SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 1997-1,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller,
and
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Servicer
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
Indenture Trustee and Backup Servicer
Dated as of March 1, 1997
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01. Definitions . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . . 20
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables . . . . . . . . 21
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants 24
SECTION 3.02. Representations and Warranties of the Seller 25
SECTION 3.03. Repurchase upon Breach. . . . . . . . . . 25
SECTION 3.04. Custody of Receivable Files . . . . . . . 26
SECTION 3.05. Duties of Servicer as Custodian . . . . . 26
SECTION 3.06. Instructions; Authority to Act. . . . . . 27
SECTION 3.07. Custodian's Indemnification . . . . . . . 27
SECTION 3.08. Effective Period and Termination. . . . . 28
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. . . . . . . . . . . . 28
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.03. Realization upon Receivables. . . . . . . 30
SECTION 4.04. Physical Damage Insurance . . . . . . . . 30
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles 30
SECTION 4.06. Covenants of Servicer . . . . . . . . . . 31
SECTION 4.07. Purchase of Receivables upon Breach . . . 32
SECTION 4.08. Servicing Fee . . . . . . . . . . . . . . 32
SECTION 4.09. Servicer's Certificate. . . . . . . . . . 32
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event . . . . . . . . . . . . . . . . . 32
SECTION 4.11. Annual Independent Accountants' Report. . 33
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . 33
SECTION 4.13. Monthly Tape. . . . . . . . . . . . . . . 33
SECTION 4.14. Retention and Termination of Servicer . . 34
ARTICLE V
Distributions; Spread Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Local Post Office Boxes . . . . . . . . . 35
SECTION 5.02. Accounts. . . . . . . . . . . . . . . . . 35
SECTION 5.03. Application of Collections. . . . . . . . 37
SECTION 5.04. Purchase Amounts. . . . . . . . . . . . . 37
SECTION 5.05. Transfers from the Spread Account . . . . 38
SECTION 5.06. Distributions . . . . . . . . . . . . . . 38
SECTION 5.07. Claims Upon the Policy; Policy Payments Account 39
SECTION 5.08. Notices to the Security Insurer . . . . . 41
SECTION 5.09. Rights in Respect of Insolvency Proceedings 41
SECTION 5.10. Effect of Payments by the Security Insurer; Subrogation 41
SECTION 5.11. Statements to Securityholders . . . . . . 42
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller . . . . . . . . 44
SECTION 6.02. Corporate Existence . . . . . . . . . . . 46
SECTION 6.03. Liability of Seller; Indemnities. . . . . 46
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. . . . . . . . . . . . . . . 46
SECTION 6.05. Limitation on Liability of Seller and Others 47
SECTION 6.06. Seller May Own Securities . . . . . . . . 47
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer . . . . . . . 47
SECTION 7.02. Indemnities of Servicer . . . . . . . . . 48
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. . . . . . . . . . . . . . 49
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer and
Others. . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.05. Appointment of Subservicer. . . . . . . . 51
SECTION 7.06. Servicer and Backup Servicer Not to Resign 51
ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events . . . . . . . 52
SECTION 8.02. Consequences of a Servicer Termination Event 53
SECTION 8.03. Appointment of Successor. . . . . . . . . 53
SECTION 8.04. Notification to Noteholders and Certificateholders 54
SECTION 8.05. Waiver of Past Defaults . . . . . . . . . 54
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. . . 54
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. . . . . . . . . . . . . . . . 56
SECTION 10.02. Protection of Title to Trust . . . . . . 57
SECTION 10.03. Notices. . . . . . . . . . . . . . . . . 58
SECTION 10.04. Assignment by the Seller or the Servicer 59
SECTION 10.05. Limitations on Rights of Others. . . . . 59
SECTION 10.06. Severability . . . . . . . . . . . . . . 59
SECTION 10.07. Separate Counterparts. . . . . . . . . . 59
SECTION 10.08. Headings . . . . . . . . . . . . . . . . 59
SECTION 10.09. Governing Law. . . . . . . . . . . . . . 59
SECTION 10.10. Assignment by Issuer . . . . . . . . . . 59
SECTION 10.11. Nonpetition Covenants. . . . . . . . . . 60
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.13. Servicer Payment Obligation. . . . . . . 60
SCHEDULE A
Schedule of Receivables
SCHEDULE B
Location of Receivable Files
SCHEDULE C
Local Collection Accounts
EXHIBIT A
Representations and Warranties of First Merchants
EXHIBIT B
Form of Distribution Date Statement to Securityholders
EXHIBIT C
Form of Servicer's Certificate
EXHIBIT D
Form of Policy
SALE AND SERVICING AGREEMENT dated as of March 1, 1997, among FIRST
MERCHANTS AUTO TRUST 1997-1, 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") and as backup servicer (in such capacity, the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising in
connection with motor vehicle retail installment sale contracts generated by
First Merchants Acceptance Corporation in the ordinary course of business and
sold by First Merchants Acceptance Corporation to the Seller;
WHEREAS the Seller is willing to sell such receivables to the Issuer; and
WHEREAS the Servicer is willing to service such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"Amount Financed" means with respect to a Receivable, the amount advanced
under the Receivable toward the purchase price of the Financed Vehicle and
any related costs, exclusive of any amount allocable to the premium of force-
placed physical damage insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
"Backup Servicer" means ▇▇▇▇▇▇ 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 Receivables Purchase Agreement, the
Administration Agreement, the Note Depository Agreement, the Spread Account
Agreement, the Policy, the Insurance Agreement, the Indemnification
Agreement, the Premium Letter, the 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 Final Scheduled Distribution Date" means the January 15, 2003
Distribution Date.
"Certificate Pool Factor" means, as of the close of business on the last day
of a Collection Period, a seven-digit decimal figure equal to the Certificate
Balance (after giving effect to any reductions therein to be made on the
immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing
Date; thereafter, the Certificate Pool Factor will decline to reflect
reductions in the Certificate Balance.
"Certificateholders" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Certificateholders' Monthly Interest Distributable
Amount for the immediately preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date exceeds the amount in respect of interest actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on the amount of interest due but not paid
to the Certificateholders on such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate for the related Interest Accrual
Period.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with
respect to the Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months for all purposes of this Agreement and the
Basic Documents.
"Certificateholders' Monthly Interest Distributable Amount" means (i) with
respect to the first Distribution Date, interest accrued on the Certificates
for the related Interest Accrual Period at the Pass-Through Rate on the
Certificate Balance on the Closing Date and (ii) with respect to any
Distribution Date after the first Distribution Date, interest accrued on the
Certificates for the related Interest Accrual Period at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date,
after giving effect to all distributions of principal to the
Certificateholders on or prior to such preceding Distribution Date.
"Certificateholders' 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, (ii) on which the Class A-1 Notes
are paid in full, 7% of the Regular Principal Distribution Amount remaining
after the Class A-1 Notes are paid in full, (iii) after the Distribution Date
on which the Class A-1 Notes are paid in full, 7% of the Regular Principal
Distribution Amount and (iv) 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 after the first Distribution Date, the amount, if any,
by which the sum of the Certificateholders' Monthly Principal Distributable
Amount for the immediately 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 Certificate Final Scheduled
Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include the amount
that is necessary (after giving effect to the other amounts to be deposited
in the Certificate Distribution Account on such Distribution Date and
allocable to principal) to reduce the Certificate Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
Agreement).
"Class" means any one of the classes of Notes.
"Class A-1 Final Scheduled Distribution Date" means the August 2000
Distribution Date.
