TRANSITION AUTO FINANCE II, INC.
AND
TRUST MANAGEMENT, INC., AS TRUSTEE
11% REDEEMABLE SECURED NOTES
DUE JUNE 30, 2002
____________________
INDENTURE
____________________
DATED AS OF ____________________, ______
CROSS-REFERENCE TABLE
TRUST INDENTURE ACT
SECTION INDENTURE SECTION
______________________________________________________________________________
310 (a) (1) 7.10
(a) (2) 7.10
(a) (3) N/A
(a) (4) N/A
(a) (5) 7.10
(b) 7.8, 7.10,
11.2
(c) N/A
311 (a) 7.11
(b) 7.11
(c) N/A
312 (a) 2.6
(b) 11.3
(c) 11.3
313 (a) 7.6
(b) 7.6
(c) 11.2
(d) 7.6
314 (a) 5.7, 5.8, 11.2
(b) 5.9
(c) (1) 11.4
(c) (2) 11.4
(c) (3) N/A
(d) 5.12
(e) 11.4
(f) N/A
315 (a) 7.1(0)
(0) 7.5, 11.2
(c) 7.1(a)
(d) 7.1(c)
(e) 6.11
316 (a) (1) (A) 6.5
(a) (1) (B) 6.4
(a) (last sentence) 1.1 (Def. of
"Outstanding")
(b) 6.7
(c) N/A
317 (a) (1) 6.8
(a) (2) 6.9
(b) 5.2
318 (a) 11.1
"N/A" = Not Applicable
TABLE OF CONTENTS
ARTICLE 1--DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . 2
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Incorporation by Reference of Trust Indenture Act. . . 12
Section 1.3 Rules of Construction. . . . . . . . . . . . . . . . . 12
ARTICLE 2--THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1 Forms Generally. . . . . . . . . . . . . . . . . . . . 13
Section 2.3 Denominations. . . . . . . . . . . . . . . . . . . . . 17
Section 2.4 Execution and Authentication . . . . . . . . . . . . . 17
Section 2.5 Registrar and Paying Agent . . . . . . . . . . . . . . 18
Section 2.6 Securityholder Lists . . . . . . . . . . . . . . . . . 18
Section 2.7 Transfer and Exchange. . . . . . . . . . . . . . . . . 18
Section 2.8 Replacement Securities . . . . . . . . . . . . . . . . 19
Section 2.9 Temporary Securities . . . . . . . . . . . . . . . . . 19
Section 2.10 Cancellation . . . . . . . . . . . . . . . . . . . . . 19
Section 2.11 Defaulted Interest . . . . . . . . . . . . . . . . . . 19
Section 2.12 Persons Deemed Owners. . . . . . . . . . . . . . . . . 20
ARTICLE 3--REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.1 Redemption after Release of Funds from Escrow. . . . . 20
Section 3.2 Securities Not Previously Delivered to Trustee . . . . 20
Section 3.3 Selection of Securities to Be Purchased or Redeemed. . 20
Section 3.4 Notice of Redemption . . . . . . . . . . . . . . . . . 21
Section 3.5 Effect of Notice of Redemption . . . . . . . . . . . . 21
Section 3.6 Deposit of Redemption Amount . . . . . . . . . . . . . 21
Section 3.7 Securities Redeemed in Part. . . . . . . . . . . . . . 22
ARTICLE 4--ACCOUNTS, DISBURSEMENTS AND RELEASES. . . . . . . . . . . . . . 22
Section 4.1 Collection of Moneys . . . . . . . . . . . . . . . . . 22
Section 4.2 Sinking Fund Account; Operating Account; Master
Collections Account. . . . . . . . . . . . . . . . . . 22
Section 4.3 Purchase of Leased Vehicles and Eligible Additional
Contracts. . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4 Representations and Warranties as to the Contracts . . 26
Section 4.5 General Provisions regarding Sinking Fund Account. . . 28
Section 4.6 Releases . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.7 Reports by Trustee . . . . . . . . . . . . . . . . . . 30
Section 4.8 Trust Estate; Contract Documents . . . . . . . . . . . 30
ARTICLE 5--COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.1 Payment of Principal and Interest. . . . . . . . . . . 31
Section 5.2 Money for Security Payments to be Held in Trust. . . . 32
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Section 5.3 Payment of Taxes and Other Claims. . . . . . . . . . . 33
Section 5.4 Maintenance of Properties. . . . . . . . . . . . . . . 33
Section 5.5 Limitation on Investment Activities. . . . . . . . . . 33
Section 5.6 Compliance Certificates. . . . . . . . . . . . . . . . 33
Section 5.7 Reporting. . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.8 Protection of Trust Estate . . . . . . . . . . . . . . 35
Section 5.9 Opinions as to Trust Estate. . . . . . . . . . . . . . 35
Section 5.10 Performance of Obligations; Servicing Agreement. . . . 36
Section 5.11 Negative Covenants . . . . . . . . . . . . . . . . . . 37
Section 5.12 Substitution or Release of Collateral or Withdrawal
of Cash in Trust Estate. . . . . . . . . . . . . . . . 38
ARTICLE 6--DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . 39
Section 6.1 Events of Default. . . . . . . . . . . . . . . . . . . 39
Section 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . 41
Section 6.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.4 Waiver of Past Defaults. . . . . . . . . . . . . . . . 42
Section 6.5 Control by Majority. . . . . . . . . . . . . . . . . . 42
Section 6.6 Limitation on Suits. . . . . . . . . . . . . . . . . . 42
Section 6.7 Rights of Holders to Receive Payment . . . . . . . . . 42
Section 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . 43
Section 6.9 Trustee may File Proofs of Claim . . . . . . . . . . . 43
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . 43
Section 6.12 Stay, Extension or Usury Laws. . . . . . . . . . . . . 44
Section 6.13 Optional Preservation of Trust Estate. . . . . . . . . 44
Section 6.14 Sale of Trust Estate . . . . . . . . . . . . . . . . . 45
ARTICLE 7--TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . 46
Section 7.2 Rights of Trustee. . . . . . . . . . . . . . . . . . . 47
Section 7.3 Individual Rights of Trustee . . . . . . . . . . . . . 47
Section 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . 47
Section 7.5 Notice of Defaults . . . . . . . . . . . . . . . . . . 47
Section 7.6 Reports by Trustee to Holders. . . . . . . . . . . . . 48
Section 7.7 Compensation and Indemnity . . . . . . . . . . . . . . 48
Section 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . 49
Section 7.9 Successor Trustee by Xxxxxx, etc.. . . . . . . . . . . 49
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . 50
Section 7.11 Preferential Collection of Claims Against Company. . . 50
Section 7.12 Withholding Taxes. . . . . . . . . . . . . . . . . . . 50
ARTICLE 8--DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . . . 50
Section 8.1 Satisfaction and Discharge of Indenture. . . . . . . . 50
Section 8.2 Application of Trust Money . . . . . . . . . . . . . . 51
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Section 8.3 Repayment to Company . . . . . . . . . . . . . . . . . 51
ARTICLE 9--AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . 52
Section 9.1 Without Consent of Holders . . . . . . . . . . . . . . 52
Section 9.2 With Consent of Holders. . . . . . . . . . . . . . . . 52
Section 9.3 Compliance with Trust Indenture Act. . . . . . . . . . 53
Section 9.4 Revocation and Effect of Consents. . . . . . . . . . . 53
Section 9.5 Notation on or Exchange of Securities. . . . . . . . . 53
Section 9.6 Trustee to Sign Amendments, etc. . . . . . . . . . . . 53
ARTICLE 10--MEETINGS OF SECURITYHOLDERS. . . . . . . . . . . . . . . . . . 54
Section 10.1 Purposes for which Meetings may be Called. . . . . . . 54
Section 10.2 Manner of Calling Meetings . . . . . . . . . . . . . . 54
Section 10.3 Call of Meetings by Company or Securityholders . . . . 54
Section 10.4 Who May Attend and Vote at Meetings. . . . . . . . . . 55
Section 10.5 Regulations may be Made by Trustee; Conduct of the
Meeting; Voting Rights . . . . . . . . . . . . . . . . 55
Section 10.6 Exercise of Rights of Trustee or Securityholders may
not be Hindered or Delayed by Call of Meeting. . . . . 55
Section 10.7 Evidence of Actions by Securityholders . . . . . . . . 55
ARTICLE 11--MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.1 Trust Indenture Act Controls . . . . . . . . . . . . . 56
Section 11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.3 Communication by Holders with Other Holders. . . . . . 57
Section 11.4 Certificate and Opinion as to Conditions Precedent . . 57
Section 11.5 Rules by Paying Agent and Registrar. . . . . . . . . . 57
Section 11.6 Legal Holidays . . . . . . . . . . . . . . . . . . . . 57
Section 11.7 Governing Law. . . . . . . . . . . . . . . . . . . . . 57
Section 11.8 No Adverse Interpretation of Other Agreements. . . . . 58
Section 11.9 No Recourse Against Others . . . . . . . . . . . . . . 58
Section 11.10 Successors . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.11 Duplicate Originals. . . . . . . . . . . . . . . . . . 58
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THIS INDENTURE, dated as of ______________, 1998, is between TRANSITION
AUTO FINANCE II, INC., a Texas corporation (the "Company"), having its
principal office at 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 and TRUST
MANAGEMENT, INC., a Texas Trust Company, 000 Xxxx Xxxxx Xxxxxx, Xxxxx 000,
Xxxx Xxxxx, Xxxxx 00000, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture and the issuance of its 11% Redeemable Secured Notes Due June 30,
2002 in the maximum aggregate principal amount of $10,000,000 (the
"Securities").
All acts necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been
accomplished.
THEREFORE, for and in consideration of the premises and the purchase or
acceptance of the Securities by the Holders (as herein defined) thereof, it
is mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities, as follows:
GRANTING CLAUSES
The Company hereby Grants to the Trustee, for the exclusive benefit of
the Holders of the Securities, all of the Company's right, title and interest
in and to (a) all Contracts (as herein defined) hereafter acquired by the
Company, together with all related Contract Documents, and all payments or
instruments paid on account of such Contracts whenever received, and all
other proceeds (cash or non-cash) received in respect of such Contracts, (b)
the Servicing Agreement, (c) the Operating Account, (d) the Master Collections
Account, (e) the Sinking Fund Account, including all Eligible Investments
therein and all income from the investment of funds therein, (f) all Leased
Vehicles, together with any repossessed or returned Leased Vehicles
(including any Leased Vehicle returned upon termination of its Contract), and
(g) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property, including, without limitation,
all Net Liquidation Proceeds and Insurance Proceeds (collectively, the "Trust
Estate").
The foregoing Grants are made, however, in trust, to secure the
Securities equally and ratably without prejudice, priority or distinction,
except as expressly provided in the Indenture, between any Security and any
other Securities by reason of difference in time of issuance or otherwise,
and to secure (i) the payment of all amounts due on the Securities in
accordance with their terms, (ii) the payment of all other sums payable under
this Indenture, and (iii) compliance with the provisions of this Indenture,
all as provided in this Indenture.
The Trustee acknowledges the foregoing Grants, accepts the trusts hereunder
in accordance with the provisions hereof and agrees to perform the duties
herein required to the best of its ability.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Accounts" means the Sinking Fund Account, the Master Collections Account
and the Operating Account established by the Company under the provisions of
Section 4.2.
"Affiliate" means, as to any Person, any other Person that directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of capital stock,
partnership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly 20% or more of the
securities having ordinary voting power for the election of directors or
other governing body of a corporation or 20% or more of the partnership or
other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such other Person for
the purposes of this definition; and provided further that no individual
shall be an Affiliate of a corporation or partnership solely by reason of his
being an officer, director or partner of such entity.
"Allowed Expenses" means any amounts due the Trustee under Section 7.7,
any Servicing Fees, any fees payable for the transfer of the lien reflected
in the Title Documents into and out of the Trustee's name, any fees payable
for the transfer of the ownership reflected in the Title Documents into and
out of the Company's name, any federal, state and local taxes and assessments
incurred by the Company (including corporate franchise taxes), any bank
service charges and account fees relating to the Accounts, the Company's pro
rata share (based on the relative amounts of funds attributable to the
Contracts as compared to the lease Contracts of all other Persons serviced by
the Servicer) of the lockbox fees, account fees and bank service charges
relating to the Master Collections Account, any legal and accounting fees for
reports, certificates and opinions of attorneys and independent accountants
required under this Indenture, and any Liquidation Expenses.
"Assignment" means the original instrument of assignment of a Contract
and all other documents securing such Contract made by the Servicer to the
Company (or in the case of any Contract acquired by the Company from another
Person, from such other Person to the Company), which is in a form sufficient
under the laws of the jurisdiction under which the ownership interest in the
Leased Vehicle is governed such that the ownership interest and a first
priority security interest in the Leased Vehicle may be transferred to the
Company and a second priority security interest in the related Leased Vehicle
may be granted in favor of the Trustee to permit the assignee to exercise all
rights granted by the Obligor under such Contract and such
2
other documents and all rights available under applicable law to the obligee
under such Contract and that may, to the extent permitted by the laws of such
jurisdiction, be an assignment constituting a part of the form of the
Contract itself or a blanket instrument of assignment covering other
Contracts as well.
"Bankruptcy Law" shall have the meaning provided in Section 6.1.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a Legal Holiday.
"Collection Period" means with respect to any Payment Date, the calendar
month immediately preceding the Payment Date.
"Common Stock" means the common stock issued or issuable by the Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person replaces it pursuant to the
applicable provisions of this Indenture, and thereafter "Company" means such
successor Person.
"Company Order" or "Company Request" means a written order or request
signed in the name of the Company by its Chairman, President or a Vice
President, and by its Treasurer, Assistant Treasurer, Controller, Assistant
Controller, Secretary or an Assistant Secretary, and delivered to the Trustee.
"Contract" means each lease contract that has been executed by an
Obligor and pursuant to which such Obligor leased the Leased Vehicle
described therein, agreed to pay the lease payments as therein provided in
connection with such lease, and undertook to perform certain other
obligations as specified in such contract and that is Granted to the Trustee
pursuant to this Indenture as security for the Securities. The term
"outstanding Contracts" as of any date means all Contracts other than
Liquidated Contracts.
"Contract Documents" means with respect to each Contract, (i) the
original Contract; (ii) either the original Title Document for the related
Leased Vehicle showing the Company as the owner and first lienholder and the
Trustee as second lienholder or an official receipt from the responsible
state or local government authority showing that an application has been made
(and the required fees have been paid) for registration of the Title
Documents for such Leased Vehicle in the names of the Company as owner and
first lienholder and the Trustee as second lienholder (or such other evidence
of ownership of the Leased Vehicle by the Company and perfection of the
security interest in the related Leased Vehicle, as determined by the Trustee
to be permitted or required to transfer ownership of the Leased Vehicle to
the Company and to perfect such security interests under the laws of the
applicable jurisdiction, or a guarantee from the dealer conveying such Leased
Vehicle that the Title Document for such Leased Vehicle showing the Company
as owner and first lienholder and the Trustee as second lienholder has been
applied for); (iii) the related Assignment; and (iv) any agreement(s)
modifying the Contract (including, without limitation, any extension
agreement(s)).
3
"Contract Number" means with respect to any Contract included in the
Trust Estate, the number assigned to such Contract by the Servicer, which
number is set forth in the related Monthly Report.
"Contract Unavailability Notice" shall have the following meaning: in
the event that the Company determines, in its discretion, that it is unable,
for any reason outside its control, to purchase additional Leased Vehicles
and Contracts that conform with the purchasing criteria set forth in the
Servicing Agreement or in Exhibit B hereto, the Company may elect to provide
notice of such determination to the Trustee, such notice to be referred to
herein as a "Contract Unavailability Notice."
"Corporation" includes corporations, associations, companies and
business trusts.
"Default" means any event that is, or after notice or passage of time
would be, an Event of Default.
"Defaulted Contract" means with respect to any Collection Period, a
Contract (a) whose Obligor, at the end of such Collection Period is past due
with respect to at least one scheduled lease payment, or (b) with respect to
which the related Leased Vehicle has been repossessed and, in the case of
either (a) or (b), in respect of which Liquidation Proceeds, which, in the
Servicer's judgment, would constitute the final amounts recoverable in
respect of such Contracts, have not yet been collected as of the end of such
Collection Period.
