SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 1996-B,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller,
and
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
Indenture Trustee, Collateral Agent and Backup Servicer
Dated as of September 1, 1996
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01.Definitions 1
SECTION 1.02.Other Definitional Provisions 19
ARTICLE II
Conveyance of Receivables
SECTION 2.01.Conveyance of Receivables 20
ARTICLE III
The Receivables
SECTION 3.01.Representations and Warranties of First Merchants 21
SECTION 3.02.Representations and Warranties of the Seller 21
SECTION 3.03.Repurchase upon Breach 22
SECTION 3.04.Custody of Receivable Files 22
SECTION 3.05.Duties of Servicer as Custodian 23
SECTION 3.06.Instructions; Authority to Act 23
SECTION 3.07.Custodian's Indemnification 23
SECTION 3.08.Effective Period and Termination 24
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01.Duties of Servicer 24
SECTION 4.02.Collection and Receivable Payments; Modifications of Receivables
25
SECTION 4.03.Realization upon Receivables 26
SECTION 4.04.Physical Damage Insurance 27
SECTION 4.05.Maintenance of Security Interests in Financed Vehicles 27
SECTION 4.06.Covenants of Servicer 27
SECTION 4.07.Purchase of Receivables upon Breach 28
SECTION 4.08.Servicing Fee 28
SECTION 4.09.Servicer's Certificate 28
SECTION 4.10.Annual Statement as to Compliance; Notice of Servicer Termination
Event 29
SECTION 4.11.Annual Independent Accountants' Report 29
SECTION 4.12.Access to Certain Documentation and Information Regarding
Receivables 29
SECTION 4.13.Monthly Tape 30
SECTION 4.14.Retention and Termination of Servicer 30
ARTICLE V
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01.Local Post Office Boxes 31
SECTION 5.02.Accounts 31
SECTION 5.03.Application of Collections 33
SECTION 5.04.Purchase Amounts 33
SECTION 5.05.Transfers from the Spread Account 33
SECTION 5.06.Distributions 34
SECTION ▇.▇▇.▇▇▇▇▇▇ Upon the Policies; Policy Payments Account 35
SECTION 5.08.Notices to the Security Insurer 36
SECTION 5.09. Rights in Respect of Insolvency Proceedings 37
SECTION 5.10.Effect of Payments by the Security Insurer; Subrogation 37
SECTION 5.11.Statements to Securityholders 38
ARTICLE VI
The Seller
SECTION 6.01.Representations of Seller 39
SECTION 6.02.Corporate Existence 41
SECTION 6.03.Liability of Seller; Indemnities 41
SECTION 6.04.Merger or Consolidation of, or Assumption of the Obligations of,
Seller 41
SECTION 6.05.Limitation on Liability of Seller and Others 41
SECTION 6.06.Seller May Own Securities 42
ARTICLE VII
The Servicer
SECTION 7.01.Representations of Servicer 42
SECTION 7.02.Indemnities of Servicer 43
SECTION 7.03.Merger or Consolidation of, or Assumption of the Obligations of,
Servicer 44
SECTION 7.04.Limitation on Liability of Servicer, Backup Servicer and Others
45
SECTION 7.05.Appointment of Subservicer 46
SECTION 7.06.Servicer and Backup Servicer Not to Resign 46
ARTICLE VIII
Default
SECTION 8.01.Servicer Termination Events 47
SECTION 8.02.Consequences of a Servicer Termination Event 47
SECTION 8.03.Appointment of Successor 48
SECTION 8.04.Notification to Noteholders and Certificateholders 49
SECTION 8.05.Waiver of Past Defaults 49
ARTICLE IX
Termination
SECTION 9.01.Optional Purchase of All Receivables 49
ARTICLE X
Miscellaneous
SECTION 10.01.Amendment 51
SECTION ▇▇.▇▇.▇▇▇▇▇▇▇▇▇▇ of Title to Trust 51
SECTION 10.03.Notices 53
SECTION 10.04.Assignment by the Seller or the Servicer 53
SECTION 10.05.Limitations on Rights of Others 54
SECTION 10.06.Severability 54
SECTION 10.07.Separate Counterparts 54
SECTION 10.08.Headings 54
SECTION 10.09.Governing Law 54
SECTION 10.10.Assignment by Issuer 54
SECTION 10.11.Nonpetition Covenants 54
SECTION 10.12.Limitation of Liability of Owner Trustee and Indenture Trustee
55
SECTION 10.13.Servicer Payment Obligation 55
EXHIBIT A Representations and Warranties of First Merchants
EXHIBIT D Form of Notes Policy
SCHEDULE A Schedule of Receivables
SCHEDULE B Schedule of Eligible Investment Receivables
SCHEDULE C Location of Receivable Files
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 Notes Policy
EXHIBIT E Form of Certificates PolicySALE AND SERVICING AGREEMENT
dated as of September 1, 1996, among FIRST
MERCHANTS AUTO TRUST 1996-B, a Delaware business trust (the "Issuer"), FIRST
MERCHANTS AUTO RECEIVABLES CORPORATION II, a Delaware corporation (the
"Seller"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware corporation (the
"Servicer") and ▇▇▇▇▇▇ TRUST AND SAVINGS BANK, an Illinois banking corporation
as indenture trustee (in such capacity, the "Indenture Trustee"), as
collateral agent (in such capacity, the "Collateral Agent") and as backup
servicer (in such capacity, the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with automobile retail installment sale contracts generated by
First Merchants Acceptance Corporation in the ordinary course of business and
sold by First Merchants Acceptance Corporation to the Seller;
WHEREAS the Seller is willing to sell such receivables to the Issuer; and
WHEREAS First Merchants Acceptance Corporation is willing to service such
receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"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 or Eligible Investment
Receivable means the annual rate of finance charges stated in the related
Contract.
"Backup Servicer" means ▇▇▇▇▇▇ Trust and Savings Bank or its successor in
interest pursuant to Section 7.03 or such other Person as shall have been
appointed as Backup Servicer pursuant to Section 8.03(b).
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Indenture, this Agreement, the Purchase Agreement, the Receivables
Purchase Agreement, the Administration Agreement, the Note Depository
Agreement, the Policies, the Insurance Agreement, the Indemnification
Agreement, the Premium Letter, the Local Collection Account Agreement and
other documents and certificates delivered in connection therewith.
"Certificate Balance" equals the Initial Certificate Balance reduced by
all amounts allocable to principal previously distributed to
Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made
on the immediately following Distribution Date) divided by the Initial
Certificate Balance. The Certificate Pool Factor will be 1.0000000 as of the
Closing Date; thereafter, the Certificate Pool Factor will decline to reflect
reductions in the Certificate Balance.
"Certificateholders" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the amount, if any, by which the sum of the
Certificateholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Certificateholders' Interest Carryover
Shortfall on such preceding Distribution Date exceeds the amount in respect of
interest actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus 30 days' 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.
"Certificateholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with
respect to the Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months for all purposes of this Agreement and the
Basic Documents.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 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 (or, in the case of the
first Distribution Date, the Closing Date), after giving effect to all
distributions of principal to the Certificateholders on or prior to such
preceding Distribution Date.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date (i) prior to the Distribution Date on which
the Class A-2 Notes are paid in full, zero and (ii) on or after the
Distribution Date on which the Class A-2 Notes are paid in full, 100% of the
Regular Principal Distribution Amount (less, on the Distribution Date on which
the Class A-2 Notes are paid in full, the portion thereof payable on the Class
A-2 Notes).
"Certificateholders' Principal Carryover Shortfall" means, with respect
to any Distribution Date, the amount, if any, by which the sum of the
Certificateholders' Monthly Principal Distributable Amount for the preceding
Distribution Date and any outstanding Certificateholders' Principal Carryover
Shortfall on such preceding Distribution Date exceeds the amount in respect of
principal 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 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).
"Certificates Policy" means the financial guaranty insurance policy
issued by the Security Insurer with respect to the Certificates, including any
endorsements thereto, in the form of Exhibit E.
"Class" means any one of the classes of Notes.
"Class A-1 Final Scheduled Distribution Date" means the March 15, 2000
Distribution Date.
"Class A-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-1
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-1 Interest Carryover Shortfall on such preceding
Distribution Date 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 Class A-1
Noteholders on such preceding Distribution Date, to the extent permitted by
law, at the Class A-1 Rate for the related Floating Rate Interest Accrual
Period.
"Class A-1 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and
the Basic Documents, interest with respect to the Class A-1 Notes shall be
computed on the basis of the actual number of days in each applicable Floating
Rate Interest Accrual Period.
"Class A-1 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related Floating Rate Interest
Accrual Period on the Class A-1 Notes at the Class A-1 Rate on the Outstanding
Amount of the Class A-1 Notes on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Closing Date), after
giving effect to all distributions of principal to the Class A-1 Noteholders
on or prior to such preceding Distribution Date.
"Class A-1 Monthly Principal Distribution Amount" means, with respect to
any Distribution Date until the Class A-1 Notes are paid in full, 100% of the
Regular Principal Distribution Amount.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
"Class A-1 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-1
Monthly Principal Distributable Amount for the preceding Distribution Date and
any outstanding Class A-1 Principal Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of principal actually
deposited in the Note Distribution Account on such preceding Distribution
Date.
"Class A-1 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Monthly Principal Distributable
Amount and the Class A-1 Principal Carryover Shortfall; provided, however,
that the Class A-1 Principal Distributable Amount shall not exceed the
Outstanding Amount of the Class A-1 Notes. In addition, on the Class A-1
Final Scheduled Distribution Date, the principal required to be deposited in
the Note Distribution Account will include the amount necessary (after giving
effect to the other amounts to be deposited in the Note Distribution Account
on such Distribution Date and allocable to principal) to reduce the
Outstanding Amount of the Class A-1 Notes to zero.
"Class A-2 Additional Principal Distribution Amount" means, (i) with
respect to any Distribution Date prior to the Distribution Date on which the
Class A-1 Notes are paid in full and any Distribution Date after the
Distribution Date on which the Class A-2 Notes are paid in full, zero and (ii)
with respect to any Distribution Date on or after the Distribution Date on
which the Class A-1 Notes are paid in full, 50% of the portion, if any, of the
Total Distribution Amount for the related Collection Period that remains after
the payment of amounts in respect of Section 5.06(b)(1) through (8); provided,
however, that the Class A-2 Additional Principal Distribution Amount shall not
exceed the Outstanding Amount of the Class A-2 Notes.
"Class A-2 Final Scheduled Distribution Date" means the May 15, 2001
Distribution Date.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-2
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class A-2 Interest Carryover Shortfall on such preceding
Distribution Date 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 Class A-2
Noteholders on such preceding Distribution Date, to the extent permitted by
law, at the Class A-2 Rate for the related Interest Accrual Period.
"Class A-2 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and
the Basic Documents, interest with respect to the Class A-2 Notes shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
"Class A-2 Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related Interest Accrual
Period on the Class A-2 Notes at the Class A-2 Rate on the Outstanding Amount
of the Class A-2 Notes on the immediately preceding Distribution Date (or, in
the case of the first Distribution Date, the Closing Date), after giving
effect to all distributions of principal to the Class A-2 Noteholders on or
prior to such preceding Distribution Date.
"Class A-2 Monthly Principal Distributable Amount" means, with respect to
any Distribution Date (i) prior to the Distribution Date on which the Class
A-1 Notes are paid in full, zero and (ii) on or after the Distribution Date on
which the Class A-1 Notes are paid in full 100% of the Regular Principal
Distribution Amount (less, on the Distribution Date on which the Class A-1
Notes are paid in full, the portion thereof payable on the Class A-1 Notes).
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"Class A-2 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the sum of the Class A-2
Monthly Principal Distributable Amount for the preceding Distribution Date and
any outstanding Class A-2 Principal Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of principal actually
deposited in the Note Distribution Account on such preceding Distribution
Date.
"Class A-2 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-2 Monthly Principal Distributable
Amount and the Class A-2 Principal Carryover Shortfall; provided, however,
that the Class A-2 Principal Distributable Amount shall not exceed the
Outstanding Amount of the Class A-2 Notes. In addition, on the Class A-2
Final Scheduled Distribution Date, the principal required to be deposited in
the Note Distribution Account will include the amount necessary (after giving
effect to the other amounts to be deposited in the Note Distribution Account
on such Distribution Date and allocable to principal) to reduce the
Outstanding Amount of the Class A-2 Notes to zero.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.02(b)(i).
"Collection Period" means with respect to any Distribution Date, the calend
ar 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.
"Controlling Party" means (i) as long as either Policy is in effect and
no Security Insurer Default has occurred and is continuing, the Security
Insurer, (ii) if (a) a Security Insurer Default has occurred and is continuing
or both Policies are otherwise no longer in effect and (b) the Notes have not
been paid in full, the Indenture Trustee for the benefit of the Noteholders
and (iii) if (a) a Security Insurer Default has occurred and is continuing or
the Certificates Policy is otherwise no longer in effect and (b) the Notes
have been paid in full, 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 ▇▇▇▇▇▇ Trust and Savings Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Indenture Trust Administration; or at
such other address as the Indenture Trustee may designate from time to time by
notice to the Noteholders and the Seller, or the principal corporate trust
office of any successor Indenture Trustee (of which address such successor
Indenture Trustee will notify the Noteholders and the Seller).
"Cram Down Loss" means any loss resulting from an order issued by a court
of appropriate jurisdiction in an insolvency proceeding that reduces the
amount owed on a Receivable or otherwise modifies or restructures the
Obligor's Scheduled Payments to be made thereon. The amount of any such Cram
Down Loss will equal the excess of (i) the Principal Balance of the Receivable
immediately prior to such order over (ii) the Principal Balance of such
Receivable as so reduced, modified or restructured. A Cram Down Loss will be
deemed to have occurred on the date of issuance of such order.
