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EXHIBIT 10.3
SALE AND SERVICING AGREEMENT
among
FIRST MERCHANTS AUTO TRUST 1997-2,
Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II,
Seller,
FIRST MERCHANTS ACCEPTANCE CORPORATION,
Originator and Sub-Servicer,
LSI FINANCIAL GROUP,
Servicer
and
XXXXXX TRUST AND SAVINGS BANK,
Indenture Trustee, Backup Servicer and Custodian
Dated as of June 1, 1997
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TABLE OF CONTENTS
ARTICLE I
Definitions
Page
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 22
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables 23
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants 24
SECTION 3.02. Representations and Warranties of the Seller 24
SECTION 3.03. Repurchase upon Breach 25
SECTION 3.04. Custody of Receivable Files and Legal Files 25
SECTION 3.05. Duties of Servicer as Custodian 27
SECTION 3.06. Instructions; Authority to Act 28
SECTION 3.07. Servicer's and Custodian's Indemnification and Liability 28
SECTION 3.08. Effective Period and Termination 29
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer 30
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables 31
SECTION 4.03. Realization upon Receivables 32
SECTION 4.04. Physical Damage Insurance 32
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles 32
SECTION 4.06. Covenants of Servicer 33
SECTION 4.07. Purchase of Receivables upon Breach 34
SECTION 4.08. Servicing Fee 34
SECTION 4.09. Servicer's Certificate 34
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event 35
SECTION 4.11. Annual Independent Accountants' Report 35
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables 36
SECTION 4.13. Monthly Tape 36
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SECTION 4.14. Retention and Termination of Servicer 37
SECTION 4.15. Fidelity Bond 37
SECTION 4.16. Duties of the Sub-Servicer 37
ARTICLE V
Distributions; Spread Account; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Lock-box Account 38
SECTION 5.02. Accounts 38
SECTION 5.03. Application of Collections 41
SECTION 5.04. Purchase Amounts 41
SECTION 5.05. Transfers from the Spread Account and the Reserve
Account 41
SECTION 5.06. Distributions 42
SECTION 5.07. Claims Upon the Policy; Policy Payments Account 44
SECTION 5.08. Notices to the Note Insurer 45
SECTION 5.09. Rights in Respect of Insolvency Proceedings 45
SECTION 5.10. Effect of Payments by the Note Insurer; Subrogation 46
SECTION 5.11. Statements to Securityholders 47
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller 49
SECTION 6.02. Corporate Existence 50
SECTION 6.03. Liability of Seller; Indemnities 50
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller 50
SECTION 6.05. Limitation on Liability of Seller and Others 51
SECTION 6.06. Seller May Own Securities 51
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer 51
SECTION 7.02. Indemnities of Servicer 53
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer 54
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer and
Others 55
SECTION 7.05. Appointment of Sub-servicer 56
SECTION 7.06. Servicer and Backup Servicer Not to Resign 56
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ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events 57
SECTION 8.02. Consequences of a Servicer Termination Event 58
SECTION 8.03. Appointment of Successor 58
SECTION 8.04. Notification to Noteholders and Certificateholders 59
SECTION 8.05. Waiver of Past Defaults 59
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables; Optional Redemption
on Notes 60
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment 60
SECTION 10.02. Protection of Title to Trust 61
SECTION 10.03. Notices 63
SECTION 10.04. Assignment by the Seller or the Servicer 64
SECTION 10.05. Limitations on Rights of Others 64
SECTION 10.06. Severability 64
SECTION 10.07. Separate Counterparts 64
SECTION 10.08. Headings 64
SECTION 10.09. Governing Law 64
SECTION 10.10. Assignment by Issuer 64
SECTION 10.11. Nonpetition Covenants 64
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee 65
SECTION 10.13. Originator Payment Obligation 65
SECTION 10.14. Insurer Default 66
SCHEDULE A Schedule of Receivables
SCHEDULE B Location of Receivable Files and Legal Files
SCHEDULE C Documentation Checklist
SCHEDULE D Backup Servicer Fee
SCHEDULE E Deficiency Fee
SCHEDULE F Indenture Trustee Fee
SCHEDULE G Owner Trustee Fee
EXHIBIT A Representations and Warranties of First Merchants
EXHIBIT B Form of Distribution Date Statement to Securityholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Policy
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EXHIBIT E Custodian Fee Letter
EXHIBIT F Form of Request for Release
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SALE AND SERVICING AGREEMENT dated as of June 1, 1997, among FIRST
MERCHANTS AUTO TRUST 1997-2, a Delaware business trust (the "Issuer"),
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, a Delaware corporation
(the "Seller"), FIRST MERCHANTS ACCEPTANCE CORPORATION, a Delaware
corporation, as originator (in such capacity, the "Originator") and as
sub-servicer (in such capacity, the "Sub-servicer"), LSI Financial Group, a
California corporation (the "Servicer"), and XXXXXX TRUST AND SAVINGS BANK,
an Illinois banking corporation, as indenture trustee (in such capacity,
the "Indenture Trustee"), as backup servicer (in such capacity, the "Backup
Servicer") and as custodian (in such capacity, the "Custodian").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts generated by
First Merchants Acceptance Corporation in the ordinary course of business and
sold by First Merchants Acceptance Corporation to the Seller;
WHEREAS the Seller is willing to sell such receivables to the Issuer; and
WHEREAS the Servicer is willing to service such receivables.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Amount Financed" means with respect to a Receivable, the amount advanced
under the Receivable toward the purchase price of the Financed Vehicle and any
related costs, exclusive of any amount allocable to the premium of force-placed
physical damage insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
"Backup Servicer" means Xxxxxx 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).
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"Backup Servicer Fee" means, with respect to any Distribution Date, the
fee set forth on Schedule D.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Indenture, this Agreement, the Receivables Purchase Agreement, the
Administration Agreement, the Note Depository Agreement, the Spread Account
Agreement, the Policy, the Insurance Agreement, the Indemnification Agreement,
the Premium Letter, the Sub-servicing Agreement and other documents and
certificates delivered in connection therewith.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or any other day on which commercial banking institutions in Little
Rock, Arkansas, Memphis, Tennessee, New York, New York, Chicago, Illinois or
any other city in which the corporate trust office of the Indenture Trustee is
located are authorized or required by law, executive order or governmental
decree to be closed.
"Certificate Balance" equals the Initial Certificate Balance reduced by
all amounts allocable to principal (including, without limitation, any
Certificateholders' Additional Principal Distribution Amount) previously
distributed to Certificateholders.
"Certificate Balance Floor" means, with respect to any Distribution Date
(a) while the Notes are outstanding, an amount equal to the product of the Pool
Factor and the Certificate Balance as of the Closing Date and (b) after the
Notes have been paid in full, zero.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Final Scheduled Distribution Date" means the November 15,
2002 Distribution Date.
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made
on the immediately following Distribution Date) divided by the Initial
Certificate Balance. The Certificate Pool Factor will be 1.0000000 as of the
Closing Date; thereafter, the Certificate Pool Factor will decline to reflect
reductions in the Certificate Balance.
"Certificate Sale Date" means the earlier of (a) the date the Reserve
Account Initial Deposit is deposited in the Reserve Account and (b) the
earliest date on which any Trust Certificate is sold to an investor (except GCM
or an affiliate thereof).
"Certificateholders" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Additional Principal Distribution Amount" means,
with respect to any Distribution Date to and including the Distribution Date on
which the Certificate Balance is reduced to zero, the Reserve Account Release
Amount for such Distribution Date; provided,
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however, that the Certificateholders' Additional Principal Distribution Amount
for any Distribution Date shall not exceed the amount necessary to reduce the
Certificate Balance to the Certificate Balance Floor for such Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Certificateholders' Monthly Interest Distributable Amount
for the immediately preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date exceeds the amount in respect of interest actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on the amount of interest due but not paid to the Certificateholders
on such preceding Distribution Date, to the extent permitted by law, at the
Pass-Through Rate for the related Interest Accrual Period; provided that,
notwithstanding anything to the contrary, for each Distribution Date until the
Distribution Date after the Distribution Date following the Certificate Sale
Date, the Certificateholders' Interest Carryover Shortfall shall not include
the component thereof which represents interest on unpaid Certificateholders'
Monthly Interest Distributable Amounts.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with respect
to the Certificates shall be computed on the basis of a 360-day year consisting
of twelve 30-day months for all purposes of this Agreement and the Basic
Documents.
"Certificateholders' Monthly Interest Distributable Amount" means (i) with
respect to the first Distribution Date, interest accrued on the Certificates
for the related Interest Accrual Period at the Pass-Through Rate on the
Certificate Balance on the Closing Date and (ii) with respect to any
Distribution Date after the first Distribution Date, interest accrued on the
Certificates for the related Interest Accrual Period at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date,
after giving effect to all distributions of principal to the Certificateholders
on or prior to such preceding Distribution Date; provided that, until the first
Distribution Date on or after the Certificate Sale Date, the
Certificateholders' Monthly Interest Distributable Amount shall accrue as
provided herein but shall be payable only to the extent funds are available
therefore pursuant to Section 5.06(b)(8) (after giving effect to the
distributions in clauses (1) through (7) of Section 5.06(b)).
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date (i) prior to the Distribution Date on which
the Notes are paid in full, zero, and (ii) on or after the Distribution Date on
which the Notes are paid in full, 100% of the Regular Principal Distribution
Amount (less, on the Distribution Date on which the Notes are paid in full, the
portion thereof payable on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, with respect to
any Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Certificateholders' Monthly Principal Distributable Amount
for the immediately preceding
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Distribution Date and any outstanding Certificateholders' Principal Carryover
Shortfall on such preceding Distribution Date exceeds the amount in respect of
principal (other than any amount in respect of Certificateholders' Additional
Principal Distribution Amount for such Distribution Date) actually deposited in
the Certificate Distribution Account on such preceding Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall for such Distribution Date; provided, however,
that the Certificateholders' Principal Distributable Amount shall not exceed
the Certificate Balance. In addition, on the Certificate Final Scheduled
Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include the amount that
is necessary (after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
Agreement).
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.02(c).
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding such Distribution Date. Any amount stated as of the
last day of a Collection Period or as of the first day of a Collection Period
shall give effect to the following calculations as determined as of the close
of business on such last day: (1) all applications of collections and (2) all
distributions to be made on the following Distribution Date.
"Contract" means a motor vehicle retail installment sale contract and any
dealer assignment thereof.
"Controlling Party" means (i) as long as the Policy is in effect and no
Note Insurer Default has occurred and is continuing, the Note Insurer, (ii) if
a Note Insurer Default has occurred and is continuing or the Policy is
otherwise no longer in effect, the Indenture Trustee for the benefit of the
Noteholders and (iii) if the Notes have been paid in full and there are no
amounts owed to the Note Insurer under the Policy, the Owner Trustee for the
benefit of the Certificateholders.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Xxxxxx Trust and Savings Bank, 000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000, Attention: Indenture Trust Administration; or at such
other address as the Indenture Trustee may designate from time to time by notice
to the Noteholders and the Seller, or the principal corporate trust office of
any successor Indenture Trustee (of which address such successor Indenture
Trustee will notify the Noteholders and the Seller).
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"Cram Down Loss" means any loss resulting from an order issued by a court
of appropriate jurisdiction in an insolvency proceeding that reduces the amount
owed on a Receivable (other than a Liquidated Receivable) or otherwise modifies
or restructures the Obligor's Scheduled Payments to be made thereon. The
amount of any such Cram Down Loss will equal the excess of (i) the Principal
Balance (without giving effect to clause (2) of the definition thereof) of the
Receivable immediately prior to such order over (ii) the Principal Balance of
such Receivable as so reduced, modified or restructured. A Cram Down Loss will
be deemed to have occurred on the date of issuance of such order.
"Credit Enhancement Fee" means, with respect to the Certificate Final
Scheduled Distribution Date, the fee paid to the Seller, upon the terms and
subject to the conditions set forth in the Spread Account Agreement, in
consideration of the pledge by the Seller of certain of its assets pursuant to
the Spread Account Agreement. The Credit Enhancement Fee shall be in an amount
on the Certificate Final Scheduled Distribution Date equal to the funds
remaining in the Collection Account and the Reserve Account on such date after
the distribution by the Indenture Trustee of all amounts required pursuant to
clauses (1) through (11) of Section 5.06(b).
"Custodian" means Xxxxxx Trust and Savings Bank and its successors in
interest, when acting in its capacity as Custodian under this Agreement.
"Custodian Fee" means, with respect to any Distribution Date, the fee set
forth in the letter dated May 23, 1997, attached hereto as Exhibit E.
"Cutoff Date" means June 1, 1997.
"Dealer" means the dealer or other entity who sold a Financed Vehicle and
who originated the related Receivable and assigned it to (x) First Merchants,
(y) Magna or (z) any other Person approved by First Merchants, pursuant to a
Dealer Agreement.
"Dealer Agreement" means (a) an agreement between First Merchants and a
Dealer pursuant to which such Dealer sells Contracts to First Merchants
or (b) collectively, (i) an agreement between (x) Magna or (y) an affiliate of
First Merchants and a Dealer pursuant to which such Dealer sells Receivables to
Magna or such affiliate of First Merchants, as the case may be, and (ii) an
agreement between (x) Magna or (y) an affiliate of First Merchants and First
Merchants pursuant to which Magna or such affiliate of First Merchants, as the
case may be, sells Receivables to First Merchants (or otherwise assigns
Receivables to First Merchants' designee).
"Defaulted Receivable" means a Receivable with respect to which any of
the following shall have occurred: (i) a payment under the related Contract
is 120 or more days (or, if the related Obligor is a debtor under Chapter 13 of
the U.S. Bankruptcy Code, 180 or more days) delinquent, (ii) the related
Financed Vehicle has been repossessed or (iii) the Servicer has determined in
good faith that payments under the related Contract are not likely to be
resumed.
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"Deficiency Claim Date" means, with respect to each Distribution Date,
the third Business Day preceding such Distribution Date.
"Deficiency Fee" means, with respect to any Collection Period, the fee set
forth on Schedule E.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee
or custodian by physical delivery to the Indenture Trustee or its nominee
or custodian endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of the UCC)
transfer thereof (i) by delivery of such certificated security endorsed to,
or registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated securities
as belonging to the Indenture Trustee or its nominee or custodian and the
sending by such financial intermediary of a confirmation of the purchase of
such certificated security by the Indenture Trustee or its nominee or
custodian, or (ii) by delivery thereof to a "clearing corporation" (as
defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of
the certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated securities by
such clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law,
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including applicable Federal regulations and Articles 8 and 9 of the
UCC: book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank by a
financial intermediary which is also a "depository" pursuant to applicable
Federal regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to the
Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry securities;
the making by such financial intermediary of entries in its books and
records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging to
the Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Indenture
Trustee or its nominee or custodian of such uncertificated security, the
making by such financial intermediary of entries on its books and records
identifying such uncertificated certificates as belonging to the Indenture
Trustee or its nominee or custodian.
"Determination Date" means, with respect to each Distribution Date, the
earlier of (i) the eighth calendar day of the month in which such Distribution
Date occurs (or if such eighth day is not a Business Day, the next succeeding
Business Day) and (ii) the fifth Business Day preceding such Distribution Date.
"Distribution Date" means, with respect to each Collection Period, the
fifteenth day of the following month or, if such day is not a Business Day, the
immediately following Business Day, commencing on July 15, 1997.
"Eligible Deposit Account" means wither (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository institution shall
have a credit rating from each Rating Agency in one of its generic rating
categories that signifies investment grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee, the Owner Trustee or The Chase Manhattan Bank so long as it
shall be Paying Agent under the
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Trust Agreement or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), which (i) has either (A) a
long-term unsecured debt rating of AAA or better by Standard & Poor's and A1 or
better by Moody's or (B) a certificate of deposit rating of A-1+ by Standard &
Poor's and P-1 or better by Moody's, or any other long-term, short-term or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC. If so qualified, the Indenture Trustee, the
Owner Trustee or The Chase Manhattan Bank may be considered an Eligible
Institution for the purposes of clause (b) of this definition.