"Class A-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Class A-1 Monthly Interest Distributable Amount for the
immediately 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, (i) with respect to
the first Distribution Date, interest accrued for the related Floating Rate
Interest Accrual Period at the Class A-1 Rate on the Outstanding Amount of
the Class A-1 Notes on the Closing Date and (ii) with respect to any
Distribution Date after the first Distribution Date, interest accrued for the
related Floating Rate Interest Accrual Period at the Class A-1 Rate on the
Outstanding Amount of the Class A-1 Notes on the immediately preceding
Distribution 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 after the first Distribution Date, the amount, if any, by
which the sum of the Class A-1 Monthly Principal Distributable Amount for the
immediately 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 for such Distribution Date and the Class A-1 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the Class A-1
Principal Distributable Amount shall not exceed the Outstanding Amount of the
Class A-1 Notes. In addition, on the Class A-1 Final Scheduled Distribution
Date, the principal required to be deposited in the Note Distribution Account
will include the amount necessary (after giving effect to the other amounts
to be deposited in the Note Distribution Account on such Distribution Date
and allocable to principal) to reduce the Outstanding Amount of the Class A-1
Notes to zero.
"Class A-2 Additional Principal Distribution Amount" means, (i) with respect
to any Distribution Date prior to the Distribution Date on which the Class
A-1 Notes are paid in full and any Distribution Date after the Distribution
Date on which the Class A-2 Notes are paid in full, zero and (ii) with
respect to any Distribution Date on or after the Distribution Date on which
the Class A-1 Notes are paid in full, 50% of the portion, if any, of the
Total Distribution Amount for the related Collection Period that remains
after the payment of amounts in respect of clauses (1) through (8) of Section
5.06(b); 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 December 2001
Distribution Date.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Class A-2 Monthly Interest Distributable Amount for the
immediately 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, (i) with respect to
the first Distribution Date, interest accrued for the related Interest
Accrual Period at the Class A-2 Rate on the Outstanding Amount of the Class
A-2 Notes on the Closing Date and (ii) with respect to any Distribution Date
after the first Distribution Date, interest accrued for the related Interest
Accrual Period at the Class A-2 Rate on the Outstanding Amount of the Class
A-2 Notes on the immediately preceding Distribution 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, 93% of the Regular Principal
Distribution Amount (or, on the Distribution Date on which the Class A-1
Notes are paid in full, 93% of the Regular Principal Distribution Amount
remaining after such payment 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 after the first Distribution Date, the amount, if any, by
which the sum of the Class A-2 Monthly Principal Distributable Amount for the
immediately 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 for such Distribution Date and the Class A-2 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the Class A-2
Principal Distributable Amount shall not exceed the Outstanding Amount of the
Class A-2 Notes. In addition, on the Class A-2 Final Scheduled Distribution
Date, the principal required to be deposited in the Note Distribution Account
will include the amount necessary (after giving effect to the other amounts
to be deposited in the Note Distribution Account on such Distribution Date
and allocable to principal) to reduce the Outstanding Amount of the Class A-2
Notes to zero.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.02(b).
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding such Distribution Date. Any amount stated as of the
last day of a Collection Period or as of the first day of a Collection Period
shall give effect to the following calculations as determined as of the close
of business on such last day: (1) all applications of collections and (2)
all distributions to be made on the following Distribution Date.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" means (i) as long as the Policy is in effect and no
Security Insurer Default has occurred and is continuing, the Security
Insurer, (ii) if a Security Insurer Default has occurred and is continuing or
the Policy is otherwise no longer in effect, the Indenture Trustee for the
benefit of the Noteholders and (iii) if the Notes have been paid in full and
there are no amounts owed to the Security Insurer under the Policy, the Owner
Trustee for the benefit of the Certificateholders.
"Corporate Trust Office" means the principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at ▇▇▇▇▇▇ 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 March 1, 1997.
"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 April 15, 1997.
"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 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;
(v)
each of Standard & Poor's and Moody's has confirmed in writing to
the Indenture Trustee or Issuer, as applicable, that it has
reviewed the form of the guarantee of the Rated Holding Company
and has determined that the issuance of such guarantee will not
result in the downgrade or withdrawal of the ratings assigned to
the Notes or result in an increased capital charge to the
Security Insurer;
(G)
the repurchase obligation shall require that the repurchase obligation
be overcollateralized and shall provide that, upon any failure to
maintain such overcollateralization, the repurchase obligation shall
become due and payable, and unless the repurchase obligation is
satisfied immediately, the collateral subject to the repurchase
agreement shall be liquidated and the proceeds applied to satisfy the
unsatisfied portion of the repurchase obligation; and
(h)
any other investment with respect to which the Issuer or the Servicer has
received written notification from the Rating Agencies that the acquisition
of such investment as an Eligible Investment will not result in a withdrawal
or downgrading of the ratings on the Notes or result in an increased capital
charge to the Security Insurer.
"Eligible Servicer" means First Merchants, the Backup Servicer or any other
Person which at the time of its appointment as Servicer (i) is servicing a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally
and competently to service a portfolio of motor vehicle retail installment
sale contracts and/or motor vehicle installment loans similar to the
Receivables with reasonable skill and care and (iv) has a minimum net worth
of $100,000,000.
"Endorsement" shall have the meaning specified in the Policy.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financed Vehicle" means an automobile, light-duty truck, van or minivan,
together with all accessions thereto, securing an Obligor's indebtedness
under the respective Receivable.
"First Merchants" means First Merchants Acceptance Corporation, a Delaware
corporation, and its successors.
"Fiscal Agent" shall have the meaning specified in the Policy.
"FMARC II" means First Merchants Auto Receivables Corporation II, a Delaware
corporation, and its successors.
"Guaranteed Payment" means, with respect to each Distribution Date, an
amount equal to the Noteholders' Interest Distributable Amount plus the
Noteholders' Principal Distributable Amount.
"Holder" means "Noteholder" in connection with the Notes and
"Certificateholder" in connection with the Certificates.
"Indenture" means the Indenture dated as of March 1, 1997, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" means $8,486,690.83.
"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 March 1, 1997 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 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 to the extent allocable to interest; provided, however,
that in calculating the Interest Distribution Amount the following will be
excluded: all payments and proceeds (including Liquidation Proceeds and
Recoveries) of any Purchased Receivables the Purchase Amount of which has
been included in the Interest Distribution Amount in a prior Collection
Period.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Distribution Date pursuant to Section 5.02(b).
"Issuer" means First Merchants Auto Trust 1997-1.
"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 with respect to which any of
the following shall have occurred: (i) the related Financed Vehicle has been
repossessed for 90 days or more, (ii) such Receivable is a Defaulted
Receivable with respect to which the Servicer has determined in good faith
that all amounts it expects to recover have been received or (iii) a payment
under the related Contract is 150 or more days (or, if the related Obligor is
a debtor under Chapter 13 of the U.S. Bankruptcy Code, 210 or more days)
delinquent.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable, the
moneys collected in respect thereof, from whatever source on a Liquidated
Receivable during the Collection Period in which such Receivable became a
Liquidated Receivable, net of the sum of any amounts expended by the Servicer
in connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivable.
"Local Collection Account" shall have the meaning provided in Section 5.02.
"Local Collection Account Agreement" means the agreement dated as of March
1, 1997, among the Indenture Trustee, First Merchants, the Security Insurer,
First Merchants Auto Receivables Corporation, FMARC II, First Merchants Auto
Trust 1996-A, First Merchants Auto Trust 1996-B, First Merchants Auto Trust
1996-C and the Issuer, 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.
"Modification Level" shall have the meaning set forth in the Insurance
Agreement.
"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.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under such
Receivable.
"Obligor's Scheduled Payment" means, with respect to each Receivable, the
scheduled monthly payment amount set forth in the related Contract and
required to be paid by the Obligor during each Collection Period. If, after
the Closing Date, an Obligor's scheduled monthly payment obligation under the
related Contract is modified (i) as a result of the order of a court in an
insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940 or (iii) as a result of modifications
or extensions of the Contract permitted by Section 4.02, "Obligor's Scheduled
Payment" shall refer to the Obligor's scheduled monthly payment obligation as
so modified.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, any vice president, the controller or any assistant controller and
(b) the president, a treasurer, assistant treasurer, secretary or assistant
secretary of the Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who may
be an employee of or counsel to the Seller or the Servicer, which counsel
shall be acceptable to the Indenture Trustee, the Owner Trustee or the Rating
Agencies, as applicable.