"Disbursement Certificate" means an Officers' Certificate of the Company
setting forth the individual items of Allowed Expenses to be paid by the
Company from funds in the Operating Account, agreeing that such items will be
promptly paid with such funds and certifying that such withdrawal of funds
and the payment of such Allowed Expenses conforms to the requirements of this
Indenture.
"Due Date" means as to any lease payment by an Obligor on a Contract,
the date upon which such lease payment is due.
"Eligible Account" means an account that is either (i) maintained with a
depository institution subject to supervision or examination by federal or
state authority and having a combined capital and surplus of at least
$3,000,000, or (ii) an account or accounts the deposits in which are fully
insured by the Federal Deposit Insurance Corporation.
"Eligible Additional Contract" means a Contract hereafter acquired by
the Company that, as of the date of such acquisition, satisfies the
representations and warranties contained in Section 4.4 of this Indenture.
"Eligible Investments" means any one or more of the following
obligations or securities:
(i) United States Obligations;
4
(ii) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any
depository institution or trust company incorporated under the laws of
the United States of America or any State thereof and subject to
supervision and examination by federal and/or state banking
authorities, so long as such institution or company has a combined
capital and surplus of at least $3,000,000;
(iii) repurchase obligations with respect to any security
described in clause (i) entered into with a depository institution or
trust company, acting as principal, whose obligations have the same
maturity as that of the repurchase agreement and would be Eligible
Investments under clause (ii) above;
(iv) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any state thereof that at the time of such investment has
long-term, unsecured debt rated by Standard & Poor's as "AA-" or
better; provided, however, that securities issued by any particular
corporation will not be Eligible Investments to the extent that
investment therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the Trust
Estate to exceed 10% of the aggregate outstanding balances and amounts
of all Contracts and Eligible Investments held as part of the Trust
Estate;
(v) commercial paper given the highest rating by Standard &
Poor's at the time of such investment; and
(vi) any publicly traded money market mutual fund that is
invested in the above-mentioned Eligible Investments.
"Event of Default" shall have the meaning provided in Section 6.1.
"Full Prepayment" with respect to a Contract means either of the
following: (i) payment to the Servicer of 100% of the outstanding lease
payments of a Contract plus early termination fees and/or other charges
properly payable under the Contract (exclusive of any Contract referred to in
clause (ii) or (iii) of the definition of the term "Liquidated Contract"),
less any discount of such lease payments to which the Obligor shall be
entitled under the terms of such Contract and applicable law by virtue of
early payment of any lease payment, or (ii) payment by the Servicer into the
Master Collections Account of the purchase price of a Contract in connection
with the repurchase by Servicer of the Contract.
"Grant" means to mortgage, pledge, assign and grant a security interest
in. A Grant of a Contract and the related Contract Documents, the related
Leased Vehicle, an Eligible Investment, the Servicing Agreement or any other
instrument shall include all rights, powers and options (but none of the
obligations, except to the extent required by law) of the Granting party
thereunder, including without limitation, the immediate and continuing right
to claim, collect, receive and give receipt for payments in respect of the
Contract and principal and interest payments in respect of
5
the Eligible Investment, Insurance Proceeds, Liquidation Proceeds, purchase
prices and all other moneys payable thereunder and all proceeds thereof, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring suit or other legal
proceedings in the name of the Granting party or otherwise, and generally to
do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Holder," "Securityholder" or "Noteholder" means a Person in whose name
a Security is registered on the Registrar's books.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Independent" means with respect to any specified Person, such a Person
who (i) is in fact independent, (ii) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor upon the Notes or in any Affiliate of the Company or of such
other obligor, and (iii) is not connected with the Company or such other
obligor as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions. Whenever it is herein
provided that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by a Company Order
in the exercise of reasonable care and such opinion or certificate shall
state that the signer is Independent within the meaning hereof.
"Insurance Proceeds" means the proceeds paid pursuant to any Physical
Damage Insurance Policy and amounts paid by any insurer under any other
insurance policy for damage or repair of a Leased Vehicle.
"Investment Company Act" means the Investment Company Act of 1940 (15
U.S.C. 90a-1 et seq.), as amended.
"Leased Vehicle" means, as to any Contract, the automobile (which may be
a passenger car, minivan, sport/utility vehicle or light truck) that
constitutes the subject of such Contract.
"Legal Holiday" shall have the meaning provided in Section 11.6.
"Liquidated Contract" means a Contract that (i) has been the subject of
a Full Prepayment, (ii) was a Defaulted Contract and with respect to which
Liquidation Proceeds that, in the Servicer's judgment, constitute the final
amounts recoverable in respect of such Contract have been realized and
deposited in the Master Collections Account, or (iii) has been paid in full
on or after its Maturity Date.
"Liquidation Expenses" means the reasonable out-of-pocket expenses
incurred by the Servicer in connection with the liquidation of any Contract
(including the attempted liquidation of a Contract that is brought current
and is no longer in default during such attempted liquidation)
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and the sale of any property acquired in respect thereof, which expenses are
not recoverable under any insurance policy.
"Liquidation Proceeds" means the amounts received by the Servicer
(before reimbursement for Liquidation Expenses) in connection with the
liquidation of any Defaulted Contract and the sale of any property acquired
in respect thereof, whether through receipt of Insurance Proceeds,
repossession, sale or otherwise.
"Master Collections Account" means the lockbox account established and
maintained by the Servicer.
"Master Contract Acquisition Agreement" means the agreement between the
Company and Transition Leasing Management, Inc. pursuant to which Transition
Leasing (i) will acquire on behalf of the Company vehicles that are to become
Leased Vehicles and prepare and execute Contracts on the Company's behalf
with Obligors, and (ii) will prepare and execute on behalf of the Company the
necessary documents by which the Company may acquire existing Contracts from
Transition Auto Finance Inc.
"Maturity Date" means with respect to any Contract, the date on which
the last scheduled lease payment of such Contract shall be due and payable
(after giving effect to all prepayments received prior to the date of
determination).
"Monthly Report" means an Officer's Certificate of the Company relating
to interest payments on the Notes required to be delivered to the Trustee
under this Indenture. The Monthly Report shall be substantially in the form
of Exhibit B attached hereto, as amended from time to time, and shall have
attached or included all lists, data and information required to be attached
or included hereunder.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Net Liquidation Proceeds" means the amount derived by subtracting from
the Liquidation Proceeds of a Contract the related Liquidation Expenses.
"Note Register" means the register for the Securities maintained by the
Registrar pursuant to Section 2.5.
"Obligor" means each Person who is indebted under a Contract or who has
acquired the Leased Vehicle subject to a Contract.
"Offering Amount" shall mean the $10,000,000 in aggregate principal
amount of 10% Redeemable Secured Notes Due June 30, 2002 that may be issued
under this Indenture.
7
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of any Person.
"Officers' Certificate" when used with respect to any Person, means a
certificate signed by the Chairman of the Board, President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of such Person, or any other officer of such Person
customarily performing functions similar to those performed by any of the
above designated officers.
"Operating Account" means the commercial bank account created and
maintained by the Company and denominated as such pursuant to Section 4.2.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Outstanding" means, with respect to the Securities, as of the date of
determination, all the Securities theretofore authenticated and delivered
under this Indenture except:
(i) the Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) the Securities or portions thereof for whose payment or
redemption money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent in trust for the Holders of such Securities;
provided that, if such Securities or portions thereof are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
(iii) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture
unless proof satisfactory to the Trustee is presented that any such
Securities are held by a holder in due course;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any Affiliates of the Company shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Securities
with respect to which the Trustee has received written notice of such
ownership or otherwise has actual knowledge of such ownership shall be so
disregarded. Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities
or any Affiliate of the Company or such other obligor.
8
"Overdue Interest Rate" means the lesser of (i) an interest rate of 18%
per annum, or (ii) the highest lawful rate of interest.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 7.10 and is
authorized by the Company to pay the principal or any interest that may
become payable on any Securities on behalf of the Company.
"Payment Date" with respect to any Security, means the (i) fifteenth day
of each calendar month (unless such day is a Legal Holiday, in which event
the next succeeding Business Day) commencing with the second calendar month
following the month in which the Security is issued, and (ii) the Stated
Maturity.
"Payment Date Statement" shall have the meaning provided in Section 5.1.
"Person" means any individual, corporation, partnership, joint venture,
joint adventure, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Damage Insurance Policy" means with respect to a Leased
Vehicle, any policy of physical damage, comprehensive or collision insurance
covering the Leased Vehicle pursuant to which the Servicer may obtain
recoveries for loss or damage to the Leased Vehicle.
"Purchase Date" means the date on which the Company remits funds from
the Operating Account to pay the purchase price for a Leased Vehicle or for
an Eligible Additional Contract.
"Purchased Contracts Certificate" means the Officer's Certificate of the
Company and the Servicer required to be delivered to the Trustee in
connection with the purchase of any Eligible Additional Contracts and
designated as such pursuant to Section 4.3.
"Record Date" for the interest payable on any Payment Date means the
first Business Day of the month in which such Payment Date occurs.
"Redemption Date" means any Payment Date which is subsequent to the
Sinking Fund Trigger Date and which is designated by the Company as the date
upon which the Company will redeem some or all of the Securities.
"Redemption Price" means with respect to any Security to be redeemed,
100% of the unpaid principal amount of such Security together with accrued
and unpaid interest on the unpaid principal amount thereof to the applicable
Redemption Date.
"Registrar" means the registrar for the Securities appointed by the
Company pursuant to Section 2.5 hereof, and any successor registrar appointed
by the Company hereunder.
9
"Registrar of Titles" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and
issuing documents evidencing such titles in the jurisdiction in which a
particular Leased Vehicle is registered.
"Responsible Officer" when used with respect to the Trustee means the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman
or Vice Chairman of the Executive Committee of the Board of Directors or
Trustees, the President, any Vice President, any Assistant Trust Officer, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer,
or any other officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means,
with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Sale" has the meaning set forth in Section 6.14.
"Schedule of Contracts" means the list of Contracts attached hereto as
Exhibit A, as such list may be supplemented from time to time hereafter
pursuant to Section 4.3, as being Granted to the Trustee as part of the Trust
Estate, which list or lists shall set forth, with respect to each Contract,
the Contract Number, the aggregate unpaid lease payments as of the date
acquired by the Company and as of the date of origination, the name of the
Obligor, the Maturity Date, the name of the originating person, and the
vehicle identification number for the Leased Vehicle, and the date on which
the Contract was originated.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or if at any
time after the execution of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act,
then the body performing such duties on such date.
"Securities" or "Notes" means the 10% Redeemable Secured Notes Due June
30, 2002, that are issued under this Indenture, as amended from time to time.
"Securities Act of 1933" means the Securities Act of 1933, as amended.
"Securities Exchange Act of 1934" means the Securities Exchange Act of
1934, as amended.
"Servicer" means Transition Leasing Management, Inc., as servicer under
the Servicing Agreement, and its permitted successors and assigns, including
any successor servicer appointed pursuant to Section 5.10.
"Servicer Report Date" means the l0th day (or the Business Day next
preceding such day if such day is not a Business Day) of each month during
the existence of this Indenture.
"Servicing Agreements" means the Acquisition Agreement and the Servicing
Agreement, each dated as of ______________, 1998, between the Company and the
Servicer, providing,
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among other things, for the purchasing of Leased Vehicles and Contracts and
the collecting and servicing of the Contracts, as said agreements may be
amended or supplemented from time to time as permitted hereby and thereby.
Such term shall also include any servicing agreement entered into with a
successor servicer pursuant to Section 5.10 and any separate servicing
agreement for the servicing of Contracts.
"Servicing Fee" means the servicing, purchasing, and investor
administration fees and other fees payable by the Company to the Servicer
under the Servicing Agreement.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Company and the
Trustee by the Servicer, as such list may be amended or supplemented from
time to time.
"Sinking Fund Account" means the trust account established and
maintained by the Company and designated as such pursuant to Section 4.2.
"Sinking Fund Trigger Date" means the earlier to occur of 25 months from
the release of funds from escrow or the receipt by the Trustee of a Contract
Unavailability Notice.
"Special Record Date" means the date determined pursuant to Section 2.11.
"Stated Maturity" means June 30, 2002.
"Subsidiary" means, with respect to the Company, any corporation,
partnership, joint venture or joint adventure whether now existing or
hereafter organized or acquired: (i) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election of
directors or other governing body of such corporation (other than securities
having such power only by reason of the happening of a contingency) are at
the time owned by the Company or one of more other Subsidiaries of the
Company, or (ii) in the case of a partnership, joint venture or joint
adventure, in which the Company is a general partner or joint venturer or
joint adventurer.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb),
as amended from time to time.
"Title Document" means, with respect to any Leased Vehicle, the
certificate of title for, or other evidence of ownership of, such Leased
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Leased Vehicle is registered.
"Trust Estate" shall have the meaning provided in the Granting Clauses
of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it, and thereafter means the successor.
11
"Trust Officer" means any Responsible Officer assigned by the Trustee to
administer its corporate trust matters.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
"United States Obligations" means direct obligations of the United
States of America or any agency or instrumentality of the United States of
America, or other obligations the principal of and interest on which are
unconditionally guaranteed or insured by United States of America.
SECTION 1.2 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Indenture. If this
Indenture is qualified under the TIA, any provision that is required by the
TIA to be incorporated herein shall be so incorporated and shall supersede
any conflicting provision hereof. The following TIA terms have the following
meanings in this Indenture:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company (or any other
obligor on the Securities).
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings so assigned to them.
SECTION 1.3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as of the
date of this Indenture;
(3) "or" is not exclusive; and
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(4) words in the singular include the plural, and in the plural
include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.1 FORMS GENERALLY.
The Securities and the Trustee's certificate of authentication shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the
Securities may be listed, or as may consistently herewith be determined by
the officers executing such Securities, as evidenced by their execution
thereof. Any portion of the text of any Security may be set forth on the
reverse thereof, in which case the following reference to the portion of the
text appearing on the reverse of the Securities shall be inserted on the face
of the Securities, immediately prior to the paragraph stating that the
certificate of authentication on the Security must be executed by manual
signature of the Trustee as a condition to the validity of such Security:
"Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which provisions shall for all
purposes have the same effect as if set forth at this place."
The definitive Securities shall be printed, lithographed or engraved or
produced by any commercially reasonable manner, all as determined by the
officers executing such Securities, as evidenced by their execution thereof.
SECTION 2.2 FORMS OF SECURITY.
(a) The form of Security is as follows:
TRANSITION AUTO FINANCE II, INC.
11% REDEEMABLE SECURED NOTES DUE JUNE 30, 2002
No. _________ CUSIP NO. _______ $__________
Transition Auto Finance II, Inc., a corporation duly organized and
existing under the laws of the State of Texas (herein referred to as the
"Company"), for value received, hereby promises to pay to
_____________________ or registered assigns, the principal sum of
____________________________ dollars on June 30, 2002 (the "Stated Maturity"
of such principal), and to pay interest (computed on the basis of a 360-day
year consisting of 12 months of 30 days each) on the unpaid portion of said
principal sum outstanding from time to time from
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the date of issue, until the principal amount of this Note is paid in full at
the rate of 11% per annum, which interest shall be due and payable on the
fifteenth day of each calendar month (for such interest accruing during the
preceding month or months) commencing with the second calendar month after
the issuance hereof and upon the Stated Maturity (each a "Payment Date").
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note. Any installment of interest that is not paid when and as due shall
bear interest at the Overdue Interest Rate from the date due to the date of
payment thereof, but only to the extent payment of such interest shall be
lawful and enforceable. This Note represents a general obligation of the
Company.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 11% Redeemable Secured Notes Due June 30, 2002 (herein
called the "Notes"), all issued and to be issued under the Indenture dated as
of _______________, 1998 (herein called the "Indenture"), between the Company
and Trust Management, Inc. (the "Trustee," which term includes any successor
Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Company, the Trustee and the Holders of
the Notes, and the terms upon which the Notes are, and are to be,
authenticated and delivered. All terms used in this Note that are
capitalized, if not defined herein, are defined in the Indenture and shall
have the meanings assigned to them in the Indenture.
Payment of the outstanding principal of and accrued interest on this
Note at the Stated Maturity or of the Redemption Price payable on any
Redemption Date as of which this Note has been called for redemption shall be
made upon presentation of this Note to the Paying Agent appointed by the
Company for such purpose. Payments of all installments of interest due and
payable on any Payment Date (other than the Stated Maturity) shall be made by
check mailed to the Person whose name appears as the Holder of this Note on
the Note Register as of the first business day of the month in which such
Payment Date occurs (the "Record Date") without requiring that this Note be
submitted for notation of payment. Checks returned undelivered will be held
for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated
by the Company for such purpose pursuant to the Indenture.