"Eligible Investments" means book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or
State banking or depository institution authorities; provided, however,
that at the time of the investment or contractual commitment to invest
therein, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based on
the credit of a Person other than such depository institution or trust
company) thereof shall have a credit rating from each of the Rating
Agencies in the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted thereby
(including funds for which the Indenture Trustee or the Owner Trustee or
any of their respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b);
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(g) repurchase obligations with respect to any security or whole loan,
entered into with (i) a depository institution or trust company (acting as
principal) described in clause (b) above (except that the rating referred
to in the proviso in such clause (b) shall be A-1 or higher in the case of
Standard & Poor's) (such depository institution or trust company being
referred to in this definition as a "financial institution"), (ii) a
broker/dealer (acting as principal) registered as a broker or dealer under
Section 15 of the Exchange Act (a "broker/dealer") the unsecured short-term
debt obligations of which are rated P-1 by Moody's and at least A-1 by
Standard & Poor's at the time of entering into such repurchase obligation
(a "rated broker/dealer"), (iii) an unrated broker/dealer (an "unrated
broker/dealer"), acting as principal, that is a wholly-owned subsidiary of
a non-bank holding company the unsecured short-term debt obligations of
which are rated P-1 by Moody's and at least A-1 by Standard & Poor's at the
time of entering into such repurchase obligation (a "Rated Holding
Company") or (iv) an unrated subsidiary (a "Guaranteed Counterparty"),
acting as principal, that is a wholly-owned subsidiary of a direct or
indirect parent Rated Holding Company, which guarantees such subsidiary's
obligations under such repurchase agreement; provided that the following
conditions are satisfied:
(A) the aggregate amount of funds invested in repurchase
obligations of a financial institution, a rated broker/dealer, an
unrated broker/dealer or Guaranteed Counterparty in respect of which
the Standard & Poor's unsecured short-term ratings are A-1 (in the
case of an unrated broker/dealer or Guaranteed Counterparty, such
rating being that of the related Rated Holding Company) shall not
exceed 20% of the sum of the then Outstanding Amount of the Notes and
the Certificate Balance (there being no limit on the amount of funds
that may be invested in repurchase obligations in respect of which
such Standard & Poor's rating is A-1+ (in the case of an unrated
broker/dealer or Guaranteed Counterparty, such rating being that of
the related Rated Holding Company));
(B) the repurchase obligation must mature within 30 days of the
date on which the Indenture Trustee or the Issuer, as applicable,
enters into such repurchase obligation;
(C) the repurchase obligation shall not be subordinated to any
other obligation of the related financial institution, rated
broker/dealer, unrated broker/dealer or Guaranteed Counterparty;
(D) the collateral subject to the repurchase obligation is held,
in the appropriate form, by a custodial bank on behalf of the
Indenture Trustee or the Issuer, as applicable;
(E) the repurchase obligation shall require that the collateral
subject thereto shall be marked to market daily;
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(F) in the case of a repurchase obligation of a Guaranteed
Counterparty, the following conditions shall also be satisfied:
(i) the Indenture Trustee or the Issuer, as applicable,
shall have received an opinion of counsel (which may be in-house
counsel) to the effect that the guarantee of the related Rated
Holding Company is a legal, valid and binding agreement of the
Rated Holding Company, enforceable in accordance with its terms,
subject as to enforceability to bankruptcy, insolvency,
reorganization and moratorium or other similar laws affecting
creditors' rights generally and to general equitable principles;
(ii) the Indenture Trustee or the Issuer, as applicable,
shall have received (x) an incumbency certificate for the signer
of such guarantee, certified by an officer of such Rated Holding
Company and (y) a resolution, certified by an officer of the
Rated Holding Company, of the board of directors (or applicable
committee thereof) of the Rated Holding Company authorizing the
execution, delivery and performance of such guarantee by the
Rated Holding Company;
(iii) the only conditions to the obligation of such Rated
Holding Company to pay on behalf of the Guaranteed Counterparty
shall be that the Guaranteed Counterparty shall not have paid
under such repurchase obligation when required (it being
understood that no notice to, demand on or other action in
respect of the Guaranteed Counterparty is necessary) and that the
Indenture Trustee or the Issuer shall make a demand on the Rated
Holding Company to make the payment due under such guarantee;
(iv) the guarantee of the Rated Holding Company shall be
irrevocable with respect to such repurchase obligation and shall
not be subordinated to any other obligation of the Rated Holding
Company;
(v) each of Standard & Poor's and Moody's has confirmed in
writing to the Indenture Trustee or Issuer, as applicable, that
it has reviewed the form of the guarantee of the Rated Holding
Company and has determined that the issuance of such guarantee
will not result in the downgrade or withdrawal of the ratings
assigned to the Notes or result in an increased capital charge to
the Note Insurer;
(G) the repurchase obligation shall require that the repurchase
obligation be overcollateralized and shall provide that, upon any
failure to maintain such overcollateralization, the repurchase
obligation shall become due and payable, and unless the repurchase
obligation is satisfied immediately, the collateral subject to the
repurchase agreement shall be liquidated and the proceeds applied to
satisfy the unsatisfied portion of the repurchase obligation; and
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(h) any other investment with respect to which the Issuer has received
written notification from the Rating Agencies that the acquisition of such
investment as an Eligible Investment will not result in a withdrawal or
downgrading of the ratings on the Notes or Certificates or result in an
increased capital charge to the Note Insurer.
"Eligible Servicer" means First Merchants, LSI, the Backup Servicer, any
other Person which at the time of its appointment as Servicer (i) is servicing
a portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sale
contracts and/or motor vehicle installment loans similar to the Receivables
with reasonable skill and care and (iv) has a minimum net worth of
$100,000,000, or any other Person which at the time of its appointment as
Servicer is acceptable to the Note Insurer, the Backup Servicer and the Rating
Agencies (in each case, as evidenced by their prior written consent).
"Endorsement" shall have the meaning specified in the Policy.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financed Vehicle" means an automobile, light-duty truck, van or minivan,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"First Merchants" means First Merchants Acceptance Corporation, a Delaware
corporation, and its successors.
"Fiscal Agent" shall have the meaning specified in the Policy.
"FMARC II" means First Merchants Auto Receivables Corporation II, a
Delaware corporation, and its successors.
"GCM" means Greenwich Capital Markets, Inc. The address of GCM is 000
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxx Xxxx (facsimile
no. (000) 000-0000).
"Guaranteed Noteholders' Principal Distributable Amount" means, with
respect to each Distribution Date, an amount equal to the product of 88.002211%
and the Noteholders' Principal Distributable Amount for such Distribution Date.
In addition, on the Note Final Scheduled Distribution Date, the Guaranteed
Noteholders' Principal Distributable Amount shall include the amount necessary
to reduce the Outstanding Amount of the Notes to zero.
"Guaranteed Payment" means, with respect to each Distribution Date, an
amount equal to the Noteholders' Interest Distributable Amount plus the
Guaranteed Noteholders' Principal Distributable Amount.
"Holder" means "Noteholder" in connection with the Notes and
"Certificateholder" in connection with the Certificates.
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"Indenture" means the Indenture dated as of June 1, 1997, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"Indenture Trustee Fee" means, with respect to any Distribution Date, the
fee set forth on Schedule F.
"Initial Certificate Balance" means $8,582,293.55.
"Initial Lockbox Account" shall have the meaning specified in Section
5.02.
"Initial Pool Balance" means $71,532,293.55.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in
an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by such Person to the entry of
an order for relief in an involuntary case under any such law, or the consent
by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure
by such Person generally to pay its debts as such debts become due, or the
taking of action by such Person in furtherance of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement dated as
of June 1, 1997 among the Note Insurer, the Issuer, First Merchants and the
Seller.
"Insurance Agreement Event of Default" means any Event of Default, as
defined in the Insurance Agreement.
"Interest Accrual Period" means, with respect to any Distribution Date,
the period from and including the 15th day of the preceding calendar month (or,
in the case of the first Distribution Date, from and including the Cutoff Date)
to and including the 14th day of the calendar month in which such Distribution
Date occurs.
"Interest Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts, without duplication, with respect to
the Receivables in respect of the
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Collection Period preceding such Distribution Date: (a) that portion of all
collections on Receivables allocable to interest, (b) Liquidation Proceeds with
respect to the Receivables to the extent allocable to interest due thereon in
accordance with the Servicer's customary servicing procedures, (c) the Purchase
Amount of each Receivable that became a Purchased Receivable during such
Collection Period to the extent attributable to accrued interest on such
Receivable, (d) that portion of all collections on Receivables allocable to
extension fees, (e Investment Earnings for the related Distribution Date, (f)
Recoveries for such Collection Period to the extent allocable to interest and
(g) with respect to each Rule of 78s Receivable that is prepaid in full during
the related Collection Period, all collections on such Rule of 78s Receivable in
excess of the outstanding principal balance of such Rule of 78s Receivable and
accrued interest thereon (calculated pursuant to the actuarial method);
provided, however, that in calculating the Interest Distribution Amount the
following will be excluded: all payments and proceeds (including Liquidation
Proceeds and Recoveries) of any Purchased Receivables the Purchase Amount of
which has been included in the Interest Distribution Amount in a prior
Collection Period.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Distribution Date pursuant to Section 5.02(b).
"Issuer" means First Merchants Auto Trust 1997-2.
"Legal Files" means, with respect to each Receivable, the following
documents held by the Custodian pursuant to Section 3.04(a): the fully
executed original of such Receivable with fully executed assignment from the
related Dealer to First Merchants (and any intervening assignments) (together
with any agreements modifying the Receivable, including, without limitation,
any extension agreements), a fully executed assignment in blank from First
Merchants and the fully executed Lien Certificate (if such Lien Certificate has
been issued by the relevant state motor vehicle authority).
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification issued to a
secured party.
"Liquidated Receivable" means any Receivable or with respect to which any
of the following shall have occurred: (i) the related Financed Vehicle has
been repossessed for 90
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days or more, (ii) such Receivable is a Defaulted Receivable with respect
to which the Servicer has determined in good faith that all amounts it expects
to recover have been received or (iii) a payment under the related Contract is
150 or more days (or, if the related Obligor is a debtor under Chapter 13 of the
U.S. Bankruptcy Code, 210 or more days) delinquent.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
the moneys collected in respect thereof, from whatever source during the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the sum of any amounts reasonably expended by the Servicer in connection
with such liquidation and any amounts required by law to be remitted to the
Obligor on such Liquidated Receivable.
"Local Collection Account" shall have the meaning provided in Section
5.02.
"Local Collection Account Processing Agreement" means the Local Collection
Account Processing Agreement dated as of June 20, 1997, between the Paying
Agent, the Sub-servicer and Xxxxxx Trust and Savings Bank, not in its
individual capacity, but solely in the capacities identified therein, as the
same may be amended, supplemented or otherwise modified pursuant to the terms
thereof.
"Lockbox Account" shall have the meaning specified in Section 5.01.
"Lockbox Agreement" means the agreement between First Tennessee, National
Association and the Indenture Trustee and any other instrument or agreement
relating to the Lockbox Account, in form and substance acceptable to (a) the
Note Insurer, (b) if a Note Insurer Default shall have occurred and be
continuing, to the Holders of a majority of the Outstanding Amount of the Notes
or (c) if the Notes have been paid in full and the Note Insurer has been paid
all amounts owed to it under the Insurance Agreement, to Certificateholders
holding in aggregate Certificates evidencing a majority of the Certificate
Balance.
"Lockbox Bank" means First Tennessee, National Association or any other
depository institution named by the Servicer and, (a) so long as a Note Insurer
Default shall not have occurred and be continuing, acceptable to the Note
Insurer, (b) if a Note Insurer Default shall have occurred and be continuing,
to the Holders of a majority of the Outstanding Amount of the Notes or (c) if
the Notes have been paid in full and the Note Insurer has been paid all amounts
owed to it under the Insurance Agreement, to Certificateholders holding in
aggregate Certificates evidencing a majority of the Certificate Balance.
"LSI" means LSI Financial Group, a California corporation and its
successors in interest.
"Magna" means Magna Bank of St. Louis, a Missouri banking corporation, and
its successors and assigns.
"Master Spread Account Agreement" means the Master Spread Account
Agreement dated as of March 1, 1996, as amended by amendments thereto dated May
1, 1996 and
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March 1, 1997, among FMARC II, as depositor, the Note Insurer and Xxxxxx
Trust and Savings Bank, as trustee and collateral agent.
"Modification Level" shall have the meaning set forth in the Insurance
Agreement.
"Moody's" means Xxxxx'x Investors Service, Inc., or its successor.
"Note" shall have the meaning specified in the Indenture.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.02(c).
"Note Final Scheduled Distribution Date" means the November 15, 2002
Distribution Date.
"Note Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or its
successor.
"Note Insurer Default" means any one of the following events shall have
occurred and be continuing:
(a) the Note Insurer shall have failed to make a required payment when
due under the Policy;
(b) the Note Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the
benefit of its creditors or (iii) had an order for relief entered against
it under the United States Bankruptcy Code, the New York State Insurance
Law or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation, or reorganization that is final
and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent, or receiver for the Note Insurer or for all or
any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent, or receiver of the Note Insurer
or of all or any material portion of its property.
"Note Pool Factor" means, with respect to the Notes as of the close of
business on the last day of a Collection Period, a seven-digit decimal figure
equal to the Outstanding Amount of the Notes (after giving effect to any
reductions thereof to be made on the immediately following Distribution Date)
divided by the original Outstanding Amount of the Notes. The
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Note Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Note
Pool Factor will decline to reflect reductions in the Outstanding Amount of the
Notes.
"Note Rate" means 6.85% per annum.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date after the first Distribution Date, the amount, if any, by
which the sum of the Noteholders' Monthly Interest Distributable Amount for the
immediately preceding Distribution Date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding Distribution Date exceeds the
amount in respect of interest actually deposited in the Note Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to the Noteholders on such preceding Distribution
Date, to the extent permitted by law, at the Note Rate for the related Interest
Accrual Period.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and
the Basic Documents, interest with respect to the Notes shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Monthly Interest Distributable Amount" means, (i) with
respect to the first Distribution Date, interest accrued for the related
Interest Accrual Period at the Note Rate on the Outstanding Amount of the Notes
on the Closing Date and (ii) with respect to any Distribution Date after the
first Distribution Date, interest accrued for the related Interest Accrual
Period at the Note Rate on the Outstanding Amount of the Notes on the
immediately preceding Distribution Date, after giving effect to all
distributions of principal to the Noteholders on or prior to such preceding
Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, 100% of the Regular Principal Distribution Amount for such
Distribution Date; provided, however, that the Noteholders' Principal
Distributable Amount shall not exceed the Outstanding Amount of the Notes. In
addition, on each Distribution Date, any unpaid portion of the Noteholders'
Principal Distributable Amount from one or more prior Distribution Dates shall
not constitute part of the Noteholders' Principal Distributable Amount on the
current Distribution Date (other than any portion thereof constituting a portion
of the Guaranteed Noteholders' Principal Distributable Amount). On the Note
Final Scheduled Distribution Date, the principal required to be deposited in the
Note Distribution Account will include the amount necessary (after giving effect
to the other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the Outstanding Amount
of the Notes to zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under such Receivable.
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"Obligor's Scheduled Payment" means, with respect to each Receivable, the
scheduled monthly payment amount set forth in the related Contract and required
to be paid by the Obligor during each Collection Period. If, after the Closing
Date, an Obligor's scheduled monthly payment obligation under the related
Contract is modified (i) as a result of the order of a court in an insolvency
proceeding involving the Obligor, (ii) pursuant to the Soldiers' and Sailors'
Civil Relief Act of 1940 or (iii) as a result of modifications or extensions of
the Contract permitted by Section 4.02, "Obligor's Scheduled Payment" shall
refer to the Obligor's scheduled monthly payment obligation as so modified.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, any vice president, the controller or any assistant controller and
(b) the president, a treasurer, assistant treasurer, secretary or assistant
secretary of the Seller, the Originator, the Sub-servicer or the Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Originator, the Seller or the Servicer,
as applicable, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or the Rating Agencies, as applicable.
"Originator" means First Merchants and its successors in interest to the
extent permitted hereunder.
"Outstanding Amount" shall have the meaning specified in the Indenture.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"Owner Trustee Fee" means, with respect to any Distribution Date, the fee
set forth on Schedule G.
"Pass-Through Rate" means 12.25% per annum.
"Paying Agent" shall have the meaning assigned to such term in the Trust
Agreement.
"Payment Determination Date" means, with respect to any Distribution Date,
the Business Day immediately preceding such Distribution Date.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Policy" means the financial guaranty insurance policy issued by the Note
Insurer with respect to the Notes, including any endorsements thereto, in the
form of Exhibit D.
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"Policy Payments Account" shall have the meaning specified in Section
5.07(b).
"Pool Balance" means, with respect to each Determination Date, the
aggregate Principal Balance of the Receivables (excluding all Purchased
Receivables and Liquidated Receivables) as of the close of business on the last
day of the related Collection Period, after giving effect to all payments
received from Obligors for such Collection Period, and after adjustment for
Cram Down Losses for such Collection Period.
"Pool Factor" means the seven-digit decimal that the Servicer shall
compute on each Distribution Date indicating the Pool Balance for such
Distribution Date as a fraction of the Initial Pool Balance.
"Portfolio Performance Test" has the meaning set forth in the Spread
Account Agreement.
"Precomputed Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" means, with respect to any Receivable and
Determination Date, the Amount Financed minus an amount equal to the sum, as of
the close of business on the last day of the related Collection Period, of (1)
that portion of all amounts received on or prior to such day with respect to
such Receivable and allocable to principal using the actuarial method (with
respect to Precomputed Receivables) or the Simple Interest Method (with respect
to Simple Interest Receivables), as applicable, and (2) any Cram Down Losses
with respect to such Receivable.
"Purchase Amount" means, with respect to any Receivable that became a
Purchased Receivable, the unpaid principal balance owed by the Obligor thereon
plus interest on such amount at the applicable APR to the last day of the month
of repurchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by the Seller or the Originator pursuant to Section 3.03 or
purchased by the Originator pursuant to Section 9.01.
"Rating Agency" means either Moody's or Standard & Poor's or, when used in
the plural form, Moody's and Standard and Poor's. If none of Moody's, Standard
& Poor's or a successor to either of them remains in existence, "Rating Agency"
shall mean any nationally recognized statistical rating organization or other
comparable Person designated by the Seller, notice of which designation shall
be given to the Owner Trustee, the Indenture Trustee, the Servicer and the Note
Insurer.
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"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall
be acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Owner Trustee
and the Indenture Trustee in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes or Certificates
or result in an increased capital charge of the Note Insurer.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may
be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.04(b).
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of June 1, 1997, between First Merchants, as seller, and FMARC II, as
purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Regular Principal Distribution Amount" means, with respect to any
Distribution Date, the sum of the following amounts, without duplication, with
respect to the Receivables in respect of the related Collection Period: (i)
that portion of all collections on the Receivables allocable to principal, (ii)
the aggregate outstanding principal balance of all Receivables that became
Liquidated Receivables during such Collection Period, (iii) that portion
allocable to principal of the aggregate amount of any Cram Down Losses and (iv)
that portion allocable to principal of the Purchase Amount of all Receivables
that became Purchased Receivables during or in respect of such Collection
Period; provided, however, that in calculating the Regular Principal
Distribution Amount the following will be excluded: (i) all payments and
proceeds (including Liquidation Proceeds) of any Purchased Receivables the
Purchase Amount of which has been included in the Regular Principal Distribution
Amount in a prior Collection Period and (ii) Recoveries.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.02(c)(iii).