"Original Pool Balance" means $106,081,690.83.
"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 6.75% per annum.
"Payment Determination Date" means, with respect to any Distribution Date,
the Business Day immediately preceding such Distribution Date.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Policy" means the financial guaranty insurance policy issued by the
Security Insurer with respect to the Notes, including any endorsements thereto,
in the form of Exhibit D.
"Policy Payments Account" shall have the meaning specified in Section
5.07(b).
"Pool Balance" means, with respect to each Determination Date, the aggregate
Principal Balance of the Receivables (excluding all Purchased Receivables and
Liquidated Receivables) as of the close of business on the last day of the
related Collection Period, after giving effect to all payments received from
Obligors for such Collection Period, and after adjustment for Cram Down
Losses for such Collection Period.
"Portfolio Performance Test" has the meaning set forth in the Spread Account
Agreement.
"Precomputed Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum
of monthly balances or any equivalent method or are monthly actuarial
receivables.
"Principal Balance" means, with respect to any Receivable and Determination
Date, the Amount Financed minus an amount equal to the sum, as of the close
of business on the last day of the related Collection Period, of (1) that
portion of all amounts received on or prior to such day with respect to such
Receivable and allocable to principal using the actuarial method (with
respect to Precomputed Receivables) or the Simple Interest Method (with
respect to Simple Interest Receivables), as applicable, and (2) any Cram Down
Losses with respect to such Receivable.
"Purchase Amount" means, with respect to any Receivable that became a
Purchased Receivable, the unpaid principal balance owed by the Obligor
thereon plus interest on such amount at the applicable APR to the last day of
the month of repurchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by the Seller pursuant to Section 3.03 or purchased by the
Servicer pursuant to Section 9.01.
"Rating Agency" means either Moody's or Standard & Poor's or, when used in
the plural form, Moody's and Standard and Poor's. If none of Moody's,
Standard & Poor's or a successor to either of them remains in existence,
"Rating Agency" shall mean any nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Owner Trustee, the Indenture Trustee,
the Servicer and the Security Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee in writing that such action will not result
in a reduction or withdrawal of the then current rating of the Notes or
result in an increased capital charge of the Security Insurer.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may be
in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.04.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of March 1, 1997, between First Merchants, as seller, and FMARC II,
as purchaser.
"Recoveries" means, with respect to any Receivable that becomes a Liquidated
Receivable, monies collected in respect thereof, from whatever source, during
any Collection Period following the Collection Period in which such
Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Regular Principal Distribution Amount" means, with respect to any
Distribution Date, the sum of the following amounts, without duplication,
with respect to the Receivables in respect of the related Collection Period:
(i) that portion of all collections on the Receivables allocable to
principal, (ii) the aggregate outstanding principal balance of all
Receivables that became Liquidated Receivables during such Collection Period,
(iii) that portion allocable to principal of the aggregate amount of any Cram
Down Losses and (iv) that portion allocable to principal of the Purchase
Amount of all Receivables that became Purchased Receivables during or in
respect of such Collection Period; provided, however, that in calculating the
Regular Principal Distribution Amount the following will be excluded:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Purchased Receivables the Purchase Amount of which has been included in the
Regular Principal Distribution Amount in a prior Collection Period and
(ii) Recoveries.
"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 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 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, as amended by
Amendments to the Master Spread Account Agreement, dated as of May 1, 1996
and as of March 1, 1997, and as supplemented by the Series 1997-1 Supplement
to the Master Spread Account Agreement, dated as of March 1, 1997, 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 50 states of the United States of America or
the District of Columbia.
"Total Distribution Amount" means, for each Distribution Date, the sum of
the applicable Interest Distribution Amount and the applicable Regular Principal
Distribution Amount (other than the portion thereof attributable to Realized
Losses 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
March 1, 1997, between the Seller, as depositor, and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee or the Backup
Servicer, any Officer within the Corporate Trust Office of the Indenture
Trustee, including any Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject and, with respect to the Owner
Trustee, any officer in the Corporate Trust Administration Department of the
Owner Trustee with direct responsibility for the administration of the Trust
Agreement and the Basic Documents on behalf of the Owner Trustee.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
the Indenture or, if not defined therein, in the Trust Agreement.
(b)
All terms defined in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c)
As used in this Agreement and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document
to the extent not defined, shall have the respective meanings given to them
under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d)
The words "hereof," "herein," "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without
limitation".
(e)
The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
(f)
Any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE
II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller of $103,103,035.03, the Seller
does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (subject to the obligations of the Seller set forth
herein), all right, title and interest of the Seller in and to:
(i)
the Receivables and all moneys received thereon on or after the Cutoff Date;
(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 or First Merchants;
(v)
all documents and other items contained in the Receivable Files;
(vi)
all of the Seller's rights (but not its obligations) under the Receivables
Purchase Agreement;
(vii)
all funds on deposit from time to time in the Trust Accounts and the
Certificate Distribution Account and all investments and proceeds thereof
(including all income thereon); and
(viii)
the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants. (a)
First Merchants has made each of the representations and warranties set forth in
Exhibit A hereto under the Receivables Purchase Agreement and has consented
to the assignment by the Seller to the Issuer of the Seller's rights with
respect thereto. Such representations and warranties speak as of the
execution and delivery of this Agreement and as of the Closing Date, but
shall survive the sale, transfer and assignment of the Receivables to the
Issuer. Pursuant to Section 2.01 of this Agreement, the Seller has sold,
assigned, transferred and conveyed to the Issuer, as part of the assets of
the Issuer, its rights under the Receivables Purchase Agreement, including
the representations and warranties of First Merchants therein as set forth in
Exhibit A, upon which the Issuer relies in accepting the Receivables and
delivering the Securities and the Security Insurer relies in issuing the
Policy, together with all rights of the Seller with respect to any breach
thereof, including the right to require First Merchants to repurchase
Receivables in accordance with the Receivables Purchase Agreement. It is
understood and agreed that the representations and warranties referred to in
this Section shall survive the delivery of the Receivable Files to the Issuer
or any custodian.
(b) First Merchants hereby agrees that the Issuer shall have the right to
enforce any and all rights under the Receivables Purchase Agreement assigned
to the Issuer herein, including the right to cause First Merchants to
repurchase any Receivable with respect to which it is in breach of any of its
representations and warranties set forth in Exhibit A, directly against First
Merchants as though the Issuer were a party to the Receivables Purchase
Agreement, and the Issuer shall not be obligated to exercise any such rights
indirectly through the Seller.
SECTION 3.02. Representations and Warranties of the Seller. The Seller
makes the following representations and warranties as to the Receivables on
which the Issuer relies in accepting the Receivables and delivering the
Securities and the Security Insurer relies in issuing the Policy. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer
and assignment of the Receivables by the Seller to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a)
Title. It is the intention of the Seller that (i) the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Seller to the Issuer, conveying good title thereto, free and clear of any
Liens or rights of other Persons and (ii) the beneficial interest in and
title to the Receivables not be part of the debtor's estate in the event of
the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Receivable has been sold, transferred, assigned or
pledged by the Seller to any Person other than the Issuer. Immediately prior
to the transfer and assignment herein contemplated, the Seller had good and
marketable title to each Receivable, free and clear of all Liens and rights
of others and, immediately upon the transfer thereof, the Issuer shall have
good and marketable title to each such Receivable, free and clear of all
Liens and rights of others; and the transfer has been perfected under the
UCC.
(b)
All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give the Issuer a first perfected ownership interest in the
Receivables have been made.
SECTION 3.03. Repurchase upon Breach. The Seller and the Servicer shall
inform the other parties to this Agreement and the Security Insurer promptly,
in writing, upon the discovery of any breach of First Merchants'
representations and warranties made pursuant to Section 3.01 of this
Agreement or Section 3.02 of the Receivables Purchase Agreement or of the
Seller's representations and warranties made pursuant to Section 3.02 above.
