum under the headings "Summary of 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
consequences to holders of the Notes under ERISA.
(e) The Initial Purchaser shall have received from
Counsel for the Initial Purchaser such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of
the Notes, the Final Memorandum (as amended or supplemented at
the Closing Date) and other related matters as the Initial
Purchaser 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.
(f) The Initial Purchaser shall have received an opinion
addressed to the Initial Purchaser, the Seller and the Servicer
of Pryor, Cashman, Sherman & Flynn, counsel to the Owner
Trustee, dated the Closing Date and satisfactory in form and
substance to the Initial Purchaser and Counsel for the Initial
Purchaser, to the effect that:
(i) The Owner Trustee is a banking corporation duly
incorporated and validly existing under the laws of the State of
Delaware.
(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
Certificates and the Notes 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 and 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
thereunder.
(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.
(g) The Initial Purchaser shall have received an opinion
addressed to the Initial Purchaser and the Seller of Seward &
Kissel, counsel to Harris Trust and Savings Bank (the "Bank"),
dated the Closing Date and satisfactory in form and substance to
the Initial Purchaser and Counsel for the Initial Purchaser, to
the effect that:
(i) the Bank is a banking corporation duly
incorporated and validly existing under the laws of the
State of Illinois;
(ii) the Bank 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 and the Spread
Account Agreement;
(iii) the execution and delivery of the Indenture,
the Sale and Servicing Agreement, the Master Spread
Account Agreement and the Supplement and the performance
by the Bank of its obligations under the Indenture, the
Sale and Servicing Agreement, the Master Spread Account
Agreement and the Supplement have been duly authorized by
all necessary corporate action of the Bank and each has
been duly executed and delivered by the Bank;
(iv) the Indenture, the Sale and Servicing
Agreement and the Spread Account Agreement constitute
valid and binding obligations of the Bank enforceable
against the Bank 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 Bank of the
Indenture, the Sale and Servicing Agreement, the Master
Spread Account Agreement and the Supplement do not require
any consent, approval or authorization of, or any
registration or filing with, any Illinois, New York or
United States federal governmental authority;
(vi) each of the Notes has been duly authenticated
by the Bank, as Indenture Trustee;
(vii) neither the consummation by the Bank of the
transactions contemplated in the Indenture, the Sale and
Servicing Agreement or the Spread Account Agreement nor
the fulfillment of the terms thereof by the Bank 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 Bank, or the
terms of any indenture or other agreement or instrument
known to such counsel and to which the Bank or any of its
subsidiaries is a party or by which it is bound, or any
judgment, order or decree known to such counsel to be
applicable to the Bank or any of its subsidiaries of any
court, regulatory body, administrative agency,
governmental body, or arbitrator having jurisdiction over
the Bank or any of its subsidiaries;
(viii) to the knowledge of such counsel there
is no action, suit or proceeding pending or threatened
against the Bank (as Indenture Trustee under the
Indenture, or Backup Servicer under the Sale and Servicing
Agreement, as collateral agent under the Spread Account
Agreement or in its individual capacity) before or by any
governmental authority that, if adversely decided, would
materially and adversely affect the ability of the Bank to
perform its obligations under the Indenture, the Sale and
Servicing Agreement or the Spread Account Agreement; and
(ix) the execution and delivery by the Bank of, and
the performance by the Bank of its obligations under, the
Indenture, the Sale and Servicing Agreement and the Spread
Account 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 Bank that are unrelated to
the transactions contemplated in such Agreements.
(h) The Initial Purchaser shall have received the
opinion of Richards, Layton & Finger, special Delaware counsel
for the Trust, dated the Closing Date and satisfactory in form
and substance to the Initial Purchaser and to Counsel for the
Initial Purchaser, to the effect that:
(i) The Trust Agreement is the legal, valid and
binding agreement of the Seller and the Trustee,
enforceable against the Seller and the Trustee in
accordance with its terms.
(ii) The Trust has been duly formed and is validly
existing as a business trust under the Delaware Business
Trust Act, 12 Del. C. 3801, et seq. (the "Act").
(iii) The Trust has the power and authority under
the Trust Agreement and the Act to execute, deliver and
perform its obligations under the trust documents and has
duly authorized, executed and delivered the trust
documents.
(iv) No consent, approval or other authorization
of, or registration, declaration or filing with, any court
of governmental agency or commission of the State of
Delaware is required by or with respect to the Trust for
the issuance and sale of the Notes or the Certificates or
the valid execution and delivery of the Trust Agreement,
or for the validity and enforceability thereof, or for the
payment of any amounts by the Trust thereunder, except for
the filing of the Certificate of Trust with the Secretary
of State.
(v) To the extent that Article 9 of the Uniform
Commercial Code in effect in the State of Delaware (the
"Delaware UCC") is applicable (without regard to conflicts
of laws principles), upon the filing of the First
Merchants Financing Statement with the Secretary of State,
the Seller will have a perfected security interest in
First Merchant's rights in the Receivables and the
proceeds thereof, and such security interest will be prior
to any other security interest granted by First Merchants
that is perfected solely by the filing of financing
statements under the Delaware UCC, excluding purchase
money security interests under Section 9-312(4) of the
Delaware UCC and temporarily perfected security interests
in proceeds under Section 9-306(3) of the Delaware UCC.
(vi) To the extent that Article 9 of the Delaware
UCC is applicable (without regard to conflicts of laws
principles), upon the filing of the Seller Financing
Statement with the Secretary of State, the Trust will have
a perfected security interest in the Seller's rights in
the Receivables and the proceeds thereof, and such
security interest will be prior to any other security
interest granted by the Seller that is perfected solely by
the filing of financing statements under the Delaware UCC,
excluding purchase money security interests under Section
9-312(4) of the Delaware UCC and temporarily perfected
security interests in proceeds under Section 9-306(3) of
the Delaware UCC.
(vii) To the extent that Article 9 of the Delaware
UCC is applicable (without regard to conflicts of laws
principles), upon the filing of the Trust Financing
Statement with the Secretary of State, the Indenture
Trustee will have a perfected security interest in the
Trust's rights in the Receivables and the proceeds
thereof, and such security interest will be prior to any
other security interest granted by the Trust that is
perfected solely by the filing of financing statements
under the Delaware UCC, excluding purchase money security
interests under Section 9-312(4) of the Delaware UCC and
temporarily perfected security interests in proceeds under
Section 9-306(3) of the Delaware UCC.
(viii) No re-filing or other action is
necessary under the Delaware UCC in the State of Delaware
in order to maintain the security interests referenced in
paragraphs 5, 6 and 7 except for the filing of
continuation statements at five year intervals.
(ix) The Certificates have been duly authorized,
executed and authenticated by the Owner Trustee on behalf
of the Trust and, when the Certificates have been issued
and delivered in accordance with the instructions of the
Seller, the Certificates will be validly issued and
entitled to the benefits of the Trust Agreement.
(x) Under 12 Del. C. Section 3805(b), no creditor
of any Certificateholder (including creditors of the
Seller, as Certificateholder) shall have any right to
obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the property of the
Trust except in accordance with the Trust Agreement.
(i) The Initial Purchaser shall have received such
opinions, addressed to the Initial Purchaser and dated the
Closing Date, as are delivered to the Rating Agencies.
(j) The Initial Purchaser shall have received an opinion
from Sonnenschein Nath & Rosenthal, counsel for the Seller,
dated the Closing Date and satisfactory in form and substance to
the Initial Purchaser and Counsel for the Initial Purchaser
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.
(k) The Initial Purchaser shall have received an opinion
from Sonnenschein Nath & Rosenthal, counsel for the Seller,
dated the Closing Date and satisfactory in form and substance to
the Initial Purchaser and Counsel for the Initial Purchaser
regarding substantive consolidation.
(l) The Initial Purchaser shall have received an opinion
from Steven D. Thomas, Esquire, Associate General Counsel for
FSA, dated the Closing Date and satisfactory in form and
substance to the Initial Purchaser and Counsel for the Initial
Purchaser, addressed to the Initial Purchaser and the Seller.
(m) The Initial Purchaser 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; and
(ii since the date of the Final Memorandum, no
material adverse change, or any development involving a
prospective material adverse change, in or affecting
particularly the business or properties of the Seller has
occurred.
(n) The Initial Purchaser 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; and
(ii since the date of the most recent financial
information included in the Final Memorandum, no material
adverse change, or any development involving a prospective
material adverse change, in or affecting particularly the
business or properties of First Merchants has occurred.
(o) The Initial Purchaser shall have received a fully
executed Insurance Agreement by and among the Seller, First
Merchants and Financial Security Assurance Inc., dated as of May
1, 1996 (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.
(p) The Policy relating to the Notes 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 Final Memorandum.
(q) The Initial Purchaser 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.
(r) At the Execution Time and at the Closing Date,
Deloitte & Touche llp shall have furnished to the Initial
Purchaser 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 Initial Purchaser has
previously agreed and otherwise in form and substance
satisfactory to the Initial Purchaser and to Counsel for the
Initial Purchaser.
(s) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Final Memorandum,
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 Initial Purchaser, so material and
adverse as to make it impractical or inadvisable to market the
Notes as contemplated by the Final Memorandum.
(t) The Notes shall have been rated "Aaa" by Moody's and
"AAA" by S&P.
(u) 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.
(v) On or prior to the Closing Date, the Notes sold in
reliance on Rule 144A shall have been accepted for settlement
through the facilities of DTC.
(w) On the Closing Date, $9,476,823.72 aggregate
principal amount of the Certificates shall have been issued and
delivered to the Seller.
(x) Prior to the Closing Date, the Seller shall have
furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may
reasonably request.
If any of the conditions specified in this Section 8 shall not
have been fulfilled in all material respects when and as provided in
this Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material
respects reasonably satisfactory in form and substance to the Initial
Purchaser and Counsel for the Initial Purchaser, this Agreement and all
obligations of the Initial Purchaser hereunder may be canceled at, or
at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Seller in writing or
by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 8 will be
delivered at the office of Counsel for the Initial Purchaser, at One
World Trade Center, New York, New York, on the Closing Date.
14. Reimbursement of Expenses. If the sale of the Notes
provided for herein is not consummated because any condition to the
obligation of the Initial Purchaser set forth in Section 8 hereof is
not satisfied, because of any refusal, inability or failure on the part
of the Seller to perform any agreement herein or to comply with any
provision hereof other than by reason of a default by the Initial
Purchaser in payment for the Notes on the Closing Date, the Seller will
reimburse the Initial Purchaser upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by it in connection with the proposed purchase
and sale of the Notes.
15. Indemnification and Contribution. (a) The Seller and
First Merchants, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, the directors, officers, employees and
agents of the Initial Purchaser and each person who controls the
Initial Purchaser 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 Preliminary
Memorandum, the Final Memorandum or any information provided by the
Seller or First Merchants to any holder or prospective purchaser of
Notes pursuant to Section 6(h) or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, 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
made in the Preliminary Memorandum or the Final Memorandum, or in any
amendment thereof or supplement thereto, in reliance upon and in
conformity with written information furnished to the Seller by the
Initial Purchaser specifically for inclusion therein. This indemnity
agreement will be in addition to any liability that the Seller or First
Merchants may otherwise have.
(b) The Initial Purchaser 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 Initial Purchaser, but only with reference to written
information relating to the Initial Purchaser furnished to the Seller
by the Initial Purchaser specifically for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or supplement
thereto). This indemnity agreement will be in addition to any
liability that the Initial Purchaser 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 "Plan of
Distribution" in the Preliminary Memorandum and the Final Memorandum
constitute the only information furnished in writing by or on behalf
of the Initial Purchaser for inclusion in the Preliminary Memorandum
or the Final Memorandum (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 Initial Purchaser 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 Initial Purchaser 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 Initial Purchaser
on the other from the offering of the Notes; provided, however, that
in no case shall the Initial Purchaser be responsible for any amount
in excess of the purchase discount or commission applicable to the
Notes purchased by the Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any
reason, the Seller, First Merchants and the Initial Purchaser 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 Initial Purchaser 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 Initial Purchaser shall be
deemed to be equal to the total purchase discounts and commissions
received by the Initial Purchaser from the Seller in connection with
the purchase of the Notes 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 Initial Purchaser on the other. The
Seller, First Merchants and the Initial Purchaser 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 Initial Purchaser within
the meaning of either the Securities Act or the Exchange Act and each
director, officer, employee and agent of the Initial Purchaser shall
have the same rights to contribution as the Initial Purchaser, 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).
16. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, by
notice given to the Seller prior to delivery of and payment for the
Notes, if prior to such time (I) (A) trading in securities of First
Merchants on the Nasdaq Stock Market's National Market shall have been
suspended or limited or minimum prices therefor shall have been
established on such exchange or (B) trading in securities generally on
the New York Stock Exchange or the Nasdaq Stock Market's National
Market shall have been suspended or limited or minimum prices shall
have been established on either such exchange, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of
which on financial markets is such as to make it, in the judgment of
the Initial Purchaser, impracticable or inadvisable to proceed with the
offering or delivery of the Notes as contemplated by the Final
Memorandum.
17. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other
statements of the Seller and First Merchants and their respective
officers and of the Initial Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Initial Purchaser or the
Seller or any of the officers, directors or controlling persons
referred to in Section 10 hereof, and will survive delivery of and
payment for the Notes. The provisions of Sections 9 and 10 hereof
shall survive the termination or cancellation of this Agreement.
18. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser,
will be mailed, delivered or telegraphed and confirmed to it, at
Salomon Brothers Inc, Seven World Trade Center, New York, New York
10048; or, if sent to the Seller, will be mailed, delivered or
telegraphed and confirmed to it at First Merchants Auto Receivables
Corporation II, 570 Lake Cook Road, Suite 126B, Deerfield, Illinois
60015, Attention: President; or if sent to First Merchants, will be
mailed, delivered or telegraphed and confirmed to it at First Merchants
Acceptance Corporation, 570 Lake Cook Road, Suite 126, Deerfield,
Illinois 60015, Attention: Treasurer.