The payment of principal and accrued interest on the Notes, when due, is
secured by the Trust Estate, which consists of, among other things, a first
priority security interest in specific motor vehicle lease Contracts, the
Leased Vehicles described therein and the funds in the Sinking Fund Account.
If an Event of Default shall occur and be continuing with respect to the
Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Company and each surety, endorser, guarantor, and other party, if
any, now or hereafter liable for payment of any sums of money payable on this
Note, jointly and severally, waive presentment and demand for payment, notice
of intent to accelerate and notice of acceleration, protest and notice of
protest and nonpayment, and diligence in collecting or bringing suit against
any party liable hereon, and agree that their liability on this Note shall
not be affected by any renewal or extension in time of payment hereof, by any
indulgence, or by any release, modification, or substitution of any security
for the payment of this Note, and hereby consent to any and all extensions,
renewals, replacements, waivers, releases, or exchanges affecting this Note
and the taking, release, modification, or substitution of any security, with
or without notice and before or after maturity.
14
The Notes are redeemable at the option of the Company on any Payment
Date following the Sinking Fund Trigger Date, in whole or in part, at 100% of
the unpaid principal amount thereof, together with accrued and unpaid
interest thereon to the Redemption Date; provided, however, that the Paying
Agent shall be required to redeem the Notes at such time only to the extent
that the Company has theretofore deposited with the Paying Agent money
sufficient to effect such redemption. At least 10 but not more than 60 days
prior to the Redemption Date, the Company is required to mail a notice of
redemption by first class mall to the registered owner of this Note
specifying the Redemption Date, the Redemption Price, the name and address of
the Paying Agent, that this Note must be delivered to the Paying Agent and
that interest on this Note ceases to accrue on and after the Redemption Date.
If provision is made for the redemption and payment of this Note in
accordance with the Indenture, this Note shall thereupon cease to bear
interest from and after the Redemption Date.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Note Register
of the Company, upon surrender of this Note for registration of transfer at
the office or agency designated by the Company pursuant to the Indenture,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of this Note,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note is overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of Notes representing
more than 50% of the principal amount of all Notes at the time outstanding.
The Indenture also contains provisions permitting the Holders of Notes
representing specified percentages of the principal amount of the Notes at
the time outstanding, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon
this Note. The Indenture also permits the Trustee to amend or waive certain
terms and conditions set forth in the Indenture without the consent of
Holders of the Note issued thereunder.
The term "Company" as used in this Note includes any successor to the
Company under the Indenture.
15
The Notes are issuable only in registered form in denominations as
provided in the Indenture and subject to certain limitations therein set
forth. The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder surrendering
same.
This Note and the Indenture shall be construed in accordance with, and
governed by, the laws of the State of Texas applicable to agreements made and
to be performed therein.
The Indenture and this Note are hereby expressly limited so that in no
contingency or event, whether by reason of acceleration of the maturity of
this Note or otherwise, shall the amount paid, or agreed to be paid by the
Company for the use, forbearance, or detention of the money loaned under this
Note or otherwise or for the payment or performance of any covenant or
obligation contained herein or the Indenture or in any other document
evidencing, securing or pertaining hereto, exceed the maximum amount
permissible under applicable law, as now or as hereafter amended. If from any
circumstances whatsoever fulfillment of any provision hereof or any of such
other documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity, and if from any such
circumstances the registered owner of this Note shall ever receive interest
or anything that might be deemed interest under applicable law that should
exceed the highest lawful rate, such amount that would be excessive interest
shall be applied to the reduction of the principal of this Note and not to
the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal of this Note such excess shall be refunded to the
Company. All sums paid or agreed to be paid to the registered owner of this
Note for the use, forbearance or detention of the indebtedness of the Company
to the registered owner of this Note shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the actual rate
of interest on account of such indebtedness is uniform, or does not exceed
the maximum rate permitted by applicable law as now or hereafter amended,
throughout the term thereof. The terms and provisions of this paragraph shall
control and supersede every other provision of this Note and the Indenture.
The Company hereby waives, to the extent permitted by applicable law, all of
its rights or protections afforded by any applicable usury or interest
limitation law.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall impair or affect the right of the registered owner of
this Note to receive payment of principal and interest on this Note, on or
after the respective due dates, or to being suit for the enforcement of any
such payment on or after such respective dates, without the consent of the
registered owner.
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Transition Auto Finance II, Inc. has caused this
instrument to be duly executed under its corporate seal.
Dated: ___________________________
16
TRANSITION AUTO FINANCE II, INC.
By:
-------------------------------------
(Authorized Officer)
[SEAL]
Attest:
-----------------------------------
(Authorized Officer)
(b) The form of the Trustee's certificate of authentication is as follows:
This is one of the Notes referred to in the within-mentioned Indenture.
-----------------------------------------
-----------------------------------------
as Trustee, Paying Agent and Registrar
By:
-------------------------------------
Authorized Signatory
SECTION 2.3 DENOMINATIONS.
The Securities shall be issuable only as registered Securities in
authorized denominations with a minimum denomination of $1,000 and larger
denominations of integral multiples of $1,000 (in each case expressed in
terms of the principal amount thereof on the date of issuance).
SECTION 2.4 EXECUTION AND AUTHENTICATION.
(a) The Securities shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President of the Company and
attested to by an Officer of the Company other than an Officer who has
executed the Securities. The signature of any such Persons on the Securities
may be manual or facsimile.
(b) Securities bearing the manual or facsimile signatures of
individuals who were at any time the Officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
be such prior to the authentication and delivery of such Securities.
17
(c) A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security on
behalf of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
(d) The Trustee shall authenticate Securities from time to time for
original issue in the aggregate Offering Amount upon a Company Order;
provided, however, the Trustee shall not be required to so authenticate more
often than once a week. The aggregate principal amount of Securities
outstanding at any time may not exceed that amount except as provided in
Section 2.8.
(e) Notwithstanding anything contained herein to the contrary, each of
the Notes issued hereunder, with the consent of the Company and Trustee,
may be issued in book entry from as an uncertificated security in accordance
with the provisions of Article 8 of the Uniform Commercial Code as adopted
in the state of organization of the Company.
SECTION 2.5 REGISTRAR AND PAYING AGENT.
(a) The Company shall appoint a registrar for the Securities (the
"Registrar") who shall maintain or cause to be maintained an office or agency
where Securities may be presented for registration or transfer or for
exchange. The Registrar shall keep a register of the Securities and of their
transfer and exchange (the "Note Register"). The Company may have one or more
co-registrars.
(b) Subject to the provisions of Section 5.2, the Company may designate
one or more Paying Agents (the "Paying Agents") who shall maintain or cause
to be maintained an office within the United States of America, at which the
Securities may be presented or surrendered for payment or at which the Paying
Agent may make payments of accrued interest on the Securities on behalf of
the Company with funds withdrawn from the Sinking Fund Account.
(c) The Company shall notify the Trustee of the name and address of any
such Registrar or Paying Agent and may appoint successors thereof.
(d) The Company initially appoints the Trustee as Registrar and as
Paying Agent.
SECTION 2.6 SECURITYHOLDER LISTS.
The Trustee shall preserve a list of the names and addresses of
Securityholders in as current a form as is reasonably practicable. If the
Trustee is not the Registrar, the Company shall cause the Registrar to
furnish to the Trustee five Business Days before each Payment Date and at
such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
SECTION 2.7 TRANSFER AND EXCHANGE.
Where a Security is presented to the Company or the Registrar with a
request to register a transfer of Securities, the Company shall cause the
Registrar to register the transfer as requested if the requirements for a
transfer pursuant to the Uniform Commercial Code, as enacted in the State of
Texas, are met. Where Securities are presented to the Company or the
Registrar with a request to exchange them for an equal principal amount of
Securities of other denominations, the Company shall cause the Registrar to
make the exchange as requested if the same requirements are met. To permit
transfers and exchanges, the Trustee shall authenticate Securities upon
18
Company Request or upon request of the Registrar. The Company may charge a
reasonable fee to the Holder for any transfer or exchange other than an
exchange pursuant to Section 2.9, 3.7 or 9.5.
SECTION 2.8 REPLACEMENT SECURITIES.
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the requirements for the issuance of
replacements securities pursuant to the Uniform Commercial Code, as enacted
in the State of Texas, are met. An indemnity bond must be sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee,
the Paying Agent and the Registrar from any loss that any of them may suffer
if a Security is replaced. The Company may charge for its expenses in
replacing a Security.
SECTION 2.9 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but
may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities.
SECTION 2.10 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Company shall forward
to the Trustee any Securities surrendered to them for transfer, exchange,
payment or cancellation and shall dispose of cancelled Securities as the
Company directs in accordance with applicable law. The Company may not issue
new Securities to replace Securities it has paid or delivered to the Trustee
for cancellation.
SECTION 2.11 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest and, to the extent permitted by law,
interest on defaulted interest at the Overdue Interest Rate to the persons
who are Securityholders of record as of a subsequent date designated as a
"Special Record Date" for such payment. The Trustee shall establish the
Special Record Date if and when funds for the payment of such interest have
been received by the Paying Agent from the Company. At least 15 days before
the subsequent Special Record Date, the Trustee shall mail to each
Securityholder a notice that states the subsequent Special Record Date, the
payment date for the defaulted interest, and the amount of defaulted interest
(plus any permitted interest thereon) to be paid.
19
SECTION 2.12 PERSONS DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar and any
agent of the Company or of the Trustee may treat the Person whose name and
Security is registered on the Note Register as the owner of such Security for
the purpose of receiving payments of the principal of and interest on such
Security and for all other purposes whatsoever, whether or not such Security
be overdue, and neither the Company, the Trustee, nor any agent of the
Company shall be affected by notice to the contrary.
ARTICLE 3
REDEMPTION
SECTION 3.1 REDEMPTION AFTER RELEASE OF FUNDS FROM ESCROW.
At any time on any Payment Date on or after the Sinking fund Trigger
Date, the Securities may be redeemed, in whole or in part, at the option of
the Company at the Redemption Price for such Securities. If the Company
elects to redeem the Securities, it shall, not later than 45 days prior to
the Payment Date selected for redemption, deliver notice of such election to
the Trustee, together with a Company Order directing the Trustee to effect
such redemption.
SECTION 3.2 SECURITIES NOT PREVIOUSLY DELIVERED TO TRUSTEE.
If the Company wishes to credit Securities it has not previously
delivered to the Trustee for cancellation against the principal amount of
Securities to be redeemed, it shall so notify the Trustee and it shall
deliver the Securities duly endorsed with the notice.
SECTION 3.3 SELECTION OF SECURITIES TO BE PURCHASED OR REDEEMED.
If less than all of the Securities are to be called for redemption, the
particular Securities to be redeemed shall be selected by the Trustee by lot
or by such other method as the Trustee deems appropriate.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be redeemed.
Securities and portions of Securities selected shall be in amounts of $1,000
or whole multiples of $1,000; except that if all of the Securities of a
Holder are to be redeemed, the entire outstanding amount of Securities held
by such Holder, even if not a multiple of $1,000, shall be purchased or
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
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SECTION 3.4 NOTICE OF REDEMPTION.
(a) At least 10 days but not more than 60 days before the Redemption
Date, the Company shall mall a notice of redemption by first-class mall to
each Holder of Securities, with a copy thereof to Trustee.
(b) The notice shall identify the Securities to be redeemed by CUSIP
No. and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Security;
(iv) the name and address of the Paying Agent;
(v) that the Securities must be delivered to Paying Agent at the
address stated in the notice for the Holder to receive the Redemption
Price; and
(vi) that interest on the Securities ceases to accrue on and after
the Redemption Date.
(c) At the Company's request, the Trustee shall give notice of
redemption in the Company's name and at the Company's expense. Failure to
give notice of redemption, or any defect therein, to any Holder of any
Security shall not impair or affect the validity of the redemption of any
Security.
SECTION 3.5 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption under Section 3.4 has been given, the
Securities called for redemption must be redeemed on the designated
Redemption Date. Upon surrender to the Paying Agent, such Securities shall be
paid at the Redemption Price.
A notice of redemption under Section 3.4 may not be conditional. Unless
the Company shall default in the payment of the Redemption Price, no interest
shall accrue on the Securities for any period after the Redemption Date.
SECTION 3.6 DEPOSIT OF REDEMPTION AMOUNT.
Prior to the Redemption Date, the Company shall deposit with the Paying
Agent money sufficient to pay the Redemption Price on Securities on that
date. Such moneys shall be segregated
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by the Paying Agent for the purpose of application to such redemption on the
Redemption Date. If such deposit shall be made, the amount payable on the
Securities shall be limited to the Redemption Price therefore, without any
premium or penalty, and no interest shall accrue on such Redemption Price for
any period after the Redemption Date. If any Security called for redemption
shall not be so paid upon surrender for redemption because of the failure of
the Company to comply with the provisions of this Section 3.6, interest shall
be paid on the unpaid principal from the Redemption Date until such principal
is paid, and, to the extent lawful, on any interest not paid on such unpaid
principal, in each case at the rate provided in the Securities.
SECTION 3.7 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 4.1 COLLECTION OF MONEYS.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and may receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all
money and other property payable to or receivable by the Trustee pursuant to
this Indenture. The Trustee shall hold all such money and property received
by it as part of the Trust Estate, and shall apply it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under the
Servicing Agreement, the Trustee may, and upon the request of the Holders of
Securities representing more than 50% of the principal amount of the
Outstanding Securities shall, take such action as may be appropriate to
enforce such payment or performance including the institution and prosecution
of appropriate judicial proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and to proceed thereafter as provided in Article 7.
SECTION 4.2 SINKING FUND ACCOUNT; OPERATING ACCOUNT; MASTER COLLECTIONS
ACCOUNT.
(a) Prior to the initial authentication and delivery of any Securities,
the Company shall open, at one or more depository institutions (which may be
the Trustee) (the "Custodians"), a trust account denominated "Sinking Fund
Account--Trust Management, Inc., as trustee in respect of the 11% Redeemable
Secured Notes Due June 30, 2002," (the "Sinking Fund Account"). The Sinking
Fund Account shall be an Eligible Account. Deposits to and withdrawals from
the Sinking Fund Account shall be made solely in accordance herewith, and the
funds in the Sinking Fund Account shall not be commingled with any other
moneys, except as expressly provided for herein. The Company shall also open
a commercial bank account in its own name for use in holding the Company's
funds and in
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paying the Company's expenditures (the "Operating Account"). The Sinking
Fund Account, the Master Collections Account and the Operating Account are
sometimes collectively referred to as the "Accounts" or individually as an
"Account." The Company shall give the Trustee at least five Business Days'
written notice of any change in the location of any Operating Account and any
related account identification information.
(b) The Company shall direct or cause to be directed all Obligors to
remit all collections and payments on the Contracts directly to the Master
Collections Account maintained by the Servicer. The Company agrees to provide
or cause to be provided payment books or will mail or cause to be mailed
monthly statements to all Obligors with remittance instructions directing all
payments to be remitted directly to the Master Collections Account. The
Company agrees that all cash, money orders, checks, notes, drafts and other
items that it otherwise receives and that are attributable to the Contracts
shall be promptly deposited into the Master Collections Account. The Company
shall likewise deposit or cause to be deposited in the Master Collections
Account within two Business Days of receipt all Net Liquidation Proceeds and
Insurance Proceeds (net of any portion thereof applied to the repair of any
Leased Vehicle, released to an Obligor in accordance with the normal
servicing procedures of the Servicer). The Company shall cause the Servicer
to transfer to the Operating Account, at least weekly and more frequently if
deemed reasonable by the Company under the circumstances, all funds (except
any minimum sum necessary to avoid bank service charges) in the Master
Collections Account that are attributable to the Contracts.
(c) The Company shall cause the Servicer to maintain detailed
accounting books and records adequate to determine the respective share of
the funds (including all income earned thereon as determined by any
allocation method deemed reasonable by the Servicer) deposited or contained
in the Master Collections Account attributable to each motor vehicle lease
contract, including the Contracts, owned by the Company or serviced by the
Servicer.
(d) The Company agrees that it shall not withdraw any funds in the
Operating Account except for an investment, transfer or payment of such funds
in accordance with the provisions of this Section 4.2 and Section 4.3.
