Exhibit 4.3
PARAGON AUTO RECEIVABLES CORPORATION
Seller,
PARAGON ACCEPTANCE CORPORATION
Servicer
and
[NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION]
Trustee [and Backup Servicer]
on behalf of the Holders
-------------------------------
POOLING AND SERVICING AGREEMENT
-------------------------------
Dated as of _______ __, _____
PARAGON AUTO RECEIVABLES TRUST ____-_
____% Asset Backed Certificates, Class A
____% Asset Backed Certificates, Class B
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.....................................................1
Section 1.2. Usage of Terms.................................................18
Section 1.3. Calculations...................................................19
Section 1.4. Section References.............................................19
Section 1.5. Action by or Consent of Certificateholders.....................19
Section 1.6. No Recourse....................................................19
Section 1.7. Nonpetition Covenant...........................................19
ARTICLE II
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE
Section 2.1. Conveyance of Receivables......................................20
Section 2.2. Custody of Receivable Files....................................20
Section 2.3. Conditions Precedent to Issuance by Trust......................22
Section 2.4. Representations and Warranties of Seller.......................22
Section 2.5. Repurchase of Receivables Upon Breach of Warranty..............24
Section 2.6. Trustee's Assignment of Receivables............................24
Section 2.7. Collecting Lien Certificates...................................25
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer.........................................25
Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement.................................26
Section 3.3. Realization Upon Receivables...................................27
Section 3.4. Insurance......................................................28
Section 3.5. Maintenance of Security Interests in Vehicles..................28
Section 3.6. Covenants, Representations and Warranties of Servicer..........29
Section 3.7. Purchase of Receivables Upon Breach of Covenant................31
Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer[; Backup Servicer Fee]................................32
Section 3.9. Servicer's Certificate.........................................32
Section 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event..............................................32
Section 3.11. Annual Independent Accountants' Report.........................33
Section 3.12. Access to Certain Documentation and Information Regarding
Receivables....................................................33
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Section 3.13. Monthly Tape[; Certain Duties of Backup Servicer]..............33
Section 3.14. Insurance......................................................34
Section 3.15. Compliance with Laws...........................................34
Section 3.16. Reports to the Commission......................................34
ARTICLE IV
PAYMENTS; STATEMENTS TO CERTIFICATEHOLDERS
Section 4.1. Trust Accounts.................................................35
Section 4.2. Servicer Reimbursements........................................37
Section 4.3. Application of Collections.....................................37
Section 4.4. Additional Deposits............................................38
Section 4.5. Payments.......................................................38
Section 4.6. Net Deposits...................................................39
Section 4.7. Statements to Certificateholders...............................40
ARTICLE V
THE CERTIFICATES
Section 5.1. The Certificates...............................................41
Section 5.2. Authentication of Certificates.................................41
Section 5.3. Registration of Transfer and Exchange of Certificates..........41
Section 5.4. Mutilated, Destroyed, Lost or Stolen Certificates..............42
Section 5.5. Persons Deemed Owners..........................................43
Section 5.6. Access to List of Holders' Names and Addresses.................43
Section 5.7. Maintenance of Office or Agency................................43
Section 5.8. Book Entry Certificates........................................43
Section 5.9. Notices to Clearing Agency.....................................44
Section 5.10. Definitive Certificates........................................44
ARTICLE VI
THE RESERVE ACCOUNT
Section 6.1. Initial Deposit................................................45
Section 6.2. Deficiency Claim Amounts.......................................45
Section 6.3. Distribution of Excess.........................................45
ARTICLE VII
THE SELLER
Section 7.1. Liability of Seller............................................45
Section 7.2. Merger or Consolidation of the Seller..........................46
Section 7.3. Limitation on Liability of Seller and Others...................47
Section 7.4. Special Purpose Entity.........................................47
Section 7.5. Restrictions on Liens..........................................48
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Section 7.6. Creation of Indebtedness; Guarantees...........................48
Section 7.7. Compliance with Laws...........................................48
Section 7.8 Further Instruments and Acts...................................49
Section 7.9 Investment Company Act.........................................49
ARTICLE VIII
THE SERVICER
Section 8.1. Liability of the Servicer; Indemnities.........................49
Section 8.2. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer [or Backup Servicer]..........................50
Section 8.3. Limitation on Liability of Servicer[, Backup Servicer] and
Others.........................................................51
Section 8.4. Delegation of Duties...........................................52
Section 8.5. Servicer [and Backup Servicer] Not to Resign...................52
ARTICLE IX
TRUSTEE
Section 9.1. Acceptance by the Trustee......................................52
Section 9.2. Duties of the Trustee..........................................52
Section 9.3. The Trustee's Certificate......................................54
Section 9.4. The Trustee's Assignment of Purchased Receivables..............54
Section 9.5. Certain Matters Affecting the Trustee..........................54
Section 9.6. The Trustee Not Liable for Certificates or Receivables.........56
Section 9.7. The Trustee May Own Certificates...............................57
Section 9.8. The Trustee's Fees and Expenses................................57
Section 9.9. Eligibility Requirements for The Trustee.......................58
Section 9.10. Resignation or Removal of the Trustee..........................58
Section 9.11. Successor Trustee..............................................59
Section 9.12. Merger or Consolidation of or Assumption of Obligations of
the Trustee....................................................59
Section 9.13. Appointment of Co-Trustee or Separate Trustee..................60
Section 9.14. Representations and Warranties of the Trustee..................61
Section 9.15. Reports by the Trustee.........................................62
Section 9.16. Tax Returns....................................................62
Section 9.17. The Trustee May Enforce Claims Without Possession of
Certificates...................................................62
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1. Servicer Termination Event.....................................62
Section 10.2. Consequences of a Servicer Termination Event...................63
Section 10.3. Appointment of Successor.......................................64
Section 10.4. Notification to Certificateholders.............................64
Section 10.5. Waiver of Past Defaults........................................65
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ARTICLE XI
TERMINATION
Section 11.1. Termination of the Trust.......................................65
Section 11.2. Optional Purchase of All Receivables...........................66
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Amendment......................................................66
Section 12.2. Protection of Title to Trust...................................67
Section 12.3. Limitation on Rights of Certificateholders.....................69
Section 12.4. GOVERNING LAW..................................................70
Section 12.5. Severability of Provisions.....................................70
Section 12.6. Assignment.....................................................70
Section 12.7. Third-Party Beneficiaries......................................70
Section 12.8. Counterparts...................................................70
Section 12.9. Notices........................................................70
Section 12.10. Successors and Assigns.........................................71
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SCHEDULES
Schedule A -- Schedule of Receivables
Schedule B -- Representations and Warranties of the Seller
EXHIBITS
Exhibit A -- Form of Servicer's Certificate
Exhibit B -- Request for Release and Receipt of Documents
Exhibit C -- Form of Class A Certificates
Exhibit D -- Form of Class B Certificates
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POOLING AND SERVICING AGREEMENT, dated as of ________ __, ____
(this "Agreement"), between PARAGON ACCEPTANCE CORPORATION, a Delaware
corporation, in its individual capacity ("Paragon") and as Servicer (the
"Servicer"), PARAGON AUTO RECEIVABLES CORPORATION, a Delaware corporation,
as Seller (the "Seller"), and [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association], as Trustee (in such capacity,
the "Trustee") [and as Backup Servicer (in such capacity, the "Backup
Servicer")].
In consideration of the premises and of the mutual agreements
herein contained, and other good and valuable consideration, the receipt of
which is acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used but not defined
herein shall have the meanings set forth in the Receivables Purchase
Agreement (as defined below). Whenever capitalized and used in this
Agreement, the following words shall have the following meanings:
Accountants' Report: The report of a firm of nationally recognized
independent accountants described in Section 3.11.
Accounting Date: (a) The last day of a Collection Period and (b)
with respect to a Payment Date or Determination Date, the last day of the
Collection Period preceding such Payment Date or Determination Date (such
date being referred to as the "related Accounting Date" with respect to
such Payment Date or Determination Date).
Administrative Receivable: With respect to any Collection Period,
a Receivable that the Servicer is required to purchase pursuant to Section
3.7 on or before the Deposit Date following such Collection Period.
Affiliate: With respect to any Person, any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
the term "control" (including the terms "controlling," "controlled by" and
"under common control with") means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Aggregate Principal Balance: With respect to the Closing Date, the
Cutoff Date Principal Balance, and with respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than Liquidated Receivables and Purchased
Receivables).
Agreement: This Agreement and all exhibits and schedules hereto.
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Amount Financed: With respect to a Receivable, the "amount
financed" within the meaning of the Federal Truth-in-Lending Act, which is
the aggregate amount of credit initially extended under such Receivable
toward the purchase price of the related Financed Vehicle and related
costs, including amounts of credit extended in respect of accessories,
insurance premiums, service and warranty policies or contracts and other
items customarily financed as part of motor vehicle retail installment
contracts.
Annual Percentage Rate or APR: With respect to a Receivable, the
rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act);
provided, however, that if, after the Closing Date, the annual percentage
rate with respect to a Receivable as of the Closing Date is reduced as a
result of (i) an insolvency proceeding involving the related Obligor or
(ii) the Soldiers' and Sailors' Civil Relief Act of 1940, the Annual
Percentage Rate or APR shall refer to such reduced rate.
Authorized Officer: means any officer within the Corporate Trust
Office of Trustee, including any vice president, assistant vice president,
secretary, assistant secretary or any other officer of Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
Available Funds: With respect to any Determination Date, the sum
of (i) the Collected Funds received by the Servicer during the related
Collection Period, (ii) all Purchase Amounts with respect to Purchased
Receivables deposited in the Collection Account since the preceding
Determination Date and on or before the related Deposit Date, and (iii) all
income from investments of funds in the Collection Account during the
related Collection Period.
[Backup Servicer: [ Norwest Bank Minnesota, National Association,]
its successor in interest pursuant to Section 8.2 or such Person as shall have
been appointed as Backup Servicer pursuant to Section 10.3.]
[Backup Servicer Fee: With respect to any Payment Date, the fee
payable to the Backup Servicer for services rendered during the related
Collection Period, as specified in a separate fee letter between the Backup
Servicer and Paragon.]
Basic Servicing Fee: With respect to any Payment Date, the fee
payable to the Servicer for services rendered during the related Collection
Period, which shall be equal to one-twelfth of 1.00% multiplied by the
Aggregate Principal Balance as of the open of business on the first day of
the related Collection Period.
Book Entry Certificates: means beneficial interests in the
definitive Certificates described in Section 5.8, the ownership of which
shall be evidenced, and transfers of which shall be made, through book
entries by a Clearing Agency as described in Section 5.8.
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Business Day: Any day other than a Saturday, Sunday or other day
on which commercial banking institutions or trust companies in St. Louis,
Missouri, Los Angeles, California, New York, New York, Minneapolis,
Minnesota or the principal place of business of any successor Servicer or
successor Trustee are authorized or obligated by law or order to be closed.
Certificate: Any one of the Class A Certificates or Class B
Certificates executed on behalf of the Trust and issued pursuant to this
Agreement in substantially the form set forth in Exhibit C or D to this
Agreement, respectively.
Certificate Balance: As of any date of determination, the sum the
Class A Certificate Balance and the Class B Certificate Balance.
Certificate Majority: As of any date of determination, Holders of
Class A Certificates and Class B Certificates representing more than 50% of
the Certificate Balance.
Certificate Owner: means, with respect to a Book Entry
Certificate, the Person who is the owner of such Book Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an
indirect participant, in accordance with the rules, regulations and
procedures of such Clearing Agency).
Certificate Register: means the register maintained by Trustee for the
registration of Certificates and of transfers and exchanges of Certificates
as provided in Section 5.3.
Certificated Security: As defined in Section 8-102(a)(4) of Revised
Article 8.
Certificateholder or Holder: Registered holders of Certificates.
Class: A class of Certificates.
Class A Certificate: Any Certificate executed on behalf of the
Trust and issued pursuant to this Agreement in substantially the form set
forth in Exhibit C hereto.
Class A Certificate Balance: Initially, $____________ and,
thereafter, an amount equal to the initial Class A Certificate Balance
reduced by all amounts distributed to the Class A Certificateholders that
are allocable to principal.
Class A Certificate Factor: As of any Payment Date, a seven-digit
decimal figure equal to the Class A Certificate Balance as of the close of
business on such Payment Date divided by the initial Class A Certificate
Balance.
Class A Interest Carryover Shortfall: As of the close of business on
any Payment Date, an amount equal to (i) the Class A Interest Payment
3
Amount for such Payment Date, minus (ii) the amount of interest that the
holders of the Class A Certificates actually received on such Payment Date.
Class A Interest Payment Amount: With respect to any Payment Date,
the sum of (i) for the initial Payment Date, 44 days of interest and for
any Payment Date thereafter, 30 days of interest, in each case calculated
on the basis of a 360-day year consisting of twelve 30-day months, at the
Class A Interest Rate on the Class A Certificate Balance as of the close of
business on the Cutoff Date (with respect to the initial Payment Date) or
the related Accounting Date (with respect to each Payment Date after the
initial Payment Date), plus (ii) any outstanding Class A Interest Carryover
Shortfall with respect to the preceding Payment Date, plus 30 days of
interest on such outstanding Class A Interest Carryover Shortfall, to the
extent permitted by law, at the Class A Interest Rate.
Class A Interest Rate: ___% per annum, calculated on a basis of a
360-day year consisting of twelve 30-day months.
Class A Payment Amount: On any Payment Date, the sum of the
Class A Principal Payment Amount and the Class A Interest Payment Amount.
Class A Percentage: ____%.
Class A Principal Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class A Principal Payment
Amount, minus (ii) the amount of principal that the holders of the Class A
Certificates actually received on such Payment Date.
Class A Principal Payment Amount: With respect to any Payment
Date, without duplication, the sum of: (i) the Class A Percentage of the
sum of: (A) the principal portion of all Collected Funds for the related
Determination Date (other than Collected Funds received with respect to
Liquidated Receivables following the respective dates such Receivables
became Liquidated Receivables), (B) the Principal Balance of all
Receivables that became Liquidated Receivables during the related
Collection Period (other than Purchased Receivables) as determined on the
respective dates such Receivables became Liquidated Receivables, (C) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the related Accounting Date, and (D) the
aggregate amount of Cram Down Losses that shall have been realized during
the related Collection Period; plus (ii) any Class A Principal Carryover
Shortfall with respect to the preceding Payment Date; provided, however,
that on the Final Scheduled Payment Date, the Class A Principal Payment
Amount shall equal the Class A Certificate Balance.
Class B Certificate: Any Certificate executed on behalf of the
Trust and issued pursuant to this Agreement in substantially the form set
forth in Exhibit D hereto.
Class B Certificate Balance: Initially, $____________ and,
thereafter, an amount equal to the initial Class B Certificate Balance
reduced by all amounts distributed to the Class B Certificateholders that
are allocable to principal.
4
Class B Certificate Factor: As of any Payment Date, a seven-digit
decimal figure equal to the Class B Certificate Balance as of the close of
business on such Payment Date divided by the initial Class B Certificate
Balance.
Class B Interest Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class B Interest Payment
Amount for such Payment Date, minus (ii) the amount of interest that the
holders of the Class B Certificates actually received on such Payment Date.
Class B Interest Payment Amount: With respect to any Payment Date,
the sum of (i) for the initial Payment Date, 44 days of interest and for
any Payment Date thereafter, 30 days of interest, in each case calculated
on the basis of a 360-day year consisting of twelve 30-day months, at the
Class B Interest Rate on the Class B Certificate Balance as of the close of
business on the Cutoff Date (with respect to the initial Payment Date) or
the related Accounting Date (with respect to each Payment Date after the
initial Payment Date), plus (ii) any outstanding Class B Interest Carryover
Shortfall with respect to the preceding Payment Date, plus 30 days of
interest on such outstanding Class B Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Interest Rate.
Class B Interest Rate: ___% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months.
Class B Payment Amount: On any Payment Date, the sum of the
Class B Interest Payment Amount and the Class B Principal Payment Amount.
Class B Percentage: ___%.
Class B Principal Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class B Principal Payment
Amount, minus (ii) the amount of principal that the holders of the Class B
Certificates actually received on such Payment Date.
Class B Principal Payment Amount: With respect to any Payment
Date, without duplication, the sum of: (i) the Class B Percentage of the
sum of: (A) the principal portion of all Collected Funds for the related
Determination Date (other than Collected Funds received with respect to
Liquidated Receivables following the respective dates such Receivables
became Liquidated Receivables), (B) the Principal Balance of all
Receivables that became Liquidated Receivables during the related
Collection Period (other than Purchased Receivables) as determined on the
respective dates such Receivables became Liquidated Receivables, (C) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the related Accounting Date, and (D) the
aggregate amount of Cram Down Losses that shall have been realized during
the related Collection Period; plus (ii) any Class B Principal Carryover
Shortfall with respect to the preceding Payment Date; provided, however,
that on the Final Scheduled Payment Date, the Class B Principal Payment
Amount shall equal the Class B Certificate Balance.
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Clearing Agency: means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act, as amended.
Clearing Agency Participant: means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the
Clearing Agency.
Clearing Corporation: As defined in Section 8-102(3) of Old Article 8.
Closing: As defined in Section 2.1(d).
Closing Date: ________ __, ____.
Code: means the Internal Revenue Code of 1986 and the Treasury
Regulations promulgated thereunder.
Collected Funds: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables received by the Servicer during the related Collection Period,
including all Liquidation Proceeds collected during the related Collection
Period (but excluding any Purchase Amounts) and all amounts paid by the
Dealers under Dealer Agreements or Dealer Assignments with respect to the
Receivables during the related Collection Period.
Collection Account: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 4.1.
Collection Period: (a) A calendar month and (b) with respect to a
Payment Date or Determination Date, the calendar month preceding the month
in which such Payment Date or Determination Date occurs (such calendar
month being referred to as the "related Collection Period" with respect to
such Payment Date or Determination Date).
Commission: means the Securities and Exchange Commission.
Computer Tape: The computer tape or diskette generated on behalf
of the Seller that provides information relating to the Receivables.
Control: With respect to any Federal Book Entry Security, the
Trustee shall have obtained control if:
(i) the Trustee is a participant in the book entry system
maintained by the Federal Reserve Bank that is acting as fiscal
agent for the issuer of such Federal Book Entry Security, and such
Federal Reserve Bank has indicated by book entry that such Federal
6
Book Entry Security has been credited to the Trustee's securities
account in such book entry system; or
(ii) (a) the Trustee (1) is registered on the records of
a Securities Intermediary as the person having a Securities
Entitlement in respect of such Federal Book Entry Security against
such Securities Intermediary; or (2) has obtained the agreement,
in writing, of the Securities Intermediary for such Securities
Entitlement that such Securities Intermediary will comply with
Entitlement Orders of the Trustee without further consent of any
other Person; and (b) the Securities Intermediary is a participant
in the book entry system maintained by the Federal Reserve Bank
that is acting as fiscal agent for the issuer of such Federal Book
Entry Security; and (c) such Federal Reserve Bank has indicated by
book entry that such Federal Book Entry Security has been credited
to the Securities Intermediary's securities account in such book
entry system.
Controlling Party: The Trustee for the benefit of the Certificate-
holders.
Corporate Trust Office: The principal office of the Trustee at
which its corporate trust business shall be administered, which office at
the Closing Date is located at [Norwest Center, Xxxxx Xxxxxx xxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Services/Asset-Backed Administration]; or such other address or the Trustee
may designate from time to time by notice to the Certificateholders and the
Seller.
Cram Down Loss: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an amount
equal to the principal balance of such Receivable immediately prior to such
order, minus the principal balance of such Receivable as so reduced. A
"Cram Down Loss" shall be deemed to have been realized on the date of
issuance of such order.
[CTS: ContiTrade Services L.L.C., a Delaware limited liability
company.]
[CTS Liens: The security interests in the Receivables and other
Trust Property granted by Paragon as debtor/seller in favor of CTS as
secured party/purchaser in connection with the Warehouse Credit and
Servicing Agreement, dated as of March 29, 1996, as amended, between
Paragon and CTS.]
Cumulative Net Loss Ratio: With respect to any Determination Date,
the fraction (expressed as a percentage) the numerator of which is equal to
the sum of (i) the Principal Balance of all Receivables that have become
Liquidated Receivables as of the related Accounting Date less all
Liquidation Proceeds and recoveries received with respect to such
Receivables and (ii) the aggregate Cram Down Losses with respect to the
Receivables as of the related Accounting Date, and the denominator of which
is equal to the Aggregate Principal Balance as of the Cutoff Date.
Cutoff Date: The close of business on _______ __, ___-.
7
Cutoff Date Principal Balance: $_______________.
DCR: Duff & Xxxxxx Credit Rating Co., or any successor thereto.
Dealer: A seller of new or used automobiles, light trucks or
sports utility vehicles that originated one or more of the Receivables and
sold the respective Receivable to Paragon under a Dealer Agreement or
Dealer Assignment.
Dealer Agreement: An agreement between Paragon and a Dealer relating
to the sale of retail installment contracts to Paragon and all documents
and instruments relating thereto.
Dealer Assignment: With respect to a Receivable, the assignment
executed by a Dealer conveying such Receivable to Paragon.
Deemed Cured: As of any Determination Date, with respect to a
Trigger Event that has occurred, that no Trigger Event shall have occurred
as of such Determination Date or as of either of the two consecutively
preceding Determination Dates.
Deficiency Claim Amount: As defined in Section 6.2.
Definitive Certificates: As defined in Section 5.8.
Delinquency Ratio: With respect to any Determination Date, the
fraction (expressed as a percentage) the numerator of which is the
Principal Balance of all Receivables, of which 10% or more of any Scheduled
Payment (including any Receivable for which the related Financed Vehicle
has been repossessed but not yet sold by the Servicer) is 60 or more days
past due as of the related Accounting Date, and the denominator of which is
the Aggregate Principal Balance.