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"Reserve Account Initial Deposit" means an amount equal to $4,470,763.35.
"Reserve Account Release Amount" means, with respect to any Distribution
Date, the excess, if any, of the amount in deposit in the Reserve Account over
the Reserve Account Required Amount (after giving effect to distributions made
pursuant to clauses (1) through (11) of Section 5.06(b) on such Distribution
Date).
"Reserve Account Required Amount" means, with respect to any Distribution
Date, an amount equal to the greater of (i) 6.50% of the Pool Balance as of the
close of business on the last day of the related Collection Period and (ii) the
lesser of (x) 1.5% of the Initial Pool Balance and (y) the Certificate Balance.
"Responsible Officer" means the chairman of the board, the president, any
executive vice president, any vice president, the treasurer, any assistant
treasurer, the secretary, or any assistant secretary of the Servicer or the
Sub-servicer, as the case may be.
"Retail Lockbox Mail Service Agreement" means the Retail Lockbox Mail
Service Agreement dated as of June 20, 1997, between LaSalle National Bank and
the Sub-servicer, as the same may be amended, supplemented or otherwise
modified from time to time pursuant to the terms thereof.
"Rule of 78s Receivable" means any Receivable that provides for the
allocation of payments in respect thereof according to the "sum of periodic
balances" or "sum of monthly payments" method.
"Securities" means the Notes and the Certificates.
"Securityholders" means the Noteholders and/or the Certificateholders.
"Seller" means FMARC II and its successors in interest to the extent
permitted hereunder.
"Servicer" means LSI, as the servicer of the Receivables, and each
successor to LSI (in the same capacity) pursuant to Section 7.03 or 8.03.
"Servicer Termination Event" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicer Extension Notice" shall have the meaning specified in Section
4.14.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during each Collection Period, determined pursuant to Section 4.08.
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"Servicing Transition Agreement" means the Servicing Transition Agreement
dated as of June 1, 1997, between the Sub-servicer and the Servicer, as the
same may be amended, supplemented or otherwise modified from time to time
pursuant to the terms thereof.
"Servicing Transfer Date" means the date the transfer of servicing from
the Sub-servicer to the Servicer is completed pursuant to the Servicing
Transistion Agreement.
"Simple Interest Method" means the method of allocating the monthly
payments received with respect to a Receivable to interest in an amount equal
to the product of (i) the applicable APR, (ii) the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and 365 days in the calendar year) elapsed since the preceding payment was made
under such Receivable and (iii) the outstanding principal amount of the
Receivable, and allocating the remainder of each such monthly payment to
principal.
"Simple Interest Receivable" means any Receivable under which the portion
of a payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Spread Account" means the account designated as such, established and
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" means the Master Spread Account Agreement dated
as of March 1, 1996, among FMARC II, as depositor, the Note Insurer and Xxxxxx
Trust and Savings Bank, as trustee and collateral agent, as amended by
Amendments to the Master Spread Account Agreement, dated as of June 1, 1996 and
as of March 1, 1997, and as supplemented by the Series 1997-2 Supplement to the
Master Spread Account Agreement, dated as of June 1, 1997, among FMARC II, the
Note Insurer, the Owner Trustee and Xxxxxx 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 XxXxxx-Xxxx Companies, Inc. or its successor.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Sub-Servicer" means First Merchants, as the sub-servicer of the
Receivables, and each successor to First Merchants (in the same capacity)
pursuant to Section 7.05.
"Sub-servicing Agreement" means the Servicing Transfer Agreement dated as
of June 1, 1997 between the Servicer and the Sub-servicer.
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"Title Package" means (i) a fully executed Lien Certificate noting the
lien of the Originator on the Financed Vehicle or (ii) evidence that
documentation has been submitted to the appropriate state motor vehicle
authority to obtain a Lien Certificate noting the lien of the Originator on the
Financed Vehicle, as applicable.
"Total Distribution Amount" means, for each Distribution Date, the sum of
(i) the applicable Interest Distribution Amount, (ii) the applicable Regular
Principal Distribution Amount (other than the portion thereof attributable to
Realized Losses or Cram Down Losses) and (iii) the portion of Recoveries
allocable to principal with respect to the related Collection Period.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.02(c)(iii).
"Trust Agreement" means the Amended and Restated Trust Agreement dated as
of June 1, 1997, between the Seller, as depositor, and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee or the Backup
Servicer, any Officer within the Corporate Trust Office of the Indenture
Trustee, including any Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject and, with respect to the Owner Trustee, any officer in
the Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and the Basic
Documents on behalf of the Owner Trustee.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the Indenture or, if not defined therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any
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such certificate or other document, and accounting terms partly defined
in this Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to
a Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller of $63,158,977.25, the Seller does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse (subject to the obligations of the Seller set forth herein),
all right, title and interest of the Seller in and to:
(i) the Receivables and all moneys received thereon on or after the
Cutoff Date (including, without limitation, such moneys received thereon
that are deposited from time to time in the Initial Lockbox Account, the
Local Collection Account and the Lockbox Account);
(ii) the security interests in the Financed Vehicles and any
accessions thereto granted by Obligors pursuant to the Receivables and any
other interest of the Seller in such Financed Vehicles;
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(iii) any Liquidation Proceeds, Recoveries and any other proceeds with
respect to the Receivables from claims on any physical damage, credit life
or disability insurance policies covering Financed Vehicles or Obligors,
including any vendor's single interest or other collateral protection
insurance policy;
(iv) all rights of the Seller against Dealers, Magna and any
intervening assignor with respect to the Receivables under the Dealer
Agreements and Dealer assignments;
(v) any property that shall have secured a Receivable and shall have
been acquired by or on behalf of the Seller or First Merchants;
(vi) all documents and other items contained in the Receivable Files
and the Legal Files;
(vii) all of the Seller's rights (but not its obligations) under the
Receivables Purchase Agreement;
(viii) all funds on deposit from time to time in the Trust Accounts
(including without limitation any Reserve Account Initial Deposit) and the
Certificate Distribution Account and all investments and proceeds thereof
(including all income thereon); and
(ix) the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of First Merchants.
(a) First Merchants has made each of the representations and
warranties set forth in Exhibit A hereto under the Receivables Purchase
Agreement and has consented to the assignment by the Seller to the Issuer of
the Seller's rights with respect thereto. Such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date, but shall survive the sale, transfer and assignment of the Receivables to
the Issuer. Pursuant to Section 2.01 of this Agreement, the Seller has sold,
assigned, transferred and conveyed to the Issuer, as part of the assets of the
Issuer, its rights under the Receivables Purchase Agreement, including the
representations and warranties of First Merchants therein as set forth in
Exhibit A, upon which the Issuer relies in accepting the Receivables and
delivering the Securities and the Note Insurer relies in issuing the Policy,
together with all rights of the Seller with respect to any breach thereof,
including the right to require First Merchants to repurchase Receivables in
accordance with the Receivables Purchase Agreement. It is understood and
agreed that the representations and warranties referred to in this Section
shall survive the delivery of the Receivable Files and the Legal Files to the
Issuer or any custodian.
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(b) First Merchants hereby agrees that the Issuer shall have the right to
enforce any and all rights under the Receivables Purchase Agreement assigned to
the Issuer herein, including the right to cause First Merchants to repurchase
any Receivable with respect to which it is in breach of any of its
representations and warranties set forth in Exhibit A, directly against First
Merchants as though the Issuer were a party to the Receivables Purchase
Agreement, and the Issuer shall not be obligated to exercise any such rights
indirectly through the Seller.
SECTION 3.02. Representations and Warranties of the Seller. The Seller
makes the following representations and warranties as to the
Receivables on which the Issuer relies in accepting the Receivables and
delivering the Securities and the Note Insurer relies in issuing the Policy.
Such representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date, but shall survive the sale, transfer
and assignment of the Receivables by the Seller to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Seller that (i) the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Seller to the Issuer, conveying good title thereto, free and clear of any Liens
or rights of other Persons and (ii) the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. In the
event, however, that such transfer is deemed not to be a sale but to be of a
mere security interest to secure a borrowing, the Seller shall be deemed to
have hereby granted to the Issuer a perfected first priority security interest
in all such assets, and this Agreement shall constitute a security agreement
under applicable law. No Receivable has been sold, transferred, assigned or
pledged by the Seller to any Person other than the Issuer. Immediately prior
to the transfer and assignment herein contemplated, the Seller had good and
marketable title to each Receivable, free and clear of all Liens and rights of
others and, immediately upon the transfer thereof, the Issuer shall have good
and marketable title to each such Receivable, free and clear of all Liens and
rights of others; and the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give the Issuer a first perfected ownership interest in the
Receivables have been made.
SECTION 3.03. Repurchase upon Breach. The Seller, the Servicer and the
Sub-Servicer shall inform the other parties to this Agreement and the Note
Insurer promptly, in writing, upon the discovery of any breach of First
Merchants' representations and warranties made pursuant to Section 3.01 of this
Agreement or Section 3.02 of the Receivables Purchase Agreement or of the
Seller's representations and warranties made pursuant to Section 3.02 above.
Unless any such breach shall have been cured by the last day of the first
Collection Period following the discovery or notice thereof by or to the
Seller, the Servicer or the Sub-Servicer, the Seller shall be obligated and, if
necessary, the Seller or the Issuer shall enforce the obligation of First
Merchants under the Receivables Purchase Agreement, to repurchase as of such
last day any Receivable materially and adversely affected by any such breach.
In consideration of the repurchase of any such Receivable, the Seller shall
remit the Purchase Amount to the Collection Account, in the manner specified in
Section 5.04 (and the Seller shall promptly
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notify the Servicer in writing of the date and amount of such remittance);
provided, however, that the obligation of the Seller to repurchase any
Receivable arising solely as a result of a breach of First Merchants'
representations and warranties under Section 3.02 of the Receivables Purchase
Agreement is subject to the receipt by the Seller of the Purchase Amount from
First Merchants. The sole remedy of the Issuer, the Indenture Trustee, the
Noteholders or the Certificateholders with respect to a breach of
representations and warranties pursuant to Sections 3.01 and 3.02 and the
agreement contained in this Section shall be to require the Seller to repurchase
Receivables pursuant to this Section, subject to the conditions contained
herein, or to enforce First Merchants' obligation to the Seller to repurchase
such Receivables pursuant to the Receivables Purchase Agreement.
SECTION 3.04. Custody of Receivable Files and Legal Files. (a)(i) The
Issuer hereby revocably appoints the Custodian, and the Custodian
hereby accepts such appointment, to act for the benefit of the Issuer, the
Indenture Trustee and the Note Insurer as custodian of the Legal Files with
respect to each Receivable. The Custodian shall maintain such accurate and
complete accounts, records and computer systems pertaining to each Legal File
as shall enable the Custodian to comply with this Agreement. In performing its
duties, as Custodian, the Custodian shall act with reasonable care, using that
degree of skill and attention that the Custodian exercises with respect to the
legal files relating to all comparable automotive receivables that the
Custodian maintains for itself or others. The Custodian shall promptly report
to the Issuer and the Indenture Trustee any failure on its part to hold the
Legal Files and maintain its accounts, records and computer systems as herein
provided and shall promptly take appropriate action to remedy such failure.
(ii) On or prior to the Closing Date, the Issuer shall transfer and
deliver to the Custodian or its agent and bailee (as that term is used in
Section 9-305 of the UCC) the Legal Files with respect to each Receivable.
(iii) From time to time, the Originator, the Servicer or the
Sub-servicer may submit additional documents for one or more of the Legal
Files in custody of the Custodian, attached to a document transmittal log.
Upon receipt of these additional documents, the Custodian shall update the
appropriate Legal File to reflect the receipt of (a) supplementation or
replacement of any of the documents in the Legal File and (b) the delivery
of additional documents, assignments, instruments, agreements, certificates
or other writings and additional financing statements.
(iv) The Custodian shall segregate and maintain continuous custody of
all documents constituting the Legal Files received by it in secure and
fire resistant facilities in accordance with customary standards for such
custody. The Custodian shall hold the Legal Files as bailee, as that term
is used in Section 9-305 of the UCC, for the Issuer and the Indenture
Trustee pursuant to, and in accordance with, this Agreement. The Custodian
shall retain custody of the Legal Files on behalf of the Issuer and the
Indenture Trustee until it is directed in writing by the Issuer and the
Indenture Trustee to release any or all of such Legal Files.
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(v) The Custodian is hereby authorized, upon receipt of a written
request and receipt provided by the Servicer or its designee in the form
attached as Exhibit F hereto (a "Request for Release"), to release to the
Servicer or its designee, as the case may be, the Legal File or certain
documents therefrom specified in the Request for Release. All Documents so
released shall, while held by the Servicer or its designee, be held in
trust for the benefit of the Issuer and the Indenture Trustee. Unless the
Legal File is (x) released because the related Receivable was paid in full,
repurchased, refinanced or otherwise liquidated and (y) the Issuer and the
Indenture Trustee have consented in writing (in their sole discretion), the
Servicer or its designee shall return any documents so released promptly
after the need for such Person's possession of such documents no longer
exists.
(vi) The Custodian may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(b) To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Issuer hereby revocably appoints the Servicer, and the
Servicer hereby accepts such appointment, to act for the benefit of the Issuer
and the Indenture Trustee as custodian of the following documents or
instruments, which are hereby constructively delivered by the Issuer to the
Indenture Trustee:
(i) a copy of the fully executed original of each Receivable with a
copy of the fully executed assignment from the related Dealer to First
Merchants (and any intervening assignments) (together with any agreements
modifying such Receivable, including, without limitation, any extension
agreement);
(ii) the original credit application, or a copy thereof, fully
executed by each Obligor thereon;
(iii) a copy of the Lien Certificate or the Title Package or such
other documents that the Servicer shall keep on file in accordance with its
customary procedures evidencing the security interest of the Seller in the
Financed Vehicle;
(iv) all other documents listed on Schedule C relating to each
Receivable; provided that, with respect to this clause (iv), the Servicer,
as custodian of the documents herein identified, shall not be responsible
to confirm or verify the completeness or existence in each Receivable File
of the documents identified in this clause (iv);
(v) if the Lien Certificate for any Receivable is not in the Legal
File, the documents referred to in clause (ii) of the definition of Title
Package herein with respect to such Receivable; and
(vi) any and all other documents that the Servicer shall keep or file
in accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
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(c) Notwithstanding anything contained herein to the contrary, the
Custodian may perform any of its duties hereunder through agents or other
custodians.
SECTION 3.05. Duties of Servicer as Custodian of Receivable Files.
(a) Safekeeping of Receivable Files. The Servicer shall hold the Receivable
Files as custodian for the benefit of the Issuer, the Indenture Trustee and, to
the extent provided herein, the Note Insurer, and shall maintain such accurate
and complete accounts, records and computer systems pertaining to each
Receivable File as shall enable the Issuer to comply with this Agreement. In
performing its duties as custodian, the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the receivable files relating to all comparable automotive
receivables that the Servicer services for itself or others. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Receivable Files held
by it under this Agreement and of the related accounts, records and computer
systems, in such a manner as shall enable the Issuer or the Indenture Trustee to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Issuer and the Indenture Trustee any failure on its part
to hold the Receivable Files and maintain its accounts, records and computer
systems as herein provided and shall promptly take appropriate action to remedy
any such failure. Nothing herein shall be deemed to require an initial review
or any periodic review by the Issuer or the Indenture Trustee of the Receivable
Files.
(b) Maintenance of and Access to Records Relating to Receivable Files.
The Servicer shall maintain each Receivable File at one of its offices
specified in Schedule B to this Agreement or at such other office as shall be
specified to the Issuer and the Indenture Trustee by written notice not later
than 30 days prior to any change in location. The Servicer shall make
available to the Issuer, the Sub-Servicer and the Indenture Trustee or their
duly authorized representatives, attorneys or auditors a list of locations of
the Receivable Files and the related accounts, records and computer systems
maintained by the Servicer at such times during normal business hours as the
Issuer shall instruct.
(c) Release of Documents from Receivable Files. Upon instruction from the
Indenture Trustee, the Servicer shall release any Receivable File to the
Indenture Trustee, the Indenture Trustee's agent or the Indenture Trustee's
designee, as the case may be, at such place or places as the Indenture Trustee
may designate, as soon as practicable, and upon the release and delivery of any
such document in accordance with the instructions of the Indenture Trustee, the
Servicer shall be released from any further liability and responsibility under
this Section 3.05 with respect to such documents, unless and until such time as
such documents shall be returned to the Servicer. In no event shall the
Servicer be responsible for any loss occasioned by the Indenture Trustee's
failure to return any Receivable File or any portion thereof in a timely
manner.
SECTION 3.06. Instructions; Authority to ActSECTION 3.06. Instructions;
Authority to Act3.06. Instructions; Authority to Act. (a) The Servicer shall
be deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trust Officer of the
Indenture Trustee.
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(b) The Custodian shall be deemed to have received proper instructions
with respect to the Legal Files upon its receipt of written instructions signed
by a Trust Officer of the Indenture Trustee.
SECTION 3.07. Servicer's and Custodian's Indemnification and Liability.