"Credit Enhancement Fee" means, with respect to any Distribution Date,
the fee paid to the Seller, upon the terms and subject to the conditions set
forth in the Spread Account Agreement, in consideration of the pledge by the
Seller of certain of its assets pursuant to the Spread Account Agreement. The
Credit Enhancement Fee shall be in an amount on each Distribution Date equal
to the funds remaining in the Collection Account on such date after the
distribution by the Indenture Trustee of all amounts required pursuant to
clauses (1) through (9) of Section 5.06(b).
"Cutoff Date" means September 1, 1996.
"Dealer" means the dealer who sold a Financed Vehicle and who originated
the related Receivable and assigned it to First Merchants pursuant to a Dealer
Agreement.
"Dealer Agreement" means an agreement between First Merchants and a
Dealer pursuant to which such Dealer sells Contracts to First Merchants.
"Defaulted Receivable" means a Receivable with respect to which any of
the following shall have occurred: (i) a payment under the related Contract is
120 or more days (or, if the related Obligor is a debtor under Chapter 13 of
the U.S. Bankruptcy Code, 180 or more days) delinquent, (ii) the related
Financed Vehicle has been repossessed or (iii) the Servicer has determined in
good faith that payments under the related Contract are not likely to be
resumed.
"Deficiency Claim Date" means, with respect to each Distribution Date,
the third Business Day preceding such Distribution Date.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee or
custodian by physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture Trustee or
its nominee or custodian or endorsed in blank, and, with respect to a
certificated security (as defined in Section 8-102 of the UCC) transfer
thereof (i) by delivery of such certificated security endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or custodian
or endorsed in blank to a financial intermediary (as defined in Section 8-313
of the UCC) and the making by such financial intermediary of entries on its
books and records identifying such certificated securities as belonging to the
Indenture Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such certificated
security by the Indenture Trustee or its nominee or custodian, or (ii) by
delivery thereof to a "clearing corporation" (as defined in Section 8-102(3)
of the UCC) and the making by such clearing corporation of appropriate entries
on its books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary by
the amount of such certificated security, the identification by the clearing
corporation of the certificated securities for the sole and exclusive account
of the financial intermediary, the maintenance of such certificated securities
by such clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such securities and the making by such financial intermediary
of entries on its books and records identifying such certificated securities
as belonging to the Indenture Trustee or its nominee or custodian (all of the
foregoing, "Physical Property"), and, in any event, any such Physical Property
in registered form shall be in the name of the Indenture Trustee or its
nominee or custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of ownership of
any such Trust Account Property (as defined herein) to the Indenture Trustee
or its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures,
all in accordance with applicable law, including applicable Federal
regulations and Articles 8 and 9 of the UCC: book-entry registration of such
Trust Account Property to an appropriate book-entry account maintained with a
Federal Reserve Bank by a financial intermediary which is also a "depository"
pursuant to applicable Federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Indenture Trustee or its nominee or custodian
of the purchase by the Indenture Trustee or its nominee or custodian of such
book-entry securities; the making by such financial intermediary of entries in
its books and records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as belonging
to the Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the Indenture
Trustee or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Indenture Trustee or its
nominee or custodian, consistent with changes in applicable law or regulations
or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof
in the name of the financial intermediary, the sending of a confirmation by
the financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such uncertificated security, the making by such
financial intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Indenture Trustee or its
nominee or custodian.
"Depositor" means the Seller in its capacity as Depositor under the Trust
Agreement.
"Determination Date" means, with respect to each Distribution Date, the
earlier of (i) the 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 October 15, 1996.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution shall have a credit
rating from each Rating Agency in one of its generic rating categories that
signifies investment grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee, the Owner Trustee or The Chase Manhattan Bank so long as it
shall be Paying Agent under the Trust Agreement or (b) a depository
institution organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch
of a foreign bank), which (i) has either (A) a long-term unsecured debt rating
of AAA or better by Standard & Poor's and A1 or better by Moody's or (B) a
certificate of deposit rating of A-1+ by Standard & Poor's and P-1 or better
by Moody's, or any other long-term, short-term or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured
by the FDIC. If so qualified, the Indenture Trustee, the Owner Trustee or
The Chase Manhattan Bank may be considered an Eligible Institution for the
purposes of clause (b) of this definition.
"Eligible Investment Receivable" has the meaning assigned to such term in
the Receivables Purchase Agreement.
"Eligible Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than
such obligations the rating of which is based on the credit of a Person other
than such depository institution or trust company) thereof shall have a credit
rating from each of the Rating Agencies in the highest investment category
granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each of
the Rating Agencies in the highest investment category granted thereby
(including funds for which the Indenture Trustee or the Owner Trustee or any
of their respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by
the full faith and credit of the United States of America, in either case
entered into with a depository institution or trust company (acting as
principal) described in clause (b);
(g) repurchase obligations with respect to any security or whole
loan, entered into with (i) a depository institution or trust company (acting
as principal) described in clause (b) above (except that the rating referred
to in the proviso in such clause (b) shall be A-1 or higher in the case of
Standard & Poor's) (such depository institution or trust company being
referred to in this definition as a "financial institution"), (ii) a
broker/dealer (acting as principal) registered as a broker or dealer under
Section 15 of the Exchange Act (a "broker/dealer") the unsecured short-term
debt obligations of which are rated P-1 by Moody's and at least A-1 by
Standard & Poor's at the time of entering into such repurchase obligation (a
"rated broker/dealer"), (iii) an unrated broker/dealer (an "unrated
broker/dealer"), acting as principal, that is a wholly-owned subsidiary of a
non-bank holding company the unsecured short-term debt obligations of which
are rated P-1 by Moody's and at least A-1 by Standard & Poor's at the time of
entering into such repurchase obligation (a "Rated Holding Company") or (iv)
an unrated subsidiary (a "Guaranteed Counterparty"), acting as principal, that
is a wholly-owned subsidiary of a direct or indirect parent Rated Holding
Company, which guarantees such subsidiary's obligations under such repurchase
agreement; provided that the following conditions are satisfied:
(A) the aggregate amount of funds invested in repurchase obligations
of a financial institution, a rated broker/dealer, an unrated broker/dealer or
Guaranteed Counterparty in respect of which the Standard & Poor's unsecured
short-term ratings are A-1 (in the case of an unrated broker/dealer or
Guaranteed Counterparty, such rating being that of the related Rated Holding
Company) shall not exceed 20% of the sum of the then Outstanding Amount of the
Notes and the Certificate Balance (there being no limit on the amount of funds
that may be invested in repurchase obligations in respect of which such
Standard & Poor's rating is A-1+ (in the case of an unrated broker/dealer or
Guaranteed Counterparty, such rating being that of the related Rated Holding
Company));
(B) the repurchase obligation must mature within 30 days of the date
on which the Indenture Trustee or the Issuer, as applicable, enters into such
repurchase obligation;
(C) the repurchase obligation shall not be subordinated to any other
obligation of the related financial institution, rated broker/dealer, unrated
broker/dealer or Guaranteed Counterparty;
(D) the collateral subject to the repurchase obligation is held, in
the appropriate form, by a custodial bank on behalf of the Indenture Trustee
or the Issuer, as applicable;
(E) the repurchase obligation shall require that the collateral
subject thereto shall be marked to market daily;
(F) in the case of a repurchase obligation of a Guaranteed
Counterparty, the following conditions shall also be satisfied:
(i) the Indenture Trustee or the Issuer, as applicable, shall have
received an opinion of counsel (which may be in-house counsel) to the effect
that the guarantee of the related Rated Holding Company is a legal, valid and
binding agreement of the Rated Holding Company, enforceable in accordance with
its terms, subject as to enforceability to bankruptcy, insolvency,
reorganization and moratorium or other similar laws affecting creditors'
rights generally and to general equitable principles;
(ii) the Indenture Trustee or the Issuer, as applicable, shall have
received (x) an incumbency certificate for the signer of such guarantee,
certified by an officer of such Rated Holding Company and (y) a resolution,
certified by an officer of the Rated Holding Company, of the board of
directors (or applicable committee thereof) of the Rated Holding Company
authorizing the execution, delivery and performance of such guarantee by the
Rated Holding Company;
(iii) the only conditions to the obligation of such Rated Holding
Company to pay on behalf of the Guaranteed Counterparty shall be that the
Guaranteed Counterparty shall not have paid under such repurchase obligation
when required (it being understood that no notice to, demand on or other
action in respect of the Guaranteed Counterparty is necessary) and that the
Indenture Trustee or the Issuer shall make a demand on the Rated Holding
Company to make the payment due under such guarantee;
(iv) the guarantee of the Rated Holding Company shall be irrevocable
with respect to such repurchase obligation and shall not be subordinated to
any other obligation of the Rated Holding Company; and
(v) each of Standard & Poor's and Moody's has confirmed in writing to
the Indenture Trustee or Issuer, as applicable, that it has reviewed the form
of the guarantee of the Rated Holding Company and has determined that the
issuance of such guarantee will not result in the downgrade or withdrawal of
the ratings assigned to the Notes or result in an increased capital charge to
the Security Insurer; and
(G) the repurchase obligation shall require that the repurchase
obligation be overcollateralized and shall provide that, upon any failure to
maintain such overcollateralization, the repurchase obligation shall become
due and payable, and unless the repurchase obligation is satisfied
immediately, the collateral subject to the repurchase agreement shall be
liquidated and the proceeds applied to satisfy the unsatisfied portion of the
repurchase obligation; and
(h) any other investment with respect to which the Issuer or the
Servicer has received written notification from the Rating Agencies that the
acquisition of such investment as an Eligible Investment will not result in a
withdrawal or downgrading of the ratings on the Notes or the Certificates or
result in an increased capital charge to the Security Insurer.
"Eligible Servicer" means First Merchants Acceptance Corporation, the
Backup Servicer or any other Person which at the time of its appointment as
Servicer (i) is servicing a portfolio of motor vehicle retail installment sale
contracts and/or motor vehicle installment loans, (ii) is legally qualified
and has the capacity to service the Receivables, (iii) has demonstrated the
ability professionally and competently to service a portfolio of motor vehicle
retail installment sale contracts and/or motor vehicle installment loans
similar to the Receivables with reasonable skill and care and (iv) has a
minimum net worth of $100,000,000.
"Endorsement" shall have the meaning specified in the applicable Policy.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the July 15, 2002 Distribution
Date.
"Final Scheduled Maturity Date" means February 25, 2002.
"Financed Vehicle" means an automobile or light-duty truck, together with
all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable or Eligible Investment Receivable, as the case may be.
"First Merchants" means First Merchants Acceptance Corporation, a
Delaware corporation, and its successors.
"Fiscal Agent" shall have the meaning specified in the applicable Policy.
"FMARC II" means First Merchants Auto Receivables Corporation II, a
Delaware corporation, and its successors.
"Guaranteed Certificate Payment" means, with respect to each Distribution
Date, an amount equal to the Certificateholders' Interest Distributable Amount
plus the Certificateholders' Principal Distributable Amount.
"Guaranteed Note Payment" means, with respect to each Distribution Date,
an amount equal to the Noteholders' Interest Distributable Amount plus the
Noteholders' Principal Distributable Amount.
"Guaranteed Payment" means, with respect to each Distribution Date, a
Guaranteed Note Payment or a Guaranteed Certificate Payment.
"Indenture" means the Indenture dated as of September 1, 1996, between
the Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" means $4,700,432.10.
"Initial Pool Balance" means the aggregate principal balance of the
Receivables as of the Cutoff Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in
an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by such Person to the entry of
an order for relief in an involuntary case under any such law, or the consent
by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure
by such Person generally to pay its debts as such debts become due, or the
taking of action by such Person in furtherance of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement dated
as of September 1, 1996 among the Security Insurer, the Issuer, First
Merchants and the Seller.
"Insurance Agreement Event of Default" means any Event of Default, as
defined in the Insurance Agreement.
"Interest Accrual Period" means, with respect to the Class A-2 Notes and
the Certificates and 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 Closing 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 (i.e., not with respect to Eligible Investment Receivables) in
respect of the Collection Period preceding such Distribution Date: (a) that
portion of all collections on Receivables allocable to interest, (b)
Liquidation Proceeds with respect to the Receivables to the extent allocable
to interest due thereon in accordance with the Servicer's customary servicing
procedures, (c) the Purchase Amount of each Receivable that became a Purchased
Receivable during such Collection Period to the extent attributable to accrued
interest on such Receivable, (d) Investment Earnings for the related
Distribution Date and (e) Recoveries for such Collection Period; provided,
however, that in calculating the Interest Distribution Amount the following
will be excluded: all payments and proceeds (including Liquidation Proceeds)
of any Purchased Receivables the Purchase Amount of which has been included in
the Interest Distribution Amount in a prior Collection Period.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Distribution Date pursuant to Section 5.02(b).
"Issuer" means First Merchants Auto Trust 1996-B.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of
any act or omission by the related Obligor.
"Liquidated Receivable" means any Receivable or Eligible Investment
Receivable, as applicable, with respect to which any of the following shall
have occurred: (i) the related Financed Vehicle has been repossessed for 90
days or more, (ii) such Receivable is a Defaulted Receivable with respect to
which the Servicer has determined in good faith that all amounts it expects to
recover have been received or (iii) a payment under the related Contract is
150 or more days (or, if the related Obligor is a debtor under Chapter 13 of
the U.S. Bankruptcy Code, 210 or more days) delinquent.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
the moneys collected in respect thereof, from whatever source on a Liquidated
Receivable during the Collection Period in which such Receivable or Eligible
Investment Receivable, as applicable, became a Liquidated Receivable, net of
the sum of any amounts expended by the Servicer in connection with such
liquidation and any amounts required by law to be remitted to the Obligor on
such Liquidated Receivable.
"Local Collection Account" shall have the meaning provided in Section
5.02.
["Local Collection Account Agreement" means the letter agreement dated as
of September 1, 1996, among ▇▇▇▇▇▇ Trust and Savings Bank, First Merchants
Auto Receivables Corporation II, the Indenture Trustee, the Seller, the
Servicer and the Security Insurer, as amended, supplemented or otherwise
modified from time to time.]
"Local Post Office Box" shall have the meaning specified in Section 5.01.