Delivery: When used with respect to Trust Account Property,
"Delivery" means:
(i) with respect to Physical Property other than a
"certificated security" as defined under Old Article 8, transfer
thereof to the Trustee or its nominee or custodian by physical
delivery to the Trustee or its nominee or custodian endorsed to,
or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank;
(ii) with respect to a "certificated security" as defined
under Old Article 8 that will, upon compliance with the following
procedures, be held by a Person located in an Old Article 8
Jurisdiction, transfer thereof:
(A) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or
its nominee or custodian or endorsed in blank to a
Financial Intermediary, and the making by such Financial
Intermediary of entries on its books and records
identifying such certificated security as belonging to
the Trustee or its nominee or custodian and the sending
8
by such Financial Intermediary of a confirmation of the
transfer to the Trustee or its nominee or custodian of such
certificated security; or
(B)(1) by delivery thereof to a Clearing
Corporation and the registering by such Clearing
Corporation of appropriate entries on its books reducing
the appropriate securities account of the transferor and
increasing the appropriate securities account of a
Financial Intermediary by the amount of such certificated
security, (2) the identification by the Clearing
Corporation of the certificated securities for the sole
and exclusive account of the Financial Intermediary, (3)
the maintenance of such certificated securities by such
Clearing Corporation or a "custodian bank" (as defined in
Section 8-102(4) of Old Article 8) or the nominee of
either subject to the Clearing Corporation's exclusive
control, (4) the sending of a confirmation by the
Financial Intermediary of the transfer to the Trustee or
its nominee or custodian of such securities and the
registering by such Financial Intermediary of entries on
its books and records identifying such certificated
security as belonging to the Trustee or its nominee or
custodian, and, in any event, any such Physical Property
in registered form shall be in the name of the Trustee or
its nominee or custodian, and (5) such additional or
alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of
any such Trust Account Property to the Trustee or its
nominee or custodian, consistent with applicable law or
regulations or the interpretation thereof;
(iii) with respect to a Certificated Security that will,
upon compliance with the following procedures, be held by a person
located in a Revised Article 8 Jurisdiction, transfer of such
Certificated Security to the Trustee or its nominee or custodian
by physical delivery to the Trustee or its nominee or custodian,
endorsed to, or registered in the name of, the Trustee or its
nominee or custodian or endorsed in blank;
(iv) with respect to any such Trust Account Property that
constitutes an "uncertificated security" under Old Article 8 (and
that is not a Federal Book Entry Security) and where the issuer
thereof is organized in an Old Article 8 Jurisdiction,
registration of the transfer to, and ownership of such Trust
Account Property by the Trustee or any Financial Intermediary
acting on behalf of the Trustee by the issuer of such Trust
Account Property, and (B) in the case of registration in the name
of any Financial Intermediary, (1) the making by any such
Financial Intermediary of entries in its books and records
identifying such uncertificated security as belonging to the
Trustee, and (2) delivery by any such Financial Intermediary to
the Trustee of a written confirmation of the transfer of the
uncertificated securities to the Trustee; and
(v) with respect to any such Trust Account Property that
constitutes an Uncertificated Security (including any investments
in money market mutual funds, but excluding any Federal Book Entry
Security) and where the issuer thereof is organized in a Revised
Article 8 Jurisdiction, (A) registration of the Trustee as the
registered owner by the issuer, or (B)
9
satisfaction of the requirements for obtaining "control" pursuant
to Section 8-106(c)(2) of Revised Article 8.
Deposit Date: With respect to any Determination Date, the Business
Day preceding such Determination Date.
Depository Agreement: means the agreement, dated the Closing Date,
between Seller, Servicer, Trustee and the initial Clearing Agency.
Determination Date: With respect to any Payment Date, the eighth
day of the calendar month in which such Payment Date occurs (or, if such
day is not a Business Day, the next Business Day).
Electronic Ledger: The electronic master record of the retail
installment contracts of the Servicer.
Eligible Account: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution,
or (ii) a segregated direct deposit account maintained with a depository
institution or trust company organized under the laws of the United States
of America, any of the States thereof or the District of Columbia having a
certificate of deposit, short-term deposit or commercial paper rating of at
least ["D-1" by DCR (or, if not rated by DCR, "A-l" by S&P or "P-1" by
Moody's)].
Eligible Investments: Any one or more of the following types of
investments:
(a) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or
instrumentality of the United States the obligations of which are
backed by the full faith and credit of the United States;
(b) demand or time deposits in, certificates of deposit
of, demand notes of, or bankers' acceptances issued by any
depository institution or trust company organized under the laws
of the United States or any State and subject to supervision and
examination by federal and/or state banking authorities
(including, if applicable, the Trustee or any agent of the Trustee
acting in their respective commercial capacities); provided,
however, that the short-term unsecured debt obligations of such
depository institution or trust company at the time of such
investment, or contractual commitment providing for such
investment, are rated in one of the two highest short-term rating
categories by [DCR (or, if not rated by DCR, in one of the two
highest short-term rating categories by S&P or Moody's)];
(c) repurchase obligations pursuant to a written
agreement (i) with respect to any obligation described in clause
(a) above, where the Trustee has taken actual or constructive
delivery of such obligation in accordance with Section 4.1, and
(ii) entered into with a depository institution or trust company
organized under the laws of the United States or any
10
State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated in one of the two highest
short-term rating categories by [DCR (or, if not rated by DCR, in
one of the two highest short-term rating categories by S&P or
Moody's)] (including, if applicable, the Trustee, or any agent of
the Trustee acting in its commercial capacity);
(d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the
United States or any State whose long-term unsecured debt
obligations are rated in one of the two highest long-term rating
categories by [DCR (or, if not rated by DCR, in one of the two
highest long-term rating categories by S&P or Moody's)] at the
time of such investment or contractual commitment providing for
such investment; provided, however, that securities issued by any
particular corporation shall not be Eligible Investments with
respect to the Collection Account to the extent that an investment
therein will cause the then outstanding principal amount of
securities issued by such corporation and held in the Collection
Account to exceed 10% of the Eligible Investments held in the
Collection Account (with Eligible Investments held in the
Collection Account valued at par);
(e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in one of the two highest short-term
rating categories by [DCR (or, if not rated by DCR, in one of the
two highest short-term rating categories by S&P or Moody's)];
(f) money market mutual funds that are rated in the
highest credit rating category by [Moody's or S&P]; or
(g) any other demand or time deposit, obligation,
security or investment as may be acceptable to the Rating Agency,
as evidenced by the prior written consent of the Rating Agency.
Any such Eligible Investments may be purchased by or through the Trustee or
any of its Affiliates.
Eligible Servicer: Paragon[, the Backup Servicer] or another
Person that, at the time of its appointment as Servicer, (i) is servicing a
portfolio of motor vehicle retail installment contracts and/or motor
vehicle installment loans comparable to the Receivables, (ii) is legally
qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability to service with reasonable skill and care a
portfolio of motor vehicle retail installment contracts and/or motor
vehicle installment loans similar to the Receivables, (iv) is qualified and
entitled to use, pursuant to a license or other written agreement, and
agrees to maintain the confidentiality of, the software that the Servicer
uses in connection with performing its duties and responsibilities under
this Agreement or otherwise has available software that is adequate to
perform its duties and responsibilities under this Agreement and (v) has
been approved by Certificateholders constituting a Certificate Majority.
Entitlement Order: As defined in Section 8-102(a)(8) of Revised
Article 8.
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Executive Officer: With respect to any corporation, the President,
Chief Financial Officer or any Vice President.
Federal Book Entry Security: An obligation (i) issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association, or any other direct obligation of, or
obligation fully guaranteed as to timely payment or principal and interest
by, the United States of America, that is a book-entry security held
through the Federal Reserve System pursuant to Federal book entry
regulations, and (ii) the perfection of a security interest in which is
governed pursuant to federal regulations by Revised Article 8.
Final Scheduled Payment Date: _______ __, 20__ (or, if such day is
not a Business Day, the next Business Day).
Financed Vehicle: A new or used automobile, light truck or sports
utility vehicle, together with all accessories thereto, securing or
purporting to secure an Obligor's indebtedness under a Receivable.
Financial Asset: As defined in Section 8-102(a)(9) of Revised
Article 8.
Financial Intermediary: As defined in Section 8-313(4) of Old
Article 8.
Floor Amount: The lesser of (i) the Certificate Balance and (ii)
$500,000.
Governmental Authority: Any court or federal or state regulatory
body, administrative agency or other tribunal or other governmental
instrumentality.
Independent Accountants: As defined in Section 3.11.
Insolvency Event: With respect to a specified Person, (a) the
entry of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, or the
commencement of an involuntary case under the federal bankruptcy laws, as
now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law and such case is not dismissed within
60 days; or (b) the commencement by such Person of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by such Person to the entry of
an order for relief in an involuntary case under any such law, or the
consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of
any of the foregoing.
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Instruments: As defined in Section 9-105(l)(i) of Revised Article 8.
Insurance Policy: With respect to a Receivable, any insurance
policy benefiting the holder of the Receivable and providing loss or
physical damage, credit life, accident and health, theft, mechanical
breakdown or similar coverage with respect to the Financed Vehicle or the
related Obligor.
Investment Property: As defined in Section 9-115(1)(f) of Revised
Article 8.
Lien: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens
and any liens that attach by operation of law.
Lien Certificate: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by
the Registrar of Titles of the applicable state to a secured party that
indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor,
the term "Lien Certificate" shall mean only a certificate or notification
issued to a secured party.
Liquidated Receivable: With respect to any Collection Period, a
Receivable as to which (i) the related Financed Vehicle has been
repossessed and sold by the Servicer, (ii) at least 10% of any Scheduled
Payment has become 120 or more days delinquent, or (iii) the Servicer has
determined in good faith that all amounts it expects to recover with
respect thereto have been received. Any Receivable that becomes a Purchased
Receivable on or before the related Deposit Date shall not be a Liquidated
Receivable.
Liquidation Proceeds: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts
withdrawn from the Reserve Account) net of (i) reasonable expenses incurred
by the Servicer in connection with the collection of such Receivable and
the repossession and disposition of the related Financed Vehicle and (ii)
amounts that are required to be refunded to the Obligor on such Receivable;
provided, however, that the Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero.
Lockbox Account: As defined in Section 3.2(d).
Lockbox Agreement: As defined in Section 3.2(d).
Lockbox Bank: As defined in Section 3.2(d).
Monthly Records: All records and data maintained by the Servicer
with respect to the Receivables and the Obligors, including the following
with respect to each Receivable: the account number; the identity of the
originating Dealer; Obligor name, Obligor address; Obligor home phone
number; Obligor business phone number (if any); original Amount Financed or
Principal Balance; original total of payments; original term; Annual
Percentage Rate; current balance; pay off balance;
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current remaining term; contract origination date; first payment date;
final scheduled payment date; next payment due date; collateral
description; days currently delinquent; new/used classification; amount of
the Scheduled Payment; and past due late charges, if any.
Moody's: Xxxxx'x Investors Service, Inc., or any successor thereto.
Obligor: With respect to a Receivable, the purchaser or the
co-purchasers of the related Financed Vehicle and any other Person or
Persons who are primarily or secondarily obligated to make payments under
such Receivable.
Officer's Certificate: A certificate signed by an Executive Officer.
Old Article 8: Article 8 of the UCC as in effect in the State of
Missouri as of the date hereof.
Old Article 8 Jurisdiction: A jurisdiction which has not adopted
Revised Article 8.
Opinion of Counsel: A written opinion of counsel reasonably
acceptable in form and substance and from counsel acceptable to the
Servicer and, if such opinion or a copy thereof is required to be delivered
to the Trustee, reasonably acceptable (as to form and substance) to it.
Paragon: As defined in the first paragraph of this Agreement.
Payment Amount: With respect to a Payment Date, the sum of (i) the
Available Funds as of the related Determination Date, plus (ii) the
Deficiency Claim Amount, if any, with respect to such Payment Date.
Payment Date: The 15th day of each calendar month, or if such 15th
day is not a Business Day, the next Business Day, commencing ________ 15,
____ and including the Final Scheduled Payment Date.
Permitted Lien: (i) the Lien in favor of the Trust, (ii) the Lien
in favor of the Trustee for the benefit of the Certificateholders, (iii)
the restrictions on transferability imposed by the Related Documents and
(iv) inchoate Liens for taxes not yet payable and mechanics' or suppliers'
liens for services or materials supplied the payment of which is not yet
overdue.
Person: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
Physical Property: Personal property constituting Instruments or
constituting "certificated securities" under Old Article 8, including
bankers' acceptances, commercial paper, negotiable certificates of deposit
and other obligations that are susceptible of physical delivery.
14
Pre-Computed Receivable: Any Receivable under which the portion of
a payment allocable to earned interest (which may be referred to in the
related Receivable as an add-on finance charge) and the portion allocable
to the Amount Financed is determined according to the sum of periodic
balances or the sum of monthly balances or any equivalent method or are
monthly actuarial receivables.
Principal Balance: With respect to any Receivable, as of any date,
the Amount Financed minus (i) in the case of a Pre-Computed Receivable,
that portion of all payments (including all Scheduled Payments and any
prepayments in full or partial prepayment) received on or prior to such
date and allocable to principal in accordance with the actuarial method,
(ii) in the case of a Simple Interest Receivable, that portion of all
payments (including all Scheduled Payments and any prepayments in full or
partial prepayment) received on or prior to such date and allocable to
principal in accordance with the simple interest method, and (iii) any Cram
Down Loss in respect of such Receivable.
Purchase Amount: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable as of the Accounting
Date as of which such Receivable is to be purchased.
Purchased Receivable: With respect to any Collection Period, any
Warranty Receivable or Administrative Receivable as to which the Purchase
Amount has been deposited in the Collection Account by or on behalf of the
Seller or the Servicer, as applicable, on or before the related Deposit
Date and any Receivable purchased by the Servicer pursuant to Section 9.1
as to which the Purchase Amount has been deposited in the Collection
Account by or on behalf of the Servicer.
Rating Agency: ___, so long as ___ maintains a rating on the Class
A Certificates and the Class B Certificates; and if ___ no longer maintains
a rating on the Class A Certificates or Class B Certificates, such other
nationally recognized statistical rating organization selected by the
Seller.
Rating Agency Condition: With respect to any action, that the
Rating Agency shall have been given prior notice thereof and that the
Rating Agency shall have notified Paragon, the Seller, the Servicer and the
Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Class A Certificates or the
Class B Certificates.
Receivable: A retail installment contract (and related security
agreement) for a new or used automobile, light truck or sports utility
vehicle (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract.
Receivable File: The documents, electronic entries, instruments and
writings listed in Section 2.2 pertaining to a particular Receivable.
Receivables Purchase Agreement: The Receivables Purchase Agreement,
dated as of ________ __, ____, between the Seller and Paragon.
15
Record Date: The Business Day preceding the related Payment Date.
Registrar of Titles: With respect to any state, the Governmental
Authority responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
Related Documents: This Agreement, the Certificates, the
Receivables Purchase Agreement, the Certificate of Incorporation of Paragon
Auto Receivables Corporation and the other agreements executed in
connection with the Closing. The Related Documents executed by any party
are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.
Reserve Account: The Reserve Account established and maintained
pursuant to Section 4.1(a)(ii).
Reserve Account Required Amount: With respect to a Payment Date,
the greater of (i) 5% of the Certificate Balance as of the related
Accounting Date and (ii) the Floor Amount; provided, however, that if a
Trigger Event has occurred and has not been Deemed Cured as of such Payment
Date, the Reserve Fund Required Amount shall be 10% of the Certificate
Balance as of the related Accounting Date.
Responsible Officer: When used with respect to the Trustee, any
officer of the Trustee assigned by the Trustee to administer its corporate
trust affairs relating to the Trust. When used with respect to any other
Person that is not an individual, the President, any Vice-President or
Assistant Vice-President or the Controller of such Person, or any other
officer or employee having similar functions.
Revised Article 8: UCC, Revised Article 8, Investment Securities
(with conforming and miscellaneous amendments to Articles 1, 3, 4, 5, 9 and
10), 1994 Official Text, as adopted by the American Law Institute and the
National Conference of Commissioners on Uniform State Laws. Unless the
context requires otherwise, "Revised Article 8" means such version in the
form in which it is adopted in the applicable jurisdiction.
Revised Article 8 Jurisdiction: A jurisdiction which has adopted
Revised Article 8.
S&P: Standard & Poor's a division of the XxXxxx-Xxxx Companies,
Inc., or any successor thereto.
Schedule of Receivables: The schedule of all retail installment
contracts sold and transferred to the Trust on the Closing Date attached
hereto as Schedule A, as it may be amended from time to time, including to
remove Purchased Receivables pursuant to Section 2.6.
Schedule of Representations: The Schedule of Representations and
Warranties of the Seller attached as Schedule B.
16
Scheduled Payment: With respect to any Collection Period for any
Receivable, the amount set forth in such Receivable as required to be paid
by the Obligor thereon in such Collection Period. If, after the Closing
Date, the Obligor's obligation under a Receivable with respect to a
Collection Period has been modified so as to differ from the amount
specified in such Receivable as a result of (i) the order of a court in an
insolvency proceeding involving the Obligor, (ii) the Soldiers' and
Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of
the Receivable permitted by Section 3.2(b) or 3.2(c), the Scheduled Payment
with respect to such Collection Period shall refer to the Obligor's payment
obligation with respect to such Collection Period as so modified.
Securities Account: As defined in Section 8-501(a) of Revised
Article 8.
Securities Act: The Securities Act of 1933, as amended.
Securities Entitlement: As defined in Section 8-102(a)(17) of
Revised Article 8.
Securities Intermediary: As defined in Section 8-102(a)(14) of
Revised Article 8.
Seller: As defined in the first paragraph of this Agreement.
Servicer: Paragon Acceptance Corporation, a Delaware corporation,
its successor in interest pursuant to Section 8.2 or, after any termination
of the Servicer upon a Servicer Termination Event[, the Backup Servicer] or
any other successor Servicer.
Servicer Termination Event: An event described in Section 10.1.
Servicer's Certificate: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached as Exhibit A.
Simple Interest Receivable: Any Receivable under which principal and
interest is allocated according to the simple interest method.
Supplemental Servicing Fee: With respect to any Collection Period,
all administrative fees, expenses and charges paid by or on behalf of
Obligors, including any late fees, NSF fees and liquidation fees collected
on the Receivables during such Collection Period and reimbursement of any
personal property taxes assessed on repossessed Financed Vehicles paid by
the Servicer.
Total Servicing Fee: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
17
Trigger Event: With respect to any Determination Date, (a) the
average of the Delinquency Ratios for the three preceding Collection
Periods exceeds ____% or (b) the Cumulative Net Loss Ratio exceeds the
percentage shown opposite the number of the applicable Determination Date
(after the Closing Date) below:
Determination Date Cumulative Net Loss Ratio
------------------ -------------------------
(after the Closing Date)
1st through 12th %
13th through 18th %
19th through 24th %
25th through 30th %
31st and on %
Trust: As defined in the first paragraph of this Agreement.
Trust Account: As defined in Section 4.1(b).
Trust Account Property: The Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the
form of deposit accounts, physical property, book-entry securities,
uncertificated securities or otherwise) and all proceeds of the foregoing.
Trust Property: The property and proceeds conveyed pursuant to
Section 2.1, together with certain monies paid after the Cutoff Date with
respect to the Receivables, the Trust Accounts (including all Eligible
Investments therein and all proceeds therefrom), the rights of the Trust
under this Agreement and the rights of the Seller under the Receivables
Purchase Agreement.
Trustee: As defined in the first paragraph of this Agreement.
Trustee Fee: With respect to any Payment Date, the fee payable to
the Trustee for services rendered during the related Collection Period.
Uncertificated Security: As defined in Section 8-102(a)(18) of
Revised Article 8.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
Warranty Receivable: With respect to any Collection Period, a
Receivable that the Seller has become obligated to repurchase pursuant to
Section 2.5.
Section 1.2. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular, words importing one gender include the other
18
gender, references to "writing" include printing, typing, lithography and
other means of reproducing words in a visible form, references to
agreements and other contractual instruments include all subsequent
amendments thereto or changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement, references to
Persons include their permitted successors and assigns, and the terms
"include" or "including" mean "include without limitation" or "including
without limitation."
Section 1.3. Calculations. All calculations of the amount of
interest accrued on the Certificates shall be made on the basis of a
360-day year consisting of twelve 30-day months. All references to the
Principal Balance of a Receivable as of an Accounting Date shall refer to
the close of business on such day.
Section 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. Action by or Consent of Certificateholders. Whenever
any provision of this Agreement refers to action to be taken or consented
to by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date preceding the date on
which such action is to be taken or consent given by Certificateholders.
Solely for purposes of any action to be taken or consented to by
Certificateholders, any Certificate registered in the name of Paragon, the
Seller or any Affiliate thereof shall be deemed not to be outstanding;
provided, however, that, solely for the purpose of determining whether the
Trustee is entitled to rely upon any such action or consent, only
Certificates that the Trustee knows to be so owned shall be so disregarded.
Section 1.6. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer or director, as such, of Paragon, the Seller, the Servicer, [the
Backup Servicer,] or the Trustee or of any predecessor or successor of
Paragon, the Seller, the Servicer[, the Backup Servicer] or the Trustee.
Section 1.7. Nonpetition Covenant. Until one year and one day
following the payment in full of all amounts due in respect of the
Certificates, none of the Seller, the Servicer, the Trustee[, the Backup
Servicer] nor Paragon shall petition or otherwise invoke the process of any
court or government authority for the purpose of commencing or sustaining a
case against the Seller or the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Seller or
the Trust or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Seller or the Trust.