(a) The Servicer, as custodian, shall indemnify the Trust, the Owner
Trustee, the Custodian and the Indenture Trustee and each of their officers,
directors, employees and agents for any and all liabilities, obligations,
losses, compensatory damages, payments, costs, or expenses of any kind
whatsoever that may be imposed on, incurred by or asserted against the Trust,
the Owner Trustee or the Indenture Trustee or any of their officers, directors,
employees or agents as the result of any improper act or omission in any way
relating to the maintenance and custody by the Servicer as custodian of the
Receivable Files; provided, however, that the Servicer shall not be liable to
the Owner Trustee, the Indenture Trustee or any such officer, director,
employee or agent of the Owner Trustee or the Indenture Trustee for any portion
of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Owner Trustee or the Indenture Trustee, as the case may be,
or any such officer, director, employee or agent of the Owner Trustee or the
Indenture Trustee, as the case may be. Indemnification under this Section
3.07(a) shall survive the resignation or removal of the Servicer (or the
resignation or removal hereunder of the indemnified party) or the termination
of this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer shall have made any indemnity payments
pursuant to this Section 3.07(a) and the Person to or on behalf of whom such
payments are made thereafter collects any of such amounts from others, such
Person shall promptly repay such amounts to the Servicer, without interest.
(b) Neither the Custodian nor any of its officers, directors, employees
or agents shall be liable, directly or indirectly, for any damages or expenses
arising out of the services performed under this Agreement other than damages
which result from the negligence or willful misconduct of it or them.
SECTION 3.08. Effective Period and Termination. (a) The
Servicer's appointment as custodian shall become effective as of the Cutoff
Date and shall continue in full force and effect unless and until terminated
pursuant to this Section 3.08(a). If LSI or any successor Servicer shall
resign as Servicer in accordance with the provisions of this Agreement or if
all of the rights and obligations of LSI or any successor Servicer shall have
been terminated under Section 8.02, the appointment of such Servicer as
custodian may be terminated by the Note Insurer, the Issuer, the Indenture
Trustee or by the Holders of Notes evidencing not less than 25% of the
Outstanding Amount of the Notes, by the Owner Trustee or by Holders (other than
the Seller or an affiliate thereof) of Certificates evidencing not less than
25% of the Certificate Balance, in the same manner as the Note Insurer, the
Indenture Trustee or such Securityholders may terminate the rights and
obligations of the Servicer under Section 8.02. The Indenture Trustee or with
the consent of the Indenture Trustee, the Owner Trustee may terminate the
Servicer's appointment as custodian, with cause, at any time upon written
notification to the Servicer and without cause, only by written notification to
the Servicer pursuant to Section 8.02. As soon as practicable after any
termination of such appointment (but in no event more than 10 Business Days
after any such termination of appointment), the
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Servicer shall deliver the Receivable Files to the Indenture Trustee or the
Indenture Trustee's agent at such place or places as the Indenture Trustee may
reasonably designate.
(b) The Custodian's appointment as custodian shall become effective as
of the Cutoff Date and shall continue in full force and effect unless and
until terminated pursuant to this Section 3.08(b). The appointment of the
Custodian as custodian may be terminated by the Note Insurer or, if the Note
Insurer is no longer the Controlling Party, the Indenture Trustee or the Holders
of at least 25% of the Outstanding Amount of the Notes, by notice given in
writing to the Custodian (and to the Indenture Trustee, the Owner Trustee and
the Seller if given by the Note Insurer or such Noteholders) in the same manner
as the Note Insurer, the Indenture Trustee or such Securityholders, as the case
may be, may terminate the rights and obligations of the Servicer under Section
8.02. The Indenture Trustee or with the consent of the Indenture Trustee, the
Owner Trustee may terminate the Custodian's appointment as custodian, with
cause, at any time upon written notification to the Custodian. As soon as
practicable after any termination of such appointment (but in no event more than
10 Business Days after any such termination of appointment), the Custodian shall
deliver the Legal Files to the Indenture Trustee or the Indenture Trustee's
agent at such place or places as the Indenture Trustee may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer, the Indenture Trustee and the Note Insurer, shall manage,
service, administer and make collections on the Receivables and perform the
other actions required by the Servicer under this Agreement. The Servicer
shall service the Receivables in accordance with its customary and usual
procedures and consistent with the procedures employed by institutions that
service motor vehicle retail installment sale contracts. The Servicer's duties
shall include the collection and posting of all payments, responding to
inquiries of Obligors, investigating delinquencies, sending monthly billing
statements to Obligors, reporting any required tax information to Obligors,
monitoring the collateral, accounting for collections, furnishing monthly and
annual statements to the Owner Trustee, Indenture Trustee and the Note Insurer
with respect to distributions, monitoring the compliance by Obligors with the
insurance requirements contained in the related Contracts, and performing the
other duties specified herein. The Servicer also shall administer and enforce
all rights of the holder of the Receivables under the Contracts and the Dealer
Agreements. To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with the managing,
servicing, administration and collection of the Receivables that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered to execute and deliver, on behalf
of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction
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or cancellation, or of partial or full release or discharge, and all other
comparable instruments with respect to the Receivables and with respect to the
Financed Vehicles; provided, however, that, notwithstanding the foregoing, the
Servicer shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount due under any
Receivable or waive the right to collect the unpaid balance of any Receivable
from an Obligor. The Servicer is hereby authorized to commence, in its own name
or in the name of the Issuer, the Indenture Trustee, the Owner Trustee, the
Certificateholders or the Noteholders, a legal proceeding to enforce a
Receivable pursuant to Section 4.03 or to commence or participate in any other
legal proceeding (including a bankruptcy proceeding) relating to or involving a
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in any such legal proceeding in its own name, the Indenture Trustee
or the Issuer shall thereupon be deemed to have automatically assigned the
applicable Receivable to the Servicer solely for purposes of commencing or
participating in such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Indenture Trustee or the Issuer to execute and
deliver in the Indenture Trustee's or the Issuer's name any notices, demands,
claims, complaints, responses, affidavits, or other documents or instruments in
connection with any such proceeding. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce such Receivable, the Owner Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Issuer, the Indenture Trustee, the Certificateholders or
the Noteholders. The Owner Trustee and the Indenture Trustee shall upon the
written request of the Servicer furnish the Servicer with any powers of attorney
and other documents reasonably necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.
SECTION 4.02. Collection and Receivable Payments; Modifications of
Receivables. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automotive
receivables that it services for itself or others and otherwise act with
respect to the Receivables in such manner as will, in the reasonable judgment
of the Servicer, maximize the amount to be received by the Trust with respect
thereto. The Servicer is authorized in its discretion to waive any prepayment
charge, late payment charge, extension fee or any other similar fees that may
be collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment of a
Receivable in order to (i) change the date during each calendar month when the
related Obligor's Scheduled Payment is due or (ii) reamortize the Obligor's
Scheduled Payments on the Receivable following a partial prepayment of
principal.
(c) The Servicer may grant payment extensions or other modifications of or
amendments with respect to a Receivable (in addition to those modifications
permitted by Section 4.02(b)) in accordance with its customary procedures if
the Servicer believes in good
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faith that such extension, modification or amendment is necessary to avoid
a default on such Receivable, will maximize the amount to be received by the
Trust with respect to such Receivable and is otherwise in the best interests of
the Trust; provided, however, that:
(i) the aggregate period of all extensions on a Receivable shall not
exceed four months;
(ii) no extension shall exceed one month;
(iii) in no event may the final Obligor's Scheduled Payment on a
Receivable be extended beyond the last day of the Collection Period
relating to the Certificate Final Scheduled Distribution Date;
(iv) no more than two extensions may be granted with respect to any
Receivable in any one-year period; and
(v) with respect to any Determination Date, the amount of Receivables
subject to extension or modification shall not exceed the Modification
Level applicable to such Determination Date;
provided, however, that if the Controlling Party waives compliance with this
Section 4.02(c), no breach shall be deemed to have occurred.
(d) The Servicer shall treat all Rule of 78s Receivables as actuarial
Receivables for purposes of the allocation of payments to principal and
interest components and balance tracking.
SECTION 4.03. Realization upon Receivables. Consistent with the standards,
policies and procedures required by this Agreement, the Servicer shall use its
best efforts to repossess or otherwise convert the ownership of and liquidate
any Financed Vehicle securing a Receivable with respect to which the Servicer
shall have determined that eventual payment in full is unlikely. The Servicer
shall begin such repossession and conversion procedures as soon as practicable
after default on such Receivable, but in no event later than the date on which
all or any portion of an Obligor's Scheduled Payment has become 91 days
delinquent; provided, however, that the Servicer may elect not to repossess a
Financed Vehicle within such time period if in its good faith judgment it
determines that the proceeds ultimately recoverable with respect to such
Receivable would be increased by forbearance. In repossessing or otherwise
converting the ownership of a Financed Vehicle and liquidating a Receivable,
the Servicer is authorized to follow such customary practices and procedures as
it shall deem necessary or advisable, consistent with the standard of care
required by Section 4.01, which practices and procedures may include reasonable
efforts to realize upon any recourse to Dealers (and/or Magna), the sale of the
related Financed Vehicle at public or private sale, the submission of claims
under an insurance policy and other actions by the Servicer in order to realize
on a Receivable; provided, however, that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with
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any repair or towards the repossession of such Financed Vehicle unless it
shall determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Receivable by an amount
greater than the expense for such repair or repossession. The Servicer shall be
entitled to recover all reasonable expenses incurred by it in the course of
repossessing and liquidating a Financed Vehicle into cash proceeds, but only out
of the cash proceeds of the sale of such Financed Vehicle, any deficiency
obtained from the Obligor or any amounts received from recourse to the related
Dealer (and/or Magna); provided that the parties hereto acknowledge that the
Servicer may xxxx expenses monthly as incurred.
SECTION 4.04. Physical Damage Insurance. The Sub-servicer shall, in
accordance with its customary servicing procedures, require that each Obligor
shall have obtained and maintain physical loss damage insurance covering the
Financed Vehicle as of the execution of the Receivable.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
(a) The Servicer shall, in accordance with its customary servicing
procedures, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Servicer is hereby authorized to take such steps as are necessary to
re-perfect such security interest on behalf of the Issuer and the Indenture
Trustee in the event of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Issuer is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements
under the laws of the state in which the Financed Vehicle is located, to
perfect a security interest in the related Financed Vehicle in favor of the
Issuer, the Originator, the Seller and the Issuer hereby agree that the
designation of First Merchants as the secured party on the certificate of title
is in its capacity as agent of the Issuer.
(b) The Seller, the Owner Trustee, the Indenture Trustee, the Servicer,
the Originator and the Backup Servicer hereby agree that, upon the occurrence
of a Servicer Termination Event, the Controlling Party may take or cause to be
taken such actions as may, in the opinion of counsel to the Controlling Party,
be necessary to perfect or re-perfect the security interests in the Financed
Vehicles in the name of the Issuer, including by amending the title documents
of the Financed Vehicles. The Seller hereby agrees to pay all expenses related
to such perfection or reperfection and to take all action necessary therefor.
In addition, the Controlling Party may at any other time instruct the Servicer
to take or cause to be taken such action as may, in the opinion of counsel to
the Controlling Party, be necessary to perfect or re-perfect the security
interest in the Financed Vehicles in the name of the Trust; provided, however,
that if the Controlling Party requests that the title documents be amended
prior to the occurrence of an Insurance Agreement Event of Default, the
out-of-pocket expenses of the Servicer, the Seller, the Originator or any other
entity incurred in connection with any such action shall be reimbursed to the
Servicer, the Seller, the Originator or such other party by the Controlling
Party.
SECTION 4.06. Covenants of Covenants of Servicer. By its execution and
delivery of this Agreement, the Servicer hereby covenants as follows (on which
covenants the Issuer, the Indenture
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Trustee, the Custodian and the Owner Trustee rely in accepting the
Receivables and delivering the applicable Securities and on which the Note
Insurer relies in issuing the Policy):
(a) Liens in Force. No Financed Vehicle securing a Receivable shall be
released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the rights of
the Trust in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend the
terms of any Receivable, except in accordance with Section 4.02 (provided that
no breach of this covenant shall be deemed to have occurred unless and until
the remedy provided in Section 4.07, after demand therefor, has not been
complied with); and
(d) Restrictions on Liens. The Servicer shall not (A) create, incur or
suffer to exist, or agree to create, incur or suffer to exist, or consent to or
permit in the future (upon the occurrence of a contingency or otherwise) the
creation, incurrence or existence of any Lien on or restriction on
transferability of any Receivable except for the Lien in favor of the Trust and
the restrictions on transferability imposed by this Agreement or (B) sign or
file any UCC financing statements in any jurisdiction that names First
Merchants, the Servicer or the Seller as a debtor, and any Person other than
the Seller or the Issuer as a secured party, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement
with respect to the Receivables.
SECTION 4.07. Purchase of Receivables upon BreachSECTION 4.07. Purchase
of Receivables upon Breach4.07. Purchase of Receivables upon Breach. Upon
discovery by any of the Servicer, the Seller, the Owner Trustee, the Indenture
Trustee, the Originator or the Backup Servicer of a breach of any of the
covenants set forth in Sections 4.02(c), 4.05(a) or 4.06 (which breach has not
been waived by the Controlling Party), the party discovering such breach shall
give prompt written notice to the other parties and the Note Insurer; provided,
however, that the failure to give any such notice shall not affect any
obligation of the Servicer under this Section 4.07; provided further that, with
respect to the Owner Trustee, the Indenture Trustee and the Backup Servicer,
"discovery" shall mean actual knowledge by a Trust Officer. On or before the
last day of the first Collection Period following its discovery or receipt of
notice of any breach of any covenant set forth in Sections 4.02(c), 4.05(a) or
4.06 that materially and adversely affects the interests of the Issuer, the
Indenture Trustee, the Owner Trustee, the Certificateholders, the Noteholders
or the Note Insurer in any Receivable, the Servicer shall, unless such
breach shall have been cured in all material respects by such date, purchase
from the Issuer the Receivable affected by such breach. In consideration of
the purchase of any such Receivable, the Servicer shall remit the related
Purchase Amount into the Collection Account in the manner specified in Section
5.04. Subject to Section 7.02, it is understood and agreed that the obligation
of the Servicer to purchase any Receivable with respect to which such a breach
has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available
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to the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders
or the Noteholders.
SECTION 4.08. Servicing Fee. The Servicing Fee payable to the Servicer
on each Distribution Date shall equal the sum of (a) the product of (i)
one-twelfth, (ii) 2.75% and (iii) the Pool Balance as of the first day of the
related Collection Period, (b) any unreimbursed expenses reimbursable pursuant
to this Agreement and (c) any Deficiency Fee earned during the related
Collection Period. The Servicing Fee shall be calculated on the basis of a
360-day year comprised of twelve 30-day months. The Servicer also shall be
entitled to all late fees and other administrative fees or similar charges
allowed by applicable law with respect to the Receivables, collected (from
whatever source) on the Receivables, but not including (x) extension fees and
(y) amounts described in clause (g) of the definition of Interest Distribution
Amount herein.
Except for the expenses reimbursable pursuant to this Agreement, the
Servicer shall be required to pay all expenses incurred by it in connection
with its activities under this Agreement (including taxes imposed on the
Servicer and expenses incurred in connection with distributions and reports
made by the Servicer to the Owner Trustee and Indenture Trustee).
SECTION 4.09. Servicer's Certificate. Not later than 10:00 a.m. (New York
City time) on each Determination Date, the Servicer shall deliver to the Owner
Trustee, the Paying Agent, the Indenture Trustee, the Originator, the Seller,
the Backup Servicer and the Note Insurer and with a copy to the Rating Agencies
and GCM (at the address indicated in the definition of GCM herein), a
Servicer's Certificate containing all information necessary to make the
distributions to be made on the related Distribution Date pursuant to Section
5.06 for the related Collection Period; provided that the Servicer shall
deliver a Servicer's Certificate to the Note Insurer (with a copy to the Owner
Trustee, the Paying Agent, the Indenture Trustee, the Originator, the
Sub-servicer, the Backup Servicer and the Seller) at any time upon the prior
written request of the Note Insurer. Receivables to be purchased by the
Servicer or to be repurchased by the Seller and each Receivable that became a
Liquidated Receivable shall be identified by the Servicer by account number
with respect to such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. (a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Originator, the Seller, the
Note Insurer and each Rating Agency, within 120 days after the end of the
Servicer's fiscal year (with the first such certificate being delivered no
later than April 30, 1998), an Officer's Certificate signed by a Responsible
Officer of the Servicer, stating that (i) a review of the activities of the
Servicer during the preceding 12-month period (or such shorter period as shall
have elapsed from the Closing Date to the end of the first such fiscal year)
and of the performance of its obligations under this Agreement has been made
under such officer's supervision and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
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(b) The Servicer or the Seller shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer the Originator, the Note Insurer and
each Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time or
both would become a Servicer Termination Event under Section 8.01.
SECTION 4.11. Annual Independent Accountants' Report. The Servicer
shall cause a firm of independent certified public accountants, which may also
render other services to the Servicer or its Affiliates, to deliver to the
Owner Trustee, the Indenture Trustee, the Originator, the Backup Servicer, the
Seller, the Note Insurer and each Rating Agency, within 120 days after the end
of each fiscal year (with the first such report being delivered no later than
April 30, 1998), a report addressed to the Board of Directors of the Servicer,
the Owner Trustee, the Indenture Trustee, the Originator, the Backup Servicer
and the Note Insurer, to the effect that such firm has audited the books and
records of the Servicer and issued its report thereon and that (1) such audit
was made in accordance with generally accepted auditing standards and
accordingly included such tests of the accounting records and such other
auditing procedures as such firm considered necessary in the circumstances; (2)
the firm is independent of the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants;
and (3) a review in accordance with agreed upon procedures was made of three
randomly selected Servicer's Certificates, including the delinquency, default
and loss statistics required to be specified therein and, except as disclosed
in the accountants' report, no exceptions or errors in the Servicer's
Certificates were found. In the event such firm requires the Backup Servicer
or the Indenture Trustee to agree to the procedures performed by such firm, the
Servicer shall direct the Backup Servicer or the Indenture Trustee, as the case
may be, in writing to so agree; it being understood and agreed that (x) the
Backup Servicer or the Indenture Trustee, as the case may be, shall notify the
Servicer of any such requirement to agree and (y) the Backup Servicer or the
Indenture Trustee, as the case may be, shall be entitled to conclusively rely
on the written direction of the Servicer with respect thereto. The Backup
Servicer and the Indenture Trustee shall be under no obligation or have any
liability in respect of the sufficiency, validity or correctness of such
procedures.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Owner
Trustee, the Indenture Trustee, the Sub-servicer, the Backup Servicer,
the Note Insurer (so long as no Note Insurer Default shall have occurred and be
continuing), the Certificateholders and Noteholders reasonable access to the
documentation regarding the Receivables. Access shall be afforded without
charge, but only upon reasonable request and during the normal business hours
at the offices of the Servicer. Nothing in this Section shall affect the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors and the failure of the Servicer to
provide access to information as a result of such obligation shall not
constitute a breach of this Section.