"Master Spread Account Agreement" means the Master Spread Account
Agreement dated as of March 1, 1996, as amended, among FMARC II, as depositor,
the Security Insurer and ▇▇▇▇▇▇ Trust and Savings Bank, as trustee and
collateral agent.
"Moody's" means ▇▇▇▇▇'▇ 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.
"Note Pool Factor" means, with respect to each Class of Notes as of the
close of business on the last day of a Collection Period, a seven-digit
decimal figure equal to the Outstanding Amount of such Class of Notes (after
giving effect to any reductions thereof to be made on the immediately
following Distribution Date) divided by the original Outstanding Amount of
such Class of Notes. The Note Pool Factor will be 1.0000000 as of the Closing
Date; thereafter, the Note Pool Factor will decline to reflect reductions in
the Outstanding Amount of such Class of Notes.
"Noteholders" shall mean the Class A-1 Noteholders and/or the Class A-2
Noteholders.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Interest Distributable Amount for
such Distribution Date and the Class A-2 Interest Distributable Amount for
such Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A-1 Principal Distributable Amount for
such Distribution Date and the Class A-2 Principal Distributable Amount for
such Distribution Date.
"Notes Policy" means the financial guaranty insurance policy issued by
the Security Insurer with respect to the Notes, including any endorsements
thereto, in the form of Exhibit D.
"Obligor" on a Receivable or an Eligible Investment Receivable means the
purchaser or co-purchasers of the Financed Vehicle and any other Person who
owes payments under such Receivable or Eligible Investment Receivable,
respectively.
"Obligor's Scheduled Payment" means, with respect to each Receivable and
each Eligible Investment Receivable, the scheduled monthly payment amount set
forth in the related Contract and required to be paid by the Obligor during
each Collection Period. If, after the Closing Date, an Obligor's scheduled
monthly payment obligation under the related Contract is modified (i) as a
result of the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940
or (iii) as a result of modifications or extensions of the Contract permitted
by Section 4.02, "Obligor's Scheduled Payment" shall refer to the Obligor's
scheduled monthly payment obligation as so modified.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, any vice president, the controller or any assistant controller and
(b) the president, a treasurer, assistant treasurer, secretary or assistant
secretary of the Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Seller or the Servicer, which counsel
shall be acceptable to the Indenture Trustee, the Owner Trustee or the Rating
Agencies, as applicable.
"Original Pool Balance" means $117,522,432.10.
"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.
"Pass-Through Rate" means 7.00% per annum.
"Payment Determination Date" means, with respect to any Distribution
Date, the Business Day immediately preceding such Distribution Date.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Policy" means the Certificates Policy or the Notes Policy, as
applicable.
"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 (i.e., not Eligible Investment
Receivables, and 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.
"Portfolio Performance Test" has the meaning set forth in the Spread
Account Agreement.
"Precomputed Receivable" means any Receivable or Eligible Investment
Receivable, as applicable, 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 or Eligible
Investment 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 or Eligible Investment
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 or Eligible Investment Receivable.
"Purchase Amount" means, with respect to any Receivable or Eligible
Investment Receivable, as applicable, 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 or Eligible Investment
Receivable, as applicable, purchased as of the close of business on the last
day of a Collection Period by the Servicer pursuant to Section 4.07 or by the
Seller pursuant to Section 3.03.
"Rating Agency" means either Moody's or Standard & Poor's or, when used
in the plural form, Moody's and Standard and Poor's. If none of Moody's,
Standard & Poor's or a successor to either of them remains in existence,
"Rating Agency" shall mean any nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Owner Trustee, the Indenture Trustee,
the Servicer and the Security Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall
be acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee in writing that such action will not result
in a reduction or withdrawal of the then current rating of the Notes or the
Certificates or result in an increased capital charge of the Security Insurer.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may
be in the form of microfiche). An Eligible Investment Receivable is not a
"Receivable".
"Receivable Files" means the documents specified in Section 3.04.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of September 1, 1996, between First Merchants, as seller and FMARC
II, as Purchaser.
"Receivables Schedule" means Schedule A or Schedule B hereto, as
applicable.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Regular Principal Distribution Amount" means, with respect to any
Distribution Date, the sum of the following amounts, without duplication, with
respect to the Receivables (i.e., not with respect to any Eligible Investment
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.
"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.
"Securities" means the Notes and the Certificates.
"Security Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or its
successor.
"Security Insurer Default" means any one of the following events shall
have occurred and be continuing:
(a) the Security Insurer shall have failed to make a required payment
when due under the Notes Policy or the Certificates Policy;
(b) the Security Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation,
or reorganization, (ii) made a general assignment for the benefit of its
creditors or (iii) had an order for relief entered against it under the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent, or receiver for the Security Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession
by a custodian, trustee, agent, or receiver of the Security Insurer or of all
or any material portion of its property.
"Securityholders" means the Noteholders and/or the Certificateholders.
"Seller" means FMARC II and its successors in interest to the extent
permitted hereunder.
"Servicer" means First Merchants, as the servicer of the Receivables, and
each successor to First Merchants (in the same capacity) pursuant to Section
7.03 or 8.03.
"Servicer Termination Event" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit 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.
"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 or Eligible Investment
Receivable, as applicable, under which the portion of a payment allocable to
interest and the portion allocable to principal is determined in accordance
with the Simple Interest Method.
"Spread Account" means the account designated as such, established and
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" means the Master Spread Account Agreement
dated as of March 1, 1996, among FMARC II, as depositor, the Security Insurer
and ▇▇▇▇▇▇ Trust and Savings Bank, as trustee and collateral agent, and as
amended by the Amendment to the Master Spread Account Agreement, dated as of
May 1, 1996, as supplemented by the Series 1996-B Supplement to the Master
Spread Account Agreement, dated as of September 1, 1996, among FMARC II, the
Security Insurer, the Owner Trustee and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or its successor.
"State" means any one of the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ 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 or Cram Down Losses).
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.02.
"Trust Agreement" means the Amended and Restated Trust Agreement dated as
of September 1, 1996, between the Seller, as Depositor, and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee or the Backup
Servicer, any Officer within the Corporate Trust Office of the Indenture
Trustee, including any Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject and, with respect to the Owner
Trustee, any officer in the Corporate Trust Administration Department of the
Owner Trustee with direct responsibility for the administration of the Trust
Agreement and the Basic Documents on behalf of the Owner Trustee.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
used herein and not otherwise defined herein have the meanings assigned to
them in the Indenture or, if not defined therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate
or other document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting principles. To the
extent that the definitions of accounting terms in this Agreement or in any
such certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLEII
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Issuer's delivery to or upon the order of the Seller of $[ ], the Seller does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse (subject to the obligations of the Seller set forth herein),
all right, title and interest of the Seller in and to:
(i) the Receivables and all moneys received thereon on or after
September 1, 1996;
(ii) the security interests in the Financed Vehicles and any
accessions thereto granted by Obligors pursuant to the Receivables and any
other interest of the Seller in such Financed Vehicles;
(iii) any Liquidation Proceeds and any other proceeds with respect to
the Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors, including any
vendor's single interest or other collateral protection insurance policy;
(iv) any property that shall have secured a Receivable and shall have
been acquired by or on behalf of the Seller, the Servicer or the Trust;
(v) all documents and other items contained in the Receivables Files;
(vi) all of the Seller's rights (but not its obligations) under the
Receivables Purchase Agreement;
(vii) 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
(viii) the proceeds of any and all of the foregoing.
(a) Except as otherwise provided herein, all of the provisions of this
Agreement applicable to a Receivable shall also apply to each Eligible
Investment Receivable, except that (i) collections on the Eligible Investment
Receivables shall be deposited in the Local Collection Accounts and swept to
the Collection Account pursuant to Sections 5.01 and 5.02, and, upon receipt
pursuant to Section 4.09 of the monthly Servicer's Certificate separately
identifying the collections received on the Eligible Investment Receivables,
the Indenture Trustee shall deposit the amount of such collections into the
Spread Account and (ii) pursuant to Section 5.02, the Servicer shall deposit
Purchase Amounts in respect of the Eligible Investment Receivables into the
Spread Account at the time when Purchase Amounts in respect of the Receivables
are required to be deposited into the Collection Account. Eligible Investment
Receivables shall be part of the Spread Account and shall not be Receivables
hereunder or under the Indenture, and collections on and Purchase Amounts in
respect of Eligible Investment Receivables shall be applied as part of the
Spread Account pursuant to the Spread Account Agreement and shall not be part
of the Total Distribution Amount. The Servicer shall receive a Servicing Fee
in respect of the Eligible Investment Receivables calculated in the manner
specified in Section 4.08 and payable out of any collections on the Eligible
Investment Receivables allocable to interest.
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 Security Insurer relies in issuing the
Policies, together with all rights of the Seller with respect to any breach
thereof, including the right to require First Merchants to repurchase
Receivables in accordance with the Receivables Purchase Agreement. It is
understood and agreed that the representations and warranties referred to in
this Section shall survive the delivery of the Receivable Files to the Issuer
or any custodian.
(b) First Merchants hereby agrees that the Issuer shall have the right
to enforce any and all rights under the Receivables Purchase Agreement
assigned to the Issuer herein, including the right to cause First Merchants to
repurchase any Receivable with respect to which it is in breach of any of its
representations and warranties set forth in Exhibit A, directly against First
Merchants as though the Issuer were a party to the Receivables Purchase
Agreement, and the Issuer shall not be obligated to exercise any such rights
indirectly through the Seller.
SECTION 3.02. Representations and Warranties of the Seller. The Seller
makes the following representations and warranties as to the Receivables on
which the Issuer relies in accepting the Receivables and delivering the
Securities and the Security Insurer relies in issuing the Policies. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables by the Seller to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Seller that (i) the transfer
and assignment herein contemplated constitute a sale of the Receivables from
the Seller to the Issuer, conveying good title thereto, free and clear of any
Liens or rights of other Persons and (ii) the beneficial interest in and title
to the Receivables not be part of the debtor's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law. No Receivable has been sold, transferred, assigned or pledged by the
Seller to any Person other than the Issuer. Immediately prior to the transfer
and assignment herein contemplated, the Seller had good and marketable title
to each Receivable, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and
marketable title to each such Receivable, free and clear of all Liens and
rights of others; and the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary
in any jurisdiction to give the Issuer a first perfected ownership interest in
the Receivables have been made.
SECTION 3.03. Repurchase upon Breach. The Seller and the Servicer shall
inform the other parties to this Agreement and the Security Insurer promptly,
in writing, upon the discovery of any breach of First Merchants'
representations and warranties made pursuant to Section 3.01 of this Agreement
or Section 3.02 of the Receivables Purchase Agreement or of the Seller's
representations and warranties made pursuant to Section 3.02 above. Unless
any such breach shall have been cured by the last day of the first Collection
Period following the discovery or notice thereof by or to the Seller or the
Servicer, the Seller shall be obligated and, if necessary, the Seller or the
Issuer shall enforce the obligation of First Merchants under the Receivables
Purchase Agreement, to repurchase as of such last day any Receivable
materially and adversely affected by any such breach. In consideration of the
repurchase of any such Receivable, the Seller shall remit the Purchase Amount
to the Collection Account, in the manner specified in Section 5.04; provided,
however, that the obligation of the Seller to repurchase any Receivable
arising solely as a result of a breach of First Merchants' representations and
warranties under Section 3.02 of the Receivables Purchase Agreement is subject
to the receipt by the Seller of the Purchase Amount from First Merchants. The
sole remedy of the Issuer, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Sections 3.01 and 3.02 and the agreement contained in this Section
shall be to require the Seller to repurchase Receivables pursuant to this
Section, subject to the conditions contained herein, or to enforce First
Merchants' obligation to the Seller to repurchase such Receivables pursuant to
the Receivables Purchase Agreement.
SECTION 3.04. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer (with
respect to the Receivables other than the Eligible Investment Receivables) and
the Seller (with respect to the Eligible Investment Receivables) hereby
revocably appoint the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee
(in the case of the Receivables other than the Eligible Investment
Receivables) and for the benefit of the Issuer and the Collateral Agent, as
agent for the secured parties, (in the case of the Eligible Investment
Receivables) as custodian of the following documents or instruments
respectively relating to the Receivables or the Eligible Investment
Receivables, as the case may be, which documents and instruments are hereby
constructively delivered by the Issuer to the Indenture Trustee (in the case
of the Receivables other than the Eligible Investment Receivables) and by the
Seller to the Collateral Agent (in the case of the Eligible Investment
Receivables):
(a) the fully executed original of the Receivable or Eligible
Investment Receivable, as applicable (together with any agreements modifying
such Receivable or Eligible Investment Receivable, including any extension
agreement);
(b) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(c) the original certificate of title or such other documents that
the Servicer or the Seller shall keep on file in accordance with its customary
procedures evidencing the security interest of the Seller in the Financed
Vehicle; and
(d) any and all other documents that the Servicer or the Seller shall
keep on file in accordance with its customary procedures relating to a
Receivable or Eligible Investment Receivable, as applicable, an Obligor or a
Financed Vehicle.
SECTION 3.05. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivable Files as custodian for the benefit of the
Issuer, the Indenture Trustee and, to the extent provided herein, the Security
Insurer, and shall maintain such accurate and complete accounts, records and
computer systems pertaining to each Receivable File as shall enable the Issuer
to comply with this Agreement. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to the receivable files
relating to all comparable automotive receivables that the Servicer services
for itself or others. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Receivable Files held by it under this Agreement and of
the related accounts, records and computer systems, in such a manner as shall
enable the Issuer or the Indenture Trustee to verify the accuracy of the
Servicer's record keeping. The Servicer shall promptly report to the Issuer
and the Indenture Trustee any failure on its part to hold the Receivable Files
and maintain its accounts, records and computer systems as herein provided and
shall promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review by
the Issuer or the Indenture Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Receivable File at one of its offices specified in Schedule C to
this Agreement or at such other office as shall be specified to the Issuer and
the Indenture Trustee by written notice not later than 90 days after any
change in location. The Servicer shall make available to the Issuer and the
Indenture Trustee or their duly authorized representatives, attorneys or
auditors a list of locations of the Receivable Files and the related accounts,
records and computer systems maintained by the Servicer at such times during
normal business hours as the Issuer shall instruct.
