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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
June 17, 1997
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Date of Report (Date of earliest event reported)
First Merchants Acceptance Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-24686 36-3759045
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
570 Lake Cook Road, Suite 126, Deerfield, Illinois 60015
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(Address of principal executive offices) (Zip Code)
(847) 948-9300
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(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets.
On June 17, 1997 First Merchants Acceptance Corporation (the "Registrant")
sold approximately $9.5 million principal balance of its motor vehicle
installment contract receivables (the "Receivables") to Greenwich Capital
Financial Products, Inc. ("Greenwich") for a purchase price of $7.6 million,
pursuant to Receivables Purchase Agreements dated as of June 17, 1997. The
purchase price for the Receivables was determined by arms length negotiation.
Registrant continued to service the Receivables, while owned by Greenwich,
pursuant to a Servicing Agreement between Greenwich, Registrant and Harris Trust
and Savings Bank, as Paying Agent and Backup Servicer, dated as of June 17,
1997.
The Registrant used the estimated net proceeds from the sale of the
Receivables to Greenwich to pay down its syndicated senior bank line of credit.
On June 20, 1997 Registrant effected a securitization of approximately
$71.5 million of its motor vehicle installment contract receivables (the
"Securitization Receivables") pursuant to a 144A private placement transaction.
In connection with the securitization, First Merchants Auto Receivables II, a
bankruptcy remote special purpose wholly owned subsidiary of the Registrant (the
"Seller"), acquired the Securitization Receivables from Registrant, which
included the Receivables and other motor vehicle installment contract
receivables which Registrant repurchased from Greenwich, with approximately
$51.0 million of the proceeds received from its sale of notes and certificates
issued by First Merchants Auto Trust 1997-2 (the "Trust") pursuant to a
Receivables Purchase Agreement dated as of June 1, 1997 between Registrant and
Seller. The Trust was formed pursuant to an Amended and Restated Trust
Agreement dated as of June 1, 1997 (the "Trust Agreement"). The Trust acquired
the Securitization Receivables together with certain related property from
Seller and issued to the Seller $62,950,000 aggregate principal amount of 6.85%
Asset Backed Notes (the "Notes") and $8,582,293.55 aggregate principal amount of
12.25% Asset Backed Certificates (the "Certificates"), (the Notes and
Certificates together the "Securities"), all pursuant to an Indenture dated as
of June 1, 1997, between the Trust and Harris Trust and Savings Bank, as
Indenture Trustee. The assets of the Trust include the Securitization
Receivables and the related security interests in the underlying motor vehicles.
The Notes and Certificates were issued pursuant to the Trust Agreement. LSI
Financial Group, Inc. will act as servicer for the portfolio of Securitization
Receivables pursuant to a Sale and Servicing Agreement dated as of June 1, 1997.
The Notes and Certificates will be sold by Greenwich Capital Markets, Inc. to
institutional investors pursuant to Rule 144A under the Securities Act of 1933,
as amended, except that the Seller will retain a Certificate equal to
approximately 1% (or $86,805.52) of the Initial Certificate Balance. The
obligations of the Trust to pay principal and interest under the Notes and
Certificates are non-recourse to the Registrant. However, regular payment of
principal and interest on the Notes (but not the Certificates) have been
guaranteed by Financial Security Assurance Inc.
Principal and interest on the Securities generally will be paid on the
fifteenth day of each month (or if such fifteenth day is not a business day, the
next succeeding business day), commencing July 15, 1997; however, no principal
payments will be made to holders of the Certificates until the Notes have been
paid in full. The Notes and Certificates Final Scheduled
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Distribution Dates will both be November 15, 2002. The Notes and Certificates
bear interest at a rate of 6.85% per annum with respect to the Notes and at a
pass through rate of 12.85% per annum with respect to the Certificates. The
Notes and Certificates are subject to redemption in whole, but not in part, on
any Distribution Date on which the Registrant exercises its option to purchase
the Securitization Receivables, which it may do when the outstanding principal
balance of the Securitization Receivables has been reduced to 10% or less of
their initial aggregate balance at the time of transfer to the Trust. The
Registrant used the estimated net proceeds from the sale of the Securitization
Receivables to repay senior bank indebtedness and to repurchase the Receivables
and other motor vehicle installment contract receivables from Greenwich.
Item 7. Exhibits.
2.1 Receivables Purchase Agreement, dated as of June 17, 1997 between First
Merchants Acceptance Corporation, as Seller and Greenwich Capital Financial
Products, Inc., as Purchaser.
2.2 Receivables Purchase Agreement, dated as of June 1, 1997 between First
Merchants Acceptance Corporation, as Seller and First Merchants Auto
Receivables Corporation II, as Purchaser.
4.1 Indenture, dated as of June 1, 1997 between First Merchants Auto Trust
1997-2, as Issuer and Harris Trust and Savings Bank, as Indenture Trustee.
10.1 Servicing Agreement, dated as of June 17, 1997 Greenwich Capital
Financial Products, Inc., as Purchaser, First Merchants Acceptance Corporation,
as Servicer and Harris Trust and Savings Bank, as Paying Agent and Backup
Servicer.
10.2 Custodian Agreement, dated as of June 17, 1997 among Greenwich Capital
Financial Products, Inc., as Purchaser, First Merchants Acceptance Corporation,
as Seller and Harris Trust and Savings Bank, as Custodian.
10.3 Sale and Servicing Agreement, dated as of June 1, 1997 among First
Merchants Auto Trust 1997-2, as Issuer, First Merchants Auto Receivables
Corporation II, as Seller, First Merchants Acceptance Corporation, as Originator
and Sub-Servicer, LSI Financial Group, as Servicer and Harris Trust and Savings
Bank, as Indenture Trustee, Backup Servicer and Custodian.
10.4 Amended and Restated Trust Agreement, dated as of June 1, 1997 between
First Merchants Auto Receivables II, as Depositor and Chase Manhattan Bank
Delaware, as Owner Trustee.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
FIRST MERCHANTS ACCEPTANCE CORPORATION
Howard Adamski
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Dated: June 17, 1997 Howard Adamski
Vice President and Treasurer
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EXHIBIT 2.1
=========================================================
RECEIVABLES PURCHASE AGREEMENT
between
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller,
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
as Purchaser
Dated as of June 17, 1997
=========================================================
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TABLE OF CONTENTS
ARTICLE I
Certain Definitions................... 1
ARTICLE II
Conveyance of Receivables................. 3
SECTION 2.01. Conveyance of Receivables........................ 3
SECTION 2.02. The Closing ..................................... 4
ARTICLE III
Representations and Warranties ............. 4
SECTION 3.01. Representations and Warranties of the Purchaser.. 4
SECTION 3.02. Representations and Warranties of Seller ........ 4
ARTICLE IV
Conditions ....................... 9
SECTION 4.01. Conditions to Obligation of the Purchaser ....... 9
SECTION 4.02. Conditions to Obligation of the Seller .......... 10
ARTICLE V
Covenants of the Seller ................ 11
SECTION 5.01. Protection of Right, Title and Interest ......... 11
SECTION 5.02. Other Liens or Interests ........................ 11
SECTION 5.03. Costs and Expenses .............................. 11
SECTION 5.04. Indemnification ................................. 11
ARTICLE VI
Miscellaneous Provisions ................ 12
SECTION 6.01. Obligations of Seller ........................... 12
SECTION 6.02. Repurchase Events ............................... 12
SECTION 6.03. Purchaser Assignment of Repurchased Receivables.. 12
SECTION 6.04. Assignment ...................................... 12
SECTION 6.05. Amendment ....................................... 12
SECTION 6.06. Waivers ......................................... 12
SECTION 6.07. Notices ......................................... 13
SECTION 6.08. Costs and Expenses .............................. 13
SECTION 6.09. Representations of the Seller and the Purchaser.. 13
SECTION 6.10. Headings and Cross-References ................... 13
SECTION 6.11. Governing Law ................................... 13
SECTION 6.12. Counterparts .................................... 13
EXHIBIT A
A-1
SCHEDULE I
Schedule of Receivables............ I-1
i
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SCHEDULE II
Location of Receivable Files....... II-1
ii
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RECEIVABLES PURCHASE AGREEMENT dated as of June 17, 1997, between FIRST
MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation, as seller (the
"Seller"), and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., 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
and/or Magna; and
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 on a
servicing released basis.
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 II
Certain Definitions
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.
"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 Receivable.
"Assignment" shall mean the document of bill of sale and assignment
substantially in the form attached to this Agreement as Exhibit A.
"Basic Documents" means this Agreement, the Assignment and any other
agreements, documents and certificates delivered in connection herewith or
therewith.
"Contract" means a motor vehicle retail installment sale contract between
a Dealer and one or more Obligors named in the list of Receivables on Schedule
I hereto, together with all accounts, general intangibles, chattel paper,
documents and instruments (as those terms are defined in the Uniform Commercial
Code as enacted in the State of Illinois) and any contract rights related
thereto.
"Cutoff Date" means June 1, 1997.
"Dealer" means the dealer who sold a Financed Vehicle and who originated
the related Receivable and assigned it to First Merchants or Magna pursuant to
a Dealer Agreement.
"Dealer Agreement" means (a) an agreement between the Seller and a Dealer
pursuant to which such Dealer sells Contracts to the Seller or (b)
collectively, (i) an agreement between Magna and a
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Dealer pursuant to which such Dealer sells Contracts to Magna and (ii) an
agreement between Magna and the Seller pursuant to which Magna sells Contracts
to the Seller (or otherwise assigns Contracts to the Seller's designee).
"Dealer Underwriting Guide" means the underwriting manual used by the
Seller in the purchase of Receivables, as amended from time to time.
"Defaulted Receivable" means a Receivable with respect to which any of the
following shall have occurred: (i) a payment under the related Receivable is
120 or more days delinquent (and the related Obligor has not cured any
delinquency with respect to such Receivable during the calendar month in which
such Receivable became 120 days delinquent), (ii) the related Financed Vehicle
has been repossessed or (iii) the servicer has determined in good faith that
payments under the related Receivable are not likely to be resumed.
"Financed Vehicle" means an automobile, light-duty truck, van or minivan,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"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 or otherwise
(including, without limitation, as a result of any act or omission by the
related Obligor).
"Lien Certificate" means with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means any Receivable with respect to which 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 thereof has determined in good faith that
all amounts it expects to recover have been received or (iii) a payment under
the related Receivable is 150 or more days delinquent.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
monies collected in respect thereof, from whatever source, including, without
limitation, rebates of service contracts, proceeds of dealer recourse and all
available rebates of state sales taxes, following the date on 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.
"Magna" means Magna Bank of St. Louis, a Missouri banking corporation, and
its successors and assigns.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under such Receivable.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including, without
limitation, any beneficiary thereof), unincorporated organization or government
or agency or political subdivision thereof.
"Purchaser" shall mean Greenwich Capital Financial Products, Inc., a
Delaware corporation, its successors and assigns.
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"Purchase Amount" means, with respect to any Receivable purchased
hereunder, 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.
"Receivable" shall mean any Contract listed on Schedule I hereto (which
Schedule may be in the form of microfiche).
"Receivable Files" means the following documents or instruments:
(a) the fully executed original of each Receivable (together with any
agreements modifying such Receivable, including, without limitation, 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 a
custodian or 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 are set forth on Schedule III
hereto.
"Registrar of Titles" means with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Repurchase Event" shall have the meaning specified in Section 6.02.
"Schedule of Receivables" shall mean the list of Receivables annexed
hereto as Schedule I.
"Seller" shall mean First Merchants Acceptance Corporation, a Delaware
corporation, its successors and assigns.
"Subsequent Transferee" shall have the meaning specified in Section 6.04.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. Subject to the terms and
conditions and in reliance upon the representations and warranties herein set
forth, the Purchaser hereby agrees to pay to or upon the order of the Seller
the purchase price heretofore agreed to by the Seller and the Purchaser, in the
manner and at the time heretofore agreed to, and the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Purchaser, with all
servicing rights released to Purchaser and without recourse (subject to the
obligations herein) all right, title, and interest of the Seller in and to:
(a) the Receivables and all monies 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;
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(c) any Liquidation Proceeds and any other proceeds with respect to the
Receivables from any source, including, without limitation, claims on any
physical damage, credit life or disability insurance policies covering Financed
Vehicles or Obligors, including, without limitation, any vendor's single
interest or other collateral protection insurance policy;
(d) all rights of the Seller against Dealers and Magna with respect to the
Receivables under the Dealer Agreements and Dealer assignments;
(e) any property that shall have secured a Receivable and that shall have
been acquired by or on behalf of the Seller;
(f) all documents and other items contained in the Receivable Files; and
(g) 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 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 Section 6.04 hereof, the Purchaser may sell, transfer and reassign to a
Subsequent Transferee (i) all or any portion of the assets assigned to the
Purchaser hereunder, (ii) all or any portion of the Purchaser's rights against
the Seller under this Agreement and (iii) all proceeds thereof. Such
reassignment may be made by the Purchaser with or without a reassignment by the
Purchaser of its rights under this Agreement, and without further notice to or
acknowledgement from the Seller. The Seller waives, to the extent permitted
under applicable law, all claims, causes of action and remedies, whether legal
or equitable (including, without limitation, 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 this Agreement.
SECTION 2.02. The Closing. The sale and purchase of the Receivables
shall take place at the closing on June 17, 1997 (the "Closing Date").
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants as follows 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
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performance of this Agreement have been duly authorized by the Purchaser by all
necessary corporate action.
SECTION 3.02. Representations and Warranties of Seller. (a) The Seller
hereby represents and warrants as follows 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 to carry out its 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 have been duly
authorized by the Seller by all necessary corporate action.
(4) No Violation. Upon giving effect to the release of the Lien
described in Section 3.02(b)(14), 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 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 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.
(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 other
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.
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(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 may rely in transferring the Receivables. 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 and the subsequent sale, transfer and assignment
of the Receivables by the Purchaser.
(1) Characteristics of Receivables. Each Receivable (A) was
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business, is
payable in United States dollars, has been fully and duly executed by the
parties thereto, has been validly purchased by the Seller from a Dealer or
Magna, as applicable, under an existing Dealer Agreement (and each Dealer
had all necessary licenses and permits to originate such Receivable), (B)
provides for level monthly payments (provided that the payment in the first
or last month in the life of the Receivable may be minimally different from
the level payment) that fully amortize the Amount Financed by maturity date
and yield interest at the APR, (C) permits partial prepayment, full
prepayment, or both partial and full prepayment of such Receivable; (D) 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 has
been validly assigned by the Seller to the Purchaser and (E) 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.
(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, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, the Federal Reserve Board's Regulations "B" and "Z", 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 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 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. No Obligor had been identified on the records
of the Seller as being the subject of a current bankruptcy proceeding.
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(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 shall have
caused its records relating to each Receivable, including, without
limitation, any computer records, to be clearly and unambiguously marked to
show that the Receivables have been sold to the Purchaser by the Seller.
(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 Purchaser were utilized in selecting the
Receivables.
(10) Chattel Paper. Each Receivable constitutes chattel paper within
the meaning of the UCC as in effect in the State of origination.
(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 to the Purchaser under this Agreement or the pledge of such
Receivable by the Purchaser.
(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. 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 dated as of June 17, 1997 under
the Fourth Amended and Restated Loan and Security Agreement dated as of
February 28, 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.
(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 and, upon the sale thereof to the Purchaser on the Closing
Date, the Purchaser has a valid and effective assignment of such security
interest. The Lien Certificate for each Financed Vehicle shows, or if a
new or replacement Lien Certificate is being applied for with respect to
such Financed Vehicle such Lien Certificate shall be received within 120
days of the Closing Date and shall show, the Seller named as the original
secured party under each Receivable as the holder of a first priority
security interest in such Financed Vehicle. With respect to each
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Receivable for which the Lien Certificate has not yet been returned from
the Registrar of Titles, the Seller has received written evidence that such
Lien Certificate showing the Seller as first lienholder has been applied
for. Each Dealer's security interest in any Receivable originated by such
Dealer has been validly assigned by the Dealer (or Magna, as applicable) to
the Seller. The Seller's security interest has been validly assigned to
the Purchaser pursuant to this Agreement.
(16) All Filings Made. All filings (including, without limitation,
UCC filings) required to be made in any jurisdiction to give the Purchaser
a first priority 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 30 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) Final Scheduled Maturity Date. No Receivable has a final
scheduled payment date after [ ].
(20) Certain Characteristics of the Receivables. As of the Cutoff
Date, (A) each Receivable had an original maturity of not more than 66
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.
(21) No Foreign Obligor. All of the Contracts are due from Obligors
who are citizens, or legal resident aliens, of the United States of
America.
(22) Insurance. The Seller has determined that the Obligor, at the
time of origination of its Receivable, obtained physical damage insurance
covering the Financed Vehicle and with appropriate deductibles in
accordance with Seller's underwriting guidelines and that such physical
damage insurance was in full force and effect as of its origination date.
(23) No Extensions. The number or timing of scheduled payments has not
been changed on any Receivable on or before the Closing Date, except as
reflected on the computer tape delivered in connection with the sale of the
Receivables.
(24) Scheduled Payments. Each Contract has a first scheduled payment
due on or prior to 45 calendar days after the origination date thereof.
Each Obligor has been instructed to make all scheduled payments to a
lockbox at LaSalle National Bank.
(25) Dealer Agreements. The representations and warranties of the
Dealer in the Dealer Agreement with respect to each Receivable purchased by
the Seller pursuant to such Dealer Agreement were true and correct in all
material respects as of the date the Seller (or Magna, as the case may be)
acquired such Receivable from that Dealer.
(26) No Fleet Sales. No Receivable has been included in a "fleet"
sale (i.e., a sale to any single Obligor of more than five Financed
Vehicles).
(27) Receivable Files Complete. There exists a Receivable File
pertaining to each Receivable and such Receivable File contains,
without limitation, (A) a fully executed original of the Receivable,
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(B) a certificate of insurance, application form for insurance signed by the
Obligor, or a signed representation letter from the Obligor named in the
Receivable pursuant to which the Obligor has agreed to obtain physical damage
insurance for the related Financed Vehicle, (C) the original Lien Certificate
or application therefor together with an assignment of the Lien Certificate
executed by the Seller to the Purchaser or, with respect to any Receivable
originated by a Dealer, an assignment of the Lien Certificate executed by such
Dealer to the Seller (or Magna, as the case may be) and by the Seller to the
Purchaser (or, in the case of Receivables sold by Dealers to Magna, from Magna
to the Seller and from the Seller to the Purchaser), (D) an original credit
application signed by the Obligor and (E) the other documents that are set
forth on Schedule III hereto. Each of such documents which is required to be
signed by the Obligor has been signed by the Obligor in the appropriate spaces.
All blanks on any form described in clauses (A), (B), (C), (D) and (E) above
have been properly filled in and each form has otherwise been correctly
prepared. Notwithstanding the above, the complete Receivable File for each
Receivable, shall (x) fulfill the documentation requirements of the Dealer
Underwriting Guide as in effect on the Closing Date and (y) be in possession of
the servicer and/or custodian, as applicable, on such date.
(28) No Fraud or Misrepresentation. Each Receivable was originated by a
Dealer and was sold by the Dealer to the Seller (or Magna, as the case may be),
to the best of the Seller's knowledge, without fraud or misrepresentation on
the part of such Dealer in either case.
(29) Receivables Not Assumable. No Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such Obligor's
obligations to the Seller with respect to such Receivable.
(30) No Impairment. The Seller has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under a Receivable or otherwise to impair the rights of the Purchaser in any
Receivable or the proceeds thereof.
(31) Tax Liens. There is no Lien against any Financed Vehicle for
delinquent taxes.
(32) No Corporate Obligor. All of the Purchased Contracts are due
from Obligors who are natural persons.
(33) No Liens. No Liens or claims have been filed for work, labor, or
materials relating to a Financed Vehicle that are prior to, or equal or
coordinate with, the security interest in the Financed Vehicle granted by the
related Receivable.
(34) Servicing. Each Receivable has been serviced in conformity with all
applicable laws, rules and regulation and in conformity with the Seller's
policies and procedures which are consistent with customary, prudent industry
standards.
(35) No Omissions. There have been no material omissions or misstatements
in any document provided or statement made to the Purchaser in writing
concerning the Seller or the Receivables by or on behalf of the Seller in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Purchaser. The obligation
of the Purchaser to purchase the Receivables is subject to the satisfaction
of the following conditions:
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(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) Delivery of Receivables to Custodian. The Seller shall deliver the
original Receivables and assignments thereof to the custodian on or prior to
the Closing Date.
(d) Release of Lenders. The Seller shall obtain the executed consent and
release of the secured lenders as described in Section 3.02(b)(14) and the
related UCC-3, in each case in form and substance satisfactory to the
Purchaser, at or prior to the time of closing.
(e) Documents To Be Delivered on the Closing Date:
(1) The Bill of Sale. On the Closing Date, the Seller shall execute
and deliver a Bill of Sale and Assignment of Receivables 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
sold, transferred and 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) Certificate of Custodian. On or prior to the Closing Date, the
Purchaser shall receive a certificate of the custodian in form and
substance satisfactory to the Purchaser.
(4) Paying Agent. On or prior to the Closing Date, arrangements with a
paying agent satisfactory to the Purchaser shall be consummated.
(5) Opinions of Seller's Counsel. On or prior to the Closing Date,
the Purchaser shall have received the opinions of counsel to Seller, in
form and substance satisfactory to the Purchaser, as to the matters set
forth in Exhibit B hereto and such other matters as the Purchaser has
heretofore requested or may reasonably request.
(6) Power of Attorney. Seller shall have executed and delivered to
Purchaser a Limited Power of Attorney, substantially in the form of Exhibit
C hereto, on or prior to the Closing Date.
(7) Other Documents. Such other documents as the Purchaser may
reasonably request.
(f) Other Transactions. Arrangements with respect to the custody and
servicing of the Receivables, satisfactory to the Purchaser, shall be
consummated on the Closing 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:
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(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Purchaser shall have
performed all obligations to be performed by it hereunder on or prior to the
Closing Date.
(b) Receivables Purchase Price. On the Closing Date, the Purchaser shall
have delivered to the Seller the purchase price for the Receivables.
ARTICLE V
Covenants of the Seller
The Seller agrees with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings.
The Seller shall cause all financing statements and continuation statements and
any other necessary documents covering the right, title and interest of the
Seller and the Purchaser, respectively, in and to the Receivables and related
property conveyed pursuant to Section 2.01 hereof to be promptly 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 related property. 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 shall
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 written notice thereof at least 60 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
Receivables and the related property.
SECTION 5.02. Other Liens or Interests5.02. 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.
SECTION 5.03. Costs and Expenses5.03. 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 right, title and
interest in and to the Receivables and the related property.
SECTION 5.04. Indemnification5.04. Indemnification. Seller shall protect,
defend, indemnify and hold Purchaser and its assigns and their attorneys,
accountants, employees, officers and directors harmless from and against all
losses, liabilities, claims, damages and expenses of every kind and character,
as incurred, resulting from or relating to or arising out of (i) the
inaccuracy, nonfulfillment or breach of any representation, warranty, covenant
or agreement made by Seller in this Agreement, (ii) any legal action,
including, without limitation, any counterclaim, that has either been settled
by the litigants (which settlement, if Seller is not a party thereto shall be
with the consent of Seller) or has proceeded to judgment by a court of
competent jurisdiction, in either case to the extent it is based upon alleged
facts that, if true, would constitute a breach of any representation, warranty,
covenant or agreement made by Seller in this Agreement, (iii) any actions or
omissions of Seller or any employee or agent of Seller (including, without
limitation, any Dealer) occurring prior to the Closing Date with respect to any
of the
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Receivables or Financed Vehicles or (iv) any failure of a Receivable to be
originated in compliance with all requirements of law. These indemnity
obligations shall be in addition to any obligation that the Seller may
otherwise have.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Seller. The obligations of the Seller
under this Agreement shall not be affected by reason of any invalidity,
illegality or irregularity of any Receivable.
SECTION 6.02. Repurchase Events. The Seller hereby covenants and agrees
with the Purchaser for the benefit of the Purchaser that the occurrence of a
breach of any of the Seller's representations and warranties contained in
Section 3.02(b) in any material respect shall constitute an event obligating
the Seller to repurchase the Receivables to which the breach is applicable
("Repurchase Events"), at the unpaid principal balance of the repurchased
receivable plus accrued interest at the APR to the date of repurchase, from the
Purchaser unless any such breach shall have been cured by the last day of the
calendar month following the discovery or notice thereof by or to the Seller.
The repurchase amount shall be paid by Seller within five business days after
the end of any such calendar month. Subject to Section 5.04, the repurchase
obligation of the Seller shall constitute the sole remedy available to the
Purchaser 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. Assignment. The Purchaser shall not sell, transfer or
assign any of its obligations under this Agreement to any other Person. Seller
acknowledges that Purchaser may, in its sole discretion, sell, transfer and
assign to a third party all or any portion of the assets sold, transferred and
assigned to the Purchaser hereunder and, in connection therewith may also
assign all or any portion of the Purchaser's rights against the Seller under
this Agreement. Seller also acknowledges that any sale, transfer or assignment
described in this Section may be made without the consent or approval of Seller
and without limiting the obligations of Seller hereunder (including, without
limitation, the covenant of Seller under Section 6.02 hereof) to the Purchaser.
The Seller waives, to the extent permitted under applicable law, all claims,
causes of action and remedies, whether legal or equitable (including, without
limitation, any right of setoff), against the Purchaser and any party to whom
Purchaser sells, transfers or assigns its rights hereunder relating to such
action by the Purchaser. In particular, without limiting the generality of the
foregoing, (i) the representations and warranties of the Seller set forth in
Section 3.02(b) speak solely as of the date of execution and delivery of this
Agreement and as of the Closing Date, but shall survive the subsequent sale,
transfer or assignment of the assets transferred to Purchaser hereunder, and
any party to whom such assets are subsequently transferred (a "Subsequent
Transferee") shall be entitled to rely thereon; and (ii) following notice to
the Seller (in accordance with Section 6.07 hereof), of a sale, transfer or
assignment to a Subsequent Transferee, the Seller will be obligated to make all
deliveries of documents, certificates and notices which Seller is required to
make to the Purchaser by the terms of this Agreement to the Subsequent
Transferee.
Any Subsequent Transferee will, following the sale, transfer or assignment
of assets to it, have the same rights to sell, transfer or assign the assets so
transferred as the Purchaser does hereunder.
SECTION 6.05. Amendment. This Agreement may only be amended by a
written amendment duly executed and delivered by the Seller and the Purchaser.
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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: Norman Smagley; (b) in the case of the Purchaser,
Greenwich Capital Financial Products, Inc., 600 Steamboat Road, Greenwich,
Connecticut 06830, Attention: Bruce Katz with a copy to the attention of the
General Counsel;
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 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 shall survive the closing under Section
2.02 and the transfers and assignments referred to in Section 6.04.
SECTION 6.10. 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 6.11. 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 6.12. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date and year
first above written.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By:_____________________________________
Name:
Title:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:_____________________________________
Name:
Title:
<PAGE> 18
BILL OF SALE AND ASSIGNMENT OF RECEIVABLES
For value received, in accordance with the Receivables Purchase Agreement
dated as of June 17, 1997 (the "Receivables Purchase Agreement"), between the
undersigned and Greenwich Capital Financial Products, Inc. (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 thereon on or
after June 1, 1997; (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, without limitation, any vendor's
single interest or other collateral protection insurance policy; (iv) all
rights of the Seller against Dealers with respect to the Receivables under the
Dealer Agreements and Dealer assignments executed in connection with the
Receivables and the Dealer Agreements; (v) any property that shall have secured
a Receivable and that shall have been acquired by or on behalf of the Seller;
(vi) all documents and other items contained in the Receivable Files; and (vii)
the proceeds of any and all of the foregoing. The foregoing sale does not
constitute and is not intended to result in any assumption by the Purchaser of
any obligation of the undersigned to the Obligors, insurers or any other person
in connection with the Receivables, the Receivable Files, any insurance
policies or any agreement or instrument relating to any of them.
This Bill of Sale and Assignments of Receivables 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 Bill of Sale and
Assignment of Receivables to be duly executed as of June 17, 1997.
FIRST MERCHANTS ACCEPTANCE CORPORATION,
By:_____________________________________
Name:
Title:
<PAGE> 19
EXHIBIT B
Opinions of Counsel
A. The Seller shall have furnished to the Purchaser the opinion of
Sonnenschein Nath & Rosenthal, counsel for the Seller, dated the Closing Date
and satisfactory in form and substance to the Purchaser, substantially to the
effect that:
(1) 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 presently owned and conducted, and is duly qualified to
do business as a foreign corporation and is in good standing under the
laws of the State of Illinois;
(2) the Receivables Purchase Agreement and each other Basic Document
to which the Seller is a party 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);
(3) 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 or in the Receivables Purchase
Agreement, except such other approvals (which shall be specified in such
opinion) as have been obtained and such filings as have been made or are
in the process of being made;
(4) none of the sale of the Receivables by the Seller to the
Purchaser pursuant to the Receivables Purchase Agreement, the
consummation of any other of the transactions therein contemplated or the
fulfillment of the terms thereof shall conflict with, result in a breach
or violation of, or constitute a default under, any law binding on the
Seller or the charter, resolutions 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;
(5) 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 the Receivables Purchase Agreement, (2) seeking to
prevent the consummation of any of the transactions contemplated by the
Receivables Purchase Agreement 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,
the Receivables Purchase Agreement;
(6) the provisions of the Receivables Purchase Agreement are
effective to transfer to the Purchaser all right, title and interest of
the Seller in and to the Receivables and other assets and property
described in clauses (a) through (g) of Section 2.01 of the Receivables
Purchase Agreement ("Other Transferred Property"), and upon filing of the
UCC-3 partial release statements with respect to the interests of the
Sellers' secured lenders in the Receivables (which shall be specified in
such opinion), the Receivables shall be owned by the Purchaser free and
clear of any Lien;
(7) the provisions of the Receivables Purchase Agreement are
effective to create, in favor of the Purchaser, a valid security interest
in the Receivables and the Other Transferred
A-2
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Property that is subject to Article 9 of the New York Uniform Commercial
Code (the "UCC Collateral");
(8) the UCC-1 financing statements naming the Seller as seller and
the Purchaser as purchaser are in appropriate form for filing with the
Secretary of State of the State of Illinois and the County Clerk of Lake
County, Illinois; the interest of the Purchaser 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 Transferred
Property under Article 9 of the Illinois Uniform Commercial Code, the
Other Transferred Property, shall be perfected upon the filing of such
financing statements in such filing offices; and upon the filing of the
UCC-3 partial release statements with respect to the interests of the
Sellers' secured lenders in such filing offices, no other interest of any
other purchaser from or creditor of the Seller is equal or prior to the
interest of the Trustee in the Receivables and such other Trust Property;
(9) the Contracts included in the Receivables are "chattel paper"
under Article 9 of the Illinois Uniform Commercial Code; and
(10) 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.
B. The Seller shall have furnished to the Purchaser the opinion of Richard
P. Vogelman, Esquire, General Counsel of the Seller, dated the Closing Date and
satisfactory in form and substance to the Purchaser, to the effect that:
(1) the Seller and all of its subsidiaries are duly qualified to do
business as foreign corporations and are in good standing under the laws
of each jurisdiction wherein each of them owns or leases material
properties or conducts material business and which requires such
qualification;
(2) the Seller has no subsidiaries in any form, whether wholly owned
or other than wholly owned, direct or indirect, other than First
Merchants Auto Receivables Corporation and First Merchants Auto
Receivables Corporation II, both Delaware corporations and wholly owned
subsidiaries of the Seller;
(3) 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; and
(4) none of the execution and delivery of the Receivables Purchase
Agreement or the consummation of any of the transactions therein
contemplated or the fulfillment of the terms thereof shall conflict with,
result in a breach or violation of, or constitute a default under, any
law or the charter, resolutions or bylaws of the Seller or the terms of
any indenture or other agreement or instrument known to such counsel and
to which 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 the
Seller of any court, regulatory body, administrative agency, governmental
body, or arbitrator having jurisdiction over the Seller.