19. 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 hereof, and, except as expressly set forth in Section 6(h)
hereof, no other person will have any right or obligation hereunder.
20. No Bankruptcy Petition. The Initial Purchaser 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.
21. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
22. Business Day. For purposes of this Agreement, "business
day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banking associations in the cities of
Chicago, Illinois or New York, New York are authorized or obligated by
law, executive order or regulation to close.
23. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but
all such Counterparts will together constitute one and the same
agreement.<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding
agreement among the Seller, First Merchants and the Initial Purchaser.
Very truly yours,
FIRST MERCHANTS
AUTO RECEIVABLES CORPORATION II
By:
Name: Brian P. Hake
Title: Treasurer
FIRST MERCHANTS ACCEPTANCE
CORPORATION
By:
Name: Brian P. Hake
Title: Treasurer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
By:
Name: William E. Grady
Title: Vice President
EXHIBIT A
Form of Investment Letter
First Merchants Auto Receivables Corporation II
570 Lake Cook Road
Suite 126B
Deerfield, Illinois 60015
First Merchants Acceptance Corporation
570 Lake Cook Road
Suite 126
Deerfield, Illinois 60015
Harris Trust and Savings Bank,
as Indenture Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Chemical Bank Delaware
as Owner Trustee
1201 Market Street
Wilmington, Delaware 19801
Ladies and Gentlemen:
In connection with our proposed purchase of $
aggregate principal amount of [Floating Rate Asset Backed Notes, Class
A-1] [6.70% Asset Backed Notes, Class A-2] (the "Securities") of First
Merchants Auto Trust 1996-A (the "Trust"), we confirm that:
1. We understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold except as permitted in
the following sentence. We understand and agree, on our own
behalf and on behalf of any accounts for which we are acting as
hereinafter stated, (x) that such Securities are being offered
only in a transaction not involving any public offering within
the meaning of the Securities Act, (y) that if we should resell,
pledge or otherwise transfer such Securities within three years
(or such shorter period as may then be applicable under the
Securities Act) after the date of the original issuance of the
Securities or within three months after we cease to be an
affiliate (within the meaning of Rule 144 under the Securities
Act) of the Seller, such Securities may be resold, pledged or
transferred only (I) to the Seller, (ii) so long as Securities
are eligible for resale pursuant to Rule 144A under the
Securities Act ("Rule 144A"), to a person whom we reasonably
believe is a "qualified institutional buyer" (as defined in Rule
144A) ("QIB") that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge
or transfer is being made in reliance on Rule 144A (as indicated
by the box checked by the transferor on the Certificate of
Transfer on the reverse of the certificate for the Security),
(iii) in an offshore transaction in accordance with Regulation
S under the Securities Act (as indicated by the box checked by
the transferor on the Certificate of Transfer on the reverse of
the certificate for the Security), and, if such transfer is
being effected by certain transferors specified in the Indenture
(as defined below) prior to the expiration of the "40 day
restricted period" (within the meaning of Rule 903(c)(3) of
Regulation S under the Securities Act), a certificate which may
be obtained from the Administrator or the Indenture Trustee is
delivered by the transferee to the Seller and the Indenture
Trustee, (iv) to an institution that is an "accredited investor"
as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the
certificate for the Security) that has certified to the
Administrator and the Indenture Trustee that it is such an
accredited investor and is acquiring the Securities for
investment purposes and not for distribution, (v) pursuant to an
exemption from registration under the Securities Act provided by
Rule 144 (if applicable) under the Securities Act, or (vi)
pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States, and we will
notify any purchaser of the Securities from us of the above
resale restriction, if then applicable. We further understand
that, in connection with any transfer of the Securities by us,
the Administrator and the Indenture Trustee may request, and if
so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm
that any such transfer complies with the foregoing restrictions.
2. We are able to fend for ourselves in the
transactions contemplated by this Offering Memorandum, we have
such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which
we are acting are each able to bear the economic risk of our or
its investment and can afford the complete loss of such
investment.
3. We understand that the minimum principal amount of
Securities that may be purchased by an institutional accredited
investor is $250,000.
4. We are acquiring the Securities purchased by us for
investment purposes, and not for distribution, for our own
account or for one or more accounts as to each of which we
exercise sole investment discretion and we are or such account
is an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act).
5. 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: ______________________________
Date: _____________________________
<PAGE>
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
between
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller,
and
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
as Purchaser
Dated as of May 1, 1996
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
<PAGE>
RECEIVABLES PURCHASE AGREEMENT dated as of May 1, 1996, between
FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation, as
seller (the "Seller"), and FIRST MERCHANTS AUTO RECEIVABLES CORPORATION
II, 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 1996-A (the "Issuer")
pursuant to a Sale and Servicing Agreement dated as of May 1, 1996 (the
"Sale and Servicing Agreement"), by and among First Merchants Auto
Trust 1996-A, as Issuer, First Merchant Auto Receivables Corporation
II, as Seller, First Merchants Acceptance Corporation, as Servicer, and
Harris Trust and Savings Bank, 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 VI
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 II, 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 May 1, 1996, among First Merchants Auto Trust
1996-A, as Issuer, First Merchants Auto Receivables Corporation II, as
Seller, First Merchants Acceptance Corporation, as Servicer, and Harris
Trust and Savings Bank, 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 VII
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 $117,513,702.68, 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 April
1, 1996, in the case of the Precomputed Receivables, and all moneys
received thereon on and after April 1, 1996 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 acknowledgment
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 VIII
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 July 20, 2001.
(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 IX
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 X
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 XI
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 such 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: Thomas R.
Ehmann; (b) in the case of the Purchaser, First Merchants Auto
Receivables Corporation II, 570 Lake Cook Road, Suite 126B, Deerfield,
Illinois 60015, Attention: Thomas R. Ehmann; (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, Financial Security
Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention:
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 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.
<PAGE>
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: Brian P. Hake
Title: Treasurer
FIRST MERCHANTS AUTO
RECEIVABLES CORPORATION II
By:
Name: Brian P. Hake
Title: Treasurer
<PAGE>
EXHIBIT A
Form of Assignment
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of May 1, 1996 (the "Receivables Purchase
Agreement"), between the undersigned and First Merchants Auto
Receivables Corporation II (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 April
1, 1996; (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 May , 1996.
FIRST MERCHANTS ACCEPTANCE
CORPORATION,
By:
Name:
Title:
<PAGE>
SCHEDULE I
Schedule of Receivables
<PAGE>
SCHEDULE II
Location of Receivable Files
<PAGE>
EXECUTION COPY
SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 1996-A,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller,
and
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer
and
HARRIS TRUST AND SAVINGS BANK,
Indenture Trustee and Backup Servicer
Dated as of May 1, 1996
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
SECTION 5.12. Transfer of the Notes . . . . . . . . . . . . . . . . . . 38
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<PAGE>
SALE AND SERVICING AGREEMENT
dated as of May 1, 1996, among FIRST
MERCHANTS AUTO TRUST 1996-A, a Delaware business trust (the
"Issuer"), FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a
Delaware corporation (the "Seller"), FIRST MERCHANTS ACCEPTANCE
CORPORATION, a Delaware corporation (the "Servicer") and HARRIS
TRUST AND SAVINGS BANK, an Illinois 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 18% 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 Harris Trust and Savings Bank 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, $9,476,823.72 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 June 15, 1996) 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, 7% 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 January
15, 1999 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,
50% 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 July 17,
2000 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 93% 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 93% 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 May 31, 1996. 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 Harris Trust and Savings
Bank, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Indenture Trust Administration; 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 April 1, 1996.
"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 8th day of the calendar month in which
such Distribution Date occurs (or if such 8th 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 fifteenth day of the following month or, if such day is not a
Business Day, the immediately following Business Day, commencing on
June 17, 1996.
"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 Chemical Bank 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 Chemical
Bank 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 Guar-
anteed 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 over-
collateralization, 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 August 15, 2001
Distribution Date.
"Final Scheduled Maturity Date" means July 20, 2001.
"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 II" means First Merchants Auto Receivables Corporation II,
a Delaware corporation, and its successors.
"Indenture" means the Indenture dated as of May 1, 1996, 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 May 1, 1996, 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 1996-A.
"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 letter agreement
dated as of March 1, 1996, among Harris Trust and Savings Bank, as
trustee under an Indenture dated as of November 17, 1995, among First
Merchants Auto Receivables Corporation ("FMARC"), the Indenture
Trustee, FMARC, the Seller, the Servicer and the Security Insurer, as
amended, supplemented or otherwise modified from time to time.
"Local Collection Account Agreement" means the Local Collection
Account Agreement, dated as of May 21, 1996, among Harris Trust and
Savings Bank, as FMARC Trustee, Harris Trust and Savings Bank, as
FMARC II Trustee, Harris Trust and Savings Bank, as FMAT Trustee, First
Merchants Acceptance Corporation, Financial Security Assurance, Inc.,
First Merchants Auto Receivables Corporation, First Merchants Auto
Receivables Corporation II, and First Merchants Auto Trust 1996-A.
"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 March 1, 1996, among FMARC II, as depositor, the
Security Insurer and Harris Trust and Savings Bank, 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)
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 $135,373,823.72.
"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 6.70% 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 6%, (ii) the arithmetic average
of the Default Rates for the three immediately preceding Collection
Periods equals or exceeds 20%, (iii) the arithmetic average of the Net
Loss Rates for the three immediately preceding Collection Periods
equals or exceeds 10% 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 2.5%;
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 May 1, 1996, between First Merchants, as seller
and FMAC II, 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 Financial Security Assurance Inc., a
monoline insurance company incorporated under the laws of the State of
New York, 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 II 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 March 1, 1996, among FMARC II, as depositor, the
Security Insurer and Harris Trust and Savings Bank, as trustee and
collateral agent, as supplemented by the Series 1996-A Supplement to
the Master Spread Account Agreement, dated as of May 1, 1996 and as
amended by the Amendment to the Master Spread Account Agreement, dated
as of May 1, 1996, each among FMARC II, the Security Insurer and Harris
Trust and Savings Bank, as the same may be supplemented or amended from
time to time.
"Spread Account Required Amount" means with respect to any
Distribution Date, the greater of (i) 5% 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) 1.5% 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 $100,000.
"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 Amended and Restated Trust Agreement
dated as of May 1, 1996, 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 $117,513,702.68
and the Certificates in the aggregate principal amount of
$9,476,823.72, 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 April 1, 1996;
(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 13% 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) 2.50% 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 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 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 April 30, 1997), 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 August 21, 1996, 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 August 21, November 21, February 21 and May 21 (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.
SECTION 5.12. Transfer of the Notes. In the event any Holder of
a Note shall wish to transfer such Note, the Seller and the Servicer
shall provide to such Holder and any prospective transferee designated
by such Holder information regarding the Notes and the Receivables and
such other information as shall be necessary to satisfy the condition
to eligibility set forth in Rule 144A(d)(4) for transfer of any such
Note without registration thereof under the Securities Act of 1933, as
amended, pursuant to the exemption from registration provided by Rule
144A.
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 Serv
icer
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 Harris Trust
and Savings Bank 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. Harris Trust and Savings Bank 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 Harris Trust and
Savings Bank 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 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 II, 570 Lake Cook Road, Suite 126B, Deerfield,
Illinois 60015, Attention: Thomas R. Ehmann; (b) in the case of the
Servicer, to First Merchants Acceptance Corporation, 570 Lake Cook
Road, Suite 126, Deerfield, Illinois 60015, Attention: Thomas R.
Ehmann; (c) in the case of the Backup Servicer or the Indenture
Trustee, to Harris Trust and Savings Bank, 311 West Monroe Street, 12th
Floor, Chicago, Illinois 60606, Attention: Indenture Trust
Administration; (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 Financial Security Assurance Inc.,
350 Park Avenue, New York, New York 10022, Attention: Surveillance
Department; (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 Chemical Bank
Delaware not in its individual capacity but solely in its capacity as
Owner Trustee of the Issuer and in no event shall Chemical Bank
Delaware 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 Harris Trust and Savings Bank, not
in its individual capacity but solely as Indenture Trustee and in no
event shall Harris Trust and Savings Bank 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers as of the day and year
first above written.
FIRST MERCHANTS AUTO TRUST 1996-A
By: CHEMICAL BANK DELAWARE, not in
its individual capacity but
solely as Owner Trustee on
behalf of the Trust
By:
Name:
Title:
FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION II, Seller
By:
Name:
Title:
FIRST MERCHANTS ACCEPTANCE
CORPORATION, Servicer
By:
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
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 February 29, 1996, 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 July 20, 2001.
(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.