19
ARTICLE II
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE
Section 2.1. Conveyance of Receivables. (a) Subject to the terms
and conditions of this Agreement, the Seller hereby sells, transfers,
assigns and otherwise conveys to the Trust, without recourse (but without
limitation of its obligations under this Agreement): (1) all of the right,
title and interest of the Seller in and to the Receivables and all monies
due or received thereunder or in respect thereof after the Cutoff Date
(including all Liquidation Proceeds and recoveries received with respect to
such Receivables); and (2) all of the right, title and interest of Paragon
and the Seller in and to (i) the security interests of Paragon and the
Seller in the related Financed Vehicles and any other interest of Paragon
and the Seller in the related Financed Vehicles, including the certificates
of title with respect to such Financed Vehicles, (ii) the Insurance
Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Obligors or the related Financed Vehicles, including
rebates or refunds of premiums, (iii) the rights of Paragon and the Seller
against Dealers with respect to the Receivables under the Dealer Agreements
and the Dealer Assignments, (iv) the rights of the Seller under the
Receivables Purchase Agreement, (v) all funds on deposit from time to time
in the Collection Account and the Reserve Account, including all income
thereon and proceeds thereof, and (vi) all proceeds and investments of any
of the foregoing, all present and future claims, demands, causes and
chooses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever
in respect of any of the foregoing.
(b) It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
Receivables and the other Trust Property from the Seller to the Trust and
the beneficial interest in and title to the Receivables and the other Trust
Property shall not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. If, notwithstanding the intent of the Seller, the transfer
and assignment contemplated hereby is held not to be a sale, the Seller
hereby grants a first priority security interest to the Trust in the
property referred to in this Section 2.1, and this Agreement shall
constitute a security agreement. The execution and delivery of this
Agreement shall constitute an acknowledgment by the Seller and the Trustee
on behalf of the Certificateholders that they intend to establish (for
federal income tax purposes) a trust, rather than an association taxable as
a corporation. The powers granted and obligations undertaken in this
Agreement shall be construed so as to further such intent.
(c) The Seller hereby directs the Trust to, and the Trust does
hereby, accept the Trust Property conveyed by the Seller to the Trust
pursuant to this Section 2.1.
(d) The conveyance of the Receivables and the other Trust Property
with respect thereto shall take place at a closing (the "Closing") at the
offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000 on the Closing Date.
Section 2.2. Custody of Receivable Files.
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(a) Simultaneously with the execution and delivery of this
Agreement and the sale, transfer and assignment of the Receivables
and the other Trust Property to the Trust pursuant to this
Agreement, the Seller shall deliver the following documents or
instruments in its possession to the Trustee, other than the
documents referred to in clause (iii) which shall be delivered no
later than 30 days following the Closing Date:
(i) The fully executed original of the Receivable
(together with any agreements modifying the Receivable including
any extension agreements, provided that the Trustee shall not have
to certify the receipt of any such agreements modifying or
extending the Receivable);
(ii) The original credit application, or a copy thereof,
of each Obligor, fully executed by each such Obligor; and
(iii) The original Lien Certificate (when received) and
any such other documents, if any, that Paragon keeps on file in
accordance with its customary procedures indicating that the
Financed Vehicle is owned by the Obligor and subject to the
interest of Paragon as first lienholder or secured party
(including any Lien Certificate received by Paragon), or, if such
original Lien Certificate has not yet been received, a copy of the
application therefor, if any, showing Paragon as secured party.
(b) Upon payment in full of any Receivable, the Servicer shall
notify the Trustee pursuant to a certificate of an officer of the Servicer
in the form of Exhibit B hereto and shall request delivery of the
Receivable and the Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Trustee shall,
upon written request of an officer of the Servicer and delivery to the
Trustee of a receipt signed by such officer cause the original Receivable
and the Receivable File to be released to the Servicer. The Servicer's
receipt of a Receivable and/or a Receivable File shall obligate the
Servicer to return the original Receivable and Receivable File to the
Trustee when its need by the Servicer has ceased, unless the Receivable is
repurchased as described in Section 2.5 or Section 3.7.
(c) The Trustee shall maintain the Receivable Files it has
received at its principal office or at such other office as shall from time
to time be identified to the Servicer, and the Trustee will hold such
Receivable File in such office on behalf of the Certificateholders, clearly
identified as being separate from any other instruments and files on its
records, including other instruments and files held by the Trustee. Each
Receivable shall be identified on the books and records of the Trustee in a
manner that (i) is consistent with practices of a commercial bank acting in
the capacity of custodian with respect to similar receivables and (ii) is
otherwise necessary, as reasonably determined by the Trustee, to comply
with the terms of this Agreement.
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Section 2.3. Conditions Precedent to Issuance by Trust. As
conditions to the Trustee's authentication and delivery of the Certificates
on the Closing Date, the Trustee shall have received the following on or
before the Closing Date:
(a) The Schedule of Receivables certified by an Executive
Officer of the Seller;
(b) The acknowledgment (including an exceptions listing,
if any) of the Trustee stating that it holds the Receivable Files
relating to the Receivables and has reviewed such Receivable Files
and such Receivable Files contain the items set forth in Section
2.2(i), (ii) and (iii);
(c) Copies of resolutions of the Board of Directors of
the Seller approving the execution, delivery and performance of
the Seller's Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant
Secretary of the Seller;
(d) Copies of resolutions of the Board of Directors of
Paragon approving the execution, delivery and performance of its
Related Documents and the transactions contemplated hereby and
thereby, certified by a Secretary or an Assistant Secretary of
Paragon; and
(e) Opinions from Xxxxx, Xxxxx & Xxxxx and Xxxxx X.
Xxxxxxxx, General Counsel of Paragon, and Xxxxxx Xxxx, LLP with
respect to the Trust's first priority perfected security interest
or ownership interest in the Receivables and the Financed Vehicles
and copies of any financing statements which have been or will be
attached to such opinions.
Section 2.4. Representations and Warranties of Seller. By its
execution of this Agreement, the Seller makes the following representations
and warranties on which the Trust relies in accepting the Receivables and
the other Trust Property and in issuing the Certificates and on which the
Trustee relies in authenticating the Certificates. Unless otherwise
specified, such representations and warranties speak as of the Closing
Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trust.
(a) Schedule of Representations. The representations and
warranties set forth on the Schedule of Representations are true and
correct in all material respects.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted.
(c) Due Qualification. The Seller is duly qualified to do business
and has obtained all necessary licenses and approvals in all jurisdictions
where the failure to do so would have a material adverse effect on (i) the
Seller's ability to transfer the Receivables and the other Trust Property to
22
the Trust pursuant to this Agreement, (ii) the validity or enforceability
of the Receivables and the other Trust Property or (iii) the Seller's
ability to perform its obligations hereunder and under its Related
Documents.
(d) Power and Authority. The Seller has the power and authority to
execute and deliver its Related Documents and to carry out their terms; the
Seller has power and authority to sell and assign the Receivables and the
other Trust Property to be sold and assigned to and deposited with the
Trust by it and has duly authorized such sale and assignment to and deposit
with the Trust by all necessary corporate action; and the execution,
delivery and performance of the Seller's Related Documents have been duly
authorized by the Seller by all necessary corporate action.
(e) Binding Obligations. The Seller's Related Documents, when duly
executed and delivered, shall constitute valid and binding obligations of
the Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(f) No Violation. The execution, delivery and performance by the
Seller of its Related Documents, the consummation of the transactions
contemplated thereby and the fulfillment of the terms thereof do not (i)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the Seller
is a party or by which it or its properties are bound, (ii) result in the
creation or imposition of any Lien (other than Permitted Liens) upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument or (iii) to the Seller's
knowledge, violate any law, order, rule or regulation applicable to the
Seller of any Governmental Authority having jurisdiction over the Seller or
any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any Governmental Authority having jurisdiction over the Seller or
its properties (i) asserting the invalidity of any of the Related
Documents, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by any of the Related
Documents, (iii) seeking any determination or ruling that would have a
material adverse effect on the performance by the Seller of its obligations
under, or the validity or enforceability of, any of the Related Documents,
or (iv) seeking to materially and adversely affect the federal income tax
or other federal, state or local tax attributes of the Certificates or
seeking to impose any excise, franchise, transfer or similar tax upon the
Certificates or the sale and assignment of the Receivables and the other
Trust Property hereunder.
(h) No Consents. No consent, approval, license, authorization or
order of, or declaration, registration or filing with, any Governmental
Authority or other Person is required to be made by the Seller in
connection with the execution, delivery or performance of its Related
23
Documents or the consummation of the transactions contemplated thereby,
except such as have been duly made, effected or obtained.
(i) Chief Executive Office. The chief executive office of the
Seller is at 27405 Puerta Real, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
(j) Dealer Recourse. The Seller shall execute and deliver such
other instruments and agreements as the Trustee may reasonably request in
order to enforce any rights against a Dealer assigned to the Seller under
the Receivables Purchase Agreement and assigned to the Purchaser hereunder
and any obligations of a Dealer in connection with a Receivable including
any rights to recourse against such Dealer.
Section 2.5. Repurchase of Receivables Upon Breach of Warranty.
Upon discovery by any of the Seller, the Servicer or the Trustee of a
breach of any of the representations and warranties of the Seller contained
in Section 2.4(a) that has a material adverse effect on the interests of
the Certificateholders in any Receivable, the party discovering such breach
shall give prompt written notice to the others; provided, however, that the
failure to give any such notice shall not affect any obligation of the
Seller under this Section 2.5; and provided, further, that the maximum
aggregate purchase obligation of the Seller with respect to breaches of the
representation and warranty made in clause (C) of paragraph 4 of the
Schedule of Representations shall not exceed an amount equal to 10% of the
aggregate Principal Balance of all Receivables originated after ________
__, ____. As of the second Accounting Date (or, at the Seller's election,
the first Accounting Date) following its discovery or its receipt of notice
of any such breach the Seller shall, unless such breach shall have been
cured in all material respects, repurchase such Receivable from the Trust
and, on or before the Deposit Date following such Accounting Date, the
Seller shall pay the Purchase Amount to the Trust pursuant to Section 4.4.
The obligation of the Seller to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against the Seller for such breach
available to the Trust, the Certificateholders or the Trustee on behalf of
the Certificateholders. The Trustee shall not be under any duty or
obligation to investigate the occurrence of a breach of representation or
warranty in accordance with this Section 2.5.
Section 2.6. Trustee's Assignment of Receivables. With respect to
all Administrative Receivables and all Warranty Receivables purchased by
the Servicer or the Seller and all Receivables purchased by the Servicer
pursuant to Section 11.2, the Trust and the Trustee shall take any and all
actions reasonably requested by the Seller or the Servicer, at the expense
of the requesting party, to assign, without recourse, representation or
warranty, to the Seller or the Servicer, as applicable, all the Trust's and
the Trustee's right, title and interest in and to such Purchased
Receivables and the other Trust Property with respect thereto, such
assignment being an assignment outright and not for security; and the
Seller or the Servicer, as applicable, shall thereupon own such Purchased
Receivables and the other Trust Property related thereto, free of any
further obligation to the Trust, the Trustee or the Certificateholders with
respect thereto. The Trust and the Trustee shall take any and all actions
reasonably requested by the Seller or the Servicer, at the expense of the
requesting party, to release its security interest in each Purchased
Receivable and in the other Trust Property with respect thereto. The
24
Servicer shall remove each Purchased Receivable from the Schedule of
Receivables and xxxx the Electronic Ledger accordingly. The Servicer shall
deliver any supplements to the Schedule of Receivables to the Seller and
the Trustee. Notwithstanding the foregoing, although the Trust and the
Trustee, as applicable, shall be required to execute documentation related
to the foregoing, neither the Trust nor the Trustee shall be required to
prepare any such documentation.
Section 2.7. Collecting Lien Certificates. The Servicer shall use
its best efforts to collect each Lien Certificate from the applicable
Registrar of Titles as promptly as practicable and, pending receipt of each
Lien Certificate from such Registrar of Titles, shall supply written
evidence that each such Lien Certificate has been applied for. If a Lien
Certificate with respect to a Receivable showing Paragon as first
lienholder is not received by the Trustee within 180 days after the Closing
Date, the Servicer shall be obligated to purchase such Receivable under
Section 3.7.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions that service
motor vehicle retail installment contracts and, to the extent more
exacting, with the degree of skill and attention that the Servicer
exercises from time to time with respect to comparable motor vehicle
receivables that it services for itself or others. In performing such
duties, it shall comply with its current servicing policies and procedures,
as such servicing policies and procedures may be amended from time to time,
so long as such amendments shall not materially and adversely affect the
interests of the Certificateholders or the Trust. The Servicer's duties
shall include collection and posting of all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies,
sending statements or payment coupons to Obligors, monitoring the
collateral, accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions and performing the
other duties specified herein. To the extent consistent with the standards,
policies and procedures otherwise required hereby, the Servicer shall
follow its customary standards, policies and procedures and shall have full
power and authority, acting alone, to do any and all things in connection
with management, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing,
the Servicer is hereby authorized and empowered by the Trust to execute and
deliver, on behalf of the Trust, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and the Financed
Vehicles. The Servicer is authorized to release Liens on Financed Vehicles
granted by the Receivables in order to collect insurance proceeds with
respect thereto and to liquidate such Financed Vehicles in accordance with
its customary standards, policies and procedures. The Servicer is hereby
authorized to commence, in its own name or in the name of the Trust or the
Trustee (provided that, if the Servicer is acting in the name of the
Trustee, it has obtained the Trustee's consent, which consent shall not be
unreasonably withheld), legal proceedings
25
to enforce Receivables or to commence or participate in any other legal
proceedings (including bankruptcy proceedings) relating to or involving
Receivables, Obligors or Financed Vehicles. If the Servicer commences or
participates in such legal proceedings in its own name, the Trust shall
thereupon be deemed to have automatically assigned such Receivables to the
Servicer solely for purposes of commencing or participating in any such
proceedings as a party or claimant, and the Servicer is authorized and
empowered by the Trust to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceedings. The
Trustee and the Trust shall furnish the Servicer with any powers of
attorney and other documents that the Servicer may reasonably request and
that the Servicer deems necessary or appropriate and take any other steps
that the Servicer may deem reasonably necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under
this Agreement.
Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement. (a) Consistent with the standards, policies
and procedures required by this Agreement, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due, and
shall follow such collection procedures as it follows with respect to
comparable motor vehicle receivables that it services for itself or others
and otherwise act with respect to the Receivables, the Dealer Agreements,
the Dealer Assignments, the Insurance Policies and the other Trust Property
in such manner as will, in the reasonable judgment of the Servicer,
maximize the amount to be received by the Trust with respect thereto. The
Servicer is authorized in its discretion to waive any prepayment charge,
late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the Obligor's regular due
date to another date within fifteen calendar days of such due date, or (ii)
re-amortize the Scheduled Payments on the Receivable following a partial
prepayment of principal, or (iii) add an additional Obligor to the
Receivable.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such
Receivable, will maximize the amount to be received by the Trust with
respect to such Receivable and is otherwise in the best interests of the
Certificateholders; provided, however, that, with respect to any
Receivable, the Servicer shall not grant more than one extension per year
and shall not grant extensions for a cumulative total of more than six
months during the life of the Receivable.
(d) Paragon has entered into [a Lockbox Agreement, dated as of
November 25, 1997 (as it may be amended or supplemented from time to time,
the "Lockbox Agreement"), with NationsBank, N.A. (the "Lockbox Bank"),
ContiTrade Services L.L.C., the Servicer and Norwest Bank Minnesota,
National Association as agent for the various parties described therein.]
The bank account established pursuant to the Lockbox Agreement (the
"Lockbox Account") shall be
26
maintained at the Lockbox Bank. The Servicer shall direct funds in the
Lockbox Account relating to the Receivables to be transferred on a daily
basis to the Collection Account established in the name of [Norwest Bank
Minnesota, National Association,] as Trustee. All payments made by or on
behalf of Obligors or received by the Servicer with respect to the
Receivables and all Liquidation Proceeds received by the Servicer with
respect to the Receivables shall be sent to the Lockbox Account within one
Business Day after receipt. The Servicer shall transfer such payments, and
any payments made by Obligors directly to the Lockbox Account, to the
Collection Account within two Business Days after receipt of available
funds in the Lockbox Account; provided, however, that if the Servicer is
not able to transfer such payments within two Business Days due to
circumstances outside the Servicer's control, the Servicer shall transfer
such payments to the Collection Account as soon as is practicable; and,
provided, further, that if the Servicer is not able to transfer any such
payment within two Business Days because the Obligor or Receivable to which
such payment relates is not readily identifiable, the Servicer shall use
its best efforts to identify the related Obligor or Receivable as soon as
practicable and shall transfer such payment within one Business Day after
identifying such related Obligor or Receivable.
(e) Notwithstanding any third-party processing arrangement, or any
of the provisions of this Agreement relating to any third-party processing
arrangement, the Servicer shall remain obligated and liable to the Trust
and the Certificateholders for servicing and administering the Receivables
and the other Trust Property in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue
thereof.
Section 3.3. Realization Upon Receivables. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert
the ownership of) and liquidate any Financed Vehicle securing a Receivable
with respect to which the Servicer has determined that payments thereunder
are not likely to be resumed, as soon as practicable after default on such
Receivable but in no event later than the date on which at least 10% of a
Scheduled Payment has become 120 days delinquent; provided, however, that
the Servicer may elect not to repossess a Financed Vehicle within such time
period if in its good faith judgment it determines that the proceeds
ultimately recoverable with respect to such Receivable would be increased
by forbearance; and provided, further, that the Servicer shall not be
required to repossess a Financed Vehicle if prohibited by law. The Servicer
is authorized to follow such customary practices and procedures as it shall
deem necessary or advisable, consistent with the standard of care required
by Section 3.1, which practices and procedures may include reasonable
efforts to realize upon any recourse to Dealers, the sale of the related
Financed Vehicle at public or private sale, the submission of claims under
an Insurance Policy and other actions by the Servicer in order to realize
upon a Receivable. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with any repair or towards the
repossession of such Financed Vehicle unless it shall determine in its
discretion that such repair or repossession shall increase the proceeds of
liquidation of the related Receivable by an amount greater than the amount
of such expenses. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, but only out of the cash proceeds of
such Financed Vehicle, any deficiency obtained from the Obligor or any
27
amounts received from the related Dealer, which amounts in reimbursement
may be retained by the Servicer (and shall not be required to be deposited
as provided in Section 3.2(d) to the extent of such expenses). All amounts
received upon liquidation of a Financed Vehicle (less reasonable expenses
as described in the preceding sentence) shall be remitted directly by the
Servicer as provided in Section 3.2(d).
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust and the
Trustee to the Servicer of the rights under such agreements for purposes of
collection only. If, however, in any enforcement suit or legal proceeding
it is held that the Servicer may not enforce any such agreement on the
grounds that it is not a real party in interest or a Person entitled to
enforce such agreement, the Trust or the Trustee, at the Servicer's
expense, or the Seller, at the Seller's expense, shall take such steps as
the Servicer deems reasonably necessary to enforce such agreement,
including bringing suit in its name or the name of the Seller, the Trust or
the Trustee for the benefit of the Certificateholders. All amounts
recovered shall be remitted directly by the Servicer as provided in Section
3.2(d).
Section 3.4. Insurance. The Servicer may xxx to enforce or collect
upon the Insurance Policies in its own name or as agent of the Trust. If
the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic
assignment of the rights of the Trust and the Trustee under such Insurance
Policy to the Servicer for purposes of collection only. If, however, in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce an Insurance Policy on the grounds that it is not a real party in
interest or a holder entitled to enforce the Insurance Policy, the Trust or
the Trustee, at the Servicer's expense, or the Seller, at the Seller's
expense, shall take such steps as the Servicer deems reasonably necessary
to enforce such Insurance Policy, including bringing suit in its name or
the name of the Trust and the Trustee for the benefit of the
Certificateholders.
Section 3.5. Maintenance of Security Interests in Vehicles.
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the first priority security interest created by each
Receivable in the related Financed Vehicle, including the recording,
registering, filing, re-recording, re-filing and re-registering of all
security agreements, financing statements and continuation statements as
are necessary to maintain the security interest under the respective
Receivables. The Trust and the Trustee each hereby authorize the Servicer,
and the Servicer agrees, to take any and all steps necessary to re-perfect
such security interest in the name of Paragon or the Seller on behalf of
the Trust as necessary because of the relocation of a Financed Vehicle or
for any other reason. If the assignment of a Receivable to the Trust and
the pledge of such Receivables to the Trustee are insufficient without a
notation on the related Financed Vehicle's certificate of title or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security
interest in the related Financed Vehicle in favor of the Trustee, the
Servicer hereby agrees that Paragon's designation as the secured party on
the certificate of title is in its capacity as agent of the Trustee, solely
for purposes of providing perfection of the security interest therein.
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Section 3.6. Covenants, Representations and Warranties of
Servicer. By its execution and delivery of this Agreement, the Servicer
makes the following representations, warranties and covenants on which the
Trust relies in accepting the Receivables and issuing the Certificates and
on which the Trustee relies in authenticating the Certificates. Unless
otherwise specified, such representations and warranties speak as of the
Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trust.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the
security interest granted by the Receivable, except upon payment
in full of the Receivable or as otherwise contemplated herein;
(ii) No Impairment. The Servicer shall do nothing to
impair the rights of the Trust, the Trustee or the
Certificateholders in the Receivables or the other Trust Property.
The Servicer shall take such action as is necessary (including the
filing of appropriate UCC financing statements and continuation
statements) to preserve the rights of the Trust, the Trustee and
the Certificateholders in the Receivables and the other Trust
Property;
(iii) No Amendments. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance
with Section 3.2; and
(iv) Restrictions on Liens. The Servicer shall not (A)
create, incur or suffer to exist, or agree to create, incur or
suffer to exist, or consent to cause or permit in the future (upon
the happening of a contingency or otherwise) the creation,
incurrence or existence of any Lien on, or restriction on
transferability of, the Receivables, except for Permitted Liens or
(B) sign or file under the UCC of any jurisdiction any financing
statement that names the Servicer as a debtor, or sign any
security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Receivables,
except in each case any such instrument solely securing the rights
and preserving the Lien of the Trustee for the benefit of the
Certificateholders or as otherwise permitted under this Agreement
or the Related Documents.