(c) Release of Documents. Upon instruction from the Indenture
Trustee, the Servicer shall release any Receivable File to the Indenture
Trustee, the Indenture Trustee's agent or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may
designate, as soon as practicable, and upon the release and delivery of any
such document in accordance with the instructions of the Indenture Trustee,
the Servicer shall be released from any further liability and responsibility
under this Section 3.05 with respect to such documents, unless and until such
time as such documents shall be returned to the Servicer. In no event shall
the Servicer be responsible for any loss occasioned by the Indenture Trustee's
failure to return any Receivable File or any portion thereof in a timely
manner.
SECTION 3.06. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trust Officer of
the Indenture Trustee in the case of the Receivables and the Collateral Agent
in the case of the Eligible Investment Receivables.
SECTION 3.07. Custodian's Indemnification. The Servicer, as custodian,
shall indemnify the Trust, the Owner Trustee, the Collateral Agent 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, the Collateral
Agent 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 Collateral Agent, the Indenture Trustee or any such officer,
director, employee or agent of the Owner Trustee, the Collateral Agent or the
Indenture Trustee for any portion of any such amount resulting from the
willful misfeasance, bad faith or negligence of the Owner Trustee, the
Collateral Agent or the Indenture Trustee, as the case may be, or any such
officer, director, employee or agent of the Owner Trustee, the Collateral
Agent or the Indenture Trustee, as the case may be.
Indemnification under this Section shall survive the resignation or
removal of the Servicer or the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and
the Person to or on behalf of whom such payments are made thereafter collects
any of such amounts from others, such Person shall promptly repay such amounts
to the Servicer, without interest.
SECTION 3.08. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and
shall continue in full force and effect unless and until terminated pursuant
to this Section 3.08. If First Merchants or any successor Servicer shall
resign as Servicer in accordance with the provisions of this Agreement or if
all of the rights and obligations of First Merchants or any successor Servicer
shall have been terminated under Section 8.02, the appointment of such
Servicer as custodian may be terminated by the Security Insurer, the Issuer or
by the Noteholders evidencing not less than 25% of the Outstanding Amount of
the Notes, by the Owner Trustee or by Certificateholders evidencing not less
than 25% of the Certificate Balance, in the same manner as the Security
Insurer, the Indenture Trustee or such 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 Servicer shall
deliver the Receivable Files to the Indenture Trustee or the Indenture
Trustee's agent at such place or places as the Indenture Trustee may
reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer, the Indenture Trustee and the Security Insurer (or, in the case of the
Eligible Investment Receivables, for the benefit of the Issuer, the Collateral
Agent and the Security Insurer), shall manage, service, administer and make
collections on the Receivables and perform the other actions required by the
Servicer under this Agreement. The Servicer shall service the Receivables in
accordance with its customary and usual procedures and consistent with the
procedures employed by institutions that service motor vehicle retail
installment sale contracts. The Servicer's duties shall include the
collection and posting of all payments, responding to inquiries of Obligors,
investigating delinquencies, sending payment coupons to Obligors, reporting
any required tax information to Obligors, monitoring the collateral,
accounting for collections, furnishing monthly and annual statements to the
Owner Trustee, Indenture Trustee, and the Security Insurer with respect to
distributions, monitoring the compliance by Obligors with the insurance
requirements contained in the related Contracts, and performing the other
duties specified herein. The Servicer also shall administer and enforce all
rights of the holder of the Receivables under the Contracts and the Dealer
Agreements. To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with the managing,
servicing, administration and collection of the Receivables that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered to execute and deliver, on behalf
of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge,
and all other comparable instruments with respect to the Receivables and with
respect to the Financed Vehicles; provided, however, that, notwithstanding the
foregoing, the Servicer shall not, except pursuant to an order from a court of
competent jurisdiction, release an Obligor from payment of any unpaid amount
due under any Receivable or waive the right to collect the unpaid balance of
any Receivable from an Obligor. The Servicer is hereby authorized to
commence, in its own name or in the name of the Issuer, the Indenture Trustee,
the Owner Trustee, the Collateral Agent, 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, the Collateral Agent 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, complaint
s, 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, the Collateral Agent 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 or any other similar fees that may be collected in
the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment
of a Receivable in order to (i) change the date during each calendar month
when the related Obligor's Scheduled Payment is due or (ii) reamortize the
Obligor's Scheduled Payments on the Receivable following a partial prepayment
of principal.
(c) The Servicer may grant payment extensions or other modifications
of or amendments with respect to a Receivable (in addition to those
modifications permitted by Section 4.02(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable and is otherwise in the best interests of the Trust; provided,
however, that:
(i) the aggregate period of all extensions on a Receivable shall not
exceed four months;
(ii) in no event may the final Obligor's Scheduled Payment on a
Receivable be extended beyond the last day of the Collection Period relating
to the Final Scheduled Maturity Date;
(iii) no more than two extensions may be granted with respect to any
Receivable in any one-year period; and
(iv) no more than 13% of the aggregate Pool Balance may be subject to
extension or modification in any one-year period.
SECTION 4.03. Realization upon Receivables. Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess or otherwise convert the ownership of
and liquidate any Financed Vehicle securing a Receivable with respect to which
the Servicer shall have determined that eventual payment in full is unlikely.
The Servicer shall begin such repossession and conversion procedures as soon
as practicable after default on such Receivable, but in no event later than
the date on which all or any portion of an Obligor's Scheduled Payment has
become 91 days delinquent; provided, however, that the Servicer may elect not
to repossess a Financed Vehicle within such time period if in its good faith
judgment it determines that the proceeds ultimately recoverable with respect
to such Receivable would be increased by forbearance. In repossessing or
otherwise converting the ownership of a Financed Vehicle and liquidating a
Receivable, the Servicer is authorized to follow such customary practices and
procedures as it shall deem necessary or advisable, consistent with the
standard of care required by Section 4.01, which practices and procedures may
include reasonable efforts to realize upon any recourse to Dealers, the sale
of the related Financed Vehicle at public or private sale, the submission of
claims under an insurance policy and other actions by the Servicer in order to
realize on a Receivable; provided, however, that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend
funds in connection with any repair or towards the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the expense for such repair or
repossession. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, but only out of the cash proceeds of the
sale of such Financed Vehicle, any deficiency obtained from the Obligor or any
amounts received from recourse to the related Dealer.
SECTION 4.04. Physical Damage Insurance. The Servicer shall, in
accordance with its customary servicing procedures, require that each Obligor
shall have obtained and maintain physical loss damage insurance covering the
Financed Vehicle as of the execution of the Receivable.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
(a) The Servicer shall, in accordance with its customary servicing procedures,
take such steps as are necessary to maintain perfection of the security
interest created by each Receivable in the related Financed Vehicle. The
Servicer is hereby authorized to take such steps as are necessary to
re-perfect such security interest on behalf of the Issuer and the Indenture
Trustee in the event of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Issuer is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements
under the laws of the state in which the Financed Vehicle is located, to
perfect a security interest in the related Financed Vehicle in favor of the
Issuer, the Servicer hereby agrees that the designation of First Merchants as
the secured party on the certificate of title is in its capacity as agent of
the Issuer.
(b) The Seller, the Owner Trustee, the Indenture Trustee, the
Servicer and the Backup Servicer hereby agree that, upon the occurrence of a
Servicer Termination Event, the Controlling Party may take or cause to be
taken such actions as may, in the opinion of counsel to the Controlling Party,
be necessary to perfect or re-perfect the security interests in the Financed
Vehicles in the name of the Issuer, including by amending the title documents
of the Financed Vehicles. The Seller hereby agrees to pay all expenses
related to such perfection or reperfection and to take all action necessary
therefor. In addition, the Controlling Party may at any other time instruct
the Servicer to take or cause to be taken such action as may, in the opinion
of counsel to the Controlling Party, be necessary to perfect or re-perfect the
security interest in the Financed Vehicles in the name of the Trust; provided,
however, that if the Controlling Party requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default,
the out-of-pocket expenses of the Servicer, the Seller or any other entity
incurred in connection with any such action shall be reimbursed to the
Servicer, the Seller or such other party by the Controlling Party.
SECTION 4.06. Covenants of Servicer. By its execution and delivery of
this Agreement, the Servicer hereby covenants as follows (on which covenants
the Issuer, the Indenture Trustee, the Collateral Agent and the Owner Trustee
rely in accepting the Receivables and delivering the applicable Securities and
on which the Security Insurer relies in issuing the Policies):
(a) Liens in Force. No Financed Vehicle securing a Receivable shall
be released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the
rights of the Trust in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend
the terms of any Receivable, except in accordance with Section 4.02; and
(d) Restrictions on Liens. The Servicer shall not (A) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or consent
to or permit in the future (upon the occurrence of a contingency or otherwise)
the creation, incurrence or existence of any Lien on or restriction on
transferability of any Receivable except for the Lien in favor of the Trust
and the restrictions on transferability imposed by this Agreement or (B) sign
or file any UCC financing statements in any jurisdiction that names First
Merchants, the Servicer or the Seller as a debtor, and any Person other than
the Seller or the Issuer as a secured party, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement
with respect to the Receivables.
SECTION 4.07. Purchase of Receivables upon Breach. Upon discovery by
any of the Servicer, the Seller, the Owner Trustee, the Indenture Trustee or
the Backup Servicer of a breach of any of the covenants set forth in Sections
4.02(c), 4.05(a) or 4.06, the party discovering such breach shall give prompt
written notice to the other parties; provided, however, that the failure to
give any such notice shall not affect any obligation of the Servicer under
this Section 4.07. On or before the last day of the first Collection Period
following its discovery or receipt of notice of any breach of any covenant set
forth in Sections 4.02(c), 4.05(a) or 4.06 that materially and adversely
affects the interests of the Issuer, the Indenture Trustee, the Owner Trustee,
the Certificateholders, the Noteholders or the Security Insurer in any
Receivable, the Servicer shall, unless such breach shall have been cured in
all material respects by such date, purchase from the Issuer the Receivable
affected by such breach. In consideration of the purchase of any such
Receivable, the Servicer shall remit the related Purchase Amount into the
Collection Account in the manner specified in Section 5.04. Subject to
Section 7.02, it is understood and agreed that the obligation of the Servicer
to purchase any Receivable with respect to which such a breach has occurred
and is continuing shall, if such obligation is fulfilled, constitute the sole
remedy against the Servicer for such breach available to the Issuer, the Owner
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders.
SECTION 4.08. Servicing Fee. The Servicing Fee payable to the Servicer
on each Distribution Date shall equal the product of (i) one-twelfth, (ii)
2.50% and (iii) the Pool Balance as of the first day of the related Collection
Period. The Servicing Fee shall be calculated on the basis of a 360-day year
comprised of twelve 30-day months. The Servicer also shall be entitled to all
late fees, prepayment charges (including, in the case of a Receivable that
provides for payments according to the "Rule of 78s" and that is prepaid in
full, the difference between the Principal Balance of such Receivable (plus
accrued interest to the date of prepayment) and the Principal Balance of such
Receivable computed according to the "Rule of 78s"), and other administrative
fees or similar charges allowed by applicable law with respect to the
Receivables, collected (from whatever source) on the Receivables.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed
on the Servicer and expenses incurred in connection with distributions and
reports made by the Servicer to the Owner Trustee and Indenture Trustee). The
Servicer shall be liable for the fees and expenses of the Backup Servicer.
SECTION 4.09. Servicer's Certificate. Not later than 10:00 a.m. (New
York City time) on each Determination Date, the Servicer shall deliver to the
Owner Trustee, each Paying Agent, the Indenture Trustee, the Collateral Agent,
the Backup Servicer, the Security Insurer and the Seller, with a copy to the
Rating Agencies, a Servicer's Certificate containing all information necessary
to make the distributions to be made on the related Distribution Date pursuant
to Section 5.06 for the related Collection Period. Receivables to be
purchased by the Servicer or to be repurchased by the Seller and each
Receivable that became a Liquidated Receivable shall be identified by the
Servicer by account number with respect to such Receivable (as specified in
the applicable Receivables Schedule).
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. (a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, within 120 days after the end of the Servicer's fiscal year (with the
first such certificate being delivered no later than April 30, 1997), an
Officer's Certificate signed by a Responsible Officer of the Servicer, stating
that (i) a review of the activities of the Servicer during the preceding
12-month period (or such shorter period as shall have elapsed from the Closing
Date to the end of the first such fiscal year) and of the performance of its
obligations under this Agreement has been made under such officer's
supervision and (ii) to such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout
such period or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Servicer or the Seller shall deliver to the Owner Trustee,
the Indenture Trustee, the Backup Servicer, the Security Insurer and each
Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time or
both would become a Servicer Termination Event under Section 8.01.
SECTION 4.11. Annual Independent Accountants' Report. The Servicer
shall cause a firm of independent certified public accountants, which may also
render other services to the Servicer or its Affiliates, to deliver to the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security
Insurer and each Rating Agency, within 120 days after the end of each fiscal
year (with the first such report being delivered no later than April 30,
1997), a report addressed to the Board of Directors of the Servicer, the Owner
Trustee, the Indenture Trustee, the Backup Servicer and the Security Insurer,
to the effect that such firm has audited the books and records of the Servicer
and issued its report thereon and that (1) such audit was made in accordance
with generally accepted auditing standards and accordingly included such tests
of the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances; (2) the firm is independent of the
Seller and the Servicer within the meaning of the Code of Professional Ethics
of the American Institute of Certified Public Accountants; and (3) a review in
accordance with agreed upon procedures was made of three randomly selected
Servicer's Certificates, including the delinquency, default and loss
statistics required to be specified therein and, except as disclosed in the
accountants' report, no exceptions or errors in the Servicer's Certificates
were found.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Owner
Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer (so
long as no Security Insurer Default shall have occurred and be continuing),
the Certificateholders and Noteholders reasonable access to the documentation
regarding the Receivables. Access shall be afforded without charge, but only
upon reasonable request and during the normal business hours at the offices of
the Servicer. Nothing in this Section shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of
this Section.