(e) The Company may invest the funds in the Operating Account but only
in Eligible Investments that mature on or prior to the Business Day next
preceding the next Payment Date following the making of such investment.
(f) So long as the Securities have not been declared due and payable
pursuant to Section 6.2 and subject to the receipt by the Trustee of any
required certificates, the Company shall have the right to cause the funds in
the Operating Account to be withdrawn or applied, to the extent necessary and
in the amounts required, for the following purposes in the following order of
priority:
FIRST to the transfer to the Sinking Fund Account of the amount that,
together with any amounts held in the Sinking Fund Account, is
sufficient for the payment, PRO RATA, of all interest due on the
Outstanding Securities on each Payment Date;
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SECOND, to the payment to the Trustee of any unpaid amount due the
Trustee pursuant to Section 7.7;
THIRD, to the payment of any other unpaid Allowed Expenses, except
that during the continuance of an Event of Default, no such payments
of unpaid Allowed Expenses shall be made (except for payments of
amounts due to the Trustee under Section 7.7);
FOURTH, after the Sinking Fund Trigger Date or during the continuance
of an Event of Default, to the transfer to the Sinking Fund Account
for the PRO RATA payment of amounts owing on the Notes when due; and
FIFTH except during the continuance of an Event of Default, until the
Sinking Fund Trigger Date, to the purchase of Eligible Additional
Contracts in accordance with Section 4.3.
All of the foregoing applications of funds in the Operating Account that have
higher priority must be fully satisfied before any of the foregoing
applications having lower priority may be satisfied with such funds.
(g) On or prior to the Business Day next preceding each Payment Date
occurring prior to the Sinking Fund Trigger Date, the Company shall cause to
be transferred from the Operating Account to the Sinking Fund Account an
amount that, together with any funds then held in the Sinking Fund Account,
is sufficient to pay the accrued interest due on the Outstanding Notes on
such Payment Date. After the Sinking Fund Trigger Date, upon the written
request of a Trust Officer from time to time or as otherwise determined by
the Company but in any event not less often than the Business Day next
preceding each Payment Date, the Company shall cause to be transferred from
the Operating Account to the Sinking Fund Account the funds in the Operating
Account (except any minimum balance necessary to avoid bank service charges),
less any Allowed Expenses for which funds have not been previously withdrawn
from the Operating Account.
(h) During the continuance of an Event of Default, upon the written
request of a Trust Officer from time to time but in any event not less often
than the Business Day next preceding each Payment Date, the Company shall
cause to be transferred from the Operating Account to the Sinking Fund
Account all of the funds in the Operating Account, less any amounts due the
Trustee under Section 7.7.
(i) If the funds in the Operating Account exceed $250,000 for a period
of 60 consecutive days or longer, the Company shall promptly transfer from
the Operating Account to the Sinking Fund Account that portion of such funds
exceeding $250,000 at the end of such 60 day period. This provision shall not
apply to any proceeds from the sale of the Notes by the Company if the
Company elects to deposit such proceeds in the Operating Account, and for
this purpose, any proceeds from the sale of Notes shall be deemed to be the
first funds used by the Company for the purchase of Eligible Additional
Contracts.
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(j) Upon the Sinking Fund Trigger Date, the Company shall deposit in
the Sinking Fund Account any remaining net proceeds from the sale of the
Securities that have not been used for the purchase of Contracts.
(k) All payments of principal or accrued interest with respect to the
Securities shall be made from amounts held in the Sinking Fund Account. All
payments to be made from time to time to the holders of Securities out of
funds in the Sinking Fund Account pursuant to this Indenture shall be made by
the Trustee as the Paying Agent appointed by the Company, subject to Section
5.2. All moneys deposited from time to time in the Sinking Fund Account, and
all investments made with such moneys, shall be held by the Trustee as part
of the Trust Estate as herein provided. No amounts contained in the Sinking
Fund Account shall be paid over to or at the direction of the Company, except
as provided in a Payment Date Statement delivered by the Company, that is in
compliance with provisions of Section 5.1 or as otherwise provided by the
provisions of this Indenture.
(l) So long as no Event of Default shall have occurred and be
continuing, any funds in the Sinking Fund Account shall be invested and
reinvested by the Trustee at the Company's direction in one or more Eligible
Investments. All income or other gain from investment of moneys deposited in
the Sinking Fund Account shall be deposited therein immediately upon receipt,
and any loss resulting from such investment shall be charged to such Account.
(m) Notwithstanding any other provision of this Indenture, the Company
may elect, in its sole discretion, to deposit the proceeds from the sale of
Notes into the Operating Account. In that event, the Company may, without the
consent of the Trustee or any Noteholder, withdraw from the Operating Account
the funds necessary to pay the offering expenses incurred in connection with
the sale of the Notes, but not to exceed the limits set forth in the
Company's final prospectus filed with the SEC pursuant to which the
Securities are offered and sold on behalf of the Company.
SECTION 4.3 PURCHASE OF LEASED VEHICLES AND ELIGIBLE ADDITIONAL CONTRACTS.
(a) Leased Vehicles and Eligible Additional Contracts shall be
originated by the Servicer (or its contractors) for purchase by the Company
pursuant to the terms of the Servicing Agreements and this Indenture. In
carrying out its purchase obligations, the Servicer shall use its customary
and usual procedures in evaluating the purchase of motor vehicles and motor
vehicle lease Contracts and, to the extent more exacting, the procedures used
by the Servicer in respect to such motor vehicles and Contracts purchased by
it for its own account. The Company and the Servicer shall agree from time to
time as to which Leased Vehicles and Eligible Additional Contracts are to be
purchased by the Company through Servicer. The purchase prices for any such
purchases shall be payable from the funds in the Operating Account,
notwithstanding the provisions of Section 5.12. On or prior to each Servicer
Report Date, the Company shall deliver to the Trustee (or any duly appointed
custodian for the Contract Documents) the Contract Documents relating to such
Contracts, with the Contracts containing the notice required by Section
4.3(e).
(b) Servicer agrees that any motor vehicle lease Contracts originated
by it that satisfy the criteria established in Section 4.4 of this Indenture
will be offered for sale to the Company, to the extent that the Company has
sufficient funds to purchase such Contracts.
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(c) The purchase price payable by the Company for each Leased Vehicle
originated by the Servicer on the Company's behalf shall equal the original
purchase price of the Leased Vehicle, plus a fee to the Servicer equal to
$150 of per purchased Contract, plus 57.5% of the Obligor's down payment to
the Company. The purchase price payable by the Company for each Eligible
Additional Contract acquired from Transition Auto Finance Inc. ("TAFI"), an
affiliate of the Company, shall be an amount equal to the sum of (i) the
value of the Leased Vehicle on a "clean wholesale retail" basis, as
determined by reference to the Automobile Wholesale Buyer's Guide in effect
as of the date of the Company's purchase plus (ii) 57.5% of the down payment
originally received by TAFI with respect to such Leased Vehicle plus (iii)
$150.
(d) Servicer and the Company may amend the purchasing criteria set
forth in the Servicing Agreement with the exception of the purchasing
criteria set forth on Exhibit A to this Indenture, for which the prior
written consent of the Trustee or the Holders of 50% of the aggregate
principal amount of the Outstanding Securities must be obtained.
(e) Each Eligible Additional Contract purchased by the Company pursuant
to this Section 4.3 shall be marked on its face with the following notice:
"NOTICE: THIS MOTOR VEHICLE LEASE CONTRACT HAS BEEN SOLD TO TRANSITION AUTO
FINANCE II, INC., AND IS SUBJECT TO A PERFECTED SECURITY INTEREST OF TRUST
MANAGEMENT, INC., AS TRUSTEE, UNDER AN INDENTURE DATED AS OF ______________,
1998 BETWEEN TRANSITION AUTO FINANCE II, INC. AND SAID TRUSTEE." A UCC-l
financing statement properly describing each Eligible Additional Contract and
naming the Trustee as secured party shall be duly filed in the appropriate
filing office to perfect the Trustee's security interest in such Contract.
(f) Without the prior consent of the Trustee, neither the Servicer nor
the Company shall make any payments or withdrawals from funds in the
Operating Account for the purchase of any Contracts (i) following the Sinking
Fund Trigger Date, or (ii) during the continuance of an Event of Default.
SECTION 4.4 REPRESENTATIONS AND WARRANTIES AS TO THE CONTRACTS.
With respect to each Contract, the Company covenants and agrees that,
effective as of the Purchase Date for such Contract, the following
representations and warranties shall be true and shall be reaffirmed by
delivery of the Purchased Contracts Certificate signed by the Servicer:
(a) Each Contract conforms with all applicable Federal, state and local
laws, regulations and official rulings.
(b) Each Contract (i) shall have been originated in the United States
of America and covers a Leased Vehicle purchased from a dealer in the retail
sale of the Leased Vehicle in the ordinary course of such dealer's business,
shall have been fully and properly executed by the parties thereto and the
full and complete title to such Leased Vehicle shall have been validly
assigned by such dealer to the Company in accordance with its terms, (ii)
shall have created or shall create ownership of the Leased Vehicle in the
name of the Company and a valid, subsisting
26
and enforceable first priority security interest in favor of the Company and
a valid, subsisting and enforceable second priority security interest in
favor of the Trustee in the Leased Vehicle, (iii) shall contain customary and
enforceable provisions such that the rights and remedies of the holder
thereof shall be adequate for realization against the collateral of the
benefits of the Leased Vehicle, (iv) shall provide for, in the event that
such Contract is prepaid, a prepayment that fully satisfies all required
payments pursuant to the Contract, (v) meets in all material respects all
purchasing criteria set forth on Exhibit A attached hereto, and (vi) shall
not be a Defaulted Contract.
(c) (i) The Title Document for the related Leased Vehicle shows (or if
a new or replacement Title Document is applied for with respect to such
Leased Vehicle, the official receipt from the responsible state or local
governmental authority indicating that an application has been made and that
the Title Document, when issued, will show) the Servicer or the Company as
the owner of the Leased Vehicle and the Trustee as the holder of a first
priority security interest in such Leased Vehicle, (ii) within 30 days after
the Purchase Date for the Contract relating to the Leased Vehicle, the Title
Document for such Leased Vehicle will show the Company as owner of the Leased
Vehicle and the Trustee as the holder of a first priority security interest
in such Leased Vehicle, and (iii) the Company, upon delivery of the
Assignment, will have a valid and enforceable ownership interest in the
Leased Vehicle and the Trustee will have a first priority security interest
in the Leased Vehicle.
(d) Each Contract and the lease of the Leased Vehicle shall have
complied at the time it was originated or made in all material respects with
all requirements of applicable federal, state, and local laws, and
regulations thereunder, including, without limitation, usury laws, the
Federal Truth-In-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Federal Reserve Board's Regulations B, M and Z, and
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, and other consumer laws and equal credit opportunity and
disclosure laws.
(e) Each Contract shall represent the genuine, legal, valid and binding
payment obligation in writing of the Obligor, enforceable by the holder
thereof in accordance with its terms subject to the effects of bankruptcy,
insolvency, reorganization or other similar laws affecting the enforceability
of creditors' rights generally.
(f) No provision of a Contract shall have been waived, amended or
modified, except as disclosed in writing by Servicer.
(g) No right of rescission, setoff, counterclaims or defense shall have
been asserted or threatened with respect to any Contract.
(h) The Assignment constitutes an enforceable sale and transfer of the
Leased Vehicle and the Contract from the Person from whom they are purchased
to the Company and it is the intention of the Servicer that the beneficial
interest in and title to the Leased Vehicles and the
27
Contracts not be part of Servicer's estate in the event of the filing of a
bankruptcy petition by or against Servicer under bankruptcy law.
(i) Immediately prior to the Assignment herein contemplated, the Person
from whom such Leased Vehicle or Contract is purchased by the Company had
good and marketable title to each Leased Vehicle or Contract free and clear
of all liens, encumbrances, security interests, and rights of others and,
immediately upon the transfer thereof pursuant to the Assignment, the Company
shall have good and marketable title to each Leased Vehicle and Contract,
free and clear of all liens, encumbrances, security interests and rights of
others.
(j) No Contract shall have been originated in, or shall be subject to
the laws of, any jurisdiction under which the sale, transfer and assignment
of such Contract to the Company or the Trustee would be unlawful, void or
voidable.
SECTION 4.5 GENERAL PROVISIONS REGARDING SINKING FUND ACCOUNT.
(a) The Company shall not direct the Trustee to make any investment of
any funds in the Sinking Fund Account or to sell any investment held in the
Sinking Fund Account except under the following terms and conditions: (i) (A)
each such investment shall be made in the name of the Trustee (in its
capacity as such) or its nominee (or, if applicable law provides for
perfection of pledges of an investment not evidenced by a certificate or
other instrument through registration of such pledge on books maintained by
or on behalf of such issuer of such investment, such pledge may be so
registered), (B)any instrument evidencing such investment shall be delivered
directly to the Trustee or its agent; and (ii) the proceeds of each such sale
of an investment shall be remitted by the purchaser thereof directly to the
Trustee for deposit into the Sinking Fund Account.
(b) If any amounts are needed for disbursement from the Sinking Fund
Account and sufficient uninvested funds are not available to make such
disbursement, in the absence of a Company Order for the liquidation of the
investments in an amount sufficient to provide the required funds, the
Trustee may cause to be sold or otherwise converted to cash a sufficient
amount of the investments in the Sinking Fund Account.
(c) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Sinking Fund Account resulting from any loss on any
Eligible Investment included therein except that the Trustee shall remain
liable on Eligible Investments that are obligations of the Trustee in its
commercial capacity.
(d) All investments of funds in the Sinking Fund Account and all sales
of Eligible Investments held in the Sinking Fund Account shall, except as
otherwise expressly provided in this Indenture, be made by the Trustee in
accordance with a Company Order. Such Company Order may specify actions
(including, without limitation, that such funds not be invested, in which
case such funds shall remain deposited in the Sinking Fund Account) or may be
a general, standing order authorizing the Trustee to act on written
instructions of specified personnel or agents of the Company. In order to
insure that the Trustee can invest funds in the Sinking Fund
28
Account or sell any investment in the Sinking Fund Account, the Company Order
with respect thereto must be received by the Trustee no later than 9:00 a.m.
on the date specified in the Company Order for effecting such transaction.
(e) In the event that:
(i) the Company shall have failed to give investment directions to
the Trustee by 9:00 a.m. Dallas, Texas time on any Business Day authorizing
the Trustee to invest the funds then in the Sinking Funds Account,
(ii) a Default or Event of Default shall have occurred and be
continuing but the Securities shall not have been declared due and payable
pursuant to Section 6.2, or if the Securities shall have been declared due
and payable following an Event of Default, amounts collected or receivable
from the related Trust Estate are being applied in accordance with Section
6.13, or
(iii) an Event of Default shall have occurred and be continuing, the
Securities shall have been declared due and payable pursuant to Section
6.2, and amounts collected or receivable from the related Trust Estate are
being applied in accordance with Section 6.10,
the Trustee shall invest and reinvest the funds then in the Sinking Fund Account
to the fullest extent practicable in the _______________________________________
__________________. All investments made pursuant to clause (i) above shall
mature on the next Business Day following the date of such investment, all
such investments made pursuant to clause (ii) above shall mature no later
than the next Payment Date, and all investments made pursuant to clause (iii)
above shall mature no later than the first date following the date of such
investment on which the Trustee proposes to make a distribution to
Noteholders pursuant to Section 6.10.
SECTION 4.6 RELEASES.
(a) The lien of this Indenture shall be released from a Liquidated
Contract (including any related Contract Documents and Leased Vehicle),
notwithstanding the provisions of Section 5.12, if:
(i) in the event that such Liquidated Contract has been paid in
full, the Trustee receives the certificate of a Servicing Officer
identifying such Contract and certifying that such Contract has been fully
paid and all proceeds received in respect of such Contract have been
deposited in the Master Collections Account;
(ii) in the event that such Liquidated Contract is required to be
purchased by the Servicer pursuant to the Servicing Agreement, the Trustee
receives a certificate of a Servicing Officer (A) identifying the Contract
to be released, (B) requesting the release thereof, and (C) certifying that
the correct repurchase price therefor has been deposited in the Master
Collections Account; and
29
(iii) in the event that such Liquidated Contract is a "Liquidated
Contract" by virtue of clause (ii) of the definition thereof, the Trustee
receives the certificate of a Servicing Officer to the effect that such
Contract is a Defaulted Contract that became a Liquidated Contract during
the related Collection Period, and there has been deposited in the Master
Collections Account any related Net Liquidation Proceeds that, in the
Servicer's judgment, constitute the final amounts recoverable in respect of
such Contract.