(v) Servicing of Receivables. The Servicer shall service
the Receivables as described in this Agreement until such time as
it has been replaced by a successor Servicer.
(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself:
(i) Organization and Good Standing. The Servicer has been
duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of organization, with
power and authority to own its properties and to conduct its
business as such properties are currently owned and such business
is currently conducted;
29
(ii) Due Qualification. The Servicer is duly qualified to
do business as a foreign corporation in good standing and has
obtained all necessary licenses and approvals in all jurisdictions
where the failure to do so would have a material adverse effect on
its ability to perform its obligations under its Related Documents
and its ability to enforce the Receivables and the other Trust
Property;
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, and the
execution, delivery and performance of the Servicer's Related
Documents have been duly authorized by the Servicer by all
necessary corporate action;
(iv) Binding Obligation. The Servicer's Related
Documents, when duly executed and delivered, shall constitute
legal, valid and binding obligations of the Servicer enforceable
in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(v) No Violation. The execution, delivery and performance
by the Servicer of its Related Documents, the consummation of the
transactions contemplated thereby and the fulfillment of the terms
thereof do not (A) conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without notice
or lapse of time) a default under, the certificate of
incorporation or bylaws of the Servicer, or any indenture,
agreement, mortgage, deed of trust or other instrument to which
the Servicer is a party or by which it or its properties are
bound, (B) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (C) to
the best of the Servicer's knowledge, violate any law, order, rule
or regulation applicable to the Servicer of any Governmental
Authority having jurisdiction over the Servicer or any of its
properties;
(vi) No Proceedings. There are no proceedings or
investigations pending or, to the best of the Servicer's
knowledge, threatened against the Servicer, before any
Governmental Authority having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of any of the Related
Documents, (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the
Related Documents, (C) seeking any determination or ruling that
would have a material adverse effect on the performance by the
Servicer of its obligations under, or the validity or
enforceability of, any of the Related Documents or (D) seeking to
materially and adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificates or
seeking to impose any excise, franchise, transfer or similar tax
upon the Certificates or the sale and assignment of the
Receivables hereunder; and
30
(vii) No Consents. No consent, license, approval,
authorization or order of, or registration, declaration or filing
with, any Governmental Authority or other Person is required to be
made in connection with the execution, delivery or performance of
the Servicer's Related Documents or the consummation of the
transactions contemplated thereby, except such as have been duly
made, effected or obtained.
[(c) The Servicer covenants and agrees:
(i) [Backup Servicer and] Trustee Indemnification. The
Servicer shall defend, indemnify and hold [the Backup Servicer
and] the Trustee and any officers, directors, employees or agents
of [the Backup Servicer and] the Trustee harmless against any and
all claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments and any other costs, fees and expenses
that [the Backup Servicer and] the Trustee may sustain in
connection with claims asserted at any time by third parties
against [the Backup Servicer or] the Trustee that result from (A)
any willful or negligent act taken or omission by the Servicer
(other than errors in judgment) or (B) a material breach of any
representations of the Servicer in this Section 3.6; and
(ii) The Servicer shall make arrangements for the prompt
and safe transfer of, and the Servicer shall provide to the Backup
Servicer, all necessary servicing files and records, including (as
deemed necessary by the Backup Servicer at such time): (A) account
documentation, (B) servicing system tapes (in a format acceptable
to the Backup Servicer), (C) account payment history, (D)
collections history and (E) the trial balances, as of the close of
business on the day immediately preceding conversion to the Backup
Servicer, reflecting all applicable loan information.]
Section 3.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by the Servicer or the Trustee of (a) a breach of any of the
covenants set forth in Sections 3.5 or 3.6(a) that has a material adverse
effect on the interests of the Trust or the Certificateholders in any
Receivable, or (b) a failure to obtain a Lien Certificate within 180 days
as described in Section 2.7, the party discovering such breach shall give
prompt written notice to the others; provided, however, that the failure to
give any such notice shall not affect any obligation of the Servicer under
this Section 3.7. As of the second Accounting Date (or, at the Servicer's
election, the first Accounting Date) following its discovery or receipt of
notice of any such breach, the Servicer shall, unless such breach shall
have been cured in all material respects, purchase from the Trust the
Receivables affected by such breach and, on or before the related Deposit
Date, the Servicer shall pay the related Purchase Amount to the Trust
pursuant to Section 4.4. The obligation of the Servicer to purchase any
Receivable with respect to which such a breach has occurred and is
continuing shall, if such obligation is fulfilled, constitute the sole
remedy against the Servicer for such breach available to the Trust, the
Certificateholders or the Trustee on behalf of Certificateholders. The
Trustee shall not be under any duty or obligation to investigate the
occurrence of a breach of a covenant in accordance with this Section 3.7.
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Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer[; Backup Servicer Fee]. On each Payment Date, the Servicer shall
be entitled to receive out of the Collection Account the Total Servicing
Fee for the related Collection Period pursuant to Section 4.5. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities under this Agreement, including taxes imposed on the Servicer,
costs and expenses of independent accountants, expenses incurred in
connection with distributions and reports made by the Servicer to
Certificateholders. [On each Payment Date, the Backup Servicer shall be
entitled to receive out of the Collection Account the Backup Servicer Fee
for the related Collection Period pursuant to Section 4.5.]
Section 3.9. Servicer's Certificate. No later than 2:00 p.m., New
York City time, on each Determination Date, the Servicer shall deliver to
the Seller, the Trustee[, the Backup Servicer] and the Rating Agency, a
Servicer's Certificate executed by a Responsible Officer of the Servicer
containing, among other things, (i) all information necessary to enable the
Trustee to make any withdrawal required by Section 6.2, to give any notice
required by Section 6.2 and to make the distributions required by Section
4.5, (ii) all information necessary to enable the Trustee to send the
statements required by Section 4.7 to Certificateholders, (iii) a listing
of all Purchased Receivables purchased as of the related Deposit Date with
respect to the related Collection Period and (iv) all information necessary
to enable the Trustee to reconcile all deposits to, and withdrawals from,
the Collection Account for the related Collection Period and Payment Date,
including the accounting required by Section 4.6. Receivables purchased by
the Servicer or repurchased by the Seller on or before the related Deposit
Date and each Receivable that became a Liquidated Receivable or that was
paid in full during the related Collection Period shall be identified by
account number (as set forth in the Schedule of Receivables). In addition
to the information set forth in the preceding sentence, the Servicer's
Certificate shall also contain the following information: (a) the
Delinquency Ratio and the Cumulative Net Loss Ratio for such Determination
Date; (b) whether any Trigger Event has occurred as of such Determination
Date; and (c) whether any Trigger Event that may have occurred as of a
prior Determination Date is Deemed Cured as of such Determination Date. A
copy of such certificate may be obtained by any Certificateholder by a
request in writing to the Trustee addressed to the Corporate Trust Office.
Section 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. (a) The Servicer shall deliver to the Trustee,
[the Backup Servicer,] and the Rating Agency, on or before April 30 (or 120
days after the end of the Servicer's fiscal year, if other than December
31) of each year, beginning on April 30, 1999, an officer's certificate
signed by any Responsible Officer of the Servicer, dated as of the
preceding December 31 (or other applicable date), stating that (i) a review
of the activities of the Servicer during the preceding 12-month period (or
such other period as shall have elapsed from the Closing Date to the date
of the first such certificate) and of its performance under this Agreement
has been made under such officer's supervision, and (ii) to such officer's
knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has
been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof.
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(b) The Servicer shall deliver to the Trustee, [the Backup
Servicer] and the Rating Agency, promptly after having obtained knowledge
thereof, but in no event later than two Business Days thereafter, written
notice in an Officer's Certificate of any event that, with the giving of
notice or lapse of time, would become a Servicer Termination Event under
Section 10.1.
Section 3.11. Annual Independent Accountants' Report. The Servicer
shall cause KPMG Peat Marwick LLP or another firm of nationally recognized
independent certified public accountants (the "Independent Accountants"),
who may also render other services to the Servicer, to deliver to the
Servicer, on or before April 30 (or 120 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning
on April 30, 1999, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as
shall have elapsed from the Closing Date to the date of such certificate),
a statement (the "Accountants' Report") addressed to the Servicer, to the
effect that such firm has audited the books and records of the Servicer and
issued its report thereon and that: (1) such audit was made in accordance
with generally accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing procedures as such
firm considered necessary in the circumstances; and (2) the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants. The
Servicer shall also cause the Independent Accountants to deliver to the
Servicer on such dates a letter to the effect that certain agreed upon
procedures were performed relating to three randomly selected Servicer's
Certificates (or, for the twelve months ending December 31, ____, the
Servicer's Certificate for the December ____ Collection Period), and,
except as disclosed in such report, no errors or exceptions were found in
the Servicer's Certificate(s) based on the performance of such agreed upon
procedures. The Servicer shall deliver a copy of the Accountants' Report,
within 15 days of receipt, to the Seller, the Trustee[, the Backup
Servicer] and the Rating Agency.
Section 3.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Trustee and [the Backup Servicer] reasonable access to the documentation
regarding the Receivables. In each case, such access shall be afforded
without charge but only upon reasonable request and during normal business
hours. Nothing in this Section 3.12 shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to
provide access as a result of such obligation shall not constitute a breach
of this Section 3.12.
Section 3.13. Monthly Tape[; Certain Duties of Backup Servicer].
(a) On or before each Determination Date, the Servicer shall deliver to the
Trustee [and the Backup Servicer] a computer tape or a diskette (or any
other electronic transmission acceptable to the Trustee [and the Backup
Servicer]) in a format acceptable to the Trustee [and the Backup Servicer]
containing the information with respect to the Receivables as of the
preceding Accounting Date necessary for preparation of the Servicer's
Certificate relating to the next Determination Date.
[(b) Prior to each such Payment Date, the Backup Servicer shall
use such tape or diskette (or other means of electronic transmission
acceptable to the Trustee and the Backup Servicer) and review the related
Servicer's Certificate in order to perform the following:
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(i) confirm that the Servicer's Certificate is complete
on its face;
(ii) calculate and confirm the Class A Principal Payment
Amount, the Class A Interest Payment Amount, the Class B Principal
Payment Amount and the Class B Interest Payment Amount for the
next Payment Date; and
(iii) verify the mathematical accuracy of any
calculations on the face of the Servicer's Certificate.]
[(c) In the event of any discrepancy between the information set
forth in (ii) or (iii) in clause (b) above as calculated by the Servicer
from that determined or calculated by the Backup Servicer, the Backup
Servicer shall promptly report such discrepancy to the Servicer and the
Trustee. In the event of a discrepancy as described in the preceding
sentence, the Servicer and the Backup Servicer shall attempt to reconcile
such discrepancies prior to the related Payment Date, but in the absence of
a reconciliation, distributions on the related Payment Date shall be made
by the Trustee consistent with the information provided by the Servicer and
the Servicer and the Backup Servicer shall attempt to reconcile such
discrepancies prior to the next Determination Date. If the Backup Servicer
and the Servicer are unable to reconcile discrepancies with respect to such
Servicer's Certificate by the next Determination Date that falls in April,
July, October or January, the Servicer shall cause the Independent
Accountants, at the Servicer's expense, to examine the Servicer's
Certificate and attempt to reconcile the discrepancies at the earliest
possible date. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for such next succeeding
Determination Date.]
[(d) Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder,
including to supervise, verify, monitor or administer the performance of
the Servicer. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer, except for the express duties of the
Backup Servicer set forth herein.]
Section 3.14. Insurance. The Servicer shall maintain customary
amounts of insurance coverage, including errors and omissions liability,
fidelity bond, commercial general liability, property, directors and
officers liability and workers' compensation coverage. The Servicer shall
be entitled to self-insure with respect to such insurance so long as the
long-term unsecured debt obligations of the Servicer are rated in the
second highest long-term debt category by the Rating Agency (or, if not
rated by the Rating Agency, by ___ or ____).
Section 3.15. Compliance with Laws. The Servicer shall comply with
the requirements of all applicable laws (including any federal or state
laws regulating the collection or enforcement of consumer debts and/or the
foreclosure upon, and repossession of, vehicles) in the discharge of its
duties and obligations hereunder.
Section 3.16. Reports to the Commission. Servicer shall, on behalf
of the Trust, cause to be filed with the Commission any periodic reports
34
required to be filed under the provisions of the Exchange Act, and the
rules and regulations of the Commission thereunder. Seller shall, at its
expense, cooperate in any reasonable request made by Servicer in connection
with such filings.
ARTICLE IV
PAYMENTS; STATEMENTS TO CERTIFICATEHOLDERS
Section 4.1. Trust Accounts. (a) (i) On or prior to the Closing
Date, the Servicer or the Trustee on behalf of and at the direction of the
Servicer shall establish the Collection Account in the name of the Trustee
for the benefit of the Certificateholders. The Collection Account shall be
an Eligible Account and shall be a segregated trust account initially
established with the Trustee.
(ii) On or prior to the Closing Date, the Servicer or the
Trustee on behalf of and at the direction of the Servicer shall
establish the Reserve Account in the name of the Trustee for the
benefit of the Certificateholders. The Reserve Account shall be an
Eligible Account and shall be a segregated trust account initially
established with the Trustee.
(b) All amounts held in the Collection Account and the Reserve Account
(collectively, the "Trust Accounts"), shall, to the extent permitted by
applicable laws, rules and regulations, be invested by the Trustee, as
directed by the Servicer in writing (or, if the Servicer fails to provide
such direction, amounts in the Collection Account shall be invested in
investments described in clause (f) of the definition of Eligible
Investments), in Eligible Investments that mature not later than one
Business Day prior to the Payment Date for the Collection Period to which
such amounts relate. Any such written direction shall certify that any such
investment is authorized by this Section 4.1. Investments in Eligible
Investments shall be made in the name of the Trustee on behalf of the
Certificateholders, and such investments shall not be sold or disposed of
prior to their maturity. Each and every investment of funds in a Trust
Account shall be made in Eligible Investments held by a financial
institution that is a Securities Intermediary:
(i) in an account pursuant to an agreement with such
financial institution, governed by the law of the State of
Missouri or any other jurisdiction which has adopted Revised
Article 8, that requires such financial institution to (A) comply
with Entitlement Orders pertaining to such account originated by
the Trustee, in its capacity as trustee hereunder, without further
consent of the Seller, (B) not enter into any agreement which
grants "control" (as defined in Section 8-106 of Revised Article
8) of such account (or any interest or property therein) to any
Person other than the Trustee, (C) subordinate any security
interest, banker's lien, right of setoff or other similar right
which such financial institution may have in such account to the
interest of the Trustee and (D) expressly treat each item of
property as a Financial Asset and such account as a Securities
Account; and
(ii) with respect to which such institution has noted the
Trustee's interest therein by book entry or otherwise, and with
respect to which a confirmation of the Trustee's interest has been
sent to the Trustee by such institution, provided that such
Eligible Investments are (A) specific "certificated securities"
(as defined under Old Article 8), and
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(B) either (1) in the possession of such institution or (2) in the
possession of a Clearing Corporation, registered in the name of
such Clearing Corporation, not endorsed for collection or
surrender or any other purpose not involving transfer, not
containing any evidence of a right or interest inconsistent with
the Trustee's security interest therein, and held by such Clearing
Corporation in an account of such institution.
Subject to the other provisions hereof, the Trustee shall have sole control
over each such investment and the income thereon, and any certificate or
other instrument evidencing any such investment, if any, shall be delivered
directly to the Trustee or its agent, together with each document of
transfer, if any, necessary to transfer title to such investment to the
Trustee in a manner that complies with this Section 4.1. All interest,
dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Collection Account shall be deposited in the
Collection Account and distributed on the next Payment Date pursuant to
Section 4.5. All interest, dividends, gains upon sale and other income from
or earnings on, investments of funds in the Reserve Account shall be
deposited in the Reserve Account and distributed on the next Payment Date
pursuant to Section 4.5. If the Trustee is given instructions to invest
funds in a Trust Account in investments other than investments of the type
described in clause (f) of the definition of "Eligible Investments", the
Person giving such instructions agrees to assist the Trustee in complying
with the requirements herein with respect to such investments.
(c) With respect to the Trust Account Property:
(i) any Trust Account Property that is held in
deposit accounts shall be held solely in the name of the Trustee
in accounts which satisfy clause (ii) of the definition of
Eligible Account; each such deposit account shall be subject to
the exclusive custody and control of the Trustee, and the Trustee
shall have sole signature authority with respect thereto;
(ii) any Trust Account Property that constitutes
Physical Property (other than a "certificated security" as defined
under Old Article 8) shall be delivered to the Trustee in
accordance with paragraph (i) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by the
Trustee;
(iii) any Trust Account Property that
constitutes a "certificated security" as defined under Old Article
8 that will, upon compliance with the procedures set forth in
paragraph (ii) of the definition of "Delivery," be held by a
Person located in an Old Article 8 Jurisdiction, shall be
delivered to the Trustee in accordance with paragraph (ii) of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a Financial Intermediary
acting solely for the Trustee;
(iv) any Trust Account Property that constitutes
a Certificated Security that will, upon compliance with the
procedures set forth in paragraph (iii) of the definition of
"Delivery," be held by a Person located in a Revised Article 8
Jurisdiction shall be
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delivered to the Trustee in accordance with paragraph (iii) of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee;
(v) any Trust Account Property that constitutes
an "uncertificated security" under Old Article 8 (and that is not
a Federal Book Entry Security) and where the issuer thereof is
organized in an Old Article 8 Jurisdiction, shall be delivered to
the Trustee in accordance with paragraph (iv) of the definition of
"Delivery" and shall be maintained, pending maturity or
disposition, through continued registration of the Trustee's (or
its nominee's) ownership of such security;
(vi) any such Trust Account Property that
constitutes an Uncertificated Security (including any investments
in money market mutual funds, but excluding any Federal Book Entry
Security) and where the issuer thereof is organized in a Revised
Article 8 Jurisdiction, shall be delivered to the Trustee in
accordance with paragraph (v) of the definition of "Delivery" and
shall be maintained, pending maturity or disposition, through
continued registration of the Trustee's (or its nominee's)
ownership of such security; and
(vii) with respect to any Trust Account Property
that constitutes a Federal Book Entry Security, the Trustee shall
maintain and obtain Control over such property.
Effective upon Delivery of any Trust Account Property in the form
of Physical Property, book-entry securities or uncertificated
securities, the Trustee shall be deemed to have represented that
it has purchased such Trust Account Property for value, in good
faith and without notice of any adverse claim thereto.
(d) On or within three Business Days of the Closing Date, the
Servicer shall deposit in the Collection Account (i) all Scheduled Payments
and prepayments of Receivables with respect to which available funds have
been received in the Lockbox Account after the Cutoff Date and prior to the
Closing Date and (ii) all Liquidation Proceeds and proceeds of Insurance
Policies realized in respect of Financed Vehicles and applied by the
Servicer after the Cutoff Date.
Section 4.2. Servicer Reimbursements. The Servicer shall be
entitled to be reimbursed from amounts on deposit in, or to be deposited
in, the Collection Account with respect to a Collection Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder
shall be paid to the Servicer on the related Payment Date pursuant to
Section 4.5(a)(ii). Upon the request of the Trustee, the Servicer shall
certify any amount to be reimbursed hereunder and shall supply such other
information as may be necessary in the opinion of the Trustee to verify the
accuracy of such certification. The Trustee shall not be under any
obligation to make the request described in the immediately preceding
sentence.
Section 4.3. Application of Collections. For purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
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(a) With respect to each Receivable, payments by or on
behalf of the Obligor (other than Supplemental Servicing Fees with
respect to such Receivable, to the extent collected) shall be
applied to reduce the balance thereof in accordance with the terms
of such Receivable.
(b) With respect to each Receivable that has become a
Purchased Receivable on any Deposit Date, the Purchase Amount
shall be applied to interest and principal on the Receivable in
accordance with Section 4.3(a) as if the Purchase Amount had been
paid by the Obligor on the related Accounting Date. Nothing
contained herein shall relieve any Obligor of any obligation
relating to any Receivable.
(c) All amounts collected that are payable to the
Servicer as Supplemental Servicing Fees hereunder shall be
deposited in the Collection Account and paid to the Servicer in
accordance with Section 4.5(a)(ii).
(d) All payments by or on behalf of an Obligor received
with respect to any Purchased Receivable after the Accounting Date
preceding the Deposit Date on which the Purchase Amount was paid
by the Seller or the Servicer shall be paid to the Seller or the
Servicer, respectively, and shall not be included in the Available
Funds.
Section 4.4. Additional Deposits. On or before each Deposit Date,
the Servicer or the Seller shall deposit into the Collection Account the
aggregate Purchase Amounts with respect to Purchased Receivables. All such
deposits of Purchase Amounts shall be made in immediately available funds.
On or before each Payment Date, the Trustee shall remit to the Collection
Account any amounts to be transferred into the Collection Account by the
Trustee from the Reserve Account pursuant to Section 6.2.