SECTION 4.13. Monthly Tape. On or before the eighth Business Day, but
in no event later than the tenth calendar day, of each month, the Servicer
shall deliver or cause to be delivered to the Indenture Trustee, Owner Trustee
and the Backup Servicer a computer tape and a diskette (or any other form of
electronic transmission acceptable to the Owner Trustee, the Indenture Trustee
and the Backup Servicer) in a format acceptable to the Indenture Trustee,
Owner Trustee and the Backup Servicer containing the information with respect
to the Receivables as of the last day of the preceding Collection Period and
necessary for preparation of the Servicer's Certificate for the immediately
succeeding Determination Date and to determine the application of Collections
as provided herein. The Backup Servicer shall use such tape or diskette (or
other electronic transmission acceptable to the Indenture Trustee, Owner
Trustee and the Backup Servicer) to verify the mathematical accuracy of the
Servicer's Certificate delivered by the Servicer, and the Backup Servicer
shall certify to the Indenture Trustee and the Owner Trustee that it has
verified the mathematical accuracy of the Servicer's Certificate in accordance
with this Section 4.13 and shall notify the Servicer, the Indenture Trustee
and the Owner Trustee of any discrepancies, in each case, on or before the
third Business Day following the related Determination Date. In the event
that the Backup Servicer reports any discrepancies, the Servicer and the
Backup Servicer shall attempt to reconcile such discrepancies prior to the
related Distribution Date, but in the absence of a reconciliation, the
Servicer's Certificate shall control for the purpose of calculations and
distributions with respect to the related Distribution Date. In the event
that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Distribution Date, the Servicer shall cause a firm of nationally recognized
independent certified public accountants, at the Servicer's expense, to audit
the Servicer's Certificate and, prior to the third Business Day, but in no
event later than the fifth calendar day, of the following month, to reconcile
the discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for the next succeeding Determination
Date. In addition, upon the occurrence of a Servicer Termination Event, the
Servicer shall, if so requested by the Indenture Trustee or the Owner Trustee,
deliver to the Backup Servicer within 15 days after demand therefor its
records relating to the Receivables and a computer tape containing as of the
close of business on the date of demand all of the data maintained by the
Servicer in computer format in connection with servicing the Receivables.
Other than the duties specifically set forth in this Agreement, the Backup
Servicer shall have no obligations hereunder, including, without limitation,
to supervise, verify or monitor the performance of the Servicer. The Backup
Servicer shall have no liability for any actions taken or omitted by the
Servicer.
SECTION 4.14. Retention and Termination of Servicer. The Servicer
hereby covenants and agrees to act as Servicer under this Agreement for an
initial term commencing on the Closing Date and ending on December 26, 1996,
which term shall be extendible by the Security Insurer (or (a) the Indenture
Trustee for as long as the Notes are outstanding, if there is an existing
Security Insurer Default or if both Policies are no longer in effect or (b)
the Owner Trustee for as long as the Certificates are outstanding, if (i)
there is an existing Security Insurer Default or if both Policies are no
longer in effect and (ii) the Notes are no longer outstanding) for successive
quarterly terms ending on each successive December 26, March 26, June 26 and
September 26 (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). Each such notice (including each
notice pursuant to standing instructions, which shall be deemed delivered at
the end of successive quarterly terms for so long as such instructions are in
effect) (a "Servicer Extension Notice") shall be delivered by the Security
Insurer, the Indenture Trustee or the Owner Trustee, as applicable, to the
other parties to this Agreement. The Servicer hereby agrees that, as of the
date hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall be bound for the duration of the initial term or the term
covered by such Servicer Extension Notice to act as the Servicer, subject to
and in accordance with the other provisions of this Agreement. Until such
time as a Security Insurer Default shall have occurred and be continuing, the
Servicer agrees that if as of the last day of the calendar month preceding the
last day of any such servicing term the Servicer shall not have received a
Servicer Extension Notice from the Security Insurer, the Servicer shall,
within five days thereafter, give written notice of such non-receipt to the
Indenture Trustee, the Owner Trustee, the Security Insurer and the Backup
Servicer.
ARTICLE V
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Local Post Office Boxes. On or prior to the Closing Date,
the Servicer shall send revised payment statements (which statements will
indicate (by notation specific to this transaction) that such payments relate
to Receivables owned by the Issuer) to each Obligor pursuant to which payments
made by such Obligor after the Closing Date will be addressed to a regional
post office box (each a "Local Post Office Box") separate from any post office
box to which receivables owned by First Merchants are or will be sent. All
payments and other proceeds of any type and from any source on or with respect
to the Receivables that are delivered to one of the Local Post Office Boxes
shall be the property of the Issuer, subject to the lien of the Indenture and
the rights of the Indenture Trustee thereunder.
SECTION 5.02. Accounts. (a) The Servicer has established various
accounts in the name of the Indenture Trustee (the "Local Collection
Accounts"), at the locations identified on Schedule IV. Each Local Collection
Account shall be maintained as an Eligible Deposit Account and shall bear a
designation clearly indicating that the amounts deposited thereto and held
therein are for the benefit of the Issuer, as provided in the Local Collection
Account Agreement. All payments on the Receivables mailed by Obligors or any
other Person to the Local Post Office Boxes or otherwise delivered to the
Servicer shall be deposited on a daily basis into the applicable Local
Collection Account, from which they will be swept within two Business Days to
the Collection Account. Amounts on deposit in any Local Collection Account
shall not be invested.
(b) (i) On or prior to the Closing Date, the Servicer
shall establish, or cause to be established, an account in the name of the
Indenture Trustee (the "Collection Account"), which shall be maintained as an
Eligible Deposit Account and shall bear a designation clearly indicating that
the amounts deposited thereto are held for the benefit of the Noteholders and
Certificateholders. The Servicer shall cause the Indenture Trustee to sweep
any amounts deposited to any Local Collection Account, on or with respect to
the Receivables into the Collection Account as promptly as possible, but in no
event later than the second Business Day following receipt thereof in the
Local Collection Accounts.
(ii) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Note Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit
of the Noteholders.
(iii) Funds on deposit in the Collection Account and the Note
Distribution Account (collectively, the "Trust Accounts") shall be invested by
the Indenture Trustee in Eligible Investments selected in writing by the
Servicer or, if an Insurance Agreement Event of Default shall have occurred
and be continuing, the Security Insurer. All such Eligible Investments shall
be held by the Indenture Trustee for the benefit of the Noteholders and the
Certificateholders or the Noteholders, as applicable; provided, on each
Payment Determination Date all interest and other investment income (net of
losses and investment expenses) on funds on deposit in the Trust Accounts
shall be deposited into the Collection Account and shall be deemed to
constitute a portion of the Interest Distribution Amount for the related
Distribution Date. Other than as permitted by the Rating Agencies, funds on
deposit in the Collection Account and the Note Distribution Account shall be
invested in Eligible Investments that will mature not later than the Business
Day immediately preceding the next Distribution Date. Funds deposited in a
Trust Account on a day which immediately precedes a Distribution Date upon the
maturity of any Eligible Investments are not required to be invested
overnight.
(iv) The Indenture Trustee shall not be held liable in any way by
reason of any insufficiency in the Collection Account resulting from any loss
on an Eligible Investment included therein, except for losses attributable to
the Indenture Trustee's failure to make payments on such Eligible Investments
issued by the Indenture Trustee, in its commercial capacity as principal
obligor and not as Indenture Trustee, in accordance with their terms.
(c) (i) The Indenture Trustee and, to the extent provided herein, the
Security Insurer shall possess all right, title and interest in all funds on
deposit from time to time in the Local Post Office Boxes, the Local Collection
Accounts, the Collection Account and the Note Distribution Account and in all
proceeds thereof (including all income thereon), subject to the Local
Collection Account Agreement. The Local Post Office Boxes, the Local
Collection Accounts, the Collection Accounts and the Note Distribution Account
shall be under the sole dominion and control of the Indenture Trustee for the
benefit of the Noteholders or the Noteholders and the Certificateholders, as
the case may be subject to the Local Collection Account Agreement. If, at any
time, any Local Collection Account or the Collection Account ceases to be an
Eligible Deposit Account, the Indenture Trustee (or the Servicer on its
behalf) shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Local Collection Account or Collection Account as applicable, as an Eligible
Deposit Account and shall transfer any cash and/or any investments from the
account that is no longer an Eligible Deposit Account to the new Local
Collection Account or Collection Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit accounts shall
be held solely in the Eligible Deposit Accounts, subject to the last sentence
of Section 5.02(c)(i); and each such Eligible Deposit Account shall be subject
to the exclusive custody and control of the Indenture Trustee, and the
Indenture Trustee shall have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph (a)
of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial intermediary (as
such term is defined in Section 8-313(4) of the UCC) acting solely for the
Indenture Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry regulations
shall be delivered in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee, pending maturity
or disposition, through continued book-entry registration of such Trust
Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated security"
under Article VIII of the UCC and that is not governed by clause (C) above
shall be delivered to the Indenture Trustee in accordance with paragraph (c)
of the definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued registration of
the Indenture Trustee's (or its nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the Trust
Accounts for the purpose of permitting the Servicer or the Owner Trustee to
carry out its respective duties hereunder or permitting the Indenture Trustee
to carry out its duties under the Indenture.
SECTION 5.03. Application of Collections. All amounts received with
respect to the Receivables during each Collection Period shall be applied by
the Servicer as follows:
With respect to each Simple Interest Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied to
interest and principal in accordance with the Simple Interest Method. With
respect to each Precomputed Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, first, to the
Obligor's Scheduled Payment, with any excess amounts being applied to future
Obligor's Scheduled Payments.
SECTION 5.04. Purchase Amounts. Except as otherwise provided in Section
2.01(b), the Servicer and the Seller shall deposit or cause to be deposited in
the Collection Account, on or prior to each Determination Date, the aggregate
Purchase Amount with respect to Purchased Receivables and the Servicer shall
deposit therein all amounts to be paid under Section 4.07.
SECTION 5.05. Transfers from the Spread Account. The Indenture Trustee
shall determine, no later than 11:00 a.m., New York City time, on each
Deficiency Claim Date whether a shortfall exists with respect to the
distributions that the Indenture Trustee is required to make on the upcoming
Distribution Date pursuant to clauses (1) through (7) of Section 5.06(b). In
the event that the Indenture Trustee determines that such a shortfall exists,
the Indenture Trustee shall furnish to the Collateral Agent and the Security
Insurer, no later than 12:00 noon, New York City time, on such Deficiency
Claim Date, a written notice specifying the amount of the shortfall and
directing the Collateral Agent to remit an amount equal to such shortfall (to
the extent of funds available to be so distributed pursuant to the Spread
Account Agreement) to the Indenture Trustee for deposit in the Collection
Account. Upon receipt of any such funds, the Indenture Trustee shall
immediately deposit such amounts into the Collection Account for distribution
on the Distribution Date pursuant to Section 5.06.
SECTION 5.06. Distributions. (a) On each Payment Determination
Date, the Servicer shall calculate all amounts required to be deposited in the
Note Distribution Account and the Certificate Distribution Account.
(b) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee in writing (based on the information contained in the
Servicer's Certificate delivered on the related Payment Determination Date
pursuant to Section 4.09) to make the following deposits and distributions for
receipt by the Servicer or deposit in the applicable account by 11:00 a.m.
(New York City time), to the extent of the Total Distribution Amount plus all
amounts transferred to the Collection Account from the Spread Account, plus
any amounts deposited thereto from the Policy Payments Accounts pursuant to
Section 5.07(b), to make required payments and distributions on such date
pursuant to clauses (1) through (9) 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).
Shortfalls in amounts due to the Servicer as Servicing Fees on any
Distribution Date may be paid using amounts transferred from the Spread
Account only to the extent provided in Section 3.03(b) of the Master Spread
Account Agreement;
(2) To the Owner Trustee and the Indenture Trustee, from the Interest
Distribution Amount remaining after the application of (1) above, any accrued
and unpaid fees and expenses (including legal fees and expenses) due, but only
to the extent not previously paid by the Servicer. Shortfalls in any such
amounts due to the Owner Trustee or the Indenture Trustee on any Distribution
Date may be paid using amounts transferred from the Spread Account only to the
extent provided in Section 3.03(b) of the Master Spread Account Agreement.
(3) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (1) and (2) above, the
Noteholders' Interest Distributable Amount;
(4) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1) through
(3), the Noteholders' Principal Distributable Amount;
(5) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1) through
(4), the Certificateholders' Interest Distributable Amount;
(6) only after the Class A-2 Notes have been paid in full, to the
Certificate Distribution Account, from the Total Distribution Amount remaining
after the application of clauses (1) through (5), the Certificateholders'
Principal Distributable Amount;
(7) to the Security Insurer, from the Total Distribution Amount
remaining after the application of clauses (1) through (6), any amounts due to
the Security Insurer under the Insurance Agreement;
(8) to the Spread Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (7), an amount up to
the amount of any deficiency in the Spread Account Required Amount;
(9) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (1) through (8), the Class
A-2 Additional Principal Distribution Amount; and
(10) to the Collateral Agent, the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (1) through (9)
above to pay the Credit Enhancement Fee to the Seller pursuant to the terms
and subject to the conditions set forth in the Spread Account Agreement.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
SECTION 5.07. Claims Upon the Policies; Policy Payments Accounts. (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(a)) is insufficient to pay the Guaranteed Payments on the related
Distribution Date, then the Indenture Trustee shall give notice to the
Security Insurer and the Owner Trustee by telephone or telecopy of the amount
of such deficiency, separately identifying the amount of such deficiency
applicable to the Notes and the Certificates, as the case may be. Such notice
shall be confirmed in writing by the Indenture Trustee in the case of the
Notes Policy and the Owner Trustee in the case of the Certificates Policy in
the form set forth as Exhibit A to the Endorsement of the applicable Policy,
to the Security Insurer and the Fiscal Agent, if any, at or before 12:00 noon,
New York City time, on the second Business Day prior to such Distribution
Date. Following receipt by the Security Insurer of such notice in such form,
the Security Insurer or the Fiscal Agent will pay any amount payable under the
Notes Policy or the Certificates Policy, or both, 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
Policies. The Indenture Trustee shall not be liable for any failure by the
Owner Trustee to make claims in a timely manner under the Certificates Policy
so long as the Indenture Trustee shall have provided timely notice to the
Owner Trustee pursuant to this Section 5.07.