<PAGE>
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 1996-A 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 $1,000 Certificate
Pool Balance
Realized Losses
Spread Account Balance
<PAGE>
EXHIBIT C
First Merchants Acceptance Corporation
First Merchants Auto Trust 1996-A Distribution Date Statement to
Noteholders
Principal Distribution Amount
Class A-1 Notes: ($ 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
<PAGE>
EXHIBIT D
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
First Merchants Owner Trust 1996-A
$ 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
of Period
End
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:
<PAGE>
EXHIBIT E
Form of Policy
EXECUTION COPY
This ADMINISTRATION AGREEMENT dated as of May 1, 1996, among
FIRST MERCHANTS AUTO TRUST 1996-A, a Delaware business trust (the
"Issuer"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware
corporation, as administrator (the "Administrator"), and HARRIS
TRUST AND SAVINGS BANK, an Illinois 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 $85,000,000 Floating Rate Asset
Backed Notes, Class A-1 and $40,897,000 6.70% Asset Backed Notes, Class
A-2(collectively, the "Notes") pursuant to the Indenture dated as of
May 1, 1996 (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 May 1, 1996 (as amended and supplemented from
time to time, the "Sale and Servicing Agreement"), among the Issuer,
First Merchants Auto Receivables Corporation II, 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 May 20, 1996 (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 foregoing 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 Offi-
cer'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 (Section 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 Inden-
ture (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
calculations 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 May 31, 1997, 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
Indenture 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 Indenture; 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 $100.00 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 1996-A
In care of Chemical Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust Office
(b) if to the Administrator, to:
First Merchants Acceptance Corporation
570 Lake Cook Road
Suite 126
Deerfield, Illinois 60015
Attention: Thomas R. Ehmann
(c) if to the Indenture Trustee, to:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
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 ACCOR-
DANCE 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 Chemical Bank
Delaware not in its individual capacity but solely in its capacity as
Owner Trustee of the Issuer and in no event shall Chemical Bank
Delaware 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 Harris Trust and Savings Bank
not in its individual capacity but solely as Indenture Trustee and in
no event shall Harris Trust and Savings Bank 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.
* * * * * * * * * * * * * * * * * * * * * *
<PAGE>
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 1996-A
By: CHEMICAL BANK DELAWARE, not in its
individual capacity but solely as
Owner Trustee
By:
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity
but solely as Indenture Trustee
By:
Name:
Title:
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Administrator
By:
Name:
Title:
<PAGE>
EXHIBIT A
POWER OF ATTORNEY
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
KNOW ALL MEN BY THESE PRESENTS, that Chemical Bank Delaware, a
Delaware banking corporation, not in its individual capacity but solely
as owner trustee (the "Owner Trustee") for First Merchants Auto Trust
1996-A (the "Trust"), does hereby make, constitute and appoint First
Merchants Acceptance Corporation, as administrator under the
Administration Agreement dated May 1, 1996 (the "Administration
Agreement"), among the Trust, First Merchants Acceptance Corporation
and Harris Trust and Savings Bank, 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_.
CHEMICAL BANK DELAWARE,
not in its individual capacity
but solely as Owner Trustee
Name:
Title:
<PAGE>
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 he/she signed the same for the purposes and considerations therein
expressed.
Sworn to before me this ___
day of _______, 199_.
Notary Public - State of ____________
<PAGE>
EXECUTION COPY
AMENDED AND RESTATED
TRUST AGREEMENT
between
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
as Depositor,
and
CHEMICAL BANK DELAWARE,
as Owner Trustee
Dated as of May 1, 1996
<PAGE>
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 1996-A . . . . . . . . . . . . . . . . . . . . . . . . .B-1
EXHIBIT C FORM OF TRANSFEROR CERTIFICATE . . . . . . . . . . . . . . . .C-1
EXHIBIT D FORM OF INVESTMENT LETTER. . . . . . . . . . . . . . . . . . .D-1
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT dated as of May 1, 1996,
between FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a
Delaware corporation, as depositor (the "Depositor"), and
CHEMICAL BANK DELAWARE, a Delaware banking corporation, as owner
trustee (the "Owner Trustee").
WHEREAS, the Depositor and the Owner Trustee entered into a Trust
Agreement dated as of April 29, 1996 (the "Trust Agreement");
WHEREAS, the Trust Agreement is being amended and restated as of
May 1, 1996;
NOW, THEREFORE, the Depositor and the Owner Trustee hereby agree
as follows:
ARTICLE XX
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 May 1, 1996, among the Trust, the Indenture
Trustee and First Merchants Acceptance Corporation, as Administrator.
"Agreement" shall mean this Amended and Restated 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 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 $85,000,000 Floating Rate Asset
Backed Notes, Class A-1 issued pursuant to the Indenture.
"Class A-2 Notes" shall mean the $40,897,000 6.70% 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 1201 Market Street, Wilmington, Delaware 19801, 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 May 20, 1996 from
First Merchants Acceptance Corporation to the Depositor.
"Depositor" shall mean First Merchants Auto Receivables
Corporation II 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 May 1, 1996
between the Trust and Harris Trust and Savings Bank, as Indenture
Trustee.
"Initial Certificate Balance" shall mean $9,476,823.72.
"Indemnification Agreement" shall mean the Indemnification
Agreement dated as of May 1, 1996 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 May
20, 1996 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 Chemical Bank Delaware, a Delaware
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 Chemical
Bank.
"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 May 21,
1996 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 May 1, 1996, among the Trust, as issuer, the
Depositor, as seller, First Merchants Acceptance Corporation, as
Servicer, and Harris Trust and Savings Bank, 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 XXI
Organization
SECTION 2.01. Name. The Trust created hereby shall be known
as "First Merchants Auto Trust 1996-A," 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 Delaware 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 XXII
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 $100,000 and in integral
multiples of $1,000 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 Chemical Bank, 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. Chemical Bank shall be the
initial Certificate Registrar.
The Trust Certificates have not been and will not be registered
under the Securities Act and will not be listed on any exchange. No
transfer of a Trust Certificate shall be made unless such transfer is
made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt
from the registration requirements under said Act and such state
securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and state securities
laws, in order to assure compliance with the Securities Act and such
laws, the Holder desiring to effect such transfer and such Holder's
prospective transferee shall each certify to the Owner Trustee or the
Certificate Registrar and the Depositor in writing the facts
surrounding the transfer in substantially the forms set forth in
Exhibit C (the "Transferor Certificate") and Exhibit D (the "Investment
Letter"). Except in the case of a transfer as to which the proposed
transferee has provided an Investment Letter with respect to a Rule
144A transaction, there shall also be delivered to the Owner Trustee
an Opinion of Counsel that such transfer may be made pursuant to an
exemption from the Securities Act and state securities laws, which
Opinion of Counsel shall not be an expense of the Trust, the Owner
Trustee or the Indenture Trustee (unless it is the transferee from whom
such opinion is to be obtained) or of the Depositor or First Merchants
Acceptance Corporation; provided that such Opinion of Counsel in
respect of the applicable state securities laws may be a memorandum of
law rather than an opinion if such counsel is not licensed in the
applicable jurisdiction. The Depositor shall provide to any Holder of
a Trust Certificate and any prospective transferee designated by any
such Holder information regarding the Trust Certificates and the
Receivables and such other information as shall be necessary to satisfy
the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Trust Certificate without registration thereof under the
Securities Act pursuant to the registration exemption provided by Rule
144A. Each Holder of a Trust Certificate desiring to effect such a
transfer shall, and does hereby agree to, indemnify the Trust, the
Owner Trustee, the Indenture Trustee and the Depositor against any
liability that may result if the transfer is not so exempt or is not
made in accordance with federal and state securities laws.
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
paragraph 3 to the Investment Letter attached hereto as Exhibit D 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 Chemical Bank 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 Chemical Bank, 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 Chemical Bank, 55 Water
Street, New York, New York 10041 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 Chemical Bank, and any co-paying agent chosen by
Chemical Bank and acceptable to the Owner Trustee. Chemical Bank shall
be permitted to resign as Paying Agent upon 30 days' written notice to
the Owner Trustee. In the event that Chemical Bank 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 XXIII
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 XXIV
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 XXV
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 XXVI
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 Delaware. 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
Chemical Bank Delaware 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 XXVII
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 XXVIII
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 XXIX
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 XXX
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
II, 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated 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 II,
as Depositor
by:
Name:
Title:
CHEMICAL BANK DELAWARE,
not in its individual capacity
but solely as Owner Trustee
by:
Name: John J. Cashin
Title: Senior Trust
Officer
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
THIS TRUST CERTIFICATE IS SUBORDINATED TO THE NOTES, AS SET FORTH IN
THE SALE AND SERVICING AGREEMENT.
THIS TRUST CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OR ANY
FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE OF THIS TRUST CERTIFICATE
THE HOLDER HEREOF UNLESS SUCH HOLDER IS THE DEPOSITOR OR AN AFFILIATE
THEREOF IS DEEMED TO REPRESENT TO THE DEPOSITOR AND THE OWNER TRUSTEE
(i) THAT IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT (AN
"ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS TRUST CERTIFICATE
FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A
FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE ACCREDITED
INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS FIDUCIARY
CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR (ii) THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
1933 ACT AND IS ACQUIRING SUCH TRUST CERTIFICATE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS TRUST CERTIFICATE MAY BE MADE
BY ANY PERSON UNLESS EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS
MADE TO THE DEPOSITOR, (ii) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE
TO AN ACCREDITED INVESTOR THAT EXECUTES A CERTIFICATE, SUBSTANTIALLY
IN THE FORM SPECIFIED IN THE TRUST AGREEMENT, TO THE EFFECT THAT IT IS
AN ACCREDITED INVESTOR ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE
ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY), (iii) SO LONG AS THIS TRUST CERTIFICATE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, SUCH
SALE, PLEDGE OR OTHER TRANSFER IS MADE TO A PERSON WHOM THE PROSPECTIVE
TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT
FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO
WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER
IS OTHERWISE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT, IN WHICH CASE (A) THE OWNER TRUSTEE SHALL
REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE
TRANSFEREE CERTIFY TO THE OWNER TRUSTEE AND THE DEPOSITOR IN WRITING
THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND THE DEPOSITOR,
AND (B) THE OWNER TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL
(WHICH SHALL NOT BE AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF
THE DEPOSITOR OR THE OWNER TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND
THE OWNER TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL NOT VIOLATE THE
1933 ACT. NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE
PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS THAN $100,000 AND, IN
THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES
(OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT)
ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT
OF LESS THAN $100,000 FOR EACH SUCH THIRD PARTY."
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
PARAGRAPH 3 TO THE INVESTMENT LETTER ATTACHED HERETO AS EXHIBIT D 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.]
<PAGE>
NUMBER $_________
R- CUSIP NO. _________
FIRST MERCHANTS AUTO TRUST 1996-A
6.70% 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 II, 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
1996-A (the "Trust"), formed by FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION II, 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.
CHEMICAL BANK DELAWARE, CHEMICAL BANK DELAWARE,
as Owner Trustee or as Owner Trustee
by: CHEMICAL BANK, as
Authenticating Agent
by:
Authorized Signatory
by:
Authorized Signatory
The Trust was created pursuant to a Trust Agreement dated as of
April 29, 1996, as amended and restated by an Amended and Restated
Trust Agreement dated as of May 1, 1996 (as so amended and restated and
further amended or supplemented from time to time, the "Trust
Agreement"), between the Depositor and Chemical Bank Delaware, 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 May 1, 1996 (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 Harris Trust and Savings Bank, as Indenture Trustee and
Backup Servicer, as applicable.
This Trust Certificate is one of the duly authorized Trust
Certificates designated as "6.70% Asset Backed Certificates" (herein
called the "Trust Certificates"). Also issued under an Indenture dated
as of May 1, 1996 (the "Indenture"), between the Trust and Harris Trust
and Savings Bank, as indenture trustee, are the two classes of Notes
designated as "Floating Rate Asset Backed Notes, Class A-1" and "6.70%
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 April 1, 1996, in the
case of Precomputed Receivables, or received on or after April 1, 1996,
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 15th
day of each month or, if such 15th day is not a Business Day, the next
Business Day (each, a "Distribution Date"), commencing on June 17,
1996, 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
1996-A
by: CHEMICAL BANK
DELAWARE, not in its
individual capacity
but solely as Owner
Trustee
Dated: by:
Authorized Signatory
<PAGE>
[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 Chemical Bank, New
York, New York.
Except as provided in the Trust Agreement, the Trust Certificates
are issuable only as registered Trust Certificates without coupons in
denominations of $100,000 and in integral multiples of $1,000 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.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or type name and address, including postal zip code,
of assignee)
the within Trust Certificate, and all rights thereunder, 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 1996-A
THIS Certificate of Trust of FIRST MERCHANTS AUTO TRUST 1996-A
(the "Trust"), dated April __, 1996, is being duly executed and filed
by Chemical Bank Delaware, a Delaware banking corporation, as trustee,
to form a business trust under the Delaware Business Trust Act (12 Del.
Code, 3801 et seq.).
1. Name. The name of the business trust formed hereby is FIRST
MERCHANTS AUTO TRUST 1996-A.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is Chemical Bank
Delaware, 1201 Market Street, Wilmington, Delaware 19801,
Attention: Corporate Trustee Administration Department.
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.