Section 4.5. Payments. (a) From the Collection Account, on each
Payment Date, the Trustee shall (based solely on the information contained
in the Servicer's Certificate delivered with respect to the related
Determination Date) distribute the following amounts in the following order
of priority:
(i) first, from the Payment Amount, to the Trustee, any
accrued and unpaid Trustee Fees and any other accrued and unpaid
fees and expenses of the Trustee[; to the Backup Servicer, any
accrued and unpaid Backup Servicer Fees and any other accrued and
unpaid fees and expenses of the Backup Servicer; in each case] in
accordance with the Related Documents;
(ii) second, from the remaining Payment Amount, to the
Servicer, any accrued and unpaid Basic Servicing Fees and
Supplemental Servicing Fees with respect to the related Collection
Period and the amounts specified in Section 4.2 to the extent the
Servicer has not reimbursed itself in respect of such amounts
pursuant to Section 4.6;
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(iii) third, from the remaining Payment Amount, to the
Class A Certificateholders, the Class A Interest Payment Amount
for such Payment Date;
(iv) fourth, from the remaining Payment Amount, to the
Class B Certificateholders, the Class B Interest Payment Amount
for such Payment Date;
(v) fifth, from the remaining Payment Amount, to the
Class A Certificateholders, the Class A Principal Payment Amount
for such Payment Date;
(vi) sixth, from the remaining Payment Amount, to the
Class B Certificateholders, the Class B Principal Payment Amount
for such Payment Date;
(vii) seventh, from the remaining Payment Amount, to the
Reserve Account to the extent necessary to make the amount on
deposit in the Reserve Account equal to the Reserve Account
Required Amount (after giving effect to all withdrawals from the
Reserve Account on such date); and
(viii) eighth, from the remaining Payment Amount,
together with any funds to be released from the Reserve Account
pursuant to this Agreement, to the Seller.
(b) Subject to Section 11.2 respecting the final payment upon
retirement of each Certificate, and provided that the Trustee has received
the applicable Servicer's Certificate, on each Payment Date, the Trustee
shall distribute to each Certificateholder (or, in the case of Certificates
registered in the name of a Clearing Agency, or its nominee, by wire
transfer of immediately available funds) of record on the preceding Record
Date either (i) by wire transfer, in immediately available funds to the
account of such holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder holds Certificates
representing at least $1,000,000 in Class A Certificate Balance or Class B
Certificate Balance as of the Closing Date, and if such Certificateholder
shall have provided to the Trustee appropriate instructions not later than
15 days prior to such Payment Date, or (ii) by check mailed to such
Certificateholder at the address of such Holder appearing in the
Certificate Register, the amount of the Class A Payment Amount or the Class
B Payment Amount, as applicable, allocable to such Holder to the extent
funds therefor are distributed under Section 4.5(a).
Section 4.6. Net Deposits. So long as no Servicer Termination
Event has occurred and is continuing, the Servicer may make the remittances
to be made by it pursuant to Sections 4.2 net of amounts (which amounts may
be netted prior to any such remittance for a Collection Period) to be
distributed to it pursuant to Section 4.2; provided, however, that the
Servicer shall account for all of such amounts in the related Servicer's
Certificate as if such amounts were deposited and distributed separately;
and provided, further, that if an error is made by the Servicer in
calculating the amount to be deposited or retained by it, with the result
that an amount less than required is deposited in the Lockbox Account or
the Collection Account, the Servicer shall make a payment of the deficiency
to the Lockbox Account or the Collection Account, as applicable,
immediately upon becoming aware, or receiving notice from the Trustee, of
such error.
39
Section 4.7. Statements to Certificateholders. (a) On each Payment
Date, the Trustee shall include with each payment to each
Certificateholder, a statement prepared by the Servicer (which statement
shall also be provided to the Certificateholder(s) and to the Rating
Agency), based on information in the Servicer's Certificate delivered on
the related Determination Date pursuant to Section 3.9, setting forth for
such Payment Date and the Collection Period relating to such Payment Date
the following information:
(i) in the case of the Class A and Class B
Certificateholders, the amount of such payment allocable to principal;
(ii) in the case of the Class A and Class B
Certificateholders, the amount of such payment allocable to
interest;
(iii) the amount of such payment payable out of amounts
withdrawn from the Reserve Account and the amount remaining in the
Reserve Account;
(iv) the Class A Certificate Balance and the Class B
Certificate Balance, as applicable (after giving effect to all
payments made on such Payment Date);
(v) the amount of fees paid by the Trust with respect to
such Collection Period;
(vi) the amount of the Class A Interest Carryover
Shortfall, Class A Principal Carryover Shortfall, Class B Interest
Carryover Shortfall and Class B Principal Carryover Shortfall, if
any, on such Payment Date and the change in such amounts from
those of the prior Payment Date;
(vii) the Class A Certificate Factor and the Class B
Certificate Factor as of such Payment Date (after giving effect to
payments made on such Payment Date);
(viii) the Delinquency Ratio and Cumulative Net Loss Ratio
for such Determination Date;
(ix) whether any Trigger Event has occurred as of such
Determination Date; and
(x) whether any Trigger Event that may have occurred as
of a prior Determination Date is Deemed Cured as of such
Determination Date.
Each amount set forth pursuant to clauses (i) (such amounts broken down by
Class of Certificate), (ii) (such amounts broken down by Class of
Certificate) and (iv) above shall be expressed as a dollar amount per
$1,000 of original principal balance of a Certificate of the related Class.
(b) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this
Agreement, the Trustee shall mail, to each Person who at any time during
such calendar year shall have been a Holder of a Certificate, a statement
40
containing the sum of the amounts set forth in clauses (i), (ii), and (v)
(separately indicating amounts in respect of the Class A Certificates and
the Class B Certificates in the case of (i) and (ii)) and such other
information, requested in writing by the Servicer, if any, as the Servicer
determines is reasonably necessary to permit such Certificateholder to
ascertain its share of the gross income and deductions of the Trust
(exclusive of the Supplemental Servicing Fee), for such calendar year or,
if such Person shall have been a Holder of a Certificate during a portion
of such calendar year, for the applicable portion of such year, for the
purposes of such Certificateholder's preparation of federal income tax
returns.
ARTICLE V
THE CERTIFICATES
Section 5.1. The Certificates. The Trustee shall, upon written
order or request signed in the name of the Seller by one of its officers
authorized to do so and delivered to an Authorized Officer of the Trustee,
execute on behalf of the Trust, authenticate and deliver the Certificates
to or upon the order of the Seller in the aggregate principal amount and
denominations as set forth in such written order or request. The
Certificates shall be issuable in denominations of $1,000 and integral
multiples thereof; provided, however, that one Class A Certificate and one
Class B Certificate may be issued in a denomination that represents the
residual amount of the original Class A Certificate Balance and the
original Class B Certificate Balance, respectively. Upon initial issuance,
the Class A Certificates and the Class B Certificates shall be in the form
of Exhibit B and Exhibit D, respectively, which are incorporated by
reference herein, and shall be issued as provided in Section 5.8, in an
aggregate amount equal to the original Class A Certificate Balance and the
original Class B Certificate Balance, respectively. The Certificates shall
be executed by the Trustee on behalf of the Trust by manual or facsimile
signature of an Authorized Officer of the Trustee under the Trustee's seal
imprinted thereon and attested by the manual or facsimile signature of an
Authorized Officer of the Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid and binding obligations of the Trust, notwithstanding
that such individuals shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such
offices at the date of such Certificates.
Section 5.2. Authentication of Certificates. No Certificate shall
entitle the Holder thereof to any benefit under this Agreement, or shall be
valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication, substantially in the form set forth in the
form of Certificates attached hereto as Exhibit C and Exhibit D, executed
by the Trustee by manual signature. Such authentication shall constitute
conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. All Certificates shall be dated
the date of their authentication.
Section 5.3. Registration of Transfer and Exchange of Certificates.
The Trustee shall maintain, or cause to be maintained, at the office or
agency to be maintained by it in accordance with Section 5.7, a Certificate
Register in which, subject to such reasonable regulations as it may
41
prescribe, the Trustee shall provide for the registration of Certificates
and of transfers and exchanges of Certificates as herein provided. Upon
surrender for registration of transfer of any Class A Certificate or Class
B Certificate at such office or agency, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Class A Certificates or Class B Certificates,
as the case may be, in authorized denominations of a like aggregate amount.
At the option of a Holder, Class A Certificates or Class B Certificates may
be exchanged for other Class A Certificates or Class B Certificates, as the
case may be, of authorized denominations of a like aggregate amount at the
office or agency maintained by the Trustee in accordance with Section 5.7.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer duly
executed by the Holder and in a form satisfactory to the Trustee. No
service charge shall be made for any registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Certificates. All Certificates surrendered for
registration of transfer or exchange shall be canceled and disposed of in
accordance with the customary procedures of the Trustee.
The Class B Certificates and any beneficial interest in such Class
B Certificates may not be acquired (a) with the assets of an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) by a plan described in Section
4975(e)(1) of the Code or (c) by any entity whose underlying assets include
plan assets by reason of a plan's investment in the entity. By accepting
and holding a Class B Certificate or interest therein, the Holder thereof
or Class B Certificate Owner thereof shall be deemed to have represented
and warranted that it is not subject to the foregoing limitation.
The preceding provisions of this Section 5.3 notwithstanding, the
Trustee shall not make and need not register any transfer or exchange of
Certificates for a period of 15 days preceding any Payment Date for any
payment with respect to the Certificates.
Section 5.4. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Class A Certificate or Class B Certificate shall be
surrendered to the Trustee, or if the Trustee shall receive evidence to its
satisfaction of the destruction, loss or theft of any Class A Certificate
or Class B Certificate and (b) there shall be delivered to the Trustee such
security or indemnity as may be required to save the Trustee harmless, then
in the absence of notice that such Class A Certificate or Class B
Certificate shall have been acquired by a bona fide purchaser, the Trustee
shall execute, authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Class A Certificate or Class B
Certificate, a new Class A Certificate or Class B Certificate of like tenor
and denomination. In connection with the issuance of any new Certificate
under this Section 5.4, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection herewith. Any replacement Certificate issued pursuant
to this Section 5.4 shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
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Section 5.5. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee may treat the Person
in whose name any Certificate shall be registered as the owner of such
Certificate for the purpose of receiving payments pursuant to Section 4.5
and for all other purposes, and the Trustee shall not be bound by any
notice to the contrary.
Section 5.6. Access to List of Holders' Names and Addresses. The
Trustee shall furnish or cause to be furnished to the Servicer, within
fifteen days after receipt by the Trustee of a request therefor from the
Servicer in writing, in such form as Servicer may reasonably require, a
list of the names and addresses of the Holders as of the most recent Record
Date. If Definitive Certificates have been issued, the Trustee, upon
written request of (a) three or more Holders or (b) one or more Holders
evidencing not less than 25% of the aggregate outstanding principal balance
of the Certificates, shall, within five Business Days after the receipt of
such request, afford such Holders access during normal business hours to
the most current list of Holders for purposes of communicating with other
Holders with respect to their rights under the Agreement. Each Holder, by
receiving and holding a Certificate, shall be deemed to have agreed not to
hold the Seller, the Servicer or the Trustee accountable by reason of the
disclosure of such Holder's name and address, regardless of the source from
which such information was derived.
Section 5.7. Maintenance of Office or Agency. The Trustee shall
maintain, or cause to be maintained, at its expense, in _______________, an
office or agency where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee
in respect of the Certificates and this Agreement may be served. The
Trustee initially designates its office located at _______________________
for such purposes. The Trustee shall give prompt written notice to the
Servicer and to the Holders of any change in the location of any such
office or agency.
Section 5.8. Book Entry Certificates. Upon original issuance, the
Class A Certificates and the Class B Certificates, other than the Class A
Certificate representing the residual amount of the original Class A
Certificate Balance and the Class B Certificate representing the residual
amount of the original Class B Certificate Balance, which shall be issued
upon the written order of the Seller, shall be issued in the form of one or
more typewritten Certificates representing the Book Entry Certificates, to
be delivered to the initial Clearing Agency, by, or on behalf of, the
Seller. Such Certificates shall initially be registered on the Certificate
Register in the name of CEDE & Co., the nominee of the initial Clearing
Agency, and no Certificate Owner shall receive a Definitive Certificate
representing such Certificate Owner's interest in the Class A Certificates
or the Class B Certificates, as the case may be, except as provided in
Section 5.10. Unless and until definitive, fully registered Certificates
("Definitive Certificates") have been issued to the Holders pursuant to
Section 5.10:
(a) the provisions of this Section 5.8 shall be in full
force and effect;
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(b) the Seller, the Servicer and the Trustee may deal
with the Clearing Agency for all purposes (including the making of
distributions on the Certificates and the taking of actions by the
Holders) as the authorized representative of the Certificate
Owners;
(c) to the extent that the provisions of this Section 5.8
conflict with any other provisions of this Agreement, the
provisions of this Section 5.8 shall control;
(d) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law, the rules, regulations and procedures of the
Clearing Agency and agreements between such Certificate Owners and
the Clearing Agency and all references in this Agreement to
actions by Holders shall refer to actions taken by the Clearing
Agency upon instructions from the Clearing Agency Participants,
and all references in this Agreement to distributions, notices,
reports and statements to Holders shall refer to distributions,
notices, reports and statements to the Clearing Agency or its
nominee, as registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with the
rules, regulations and procedures of the Clearing Agency; and
(e) pursuant to the Depository Agreement, the initial
Clearing Agency shall make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of
principal and interest on the Certificates to the Clearing Agency
Participants, for distribution by such Clearing Agency
Participants to the Certificate Owners or their nominees.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Holders of
Certificates evidencing specified percentages of the aggregate outstanding
principal balance of such Certificates, such direction or consent may be
given by Certificate Owners having interests in the requisite percentage,
acting through the Clearing Agency.
Section 5.9. Notices to Clearing Agency. Whenever notice or other
communication to the Holders is required under this Agreement, unless and
until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 5.10, the Trustee shall give all such notices and
communications specified herein to be given to Holders to the Clearing
Agency.
Section 5.10. Definitive Certificates. If (a) (i) the Seller
advises the Trustee in writing that the Clearing Agency is no longer
willing or able properly to discharge its responsibilities under the
Depository Agreement and (ii) the Trustee or the Seller is unable to locate
a qualified successor, (b) the Seller, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency or (c) after the occurrence of a Servicer Termination
Event, Certificate Owners representing in the aggregate not less than a
majority of the aggregate outstanding principal balance of the
Certificates, advise the Trustee and the Clearing Agency through the
Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the
Certificate Owners' best interests, the Trustee shall
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notify the Clearing Agency which shall be responsible to notify the
Certificate Owners of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting
the same. Upon surrender to the Trustee by the Clearing Agency of the
Certificates registered in the name of the nominee of the Clearing Agency,
accompanied by re-registration instructions from the Clearing Agency for
registration, the Trustee shall execute, on behalf of the Trust,
authenticate and deliver Definitive Certificates in accordance with such
instructions. The Seller shall arrange for, and shall bear all costs of,
the printing and issuance of such Definitive Certificates. Neither the
Seller, the Servicer nor the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Trustee shall recognize the Holders of the Definitive
Certificates as Holders hereunder.
ARTICLE VI
THE RESERVE ACCOUNT
Section 6.1. Initial Deposit. On the Closing Date, the Seller shall
deposit $___________ into the Reserve Account.
Section 6.2. Deficiency Claim Amounts. If the Servicer's
Certificate with respect to any Determination Date shall state that the
amount of the Available Funds with respect to such Determination Date is
less than the sum of the amounts payable on the related Payment Date
pursuant to clauses (i) through (vi) of Section 4.5(a) (such deficiency
being a "Deficiency Claim Amount"), then the Trustee shall transfer funds
in the amount of such Deficiency Claim Amount (to the extent of the funds
available therein) from the Reserve Account to the Collection Account on
the related Deposit Date.
Section 6.3. Distribution of Excess. If (i) the amount on deposit
in the Reserve Account on any Payment Date (after giving effect to all
deposits therein or withdrawals therefrom on such Payment Date) exceeds the
Reserve Account Required Amount and (ii) (a) no Trigger Event has occurred
or (b) all Trigger Events which have occurred have been Deemed Cured, the
Trustee shall distribute an amount equal to any such excess pursuant to the
Servicer's Certificate and Section 4.5(a)(viii).
ARTICLE VII
THE SELLER
Section 7.1. Liability of Seller. (a) The Seller shall be
liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Seller and the representations made by the
Seller.
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(b) The Seller shall defend, indemnify and hold harmless the
Trustee, the Servicer, the Trust[, the Backup Servicer] and the
Certificateholders, and their respective officers, directors, agents and
employees, from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel
and expenses of litigation, arising out of or resulting from (i) the use,
ownership or operation, if any, by the Seller or any Affiliate thereof of a
Financed Vehicle or (ii) any violation by the Seller, the Servicer or the
Trust of state or federal securities laws relating to the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the
Servicer, the Trustee, the Trust, [the Backup Servicer,] and their
respective officers, directors, agents and employees, from and against any
and all costs, expenses, losses, claims, penalties, fines, forfeitures,
judgments, damages and liabilities to the extent that such cost, expense,
loss, claim, penalty, fine, forfeiture, judgment, damage or liability arose
out of, or was imposed upon the Servicer, the Trustee[, the Backup
Servicer] or the Trust by reason of, the breach of this Agreement by the
Seller, the negligence (other than errors in judgment), misfeasance or bad
faith of the Seller in the performance of its duties under this Agreement
or by reason of negligent disregard of its obligations and duties under
this Agreement.
(d) Indemnification under this Section 7.1 shall survive the
termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Seller has made any
indemnity payments pursuant to this Section 7.1 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts collected to the Seller, without interest.
(e) Notwithstanding the indemnity provisions contained in Sections
7.1(b) through (d), the Seller shall not be required to indemnify the
Servicer, the Trustee, the Trust[, the Backup Servicer] or their respective
officers, directors, agents or employees, against any costs, expenses,
losses, damages, claims or liabilities to the extent the same shall have
been (i) caused by the misfeasance, bad faith or gross negligence (or
ordinary negligence in the handling of funds) of such party or (ii)
suffered by reason of uncollectible or uncollected Receivables not caused
by the Seller's negligence (other than errors in judgment), misfeasance or
bad faith. Notwithstanding the indemnity provisions contained in Section
7.1(b), the Seller shall not be required to indemnify the
Certificateholders for any losses suffered in their capacity as investors
in the Certificates.
Section 7.2. Merger or Consolidation of the Seller. The Seller
shall not merge or consolidate with any other Person or permit any other
Person to become the successor to all or substantially all of the Seller's
business or assets unless the conditions precedent set forth in this
Section 7.2 have been satisfied. Any such successor corporation shall
execute an agreement of assumption of every obligation of the Seller under
its Related Documents and, whether or not such assumption agreement is
executed, shall be the successor to the Seller under this Agreement without
the execution or filing of any document (or any further act on the part of
any of the parties to this Agreement). The Seller shall provide prompt
notice of any merger, consolidation or succession pursuant to this Section
7.2 to the Trustee, the Certificateholders and the Rating Agency.
Notwithstanding the foregoing, the Seller shall not merge or consolidate
with any other Person or permit any other Person to become
46
a successor to the Seller's business, unless: (a) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 2.4 shall have been breached in any material respect (for purposes
hereof, such representations and warranties shall speak as of the date of
the consummation of such transaction) and no event that, after notice or
lapse of time, would become an Event of Default shall have occurred and be
continuing; (b) the Seller shall have delivered to the Trustee and the
Rating Agency an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 7.2 and that all conditions precedent,
if any, provided for in this Agreement relating to such transaction have
been complied with; and (c) the Seller shall have delivered to the Trustee
and the Rating Agency an Opinion of Counsel, stating, in the opinion of
such counsel, either (i) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interests of the Trust and the
Trustee in the Receivables or (ii) no such action shall be necessary to
preserve and protect such interest.
Section 7.3. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Seller of the Receivables under this
Agreement and that in its opinion may involve it in any expense or
liability.
Section 7.4. Special Purpose Entity. (a) The Seller shall conduct
its business solely in its own name through its duly authorized officers or
agents so as not to mislead others as to the identity of the entity with
which such persons are concerned, and shall use its best efforts to avoid
the appearance that it is conducting business on behalf of any Affiliate
thereof or that the assets of the Seller are available to pay the creditors
of Paragon or any Affiliate thereof (other than as expressly provided
herein).
(b) The Seller shall maintain corporate records and books of
account separate from those of Paragon and any Affiliate thereof.
(c) The Seller shall obtain proper authorization for all corporate
action requiring such authorization.
(d) The Seller shall pay its own operating expenses and
liabilities from its own funds.
(e) The annual financial statements of Paragon shall disclose the
effects of the transactions contemplated hereby in accordance with
generally accepted accounting principles.
(f) The resolutions, agreements and other instruments of the
Seller underlying the transactions described in the Related Documents shall
be continuously maintained by the Seller as official records of the Seller.
47
(g) The Seller shall maintain an arm's-length relationship with
Paragon and its Affiliates, and shall not hold itself out as being liable
for the debts of Paragon or any of its Affiliates.
(h) The Seller shall keep its assets and liabilities separate from
those of all other entities other than as permitted by the Related
Documents.
(i) The books and records of the Seller shall be maintained at the
address designated herein for receipt of notices, unless the Seller shall
otherwise advise the parties hereto in writing.
(j) The Seller shall not maintain bank accounts or other
depository accounts to which any Affiliate is an account party, into which
any Affiliate makes deposits or from which any Affiliate has the power to
make withdrawals, except as otherwise permitted by the Related Documents.
(k) The Seller shall insure that any consolidated financial
statements of Paragon has notes to the effect that the Seller is a separate
entity whose creditors have a claim on its assets prior to those assets
becoming available to its equity holders.
(l) The Seller shall not amend, supplement or otherwise modify its
certificate of incorporation or bylaws except in accordance therewith.
Section 7.5. Restrictions on Liens. The Seller shall not (i)
create, incur or suffer to exist, or agree to create, incur or suffer to
exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
on, or restriction on transferability of, the Receivables except for
Permitted Liens or (ii) sign or file under the UCC of any jurisdiction any
financing statement that names Paragon or the Seller as a debtor, or sign
any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables, except in each
case any such instrument solely securing the rights and preserving the Lien
of the Trust and the Lien of the Trustee for the benefit of the
Certificateholders.