A-3
<PAGE> 21
Exhibit C
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, pursuant to section 4.01(e)(6) of a certain
Receivables Purchase Agreement dated June 17, 1997, between FIRST MERCHANTS
ACCEPTANCE CORPORATION, a Delaware corporation herein termed the "Seller", and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation herein
termed the "Attorney", the undersigned Seller does hereby constitute and
appoint the Attorney, its successors and assigns, as the true and lawful
attorney-in-fact of the Seller and with full power by an instrument in writing
to appoint a substitute or substitutes, to demand, reduce to possession,
collect, receive, receipt for, endorse, compromise, settle or assign without
recourse any and all indebtedness, notes, commercial paper, promises to pay,
retail installment sale contracts, chattel paper, instruments, choses in action
and other obligations described that certain Bill of Sale and Assignment of
Receivables dated June 17, 1997, from the Seller to the Attorney, herein termed
the "Receivables", together with all monies due or to become due under said
Receivables, and any and all claims, choses in action, and rights and causes of
action relating thereto, including, without limitation, any and all real estate
and personal property, security instruments and insurance policies held as
security for said Receivables, and all other property of every kind identified
in said Bill of Sale; to cancel or release the Receivables and release any
security, in whole or in part and in connection therewith to execute,
acknowledge or handle proper discharges, releases, satisfactions, certificates
of title, other lien certificates or other instruments in writing which may
become necessary in order to carry the foregoing powers into effect, the Seller
hereby ratifying and confirming all acts and things lawfully and reasonably
done by the Attorney or its substitute or substitutes in pursuance of the
authority herein granted.
IN WITNESS WHEREOF, the Seller has executed this instrument 16th day of
June, 1997.
Attest: FIRST MERCHANTS ACCEPTANCE CORPORATION
___________________________ By:______________________________
Its:_______________ Secretary Its:_____________________________ President
A-4
<PAGE> 22
SCHEDULE I
Schedule of Receivables
I-1
<PAGE> 23
SCHEDULE II
Location of Receivable Files
II-1
<PAGE> 24
SCHEDULE III
Receivable File Schedule
1. All documents obtained or created in connection with the credit
investigation.
2. All evidence of borrower verification of the Receivable.
3. All Obligor records including without limitation (i) file copy of
Receivable; (ii) copy Dealer assignment (if applicable); (iii) warranty
copy; (iv) credit life insurance policy; (v) proof of auto insurance; (vi)
bill of sale; (vii) buyer's guide (as is form); (viii) odometer statement;
(ix) title application; (x) contract verification sheet; (xi)
participation worksheet; (xii) checklist; (xiii) underwriting worksheet;
(xiv) approval; (xv) purchase trans printout; (xvi) original application;
(xvii) credit investigation; (xviii) credit bureau reports; (xix) check
stubs; and (xx) copies of drivers license reference sheets.
4. Original document envelope together with all documents maintained
therein.
5. All insurance verification forms and documents relating to insurance
follow-ups and all mail received from insurance.
6. Any and all other documents that the Servicer shall keep on file in
accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
II-2
<PAGE> 1
EXHIBIT 2.2
EXECUTION COPY
- --------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
between
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller,
and
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
as Purchaser
Dated as of June 1, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
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 8
SECTION 4.01. Conditions to Obligation of the Purchaser 8
SECTION 4.02. Conditions to Obligation of the Seller 8
ARTICLE V Covenants of the Seller 9
SECTION 5.01. Protection of Right, Title and Interest 9
SECTION 5.02. Other Liens or Interests 9
SECTION 5.03. Costs and Expenses 9
SECTION 5.04. Indemnification 9
ARTICLE VI Miscellaneous Provisions 10
SECTION 6.01. Obligations of Seller 10
SECTION 6.02. Repurchase Events 10
SECTION 6.03. Purchaser Assignment of Repurchased Receivables 10
SECTION 6.04. Transfer to the Issuer 10
SECTION 6.05. Amendment 10
SECTION 6.06. Waivers 11
SECTION 6.07. Notices 11
SECTION 6.08. Costs and Expenses 11
SECTION 6.09. Representations of the Seller and the Purchaser 11
SECTION 6.10. Confidential Information 11
SECTION 6.11. Headings and Cross-References 11
SECTION 6.12. Governing Law 11
SECTION 6.13. Counterparts 11
EXHIBIT A Form of Assignment A-1
SCHEDULE I Schedule of Receivables I-1
SCHEDULE II Location of Receivable Files and Legal Files II-1
</TABLE>
i
<PAGE> 3
RECEIVABLES PURCHASE AGREEMENT dated as of June 1, 1997, 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 1997-2 (the "Issuer") pursuant to a Sale and
Servicing Agreement dated as of June 1, 1997 (the "Sale and Servicing
Agreement"), by and among First Merchants Auto Trust 1997-2, as Issuer, First
Merchants Auto Receivables Corporation II, as Seller, First Merchants
Acceptance Corporation, as Originator and Sub-Servicer, LSI Financial Group, as
Servicer, and Harris Trust and Savings Bank, as Indenture Trustee, Backup
Servicer and Custodian.
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
Certain DefinitionsARTICLE I Certain Definitions
Terms not defined in this Agreement shall have the meanings assigned
thereto in the Sale and Servicing Agreement. As used in this Agreement, the
following terms shall, unless the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Agreement" shall mean this Receivables Purchase Agreement, as the same
may be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in the
form attached to this Agreement as Exhibit A.
"Purchaser" shall mean First Merchants Auto Receivables Corporation II, a
Delaware corporation, its successors and assigns.
"Receivable" shall mean any Contract listed on the Schedule of Receivables
(which Schedule may be in the form of microfiche hereto).
"Repurchase Event" shall have the meaning specified in Section 6.02.
"Sale and Servicing Agreement" shall have the meaning set forth in the
recitals
"Schedule of Receivables" shall mean the list of Receivables annexed
hereto as Schedule I (which Schedule may be in the form of microfiche).
<PAGE> 4
"Seller" shall mean First Merchants Acceptance Corporation, a Delaware
corporation, its successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. In consideration of the
Purchaser's delivery to or upon the order of the Seller on the Closing Date of
$63,158,977.25, 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 received thereon on or after June 1,
1997 (including, without limitation, moneys received thereon that are deposited
from time to time in the Initial Lockbox Account, the Local Collection Account
and the Lockbox Account);
(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, Recoveries and any other proceeds with
respect to the Receivables from claims on any physical damage, credit life or
disability insurance policies covering Financed Vehicles or Obligors, including
any vendor's single interest or other collateral protection insurance policy;
(d) all rights of the Seller against Dealers, Magna and any intervening
assignors with respect to the Receivables under the Dealer Agreements and
Dealer assignments;
(e) any property that shall have secured a Receivable and that shall have
been acquired by or on behalf of the Seller;
(f) all documents and other items contained in the Receivable Files and
the Legal Files; and
(g) the proceeds of any and all of the foregoing.
The Seller and the Purchaser intend that the transfer of assets by the Seller
to the Purchaser pursuant to this Agreement be a sale of the ownership interest
in such assets to the Purchaser, rather than the mere granting of a security
interest to secure a borrowing. In the event, however, that such transfer is
deemed not to be a sale but to be of a mere security interest to secure a
borrowing, the Seller shall be deemed to have hereby granted to the Purchaser a
perfected first priority security interest in all such assets, and this
Agreement shall constitute a security agreement under applicable law. Pursuant
to the Sale and Servicing Agreement and Section 6.04 hereof, the Purchaser may
sell, transfer and reassign to the Issuer (i) all or any portion of the assets
assigned to the Purchaser hereunder, (ii) all or any portion of the Purchaser's
rights against the Seller under this Agreement and (iii) all proceeds thereof.
Such reassignment may be made by the Purchaser with or without a reassignment
by the Purchaser of its rights under this Agreement, and without further notice
to or acknowledgement from the Seller. The Seller waives, to the extent
permitted under applicable law, all claims, causes of action and remedies,
whether legal or equitable (including any right of setoff), against the
Purchaser or any assignee of the Purchaser relating to such action by the
Purchaser in connection with the transactions contemplated by the Sale and
Servicing Agreement.
SECTION 2.02. The Closing. The sale and purchase of the Receivables
shall take place at a closing at the offices of Brown & Wood LLP, One World
Trade Center, New York, New York 10048
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<PAGE> 5
on the Closing Date, simultaneously with the closing under (a) the Sale and
Servicing Agreement and (b) the Indenture.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants as follows 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 as follows 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.
3
<PAGE> 6
(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) 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.
4
<PAGE> 7
(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 and on which the Note 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 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, (and such Dealer had all
necessary licenses and permits to originate Receivables in the state where
such Dealer is located) was fully and properly executed by the parties
thereto, was purchased by the Seller from such Dealer (or in the case of
the Magna Receivables, Magna, or, in the case of the Affiliate Receivables,
such affiliate) 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. 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.
5
<PAGE> 8
(7) Marking Records. By the Closing Date, the Seller will (and will
have caused the Servicer and the Custodian to each) mark 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; Valid Sale. 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 GCFP, which
Receivables have been resold to Seller immediately prior to the sale
hereunder) 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 dated as of June 19, 1997 under the Fourth Amended and Restated
Loan and Security Agreement dated as of February 28, 1996, (the "Bank
Consent") 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. No Dealer has a participation in, or other right to receive,
proceeds of any Receivable.
(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
(or, in the case of the Magna Receivables, Magna or, in the case of the
Affiliate Receivables, such affiliate) 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. The original certificate of title
for each Financed Vehicle
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<PAGE> 9
shows, or if a new or replacement certificate of title is being applied for
with respect to such Financed Vehicle the certificate of title will be
received within 180 days of the Closing Date, and will show, the Seller
named as the original secured party under each Receivable as the holder of
a first priority security interest in such Financed Vehicle. With respect
to each Receivable for which the certificate of title has not yet been
returned from the registrar of titles, the Seller has received written
evidence from the related Dealer that such certificate of title showing the
Seller as first lienholder has been applied for. The Seller's security
interest has been validly assigned by the Seller to the Purchaser and by
the Purchaser to the Indenture Trustee pursuant to the Indenture, as
applicable. Immediately after the sale, transfer and assignment thereof to
the Trust, each Receivable will be secured by an enforceable and perfected
first priority security interest in the Financed Vehicle in favor of the
Indenture Trustee as secured party, which security interest is prior to all
other liens upon and security interest in such Financed Vehicle which now
exist or may hereafter arise or be created (except, as to priority, for any
lien for taxes, labor or materials affecting a Financed Vehicle). As of
the Cutoff Date there were no Liens other than those identified in the Bank
Consent, Liens of GCFP released on the Closing Date, and claims for taxes,
work, labor or materials affecting a Financed Vehicle which are or may be
Liens prior or equal to the lien of the related Receivable.
(16) All Filings Made. All filings (including UCC filings) or action
required to be made or taken in any jurisdiction to give the Purchaser a
first perfected ownership interest in the Receivables have been made or
taken.
(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 30 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 May 13, 2002.
(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 (or extensions granted other than in accordance with the
Seller's extension policy) by the Servicer, the Seller, any Dealer or
anyone acting on behalf of any of them in order to cause any Receivable to
qualify under clause (B) above.
(22) Receivables Files and Legal Files Complete. There exists a
Receivable File and a Legal File pertaining to each Receivable and such
Receivable File contains the items specified in Section 3.04 of the Sale
and Servicing Agreement. All blanks on any form have been properly filled
in and each form has otherwise been correctly prepared. The complete
Receivable File for each Receivable currently is in the possession of the
Servicer and the complete Legal File is currently in the possession of the
Custodian.
(23) No Impairment. The Seller has not done anything to convey any
right to any Person that would result in such Person having a right to
payments due under the Receivable or
7
<PAGE> 10
otherwise to impair the rights of the Trust, the Indenture Trustee,
the Noteholders, the Certificateholders and the Note Insurer in any
Receivable or the proceeds thereof.
(24) Receivable Not Assumable. No Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Purchaser. The obligation
of the Purchaser to purchase the Receivables is subject to the satisfaction of
the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing
Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the Receivables
have been sold to the Purchaser pursuant to this Agreement and deliver to the
Purchaser the Schedule of Receivables, certified by the Seller's President, a
Vice President or the Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Seller on the Closing Date.
(1) The Assignment. On the Closing Date, the Seller will execute and
deliver an Assignment with respect to the Receivables, substantially in the
form of Exhibit A hereto.
(2) Evidence of UCC Filing. On or prior to the Closing Date, the
Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser, as
purchaser or secured party, describing the Receivables and the other assets
assigned to the Purchaser pursuant to Section 2.01 hereof, meeting the
requirements of the laws of each such jurisdiction and in such manner as is
necessary to perfect the sale, transfer, assignment and conveyance of the
Receivables and such other assets to the Purchaser. The Seller shall
deliver to the Purchaser a file-stamped copy or other evidence satisfactory
to the Purchaser of such filing on or prior to the Closing Date.
(3) Other Documents. Such other documents as the Purchaser may
reasonably request.
(d) Other Transactions. The transactions contemplated by the Sale and
Servicing Agreement, the Indenture and the Trust Agreement to be consummated on
the Closing Date shall be consummated on such date.
SECTION 4.02. Conditions to Obligation of the Seller. The obligation of
the Seller to sell the Receivables to the Purchaser is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing
Date.
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<PAGE> 11
(b) Receivables Purchase Price. On the Closing Date, the Purchaser shall
have delivered to the Seller the purchase price specified in Section 2.01.
ARTICLE V
Covenants of the Seller
The Seller agrees with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings. The
Seller shall cause all financing statements and continuation statements and
any other necessary documents covering the right, title and interest of the
Seller and the Purchaser, respectively, in and to the Receivables and the other
property included in the Owner Trust Estate to be promptly filed and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Purchaser hereunder in and to the Receivables and the other
property included in the Owner Trust Estate. The Seller shall deliver to the
Purchaser file stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available following
such recordation, registration or filing. The Purchaser shall cooperate fully
with the Seller in connection with the obligations set forth above and will
execute any and all documents reasonably required to fulfill the intent of this
paragraph.
(b) Name Change. If the Seller makes any change in its name, identity or
corporate structure that would make any financing statement or continuation
statement filed in accordance with paragraph (a) above seriously misleading
within the applicable provisions of the UCC or any title statute, the Seller
shall give the Purchaser, the Indenture Trustee, the Owner Trustee and the Note
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. IndemnificationSECTION 5.04. Indemnification. The Seller
shall indemnify the Purchaser, the Issuer and the Note 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.
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<PAGE> 12
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Seller. The obligations of the Seller under
this Agreement shall not be affected by reason of any invalidity, illegality or
irregularity of any Receivable.
SECTION 6.02. Repurchase Events. The Seller hereby covenants and agrees
with the Purchaser for the benefit of the Purchaser, the Indenture Trustee, the
Owner Trustee, the Certificateholders, the Noteholders and the Note 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 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 repurchase obligation of the Seller and
the indemnification obligations described in Section 5.04 shall constitute the
sole remedies 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
with respect thereto to the Issuer and the Issuer will pledge the Receivables
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 Note 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 Note
Insurer is the Controlling Party under the Sale and Servicing Agreement, the
prior written consent of the Note 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 Note Insurer is the Controlling Party under the Sale and
Servicing Agreement, the prior written consent of the Note 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.
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<PAGE> 13
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: Norman Smagley; (b) in the case of the
Purchaser, First Merchants Auto Receivables Corporation II, 570 Lake Cook Road,
Suite 126B, Deerfield, Illinois 60015, Attention: Norman Smagley; (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
Note 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.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date and year
first above written.
FIRST MERCHANTS ACCEPTANCE CORPORATION
By: _________________________________
Name:
Title:
FIRST MERCHANTS AUTO
RECEIVABLES CORPORATION II
By: _________________________________
Name:
Title:
<PAGE> 15
EXHIBIT A
Form of Assignment
ASSIGNMENT
For value received, in accordance with the Receivables Purchase Agreement
dated as of June 1, 1997 (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 thereon
on or after June 1, 1997; (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, Recoveries 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)
all rights of the Seller against Dealers, Magna and any intervening assignor
with respect to the Receivables under the Dealer Agreements and Dealer
assignments; (v) any property that shall have secured a Receivable and that
shall have been acquired by or on behalf of the Seller; (vi) all documents and
other items contained in the Receivable Files and the Legal Files; and (vii)
the proceeds of any and all of the foregoing. The foregoing sale does not
constitute and is not intended to result in any assumption by the Purchaser of
any obligation of the undersigned to the Obligors, insurers or any other person
in connection with the Receivables, the Receivable Files, any insurance
policies or any agreement or instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Receivables Purchase Agreement and is to be governed by the Receivables
Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to them in the Receivables Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed as of June 1, 1997.
FIRST MERCHANTS ACCEPTANCE CORPORATION,
By: _________________________________
Name:
Title:
A-1
<PAGE> 16
SCHEDULE I
Schedule of Receivables
I-1
<PAGE> 17
SCHEDULE II
Location of Receivable Files
LSI Financial Group
17500 Chenal Parkway
Arksys Plaza, Suite 200
Little Rock, AR 72211
Location of Legal Files
Harris Trust and Savings Bank
111 West Monroe Street, Level P-2
Chicago, IL 60603
II-1
<PAGE> 1
EXHIBIT 4.1
================================================================================
INDENTURE
between
FIRST MERCHANTS AUTO TRUST 1997-2,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of June 1, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions 2
SECTION 1.02. Rules of Construction 7
ARTICLE II
The Notes
SECTION 2.01. Form 8
SECTION 2.02. Execution, Authentication and Delivery 8
SECTION 2.03. Temporary Notes 9
SECTION 2.04. Registration; Registration of Transfer and Exchange 9
SECTION 2.05. Certain Transfer Restrictions 10
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes 12
SECTION 2.07. Persons Deemed Owner 13
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest 13
SECTION 2.09. Cancellation 14
SECTION 2.10. Book-Entry Notes 14
SECTION 2.11. Notices to Clearing Agency 15
SECTION 2.12. Definitive Notes 15
SECTION 2.13. Tax Treatment 16
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest 16
SECTION 3.02. Maintenance of Office or Agency 16
SECTION 3.03. Money for Payments To Be Held in Trust 16
SECTION 3.04. Existence 18
SECTION 3.05. Protection of Trust Estate 18
SECTION 3.06. Opinions as to Trust Estate 18
SECTION 3.07. Performance of Obligations; Servicing of Receivables 19
SECTION 3.08. Negative Covenants 21
SECTION 3.09. Annual Statement as to Compliance 21
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms 22
SECTION 3.11. Successor or Transferee 23
SECTION 3.12. No Other Business 23
SECTION 3.13. No Borrowing 23
SECTION 3.14. Servicer's Obligations 23
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities 23
SECTION 3.16. Capital Expenditures 24
SECTION 3.17. Removal of Administrator 24
SECTION 3.18. Restricted Payments 24
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<PAGE> 3
SECTION 3.19. Notice of Events of Default 24
SECTION 3.20. Further Instruments and Acts 24
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture 24
SECTION 4.02. Application of Trust Money 25
SECTION 4.03. Repayment of Moneys Held by Paying Agent 26
SECTION 4.04. Release of Collateral 26
ARTICLE V
Remedies
SECTION 5.01. Events of Default 26
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment 27
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee; 29
SECTION 5.04. Remedies; Priorities 31
SECTION 5.05. Optional Preservation of the Receivables 32
SECTION 5.06. Limitation of Suits 32
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal
and Interest 33
SECTION 5.08. Restoration of Rights and Remedies 33
SECTION 5.09. Rights and Remedies Cumulative 33
SECTION 5.10. Delay or Omission Not a Waiver 34
SECTION 5.11. Control by Noteholders 34
SECTION 5.12. Waiver of Past Defaults 34
SECTION 5.13. Undertaking for Costs 35
SECTION 5.14. Waiver of Stay or Extension Laws 35
SECTION 5.15. Action on Notes 35
SECTION 5.16. Performance and Enforcement of Certain Obligations 35
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee 36
SECTION 6.02. Rights of Indenture Trustee 37
SECTION 6.03. Individual Rights of Indenture Trustee 38
SECTION 6.04. Indenture Trustee's Disclaimer 38
SECTION 6.05. Notice of Defaults 38
SECTION 6.06. Reports by Indenture Trustee to Holders 38
SECTION 6.07. Compensation and Indemnity 38
SECTION 6.08. Replacement of Indenture Trustee 39
SECTION 6.09. Successor Indenture Trustee by Merger 40
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee 40
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<PAGE> 4
SECTION 6.11. Eligibility; Disqualification 41
SECTION 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses 42
SECTION 6.13. Note Insurer Default 42
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders 42
SECTION 7.02. Preservation of Information; Communications to Noteholders 42
SECTION 7.03. Fiscal Years of Issuer 43
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money 43
SECTION 8.02. Trust Accounts 43
SECTION 8.03. General Provisions Regarding Accounts 44
SECTION 8.04. Release of Trust Estate 44
SECTION 8.05. Opinion of Counsel 45
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders 45
SECTION 9.02. Supplemental Indentures with Consent of Noteholders 46
SECTION 9.03. Execution of Supplemental Indentures 47
SECTION 9.04. Effect of Supplemental Indenture 48
SECTION 9.05. Reference in Notes to Supplemental Indentures 48
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption 48
SECTION 10.02. Form of Redemption Notice 48
SECTION 10.03. Notes Payable on Redemption Date 49
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. 49
SECTION 11.02. Form of Documents Delivered to Indenture Trustee 51
SECTION 11.03. Acts of Noteholders 51
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<PAGE> 5
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer, Note Insurer
and Rating Agencies 52
SECTION 11.05. Notices to Noteholders; Waiver 53
SECTION 11.06. Alternate Payment and Notice Provisions 53
SECTION 11.07. Effect of Headings and Table of Contents 53
SECTION 11.08. Successors and Assigns 53
SECTION 11.09. Separability 54
SECTION 11.10. Benefits of Indenture 54
SECTION 11.11. Legal Holidays 54
SECTION 11.12. GOVERNING LAW 54
SECTION 11.13. Counterparts 54
SECTION 11.14. Recording of Indenture 54
SECTION 11.15. Trust Obligation 54
SECTION 11.16. No Petition 55
SECTION 11.17. Inspection 55
SCHEDULE A Schedule of Receivables
EXHIBIT A Form of Note A-1
EXHIBIT B Form of the Note Depository Agreement B-1
iv
<PAGE> 6
INDENTURE dated as of June 1, 1997, between FIRST MERCHANTS AUTO TRUST
1997-2, 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 6.85% Asset Backed
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 June 1, 1997 (including, without limitation, such
moneys received thereon that are deposited from time to time in the Initial
Lockbox Account, the Local Collection Account and the Lockbox Account); (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, Recoveries 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 and the Legal Files; (f) all funds on deposit from time to time in the
Trust Accounts (other than the Reserve Account) 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, 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> 7
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
June 1, 1997, among the Administrator, the Issuer and the Indenture Trustee.
"Administrator" means First Merchants, or any successor Administrator
under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Book-Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in New York, New York, Chicago,
Illinois or the city in which the Corporate Trust Office is located are
authorized or obligated by law, regulation or executive order to remain closed.
"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 June 19, 1997.
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"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.
"Commission" means the Securities and Exchange Commission.
"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 Note 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 Note Insurer and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.10.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"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 Note Insurer has made a payment
under the Policy, the Note Insurer to the extent provided in Section 2.08(c) of
this Indenture, Section 5.10 of the Sale and Servicing Agreement and the
proviso to the definition of "Outstanding".
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"Indenture Trustee" means Harris Trust and Savings Bank, an Illinois
banking corporation, not in its individual capacity, but 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.
"Issuer" means First Merchants Auto Trust 1997-2 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.
"Note Depository Agreement" means the agreement dated June 18, 1997, among
the Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency, relating to the Notes, substantially
in the form of Exhibit B.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing
Agency).
"Note Rate" means 6.85% per annum (computed on the basis of a 360-day year
consisting of twelve 30-day months).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Notes" means the 6.85% Asset Backed Notes, substantially in the form of
Exhibit A.
"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.
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"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 Note Insurer is an addressee of such Opinion of Counsel) to
the Note Insurer, and which opinion or opinions shall be addressed to the
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 Note Insurer is an addressee of such Opinion of Counsel) to the
Note Insurer.
"Outstanding" means, as of any 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
Note Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement, as evidenced by a written notice from the Note Insurer
delivered to the Indenture Trustee, and the Note Insurer shall be deemed to be
the Holder of such Notes to the extent of any payments made thereon by the Note
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, as of any date of determination the aggregate
principal amount of all Notes Outstanding as of such date of determination.
"Owner Trustee" means Chase Manhattan 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.
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"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" 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.
"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 Note Insurer is the Controlling Party) the Note 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
Note Insurer.
"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, the Distribution Date specified by the Servicer or the Issuer
pursuant to Section 10.01.
"Redemption Price" means an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the Note Rate
for each Note being so redeemed to but excluding the Redemption Date.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above
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designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of June 1, 1997, among the Issuer, the Seller, the Servicer, the
Sub-servicer and the Indenture Trustee, as Backup Servicer, Custodian and
Indenture Trustee.
"Schedule of Receivables" means the list of Receivables set forth in
Schedule A (which Schedule may be in the form of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means FMARC II, in its capacity as seller under the Sale and
Servicing Agreement, and its successors in interest.
"Servicer" means LSI, 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.
"Sub-servicer" means First Merchants in its capacity as sub-servicer under
the Sale and Servicing Agreement.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"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.
"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;
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(iv) "including" means including without limitation;
(v) definitions are applicable to the singular and plural forms of such
terms and to the masculine, feminine and neuter genders of such terms; 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 Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, 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 are part of the terms of this Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Notes for original issue in an aggregate principal amount of $62,950,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.06.
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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.
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
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transferee or transferees, one or more new Notes in any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes 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. Certain Transfer Restrictions. The Notes have not been and
will not be registered under the Securities Act and will not be listed on any
exchange. No registration of a transfer of a Note shall be made unless (i) such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or (ii) (A) such
transfer is exempt from the registration requirements under the Securities Act
and such state securities laws and (B) the Registrar either (x) is notified by
such transferee that such Note shall be registered in the name of the Clearing
Agency or its nominee and shall be held by such transferee in book-entry form
through the Clearing Agency or (y) receives written certification from such
Holder and such Holder's prospective transferee substantially in the form of
Exhibit A to the Offering Memorandum setting forth the basis of the exemption
from such registration requirements. If an election is made to hold a Note in
book-entry form, the Note shall be registered in the name of a nominee
designated by the Clearing Agency (and may be aggregated as to denominations
with other Notes held by the Clearing Agency). With respect to Notes held in
book-entry form:
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(i) the Note Registrar and the Indenture Trustee will be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of the
Notes, and shall have no obligation to the Note Owners;
(ii) the rights of Note Owners will be exercised only through the
Clearing Agency and will be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Depository Agreement;
(iii) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency will be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee; and
(iv) without the consent of the Issuer and the Indenture Trustee, no
such Note may be transferred by the Clearing Agency except to a successor
Clearing Agency that agrees to hold such Note for the account of the
Owners or except upon the election of the Owner thereof or a subsequent
transferee to hold such Note in physical form.
Neither the Indenture Trustee nor the Registrar shall have any responsibility
to monitor or restrict the transfer of beneficial ownership in any Note an
interest in which is transferable through the facilities of the Clearing
Agency.
Each Note shall bear legends in substantially the following form:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES 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 NOTE THE HOLDER OF THIS NOTE (A) IS DEEMED TO REPRESENT TO
THE ISSUER AND THE INDENTURE TRUSTEE (i) THAT IT IS AN INSTITUTIONAL INVESTOR
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS
(WHICH OTHERS ALSO ARE INSTITUTIONAL 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
SECURITIES ACT AND IS ACQUIRING SUCH NOTE 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 NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE ISSUER, (ii) SUCH
SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN INSTITUTIONAL
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ACCREDITED INVESTOR THAT EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM
SPECIFIED IN THE INDENTURE, TO THE EFFECT THAT IT IS AN INSTITUTIONAL 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 INSTITUTIONAL ACCREDITED
INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS FIDUCIARY CAPACITY), (iii)
SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO A PERSON WHOM THE
ISSUER 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 SECURITIES ACT, IN WHICH CASE (A) THE INDENTURE TRUSTEE
SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE
TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE ISSUER IN WRITING THE FACTS
SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER, AND (B) THE INDENTURE
TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE
EXPENSE OF THE ISSUER OR THE INDENTURE TRUSTEE) SATISFACTORY TO THE ISSUER AND
THE INDENTURE TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL NOT VIOLATE 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.
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; 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
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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
Note Insurer and any agent of the Issuer, the Indenture Trustee or the Note
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 Note Insurer or any agent of the Issuer, the
Indenture Trustee or the Note Insurer shall be affected by notice to the
contrary.
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest. (a)
The Notes shall accrue interest at the Note Rate, as set forth in Exhibit A, and
such interest shall be payable on each Distribution Date as specified therein,
subject to Section 3.01. Any installment of interest or principal payable on a
Note that is punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the Person in whose name such
Note (or one or more Predecessor Notes) is registered on the Record Date (i) by
check mailed first-class postage prepaid to such Person's address as it appears
on the Note Register on such Record Date, except that, unless Definitive Notes
have been issued pursuant to Section 2.12, with respect to Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payment will be made by wire transfer in
immediately available funds to the account designated by such nominee;
provided, however, that the final installment of principal payable with respect
to such Note on a Distribution Date or on the Final Scheduled Distribution Date
(including the Redemption Price for any Note called for redemption pursuant to
Section 10.01) shall be payable as provided in paragraph (b) below. The funds
represented by any such checks returned undelivered shall be held in accordance
with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the form of the Notes set forth in Exhibit A.
Notwithstanding the
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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 Note Insurer is the
Controlling Party, the Note Insurer, in its sole discretion, may determine
whether or not to accelerate payments on the Notes. All principal payments on
the Notes shall be made pro rata to the Noteholders 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 Note Insurer has paid
any amount in respect of the Notes under the Policy that has not been
reimbursed to the Note Insurer, deliver such surrendered Notes to the Note
Insurer.
(d) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) at the applicable Interest Rate in any lawful manner on
the next Distribution Date.
SECTION 2.09. Cancellation. Subject to Section 2.08(c), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly cancelled by the Indenture Trustee.
Subject to Section 2.08(c), the Issuer may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly cancelled by the Indenture Trustee. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.08(c), all cancelled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, that such Issuer Order
is timely and the Notes have not been previously disposed of by the Indenture
Trustee.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Issuer. The Book-Entry Notes shall be registered initially
on the Note Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and effect;
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(ii) the Note Registrar and the Indenture Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of the
Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of and
interest on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default or a Servicer Termination Event,
Owners of the Book-Entry Notes representing beneficial interests aggregating at
least a majority of the Outstanding Amount of such Notes advise the Clearing
Agency in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of such Note Owners, then the
Clearing Agency shall notify all Note Owners and the Indenture Trustee of the
occurrence of any such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
written instructions of the Clearing Agency. None of the Issuer, the Note
Registrar or the Indenture Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
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SECTION 2.13. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness secured by the Trust Estate. The Issuer, by entering into this
Indenture, and each Noteholder, by its acceptance of a Note (and each Note Owner
by its acceptance of an interest in the applicable Book-Entry Note), agree to
treat the Notes for federal, state and local income and franchise tax purposes
as indebtedness.
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal, if any, of and the 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), on each Distribution Date the Issuer
will cause to be distributed all amounts deposited pursuant to the Sale and
Servicing Agreement into the Note Distribution Account, for the benefit of the
Notes, to the 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 Note 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. 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
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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
Note Insurer (if the Note 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 Note
Insurer to the Indenture Trustee for the payment of principal of or interest on
such Note to the extent of such unreimbursed amounts, to the Note 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
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remaining will be repaid to the Issuer or the Note 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 Note 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 1998, the
Issuer shall furnish to the Indenture Trustee and the Note 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,
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re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action, or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements
and continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture until May
31 in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables. (a)
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Controlling Party to assist it in performing its duties under this Indenture,
and any performance of such duties by a Person identified to the Indenture
Trustee and the Note 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 Note Insurer
(so long as no Note 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
Termination Event under the Sale and Servicing Agreement, the Issuer shall
promptly notify the Indenture Trustee, the Note Insurer (if the Note 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 Termination Event 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 Note Insurer is the
Controlling Party, the Note Insurer shall appoint the Backup Servicer as the
successor servicer (the "Successor Servicer"), and such
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Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Indenture Trustee and, if the Note Insurer is the
Controlling Party, the Note 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 Successor Servicer by giving written notice of such resignation to
the Note Insurer (if the Note 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 Note Insurer or the Issuer, as applicable, as
provided below. Upon delivery of any such notice to the Note Insurer or the
Issuer, the Note 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
Eligible Servicer, (ii) enter into a servicing agreement with the Note Insurer
or the Issuer having substantially the same provisions as the provisions of the
Sale and Servicing Agreement applicable to the Servicer and (iii) otherwise be
consented to in writing by FSA and the Rating Agencies. If within 30 days after
the delivery of the notice referred to above, the Note 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 Note 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 Note Insurer is the Controlling Party, the Note
Insurer. As soon as a Successor Servicer is appointed, the Issuer shall notify
the Indenture Trustee in writing and, if the Note Insurer is the Controlling
Party, the Note 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 Note Insurer (if the Note 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, the Sub-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,
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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 Note 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 Note 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 Note
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 Note Insurer (if the Note Insurer is the
Controlling Party), within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal year 1997), 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
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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
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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, if any;
(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 1997-2 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 1997-2 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 Trust Agreement, Sale and Servicing Agreement or this
Indenture, the
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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 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 Note Insurer (if the Note Insurer is at such time the
Controlling Party) and the Rating Agencies prompt written notice of each Event
of Default hereunder, and of each default on the part of the Servicer, the
Sub-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 Note Insurer (if the Note 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 Note
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,
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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 Note 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 Note 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), as the
case may be, and (b) all amounts due to the Note Insurer pursuant to
Section 5.06(b) 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
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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 Indenture Trustee shall
surrender the Policy to the Note 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 Note 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 Note
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 Note 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 Note Insurer
shall have delivered to the Issuer and the Indenture 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
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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 Note Insurer (so long
as no Note 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 Note Insurer is
the Controlling Party, the Note 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 Note Insurer is the Controlling Party, then the
Note 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
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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, and
SECOND: to the payment of amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind
until the Notes are paid in full.