CHEMICAL BANK DELAWARE,
not in its individual capacity
but solely as owner trustee
under a Trust Agreement dated
as of April [ ], 1996
By:
Name: John J. Cashin
Title: Senior Trust
Officer<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
First Merchants Auto Receivables
Corporation II
570 Lake Cook Road
Suite 126B
Deerfield, IL 60015
Chemical Bank Delaware, as Owner Trustee
1201 Market Street
Wilmington, DE 19801
Re: First Merchants Auto Trust 1996-A
6.70% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 6.70%
Asset Backed Certificates (the "Certificates") we certify that (a) we
understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being
transferred by us in a transaction that is exempt from the registration
requirements of the Act and (b) we have not offered or sold any
Certificates to, or solicited offers to buy any Certificates from, any
person, or otherwise approached or negotiated with any person with
respect thereto, in a manner that would be deemed, or taken any other
action which would result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:
Authorized
Officer
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
First Merchants Auto Receivables
Corporation II, as Depositor
570 Lake Cook Road
Suite 126B
Deerfield, IL 60015
Chemical Bank Delaware, as Owner Trustee
1201 Market Street
Wilmington, DE 19801
Ladies and Gentlemen:
In connection with our proposed purchase of $
aggregate principal amount of 6.70% Asset Backed Certificates (the
"Certificates") of First Merchants Auto Trust 1996-A (the "Issuer"),
we confirm that:
1. We understand that the Certificates have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and may not be sold except as permitted in the
following sentence. We understand and agree, on our own behalf
and on behalf of any accounts for which we are acting as
hereinafter stated, (x) that such Certificates are being offered
only in a transaction not involving any public offering within
the meaning of the 1933 Act and (y) that such Certificates may
be resold, pledged or transferred only (i) to the Depositor,
(ii) to an "accredited investor" as defined in Rule
501(a)(1),(2),(3) or (7) (an "Accredited Investor") under the
1933 Act acting for its own account (and not for the account of
others) or as a fiduciary or agent for others (which others also
are Accredited Investors unless the holder is a bank acting in
its fiduciary capacity) that executes a certificate
substantially in the form hereof, (iii) so long as such
Certificate is eligible for resale pursuant to Rule 144A under
the 1933 Act ("Rule 144A"), to a person whom we reasonably
believe after due inquiry is a "qualified institutional buyer"
as defined in Rule 144A, acting for its own account (and not for
the account of others) or as a fiduciary or agent for others
(which others also are "qualified institutional buyers") to whom
notice is given that the resale, pledge or transfer is being
made in reliance on Rule 144A or (iv) in a sale, pledge or other
transfer made in a transaction otherwise exempt from the
registration requirements of the 1933 Act, in which case the
Owner Trustee shall require that both the prospective transferor
and the prospective transferee certify to the Owner Trustee and
the Depositor in writing the facts surrounding such transfer,
which certification shall be in form and substance satisfactory
to the Owner Trustee and the Depositor. Except in the case of
a transfer described in clauses (i) or (iii) above, the Owner
Trustee shall require a written opinion of counsel (which will
not be at the expense of the Depositor, any affiliate of the
Depositor or the Owner Trustee) satisfactory to the Depositor
and the Owner Trustee be delivered to the Depositor and the
Owner Trustee to the effect that such transfer will not violate
the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States. We will
notify any purchaser of the Certificates from us of the above
resale restrictions, if then applicable. We further understand
that in connection with any transfer of the Certificates by us
that the Depositor and the Owner Trustee may request, and if so
requested we will furnish such certificates and other
information as they may reasonably require to confirm that any
such transfer complies with the foregoing restrictions. We
understand that no sale, pledge or other transfer may be made to
any one person of Certificates with a face amount of less than
$100,000 and, in the case of any person acting on behalf of one
or more third parties (other than a bank (as defined in Section
3(a)((2) of the 1933 Act) acting in its fiduciary capacity), of
Certificates with a face amount of less than $100,000 for each
such third party.
2. [CHECK ONE]
(a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the 1933
Act) acting for our own account (and not for the account
of others) or as a fiduciary or agent for others (which
others also are Accredited Investors unless we are a bank
acting in its fiduciary capacity). We have such knowledge
and experience in financial and business matters as to be
capable of evaluating the merits and risks of our
investment in the Certificates, and we and any accounts
for which we are acting are each able to bear the economic
risk of our or their investment for an indefinite period
of time. We are acquiring the Certificates for investment
and not with a view to, or for offer and sale in
connection with, a public distribution.
(b) We are a "qualified institutional buyer" as defined
under Rule 144A under the 1933 Act and are acquiring the
Certificates for our own account (and not for the account
of others) or as a fiduciary or agent for others (which
others also are "qualified institutional buyers"). We are
familiar with Rule 144A under the 1933 Act and are aware
that the seller of the Certificates and other parties
intend to rely on the statements made herein and the
exemption from the registration requirements of the 1933
Act provided by Rule 144A.
3. 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, Harris Trust and Savings
Bank, 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.
4. 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.
5. 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: ________________________________
<PAGE>
EXECUTION COPY
INDENTURE
between
FIRST MERCHANTS AUTO TRUST 1996-A,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of May 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Rules of Construction. . . . . . . . . . . . . . . . . . . 9
ARTICLE II
The Notes
SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02. Execution, Authentication and Delivery . . . . . . . . . . 12
SECTION 2.03. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.04. Registration; Registration of Transfer and Exchange. . . . 13
SECTION 2.05. Transfer and Exchange. . . . . . . . . . . . . . . . . . . 14
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . 21
SECTION 2.07. Persons Deemed Owner . . . . . . . . . . . . . . . . . . . 22
SECTION 2.08. Payment of Principal and Interest; Defaulted
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.10. Definitive Notes . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.11. Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.12. Determination of LIBOR . . . . . . . . . . . . . . . . . . 24
SECTION 2.13. Initial Calculation Agent; Replacement of Calculation
Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest. . . . . . . . . . . . . 25
SECTION 3.02. Maintenance of Office or Agency. . . . . . . . . . . . . . 25
SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . . 25
SECTION 3.04. Existence. . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.05. Protection of Trust Estate . . . . . . . . . . . . . . . . 27
SECTION 3.06. Opinions as to Trust Estate. . . . . . . . . . . . . . . . 27
SECTION 3.07. Performance of Obligations; Servicing of
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.08. Negative Covenants . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.09. Annual Statement as to Compliance. . . . . . . . . . . . . 30
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. . . . 30
SECTION 3.11. Successor or Transferee. . . . . . . . . . . . . . . . . . 32
SECTION 3.12. No Other Business. . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . . 32
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. . . . . 32
SECTION 3.16. Capital Expenditures . . . . . . . . . . . . . . . . . . . 33
SECTION 3.17. Removal of Administrator . . . . . . . . . . . . . . . . . 33
SECTION 3.18. Restricted Payments. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.19. Notice of Events of Default. . . . . . . . . . . . . . . . 33
SECTION 3.20. Further Instruments and Acts . . . . . . . . . . . . . . . 33
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. . . . . . . . . . 33
SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . . 34
SECTION 4.03. Repayment of Moneys Held by Paying Agent . . . . . . . . . 35
SECTION 4.04. Release of Collateral. . . . . . . . . . . . . . . . . . . 35
ARTICLE V
Remedies
SECTION 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment . . . . 36
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee;. . . . . . . . . . . . . . . . . . . 38
SECTION 5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . 40
SECTION 5.05. Optional Preservation of the Receivables . . . . . . . . . 41
SECTION 5.06. Limitation of Suits. . . . . . . . . . . . . . . . . . . . 41
SECTION 5.07. Unconditional Rights of Noteholders To Receive
Principal and Interest . . . . . . . . . . . . . . . . . . 42
SECTION 5.08. Restoration of Rights and Remedies . . . . . . . . . . . . 42
SECTION 5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . 42
SECTION 5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . 43
SECTION 5.11. Control by Noteholders . . . . . . . . . . . . . . . . . . 43
SECTION 5.12. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 43
SECTION 5.13. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 44
SECTION 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 44
SECTION 5.15. Action on Notes. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.16. Performance and Enforcement of Certain Obligations . . . . 44
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee. . . . . . . . . . . . . . . . 45
SECTION 6.02. Rights of Indenture Trustee. . . . . . . . . . . . . . . . 46
SECTION 6.03. Individual Rights of Indenture Trustee . . . . . . . . . . 47
SECTION 6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . 47
SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.06. Reports by Indenture Trustee to Holders. . . . . . . . . . 47
SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . 47
SECTION 6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . 48
SECTION 6.09. Successor Indenture Trustee by Merger. . . . . . . . . . . 49
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.11. Eligibility; Disqualification. . . . . . . . . . . . . . . 50
SECTION 6.12. Pennsylvania Motor Vehicle Sales Finance Act
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.02. Preservation of Information; Communications to
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.03. Fiscal Year of Issuer. . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. . . . . . . . . . . . . . . . . . . . 51
SECTION 8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.03. General Provisions Regarding Accounts. . . . . . . . . . . 52
SECTION 8.04. Release of Trust Estate. . . . . . . . . . . . . . . . . . 53
SECTION 8.05. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of N o
teholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. . . . 55
SECTION 9.03. Execution of Supplemental Indentures . . . . . . . . . . . 56
SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . 56
SECTION 9.05. Reference in Notes to Supplemental Indentures. . . . . . . 56
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.02. Form of Redemption Notice. . . . . . . . . . . . . . . . 57
SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . 58
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . 58
SECTION 11.02. Form of Documents Delivered to Indenture Trustee . . . . 59
SECTION 11.03. Acts of Noteholders. . . . . . . . . . . . . . . . . . . 60
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . 61
SECTION 11.06. Alternate Payment and Notice Provisions. . . . . . . . . 62
SECTION 11.07. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.08. Successors and Assigns . . . . . . . . . . . . . . . . . 62
SECTION 11.09. Separability . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.10. Benefits of Indenture. . . . . . . . . . . . . . . . . . 62
SECTION 11.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.14. Recording of Indenture . . . . . . . . . . . . . . . . . 63
SECTION 11.15. Trust Obligation . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.16. No Petition. . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.17. Inspection . . . . . . . . . . . . . . . . . . . . . . . 63
SCHEDULE A Schedule of Receivables
EXHIBIT A-1 Form of Class A-1 Note and Class A-1 Regulation S
Temporary Global Note
EXHIBIT A-2 Form of Class A-2 Note and Class A-2 Regulation S
Temporary Global Note
EXHIBIT B-1 Transferor Certificate (From Rule 144-A Global Note to
Regulation S Global Note)
EXHIBIT B-2 Transferor Certificate (From Regulation S Global Note
to Rule 144-A
Global Note)
EXHIBIT B-3 Transferor Certificate (From Definitive Note to
Definitive Note)
Form of the Note Depository Agreement
EXHIBIT B-4 Transferor Certificate (From Definitive Note to Rule
144-A Global Note)
EXHIBIT B-5 Transferor Certificate (From Rule 144-A Global Note or
Regulation S
Permanent Global Note to Definitive Note)
EXHIBIT C Form of the Note Depository Agreement
<PAGE>
INDENTURE dated as of May 1, 1996, between FIRST MERCHANTS AUTO
TRUST 1996-A, a Delaware business trust (the "Issuer"), and HARRIS
TRUST AND SAVINGS BANK, an Illinois 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
6.70% 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 April 1, 1996;
(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.<PAGE>
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 May 1, 1996, among the Administrator, the Issuer and the
Indenture Trustee.
"Administrator" means First Merchants, or any successor
Administrator under the Administration Agreement.
"Agent Member" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depositary
effects book-entry transfers and pledges of securities deposited with
the Depositary.
"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 2.01.
"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 0.17%,
subject to a maximum rate with respect to any Floating Rate Interest
Accrual Period of 12% 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 6.70% Asset Backed Notes, Class A-2,
substantially in the form of Exhibit A-2.
"Class A-2 Rate" means 6.70% 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 May 21, 1996.
"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 Harris Trust and Savings Bank, 311 West
Monroe Street, 12th Floor, Chicago, Illinois 60606 (facsimile number
(312) 461-3525); Attention: Indenture Trust Administration, 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 2.01.
"Depositary" means an organization registered as a clearing
"agency" pursuant to Section 17A of the Exchange Act.
"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.
"Global Notes" means, individually and collectively, the
Regulation S Temporary Global Note, the Regulation S Permanent Global
Note and the Rule 144A Global Note beneficial ownership and transfers
of which shall be made through book entries by the Depositary.
"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 exent
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 Harris Trust and Savings Bank, an
Illinois 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.
"Initial Purchaser" means Salomon Brothers Inc.
"Interest Accrual Period" means, with respect to any Distribution
Date and the Class A-2 Notes, the period from and including the 15th
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 15th 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 1996-A until a successor
replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein, 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 Accural 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 May 1, 1996,
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 C.
"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.
"Offering Memorandum" means the offering memorandum relating to
the Notes dated May 10, 1996.
"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 Chemical Bank Delaware, 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 Rates for each Class of Notes 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.
"Regulation S" means Regulation S, as amended, promulgated under
the Securities Act.
"Regulation S Global Note" means the Regulation S Temporary Global
Note or the Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
note, evidencing either Class A-1 Notes or Class A-2 Notes, that
contains the paragraph referred to in footnote 1 and the additional
schedule referred to in the form of the Note attached hereto as Exhibit
A-1 or Exhibit A-2, as applicable, and that is deposited with and
registered in the name of the Depositary or its nominee, representing
the Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary
global note, evidencing either Class A-1 Notes or Class A-2 Notes, in
the form of the Note attached hereto as Exhibit A-1 or Exhibit A-2, as
applicable, that is deposited with and registered in the name of the
Depositary or its nominee, representing the Notes sold in reliance on
Regulation S.
"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.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note, evidencing
either Class A-1 Notes or Class A-2 Notes, that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in
the form of the Note attached hereto as Exhibit A-1 or Exhibit A-2, as
applicable, and that is deposited with and registered in the name of
the Depositary or its nominee, representing the Notes sold in reliance
on Rule 144A.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of May 1, 1996, 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).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means FMARC II, 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.
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.
(a) Global Notes. The Notes are being offered and sold by
the Seller pursuant to a purchase agreement relating to the Notes dated
May 10, 1996 between the Seller and the Initial Purchaser (the
"Purchase Agreement").
Notes offered and sold to qualified institutional buyers as
defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued
initially in the form of Rule 144A Global Notes, which shall be
deposited on behalf of the purchasers of the Notes represented thereby
with the Indenture Trustee, as custodian for the Depositary, and
registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Issuer and authenticated by the
Indenture Trustee as hereinafter provided. The aggregate principal
amount of the Rule 144A Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Indenture
Trustee and the Depositary or its nominee as hereinafter provided. The
Indenture Trustee shall not be liable for any error or omission by the
Depositary in making such record adjustments and the records of the
Indenture Trustee shall be controlling with regard to outstanding
principal amount of Notes hereunder.