Unless any such breach shall have been cured by the last day of the first
Collection Period following the discovery or notice thereof by or to the
Seller or the Servicer, the Seller shall be obligated and, if necessary, the
Seller or the Issuer shall enforce the obligation of First Merchants under
the Receivables Purchase Agreement, to repurchase as of such last day any
Receivable materially and adversely affected by any such breach. In
consideration of the repurchase of any such Receivable, the Seller shall
remit the Purchase Amount to the Collection Account, in the manner specified
in Section 5.04; provided, however, that the obligation of the Seller to
repurchase any Receivable arising solely as a result of a breach of First
Merchants' representations and warranties under Section 3.02 of the
Receivables Purchase Agreement is subject to the receipt by the Seller of the
Purchase Amount from First Merchants. The sole remedy of the Issuer, the
Indenture Trustee, the Noteholders or the Certificateholders with respect to
a breach of representations and warranties pursuant to Sections 3.01 and 3.02
and the agreement contained in this Section shall be to require the Seller to
repurchase Receivables pursuant to this Section, subject to the conditions
contained herein, or to enforce First Merchants' obligation to the Seller to
repurchase such Receivables pursuant to the Receivables Purchase Agreement.
SECTION 3.04. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer
hereby revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee
as custodian of the following documents or instruments, which are hereby
constructively delivered by the Issuer to the Indenture Trustee:
(a)
the fully executed original of each Receivable (together with any agreements
modifying such Receivable, including any extension agreement);
(b)
the original credit application, or a copy thereof, fully executed by each
Obligor thereon;
(c)
the original certificate of title or such other documents that the Servicer
or the Seller shall keep on file in accordance with its customary procedures
evidencing the security interest of the Seller in the Financed Vehicle; and
(d)
any and all other documents that the Servicer or the Seller shall keep on
file in accordance with its customary procedures relating to a Receivable,
an Obligor or a Financed Vehicle.
SECTION 3.05. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivable Files as custodian for the benefit of the
Issuer, the Indenture Trustee and, to the extent provided herein, the
Security Insurer, and shall maintain such accurate and complete accounts,
records and computer systems pertaining to each Receivable File as shall
enable the Issuer to comply with this Agreement. In performing its duties as
custodian, the Servicer shall act with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to the
receivable files relating to all comparable automotive receivables that the
Servicer services for itself or others. The Servicer shall conduct, or cause
to be conducted, periodic audits of the Receivable Files held by it under
this Agreement and of the related accounts, records and computer systems, in
such a manner as shall enable the Issuer or the Indenture Trustee to verify
the accuracy of the Servicer's record keeping. The Servicer shall promptly
report to the Issuer and the Indenture Trustee any failure on its part to
hold the Receivable Files and maintain its accounts, records and computer
systems as herein provided and shall promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Issuer or the Indenture Trustee
of the Receivable Files.
(b)
Maintenance of and Access to Records. The Servicer shall maintain each
Receivable File at one of its offices specified in Schedule B to this
Agreement or at such other office as shall be specified to the Issuer and the
Indenture Trustee by written notice not later than 90 days after any change
in location. The Servicer shall make available to the Issuer and the
Indenture Trustee or their duly authorized representatives, attorneys or
auditors a list of locations of the Receivable Files and the related
accounts, records and computer systems maintained by the Servicer at such
times during normal business hours as the Issuer shall instruct.
(c)
Release of Documents. Upon instruction from the Indenture Trustee, the
Servicer shall release any Receivable File to the Indenture Trustee, the
Indenture Trustee's agent or the Indenture Trustee's designee, as the case
may be, at such place or places as the Indenture Trustee may designate, as
soon as practicable, and upon the release and delivery of any such document
in accordance with the instructions of the Indenture Trustee, the Servicer
shall be released from any further liability and responsibility under this
Section 3.05 with respect to such documents, unless and until such time as
such documents shall be returned to the Servicer. In no event shall the
Servicer be responsible for any loss occasioned by the Indenture Trustee's
failure to return any Receivable File or any portion thereof in a timely
manner.
SECTION 3.06. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trust Officer of the
Indenture Trustee.
SECTION 3.07. Custodian's Indemnification. The Servicer, as custodian,
shall indemnify the Trust, the Owner Trustee and the Indenture Trustee and
each of their officers, directors, employees and agents for any and all
liabilities, obligations, losses, compensatory damages, payments, costs, or
expenses of any kind whatsoever that may be imposed on, incurred by or
asserted against the Trust, the Owner Trustee or the Indenture Trustee or any
of their officers, directors, employees or agents as the result of any
improper act or omission in any way relating to the maintenance and custody
by the Servicer as custodian of the Receivable Files; provided, however, that
the Servicer shall not be liable to the Owner Trustee, the Indenture Trustee
or any such officer, director, employee or agent of the Owner Trustee or the
Indenture Trustee for any portion of any such amount resulting from the
willful misfeasance, bad faith or negligence of the Owner Trustee or the
Indenture Trustee, as the case may be, or any such officer, director,
employee or agent of the Owner Trustee or the Indenture Trustee, as the case
may be.
Indemnification under this Section shall survive the resignation or removal
of the Servicer or the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and
the Person to or on behalf of whom such payments are made thereafter collects
any of such amounts from others, such Person shall promptly repay such
amounts to the Servicer, without interest.
SECTION 3.08. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect unless and until terminated pursuant to this
Section 3.08. If First Merchants or any successor Servicer shall resign as
Servicer in accordance with the provisions of this Agreement or if all of the
rights and obligations of First Merchants or any successor Servicer shall have
been terminated under Section 8.02, the appointment of such Servicer as
custodian may be terminated by the Security Insurer, the Issuer or by the
Holders of Notes evidencing not less than 25% of the Outstanding Amount of the
Notes, by the Owner Trustee or by Holders (other than the Seller or an affiliate
thereof) of Certificates evidencing not less than 25% of the Certificate
Balance, in the same manner as the 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, 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
Certificateholders or the Noteholders, a legal proceeding to enforce a
Receivable pursuant to Section 4.03 or to commence or participate in any
other legal proceeding (including a bankruptcy proceeding) relating to or
involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer
commences or participates in any such legal proceeding in its own name, the
Indenture Trustee or the Issuer shall thereupon be deemed to have
automatically assigned the applicable Receivable to the Servicer solely for
purposes of commencing or participating in such proceeding as a party or
claimant, and the Servicer is authorized and empowered by the Indenture
Trustee or the Issuer to execute and deliver in the Indenture Trustee's or
the Issuer's name any notices, demands, claims, complaints, responses,
affidavits, or other documents or instruments in connection with any such
proceeding. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall
not be a real party in interest or a holder entitled to enforce such
Receivable, the Owner Trustee shall, at the Servicer's expense and direction,
take steps to enforce such Receivable, including bringing suit in its name or
the name of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders. The Owner Trustee and the Indenture Trustee shall upon the
written request of the Servicer furnish the Servicer with any powers of
attorney and other documents reasonably necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder.
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automotive
receivables that it services for itself or others and otherwise act with
respect to the Receivables in such manner as will, in the reasonable judgment
of the Servicer, maximize the amount to be received by the Trust with respect
thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge 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
Certificate 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)
with respect to any Determination Date, the amount of Receivables subject to
extension or modification shall not exceed the Modification Level applicable
to such Determination Date;
provided, however, that if the Controlling Party waives compliance with this
Section 4.02(c), no breach shall be deemed to have occurred.