(b) If an Event of Default occurs at any time when the Note Insurer is the
Controlling Party, the Note 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 Note Insurer, in its sole discretion, shall so
elect. This right of the Note 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 Note 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 Note Insurer (so long as a Note Insurer Default has not occurred and
is continuing) or the Holders of Notes representing a majority of the
Outstanding Amount of the Notes (if a Note 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
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(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.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee;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 Note Insurer (so long as no Note 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 Note
Insurer is the Controlling Party or (ii) (A) the Note 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 Note 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
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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 Note Insurer if
the Note 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 Proceedings
relative thereto, and any such Proceedings
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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 Note Insurer Default shall also have
occurred or (ii) if the Note Insurer is the Controlling Party and the Note
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 Note 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 a majority
of the Outstanding Amount of the Notes, (y) if the Note Insurer is the
Controlling Party, the Note 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 Note 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.
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(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 Notes for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal, until
the Outstanding Amount of the Notes is reduced to zero;
FOURTH: to the Note Insurer pursuant to Section 5.06(b) of the Sale
and Servicing Agreement and Section 5.10 of the Sale and Servicing
Agreement; and
FIFTH: 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;
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(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.
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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 Note 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 Note
Insurer may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Noteholders or the Note Insurer as the
case may be.
SECTION 5.11. Control by Noteholders. If the Indenture 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 Note 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
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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, the Sub-servicer 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, the Sub-servicer or the Servicer thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Seller, the Sub-servicer or the Servicer of each
of their obligations under the Sale and Servicing Agreement or the Receivables
Purchase Agreement.
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(b) If an Event of Default has occurred and is continuing at any time when
the Note 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 not less than a
majority of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Seller, the
Sub-servicer 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,
the Sub-servicer 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.
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(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 Indenture 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 shall be charged with actual knowledge of an Event of Default if a
Responsible Officer of the Indenture Trustee receives written notice of such
Event of Default from the Issuer, the Servicer, the Sub-servicer, the Backup
Servicer, the Note 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.
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(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 Note 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,
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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 Note Insurer is the
Controlling Party) the Note 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 Note Insurer
is the Controlling Party) to the Note Insurer. If the Issuer fails to appoint
such a successor Indenture Trustee and the Note Insurer is the Controlling
Party, the Note 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
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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 Note Insurer (if the Note 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 Note Insurer (if the Note 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.
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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 Note Insurer is the Controlling Party, the
Indenture Trustee shall provide copies of such reports to the Note Insurer upon
request.
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SECTION 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses. The
Indenture Trustee shall use its best efforts to maintain the effectiveness of
all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act
in connection with this Indenture and the transactions contemplated hereby until
the lien and security interest of this Indenture shall no longer be in effect
in accordance with the terms hereof.
SECTION 6.13. Note Insurer Default. In the event any right of the Note
Insurer hereunder is suspended during the continuation of an Note Insurer
Default, unless otherwise specifically provided herein or in the Sale and
Servicing Agreement, such right automatically and forthwith shall be assigned to
the Indenture Trustee, and may be exercised by the Indenture Trustee, during the
continuation of such Note Insurer Default. Upon the cessation of such Note
Insurer Default, any such rights shall revert to the Note Insurer and shall be
exercisable solely by the Note Insurer. Notwithstanding anything herein to the
contrary, the Indenture Trustee shall have no obligation to exercise such
rights.
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 Note Insurer (if the
Note Insurer is the Controlling Party) in writing on an annual basis and at such
other times as the Note 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
Note Insurer (if the Note Insurer is the Controlling Party) on request, and to
the Noteholders upon written request of three or more Noteholders or one or more
Noteholders evidencing not less than 25% of the Outstanding Amount of the Notes.
(b) Noteholders shall have the right to communicate equivalent to that
found in TIA Section 312(b) with other Noteholders with respect to their
rights under this Indenture or under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection equivalent to that found in TIA Section 312(c).
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SECTION 7.03. Fiscal Years 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; and
(ii) to the Holders of the Notes on account of principal until the
Outstanding Amount of the Notes is reduced to zero.
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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 Note 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
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receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion
of Counsel meeting the applicable requirements of Section 11.01.
The 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 Note
Insurer (if the Note 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;
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(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; or
(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 Note Insurer (if the Note 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 Note 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 Note
Insurer (if the Note 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 Note
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);
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(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 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
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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. The 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) of the Sale and Servicing Agreement, for a purchase price equal to the
Redemption Price; provided, that the Issuer has available funds sufficient to
pay the Redemption Price and all amounts owed to the Note Insurer. The Servicer
or the Issuer shall furnish the Note Insurer (if the Note Insurer is the
Controlling Party) and the Rating Agencies notice of any redemption pursuant to
this Section 10.01. If the Notes are to be redeemed pursuant to this Section
10.01, 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 Notes to be redeemed, whereupon all such Notes shall be due and
payable on the Redemption Date upon the furnishing of a notice complying with
Section 10.02 to each Holder of the Notes.
SECTION 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 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
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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.
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, 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
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(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 Note Insurer (if the Note 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 Note 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 Note
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 Note Insurer (if the Note 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 Note 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
Note 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)
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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
51
<PAGE> 57
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, Note Insurer
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 1997-2, in care of Chase Manhattan 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 Note 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 Note 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 Note Insurer refers to an Event of
Default, a claim on the Policy or with respect to which failure on the part
of the Note 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
52
<PAGE> 58
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.
53
<PAGE> 59
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 Note 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 Note 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 Note Insurer and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.15. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer, including the Seller, or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee or the Owner Trustee in its individual capacity, any holder of
a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or
54
<PAGE> 60
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
Note Insurer (if the Note 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.
* * * * *
55
<PAGE> 61
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 1997-2,
by: CHASE MANHATTAN 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:
<PAGE> 62
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said FIRST
MERCHANTS AUTO TRUST 1997-2, a Delaware business trust, and that s/he executed
the same as the act of said business trust for the purpose and consideration
therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this __th
day of June, 1997.
_______________________________________________
Notary Public in and for the State of New York.
My commission expires:
________________________________________________
<PAGE> 63
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 s/he executed the same
as the act of said corporation for the purpose and consideration therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _____ day of June, 1997.
_______________________________________________
Notary Public in and for the State of New York.
My commission expires:
________________________________________
<PAGE> 64
SCHEDULE A
[To be Provided on the Closing Date]
<PAGE> 65
EXHIBIT A
[FORM OF NOTE]
[UNLESS THIS NOTE 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 NOTE 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.]
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.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES 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 NOTE THE HOLDER OF THIS NOTE (A) IS DEEMED TO REPRESENT TO
THE ISSUER AND THE INDENTURE TRUSTEE (i) THAT IT IS AN INSTITUTIONAL INVESTOR
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS
(WHICH OTHERS ALSO ARE INSTITUTIONAL 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
SECURITIES ACT AND IS ACQUIRING SUCH NOTE 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 NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE ISSUER, (ii) SUCH
SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE
INDENTURE, TO THE EFFECT THAT IT IS AN INSTITUTIONAL 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 INSTITUTIONAL ACCREDITED INVESTORS
UNLESS THE HOLDER IS A BANK ACTING IN ITS FIDUCIARY CAPACITY), (iii) SO LONG AS
THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE
A-1
<PAGE> 66
TO A PERSON WHOM THE ISSUER 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 SECURITIES ACT, IN WHICH CASE
(A) THE INDENTURE TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND
THE PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE ISSUER IN
WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER, AND (B)
THE INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL
NOT BE AT THE EXPENSE OF THE ISSUER OR THE INDENTURE TRUSTEE) SATISFACTORY TO
THE ISSUER AND THE INDENTURE TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL NOT
VIOLATE 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.
A-2
<PAGE> 67
REGISTERED $
---------(1)
No. R- CUSIP NO.
FIRST MERCHANTS AUTO TRUST 1997-2
6.85% ASSET BACKED NOTE
FIRST MERCHANTS AUTO TRUST 1997-2, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to ______________________, or
registered assigns, the principal sum of [ ] DOLLARS, payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i)
a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF
NOTE] and the denominator of which is $[ ] by (ii) the aggregate amount,
if any, payable from the Note Distribution Account in respect of principal on
the Notes pursuant to Section 3.01 of the Indenture dated as of June 1, 1997
(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 [______ __, 2002] (the "Note Final Scheduled Distribution
Date"). 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 Cutoff Date) to and including the 14th day of the
month of such Distribution Date. Interest will be computed on the basis of a
360-day year consisting 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 Note
Insurer"), pursuant to which the Note Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Guaranteed
Noteholders' Principal Distributable Amount on each
- -------------------------
(1) Denominations of $250,000 and integral multiples of $1,000 in excess
thereof.
A-3
<PAGE> 68
Distribution Date (collectively, the "Scheduled Payment"), all as more fully set
forth in the Indenture and the Sale and Servicing Agreement.
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.
A-4
<PAGE> 69
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 1997-2,
by: CHASE MANHATTAN 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
A-5
<PAGE> 70
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 6.85% Asset Backed Notes (herein called the "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 Notes are subject to all terms of the Indenture.
The Notes are and will be secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Notes will be payable on each Distribution Date in an
amount described on the face hereof. "Distribution Date" means the 15th day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing July 15, 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the Final Scheduled Distribution Date. Notwithstanding
the foregoing, (i) if an Event of Default occurs at a time when no Note Insurer
Default has occurred under the Policy, the Note 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 Note 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 Notes shall be made pro rata to the Noteholders
entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected
to be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding
such Distribution Date by notice mailed or transmitted by facsimile prior to
such Distribution Date, and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the City of New York.
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<PAGE> 71
The Issuer shall pay interest on overdue installments of interest at the
Note Rate to the extent lawful.
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),
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<PAGE> 72
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 Note Insurer and any agent of the
Issuer, the Indenture Trustee or the Note 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 Note 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 Note 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 Note Insurer but without the consent of Holders of the Notes issued
thereunder.
This Note is 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) of the Sale and
Servicing Agreement, for a purchase price equal to the Redemption Price;
provided, that the Issuer has available funds in the Collection Account
sufficient to pay the Redemption Price and any amounts owed to the Note
Insurer.
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
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<PAGE> 73
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 Chase Manhattan 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.
A-9
<PAGE> 74
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.
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<PAGE> 75
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) [] 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
(4) [] 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) or (4) 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
______________________________________
* Signature must guaranteed by a commercial bank, trust company or member
of the New York Stock Exchange.
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<PAGE> 76
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
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<PAGE> 77
EXHIBIT B
FORM OF NOTE DEPOSITORY AGREEMENT
B-11
<PAGE> 1
EXHIBIT 10.1
================================================================================
SERVICING AGREEMENT
between
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
Purchaser,
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer,
and
HARRIS TRUST AND SAVINGS BANK,
Paying Agent and Backup Servicer
Dated as of June 17, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
Definitions
1
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 11
ARTICLE II
The Receivables
12
SECTION 2.01. Custody of Receivable Files 12
SECTION 2.02. Duties of Servicer as Custodian 13
SECTION 2.03. Instructions; Authority to Act 14
SECTION 2.04. Custodian's Indemnification 14
SECTION 2.05. Effective Period and Termination 14
ARTICLE III
Administration and Servicing of Receivables
15
SECTION 3.01. Duties of Servicer 15
SECTION 3.02. Collection and Receivable Payments; Modifications of Receivables 16
SECTION 3.03. Realization upon Receivables 16
SECTION 3.04 Physical Damage Insurance 17
SECTION 3.05. Maintenance of Security Interests in Financed Vehicles 18
SECTION 3.06. Covenants of Servicer 18
SECTION 3.07. Purchase of Receivables upon Breach 19
SECTION 3.08. Servicing Fee 20
SECTION 3.09. Servicer's Certificate 20
SECTION 3.10. Annual Statement as to Compliance; Notice of Servicer Termination Event 20
SECTION 3.11. Annual Independent Accountants' Report 21
SECTION 3.12. Access to Certain Documentation and Information Regarding Receivables 21
SECTION 3.13. Monthly Tape 21
SECTION 3.14. Retention and Termination of Servicer 22
ARTICLE IV
Distributions;
Statements to the Purchaser
23
SECTION 4.01. Lock-Box Account 23
SECTION 4.02. Accounts 23
SECTION 4.03. Application of Collections 26
SECTION 4.04. Purchase Amounts 26
SECTION 4.05. Distributions 26
SECTION 4.06. Statements to the Purchaser 26
</TABLE>
i
<PAGE> 3
<TABLE>
ARTICLE V
The Servicer
<S> <C>
27
SECTION 5.01. Representations of Servicer 27
SECTION 5.02. Indemnities of Servicer 29
SECTION 5.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer 30
SECTION 5.04. Limitation on Liability of Servicer, Backup Servicer and Others 31
SECTION 5.05. Appointment of Subservicer 32
SECTION 5.06. Servicer Not to Resign 32
ARTICLE VI
Default
33
SECTION 6.01. Servicer Termination Events 33
SECTION 6.02. Consequences of a Servicer Termination Event 34
SECTION 6.03. Appointment of Successor 34
SECTION 6.04. Waiver of Past Defaults 35
35
ARTICLE VII
Miscellaneous 35
SECTION 7.01. Amendment 35
SECTION 7.02. Protection of Title 36
SECTION 7.03. Notices 37
SECTION 7.04. Assignment by the Servicer 38
SECTION 7.05. Limitations on Rights of Others 38
SECTION 7.06. Severability 38
SECTION 7.07. Separate Counterparts 38
SECTION 7.08. Headings 38
SECTION 7.09. Governing Law 38
</TABLE>
ii
<PAGE> 4
SERVICING AGREEMENT dated as of June 17, 1997, among GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC., a Delaware corporation (the "Purchaser"), FIRST
MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation (the "Servicer") and
HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation, as Paying Agent
(in such capacity, the "Paying Agent") and as Backup Servicer (in such
capacity, the "Backup Servicer").
WHEREAS the Purchaser has purchased from First Merchants Acceptance
Corporation a portfolio of motor vehicle retail installment sale contracts
originated or purchased by First Merchants Acceptance Corporation in the
ordinary course of business;
WHEREAS the Servicer is willing to service the receivables arising in
connection with such contracts;
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:
"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 such Receivable.
"Backup Servicer" means Harris Trust and Savings Bank or its successor in
interest pursuant to Section 5.03 or such other Person as shall have been
appointed as Backup Servicer pursuant to Section 6.03(b).
<PAGE> 5
"Basic Documents" means this Agreement, the Receivables Purchase Agreement
and the Custodian Agreement and any other documents and certificates delivered
in connection therewith.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banking institutions in the City of New York and Chicago,
Illinois are authorized or obligated by law or executive order to be closed.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 4.02(b).
"Collection Account Property" means the Collection Account, all amounts
and investments held from time to time in such account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding such Distribution Date. Any amount stated as of the
last day of a Collection Period or as of the first day of a Collection Period
shall give effect to the following calculations as determined as of the close
of business on such last day: (1) all applications of collections and (2) all
distributions to be made on the related Distribution Date.
"Contract" means a motor vehicle retail installment sale contract between
a Dealer and one or more Obligors named in list of Receivables on Schedule I
hereto, together with all accounts, general intangibles, chattel paper,
documents and instruments (as those terms are defined in the Uniform Commercial
Code as enacted in the State of Illinois) and any contract rights related
thereto.
"Corporate Trust Office" means the principal office of the Paying Agent
and the Backup Servicer from 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, IL 60606, Attention: Indenture Trust
Administration or at any other time at such other address as the Paying Agent
and the Backup Servicer may designate from time to time by notice to the
Servicer.
"Cram Down Loss" means any loss resulting from an order issued by a court
of appropriate jurisdiction in an insolvency proceeding
2
<PAGE> 6
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.
"Custodian" means Harris Trust and Savings Bank, in its capacity as
custodian under the Custodian Agreement.
"Custodian Agreement" means the Custodian Agreement dated as of June 17,
1997 among the Purchaser, as purchaser, the Servicer, as servicer and as
seller, and Harris Trust and Savings Bank, as custodian, in the form attached
hereto as Exhibit D.
"Cutoff Date" means June 1, 1997.
"Dealer" means the dealer or other entity who sold a Financed Vehicle and
who originated the related Receivable and assigned it to (x) First Merchants,
(y) Magna or (z) any other Person approved by First Merchants, pursuant to a
Dealer Agreement.
"Dealer Agreement" means (a) an agreement between First Merchants and a
Dealer pursuant to which such Dealer sells Contracts to First Merchants or (b)
collectively, (i) an agreement between (x) Magna and or (y) an affiliate of
First Merchants and a Dealer pursuant to which such Dealer sells Contracts to
Magna or such affiliate of First Merchants, as the case may be, and (ii) an
agreement between (x) Magna or (y) an affiliate of First Merchants and First
Merchants pursuant to which Magna sells Contracts to First Merchants (or
otherwise assigns Contracts to First Merchants' designee).
"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 delinquent (and the related Obligor has not cured any deficiency
with respect to such Receivable during the related Collection Period), (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.
3
<PAGE> 7
"Delivery" when used with respect to Collection 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 Paying Agent or its nominee or
custodian by physical delivery to the Paying Agent or its nominee or
custodian endorsed to, or registered in the name of, the Paying Agent 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 Paying Agent 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 Paying Agent or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such
certificated security by the Paying Agent 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 Paying Agent 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 Paying Agent 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 Paying Agent 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
4
<PAGE> 8
Collection Account Property to the Paying Agent 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 Collection 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 Paying
Agent or its nominee or custodian of the purchase by the Paying Agent 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 Paying Agent or its
nominee or custodian and indicating that such custodian holds such
Collection Account Property solely as agent for the Paying Agent 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 Collection Account Property to the Paying Agent 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 Collection 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 Paying
Agent 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 Paying
Agent or its nominee or custodian.
5
<PAGE> 9
"Determination Date" means, with respect to each Distribution Date, the
earlier of (i) the eighth calendar day of the month in which such Distribution
Date occurs (or if such eighth day is not a Business Day, the next succeeding
Business Day) and (ii) the fifth 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 July 15, 1997.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution acceptable to the Purchaser 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 and acceptable to the
Purchaser.
"Eligible Institution" means (a) the corporate trust department of Harris
Trust and Savings Bank so long as it shall be Paying Agent under this 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 Purchaser and (ii) whose deposits are insured
by the FDIC.
"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
6
<PAGE> 10
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
grade 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 grade category granted thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment grade category granted thereby
(including funds for which the Paying Agent or the Custodian or any of
their Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above; and
(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).
"Eligible Servicer" means First Merchants, 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
7
<PAGE> 11
similar to the Receivables with reasonable skill and care and (iv) has a
minimum net worth of $100,000,000.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financed Vehicle" means an automobile, light-duty truck, van or minivan,
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.
"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 entry
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; (b) the commencement of an
involuntary case under the federal or state bankruptcy, insolvency or similar
law, as now or hereinafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law with respect to such Person and
such case is not dismissed within 60 days; or (c) 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.
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"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: () 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 to the extent
allocable to interest; provided, however, that in calculating the Interest
Distribution Amount the following will be excluded: all payments and proceeds
(including Liquidation Proceeds and Recoveries) 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 Collection Account.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
arising subsequent to the Closing Date 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 or 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 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; provided however that
the
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Liquidation Proceeds with respect to any Receivable shall in no event be less
than zero.
"Local Collection Account" shall have the meaning provided in Section
4.02.
"Local Collection Account Agreement" means the agreement dated as of June
17, 1997, among Harris Trust and Savings Bank, the Purchaser and the Servicer,
as amended, supplemented or otherwise modified from time to time.
"Local Post Office Box" shall have the meaning specified in Section 4.01.
"Magna" means Magna Bank of St. Louis, a Missouri banking corporation, and
its successors and assigns.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"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 3.02, "Obligor's Scheduled Payment" shall
refer to the Obligor's scheduled monthly payment obligation as so modified.
"Opinion of Counsel" means one or more written opinions of counsel, which
counsel shall be reasonably acceptable to the Purchaser; provided that, with
respect to any opinion delivered to the Backup Servicer or the Paying Agent,
such counsel shall also be reasonably acceptable to the Backup Servicer or the
Paying Agent, as applicable.
"Original Pool Balance" means $[______________].
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"Paying Agent" means Harris Trust and Savings Bank in its capacity as
paying agent under this Agreement.
"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.
"Pool Balance" means, with respect to each Determination Date, the
aggregate Principal Balance of the Receivables (excluding all 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 payments
received from Obligors for such Collection Period, and after adjustment for
Cram Down Losses for such Collection Period.
"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 that became a
Purchased Receivable, the unpaid principal balance owed by the Obligor thereon
plus interest on such amount at the applicable APR to the date 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 3.07 or by the Seller pursuant to the Receivables Purchase Agreement.
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"Purchaser" means Greenwich Capital Financial Products, Inc. and its
successors in interest to the extent permitted hereunder.
"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 Purchaser, notice of which designation
shall be given to the Servicer, the Backup Servicer and the Paying Agent.
"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.
"Receivable Files" means the documents specified in Section 2.01.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of June 17, 1997, between First Merchants, as seller, and the
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 related Obligor and any amounts
required by law to be remitted to the related 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 related Collection Period: (i)
that portion of all collections on the Receivables allocable to principal, (ii)
that portion of all Liquidation Proceeds and Recoveries allocable to principal
and (iii) that portion allocable to principal of the Purchase Amount of all
Receivables that became Purchased Receivables during or in respect of such
Collection Period; provided, however, that in calculating the Regular Principal
Distribution Amount the following will be excluded: (i) all payments and
proceeds (including
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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.
"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 or
Purchaser.
"Seller" means First Merchants under the Receivables Purchase Agreement.
"Servicer" means First Merchants, as the servicer of the Receivables, and
each successor to First Merchants (in the same capacity) pursuant to Section
5.03 or 6.03.
"Servicer Extension Notice" shall have the meaning specified in Section
3.14.
"Servicer Termination Event" means an event specified in Section 6.01.
"Servicer's 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 Servicer delivered pursuant to Section 3.09, substantially in
the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during each Collection Period, determined pursuant to Section 3.08.
"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 under which the portion
of a payment allocable to interest and the portion
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allocable to principal is determined in accordance with the Simple Interest
Method.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. 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 and/or Cram Down Losses).
"Trust Officer" means, in the case of the Custodian, the Backup Servicer
or the Paying Agent, any officer within the Corporate Trust Office of the
Custodian, the Backup Servicer or the Paying Agent as the case may be,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer customarily performing functions
similar to these performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
herein and not otherwise defined herein have the meaning assigned to them in
the Receivables Purchase Agreement. 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.
(b) 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
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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.
(c) 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".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to
a Person are also to its permitted successors and assigns.
ARTICLE II
The Receivables
SECTION 2.01. Custody of Receivable Files.
(a) To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Purchaser hereby revocably appoints the Servicer, and
the Servicer hereby accepts such appointment, to act for the benefit of the
Purchaser as custodian of the following documents or instruments:
(i) a copy of the fully executed original of each Receivable
(together with a copy of any agreements modifying such Receivable,
including a copy of any extension agreement);
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(ii) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(iii) the original certificate of title or such other documents that
the Custodian or 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
(iv) any and all other documents that are set forth in Schedule C
hereto.
(b) Pursuant to the Custodian Agreement, the Custodian will act as
custodian of (i) the fully executed original of each Receivable (together with
any agreements modifying such Receivable, including any extension agreement)
with executed assignment from the related Dealer (or Magna, as applicable) to
Seller and any intervening assignments and (ii) a fully executed assignment in
blank from Seller.
SECTION 2.02. Duties of Servicer as Custodian2.02. Duties of Servicer as
Custodian. (a) Safekeeping. The Servicer shall hold the Receivable Files as
custodian for the benefit of the Purchaser, and shall maintain accurate and
complete accounts, records and computer systems pertaining to each Receivable
File. 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 Purchaser
and the Backup Servicer to verify the accuracy of the Servicer's record
keeping. The Servicer shall promptly report to the Purchaser and the Backup
Servicer 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 Purchaser 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
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specified to the Purchaser and the Backup Servicer by written notice not later
than 3 Business Days prior to any change in location. The Servicer shall make
available to the Purchaser and the Backup Servicer 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 Purchaser and the
Backup Servicer (as the case may be) shall instruct.
(c) Release of Documents. Upon instruction from the Purchaser, the
Servicer shall release any Receivable File to the person designated by the
Purchaser, at such place or places as the Purchaser may designate, as soon as
practicable, and upon the release and delivery of any such document in
accordance with the instructions of the Purchaser, the Servicer shall be
released from any further liability and responsibility under this Section 2.02
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 Purchaser's failure to return any
Receivable File or any portion thereof in a timely manner.
SECTION 2.03. 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 Responsible Officer
of the Purchaser. The Servicer shall be entitled to rely and act upon any such
instructions it reasonably believes to be genuine.
SECTION 2.04. Custodian's Indemnification. The Servicer, as custodian,
shall indemnify the Purchaser, the Backup Servicer and 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
Purchaser, the Backup Servicer 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 Purchaser or any
such officer, director, employee or agent of the Purchaser for any portion of
any such amount resulting from the willful misfeasance, bad faith or negligence
of the Purchaser or any officer, director, employee or agent of the Purchaser.
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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 2.05. 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 2.05. 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 6.02, the appointment of such Servicer as
custodian may be terminated by the Purchaser in the same manner as the
Purchaser may terminate the rights and obligations of the Servicer under
Section 6.02. The Purchaser 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 6.02. As soon as practicable after any termination of such appointment
(but in no event more than 3 Business Days after any such termination of
appointment), the Servicer shall deliver the Receivable Files to the Purchaser
or the Purchaser's agent at such place or places as the Purchaser may
reasonably designate.
ARTICLE III
Administration and Servicing of Receivables
SECTION 3.01. Duties of Servicer. The Servicer, for the benefit of the
Purchaser, 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
monthly payment statements to Obligors, reporting any required tax information
to Obligors,
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monitoring the collateral, accounting for collections, furnishing monthly and
annual statements to the Purchaser 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 and the Purchaser, 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 Purchaser, a
legal proceeding to enforce a Receivable pursuant to Section 3.03 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 Purchaser 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 Purchaser to
execute and deliver in the Purchaser'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 Purchaser may, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in
its name or the name of the Purchaser. The Purchaser may upon the written
request of the Servicer furnish the Servicer with any powers of attorney and
other
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documents reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder.
SECTION 3.02. 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 Purchaser 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) Except as otherwise instructed by the Purchaser, 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
3.02(b)) in accordance with its customary procedures, which are attached hereto
as Schedule D, 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 Purchaser with respect to such
Receivable and is otherwise in the best interests of the Purchaser; provided,
however, that:
(i) in no event may the final Obligor's Scheduled Payment on a
Receivable be extended beyond [ ]; and
(ii) with respect to any Determination Date, the amount of Receivables
subject to extension or modification shall not exceed 25 Receivables in any
calendar month.
SECTION 3.03. Realization upon Receivables. Consistent with the
standards, policies and procedures required by this Agreement,
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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 3.01, which practices and procedures may
include reasonable efforts to realize upon any recourse to Dealers (or Magna,
as applicable) or any sales tax or other rebates, 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 or obtain a deficiency judgement; 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 (or Magna,
as applicable).
SECTION 3.04. Physical Damage Insurance. (a) 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.
(b) The Servicer shall monitor the status of the insurance policies
referred to in this Section 3.04 in accordance with its customary servicing
procedures. If the Servicer shall
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determine that an Obligor has failed to obtain or maintain a physical loss and
damage insurance policy covering the related Financial Vehicle as set forth in
clause (a) of this Section 3.04 (including during the repossession of such
Financed Vehicle) the Servicer shall be diligent in carrying on its customary
servicing procedures to enforce the rights of the holder of the Receivable
thereunder to require the Obligor to obtain such physical loss and damage
insurance.
(c) The Servicer may sue to enforce or collect upon the insurance
policies, in its own name, if possible, or as agent of the Purchaser. If the
Servicer elects to commence a legal proceeding to enforce an insurance policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Purchaser under such insurance policy to the Servicer for
purposes of collection only.
SECTION 3.05. 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 of
the Seller 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 Purchaser 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 Purchaser 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 Purchaser, 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 Purchaser.
(b) The Purchaser and Servicer hereby agree that the Purchaser may take or
cause to be taken such actions as may, in the opinion of counsel to the
Purchaser, be necessary or desirable to perfect or re-perfect the security
interests in the Financed Vehicles in the name of the Purchaser, including by
amending the title documents of the Financed Vehicles. The Servicer hereby
agrees to pay all expenses related to such perfection or reperfection and to
take all action necessary therefor. In addition, the Purchaser may at any
other time instruct the Servicer to take or cause to be taken such action as
may, in the opinion of
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counsel to the Purchaser, be necessary or desirable to perfect or re-perfect
the security interest in the Financed Vehicles in the name of the Purchaser;
provided, however, that if the Purchaser requests that the title documents be
amended prior to the occurrence of a Servicer Termination Event, the
out-of-pocket expenses of the Servicer or any other entity incurred in
connection with any such action shall be reimbursed to the Servicer or such
other party by the Purchaser.
SECTION 3.06. Covenants of Servicer. By its execution and delivery of
this Agreement, the Servicer hereby covenants to the Purchaser as follows:
(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 Purchaser in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend the
terms of any Receivable, except in accordance with Section 3.02 (provided that
no breach of this covenant shall be deemed to have occurred unless and until
the remedy provided in Section 3.07, after demand therefor, has not been
complied with); 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 Purchaser
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 or the Servicer as a debtor and any Person other than the Purchaser
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.
(e) Power of Attorney. Servicer shall execute and deliver to Purchaser a
Limited Power of Attorney, substantially in the form of Exhibit E hereto.
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SECTION 3.07. Purchase of Receivables upon Breach. Upon discovery by any
of the Servicer, Purchaser or Backup Servicer of a breach of any of the
covenants set forth in Sections 3.02(c), 3.05(a) or 3.06 (which breach has not
been waived by the Purchaser), the party discovering such breach shall give
prompt written notice to the other party; provided, however, that the failure
to give any such notice shall not affect any obligation of the Servicer under
this Section 3.07; and provided further that, with respect to the Backup
Servicer, "discovery" shall mean actual knowledge by a Trust Officer. 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 3.02(c),
3.05(a) or 3.06 that materially and adversely affects the interests of the
Purchaser, the Servicer shall, unless such breach shall have been cured in all
material respects by such date, purchase from the Purchaser 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 4.04. Subject to Section
5.02, 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 Purchaser.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Servicer, the Servicer shall
indemnify the Seller, the Backup Servicer and the Purchaser against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees
and expenses of counsel, which may be asserted against or incurred by either of
them as a result of third party claims arising out of the events or facts
giving rise to a breach of the covenants or representations and warranties set
forth in Sections 3.05 or 3.06.
SECTION 3.08. 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)
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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.
Except as otherwise provided herein, 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 Purchaser
and the Paying Agent). The Servicer shall be liable for the fees and expenses
of the Backup Servicer, the Paying Agent and the Custodian.