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note,
which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Indenture Trustee, at its office in The
City of New York, as custodian for the Depositary, and registered in
the name of the Depositary or the nominee of the Depositary for the
investors' respective accounts at Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System
("Euroclear") or Cedel Bank Society Anonyme ("Cedel") duly executed by
the Issuer and authenticated by the Indenture Trustee as hereinafter
provided. The "40-day restricted period" (as defined in Regulation S)
shall be terminated upon the receipt by the Indenture Trustee of (i)
a written certificate from the Depositary, together with copies of
certificates from Euroclear and Cedel, certifying that they have
received certification of non-United States beneficial ownership of
100% of the aggregate principal amount of the Regulation S Temporary
Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein pursuant to another exemption from
registration under the Securities Act and who will take delivery of a
beneficial ownership interest in a Rule 144A Global Note, all as
contemplated by Section 2.05(a)(ii) hereof), and (ii) an Officers'
Certificate from the Administrator. Following the termination of the
40-day restricted period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes which will be deposited with the
Indenture Trustee, as custodian, and registered in the name of a
nominee of the Depositary. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Trustee shall cancel the
Regulation S Temporary Global Note. The aggregate principal amount of
the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Indenture Trustee and the
Depositary or its nominee, as the case may be, in connection with
transfers of interest as hereinafter provided. The Indenture Trustee
shall incur no liability for any error or omission of the Depositary
in making such record adjustments and the records of the Indenture
Trustee shall be controlling with regard to outstanding principal
amount of Regulation S Global Notes hereunder.
Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Notes from time to
time endorsed thereon and that the aggregate amount of outstanding
Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall
be made by the Indenture Trustee, or by the custodian at the direction
of the Indenture Trustee, in accordance with instructions given by the
holder thereof as required by Section 2.05 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to Participants" of Cedel
shall be applicable to interests in the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes that are held by the
Agent Member through Euroclear or Cedel.
Except as set forth in Section 2.05 hereof, the Global Notes
may be transferred, in whole and not in part, only to another nominee
of the Depositary or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply
only to the Rule 144A Global Note and the Regulation S Permanent Global
Note deposited with or on behalf of the Depositary.
The Issuer shall execute and the Indenture Trustee shall, in
accordance with this Section 2.01(b), authenticate and deliver the Rule
144A Global Note and the Regulation S Permanent Global Note which (i)
shall be registered in the name of the Depositary or the nominee of the
Depositary and (ii) shall be delivered by the Indenture Trustee to the
Depositary or pursuant to the Depositary's instructions or held by the
Indenture Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights either under this Indenture with respect
to any Global Note held on their behalf by the Depositary or by the
Indenture Trustee as custodian for the Depositary or under such Global
Note, and the Depositary may be treated by the Issuer, the Indenture
Trustee and any agent of the Issuer or the Indenture Trustee as the
absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer,
the Indenture Trustee or any agent of the Issuer or the Indenture
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices
of such Depositary governing the exercise of the rights of an owner of
a beneficial interest in any Global Note.
The Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depositary 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.
The rights of Note Owners shall be exercised only through
the Depositary and shall be limited to those established by law and
agreements between such Note Owners and the Depositary and/or the Agent
Members pursuant to the Note Depository Agreement. The initial
Depositary will make book-entry transfers among the Agent Members and
receive and transmit payments of principal of and interest on the Notes
to such Agent Members with respect to such Global Notes.
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 Depositary shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Note Owners and/or Agent Members owning or representing, respectively,
such required percentage of the beneficial interest in the Notes and
has delivered such instructions to the Indenture Trustee.
(c) Definitive Notes. Except as provided in this Section
2.01(c) and in Sections 2.05 and 2.10, owners of beneficial interests
in Global Notes will not be entitled to receive physical delivery of
certificated definitive, fully registered Notes (the "Definitive
Notes"). Purchasers of Notes who are institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act and referred to as "Institutional Accredited
Investors") who are not QIBs (and QIBs, if so requested by the Initial
Purchaser) will receive Definitive Notes bearing the Restricted Notes
Legend set forth in Exhibit A-1 hereto ("Restricted Notes").
Restricted Notes will bear the Restricted Notes Legend set forth on
Exhibit A-1 unless removed in accordance with Section 2.05(f) hereof
and may be exchanged for a Rule 144A Global Note, or interest therein,
at any time, in the manner provided and subject to the requirements of
Section 2.05(c) hereof.
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 $85,000,000 and Class A-2 Notes for original issue in an
aggregate principal amount of $40,897,000. 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 $250,000 and in integral multiples of $1,000 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.
Subject to Section 2.05, 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.
Subject to Section 2.05, 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. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture and
the procedures of the Depositary therefor, which shall include
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Beneficial interests in a
Global Note may be transferred to persons who take delivery thereof in
the form of a beneficial interest in the same Global Note in accordance
with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.05. Transfers of beneficial interests in the
Global Notes to persons required or permitted to take delivery thereof
in the form of an interest in another Global Note shall be permitted
as follows:
(i Rule 144A Global Note to Regulation S Global
Note. If, at any time, an owner of a beneficial interest in
a Rule 144A Global Note deposited with the Depositary (or
the Indenture Trustee as custodian for the Depositary)
wishes to transfer its interest in such Rule 144A Global
Note to a person who is required or permitted to take
delivery thereof in the form of an interest in a Regulation
S Global Note, such owner shall, subject to compliance with
the applicable procedures described herein (the "Applicable
Procedures"), exchange or cause the exchange of such
interest for an equivalent beneficial interest in a
Regulation S Global Note as provided in this Section
2.05(a)(i). Upon receipt by the Indenture Trustee of (1)
instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Indenture
Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal
to the beneficial interest in the Rule 144A Global Note to
be exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding
the participant account of the Depositary and the Euroclear
or Cedel account to be credited with such increase, and (3)
a certificate in the form of Exhibit B-1 hereto given by the
Note Owner of such beneficial interest stating that the
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S, then the Indenture Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be
reduced the initial aggregate principal amount of the
applicable Rule 144A Global Note and to increase or cause to
be increased the initial aggregate principal amount of the
applicable Regulation S Global Note by the initial principal
amount of the beneficial interest in the Rule 144A Global
Note to be exchanged, to credit or cause to be credited to
the account of the person specified in such instructions a
beneficial interest in the Regulation S Global Note equal to
the reduction in the initial aggregate principal amount of
the Rule 144A Global Note, and to debit, or cause to be
debited, from the account of the person making such exchange
or transfer the beneficial interest in the Rule 144A Global
Note that is being exchanged or transferred.
(ii Regulation S Global Note to Rule 144A Global
Note. If, at any time an owner of a beneficial interest in
a Regulation S Global Note deposited with the Depositary or
with the Indenture Trustee as custodian for the Depositary
wishes to transfer its interest in such Regulation S Global
Note to a person who is required or permitted to take
delivery thereof in the form of an interest in a Rule 144A
Global Note, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such interest
for an equivalent beneficial interest in a Rule 144A Global
Note as provided in this Section 2.05(a)(ii). Upon receipt
by the Indenture Trustee of (1) instructions from Euroclear
or Cedel, if applicable, and the Depositary, directing the
Indenture Trustee, as Registrar, to credit or cause to be
credited a beneficial interest in the Rule 144A Global Note
equal to the beneficial interest in the Regulation S Global
Note to be exchanged, such instructions to contain
information regarding the participant account with the
Depositary to be credited with such increase, (2) a written
order given in accordance with the Applicable Procedures
containing information regarding the participant account of
the Depositary and (3) if such transfer is being effected
prior to the expiration of the "40 day restricted period"
(as defined by Regulation S under the Securities Act), a
certificate in the form of Exhibit B-2 attached hereto given
by the Note Owner of such beneficial interest stating (A) if
the transfer is pursuant to Rule 144A, that the person
transferring such interest in a Regulation S Global Note
reasonably believes that the person acquiring such interest
in a Rule 144A Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or
securities laws of any state of the United States, (B) that
the transfer complies with the requirements of Rule 144A
under the Securities Act and any applicable blue sky or
securities laws of any state of the United States or (C) if
the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the requirements of the
exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in
form reasonably acceptable to the Administrator and to the
Indenture Trustee, then the Indenture Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be
reduced the initial aggregate principal amount of such
Regulation S Global Note and to increase or cause to be
increased the initial aggregate principal amount of the
applicable Rule 144A Global Note by the initial principal
amount of the beneficial interest in the Regulation S Global
Note to be exchanged, and the Indenture Trustee, as
Registrar, shall instruct the Depositary, concurrently with
such reduction, to credit or cause to be credited to the
account of the person specified in such instructions a
beneficial interest in the applicable Rule 144A Global Note
equal to the reduction in the aggregate principal amount at
maturity of such Regulation S Global Note and to debit or
cause to be debited from the account of the person making
such transfer the beneficial interest in the Regulation S
Global Note that is being transferred.
(b) Transfer and Exchange from Definitive Notes to
Definitive Notes. When Definitive Notes are presented by a holder to
the Registrar with a request:
(i) to register the transfer of Definitive Notes in
the form of other Definitive Notes; or
(ii) to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested; provided, however, that the Definitive Notes presented or
surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instruction of transfer in form
satisfactory to the Registrar duly executed by
such holder or by his attorney, duly authorized
in writing; and
(ii) the case of a Definitive Note that is a
Restricted Note, such request shall be
accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Note is being
delivered to the Registrar by a holder
for registration in the name of such
holder, without transfer, or such
Restricted Note is being transferred to
the Seller, no certification is
required;
(B) if such Restricted Note is being
transferred to a QIB in accordance with
Rule 144A under the Securities Act or
pursuant to an exemption from
registration in accordance with Rule
144 under the Securities Act or
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from such
holder (in substantially the form of
Exhibit B-3 hereto); or
(C) if such Restricted Note is being
transferred in reliance on any other
exemption from the registration
requirements of the Securities Act, a
certification to that effect from such
holder (in substantially the form of
Exhibit B-3 hereto) and an Opinion of
Counsel from such holder or the
transferee reasonably acceptable to the
Administrator and to the Indenture
Trustee to the effect that such
transfer is in compliance with the
Securities Act.
(c) Transfer and Exchange of a Definitive Note for a
Beneficial Interest in a Rule 144A Global Note. The transfer and
exchange of a Definitive Note for a beneficial interest in a Rule 144A
Global Note shall be effected in accordance with this Indenture and the
procedures of the Depositary therefor, which shall include restrictions
on transfer comparable to those set forth herein to the extent required
by the Securities Act. If, at any time an owner of a Definitive Note
wishes to transfer its interest in such Note to a person who is
required or permitted to take delivery thereof in the form of an
interest in a Rule 144A Global Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such
Definitive for an equivalent beneficial interest in a Rule 144A Global
Note as provided in this Section 2.05(c). Upon receipt by the
Indenture Trustee of (1) the Definitive Notes for registration of
transfer or exchange duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Indenture Trustee
duly executed by such holder or by his attorney, duly authorized in
writing, (2) the instructions from the Depositary, directing the
Indenture Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
Definitive Note to be exchanged, such instructions to contain
information regarding the participant account with the Depositary to
be credited with such increase, (3) a written order given in accordance
with the Applicable Procedures containing information regarding the
participant account of the Depositary, (4) a certificate in the form
of Exhibit B-4 attached hereto given by the owner of such Definitive
Note stating, if the transfer is pursuant to Rule 144A, that the person
transferring such Definitive Note reasonably believes that the person
acquiring such interest in a Rule 144A Global Note is a QIB and is
obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities
laws of any state of the United States and (5) if the transfer is
pursuant to Rule 144A, a certification from the transferee that such
transferee is a "qualified institutional buyer" within the meaning of
Rule 144A, such certification to be in substantially the form set forth
on the reverse of the Definitive Notes, then the Indenture Trustee, as
Registrar, shall instruct the Depositary to increase or cause to be
increased the aggregate principal amount at maturity of the applicable
Rule 144A Global Note by the initial principal amount of the Definitive
Note to be exchanged, and the Indenture Trustee, as Registrar, shall
instruct the Depositary, concurrently with such reduction, to credit
or cause to be credited to the account of the person specified in such
instructions a beneficial interest in the applicable Rule 144A Global
Note equal to the initial aggregate principal amount of such Definitive
Note being transferred.
(d) Transfer of a Beneficial Interest in a Rule 144A Global
Note or Regulation S Permanent Global Note for a Definitive Note.
(i) Any person having a beneficial interest in a Rule
144A Global Note or Regulation S Permanent Global
Note may upon request, subject to the Applicable
Procedures, exchange such beneficial interest for
a Definitive Note. Upon receipt by the Indenture
Trustee of written instructions or such other
form of instructions as is customary for the
Depositary (or Euroclear or Cedel, if
applicable), from the Depositary or its nominee
on behalf of any person having a beneficial
interest in a Rule 144A Global Note or Regulation
S Permanent Global Note, and, in the case of a
Restricted Note, the following additional
information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being
transferred to the person designated by
the Depositary as being the beneficial
owner, a certification to that effect
from such person (in substantially the
form of Exhibit B-5 hereto);
(B) if such beneficial interest is being
transferred to a QIB in accordance with
Rule 144A under the Securities Act or
pursuant to an exemption from
registration in accordance with Rule
144 under the Securities Act or
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from the
transferor (in substantially the form
of Exhibit B-5 hereto); or
(C) if such beneficial interest is being
transferred in reliance on any other
exemption from the registration
requirements of the Securities Act, a
certification to that effect from the
transferor (in substantially the form
of Exhibit B-5 hereto) and an Opinion
of Counsel from the transferee or the
transferor reasonably acceptable to the
Administrator and to the Indenture
Trustee to the effect that such
transfer is in compliance with the
Securities Act,
in which case the Indenture Trustee or the
custodian, at the direction of the Indenture
Trustee, shall, in accordance with the standing
instructions and procedures existing between the
Depositary and the custodian, cause the aggregate
principal amount of Rule 144A Global Notes or
Regulation S Permanent Global Notes, as
applicable, to be reduced accordingly and,
following such reduction, the Issuer shall
execute and, the Indenture Trustee shall
authenticate and deliver to the transferee a
Definitive Note in the appropriate principal
amount.