(b) Each certificate of a Servicing Officer required by subsection (a)
above, shall contain a statement to the effect that the release of the
Liquidated Contract from the lien for this Indenture will not impair the
security under this Indenture in contravention of its provisions, after
taking into account the amounts deposited in the Master Collections Account
on the account of such Liquidated Contract.
SECTION 4.7 REPORTS BY TRUSTEE.
The Trustee shall report and account to the Company in writing (using
such form as the Trustee shall choose in its sole discretion) with respect to
the Sinking Fund Account and the identity of the investments included
therein, on a monthly basis and more frequently as the Company may from time
to time reasonably request, including accounting of deposits into and
payments from the Sinking Fund Account.
SECTION 4.8 TRUST ESTATE; CONTRACT DOCUMENTS.
(a) Subject to the payment of its fees and expenses the Trustee may,
and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey
the Trustee's interest in the same, in a manner and under circumstances that
are not inconsistent with the provisions of this Indenture. No party relying
upon an instrument executed by the Trustee as provided in this Article 4
shall be bound to ascertain the Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) In order to facilitate the servicing of the Contracts by the
Servicer, the Trustee hereby acknowledges that the Servicer is authorized in
the name and on behalf of the Company, to execute instruments of satisfaction
or cancellation, or of partial or full release or discharge, and other
comparable instruments with respect to the Contracts and with respect to the
Leased Vehicles.
(c) Upon Company Order, the Trustee shall, at such time as there are no
Securities Outstanding, release and transfer, without recourse, all of the
Trust Estate that secured the Securities (other than any cash held for the
payment of the Securities pursuant to Sections 4.2(b) or 8.2).
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ARTICLE 5
COVENANTS
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.
(a) Interest payable on any Security shall be paid to the Person in
whose name such Security (or one or more predecessor Securities) is
registered at the close of business on the Record Date for such Payment Date
by check mailed to such Person's address as it appears in the Note Register
on such Record Date, except for the final payment of principal of a Security,
which shall be payable only upon presentation and surrender as provided in
subsection (b) of this Section 5.1.
Checks for interest shall be mailed without requiring that such Security
be submitted for notation of payment. Checks returned undelivered will be
held by the Paying Agent for payment to the Person entitled thereto, subject
to the terms of Section 5.2. Payments made on any Payment Date shall be
binding upon all future Holders of such Securities and of any Securities
issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not noted thereon.
(b) Each installment of interest on the Securities is payable as
specified in the form of Security set forth in Section 2.2. Any installment
of interest that is not paid when and as due shall bear interest at the
Overdue Interest Rate from the date due to the date of payment thereof, but
only to the extent payment of such interest shall be lawful and enforceable.
The principal of each Security shall be payable at the Stated Maturity
thereof unless such Security becomes due and payable at an earlier date by
declaration of acceleration, call for redemption or otherwise. The final
payment of principal of each Security (or the Redemption Price thereof of the
Securities called for redemption) shall be payable upon presentation and
surrender thereof on or after its Stated Maturity to the Paying Agent. The
Trustee upon Company Order shall notify the Person in whose name a Security
is registered at the Record Date for the Payment Date next preceding the
Payment Date on which the Company expects that the final payment of principal
and interest on such Security will be paid. Such notice shall be mailed no
earlier than the sixtieth (60th) day, and no later than the twentieth (20th)
day, prior to such Payment Date and shall specify that such final payment
will be payable only upon presentation and surrender of such Securities and
shall specify the name and address of the Paying Agent where such Securities
may be presented and surrendered for payment of such installment. Notices in
connection with redemptions of Securities shall be mailed to Securityholders
as provided in Section 3.2.
(c) All computations of interest due with respect to any Securities
shall be based on a 360-day year consisting of 12 months of 30 days each and
on the amount of principal outstanding on the Securities from time to time.
(d) On each Servicer Report Date, the Company shall transmit to the
Trustee the Monthly Report (a "Payment Date Statement"), which shall set
forth, with respect to the next succeeding Payment Date, the amount of
interest payable on such Payment Date on each
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Outstanding Security. On the last Servicer Report Date prior to the Stated
Maturity, the Company shall transmit to the Trustee a final Payment Date
Statement setting forth, with respect to the Stated Maturity, the amount of
accrued interest and principal payable on the Stated Maturity on each
Outstanding Security. Each Payment Date Statement shall state that the
computations of interest were made in conformity with the requirements of
this Indenture. Notwithstanding the foregoing, the Trustee may rely on its
own calculations for purposes of paying interest on the Securities.
(e) The Company at any time may terminate its obligation to pay an
installment of interest if it deposits with the Trustee, or the Trustee holds
in the Sinking Fund Account as of the related Payment Date, money sufficient
to pay the installment when due. The Company shall designate the installment.
(f) Subject to the foregoing provisions of this Section 5.1, each
Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
unpaid principal and interest, if any, that were carried by such other
Security.
SECTION 5.2 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
(a) Whenever the Company shall have a Paying Agent other than the
Trustee, it will, by Company Order delivered on or before the Business Day
next preceding each Payment Date, direct the Trustee to deposit with such
Paying Agent on or before such Payment Date a sum sufficient to pay the
amounts then becoming due, and the Trustee shall, to the extent it has
received such amount from the Company, deposit such amount with the Paying
Agent as directed. Such sum shall be held in trust for the benefit of the
Persons entitled to such payments.
(b) The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent, in acting as Paying Agent, will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Securities in trust for the benefit of the persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment required to
be made with respect to the Securities; and
(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
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(c) For the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, the Company may at any time direct by
Company Order any Paying Agent to pay to the Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall
be released from all further liability with respect to such money.
SECTION 5.3 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged
before the same shall become delinquent (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or the Leased
Vehicles, and (2) all lawful claims for labor, materials and supplies that,
if unpaid, might by law become a lien upon the property of the Company;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings; and provided further, that the Company shall not be
required to cause to be paid or discharged any such tax, assessment, charge
or claim if the Company's Board of Directors shall determine such payment is
not advantageous to the conduct of the business of the Company and that the
failure so to pay or discharge is not disadvantageous in any material respect
to the Holders.
SECTION 5.4 MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of
its business to be maintained and kept in good condition, repair and working
order and will cause to be made all necessary repairs, renewals,
replacements, betterment and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company
from discontinuing the operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Company's Board of Directors, desirable in the conduct of the
business of the Company and not disadvantageous in any material respect to
the Holders.
SECTION 5.5 LIMITATION ON INVESTMENT ACTIVITIES.
The Company will not register as, or conduct its business or take any
action that shall cause it to become, or to be deemed to be, an "investment
Company" as defined under the provisions of the Investment Company Act.
SECTION 5.6 COMPLIANCE CERTIFICATES.
(a) Commencing with the fiscal year ending December 31, 1998, the
Company shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company a certificate of a firm of independent accountants
with respect to the compliance by the Company
33
and the Servicer, in all material respects, with their respective obligations
arising under this Indenture. If such accountant knows of such a default, the
certificate shall describe the default.
(b) Commencing with the fiscal quarter ending December 31, 1998, on or
before 45 days after the end of each fiscal quarter of the Company, the
Company shall deliver an Officers' Certificate to the Trustee to the effect
that a review of the activities of the Company during the Company's preceding
fiscal quarter has been made under the supervision of the officers executing
such Officers' Certificate with a view to determining whether during such
period the Company and the Servicer have performed and observed all of their
obligations under this Indenture, and either (A) stating that to the best of
their knowledge no Default by the Company or the Servicer under this
Indenture has occurred and is continuing, or (B) if such a Default has
occurred and is continuing, specifying such Default and the nature and status
thereof.
(c) The Company will deliver to the Trustee an Officers' Certificate
stating whether or not the signee knows of any default by the Company in
performing its covenants under this Indenture within 15 days of a written
request by the Trustee. The Company will perform, execute, acknowledge and
deliver, all such further acts, instruments, and assurances as may reasonably
be requested by the Trustee. The certificates required under this Section 5.6
need not comply with Section 11.4.
(d) The Company will deliver to the Trustee within 15 days after the
occurrence thereof written notice of any Default.
SECTION 5.7 REPORTING.
(a) Commencing with the fiscal year ending December 31, 1998, the
Company shall file with the Trustee copies of any annual reports and other
information, documents, and statements (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that the
Company may be required to file with the SEC pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, within 15 days after it files them
with the SEC. The Company also shall comply with the other provisions of TIA
Section 314(a).
(b) Until the Company has a class of equity securities registered under
the Securities Exchange Act of 1934, the Company will prepare, for the first
three quarters of each fiscal year, commencing with the fiscal quarter ending
December 31, 1998, summary reports containing unaudited cash basis financial
statements of the Company. In addition, the Company will prepare, for each
fiscal year, an annual report containing complete audited financial
statements of the Company including, but not limited to, a balance sheet, a
statement of income and shareholders' equity, a statement of changes in
financial position and all appropriate notes. The annual financial statements
will be prepared in accordance with generally accepted accounting principles
consistently applied, except for changes with which the Company's independent
public accountants concur. Quarterly statements may be subject to year-end
adjustments. The Company will cause a copy of the respective quarterly or
annual report to be mailed to the Trustee and to each of the
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Holders of the Securities within 45 days alter the close of each of the first
three quarters of each fiscal year and within 120 days after the close of
each fiscal year, at such Xxxxxx's address appearing on the Note Register.
SECTION 5.8 PROTECTION OF TRUST ESTATE.
The Company will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance, and other
instruments, and will take such other action as is necessary or advisable to:
(i) grant more effectively all or any portion of the Trust Estate,
(ii) maintain or preserve the lien of this Indenture or carry out
more effectively the purposes hereof,
(iii) perfect, publish notice of, or protect the validity of, any
Grant made or to be made by this Indenture,
(iv) enforce any of the Contract Documents, or
(v) preserve and defend title to the Trust Estate and the rights
of the Trustee and the Securityholders in such Trust Estate against the
claims of all persons and parties.
SECTION 5.9 OPINIONS AS TO TRUST ESTATE.
(a) Upon the initial Company Order to the Trustee for the
authentication of Notes under this Indenture, the Company shall deliver to
the Trustee an Opinion of Counsel (i) that this Indenture, together with the
filing referred to in the next sentence, creates as security for the Notes a
security interest in the Contracts, and identifiable cash proceeds thereof in
the Operating Account and the Sinking Fund Account; (ii) that a financing
statement with respect to the Contracts has been filed with the Texas
Secretary of State pursuant to the Texas Uniform Commercial Code, as amended;
(iii) that the security interest in the Trust Estate has been perfected and
is a valid second priority security interest; and (iv) that no other filings
in any jurisdiction or any other actions are necessary to perfect the
security interest of the Trustee in the Trust Estate, as constituted as of
the date of such opinion, as against any third parties.
(b) On or before December 15, in each calendar year commencing with
1998, the Company shall furnish to the Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and re-filing of this
Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe
35
the recording, filing, re-recording and re-filing of this Indenture, any
indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien
and security interest of this Indenture until December 15 in the following
calendar year. In rendering such opinion, such counsel may rely upon an
Officers' Certificate of the Servicer as to the filing of any financing
statements and to the effect that no further assignment of the related
Contract or satisfaction and discharge thereof has been recorded and that the
original financing statements so filed have not been discharged.
SECTION 5.10 PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.
(a) The Company will punctually perform and observe all of its
obligations and agreements contained in the Servicing Agreement.
(b) The Company will not take any action or permit any action to be
taken by others that would release any Person from any of such Person's
covenants or obligations under any of the Contract Documents or under any
instrument included in the Trust Estate, or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any of the Contract Documents or any
such instrument, except as expressly provided in this Indenture, the
Servicing Agreement or such Contract Documents or other instrument.
(c) If the Company shall have knowledge of the occurrence of a default
by the Servicer of any of its material obligations under the Servicing
Agreement, the Company shall promptly notify the Trustee thereof, and shall
specify in such notice the action, if any, the Company is taking in respect
of such default. If such default arises from the failure of the Servicer to
perform any of its obligations under the Servicing Agreement with respect to
the Contracts, the Company may remedy such failure. So long as any such
default under the Servicing Agreement shall be continuing, the Trustee may,
and upon the direction of the Holders of Securities representing more than 25
% of the aggregate principal amount of the Outstanding Securities the Trustee
shall, direct the Company to, and the Company shall, terminate all of the
rights and powers of the Servicer under the Servicing Agreement. Unless
directed or permitted by the Trustee or the Holders of Securities
representing not less than 50% of the aggregate principal amount of the
Outstanding Securities, the Company may not waive any such default under the
Servicing Agreement or terminate the rights and powers of the Servicer under
the Servicing Agreement.
(d) Upon any termination of the Servicer's rights and powers, all
rights, powers, duties, obligations and responsibilities of the Servicer with
respect to the related Contracts (except for any obligations of the Servicer
to indemnify the Company) shall vest in and be assumed by the Company, or any
servicing agent that the Company may designate, and the Company or its
servicing agent shall be the successor in all respects to the Servicer in its
capacity as servicer with respect to such Contracts under the Servicing
Agreement (except for any obligations of the Servicer to indemnify the
Company). The Company may resign as the Servicer by giving written notice of
such resignation to the Trustee and in such event will be released from such
duties and obligations, such release not to be effective until the date a new
servicer enters into a servicing
36
agreement with the Company as provided below and has been approved in writing
by the Trustee. Any successor servicer shall enter into a servicing agreement
with the Company substantially similar to the Servicing Agreement. The
Company may make such arrangements for the compensation of such successor
servicer as it and such successor servicer shall agree, provided that such
compensation of the successor servicer shall not be in excess of that payable
to the Servicer under the Servicing Agreement, unless the Servicer or the
Company agrees to pay such additional compensation.
SECTION 5.11 NEGATIVE COVENANTS.
The Company will not:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Indenture;
(ii) obtain or carry insurance relating to the Contracts separate
from that required by the Servicing Agreement, unless the Trustee shall be
named therein as a loss payee;
(iii) claim any credit on, or take any deduction from, the principal
of or interest payable in respect to the Securities by reason of the
payment of any taxes levied or assessed upon any part of the Trust Estate;
(iv) engage in any business or activity other than in connection
with the purchase, collection and servicing of lease Contracts or consumer
obligations secured by motor vehicles, the repossession and resale of motor
vehicles and the raising of capital, both debt and equity, and any other
incidental businesses or activities, without the consent of the Holders of
a majority of the aggregate principal amount of the Securities then
outstanding;
(v) without the consent of the Holders of a majority of the
aggregate principal amount of the Securities then outstanding, create,
incur, assume or in any manner become liable in respect of any indebtedness
other than the Securities, any indebtedness incurred for the purpose of the
purchase of lease Contracts or consumer obligations relating to or secured
by motor vehicles (including any related borrowing and transactional
costs), any Allowed Expenses and any other amounts incurred in the ordinary
course of the Company's business;
(vi) dissolve or liquidate in whole or in part;
(vii) merge or consolidate with any corporation, partnership or
other entity other than another direct or indirect wholly-owned Subsidiary
of an Affiliate of the Company or the Servicer; any such merger or
consolidation with another Subsidiary of the Servicer shall be subject to
the following conditions:
37
(1) the surviving or resulting entity shall be a corporation
organized under the laws of the United States or any state thereof whose
business and activities shall be limited as set forth in paragraph (iv)
above;
(2) the surviving or resulting corporation (if other than the
Company) shall expressly assume by an indenture supplemental hereto all of
the Company's obligations hereunder;
(3) the surviving or resulting corporation shall have the
same fiscal year as the Company; and
(4) immediately after consummation of the merger or
consolidation no Event of Default or Default shall exist with respect to
the Securities;
(viii) (to the extent that it may lawfully so covenant and to the
extent that such covenant is lawfully enforceable) institute any
bankruptcy, insolvency or receivership proceedings with respect to itself
or its properties;
(ix) (1) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations under this Indenture,
except as may be expressly permitted hereby, (2) permit any lien, charge,
security interest, mortgage or other encumbrance (other than the lien of
this Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or the
proceeds thereof, or (3) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust Estate; or
(x) originate or acquire any Contract with an Obligor located in
any jurisdiction unless at the time of such origination or acquisition of
such Contract by the Company or the Servicer, both the Company and the
Servicer shall have obtained all licenses, permits and governmental
approvals, if any (1) necessary to comply with the laws of such
jurisdiction with respect to their respective operations and businesses,
(2) necessary to perform their respective obligations as contemplated by
the Indenture and the Servicing Agreement with respect to such Contract,
(3) necessary to maintain the enforce ability of such Contract and the
security interest in the related Leased Vehicle and to prevent such
Contract or any portion thereof from becoming void or voidable by the
Obligor or any other person, and (4) if such Contract has been assigned to
the Company, necessary for such assignment to be a lawful and binding
assignment on the assignor and the Obligor.