SECTION 3.09. Servicer's Certificate. Not later than 10:00 a.m. (New
York City time) on each Determination Date, the Servicer shall deliver to the
Paying Agent, Backup Servicer, and the Purchaser a Servicer's Certificate
containing all information necessary to make the distributions to be made on
the related Distribution Date pursuant to Section 4.05 for the related
Collection Period. Receivables to be purchased by the Servicer or to be
repurchased by the Seller pursuant to the Receivables Purchase Agreement 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 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. (a) The Servicer shall deliver to the Paying Agent, the
Backup Servicer and the Purchaser, within 120 days after the end of the
Servicer's fiscal year (with the first such certificate being delivered no
later than April 30, 1998), an Officer's Certificate signed by a Responsible
Officer of the Servicer, stating that (i) a review of the activities of the
Servicer during the preceding 12-month period (or such shorter period as shall
have elapsed from the Closing Date to the end of the first such fiscal year)
and of the performance of its obligations under this Agreement has been made
under such officer's supervision and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) The Servicer shall deliver to the Backup Servicer, and the Purchaser,
promptly after having obtained knowledge thereof, but in no event later than
two Business Days thereafter, written
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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 6.01.
SECTION 3.11. 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 Backup
Servicer and the Purchaser, within 120 days after the end of each fiscal year
(with the first such report being delivered no later than April 30, 1998), a
report addressed to the Board of Directors of the Servicer, the Backup Servicer
and the Purchaser to the effect that such firm has audited the books and
records of the Servicer and issued its report thereon and that (1) such agreed
upon procedures report 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 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. In the event such firm requires the Backup
Servicer to agree to the procedures performed by such firm, the Purchaser shall
direct the Backup Servicer in writing to so agree; it being understood and
agreed that (x) the Backup Servicer shall notify the Purchaser of any such
requirement to agree and (y) the Backup Servicer shall be entitled to
conclusively rely on the written direction of the Purchaser with respect
thereto. The Backup Servicer shall be under no obligation or have any
liability in respect of the sufficiency, validity or correctness of such
procedures.
SECTION 3.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Paying
Agent, the Custodian, the Backup Servicer and the Purchaser reasonable access
to any and all documentation regarding the Receivables held by the Servicer.
Access shall be afforded without charge, but only upon reasonable request and
during the normal business hours at the offices of the Servicer.
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SECTION 3.13. 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 Paying Agent, the Backup Servicer and
the Purchaser, a computer tape or a diskette (or any other form of electronic
transmission acceptable to the Purchaser, Paying Agent and Backup Servicer) in
a format acceptable to the Purchaser, Paying Agent and 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 payments received on the Receivables as provided
herein. The Backup Servicer shall use such tape or diskette (or other
electronic transmission acceptable to the Paying Agent, the Backup Servicer and
the Purchaser) to verify the mathematical accuracy of the Servicer's
Certificate delivered by the Servicer, and the Backup Servicer shall certify to
the Purchaser that it has verified the mathematical accuracy of the Servicer's
Certificate in accordance with this Section 3.13 and shall notify the Servicer
and the Purchaser 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, the Servicer shall, if so
requested by the Purchaser, deliver within 3 Business Days after demand
therefor its records relating to the Receivables and a computer tape or
diskette 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 to supervise, verify or monitor the performance of the Servicer. The
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Backup Servicer shall have no liability for any actions taken or omitted by the
Servicer.
SECTION 3.14. 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 June 30, 1997, which term
shall be extendible by the Purchaser on written notice for successive calendar
months ending on the last day of each such month (or pursuant to revocable
written standing instructions delivered from time to time to the Servicer, for
any specified number of months). Each such notice (including each notice
pursuant to standing instructions, which shall be deemed delivered at the end
of successive monthly terms for so long as such instructions are in effect) (a
"Servicer Extension Notice") shall be delivered by the Purchaser to the
Servicer with a copy to the Backup Servicer. 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. The Servicer
agrees that if as of the fifteenth day of the calendar month preceding the last
day of any such servicing term the Servicer shall not have received a Servicer
Extension Notice, the Servicer shall, within five days thereafter, give written
notice of such non-receipt to the Backup Servicer and the Purchaser.
ARTICLE IV
Distributions;
Statements to the Purchaser
SECTION 4.01. Lock-Box Account. The Servicer shall promptly after the
Closing Date send revised payment statements (which statements will indicate
(by notation specific to this transaction) that such payments relate to
Receivables owned by the Purchaser) to each Obligor pursuant to which payments
made by such Obligor after the Closing Date will be addressed to a Lock-Box
Account (the "Lock-Box Account") at LaSalle National Bank. All payments and
other proceeds of any type and from any source on or with respect to the
Receivables that are delivered to the Lock-Box Account, or otherwise received
by the Seller or the Servicer, shall be the property of the Purchaser.
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SECTION 4.02. Accounts. (a) The Servicer has established various
accounts in the name of the Paying Agent (the "Local Collection Accounts"), at
the locations identified in the Local Collection Account Processing Agreement
attached as Exhibit A hereto. 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 Purchaser, as provided in the Local Collection Account
Agreement. All payments on the Receivables not mailed by Obligors or any other
Person to the Lock-Box Account which are otherwise delivered to the Seller or
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 with the Paying Agent, an account in the name of the
Purchaser (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 Purchaser. The
Paying Agent shall cause any amounts deposited to the Lock-Box Account or to
any Local Collection Account on or with respect to the Receivables to be swept
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. The Seller, the Servicer and the Paying Agent shall follow the daily
operating procedures set forth in Schedule E hereto with respect to collections
on the Receivables.
(ii) Funds on deposit in the Collection Account shall be invested by
the Paying Agent in Eligible Investments selected in writing by the
Purchaser; provided that such selection shall not conflict with the last
two sentences of the following clause (iii). All such Eligible Investments
shall be held by the Paying Agent for the benefit of the Purchaser.
(iii) On each Payment Determination Date all interest and other
investment income (net of losses and investment expenses) on funds on
deposit in the Collection Account shall be deemed to constitute a portion
of the Interest Distribution Amount for the related Distribution Date.
Funds on deposit in the Collection Account shall be invested in Eligible
Investments that will mature not later than the Business Day immediately
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preceding the next Distribution Date; provided that such requirement shall
be deemed fulfilled for all Eligible Investments falling under paragraph
(d) of the definition thereof. Funds deposited in the Collection 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 Paying Agent 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 Paying Agent's failure to make payments on such Eligible Investments
issued by the Paying Agent, in its commercial capacity as principal
obligor and not as Paying Agent, in accordance with their terms.
(c)(i) The Purchaser shall possess all right, title and interest in all
funds in respect of the Receivables received in the Local Post Office Boxes and
all funds on deposit from time to time in the Local Collection Accounts and the
Collection Account and in all proceeds thereof (including all income thereon),
subject to the Local Collection Account Agreement. The Local Post Office
Boxes, the Local Collection Accounts and the Collection Account shall be under
the sole dominion and control of the Paying Agent on behalf of the Purchaser,
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 Paying Agent, on the Purchaser's behalf, shall within 10 Business
Days (or such longer period, not to exceed 30 calendar days, as to which the
Purchaser 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 Collection Account Property, Paying Agent
agrees that:
(A) any Collection Account Property that is held in deposit
accounts shall be held by the Paying Agent solely in the Eligible
Deposit Accounts, subject to the last sentence of Section 4.02(c)(i);
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(B) any Collection Account Property that constitutes Physical
Property shall be delivered to the Paying Agent in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Paying Agent or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Paying Agent;
(C) any Collection 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 Paying Agent,
pending maturity or disposition, through continued book-entry
registration of such Collection Account Property as described in such
paragraph; and
(D) any Collection 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 Paying Agent in accordance
with paragraph (c) of the definition of "Delivery" and shall be
maintained by the Paying Agent, pending maturity or disposition,
through continued registration of the Paying Agent's (or its
nominee's) ownership of such security.
(iii) with the prior approval of the Purchaser, the Servicer shall
have the power to instruct the Paying Agent to make withdrawals and
payments from the Collection Account for the purpose of permitting the
Servicer to carry out its respective duties hereunder.
(iv) It is expressly agreed to by the parties hereto that in no event
shall the Paying Agent have any liability in respect of the actions made by
any other Person in respect of the method of "Delivery" as required by
subsection (ii) above.
SECTION 4.03. 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
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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 scheduled payments of such Obligor.
SECTION 4.04. 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 3.07.
SECTION 4.05. Distributions. (a) On each Payment Determination Date,
the Servicer shall calculate all amounts required to be distributed and on each
Distribution Date, the Servicer shall instruct the Paying Agent in writing
(based on the information contained in the Servicer's Certificate delivered on
the related Determination Date pursuant to Section 3.09) to make the following
payments and distributions by 11:00 a.m. (New York City time) in the following
order and priority:
(1) to the Servicer, from the Interest Distribution Amount, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(2) to the Backup Servicer, the Paying Agent and the Custodian,
from the Interest Distribution Amount remaining after the application
of clause (1) above, any accrued and unpaid fees and expenses
(including legal fees and expenses) due, but only to the extent not
previously paid by the Servicer; and
(3) to the Purchaser, the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (1) and
(2) above.
SECTION 4.06. Statements to the Purchaser. On each Distribution Date,
the Servicer shall provide to the Purchaser, a statement substantially in the
form of Exhibit B, setting forth at least the following information:
(i) the amount of such distribution allocable to principal;
(ii) the amount of such distribution allocable to interest;
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(iii) 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;
(iv) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period, and the amount of fees paid to each of
the Backup Servicer, the Paying Agent and the Custodian with respect to
related Collection Period;
(v) the aggregate amounts of Realized Losses, if any, and Cram Down
Losses, if any, separately identified, with respect to the related
Collection Period;
(vi) the aggregate principal balance of all Receivables that became
Liquidated Receivables or Purchased Receivables during the related
Collection Period;
(vii) the aggregate principal balance of Receivables that are 30 to 59
days, 60 to 89 days or 90 days or more delinquent;
(viii) the aggregate Purchase Amounts for Receivables, if any, that
were purchased during or with respect to such Collection Period; and
(ix) the following information regarding Receivables which have been
extended pursuant to Sections 3.02(b) or (c): (A) identification of which
Receivables have been so extended, (B) the aggregate number of such
Receivables, (C) the aggregate outstanding principal balance of such
Receivables, (D) and the percentage of all Receivables represented by such
Receivables (measured by outstanding principal balance).
ARTICLE V
The Servicer
SECTION 5.01. Representations of Servicer. The Servicer makes the
following representations on which the Purchaser is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date.
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(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
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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 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 authority of the Servicer to perform its obligations
under, or the validity or enforceability of, this Agreement or any of the
Basic Documents.
(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 5.02. 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
Purchaser, Backup Servicer, the Paying Agent, the Custodian and their
respective officers, directors, employees and agents 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
Purchaser, Backup Servicer, the Paying Agent, the Custodian and their
respective officers, directors, agents and employees from and against any
taxes that may at any time be
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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 Purchaser), and costs and expenses in defending against
the same.
(c) The Servicer shall indemnify, defend and hold harmless the
Purchaser, Backup Servicer, the Paying Agent, the Custodian and their
respective officers, directors, employees and agents, 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 breach of this
Agreement or 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 5.03) as Servicer pursuant to Section 6.02, 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 pursuant to Section 6.03.
Indemnification under this Section shall survive the resignation or
removal of any indemnifying 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 5.03. 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
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<PAGE> 40
in this Agreement and shall be reasonably acceptable to the Purchaser. 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 5.03(a) to the Purchaser, the Custodian and the Paying
Agent. 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
5.01 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 Purchaser 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 5.03(a) and that all
conditions precedent provided for in this Agreement relating to such
transaction have been complied with, and (iii) the Servicer shall have
delivered to the Purchaser 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 Purchaser 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 or the Paying Agent may
be merged or consolidated, (ii) resulting from any merger or consolidation to
which the Backup Servicer or the Paying Agent shall be a party, (iii) which
acquires by conveyance, transfer or lease substantially all of the assets of
the Backup Servicer or the Paying Agent or (iv) succeeding to the business of
the Backup Servicer or the Paying Agent which Person shall execute an agreement
of assumption to perform every obligation of the Backup Servicer or the Paying
Agent, as the case may be, under this
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Agreement, shall be the successor to the Backup Servicer or the Paying Agent,
as the case may be, under this Agreement without the execution or filing of any
paper or any further act on the part of any the parties to this Agreement.
SECTION 5.04. Limitation on Liability of Servicer, Backup Servicer and
Others. (a) None of the Servicer, the Backup Servicer, the Paying Agent or any
of their respective directors, officers, employees or agents shall be under any
liability to the Purchaser 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, the Paying Agent 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, the Paying Agent 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 and the Paying Agent 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 or
the Paying Agent, as the case may be, must rely in order to preform its
obligations and the Purchaser shall look only to the Servicer to perform such
obligations. The Backup Servicer and the Paying Agent 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
respective duties under this Agreement if such failure or delay results from
the Backup Servicer or the Paying Agent, as the case may be, acting in
accordance with information prepared or supplied by a Person other than the
Backup Servicer or the Paying Agent, as the case may be, or the failure of any
such other Person to prepare or provide such information. The Backup Servicer
and the Paying Agent 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 Purchaser, (ii) any inaccuracy or omission in a
notice or communication received by the Backup Servicer or the Paying Agent, as
the case may be, from any third
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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 or successor Paying Agent, as the case may be.
(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 as Paying Agent under this 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 5.05. Appointment of Subservicer. With the prior written consent
of the Purchaser, the Servicer may appoint a subservicer to perform all or any
portion of its obligations as Servicer hereunder; provided, however that the
Servicer shall remain obligated and be liable to the Purchaser 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
neither the Backup Servicer nor the Purchaser shall have any responsibility
therefor.
SECTION 5.06. Servicer Not to Resign; Resignation of the Backup Servicer
and the Paying Agent. (a) Subject to the provisions of Section 5.03(a) and
5.06(d), 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 6.03(b) and 5.06(d), the Backup
Servicer may resign from the obligations and duties as Backup Servicer imposed
on it by this Agreement (i) upon a determination that the performance of its
duties under this Agreement shall no longer be permissible under applicable law
or
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<PAGE> 43
(ii) with the prior written consent of the Purchaser. The Backup Servicer
shall be paid all fees owed to it hereunder upon such resignation.
(c) The Paying Agent may resign from its obligations and duties as Paying
Agent imposed on it by this Agreement (i) upon a determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law or (ii) with the prior written consent of Purchaser. The
Paying Agent shall be paid all fees owed to it hereunder upon such resignation.
(d) Notice of any determination that the performance by any of the
Servicer, the Backup Servicer or the Paying Agent of its duties hereunder is no
longer permitted under applicable law shall be communicated to the Purchaser 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, Backup Servicer or the Paying Agent, as applicable,
to the Purchaser 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 6.03. No resignation of the Backup
Servicer or the Paying Agent shall become effective until an entity acceptable
to the Purchaser shall have assumed the responsibilities and obligations of the
Backup Servicer or the Paying Agent, as applicable.
ARTICLE VI
Default
SECTION 6.01. 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 of the Local
Collection Account, any lock-box account specifically used (with the consent of
the Purchaser) for receipt of payments in respect of the Receivables, 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 such payment is required to be deposited;
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<PAGE> 44
(b) failure by the Servicer to deliver to the Purchaser and the Paying
Agent the Servicer's Certificate by the applicable Determination Date, or to
observe any covenant or agreement set forth in Section 3.06;
(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 Purchaser
and (ii) continues unremedied for a period of 30 days after knowledge thereof
by the Servicer or after the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Servicer by the
Purchaser;
(d) any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the
same shall have been made, and the incorrectness of such representation,
warranty or statement has a material adverse effect on the Purchaser and,
within 30 days after written notice thereof shall have been given to the
Servicer by the Purchaser, the circumstances or condition in respect of which
such representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured;
(e) the occurrence of an Insolvency Event with respect to the Servicer or,
so long as First Merchants is the Servicer, the Seller;
(f) any failure by the Purchaser to have delivered a Servicer Extension
Notice pursuant to Section 3.14 at least 5 Business Days prior to the
expiration of any servicing term; or
(g) the Servicer is terminated as servicer with respect to any trust that
has issued one or more classes of asset backed securities.
SECTION 6.02. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Purchaser, by notice given
in writing to the Servicer, 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 non-extension of the term of the Servicer pursuant
to Section 3.14, all authority, power, obligations and responsibilities of the
Servicer under this Agreement automatically
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shall pass to, be vested in and become obligations and responsibilities of the
Backup Servicer (or such other successor Servicer or successor Backup Servicer
appointed by the Purchaser); 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 Purchaser as lienholder or
secured party on the related certificates of title of the Financed Vehicles or
otherwise. The terminated Servicer at its own cost 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 or advisable to enable the successor
Servicer to service the Receivables.
SECTION 6.03. Appointment of Successor. (a) On and after the time the
Servicer receives a notice of termination pursuant to Section 6.02, upon
non-extension of the servicing term as referred to in Section 3.14, or upon the
resignation of the Servicer pursuant to Section 5.06, the Backup Servicer
(unless the Purchaser shall have exercised its option pursuant to Section
6.03(b) to appoint an alternative successor Servicer) shall be the successor in
all respects to the Servicer in its capacity as Servicer under this Agreement
and shall be subject to all the rights, responsibilities, restrictions, duties,
liabilities, and termination provisions relating to the Servicer under this
Agreement, except as otherwise stated herein. The Purchaser 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
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referred to in Section 3.14 and to termination under Section 6.02 upon the
occurrence of any Servicer Termination Event applicable to it as Servicer.
(b) The Purchaser 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 Person then
serving as Backup Servicer, or any other Person if it does so. Pending
appointment pursuant to the preceding sentence, the Backup Servicer shall act
as a 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 5.06, 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 6.02, the resignation of the Servicer pursuant to
Section 5.06 or the non-extension of the servicing term of the Servicer
pursuant to Section 3.14. If upon the termination of the Servicer pursuant to
Section 6.02 or the resignation of the Servicer pursuant to Section 5.06, the
Purchaser 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 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; provided that such successor Servicer shall have no liability for
the acts or omissions of any predecessor Servicer.
SECTION 6.04. Waiver of Past Defaults. The Purchaser may waive in
writing any default by the Servicer in the performance of its obligations
hereunder and its consequences. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto.
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ARTICLE VII
Miscellaneous
SECTION 7.01. Amendment. This Agreement may only be amended in writing by
the Purchaser, the Servicer, the Backup Servicer and the Paying Agent.
SECTION 7.02. Protection of Title. (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
Purchaser in the Receivables and in the proceeds thereof. The Servicer shall
deliver (or cause to be delivered) to the Purchaser file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing.
(b) The Servicer shall not change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9 402(7) of the UCC, unless
it shall have given the Purchaser and the Backup Servicer at least 60 days'
prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Servicer shall give the Purchaser and the Backup Servicer at least
60 days' prior written notice of any relocation of its principal executive
office, and 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, the
Servicer 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
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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 and Norwest systems)
that refer to a Receivable shall indicate clearly the interest of the Purchaser
in such Receivable and that such Receivable is owned by the Purchaser.
Indication of the Purchaser'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 (or sold by the
Purchaser).
(f) If at any time 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 Purchaser.
(g) The Servicer shall permit the Purchaser and the Backup Servicer 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 the Purchaser's request, the Servicer shall furnish to the
Purchaser, within five Business Days, a list of all Receivables (by contract
number and name of Obligor) the documents relating to which are then held on
behalf of the Purchaser, 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 pool.
(i) The Servicer shall deliver to the Purchaser:
(1) promptly after the execution and delivery of this Agreement and
each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all
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financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Purchaser 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
Purchaser 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 7.03. Notices. All demands, notices, communications and
instructions upon or to the Purchaser and the Servicer 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 Servicer, to First Merchants Acceptance Corporation, 570
Lake Cook Road, Suite 126, Deerfield, Illinois 60015, Attention: Norman
Smagley; (b) in the case of the Purchaser, to Greenwich Capital Financial
Products, Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, Attention:
Bruce Katz (with a copy to the General Counsel); or, as to each of the
foregoing, at such other address as shall be designated by written notice to
the other parties; (c) in the case of the Paying Agent and the Backup Servicer,
Harris Trust and Savings Bank, 12th Floor, 311 West Monroe Street, Chicago,
Illinois 60606, Attention: Robert Foltz.
SECTION 7.04. Assignment by the Servicer. Notwithstanding anything to
the contrary contained herein, except as provided in the remainder of this
Section, as provided in Section 5.03 herein and as provided in the provisions
of this Agreement concerning the
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resignation of the Servicer, this Agreement may not be assigned by the
Servicer.
SECTION 7.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Purchaser, the Paying Agent, the
Backup Servicer and the Servicer, 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 under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 7.06. 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 7.07. 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 7.08. 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 7.09. 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.
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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.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
Purchaser
By: _____________________________________
Name:
Title:
FIRST MERCHANTS ACCEPTANCE
CORPORATION, Servicer
By: _____________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
Paying Agent and Backup Servicer
By: _____________________________________
Name:
Title:
<PAGE> 52
SCHEDULE A
Schedule of Receivables
[To be Delivered to the Purchaser at Closing]
<PAGE> 53
SCHEDULE B
Location of Receivable Files
<PAGE> 54
SCHEDULE C
Receivable Files
1. All documents obtained or created in connection with the credit
investigation.
2. All evidence of borrower verification of the Receivable.
3. All Obligor records including without limitation (i) file copy of
Receivable; (ii) copy Dealer assignment (if applicable); (iii) warranty
copy; (iv) credit life insurance policy; (v) proof of auto insurance; (vi)
bill of sale; (vii) buyer's guide (as is form); (viii) odometer statement;
(ix) title application; (x) contract verification sheet; (xi)
participation worksheet; (xii) checklist; (xiii) underwriting worksheet;
(xiv) approval; (xv) purchase trans printout; (xvi) original application;
(xvii) credit investigation; (xviii) credit bureau reports; (xix) check
stubs; and (xx) copies of drivers license reference sheets.
4. Original document envelope together with all documents maintained
therein.
5. All insurance verification forms and documents relating to insurance
follow-ups and all mail received from insurance.
6. Any and all other documents that the Servicer shall keep on file in
accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
<PAGE> 55
SCHEDULE D
Deferment Procedure
1. Deferments require manager approval. Supervisors and team leaders
are not authorized at this time.
2. The customer can be no more than 30 days delinquent.
p It is not the intent of this procedure to imply an all
or nothing philosophy on 60+ accounts. The correct approach
to take is to get a positive cash flow while negotiating for
up-to-date arrangements.
3. Customers are not eligible unless they have made a minimum of 4 full
contractual payments since the account opened.
4. Only 2 deferments can be granted in a 12 month period with a maximum
of 4 over the life of the contract. This must be verified by
reviewing either the transaction history screen or the archived
history.
<PAGE> 56
SCHEDULE E
Operating Procedures
<PAGE> 57
EXHIBIT A
LOCAL COLLECTION ACCOUNT PROCESSING AGREEMENT
A-1
<PAGE> 58
EXHIBIT B
First Merchants Acceptance Corporation Distribution Date Statement to Purchaser
Principal Distribution Amount
Interest Distribution Amount
Paying Agent Fee
Custodian Fee
Pool Balance
Pool Factor
Servicing Fee
Backup Servicer Fee
Realized Losses
Cram Down Losses
Liquidated Receivables or Purchased Receivables
Purchase Amounts
Principal Balance of Receivables that were delinquent:
30 to 59 days
60 to 89 days
90 days or more
B-1
<PAGE> 59
EXHIBIT C
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
Distribution Date:
I. Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Servicing Fee Rate
(C) Original Weighted Average Coupon (WAC)
(D) Original Weighted Average Remaining Term (WAM)
(E) Number of Contracts
II. Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Pool Factor
(C) Weighted Average Coupon of Remaining Portfolio (WAC)
(D) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(E) 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) Liquidated Contracts
i. Gross Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(C) Weighted Average Coupon of Remaining Portfolio (WAC)
(D) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(E) Remaining Number of Contracts
(F) Receivable Balance of Vehicles in Repossession During the Collection
Period
(G) Number of Vehicles in Repossession During the Collection Period
(H) Aggregate Net Losses for Collection Period
(I) Delinquent Contracts
Contracts Amount
--------- ------
i. 31-60 Days Delinquent
ii. 61 Days or More Delinquent
C-1
<PAGE> 60
IV. Inputs Derived from Other Sources
A. Collection Account Investment Income
- ---------------
B. 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
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) Principal Distribution Amount
(a) Principal Payments on Receivables
(b) Repurchased Receivables
(c) Cram Down Loss
(2) Required Distributions
(a) Servicing Fee (Includes late fees collected)
(b) Fees Paid to the Paying Agent, Custodian and the Backup
Servicer
F. Pool Balances and Portfolio Information
Beginning End
of Period of Period
--------- ----------
(1) Total Pool Balance
(2) Total Pool Factor
(5) Remaining
Overcollateralization
Amount
(6) Weighted Average
Coupon
(7) Weighted Average
Remaining Maturity
(8) Remaining Number
of Contracts
G. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
C-2
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(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
H. Aggregate extensions and deferrals
I. Pool Balance at the end of the related Collection Period:
J. Outstanding Pool Balance:
Pool Factor:
K. Aggregate Purchase Amounts for Collection Period:
L. Aggregate Amount of Realized Losses for the Collection Period:
C-3
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EXHIBIT D
Custodial Agreement
C-4
<PAGE> 63
EXHIBIT E
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, pursuant to Section 3.06(f) of a certain
Servicing Agreement dated June 17, 1997, herein termed the "Servicing
Agreement", among FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware
corporation herein termed the "Servicer", GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC., a Delaware corporation herein termed the "Attorney", and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, the undersigned Servicer does
hereby constitute and appoint the Attorney, its successors and assigns, as the
true and lawful attorney-in-fact of the Servicer and with full power by an
instrument in writing to appoint a substitute or substitutes, to demand, reduce
to possession, collect, receive, receipt for, endorse, compromise, settle or
assign without recourse any and all indebtedness, notes, commercial paper,
promises to pay, retail installment sale contracts, chattel paper, instruments,
choses in action and other obligations described in Schedule "A" to the
Servicing Agreement, herein termed the "Receivables", together with all monies
due or to become due under said Receivables, and any and all claims, choses in
action, and rights and causes of action relating thereto, including any and all
real estate and personal property, security instruments and insurance policies
held as security for said Receivables, and all other property of every kind
relating thereto; to cancel or release the Receivables and release any
security, in whole or in part and in connection therewith to execute,
acknowledge or handle proper discharges, releases, satisfactions, certificates
of title, other lien certificates or other instruments in writing which may
become necessary in order to carry the foregoing powers into effect, the
Servicer hereby ratifying and confirming all acts and things lawfully and
reasonably done by the Attorney or its substitute or substitutes in pursuance
of the authority herein granted.
IN WITNESS WHEREOF, the Servicer has executed this instrument 16th day of
June, 1997.
Attest: FIRST MERCHANTS ACCEPTANCE
CORPORATION
__________________________ By:________________________
Its:_____________________ Secretary Its:_______________________ President
c-5
<PAGE> 1
EXHIBIT 10.2
CUSTODIAN AGREEMENT
CUSTODIAN AGREEMENT (the "Agreement") dated as of June 17, 1997 among
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Purchaser"), FIRST MERCHANTS
ACCEPTANCE CORPORATION as seller under the Purchase Agreement (as defined
below) (in such capacity, the "Seller"), and as servicer under the Servicing
Agreement (as defined below) (in such capacity, the "Servicer") and HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, in its capacity as
custodian hereunder (the "Custodian").
WHEREAS, the Purchaser intends to purchase from the Seller certain retail
installment sale contracts (the "Receivables") secured by automobiles, vans and
light-duty trucks (the "Financed Vehicles") pursuant to the terms and
conditions of a Receivables Purchase Agreement, dated as of June 17, 1997 (the
"Purchase Agreement"), between the Seller and the Purchaser; and
WHEREAS, the Purchaser will purchase Receivables on a servicing released
basis and has arranged for the Receivables to be serviced pursuant to the terms
and conditions of a Servicing Agreement, dated as of June 17, 1997 (the
"Servicing Agreement") between the Purchaser, the Servicer and Harris Trust and
Savings Bank; and
WHEREAS, the Purchaser desires to have the Custodian take possession of
the Legal File for each Receivable, along with certain other documents
specified herein, and to perform certain procedures in connection therewith.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
Section 1. Definitions. Initially capitalized terms used herein and not
defined herein shall have the meanings given them in the Purchase Agreement
and/or the Servicing Agreement, as applicable, copies of both of which has been
delivered to the Custodian.
Section 2. Delivery of Documents. (a) The Seller has delivered and
released, or will cause to be delivered and released, to the Custodian the
documents identified in this Section 2
<PAGE> 2
pertaining to each of the Receivables identified on a Schedule of Receivables
(the "Schedule of Receivables").
Prior to the Closing Date (the "Delivery Date"), the Seller shall deliver
or shall cause to be delivered to the Custodian and Purchaser a preliminary
Schedule of Receivables and each of the following with respect to the
Receivables identified in such Schedule of Receivables, in form and content
acceptable to the Purchaser:
(i) the fully executed original of the Receivable with executed
assignment from the related Dealer to Seller and any intervening assignments;
and
(ii) a fully executed assignment in blank from Seller.
All Receivable documents held by the Custodian as to each Receivable under
any provision of this Agreement are referred to herein as the "Legal File."
The Seller shall also cause each Schedule of Receivables to be delivered via
electronic transmission to the Custodian in a format acceptable to the
Custodian on the same day that such Schedule of Receivables is delivered to the
Custodian in accordance with this Section.
(b) In addition to the documents delivered to the Custodian pursuant to
Section 2(a) hereof, prior to the Closing Date the Seller shall deliver or
cause to be delivered to the Custodian the following: (i) a notification of
sale by Seller in the form attached hereto as Exhibit A ("Notification of
Sale") and (ii) an original executed Consent with respect to the Receivables
(the "Consent"), in form and substance acceptable to the Custodian and the
Purchaser and copies of any partial release UCC-3 financing statements executed
in connection therewith by LaSalle National Bank, as Agent for the Lenders
identified in that certain Fourth Amended and Restated Loan and Security
Agreement dated as of February 28, 1996 (the "Loan Agreement") among the
Purchaser, such Lenders and such Agent.
(c) From time to time, the Purchaser may submit additional documents for
one or more of the Receivables in custody of the Custodian, attached to a
document transmittal log. Upon receipt of
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<PAGE> 3
these additional documents, the Custodian shall update the appropriate Legal
File to reflect the receipt of (i) supplementation or replacement of any of the
documents in the Legal File and (ii) the delivery of additional documents,
assignments, instruments, agreements, certificates or other writings and
additional financing statements, which are necessary to effect the sale or
transfer of the Receivable.
Section 3. Custody of Files. (a) The Custodian shall segregate and
maintain continuous custody of all documents constituting the Legal File
received by it in secure and fire resistant facilities in accordance with
customary standards for such custody. Prior to receipt by the Seller of the
purchase price for the Receivables (the "Purchase Price") from the Purchaser,
the Custodian shall hold the related Legal Files on behalf of the Seller. Upon
receipt from the Purchaser of the Purchase Price by the Seller, the Custodian
shall automatically cease to hold the related Legal Files in its capacity as
custodian for the Seller or any Person other than the Purchaser or its assigns
but shall instead hold such documents as bailee, as that term is used in
Section 9-305 of the Uniform Commercial Code (the "UCC"), for the Purchaser
pursuant to, and in accordance with, this Agreement. During the term of this
Agreement and after the Purchaser has paid the related Purchase Price, the
Custodian shall retain custody of the Legal Files on behalf of the Purchaser
until it is directed in writing by the Purchaser to release any or all of such
Legal Files.
(b) The Custodian is hereby authorized, upon receipt of a written request
and receipt provided by the Servicer or its designee, the Purchaser or the
Purchaser's designee, as the case may be, in the form attached as Exhibit B
hereto (a "Request for Release"), to release to the Servicer or its designee,
the Purchaser or the Purchaser's designee, as the case may be, the Legal File
or certain documents therefrom specified in the Request for Release; provided
that the Purchaser must consent in writing (x) for any release to the Servicer
that would relate to more than 25 Receivables and (y) for any release to the
Servicer in connection with the liquidation of a Receivable. Subsequent to the
payment of the Purchase Price, all Documents so released shall be held in trust
for the benefit of the Purchaser. Unless the Legal File is released because
the related Receivable was paid in full,
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<PAGE> 4
repurchased or liquidated, the Servicer or its designee or the Purchaser or its
designee shall return any documents so released promptly after the need for
such Person's possession of such documents no longer exists.