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 and the Owner Trustee rely in accepting the
Receivables and delivering the applicable Securities and on which the
Security Insurer relies in issuing the Policy):
(a)
Liens in Force. No Financed Vehicle securing a Receivable shall be released
in whole or in part from the security interest granted by the Receivable,
except upon payment in full of the Receivable or as otherwise contemplated
herein;
(b)
No Impairment. The Servicer shall do nothing to impair the rights of the
Trust in the Receivables;
(c)
No Amendments. The Servicer shall not extend or otherwise amend the terms
of any Receivable, except in accordance with Section 4.02 (provided that no
breach of this covenant shall be deemed to have occurred unless and until the
remedy provided in Section 4.07, after demand therefor, has not been complied
with); and
(d)
Restrictions on Liens. The Servicer shall not (A) create, incur or suffer
to exist, or agree to create, incur or suffer to exist, or consent to or permit
in the future (upon the occurrence of a contingency or otherwise) the
creation, incurrence or existence of any Lien on or restriction on
transferability of any Receivable except for the Lien in favor of the Trust
and the restrictions on transferability imposed by this Agreement or (B) sign
or file any UCC financing statements in any jurisdiction that names First
Merchants, the Servicer or the Seller as a debtor, and any Person other than
the Seller or the Issuer as a secured party, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement
with respect to the Receivables.
SECTION 4.07. Purchase of Receivables upon 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 (which breach has not been waived by the Controlling
Party), 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 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 Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. (a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, within 120 days after the end of the Servicer's fiscal year (with the
first such certificate being delivered no later than April 30, 1998), an
Officer's Certificate signed by a Responsible Officer of the Servicer,
stating that (i) a review of the activities of the Servicer during the
preceding 12-month period (or such shorter period as shall have elapsed from
the Closing Date to the end of the first such fiscal year) and of the
performance of its obligations under this Agreement has been made under such
officer's supervision and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and
the nature and status thereof.
(b)
The Servicer 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,
1998), 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 payments received on the Receivables as provided herein. The
Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Indenture Trustee, Owner Trustee 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 June 30, 1997, which term
shall be extendible by the Security Insurer (or the Indenture Trustee for as
long as the Notes are outstanding, if there is an existing Security Insurer
Default or if the Policy is no longer in effect) for successive quarterly
terms ending on each successive September 30, December 31, March 31 and June
30 (or pursuant to revocable written standing instructions delivered from
time to time to the Servicer, the Indenture Trustee and the Owner Trustee,
for any specified number of terms), until the Notes are paid in full;
provided, however, that on the date that the Notes are paid in full, the then
current term of the Servicer shall be automatically extended until the
Certificates are paid in full. Each such notice (including each notice
pursuant to standing instructions, which shall be deemed delivered at the end
of successive quarterly terms for so long as such instructions are in effect)
(a "Servicer Extension Notice") shall be delivered by the Security Insurer,
the Indenture Trustee or the Owner Trustee, as applicable, to the other
parties to this Agreement. The Servicer hereby agrees that, as of the date
hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall be bound for the duration of the initial term or the term
covered by such Servicer Extension Notice to act as the Servicer, subject to
and in accordance with the other provisions of this Agreement. Until such
time as a Security Insurer Default shall have occurred and be continuing, the
Servicer agrees that if as of the last day of the calendar month preceding
the last day of any such servicing term the Servicer shall not have received
a Servicer Extension Notice from the Security Insurer, the Servicer shall,
within five days thereafter, give written notice of such non-receipt to the
Indenture Trustee, the Owner Trustee, the Security Insurer and the Backup
Servicer.
ARTICLE V
Distributions; Spread 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 C. 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 that,
on each Payment Determination Date all interest and other investment income
(net of losses and investment expenses) on funds on deposit in the Trust
Accounts shall be deposited into the Collection Account and shall be deemed
to constitute a portion of the Interest Distribution Amount for the related
Distribution Date. Other than as permitted by the Rating Agencies, funds on
deposit in the Trust Accounts shall be invested in Eligible Investments that
will mature not later than the Business Day immediately preceding the next
Distribution Date. Funds deposited in a Trust Account on a day which
immediately precedes a Distribution Date upon the maturity of any Eligible
Investments are not required to be invested overnight.
(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
received in the Local Post Office Boxes and all funds on deposit from time
to time in the Local Collection Accounts and the Trust Accounts and in all
proceeds thereof (including all income thereon), subject to the Local
Collection Account Agreement. The Local Post Office Boxes, the Local
Collection Accounts and the Trust Accounts 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 Trust Account ceases to be an Eligible Deposit
Account, the Indenture Trustee (or the Servicer on its behalf) shall within
10 Business Days (or such longer period, not to exceed 30 calendar days, as
to which each Rating Agency may consent) establish a new Local Collection
Account or Trust 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
Trust Account.
(ii)
With respect to the Trust Account Property, the Indenture Trustee agrees, by
its acceptance hereof, that:
(A)
any Trust Account Property that is held in deposit accounts shall be held
solely in the Eligible Deposit Accounts, subject to the last sentence of
Section 5.02(c)(i); and each such Eligible Deposit Account shall be subject
to the exclusive custody and control of the Indenture Trustee, and the
Indenture Trustee shall have sole signature authority with respect thereto;
(B)
any Trust Account Property that constitutes Physical Property shall be
delivered to the Indenture Trustee in accordance with paragraph (a) of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC) acting solely for
the Indenture
Trustee;
(C)
any Trust Account Property that is a book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations shall be
delivered in accordance with paragraph (b) of the definition of "Delivery"
and shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such Trust
Account Property as described in such paragraph; and
(D)
any Trust Account Property that is an "uncertificated security" under
Article VIII of the UCC and that is not governed by clause (C) above shall
be delivered to the Indenture Trustee in accordance with paragraph (c) of
the definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued registration of
the Indenture Trustee's (or its nominee's) ownership of such security.
(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
Scheduled Payments of such Obligor.
SECTION 5.04. Purchase Amounts. The Servicer and the Seller shall deposit
or cause to be deposited in the Collection Account, on or prior to each
Determination Date, the aggregate Purchase Amount with respect to Purchased
Receivables and the Servicer shall deposit therein all amounts to be paid
under Section 4.07.
SECTION 5.05. Transfers from the Spread Account. The Indenture Trustee
shall determine, no later than 11:00 a.m., New York City time, on each
Deficiency Claim Date whether a shortfall exists with respect to the
distributions that the Indenture Trustee is required to make on the upcoming
Distribution Date pursuant to clauses (1) through (5) of Section 5.06(b). In
the event that the Indenture Trustee determines that such a shortfall exists,
the Indenture Trustee shall furnish to the Collateral Agent and the Security
Insurer, no later than 12:00 noon, New York City time, on such Deficiency
Claim Date, a written notice specifying the amount of the shortfall and
directing the Collateral Agent to remit an amount equal to such shortfall (to
the extent of funds available to be so distributed pursuant to the Spread
Account Agreement) to the Indenture Trustee for deposit in the Collection
Account. Upon receipt of any such funds, the Indenture Trustee shall
immediately deposit such amounts into the Collection Account for distribution
on the Distribution Date pursuant to Section 5.06.
SECTION 5.06. Distributions.
(a) On each Payment Determination Date, the Servicer shall calculate all
amounts required to be deposited in the Note Distribution Account and the
Certificate Distribution Account.