(xi) enter into any transaction with the Servicer, or any
Affiliate of the Servicer on terms less favorable to the Company than
could be obtained from an independent third party in an arms-length
transaction.
SECTION 5.12 SUBSTITUTION OR RELEASE OF COLLATERAL OR WITHDRAWAL OF CASH IN
TRUST ESTATE.
(a) The Company shall furnish to the Trustee an Officer's Certificate
stating the fair value of any property or securities the deposit of which
with the Trustee is to be the basis for the withdrawal or release of any
cash, property or securities constituting a part of the Trust Estate.
38
If the fair value to the Company of any such securities and all other such
securities made the basis for the withdrawal or release of any cash, property
or securities constituting part of the Trust Estate since the commencement of
the then current calendar year, as set forth in the Officer's Certificates
with respect thereto, is 10% or more of the aggregate principal amount of the
Notes at that time Outstanding, and if the fair value of such securities so
delivered is at least $25,000 and one percent of the aggregate principal
amount of the Notes at that time outstanding, the Company shall furnish a
certificate of an Independent appraiser or financial expert as to the fair
value of the securities so delivered. If the property so delivered has been
used or operated by a Person other than the Company, within six months prior
to the date of acquisition by the Company, in a business similar to that in
which it has been or is to be used or operated by the Company, and if the
fair value to the Company of such property is not less than $25,000 and not
less than one percent of the aggregate principal amount of the Notes at that
time Outstanding, the Company shall furnish an opinion of an Independent
engineer, appraiser or other expert covering the fair value to the Company of
the property so subjected to the lien of the Indenture.
(b) The Company shall furnish to the Trustee an Officer's Certificate
as to the fair value of any property or securities to be released from the
lien of this Indenture and stating that in the opinion of the signer the
proposed release will not impair the security under this Indenture in
contravention of its provisions. If the fair value of such property or
securities and of all other property or securities released since the
commencement of the then current calendar year, as set forth in such
Officer's Certificates required by the preceding sentence, is 10% or more of
the aggregate principal amount of the Notes at the time Outstanding and if
the fair value of the property or securities proposed to be released is at
least $25,000 and one percent of the aggregate principal amount of the Notes
at the time Outstanding, the Company shall furnish an opinion of an
Independent engineer, appraiser or other expert with respect to the same
subject matter required to be set forth in such Officer's Certificate.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at the Stated Maturity, upon
redemption or otherwise;
(3) the Company falls to comply with any of its other agreements in
the Securities or this Indenture (other than a covenant or warranty, a
default in the observance of which is elsewhere in this section
specifically dealt with) and the default continues for a period of 30 days
alter receipt by the Company of written notice of such default from the
Trustee specifying such default and requiring it to be remedied and stating
that such notice
39
is a "Notice of Default" hereunder or after receipt by the Company and the
Trustee of such notice from the Holders of not less than 25% in aggregate
principal amount of the Securities then Outstanding;
(4) if any representation or warranty of the Company made in this
Indenture or in any certificate or other writing delivered pursuant hereto
or in connection herewith shall prove to be incorrect m any material
respect as of the time when the same shall have been made and, within 30
days after receipt by the Company of written notice from the Trustee
specifying such inaccuracy and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder or after receipt by the
Company and the Trustee of such notice from the Holders of Securities
representing at least 25 % of the aggregate principal amount of the
Outstanding Securities, the circumstance or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or otherwise cured;
(5) if (i) the validity or effectiveness of this Indenture or any
Grant under this Indenture shall be impaired, or this Indenture shall be
amended, hypothecated, subordinated, terminated or discharged, or any
Person shall be released from any covenants or obligations under this
Indenture or the Servicing Agreement, in each case except as may be
expressly permitted hereby and thereby, (ii) any lien, charge, security
interest, mortgage or other encumbrance (exclusive of any mechanic's lien
on any Leased Vehicle) shall be created on or extend to or otherwise arise
upon or burden the Trust Estate or any part thereof or any interest therein
or the proceeds thereof, or (iii) this Indenture shall not constitute a
valid first priority security interest in the Trust Estate, and if any of
the foregoing Defaults shall continue for a period of 30 days after receipt
by the Company of written notice from the Trustee specifying such Default
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder or after receipt by the Company and the Trustee of
such notice from the Holders of Securities representing at least 25 % of
the aggregate principal amount of the Outstanding Securities; or
(6) the Company, pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official of it or for all or substantially
all of its property; or
(D) makes a general assignment for the benefit of its creditors;
or
(7) a court of competent jurisdiction enters an order or decree,
which remains unstayed and in effect for 60 days, under any Bankruptcy Law
against the Company:
(A) for relief in an involuntary case;
40
(B) appointing a receiver, trustee, assignee, liquidator or
similar official for all or substantially all of its property; or
(C) ordering its liquidation.
The term "Bankruptcy Law" means title 11, U.S. Code, or any similar Federal or
State law for the relief of debtors.
SECTION 6.2 ACCELERATION.
If an Event of Default occurs and is continuing, the Trustee may, or at
the direction of the Holders of at least 25 % in principal amount of the
Securities shall, by notice to the Company, declare the principal amount of
all the Securities together with accrued interest thereon to be due and
payable immediately, and upon any such declaration such principal and accrued
and unpaid interest shall become immediately due and payable, notwithstanding
anything contained in this Indenture or the Securities to the contrary. The
Holders of a majority in principal amount of the Outstanding Securities may,
by written notice to the Trustee, rescind an acceleration and its
consequences if all existing Events of Default have been cured or waived, all
expenses relating to the Default have been paid and if the rescission would
not conflict with any judgment or decree.
SECTION 6.3 REMEDIES.
(a) If an Event of Default shall have occurred and be continuing, the
Trustee may, subject to Section 6.2, do one or more of the following:
(i) make demand and institute judicial proceedings in equity or
law for the collection of all amounts then payable on the Securities, or
under this Indenture, whether by declaration or otherwise, enforce all
judgments obtained, and collect from the Company the Trust Estate securing
the Securities and moneys adjudged due;
(ii) subject to Section 6.14, sell the Trust Estate securing the
Securities or any portion thereof or rights or interest therein, at one or
more public or private Sales called and conducted in any manner permitted
by law;
(iii) institute judicial proceedings in equity or at law from time
to time for the complete or partial foreclosure of this Indenture with
respect to the Trust Estate; and
(iv) 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 Trustee or the Holders of the Securities hereunder.
(b) The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceedings. A
delay or omission by the Trustee or any Securityholder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or an acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All available remedies
are cumulative.
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SECTION 6.4 WAIVER OF PAST DEFAULTS.
Subject to Section 9.2, the Holders of a majority in principal amount of
the Outstanding Securities may, by written notice to the Trustee, waive an
existing Default and its consequences. When a Default is waived in accordance
herewith, it is cured and shall stop continuing.
SECTION 6.5 CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that is unduly
prejudicial to the rights of Securityholders not joining in such direction,
or that would involve the Trustee in personal liability.
SECTION 6.6 LIMITATION ON SUITS.
(a) A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25 % in aggregate principal amount of
the Outstanding Securities make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity and the Event of
Default has not been waived; and
(v) the Trustee has received no contrary direction from the
Holders of a majority in principal amount of the Outstanding Securities
during such 60-day period.
(b) A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder.
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SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of interest or principal specified in
Section 6.1(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest remaining unpaid.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
(a) The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings relative
to the Company, its creditors or its property.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
FIRST to the Trustee for the amounts due under Section 7.7;
SECOND, to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively;
THIRD, to the Servicer for any unpaid Allowed Expenses owed to or
incurred by it with respect to the Contracts; and
FOURTH, to the Company.
The Trustee shall fix a Special Record Date and payment date pursuant to
Section 2.11 hereof for any payment to Securityholders under this Section
6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims
43
or defenses made by the party litigant. This Section does not apply to a suit
by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by
Holders of more than 10% in principal amount of the Outstanding Securities.
SECTION 6.12 STAY, EXTENSION OR USURY LAWS.
The Company agrees (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the
benefits or advantage of any stay or extension law or any usury or other law,
wherever enacted, now or at any time hereafter in force, which would prohibit
or forgive the Company from paying all or any portion of the principal of
and/or interest on the Securities as contemplated herein, or which may affect
the covenants or performance of this Indenture, and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and agrees that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of any such power as though no such law has been enacted.
SECTION 6.13 OPTIONAL PRESERVATION OF TRUST ESTATE.
(a) If the Securities have been declared due and payable following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Trustee may, in its sole discretion, refrain from
selling the Trust Estate and may apply all amounts received with respect to
such Trust Estate to the payment of the principal of and interest on the
Securities as and when such principal and interest would have become due
pursuant to the terms hereof and of the Securities if there had not been a
declaration of acceleration of the maturity of the Securities, provided that:
(i) the Trustee shall have determined that the amounts receivable
with respect to such Trust Estate are sufficient to provide the funds
required to pay the principal of and interest on the Securities as and when
such principal and interest would have become due pursuant to the terms
hereof and of the Securities if there had not been a declaration of
acceleration of the maturity of the Securities; and
(ii) the Securityholders shall not have directed the Trustee in
accordance with Section 6.5 (subject, however, to Section 6.14(b)) to sell
the Trust Estate securing the Securities.
(b) The Trustee may, but need not, obtain and rely upon an opinion of
an independent investment banking firm as to the feasibility of any action
proposed to be taken in accordance with Section 6.13(a) and as to the
sufficiency of the amounts receivable with respect to the Trust Estate to
make the required payments of principal of and interest on the Securities,
which opinion shall be conclusive evidence as to such feasibility or
sufficiency.
(c) If the conditions of Section 6.13(a) are not satisfied after the
Securities have been declared due and payable following an Event of Default
or the Trustee does not determine to take
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the action specified in Section 6.13(a), then all amounts collected by the
Trustee with respect to the Securities pursuant to this Article 6 or
otherwise shall be applied in accordance with Section 6.10.
(d) Notwithstanding anything in this Indenture to the contrary, if the
Securities have been declared due and payable, then Trustee may, in its sole
discretion, retain the Trust Estate without compliance with this Section 6.13
and apply all amounts received with respect to the Trust Estate to the payment
of principal and interest on the Securities as and when such principal and
interest would have become due pursuant to the terms hereof and of the
Securities if there had not been a declaration of acceleration of the maturity
of the Securities.
SECTION 6.14 SALE OF TRUST ESTATE.
(a) The power to effect any sale (a "Sale") of any portion of the Trust
Estate pursuant to Section 6.3 shall not be exhausted by any one or more
Sales as to any portion of such Trust Estate remaining unsold, but shall
continue unimpaired until the entire such Trust Estate shall have been sold
or all amounts payable on the Securities secured thereby and under this
Indenture with respect thereto shall have been paid. The Trustee may from
time to time postpone any Sale by public announcement made at the time and
place of such Sale. The Trustee hereby expressly waives its rights to any
amount fixed by law as compensation for any Sale.
(b) (i) Without the consent or direction to the contrary by the Holders
of a majority in principal amount of the Securities then Outstanding, the
Trustee shall not sell or otherwise dispose of the Trust Estate following an
Event of Default for an amount less than the sum of (x) the amount of fees
and expenses of such sale that are reimbursable to the Trustee and (y) the
entire amount that would be distributable to the Holders of the Securities,
in full payment thereof in accordance with Section 6.10, and (ii) without the
consent of or direction to the contrary by the Holders of a majority in
principal amount of the Securities then Outstanding, at any public Sale at
which no other Person bids an amount equal to or greater than the amount
described in clause (y) above, the Trustee shall bid an amount at least equal
to $1.00 more than the highest other bid.
(c) The Trustee may bid for and acquire any portion of the Trust Estate
in connection with a public Sale thereof. The Securities need not be produced
in order to complete any such sale. The Trustee may, subject to this
Indenture, hold, lease, operate, manage or otherwise deal with any property
so acquired in any manner permitted by law.
(d) The Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Trust Estate in
connection with a Sale thereof. In addition, the Trustee is hereby
irrevocably appointed the agent and attorney-in-fact of the Company to
transfer and convey its interest in any portion of the Trust Estate in
connection with a Sale thereof (including changing the designation of the
secured party on any certificate of title or financing statements), and to
take all action necessary to effect such Sale. No purchaser or transferee at
such a Sale shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
moneys.
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(e) Notwithstanding anything in this Indenture to the contrary, if an
Event of Default specified in Section 6.1(1) or (2) is the Event of Default,
or one of the Events of Default, on the basis of which the Securities have
been declared due and payable, then the Trustee may, in its sole discretion,
sell the Trust Estate without compliance with this Section 6.14.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(a) For so long as any Notes remain outstanding, the Trustee shall:
(i) maintain the custodianship of the documentation delivered to
it evidencing title or perfected security interest in the Company's
assets;
(ii) verify all funds deposited in the trust account for the
benefit of the Securityholders and use its best efforts to verify all
payments called for under the terms of this Indenture;
(iii) verify the delivery of all reports and other instruments
required pursuant to the terms of this Indenture and the Securities
Exchange Act of 1934;
(iv) examine all reports or other instruments furnished to the
Trustee pursuant to the terms of this Indenture and determine, based on
the information provided, whether there is a violation of any of the
terms and conditions set forth in this Indenture;
(b) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture
and use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(c) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee.
(d) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, breach of this Indenture
or its own willful misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (c) of
this Section.
(ii) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it from the Holders of not less than a majority in principal
amount of the Notes at the time Outstanding.
(e) The Trustee shall not be liable for any action or omission taken or
not taken by the Servicer of any kind or nature.
(f) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives written indemnity and security satisfactory to it
against any loss, liability or expense and no provision of this Indenture or
any other document shall require the Trustee to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers, if it
shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it; provided, however, that in the event that the Trustee determines that
there has been an Event of Default, the Trustee shall not be entitled to such
indemnification and security other than that provided in this Indenture as a
condition to providing notice of such default to the Securityholders in
accordance with the terms of this Indenture and to taking appropriate remedial
action.
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(g) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust
by the Trustee need not be segregated from other funds except to the extent
required by law.
(h) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraph (b), (c), (d) and (e) of this Section.
SECTION 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document. The Trustee shall
not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records, and premises of the
Company, personally or by agent or attorney, to the extent reasonably
required by such inquiry or investigation.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Certificate or Opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel of its selection and the
advice of such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(f) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Trust Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default
is received by the Trustee at the principal corporate trust office of the
Trustee, and such notice references the Securities and this Indenture.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or its
Affiliate with the same rights it would have if it were not the Trustee. Any
Paying Agent, Registrar or Co-registrar may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities. It shall not be accountable for the
Company's use of the proceeds from the Securities and shall not be
responsible for any statement in the Securities, other than its certificate of
authentication, or in any prospectus used in the sale of the Securities,
other than statements provided in writing by the Trustee for use in such
prospectus.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Securityholder notice of the Default within 90
days after it obtains actual knowledge of the Default. Except in the case of
a Default in payment on any Security, the Trustee may withhold the notice if
and so long as the board of directors, the executive committee or a trust
committee of the directors and/or responsible officers of the Trustee in good
faith determines that withholding notice is in the interests of
Securityholders.
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SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
(a) Within 60 days after each December 31 beginning with December
31, 1998, the Trustee shall, to the extent required by TIA Section 313(a),
mail to each Securityholder a brief report dated as of such September 30 that
complies with TIA Section 313(a). The Trustee also shall also, to the extent
required by TIA Section 313(b), comply with TIA Section 313(b)(l) and (2).
(b) If this Indenture is qualified with the SEC under the TIA, a copy
of each report at the time of its mailing to Securityholders shall be filed
with the SEC and each national securities exchange on which the Securities
are listed. The Company shall notify the Trustee if and when the Securities
are listed on any national securities exchange (as defined in the Securities
Exchange Act of 1934) or quoted on NASDAQ.