(c) Upon the repurchase of any Receivable pursuant to the Purchase
Agreement or the Servicing Agreement or the payment in full of any Receivable,
which shall be evidenced by the delivery to the Custodian of a Request for
Release that also certifies the payment in full of such Receivable, the
Custodian shall release the related Legal File to the Person specified in such
Request for Release.
Section 4. Certification of Receipt by Custodian. (a) The Custodian
shall promptly review each document in the Legal Files delivered to it
hereunder and, subject to Section 22(c) hereof, ascertain that all documents
required to be delivered to it pursuant to Section 2 hereof in respect of each
Receivable are in its possession and shall deliver to the Purchaser on the
Closing Date a certificate (the "Custodial Certificate"), in the form of
Exhibit C attached hereto, as to each Receivable listed in the Schedule of
Receivables, that (i) lists the Legal Files reviewed and any exceptions to the
foregoing; (ii) states that the documents set forth in Section 2(a) have been
reviewed by it and appear regular on their face; (iii) states that it has
compared the following items set forth in each Legal File to the information
contained in the Schedule of Receivables and found no exceptions other than as
listed in the Custodial Certificate: account number; Obligor name; make, model
and model year; Amount Financed; (iv) states that the signature block of the
Receivable contains an ink signature; (v) states that the Legal File contains a
chain of original and any intervening assignments of the Receivable and the
lien on the related Financed Vehicle from Dealer to Seller and Seller to blank;
(vi) states that all documents required to be delivered to it pursuant to
Section 2(a) hereof are in its possession; (vii) states that an original
executed Notification of Sale by Seller has been received by the Custodian and
(viii) states that an original executed Consent and copies of any partial
release UCC-3 financing statements executed in connection therewith have been
received by the Custodian. Any exceptions to any of the
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<PAGE> 5
foregoing shall be noted on an exception report to accompany the Custodial
Certificate.
(b) The Purchaser may designate any Person as the recipient of each
Custodial Certificate, Notice of Beneficial Ownership (as defined below) or
Custodian Confirmation Certificate (as defined below) of Custodian reflecting
the interest of the Purchaser. Such designation shall be made (or may be
changed) by the Purchaser in writing.
Section 5. Unfunded Receivables. (a) If a Receivable is not purchased by
the Purchaser because of a defect in the related Legal File, or if the
Purchaser gives written notice to the Custodian that it will not be purchasing
a specific contract for any other reason, the Custodian will return the Legal
File relating to the Receivable to the Seller (or such other person that the
Seller shall indicate in writing) at the written direction of the Seller within
two Business Days of such Closing Date, unless otherwise instructed in writing
by the Seller.
(b) If the Purchaser gives written notice to the Custodian that it will
not be purchasing all of the Receivables that it is scheduled to purchase on
the Closing Date, then the Custodian shall maintain custody of the Legal Files
relating to those Receivables not purchased until the Custodian receives a
written direction from the Seller instructing the Custodian to return such
Legal Files to the Seller. Upon receiving such written direction from the
Seller, the Custodian shall return such Legal Files to the Seller (or such
other Person that the Seller shall indicate in writing) within two Business
Days of receiving such direction.
Section 6. [Reserved.]
Section 7. Attachment of Legal Files. In the event the Seller, the
Purchaser, or the Custodian shall be served by a third party with any type of
levy, attachment, writ or garnishment with respect to any Receivable, or in the
event a third party shall institute any court proceeding by which any document
in the Legal File shall be required to be delivered otherwise than in
accordance with the provisions of this Agreement, the party which received such
service shall immediately deliver or cause to be delivered to
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<PAGE> 6
the other parties hereto copies of all court papers, orders, documents and
other materials concerning such proceedings. The Custodian shall continue to
hold and maintain all documents in the Legal File received by it pursuant to
the provisions of this Agreement pending an order of a court of competent
jurisdiction permitting or directing disposition thereof. Upon final
determination of such court, the Custodian shall dispose of documents in the
Legal File held by it as directed by such determination or, if no such
determination is made, in accordance with the provisions of this Agreement.
Expenses of the Custodian incurred as a result of the attachment of any
documents in the Legal File shall be borne directly by either (i) the Seller if
such expenses relate to a breach of the terms and conditions of the Purchase
Agreement or any action that arose prior to such sale or (ii) the Purchaser in
all other cases.
Section 8. Transfers of Beneficial Ownership Interest to Third Persons.
The Custodian acknowledges that the Purchaser may, but need not, transfer all
or part of its beneficial ownership interest in any or all Receivables as
collateral for a loan, pursuant to a repurchase transaction, or to a
third-party custodian pursuant to a repurchase transaction, or in a sale. The
Purchaser shall deliver to the Custodian the Notice to Custodian (as defined
below) at least twenty-four hours prior to any such transfer, which written
notice will provide that the Purchaser will transfer all or part of its
beneficial ownership interest in the Receivables identified on a schedule to
such notice (the "Notice Schedule") to a third person as well as the Custodial
Certificate relating to such Receivables, endorsed for transfer. Within
twenty-four (24) hours of receipt by the Custodian of such written notice, or
on the Transfer Date (as defined below), whichever is later, the Custodian
shall promptly (i) acknowledge by letter in the form of Exhibit D attached
hereto (a "Notice of Beneficial Ownership") to such third person that it is
holding the Receivables identified in the related Notice Schedule solely and
exclusively as the custodian for such third person and (ii) deliver to the
Purchaser or its designee a Certificate in the form of Exhibit E hereto (a
"Custodian Confirmation Certificate") indicating the Receivables, if any, held
pursuant to the aforementioned endorsed Custodial Certificate that shall be
retained by the Purchaser; provided, however, that the Custodian shall not be
required to deliver the Notice of Beneficial
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<PAGE> 7
Ownership or Custodian Confirmation Certificate until the Custodian has
received from the Purchaser appropriate schedules to be attached to the Notice
of Beneficial Ownership and the Custodian Confirmation Certificate. The notice
sent by the Purchaser to the Custodian shall be in substantially the form of
Exhibit F attached hereto (a "Notice to Custodian") and shall specify (i) the
name of the third person, (ii) the address of the third person which may be an
address in care of the Purchaser, (iii) the Notice Schedule and (iv) the
effective date of transfer (the "Transfer Date"). Upon receipt of a Notice to
Custodian from the Purchaser, the Custodian shall (a) retain possession and
custody of the Legal File with respect to the Receivables in the Notice
Schedule as bailee (as that term is used in Section 9-305 of the UCC) of and
custodian for such third person, and (b) make appropriate notations in the
Custodian's books and records reflecting that the Receivables identified in the
Notice Schedule are owned by such third person.
Subsequent transfers of beneficial ownership interests in the Receivables,
identified in the Notice Schedule by a predecessor third person, shall be
effected by delivery from such predecessor third person of a Notice to
Custodian specifying the subsequent third person to whom such Receivables have
been transferred, such subsequent third person's address and the Notice
Schedule identifying such transferred Receivables. Upon receipt of such Notice
to Custodian, the Custodian shall (a) promptly deliver a Notice of Beneficial
Ownership to the subsequent third person designated in the Notice to Custodian
received from the predecessor third person that it is acting solely and
exclusively as bailee (as that term is used in Section 9-305 of the UCC) of and
custodian for such subsequent third person, (b) make appropriate notations in
the Custodian's books and records reflecting that the Receivables identified in
the Notice Schedule are owned by such subsequent third person and (c) deliver
to such predecessor third person a Custodian Confirmation Certificate
reflecting such transfer.
The Custodian shall segregate and maintain continuous custody of such
Legal Files for the benefit of the third person to whom it has sent the Notice
of Beneficial Ownership and shall accept instructions from no other person with
respect to such Legal Files for so long as such third person has an interest in
such Receivables and until and unless otherwise instructed by such third
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<PAGE> 8
person. The Purchaser shall remain primarily liable for all of the Purchaser's
obligations with respect to such transferred Legal Files until the transferee
assumes the liabilities of the Purchaser hereunder, including those set forth
in Sections 9 and 22 hereof.
Section 9. Custodian Fees and Expenses; Successor Custodian. (a) As
compensation for its services hereunder, the Custodian shall be entitled to
receive its fees as set forth on that certain fee schedule addressed to the
Seller and dated May 23, 1997. The Custodian shall also be entitled to recover
out-of-pocket expenses (including, without limitation, legal fees and expenses)
and reasonable additional fees in connection with any further Receivable review
conducted in connection with or resulting from an assignment made by the
Purchaser under Section 17 of this Agreement. After payment of the Purchase
Price, the Seller shall not have any right or privilege to instruct the
Custodian with respect to the Legal Files.
(b) The Custodian or any successor Custodian may resign at any time by
giving 30 days' written notice to the Servicer and the Purchaser. Such
resignation shall take effect upon the appointment of a successor Custodian by
the Purchaser, which successor Custodian shall be a bank or trust company
acceptable to the Purchaser; provided, however, in the event a successor
Custodian is not appointed within 60 days of such notice of resignation, the
Custodian may petition a court of competent jurisdiction for the appointment of
a successor Custodian.
(c) The Purchaser may at any time remove and discharge the Custodian or
any successor Custodian thereafter appointed from the performance of its duties
under this Agreement by written notice from the Purchaser to the Custodian or
the successor Custodian, as applicable, with copies to the Servicer. Such
removal shall take effect upon the appointment of a successor Custodian by the
Purchaser; provided, however, in the event a successor Custodian is not
appointed within 60 days of such notice of resignation, the Custodian may
petition a court of competent jurisdiction for the appointment of a successor
Custodian.
(d) In connection with the appointment of a successor Custodian pursuant
to paragraphs (b) or (c) above, the Custodian
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agrees to deliver all Legal Files to such successor Custodian, provide a copy
of its records relating to the Receivables to such successor Custodian, and
otherwise cooperate with the appointment of such successor Custodian. The
Custodian shall not be liable for any acts or omissions of a successor
Custodian.
Section 10. Access to Documents. Upon reasonable prior written notice to
the Custodian, the Purchaser and their agents, accountants, attorneys, auditors
and potential or actual transferees under Section 8 hereof will be permitted,
at their own expense, during normal business hours to examine and copy the
Legal Files, documents, records and other papers in possession of or under the
control of the Custodian relating to any or all of the Receivables. Upon the
reasonable request of the Purchaser, the Custodian shall provide the Purchaser
with copies of the documents relating to any of the Receivables at the
Purchaser's sole cost and expense.
Section 11. Errors and Omission and Fidelity Insurance. The Custodian
shall, at its own expense, maintain at all times during the existence of this
Agreement (1) a fidelity bond, (2) theft of documents insurance, (3) forgery
insurance and (4) errors and omissions insurance; provided that the parties
hereto understand and acknowledge that the Custodian may maintain the foregoing
insurance by self-insuring or insuring through an Affiliate. All such
insurance shall be with standard coverage and subject to deductibles as is
customary for insurance typically maintained by money center banks which act as
custodians.
Section 12. Representations and Warranties of the Custodian. The
Custodian hereby represents and warrants to, and covenants with, the Seller,
the Servicer and the Purchaser that, as of the date hereof:
(a) The Custodian is an Illinois banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois and has the power and authority to own its assets and
to transact the business in which it is presently engaged.
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(b) The Custodian has the full power and authority to hold each
Receivable, as Custodian, and has the full power and authority to
execute, deliver and perform, and to enter into and consummate all
transactions contemplated by, this Agreement, has duly authorized the
execution, delivery and performance of this Agreement and has duly
executed and delivered this Agreement, and this Agreement constitutes a
legal, valid and binding obligation of the Custodian, enforceable against
it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(c) The consummation of the transactions contemplated hereby, and
the fulfillment of the terms hereof and thereof shall not conflict with,
result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of association, or by-laws of the Custodian, or any indenture,
agreement, or other instrument to which the Custodian is a party or by
which it shall be bound; nor result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, or other instrument, nor violate any law or any
order, rule, or regulation applicable to the Custodian of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Custodian or
its properties.
(d) All approvals, licenses, authorizations, consents, orders or
other actions or registrations with any person or any governmental body
or official required to be obtained on or prior to the date hereof in
connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof have been obtained.
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Section 13. Security Interest. If, pursuant to the Purchase Agreement,
the sale or purchase of the Receivables is deemed to be a loan or a transaction
other than a sale or purchase of the Receivables, and, as a result, the Seller
is deemed to have granted a security interest to the Purchaser in and to the
Receivables, and proceeds thereof, then the Notification of Sale by Seller in
respect of the Receivables delivered hereunder shall be deemed to be a
notification of pledge by the Seller, as pledgor, to the Purchaser, as pledgee,
and the books and records of the Custodian and the provisions of this Agreement
shall be deemed to have been amended, mutatis mutandis, to reflect the
foregoing.
Section 14. No Adverse Interests. By its acceptance of each Legal File,
the Custodian covenants and warrants to the Purchaser that: (a) upon receipt of
the Consent, the Custodian (in such capacity) holds no adverse interests, by
way of security or otherwise, in the related Receivable and (b) the Custodian
(in such capacity) hereby waives and releases any such interest in such
Receivable which it has or which it may thereafter acquire prior to the time of
release of such Receivable from the terms of this Agreement.
Section 15. Amendments. This Agreement may be amended from time to time
only by written agreement of the parties hereto.
Section 16. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same instrument.
Section 17. Assignment. This Agreement shall bind the parties hereto and
their respective successors. This Agreement may not be assigned by the Seller,
the Servicer or the Custodian without the prior written consent of the
Purchaser but may be assigned by the Purchaser without any consent, notice or
approval to or by the other party hereto.
Section 18. Effect of Invalidity of Provisions. In case any one or more
of the provisions contained in this Agreement should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions
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contained herein or therein shall in no way be affected, prejudiced or
disturbed thereby.
Section 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 20. [Reserved.]
Section 21. Notices. Any notices, consents, directions and other
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered at, mailed by
overnight express and sent to, or telecopied to the respective addresses or
facsimile numbers, as the case may be, of the parties hereto set forth on the
signature page hereof or to such other address or number as any party shall
give in a notice to the other parties pursuant to this Section.
Section 22. Limitation of Liability; Indemnification. (a) The Custodian
undertakes to perform only such duties and obligations as are specifically set
forth in this Agreement, it being expressly understood by the Purchaser and the
Seller that there are no implied duties or obligations under this Agreement.
Neither the Custodian nor any of its officers, directors, employees or agents
shall be liable, directly or indirectly, for any damages or expenses arising
out of the services performed under this Agreement other than damages which
result from the negligence or willful misconduct of it or them.
(b) Except as described in the following sentence, the Purchaser agrees
to indemnify and hold the Custodian, its officers, directors, employees and
agents harmless against any and all losses, liabilities, damages, fees
(including, without limitation, reasonable attorneys' fees and expenses), costs
and expenses that may be imposed or incurred by or assessed against it or them,
in the absence of its or their negligence or willful misconduct that in any way
relates to or arises out of the services performed by it or them under this
Agreement, the Purchase Agreement or the Servicing Agreement or any action
taken or not taken by it or them in accordance with this Agreement, the
Purchase Agreement or the Servicing Agreement. In the event of an attachment
of a Legal
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File, the party hereto served as described in Section 7 hereof shall indemnify
the Custodian as provided for in the preceding sentence with respect to any and
all costs and expenses incurred by the Custodian caused by such attachment.
(c) Subject to Section 4 hereof, the Custodian makes no warranty or
representation and shall have no responsibility as to the completeness,
validity, sufficiency, value, genuineness, ownership or transferability of the
Receivables and the Legal Files and will not be required to and will not make
any representations as to the validity or value of any of the Receivables and
the Legal Files. Subject to Section 4 hereof, the Custodian makes no warranty
or representation and shall have no responsibility (i) as to whether a
Receivable has been originally executed and (ii) as to whether any such
signature has been duly authorized.
(d) Except as otherwise provided in Section 22(a) hereof, the Custodian
shall not be liable for any error of judgment, or for any act done or step
taken or omitted by it, in good faith, or for any mistakes of fact or law, or
for anything which it may do or refrain from doing in connection herewith.
(e) The Custodian may rely on and shall be protected in acting in good
faith upon any certificate, instrument, opinion, notice, letter, telegram or
other document delivered to it and which in good faith it believes to be
genuine and which has been signed by the proper party or parties. The
Custodian may rely on and shall be protected in acting in good faith upon the
written instructions of any designated officer of the Seller, to the extent the
Seller is expressly permitted herein to give instructions, the Servicer or the
Purchaser.
(f) The Custodian may at its own expense consult counsel satisfactory to
it and the advice and opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or
opinion of such counsel.
(g) The Custodian shall not be required 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 its rights or
13
<PAGE> 14
powers, if the Custodian believes that repayment of such funds (repaid in
accordance with the terms of this Agreement) or adequate indemnity against such
risk or liability is not reasonably assured to it.
Section 23. Merger, Conversion, Consolidation or Succession to Business
of Custodian. Any Person into which the Custodian may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Custodian shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Custodian, shall be the successor of the Custodian hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
Section 24. Termination. This Agreement shall terminate upon the receipt
of written notice from the Purchaser to the Custodian of its intent to
terminate this Agreement. Upon such termination, the Custodian shall promptly
transfer the Legal Files as directed by the Purchaser in such written notice.
Termination of the Custodian's obligations hereunder shall not in any event be
effective until the Legal Files are delivered as so directed. Notwithstanding
any such termination, the indemnity obligations and the representations and
warranties made hereunder shall survive the termination of this Agreement.
Section 25. Construction. The headings in this Agreement are for
convenience only and are not intended to influence its construction.
References to Sections and Exhibits in this Agreement are to the Sections of
and Exhibits to this Agreement. The Exhibits are part of this Agreement. In
this Agreement, the singular includes the plural, the plural the singular, and
the words "and" and "or" are used in the conjunctive or disjunctive as the
sense and circumstances may require.
14
<PAGE> 15
IN WITNESS WHEREOF, the Seller, the Purchaser, the Servicer and the
Custodian have caused this Agreement to be duly executed as of the date and
year first above written.
GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC., as Purchaser
By:
-------------------------
Name:
Title:
Address: 600 Steamboat Road
Greenwich, CT 06830
Telephone: (203) 622-5620
Facsimile: (203) 629-8363
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Seller
By:
-------------------------
Name:
Title:
Address: 570 Lake Cook Road
Suite 126
Deerfield, IL 60015
Telephone: (847) 948-9300
Facsimile: (847) 948-9303
FIRST MERCHANTS ACCEPTANCE CORPORATION,
as Servicer
By:
-------------------------
Name:
Title:
Address: 570 Lake Cook Road
Suite 126
<PAGE> 16
Deerfield, IL 60015
Telephone: (847) 948-9300
Facsimile: (847) 948-9303
HARRIS TRUST AND SAVINGS BANK, as
Custodian
By:
----------------------
Name:
Title:
Address: 311 West Monroe Street
12th Floor
Chicago, IL 60606
Attention: Indenture Trust Division
Telephone: (312) 461-6030
Facsimile: (312) 461-3525
<PAGE> 17
EXHIBIT A
NOTIFICATION OF SALE BY SELLER
To: Greenwich Capital Financial Harris Trust and Savings Bank
Products, Inc. 311 West Monroe Street
600 Steamboat Road 12th Floor
Greenwich, Connecticut 06830 Chicago, IL 60606
Attention: Attention: Indenture Trust
Division
The undersigned (the "Seller") hereby notifies you that certain of
the Receivable documents (collectively, the "Legal File") relating to the
Receivables specified in the attached Schedule of Receivables (the
"Receivables") which are required to be delivered to Harris Trust and
Savings Bank, as custodian and paying agent (the "Custodian"), under the
Custodian Agreement (defined below) have been deposited by us with the
Custodian pursuant to a Receivables Purchase Agreement (the "Agreement")
dated as of June 17, 1997, between the Seller and Greenwich Capital
Financial Products, Inc. (the "Purchaser"), are now and hereafter to be
held by the Custodian pursuant to the provisions of a Custodian
Agreement, dated as of June 17, 1997, among the Seller, the Purchaser,
the Servicer identified therein and the Custodian (the "Custodian
Agreement") until released or transferred as provided therein. The
Seller further certifies to the Purchaser and the Custodian that all
conditions precedent to the delivery of the Receivables under the
Agreement have been met and that the representations and warranties with
respect to the Receivables set forth in the Agreement are true and
correct as if made on and as of the date hereof.
A sale of the Receivables has been made to the Purchaser pursuant to
the Agreement. The Consent releasing the liens identified therein has
been executed and delivered to us with respect to the Receivables and is
being sent to you simultaneously herewith. The Custodian is hereby
instructed to enter the Purchaser's name and address in its records as
the owner of such Receivables and to promptly provide to the Purchaser an
acknowledgment thereof by signing in the space
A-1
<PAGE> 18
provided below and delivering an original hereof to the Purchaser at the
above address. Such acknowledgment will serve to confirm that such
Receivables and this Notification of Sale by Seller have been duly
received by the Custodian and that (i) such Receivables and the documents
set forth in Section 2 of the Custodian Agreement have been reviewed by
the Custodian and duly
A-2
<PAGE> 19
accepted for deposit by the Custodian and (ii) such Receivables are being
held by the Custodian as bailee, as that term is used in Section 9-305 of
the UCC, for the Purchaser (in its capacity as owner thereof).
In the event any such sale is deemed to be other than a sale of the
Receivables then, in accordance with the Agreement and the Custodian
Agreement, delivery of this Notification of Sale by Seller shall be
deemed to be delivery of a notification of pledge by the Seller, as
pledgor, to the Purchaser, as pledgee, and the provisions hereof shall be
deemed to have been amended, mutatis mutandis, to reflect such pledge.
FIRST MERCHANTS ACCEPTANCE
CORPORATION
By
-----------------------
Name:
Title:
Date:
ACKNOWLEDGED:
HARRIS TRUST AND SAVINGS BANK,
as Custodian
By
----------------------------
Name:
Title:
Date:
A-3
<PAGE> 20
EXHIBIT B
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: Harris Trust and Savings Bank, as Custodian
311 West Monroe Street, 12th Floor
Chicago, IL 60606
Attention: Indenture Trust Division
Re: CUSTODIAN AGREEMENT dated as of June 17, 1997, among
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("GCFP"),
FIRST MERCHANTS ACCEPTANCE CORPORATION,
and
HARRIS TRUST AND SAVINGS BANK,
as Custodian
Ladies and Gentlemen:
In connection with the administration of the Receivables held by you as
the Custodian for GCFP, we request the release, and acknowledge receipt, of the
(Legal File/specify documents) for the Receivable described below, for the
reason indicated. Terms not otherwise defined herein are used as defined in
the above-referenced Custodian Agreement.
Obligor's Name, Address & Zip Code:
Receivable Number:
Reason for Requesting Documents (check one or more)
1. Receivable Paid in Full (1)
- -----
2. Receivable Repurchased (1)
- -----
3. Receivable Liquidated (1)
- -----
- --------------------
(1) If this box is checked, the undersigned also represents and warrants that
the related receivable has been paid in full to the Purchaser.
B-1
<PAGE> 21
4. Receivable in Repossession
- -----
5. Other (explain)
- -----
If item 1, 2 or 3 above is checked, and if all or part of the Legal File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to
the above specified Receivable.
If item 4 or 5 above is checked, upon our return of the above document(s) to
you as the Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
------------------------------
By
---------------------------
Name:
---------------------
Title:
---------------------
Date:
---------------------
DOCUMENTS RETURNED TO THE CUSTODIAN:
HARRIS TRUST AND SAVINGS BANK, as Custodian
By
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date:
--------------------------------
[only required if release made in connection with a liquidation:
CONSENTED TO BY:
GREENWICH CAPITAL FINANCIAL PRODUCTS,
INC., as Purchaser
By:
-----------------------------
Name:
Title:]
B-2
<PAGE> 22
EXHIBIT C
CUSTODIAL CERTIFICATE
[Date]
Pool No._________________
Amount Financed:__________
Attention:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: CUSTODIAN AGREEMENT, dated as of June 17, 1997 among
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Purchaser"),
FIRST MERCHANTS ACCEPTANCE CORPORATION,
and
HARRIS TRUST AND SAVINGS BANK,
as Custodian
Ladies and Gentlemen:
In accordance with the provisions of Section 4 of the above-referenced
Custodian Agreement, the undersigned, as Custodian, hereby certifies, subject
to any exceptions noted on an accompanying exception report, that, as to each
Receivable listed in the Schedule of Receivables attached hereto, it has
reviewed the Legal File and has determined that (i) all documents required to
be delivered to it pursuant to Section 2(a) of the Custodian Agreement are in
the Custodian's possession; (ii) the documents set forth in Section 2(a) have
been reviewed by it and appear regular on their face; (iii) it has compared the
following items set forth in each Legal File to the information contained in
the Schedule of Receivables and found no exceptions other than as listed in
this Custodial Certificate: account number; Obligor name; make, model and model
year; Amount Financed; (iv) the signature block of the Receivable contains a
manual ink signature;
C-1
<PAGE> 23
(v) the Legal File contains a chain of original and any intervening assignments
of the Receivable and the lien on the related Financed Vehicle from Dealer to
Seller and Seller to blank; (vi) it has received an original executed
Notification of Sale by Seller in the form attached to the Custodian Agreement
as Exhibit A; and (vii) it has received an original executed Consent and copies
of the partial release UCC-3 financing statements executed in connection
therewith. Terms not otherwise defined herein are used as defined in the
above-referenced Custodian Agreement.
The Custodian hereby confirms it is holding such Receivables as bailee and
custodian exclusively for the Purchaser pursuant to the above-referenced
Custodian Agreement.
This Custodial Certificate is not divisible or negotiable. However, you
or an affiliate may transfer this Custodial Certificate by special endorsement
as collateral for a loan or pursuant to a repurchase transaction or to a
third-party Custodian pursuant to a repurchase transaction. Any party that
takes this Custodial Certificate from you or your affiliate by special
endorsement may only transfer it by a second endorsement in your or your
affiliate's favor.
The Custodian will accept and act on instructions with respect to the
Receivables subject hereto upon surrender of this Custodial Certificate at its
office at 311 West Monroe Street, Lower Level B2 Vault, Chicago, Il 60603,
Attention: Diane Moser.
HARRIS TRUST AND SAVINGS BANK, as
Custodian
By
-------------------------------
Name:
Title:
[Greenwich Capital Financial Products, Inc., by its signature below,
hereby transfers those Receivables set forth on the Notice Schedule attached
hereto to .]
------------------------------------
[GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
C-2
<PAGE> 24
By
-------------------------------
Name:
Title:]
C-3
<PAGE> 25
SCHEDULE OF RECEIVABLES
<PAGE> 26
EXHIBIT D
NOTICE OF BENEFICIAL OWNERSHIP
To:
cc: Greenwich Capital Financial Products, Inc.
From:
Date:
The undersigned hereby acknowledges that as of___________ it is in
possession of each Legal File with respect to the Receivables identified in the
Notice Schedule attached to the Notice to the Custodian, dated [date] from
[transferor] (a copy of which Notice is attached hereto) and it is holding such
Legal Files as bailee of and custodian for [transferee] subject to the terms of
the Custodian Agreement, dated as of June 17, 1997 (the "Custodian Agreement"),
among Greenwich Capital Financial Products, Inc., First Merchants Acceptance
Corporation and Harris Trust and Savings Bank. The undersigned will act solely
on the instructions of [transferee] with respect to such Receivables.
No person or entity other than [transferee] may rely or shall be entitled
to rely on this acknowledgment.
HARRIS TRUST AND SAVINGS BANK, as Custodian
By
---------------------------------
Name:
Title:
The undersigned, the transferee of certain Receivables from [transferor]
hereby agrees that it is holding such Receivables subject to the terms and
conditions set forth in the Custodian Agreement.
[Transferee]
D-1
<PAGE> 27
By
----------------------------
Name:
Title:
D-2
<PAGE> 28
EXHIBIT E
CUSTODIAN CONFIRMATION CERTIFICATE
To:
From:
Date:
The undersigned hereby confirms that as of ______________it is in
possession of each Legal File with respect to the Receivables identified on
Schedule A hereto and that it is holding such Legal Files as bailee of and
custodian for _______________, subject to the terms of the
Custodian Agreement, dated as of June 17, 1997, among Greenwich Capital
Financial Products, Inc., First Merchants Acceptance Corporation and Harris
Trust and Savings Bank.
HARRIS TRUST AND SAVINGS BANK, as
Custodian
By
--------------------------
Name:
Title:
E-1
<PAGE> 29
EXHIBIT F
NOTICE TO THE CUSTODIAN
To:
From:
Date:
You are hereby notified that the undersigned has assigned its right, title
and interest in and to the Receivables and the Legal Files related thereto
identified in the Schedule attached hereto (the "Notice Schedule") to
[transferee's name and address] and the undersigned hereby releases all right,
title and interest in and to such Receivables as of _____________________.
You are hereby instructed to hold such Receivables and Legal Files pursuant to
the terms of the Custodian Agreement, dated as of June 17, 1997 among Greenwich
Capital Financial Products, Inc., First Merchants Acceptance Corporation and
Harris Trust and Savings Bank for the sole and exclusive benefit of [name of
transferee] until instructed otherwise by [the transferee].
By
---------------------------
Name:
Title:
F-1
<PAGE> 1
EXHIBIT 10.3
SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 1997-2,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller,
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Originator and Sub-Servicer,
LSI FINANCIAL GROUP,
Servicer
and
HARRIS TRUST AND SAVINGS BANK,
Indenture Trustee, Backup Servicer and Custodian
Dated as of June 1, 1997
i
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Definitions
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 22
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables 23
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants 24
SECTION 3.02. Representations and Warranties of the Seller 24
SECTION 3.03. Repurchase upon Breach 25
SECTION 3.04. Custody of Receivable Files and Legal Files 25
SECTION 3.05. Duties of Servicer as Custodian 27
SECTION 3.06. Instructions; Authority to Act 28
SECTION 3.07. Servicer's and Custodian's Indemnification and Liability 28
SECTION 3.08. Effective Period and Termination 29
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer 30
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables 31
SECTION 4.03. Realization upon Receivables 32
SECTION 4.04. Physical Damage Insurance 32
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles 32
SECTION 4.06. Covenants of Servicer 33
SECTION 4.07. Purchase of Receivables upon Breach 34
SECTION 4.08. Servicing Fee 34
SECTION 4.09. Servicer's Certificate 34
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event 35
SECTION 4.11. Annual Independent Accountants' Report 35
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables 36
SECTION 4.13. Monthly Tape 36
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4.14. Retention and Termination of Servicer 37
SECTION 4.15. Fidelity Bond 37
SECTION 4.16. Duties of the Sub-Servicer 37
ARTICLE V
Distributions; Spread Account; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Lock-box Account 38
SECTION 5.02. Accounts 38
SECTION 5.03. Application of Collections 41
SECTION 5.04. Purchase Amounts 41
SECTION 5.05. Transfers from the Spread Account and the Reserve
Account 41
SECTION 5.06. Distributions 42
SECTION 5.07. Claims Upon the Policy; Policy Payments Account 44
SECTION 5.08. Notices to the Note Insurer 45
SECTION 5.09. Rights in Respect of Insolvency Proceedings 45
SECTION 5.10. Effect of Payments by the Note Insurer; Subrogation 46
SECTION 5.11. Statements to Securityholders 47
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller 49
SECTION 6.02. Corporate Existence 50
SECTION 6.03. Liability of Seller; Indemnities 50
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller 50
SECTION 6.05. Limitation on Liability of Seller and Others 51
SECTION 6.06. Seller May Own Securities 51
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer 51
SECTION 7.02. Indemnities of Servicer 53
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer 54
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer and
Others 55
SECTION 7.05. Appointment of Sub-servicer 56
SECTION 7.06. Servicer and Backup Servicer Not to Resign 56
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events 57
SECTION 8.02. Consequences of a Servicer Termination Event 58
SECTION 8.03. Appointment of Successor 58
SECTION 8.04. Notification to Noteholders and Certificateholders 59
SECTION 8.05. Waiver of Past Defaults 59
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables; Optional Redemption
on Notes 60
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment 60
SECTION 10.02. Protection of Title to Trust 61
SECTION 10.03. Notices 63
SECTION 10.04. Assignment by the Seller or the Servicer 64
SECTION 10.05. Limitations on Rights of Others 64
SECTION 10.06. Severability 64
SECTION 10.07. Separate Counterparts 64
SECTION 10.08. Headings 64
SECTION 10.09. Governing Law 64
SECTION 10.10. Assignment by Issuer 64
SECTION 10.11. Nonpetition Covenants 64
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee 65
SECTION 10.13. Originator Payment Obligation 65
SECTION 10.14. Insurer Default 66
</TABLE>
SCHEDULE A Schedule of Receivables
SCHEDULE B Location of Receivable Files and Legal Files
SCHEDULE C Documentation Checklist
SCHEDULE D Backup Servicer Fee
SCHEDULE E Deficiency Fee
SCHEDULE F Indenture Trustee Fee
SCHEDULE G Owner Trustee Fee
EXHIBIT A Representations and Warranties of First Merchants
EXHIBIT B Form of Distribution Date Statement to Securityholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Policy
iii
<PAGE> 5
EXHIBIT E Custodian Fee Letter
EXHIBIT F Form of Request for Release
iv
<PAGE> 6
SALE AND SERVICING AGREEMENT dated as of June 1, 1997, among FIRST
MERCHANTS AUTO TRUST 1997-2, a Delaware business trust (the "Issuer"),
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a Delaware corporation
(the "Seller"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware
corporation, as originator (in such capacity, the "Originator") and as
sub-servicer (in such capacity, the "Sub-servicer"), LSI Financial Group, a
California corporation (the "Servicer"), and HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation, as indenture trustee (in such capacity,
the "Indenture Trustee"), as backup servicer (in such capacity, the "Backup
Servicer") and as custodian (in such capacity, the "Custodian").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle 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 the Servicer 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:
"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.