(b)
On each Distribution Date, the Servicer shall instruct the Indenture Trustee
in writing (based on the information contained in the Servicer's Certificate
delivered on the related Payment Determination Date pursuant to Section
4.09) to make the following deposits and distributions for receipt by the
Servicer or deposit in the applicable account by 11:00 a.m. (New York 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 Account pursuant to
Section 5.07(b), to make required payments and distributions on such date
pursuant to clauses (1) through (10) below, in the 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 clause (1) above, any
accrued and unpaid fees and expenses (including legal fees and expenses)
due, but only to the extent not previously paid by the Servicer. Shortfalls
in any such amounts due to the Owner Trustee or the Indenture Trustee on any
Distribution Date may be paid using amounts transferred from the Spread
Account only to the extent provided in Section 3.03(b) of the Master Spread
Account Agreement;
(3)
to the Note Distribution Account, from the Total Distribution Amount
remaining after the application of clauses (1) and (2) above, the
Noteholders' Interest Distributable Amount;
(4)
to the Note Distribution Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (3), the Noteholders'
Principal Distributable Amount;
(5)
to the Security Insurer, from the Total Distribution Amount remaining after
the application of clauses (1) through (4), any amounts due to the Security
Insurer under the Insurance Agreement;
(6)
to the Spread Account, from the Total Distribution Amount remaining after
the application of clauses (1) through (5), an amount up to the amount of
any deficiency in the Spread Account Required Amount;
(7)
to the Certificate Distribution Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (6), the
Certificateholders' Interest Distributable Amount;
(8)
only after the Class A-1 Notes have been paid in full, to the Certificate
Distribution Account, from the Total Distribution Amount remaining after the
application of clauses (1) through (7), the Certificateholders' Principal
Distributable Amount;
(9)
only after the Class A-1 Notes have been paid in full, 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 Policy; Policy Payments Account. (a) If on
the third Business Day prior to a Distribution Date, the Total Distribution
Amount on deposit or to be deposited in the Collection Account for the
related Collection Period (after giving effect to all transfers thereto of
any amounts from the Spread Account and to the payment of all amounts
required to be paid pursuant to clauses (1) and (2) of Section 5.06(b)) is
insufficient to pay the Guaranteed Payment on the related Distribution Date,
then the Indenture Trustee shall give notice to the Security Insurer by
telephone or telecopy of the amount of such deficiency. Such notice shall be
confirmed in writing by the Indenture Trustee in the form set forth as
Exhibit A to the Endorsement of the Policy, to the Security Insurer and the
Fiscal Agent, if any, at or before 12:00 noon, New York City time, on the
second Business Day prior to such Distribution Date. Following receipt by
the Security Insurer of such notice in such form, the Security Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to
occur of (i) 12:00 noon, New York City time, on the second Business Day
following such receipt and (ii) 12:00 noon, New York City time, on the
Distribution Date to which such deficiency relates, as provided in the
Endorsement to the Policy.
(b)
The Indenture Trustee shall establish a separate special purpose trust
account for the benefit of the Noteholders (the "Policy Payments Account").
The Indenture Trustee shall have exclusive control over the Policy Payments
Account and sole right of withdrawal. The Indenture Trustee shall deposit
any amount paid under the Policy in the Policy Payments Account and
distribute such amount only to pay to Noteholders the Guaranteed Payment for
which a claim has been made, and such amount may not be applied to satisfy
any costs, expenses or liabilities of the Servicer, the Indenture Trustee or
the Owner Trustee. Amounts paid under the Policy shall be transferred to the
Collection Account in accordance with the next succeeding paragraph and
disbursed by the Indenture Trustee to Noteholders in accordance with Section
5.06. It shall not be necessary for any payments under the Policy to be made
by checks or wire transfers separate from the checks or wire transfers used
to pay the Guaranteed Payment from other funds available to make such
payment. However, the amount of any payment of principal of or interest on
the Notes to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the Note Register and in
the statement to be furnished to Noteholders pursuant to Section 5.11. Funds
held in the Policy Payments Account shall not be invested by the Indenture
Trustee.
On any Distribution Date with respect to which a claim has been made under
the Policy, the amount of any funds received by the Indenture Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Payment on such Distribution Date, shall be withdrawn from the
Policy Payments Account and deposited in the Collection Account and applied
by the Indenture Trustee, together with the other funds to be distributed
from the Collection Account pursuant to Section 5.06, directly to the payment
in full of the Guaranteed Payment due with respect to the Notes. Any funds
remaining in the Policy Payments Account on the first Business Day following
a Distribution Date shall be remitted to the Security Insurer, pursuant to
the instructions of the Security Insurer, by the end of such Business Day.
(c)
The Indenture Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Notes from moneys
received under the Policy. The Security Insurer shall have the right to inspect
such records at reasonable times during normal business hours upon one Business
Day's prior notice to the Indenture Trustee at the expense of the Security
Insurer.
SECTION 5.08. Notices to the Security Insurer. All notices, statements,
reports, notes, or opinions required by this Agreement to be sent to any
other party hereto or to the Noteholders at any time when the Security
Insurer is the Controlling Party shall also be sent to the Security Insurer.
SECTION 5.09. Rights in Respect of Insolvency Proceedings. (a) In the event
that the Indenture Trustee has received a certified copy of a final,
nonappealable order of the appropriate court that any Guaranteed Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy or insolvency law, the Indenture Trustee shall (i) deliver to the
Security Insurer a certified copy of such court order, an irrevocable
assignment to the Security Insurer of the Noteholders' rights with respect to
any such recovered payment and an instrument appointing the Security Insurer
as agent of the Noteholders with respect to any such recovered payments and
(ii) notify the Noteholders by mail that, in the event that any Guaranteed
Payment distributed to a Noteholder is so recovered, such Noteholder will be
entitled to payment of such recovered amounts pursuant to the Policy.
(b)
The Indenture Trustee shall promptly notify the 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. Each Noteholder, by its purchase of
a Note, and the Indenture Trustee hereby agree that, so long as a Security
Insurer Default shall not have occurred and be continuing, the Security
Insurer may at any time during the continuation of an Insolvency Proceeding
direct all matters relating to such Insolvency Proceeding, including (i) all
matters relating to any Preference Claim, (ii) the direction of any appeal of
any order relating to any Preference Claim at the expense of the Security
Insurer and (iii) the posting of any surety, supersedeas or performance bond
pending any such appeal. In addition, and without limitation of the
foregoing, as set forth in Section 5.10, the Security Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate
and assign, to the fullest extent permitted by law, the rights of the
Indenture Trustee and such Noteholder in the conduct of any Insolvency
Proceeding, including all rights of any party to an adversary proceeding
action with respect to any court order issued in connection with any such
Insolvency Proceeding.
(c)
The Indenture Trustee shall furnish to the Security Insurer its records
evidencing the distributions of principal of and interest on the Notes that
have been made by the Indenture Trustee and subsequently recovered from
Noteholders and the dates on which such payments were made.
SECTION 5.10. Effect of Payments by the Security Insurer; Subrogation.
(a) Anything herein to the contrary notwithstanding, any distribution of
principal of or interest on the Notes that is made with moneys received
pursuant to the terms of the Policy shall not be considered payment of the
Notes by the Issuer and shall not discharge the Trust assets in respect of
such distribution. The Indenture Trustee acknowledges that, without the need
for any further action on the part of the Security Insurer, the Indenture
Trustee or the Note Registrar, (i) to the extent the Security Insurer makes
payments, directly or indirectly, on account of principal of or interest on
the Notes to the Noteholders, the Security Insurer will be fully subrogated
to the rights of such Noteholders to receive such principal and interest from
distributions of the assets of the Trust and will be deemed to the extent of
the payments so made to be a Noteholder and (ii) the Security Insurer shall
be paid principal and interest in its capacity as a Noteholder 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 Noteholders have
received all Guaranteed Payments due to them under this Agreement.
(b)
Without limiting the rights or interests of the Noteholders as otherwise set
forth herein and subject to Article X, so long as no Security Insurer Default
exists, the Indenture Trustee shall cooperate in all respects with any
reasonable request by the Security Insurer for action to preserve or enforce
the Security Insurer's rights or interests under this Agreement, including,
upon the occurrence and continuance of a Servicer Termination Event, a
request to take any one or more of the following actions:
(i)
institute proceedings for the collection of all amounts then payable on the
Notes or under this Agreement, 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, 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 claims under the
Policy;
(vii)
the balance of the Spread Account on the related Payment Determination Date
after giving effect to deposits and withdrawals to be made on such
Distribution Date, if any;
(viii)
the Pool Balance as of the close of business on the last day of the related
Collection Period, after giving effect to payments allocated to principal
reported under clause (i) above.
(ix)
the amount of any Class A-2 Additional Principal Distribution Amount on such
Distribution 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), (vi), (ix) and (xiii) above shall be expressed as a dollar amount per
$1,000 of original principal balance of a Certificate or Note, as applicable.
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller. The Seller makes the following
representations on which the Issuer relies in accepting the Receivables and
delivering the Securities and the Security Insurer relies in issuing the
Policy. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer
and assignment of the Receivables by the Seller to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a)
Organization and Good Standing. The Seller is duly organized and validly
existing as a corporation in good standing under the laws of the State of
Delaware, with the corporate power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted.