SECTION 4.13. Monthly Tape. On or before the eighth Business Day, but
in no event later than the tenth calendar day, of each month, the
Servicer shall deliver or cause to be delivered to the Indenture Trustee, Owner
Trustee, the Seller, the Originator, the Sub-servicer
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and the Backup Servicer a computer tape or a diskette (or any other form of
electronic transmission acceptable to the Owner Trustee, the Indenture Trustee,
the Seller, the Originator, the Sub-servicer and the Backup Servicer) in a
format acceptable to the Indenture Trustee, Owner Trustee, the Seller, the
Originator, the Sub-servicer and the Backup Servicer containing the information
with respect to the Receivables as of the last day of the preceding Collection
Period and necessary for preparation of the Servicer's Certificate for the
immediately succeeding Determination Date and to determine the application of
payments received on the Receivables as provided herein. The Backup Servicer
shall use such tape or diskette (or other electronic transmission acceptable to
the Indenture Trustee, Owner Trustee, the Seller, the Originator, the
Sub-servicer and the Backup Servicer) to verify the mathematical accuracy of the
Servicer's Certificate delivered by the Servicer, and the Backup Servicer shall
certify to the Indenture Trustee and the Owner Trustee that it has verified the
mathematical accuracy of the Servicer's Certificate in accordance with this
Section 4.13 and shall notify the Servicer, the Seller, the Originator, the
Indenture Trustee, the Sub-servicer and the Owner Trustee of any discrepancies,
in each case, on or before the third Business Day following the related
Determination Date. In the event that the Backup Servicer reports any
discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile
such discrepancies prior to the related Distribution Date, but in the absence of
a reconciliation, the Servicer's Certificate shall control for the purpose of
calculations and distributions with respect to the related Distribution Date.
In the event that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Distribution Date, the Servicer shall cause a firm of nationally recognized
independent certified public accountants, at the Servicer's expense, to audit
the Servicer's Certificate and, prior to the third Business Day, but in no event
later than the fifth calendar day, of the following month, to reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for the next succeeding Determination Date. In
addition, upon the occurrence of a Servicer Termination Event, the Servicer
shall, if so requested by the Indenture Trustee or the Owner Trustee, deliver to
the Backup Servicer within 15 days after demand therefor its records relating to
the Receivables and a computer tape containing as of the close of business on
the date of demand all of the data maintained by the Servicer in computer format
in connection with servicing the Receivables. Other than the duties
specifically set forth in this Agreement, the Backup Servicer shall have no
obligations hereunder, including, without limitation, to supervise, verify or
monitor the performance of the Servicer. The Backup Servicer shall have no
liability for any actions taken or omitted by the Servicer.
SECTION 4.14. Retention and Termination of Servicer. The Servicer hereby
covenants and agrees to act as Servicer under this Agreement for an initial term
commencing on the Closing Date and ending on August 31, 1997, which term shall
be extendible by the Note Insurer (or the Indenture Trustee for as long as the
Notes are outstanding, if there is an existing Note Insurer Default or if the
Policy is no longer in effect) for successive quarterly terms ending on each
successive November 30, February 28, May 31 and August 31 (or pursuant to
revocable written standing instructions delivered from time to time to the
Servicer, the Indenture Trustee and the Owner Trustee, for any specified number
of terms), until the Notes are paid in full; provided, however, that on the date
that the Notes are paid in full, the then current term of the Servicer shall be
automatically extended until the Certificates are paid
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in full. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive quarterly
terms for so long as such instructions are in effect) (a "Servicer Extension
Notice") shall be delivered by the Note Insurer, the Indenture Trustee or the
Owner Trustee, as applicable, to the other parties to this Agreement. The
Servicer hereby agrees that, as of the date hereof and upon its receipt of any
such Servicer Extension Notice, the Servicer shall be bound for the duration of
the initial term or the term covered by such Servicer Extension Notice to act as
the Servicer, subject to and in accordance with the other provisions of this
Agreement. Until such time as a Note Insurer Default shall have occurred and be
continuing, the Servicer agrees that if as of the last day of the calendar month
preceding the last day of any such servicing term the Servicer shall not have
received a Servicer Extension Notice from the Note Insurer, the Servicer shall,
within five days thereafter, give written notice of such non-receipt to the
Indenture Trustee, the Owner Trustee, the Note Insurer, the Sub-servicer and the
Backup Servicer.
SECTION 4.15. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian
of funds and documents in respect of consumer contracts on behalf of
institutional investors.
SECTION 4.16. Duties of the Sub-Servicer. The rights and obligations of
the Sub-servicer shall be as set forth in this Agreement and in the
Sub-servicing Agreement.
ARTICLE V
Distributions; Spread Account; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Lock-box Account. (a) On or prior to the third Business
Day after Servicing Transfer Date, the Servicer shall send revised statements
(which statements will indicate (by notation specific to this transaction) that
such payments relate to Receivables owned by the Issuer) to each Obligor
pursuant to which payments made by such Obligor after the Servicing Transfer
Date will be addressed to a lockbox account (the "Lockbox Account") at the
Lockbox Bank. All payments and other proceeds of any type and from any source
on or with respect to the Receivables that are delivered to the Lockbox Account,
or otherwise received by the Originator, the Seller, the Servicer or the
Sub-servicer on and after the Cutoff Date, shall be the property of the Issuer.
SECTION 5.02. Accounts. (a)(i) The Servicer shall deposit directly
(without deposit into any intervening account) into the Lockbox Account, no
later than the Business Day following receipt thereof, all payments by or
on behalf of the Obligors on the Receivables, any Recoveries and any
Liquidation Proceeds received by the Servicer after the Closing Date. The
Servicer shall cause the Lockbox Bank to remit to the Collection Account no
later than the next Business Day after receipt thereof in the Lock-Box Account
all payments by or on behalf of the Obligors, all Recoveries and all
Liquidation Proceeds.
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(ii) On or prior to the Cutoff Date the Sub-servicer has instructed the
Obligors to make payments in respect of the Receivables to a lock-box account
(the "Initial Lockbox Account") and may otherwise receive proceeds in respect
of the Receivables in one or more local collection accounts (collectively, the
"Local Collection Account"). The Sub-servicer shall cause all payments and
other proceeds in respect of the Receivables which are deposited in the Initial
Lockbox Account or the Local Collection Account on and after the Cutoff Date,
to be swept or otherwise deposited into the Collection Account or the Lockbox
Account pursuant to the Retail Lockbox Mail Service Agreement (in the case of
the Initial Lockbox Account) and the Local Collection Account Processing
Agreement (in the case of the Local Collection Account) by the second Business
Day after receipt thereof (or in the case of such payments and other proceeds
received prior to Closing Date, on the Closing Date). In addition, all
payments and other proceeds in respect of the Receivables otherwise received by
the Sub-servicer, the Originator or the Seller on or after the Cutoff Date
shall be remitted by the Originator, the Seller or the Sub-servicer, as the
case may be, no later than the next Business Day after such receipt or deposit
(or with respect to any such payment received prior to the Closing Date, on the
Closing Date) to the Collection Account or the Lock-Box Account (as directed by
the Servicer, or, if not directed by the Servicer, to the Collection Account).
(b) The Servicer and the Sub-servicer will be entitled to be reimbursed
from amounts on deposit in the Collection Account with respect to a Collection
Period for amounts previously deposited in the Collection Account but later
determined by the Servicer or the Sub-servicer, as the case may be, or the
Lockbox Bank to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall
be paid to the Servicer or the Sub-servicer, as the case may be, on the related
Distribution Date upon certification by the Servicer or the Sub-servicer, as
the case may be, of such amounts and the provision of such information to the
Indenture Trustee and the Note Insurer as may be necessary in the opinion of
the Indenture Trustee and the Note Insurer to verify the accuracy of such
certification. In the event that the Note Insurer has not received evidence
satisfactory to it of the Servicer's or the Sub-servicer's, as the case may be,
entitlement to reimbursement pursuant to this Section 5.02(b), the Note Insurer
shall (unless an Insurer Default shall have occurred and be continuing) give
the Indenture Trustee timely written notice to such effect, following receipt
of which the Indenture Trustee shall not make a distribution to the Servicer or
the Sub-servicer, as the case may be, in respect of such amount pursuant to
this Section 5.06(b).
(c) (i) On or prior to the Closing Date, the Servicer shall establish, or
cause to be established with the Indenture Trustee, an account in the name of
the Indenture Trustee (the "Collection Account"), which shall be maintained as
an Eligible Deposit Account and shall bear a designation clearly indicating
that the amounts deposited thereto are held for the benefit of the Noteholders
and Certificateholders. The Servicer shall cause any amounts deposited to the
Lockbox Account on or with respect to the Receivables to be swept into the
Collection Account as promptly as possible, but in no event later than the
second Business Day following receipt thereof in the Lockbox Account.
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(ii) The Servicer, for the benefit of the Noteholders, shall establish
(or cause to be established) an Eligible Deposit Account (the "Note
Distribution Account") which shall be maintained in the name of the
Indenture Trustee, bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Certificateholders (and not
for the benefit of the Noteholders or the Note Insurer), shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "Reserve Account" and, together with the Collection Account
and the Note Distribution Account, the "Trust Accounts"), bearing a
designation clearly indicating that the funds deposited therein are held
for the benefit of the Certificateholders.
(iv) Funds on deposit in the Collection Account and the Note
Distribution Account shall be invested by the Indenture Trustee in Eligible
Investments selected in writing by or at the direction of the Issuer or, if
an Insurance Agreement Event of Default shall have occurred and be
continuing, the Note Insurer. All such Eligible Investments shall be held
by the Indenture Trustee for the benefit of the Noteholders
and the Certificateholders or the Noteholders, as applicable; provided
that, on each Payment Determination Date all interest and other investment
income (net of losses and investment expenses) on funds on deposit in the
Trust Accounts (other than the Reserve Account) shall be deposited into the
Collection Account and shall be deemed to constitute a portion of the
Interest Distribution Amount for the related Distribution Date. Other than
as permitted by the Rating Agencies, funds on deposit in the Trust Accounts
shall be invested in Eligible Investments that will mature not later than
the Business Day immediately preceding the next Distribution Date. Funds
deposited in a Trust Account on a day which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not
required to be invested overnight.
(v) Funds on deposit in the Reserve Account shall be invested by the
Indenture Trustee in Eligible Investments selected in writing by the
Seller. All such Eligible Investments shall be held by the Indenture
Trustee for the benefit of the Certificateholders; provided that, on each
Payment Determination Date all interest and other investment income (net of
losses and investment expenses) on funds on deposit in the Reserve Account
shall be deposited into the Reserve Account. Other than as permitted by
the Rating Agencies, funds on deposit in the Reserve Account shall be
invested in Eligible Investments that will mature not later than the
Business Day immediately preceding the next Distribution Date. Funds
deposited in the Reserve Account on a day which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not
required to be invested overnight.
(vi) The Indenture Trustee shall not be held liable in any way by
reason of any insufficiency in the Collection Account, the Note
Distribution Account or the Reserve Account resulting from any loss on an
Eligible Investment included therein, except for losses attributable to the
Indenture Trustee's failure to make payments on such Eligible
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Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(d) (i) The Indenture Trustee and, to the extent provided herein,
the Note Insurer shall possess all right, title and interest in all funds
received in the Lockbox Account and all funds on deposit from time to time
in the Trust Accounts and in all proceeds thereof (including all income
thereon). The Lockbox Account and the Trust Accounts shall be under the
sole dominion and control of the Indenture Trustee for the benefit of the
Noteholders, the Certificateholders or the Noteholders and the
Certificateholders, as the case may be. If, at any time, any Trust Account
ceases to be an Eligible Deposit Account, the Indenture Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) establish a new Trust Account as an Eligible Deposit Account and
shall transfer any cash and/or any investments from the account that is no
longer an Eligible Deposit Account to the new Trust Account.
(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts, subject to the
last sentence of Section 5.02(c)(i); and each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security.
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(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee,
to instruct the Indenture Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer or the Owner
Trustee to carry out its respective duties hereunder or permitting the
Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.03. Application of Collections. All amounts received with
respect to the Receivables during each Collection Period shall be applied by
the Servicer as follows:
With respect to each Simple Interest Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied to
interest and principal in accordance with the Simple Interest Method. With
respect to each Precomputed Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, first, to the
Obligor's Scheduled Payment, with any excess amounts (over and above fees and
expenses payable by the Obligor) being applied to future Scheduled Payments of
such Obligor.
SECTION 5.04. Purchase Amounts. The Servicer and the Seller shall
deposit or cause to be deposited in the Collection Account, on or prior to
each Determination Date, the aggregate Purchase Amount with respect to
Purchased Receivables and the Servicer shall deposit therein all amounts to be
paid under Section 4.07.
SECTION 5.05. Transfers from the Spread Account and the Reserve
Account. (a) The Indenture Trustee shall determine, no later than 11:00 a.m.,
New York City time, on each Deficiency Claim Date whether a shortfall exists
with respect to the distributions that the Indenture Trustee is required to
make on the upcoming Distribution Date pursuant to clauses (1) through (5) of
Section 5.06(b). In the event that the Indenture Trustee determines that such
a shortfall exists, the Indenture Trustee shall furnish to the Collateral Agent
and the Note Insurer, no later than 12:00 noon, New York City time, on such
Deficiency Claim Date, a written notice specifying the amount of the shortfall
and directing the Collateral Agent to remit an amount equal to such shortfall
(to the extent of funds available to be so distributed pursuant to the Spread
Account Agreement) to the Indenture Trustee for deposit in the Collection
Account. Upon receipt of any such funds, the Indenture Trustee shall
immediately deposit such amounts into the Collection Account for distribution
on the Distribution Date pursuant to Section 5.06.
(b) The Indenture Trustee shall determine on each Payment Determination
Date (based on its determination, as provided in Section 5.06(b), of the Total
Distribution Amount plus all amounts transferred to the Collection Account from
the Spread Account and the Reserve Account (pursuant to Section 5.05(a)), plus
any amounts deposited thereto from the Policy Payments Account pursuant to
Section 5.07(b)) (i) whether a shortfall exists with respect to the
distributions that the Indenture Trustee is required to make on the upcoming
Distribution Date pursuant to clauses (8) and (9) of Section 5.06(b) and (ii)
the Certificateholders' Additional Principal Distributable Amount, if any, for
the upcoming Distribution Date. In the event that the Indenture Trustee
determines that a shortfall exists with respect to the distribution required to
be made pursuant to clause (8) of Section 5.06(b)
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on the upcoming Distribution Date, the Indenture Trustee shall withdraw from
the Reserve Account (to the extent of funds available in the Reserve Account),
the amount of such shortfall. In the event that the Indenture Trustee
determines that a shortfall exists with respect to the distribution required to
be made pursuant to clause (9) of Section 5.06(b) on the upcoming Distribution
Date, the Indenture Trustee shall withdraw from the Reserve Account (to the
extent of funds available in the Reserve Account, after giving effect to the
distributions made pursuant to clause (8) of Section 5.06(b)) the amount of such
shortfall. In addition, after giving effect to the withdrawals referred to in
the preceding two sentences, on each Distribution Date, the Indenture Trustee
shall withdraw from the Reserve Account (after giving effect to the
distributions made pursuant to clauses (8) and (9) of Section 5.06(b)) an amount
equal to the Certificateholders' Additional Principal Distribution Amount, if
any, for the upcoming Distribution Date. Each amount withdrawn from the Reserve
Account by the Indenture Trustee pursuant to this Section 5.05(b) shall be
deposited in the Collection Account by the Indenture Trustee for distribution on
the Distribution Date pursuant to clauses (8), (9) and (11) of Section 5.06(b).
SECTION 5.06. Distributions. (a) On each Payment Determination Date,
the Servicer shall calculate all amounts required to be deposited in the Note
Distribution Account and the Certificate Distribution Account.