(b) The Indenture Trustee shall establish two separate special
purpose trust accounts, one for the benefit of the Noteholders (referred to
herein as the "Notes Policy Payments Account") and the other (to be
established by the Indenture Trustee as agent for the Owner Trustee) for the
benefit of Certificateholders (referred to herein as the "Certificates Policy
Payments Account" and, together with the Notes Policy Payments Account, the
"Policy Payments Accounts"). The Indenture Trustee shall have exclusive
control over the Notes Policy Payments Account and sole right of withdrawal.
The Indenture Trustee shall act as agent of the Owner Trustee with respect to
the Certificates Policy Payments Account and shall, unless and until otherwise
instructed by the Owner Trustee, have exclusive control over the Certificates
Policy Payments Account and sole right of withdrawal. The Owner Trustee
hereby appoints the Indenture Trustee as its agent for the purposes provided
for in this Section 5.07. The Indenture Trustee shall deposit any amount paid
under the Notes Policy or the Certificates Policy in the applicable Policy
Payments Account and distribute such amount only to pay to Securityholders the
Guaranteed Payments for which a claim has been made, and such amount may not
be applied to satisfy any costs, expenses or liabilities of the Servicer, the
Indenture Trustee or the Owner Trustee. Amounts paid under the Notes 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. Amounts paid under the Certificates Policy
shall not be deposited in the Collection Account but shall be paid directly to
the Certificate Distribution Account in accordance with Section 5.06 and the
next succeeding paragraph. It shall not be necessary for such payments to be
made by checks or wire transfers separate from the checks or wire transfers
used to pay the Guaranteed Payments with other funds available to make such
payment. However, the amount of any payment of principal of or interest on
the Securities to be paid from funds transferred from the Policy Payments
Accounts shall be noted as provided in paragraph (c) below in the Note
Register and the Certificate Register, as applicable, and in the statement to
be furnished to the Securityholders pursuant to Section 5.11. Funds held in
the Policy Payments Accounts shall not be invested by the Indenture Trustee.
On any Distribution Date with respect to which a claim has been made
under the Notes Policy, the amount of any funds received by the Indenture
Trustee as a result of any claim under such Policy, to the extent required to
make the related Guaranteed Payment on such Distribution Date, shall be
withdrawn from the Notes 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 applicable Guaranteed Payment due
with respect to the Notes. On any Distribution Date with respect to which a
claim has been made under the Certificates Policy, the amount of any funds
received by the Indenture Trustee as a result of any claim under such Policy,
to the extent required to make the related Guaranteed Payment on such
Distribution Date, shall be withdrawn from the Certificates Policy Payments
Account and deposited in the Certificate Distribution Account and applied,
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 applicable
Guaranteed Payment due with respect to the Certificates. Any funds remaining
in the Policy Payments Accounts on the first Business Day following a
Distribution Date shall be remitted to the Security Insurer, pursuant to the
instructions of the Security Insurer, by the end of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Securities from
moneys received under the Policies. The Security Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Indenture Trustee at the expense of the
Security Insurer.
SECTION 5.08. Notices to the Security Insurer. All notices, statements,
reports, notes, or opinions required by this Agreement to be sent to any other
party hereto or to the Securityholders at any time when the Security Insurer
is the Controlling Party shall also be sent to the Security Insurer.
SECTION 5.09. Rights in Respect of Insolvency Proceedings. (a) In the
event that the Indenture Trustee or the Owner Trustee, as applicable, 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 or the Owner Trustee, as applicable, shall (i) deliver to
the Security Insurer a certified copy of such court order, an irrevocable
assignment to the Security Insurer of the Securityholders' rights with respect
to any such recovered payment and an instrument appointing the Security
Insurer as agent of the Securityholders with respect to any such recovered
payments and (ii) notify the Securityholders by mail that, in the event that
any Guaranteed Payment distributed to a Securityholder is so recovered, such
Securityholder will be entitled to payment of such recovered amounts pursuant
to the applicable Policy.
(b) The Indenture Trustee or the Owner Trustee, as applicable, shall
promptly notify the Security 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 or
the Certificates. Each Securityholder, by its purchase of a Security, and the
Indenture Trustee and the Owner Trustee hereby agree that, so long as a
Security Insurer Default shall not have occurred and be continuing, the
Security Insurer may at any time during the continuation of an Insolvency
Proceeding direct all matters relating to such Insolvency Proceeding,
including (i) all matters relating to any Preference Claim, (ii) the direction
of any appeal of any order relating to any Preference Claim at the expense of
the Security Insurer and (iii) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition, and without limitation
of the foregoing, as set forth in Section 5.10, the Security Insurer shall be
subrogated to, and each Securityholder and the Indenture Trustee and the Owner
Trustee hereby delegate and assign, to the fullest extent permitted by law,
the rights of the Indenture Trustee and Owner Trustee and such Securityholder
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) Each of the Indenture Trustee and Owner Trustee shall furnish to
the Security Insurer its records evidencing the distributions of principal of
and interest on the Securities that have been made by such trustee and
subsequently recovered from Securityholders and the dates on which such
payments were made.
SECTION 5.10. Effect of Payments by the Security Insurer; Subrogation.
(a) Anything herein to the contrary notwithstanding, any distribution of
principal of or interest on the Securities that is made with moneys received
pursuant to the terms of the Policies shall not be considered payment of the
Securities by the Issuer and shall not discharge the Trust assets in respect
of such distribution. The Indenture Trustee and the Owner Trustee acknowledge
that, without the need for any further action on the part of the Security
Insurer, the Indenture Trustee, the Owner Trustee, the Certificate Registrar
or the Note Registrar, (i) to the extent the Security Insurer makes payments,
directly or indirectly, on account of principal of or interest on the
Securities to the Securityholders thereof, the Security Insurer will be fully
subrogated to the rights of such Securityholders 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 Securityholder and (ii) the
Security Insurer shall be paid principal and interest in its capacity as a
Securityholder until all such payments by the Security Insurer have been fully
reimbursed, but only from the sources and in the manner provided herein for
the distribution of such principal and interest and in each case only after
the Securityholders have received all Guaranteed Payments due to them under
this Agreement.
(b) Without limiting the rights or interests of the Securityholders
as otherwise set forth herein and subject to Article X, so long as no Security
Insurer Default exists, the Indenture Trustee and Owner Trustee shall
cooperate in all respects with any reasonable request by the Security Insurer
for action to preserve or enforce the Security Insurer's rights or interests
under this Agreement, including, upon the occurrence and continuance of a
Servicer Termination Event, a request to take any one or more of the following
actions:
(i) institute proceedings for the collection of all amounts then
payable on the Securities or under this Agreement, enforce any judgment
obtained and collect moneys adjudged due; and
(ii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies of
the Security Insurer hereunder.
SECTION 5.11. Statements to Securityholders. On each Distribution Date,
the Servicer shall provide to the Indenture Trustee (with a copy to the Rating
Agencies and each Paying Agent) for the Indenture Trustee to forward to each
Noteholder of record as of the most recent Record Date and to the Owner
Trustee (with a copy to each Paying Agent) for the Owner Trustee to forward to
each Certificateholder of record as of the most recent Record Date a statement
substantially in the form of Exhibit B, respectively, 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 each Class of Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest allocable
to each Class of Notes and to the Certificates;
(iii) the Outstanding Amount of each Class of Notes, the Note Pool
Factor for each such Class, the Certificate Balance and the Certificate Pool
Factor as of the close of business on the last day of the preceding Collection
Period, after giving effect to payments allocated to principal reported under
clause (i) above;
(iv) the amount of the Servicing Fee paid to the Servicer and the
amount of any fees payable to the Owner Trustee or the Indenture Trustee with
respect to the 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 amount, if any, of the distribution payable pursuant to
claim under the Policies;
(vii) the balance of the Spread Account on such Payment Determination
Date after giving effect to deposits and withdrawals to be made on the next
following Distribution Date, if any;
(viii) the Pool Balance and the Pool Factor 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.
(ix) the amount of any Class A-2 Additional Principal Distribution
Amount distributable to Class A-2 Noteholders on such date;
(x) the amount of any deposit to the Spread Account and the amount
and application of any funds withdrawn from the Spread Account;
(xi) the aggregate principal balance of all Receivables that became
Liquidated Receivables or Purchased Receivables during the related Collection
Period;
(xii) the aggregate principal balance of Receivables that are 30 to
59 days, 60 to 89 days or 90 days or more delinquent;
(xiii) the Class A-1 Interest Carryover Shortfall, the Class A-1
Principal Carryover Shortfall, the Class A-2 Interest Carryover Shortfall, the
Class A-2 Principal 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; and
(xiv) the aggregate Purchase Amounts for Receivables, if any, that
were purchased during or with respect to such Collection Period.
Each amount set forth on the Distribution Date statement under clauses
(i), (ii) or (iv) above shall be expressed as a dollar amount per $1,000 of
original principal balance of a Certificate or Note, as applicable.
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller. The Seller makes the following
representations on which the Issuer relies in accepting the Receivables and
delivering the Securities and the Security Insurer relies in issuing the
Policies. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables by the Seller to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted.
(b) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions where the failure to do so would
materially and adversely affect the Seller's ability to transfer the
Receivables to the Trust pursuant to this Agreement or the validity or
enforceability of the Receivables.
(c) Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and the other Basic Documents
to which it is a party and to carry out their respective terms; the Seller has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Issuer, and the Seller shall have duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement and the
other Basic Documents to which the Seller is a party have been duly authorized
by the Seller by all necessary corporate action.
(d) Binding Obligation. This Agreement and the other Basic Documents
to which the Seller is a party, when duly executed and delivered by the other
parties hereto and thereto, shall constitute legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, and similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and to general
principles of equity (whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time, or both) a default under, the
certificate of incorporation or bylaws of the Seller, or any indenture,
agreement, mortgage, deed of trust, or other instrument to which the Seller is
a party or by which it is bound; or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust, or other instrument, other than
this Agreement and the other Basic Documents; or violate any law, order, rule
or regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties: (1) asserting the invalidity of this Agreement or any other Basic
Document; (2) seeking to prevent the issuance of the Notes or the Certificates
or the consummation of any of the transactions contemplated by this Agreement
or any other Basic Document; (3) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or any
other Basic Document; or (4) seeking to adversely affect the federal income
tax attributes of the Trust, the Notes or the Certificates.
(g) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity, or
enforceability of this Agreement or any other Basic Document to which it is a
party that has not already been obtained.
SECTION 6.02. Corporate Existence. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Seller and its Affiliates
will be conducted on an arm's-length basis.
SECTION 6.03. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement (which shall not
include distributions on account of the Notes or Certificates).
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. The Seller shall not merge or consolidate with any
other Person or permit any other Person to become the successor to the
Seller's business without the prior written consent of the Security Insurer.
Any such successor Person shall execute an agreement of assumption of every
obligation of the Seller under this Agreement and the other Basic Documents
and, whether or not such assumption agreement is executed, shall be the
successor to the Seller under this Agreement without the execution or filing
of any document or any further act on the part of any of the parties to this
Agreement. The Seller shall provide prompt notice of any merger,
consolidation or succession pursuant to this Section 6.04 to the Owner
Trustee, the Indenture Trustee, the Security Insurer, the 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 speak as of the date of the consummation
of such transaction), (y) the Seller shall have delivered to the Owner
Trustee, the Indenture Trustee and the Security Insurer an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
6.04 and that all conditions precedent provided for in this Agreement relating
to such transaction have been complied with and (z) the Seller shall have
delivered to the Owner Trustee, the Indenture Trustee and the Security Insurer
an Opinion of Counsel stating that, in the opinion of such counsel, either (A)
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Receivables and reciting the details of the
filings or (B) no such action is necessary to preserve and protect such
interest.
SECTION 6.05. Limitation on Liability of Seller and Others. The Seller
and any director, officer, employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in
any expense or liability.
SECTION 6.06. Seller May Own 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 Security Insurer relies in issuing the
Policies. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date and shall survive the sale of the
Receivables to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of the
state of its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables and to hold the Receivable Files as custodian.
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their respective terms; and the execution,
delivery and performance of this Agreement and the other Basic Documents to
which it is a party have been duly authorized by the Servicer by all necessary
corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents to
which it is a party constitute legal, valid and binding obligations of the
Servicer, enforceable against the Servicer in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the availability
of specific remedies, regardless of whether such enforceability is considered
in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the Basic Documents to which it is a party and the
fulfillment of their respective terms shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Servicer is a party
or by which it is bound; or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust, or other instrument other than this
Agreement and the Basic Documents, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or any of its properties;
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents; (ii) seeking to prevent the issuance of the 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.
(g) No Insolvent Obligors. As of the related Cutoff Date, no Obligor
on a Receivable is shown on the Receivable Files as the subject of a
bankruptcy proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer and the representations made by the Servicer under
this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Collateral Agent, the
Backup Servicer, the Security Insurer, the Securityholders and the Seller and
any of the officers, directors, employees and agents of the Issuer, the Owner
Trustee, the Indenture Trustee, the Collateral Agent, the Backup Servicer and
the Security Insurer from and against any and all costs, expenses, losses,
damages, claims and liabilities arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Collateral Agent, the
Seller, the Backup Servicer, the Security Insurer, 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 Collateral Agent, the
Seller, the Backup Servicer, the Security Insurer, the Securityholders and any
of the officers, directors, employees and agents of the Issuer, the Owner
Trustee, the Collateral Agent, and the Indenture Trustee from and against any
and all costs, expenses, losses, claims, damages and liabilities to the extent
that such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon any such Person through, the negligence, misfeasance or bad faith
of the Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this
Agreement.