"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).
<PAGE> 7
"Backup Servicer Fee" means, with respect to any Distribution Date, the
fee set forth on Schedule D.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Indenture, this Agreement, the Receivables Purchase Agreement, the
Administration Agreement, the Note Depository Agreement, the Spread Account
Agreement, the Policy, the Insurance Agreement, the Indemnification Agreement,
the Premium Letter, the Sub-servicing Agreement and other documents and
certificates delivered in connection therewith.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or any other day on which commercial banking institutions in Little
Rock, Arkansas, Memphis, Tennessee, New York, New York, Chicago, Illinois or
any other city in which the corporate trust office of the Indenture Trustee is
located are authorized or required by law, executive order or governmental
decree to be closed.
"Certificate Balance" equals the Initial Certificate Balance reduced by
all amounts allocable to principal (including, without limitation, any
Certificateholders' Additional Principal Distribution Amount) previously
distributed to Certificateholders.
"Certificate Balance Floor" means, with respect to any Distribution Date
(a) while the Notes are outstanding, an amount equal to the product of the Pool
Factor and the Certificate Balance as of the Closing Date and (b) after the
Notes have been paid in full, zero.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Final Scheduled Distribution Date" means the November 15,
2002 Distribution Date.
"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.
"Certificate Sale Date" means the earlier of (a) the date the Reserve
Account Initial Deposit is deposited in the Reserve Account and (b) the
earliest date on which any Trust Certificate is sold to an investor (except GCM
or an affiliate thereof).
"Certificateholders" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Additional Principal Distribution Amount" means,
with respect to any Distribution Date to and including the Distribution Date on
which the Certificate Balance is reduced to zero, the Reserve Account Release
Amount for such Distribution Date; provided,
2
<PAGE> 8
however, that the Certificateholders' Additional Principal Distribution Amount
for any Distribution Date shall not exceed the amount necessary to reduce the
Certificate Balance to the Certificate Balance Floor for such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Certificateholders' Monthly Interest Distributable Amount
for the immediately preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date exceeds the amount in respect of interest actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on the amount of interest due but not paid to the Certificateholders
on such preceding Distribution Date, to the extent permitted by law, at the
Pass-Through Rate for the related Interest Accrual Period; provided that,
notwithstanding anything to the contrary, for each Distribution Date until the
Distribution Date after the Distribution Date following the Certificate Sale
Date, the Certificateholders' Interest Carryover Shortfall shall not include
the component thereof which represents interest on unpaid Certificateholders'
Monthly Interest Distributable Amounts.
"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 (i) with
respect to the first Distribution Date, interest accrued on the Certificates
for the related Interest Accrual Period at the Pass-Through Rate on the
Certificate Balance on the Closing Date and (ii) with respect to any
Distribution Date after the first Distribution Date, interest accrued on the
Certificates for the related Interest Accrual Period at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date,
after giving effect to all distributions of principal to the Certificateholders
on or prior to such preceding Distribution Date; provided that, until the first
Distribution Date on or after the Certificate Sale Date, the
Certificateholders' Monthly Interest Distributable Amount shall accrue as
provided herein but shall be payable only to the extent funds are available
therefore pursuant to Section 5.06(b)(8) (after giving effect to the
distributions in clauses (1) through (7) of Section 5.06(b)).
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date (i) prior to the Distribution Date on which
the Notes are paid in full, zero, and (ii) on or after the Distribution Date on
which the Notes are paid in full, 100% of the Regular Principal Distribution
Amount (less, on the Distribution Date on which the Notes are paid in full, the
portion thereof payable on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, with respect to
any Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Certificateholders' Monthly Principal Distributable Amount
for the immediately preceding
3
<PAGE> 9
Distribution Date and any outstanding Certificateholders' Principal Carryover
Shortfall on such preceding Distribution Date exceeds the amount in respect of
principal (other than any amount in respect of Certificateholders' Additional
Principal Distribution Amount for such Distribution Date) actually deposited in
the Certificate Distribution Account on such preceding 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 for such Distribution Date; provided, however,
that the Certificateholders' Principal Distributable Amount shall not exceed
the Certificate Balance. In addition, on the Certificate Final Scheduled
Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include 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).
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.02(c).
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding such Distribution Date. Any amount stated as of the
last day of a Collection Period or as of the first day of a Collection Period
shall give effect to the following calculations as determined as of the close
of business on such last day: (1) all applications of collections and (2) all
distributions to be made on the following Distribution Date.
"Contract" means a motor vehicle retail installment sale contract and any
dealer assignment thereof.
"Controlling Party" means (i) as long as the Policy is in effect and no
Note Insurer Default has occurred and is continuing, the Note Insurer, (ii) if
a Note 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 and (iii) if the Notes have been paid in full and there are no
amounts owed to the Note Insurer under the Policy, the Owner Trustee for the
benefit of the Certificateholders.
"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).
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"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 (other than a Liquidated 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 (without giving effect to clause (2) of the definition thereof) 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 the Certificate Final
Scheduled 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 the Certificate Final Scheduled Distribution Date equal to the funds
remaining in the Collection Account and the Reserve Account on such date after
the distribution by the Indenture Trustee of all amounts required pursuant to
clauses (1) through (11) of Section 5.06(b).
"Custodian" means Harris Trust and Savings Bank and its successors in
interest, when acting in its capacity as Custodian under this Agreement.
"Custodian Fee" means, with respect to any Distribution Date, the fee set
forth in the letter dated May 23, 1997, attached hereto as Exhibit E.
"Cutoff Date" means June 1, 1997.
"Dealer" means the dealer or other entity who sold a Financed Vehicle and
who originated the related Receivable and assigned it to (x) First Merchants,
(y) Magna or (z) any other Person approved by First Merchants, pursuant to a
Dealer Agreement.
"Dealer Agreement" means (a) an agreement between First Merchants and a
Dealer pursuant to which such Dealer sells Contracts to First Merchants
or (b) collectively, (i) an agreement between (x) Magna or (y) an affiliate of
First Merchants and a Dealer pursuant to which such Dealer sells Receivables to
Magna or such affiliate of First Merchants, as the case may be, and (ii) an
agreement between (x) Magna or (y) an affiliate of First Merchants and First
Merchants pursuant to which Magna or such affiliate of First Merchants, as the
case may be, sells Receivables to First Merchants (or otherwise assigns
Receivables to First Merchants' designee).
"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.
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"Deficiency Claim Date" means, with respect to each Distribution Date,
the third Business Day preceding such Distribution Date.
"Deficiency Fee" means, with respect to any Collection Period, the fee set
forth on Schedule E.
"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,
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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.
"Determination Date" means, with respect to each Distribution Date, the
earlier of (i) the eighth calendar day of the month in which such Distribution
Date occurs (or if such eighth day is not a Business Day, the next succeeding
Business Day) and (ii) the fifth 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 July 15, 1997.
"Eligible Deposit Account" means wither (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 The Chase Manhattan Bank so long as it
shall be Paying Agent under the
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<PAGE> 13
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 The Chase Manhattan 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);
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(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;
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(F) in the case of a repurchase obligation of a Guaranteed
Counterparty, the following conditions shall also be satisfied:
(i) the Indenture Trustee or the Issuer, as applicable,
shall have received an opinion of counsel (which may be in-house
counsel) to the effect that the guarantee of the related Rated
Holding Company is a legal, valid and binding agreement of the
Rated Holding Company, enforceable in accordance with its terms,
subject as to enforceability to bankruptcy, insolvency,
reorganization and moratorium or other similar laws affecting
creditors' rights generally and to general equitable principles;
(ii) the Indenture Trustee or the Issuer, as applicable,
shall have received (x) an incumbency certificate for the signer
of such guarantee, certified by an officer of such Rated Holding
Company and (y) a resolution, certified by an officer of the
Rated Holding Company, of the board of directors (or applicable
committee thereof) of the Rated Holding Company authorizing the
execution, delivery and performance of such guarantee by the
Rated Holding Company;
(iii) the only conditions to the obligation of such Rated
Holding Company to pay on behalf of the Guaranteed Counterparty
shall be that the Guaranteed Counterparty shall not have paid
under such repurchase obligation when required (it being
understood that no notice to, demand on or other action in
respect of the Guaranteed Counterparty is necessary) and that the
Indenture Trustee or the Issuer shall make a demand on the Rated
Holding Company to make the payment due under such guarantee;
(iv) the guarantee of the Rated Holding Company shall be
irrevocable with respect to such repurchase obligation and shall
not be subordinated to any other obligation of the Rated Holding
Company;
(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 Note Insurer;
(G) the repurchase obligation shall require that the repurchase
obligation be overcollateralized and shall provide that, upon any
failure to maintain such overcollateralization, the repurchase
obligation shall become due and payable, and unless the repurchase
obligation is satisfied immediately, the collateral subject to the
repurchase agreement shall be liquidated and the proceeds applied to
satisfy the unsatisfied portion of the repurchase obligation; and
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(h) any other investment with respect to which the Issuer 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 Certificates or result in an
increased capital charge to the Note Insurer.
"Eligible Servicer" means First Merchants, LSI, the Backup Servicer, 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, or any other Person which at the time of its appointment as
Servicer is acceptable to the Note Insurer, the Backup Servicer and the Rating
Agencies (in each case, as evidenced by their prior written consent).
"Endorsement" shall have the meaning specified in the Policy.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financed Vehicle" means an automobile, light-duty truck, van or minivan,
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.
"GCM" means Greenwich Capital Markets, Inc. The address of GCM is 600
Steamboat Road, Greenwich, Connecticut 06830, Attention: Bruce Katz (facsimile
no. (203) 629-4640).
"Guaranteed Noteholders' Principal Distributable Amount" means, with
respect to each Distribution Date, an amount equal to the product of 88.002211%
and the Noteholders' Principal Distributable Amount for such Distribution Date.
In addition, on the Note Final Scheduled Distribution Date, the Guaranteed
Noteholders' Principal Distributable Amount shall include the amount necessary
to reduce the Outstanding Amount of the Notes to zero.
"Guaranteed Payment" means, with respect to each Distribution Date, an
amount equal to the Noteholders' Interest Distributable Amount plus the
Guaranteed Noteholders' Principal Distributable Amount.
"Holder" means "Noteholder" in connection with the Notes and
"Certificateholder" in connection with the Certificates.
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"Indenture" means the Indenture dated as of June 1, 1997, 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.
"Indenture Trustee Fee" means, with respect to any Distribution Date, the
fee set forth on Schedule F.
"Initial Certificate Balance" means $8,582,293.55.
"Initial Lockbox Account" shall have the meaning specified in Section
5.02.
"Initial Pool Balance" means $71,532,293.55.
"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 June 1, 1997 among the Note 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 Accrual Period" means, with respect to any Distribution Date,
the period from and including the 15th day of the preceding calendar month (or,
in the case of the first Distribution Date, from and including the Cutoff Date)
to and including the 14th day of the calendar month in which such Distribution
Date occurs.
"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
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<PAGE> 18
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) that portion of all collections on Receivables allocable to
extension fees, (e Investment Earnings for the related Distribution Date, (f)
Recoveries for such Collection Period to the extent allocable to interest and
(g) with respect to each Rule of 78s Receivable that is prepaid in full during
the related Collection Period, all collections on such Rule of 78s Receivable in
excess of the outstanding principal balance of such Rule of 78s Receivable and
accrued interest thereon (calculated pursuant to the actuarial method);
provided, however, that in calculating the Interest Distribution Amount the
following will be excluded: all payments and proceeds (including Liquidation
Proceeds and Recoveries) 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 1997-2.
"Legal Files" means, with respect to each Receivable, the following
documents held by the Custodian pursuant to Section 3.04(a): the fully
executed original of such Receivable with fully executed assignment from the
related Dealer to First Merchants (and any intervening assignments) (together
with any agreements modifying the Receivable, including, without limitation,
any extension agreements), a fully executed assignment in blank from First
Merchants and the fully executed Lien Certificate (if such Lien Certificate has
been issued by the relevant state motor vehicle authority).
"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.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification issued to a
secured party.
"Liquidated Receivable" means any Receivable or with respect to which any
of the following shall have occurred: (i) the related Financed Vehicle has
been repossessed for 90
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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 during the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the sum of any amounts reasonably 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 Processing Agreement" means the Local Collection
Account Processing Agreement dated as of June 20, 1997, between the Paying
Agent, the Sub-servicer and Harris Trust and Savings Bank, not in its
individual capacity, but solely in the capacities identified therein, as the
same may be amended, supplemented or otherwise modified pursuant to the terms
thereof.
"Lockbox Account" shall have the meaning specified in Section 5.01.
"Lockbox Agreement" means the agreement between First Tennessee, National
Association and the Indenture Trustee and any other instrument or agreement
relating to the Lockbox Account, in form and substance acceptable to (a) the
Note Insurer, (b) if a Note Insurer Default shall have occurred and be
continuing, to the Holders of a majority of the Outstanding Amount of the Notes
or (c) if the Notes have been paid in full and the Note Insurer has been paid
all amounts owed to it under the Insurance Agreement, to Certificateholders
holding in aggregate Certificates evidencing a majority of the Certificate
Balance.
"Lockbox Bank" means First Tennessee, National Association or any other
depository institution named by the Servicer and, (a) so long as a Note Insurer
Default shall not have occurred and be continuing, acceptable to the Note
Insurer, (b) if a Note Insurer Default shall have occurred and be continuing,
to the Holders of a majority of the Outstanding Amount of the Notes or (c) if
the Notes have been paid in full and the Note Insurer has been paid all amounts
owed to it under the Insurance Agreement, to Certificateholders holding in
aggregate Certificates evidencing a majority of the Certificate Balance.
"LSI" means LSI Financial Group, a California corporation and its
successors in interest.
"Magna" means Magna Bank of St. Louis, a Missouri banking corporation, and
its successors and assigns.
"Master Spread Account Agreement" means the Master Spread Account
Agreement dated as of March 1, 1996, as amended by amendments thereto dated May
1, 1996 and
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March 1, 1997, among FMARC II, as depositor, the Note Insurer and Harris
Trust and Savings Bank, as trustee and collateral agent.
"Modification Level" shall have the meaning set forth in the Insurance
Agreement.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Note" shall have the meaning specified in the Indenture.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.02(c).
"Note Final Scheduled Distribution Date" means the November 15, 2002
Distribution Date.
"Note Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or its
successor.
"Note Insurer Default" means any one of the following events shall have
occurred and be continuing:
(a) the Note Insurer shall have failed to make a required payment when
due under the Policy;
(b) the Note 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 Note 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 Note Insurer
or of all or any material portion of its property.
"Note Pool Factor" means, with respect to the 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 the Notes (after giving effect to any
reductions thereof to be made on the immediately following Distribution Date)
divided by the original Outstanding Amount of the Notes. The
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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 the
Notes.
"Note Rate" means 6.85% per annum.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Noteholders' Monthly Interest Distributable Amount for the
immediately preceding Distribution Date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding Distribution Date exceeds the
amount in respect of interest 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 Noteholders on such preceding Distribution
Date, to the extent permitted by law, at the Note Rate for the related Interest
Accrual Period.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and
the Basic Documents, interest with respect to the Notes shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Monthly Interest Distributable Amount" means, (i) with
respect to the first Distribution Date, interest accrued for the related
Interest Accrual Period at the Note Rate on the Outstanding Amount of the Notes
on the Closing Date and (ii) with respect to any Distribution Date after the
first Distribution Date, interest accrued for the related Interest Accrual
Period at the Note Rate on the Outstanding Amount of the Notes on the
immediately preceding Distribution Date, after giving effect to all
distributions of principal to the Noteholders on or prior to such preceding
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, 100% of the Regular Principal Distribution Amount for such
Distribution Date; provided, however, that the Noteholders' Principal
Distributable Amount shall not exceed the Outstanding Amount of the Notes. In
addition, on each Distribution Date, any unpaid portion of the Noteholders'
Principal Distributable Amount from one or more prior Distribution Dates shall
not constitute part of the Noteholders' Principal Distributable Amount on the
current Distribution Date (other than any portion thereof constituting a portion
of the Guaranteed Noteholders' Principal Distributable Amount). On the Note
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 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.
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"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, the Originator, the Sub-servicer 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 Originator, the Seller or the Servicer,
as applicable, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or the Rating Agencies, as applicable.
"Originator" means First Merchants and its successors in interest to the
extent permitted hereunder.
"Outstanding Amount" shall have the meaning specified in the Indenture.
"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.
"Owner Trustee Fee" means, with respect to any Distribution Date, the fee
set forth on Schedule G.
"Pass-Through Rate" means 12.25% per annum.
"Paying Agent" shall have the meaning assigned to such term in the Trust
Agreement.
"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 Note
Insurer with respect to the Notes, including any endorsements thereto, in the
form of Exhibit D.
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"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 all 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 payments
received from Obligors for such Collection Period, and after adjustment for
Cram Down Losses for such Collection Period.
"Pool Factor" means the seven-digit decimal that the Servicer shall
compute on each Distribution Date indicating the Pool Balance for such
Distribution Date as a fraction of the Initial Pool Balance.
"Portfolio Performance Test" has the meaning set forth in the Spread
Account Agreement.
"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 that became a
Purchased 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 or the Originator pursuant to Section 3.03 or
purchased by the Originator pursuant to Section 9.01.
"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 Note
Insurer.
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"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 Certificates
or result in an increased capital charge of the Note 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(b).
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of June 1, 1997, between First Merchants, as seller, and FMARC 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.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"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 related Collection Period: (i)
that portion of all collections on the Receivables allocable to principal, (ii)
the aggregate outstanding principal balance of all Receivables that became
Liquidated Receivables during such Collection Period, (iii) that portion
allocable to principal of the aggregate amount of any Cram Down Losses and (iv)
that portion allocable to principal of the Purchase Amount of all Receivables
that became Purchased Receivables during or in respect of 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.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.02(c)(iii).
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"Reserve Account Initial Deposit" means an amount equal to $4,470,763.35.
"Reserve Account Release Amount" means, with respect to any Distribution
Date, the excess, if any, of the amount in deposit in the Reserve Account over
the Reserve Account Required Amount (after giving effect to distributions made
pursuant to clauses (1) through (11) of Section 5.06(b) on such Distribution
Date).
"Reserve Account Required Amount" means, with respect to any Distribution
Date, an amount equal to the greater of (i) 6.50% of the Pool Balance as of the
close 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 Certificate Balance.
"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 or the
Sub-servicer, as the case may be.
"Retail Lockbox Mail Service Agreement" means the Retail Lockbox Mail
Service Agreement dated as of June 20, 1997, between LaSalle National Bank and
the Sub-servicer, as the same may be amended, supplemented or otherwise
modified from time to time pursuant to the terms thereof.
"Rule of 78s Receivable" means any Receivable that provides for the
allocation of payments in respect thereof according to the "sum of periodic
balances" or "sum of monthly payments" method.
"Securities" means the Notes and the Certificates.
"Securityholders" means the Noteholders and/or the Certificateholders.
"Seller" means FMARC II and its successors in interest to the extent
permitted hereunder.
"Servicer" means LSI, as the servicer of the Receivables, and each
successor to LSI (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 C.
"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.
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"Servicing Transition Agreement" means the Servicing Transition Agreement
dated as of June 1, 1997, between the Sub-servicer and the Servicer, as the
same may be amended, supplemented or otherwise modified from time to time
pursuant to the terms thereof.
"Servicing Transfer Date" means the date the transfer of servicing from
the Sub-servicer to the Servicer is completed pursuant to the Servicing
Transistion Agreement.
"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 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 Note Insurer and Harris
Trust and Savings Bank, as trustee and collateral agent, as amended by
Amendments to the Master Spread Account Agreement, dated as of June 1, 1996 and
as of March 1, 1997, and as supplemented by the Series 1997-2 Supplement to the
Master Spread Account Agreement, dated as of June 1, 1997, among FMARC II, the
Note Insurer, the Owner Trustee and Harris Trust and Savings Bank, as the same
may be supplemented or amended from time to time.
"Spread Account Required Amount" has the meaning assigned to such term in
the Spread Account Agreement.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. or its successor.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Sub-Servicer" means First Merchants, as the sub-servicer of the
Receivables, and each successor to First Merchants (in the same capacity)
pursuant to Section 7.05.
"Sub-servicing Agreement" means the Servicing Transfer Agreement dated as
of June 1, 1997 between the Servicer and the Sub-servicer.
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"Title Package" means (i) a fully executed Lien Certificate noting the
lien of the Originator on the Financed Vehicle or (ii) evidence that
documentation has been submitted to the appropriate state motor vehicle
authority to obtain a Lien Certificate noting the lien of the Originator on the
Financed Vehicle, as applicable.
"Total Distribution Amount" means, for each Distribution Date, the sum of
(i) the applicable Interest Distribution Amount, (ii) the applicable Regular
Principal Distribution Amount (other than the portion thereof attributable to
Realized Losses or Cram Down Losses) and (iii) the portion of Recoveries
allocable to principal with respect to the related Collection Period.
"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), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.02(c)(iii).
"Trust Agreement" means the Amended and Restated Trust Agreement dated as
of June 1, 1997, 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
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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 $63,158,977.25, 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:
(i) the Receivables and all moneys received thereon on or after the
Cutoff Date (including, without limitation, such moneys received thereon
that are deposited from time to time in the Initial Lockbox Account, the
Local Collection Account and the Lockbox Account);
(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;
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(iii) any Liquidation Proceeds, Recoveries 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) all rights of the Seller against Dealers, Magna and any
intervening assignor with respect to the Receivables under the Dealer
Agreements and Dealer assignments;
(v) any property that shall have secured a Receivable and shall have
been acquired by or on behalf of the Seller or First Merchants;
(vi) all documents and other items contained in the Receivable Files
and the Legal Files;
(vii) all of the Seller's rights (but not its obligations) under the
Receivables Purchase Agreement;
(viii) all funds on deposit from time to time in the Trust Accounts
(including without limitation any Reserve Account Initial Deposit) and the
Certificate Distribution Account and all investments and proceeds thereof
(including all income thereon); and
(ix) 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 Securities and the Note 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 and the Legal Files to the
Issuer or any custodian.
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(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 Note 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. 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 Issuer a perfected first priority security interest
in all such assets, and this Agreement shall constitute a security agreement
under applicable 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, the Servicer and the
Sub-Servicer shall inform the other parties to this Agreement and the Note
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, the Servicer or the Sub-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 (and the Seller shall promptly
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notify the Servicer in writing of the date and amount of such remittance);
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 and Legal Files. (a)(i) The
Issuer hereby revocably appoints the Custodian, and the Custodian
hereby accepts such appointment, to act for the benefit of the Issuer, the
Indenture Trustee and the Note Insurer as custodian of the Legal Files with
respect to each Receivable. The Custodian shall maintain such accurate and
complete accounts, records and computer systems pertaining to each Legal File
as shall enable the Custodian to comply with this Agreement. In performing its
duties, as Custodian, the Custodian shall act with reasonable care, using that
degree of skill and attention that the Custodian exercises with respect to the
legal files relating to all comparable automotive receivables that the
Custodian maintains for itself or others. The Custodian shall promptly report
to the Issuer and the Indenture Trustee any failure on its part to hold the
Legal Files and maintain its accounts, records and computer systems as herein
provided and shall promptly take appropriate action to remedy such failure.
(ii) On or prior to the Closing Date, the Issuer shall transfer and
deliver to the Custodian or its agent and bailee (as that term is used in
Section 9-305 of the UCC) the Legal Files with respect to each Receivable.
(iii) From time to time, the Originator, the Servicer or the
Sub-servicer may submit additional documents for one or more of the Legal
Files in custody of the Custodian, attached to a document transmittal log.
Upon receipt of these additional documents, the Custodian shall update the
appropriate Legal File to reflect the receipt of (a) supplementation or
replacement of any of the documents in the Legal File and (b) the delivery
of additional documents, assignments, instruments, agreements, certificates
or other writings and additional financing statements.
(iv) The Custodian shall segregate and maintain continuous custody of
all documents constituting the Legal Files received by it in secure and
fire resistant facilities in accordance with customary standards for such
custody. The Custodian shall hold the Legal Files as bailee, as that term
is used in Section 9-305 of the UCC, for the Issuer and the Indenture
Trustee pursuant to, and in accordance with, this Agreement. The Custodian
shall retain custody of the Legal Files on behalf of the Issuer and the
Indenture Trustee until it is directed in writing by the Issuer and the
Indenture Trustee to release any or all of such Legal Files.
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(v) The Custodian is hereby authorized, upon receipt of a written
request and receipt provided by the Servicer or its designee in the form
attached as Exhibit F hereto (a "Request for Release"), to release to the
Servicer or its designee, as the case may be, the Legal File or certain
documents therefrom specified in the Request for Release. All Documents so
released shall, while held by the Servicer or its designee, be held in
trust for the benefit of the Issuer and the Indenture Trustee. Unless the
Legal File is (x) released because the related Receivable was paid in full,
repurchased, refinanced or otherwise liquidated and (y) the Issuer and the
Indenture Trustee have consented in writing (in their sole discretion), the
Servicer or its designee shall return any documents so released promptly
after the need for such Person's possession of such documents no longer
exists.
(vi) The Custodian may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(b) 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 by the Issuer to the
Indenture Trustee:
(i) a copy of the fully executed original of each Receivable with a
copy of the fully executed assignment from the related Dealer to First
Merchants (and any intervening assignments) (together with any agreements
modifying such Receivable, including, without limitation, any extension
agreement);
(ii) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(iii) a copy of the Lien Certificate or the Title Package or such
other documents that the Servicer shall keep on file in accordance with its
customary procedures evidencing the security interest of the Seller in the
Financed Vehicle;
(iv) all other documents listed on Schedule C relating to each
Receivable; provided that, with respect to this clause (iv), the Servicer,
as custodian of the documents herein identified, shall not be responsible
to confirm or verify the completeness or existence in each Receivable File
of the documents identified in this clause (iv);
(v) if the Lien Certificate for any Receivable is not in the Legal
File, the documents referred to in clause (ii) of the definition of Title
Package herein with respect to such Receivable; and
(vi) any and all other documents that the Servicer shall keep or file
in accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
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(c) Notwithstanding anything contained herein to the contrary, the
Custodian may perform any of its duties hereunder through agents or other
custodians.
SECTION 3.05. Duties of Servicer as Custodian of Receivable Files.
(a) Safekeeping of Receivable Files. 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 Note 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 Relating to Receivable Files.
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 30 days prior to any change in location. The Servicer shall make
available to the Issuer, the Sub-Servicer 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 from Receivable Files. 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 ActSECTION 3.06. Instructions;
Authority to Act3.06. Instructions; Authority to Act. (a) 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.
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(b) The Custodian shall be deemed to have received proper instructions
with respect to the Legal Files upon its receipt of written instructions signed
by a Trust Officer of the Indenture Trustee.
SECTION 3.07. Servicer's and Custodian's Indemnification and Liability.
(a) The Servicer, as custodian, shall indemnify the Trust, the Owner
Trustee, the Custodian 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, the Indenture Trustee or any such officer, director,
employee or agent of the Owner Trustee or the Indenture Trustee for any portion
of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Owner Trustee or the Indenture Trustee, as the case may be,
or any such officer, director, employee or agent of the Owner Trustee or the
Indenture Trustee, as the case may be. Indemnification under this Section
3.07(a) shall survive the resignation or removal of the Servicer (or the
resignation or removal hereunder of the 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 3.07(a) 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.
(b) Neither the Custodian nor any of its officers, directors, employees
or agents shall be liable, directly or indirectly, for any damages or expenses
arising out of the services performed under this Agreement other than damages
which result from the negligence or willful misconduct of it or them.
SECTION 3.08. Effective Period and Termination. (a) 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(a). If LSI 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 LSI or any successor Servicer shall have
been terminated under Section 8.02, the appointment of such Servicer as
custodian may be terminated by the Note Insurer, the Issuer, the Indenture
Trustee or by the Holders of Notes evidencing not less than 25% of the
Outstanding Amount of the Notes, by the Owner Trustee or by Holders (other than
the Seller or an affiliate thereof) of Certificates evidencing not less than
25% of the Certificate Balance, in the same manner as the Note Insurer, the
Indenture Trustee or such Securityholders 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
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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.
(b) The Custodian'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(b). The appointment of the
Custodian as custodian may be terminated by the Note Insurer or, if the Note
Insurer is no longer the Controlling Party, the Indenture Trustee or the Holders
of at least 25% of the Outstanding Amount of the Notes, by notice given in
writing to the Custodian (and to the Indenture Trustee, the Owner Trustee and
the Seller if given by the Note Insurer or such Noteholders) in the same manner
as the Note Insurer, the Indenture Trustee or such Securityholders, as the case
may be, 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 Custodian's appointment as custodian, with
cause, at any time upon written notification to the Custodian. 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 Custodian shall
deliver the Legal 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 Note 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 monthly billing
statements 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 Note 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
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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 Owner 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 the 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, extension fee 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
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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) no extension shall exceed one month;
(iii) 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 Certificate Final Scheduled Distribution Date;
(iv) no more than two extensions may be granted with respect to any
Receivable in any one-year period; and
(v) with respect to any Determination Date, the amount of Receivables
subject to extension or modification shall not exceed the Modification
Level applicable to such Determination Date;
provided, however, that if the Controlling Party waives compliance with this
Section 4.02(c), no breach shall be deemed to have occurred.
(d) The Servicer shall treat all Rule of 78s Receivables as actuarial
Receivables for purposes of the allocation of payments to principal and
interest components and balance tracking.
SECTION 4.03. Realization upon Receivables. 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 (and/or Magna), 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
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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 (and/or Magna); provided that the parties hereto acknowledge that the
Servicer may bill expenses monthly as incurred.
SECTION 4.04. Physical Damage Insurance. The Sub-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 Originator, the Seller and the Issuer hereby agree 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,
the Originator 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, the Originator or any other
entity incurred in connection with any such action shall be reimbursed to the
Servicer, the Seller, the Originator or such other party by the Controlling
Party.
SECTION 4.06. Covenants of Covenants of Servicer. By its execution and
delivery of this Agreement, the Servicer hereby covenants as follows (on which
covenants the Issuer, the Indenture
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Trustee, the Custodian and the Owner Trustee rely in accepting the
Receivables and delivering the applicable Securities and on which the Note
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 (provided that
no breach of this covenant shall be deemed to have occurred unless and until
the remedy provided in Section 4.07, after demand therefor, has not been
complied with); 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 BreachSECTION 4.07. Purchase
of Receivables upon Breach4.07. Purchase of Receivables upon Breach. Upon
discovery by any of the Servicer, the Seller, the Owner Trustee, the Indenture
Trustee, the Originator 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 (which breach has not
been waived by the Controlling Party), the party discovering such breach shall
give prompt written notice to the other parties and the Note Insurer; provided,
however, that the failure to give any such notice shall not affect any
obligation of the Servicer under this Section 4.07; provided further that, with
respect to the Owner Trustee, the Indenture Trustee and the Backup Servicer,
"discovery" shall mean actual knowledge by a Trust Officer. 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 Owner Trustee, the Certificateholders, the Noteholders
or the Note 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
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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 sum of (a) the product of (i)
one-twelfth, (ii) 2.75% and (iii) the Pool Balance as of the first day of the
related Collection Period, (b) any unreimbursed expenses reimbursable pursuant
to this Agreement and (c) any Deficiency Fee earned during 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 and other administrative fees or similar charges
allowed by applicable law with respect to the Receivables, collected (from
whatever source) on the Receivables, but not including (x) extension fees and
(y) amounts described in clause (g) of the definition of Interest Distribution
Amount herein.