(ii) Definitive Notes issued in exchange for a
beneficial interest in a Rule 144A Global Note or
Regulation S Permanent Global Note, as
applicable, pursuant to this Section 2.05(d)
shall be registered in such names and in such
authorized denominations as the Depositary,
pursuant to instructions from its direct or
indirect participants or otherwise, shall
instruct the Indenture Trustee. The Indenture
Trustee shall deliver such Definitive Notes to
the persons in whose names such Notes are so
registered. Following any such issuance of
Definitive Notes, the Indenture Trustee, as
Registrar, shall instruct the Depositary to
reduce or cause to be reduced the aggregate
principal amount of the applicable Global Note to
reflect the transfer.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in Section 2.10), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary.
(f) Legends.
(i) Except as permitted by the following paragraphs
(ii) and (iii), each Note certificate evidencing
Definitive Notes (and all Definitive Notes issued
in exchange therefor or substitution thereof)
shall bear legends in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR
THE BENEFIT OF THE SELLER, THE ISSUER AND THE OWNER TRUSTEE
THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y)
BY ANY HOLDER THAT WAS AN AFFILIATE OF THE SELLER AT ANY
TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE SELLER, (2)
SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY),
AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW)
PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD"
(WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER
THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED
FROM THE ADMINISTRATOR OR THE INDENTURE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE
TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION,
AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS
DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE
INDENTURE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED
IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO
THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE ADMINISTRATOR
AND THE INDENTURE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT
ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR
(3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT."
(ii) Upon any sale or transfer of a Restricted Note
(including any Restricted Note represented by a
Global Note) pursuant to Rule 144 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Restricted Note that
is a Definitive Note, the Indenture
Trustee shall permit the holder thereof
to exchange such Restricted Note for a
Definitive Note that does not bear the
legend set forth in (i) above and
rescind any restriction on the transfer
of such Restricted Note upon receipt of
a certification from the transferring
holder substantially in the form of
Exhibit B-4 hereto; and
(B) in the case of any Restricted Note
represented by a Global Note, such
Restricted Note shall not be required
to bear the legend set forth in (i)
above, but shall continue to be subject
to the provisions of Section 2.05(a)
and (b) hereof; provided, however, that
with respect to any request for an
exchange of a Restricted Note that is
represented by a Global Note for a
Definitive Note that does not bear the
legend set forth in (i) above, which
request is made in reliance upon Rule
144 under the Securities Act, the
holder thereof shall certify in writing
to the Indenture Trustee that such
request is being made pursuant to Rule
144 under the Securities Act (such
certification to be substantially in
the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Restricted Note
(including any Restricted Note represented by a
Global Note) in reliance on any exemption from
the registration requirements of the Securities
Act (other than exemptions pursuant to Rule 144A
or Rule 144 under the Securities Act) in which
the holder or the transferee provides an Opinion
of Counsel to the Administrator and the Indenture
Trustee in form and substance reasonably
acceptable to the Administrator and the Indenture
Trustee (which Opinion of Counsel shall also
state that the transfer restrictions contained in
the legend are no longer applicable):
(A) in the case of any Restricted Note that
is a Definitive Note, the Indenture
Trustee shall permit the holder thereof
to exchange such Restricted Note for a
Definitive Note that does not bear the
legend set forth in (i) above and
rescind any restriction on the transfer
of such Restricted Note; and
(B) in the case of any Restricted Note
represented by a Global Note, such
Restricted Note shall not be required
to bear the legend set forth in (i)
above, but shall continue to be subject
to the provisions of Section 2.05(a)
and (b) hereof.
(g) The Initial Purchaser shall not be required to deliver,
and neither the Administrator nor the Indenture Trustee shall demand
therefrom, any of the certifications or opinions described in this
Section 2.05 in connection with the initial issuance of the Notes and
the delivery thereof by the Seller on the effective date hereof,
including with respect to the issuance and delivery of Notes that are
Restricted Notes.
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 or (ii) (A) if the registered Holder of
such Note is the nominee of the Depositary or (B) if such Holder holds
Notes with an initial aggregate principal balance of at least
$5,000,000 and has delivered written instructions to the Indenture
Trustee requesting payment by wire transfer or (C) if such Holder is
the Security Insurer pursuant to Section 2.08(c), Section 5.10 of the
Sale and Servicing Agreement or the proviso to the definition of
"Outstanding", by wire transfer in immediately available funds to the
account designated by such Holder; 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. Definitive Notes. If (i) the Administrator
advises the Indenture Trustee in writing that the Depositary is no
longer willing or able to properly discharge its responsibilities with
respect to the Global 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 Depositary or (iii) after the occurrence of an Event
of Default or a Servicer Default, Owners of the Global Notes
representing beneficial interests aggregating at least a majority of
the Outstanding Amount of such Notes advise the Depositary in writing
that the continuation of a book-entry system through the Depositary is
no longer in the best interests of such Note Owners, then the
Depositary 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 Global
Notes by the Depositary, 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
Depositary. 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 2.11. 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 Global Note), agree to
treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness.
SECTION 2.12. 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 backs (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 2.13. 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 2.12, 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 77 Water Street, 4th Floor, New York, New
York 10005. 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 Pary 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 Pary, 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
1996), 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 1996-A 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
1996-A 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, 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. 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 a
Security Insurer Default has not occured and be 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 % 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 66 % 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.
(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 Harris Trust and Savings Bank, 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 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.
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.
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 shall have the right to communicate equivalent
to that found in TIA 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 equivalent to that found in TIA 312(c).
SECTION 7.03. Fiscal Year of Issuer. Unless the Issuer otherwise
determines, the fiscal year of the Issuer shall end on December 31 of
each year.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. 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 and an Opinion of Counsel 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 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.
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.
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.
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 1996-A, in care of
Chemical Bank Delaware, 1201 Market Street, Wilmington, Delaware
19801, Attention of Corporate Trustee Administration Department,
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: Financial Security Assurance Inc., 350 Park Avenue, New York,
New York 10022, Attention: Surveillance Department; Telex No.:
(212) 688-3101, Confirmation: (212) 826-0100; Facsimile Nos.:
(212) 339-3518, (212) 339-3529. (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 the
General Counsel and the Head-Financial Guaranty Group "URGENT
MATERIAL ENCLOSED".)
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered 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 Issuer 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.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year
first above written.
FIRST MERCHANTS AUTO TRUST 1996-A,
by: CHEMICAL BANK DELAWARE, not in its
individual capacity but solely as
Owner Trustee,
by:
Name: John J. Cashin
Title: Senior Trust
Officer
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but
solely as
Indenture Trustee,
by:
Name:
Title:
<PAGE>
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 John J. Cashin,
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 1996-A, a Delaware business
trust, and that 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 21st day of May,
1996.
Notary Public in and for the State of New York.
My commission expires:
________________________________________________
<PAGE>
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 HARRIS TRUST AND SAVINGS BANK, an Illinois
banking corporation, and that she/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 21st day of May, 1996.
Notary Public in and for the State of New York.
My commission expires:
________________________________________
<PAGE>
SCHEDULE A
[To be Provided on the Closing Date]
<PAGE>
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.]
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED
TO ON THE REVERSE HEREOF.]1
[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD
ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE SELLER AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE OTHER THAN (1) TO THE SELLER, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED<PAGE>
IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING
OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE ADMINISTRATOR OR THE
INDENTURE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR
AND THE INDENTURE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
OF REGULATION D UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE TRUSTEE (PROVIDED
THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS
SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40
DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE ADMINISTRATOR AND THE
INDENTURE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT AND
THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.]
NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON
FOR NOTES WITH A FACE AMOUNT OF LESS THAN $250,000 AND, IN THE CASE OF
ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN
A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE SECURITIES ACT) ACTING IN
ITS FIDUCIARY CAPACITY), FOR NOTES WITH A FACE AMOUNT OF LESS THAN
$250,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.05 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON
THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE,
BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO
THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS NOTE
(OR INTEREST THEREIN), COVENANTS AND AGREES THAT SUCH NOTEHOLDER OR
NOTE OWNER, AS THE CASE MAY BE, SHALL NOT, PRIOR TO THE DATE THAT IS
ONE YEAR AND ONE DAY AFTER THE TERMINATION OF THE INDENTURE, ACQUIESCE,
PETITION OR OTHERWISE INVOKE OR CAUSE THE ISSUER TO INVOKE THE PROCESS
OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING
OR SUSTAINING A CASE AGAINST THE ISSUER UNDER ANY FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW OR APPOINTING A
RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR
OTHER SIMILAR OFFICIAL OF THE ISSUER OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF
THE ISSUER.<PAGE>
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED$
No. R- CUSIP NO. 32081YAA8
FIRST MERCHANTS AUTO TRUST 1996-A
FLOATING RATE ASSET BACKED NOTE, CLASS A-1
FIRST MERCHANTS AUTO TRUST 1996-A, 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 $85,000,000 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 May 1, 1996 (the "Indenture"), between the Issuer
and Harris Trust and Savings Bank, an Illinois 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 January 15, 1999 (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 0.17%, subject to a maximum rate of 12.00% 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 2.12 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 Financial Security Assurance
Inc. ("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.
<PAGE>
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
1996-A,
by: CHEMICAL BANK DELAWARE,
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: HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory<PAGE>
[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 fifteenth day of each month, or, if any
such date is not a Business Day, the next succeeding Business Day,
commencing June 17, 1996.
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 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, (i) by check mailed first-class, postage
prepaid to such Person's address as it appears on the Note Register on
such Record Date or (ii) (A) if the registered Holder of this Note is
the nominee of the Clearing Agency or (B) if such Holder holds Notes
with an initial aggregate principal balance of at least $5,000,000 and
has delivered written instructions to the Trustee requesting payment
by wire transfer or (C) if such Holder is the Security Insurer pursuant
to Section 2.08(c) of the Indenture, Section 5.10 of the Sale and
Servicing Agreement or the proviso to the definition of "Outstanding"
in the Indenture, by wire transfer in immediately available funds to
the account designated by such Person. 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 Chemical Bank
Delaware in its individual capacity, Harris Trust and Savings Bank 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.<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee:
__________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
____________________________________________________________________
__________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________________________,
attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
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.<PAGE>
CERTIFICATION
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is three years (or such
shorter period as may then be applicable under the Securities Act)
after the later of the date of original issuance of such Notes and the
last date, if any, on which such Notes were owned by the Seller or any
Affiliate of the Seller, the undersigned confirms that such Notes are
being transferred:
CHECK ONE BOX BELOW
(1) to the Seller; or
(2) pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933 that
has furnished to the Indenture Trustee a signed
letter containing certain representations and
agreements (the form of which letter can be
obtained from the Indenture Trustee): or
(5) pursuant to another available exemption from the
registration requirements of the Securities Act of
1933.
Unless one of the boxes is checked, the Indenture Trustee will
refuse to register any of the Notes evidenced by this
certificate in the name of any person other than the registered
holder thereof; provided, however, that if box (3), (4) or (5)
is checked, the Indenture Trustee may require, prior to
registering any such transfer of the Notes such legal opinions,
certifications and other information as the Administrator has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act of 1933,
such as the exemption provided by Rule 144 under such Act.
_________________________________
Signature
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act of 1933, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Seller and the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor
is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
_________________________________
Signature
NOTICE: To be executed by an
executive officer<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
The initial principal amount at maturity of this Global
Note shall be $ .
The following increases or decreases in the initial principal amount
of this Global Note have been made:
Date Made
Amount of
increase in
Initial
Principal
Amount of this
Global Note
Amount of
decrease
in Initial
Principal
Amount of
this Global
Note
Initial
Principal
Amount of
this Global
Note
following
such
decrease or
increase
Signature of
authorized
officer of
Indenture
Trustee
or Custodian
[FACE OF CLASS A-1 REGULATION S TEMPORARY GLOBAL NOTE]
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- CIN NO. U32127AA7
FIRST MERCHANTS AUTO TRUST 1996-A
FLOATING RATE ASSET BACKED NOTE, CLASS A-1
Subject to the provision on the reverse hereof, FIRST MERCHANTS
AUTO TRUST 1996-A, 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 $85,000,000
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 May 1, 1996 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, an
Illinois 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 January 15,
1999 (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 0.17%, subject to a maximum rate of 12.00% 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 2.12 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 Financial Security Assurance
Inc. ("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.
<PAGE>
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
1996-A,
by: CHEMICAL BANK DELAWARE,
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: HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory
<PAGE>
[Reverse of Class A-1 Regulation S Temporary Global 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE SELLER, THE
ISSUER AND THE OWNER TRUSTEE THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY
HOLDER THAT WAS AN AFFILIATE OF THE SELLER AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN
(1) TO THE SELLER, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE
WHICH MAY BE OBTAINED FROM THE ADMINISTRATOR OR THE INDENTURE TRUSTEE
IS DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE
TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS
ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY
IS DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE
TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATIONS UNDER THE SECURITIES ACT)), (5) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE ADMINISTRATOR AND THE
INDENTURE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT AND
THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION
S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON EXCEPT AS PROVIDED HEREIN.
NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON
FOR NOTES WITH A FACE AMOUNT OF LESS THAN $250,000 AND, IN THE CASE OF
ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN
A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE SECURITIES ACT) ACTING IN
ITS FIDUCIARY CAPACITY), FOR NOTES WITH A FACE AMOUNT OF LESS THAN
$250,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.05 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON
THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE,
BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO
THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
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.
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 fifteenth day of each month, or, if any
such date is not a Business Day, the next succeeding Business Day,
commencing June 17, 1996.
The provisions of the form of Class A-1 Regulation S Permanent
Global Notes attached as an exhibit to the Indenture is hereby
incorporated by reference herein, mutatis mutandis, and, except as
otherwise provided herein, shall be binding on the Issuer and the
Holder hereof as if fully set forth herein. Except as otherwise
provided herein, the Issuer shall make all payments hereunder as and
when provided in the form of Class A-1 Regulation S Permanent Global
Notes and shall be bound by all its covenants set forth therein.
Until exchanged in full for Regulation S Permanent Global Notes, the
beneficial owners of this Regulation S Temporary Global Note shall in
all respects be entitled to the same benefits under the Indenture as
the beneficial owner of duly authenticated and delivered Regulation S
Permanent Global Notes, provided that the beneficial owners of this
Regulation S Temporary Global Note shall not be entitled to receive
payment of principal or interest hereon except as set forth in the next
succeeding paragraph.
With respect to each Distribution Date occurring prior to the
date (the "Exchange Date") on which this Regulation S Temporary Global
Note is exchanged in full for Regulation S Permanent Global Notes, each
beneficial owner of an interest in this Regulation S Temporary Global
Note shall be entitled to payment of principal and interest in respect
of such beneficial interest only upon presentation to the Indenture
Trustee by Euroclear or Cedel, as the case may be, of certification as
contemplated by the Indenture to the effect that it has received
certification of non-United States beneficial ownership from the Person
appearing on its records as being entitled to such beneficial
interests. Principal and interest in respect of any portion of this
Global Note that is payable prior to the Exchange Date but as to which
no such certification has been presented shall be paid by the Issuer
to the Indenture Trustee and shall be held by the Indenture Trustee for
payment upon receipt of the appropriate certificates.
This Regulation S Temporary Global Note is exchangeable in whole
or in part for one or more Regulation S Permanent Global Notes or Rule
144A Global Notes only (i) on or after the termination of the 40-day
restricted period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article II of the Indenture. Upon exchange of
this Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or Rule 144A Global Notes, the Indenture Trustee
shall cancel this Regulation S Temporary Global Note.
<PAGE>
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.]1
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED
TO ON THE REVERSE HEREOF.]1
[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD
ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE SELLER AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE OTHER THAN (1) TO THE SELLER, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED
1 Applicable to Global Notes only.
<PAGE>
IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40
DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE ADMINISTRATOR OR THE INDENTURE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE TRUSTEE, (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE TRUSTEE (PROVIDED
THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS
SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40
DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE ADMINISTRATOR AND THE
INDENTURE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT AND
THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.]2
NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON
FOR NOTES WITH A FACE AMOUNT OF LESS THAN $250,000 AND, IN THE CASE OF
ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN
A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE SECURITIES ACT) ACTING IN
ITS FIDUCIARY CAPACITY), FOR NOTES WITH A FACE AMOUNT OF LESS THAN
$250,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.05 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON
THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE,
BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO
THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS NOTE
(OR INTEREST THEREIN), COVENANTS AND AGREES THAT SUCH NOTEHOLDER OR
NOTE OWNER, AS THE CASE MAY BE, SHALL NOT, PRIOR TO THE DATE THAT IS
ONE YEAR AND ONE DAY AFTER THE TERMINATION OF THE INDENTURE, ACQUIESCE,
PETITION OR OTHERWISE INVOKE OR CAUSE THE ISSUER TO INVOKE THE PROCESS
OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING
OR SUSTAINING A CASE AGAINST THE ISSUER UNDER ANY FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW OR APPOINTING A
RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR
OTHER SIMILAR OFFICIAL OF THE ISSUER OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF
THE ISSUER.
2 Applicable to certificated Restricted Notes only.<PAGE>
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED$
No. R- CUSIP NO. 32081YAC4
FIRST MERCHANTS AUTO TRUST 1996-A
6.70% ASSET BACKED NOTE, CLASS A-2
FIRST MERCHANTS AUTO TRUST 1996-A, 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 $40,897,000 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 May 1, 1996 (the "Indenture"), between the Issuer
and Harris Trust and Savings Bank, an Illinois 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 July 17, 2000 (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 15th 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 15th 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 Financial Security Assurance
Inc. ("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.
<PAGE>
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
1996-A,
by: CHEMICAL BANK DELAWARE,
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: HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 6.70% 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 fifteenth day of each month, or, if any
such date is not a Business Day, the next succeeding Business Day,
commencing June 17, 1996.
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 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, (i) by check mailed first-class, postage
prepaid to such Person's address as it appears on the Note Register on
such Record Date or (ii) (A) if the registered Holder of this Note is
the nominee of the Clearing Agency or (B) if such Holder holds Notes
with an initial aggregate principal balance of at least $5,000,000 and
has delivered written instructions to the Trustee requesting payment
by wire transfer or (C) if such Holder is the Security Insurer pursuant
to Section 2.08(c) of the Indenture, Section 5.10 of the Sale and
Servicing Agreement or the proviso to the definition of "Outstanding"
in the Indenture, by wire transfer in immediately available funds to
the account designated by such Person. 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 Chemical Bank
Delaware in its individual capacity, Harris Trust and Savings Bank 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.<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee:
__________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
____________________________________________________________________
__________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________________________,
attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
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.<PAGE>
CERTIFICATION
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is three years (or such
shorter period as may then be applicable under the Securities Act)
after the later of the date of original issuance of such Notes and the
last date, if any, on which such Notes were owned by the Seller or any
Affiliate of the Seller, the undersigned confirms that such Notes are
being transferred:
CHECK ONE BOX BELOW
(1) to the Seller; or
(2) pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933 that
has furnished to the Indenture Trustee a signed
letter containing certain representations and
agreements (the form of which letter can be
obtained from the Indenture Trustee): or
(5) pursuant to another available exemption from the
registration requirements of the Securities Act of
1933.
Unless one of the boxes is checked, the Indenture Trustee will
refuse to register any of the Notes evidenced by this
certificate in the name of any person other than the registered
holder thereof; provided, however, that if box (3), (4) or (5)
is checked, the Indenture Trustee may require, prior to
registering any such transfer of the Notes such legal opinions,
certifications and other information as the Administrator has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act of 1933,
such as the exemption provided by Rule 144 under such Act.
_________________________________
Signature
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act of 1933, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Seller and the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor
is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
_________________________________
Signature
NOTICE: To be executed by an
executive officer<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
The initial principal amount at maturity of this Global
Note shall be $ .
The following increases or decreases in the initial principal amount
of this Global Note have been made:
Date Made
Amount of
increase in
Initial
Principal
Amount of this
Global Note
Amount of
decrease
in Initial
Principal
Amount of
this Global
Note
Initial
Principal
Amount of
this Global
Note
following
such
decrease or
increase
Signature of
authorized
officer of
Indenture
Trustee
or Custodian
<PAGE>
[FACE OF CLASS A-2 REGULATION S TEMPORARY GLOBAL NOTE]
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- CIN NO. U32127ABS
FIRST MERCHANTS AUTO TRUST 1996-A
6.70% ASSET BACKED NOTE, CLASS A-2
Subject to the provision on the reverse hereof, FIRST MERCHANTS
AUTO TRUST 1996-A, 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 $40,897,000
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 May 1, 1996 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, an
Illinois 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 July 17, 2000
(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 15th 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 15th 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 Financial Security Assurance
Inc. ("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.
<PAGE>
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
1996-A,
by: CHEMICAL BANK DELAWARE,
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: HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee,
by: _________________________________
Authorized Signatory
<PAGE>
[Reverse of Class A-2 Regulation S Temporary Global 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE SELLER, THE
ISSUER AND THE OWNER TRUSTEE THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY
HOLDER THAT WAS AN AFFILIATE OF THE SELLER AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN
(1) TO THE SELLER, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE
WHICH MAY BE OBTAINED FROM THE ADMINISTRATOR OR THE INDENTURE TRUSTEE
IS DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE
TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS
ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY
IS DELIVERED BY THE TRANSFEREE TO THE ADMINISTRATOR AND THE INDENTURE
TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE
EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATIONS UNDER THE SECURITIES ACT)), (5) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES THAT IT WILL FURNISH TO THE ADMINISTRATOR AND THE
INDENTURE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
SELLER, THE ISSUER AND THE OWNER TRUSTEE THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT AND
THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION
S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON EXCEPT AS PROVIDED HEREIN.
NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON
FOR NOTES WITH A FACE AMOUNT OF LESS THAN $250,000 AND, IN THE CASE OF
ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN
A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE SECURITIES ACT) ACTING IN
ITS FIDUCIARY CAPACITY), FOR NOTES WITH A FACE AMOUNT OF LESS THAN
$250,000 FOR EACH SUCH THIRD PARTY.
SECTION 2.05 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON
THE TRANSFER AND RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE,
BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO
THE FOREGOING RESTRICTIONS ON TRANSFERABILITY.
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.
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 fifteenth day of each month, or, if any
such date is not a Business Day, the next succeeding Business Day,
commencing June 17, 1996.
The provisions of the form of Class A-2 Regulation S Permanent
Global Notes attached as an exhibit to the Indenture is hereby
incorporated by reference herein, mutatis mutandis, and, except as
otherwise provided herein, shall be binding on the Issuer and the
Holder hereof as if fully set forth herein. Except as otherwise
provided herein, the Issuer shall make all payments hereunder as and
when provided in the form of Class A-2 Regulation S Permanent Global
Notes and shall be bound by all its covenants set forth therein.
Until exchanged in full for Regulation S Permanent Global Notes, the
beneficial owners of this Regulation S Temporary Global Note shall in
all respects be entitled to the same benefits under the Indenture as
the beneficial owner of duly authenticated and delivered Regulation S
Permanent Global Notes, provided that the beneficial owners of this
Regulation S Temporary Global Note shall not be entitled to receive
payment of principal or interest hereon except as set forth in the next
succeeding paragraph.
With respect to each Distribution Date occurring prior to the
date (the "Exchange Date") on which this Regulation S Temporary Global
Note is exchanged in full for Regulation S Permanent Global Notes, each
beneficial owner of an interest in this Regulation S Temporary Global
Note shall be entitled to payment of principal and interest in respect
of such beneficial interest only upon presentation to the Indenture
Trustee by Euroclear or Cedel, as the case may be, of certification as
contemplated by the Indenture to the effect that it has received
certification of non-United States beneficial ownership from the Person
appearing on its records as being entitled to such beneficial
interests. Principal and interest in respect of any portion of this
Global Note that is payable prior to the Exchange Date but as to which
no such certification has been presented shall be paid by the Issuer
to the Indenture Trustee and shall be held by the Indenture Trustee for
payment upon receipt of the appropriate certificates.
This Regulation S Temporary Global Note is exchangeable in whole
or in part for one or more Regulation S Permanent Global Notes or Rule
144A Global Notes only (i) on or after the termination of the 40-day
restricted period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article II of the Indenture. Upon exchange of
this Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or Rule 144A Global Notes, the Indenture Trustee
shall cancel this Regulation S Temporary Global Note.
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.05(a)(i) of the Indenture)
Harris Trust and Savings Bank,
as Indenture Trustee of First Merchants Auto Trust 1996-A
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Re: First Merchants Auto Trust
1996-A
[Floating Rate Asset Backed Notes, Class A-1 (the
"Notes")]
[6.70% Asset Backed Notes, Class A-2 (the "Notes")]
Reference is hereby made to the Indenture dated as of May 1,
1996 (the "Indenture") between First Merchants Auto Trust 1996-A, as
issuer (the "Issuer"), and Harris Trust and Savings Bank as trustee
(the "Indenture Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to the Notes which are evidenced by one or
more Rule 144A Global Notes (CUSIP No. __________) and held with the
Depositary in the name of Cede & Co. (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the
Notes to a Person who will take delivery thereof in the form of an
equal principal amount of Notes evidenced by one or more Regulation S
Global Notes (SINS No. __________), which amount, immediately after
such transfer, is to be held with the Depositary through Euroclear or
Cedel or both (Common Code_______).
In connection with such request and in respect of such Notes,
the Transferor hereby certifies that such transfer has been effected
in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with Rule 903 or Rule 904 under
the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or the
Transferor and any person acting on its behalf
reasonably believed and believes that the
transferee was outside the United States: or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities
market and neither the Transferor nor any person
acting on its behalf knows that the transaction was
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to be
held with the Depositary through Euroclear or Cedel or
both (Common Code __________).
Upon giving effect to this request to exchange a beneficial
interest in a Rule 144A Global Note for a beneficial interest in a
Regulation S Global Note, the resulting beneficial interest shall be
subject to the restrictions on transfer applicable to Regulation S
Global Notes pursuant to the Indenture and the Securities Act and, if
such transfer occurs prior to the end of the 40-day restricted period
associated with the initial offering of Notes, the additional
restrictions applicable to transfers of interest in the Regulation S
Temporary Global Note.