Section 7.6. Creation of Indebtedness; Guarantees. The Seller
shall not create, incur, assume or suffer to exist any indebtedness other
than indebtedness permitted under the Related Documents. The Seller shall
incur no additional borrowed money indebtedness secured by the Trust
Property other than the Certificates. The Seller shall not assume
guarantee, endorse or otherwise be or become directly or contingently
liable for the obligations of any Person by, among other things, agreeing
to purchase any obligation of another Person, agreeing to advance funds to
such Person or causing or assisting such Person to maintain any amount of
capital.
Section 7.7. Compliance with Laws. The Seller shall comply with
the requirements of all applicable laws, the non-compliance with which
would, individually or in the aggregate, materially and adversely affect
the ability of the Seller to perform its obligations under any Related
Document.
48
Section 7.8 Further Instruments and Acts. Upon request of the
Trust or the Trustee, the Seller shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Agreement.
Section 7.9 Investment Company Act. The Seller shall conduct its
operations in a manner that will not subject it to registration as an
"Investment Company" under the Investment Company Act of 1940, as amended.
ARTICLE VIII
THE SERVICER
Section 8.1. Liability of the Servicer; Indemnities. (a) The
Servicer (in its capacity as such) shall be liable hereunder only to the
extent of the obligations in this Agreement specifically undertaken by the
Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Seller, the Trustee, the Trust[, the Backup Servicer] and the
Certificateholders, and their respective officers, directors, agents and
employees, from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel
and expenses of litigation, arising out of or resulting from (i) the use,
ownership or operation, if any, by the Servicer or any Affiliate thereof of
a Financed Vehicle or (ii) any violation by the Seller, the Servicer or the
Trust of state or federal securities laws relating to the Certificates.
(c) The Servicer shall indemnify, defend and hold harmless the
Seller, the Trustee, the Trust, [the Backup Servicer,] and their respective
officers, directors, agents and employees, from and against any and all
costs, expenses, losses, claims, penalties, fines, forfeitures, judgments,
damages and liabilities to the extent that such cost, expense, loss, claim,
penalty, fine, forfeiture, judgment, damage or liability arose out of, or
was imposed upon the Seller, the Trustee[, the Backup Servicer] or the
Trust by reason of, the breach of this Agreement by the Servicer, the
negligence (other than errors in judgment), misfeasance or bad faith of the
Servicer in the performance of its duties under this Agreement or by reason
of negligent disregard of its obligations and duties under this Agreement.
(d) Indemnification under this Section 8.1 shall survive the
termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer has made
any indemnity payments pursuant to this Section 8.1 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts collected to the Servicer, without interest.
(e) Notwithstanding the indemnity provisions contained in Sections
8.1(b) through (d), the Servicer shall not be required to indemnify the
Seller, the Trustee, the Trust[, the Backup Servicer] or their respective
officers, directors, agents or employees, against any costs, expenses,
losses, damages, claims or liabilities to the extent the same shall have
49
been (i) caused by the misfeasance, bad faith or gross negligence (or
ordinary negligence in the handling of funds) of such party or (ii)
suffered by reason of uncollectible or uncollected Receivables not caused
by the Servicer's negligence (other than errors in judgment), misfeasance
or bad faith. Notwithstanding the indemnity provisions contained in Section
8.1(b), the Servicer shall not be required to indemnify the
Certificateholders for any losses suffered in their capacity as investors
in the Certificates.
Section 8.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer [or Backup Servicer]. (a) The Servicer shall
not merge or consolidate with any other Person, convey, transfer or lease
all or substantially all its assets as an entirety to another Person, or
permit any other Person to become the successor to all or substantially all
of its business or assets, unless, after the merger, consolidation,
conveyance, transfer, lease or succession, the successor or surviving
entity shall be capable of fulfilling the duties of the Servicer contained
in this Agreement and shall be an Eligible Servicer. Any corporation (i)
into which the Servicer may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Servicer shall be a party, (iii)
that acquires by conveyance, transfer, or lease substantially all of the
assets of the Servicer, or (iv) succeeding to the business of the Servicer,
in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement and, whether
or not such assumption agreement is executed, shall be the successor to the
Servicer under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided,
however, that nothing contained herein shall be deemed to release the
Servicer from any obligation hereunder. The Servicer shall provide notice
of any merger, consolidation or succession pursuant to this Section 8.2(a)
to the Trustee[, the Backup Servicer] and the Rating Agency and the Rating
Agency Condition in respect of such merger, consolidation or succession
shall have been satisfied. Notwithstanding the foregoing, the Servicer
shall not merge or consolidate with any other Person or permit any other
Person to become a successor to all or substantially all of its business or
assets, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.6 shall have been
breached in any material respect (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction) and no event that, after notice or lapse of time, would become
an Event of Default shall have occurred and be continuing, (y) the Servicer
shall have delivered to the Trustee and the Rating Agency an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or succession and such agreement of assumption comply
with this Section 8.2(a) and (z) the Servicer shall have delivered to the
Trustee and the Rating Agency an Opinion of Counsel, stating in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Trust and the Trustee
in the Receivables and the proceeds thereof or (B) no such action shall be
necessary to preserve and protect such interest.
[(b) Any corporation (i) into which the Backup Servicer may be
merged, consolidated or converted, (ii) resulting from any merger,
consolidation or conversion to which the Backup Servicer shall be a party,
(iii) that acquires by conveyance, transfer or lease substantially all of
the assets of the Backup Servicer, or (iv) succeeding to the business of
the Backup Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Backup
50
Servicer under this Agreement and, whether or not such assumption agreement
is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Backup Servicer from any
obligation.]
Section 8.3. Limitation on Liability of Servicer[, Backup
Servicer] and Others. (a) Neither the Servicer[, the Backup Servicer] nor
any of the directors, officers, employees or agents of the Servicer [or the
Backup Servicer] shall be under any liability to the Trust, the
Certificateholders, the Trustee, or the Seller, except as provided in this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer[, the Backup Servicer] or any such Person
against any liability that would otherwise be imposed by reason of a breach
of this Agreement or willful misfeasance, bad faith or negligence (other
than errors in judgment) in the performance of its duties. The Servicer[,
the Backup Servicer] and any director, officer, employee or agent of the
Servicer [or the Backup Servicer] may rely in good faith on the written
advice of counsel or on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising under
this Agreement.
[(b) Unless acting as Servicer hereunder, the Backup Servicer
shall not be liable for any obligation of the Servicer contained in this
Agreement, and the Trustee, the Seller and the Certificateholders shall
look only to the Servicer to perform such obligations.]
[(c) The parties expressly acknowledge and consent to [Norwest
Bank Minnesota, National Association] acting in the possible dual capacity
of Backup Servicer or successor Servicer and in the capacity as Trustee.
Norwest Bank Minnesota, National Association may, in such dual capacity,
discharge its separate functions fully, without hindrance or regard to
conflict of interest principles, duty of loyalty principles or other breach
of fiduciary duties to the extent that any such conflict or breach arises
from the performance by Norwest Bank Minnesota, National Association of
express duties set forth in this Agreement in any of such capacities, all
of which defenses, claims or assertions are hereby expressly waived by the
other parties hereto except in the case of negligence (other than errors in
judgment) and willful misconduct by Norwest Bank Minnesota, National
Association.]
[(d) The Backup Servicer shall have no responsibility and shall
not be in default hereunder nor incur any liability for any failure, error,
malfunction or any delay in carrying out any of its duties under this
Agreement if any such failure or delay results from the Backup Servicer
acting in accordance with information prepared or supplied by a Person
other than the Backup Servicer or the failure of any such Person to prepare
or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability (i)
for any act or failure to act by any third party, including the Servicer,
the Seller, the Controlling Party or the Trustee for any inaccuracy or
omission in a notice or communication received by the Backup Servicer from
any third party or (ii) that is due to or results from the invalidity,
51
unenforceability of any Receivable under applicable law or the breach or
the inaccuracy of any representation or warranty made with respect to any
Receivable.]
Section 8.4. Delegation of Duties. The Servicer may at any time
perform through subcontractors the specific duties of (i) repossession of
Financed Vehicles and (ii) pursuing the collection of deficiency balances
on defaulted Receivables, in each case without the consent of the Trustee
[or the Backup Servicer]. The Servicer may also perform other specific
duties through such sub-contractors in accordance with its customary
servicing policies and procedures without the prior consent of the Trustee
[or the Backup Servicer]. No such delegation or sub-contracting of duties
by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties.
Section 8.5. Servicer [and Backup Servicer] Not to Resign. Subject
to the provisions of Section 8.2, [neither] the Servicer [nor the Backup
Servicer] shall resign from the obligations and duties imposed on it by
this Agreement as Servicer [or Backup Servicer] except upon a determination
that by reason of a change in legal requirements the performance of its
duties under this Agreement would cause it to be in violation of such legal
requirements, and a Certificate Majority does not elect to waive the
obligations of the Servicer [or the Backup Servicer, as the case may be,]
to perform the duties that render it legally unable to act or to delegate
those duties to another Person. Any such determination permitting the
resignation of the Servicer [or Backup Servicer] shall be evidenced by an
Opinion of Counsel to such effect delivered and acceptable to the Trustee.
No resignation of the Servicer shall become effective until [the Backup
Servicer or] a successor Servicer that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Servicer. [No
resignation of the Backup Servicer shall become effective until a Person
that is an Eligible Servicer shall have assumed the responsibilities and
obligations of the Backup Servicer; provided, however, that if a successor
Backup Servicer is not appointed within 60 days after the Backup Servicer
has given notice of its resignation and has provided the Opinion of Counsel
required by this Section 8.5, the Backup Servicer may petition a court for
its removal. Notwithstanding the foregoing, the Backup Servicer may resign
for any reason, provided an entity acceptable to the Controlling Party
shall have assumed the responsibilities and obligations of the Backup
Servicer prior to the effectiveness of any such resignation and the Rating
Agency Condition is satisfied with respect thereto.]
ARTICLE IX
TRUSTEE
Section 9.1. Acceptance by the Trustee. The Trustee hereby
acknowledges its acceptance of all right, title and interest in and to the
Receivables and the other Trust Property conveyed by Seller pursuant to
this Agreement and hereby declares that the Trustee holds and shall hold
such right, title and interest, upon the trust set forth in this Agreement.
Section 9.2. Duties of the Trustee. (a) The Trustee, both prior to
and after the curing of a Servicer Termination Event, undertakes to perform
only such duties as are specifically set forth in this Agreement and no
implied covenants or obligations shall be read into this Agreement against
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the Trustee. If a Servicer Termination Event, of which an Authorized
Officer of the Trustee has actual knowledge, shall have occurred and shall
not have been cured (the appointment of a successor Servicer (including the
Trustee) to constitute a cure for the purposes of this Article), The
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and shall 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; provided, however, that if the Trustee
assumes the duties of the Servicer pursuant to Section 8.2, the Trustee in
performing such duties shall use the degree of skill and attention required
by Section 3.1.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders, or other instruments
furnished to the Trustee that are required specifically to be furnished
pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, its own willful misfeasance or its own bad faith; provided,
however, that:
(i) Prior to the occurrence of a Servicer Termination
Event, and after the curing of all such Servicer Termination
Events that may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of
this Agreement, the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee, the permissible
right of the Trustee (solely in its capacity as such) to do things
enumerated in this Agreement shall not be construed as a duty and,
in the absence of bad faith on the part of the Trustee, or
manifest error, the Trustee (solely in its capacity as such) may
conclusively rely on the truth of the statements and the
correctness of the opinions expressed in any certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by an officer of the Trustee,
unless it shall be proved that the Trustee shall have been
negligent in performing its duties in accordance with the terms of
this Agreement; and
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered, or omitted to be taken in
good faith in accordance with the direction of the Controlling
Party, as set forth in Section 8.1, relating to the time, method
and place of conducting any proceeding or any remedy available to
the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement.
(d) Except for the willful misfeasance, bad faith or negligence of
the Trustee, the Trustee shall not be required to expend or risk its own
funds or otherwise incur any 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 for believing that the repayment of
such funds or indemnity satisfactory
53
to it against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee shall be the successor to,
and be vested with the rights, duties, powers and privileges of, the
Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or Financed Vehicle or
to impair the value of any Receivable or Financed Vehicle.
(f) The Trustee shall have no power to vary the corpus of the
Trust including (i) accepting any substitute obligation for a Receivable
initially assigned to the Trustee under this Agreement, (ii) adding any
other investment, obligation or security, or (iii) withdrawing any
Receivable, except for a withdrawal permitted under this Agreement.
Section 9.3. The Trustee's Certificate. As soon as practicable
after each Deposit Date on which Receivables shall be assigned to Seller
pursuant to Section 2.4 or 10.2 or to the Servicer pursuant to Section 3.7,
as applicable, the Trustee shall execute a certificate, prepared by the
Servicer, including its date and the date of the Agreement, and accompanied
by a copy of the Servicer's Report for the related Collection Period. The
Trustee's certificate shall operate, as of such Deposit Date, as an
assignment pursuant to Section 9.4.
Section 9.4. The Trustee's Assignment of Purchased Receivables.
With respect to all Receivables repurchased by Seller pursuant to Section
2.5, or purchased by the Servicer pursuant to Section 3.7 or Section 11.2,
the Trustee shall assign, without recourse, representation or warranty, to
the Seller or the Servicer, as the case may be, all of the Trustee's right,
title and interest in and to such Receivables, and all security and
documents and all other Trust Property conveyed pursuant to Section 2.1
with respect to such Receivables. Such assignment shall be a sale and
assignment outright, and not for security. If, in any enforcement suit or
legal proceeding, it is held that the Seller or the Servicer, as the case
may be, may not enforce any such Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce the Receivable,
the Trustee shall, at the expense of the Seller or the Servicer, as the
case may be, take such steps as the Seller or the Servicer, as the case may
be, deems necessary to enforce the Receivable, including bringing suit in
the Trustee's name or the names of the Holders.
Section 9.5. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.2:
(a) The Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon, any
resolution, certificate of auditors or accountants or any other
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, appraisal, bond, note or other
paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
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(b) The Trustee may consult with counsel knowledgeable in
the area and any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered or omitted by it under this Agreement in good faith and
in accordance with such written Opinion of Counsel a copy of which
shall be provided to the Seller and the Servicer.
(c) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement
or in relation to this Agreement, at the request, order or
direction of any of the Holders pursuant to the provisions of this
Agreement, unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee against the
costs, expenses, and liabilities that may be incurred therein or
thereby. Nothing contained in this Agreement, however, shall
relieve the Trustee of the obligations, upon the occurrence of a
Servicer Termination Event that is not timely cured or waived
pursuant to Section 10.5, to exercise such of the rights and
powers vested in it by this Agreement, and to 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; provided, however, that if the Trustee assumes the duties
of the Servicer pursuant to Section 10.3, the Trustee in
performing such duties shall use the degree of skill and attention
required by Section 3.1.
(d) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed
by it to be authorized or within the discretion, rights or powers
conferred upon it by this Agreement.
(e) Prior to the occurrence of a Servicer Termination
Event and after the curing of all Servicer Termination Events that
may have occurred, the Trustee shall not be bound to make any
investigation into the facts of any matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, direction, order, approval, bond, note
or other paper or document, unless requested in writing so to do
by the Controlling Party; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in the making of an
investigation requested by the Holders is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may
require indemnity satisfactory to it against such cost, expense,
or liability as a condition to so proceeding. The reasonable
expense of every such examination shall be paid by the Servicer,
or, if paid by the Trustee, shall be reimbursed by the Servicer
upon demand. Nothing in this clause (e) shall affect the
obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors;
provided, however, further, that the Trustee shall be entitled to
make such further inquiry or investigation into such facts or
matter as it may reasonably see fit, and if the Trustee shall
determine to make such further inquiry or investigation it shall
be entitled to examine the books and records of the Servicer or
the Seller, personally or by agent or attorney, at the sole cost
and expense of the Servicer or the Seller, as the case may be.
55
(f) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this Agreement either
directly or by or through agents, attorneys, nominees or a
custodian, and shall not be liable for the acts of such agents,
attorney, nominees or custodians except for (i) acts of
____________ or any successor agent carrying out the Trustee's
obligations with respect to the preparation of Servicer's
Certificate and (ii) acts of any other agent, attorney, nominee or
custodian if (A) the Trustee has not acted with due care in their
appointment or (B) Seller has not consented to their appointment.
(g) The Trustee shall not be required to make any initial
or periodic examination of any documents or records related to the
Receivables or Financed Vehicles for the purpose of establishing
the presence or absence of defects, the compliance by Seller with
its representations and warranties or for any other purpose.
(h) The Trustee shall not be construed to be a guarantor
of the performance of the Servicer, nor shall the Trustee have any
duty to monitor the performance of the Servicer other than as
expressly stated in this Agreement.
(i) The Trustee shall not be required to take notice or
be deemed to have notice of any Servicer Termination Event
hereunder, except a Servicer Termination Event under Section
10.1(a) or (b), unless the Trustee shall be specifically notified
in writing of such Servicer Termination Event by the Servicer, the
Seller or any Holder. All notices or other instruments required by
this Agreement to be delivered to the Trustee shall be delivered
at the Corporate Trust Office and, in the absence of such notice
so delivered, the Trustee may conclusively assume there is no
Servicer Termination Event except as aforesaid.
Section 9.6. The Trustee Not Liable for Certificates or
Receivables. The Trustee assumes no responsibility for the correctness of
the recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates). Except as expressly
provided herein, the Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than the
Trustee's execution of, and the certificate of authentication on, the
Certificates), or of any Receivable or related document, or for the
validity of the execution by the Seller and the Servicer of this Agreement
or of any supplements hereto or instruments of further assurance, or for
the sufficiency of the Trust Property hereunder, and the Trustee shall not
be bound to ascertain or inquire as to the performance or observance of any
covenants, conditions or agreements on the part of the Seller or the
Servicer under this Agreement except as herein set forth; but the Trustee
may require the Seller or the Servicer to provide full information and
advice as to the performance of the aforesaid covenants, condition and
agreements. The Trustee (solely in its capacity as such) shall have no
obligation to perform any of the duties of the Seller or the Servicer,
except as explicitly set forth in this Agreement. The Trustee shall have no
liability in connection with compliance of the Servicer or the Seller with
statutory or regulatory requirements to the Receivables. The Trustee shall
not make or be deemed to have made any representations or warranties with
respect to the Receivables or the validity or sufficiency of any assignment
of the Receivables to the Trust or the Trustee. The Trustee (solely in its
capacity as such) shall at no time have any responsibility or liability
for, or with respect to, the legality, validity or enforceability of
56
any security interest in any Financed Vehicle or (prior to the time, if
any, that the Servicer is terminated as custodian hereunder) any
Receivable, or the perfection and priority of such a security interest or
the maintenance of any such perfection and priority, the efficacy of the
Trust or its ability to generate funds sufficient to provide for the
payments to be distributed to Holders under this Agreement, the existence,
condition, location, and ownership of any Financed Vehicle, the existence
and enforceability of the Insurance Policies, the existence and contents of
any Receivable or any computer or other record thereof, the validity of the
assignment of any Receivable to the Trust or of any intervening assignment,
the completeness of any Receivable, the performance or enforcement of any
Receivable, the compliance by the Seller with any warranty or
representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation, prior to the Trustee's
receipt of notice or other discovery of any noncompliance therewith or any
breach thereof, any investment of monies by the Servicer or any loss
resulting therefrom (it being understood that the Trustee shall remain
responsible for any Trust Property that it may hold), the acts or omissions
of the Seller, the Servicer, or any Obligor, any action of the Servicer
taken in the name of the Trustee, or any action by the Trustee taken at the
instruction of the Servicer, provided, however, that such instruction is
not in express violation of the terms and provisions of this Agreement);
provided, however, that the foregoing shall not relieve the Trustee of its
obligation to perform its duties under this Agreement. Except with respect
to a claim based on the failure of the Trustee to perform its duties under
this Agreement (whether in its capacity as the Trustee or as successor
Servicer) or based on the Trustee's willful misconduct, negligence, or bad
faith, or based on the Trustee's breach of a representation and warranty
contained in Section 9.14, no recourse shall be had to the Trustee (whether
in its individual capacity or as the Trustee) for any claim based on any
provision of this Agreement, the Certificates, or any Receivable or
assignment thereof against the Trustee in its individual capacity; the
Trustee shall not have any personal obligation, liability, or duty
whatsoever to any Holder or any other Person with respect to any such
claim. The Trustee shall not be accountable for the use or application by
the Seller of the proceeds of such Certificates, or for the use or
application of any funds paid to the Servicer in respect of the Receivables
prior to the time such amounts are deposited in the Collection Account
(whether or not the Collection Account is maintained with the Trustee). The
Trustee shall have no liability for any losses from the investment or
reinvestment in Eligible Investments made in accordance with Section 4.1.
Section 9.7. The Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Certificates with the same rights as it would have if it were not the
Trustee.
Section 9.8. The Trustee's Fees and Expenses. The Servicer agrees
to pay to the Trustee, and the Trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trusts created by this Agreement and
in the exercise and performance of any of the powers and duties under this
Agreement as Trustee, and the Servicer shall pay or reimburse the Trustee
upon its request for all reasonable expenses (including expenses incurred
in connection with notices or other communications to Holders),
disbursements and advances (including the reasonable compensation and the
reasonable expenses and disbursements of its counsel and of all persons not
regularly in its employ) incurred or made by the Trustee in
57
accordance with any of the provisions of this Agreement (including the
reasonable fees and expenses of its agents, any co-trustee and counsel) or
in defense of any action brought against it in connection with this
Agreement except any such expense, disbursement or advance as may arise
from its negligence, willful misfeasance, or bad faith. The Servicer's
covenant to pay the expenses, disbursements and advances provided for in
the preceding sentence shall survive the termination of this Agreement.