(b) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee in writing (based on the information contained in the
Servicer's Certificate delivered on the related Payment Determination Date
pursuant to Section 4.09) to make the following deposits and distributions
for receipt or deposit by 11:00 a.m. (New York City time), to the extent of
the Total Distribution Amount plus all amounts transferred to the
Collection Account from the Spread Account and the Reserve Account, plus
any amounts deposited thereto from the Policy Payments Account pursuant to
Section 5.07(b), to make required payments and distributions on such date
pursuant to clauses (1) through (12) below, in the following order and
priority:
(1) to the Servicer from the Interest Distribution Amount, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods) and any amounts reimbursed pursuant to Section 5.02(b);
shortfalls in amounts due to the Servicer as Servicing Fees on any
Distribution Date may be paid using amounts transferred from the
Spread Account only to the extent provided in Section 3.03(b) of the
Master Spread Account Agreement;
(2) to the Owner Trustee, the Indenture Trustee, the Backup
Servicer and the Custodian, from the Total Distribution Amount
remaining after the application of clause (1) above, any accrued and
unpaid Owner Trustee Fees, Indenture Trustee Fees, Backup Servicer
Fees and Custodian Fees, respectively, due hereunder; shortfalls in
any such amounts due to the Owner Trustee, the Indenture Trustee, the
Backup Servicer or the Custodian on any Distribution Date may be paid
using amounts transferred from the Spread Account only to the extent
provided in Section 3.03(b) of the Master Spread Account Agreement;
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(3) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (1) and (2) above,
the Noteholders' Interest Distributable Amount and to the extent of
any deficiency, first from amounts transferred to the Collection
Account from the Spread Account pursuant to Section 5.05 and then from
amounts transferred to the Collection Account from the Policy Payments
Account pursuant to Section 5.07(b);
(4) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1)
through (3) above, the Guaranteed Noteholders' Principal Distributable
Amount and to the extent of any deficiency, first from amounts
transferred to the Collection Account from the Spread Account pursuant
to Section 5.05 and then from amounts transferred to the Collection
Account from the Policy Payments Account pursuant to Section 5.07(b);
(5) to the Note Insurer, from the Total Distribution Amount
remaining after the application of clauses (1) through (4) above, any
amounts due to the Note Insurer under the Insurance Agreement;
(6) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (1) through (5)
above, any unpaid portion of the Noteholders' Principal Distributable
Amount;
(7) to the Spread Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (6) above, an
amount up to the amount of any deficiency in the Spread Account
Required Amount;
(8) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (1)
through (7) above, the Certificateholders' Interest Distributable
Amount and, to the extent of any deficiency, from the amount
transferred to the Collection Account from the Reserve Account on such
Distribution Date pursuant to the second sentence of Section 5.05(b);
(9) only after the Notes have been paid in full, to the
Certificate Distribution Account, from the Total Distribution Amount
remaining after the application of clauses (1) through (8) above, the
Certificateholders' Principal Distributable Amount and, to the extent
of any deficiency, from the amount transferred to the Collection
Account from the Reserve Account on such Distribution Date pursuant to
the third sentence of Section 5.05(b);
(10) to the Reserve Account, the Total Distribution Amount
remaining after the application of clauses (1) through (9) above;
(11) to the Certificate Distribution Account, from the amount
transferred to the Collection Account from the Reserve Account on such
Distribution Date
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pursuant to the fourth sentence of Section 5.05(b), the
Certificateholders' Additional Principal Distribution Amount; and
(12) only after the Certificates have been paid in full, to the
Collateral Agent, the sum of (x) the portion, if any, of the Total
Distribution Amount remaining after the application of clauses (1)
through (11) above and (y) any amounts remaining on deposit in the
Collection Account, the Reserve Account, the Spread Account, the
Certificate Distribution Account and the Note Distribution Account, in
each case to pay the Credit Enhancement Fee to the Seller pursuant to
the terms and subject to the conditions set forth in the Spread Account
Agreement.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account and the Reserve Account
hereunder until the Certificate Balance is reduced to zero.
SECTION 5.07. Claims Upon the Policy; Policy Payments Account. (a) If
on the third Business Day prior to a Distribution Date, the Total
Distribution Amount on deposit or to be deposited in the Collection Account for
the related Collection Period (after giving effect to all transfers thereto of
any amounts from the Spread Account and to the payment of all amounts required
to be paid pursuant to clauses (1) and (2) of Section 5.06(b)) is insufficient
to pay the Guaranteed Payment on the related Distribution Date, then the
Indenture Trustee shall give notice to the Note Insurer by telephone or
telecopy of the amount of such deficiency. Such notice shall be confirmed in
writing by the Indenture Trustee in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Note Insurer and the Fiscal Agent, if any, at
or before 12:00 noon, New York City time, on the second Business Day prior to
such Distribution Date. Following receipt by the Note Insurer of such notice
in such form, the Note Insurer or the Fiscal Agent will pay any amount payable
under the Policy on the later to occur of (i) 12:00 noon, New York City time,
on the second Business Day following such receipt and (ii) 12:00 noon, New York
City time, on the Distribution Date to which such deficiency relates, as
provided in the Endorsement to the Policy.
(b) The Indenture Trustee shall establish a separate special purpose trust
account for the benefit of the Noteholders (the "Policy Payments Account").
The Indenture Trustee shall have exclusive control over the Policy Payments
Account and sole right of withdrawal. The Indenture Trustee shall deposit any
amount paid under the Policy in the Policy Payments Account and distribute such
amount only to pay to Noteholders the Guaranteed Payment for which a claim has
been made, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Backup Servicer, the Custodian, the Indenture
Trustee or the Owner Trustee. Amounts paid under the Policy shall be
transferred to the Collection Account in accordance with the next succeeding
paragraph and disbursed by the Indenture Trustee to Noteholders in accordance
with Section 5.06. It shall not be necessary for any payments under the Policy
to be made by checks or wire transfers separate from the checks or wire
transfers used to pay the Guaranteed Payment from other funds available to make
such payment. However, the amount of any payment of principal of or interest
on the Notes to be paid from funds transferred from the Policy Payments Account
shall be noted as
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provided in paragraph (c) below in the Note Register and in the statement to
be furnished to Noteholders pursuant to Section 5.11. Funds held in the Policy
Payments Account shall not be invested by the Indenture Trustee.
On any Distribution Date with respect to which a claim has been made under
the Policy, the amount of any funds received by the Indenture Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Payment on such Distribution Date, shall be withdrawn from the
Policy Payments Account and deposited in the Collection Account and applied by
the Indenture Trustee, together with the other funds to be distributed from the
Collection Account pursuant to Section 5.06, directly to the payment in full of
the Guaranteed Payment due with respect to the Notes. Any funds remaining in
the Policy Payments Account on the first Business Day following a Distribution
Date shall be remitted to the Note Insurer, pursuant to the instructions of the
Note Insurer, by the end of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Notes from moneys
received under the Policy. The Note Insurer shall have the right to inspect
such records at reasonable times during normal business hours upon one Business
Day's prior notice to the Indenture Trustee at the expense of the Note Insurer.
SECTION 5.08. Notices to the Note Insurer. All notices, statements,
reports, notes, or opinions required by this Agreement to be sent to any other
party hereto or to the Noteholders at any time when the Note Insurer is the
Controlling Party shall also be sent to the Note Insurer.
SECTION 5.09. Rights in Respect of Insolvency Proceedings. (a) In the
event that the Indenture Trustee has received a certified copy of a final,
nonappealable order of the appropriate court that any Guaranteed Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy or insolvency law, the Indenture Trustee shall (i) deliver to the
Note Insurer a certified copy of such court order, an irrevocable assignment to
the Note Insurer of the Noteholders' rights with respect to any such recovered
payment and an instrument appointing the Note Insurer as agent of the
Noteholders with respect to any such recovered payments and (ii) notify the
Noteholders by mail that, in the event that any Guaranteed Payment distributed
to a Noteholder is so recovered, such Noteholder will be entitled to payment of
such recovered amounts pursuant to the Policy.
(b) The Indenture Trustee shall promptly notify the Note Insurer of
either of the following as to which an applicable Trust Officer has actual
knowledge: (i) the commencement of any proceeding by or against the Seller or
the Issuer commenced under the United States Bankruptcy Code or any other
applicable United States federal or state bankruptcy, insolvency, receivership,
rehabilitation, or similar law (an "Insolvency Proceeding") or (ii) the making
of any claim in connection with any Insolvency Proceeding seeking the avoidance
as a preferential transfer (a "Preference Claim") of any payment of principal of
or interest on the Notes. Each Noteholder, by its purchase of a Note, and the
Indenture Trustee hereby agree that, so long as a Note Insurer Default shall not
have occurred and be continuing, the Note Insurer may at
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any time during the continuation of an Insolvency Proceeding direct all matters
relating to such Insolvency Proceeding, including (i) all matters relating to
any Preference Claim, (ii) the direction of any appeal of any order relating to
any Preference Claim at the expense of the Note Insurer and (iii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In
addition, and without limitation of the foregoing, as set forth in Section 5.10,
the Note Insurer shall be subrogated to, and each Noteholder and the Indenture
Trustee hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Indenture Trustee and such Noteholder in the conduct of any
Insolvency Proceeding, including all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Insolvency Proceeding.
(c) The Indenture Trustee shall furnish to the Note Insurer its records
evidencing the distributions of principal of and interest on the Notes that
have been made by the Indenture Trustee and subsequently recovered from
Noteholders and the dates on which such payments were made.
SECTION 5.10. Effect of Payments by the Note Insurer; Subrogation.
(a) Anything herein to the contrary notwithstanding, any distribution of
principal of or interest on the Notes that is made with moneys received
pursuant to the terms of the Policy shall not be considered payment of the
Notes by the Issuer and shall not discharge the Trust assets in respect of such
distribution. The Indenture Trustee acknowledges that, without the need for
any further action on the part of the Note Insurer, the Indenture Trustee or
the Note Registrar, (i) to the extent the Note Insurer makes payments, directly
or indirectly, on account of principal of or interest on the Notes to the
Noteholders, the Note Insurer will be fully subrogated to the rights of such
Noteholders to receive such principal and interest from distributions of the
assets of the Trust and will be deemed to the extent of the payments so made to
be a Noteholder and (ii) the Note Insurer shall be paid principal and interest
in its capacity as a Noteholder until all such payments by the Note Insurer
have been fully reimbursed, but only from the sources and in the manner
provided herein for the distribution of such principal and interest and in each
case only after the Noteholders have received all Guaranteed Payments due to
them under this Agreement.
(b) Without limiting the rights or interests of the Noteholders as
otherwise set forth herein and subject to Article X, so long as no Note Insurer
Default exists, the Indenture Trustee shall cooperate in all respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests under this Agreement, including, upon the
occurrence and continuance of a Servicer Termination Event, a request to take
any one or more of the following actions:
(i) institute proceedings for the collection of all amounts then
payable on the Notes or under this Agreement, enforce any judgment obtained
and collect moneys adjudged due; and
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(ii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Note Insurer hereunder.
SECTION 5.11. Statements to Securityholders. On each Distribution
Date, the Indenture Trustee shall provide to each Noteholder of record as of
the most recent Record Date a statement (which statement shall also be provided
by the Indenture Trustee to the Seller, each Rating Agency, GCM (at the address
indicated in the definition of GCM herein) the Note Insurer and the Owner
Trustee (for the Owner Trustee to forward to each Certificateholder of record
as of the most recent Record Date)) prepared by the Indenture Trustee (based on
information in the Servicer's Certificate for the related Collection Period)
substantially in the form of Exhibit B, setting forth at least the following
information as to the Securities to the extent applicable:
(i) the amount of such distribution allocable to principal allocable
to the Notes;
(ii) the amount of such distribution allocable to interest allocable
to the Notes;
(iii) the amount of such distribution allocable to principal of the
Certificates;
(iv) the amount of such distribution allocable to interest on or with
respect to the Certificates;
(v) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(vi) the Outstanding Amount of the Notes, the Note Pool Factor, after
giving effect to payments allocated to principal reported under clause (i)
above;
(vii) the Certificate Balance and the Certificate Pool Factor, after
giving effect to all payments reported under clause (iii) above on such
date;
(viii) the amount, if any, of the distribution payable pursuant to
claims under the Policy;
(ix) the amount of the Servicing Fee, the Owner Trustee Fee, the
Indenture Trustee Fee, the Backup Servicer Fee and the Custodian Fee paid
from monies on deposit in the Collection Account including, with respect to
expenses constituting a part thereof, such detail as the Seller, the Note
Insurer, the Indenture Trustee and/or the Owner Trustee may request;
(x) the amount of any deposit to the Spread Account (including,
without limitation, amounts attributable to investment earnings in respect
thereof) and the amount and application of any funds withdrawn from Spread
Account;
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(xi) the amount of any deposit to the Reserve Account (including,
without limitation, amounts attributable to investment earnings in respect
thereof) and the amount and application of funds withdrawn from the Reserve
Account;
(xii) the aggregate principal balance of all Receivables that became
Liquidated Receivables or Purchased Receivables during the related
Collection Period (and the aggregate outstanding principal balance of such
Receivables at the start of such Collection Period);
(xiii) the amounts of the aggregate Realized Losses and Cram Down
Losses, if any, separately identified, for the related Collection Period;
(xiv) the aggregate principal balance of Receivables that are 30 to 59
days, 60 to 89 days or 90 days or more delinquent;
(xv) the amount of Recoveries collected during the related Collection
Period and identification of the portion interest allocable to principal in
respect of the Receivables and the portion thereof allocable to the
interest in respect of the Receivables;
(xvi) the Noteholders' Interest Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall, if any, in each case
after giving effect to payments on such Distribution Date, and any change
in such amounts from the preceding statement;
(xvii) the aggregate Purchase Amounts for Receivables, if any, that
were purchased during or with respect to such Collection Period;
(xviii) the Total Distribution Amount for such Distribution Date; and
(xix) the cumulative default rate in respect of all Receivables as of
the last day of the related Collection Period, the cumulative loss rate in
respect of all Receivables as of the last day of the related Collection
Period, and the aggregate number of extensions and deferrals in respect of
all Receivables as of the last day of the related Collection Period.
Each amount set forth on the Distribution Date statement under clauses
(i), (ii), (iii), (vi), (ix), (x), (xi) and (xv) above shall be expressed as a
dollar amount per $1,000 of original principal balance of a Certificate or
Note, as applicable.
ARTICLE VI
The Seller
SECTION 6.01. Representations of Seller. The Seller makes the following
representations on which the Issuer relies in accepting the Receivables and
delivering the
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Securities and the Note Insurer relies in issuing the Policy. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, but shall survive the sale, transfer and assignment of the
Receivables by the Seller to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller is duly organized and
validly existing as a corporation in good standing under the laws of the
State of Delaware, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(b) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions where the failure to do so
would materially and adversely affect the Seller's ability to transfer the
Receivables to the Trust pursuant to this Agreement or the validity or
enforceability of the Receivables.
(c) Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out their respective terms;
the Seller has full power and authority to sell and assign the property to
be sold and assigned to and deposited with the Issuer, and the Seller shall
have duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of
this Agreement and the other Basic Documents to which the Seller is a party
have been duly authorized by the Seller by all necessary corporate action.
(d) Binding Obligation. This Agreement and the other Basic Documents
to which the Seller is a party, when duly executed and delivered by the
other parties hereto and thereto, shall constitute legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance
with their respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, and similar laws now or
hereafter in effect relating to or affecting creditors' rights generally
and to general principles of equity (whether applied in a proceeding at law
or in equity).
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents and the fulfillment of the
terms of this Agreement and the other Basic Documents shall not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time, or both) a default
under, the certificate of incorporation or bylaws of the Seller, or any
indenture, agreement, mortgage, deed of trust, or other instrument to which
the Seller is a party or by which it is bound; or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust, or other instrument,
other than this Agreement and the other Basic Documents; or violate any law,
order, rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
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(f) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties: (1) asserting the invalidity of this Agreement or any other
Basic Document; (2) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by
this Agreement or any other Basic Document; (3) seeking any determination
or ruling that might materially and adversely affect the performance by the
Seller of its obligations under, or the validity or enforceability of, this
Agreement or any other Basic Document; or (4) seeking to adversely affect
the federal income tax attributes of the Trust, the Notes or the
Certificates.
(g) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau
or agency in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement or any other Basic Document
to which it is a party that has not already been obtained.
SECTION 6.02. Corporate Existence. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Seller and its Affiliates
will be conducted on an arm's-length basis.
SECTION 6.03. Liability of Seller; Indemnities. The Seller shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement (which shall not
include distributions on account of the Notes or Certificates).
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. The Seller shall not merge or consolidate with any
other Person or permit any other Person to become the successor to the Seller's
business without the prior written consent of the Note Insurer. Any such
successor Person shall execute an agreement of assumption of every obligation of
the Seller under this Agreement and the other Basic Documents and, whether or
not such assumption agreement is executed, shall be the successor to the Seller
under this Agreement without the execution or filing of any document or any
further act on the part of any of the parties to this Agreement. The Seller
shall provide prompt notice of any merger, consolidation or succession pursuant
to this Section 6.04 to the Owner Trustee, the Indenture Trustee, the Note
Insurer, the Securityholders and the Rating Agencies. Notwithstanding the
foregoing, the Seller shall not merge or consolidate with any other Person or
permit any other Person to become a successor to the Seller's business unless
(x) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.02 or 6.01 shall have been breached (for
purposes hereof, such representations and warranties shall
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speak as of the date of the consummation of such transaction), (y) the Seller
shall have delivered to the Owner Trustee, the Indenture Trustee and the Note
Insurer an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 6.04 and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with and (z) the
Seller shall have delivered to the Owner Trustee, the Indenture Trustee and the
Note Insurer an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trust in the Receivables and reciting the details of the
filings or (B) no such action is necessary to preserve and protect such
interest.
SECTION 6.05. Limitation on Liability of Seller and Others. The Seller
and any director, officer, employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.06. Seller May Own Securities. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not the Seller
or an Affiliate thereof, except as expressly provided herein or in any Basic
Document.
ARTICLE VII
The Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables and the Note Insurer relies in issuing the Policy. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date and shall survive the sale of the Receivables to the Issuer
and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the corporate power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right to
acquire, own, sell and service the Receivables and to hold the Receivable
Files as custodian.