For purposes of this Section, in the event of the termination of the
rights and obligations of First Merchants (or any successor thereto pursuant
to Section 7.03) as Servicer pursuant to Section 8.02, or a resignation by
such Servicer pursuant to this Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer (other than the
Indenture Trustee) pursuant to Section 8.03.
Indemnification under this Section shall survive the resignation or
removal of any indemnified party or the termination of this Agreement and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall
promptly repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. (a) The Servicer shall not merge or consolidate
with any other Person, convey, transfer or lease substantially all its assets
as an entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger, consolidation,
conveyance, transfer, lease, or succession, the successor or surviving entity
shall be capable of fulfilling the duties of the Servicer contained in this
Agreement and shall be reasonably acceptable to the Controlling Party. Any
Person (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) that acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer or (iv) succeeding to the business of the
Servicer, which Person shall execute an agreement of assumption to perform
every obligation of the Servicer under this Agreement, shall be the successor
to the Servicer under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement.
The Servicer shall provide notice of any merger, consolidation or succession
pursuant to this Section 7.03(a) to the Owner Trustee and the Indenture
Trustee, the Certificateholders, the Security Insurer and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or consolidate
with any other Person or permit any other Person to become a successor to the
Servicer's business unless (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 7.01 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no
event that, after notice or lapse of time or both, would become a Servicer
Termination Event shall have occurred and be continuing, (ii) the Servicer
shall have delivered to the Owner Trustee, the Indenture Trustee and the
Security Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 7.03(a) and that all conditions precedent
provided for in this Agreement relating to such transaction have been complied
with, (iii) immediately after giving effect to such transaction, the successor
to the Servicer shall become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement and (iv) the Servicer
shall have delivered to the Owner Trustee, the Indenture Trustee and the
Security Insurer an Opinion of Counsel stating that either (A) all financing
statements and continuation statements and amendments thereto have been
executed and filed that are necessary to preserve and protect the interest of
the Owner Trustee and the Indenture Trustee, respectively, in the Receivables
and reciting the details of such filings or (B) no such action shall be
necessary to preserve and protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer or (iv)
succeeding to the business of the Backup Servicer, which Person shall execute
an agreement of assumption to perform every obligation of the Backup Servicer
under this Agreement, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties to this Agreement.
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer
and Others. (a) None of the Servicer, the Backup Servicer or any of their
respective directors, officers, employees or agents shall be under any
liability to the Issuer, the Noteholders or the Certificateholders, except as
provided in this Agreement, for any action taken or for refraining from the
taking of any action pursuant to this Agreement; provided, however, that this
provision shall not protect the Servicer, the Backup Servicer or any such
person against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith or negligence in
the performance of duties. The Servicer, the Backup Servicer and any
director, officer, employee or agent of the Servicer or Backup Servicer may
conclusively rely in good faith on the written advice of counsel or on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Owner
Trustee, the Indenture Trustee, the Seller, the Security Insurer, the
Securityholders shall look only to the Servicer to perform such obligations.
The Backup Servicer, the Owner Trustee and the Indenture Trustee shall have no
responsibility and shall not be in default hereunder or incur any liability
for any failure, error, malfunction or any delay in carrying out any of its
duties under this Agreement if such failure or delay results from the Backup
Servicer acting in accordance with information prepared or supplied by a
Person other than the Backup Servicer or the failure of any such other Person
to prepare or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability for (i)
any act or failure to act of any third party, including the Servicer or the
Controlling Party, (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the
invalidity or unenforceability of any Receivable under applicable law, (iv)
the breach or inaccuracy of any representation or warranty made with respect
to any Receivable, or (v) the acts or omissions of any successor Backup
Servicer.
(c) The parties expressly acknowledge and consent to ▇▇▇▇▇▇ Trust and
Savings Bank simultaneously acting in the capacity of Backup Servicer or
successor Servicer and Indenture Trustee and as collateral agent under the
Spread Account Agreement and the Local Collection Account Agreement. ▇▇▇▇▇▇
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
▇▇▇▇▇▇ Trust and Savings Bank of express duties set forth in this Agreement in
any of such capacities.
SECTION 7.05. Appointment of Subservicer. The Servicer may at any
time, with the Security Insurer's consent, appoint a subservicer to perform
all or any portion of its obligations as Servicer hereunder; provided,
however, that 10 days' prior notice of such appointment shall have been given
to the Rating Agencies and each Rating Agency shall have notified the
Servicer, the Backup Servicer, the Owner Trustee and the Indenture Trustee in
writing that such appointment will not result in a reduction or withdrawal of
the then current ratings of the Securities or result in an increased capital
charge to the Security Insurer; and, provided, further, that the Servicer
shall remain obligated and be liable to the Owner Trustee, the Indenture
Trustee, the Security Insurer 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 shall be as agreed
between the Servicer and such subservicer from time to time, and none of Owner
Trustee, the Indenture Trustee, the Issuer, the Backup Servicer, the Security
Insurer 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 Security Insurer at the earliest practicable time (and, if
such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered by the Servicer or Backup
Servicer, as applicable, to the Owner Trustee, the Indenture Trustee and the
Security Insurer concurrently with or promptly after such notice. No
resignation of the Servicer shall become effective until the Backup Servicer
or a successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 8.03. No resignation
of the Backup Servicer shall become effective until an entity acceptable to
the Controlling Party shall have assumed the responsibilities and obligations
of the Backup Servicer.
ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) any failure by the Servicer to deposit into any Local Collection
Account or the Collection Account any proceeds or payment required to be so
delivered under the terms of this Agreement that continues unremedied for a
period of two Business Days (one Business Day with respect to payments of
Purchase Amounts) after written notice is received by the Servicer or after
discovery of such failure by a Responsible Officer of the Servicer;
(b) failure by the Servicer to deliver to the Owner Trustee, the
Indenture Trustee, the Seller and (so long as the Security Insurer is the
Controlling Party) the Security Insurer the Servicer's Certificate by the
applicable Determination Date, or to observe any covenant or agreement set
forth in Section 4.06;
(c) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer set forth in this Agreement,
which failure (i) materially and adversely affects the rights of the
Securityholders (determined without regard to the availability of funds under
the Policies) or of the Security Insurer (unless the Security Insurer is no
longer the Controlling Party) and (ii) continues unremedied for a period of 30
days after knowledge thereof by the Servicer or after the date on which
written notice of such failure requiring the same to be remedied shall have
been given to the Servicer by any of the Owner Trustee, the Indenture Trustee
or the Security Insurer (or, if a Security Insurer Default shall have occurred
and be continuing, 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, so long as First Merchants is the Servicer, the Seller;
(e) so long as the Security Insurer is the Controlling Party, any
failure by the Security Insurer to have delivered a Servicer Extension Notice
pursuant to Section 4.14;
(f) so long as the Security Insurer is the Controlling Party, an
Insurance Agreement Event of Default shall have occurred and be continuing; or
(g) the Servicer is terminated as servicer with respect to any other
trust that has issued one or more classes of asset backed securities with
respect to which the Security Insurer has issued a financial insurance
guaranty policy.
SECTION 8.02. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, the Security Insurer
or, if the Security Insurer is no longer the Controlling Party, the Indenture
Trustee, the Owner Trustee or Noteholders evidencing 25% of the Outstanding
Amount of the Notes, by notice given in writing to the Servicer (and to the
Indenture Trustee, the Owner Trustee and the Seller if given by the Security
Insurer or such 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 Security Insurer shall have exercised its option pursuant to
Section 8.03(b) to appoint an alternate successor Servicer) shall be the
successor in all respects to the Servicer in its capacity as Servicer under
this Agreement (including its appointment as Administrator under the
Administration Agreement as set forth in Section 8.03(c)) and shall be subject
to all the rights, responsibilities, restrictions, duties, liabilities, and
termination provisions relating to the Servicer under this Agreement, except
as otherwise stated herein. The Seller, the Owner Trustee, the Indenture
Trustee and such successor Servicer shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. If a
successor Servicer is acting as Servicer hereunder, it shall be subject to
term-to-term servicing as referred to in Section 4.14 and to termination under
Section 8.02 upon the occurrence of any Servicer Termination Event applicable
to it as Servicer.
(b) The Controlling Party may exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other than
the Person serving as Backup Servicer at the time, and shall have no liability
to the Owner Trustee, the Indenture Trustee, the Servicer, the Seller, the
Person then serving as Backup Servicer, any Noteholders, any
Certificateholders or any other Person if it does so. Notwithstanding the
above, if the Backup Servicer shall be legally unable or unwilling to act as
Servicer, and the Security Insurer is no longer the Controlling Party, the
Backup Servicer, the Indenture Trustee, the Owner Trustee or Noteholders
evidencing 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 Security Insurer or (if the
Security Insurer is no longer the Controlling Party) the Noteholders
evidencing not less than a majority of the Outstanding Amount of the Notes or
the Certificateholders evidencing not less than a majority of the outstanding
Certificate Balance (in the case of any default which does not adversely
affect the Indenture Trustee or the Noteholders) may, on behalf of all
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, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereto.
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) On each
Determination Date as of which the Pool Balance is equal to or less than 10%
of the Original Pool Balance, the Servicer shall have the option to purchase
the Receivables (with the consent of the Security Insurer, if a claim has
previously been made under either of the Policies or if such purchase would
result in a claim on one or both of the Policies or if such purchase would
result in any amount owing and remaining unpaid under this Agreement or the
Insurance Agreement to the Security Insurer or any other Person). To exercise
such option, the Servicer shall deposit to the Collection Account pursuant to
Section 5.04 an amount equal to the aggregate Purchase Amount for the
Receivables (including Defaulted Receivables) and shall succeed to all
interests in and to the Receivables.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02
of the Trust Agreement, the Servicer shall instruct the Indenture Trustee in
writing to deposit the proceeds from such sale after all payments and reserves
therefrom have been made (the "Insolvency Proceeds") in the Collection
Account. On the Distribution Date on which the Insolvency Proceeds are
deposited in the Collection Account (or, if such proceeds are not so deposited
on a Distribution Date, on the Distribution Date immediately following such
deposit), the Servicer shall instruct the Indenture Trustee to make the
following deposits (after the application on such Distribution Date of the
Total Distribution Amount pursuant to Section 5.06) from the Insolvency
Proceeds and any funds remaining on deposit in the Spread Account, including
the proceeds of any sale of investments therein as follows:
(i) to the Note Distribution Account, any portion of the Noteholders'
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Outstanding Amount of the
Notes (less the deposits made to the Note Distribution Account on such
Distribution Date and on prior Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited into
the Certificate Distribution Account on such Distribution Date;
(iv) to the Certificate Distribution Account, the Certificate Balance
(less the deposits made to the Certificate Distribution Account on such
Distribution Date); and
(v) to pay any amount owed to the Security Insurer under the
Insurance Agreement.
Any investments on deposit in the Note Distribution Account which will not
mature on or before such Distribution Date shall be sold by the Indenture
Trustee at such time as will result in the Indenture Trustee receiving the
proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after the
deposits described above shall be paid to the Seller.
(c) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee,
the Indenture Trustee and the Security Insurer as soon as practicable after
the Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes and all amounts
owed to the Security Insurer, the Certificateholders will succeed to the
rights of the Noteholders hereunder and the Owner Trustee will succeed to the
rights of, and assume the obligations of, the Indenture Trustee pursuant to
this Agreement.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. (a) This Agreement may be amended by the
Seller, the Servicer, the Backup Servicer, the Owner Trustee, the Indenture
Trustee and the Issuer, with the prior written consent of the Security Insurer
(so long as the Security Insurer is the Controlling Party), but without the
consent of any of the Noteholders or the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee and the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Issuer, with the prior written consent of the
Indenture Trustee, the Security Insurer (so long as the Security Insurer is
the Controlling Party), the Noteholders holding not less than a majority of
the Outstanding Amount of the Notes and the Holders (as defined in the Trust
Agreement) of outstanding Certificates evidencing not less than a majority of
the outstanding Certificate Balance, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the 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 percentage of
the Outstanding Amount of the Notes and the Certificate Balance, the
Securityholders 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 Owner
Trustee and the Indenture Trustee file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of § 9-402(7)
of the UCC, unless it shall have given the Owner Trustee and the Indenture
Trustee at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) Each of the Seller and the Servicer shall have an obligation to
give the Owner Trustee and the Indenture Trustee at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables, the
Servicer's master computer records (including any backup archives) that refer
to a Receivable shall indicate clearly the interest of the Issuer and the
Indenture Trustee in such Receivable and that such Receivable is owned by the
Issuer and has been pledged to the Indenture Trustee. Indication of the
Issuer's and the Indenture Trustee's interest in a Receivable shall be deleted
from or modified on the Servicer's computer systems when, and only when, the
related Receivable shall have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee and the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing) and their agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee,
the Security Insurer (so long as no Security Insurer Default shall have
occurred and be continuing) or to the Indenture Trustee, within five Business
Days, a list of all Receivables (by contract number and name of Obligor) then
held as part of the Trust, together with a reconciliation of such list to the
Schedule of Receivables and to each of the Servicer's Certificates furnished
before such request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee, the Security
Insurer (so long as no Security Insurer Default shall have occurred and be
continuing) and the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
of each amendment hereto an Opinion of Counsel stating that, in the opinion of
such counsel, either (A) all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Owner Trustee and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action
shall be necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cutoff Date, an Opinion of Counsel, dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Indenture Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (B) no such action shall be necessary to preserve and protect such
interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify
any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Seller, the Servicer, the Owner Trustee, the
Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller, to First Merchants Auto Receivables Corporation II, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇; (b) in the case of the Servicer, to First Merchants Acceptance
Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; (c) in the case of the Backup Servicer or the
Indenture Trustee, to ▇▇▇▇▇▇ Trust and Savings Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Indenture Trust
Administration; (d) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (e) in the case of
the Security Insurer, to Financial Security Assurance Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Surveillance Department; (f) in the case
of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and (g) in the case of Standard &
Poor's, to Standard & Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc., ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention
of Asset Backed Surveillance Department; or, as to each of the foregoing, at
such other address as shall be designated by written notice to the other
parties. In addition, copies of such notices shall be sent to the Security
Insurer pursuant to Section 5.08.