(b)
Due Qualification. The Seller is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions where the failure to do so would materially
and adversely affect the Seller's ability to transfer the Receivables to the
Trust pursuant to this Agreement or the validity or enforceability of the
Receivables.
(c)
Power and Authority. The Seller has the corporate power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their respective terms; the Seller has full
power and authority to sell and assign the property to be sold and assigned
to and deposited with the Issuer, and the Seller shall have duly authorized
such sale and assignment to the Issuer by all necessary corporate action;
and the execution, delivery and performance of this Agreement and the other
Basic Documents to which the Seller is a party have been duly authorized by
the Seller by all necessary corporate action.
(d)
Binding Obligation. This Agreement and the other Basic Documents to which
the Seller is a party, when duly executed and delivered by the other parties
hereto and thereto, shall constitute legal, valid and binding obligations of
the Seller, enforceable against the Seller in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, and similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and to general
principles of equity (whether applied in a proceeding at law or in equity).
(e)
No Violation. The consummation of the transactions contemplated by this
Agreement and the other Basic Documents and the fulfillment of the terms of
this Agreement and the other Basic Documents shall not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time, or both) a default under, the certificate
ofincorporation 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 Policy.
The representations speak as of the execution and delivery of this Agreement and
as of the Closing Date and shall survive the sale of the Receivables to the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a)
Organization and Good Standing. The Servicer is duly organized and validly
existing as a corporation in good standing under the laws of the state of
its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the corporate power, authority and legal right to acquire,
own, sell and service the Receivables and to hold the Receivable Files as
custodian.
(b)
Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such
qualifications.
(c)
Power and Authority. The Servicer has the power and authority to execute
and deliver this Agreement and the other Basic Documents to which it is a
party and to carry out their respective terms; and the execution, delivery
and performance of this Agreement and the other Basic Documents to which it
is a party have been duly authorized by the Servicer by all necessary
corporate action;
(d)
Binding Obligation. This Agreement and the Basic Documents to which it is a
party constitute legal, valid and binding obligations of the Servicer,
enforceable against the Servicer in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability
is considered in a proceeding in equity or at law;
(e)
No Violation. The consummation of the transactions contemplated by this
Agreement and the Basic Documents to which it is a party and the fulfillment
of their respective terms shall not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, the articles of incorporation or
bylaws of the Servicer, or any indenture, agreement, mortgage, deed of
trust, or other instrument to which the Servicer is a party or by which it
is bound; or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust, or other instrument other than this Agreement and
the Basic Documents, or violate any law, order, rule or regulation
applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or any of its properties;
(f)
No Proceedings. There are no proceedings or investigations pending or, to
the Servicer's knowledge, threatened against the Servicer before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its properties: (i)
asserting the invalidity of this Agreement or any of the Basic Documents;
(ii) seeking to prevent the issuance of the 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 Seller, the Backup Servicer, the
Security Insurer, their respective officers, directors, employees and
agents, and the Securityholders from and against any and all costs,
expenses, losses, damages, claims and liabilities arising out of or
resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of a Financed Vehicle.
(b)
The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner
Trustee, the Indenture Trustee, the Seller, the Backup Servicer, the
Security Insurer, their respective officers, directors, agents and
employees, 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 Seller, the Backup Servicer, the
Security Insurer, their respective officers, directors, employees and
agents, and the Securityholders from and against any and all costs,
expenses, losses, claims, damages and liabilities to the extent that such
cost, expense, loss, claim, damage or liability arose out of, or was imposed
upon any such Person through, the negligence, misfeasance or bad faith of
the Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this
Agreement.
For purposes of this Section, in the event of the termination of the rights
and obligations of 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, 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 and the Security Insurer and 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 their respective
duties under this Agreement if such failure or delay results from the Backup
Servicer acting in accordance with information prepared or supplied by a
Person other than the Backup Servicer or the failure of any such other Person
to prepare or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability for (i)
any act or failure to act of any third party, including the Servicer or the
Controlling Party, (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the
invalidity or unenforceability of any Receivable under applicable law, (iv)
the breach or inaccuracy of any representation or warranty made with respect
to any Receivable, or (v) the acts or omissions of any successor Backup
Servicer.
(c)
The parties expressly acknowledge and consent to ▇▇▇▇▇▇ 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
Notes or result in an increased capital charge to the Security Insurer; and,
provided, further, that the Servicer shall remain obligated and be liable to
the Owner Trustee, the Indenture Trustee, the Security Insurer 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 the 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 Policy) or of the Security Insurer (unless the Security Insurer is no
longer the Controlling Party) and (ii) continues unremedied for a period of
30 days after knowledge thereof by the Servicer or after the date on which
written notice of such failure requiring the same to be remedied shall have
been given to the Servicer by any of the Owner Trustee, the Indenture Trustee
or the Security Insurer (or, if a Security Insurer Default shall have
occurred and be continuing, 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 or the
Holders of at least 25% of the Outstanding Amount of the Notes, by notice
given in writing to the Servicer (and to the 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 or the Holders of at least 25% of the Outstanding Amount of
the Notes may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment
pursuant to the preceding sentence, the Backup Servicer shall act as
successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has
been appointed and accepted such appointment. Subject to Section 7.06, no
provision of this Agreement shall be construed as relieving the Backup
Servicer of its obligation to succeed as successor Servicer upon the
termination of the Servicer pursuant to Section 8.02, the resignation of the
Servicer pursuant to Section 7.06 or the non-extension of the servicing term
of the Servicer pursuant to Section 4.14. If upon the termination of the
Servicer pursuant to Section 8.02 or the resignation of the Servicer pursuant
to Section 7.06, the Controlling Party appoints a successor Servicer other
than the Backup Servicer, the Backup Servicer shall not be relieved of its
duties as Backup Servicer hereunder.
(c)
Upon appointment, the successor Servicer (including the Backup Servicer
acting as successor Servicer) shall (i) be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of
this Agreement and (ii) become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement.
SECTION 8.04. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof
to Certificateholders, and the Indenture Trustee shall give prompt written
notice thereof to Noteholders and the Rating Agencies.
SECTION 8.05. Waiver of Past Defaults. The Security Insurer or (if the
Security Insurer is no longer the Controlling Party) the Holders of a
majority of the Outstanding Amount of the Notes or the Holders of
Certificates evidencing a majority of the outstanding Certificate Balance (in
the case of any default which does not adversely affect the Indenture Trustee
or the Noteholders) may, on behalf of all Securityholders, waive in writing
any default by the Servicer in the performance of its obligations hereunder
and its consequences, except a default in making any required deposits to or
payments from any of the Trust Accounts in accordance with this Agreement.
Upon any such waiver of a past default, such default shall cease to exist
nunc pro tunc from the time of occurrence and shall be deemed not to have
occurred, and any Servicer Termination Event arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) On each
Determination Date as of which the Pool Balance is equal to or less than 10%
of the Original Pool Balance, the Servicer shall have the option to purchase
the Receivables (with the consent of the Security Insurer, if a claim has
previously been made under the Policy or if such purchase would result in a
claim on the Policy or if such purchase would result in any amount owing and
remaining unpaid under this Agreement or the Insurance Agreement to the
Security Insurer or any other Person). To exercise such option, the Servicer
shall deposit to the Collection Account pursuant to Section 5.04 an amount
equal to the aggregate Purchase Amount for the Receivables (including
Defaulted Receivables) and shall succeed to all interests in and to the
Receivables.