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(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Receivables as required by this Agreement) shall require such
qualifications.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which
it is a party and to carry out their respective terms; and the execution,
delivery and performance of this Agreement and the other Basic Documents to
which it is a party have been duly authorized by the Servicer by all
necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents to
which it is a party constitute legal, valid and binding obligations of the
Servicer, enforceable against the Servicer in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the Basic Documents to which it is a party and the
fulfillment of their respective terms shall not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Servicer is a
party or by which it is bound; or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust, or other instrument other
than this Agreement and the Basic Documents, or violate any law, order,
rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or any
of its properties;
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties: (i) asserting the invalidity of this Agreement or any of
the Basic Documents; (ii) seeking to prevent the issuance of the Securities
or the consummation of any of the transactions contemplated by this
Agreement or any of the Basic Documents; (iii) seeking any determination or
ruling that might materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement or any of the Basic Documents; or (iv) seeking to adversely
affect the federal income tax or other federal, state or local tax
attributes of the Securities.
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SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer and the representations made by the Servicer under
this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, employees and agents, and the Securityholders from and
against any and all costs, expenses, losses, damages, claims and
liabilities arising out of or resulting from the use, ownership, repair or
operation by the Servicer or any Affiliate thereof of a Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, agents and employees, and the Securityholders from and
against any taxes that may at any time be asserted against any of such
parties with respect to the transactions contemplated in this Agreement,
including any sales, gross receipts, tangible or intangible personal
property, privilege or license taxes (but not including any federal or
other income taxes, including franchise taxes asserted with respect to, and
as of the date of, the transfer of the Receivables to the Trust or the
issuance and original sale of the Securities), and costs and expenses in
defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Custodian, the Seller, the
Sub-servicer, the Note Insurer, the Backup Servicer, their respective
officers, directors, employees and agents, and the Securityholders from and
against any and all costs, expenses, losses, claims, damages and liabilities
to the extent that such cost, expense, loss, claim, damage or liability
arose out of, or was imposed upon any such Person through, the negligence,
misfeasance or bad faith of the Servicer in the performance of its duties
under this Agreement or by reason of reckless disregard of its obligations
and duties under this Agreement.
For purposes of this Section, in the event of the termination of the
rights and obligations of LSI (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.02, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.03.
Indemnification under this Section shall survive the resignation or
removal of LSI as Servicer, the resignation or removal of any indemnified party
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer shall have
made any indemnity payments pursuant to this Section and the Person to or on
behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Servicer,
without interest.
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SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. (a) The Servicer shall not merge or consolidate
with any other Person, convey, transfer or lease substantially all its assets
as an entirety to another Person, or permit any other Person to become the
successor to the Servicer's business unless, after the merger, consolidation,
conveyance, transfer, lease, or succession, the successor or surviving entity
shall be capable of fulfilling the duties of the Servicer contained in this
Agreement and shall be reasonably acceptable to the Controlling Party. Any
Person (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) that acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer or (iv) succeeding to the business of the
Servicer, which Person shall execute an agreement of assumption to perform
every obligation of the Servicer under this Agreement, shall be the successor
to the Servicer under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement.
The Servicer shall provide notice of any merger, consolidation or succession
pursuant to this Section 7.03(a) to the Owner Trustee, the Indenture Trustee,
the Certificateholders, the Note Insurer, the Seller and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or consolidate with
any other Person or permit any other Person to become a successor to the
Servicer's business unless (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 7.01 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no
event that, after notice or lapse of time or both, would become a Servicer
Termination Event shall have occurred and be continuing, (ii) the Servicer
shall have delivered to the Owner Trustee, the Indenture Trustee and the Note
Insurer an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption
comply with this Section 7.03(a) and that all conditions precedent provided for
in this Agreement relating to such transaction have been complied with and,
(iii) the Servicer shall have delivered to the Owner Trustee, the Indenture
Trustee and the Note Insurer an Opinion of Counsel stating that either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the interest
of the Owner Trustee and the Indenture Trustee, respectively, in the
Receivables and reciting the details of such filings or (B) no such action
shall be necessary to preserve and protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer or (iv)
succeeding to the business of the Backup Servicer, which Person shall execute
an agreement of assumption to perform every obligation of the Backup Servicer
under this Agreement, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties to this Agreement.
(c) Any person (i) into which the Custodian may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Custodian shall be
a party, (iii) which acquires by conveyance, transfer or lease substantially
all of the assets of the Custodian or
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(iv) succeeding to the business of the Custodian, which Person shall execute an
agreement of assumption to perform every obligation of the Custodian under this
Agreement, shall be the successor to the Custodian under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties to this Agreement.
SECTION 7.04. Limitation on Liability of Servicer, Backup Servicer and
Others. (a) None of the Servicer, the Sub-Servicer, the Backup Servicer, the
Custodian or any of their respective directors, officers, employees or agents
shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided in this Agreement, for any action taken
or for refraining from the taking of any action pursuant to this Agreement;
provided, however, that this provision shall not protect the Servicer, the
Sub-Servicer, the Backup Servicer, the Custodian or any such person, as the case
may be, against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith or negligence in the
performance of duties. The Servicer, the Sub-Servicer, the Backup Servicer, the
Custodian and any director, officer, employee or agent of the Servicer, the
Sub-Servicer, Backup Servicer or the Custodian may conclusively rely in good
faith on the written advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement.
(b) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document delivered
to the Backup Servicer hereunder or on which the Backup Servicer must rely in
order to perform its obligations hereunder, and the Owner Trustee, the
Indenture Trustee, the Seller and the Note Insurer and the Securityholders
shall look only to the Servicer to perform such obligations. The Backup
Servicer, the Owner Trustee, the Custodian and the Indenture Trustee shall have
no responsibility and shall not be in default hereunder or incur any liability
for any failure, error, malfunction or any delay in carrying out any of their
respective duties under this Agreement if such failure or delay results from
the Backup Servicer acting in accordance with information prepared or supplied
by a Person other than the Backup Servicer or the failure of any such other
Person to prepare or provide such information. The Backup Servicer shall have
no responsibility, shall not be in default and shall incur no liability for (i)
any act or failure to act of any third party, including the Servicer or the
Controlling Party, (ii) any inaccuracy or omission in a notice or communication
received by the Backup Servicer from any third party, (iii) the invalidity or
unenforceability of any Receivable under applicable law, (iv) the breach or
inaccuracy of any representation or warranty made with respect to any
Receivable, or (v) the acts or omissions of any successor Backup Servicer.
(c) The parties expressly acknowledge and consent to Xxxxxx 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. Xxxxxx 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 Xxxxxx Trust and Savings Bank of express duties
set forth in this Agreement in any of such capacities.
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SECTION 7.05. Appointment of Sub-servicer. The Servicer may at any
time, with the Note Insurer's consent, appoint a subservicer (which shall
initially be the Sub-servicer) to perform all or any portion of its obligations
as Servicer hereunder; provided, however, that 10 days' prior notice of such
appointment (other than the appointment of the Sub-servicer) shall have been
given to the Rating Agencies and each Rating Agency shall have notified the
Servicer, the Backup Servicer, the Owner Trustee and the Indenture Trustee in
writing that such appointment will not result in a reduction or withdrawal of
the then current ratings of the Notes or the Certificates or result in an
increased capital charge to the Note Insurer; and, provided, further, that the
Servicer shall remain obligated and be liable to the Owner Trustee, the
Indenture Trustee, the Note Insurer and the Securityholders for the servicing
and administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of any subservicer (including without
limitation the Sub-servicer) shall be as agreed between the Servicer and such
subservicer from time to time, and none of the Owner Trustee, the Indenture
Trustee, the Issuer, the Backup Servicer, the Note Insurer or the
Securityholders shall have any responsibility therefor.
SECTION 7.06. Servicer and Backup Servicer Not to Resign. (a)
Subject to the provisions of Section 7.03(a), the Servicer shall not resign from
the obligations and duties imposed on it by this Agreement as Servicer except
upon a determination that the performance of its duties under this Agreement
shall no longer be permissible under applicable law.
(b) Subject to the provisions of Section 7.03(b), the Backup Servicer may
resign from the obligations and duties imposed on it by this Agreement as
Backup Servicer (i) upon a determination that the performance of its duties
under this Agreement shall no longer be permissible under applicable law, (ii)
if the Backup Servicer resigns or is removed as Indenture Trustee (in which
case the Backup Servicer may resign as Backup Servicer subject to the same
conditions applicable to the Indenture Trustee pursuant to Section 6.08 of the
Indenture), or (iii) with the prior written consent of the Rating Agency and
the Controlling Party; provided, that, the Rating Agency Condition shall have
been satisfied.
(c) Notice of any determination that the performance by either the
Servicer or the Backup Servicer of its duties hereunder is no longer permitted
under applicable law shall be communicated to the Owner Trustee, the Indenture
Trustee and the Note Insurer at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination shall be evidenced by an Opinion
of Counsel to such effect delivered by the Servicer or the Backup Servicer, as
applicable, to the Owner Trustee, the Indenture Trustee and the Note Insurer
concurrently with or promptly after such notice. No resignation of the
Servicer shall become effective until the Backup Servicer or a successor
Servicer shall have assumed the responsibilities and obligations of the
Servicer in accordance with Section 8.03. No resignation of the Backup
Servicer shall become effective until an entity acceptable to the Controlling
Party shall have assumed the responsibilities and obligations of the Backup
Servicer.
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ARTICLE VIII
Default
SECTION 8.01. Servicer Termination Events. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) any failure by the Servicer to deposit into the Lockbox Account or the
Collection Account any proceeds or payment required to be so delivered under
the terms of this Agreement that continues unremedied for a period of two
Business Days (one Business Day with respect to payments of Purchase Amounts)
after written notice is received by the Servicer or after discovery of such
failure by a Responsible Officer of the Servicer;
(b) failure by the Servicer to deliver to the Owner Trustee, the Indenture
Trustee, the Seller and (so long as the Note Insurer is the Controlling Party)
the Note Insurer the Servicer's Certificate by the applicable Determination
Date, or to observe any covenant or agreement set forth in Section 4.06;
(c) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement,
which failure (i) materially and adversely affects the rights of the
Securityholders (determined without regard to the availability of funds under
the Policy) or of the Note Insurer (unless the Note Insurer is no longer the
Controlling Party) and (ii) continues unremedied for a period of 30 days after
knowledge thereof by the Servicer or after the date on which written notice of
such failure requiring the same to be remedied shall have been given to the
Servicer by any of the Owner Trustee, the Indenture Trustee or the Note Insurer
(or, if a Note Insurer Default shall have occurred and be continuing,
Noteholders evidencing not less than 25% of the Outstanding Amounts of the
Notes);
(d) the occurrence of an Insolvency Event with respect to the Servicer or
the Seller;
(e) so long as the Note Insurer is the Controlling Party, any failure by
the Note Insurer to have delivered a Servicer Extension Notice pursuant to
Section 4.14; provided that no such Servicer Extension Notice shall be required
from and after the date on which the Notes have been paid in full and all
amounts owed to the Note Insurer under the Insurance Agreement have been paid
in full; or
(f) so long as the Note Insurer is the Controlling Party, an Insurance
Agreement Event of Default shall have occurred and be continuing.
SECTION 8.02. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Note Insurer or, if
the Note Insurer is no longer the Controlling Party, the Indenture Trustee or
the Holders of at least 25% of the Outstanding Amount of the Notes, by notice
given in writing to the Servicer (and to the
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Indenture Trustee, the Owner Trustee and the Seller if given by the Note
Insurer or such Noteholders), may terminate all of the rights and obligations of
the Servicer under this Agreement. On or after the receipt by the Servicer of
such written notice or upon termination of the Servicer pursuant to Section
4.14, all authority, power, obligations and responsibilities of the Servicer
under this Agreement automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other successor
Servicer appointed by the Controlling Party); provided, however, that the
successor Servicer shall have no liability with respect to any obligation that
was required to be performed by the terminated Servicer prior to the date that
the successor Servicer becomes the Servicer or any claim of a third party based
on any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and related documents to show the Indenture Trustee (or Owner Trustee if the
Notes have been paid in full) as lienholder or secured party on the related
certificates of title of the Financed Vehicles or otherwise. The terminated
Servicer agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the terminated Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all money and property held by the Servicer with respect
to the Receivables and the delivery to the successor Servicer of all Receivable
Files and other records relating to the Receivables and a computer tape in
readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer to service the Receivables.
SECTION 8.03. Appointment of Successor. (a) On and after the time the
Servicer receives a notice of termination pursuant to Section 8.02, upon
non-extension of the servicing term as referred to in Section 4.14, or upon the
resignation of the Servicer pursuant to Section 7.06, the Backup Servicer
(unless the Note Insurer shall have exercised its option pursuant to Section
8.03(b) to appoint an alternate successor Servicer) shall be the successor in
all respects to the Servicer in its capacity as Servicer under this Agreement
and shall be subject to all the rights, responsibilities, restrictions, duties,
liabilities, and termination provisions relating to the Servicer under this
Agreement, except as otherwise stated herein. The Seller, the Owner Trustee,
the Indenture Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. If a successor Servicer is acting as Servicer hereunder, it shall
be subject to term-to-term servicing as referred to in Section 4.14 and to
termination under Section 8.02 upon the occurrence of any Servicer Termination
Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint as
Backup Servicer or as successor to the Servicer a Person other than the Person
serving as Backup Servicer at the time, and shall have no liability to the
Owner Trustee, the Indenture Trustee, the Servicer, the Seller, the Person then
serving as Backup Servicer, any Noteholders, any Certificateholders or any
other Person if it does so. Notwithstanding the above, if the Backup Servicer
shall be legally unable or unwilling to act as Servicer, and the Note Insurer
is no longer
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the Controlling Party, the Backup Servicer, the Indenture Trustee or the
Holders of at least 25% of the Outstanding Amount of the Notes may petition a
court of competent jurisdiction to appoint any Eligible Servicer as the
successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 7.06, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section
8.02, the resignation of the Servicer pursuant to Section 7.06 or the
non-extension of the servicing term of the Servicer pursuant to Section 4.14.
If upon the termination of the Servicer pursuant to Section 8.02 or the
resignation of the Servicer pursuant to Section 7.06, the Controlling Party
appoints a successor Servicer other than the Backup Servicer, the Backup
Servicer shall not be relieved of its duties as Backup Servicer hereunder.
(c) Upon appointment, the successor Servicer (including the Backup
Servicer acting as successor Servicer) shall (i) be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement and (ii) become the Administrator under the
Administration Agreement in accordance with Section 8 of such Agreement.
SECTION 8.04. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof
to Certificateholders, and the Indenture Trustee shall give prompt written
notice thereof to Noteholders and the Rating Agencies.
SECTION 8.05. Waiver of Past Defaults. The Note Insurer or (if the Note
Insurer is no longer the Controlling Party) the Holders of a majority of the
Outstanding Amount of the Notes or the Holders of Certificates evidencing a
majority of the outstanding Certificate Balance (in the case of any default
which does not adversely affect the Indenture Trustee or the Noteholders) may,
on behalf of all Securityholders, waive in writing any default by the Servicer
in the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist nunc pro tunc from the time of
occurrence and shall be deemed not to have occurred, and any Servicer
Termination Event arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto.
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ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables; Optional Redemption
on Notes. (a) On each Determination Date as of which the Pool Balance is equal
to or less than 10% of the Initial Pool Balance, the Servicer shall have the
option to purchase the Receivables (with the consent of the Note Insurer, if a
claim has previously been paid under the Policy or if such purchase would
result in a claim on the Policy or if such purchase would result in any amount
owing and remaining unpaid under this Agreement or the Insurance Agreement to
the Note Insurer or any other Person). To exercise such option, the Servicer
shall deposit to the Collection Account pursuant to Section 5.04 an amount
equal to the aggregate Purchase Amount for the Receivables (including Defaulted
Receivables) and shall succeed to all interests in and to the Receivables.
(b) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee,
the Indenture Trustee and the Note Insurer as soon as practicable after the
Servicer has received notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes and all amounts
owed to the Note Insurer, the Certificateholders will succeed to the rights of
the Noteholders hereunder (other than Section 5.09 (b)) and the Indenture
Trustee will continue to perform its duties hereunder and under the Basic
Documents to the extent such duties relate to the Certificates.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. (a) This Agreement may be amended by the
Seller, the Servicer, the Sub-servicer, the Backup Servicer, the Owner Trustee,
the Indenture Trustee, the Custodian and the Issuer, with the prior written
consent of the Note Insurer (so long as the Note Insurer is the Controlling
Party), but without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Owner Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer, the Backup Servicer, the Owner Trustee, the Indenture Trustee,
the Custodian and the Issuer,
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with the prior written consent of the Note Insurer (so long as the Note Insurer
is the Controlling Party), the Holders holding not less than a majority of the
Outstanding Amount of the Notes and the Holders of outstanding Certificates
evidencing not less than a majority of the outstanding Certificate Balance, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Securityholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made for the benefit of the Securityholders or (b) reduce the
aforesaid portion of the Outstanding Amount of the Notes or the Certificate
Balance, the Holders of which are required to consent to any such amendment,
without the consent of the Noteholders holding all the outstanding Notes and
Certificateholders holding all the outstanding Certificates.
Promptly after the execution of any amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Securityholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement and the Opinion of Counsel referred to in
Section 10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Owner Trustee's or the Indenture Trustee's, as applicable, own rights, duties
or immunities under this Agreement or otherwise.
SECTION 10.02. Protection of Title to Trust. (a) The Servicer
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as may
be required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Servicer shall deliver (or cause to be delivered) to the Note
Insurer, the Owner Trustee and the Indenture Trustee file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-402(7) of the UCC,
unless it shall have given the Owner Trustee and the Indenture Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
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(c) Each of the Seller and the Servicer shall have an obligation to give
the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Seller, the Originator or the Servicer shall
propose to sell, grant a security interest in, or otherwise transfer any
interest in automotive receivables to any prospective purchaser, lender or
other transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any
restored from backup archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been sold and is owned by the Issuer and has been pledged to the Indenture
Trustee.