SECTION 10.04. Assignment by the Seller or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided
in the remainder of this Section, as provided in Sections 6.04 and 7.03 herein
and as provided in the provisions of this Agreement concerning the resignation
of the Servicer, this Agreement may not be assigned by the Seller or the
Servicer.
SECTION 10.05. Limitations on Rights of Others. The Security Insurer is
an intended third party beneficiary of this Agreement entitled to enforce the
provisions hereof as if a party hereto. The provisions of this Agreement are
solely for the benefit of the Seller, the Servicer, the Issuer, the Owner
Trustee, the Security Insurer, the Certificateholders, the Indenture Trustee
and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of
this Agreement or any covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest
by the Issuer to the Indenture Trustee pursuant to the Indenture for the
benefit of the Noteholders of all right, title and interest of the Issuer in,
to and under the Receivables and/or the assignment of any or all of the
Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer and the Seller shall not, prior to
the date which is one year and one day after the termination of this Agreement
with respect to the Issuer or the Seller, acquiesce, petition or otherwise
invoke or cause the Issuer or the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against the Issuer or the Seller under any federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or
the Seller or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Issuer or the Seller.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Seller, acquiesce, petition
or otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against the Seller under any federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Seller.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by 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 ▇▇▇▇▇▇ Trust and Savings Bank, not in its
individual capacity but solely as Indenture Trustee and in no event shall
▇▇▇▇▇▇ Trust and Savings Bank have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant
hereto, as to all of which recourse shall be had solely to the assets of the
Issuer.
SECTION 10.13. Servicer Payment Obligation. The Servicer shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and
liabilities of the Administrator incurred thereunder. In addition, the
Servicer shall be responsible for the payment of all fees and expenses of the
Trust, the Owner Trustee and the Indenture Trustee paid by any of them in
connection with any of their obligations under the Basic Documents to obtain
or maintain any required license under the Pennsylvania Motor Vehicle Sales
Finance Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first
above written.
FIRST MERCHANTS AUTO TRUST 1996-B
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, Servicer
By:
Name:
Title:
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
Indenture Trustee, Collateral Agent
and Backup Servicer
By:
Name:
Title:SCHEDULE A
Schedule of Receivables
[To be Delivered to the Trust at Closing]SCHEDULE B
Schedule of Eligible Investment Receivables
[To be Delivered to the Trust at Closing]SCHEDULE C
Location of Receivable Files
EXHIBIT A
Representations and Warranties of First Merchants Acceptance Corporation
Under Section 3.02 of the Receivables Purchase Agreement
(i) Characteristics of Receivables. Each Receivable (A) was
originated in the United States by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business in accordance with
the Seller's credit policies, was fully and properly executed by the parties
thereto, was purchased by the Seller from such Dealer under an existing Dealer
Agreement and was validly assigned by such Dealer to the Seller, (B) has
created or shall create a valid, subsisting and enforceable first priority
security interest in favor of the Seller in the Financed Vehicle, which
security interest is assignable by the Seller to the Purchaser, and by the
Purchaser to the Issuer, (C) contains customary and enforceable provisions
such that the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security and (D)
provides for level monthly payments (provided that the payment in the first
and last month of the term of the Receivable may be different from the level
payments) that fully amortize the Amount Financed by maturity and yield
interest at the APR.
(ii) Compliance with Law. Each Receivable and the sale of the
related Financed Vehicle complied at the time it was originated or made, and
at the time of execution of this Agreement complies, in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the Federal Reserve
Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act
of 1940, and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and other consumer credit laws and equal credit
opportunity and disclosure laws.
(iii) Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A) as
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law and (B) as such Receivable may be modified by
the application after the Closing Date of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
(iv) No Government Obligor. No Receivable is due from the United
States of America or any State or any agency, department, subdivision or
instrumentality thereof.
(v) Obligor Bankruptcy. As of the Cutoff Date, no Obligor had been
identified on the records of the Seller as being the subject of a current
bankruptcy proceeding.
(vi) Schedule of Receivables. The information set forth in Schedule
A and Schedule B to this Agreement is true and correct in all material
respects as of the Cutoff Date.
(vii) Marking Records. By the Closing Date, the Seller will have
caused its records relating to each Receivable, including any computer
records, to be clearly and unambiguously marked to show that the Receivables
have been sold to the Purchaser by the Seller and transferred and assigned by
the Purchaser to the Issuer in accordance with the terms of the Sale and
Servicing Agreement.
(viii) Computer Tape. The computer tape regarding the Receivables
made available by the Seller to the Purchaser is complete and accurate in all
respects as of the Cutoff Date.
(ix) No Adverse Selection. No selection procedures believed by the
Seller to be adverse to the Certificateholders were utilized in selecting the
Receivables.
(x) Chattel Paper. The Receivables constitute chattel paper within
the meaning of the UCC as in effect in the State of Illinois.
(xi) One Original. There is only one original executed copy of each
Receivable.
(xii) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from the
lien of the related Receivable in whole or in part. None of the terms of any
Receivable has been waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the related
Receivable File. No Receivable has been modified as a result of the
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(xiii) Lawful Assignment. No Receivable has been originated in, or
is subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or the Sale and Servicing Agreement or the
pledge of such Receivables under the Indenture.
(xiv) Title. It is the intention of the Seller that the transfers
and assignments herein contemplated constitute sales of the Receivables from
the Seller to the Purchaser and that the beneficial interest in and title to
the Receivables not be part of the debtor's estate in the event of the filing
of a bankruptcy petition by or against the Seller under any bankruptcy law.
No Receivable has been sold, transferred, assigned or pledged by the Seller to
any Person other than to the Purchaser pursuant to this Agreement (or by the
Purchaser to the Issuer pursuant to the Sale and Servicing Agreement).
Immediately prior to the transfers and assignments herein contemplated, the
Seller has good and marketable title to each Receivable free and clear of all
Liens (other than the Lien of the Seller's senior lenders identified in the
Consent to Fourth Amended and Restated Loan and Security Agreement dated as of
February 29, 1996, by and among the Seller and such secured lenders), which
Lien is being released simultaneously with the transfers and assignments
herein contemplated) and, immediately upon the transfer thereof, the Purchaser
shall have good and marketable title to each Receivable, free and clear of all
Liens.
(xv) Security Interest in Financed Vehicle. Immediately prior to its
sale, assignment and transfer to the Purchaser pursuant to this Agreement,
each Receivable shall be secured by a validly perfected first priority
security interest in the related Financed Vehicle in favor of the Seller as
secured party, or all necessary and appropriate actions have been commenced
that will result in the valid perfection of a first priority security interest
in such Financed Vehicle in favor of the Seller as secured party.
(xvi) All Filings Made. All filings (including UCC filings) required
to be made in any jurisdiction to give the Purchaser a first perfected
ownership interest in the Receivables have been made.
(xvii) No Defenses. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense, and no such right has been
asserted or threatened with respect to any Receivable.
(xviii) No Default. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 31 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable, and there has been no waiver
of any of the foregoing. As of the Cutoff Date, no Financed Vehicle has been
repossessed.
(xix) Insurance. The Seller, in accordance with its customary
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Vehicle and, under the terms of the related
Contract, the Obligor is required to maintain such insurance.
(xx) Final Scheduled Maturity Date. No Receivable has a final
scheduled payment date after February 25, 2002.
(xxi) 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 31 days past due; and (C) no funds have been
advanced by the Seller, any Dealer or anyone acting on behalf of either of
them in order to cause any Receivable to qualify under clause (B) above.
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 1996-B Distribution Date Statement to
Securityholders
Principal Distribution Amount
Class A-1 Notes:($ per $1,000 original principal balance)
Class A-2 Notes:($ per $1,000 original principal balance)
Interest Distribution Amount
Class A-1 Notes:($ per $1,000 original principal balance)
Class A-2 Notes:($ per $1,000 original principal balance)
Principal Distribution Amount
Principal Per $1,000 Certificate
Interest Distribution Amount
Interest Per $1,000 Certificate
Note Balance:
Class A-1 Notes:
Class A-2 Notes:
Note Pool Factor:
Class A-1 Notes:
Class A-2 Notes:
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 [Certificate]
Pool Balance
Realized Losses
Spread Account Balance
EXHIBIT C
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
First Merchants Owner Trust 1996-B
$ Floating Rate Asset Backed Notes, Class A-1
$ % Asset Backed Notes, Class A-2
$ % Asset Backed Certificates
Distribution Date:
I.Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Initial Class A-1 Balance
(C) Initial Class A-2 Balance
(D) Initial Certificate Balance
(E) Class A-1 Rate
(F) Class A-2 Rate
(G) Pass-Through Rate
(E) Servicing Fee Rate
(F) Trustee Fee
(G) Security Insurer's Premium
(H) Original Weighted Average Coupon (WAC)
(I) Original Weighted Average Remaining Term (WAM)
(J) Number of Contracts
(K) Spread Account
i. Spread Account Initial Deposit
ii. Spread Account Required Amount
II.Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Current Class A-1 Note Balance
(C) Current Class A-2 Note Balance
(D) Current Certificate Balance
(D) Class A-1 Note Pool Factor
(E) Class A-2 Note Pool Factor
(F) Certificate Pool Factor
(G) Spread Account Balance
(H) Weighted Average Coupon of Remaining Portfolio (WAC)
(I) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(J) Number of Contracts
III.Inputs from the System
(A) Simple Interest Loans
i. Principal Payments Received
ii. Interest Payments Received
iii. Repurchased Receivables
iv. Late Fees
(B) Spread Account Release to Collection Account
(C) Spread Account Release to Depositor
(D) Liquidated Contracts
▇. ▇▇▇▇▇ Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(F) Weighted Average Coupon of Remaining Portfolio (WAC)
(G) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(H) Remaining Number of Contracts
(I) Receivable Balance of Vehicles in Repossession During the
Collection Period
(J) Number of Vehicles in Repossession During the Collection Period
(K) Aggregate Net Losses for Collection Period
(L) Delinquent Contracts
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 Policies
(3) Total Draw on Credit Enhancements
▇.▇▇▇▇▇ Distribution Amount
(1) Total Distribution Amount
(2) Interest Distribution Amount
(3) Regular Principal Distribution Amount
D.Liquidated Receivables, Net (includes repos repurchased in October)
(1) Gross Principal Balance of Liquidated Receivables
(2) Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(3) Liquidated Receivables, Net
E.Monthly Distributions
(1) Noteholders' Principal Distributable Amount
(2) Certificateholders' Principal Distributable Amount
(3) Principal Distribution Amount
(a) Principal Payments on Receivables
(b) Repurchased Receivables
(c) Cram Down Loss
(4) Noteholders' Interest Distributable Amount
(a) amount allocated to Class A-1 Notes
(b) amount allocated to Class A-2 Notes
(5)Certificateholders' Interest Distributable Amount
(6) Required Distributions
(a) Servicing Fee (Includes late fees collected)
(b) Fees Paid to the Indenture Trustee and Owner Trustee
(c) Monthly Security Insurer's Premium
(d) Deposits into Spread Account
F. Pool Balances and Portfolio Information
(1) Total Pool Balance
(2) Total Pool Factor
(3) Note Balance
(4) Certificate Balance
(5) Remaining
Overcollateralization
Amount
(6) Weighted Average
Coupon
(7) Weighted Average
Remaining Maturity
(8) Remaining Number
of Contracts
G.Spread Account
(1) Required Spread Account Balance
(2) Beginning Balance
(3) Amount Available for Deposit to the Spread Account
(4) Withdrawal from Spread Account
(5) Amount Released to Seller
(6) Ending Balance
H. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
(2) Liquidated Receivables for the Collection Period
(3) Cumulative Net Losses
(4) Delinquent and Repossessed Receivables
(a) 60 Days Delinquent (Receivables Balance)
(b) 60 Days Delinquent (Number of Receivables)
(c) 61 Days or More (Receivables Balance)
(d) 91 Days or More (Number of Receivables)
(e)Receivables Balance of Vehicles in Repossession During the
Monthly Period
(f) Number of Vehicles in Repossession During the Collection
Period
[I.Portfolio Performance Test
(1) Delinquency Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(2) Default Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(3) Net Loss Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(4) Delinquency Trigger Indicator
(5) Default Trigger Indicator
(6) Loss Trigger Indicator]
J. (1) Amount of principal being paid to the Noteholders:
(2) Per $1,000 original principal amount:
K. (1) Amount of principal being paid to the Certificateholders:
(2) Per $1,000 original principal amount:
L. (1) Amount of interest being paid to the Noteholders:
(a) amount allocated to the Class A-1 Notes:
(b) amount allocated to the Class A-2 Notes:
(2) Per $1,000 original principal amount:
M. (1) Amount of interest being paid to Certificateholders:
(2) Per $1,000 original principal amount:
N. Pool Balance at the end of the related Collection Period:
O. Outstanding Amount of Notes:
(1) Outstanding Amount of the Class A-1 Notes:
(2) Outstanding Amount of the Class A-2 Notes:
Note Pool Factor:
(1) Class A-1 Note Pool Factor:
(2) Class A-2 Note Pool Factor:
P. Outstanding Certificate Balance:
Certificate Pool Factor:
Q. (1) Amount of Servicing Fee:
(2) Per $1,000 original principal amount:
R. Aggregate Purchase Amounts for Collection Period:
S. Aggregate Amount of Realized Losses for the Collection Period:
T. Amount in Spread Account:
EXHIBIT D
Form of Notes PolicyEXHIBIT E
Form of Certificates Policy