(b)
Upon any sale of the assets of the Trust pursuant to Section 9.02 of the
Trust Agreement, the Servicer shall instruct the Indenture Trustee in writing
to deposit the proceeds from such sale after all payments and reserves
therefrom have been made (the "Insolvency Proceeds") in the Collection
Account. On the Distribution Date on which the Insolvency Proceeds are
deposited in the Collection Account (or, if such proceeds are not so
deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Servicer shall instruct the Indenture Trustee to
make the following deposits (after the application on such Distribution Date
of the Total Distribution Amount pursuant to Section 5.06) from the
Insolvency Proceeds and any funds remaining on deposit in the Spread Account,
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 pay any amount owed to the Security Insurer under the Insurance
Agreement;
(iv)
to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date; and
(v)
to the Certificate Distribution Account, the Certificate Balance (less the
deposits made to the Certificate Distribution Account on such Distribution
Date).
Any investments on deposit in the Note Distribution Account which will not
mature on or before such Distribution Date shall be sold by the Indenture
Trustee at such time as will result in the Indenture Trustee receiving the
proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after
the deposits described above shall be paid to the Seller.
(c)
As described in Article IX of the Trust Agreement, notice of any termination
of the Trust shall be given by the Servicer to the Owner Trustee, the
Indenture Trustee and the Security Insurer as soon as practicable after the
Servicer has received notice thereof.
(d)
Following the satisfaction and discharge of the Indenture and the payment in
full of the principal of and interest on the Notes and all amounts owed to
the Security Insurer, the Certificateholders will succeed to the rights of
the Noteholders hereunder (other than Section 5.09 (b)) and the Owner Trustee
will succeed to the rights of, and assume the obligations of, the Indenture
Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. (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, 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), the Holders holding not
less than a majority of the Outstanding Amount of the Notes and the Holders
of outstanding Certificates evidencing not less than a majority of the
outstanding Certificate Balance, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Securityholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made
for the benefit of the Securityholders or (b) reduce the aforesaid portion of
the Outstanding Amount of the Notes or the Certificate Balance, the Holders
of which are required to consent to any such amendment, without the consent
of the Noteholders holding all the outstanding Notes and Certificateholders
holding all the outstanding Certificates.
Promptly after the execution of any amendment or consent, the Owner Trustee
shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Securityholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the Owner Trustee
and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement and the Opinion of Counsel referred to in
Section 10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Owner Trustee's or the Indenture Trustee's, as applicable, own rights, duties
or immunities under this Agreement or otherwise.
SECTION 10.02. Protection of Title to Trust. (a) The Servicer shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Servicer shall deliver (or cause to be delivered) to the 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 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, 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 1997-1
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 and Backup Servicer
By:
Name:
Title:
SCHEDULE A
Schedule of Receivables
[To be Delivered to the Trust at Closing]
SCHEDULE B
Location of Receivable Files
EXHIBIT A
Representations and Warranties of First Merchants Acceptance Corporation
Under Section 3.02 of the Receivables Purchase Agreement
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 1997-1 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
Class A-1 Interest Carryover Shortfall
Class A-1 Principal Carryover Shortfall
Class A-2 Interest Carryover Shortfall
Class A-2 Principal Carryover Shortfall
Certificateholders' Interest Carryover Shortfall
Certificateholders' Principal Carryover Shortfall
Class A-2 Additional Principal Distribution Amount
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
Owner Trustee Fee
Indenture Trustee Fee
Pool Balance
Realized Losses
Cram Down Losses
Liquidated Receivables or Purchased Receivables
Purchase Amounts
Distribution Under Policy
Spread Account Balance
Amount Deposited to Spread Account
Principal Balance of Receivables that were delinquent:
30 to 59 days
60 to 89 days
90 days or more
Amount Withdrawn from Spread Account
EXHIBIT C
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
First Merchants Auto Trust 1997-1
$ 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
Contracts
Amount
i.
31-60 Days Delinquent
ii.
61 Days or More Delinquent
IV.
Inputs Derived from Other Sources
(A)
Collection Account Investment Income
(B)
Spread Account Investment Income
A.
Collections
(1)
Total Principal Payments Received
(a)
Principal Payments on Receivables (includes Partial and Full Prepayments)
(b)
Repurchased Receivables
(c)
Cram Down Loss
(2)
Interest Payments Received
B.
Draw on Credit Enhancements
(1)
Withdrawal from Spread Account
(2)
Draw on the Insurance Policy
(3)
Total Draw on Credit Enhancements
C.
Total Distribution Amount
(1)
Total Distribution Amount
(2)
Interest Distribution Amount
(3)
Regular Principal Distribution Amount
D.
Liquidated Receivables, Net (includes repos repurchased in October)
(1)
Gross Principal Balance of Liquidated Receivables
(2)
Net Liquidation Proceeds & Recoveries Received during the Collection Period
(3)
Liquidated Receivables, Net
E.
Monthly Distributions
(1)
Noteholders' Principal Distributable Amount
(2)
Certificateholders' Principal Distributable Amount
(3)
Principal Distribution Amount
(a)
Principal Payments on Receivables
(b)
Repurchased Receivables
(c)
Cram Down Loss
(4)
Noteholders' Interest Distributable Amount
(a) amount allocated to Class A-1 Notes
(b) amount allocated to Class A-2 Notes
(5)
Certificateholders' Interest Distributable Amount
(6)
Required Distributions
(a)
Servicing Fee (Includes late fees collected)
(b)
Fees Paid to the Indenture Trustee and Owner Trustee
(c)
Monthly Security Insurer's Premium
(d)
Deposits into Spread Account
F.
Pool Balances and Portfolio Information
Beginning
of Period
End
of Period
(1)
Total Pool Balance
(2)
Total Pool Factor
(3)
Note Balance
(4) Certificate Balance
(5)
Remaining
Overcollateralization
Amount
(6)
Weighted Average
Coupon
(7)
Weighted Average
Remaining Maturity
(8)
Remaining Number
of Contracts
G.
Spread Account
(1)
Required Spread Account Balance
(2)
Beginning Balance
(3)
Amount Available for Deposit to the Spread Account
(4)
Withdrawal from Spread Account
(5)
Amount Released to Seller
(6)
Ending Balance
H.
Net Loss and Delinquency Activities
(1)
Net Losses for the Collection Period (including Cram Down)
(2)
Liquidated Receivables for the Collection Period
(3)
Cumulative Net Losses
(4)
Delinquent and Repossessed Receivables
(a)
60 Days Delinquent (Receivables Balance)
(b)
60 Days Delinquent (Number of Receivables)
(c)
61 Days or More (Receivables Balance)
(d)
91 Days or More (Number of Receivables)
(e)
Receivables Balance of Vehicles in Repossession During the Monthly Period
(f)
Number of Vehicles in Repossession During the Collection Period
I.
Portfolio Performance Test
(1)
Delinquency Ratio
(a)
Second Preceding Collection Period
(b)
Preceding Collection Period
(c)
Current Collection Period
(d)
Three Month Average
(2)
Cumulative Default Rate
(a)
All Collection Periods prior to Current Collection Period
(b)
Current Collection Period
(c)
Total Cumulative Rate
(3)
Cumulative Net Loss Rate
(a)
All Collection Periods prior to Current Collection Period
(b)
Current Collection Period
(c)
Total Cumulative Rate
(4)
Delinquency Trigger Indicator
(5)
Default Trigger Indicator
(6)
Loss Trigger Indicator
J.
Aggregate extensions and deferrals
K.
(1)
Amount of principal being paid to the Noteholders:
(2)
Per $1,000 original principal amount:
L.
(1)
Amount of principal being paid to the Certificateholders:
(2)
Per $1,000 original principal amount:
M.
(1)
Amount of interest being paid to the Noteholders:
(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:
N.
(1)
Amount of interest being paid to Certificateholders:
(2)
Per $1,000 original principal amount:
O.
Pool Balance at the end of the related Collection Period:
P.
Outstanding Amount of Notes:
(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:
Q.
Outstanding Certificate Balance:
Certificate Pool Factor:
R.
(1)
Amount of Servicing Fee:
(2)
Per $1,000 original principal amount:
S.
Aggregate Purchase Amounts for Collection Period:
T.
Aggregate Amount of Realized Losses for the Collection Period:
U.
Amount in Spread Account:
EXHIBIT D
Form of Policy