(g) The Servicer and the Sub-servicer shall permit the Indenture Trustee
and the Note Insurer (so long as no Note Insurer Default shall have occurred
and be continuing) and their agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's or the
Sub-servicer's, as the case may be, records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee, the
Note Insurer (so long as no Note Insurer Default shall have occurred and be
continuing) or to the Indenture Trustee, within five Business Days, a list of
all Receivables (by contract number and name of Obligor) then held as part of
the Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.
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(i) The Originator shall deliver to the Owner Trustee, the Note Insurer
(so long as no Note Insurer Default shall have occurred and be continuing) and
the Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and
each amendment hereto, an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Indenture
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest; and
(2) within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
Cutoff Date, an Opinion of Counsel, dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables, and reciting
the details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify
any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Seller, the Servicer, the Sub-Servicer, the Owner
Trustee, the Indenture Trustee or the Rating Agencies under this Agreement
shall be in writing, personally delivered or mailed by certified mail, return
receipt requested, and shall be deemed to have been duly given upon receipt (a)
in the case of the Seller, to First Merchants Auto Receivables Corporation II,
000 Xxxx Xxxx Xxxx, Xxxxx 000X, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxx
Xxxxxxx; (b) in the case of the Sub-Servicer, to First Merchants Acceptance
Corporation, 000 Xxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx Xxxxxxx; (c) in the case of the Servicer, to LSI Financial
Group, 00000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention:
Xxxxxxx X. Xxxxxxxx, (d) in the case of the Backup Servicer, the Custodian or
the Indenture Trustee, to Xxxxxx Trust and Savings Bank, 000 Xxxx Xxxxxx
Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Indenture Trust
Administration; (e) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (f) in the case of
the Note Insurer, to Financial Security Assurance Inc., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Surveillance Department; (g) in the case of
Moody's, to Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and (h) in the case of Standard &
Poor's, to Standard & Poor's Ratings Services, a division of The XxXxxx-Xxxx
Companies, Inc., 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000, Attention
of Asset Backed Surveillance Department; or, as to each of the foregoing, at
such other address as shall be designated by written notice
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to the other parties. In addition, copies of such notices shall be sent to
the Note Insurer pursuant to Section 5.08.
SECTION 10.04. Assignment by the Seller or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided
in the remainder of this Section, as provided in Sections 6.04 and 7.03 herein
and as provided in the provisions of this Agreement concerning the resignation
of the Servicer, this Agreement may not be assigned by the Seller, the
Sub-servicer or the Servicer.
SECTION 10.05. Limitations on Rights of Others. The Note Insurer, and
its successors and assigns, is an intended third party beneficiary of this
Agreement, entitled to rely upon and to directly enforce the provisions hereof
as if a party hereto. The provisions of this Agreement are solely for the
benefit of the Seller, the Servicer, the Issuer, the Owner Trustee, the Note
Insurer, the Certificateholders, the Indenture Trustee, the Sub-Servicer and
the Noteholders, and nothing in this Agreement, whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein. Any
right of the Note Insurer to direct, appoint, approve of, or take any action
under this Agreement, shall be exercised by the Note Insurer in its sole and
absolute discretion.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest
by the Issuer to the Indenture Trustee pursuant to the Indenture for the
benefit of the Noteholders of all right, title and interest of the Issuer in,
to and under the Receivables and/or the assignment of any or all of the
Issuer's rights and obligations hereunder to the Indenture Trustee.
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SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer and the Seller shall not, prior to
the date which is one year and one day after the latest to occur of the payment
of the Notes and Certificates in full or the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause the Issuer or the Seller to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Seller under any
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Seller or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Issuer or the Seller.
(b) Notwithstanding any prior termination of this Agreement, the
Originator shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Seller, acquiesce, petition
or otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Seller or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Seller.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Chase Manhattan Bank Delaware not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Chase Manhattan Bank Delaware in its individual capacity
or, except as expressly provided in the Trust Agreement, as beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all
purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Xxxxxx Trust and Savings Bank, not in its
individual capacity but solely as Indenture Trustee and in no event shall Xxxxxx
Trust and Savings Bank have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 10.13. Originator Payment Obligation. The Originator shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder. In addition, the Originator shall be
responsible for the payment of all fees and expenses of the Trust, the Owner
Trustee and the Indenture Trustee paid by any of them in connection with
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any of their obligations under the Basic Documents to obtain or maintain any
required license under the Pennsylvania Motor Vehicle Sales Finance Act.
SECTION 10.14. Insurer Default. In the event any right of the Note
Insurer hereunder is suspended during the continuation of a Note Insurer
Default, unless otherwise specifically provided herein or in the Indenture,
such right automatically and forthwith shall be assigned to the Indenture
Trustee, and may be exercised by the Indenture Trustee, during the continuation
of such Note Insurer Default. Upon the cessation of such Note Insurer Default,
any such rights shall revert to the Note Insurer and shall be exercisable
solely by the Note Insurer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
FIRST MERCHANTS AUTO TRUST 1997-2
By: CHASE MANHATTAN BANK DELAWARE, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust
By:
---------------------------
Name:
Title:
FIRST MERCHANTS AUTO RECEIVABLES
CORPORATION II, Seller
By:
---------------------------
Name:
Title:
FIRST MERCHANTS ACCEPTANCE
CORPORATION, Originator and Sub-Servicer
By:
---------------------------
Name:
Title:
LSI FINANCIAL GROUP
Servicer
By:
---------------------------
Name:
Title:
74
XXXXXX TRUST AND SAVINGS BANK,
Indenture Trustee, Backup Servicer
and Custodian
By:
---------------------------
Name:
Title:
75
SCHEDULE A
Schedule of Receivables
[To be Delivered to the Trust at Closing]
S-A1
76
SCHEDULE B
Location of Receivable Files
LSI Financial Group
00000 Xxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Location of Legal Files
Xxxxxx Trust and Savings Bank
000 Xxxx Xxxxxx Xxxxxx, Xxxxx X-0
Xxxxxxx, Xxxxxxxx 00000
S-B1
77
SCHEDULE C
Documentation Checklist
1. All documents obtained or created in connection with the credit
investigation.
2. All evidence of borrower verification of the Receivable.
3. All Obligor records including without limitation (i) file copy of
Receivable; (ii) copy Dealer assignment (if applicable) and/or intervening
assignments to and from Magna (if applicable); (iii) warranty copy; (iv)
credit life insurance policy; (v) proof of auto insurance which may
include a certificate of insurance, an application form for insurance
signed by the Obligor, or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financial Vehicle; (vi) xxxx of
sale; (vii) buyer's guide (as is form); (viii) odometer statement; (ix)
title application; (x) contract verification sheet; (xi) participation
worksheet; (xii) checklist; (xiii) underwriting worksheet; (xiv) approval;
(xv) purchase trans printout; (xvi) original application; (xvii) credit
investigation; (xviii) credit bureau reports; (xix) check stubs; and (xx)
copies of drivers license reference sheets.
4. Original document envelope together with all documents maintained
therein.
5. All insurance verification forms and documents relating to insurance
follow-ups and all mail received from insurance.
6. Any and all other documents that the Servicer shall keep on file in
accordance with its customary procedures relating to a Receivable, an
Obligor or a Financed Vehicle.
S-C1
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SCHEDULE D
Backup Servicer Fee
S-D1
79
SCHEDULE E
Deficiency Fee
For any Collection Period, the Deficiency Fee shall be one half of the
amount of all deficiency balance recoveries (net of the out-of-pocket expenses
of the Servicer in connection with obtaining such deficiency balance
recoveries) received during such Collection Period in respect of the
Receivables.
S-E1
80
SCHEDULE F
Indenture Trustee Fee
S-F1
81
SCHEDULE G
Owner Trustee Fee
S-G1
82
EXHIBIT A
Representations and Warranties of First Merchants Acceptance Corporation
Under Section 3.02 of the Receivables Purchase Agreement
See attached pages.
A-1
83
EXHIBIT B
First Merchants Acceptance Corporation
First Merchants Auto Trust 1997-2 Distribution Date Statement to Securityholders
Principal Distribution Amount
Notes: ($ per $1,000 original principal balance)
Interest Distribution Amount
Notes: ($ per $1,000 original principal balance)
Principal Distribution Amount
Principal Per $1,000 Certificate
Interest Distribution Amount
Interest Per $1,000 Certificate
Noteholders' Interest Carryover Shortfall
Certificateholders' Interest Carryover Shortfall
Certificateholders' Principal Carryover Shortfall
Note Balance
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000
Owner Trustee Fee
Indenture Trustee Fee
Backup Servicer Fee
Custodian Fee
Deficiency Fee
Pool Balance
Realized Losses
Cram Down Losses
B-1
84
Liquidated Receivables
Purchased Receivables
Purchase Amounts
Distribution Under Policy
Spread Account Balance
Amount Deposited to Spread Account
Principal Balance of Receivables that were delinquent:
30 to 59 days
60 to 89 days
90 days or more
Amount Withdrawn from Spread Account
Reserve Account Balance
Amount Deposited to Reserve Account
Amount withdrawn from Reserve Account
B-2
85
EXHIBIT C
Form of Servicer's Certificate
First Merchants Acceptance Corporation
Monthly Servicing Report
[Date]
First Merchants Auto Trust 1997-2
$ % Asset Backed Notes
$ % Asset Backed Certificates
Distribution Date:
I. Original Deal Parameter Inputs
(A) Initial Pool Balance
(B) Note Balance
(C) Initial Certificate Balance
(D) Note Rate
(E) Pass-Through Rate
(F) Servicing Fee Rate
(G) Trustee Fee
(H) Note Insurer's Premium
(I) Original Weighted Average Coupon (WAC)
(J) Original Weighted Average Remaining Term (WAM)
(K) Number of Contracts
(L) Spread Account
i. Spread Account Initial Deposit
ii. Spread Account Required Amount
(M) Reserve Account
i. Reserve Account Initial Deposit
ii. Reserve Account Required Amount
II. Inputs from Previous Monthly Servicer Reports
(Not Applicable for First Monthly Report)
(A) Current Pool Balance
(B) Note Balance
(C) Current Certificate Balance
(D) Note Pool Factor
(E) Certificate Pool Factor
(F) Spread Account Balance
(G) Weighted Average Coupon of Remaining Portfolio (WAC)
(H) Weighted Average Remaining Term of Remaining Portfolio (WAM)
(I) Number of Contracts
III. Inputs from the System
(A) Simple Interest Loans
i. Principal Payments Received
ii. Interest Payments Received
C-1
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(B) Rule of 78s Loans
i. Principal Payments Received
ii. Interest Payments Received
(C) Repurchased Receivables
(D) Late Fees and Other Charges
(E) Spread Account Release to Collection Account
(F) Spread Account Release to Depositor
(G) Liquidated Contracts
x. Xxxxx Principal Balance of Liquidated Receivables
ii. Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(H) Weighted Average Coupon of Remaining Portfolio (WAC)
(I) Weighted Average Remaining Maturity of Remaining Portfolio (WAM)
(J) Remaining Number of Contracts
(K) Receivable Balance of Vehicles in Repossession During the Collection
Period
(L) Number of Vehicles in Repossession During the Collection Period
(M) Aggregate Net Losses for Collection Period
(N) Delinquent Contracts
Contracts Amount
--------- ------
i. 31-60 Days Delinquent
ii. 61 Days or More Delinquent
IV. Inputs Derived from Other Sources
(A) Collection Account Investment Income
(B) Spread Account Investment Income
--------------------------
A. Collections
(1) Total Principal Payments Received
(a) Principal Payments on Receivables (includes Partial and Full
Prepayments)
(b) Repurchased Receivables
(c) Cram Down Loss
(2) Interest Payments Received
B. Draw on Credit Enhancements
(1) Withdrawal from Spread Account
(2) Draw on the Insurance Policy
(3) Total Draw on Credit Enhancements
C. Total Distribution Amount
(1) Total Distribution Amount
(2) Interest Distribution Amount
(3) Regular Principal Distribution Amount
D. Liquidated Receivables, Net
(1) Gross Principal Balance of Liquidated Receivables
C-2
87
(2) Net Liquidation Proceeds & Recoveries Received during the
Collection Period
(3) Liquidated Receivables, Net
E. Monthly Distributions
(1) Noteholders' Principal Distributable Amount
(2) Certificateholders' Principal Distributable Amount
(3) Principal Distribution Amount
(a) Principal Payments on Receivables
(b) Repurchased Receivables
(c) Cram Down Loss
(4) Noteholders' Interest Distributable Amount
(5) Certificateholders' Interest Distributable Amount
(6) Required Distributions
(a) Servicing Fee (Includes late fees collected)
(b) Fees Paid to the Indenture Trustee and Owner Trustee
(c) Monthly Note Insurer's Premium
(d) Deposits into Spread Account
F. Pool Balances and Portfolio Information
Beginning End
of Period of Period
--------- ---------
(1) Total Pool Balance
(2) Total Pool Factor
(3) Note Balance
(4) Certificate Balance
(5) Remaining
Overcollateralization
Amount
(6) Weighted Average
Coupon
(7) Weighted Average
Remaining Maturity
(8) Remaining Number
of Contracts
G. Spread Account
(1) Required Spread Account Balance
(2) Beginning Balance
(3) Amount Available for Deposit to the Spread Account
(4) Withdrawal from Spread Account
(5) Amount Released to Seller
(6) Ending Balance
H. Net Loss and Delinquency Activities
(1) Net Losses for the Collection Period (including Cram Down)
(2) Liquidated Receivables for the Collection Period
(3) Cumulative Net Losses
(4) Delinquent and Repossessed Receivables
C-3
88
(a) 60 Days Delinquent (Receivables Balance)
(b) 60 Days Delinquent (Number of Receivables)
(c) 61 Days or More (Receivables Balance)
(d) 91 Days or More (Number of Receivables)
(e) Receivables Balance of Vehicles in
Repossession During the Monthly Period
(f) Number of Vehicles in Repossession During the
Collection Period
I. Portfolio Performance Test
(1) Delinquency Ratio
(a) Second Preceding Collection Period
(b) Preceding Collection Period
(c) Current Collection Period
(d) Three Month Average
(2) Cumulative Default Rate
(a) All Collection Periods prior to Current Collection Period
(b) Current Collection Period
(c) Total Cumulative Rate
(3) Cumulative Net Loss Rate
(a) All Collection Periods prior to Current Collection Period
(b) Current Collection Period
(c) Total Cumulative Rate
(4) Delinquency Trigger Indicator
(5) Default Trigger Indicator
(6) Loss Trigger Indicator
J. Aggregate extensions and deferrals
K. (1) Amount of principal being paid to the Noteholders:
(2) Per $1,000 original principal amount:
L. (1) Amount of principal being paid to the Certificateholders:
(2) Per $1,000 original principal amount:
M. (1) Amount of interest being paid to the Noteholders:
(2) Per $1,000 original principal amount:
N. (1) Amount of interest being paid to Certificateholders:
(2) Per $1,000 original principal amount:
O. Pool Balance at the end of the related Collection Period:
P. Outstanding Amount of Notes:
Note Factor:
Q. Outstanding Certificate Balance:
R. Certificate Factor:
(1) Amount of Servicing Fee:
(2) Per $1,000 original principal amount:
S. Aggregate Purchase Amounts for Collection Period:
T. Aggregate Amount of Realized Losses for the Collection Period:
U. Amount in Spread Account:
V. Servicer Reimbursable Expenses
(1) Repo and Liquidation Fees:
(2) Bankruptcy Expenses:
(3) Other Expenses:
(4) Title Expenses:
(5) Total:
W. Schedule of each Receivable that became a Liquidated Receivable
[attached hereto]
C-4
89
EXHIBIT D
Form of Policy
D-1
90
EXHIBIT E
Custodian Fee Letter
E-1
91
EXHIBIT F
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: Xxxxxx Trust and Savings Bank, as Custodian
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Indenture Trust Division
Re: SALE AND SERVICING AGREEMENT dated as of June 1, 1997 (the "Agreement"),
among
FIRST MERCHANTS AUTO TRUST 1997-2, as Issuer,
FIRST MERCHANTS AUTO RECEIVABLES CORPORATION II, as Seller,
FIRST MERCHANTS ACCEPTANCE CORPORATION, as Originator and Sub-servicer,
LSI FINANCIAL GROUP, as Servicer,
and
XXXXXX TRUST AND SAVINGS BANK,
as Indenture Trustee, Backup Servicer and Custodian
Ladies and Gentlemen:
In connection with the administration of the Receivables held by you as
the Custodian for the Issuer and the Indenture Trustee we request the release,
and acknowledge receipt, of the (Legal File/specify documents) for the
Receivable described below, for the reason indicated. Terms not otherwise
defined herein are used as defined in the above-referenced Agreement.
Obligor's Name, Address & Zip Code:
Receivable Loan Number:
Reason for Requesting Documents (check one or more)
----1. Receivable Paid in Full
----2. Receivable Repurchased pursuant to the Agreement
----3. Receivable Re-financed
----4. Receivable otherwise Liquidated
----5. Other (explain)
If item 5 above is checked, upon our return of the above document(s) to you as
the Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
F-1
92
If item 4 [or 5] above is checked, and if all or part of the Legal File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Receivable.
------------------------
By
---------------------
Name:
--------------
Title:
--------------
Date:
--------------
DOCUMENTS RETURNED TO THE CUSTODIAN:
XXXXXX TRUST AND SAVINGS BANK, as Custodian
By
---------------------
Name:
--------------
Title:
--------------
Date:
--------------
F-2