(c) Within 60 days after each December 31 beginning with December 31,
1998, the Trustee shall mail to each Securityholder a brief report which
indicates whether the Trustee has fulfilled its obligations under this
Indenture and whether there have been any known uncured defaults under this
Indenture.
SECTION 7.7 COMPENSATION AND INDEMNITY.
(a) The Company shall pay to the Trustee from time to time as
compensation for its services the amounts set forth on the Trustee's Fee
Schedule attached hereto as Exhibit C, as may be agreed upon from time to
time by the Trustee and the Company. In addition, the Company shall reimburse
the Trustee upon request for all reasonable out-of-pocket expenses incurred
by it. Such expenses may include the reasonable compensation and expenses of
the Trustee's agents and counsel. The Company shall indemnify and hold
harmless the Trustee and its successors and their respective officers,
directors, employees, agents and attorneys against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever
(including, reasonable attorneys' fees) that may be imposed on, incurred by
or asserted against Trustee or its successors, or their respective officers,
directors, employees, agents and attorneys, in connection with the
performance of its duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through the Trustee's
negligence or bad faith, other than to the extent that such negligence or bad
faith is excused pursuant to Sections 7.1 and 7.2.
(b) To secure the Company's payment of these obligations, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on the Securities. Such obligations shall survive the satisfaction
and discharge of this Indenture.
(c) When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(7) or (8), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
(d) The provisions of this Section 7.7 shall survive the satisfaction
and discharge or other termination of this Indenture.
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SECTION 7.8 REPLACEMENT OF TRUSTEE.
(a) The Trustee may resign at any time upon 30 days prior written
notice to the Company. The Holders of a majority in principal amount of the
Outstanding Securities may remove the Trustee at any time upon 30 days prior
written notice to the removed Trustee and may appoint a successor Trustee
with the Company's consent. The Company shall remove the Trustee if:
(i) The Trustee falls to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent; or
(iii) a receiver or other public officer takes charge of the Trustee
or its property.
(b) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. The resignation or removal of the Trustee shall not be
effective until a successor Trustee has been appointed and has assumed the
responsibilities of Trustee hereunder.
(c) A successor Trustee shall deliver a written acceptance of this
appointment to the retiring Trustee and to the Company. Immediately
thereafter, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee. Upon delivery of such written acceptance,
the resignation or removal of the retiring Trustee shall become effective and
the retiring Trustee shall cease to be Trustee hereunder and shall be
discharged from any responsibility or obligations for actions taken by any
successor Trustee. The successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Securityholder.
(d) If a successor Xxxxxxx does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of a majority in principal amount of the Securities may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another Person or
if the Trustee consolidates with, merges or converts into, or transfers a
substantial portion of its corporate trust assets to a Person that is
wholly-owned by the Trustee or by the Trustee's parent (of which the Trustee
is a wholly-owned subsidiary), the resulting, surviving or transferee Person
without any further act shall be the successor Trustee.
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SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall have a
combined capital and surplus of at least $1,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12 WITHHOLDING TAXES.
Whenever it is acting as a Paying Agent for the Securities, the Trustee
shall comply with all requirements of the Internal Revenue Code of 1986, as
amended (or any successor or amendatory statutes), and all regulations
thereunder, with respect to the withholding from any payments made on such
Securities of any withholding taxes imposed thereon and with respect to any
reporting requirements in connection therewith.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect, except as to
surviving rights of transfer or exchange of Securities herein expressly
provided for, and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than Securities that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 2.8) have been delivered
to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
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(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense,
of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for such
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, the principal at Stated Maturity of such Securities, or the
applicable Redemption Price with respect thereto upon redemption.
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company under Sections 7.7 and 8.3 shall survive.
SECTION 8.2 APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Section 8.1 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee shall be directed by Company Order, to the
Persons entitled thereto of the principal at Stated Maturity, or the
Redemption Price, or the Securities for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
SECTION 8.3 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any money or securities held by them at any time in excess of the
amounts needed to pay and discharge the Securities in full. The Trustee and
the Paying Agent shall pay to the Company upon request any money or
securities held by them for the payment of principal or interest that remains
unclaimed for two years. After such payment to the Company, Securityholders
entitled to such funds must look to the Company for the payment of such
unclaimed principal or interest.
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ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 WITHOUT CONSENT OF HOLDERS.
(a) The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Securityholder:
(i) to cure any ambiguity, defect or inconsistency in this
Indenture or the Securities;
(ii) to effect a merger or consolidation in conformance with
Section 5.11(vii);
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(iv) to make any change that does not materially adversely affect
the rights of any Securityholder; or
(v) to modify or add to the provisions of this Indenture to the
extent necessary to qualify it under the TIA or under any similar federal
statute hereafter enacted.
(b) The Trustee may waive compliance by the Company with any provision of
this Indenture or the Securities without notice to or consent of any
Securityholder if the waiver does not adversely affect the rights of any
Securityholder, provided that the Indenture or the Securities reflect the terms
of such waiver.
SECTION 9.2 WITH CONSENT OF HOLDERS.
(a) The Company and the Trustee may amend or supplement this Indenture
or the Securities without notice to any Securityholder but with the written
consent of the Holders of at least a majority in principal amount of the
Securities. The Holders of a majority in principal amount of the Securities
may waive compliance by the Company with any provision of this Indenture or
the Securities without notice to any Securityholder. However, without the
consent of each Securityholder affected, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.4, may not:
(i) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for payment of interest
on any Security;
(iii) reduce the principal of or extend the Stated Maturity of any
Security;
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(iv) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of a Trust
Estate or terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security afforded
by the lien of this Indenture; or
(v) make any Security payable in money other than that stated in
the Security.
(b) After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing the amendment.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect so long as this Indenture shall
then be qualified under the TIA.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
(a) A consent to an amendment, supplement or waiver by a Holder of a
Security shall bind the holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to
his Security or portion of a Security. The Trustee must receive the notice of
revocation before the date the amendment, supplement or waiver becomes
effective.
(b) After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder unless it makes a change described in clause
(ii), (iii), (iv) or (v) of Section 9.2(a). In that case the amendment,
supplement or waiver shall bind each Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security
concerning the change terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the
Security shall issue, and the Trustee shall authenticate, a new Security that
reflects the changed terms.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article if the amendment, supplement or waiver does not
adversely affect the rights of the Trustee or Securityholders. If it does,
the Trustee may but need not sign it. The Company may not sign an amendment
or supplement until such amendment or supplement is approved by the Chairman
of the Board, President or any Vice President of the Company or any other
officer of the
53
Company customarily performing functions similar to those performed by any of
the above designated officers, and such approval shall evidence the Company's
determination that such amendment, supplement or waiver does not adversely
affect the rights of the Securityholders.
ARTICLE 10
MEETINGS OF SECURITYHOLDERS
SECTION 10.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Securityholders may be called for the following purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any direction to the Trustee, or to waive or to consent to the waiving
of any default hereunder and its consequences;
(b) to remove the Trustee, or appoint a successor Trustee or apply
to a court for a successor Trustee;
(c) to consent to the execution of a supplemental indenture; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of the
Securities under this Indenture, or authorized or permitted by law, or (ii)
which the Trustee deems necessary or appropriate in connection with the
administration of the Indenture.
SECTION 10.2 MANNER OF CALLING MEETINGS.
(a) The Trustee may call a meeting of Securityholders to take any
action specified in Section 10.1. Notice setting forth the time and place of,
and the action proposed to be taken at, such meeting shall be mailed by the
Trustee to the Company and to the Holders of the Securities not less than ten
or more than 60 days prior to the date fixed for the meeting.
(b) Any meeting shall be valid without notice if the Holders of all
Securities are present in person or by proxy, or if notice is waived before
or alter the meeting by the Holders of all Securities outstanding, and if the
Company and the Trustee are either present or have, before or after the
meeting, waived notice.
SECTION 10.3 CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS.
In case at any time the Company or the Holders of not less than 50% in
aggregate principal amount of the Securities then outstanding shall have
requested in writing that the Trustee call a meeting of Securityholders to
take any action specified in Section 10.1, and the Trustee shall not
54
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders of Securities in the amount above
specified may determine the time and place for such meeting and may call such
meeting by mailing notice thereof.
SECTION 10.4 WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meetings of Securityholders, a person
shall (a) be a Holder of one or more Securities, or (b) be a person appointed
by an instrument in writing as proxy for the Holder of Securities. The only
persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and the Company and
their counsel.
SECTION 10.5 REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING;
VOTING RIGHTS.
(a) The Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, to prove the holding of
Securities, the appointment of proxies, and other evidence of the right to
vote, to fix a record date and to provide for such other matters concerning
the conduct of the meeting as it shall deem appropriate.
(b) At any meeting each Securityholder or proxy shall be entitled to
one vote for each $1,000 principal amount of Securities held by him;
provided, however, that the Company shall not be entitled to vote any
Securities held of record by it. At any meeting of Securityholders, the
presence of persons holding or representing any number of Securities shall be
sufficient for a quorum.
SECTION 10.6 EXERCISE OF RIGHTS OF TRUSTEE OR SECURITYHOLDERS MAY NOT BE
HINDERED OR DELAYED BY CALL OF MEETING.
Nothing in this Article shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Securityholders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance
or delay in the exercise of any rights conferred upon or reserved to the
Trustee or to the Securityholders or by the Securities.
SECTION 10.7 EVIDENCE OF ACTIONS BY SECURITYHOLDERS.
Whenever the Holders of a specified percentage in aggregate principal
amount of the Securities may take any action, the fact that the holders of
such percentage have acted may be evidenced by (a) instruments of similar
tenor executed by securityholders in person or by attorney or written proxy,
or (b) the Holders of Securities voting in favor thereof at any meeting of
Securityholders called and held in accordance with the provisions of this
Article 10, or (c) by a combination thereof. The Trustee may require proof of
any matter concerning the execution of any instrument by a Securityholder or
his attorney or proxy as it shall deem necessary.
55
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed on any Person by Sections 310 through 317, inclusive, of
the TIA, the duties imposed under such Sections shall control.
SECTION 11.2 NOTICES.
(a) Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by first class mail addressed as
follows:
if to the Company: Transition Auto Finance Inc.
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxx, President
if to the Trustee: Trust Management, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx, President
if to the Servicer: Transition Leasing Management, Inc.
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxx Xxxx, President
(b) The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(c) Any notice or communication mailed to a Securityholder shall be
mailed first class, postage prepaid to him at his address as it appears on
the Note Register of the Registrar and shall be sufficiently given to him if
so mailed within the time prescribed. If the Company mails a notice or
communication to Securityholders, it shall mail a copy to the Trustee at the
same time.
(d) Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
56
SECTION 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
(a) Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
(b) Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include (i) a
statement that the person making such certificate or opinion has read such
covenant or condition; (ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (iii) a statement that,
in the opinion of such person, he has made such examination or investigation
as is necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and (iv) a statement
as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
SECTION 11.5 RULES BY PAYING AGENT AND REGISTRAR.
The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.6 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banking
institutions are not required to be open in the State of Texas. If a Payment
Date is a Legal Holiday at a place of payment, payment may be made at that
place on the next succeeding day that is not a Legal Holiday.
SECTION 11.7 GOVERNING LAW.
The laws of the State of Texas shall govern this Indenture and the
Securities.
57
SECTION 11.8 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or an Affiliate of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.9 NO RECOURSE AGAINST OTHERS.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer,
director, agent or employee of the Company or the Servicer or of any
predecessor or successor of the Company or the Servicer with respect to the
obligations of the Company or the Servicer with respect to the Securities or
under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, and all such liability is waived and
released by the Trustee and all Securityholders.
SECTION 11.10 SUCCESSORS.
All agreements of the Company and the Servicer in this Indenture and the
Securities shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.11 DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
ARTICLE TWELVE
AGREEMENTS OF SERVICER
SECTION 12.1 GENERAL.
The Servicer agrees that all covenants, representations and warranties made
by the Servicer in the Servicing Agreement with respect to the Contracts shall
also be for the benefit of the Trustee and the Holders.
SECTION 12.2 SERVICER ACTING AS CUSTODIAN.
The Servicer acknowledges that any collections or proceeds from the
Contracts in the Master Collections Account, or otherwise in the possession or
control of the Servicer, are the Company's property. In holding such proceeds
and collections, the Servicer agrees to act as custodian and bailee of the
Company and the Additional Lender, if any, at all times.
SECTION 12.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE SERVICER.
The Servicer represents and warrants to the Company and the Trustee as
follows:
(a) The Servicer (i) has been duly organized and is validly existing and
in good standing as a corporation organized and existing under the laws of the
State of Texas, (ii) has qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of its properties
or the nature of its activities makes such qualification necessary, and (iii)
has full power, authority and legal right to own its property, to carry on its
business as presently conducted, and to enter into and perform its obligations
under this Indenture.
(b) The execution and delivery by the Servicer of this Indenture are
within the corporate power of the Servicer and have been duly authorized by all
necessary corporate action on the part of the Servicer. Neither the execution
and delivery of this Indenture, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof, will conflict with or
result in a breach of, or constitute a default under, any of the provisions of
any law, governmental rule, regulation, judgment, decree or order binding on the
Servicer or its properties or the charter or bylaws of the Servicer, or any of
the provisions of any indenture, mortgage, contract 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, charge or encumbrance upon any of its property pursuant
to the terms of any such indenture, mortgage, contract or other instrument.
(c) The Servicer is not required to obtain the consent of any other party
or consent, license, approval or authorization of, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Indenture.
(d) This Indenture has been duly executed and delivered by the Servicer
and the provisions of Article Twelve hereof constitute legal, valid and binding
covenants enforceable against the Servicer in accordance with their terms
(subject to applicable bankruptcy and insolvency laws and other similar laws
affecting the enforcement of creditors' rights generally).
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Servicer, threatened against or affecting the Servicer, before
or by any court, administrative agency, arbitrator or governmental body with
respect to any of the transactions contemplated by the Servicing Agreement or
this Indenture.
SECTION 12.5 CORPORATE EXISTENCE; STATUS AS SERVICER; MERGER.
(a) The Servicer shall keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Texas, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Contract Documents, this
Indenture and the Servicing Agreement.
(b) The Servicer shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any person unless the corporation formed by such consolidation or
into which the Servicer has merged or the person which acquires by conveyance,
transfer or lease substantially all the assets of the Servicer as an entirety is
an entity organized and existing under the laws of the United States or any
state or the District of Columbia and executes and delivers to the Company and
the Trustee an agreement in form and substance reasonably satisfactory to the
Company and the Trustee, which contains an assumption by such successor entity
of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Indenture and
the Servicing Agreement.
SECTION 12.6 PERFORMANCE OF OBLIGATIONS.
(a) The Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture and the Servicing
Agreement.
(b) The Servicer shall not take any action, or permit any action to be
taken by others, which would excuse any person from any of its covenants or
obligations under any of the Contract Documents, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided herein and therein.
SECTION 12.7 THE SERVICER NOT TO RESIGN; ASSIGNMENT.
(a) The Servicer shall not resign from the duties and obligations hereby
imposed on it unless, by reason of change in applicable legal requirements, the
continued performance by the Servicer of its duties under this Indenture would
cause it to be in violation of such legal
requirements in a manner which would result in a material adverse effect on the
Servicer or its financial condition. No such resignation shall become effective
unless and until a new industry qualified servicer acceptable to the Company is
willing to service the Contracts and enters into a servicing agreement with the
Company in form and substance substantially similar to the Servicing Agreement
and assumes, pursuant to a written instrument reasonably satisfactory to the
Trustee, the obligations and duties of the Servicer arising under this
Indenture. No such resignation shall affect the obligation of the Servicer to
repurchase any Contract pursuant to Section 12.9 .
(b) The Servicer may not assign this Indenture or the Servicing Agreement
or any of its rights, powers, duties or obligations hereunder, provided that the
Servicer may assign this Indenture and the Servicing Agreement in connection
with a consolidation, merger, conveyance, transfer or lease made in compliance
with Section 12.5 (b), and provided further that the Servicer may contract with
industry qualified third parties for the performance of its duties under the
Servicing Agreement and this Indenture, except that any such contract shall not
relieve the Servicer from liability for its obligations under the Servicing
Agreement and this Indenture.