Section 9.9. Eligibility Requirements for The Trustee. The Trustee
shall at all times be organized and doing business under the banking laws
of the United States or of any state thereof, shall be authorized under
such laws to exercise corporate trust powers, shall have a consolidated net
worth of at least $50,000,000 and shall be subject to supervision or
examination by federal or state banking authorities. If the Trustee shall
publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
the purpose of this Section 9.9, the consolidated net worth of the
Trustee shall be deemed to be its consolidated capital and surplus as set
forth in its most recent consolidated report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 9.9, the Trustee shall resign immediately in
the manner and with the effect specified in Section 9.10.
Section 9.10. Resignation or Removal of the Trustee. (a) The
Trustee may at any time resign and be discharged from the trusts hereby
created by giving 30 days' prior written notice thereof to the Servicer.
Upon receiving such notice of resignation, the Servicer shall promptly
appoint a successor Trustee, by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee;
provided, however, that such right to appoint or to petition for the
appointment of any such successor shall in no event relieve the resigning
Trustee from any obligations otherwise imposed on it under this Agreement
and the Related Documents until such successor has in fact assumed such
appointment.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.9 and shall fail to resign
after written request therefor by the Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver, conservator or liquidator of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer may remove
the Trustee. If the Trustee is removed under the authority of the
immediately preceding sentence, the Servicer shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed, the successor
Trustee, the Holders at their respective addresses of record and the Rating
Agencies.
58
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.10
shall not become effective until acceptance of appointment by the successor
Trustee pursuant to Section 9.11.
(d) The respective obligations of the Seller and the Servicer
described in this Agreement shall survive the removal or resignation of the
Trustee as provided in this Agreement.
Section 9.11. Successor Trustee. (a) Any successor Trustee
appointed pursuant to Section 9.10 shall execute, acknowledge, and deliver
to the Servicer and to its predecessor Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become fully
vested with all rights, powers, duties, and obligations of its predecessor
under this Agreement, with like effect as if originally named as the
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement, and the Servicer
and the predecessor Trustee shall execute and deliver such instruments and
do such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Trustee all such rights, powers,
duties, and obligations.
(b) No successor Trustee shall accept appointment as provided in
this Section 9.11 unless at the time of such acceptance such successor
Trustee shall be eligible pursuant to Section 9.9.
(c) Upon acceptance of appointment by a successor Trustee pursuant
to this Section 9.11, the Servicer shall mail notice of such acceptance by
the successor Trustee under this Agreement to all Holders at their
respective addresses of record and to the Rating Agencies. If the Servicer
shall fail to mail such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause
such notice to be mailed at the expense of the Servicer.
(d) No predecessor Trustee shall be liable for the acts or
omissions of any successor Trustee.
Section 9.12. Merger or Consolidation of or Assumption of
Obligations of the Trustee. Any corporation or banking association which is
eligible to be a successor Trustee under Section 9.9 (a) into which the
Trustee may be merged or consolidated, (b) that may result from any merger,
conversion or consolidation to which the Trustee shall be a party, or (c)
that may succeed by purchase and assumption to the business of the Trustee,
where the Trustee is not the surviving entity, which corporation or banking
association executes an agreement of assumption to perform every obligation
of the Trustee under this Agreement, shall be the successor of the Trustee
hereunder, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee shall promptly notify the Servicer
and each Rating Agency of any such merger, conversion, consolidation or
purchase and assumption where the Trustee is not the surviving entity.
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Section 9.13. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Property or any Financed Vehicle may at the time be
located, the Servicer and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person, in such capacity and for the benefit
of the Holders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 9.13, such powers, duties,
obligations, rights, and trusts as the Servicer and the Trustee may
consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to
do, or in case a Servicer Termination Event shall have occurred and be
continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall
be required to meet the terms of eligibility as a successor trustee
pursuant to Section 9.9 and no notice to Holders of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.11.
Notwithstanding the appointment of a co-trustee or separate trustee
hereunder, the Trustee shall not be relieved of any of its obligations
under this Agreement.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) All rights, powers, duties, and obligations conferred
or imposed upon the Trustee shall be conferred upon and exercised
or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee
or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any
law of any jurisdiction in which any particular act or acts are to
be performed (whether as the Trustee under this Agreement or as
successor to the Servicer under this Agreement), the Trustee shall
be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties, and obligations
(including the holding of title to the Trust Property or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee.
(ii) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under
this Agreement.
(iii) The Servicer and the Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee
or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and in particular to the provisions of this Article. Each
separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all
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the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed
with the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may, at any time, appoint
the Trustee its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and
be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee. The Trustee shall promptly
notify the Servicer and each Rating Agency of any appointment made pursuant
to this Section 9.13.
Section 9.14. Representations and Warranties of the Trustee. The
Trustee makes the following representations and warranties on which the
Seller, the Servicer, and the Holders may rely:
(a) Organization and Good Standing. The Trustee is a
banking corporation duly organized, validly existing, and in good
standing under the laws of ______________.
(b) Power and Authority. The Trustee has full power,
authority and legal right to execute, deliver, and perform this
Agreement and the Related Documents and has taken all necessary
action to authorize the execution, delivery, and performance by it
of this Agreement and the Related Documents to which it is a
party.
(c) Enforceability. This Agreement and the Related
Documents to which it is a party have been duly executed and
delivered by the Trustee and this Agreement and such Related
Documents constitute legal, valid and binding obligations of the
Trustee enforceable against the Trustee in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights generally and except as such
enforceability may be limited by equitable limitations on the
availability of specific remedies.
(d) No Consent Required. No approval, authorization,
consent, license or other order or action of, or filing or
registration with, any governmental authority, bureau or agency is
required in connection with the execution, delivery or performance
by the Trustee of this Agreement, the Related Documents or the
consummation of the transactions contemplated hereby or thereby.
(e) No Violation. The execution, delivery and performance
by the Trustee of this Agreement and the Related Documents and the
consummation of the transactions contemplated hereby and thereby
will not conflict with, result in any breach of the terms and
provisions of, constitute (with or without notice or lapse of
time) a default under, or result in the creation or disposition of
any Lien upon any of its properties pursuant to the terms of,
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(i) the articles of association or by-laws of the Trustee, (ii)
any indenture, contract, lease, mortgage, deed of trust or other
instrument or agreement to which the Trustee is a party or by
which the Trustee is bound or to which any of its properties are
subject, or (iii) any law, order, rule or regulation applicable to
the Trustee or its properties of any federal or state regulatory
body, any court, administrative agency or other governmental
instrumentality having jurisdiction over the Trustee or any of its
properties.
Section 9.15. Reports by the Trustee. The Trustee shall provide to
any Holder or Certificate Owner who so requests in writing (addressed to
the Corporate Trust Office) a copy of any Servicer's Report, the annual
statement described in Section 3.10, and the annual accountant's
examination described in Section 3.11. The Trustee may require any Holder
or Certificate Owner requesting such report to pay a reasonable sum to
cover the cost of the Trustee's complying with such request.
Section 9.16. Tax Returns. The Servicer shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and
shall remit such returns to the Trustee for signature at least five days
before such returns are due to be filed. The Trustee, upon request, will
furnish the Servicer with all such information actually known to an
Authorized Officer of the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust, and shall,
upon request, execute such returns. The Servicer shall prepare the tax
returns of the Trust in accordance with the Code and any regulations
(including, to the extent applicable by their terms, proposed regulations)
thereunder.
Section 9.17. The Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as the Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Holders in respect of
which such judgment has been obtained.
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to make deposits into the
Collection Account or to deliver to the Trustee for distribution any
proceeds or payment required to be so deposited or delivered under the
terms of this Agreement that continues unremedied for a period of two
Business Days (one Business Day with respect to payment of Purchase
Amounts) after the earlier of receipt of written notice by the Servicer
from the Trustee or discovery of such failure by a Responsible Officer of
the Servicer; or
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(b) Failure by the Servicer to deliver to the Trustee the
Servicer's Certificate by 2:00 p.m., New York City time, on each
Determination Date (or within two Business Days thereafter, if such failure
by the Servicer is due to circumstances outside the Servicer's control), or
failure on the part of the Servicer to observe in all material respects its
covenants and agreements set forth in Section 8.2(a); or
(c) Failure or failures on the part of the Servicer duly to
observe or perform any other covenants or agreements of the Servicer set
forth in this Agreement, which failure or failures, individually or in the
aggregate, (i) materially and adversely affect the rights of
Certificateholders and (ii) continue unremedied for a period of 30 days
after the earlier of knowledge thereof by a Responsible Officer of the
Servicer or the date on which written notice of such failure or failures,
requiring the same to be remedied, shall have been given to the Servicer by
the Trustee or Holders of more than 25% of the Certificate Balance; or
(d) The occurrence of an Insolvency Event with respect to the
Servicer; or
(e) Any representation or warranty of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time
when the same shall have been made, and the incorrectness of such
representation or warranty has a material adverse effect on the
Certificateholders and, within 30 days after the earlier of knowledge
thereof by a Responsible Officer of the Servicer or the date written notice
thereof shall have been given to the Servicer by the Trustee or Holders of
more than 25% of the sum of the then outstanding Class A and Class B
Certificate Balances, the circumstances or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or otherwise cured.
Section 10.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, either the
Trustee (to the extent it has knowledge thereof) or a Certificate Majority,
by notice given in writing to the Servicer and the Rating Agency (and to
the Trustee if given by the Certificateholders), may terminate all of the
rights and obligations of the Servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority, power,
obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Certificates, the Receivables, the other Trust
Property or otherwise, automatically shall pass to, be vested in and become
obligations and responsibilities of [the Backup Servicer (or] such other
successor Servicer appointed by the Trustee[)]; provided, however, that the
successor Servicer shall have no liability with respect to (i) any
obligation that was required to be performed by the terminated Servicer
prior to the date that the successor Servicer becomes the Servicer or (ii)
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether
to complete the transfer and endorsement of the Receivables, the other
Trust Property and related documents to show the Trust or the Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise.
The terminated Servicer
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agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the
terminated Servicer, in the Collection Account or the Lockbox Account or
thereafter received with respect to the Receivables and the delivery to the
successor Servicer of all Receivable Files and Monthly Records and a
computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to
service the Trust Property. The terminated Servicer shall grant the Trustee
and the successor Servicer reasonable access during normal business hours
to the terminated Servicer's premises.
Section 10.3. Appointment of Successor. (a) On and after the time
the Servicer receives a notice of termination pursuant to Section 10.2 or
upon the resignation of the Servicer pursuant to Section 8.5, the [Backup
Servicer] [successor Servicer] shall be the successor in all respects to
the Servicer in its capacity as Servicer under this Agreement and the
transactions set forth or provided for in this Agreement, and shall be
subject to all the rights, responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the
Servicer by the terms and provisions of this Agreement, except as otherwise
stated herein. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any
such succession. If a successor Servicer is acting as Servicer hereunder,
it shall be subject to termination under Section 10.2 upon the occurrence
of any Servicer Termination Event applicable to it as Servicer. Any
successor Servicer appointed pursuant to this Section 10.3 shall be
entitled to compensation equal to the greater of (i) the Total Servicing
Fee or (ii) the then-current "market rate" fee for servicing assets
comparable to the Receivables, which rate shall be determined by averaging
three servicing fee bids obtained by the [Backup] [successor] Servicer from
third party servicers selected by the [Backup] [successor] Servicer.
(b) If the [Backup] [successor] Servicer shall be legally unable
or unwilling to act as Servicer, the [Backup] [successor] Servicer, the
Trustee or a Certificate Majority may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the
Servicer. Pending appointment pursuant to the preceding sentence, the
[Backup] [successor] Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall
continue to act as Servicer until a successor has been appointed and
accepted such appointment. Subject to Section 8.5, no provision of this
Agreement shall be construed as relieving the [Backup] [successor] Servicer
of its obligation to succeed as successor Servicer upon the termination of
the Servicer pursuant to Section 10.2 or the resignation of the Servicer
pursuant to Section 8.5.
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if the Servicer
had not resigned or been terminated hereunder.
Section 10.4. Notification to Certificateholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article XX,
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the Trustee shall give prompt written notice thereof to the Rating Agency
and to the Certificateholders at their respective addresses appearing in
the Certificate Register.
Section 10.5. Waiver of Past Defaults. A Certificate Majority may,
on behalf of the Certificateholders, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon.
The Trustee shall provide the Certificateholders and the Rating Agency with
notice of any waiver of any default by the Servicer hereunder.
ARTICLE XI
TERMINATION
Section 11.1. Termination of the Trust. (a) The Trust, and the
respective obligations and responsibilities of the Seller, the Servicer and
the Trustee hereunder, shall terminate (except as otherwise expressly
provided herein) upon the earliest of: (i) the Payment Date after the
purchase by the Servicer, at its option pursuant to Section 11.2, of the
Receivables remaining in the Trust, (ii) the payment to Holders of all
amounts required to be paid to them pursuant to this Agreement or (iii) the
Payment Date after the month that is six months after the maturity or the
liquidation of the last Receivable held in the Trust and the disposition of
any amounts received upon liquidation of any property remaining in the
Trust; provided, however, that in no event shall the Trust created by this
Agreement continue beyond the expiration of 21 years from the death of the
last survivor of the descendants living on the date of this Agreement of
Xxxx Xxxxxxx of the Commonwealth of Massachusetts. Servicer shall promptly
notify the Trustee of any prospective termination pursuant to this Section
11.1.
(b) Notice of any termination, specifying the Payment Date upon
which the Holders may surrender the Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee by letter to Holders of record and the Rating Agencies mailed not
earlier than the 15th day and not later than the 25th day of the month
preceding the specified Payment Date stating the amount of any such final
payment and that the Record Date otherwise applicable to such Payment Date
is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. Upon
presentation and surrender of the Certificates, the Trustee shall cause to
be distributed to Holders amounts distributable on such Payment Date
pursuant to Section 4.5. Amounts remaining in the Trust after distribution,
or after setting aside all funds required for distribution, to the Holders
shall be distributed to the Seller.
(c) If all the Holders shall not surrender their Certificates for
cancellation within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Holders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto.
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Trustee shall after giving such notice to deliver or cause to be delivered
to the Servicer the Certificate Register. If within one year after the
second notice all the Certificates shall not have been surrendered for
cancellation, the Servicer may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Holders
concerning surrender of their Certificates, and the cost thereof shall be
paid out of the funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion of such
remedies shall be distributed by the Trustee to the Seller.
Section 11.2. Optional Purchase of All Receivables. As an
administrative convenience, the Servicer shall have the option to purchase
the Receivables and the other Trust Property on any Payment Date if, as of
the related Accounting Date, the Aggregate Principal Balance has declined
to less than 10% of the Cutoff Date Principal Balance. To exercise such
option, the Servicer shall pay the aggregate Purchase Amounts for the
Receivables (which amount shall in no event be less than the sum of the
Class A Certificate Balance and the Class B Certificate Balance then
outstanding plus accrued and unpaid interest thereon) and shall succeed to
all interests in and to the Trust Property. Not later than 10 days prior to
any proposed exercise of such option, the Servicer or Seller shall notify
the Rating Agency, the Trustee and the Certificateholders of any proposed
exercise of such option. The purchase price paid by the Servicer shall be
deposited into the Collection Account on or before such Payment Date and
distributed pursuant to Section 4.5.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1. Amendment. (a) This Agreement may be amended by the
Trust, the Seller, the Servicer, Paragon[, the Backup Servicer] and the
Trustee without the consent of any of the Certificateholders, (i) to cure
any ambiguity, (ii) to correct or supplement any provisions in this
Agreement or (iii) for the purpose of adding any provision to or changing
in any manner or eliminating any provision of this Agreement or of
modifying in any manner the rights of the Certificateholders, provided that
such action in this clause (iii) shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee and the Rating Agency, adversely affect in
any material respect the interests of the Certificateholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, Paragon[, the Backup Servicer] and the Trustee with
the consent of a Certificate Majority (which consent of any Holder of a
Certificate given pursuant to this Section 12.1(b) or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder
and on all future Holders of such Certificate and of any Certificate issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether
or not notation of such consent is made upon the Certificate), for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that
the Rating Agency Condition shall have been satisfied with respect to any
such amendment prior to the execution thereof; and provided, further, that
no such amendment shall (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on
Receivables, distributions that shall be required to be made
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on any Certificate, the Class A Interest Rate or the Class B Interest Rate,
(ii) amend any provisions of Section 4.5 in such a manner as to affect the
priority of payment of interest or principal to Certificateholders, or (c)
reduce the aforesaid percentage required to consent to any such amendment
or any waiver hereunder, without the consent of the Holders of all
Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent under
Section 12.1(a) or (b), the Seller shall furnish the Trustee with a written
notice describing the substance of such amendment and the Trustee shall
forward such written notification of the substance of such amendment or
consent to the Rating Agency within five days of receipt thereof.
(d) Promptly after the execution of any such amendment and receipt
thereof by the Trustee or consent under Section 12.1(b), the Trustee shall
furnish written notification of the substance of such amendment or consent
to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to Section 12.1(b) to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if
such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in
this Agreement) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
(f) Prior to the execution of any amendment to this Agreement, the
Trustee, upon request, shall be entitled to receive and rely upon an
Opinion of Counsel (delivered at the expense of the Seller) stating that
the execution of such amendment is authorized or permitted by this
Agreement, in addition to the Opinion of Counsel referred to in Section
12.2(i). The Trustee may, but shall not be obligated to, enter into any
such amendment that affects the Trustee's own rights, duties or immunities
under this Agreement or otherwise.
Section 12.2. Protection of Title to Trust. (a) The Servicer shall
execute, file, record and register such financing statements and cause to
be executed, filed, recorded and registered such continuation and other
statements or documents, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Trust and the Trustee under this Agreement in the Trust Property and in the
proceeds thereof. The Servicer shall deliver (or cause to be delivered) to
the Trustee file-stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available
following such recordation, registration or filing. Paragon and the Seller
shall cooperate fully with the Servicer in connection with the obligations
set forth above and shall execute any and all documents reasonably required
to fulfill the intent of this Section 12.2(a).
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would make any financing
statement or continuation statement filed by the Servicer in accordance
with Section 12.2(a) seriously misleading within the meaning of the
applicable provisions of the UCC or any title statute, unless it shall have
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given the Trustee at least 30 days prior written notice thereof, and shall
promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Each of the Seller and the Servicer shall give the Trustee at
least 30 days prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new
financing statement. The Servicer shall at all times maintain each office
from which it services Receivables and its principal executive office
within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing and (ii) reconciliation
between payments or recoveries on (or with respect to) each Receivable and
the amounts from time to time deposited in the Collection Account in
respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement, the Servicer's master
computer records (including any backup archives) that refer to any
Receivable indicate clearly that such Receivable is owned by the Trust.
Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, the
Receivable shall become a Purchased Receivable or shall have been paid in
full.
(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables (other than the Receivables) to any prospective
purchaser, lender or other transferee, the Servicer shall give to such
prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they
refer in any manner whatsoever to any Receivable, indicate clearly that
such Receivable has been sold and is owned by the Trust (unless such
Receivable shall become a Purchased Receivable or shall have been paid in
full).
(g) Upon reasonable notice, the Servicer shall permit the Trustee,
[the Backup Servicer,] the Seller and their respective agents, at any time
during normal business hours to inspect and make copies of and abstracts
from the Servicer's records regarding any Receivables or any other portion
of the Trust Property.
(h) The Servicer shall furnish to the Trustee[, the Backup
Servicer] and the Seller upon request within a reasonable period of time
the Schedule of Receivables, setting forth the Receivables then held as
part of the Trust. The Trustee shall hold the Schedule of Receivables for
examination by interested parties during normal business hours at the
Corporate Trust Office upon reasonable notice by such Persons of their
desire to conduct an examination.
(i) The Seller and the Servicer (or the applicable party in the
case of Section 12.2(b) or (c)) shall deliver to the Trustee simultaneously
with the execution and delivery of this Agreement
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and of each amendment thereto and upon the occurrence of the events giving
rise to an obligation to give notice pursuant to Section 12.2(b) or (c), an
Opinion of Counsel (i) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interests of the
Trust and the Trustee in the Receivables, and reciting the details of such
filing or referring to prior Opinions of Counsel in which such details are
given or (ii) stating that, in the opinion of such counsel, no such action
is necessary to preserve and protect such interest.
Section 12.3. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate
this Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in this Section 12.3 or Sections 10.2, 10.5 or 12.1) or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties to this Agreement, nor shall anything set forth
in this Agreement, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be
under any liability to any third person by reason of any action taken by
the parties to this Agreement pursuant to any provision of this Agreement
or any Related Document.
(c) No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action, or proceeding in equity or at law upon or under or with respect to
this Agreement, unless such Holder previously shall have given to the
Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and unless also the Holders of Certificates
evidencing not less than 25% of the Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee under this Agreement and shall have
offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and
the Trustee, for 30 days after its receipt of such notice, request, and
offer of indemnity, shall have neglected or refused to institute any such
action, suit, or proceeding and during such 30-day period, no request or
waiver inconsistent with such written request has been given to the Trustee
pursuant to and in compliance with this Section 12.3 or Section 10.5; it
being understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of
this Agreement to affect, disturb, or prejudice the rights of the Holders
of any other of the Certificates, or to obtain or seek to obtain priority
over or preference to any other such Holder, or to enforce any right under
this Agreement, except in the manner provided in this Agreement and for the
equal, ratable and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 12.3, each and
every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
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Section 12.4. GOVERNING LAW. THIS AGREEMENT (OTHER THAN ARTICLE V
AND, SOLELY FOR THE PURPOSE OF INTERPRETING ARTICLE V, ANY DEFINITIONS
REFERRED TO THEREIN) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS. ARTICLE V (AND, SOLELY FOR THE PURPOSE OF INTERPRETING ARTICLE V, ANY
DEFINITIONS REFERRED TO THEREIN) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.5. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.6. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 7.2 or Section
8.2 and as provided in the provisions of the Agreement concerning the
resignation of the Servicer [and the Backup Servicer], this Agreement may
not be assigned by the Seller or the Servicer without the prior written
consent of [the Backup Servicer and] the Trustee. Prior written notice of
any such assignment shall be provided to the Rating Agency.