Except for the expenses reimbursable pursuant to this Agreement, 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).
SECTION 4.09. Servicer's Certificate. Not later than 10:00 a.m. (New York
City time) on each Determination Date, the Servicer shall deliver to the Owner
Trustee, the Paying Agent, the Indenture Trustee, the Originator, the Seller,
the Backup Servicer and the Note Insurer and with a copy to the Rating Agencies
and GCM (at the address indicated in the definition of GCM herein), 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; provided that the Servicer shall
deliver a Servicer's Certificate to the Note Insurer (with a copy to the Owner
Trustee, the Paying Agent, the Indenture Trustee, the Originator, the
Sub-servicer, the Backup Servicer and the Seller) at any time upon the prior
written request of the Note Insurer. 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 Originator, the Seller, the
Note 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, 1998), 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.
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(b) The Servicer or the Seller shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer the Originator, the Note 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 Originator, the Backup Servicer, the
Seller, the Note 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, 1998), a report addressed to the Board of Directors of the Servicer,
the Owner Trustee, the Indenture Trustee, the Originator, the Backup Servicer
and the Note 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 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. In the event such firm requires the Backup Servicer
or the Indenture Trustee to agree to the procedures performed by such firm, the
Servicer shall direct the Backup Servicer or the Indenture Trustee, as the case
may be, in writing to so agree; it being understood and agreed that (x) the
Backup Servicer or the Indenture Trustee, as the case may be, shall notify the
Servicer of any such requirement to agree and (y) the Backup Servicer or the
Indenture Trustee, as the case may be, shall be entitled to conclusively rely
on the written direction of the Servicer with respect thereto. The Backup
Servicer and the Indenture Trustee shall be under no obligation or have any
liability in respect of the sufficiency, validity or correctness of such
procedures.
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 Sub-servicer, the Backup Servicer,
the Note Insurer (so long as no Note 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, the Seller, the Originator, the Sub-servicer
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and the Backup Servicer a computer tape or a diskette (or any other form of
electronic transmission acceptable to the Owner Trustee, the Indenture Trustee,
the Seller, the Originator, the Sub-servicer and the Backup Servicer) in a
format acceptable to the Indenture Trustee, Owner Trustee, the Seller, the
Originator, the Sub-servicer 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
payments received on the Receivables as provided herein. The Backup Servicer
shall use such tape or diskette (or other electronic transmission acceptable to
the Indenture Trustee, Owner Trustee, the Seller, the Originator, the
Sub-servicer 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 Seller, the Originator, the
Indenture Trustee, the Sub-servicer 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 31, 1997, which term shall
be extendible by the Note Insurer (or the Indenture Trustee for as long as the
Notes are outstanding, if there is an existing Note Insurer Default or if the
Policy is no longer in effect) for successive quarterly terms ending on each
successive November 30, February 28, May 31 and August 31 (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
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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 Note 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 Note 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 Note Insurer, the Servicer shall,
within five days thereafter, give written notice of such non-receipt to the
Indenture Trustee, the Owner Trustee, the Note Insurer, the Sub-servicer and the
Backup Servicer.
SECTION 4.15. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian
of funds and documents in respect of consumer contracts on behalf of
institutional investors.
SECTION 4.16. Duties of the Sub-Servicer. The rights and obligations of
the Sub-servicer shall be as set forth in this Agreement and in the
Sub-servicing Agreement.
ARTICLE V
Distributions; Spread Account; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Lock-box Account. (a) On or prior to the third Business
Day after Servicing Transfer Date, the Servicer shall send revised 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 Servicing Transfer
Date will be addressed to a lockbox account (the "Lockbox Account") at the
Lockbox Bank. All payments and other proceeds of any type and from any source
on or with respect to the Receivables that are delivered to the Lockbox Account,
or otherwise received by the Originator, the Seller, the Servicer or the
Sub-servicer on and after the Cutoff Date, shall be the property of the Issuer.
SECTION 5.02. Accounts. (a)(i) The Servicer shall deposit directly
(without deposit into any intervening account) into the Lockbox Account, no
later than the Business Day following receipt thereof, all payments by or
on behalf of the Obligors on the Receivables, any Recoveries and any
Liquidation Proceeds received by the Servicer after the Closing Date. The
Servicer shall cause the Lockbox Bank to remit to the Collection Account no
later than the next Business Day after receipt thereof in the Lock-Box Account
all payments by or on behalf of the Obligors, all Recoveries and all
Liquidation Proceeds.
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(ii) On or prior to the Cutoff Date the Sub-servicer has instructed the
Obligors to make payments in respect of the Receivables to a lock-box account
(the "Initial Lockbox Account") and may otherwise receive proceeds in respect
of the Receivables in one or more local collection accounts (collectively, the
"Local Collection Account"). The Sub-servicer shall cause all payments and
other proceeds in respect of the Receivables which are deposited in the Initial
Lockbox Account or the Local Collection Account on and after the Cutoff Date,
to be swept or otherwise deposited into the Collection Account or the Lockbox
Account pursuant to the Retail Lockbox Mail Service Agreement (in the case of
the Initial Lockbox Account) and the Local Collection Account Processing
Agreement (in the case of the Local Collection Account) by the second Business
Day after receipt thereof (or in the case of such payments and other proceeds
received prior to Closing Date, on the Closing Date). In addition, all
payments and other proceeds in respect of the Receivables otherwise received by
the Sub-servicer, the Originator or the Seller on or after the Cutoff Date
shall be remitted by the Originator, the Seller or the Sub-servicer, as the
case may be, no later than the next Business Day after such receipt or deposit
(or with respect to any such payment received prior to the Closing Date, on the
Closing Date) to the Collection Account or the Lock-Box Account (as directed by
the Servicer, or, if not directed by the Servicer, to the Collection Account).
(b) The Servicer and the Sub-servicer will be entitled to be reimbursed
from amounts on deposit in the Collection Account with respect to a Collection
Period for amounts previously deposited in the Collection Account but later
determined by the Servicer or the Sub-servicer, as the case may be, or the
Lockbox Bank to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall
be paid to the Servicer or the Sub-servicer, as the case may be, on the related
Distribution Date upon certification by the Servicer or the Sub-servicer, as
the case may be, of such amounts and the provision of such information to the
Indenture Trustee and the Note Insurer as may be necessary in the opinion of
the Indenture Trustee and the Note Insurer to verify the accuracy of such
certification. In the event that the Note Insurer has not received evidence
satisfactory to it of the Servicer's or the Sub-servicer's, as the case may be,
entitlement to reimbursement pursuant to this Section 5.02(b), the Note Insurer
shall (unless an Insurer Default shall have occurred and be continuing) give
the Indenture Trustee timely written notice to such effect, following receipt
of which the Indenture Trustee shall not make a distribution to the Servicer or
the Sub-servicer, as the case may be, in respect of such amount pursuant to
this Section 5.06(b).
(c) (i) On or prior to the Closing Date, the Servicer shall establish, or
cause to be established with the Indenture Trustee, 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 any amounts deposited to the
Lockbox Account on or with respect to the Receivables to be swept into the
Collection Account as promptly as possible, but in no event later than the
second Business Day following receipt thereof in the Lockbox Account.
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(ii) The Servicer, for the benefit of the Noteholders, shall establish
(or cause to be established) an Eligible Deposit Account (the "Note
Distribution Account") which shall be maintained in the name of the
Indenture Trustee, bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Certificateholders (and not
for the benefit of the Noteholders or the Note Insurer), shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Reserve Account" and, together with the Collection Account
and the Note Distribution Account, the "Trust Accounts"), bearing a
designation clearly indicating that the funds deposited therein are held
for the benefit of the Certificateholders.
(iv) Funds on deposit in the Collection Account and the Note
Distribution Account shall be invested by the Indenture Trustee in Eligible
Investments selected in writing by or at the direction of the Issuer or, if
an Insurance Agreement Event of Default shall have occurred and be
continuing, the Note 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
that, 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 (other than the Reserve Account) 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 Trust Accounts
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.
(v) Funds on deposit in the Reserve Account shall be invested by the
Indenture Trustee in Eligible Investments selected in writing by the
Seller. All such Eligible Investments shall be held by the Indenture
Trustee for the benefit of the Certificateholders; provided that, on each
Payment Determination Date all interest and other investment income (net of
losses and investment expenses) on funds on deposit in the Reserve Account
shall be deposited into the Reserve Account. Other than as permitted by
the Rating Agencies, funds on deposit in the Reserve Account shall be
invested in Eligible Investments that will mature not later than the
Business Day immediately preceding the next Distribution Date. Funds
deposited in the Reserve Account on a day which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not
required to be invested overnight.
(vi) The Indenture Trustee shall not be held liable in any way by
reason of any insufficiency in the Collection Account, the Note
Distribution Account or the Reserve 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
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Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(d) (i) The Indenture Trustee and, to the extent provided herein,
the Note Insurer shall possess all right, title and interest in all funds
received in the Lockbox Account and all funds on deposit from time to time
in the Trust Accounts and in all proceeds thereof (including all income
thereon). The Lockbox Account and the Trust Accounts shall be under the
sole dominion and control of the Indenture Trustee for the benefit of the
Noteholders, the Certificateholders or the Noteholders and the
Certificateholders, as the case may be. If, at any time, any Trust 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 Trust Account 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 Trust 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.
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(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 (over and above fees and
expenses payable by the Obligor) being applied to future Scheduled Payments of
such Obligor.
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 and the Reserve
Account. (a) 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 Note 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.
(b) The Indenture Trustee shall determine on each Payment Determination
Date (based on its determination, as provided in Section 5.06(b), of the Total
Distribution Amount plus all amounts transferred to the Collection Account from
the Spread Account and the Reserve Account (pursuant to Section 5.05(a)), plus
any amounts deposited thereto from the Policy Payments Account pursuant to
Section 5.07(b)) (i) 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 (8) and (9) of Section 5.06(b) and (ii)
the Certificateholders' Additional Principal Distributable Amount, if any, for
the upcoming Distribution Date. In the event that the Indenture Trustee
determines that a shortfall exists with respect to the distribution required to
be made pursuant to clause (8) of Section 5.06(b)
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on the upcoming Distribution Date, the Indenture Trustee shall withdraw from
the Reserve Account (to the extent of funds available in the Reserve Account),
the amount of such shortfall. In the event that the Indenture Trustee
determines that a shortfall exists with respect to the distribution required to
be made pursuant to clause (9) of Section 5.06(b) on the upcoming Distribution
Date, the Indenture Trustee shall withdraw from the Reserve Account (to the
extent of funds available in the Reserve Account, after giving effect to the
distributions made pursuant to clause (8) of Section 5.06(b)) the amount of such
shortfall. In addition, after giving effect to the withdrawals referred to in
the preceding two sentences, on each Distribution Date, the Indenture Trustee
shall withdraw from the Reserve Account (after giving effect to the
distributions made pursuant to clauses (8) and (9) of Section 5.06(b)) an amount
equal to the Certificateholders' Additional Principal Distribution Amount, if
any, for the upcoming Distribution Date. Each amount withdrawn from the Reserve
Account by the Indenture Trustee pursuant to this Section 5.05(b) shall be
deposited in the Collection Account by the Indenture Trustee for distribution on
the Distribution Date pursuant to clauses (8), (9) and (11) of Section 5.06(b).
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 or deposit by 11:00 a.m. (New York City time), to the extent of
the Total Distribution Amount plus all amounts transferred to the
Collection Account from the Spread Account and the Reserve Account, plus
any amounts deposited thereto from the Policy Payments Account pursuant to
Section 5.07(b), to make required payments and distributions on such date
pursuant to clauses (1) through (12) below, in the following order and
priority:
(1) to the Servicer from the Interest Distribution Amount, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods) and any amounts reimbursed pursuant to Section 5.02(b);
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, the Indenture Trustee, the Backup
Servicer and the Custodian, from the Total Distribution Amount
remaining after the application of clause (1) above, any accrued and
unpaid Owner Trustee Fees, Indenture Trustee Fees, Backup Servicer
Fees and Custodian Fees, respectively, due hereunder; shortfalls in
any such amounts due to the Owner Trustee, the Indenture Trustee, the
Backup Servicer or the Custodian 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;
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(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 and to the extent of
any deficiency, first from amounts transferred to the Collection
Account from the Spread Account pursuant to Section 5.05 and then from
amounts transferred to the Collection Account from the Policy Payments
Account pursuant to Section 5.07(b);
(4) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1)
through (3) above, the Guaranteed Noteholders' Principal Distributable
Amount and to the extent of any deficiency, first from amounts
transferred to the Collection Account from the Spread Account pursuant
to Section 5.05 and then from amounts transferred to the Collection
Account from the Policy Payments Account pursuant to Section 5.07(b);
(5) to the Note Insurer, from the Total Distribution Amount
remaining after the application of clauses (1) through (4) above, any
amounts due to the Note Insurer under the Insurance Agreement;
(6) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (1) through (5)
above, any unpaid portion of the Noteholders' Principal Distributable
Amount;
(7) to the Spread Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (6) above, an
amount up to the amount of any deficiency in the Spread Account
Required Amount;
(8) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1)
through (7) above, the Certificateholders' Interest Distributable
Amount and, to the extent of any deficiency, from the amount
transferred to the Collection Account from the Reserve Account on such
Distribution Date pursuant to the second sentence of Section 5.05(b);
(9) only after the Notes have been paid in full, to the
Certificate Distribution Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (8) above, the
Certificateholders' Principal Distributable Amount and, to the extent
of any deficiency, from the amount transferred to the Collection
Account from the Reserve Account on such Distribution Date pursuant to
the third sentence of Section 5.05(b);
(10) to the Reserve Account, the Total Distribution Amount
remaining after the application of clauses (1) through (9) above;
(11) to the Certificate Distribution Account, from the amount
transferred to the Collection Account from the Reserve Account on such
Distribution Date
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pursuant to the fourth sentence of Section 5.05(b), the
Certificateholders' Additional Principal Distribution Amount; and
(12) only after the Certificates have been paid in full, to the
Collateral Agent, the sum of (x) the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (1)
through (11) above and (y) any amounts remaining on deposit in the
Collection Account, the Reserve Account, the Spread Account, the
Certificate Distribution Account and the Note Distribution Account, in
each case 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 and the Reserve Account
hereunder until the Certificate Balance is reduced to zero.
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 and to the payment of all amounts required
to be paid pursuant to clauses (1) and (2) of Section 5.06(b)) is insufficient
to pay the Guaranteed Payment on the related Distribution Date, then the
Indenture Trustee shall give notice to the Note Insurer by telephone or
telecopy of the amount of such deficiency. Such notice shall be confirmed in
writing by the Indenture Trustee in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Note 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 Note Insurer of such notice
in such form, the Note 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 the Noteholders (the "Policy Payments Account").
The Indenture Trustee shall have exclusive control over the Policy Payments
Account 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 Noteholders the Guaranteed Payment for which a claim has
been made, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Backup Servicer, the Custodian, the Indenture
Trustee or the Owner 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 Noteholders in accordance
with Section 5.06. It shall not be necessary for any payments under the Policy
to be made by checks or wire transfers separate from the checks or wire
transfers used to pay the Guaranteed Payment from 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
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provided in paragraph (c) below in the Note Register and in the statement to
be furnished to Noteholders 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
Guaranteed 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 Guaranteed 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 Note Insurer, pursuant to the instructions of the
Note 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 Note 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 Note Insurer.
SECTION 5.08. Notices to the Note Insurer. All notices, statements,
reports, notes, or opinions required by this Agreement to be sent to any other
party hereto or to the Noteholders at any time when the Note Insurer is the
Controlling Party shall also be sent to the Note 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 Guaranteed 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
Note Insurer a certified copy of such court order, an irrevocable assignment to
the Note Insurer of the Noteholders' rights with respect to any such recovered
payment and an instrument appointing the Note Insurer as agent of the
Noteholders with respect to any such recovered payments and (ii) notify the
Noteholders by mail that, in the event that any Guaranteed Payment distributed
to a Noteholder is so recovered, such Noteholder will be entitled to payment of
such recovered amounts pursuant to the Policy.
(b) The Indenture Trustee shall promptly notify the Note Insurer of
either of the following as to which an applicable 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 Noteholder, by its purchase of a Note, and the
Indenture Trustee hereby agree that, so long as a Note Insurer Default shall not
have occurred and be continuing, the Note Insurer may at
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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 Note 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 Note Insurer shall be subrogated to, and each Noteholder and the Indenture
Trustee hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Indenture Trustee and such Noteholder 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 Note 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
Noteholders and the dates on which such payments were made.
SECTION 5.10. Effect of Payments by the Note 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 Note Insurer, the Indenture Trustee or
the Note Registrar, (i) to the extent the Note Insurer makes payments, directly
or indirectly, on account of principal of or interest on the Notes to the
Noteholders, the Note Insurer will be fully subrogated to the rights of such
Noteholders 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 Noteholder and (ii) the Note Insurer shall be paid principal and interest
in its capacity as a Noteholder until all such payments by the Note 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 Noteholders have received all Guaranteed Payments due to
them under this Agreement.
(b) Without limiting the rights or interests of the Noteholders as
otherwise set forth herein and subject to Article X, so long as no Note Insurer
Default exists, the Indenture Trustee shall cooperate in all respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note 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, enforce any judgment obtained
and collect moneys adjudged due; and
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(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 Note Insurer hereunder.
SECTION 5.11. Statements to Securityholders. On each Distribution
Date, the Indenture Trustee shall provide to each Noteholder of record as of
the most recent Record Date a statement (which statement shall also be provided
by the Indenture Trustee to the Seller, each Rating Agency, GCM (at the address
indicated in the definition of GCM herein) the Note Insurer and the Owner
Trustee (for the Owner Trustee to forward to each Certificateholder of record
as of the most recent Record Date)) prepared by the Indenture Trustee (based on
information in the Servicer's Certificate for the related Collection Period)
substantially in the form of Exhibit B, setting forth at least the following
information as to the Securities to the extent applicable:
(i) the amount of such distribution allocable to principal allocable
to the Notes;
(ii) the amount of such distribution allocable to interest allocable
to the Notes;
(iii) the amount of such distribution allocable to principal of the
Certificates;
(iv) the amount of such distribution allocable to interest on or with
respect to the Certificates;
(v) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(vi) the Outstanding Amount of the Notes, the Note Pool Factor, after
giving effect to payments allocated to principal reported under clause (i)
above;
(vii) the Certificate Balance and the Certificate Pool Factor, after
giving effect to all payments reported under clause (iii) above on such
date;
(viii) the amount, if any, of the distribution payable pursuant to
claims under the Policy;
(ix) the amount of the Servicing Fee, the Owner Trustee Fee, the
Indenture Trustee Fee, the Backup Servicer Fee and the Custodian Fee paid
from monies on deposit in the Collection Account including, with respect to
expenses constituting a part thereof, such detail as the Seller, the Note
Insurer, the Indenture Trustee and/or the Owner Trustee may request;
(x) the amount of any deposit to the Spread Account (including,
without limitation, amounts attributable to investment earnings in respect
thereof) and the amount and application of any funds withdrawn from Spread
Account;
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(xi) the amount of any deposit to the Reserve Account (including,
without limitation, amounts attributable to investment earnings in respect
thereof) and the amount and application of funds withdrawn from the Reserve
Account;
(xii) the aggregate principal balance of all Receivables that became
Liquidated Receivables or Purchased Receivables during the related
Collection Period (and the aggregate outstanding principal balance of such
Receivables at the start of such Collection Period);
(xiii) the amounts of the aggregate Realized Losses and Cram Down
Losses, if any, separately identified, for the related Collection Period;
(xiv) the aggregate principal balance of Receivables that are 30 to 59
days, 60 to 89 days or 90 days or more delinquent;
(xv) the amount of Recoveries collected during the related Collection
Period and identification of the portion interest allocable to principal in
respect of the Receivables and the portion thereof allocable to the
interest in respect of the Receivables;
(xvi) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, in each case
after giving effect to payments on such Distribution Date, and any change
in such amounts from the preceding statement;
(xvii) the aggregate Purchase Amounts for Receivables, if any, that
were purchased during or with respect to such Collection Period;
(xviii) the Total Distribution Amount for such Distribution Date; and
(xix) the cumulative default rate in respect of all Receivables as of
the last day of the related Collection Period, the cumulative loss rate in
respect of all Receivables as of the last day of the related Collection
Period, and the aggregate number of extensions and deferrals in respect of
all Receivables as of the last day of the related Collection Period.
Each amount set forth on the Distribution Date statement under clauses
(i), (ii), (iii), (vi), (ix), (x), (xi) and (xv) above shall be expressed as a
dollar amount per $1,000 of original principal balance of a Certificate or
Note, as applicable.
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller. The Seller makes the following
representations on which the Issuer relies in accepting the Receivables and
delivering the
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Securities and the Note 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.
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(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 Note 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 Note
Insurer, the Securityholders 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
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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 Note
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
Note 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 Securities. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not the Seller
or an Affiliate thereof, except as expressly provided herein or in any Basic
Document.
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables and the Note 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.
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(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 Securities
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 Securities.
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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 Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, employees and agents, and the Securityholders from and
against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from the use, ownership, repair 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 Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, agents and employees, and the Securityholders 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 Securities), 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 Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, employees and agents, and the Securityholders 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 LSI (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 LSI as Servicer, 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.
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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, the Indenture Trustee,
the Certificateholders, the Note Insurer, the Seller 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 Note
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 and,
(iii) the Servicer shall have delivered to the Owner Trustee, the Indenture
Trustee and the Note 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.
(c) Any person (i) into which the Custodian may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Custodian shall be
a party, (iii) which acquires by conveyance, transfer or lease substantially
all of the assets of the Custodian or
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(iv) succeeding to the business of the Custodian, which Person shall execute an
agreement of assumption to perform every obligation of the Custodian under this
Agreement, shall be the successor to the Custodian 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 Sub-Servicer, the Backup Servicer, the
Custodian 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
Sub-Servicer, the Backup Servicer, the Custodian or any such person, as the case
may be, 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 Sub-Servicer, the Backup Servicer, the
Custodian and any director, officer, employee or agent of the Servicer, the
Sub-Servicer, Backup Servicer or the Custodian 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 and the Note Insurer and the Securityholders
shall look only to the Servicer to perform such obligations. The Backup
Servicer, the Owner Trustee, the Custodian 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 their
respective 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. 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.
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SECTION 7.05. Appointment of Sub-servicer. The Servicer may at any
time, with the Note Insurer's consent, appoint a subservicer (which shall
initially be the Sub-servicer) to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that 10 days' prior notice of such
appointment (other than the appointment of the Sub-servicer) 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 the Certificates or result in an
increased capital charge to the Note Insurer; and, provided, further, that the
Servicer shall remain obligated and be liable to the Owner Trustee, the
Indenture Trustee, the Note Insurer and the Securityholders 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 (including without
limitation the Sub-servicer) shall be as agreed between the Servicer and such
subservicer from time to time, and none of the Owner Trustee, the Indenture
Trustee, the Issuer, the Backup Servicer, the Note Insurer or the
Securityholders 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 Note 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 the Backup Servicer, as
applicable, to the Owner Trustee, the Indenture Trustee and the Note 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.
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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 the Lockbox 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 Note Insurer is the Controlling Party)
the Note 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
Securityholders (determined without regard to the availability of funds under
the Policy) or of the Note Insurer (unless the Note 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 Note Insurer
(or, if a Note Insurer Default shall have occurred and be continuing,
Noteholders 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
the Seller;
(e) so long as the Note Insurer is the Controlling Party, any failure by
the Note Insurer to have delivered a Servicer Extension Notice pursuant to
Section 4.14; provided that no such Servicer Extension Notice shall be required
from and after the date on which the Notes have been paid in full and all
amounts owed to the Note Insurer under the Insurance Agreement have been paid
in full; or
(f) so long as the Note Insurer is the Controlling Party, an Insurance
Agreement Event of Default shall have occurred and be continuing.
SECTION 8.02. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Note Insurer or, if
the Note Insurer is no longer the Controlling Party, the Indenture Trustee or
the Holders of at least 25% of the Outstanding Amount of the Notes, by notice
given in writing to the Servicer (and to the
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Indenture Trustee, the Owner Trustee and the Seller if given by the Note
Insurer or such Noteholders), 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 Note 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
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 Note Insurer
is no longer
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the Controlling Party, the Backup Servicer, the Indenture Trustee or the
Holders of at least 25% 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 Note Insurer or (if the Note
Insurer is no longer the Controlling Party) the Holders of a majority of the
Outstanding Amount of the Notes or the Holders of Certificates evidencing 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 Securityholders, 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 nunc pro tunc from the time of
occurrence and shall be deemed not to have occurred, 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.
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ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables; Optional Redemption
on Notes. (a) On each Determination Date as of which the Pool Balance is equal
to or less than 10% of the Initial Pool Balance, the Servicer shall have the
option to purchase the Receivables (with the consent of the Note Insurer, if a
claim has previously been paid 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 Note 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) 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 Note Insurer as soon as practicable after the
Servicer has received notice thereof.
(c) 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 Note Insurer, the Certificateholders will succeed to the rights of
the Noteholders hereunder (other than Section 5.09 (b)) and the Indenture
Trustee will continue to perform its duties hereunder and under the Basic
Documents to the extent such duties relate to the Certificates.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. (a) This Agreement may be amended by the
Seller, the Servicer, the Sub-servicer, the Backup Servicer, the Owner Trustee,
the Indenture Trustee, the Custodian and the Issuer, with the prior written
consent of the Note Insurer (so long as the Note 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.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer, the Backup Servicer, the Owner Trustee, the Indenture Trustee,
the Custodian and the Issuer,
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with the prior written consent of the Note Insurer (so long as the Note Insurer
is the Controlling Party), the Holders holding not less than a majority of the
Outstanding Amount of the Notes and the Holders 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 Securityholders; 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 Securityholders or (b) reduce the
aforesaid portion of the Outstanding Amount of the Notes or the Certificate
Balance, the Holders of which are required to consent to any such amendment,
without the consent of the Noteholders holding all the outstanding Notes and
Certificateholders holding all the outstanding Certificates.
Promptly after the execution of any 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 Securityholders 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 Note
Insurer, the Owner Trustee and the Indenture Trustee file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-402(7) of the UCC,
unless it shall have given the Owner Trustee and the Indenture Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
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(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, the Originator 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 and the Sub-servicer shall permit the Indenture Trustee
and the Note Insurer (so long as no Note 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 or the
Sub-servicer's, as the case may be, records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee, the
Note Insurer (so long as no Note 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.
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(i) The Originator shall deliver to the Owner Trustee, the Note Insurer
(so long as no Note Insurer Default shall have occurred and be continuing) and
the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
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 Sub-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: Norman
Smagley; (b) in the case of the Sub-Servicer, to First Merchants Acceptance
Corporation, 570 Lake Cook Road, Suite 126, Deerfield, Illinois 60015,
Attention: Norman Smagley; (c) in the case of the Servicer, to LSI Financial
Group, 17500 Chenal Parkway, Suite 200, Little Rock, Arkansas 72211, Attention:
Timothy S. Sambrano, (d) in the case of the Backup Servicer, the Custodian or
the Indenture Trustee, to Harris Trust and Savings Bank, 311 West Monroe
Street, 12th Floor, Chicago, Illinois 60606, Attention: Indenture Trust
Administration; (e) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (f) in the case of
the Note Insurer, to Financial Security Assurance Inc., 350 Park Avenue, New
York, New York 10022, Attention: Surveillance Department; (g) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007 and (h) 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
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to the other parties. In addition, copies of such notices shall be sent to
the Note 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, the
Sub-servicer or the Servicer.
SECTION 10.05. Limitations on Rights of Others. The Note Insurer, and
its successors and assigns, is an intended third party beneficiary of this
Agreement, entitled to rely upon and to directly 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 Note
Insurer, the Certificateholders, the Indenture Trustee, the Sub-Servicer 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. Any
right of the Note Insurer to direct, appoint, approve of, or take any action
under this Agreement, shall be exercised by the Note Insurer in its sole and
absolute discretion.
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.
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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 latest to occur of the payment
of the Notes and Certificates in full or the termination of this Agreement,
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
Originator 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 Chase Manhattan Bank Delaware not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Chase Manhattan 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. Originator Payment Obligation. The Originator 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 Originator 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
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any of their obligations under the Basic Documents to obtain or maintain any
required license under the Pennsylvania Motor Vehicle Sales Finance Act.
SECTION 10.14. Insurer Default. In the event any right of the Note
Insurer hereunder is suspended during the continuation of a Note Insurer
Default, unless otherwise specifically provided herein or in the Indenture,
such right automatically and forthwith shall be assigned to the Indenture
Trustee, and may be exercised by the Indenture Trustee, during the continuation
of such Note Insurer Default. Upon the cessation of such Note Insurer Default,
any such rights shall revert to the Note Insurer and shall be exercisable
solely by the Note Insurer.
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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 1997-2
By: CHASE MANHATTAN 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, Originator and Sub-Servicer
By:
---------------------------
Name:
Title:
LSI FINANCIAL GROUP
Servicer
By:
---------------------------
Name:
Title:
<PAGE> 74
HARRIS TRUST AND SAVINGS BANK,
Indenture Trustee, Backup Servicer
and Custodian
By:
---------------------------
Name:
Title:
<PAGE> 75
SCHEDULE A
Schedule of Receivables
[To be Delivered to the Trust at Closing]
S-A1
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SCHEDULE B
Location of Receivable Files
LSI Financial Group
17500 Chenal Parkway
Little Rock, Arkansas 72211
Location of Legal Files
Harris Trust and Savings Bank
111 West Monroe Street, Level B-2
Chicago, Illinois 60603
S-B1
<PAGE> 77
SCHEDULE C
Documentation Checklist
1. All documents obtained or created in connection with the credit
investigation.
2. All evidence of borrower verification of the Receivable.
3. All Obligor records including without limitation (i) file copy of
Receivable; (ii) copy Dealer assignment (if applicable) and/or intervening
assignments to and from Magna (if applicable); (iii) warranty copy; (iv)
credit life insurance policy; (v) proof of auto insurance which may
include a certificate of insurance, an application form for insurance
signed by the Obligor, or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financial Vehicle; (vi) bill of
sale; (vii) buyer's guide (as is form); (viii) odometer statement; (ix)
title application; (x) contract verification sheet; (xi) participation
worksheet; (xii) checklist; (xiii) underwriting worksheet; (xiv) approval;
(xv) purchase trans printout; (xvi) original application; (xvii) credit
investigation; (xviii) credit bureau reports; (xix) check stubs; and (xx)
copies of drivers license reference sheets.
4. Original document envelope together with all documents maintained
therein.
5. All insurance verification forms and documents relating to insurance
follow-ups and all mail received from insurance.
6. Any and all other documents that the Servicer shall keep on file in
accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
S-C1
<PAGE> 78
SCHEDULE D
Backup Servicer Fee
S-D1
<PAGE> 79
SCHEDULE E
Deficiency Fee
For any Collection Period, the Deficiency Fee shall be one half of the
amount of all deficiency balance recoveries (net of the out-of-pocket expenses
of the Servicer in connection with obtaining such deficiency balance
recoveries) received during such Collection Period in respect of the
Receivables.
S-E1
<PAGE> 80
SCHEDULE F
Indenture Trustee Fee
S-F1
<PAGE> 81
SCHEDULE G
Owner Trustee Fee
S-G1
<PAGE> 82
EXHIBIT A
Representations and Warranties of First Merchants Acceptance Corporation
Under Section 3.02 of the Receivables Purchase Agreement
See attached pages.