This certificate and the statements contained herein are made
for your benefit and the benefit of First Merchants Auto Receivables
Corporation II, the Issuer and Salomon Brothers Inc, Seven World Trade
Center, New York, New York, the initial purchaser of such Notes being
transferred. Terms used in this certificate and not otherwise defined
in the Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By: _________________________________
Name:
Title:
Dated:______________, __
cc: First Merchants Auto Receivables Corporation II
Chemical Bank Delaware, Owner Trustee
Salomon Brothers Inc
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.05(a)(ii) of the Indenture)
Harris Trust and Savings Bank,
as Indenture Trustee of First Merchants Auto Trust 1996-A
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Re: First Merchants Auto Trust
1996-A
[Floating Rate Asset Backed Notes, Class A-1 (the
"Notes")]
[6.70% Asset Backed Notes, Class A-2 (the "Notes")]
Reference is hereby made to the Indenture dated as of May 1,
1996 (the "Indenture") between First Merchants Auto Trust 1996-A, as
issuer (the "Issuer"), and Harris Trust and Savings Bank as trustee
(the "Indenture Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to the Notes which are evidenced by one or
more Regulation S Global Notes (SINS No. __________) and held with the
Depositary through [Euroclear] [Cedel] (Common Code __________) in the
name of Cede & Co. (the "Transferor"). The Transferor has requested
a transfer of such beneficial interest in the Notes to a Person who
will take delivery thereof in the form of an equal principal amount of
Notes evidenced by one or more Rule 144A Global Notes (CUSIP No.
__________), to be held with the Depositary.
In connection with such request and in respect of such Notes,
the Transferor hereby certifies that:
[CHECK ONE]
such transfer is being effected pursuant to and in
accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies
that the Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect
to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in
a transaction meeting the requirements of Rule 144A;
or
such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
such transfer is being effected pursuant to an exemption
from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor
hereby further certifies that the Notes are being
transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification
is supported by an Opinion of Counsel, provided by the
Transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form
reasonably acceptable to the Administrator and to the
Indenture Trustee, to the effect that such transfer is in
compliance with the Securities Act;
and such Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial
interest in Regulation S Global Notes for a beneficial interest in Rule
144A Global Notes, the resulting beneficial interest shall be subject
to the restrictions on transfer applicable to Rule 144A Global Notes
pursuant to the Indenture and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of First Merchants Auto Receivables
Corporation II, the Issuer and Salomon Brothers Inc, Seven World Trade
Center, New York, New York, the initial purchaser of such Notes being
transferred.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:__________, ____
cc: First Merchants Auto Receivables Corporation II
Chemical Bank Delaware, Owner Trustee
Salomon Brothers Inc<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM DEFINITIVE NOTES TO DEFINITIVE NOTES
(Pursuant to Section 2.05(b) of the Indenture)
Harris Trust and Savings Bank,
as Indenture Trustee of First Merchants Auto Trust 1996-A
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Re: First Merchants Auto Trust
1996-A
[Floating Rate Asset Backed Notes, Class A-1 (the
"Notes")]
[6.70% Asset Backed Notes, Class A-2 (the "Notes")]
Reference is hereby made to the Indenture dated as of May 1,
1996 (the "Indenture") between First Merchants Auto Trust 1996-A, as
issuer (the "Issuer"), and Harris Trust and Savings Bank as trustee
(the "Indenture Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with such request and in respect of the Notes
surrendered to the Indenture Trustee herewith for exchange (the
"Surrendered Notes"), the holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred pursuant to
and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies
that the Surrendered Notes are being transferred to a
Person that the Transferor reasonably believes is
purchasing the Surrendered Notes for its own account, or
for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act:
or
the Surrendered Notes are being transferred pursuant to
an effective registration statement under the Securities
Act;
or
such transfer is being effected pursuant to an exemption
from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor
hereby further certifies that the Notes are being
transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification
is supported by an Opinion of Counsel, provided by the
transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form
reasonably acceptable to the Administrator and to the
Indenture Trustee, to the effect that such transfer is in
compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made
for your benefit and the benefit of First Merchants Auto Receivables
Corporation II, the Issuer and Salomon Brothers Inc, Seven World Trade
Center, New York, New York, the initial purchaser of such Notes being
transferred. Terms used in this certificate and not otherwise defined
in the Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: __________, ____
cc: First Merchants Auto Receivables Corporation II
Chemical Bank Delaware, Owner Trustee
Salomon Brothers Inc
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM DEFINITIVE NOTES TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.05(c) of the Indenture)
Harris Trust and Savings Bank,
as Indenture Trustee of First Merchants Auto Trust 1996-A
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Re: First Merchants Auto Trust
1996-A
[Floating Rate Asset Backed Notes, Class A-1 (the
"Notes")]
[6.70% Asset Backed Notes, Class A-2 (the "Notes")]
Reference is hereby made to the Indenture dated as of May 1,
1996 (the "Indenture") between First Merchants Auto Trust 1996-A, as
issuer (the "Issuer"), and Harris Trust and Savings Bank as trustee
(the "Indenture Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to Notes which are evidenced by one or more
Definitive Notes. The Transferor has requested a transfer of such
beneficial interest in the Notes to a Person who will take delivery
thereof in the form of an equal initial principal amount of Notes
evidenced by one or more Rule 144A Global Notes (CUSIP No. __________),
to be held with the Depositary.
In connection with such request and in respect of the Notes
surrendered to the Indenture Trustee herewith for exchange (the
"Surrendered Notes"), the holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred pursuant to
and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies
that the Surrendered Notes are being transferred to a
Person that the Transferor reasonably believes is
purchasing the Surrendered Notes for its own account, or
for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A;
or
the Surrendered Notes are being transferred pursuant to
an effective registration statement under the Securities
Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of First Merchants Auto Receivables
Corporation II, the Issuer and Salomon Brothers Inc, Seven World Trade
Center, New York, New York, the initial purchaser of such Notes being
transferred. Terms used in this certificate and not otherwise defined
in the Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: __________, ____
cc: First Merchants Auto Receivables Corporation II
Chemical Bank Delaware, Owner Trustee
Salomon Brothers Inc<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE
TO DEFINITIVE NOTE
(Pursuant to Section 2.05(d) of the Indenture)
Harris Trust and Savings Bank,
as Indenture Trustee of First Merchants Auto Trust 1996-A
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Re: First Merchants Auto Trust
1996-A
[Floating Rate Asset Backed Notes, Class A-1 (the
"Notes")]
[6.70% Asset Backed Notes, Class A-2 (the "Notes")]
Reference is hereby made to the Indenture dated as of May 1,
1996 (the "Indenture") between First Merchants Auto Trust 1996-A, as
issuer (the "Issuer"), and Harris Trust and Savings Bank as trustee
(the "Indenture Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
[This letter relates to the Notes which are evidenced by one or
more Rule 144A Global Notes (CUSIP No. ________) and held with the
Depositary in the name of Cede & Co. (the "Transferor").] [This letter
relates to the Notes which are evidenced by one or more Regulation S
Global Notes (SINS No. ________) and held with the Depositary through
[Euroclear] [Cedel] (Common Code ________) in the name of Cede & Co.
(the "Transferor").] The Transferor has requested a transfer of such
beneficial interest in the Notes to a Person who will take delivery
thereof in the form of an equal principal amount of Definitive Notes
(CUSIP No. _________), to be registered in the names and issued in the
authorized denominations provided to you herewith.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered
Notes"), the holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred to the
beneficial owner of such Notes;
or
the Surrendered Notes are being transferred pursuant to
and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies
that the Surrendered Notes are being transferred to a
Person that the Transferor reasonably believes is
purchasing the Surrendered Notes for its own account, or
for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred pursuant to
an effective registration statement under the Securities
Act;
or
such transfer is being effected pursuant to an exemption
from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor
hereby further certifies that the Notes are being
transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification
is supported by an Opinion of Counsel, provided by the
transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form
reasonably acceptable to the Administrator and to the
Indenture Trustee, to the effect that such transfer is in
compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are
made for your benefit and the benefit of First Merchants Auto
Receivables Corporation II, the Issuer and Salomon Brothers Inc, Seven
World Trade Center, New York, New York, the initial purchaser of such
Notes being transferred. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in
Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: __________, ____
cc: First Merchants Auto Receivables Corporation II
Chemical Bank Delaware, Owner Trustee
Salomon Brothers Inc
<PAGE>
THIRD AMENDMENT TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
THIRD AMENDMENT, dated as of June 15, 1996 ("Amendment"), to
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of October
29, 1993, as amended by a First Amendment, dated as of February 4,
1994, and a Second Amendment, dated as of July 25, 1994 (the
"Registration Rights Agreement"), among First Merchants Acceptance
Corporation, a Delaware corporation (the "Company"), the other parties
named therein and the persons that have become parties thereto by
written Joinders in accordance with the terms thereof.
WHEREAS, the undersigned have entered into the Registration
Rights Agreement; and
WHEREAS, the undersigned desire to amend the Registration Rights
Agreement as set forth herein;
NOW THEREFORE, the undersigned hereby amend the Registration
Rights Agreement as follows:
1. Sections 2(c) and 3 of the Registration Rights Agreement are
hereby deleted in their entirety.
2. Sections 4(a) and 4(b) of the Registration Rights
Agreement are hereby amended by deleting the words "or Section 3."
3. Section 5(l) of the Registration Rights Agreement is
hereby amended by deleting the words "and Section 3."
4. Section 6 of the Registration Rights Agreement is hereby
amended by (i) deleting the words "Sections 2 and 3" in the first
sentence and replacing them with the words "Section 2" and (ii)
deleting the words "or demand registration under Section 3" in the
second sentence.
5. Section 8 of the Registration Rights Agreement is hereby
amended by deleting the words "or Section 3" in the first sentence of
the first paragraph.
6. This Amendment may be executed in one or more counterparts,
each of which shall be considered an original, but all of which
together shall constitute the same instrument.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Amendment as of the date first above written.
FIRST MERCHANTS ACCEPTANCE
CORPORATION
By:
Its:
<PAGE>
STOCKHOLDERS:
MIDDLEWEST VENTURES II, L.P.
By: Middlewest Management
Company, L.P.
Its: General Partner
By:
Its:
FINANCE ACQUISITION CORP.
By:
Its:
THE KANTER FAMILY FOUNDATION
By:
Its:
DANAE INVESTMENTS
By:
Its:
CEDAR GLEN INVESTMENTS
By: RPW Trust
Its: General Partner
By:
Solomon A. Weisgal, not
in his individual
capacity but solely as
Trustee/Partner
Mitchell C. Kahn
Robert G. Mark
Marilyn E. Millard
John W. McCarthy
Brian W. Hausmann
Christopher J. Perry
M. Ann O'Brien
Robert F. Perille
Ford S. Bartholow
Jeffrey M. Mann
Matthew W. Clary
Thomas E. Van Pelt, Jr.
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT ("Termination Agreement"), dated as
of June 15, 1996, relates to the Amended and Restated Stockholders'
Agreement, dated October 29, 1993 (the "Stockholders' Agreement"),
among First Merchants Acceptance Corporation, a Delaware corporation,
the other parties named therein and the persons that have become
parties thereto by written Joinders in accordance with the terms
thereof.
WHEREAS, the undersigned have entered into the Stockholders'
Agreement; and
WHEREAS, the undersigned desire to terminate the Stockholders'
Agreement, effective as of the date hereof.
NOW, THEREFORE, in consideration of the agreements hereinafter
set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as
follows:
1. Termination.
Effective as of the date hereof, the Stockholders' Agreement is
hereby terminated and all rights and obligations thereunder are hereby
terminated.
2. Counterparts.
This Termination Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same instrument.
3. Entire Agreement. This Termination Agreement represents
the entire agreement and understanding of the parties hereto with
reference to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Termination Agreement as of the date first above written.
FIRST MERCHANTS ACCEPTANCE
CORPORATION
By:
Its:
FINANCE ACQUISITION CORP.
By:
Its:
MIDDLEWEST VENTURES II, L.P.
By: Middlewest Management
Company, L.P.
Its: General Partner
By:
Its:
Christopher J. Perry
M. Ann O'Brien
Robert F. Perille
Ford S. Bartholow
Jeffrey M. Mann
Matthew W. Clary
Thomas E. Van Pelt, Jr.
Brian W. Hausmann
Marilyn E. Millard
John W. McCarthy
Robert G. Mark
Mitchell C. Kahn
THE KANTER FAMILY FOUNDATION
By:
Its:
CEDAR GLEN INVESTMENTS
By: RPW Trust
Its: General Partner
By:
Solomon A. Weisgal, not in his
individual capacity but solely
as Trustee/Partner
DANAE INVESTMENTS
By:
Its:
<PAGE>
Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
(In Thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
-----------------------------------------------
Average number of common
shares outstanding 6,525 4,141 6,525 4,141
Common equivalent
shares outstanding:
Warrants - 124 - 124
Stock options 255 205 229 198
------- ------- ------ -----
Total common and common
equivalent shares
outstanding 6,780 4,470 6,754 4,463
====== ======= ======= ======
Net earnings $ 3,190 $ 1,365 6,212 2,533
======= ======= ======= ======
Net earnings per share $ 0.47 0.31 0.92 0.57
======= ======= ======= ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The information included in this Financial Data Schedule shall
not be deemed to be filed with the Securities and Exchange
Commission and is qualified in its entirety by reference to the
financial and other information included elsewhere in this
Quarterly Report on Form 10-Q.
</LEGEND>
<CIK> 0000926296
<NAME> FIRST MERCHANTS ACCEPTANCE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 711
<SECURITIES> 0
<RECEIVABLES> 313,606
<ALLOWANCES> (18,829)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,505
<DEPRECIATION> (887)
<TOTAL-ASSETS> 362,105
<CURRENT-LIABILITIES> 0
<BONDS> 13,953
0
0
<COMMON> 65
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 362,105
<SALES> 0
<TOTAL-REVENUES> 45,405
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,850
<LOSS-PROVISION> 7,700
<INTEREST-EXPENSE> 9,671
<INCOME-PRETAX> 10,184
<INCOME-TAX> 3,972
<INCOME-CONTINUING> 6,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,212
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