(c) For a period of 90 days after the occurrence of any Subsidiary
Payment Default (as hereinafter defined), the Trustee shall have the right to
remove the Servicer and terminate the Servicing Agreement upon delivery of
written notice of removal and termination to the Servicer. As used in this
Section 12.7(c), the term "Subsidiary Payment Default" shall mean any
default in the payment of principal and interest on any other Asset-backed
Securities (as hereinafter defined) issued (i) by an entity owned or
controlled by Transition Leasing or any affiliate of Transition Leasing and
formed for the purpose of issuing Asset-Backed Securities, (ii) in connection
with the same business plan as that of the Company and (iii) in connection
with a business plan utilizing Transition Leasing as servicer. As used in
this Section 12.7(c), the term "Asset-Backed Securities" means securities
that provide a stated rate of return to holders of such securities and that
are primarily paid, as to both return of investment and return on investment,
by the cash flow from the collateral securing such payment obligations.
SECTION 12.8 REPRESENTATIONS AND WARRANTIES AS TO THE CONTRACTS.
With respect to each Contract, the Servicer represents and warrants to the
Company, effective as of the date each such Contract is executed by the Company,
as follows:
(a) All of the representations and warranties with respect to the Servicer
set forth in Section 12.4 continue to be true and correct;
(b) In acting with respect to each Contract, Servicer shall comply in all
material respects with, all applicable Federal, state and local laws,
regulations and official rulings;
(c) Each Contract (i) shall have been originated in the United States of
America by the Servicer in the ordinary course of an automobile dealer's
business, shall have been fully and properly executed by the parties thereto,
(ii) shall contain customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against the
Contract lessee for the benefits of the Contract, (iii) shall have met, at the
time of its execution, in all material respects all purchasing criteria set
forth on EXHIBIT A attached hereto and in the Servicing Agreement, and (iv)
shall not be a Defaulted Contract.
(d) (i) The Title Document for the related Leased Vehicle shows (or if a
new or replacement Title Document is applied for with respect to such Leased
Vehicle, the official receipt from the responsible state or local governmental
authority indicating that an application has been made and that the Title
Document, when issued, will show) the Company as the owner of the Leased Vehicle
and the Trustee, on behalf of the Trust, as the holder of a first priority
security interest in such Leased Vehicle, (ii) within 120 days after the
Purchase Date for the Contract relating to the Leased Vehicle, the Title
Document for such Leased Vehicle will show the Company as the owner of the
Leased Vehicle and the Trustee, on behalf of the
Trust, as the holder of a first priority security interest in such leased
Vehicle, and (iii) the Company, upon execution of the Contract, will own the
Leased Vehicle and the Trustee, on behalf of the Trust, delivery of the
Assignment, will have a valid and enforceable security interest in the Leased
Vehicle.
(e) Each Contract and the sale or lease of each Leased Vehicle shall have
complied at the time it was originated in all material respects with all
requirements of applicable federal, state, and local laws, and regulations
thereunder, including without limitation, usury laws, the Federal
Truth-In-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Federal Reserve Board's Regulations B and Z, and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, and other consumer laws and equal credit opportunity and disclosure laws.
(f) Each Contract shall represent the genuine, legal, valid, and binding
payment obligation in writing of the Obligor, enforceable by the holder thereof
in accordance with its terms subject to the effect of bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditor's
rights generally.
(g) No provision of a Contract shall have been waived, amended or
modified, except as disclosed in writing by Servicer.
(h) No right of rescission, set off, counterclaim, or defense shall have
been asserted or threatened with respect to any Contracts.
(i) It is the intention of the Servicer that the beneficial interest in and
title to the Contracts not be part of Servicer's estate in the event of the
filing of a bankruptcy petition by or against Servicer under bankruptcy law.
(j) No Contract shall have been originated in, or shall be subject to the
laws of, any jurisdiction under which the execution of such Contract would be
unlawful, void, or voidable.
SECTION 12.9 PURCHASE OF CERTAIN CONTRACTS.
(a) The representations and warranties of the Servicer set forth in
Section 12.8 with respect to each Contract shall survive delivery of the
Contract Documents to the Company and shall continue so long as such Contract
remains outstanding. Upon discovery by the Company, the Servicer or the Trustee
that any of such representations or warranties was incorrect as of the time made
or that any of the Contract Documents relating to any such Contract has not been
properly executed by the Obligor or the Servicer or contains a material defect
or has not been received by the Company, the party making such discovery shall
give prompt notice to the Trustee (other than in cases where the Trustee has
given notice thereof) and to the other party (or parties in cases where the
Trustee has given notice thereof). If any such defect, incorrectness or omission
materially and adversely affects the interest of the Holders in and to the
related Contracts, the Servicer shall, within 90 days after discovery thereof or
receipt of
notice thereof, cure the defect or eliminate or otherwise cure the circumstances
or condition in respect of which the representation or warranty was incorrect as
of the time made. If the Servicer is unable to do so, it shall purchase such
Contract from the Company through a deposit into the Master Collections Account
no later than the end of the calendar month after which such 90-day period
expired of an amount equal to the product of (x) the Price/Payments Ratio
multiplied by (y) the aggregate unpaid installments on the Contract. Upon any
such purchase, the Company shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest in the Servicer any Contract purchased hereunder.
(b) It is understood that, without limiting the meaning of the term
"materially and adversely affects", the interest of the Holders shall be deemed
materially and adversely affected if (i) the Company, the Trustee or any of such
Holders are put under any obligation to pay any other Person any sum of money as
a result of a defect or misrepresentation described in subsection (a) above, or
(ii) the Trustee or the Majority Holders, acting reasonably, determine, by
written notice to the Company, that such defect or misrepresentation materially
and adversely affects the interests of the Holders in and to a Contract.
(c) At the time of any purchase by the Servicer of any Contract,
pursuant to the provisions of subparagraph (a) above or otherwise, the
Servicer shall certify to the Trustee in writing that (i) such purchase is
not for the purpose of recognizing gains or decreasing losses resulting from
market value changes in the Company's portfolio of Contracts and Leased
Vehicles and (ii) such purchase is at the price determined by the following
formula: the purchase price paid by the Company for the Contract (and the
Leased Vehicle related thereto), less the amount of any lease payments
received by the Company after the acquisition of the Contract.
SECTION 12.10 INDEMNIFICATION.
Servicer hereby indemnifies and holds harmless Trustee and its successors
and their respective officers, directors, employees, agents and attorneys
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
Trustee or its successors, or their respective officers, directors, employees,
agents or attorneys, due to (i) any breach by Servicer of its representations,
warranties or covenants provided for in the Servicing Agreement or this
Indenture, or (ii) any action or inaction of Servicer, or through Servicer, in
any way relating to, or arising out of, the Servicing Agreement or this
Indenture, any and all transfers or assignments of the Contracts, or any of the
transactions contemplated herein or therein or the creation or collection or
enforcement of any of the Contracts. Servicer, however, does not assume the risk
of uncollectibility and does not indemnify Trustee and/or its successors, or
their officers, directors, employees, agents or attorneys, against the
uncollectibility of all or any part of the Contracts as against the Obligor
thereof, except for uncollectibility resulting from a breach by Servicer of any
warranty, representation or covenant contained herein. The indemnities contained
in this Section shall survive any termination of this Indenture or the Servicing
Agreement.
SECTION 12.11 TERMINATION.
The respective duties and obligations of the Servicer under this Article
Twelve shall terminate upon the earlier of (i) the satisfaction and discharge of
this Indenture pursuant to Article Eight, or (ii) the latest to occur of (A) the
final payment or other liquidation of the last Outstanding Contract owned by the
Company, and (B) the disposition of all property acquired upon repossession or
comparable conversion of any Leased Vehicle securing a Contract.
SECTION 12.112 AMENDMENT.
(a) The provisions of this Article Twelve may be amended from time to time
by the Company, the Servicer and the Trustee, without the consent of any Holder,
provided that such action shall not adversely affect in any material respect the
interests of any Holder.
(b) The provisions of this Article Twelve may also be amended from time to
time by the Company, the Servicer and the Trustee, with the consent of the
Majority Holders for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Article, provided, however,
that no such amendment shall, without consent of each Holder, (i) alter the
priorities with which any allocation of funds shall be made under this Article;
(ii) deprive any such Holder of the benefit of this Indenture; or (iii) modify
this Section.
(c) Promptly after the execution of any amendment pursuant to Section
12.12(b), the Company shall cause to be sent to each Holder a notice setting
forth in general terms the substance of such amendment. Any failure to do so
shall not affect the validity of such amendment.
(d) It shall not be necessary, in any consent of Holders under this
Section, to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof by Holders shall be subject to such reasonable regulations as the
Trustee may prescribe.
(e) Any amendment or modification effected contrary to the provisions of
this Section shall be void.
SECTION 12.13 INSPECTION AND AUDIT RIGHTS.
The Servicer agrees that, upon reasonable prior notice, it will permit any
representative of the Trustee, during the Servicer's normal business hours, to
examine all of the books of account, records, reports and other papers of the
Servicer relating to the Contracts, to make copies and extracts therefrom, to
cause such books to be audited by independent accountants selected by the
Trustee, and to discuss the affairs, finances and accounts relating to the
Contracts with the Servicer's officers, employees and independent accountants
(and by this provision the Servicer hereby authorizes said accountants to
discuss with such representatives such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any expense
incident to the reasonable exercise by the Trustee of any right under this
Section shall be borne by the Trustee and reimbursed to it by the Company under
Section 7.7.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, as of the date and year first above written.
TRUST MANAGEMENT, INC.,
Attest: AS TRUSTEE
By:
------------------------------------ -------------------------------------
Title Title:
----------------------------------
Attest: TRANSITION AUTO FINANCE II, INC.
By:
------------------------------------ -------------------------------------
Secretary Xxx Xxxx, President
The undersigned Transition Leasing Management, Inc. joins in this
Indenture for the sole purpose of evidencing its agreement to the covenants,
representations and warranties pertaining to it that are set forth in Article
Twelve of this Indenture and not for the purpose of guarantying or otherwise
covenanting to pay the Notes or perform any of the Company's obligations
hereunder.
Attest: Transition Leasing Management, Inc.
By:
------------------------------------ -------------------------------------
Secretary Xxx Xxxx, President
58
STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
BEFORE ME, the undersigned authority, on this day personally appeared
Xxx Xxxx, President of Transition Auto Finance II, Inc., a Texas corporation,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he or she executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of __________,
1998.
[SEAL] --------------------------------------------
Notary Public in and for the State of Texas
--------------------------------------------
Notary Public Printed or Typed Name
My Commission Expires:
----------------------
STATE OF TEXAS Section
Section
COUNTY OF TARRANT Section
BEFORE ME, the undersigned authority, on this day personally appeared
____________ _____________________, ____________________ of Trust Management,
Inc., known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he or she executed the same
for the purposes and consideration therein expressed, in the capacity xxxxxxx
stated and as the act and deed of said trust company.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________,
1998.
[SEAL] --------------------------------------------
Notary Public in and for the State of Texas
--------------------------------------------
Notary Public Printed or Typed Name
My Commission Expires:
----------------------
59
EXHIBIT A
LEASED VEHICLE AND CONTRACT PURCHASE CRITERIA
TRANSITION AUTO FINANCE II, INC.
The following purchasing criteria shall govern all purchases of Leased
Vehicles and Eligible Additional Contracts by the Company and no Leased
Vehicle or Contract shall be purchased that does not materially meet such
criteria.
I. VEHICLE CRITERIA
a. No vehicle that is to become a Leased Vehicle may be purchased by the
Buyer if the vehicle is more than four model years old. No Contract
may be acquired by the Buyer if the Contract is secured by a Leased
Vehicle that, at the time of lease, was more than four model years
old.
b. The purchase price payable by the Buyer for each vehicle that is to
become a Leased Vehicle (and thus to become subject to a Contract)
shall never exceed that amount that a Dealer shall receive from bank
draft upon the delivery of the Leased Vehicle. With respect to any
Leased Vehicle (and the Contract related thereto) the Buyer may
acquire from TAF-I, the Purchase Price for such Leased Vehicle payable
by Buyer shall be an amount equal to the sum of (i) the value of
Leased Vehicle on a "average wholesale" basis, as determined by
reference to the "Texas Edition" of the "Official Used Car Market
Guide" in effect as of the date of the Buyer's purchase plus (ii)
57.5% of the down payment received by TAF-I with respect to the
Contract related to such Leased Vehicle.
c. In addition, with respect to any Leased Vehicle (the "Subject
Vehicle") and the Contract related thereto (the "Subject Contract")
the Buyer may acquire from TAF-I, the Subject Contract may not be in
default at the time of purchase by Buyer and may not be purchased if
another Leased Vehicle and Contract within TAF-I's portfolio both
satisfies the criteria specified within this Exhibit A and was entered
into as of a date prior to the date of such Subject Contract.
II. DOWN PAYMENT RATIO
Obligors on all Contracts must have made a down payment in cash and/or net
trade-in allowance of not less than 15% of the actual price paid by draft
to the selling automobile Dealer for the related Leased Vehicle;
provided, however, that the down payment for any Leased Vehicle which is
more than three model years old shall equal at least 20% of the actual
purchase price.
III. CONTRACT TERMS
A. Each Contract must have an original term of 42 months or less.
B. Each Contract shall be in the form of industry-standard consumer
automobile lease Contracts.
IV. CREDIT CRITERIA
A. With respect to each Obligor on each Contract, the Servicer shall
perform all credit checks and reviews that are standard for the motor
vehicle lease industry and shall supply the verification information
to the Company at the time of acquisition of each Contract.
A-1
B. In addition to the credit checks and reviews set forth in paragraph
IV.A. above, each Obligor must satisfy the following criteria:
1. Verifiable home telephone number in Obligor's residence;
2. Residence:
(a) Evidence of purchase, lease or rental agreement in Obligor's
name;
(b) Stability - Review length of time at last two addresses, as
well as time in area;
3. Employment: At least one year with last two employers;
4. Obligor has verifiable income (check stub, W-2, 1099, tax return,
or bank statements);
5. Ratio of Obligor's net disposable income to gross generally
should exceed 60%;
6. References: (a) Five relatives;
(b) Five personal.
7. Valid Texas driver's license;
8. If a previous bankruptcy, must have been discharged, or if open,
need letter of permission from bankruptcy trustee.
9. Certain exceptions for first-time buyers permitted.
A-2
EXHIBIT B
MONTHLY REPORT CERTIFICATE
For Month: _______________, ________ (the "Collection Period")
(year)
Company: Transition Auto Finance II, Inc.
Servicer: Transition Leasing Management, Inc.
Indenture: Dated as of __________________, 1998
Trustee: Trust Management, Inc.
I. INTEREST PAYMENTS ON NOTES (INDENTURE SECTION 5.1)
A. EXHIBIT I hereto sets forth a listing of the interest and any principal
payable to each Noteholder on the next Payment Date. The Company certifies that
computation of interest has been made in conformance with the Indenture.
All capitalized terms used herein and not otherwise herein defined shall
have the same meaning as set forth in the Indenture.
Company and Servicer certify that, to the best of their knowledge, the
foregoing and attached information is true and correct.
Dated: ____________________, ________
TRANSITION LEASING MANAGEMENT, INC.
By:
-------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
TRANSITION AUTO FINANCE II, INC.
By:
-------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
B-1
EXHIBITS DESCRIPTION
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I Noteholder Interest Report
B-2
EXHIBIT C
TRUSTEE'S FEE
TRANSITION AUTO FINANCE II, INC.
11% REDEEMABLE ASSET-BACKED NOTES
DUE JUNE 30, 2002
Acceptance Fee $_______________
Annual Administration Fee $_______________
(annually per
Paying Agent/Registrar Services $_______________ account maintained)
Interest Checks $_______________ each
Corrections to Schedule A $_______________ each
(certificate registration request)
All out-of-pocket expenses such as long distance telephone, stationery,
insurance, courier, attorney or accountant expense, etc., will be billed at
cost to the Company. The Trustee understands that the closing of the Note
issuance will be completed in Fort Worth and there will not be any travel
expenses charged to the Company. These fees do not include servicing
responsibilities should the Trustee be involved due to a removal of the
Servicer. The Trustee would present servicing fees at that time. These fees
do not include arbitrage accounting or excess yield calculations, if
required. If the common trust funds of Trustee are utilized, there will be
0.5% annual fee deducted from the account. If Trustee's duties are modified
to any great extent, Trustee reserves the right to re-evaluate its fees.
Extraordinary services will be charged according to time and scope of
services.
C-1