A-1
<PAGE> 83
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 1997-2 Distribution Date Statement to Securityholders
Principal Distribution Amount
Notes: ($ per $1,000 original principal balance)
Interest Distribution Amount
Notes: ($ per $1,000 original principal balance)
Principal Distribution Amount
Principal Per $1,000 Certificate
Interest Distribution Amount
Interest Per $1,000 Certificate
Noteholders' Interest Carryover Shortfall
Certificateholders' Interest Carryover Shortfall
Certificateholders' Principal Carryover Shortfall
Note Balance
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000
Owner Trustee Fee
Indenture Trustee Fee
Backup Servicer Fee
Custodian Fee
Deficiency Fee
Pool Balance
Realized Losses
Cram Down Losses
B-1
<PAGE> 84
Liquidated Receivables
Purchased Receivables
Purchase Amounts
Distribution Under Policy
Spread Account Balance
Amount Deposited to Spread Account
Principal Balance of Receivables that were delinquent:
30 to 59 days
60 to 89 days
90 days or more
Amount Withdrawn from Spread Account
Reserve Account Balance
Amount Deposited to Reserve Account
Amount withdrawn from Reserve Account
B-2
<PAGE> 85
EXHIBIT C
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
First Merchants Auto Trust 1997-2
$ % Asset Backed Notes
$ % Asset Backed Certificates
Distribution Date:
I. Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Note Balance
(C) Initial Certificate Balance
(D) Note Rate
(E) Pass-Through Rate
(F) Servicing Fee Rate
(G) Trustee Fee
(H) Note Insurer's Premium
(I) Original Weighted Average Coupon (WAC)
(J) Original Weighted Average Remaining Term (WAM)
(K) Number of Contracts
(L) Spread Account
i. Spread Account Initial Deposit
ii. Spread Account Required Amount
(M) Reserve Account
i. Reserve Account Initial Deposit
ii. Reserve Account Required Amount
II. Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Note Balance
(C) Current Certificate Balance
(D) Note Pool Factor
(E) Certificate Pool Factor
(F) Spread Account Balance
(G) Weighted Average Coupon of Remaining Portfolio (WAC)
(H) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(I) Number of Contracts
III. Inputs from the System
(A) Simple Interest Loans
i. Principal Payments Received
ii. Interest Payments Received
C-1
<PAGE> 86
(B) Rule of 78s Loans
i. Principal Payments Received
ii. Interest Payments Received
(C) Repurchased Receivables
(D) Late Fees and Other Charges
(E) Spread Account Release to Collection Account
(F) Spread Account Release to Depositor
(G) Liquidated Contracts
i. Gross Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(H) Weighted Average Coupon of Remaining Portfolio (WAC)
(I) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(J) Remaining Number of Contracts
(K) Receivable Balance of Vehicles in Repossession During the Collection
Period
(L) Number of Vehicles in Repossession During the Collection Period
(M) Aggregate Net Losses for Collection Period
(N) 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
(1) Gross Principal Balance of Liquidated Receivables
C-2
<PAGE> 87
(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
(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 Note Insurer's Premium
(d) Deposits into Spread Account
F. Pool Balances and Portfolio Information
Beginning End
of Period of Period
--------- ---------
(1) Total Pool Balance
(2) Total Pool Factor
(3) Note Balance
(4) Certificate Balance
(5) Remaining
Overcollateralization
Amount
(6) Weighted Average
Coupon
(7) Weighted Average
Remaining Maturity
(8) Remaining Number
of Contracts
G. Spread Account
(1) Required Spread Account Balance
(2) Beginning Balance
(3) Amount Available for Deposit to the Spread Account
(4) Withdrawal from Spread Account
(5) Amount Released to Seller
(6) Ending Balance
H. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
(2) Liquidated Receivables for the Collection Period
(3) Cumulative Net Losses
(4) Delinquent and Repossessed Receivables
C-3
<PAGE> 88
(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) Cumulative Default Rate
(a) All Collection Periods prior to Current Collection Period
(b) Current Collection Period
(c) Total Cumulative Rate
(3) Cumulative Net Loss Rate
(a) All Collection Periods prior to Current Collection Period
(b) Current Collection Period
(c) Total Cumulative Rate
(4) Delinquency Trigger Indicator
(5) Default Trigger Indicator
(6) Loss Trigger Indicator
J. Aggregate extensions and deferrals
K. (1) Amount of principal being paid to the Noteholders:
(2) Per $1,000 original principal amount:
L. (1) Amount of principal being paid to the Certificateholders:
(2) Per $1,000 original principal amount:
M. (1) Amount of interest being paid to the Noteholders:
(2) Per $1,000 original principal amount:
N. (1) Amount of interest being paid to Certificateholders:
(2) Per $1,000 original principal amount:
O. Pool Balance at the end of the related Collection Period:
P. Outstanding Amount of Notes:
Note Factor:
Q. Outstanding Certificate Balance:
R. Certificate Factor:
(1) Amount of Servicing Fee:
(2) Per $1,000 original principal amount:
S. Aggregate Purchase Amounts for Collection Period:
T. Aggregate Amount of Realized Losses for the Collection Period:
U. Amount in Spread Account:
V. Servicer Reimbursable Expenses
(1) Repo and Liquidation Fees:
(2) Bankruptcy Expenses:
(3) Other Expenses:
(4) Title Expenses:
(5) Total:
W. Schedule of each Receivable that became a Liquidated Receivable
[attached hereto]
C-4
<PAGE> 89
EXHIBIT D
Form of Policy
D-1
<PAGE> 90
EXHIBIT E
Custodian Fee Letter
E-1
<PAGE> 91
EXHIBIT F
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: Harris Trust and Savings Bank, as Custodian
311 West Monroe Street, 12th Floor
Chicago, IL 60606
Attention: Indenture Trust Division
Re: SALE AND SERVICING AGREEMENT dated as of June 1, 1997 (the "Agreement"),
among
FIRST MERCHANTS AUTO TRUST 1997-2, as Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, as Seller,
FIRST MERCHANTS ACCEPTANCE CORPORATION, as Originator and Sub-servicer,
LSI FINANCIAL GROUP, as Servicer,
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee, Backup Servicer and Custodian
Ladies and Gentlemen:
In connection with the administration of the Receivables held by you as
the Custodian for the Issuer and the Indenture Trustee we request the release,
and acknowledge receipt, of the (Legal File/specify documents) for the
Receivable described below, for the reason indicated. Terms not otherwise
defined herein are used as defined in the above-referenced Agreement.
Obligor's Name, Address & Zip Code:
Receivable Loan Number:
Reason for Requesting Documents (check one or more)
----1. Receivable Paid in Full
----2. Receivable Repurchased pursuant to the Agreement
----3. Receivable Re-financed
----4. Receivable otherwise Liquidated
----5. Other (explain)
If item 5 above is checked, upon our return of the above document(s) to you as
the Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
F-1
<PAGE> 92
If item 4 [or 5] above is checked, and if all or part of the Legal File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Receivable.
------------------------
By
---------------------
Name:
--------------
Title:
--------------
Date:
--------------
DOCUMENTS RETURNED TO THE CUSTODIAN:
HARRIS TRUST AND SAVINGS BANK, as Custodian
By
---------------------
Name:
--------------
Title:
--------------
Date:
--------------
F-2
<PAGE> 1
EXHIBIT 10.4
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
between
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
as Depositor,
and
CHASE MANHATTAN BANK DELAWARE,
as Owner Trustee
Dated as of June 1, 1997
================================================================================
<PAGE> 2
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 6
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 8
SECTION 3.02. The Trust Certificates 8
SECTION 3.03. Authentication of Trust Certificates 9
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates 9
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates 11
SECTION 3.06. Persons Deemed Owners 12
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses 12
SECTION 3.08. Maintenance of Office or Agency 12
SECTION 3.09. Appointment of Paying Agent 13
SECTION 3.10. Trust Certificate Transfer Restrictions 13
SECTION 3.11. Ownership by Depositor of Trust Certificates 13
<PAGE> 3
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice with Respect to Certain Matters 14
SECTION 4.02. Action by Owners with Respect to Certain Matters 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy 15
SECTION 4.04. Restrictions on Owners' Power 15
SECTION 4.05. Majority Control 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account 15
SECTION 5.02. Application of Trust Funds 16
SECTION 5.03. Method of Payment 16
SECTION 5.04. No Segregation of Moneys; No Interest. 16
SECTION 5.05. Accounting and Reports to the Noteholders, Owners,
the Internal Revenue Service and Others 16
SECTION 5.06. Signature on Returns; Tax Returns; Tax Matters Partner 17
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority 17
SECTION 6.02. General Duties 17
SECTION 6.03. Action upon Instruction 18
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions 18
SECTION 6.05. No Action Except Under Specified Documents or
Instructions 19
SECTION 6.06. Restrictions 19
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties 19
SECTION 7.02. Furnishing of Documents 20
SECTION 7.03. Representations and Warranties 21
SECTION 7.04. Reliance; Advice of Counsel 21
SECTION 7.05. Not Acting in Individual Capacity 22
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or for
<PAGE> 4
Receivables 22
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes 22
SECTION 7.08. Pennsylvania Motor Vehicle Sales Finance Act Licenses 22
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses 23
SECTION 8.02. Indemnification 23
SECTION 8.03. Payments to the Owner Trustee 23
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement 23
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor 24
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee 25
SECTION 10.02. Resignation or Removal of Owner Trustee 25
SECTION 10.03. Successor Owner Trustee 26
SECTION 10.04. Merger or Consolidation of Owner Trustee 27
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee 27
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments 28
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners 29
SECTION 11.03. Limitations on Rights of Others 30
SECTION 11.04. Notices 30
SECTION 11.05. Severability 30
SECTION 11.06. Separate Counterparts 30
SECTION 11.07. Successors and Assigns 30
SECTION 11.08. Covenants of the Depositor 31
SECTION 11.09. No Petition 31
SECTION 11.10. No Recourse 31
SECTION 11.11. Headings 31
SECTION 11.12. GOVERNING LAW 31
<PAGE> 5
AMENDED AND RESTATED TRUST AGREEMENT dated as of June 1, 1997, between
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a Delaware corporation,
as depositor (the "Depositor"), and CHASE MANHATTAN 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 May 20, 1997 (the "Trust Agreement");
WHEREAS, the Trust Agreement is being amended and restated as of June 1,
1997;
NOW, THEREFORE, the Depositor and the Owner Trustee hereby agree as
follows:
ARTICLE I
Definitions
SECTION 1.01. Capitalized TermsSECTION 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 June 1, 1997, 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.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time
to time.
"Certificate Balance" shall mean the Initial Certificate Balance reduced
by all amounts allocable to principal previously distributed to
Certificateholders.
"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.
<PAGE> 6
"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 in the
State of Delaware 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 in the State of Delaware designated by such
successor Owner Trustee by notice to the Owners and the Depositor.
"Demand Note" shall mean the Demand Note dated May 21, 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 June 1, 1997 between the
Trust and Harris Trust and Savings Bank, as Indenture Trustee.
"Initial Certificate Balance" shall mean $8,582,293.55.
"Notes" shall mean the 6.85% Asset Backed Notes issued pursuant to the
Indenture.
"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 Chase Manhattan 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.
2
<PAGE> 7
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be The Chase Manhattan 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.
"Placement Agent" means Greenwich Capital Markets, Inc. ("Greenwich") as
Placement Agent under the Placement Agent and Purchase Agreement dated June 19,
1997 among Greenwich, the Depositor and First Merchants Acceptance Corporation.
"Record Date" shall mean, with respect to any Distribution Date, the last
day of the month preceding such Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of June 1, 1997, among the Trust, as issuer, the Depositor, as seller,
First Merchants Acceptance Corporation, as originator and sub-servicer, LSI
Financial Group, as servicer, and Harris Trust and Savings Bank, as indenture
trustee, backup servicer and custodian, 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 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
3
<PAGE> 8
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 and plural forms of such terms and to the masculine, feminine and
neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to
a Person are also to its permitted successors and assigns.
ARTICLE II
Organization
SECTION 2.01. Name 2.01. Name. The Trust created hereby shall be known
as "First Merchants Auto Trust 1997-2," 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. OfficeSECTION 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 PowersSECTION 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;
4
<PAGE> 9
(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 TrusteeSECTION 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 EstateSECTION
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 TrustSECTION 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. It is the
intention of the parties hereto that, solely for income and franchise tax
purposes, the Trust shall be treated as a partnership, with the assets of the
partnership being the Receivables and other assets held by the Trust, the
partners of the partnership being the Certificateholders, and the Notes being
debt of the partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes.
Effective as of the
5
<PAGE> 10
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 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. The obligations of the Depositor under
this paragraph shall be evidenced by the Trust Certificates described in
Section 3.11, 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) above,
shall have any personal liability for any liability or obligation of the Trust.
SECTION 2.08. Title to Trust PropertySECTION 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 TrustSECTION 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.
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(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 NoteSECTION 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 TreatmentSECTION 2.12. Tax Treatment. Net income of
the Trust for any month as determined for federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation thereof)
shall be allocated:
(a among the Certificate Owners as of the first day following the end of
such month, in proportion to their ownership of principal amount of Trust
Certificates on such date, net income in an amount up to the sum of (i) the
Certificateholders' Monthly Interest Distributable Amount for such month, (ii)
interest on the excess, if any, of the
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Certificateholders' Interest Distributable Amount for the preceding
Distribution Date over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, to the extent permitted by law, at the Pass-Through Rate
from such preceding Distribution Date through the current Distribution Date,
(iii) the portion of the market discount on the Receivables accrued during such
month that is allocable to the excess, if any, of the initial aggregate
principal amount of the Trust Certificates over their initial aggregate issue
price, (iv) any amount expected to be distributed to the Certificateholders
pursuant to Section 5.07(g) of the Sale and Servicing Agreement (to the extent
not previously allocated pursuant to this clause), and (v) any other amounts of
income payable to the Certificateholders for such month; such sum to be reduced
by any amortization by the Trust of premium on Receivables that corresponds to
any excess of the issue price of Trust Certificates over their principal
amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first be
allocated to make up such shortfall before being allocated as provided in the
preceding sentence. Net losses of the Trust, if any, for any month as
determined for federal income tax purposes (and each item of income, gain, loss
and deduction entering into the computation thereof) shall be allocated to the
Company to the extent the Company is reasonably expected to bear the economic
burden of such net losses, and any remaining net losses shall be allocated
among the Certificate Owners as of the first Record Date following the end of
such month in proportion to their ownership of principal amount of Trust
Certificates on such Record Date. The Company is authorized to modify the
allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Company or to the Certificate Owners, or as otherwise required by
the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial OwnershipSECTION 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 CertificatesSECTION 3.02. The Trust
Certificates. The Trust Certificates shall be issued in minimum denominations
of $250,000 and in integral multiples of $1,000 in excess thereof; provided,
however, that the Trust Certificate issued to the Depositor pursuant to Section
3.11 may be issued in such denomination as is 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
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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.
Each Holder of the Trust Certificates, by its acceptance of a Trust
Certificate, shall be deemed to have agreed to treat the Trust as a partnership
with the Trust Certificates representing partnership interests therein and the
Notes representing debt thereof. In the event that a Holder transfers any
Trust Certificate to any other Person, such Holder, by its transfer, and such
Person, by its acceptance of the Trust Certificate so transferred, shall be
subject to the same condition.
SECTION 3.03. Authentication of Trust CertificatesSECTION 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 The Chase Manhattan 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
CertificatesSECTION 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. The Chase
Manhattan 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 or traded on an
"established securities market" as defined in Treas. Reg. Section 1.7704-1(e)
(including an interdealer quotation system that regularly disseminates firm buy
or sell quotations by identified brokers or dealers by electronic means or
otherwise).
Notwithstanding anything to the contrary contained herein, no resale or
other transfer of a Trust Certificate or any interest therein shall be made if
the transferee (or any person or entity for whom such transferee is acting as
agent or custodian in connection with the acquisition of such Trust
Certificate) is a partnership, grantor trust or S corporation for federal
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income tax purposes (a "Flow-Through Entity") unless either: (i) all Trust
Certificates owned by or on behalf of such Flow-Through Entity will represent
less than 50% of the value of all assets owned by or on behalf of such
Flow-Through Entity and no special allocation of income, gain, loss, deduction
or credit from such Trust Certificates will be made among the beneficial owners
of such Flow-Through Entity; or (ii) the number of members of such Flow-Through
Entity is restricted such that no member of such Flow-Through Entity may own
Trust Certificates representing less than two percent of the Certificate
Balance and no member of such Flow-Through Entity is itself a Flow-Through
Entity that would not satisfy the requirements of clause (i). In order to
assure compliance with the foregoing restrictions, the Holder desiring to
effect such transfer shall certify to the Owner Trustee or the Certificate
Registrar and the Depositor in writing the facts surrounding the transfer in
substantially the form set forth in Exhibit D (the "Investment Letter").
The Trust shall cause each Trust Certificate to contain a legend stating
that transfer of the Trust Certificate is subject to certain restrictions and
referring prospective purchasers of such Certificates to this Section 3.04 with
respect to such restrictions.
No transfer of a Trust Certificate shall be made unless such transfer is
exempt from the registration requirements under 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
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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.
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 The Chase Manhattan
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 Certificateholder, 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 Certificateholder or such Certificateholder'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
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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
CertificatesSECTION 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 The Chase Manhattan
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 OwnersSECTION 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
AddressesSECTION 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
(i) three or more Certificateholders or (ii) 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
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Certificateholders. Each Certificateholder, 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 AgencySECTION 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 The Chase Manhattan 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 AgentSECTION 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 The Chase Manhattan Bank, and any
co-paying agent chosen by The Chase Manhattan Bank and acceptable to the Owner
Trustee. The Chase Manhattan Bank shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Owner Trustee. In the event that The Chase
Manhattan 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. Trust Certificate Transfer RestrictionsSECTION 3.10. Trust
Certificate Transfer Restrictions. The Trust Certificates may not be acquired
by or for the account of (i) an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in
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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"). By accepting and holding a Trust Certificate, the Holder
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
SECTION 3.11. Ownership by Depositor of Trust Certificates3.11. Ownership
by Depositor of Trust Certificates. The Depositor shall on the Closing Date
purchase from the Placement Agent 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 TRUST CERTIFICATE IS NON-TRANSFERABLE".
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice with Respect to Certain Matters. With respect
to the following matters, the Owner Trustee shall not take action unless at
least 30 days before the taking of such action, the Owner Trustee shall have
notified the Certificateholders and the Note Insurer (so long as no Note
Insurer Default shall have occurred and be continuing) in writing of the
proposed action and neither the Note Insurer (so long as no Note Insurer
Default shall have occurred and be continuing, in which case the Indenture
Trustee shall have such right of the Note Insurer) 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 Note Insurer (so long as no Note Insurer
Default shall 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;
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(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, 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 Note Insurer (so long as no Note Insurer
Default shall have occurred and be continuing; and if a Note Insurer Default
shall have occured and be continuing, with the consent of the Indenture
Trustee)), 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, (d) amend the
Sale and Servicing Agreement pursuant to Section 10.01(b) of such document, or
(e) 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 Note Insurer (so long as no Note Insurer Default shall have
occurred and be continuing) or the Indenture Trustee (if a Note 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.
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ARTICLE V
ARTICLE V Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Deposit Account (the "Certificate Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control
of the Owner Trustee for the benefit of the Certificateholders. If, at any
time, the Certificate Distribution Account ceases to be an Eligible Deposit
Account, the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if
the Certificate Distribution Account is not then held by the Owner Trustee or
an affiliate thereof) shall within 10 Business Days (or such longer period, not
to exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Certificate Distribution Account as an Eligible Deposit Account
and shall transfer any cash and/or any investments to such new Certificate
Distribution Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Section 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.11 of the Sale and Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The
Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner Trustee from contesting any such tax in appropriate proceedings and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to
an Owner shall be treated as cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Owner), the Owner Trustee
may in its sole discretion withhold such amounts in accordance with this
paragraph (c).
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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 Certificateholder 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 and such Holder's Trust Certificates in the aggregate
evidence a denomination of not less than $1,000,000, or, if not, by check
mailed to such Certificateholder at the address of such Certificateholder
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 (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income
tax purposes, (d) cause such tax returns to be signed in the manner required by
law and (e) collect or cause to be collected any withholding tax as described
in and in accordance with Section 5.02(c) with respect to income or
distributions to Owners. The Owner Trustee shall elect under Section 1278 of
the Code to include in income currently any market discount that accrues with
respect to the Receivables. The Owner Trustee shall not make the election
provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Returns; Tax Matters Partner.
(a) The Owner Trustee shall sign on behalf of the Trust the tax returns of the
Trust, unless applicable law requires an Owner to sign such documents, in which
case such documents shall be signed by the Depositor. The Owner Trustee shall
file Internal Revenue Service Form 8832 and elect for the Trust to be treated
as a domestic eligible entity with multiple owners that will be treated as a
partnership for federal income tax purposes. (b) The Depositor shall be
designated the "tax matters partner" of the Trust pursuant to Section
6231(a)(7)(A) of the Code and Applicable Treasury Regulations.
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ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents (including amendments
thereto) 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 (including executing amendments thereto).
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
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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
InstructionsSECTION 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.
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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, Arkansas or Illinois
income tax purposes. The Owners shall not direct the Owner Trustee to take
action that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder
or under any Basic Document under any circumstances, except (i) for its own
willful misconduct or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment made by
a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require the
Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume
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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 Sub-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, the Sub-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.
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(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 (i0 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, Chase Manhattan 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 for
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
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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, the
Sub-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, the Servicer and the Sub-servicer in
banking transactions with the same rights as it would have if it were not Owner
Trustee.
SECTION 7.08. Pennsylvania Motor Vehicle Sales Finance Act
Licenses. The Owner Trustee, in its individual capacity, shall use its best
efforts to maintain, and the Owner Trustee, as Owner Trustee, shall cause the
Trust to use its best efforts to maintain, the effectiveness of all licenses
required under the Pennsylvania Motor Vehicle Sales Finance Act in connection
with this Agreement and the Basic Documents and the transactions contemplated
hereby and thereby until such time as the Trust shall terminate in accordance
with the terms hereof.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. As compensation for its
services hereunder, the Owner Trustee shall receive the Owner Trustee Fee as
provided in the Sale and Servicing Agreement.
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
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out of this Agreement, the Basic Documents, the Owner Trust Estate, the
administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Administrator shall not be liable for
or required to indemnify an Indemnified Party from and against Expenses arising
or resulting from any of the matters described in the third sentence of Section
7.01. The indemnities contained in this Section shall survive the resignation
or termination of the Owner Trustee or the termination of this Agreement. In
any event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Administrator, which approval shall not be
unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
than Article VIII) and the Trust shall terminate and be of no further force or
effect upon the final distribution by the Owner Trustee, notwithstanding the
payment in full of the Certificates, of all moneys or other property or
proceeds of the Owner Trust Estate in accordance with the terms of the
Indenture and the Sale and Servicing Agreement, including, without limitation
Section 5.06(b)(12) of the Sale and Servicing Agreement, and Article V hereof.
Subject to Section 9.02, the bankruptcy, liquidation, dissolution, death or
incapacity of any Owner 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) 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
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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 (other than the Depositor) of Trust Certificates 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 Notes representing more than 50% of the
Outstanding Amount of the Notes and (ii) the Note Insurer (so long as no Note
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, the Note Insurer 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, the Note Insurer 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 and the Note Insurer
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
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commercially reasonable terms. The proceeds of such a sale of the assets of
the Trust shall be treated as collections under the Sale and Servicing
Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise corporate
trust powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) time deposits that are rated at least A-1
by Standard & Poor's and P-1 by Moody's. If such corporation shall publish
reports of condition at least annually pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator, the Indenture Trustee
and the Note Insurer. Upon receiving such notice of resignation, the Depositor
(with the prior written consent of the Note Insurer, unless a Note Insurer
Default has occurred and is continuing) 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.
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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 Note
Insurer (so long as no Note 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 Note Insurer
(so long as no Note 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 Note Insurer (so long as no Note
Insurer Default shall have occurred and be continuing).
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<PAGE> 32
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
28
<PAGE> 33
the liability of, or affording protection to, the Owner Trustee. Each such
instrument shall be filed with the Owner Trustee and a copy thereof given to
the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Owner Trustee, to the extent permitted by law, without the appointment
of a new or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be amended
by the Depositor and the Owner Trustee, with the consent of the Note Insurer
(so long as no Note Insurer Default shall have occurred and be continuing) or
the Indenture Trustee (if a Note 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 Note Insurer (so long as no Note
Insurer Default shall have occurred and be continuing) and with prior written
notice to each Rating Agency, with the consent of the Holders (as defined in
the Indenture) of Notes 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 Holders of all the
outstanding Notes and Certificates.
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<PAGE> 34
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 Note Insurer 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 Trust 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 Trust 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 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 Note 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.
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<PAGE> 35
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
Certificateholder 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
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<PAGE> 36
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 Trust Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee, the Sub-servicer, 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 LAWSECTION. 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.
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<PAGE> 37
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:
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but solely
as Owner Trustee
by:_________________________________
Name:
Title:
<PAGE> 38
EXHIBIT A
FORM OF TRUST CERTIFICATE
THIS TRUST CERTIFICATE IS SUBORDINATE 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
A-1
<PAGE> 39
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
$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 1933 ACT)
ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $250,000 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 TO THE TRUST AGREEMENT 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.
THE TRANSFER OF EACH TRUST CERTIFICATE SHALL BE SUBJECT TO CERTAIN RESTRICTIONS
LISTED IN SECTION 3.04 OF THE TRUST AGREEMENT.
A-2
<PAGE> 40
NUMBER $_________
R- CUSIP NO. _______
FIRST MERCHANTS AUTO TRUST 1997-2
12.25% 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 Depositor 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 Depositor, the Servicer or the Trust; (e) all documents
and other items contained in the Receivables Files and the Legal Files; (f) all
of the Depositor'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 AN 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 1997-2 (the
"Trust"), formed by FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a Delaware
corporation (the "Depositor").
The Trust was created pursuant to a Trust Agreement dated as of May 20,
1997, as amended and restated by an Amended and Restated Trust Agreement dated
as of June 1, 1997 (as so amended and restated and further amended or
supplemented from time to time, the "Trust Agreement"), between the Depositor
and Chase Manhattan 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 June 1, 1997 (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 originator and sub-servicer
(in such capacities, the "Originator" and the "Sub-servicer"), LSI Financial
Group, as servicer (the "Servicer"), and Harris Trust and Savings Bank, as
indenture trustee, backup servicer and custodian (in such capacities, the
"Indenture Trustee", "Backup Servicer" and "Custodian"), as applicable.
A-3
<PAGE> 41
This Trust Certificate is one of the duly authorized Trust Certificates
designated as "12.25% Asset Backed Certificates" (herein called the "Trust
Certificates"). Also issued under an Indenture dated as of June 1, 1997 (the
"Indenture"), between the Trust and Harris Trust and Savings Bank, as indenture
trustee, are the Notes designated as "6.85% Asset Backed Notes" (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 Certificateholder is bound. The property of the Trust consists of a pool
of retail installment contracts for new and used automobiles, vans, minivans
and light duty trucks (the "Receivables") and all monies received thereon on or
after June 1, 1997, 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 Certificateholders are subordinate to the rights of the Noteholders, as set
forth in the Sale and Servicing Agreement.
Under the Trust Agreement and Sale and Servicing 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 July 15, 1997, 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, other than in respect of any Certificateholders' Additional
Principal Distribution Amount, until all of the Notes 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
subordinate 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, in the event the Trust Certificates
are held by more than one Owner, the Trust will be treated as a partnership and
the Certificateholders will be treated as partners in that partnership. The
Certificateholders, by acceptance of a Trust Certificate, shall be deemed to
have agreed to the above treatment and to taking no action inconsistent
therewith. Each Certificateholder, by its acceptance of a Trust Certificate,
agrees to treat, and to take no action inconsistent with the treatment of, the
Trust Certificates for such tax purposes as partnership interests in the Trust.
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.
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<PAGE> 42
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.
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<PAGE> 43
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 1997-2
by: CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity
but solely as Owner Trustee
Dated: by: _____________________________
Authorized Signatory
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
CHASE MANHATTAN BANK DELAWARE, CHASE MANHATTAN BANK DELAWARE,
as Owner Trustee or as Owner Trustee
by:
THE CHASE MANHATTAN BANK, as
Authenticating Agent
by:____________________
Authorized Signatory
by:____________________
Authorized Signatory
<PAGE> 44
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an interest
in, the Depositor, the Servicer, the Sub-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. 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 Certificateholder hereof or such Certificateholder'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 The Chase Manhattan Bank, New York, New
York.
Each Holder of the Trust Certificates, by its acceptance of a Trust
Certificate, shall be deemed to have agreed to treat the Trust as a partnership
with the Trust Certificates representing partnership interests therein and the
Notes representing debt thereof. In the event that a Holder transfers any
Trust Certificate to any other Person, such Holder, by its transfer, and such
Person, by its acceptance of the Trust Certificate so transferred, shall be
subject to the same condition.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $250,000 and in integral multiples of $1,000 in excess thereof provided,
however, that the Trust Certificate
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<PAGE> 45
issued to the Depositor pursuant to Section 3.11 of the Trust Agreement may be
issued in such denomination as is 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 Certificateholder 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
Trust 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; provided, 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 Initial Pool Balance.
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.
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<PAGE> 46
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
of the registered owner as it appears on the face of the within Trust
Certificate 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 Certificate
Registrar, which requirements include membership or participation in STAMP
or such other "signature guarantee program" as may be determined by the
Certificate Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
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<PAGE> 47
EXHIBIT B
Form of Certificate of Trust of First Merchants Auto Trust 1997-2
THIS Certificate of Trust of FIRST MERCHANTS AUTO TRUST 1997-2 (the
"Trust"), dated [ ], 1997, is being duly executed and filed by Chase Manhattan
Bank Delaware, a Delaware banking corporation, as trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. Code, Section 3801 et
seq.).
1. Name. The name of the business trust formed hereby is FIRST MERCHANTS
AUTO TRUST 1997-2.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Chase Manhattan 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.
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but
solely as owner trustee under a
Trust Agreement dated as of June [],
1997
By: ________________________________
Name:
Title:
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<PAGE> 48
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
First Merchants Auto Receivables
Corporation II
570 Lake Cook Road
Suite 126B
Deerfield, IL 60015
Chase Manhattan Bank Delaware, as Owner Trustee
1201 Market Street
Wilmington, DE 19801
Re: First Merchants Auto Trust 1997-2
12.25% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 12.25% 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
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<PAGE> 49
EXHIBIT D
FORM OF INVESTMENT LETTER
First Merchants Auto Receivables
Corporation II, as Depositor
570 Lake Cook Road
Suite 126B
Deerfield, IL 60015
Chase Manhattan 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 12.25% Asset Backed Certificates (the
"Certificates") of First Merchants Auto Trust 1997-2 (the "Trust"), 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
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<PAGE> 50
person of Certificates 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
1933 Act) acting in its fiduciary capacity), of Certificates with a face
amount of less than $250,000 for each such third party.
We have received a copy of the offering memorandum, dated June 20,
1997 (the "Certificate Memorandum"), relating to the Certificates and
such other information as we deem necessary in order to make our
investment decision and we have been provided the opportunity to ask
questions of, and receive answers from, the Seller, concerning the
Seller, the Originator, the Servicer and the terms and conditions of the
offering described in the Certificate Memorandum. We have received and
understand the above, and understand that substantial risks are involved
in an investment in the Certificates. We represent that in making our
investment decision to acquire the Certificates, we have not relied on
representations, warranties, opinions, projections, financial or other
information or analysis, if any, supplied to it by any person, including
you, the Placement Agent or the Initial Purchaser or any of your or their
affiliates, except as expressly contained in the Certificate Memorandum
and in the other written information, if any, discussed above. We
acknowledge that we have read and agreed to the matters stated in the
"Notice to Investors" contained in such Certificate Memorandum, including
the restrictions on duplication and circulation of such Certificate
Memorandum. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
an investment in the Certificates, and we are able to bear the
substantial economic risks of such an investment. We have relied upon
our own tax, legal and financial advisors in connection with our decision
to purchase Notes.
2. [CHECK ONE]
p (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.
p (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
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<PAGE> 51
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 Trust 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 seller,
the Trust, Greenwich Capital Markets, Inc. ("Greenwich") 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 Greenwich.
5. We are not, nor is any person or entity for whom we are acting as
agent or custodian in connection with the acquisition of such
Certificate, a partnership, grantor trust or S corporation for federal
income tax purposes (a "Flow-Through Entity") unless either: (i) all
Certificates owned by or on behalf of such Flow-Through Entity will
represent less than 50% of the value of all assets owned by or on behalf
of such Flow-Through Entity and no special allocation of income, gain,
loss, deduction or credit from such Certificates will be made among the
beneficial owners of such Flow-Through Entity; or (ii) the number of
members of such Flow-Through Entity are restricted such that no member of
such Flow-Through Entity may own less than two percent of the total
outstanding Certificate Balance and no member of such Flow-Through Entity
is itself a Flow-Through Entity that would not satisfy the requirements
of clause (i).
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<PAGE> 52
6. 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.
Capitalized terms used herein but not otherwise defined herein are
used as defined in the Trust Agreement.
Very truly yours,
[NAME OF PURCHASER]
By:_________________________________
Name:
Title:
Date:________________________________
D-4