Section 12.7. Third-Party Beneficiaries. Nothing in this
Agreement, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and permitted assigns, any
benefit or any legal or equitable right, remedy or claim under this
Agreement.
Section 12.8. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
Section 12.9. Notices. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of the Seller, at the following
address: Paragon Auto Receivables Corporation, 27405 Puerta Real, Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Vice President-Finance,
Telecopy No.: (000) 000-0000, (b) in the case of the Servicer, at the
following address: Paragon Acceptance Corporation, 27405 Puerta Real, Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Vice President - Finance,
Telecopy No.: (000) 000-0000, (c) in the case of the Trustee[, and for so
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long as the Trustee is the Backup Servicer, the Backup Servicer,] at the
following address: [Norwest Bank Minnesota, National Association, Norwest
Center, Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000-0000, Attention: Corporate Trust Services/Asset-Backed
Administration, Telecopy No.: (000) 000-0000], and (d) in the case of the
Rating Agency, at the following address: _____________, Attention:
_________, or at such other address as shall be designated by any such
party in a written notice to the other parties. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register, and any notice so mailed within the time prescribed
in this Agreement shall be conclusively presumed to have been duly given,
whether or not the Certificateholder receives such notice.
Section 12.10. Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors and
assigns, and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns permitted
hereunder. All covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, the Trust, the Trustee and the
Certificateholders and their respective permitted successors and assigns,
if any. Any request, notice, direction, consent, waiver or other instrument
or action by any Certificateholder shall bind its successors and assigns.
Except as otherwise provided in this Article XII, no other Person shall
have any right or obligation hereunder.
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IN WITNESS WHEREOF, the Seller, the Servicer, the Trust[, the
Backup Servicer] and the Trustee have caused this Sale and Servicing
Agreement to be duly executed by their respective officers, effective as of
the day and year first above written.
PARAGON ACCEPTANCE CORPORATION, in its
individual capacity and as Servicer
By: ____________________________________
Name: __________________________________
Title: _________________________________
[NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], as Trustee [and as
Backup Servicer]
By: ____________________________________
Name: __________________________________
Title: _________________________________
PARAGON AUTO RECEIVABLES CORPORATION, as
Seller
By: ____________________________________
Name: __________________________________
Title: _________________________________
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SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Servicer and the Trustee.
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF SELLER
WITH RESPECT TO RECEIVABLES
1. Contract Origination Date. Each Receivable has a
contract origination date on or before _______ __, ____.
2. Term of Receivables. Each Receivable has an original
term of at least __ months and not more than __ months and had a
remaining term as of the Cutoff Date of at least __ months and not
more than __ months; the weighted average original contracted term
of the Receivables was __ months as of the Cutoff Date; the
weighted average remaining contracted term of the Receivables was
__ months as of the Cutoff Date.
3. Characteristics of Receivables. (A) Each Receivable
(1) has been originated in the United States of America by a
Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business in accordance in all material
respects with Paragon's credit approval guidelines, and, to the
best knowledge of Seller, such Dealer had all necessary licenses
and permits to originate Receivables in the state where such
Dealer was located, (2) was fully and properly executed by the
parties thereto, (3) was purchased by Paragon from such Dealer
under an existing Dealer Agreement and Dealer Assignment and was
purchased by the Seller from Paragon pursuant to the Receivables
Purchase Agreement, (4) contains customary and enforceable
provisions such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the
collateral of the benefits of the security, (5) provides for level
monthly payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be greater
or smaller than the level payment), provided payments are made on
the applicable due dates, (6) has an Annual Percentage Rate of not
less than ____% and not more than ____%, (7) provides for, if such
contract is prepaid, a prepayment that fully pays the Principal
Balance and accrued interest at the Annual Percentage Rate and (8)
is a Simple Interest Receivable or a Pre-Computed Receivable; (B)
as of the Cutoff Date no Receivable has a payment more than 10% of
which is more than 29 days past due; (C) each Receivable has a
final scheduled payment due no later than ________ __, 20__; (D)
as of the Cutoff Date, not more than ____% of the aggregate
principal balance of the Receivables represented financing of used
vehicles, and the remainder of the Receivables represented
financing of new vehicles; (E) as of the Cutoff Date, the average
remaining principal balance of the Receivables was not more than
$_________; and (F) as of the Cutoff Date, the weighted average
Annual Percentage Rate of the Receivables was not more than ____%.
4. Principal Balance; Scheduled Payments. (A) Each
Receivable has an outstanding principal balance as of the Cutoff
Date of not less than $_____ and not more than $______; (B) each
Receivable originated on or prior to _________ __, ____ had at
least one scheduled payment made prior to the date that is two
Business Days prior to the Closing Date; and (C) each Receivable
originated after _________ __, ____ either (I) has had at least
B-1
one scheduled payment made prior to the date that is two Business
Days prior to the Closing Date or (II) will have a first scheduled
payment made within __ days of the due date thereof.
5. Characteristics of Obligors. As of the Cutoff Date, no
Obligor on any Receivable (A) was the subject of any federal,
state or other bankruptcy, insolvency or similar proceeding
pending on the date of application that is not discharged, (B) was
currently the subject of a judgment in favor of Paragon, and (C)
had its related Financed Vehicle repossessed (or subject to
repossession).
6. Billing Addresses for Obligors. Based on the billing
addresses of the Dealers and the Principal Balances as of the
Cutoff Date, the Obligors of approximately ___% of the Receivables
were located in _______________, the Obligors of approximately
___% of the Receivables were located in _______________, the
Obligors of approximately ___% of the Receivables were located in
_____________ and the Obligors of approximately ___% of the
Receivables were located in other states.
7. Location of Receivable Files. There exists a complete
Receivable File with respect to each Receivable that will have
been delivered to the Trustee on or prior to the Closing Date and
any exceptions set forth in the Trustee's certificate will be
corrected within 30 days.
8. Schedule of Receivables. The information with respect
to the Receivables set forth in the Schedule of Receivables has
been produced from the Electronic Ledger and is true and correct
in all material respects as of the close of business on the Cutoff
Date.
9. Adverse Selection. No selection procedures having a
material adverse effect on the Trust or Certificateholders have
been utilized in selecting the Receivables from those receivables
owned by Paragon that met the selection criteria contained in this
Agreement.
10. Compliance with Law. Neither the Receivables nor the
sale of the related Financed Vehicles, at the time the related
Receivable was originated or made, contravened in any material
respect, and, at the execution of this Agreement contravenes in
any material respect, any 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 Xxxxxxxx-Xxxx Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, each applicable state Motor Vehicle
Retail Installment Sales Act, and state adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and
disclosure laws.
11. No Government Obligor. None of the Receivables is due
from the United States of America or any state or from any other
Governmental Authority.
B-2
12. Security Interest in Financed Vehicle. Each
Receivable has created, or will create when all required
procedures are completed by the Servicer, a valid, subsisting and
enforceable first priority perfected security interest in the
related Financed Vehicle in favor of Paragon as secured party, and
such security interest is, or will be upon the completion of all
required procedures by the Servicer, prior to all other liens upon
and security interests in such Financed Vehicle that now exist or
may hereafter arise or be created (except, as to priority, for any
tax liens or mechanics' liens that may arise after the Closing
Date).
13. Binding Obligation; Receivables in Force. Each
Receivable is a binding obligation of its related Obligor and no
Receivable has been satisfied, subordinated or rescinded, nor has
any Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
14. No Amendments. As of the Cutoff Date, no Receivable has
been amended, altered or modified; and no provision of any Receivable
has been waived, other than any provisions requiring vendor single
interest insurance or late payment fees and those waivers,
alterations or modifications specifically permitted pursuant to
Section 3.2 of this Agreement. As of the Cutoff Date, no
Receivable has been modified as a result of application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
15. No Defenses. As of the Cutoff Date, no right of
rescission, setoff, counterclaim or defense exists with respect to
any Receivable. The operation of the terms of any Receivable or
the exercise of any right thereunder will not render such
Receivable unenforceable in whole or in part or subject to any
such right of rescission, setoff, counterclaim or defense.
16. No Liens. As of the Cutoff Date, there are no liens
or claims existing or that have been filed for work, labor,
storage or materials relating to any of the related Financed
Vehicles that are liens prior to the security interest in the
related Financed Vehicles granted by the related Receivables.
17. No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer and was sold by the Dealer to Paragon
without fraud or misrepresentation on the part of such Dealer in
either case.
18. No Default; Repossession. Except for payment
delinquencies continuing for a period of less than 31 days as of
the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Receivable has occurred; no
continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has arisen; the
Seller shall not waive and has not waived any of the foregoing;
and no related Financed Vehicle has been repossessed as of the
Cutoff Date.
B-3
19. Insurance; Other. Paragon, in accordance with its
customary procedures, has determined (A) that each Obligor, at the
time of origination, had obtained or agreed to obtain insurance
covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage (i) in an amount at least
equal to the lesser of (x) its maximum insurable value or (y) the
principal amount due from the Obligor under the related Receivable
and (ii) naming Paragon as loss payee, (B) each Receivable that
finances the cost of premiums for credit life and accident or
health insurance is covered by an insurance policy and certificate
of insurance naming Paragon as creditor under each such insurance
policy and certificate of insurance, and (C) as to each Receivable
that includes financing for the cost of a service contract, the
respective Financed Vehicle that secures the Receivable is covered
by a service contract. No Receivable has force-placed insurance.
20. Title. No Receivable has been sold, transferred,
assigned or pledged by Paragon to any Person other than the Seller
[or CTS (and the CTS Liens shall be released as of the Closing
Date)] or any such pledge has been released on or prior to the
Closing Date. Immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to
each Receivable, and was the sole owner thereof, free and clear of
all Liens and, immediately upon the transfer thereof, the Trust
shall have good and marketable title to each such Receivable, and
will be the sole owner thereof, free and clear of all Liens (other
than Permitted Liens), and the transfer has been perfected under
the UCC. No Dealer has a participation in, or other right to
receive, proceeds of any Receivable. The Seller has not taken any
action to convey any right to any Person that would result in such
Person having a right to payments received under the related
Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
21. Marking of Receivables. On the Closing Date, Paragon
or the Seller will have caused the portions of the Electronic
Ledger relating to the Receivables to be clearly and unambiguously
marked to show that the Receivables have been sold by Paragon to
the Seller in accordance with the terms of the Receivables
Purchase Agreement and sold by the Seller to the Trust in
accordance with the terms of this Agreement and pledged to the
Trustee for the benefit of the Certificateholders under this
Agreement.
22. Computer Tape. The Computer Tape made available by
the Seller to the Trustee on the Closing Date was complete and
accurate in all material respects as of the Cutoff Date and
includes a description of the same Receivables that are described
in the Schedule of Receivables.
23. Lawful Assignment. No Receivable has been originated
in, or is subject to the laws of, any jurisdiction under which the
sale, contribution, transfer and assignment of such Receivable
under this Agreement shall be unlawful, void or voidable. The
Seller has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any
portion of the Receivables.
B-4
24. All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Trustee a first priority perfected ownership interest in the
Receivables and the other Trust Property have been made.
25. One Original. There is only one original executed
copy of each Receivable.
26. Valid and Binding Obligation of Obligor. Each
Receivable is the legal, valid and binding obligation of the
Obligor thereunder and is enforceable in accordance with its
terms, except only as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally; all parties to such contract had
full legal capacity to execute and deliver such contract and all
other documents related thereto and to grant the security interest
purported to be granted thereby.
27. Title Documents. (A) If any Financed Vehicle was
originated in a state in which notation of security interest on
the title document is required or permitted to perfect such
security interest, the title document for such Financed Vehicle
shows, or if a new or replacement title document is being applied
for with respect to such Financed Vehicle, the title document will
be received within 180 days and will show, Paragon named as the
original secured party under the related Receivables as the Holder
of a first priority security interest in such Financed Vehicle,
and (B) if any Financed Vehicle was originated in a state in which
the filing of a financing statement under the UCC is required to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show Paragon named as the
original secured party under the related Receivable, and in either
case, no further action is required under the UCC or any titling
statute or act to continue the perfected status of the first
priority security interest in the Financed Vehicle against
creditors of and transferees from the original Obligor.
28. Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
29. Tax Liens. As of the Cutoff Date, there is no Lien
against the related Financed Vehicles for delinquent taxes.
B-5
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
[Attached.]
A-1
EXHIBIT B
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: [Norwest Bank Minnesota, National Association]
Re: Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of ________ __,
____, between Paragon Auto Receivables
Corporation (the "Seller"), Paragon Acceptance
Corporation, individually and in its capacity as
Servicer (the "Servicer"), and Norwest Bank
Minnesota, National Association, as Trustee
[and Backup Servicer] (the "Trustee")
In connection with the administration of the Receivables held by
you as the Trustee, we request the release, and acknowledge receipt, of the
Receivable and related Receivable File described below, for the reason
indicated.
Obligor's Name, Customer Account Number and Vehicle Identification Number
Reason for Requesting Documents (check one)
_____ 1. Receivable Paid in Full. All amounts received in connection with
such payments have been deposited into the Lockbox Account as
required pursuant to Section 3.2 of the Servicing Agreement
_____ 2. Receivable Purchased from Trust pursuant to Section 2.5 or 3.7
of the Servicing Agreement
_____ 3. Receivable is being serviced or subject to enforcement of
rights and remedies pursuant to Section 2.2(b) of the Servicing
Agreement
_____ 4. Other (explain)_______________________________
If item 1 or 2 above is checked, and if all or part of the Receivable or
Receivable File was previously released to us, please release to us any
additional documents in your possession relating to the above specified
Receivable.
If item 3 or 4 above is checked, upon our return of all of the above
documents to you as the Trustee, please acknowledge your receipt by signing
in the space indicated below, and returning this form.
B-1
PARAGON ACCEPTANCE CORPORATION
as Servicer
By: ________________________________
Name: _______________________________
Title: ______________________________
Date: _______________________________
DOCUMENTS RETURNED TO THE TRUSTEE
[Norwest Bank Minnesota, National Association]
(Trustee)
By: ________________________________
Name: _______________________________
Title: ______________________________
Date: _______________________________
B-2
FORM OF CLASS A CERTIFICATE
EXHIBIT C
PARAGON AUTO RECEIVABLES TRUST ____-_
____% ASSET BACKED CERTIFICATE, CLASS A
Evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of fixed rate simple interest retail
motor vehicle loans and/or retail installment sales contracts (the
"Receivables") secured by the new and used automobiles and light trucks
financed thereby (the "Financed Vehicles") and sold to the Trust by Paragon
Auto Receivables Corporation.
THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
AND DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF PARAGON AUTO
RECEIVABLES CORPORATION, PARAGON ACCEPTANCE CORPORATION OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE AND THE RECEIVABLES ARE NOT DEPOSITS AND ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER CUSIP ______________________
-----------------
$___________________________
Original Certificate Amount
C-1
THIS CERTIFIES THAT ____________________ is the registered owner
of a ______________ dollars, nonassessable, fully paid, fractional
undivided interest in Paragon Auto Receivables Trust ____-_ (the "Trust")
formed pursuant to a Pooling and Servicing Agreement dated as of ______ __,
___ (the "Agreement") between Paragon Auto Receivables Corporation (the
"Seller"), Paragon Acceptance Corporation (the "Servicer") and ___________,
a ____________ corporation, as trustee (the "Trustee").
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "____%
Asset Backed Certificates, Class A" (the "Class A Certificates"). Also
issued under the Agreement are Certificates designated as "____% Asset
Backed Certificates, Class B" (the "Class B Certificates"). The Class A
Certificates and the Class B Certificates are collectively called the
"Certificates." This Certificate is issued under and is subject to the
terms, provisions, and conditions of the Agreement, to which the Holder of
this Certificate by virtue of the acceptance hereof assents and by which
such Holder is bound. The Trust Property includes (as more fully described
in the Agreement) a pool of Receivables, certain monies received under the
Receivables after _______ __, ___ (the "Cutoff Date"), security interests
in the Financed Vehicles, and proceeds of the foregoing.
Subject to the terms and conditions of the Agreement (including
the availability of funds for distributions) and until the obligations
created by the Agreement shall have terminated in accordance therewith,
there will be distributed, but only from funds on deposit in the Collection
Account, on the __th day of each month or, if such __th day is not a
Business Day, the next succeeding Business Day (each such date, a "Payment
Date"), commencing _______ __, ____ , to the Person in whose name this
Certificate is registered on the preceding Business Day (the "Record
Date"), such Holder's fractional undivided interest in the amounts to be
distributed to Class A Holders pursuant to the Agreement on such Payment
Date.
Distributions on this Certificate shall be made by the Trustee by
check mailed to the Holder of record at its address as it appears in the
Certificate Register without the presentation or surrender of this
Certificate or the making of any notation hereon, except that with respect
to a Certificate registered in the name of a Clearing Agency or its
nominee, distributions shall be made by wire transfer of immediately
available funds. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate
at the office or agency maintained for that purpose by the Trustee.
This Certificate does not purport to summarize the Agreement and
reference is hereby made to the Agreement for information with respect to
the rights, benefits, obligations and duties evidenced thereby.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
C-2
Each Holder, by its acceptance of a Certificate or a beneficial
interest in a Certificate, acknowledges and agrees that they intend that
the Trust be classified (for federal tax purposes) as a grantor trust under
Subpart E, Part I of Subchapter J of the Internal Revenue Code of which the
Holders are owners, rather than as an association taxable as a corporation.
C-3
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not
in its individual capacity, has caused this Certificate to be duly
executed.
PARAGON AUTO RECEIVABLES TRUST ____-_
By: __________________,
as Trustee
By: _________________________________________________
Authorized Officer
DATED:
[SEAL]
ATTEST:
_____________________________________________________
Authorized Officer
Trustee's Certificate of
Authentication:
This is one of the Class A Certificates referred
to in the within-mentioned Agreement.
_____________________________,
as Trustee
By: ______________________________________________
Authorized Officer
C-4
FORM OF CLASS B CERTIFICATE
EXHIBIT D
PARAGON AUTO RECEIVABLES TRUST ____-_
____% ASSET BACKED CERTIFICATE, CLASS B
Evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of fixed rate simple interest retail
motor vehicle loans and/or retail installment sales contracts (the
"Receivables") secured by the new and used automobiles and light trucks
financed thereby (the "Financed Vehicles") and sold to the Trust by Paragon
Auto Receivables Corporation.
THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
AND DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF PARAGON AUTO
RECEIVABLES CORPORATION, PARAGON ACCEPTANCE CORPORATION OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE AND THE RECEIVABLES ARE NOT DEPOSITS AND ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE PURCHASED BY EMPLOYEE BENEFIT PLANS THAT ARE
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), OR PERSONS USING ASSETS OF SUCH PLANS.
NUMBER CUSIP ______________________
_________________
$___________________________
Original Certificate Xxxxxx
X-0
THIS CERTIFIES THAT ____________________ is the registered owner
of a ______________ dollars, nonassessable, fully paid, fractional
undivided interest in the Paragon Auto Receivables Trust ____-_ (the
"Trust") formed pursuant to a Pooling and Servicing Agreement dated as of
______ __, ___ (the "Agreement") between Paragon Auto Receivables
Corporation, a Delaware corporation (the "Seller"), Paragon Acceptance
Corporation (the "Servicer") and ____________, a ___________ corporation,
as trustee (the "Trustee").
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "____%
Asset Backed Certificates, Class B" (called the "Class B Certificates").
Also issued under the Agreement are Certificates designated as ____% Asset
Backed Certificates, Class A (the "Class A Certificates"). The Class A
Certificates and the Class B Certificates are collectively called the
"Certificates." This Certificate is issued under and is subject to the
terms, provisions, and conditions of the Agreement, to which the Holder of
this Certificate by virtue of the acceptance hereof assents and by which
such Holder is bound. The Trust Property includes (as more fully described
in the Agreement) a pool of Receivables, certain monies received under the
Receivables after _______ __, ___ (the "Cutoff Date"), security interests
in the Financed Vehicles, and proceeds of the foregoing. The rights of the
Holder of the Class B Certificates are subordinated to the rights of the
Holders of the Class A Certificates to the extent set forth in the
Agreement.
Subject to the terms and conditions of the Agreement (including
the availability of funds for distributions and the subordination of the
Class B Certificates) and until the obligations created by the Agreement
shall have terminated in accordance therewith, there will be distributed,
but only from funds on deposit in the Collection Account, on the __th day
of each month or, if such __th day is not a Business Day, the next
succeeding Business Day (each such date, a "Payment Date"), commencing
______ __, ____ , to the Person in whose name this Certificate is
registered at the close of business on the preceding Business Day (the
"Record Date"), such Holder's fractional undivided interest in the amounts
to be distributed to Class B Holders pursuant to the Agreement on such
Payment Date.
Distributions on this Certificate shall be made by the Trustee by
check mailed to the Holder of record at its address as it appears in the
Certificate Register without the presentation or surrender of this
Certificate or the making of any notation hereon, except that with respect
to a Certificate registered in the name of a Clearing Agency or its
nominee, distributions shall be made by wire transfer of immediately
available funds. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate
at the office or agency maintained for that purpose by the Trustee.
This Certificate does not purport to summarize the Agreement and
reference is hereby made to the Agreement for information with respect to
the rights, benefits, obligations and duties evidenced thereby.
D-2
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
Each Holder, by its acceptance of a Certificate or a beneficial
interest in a Certificate, acknowledges and agrees that they intend that
the Trust be classified (for federal tax purposes) as a grantor trust under
Subpart E, Part I of Subchapter J of the Internal Revenue Code of which the
Holders are owners, rather than as an association taxable as a corporation.
D-3
IN WITNESS WHEREOF, Trustee, on behalf of the Trust, and not in
its individual capacity, has caused this Certificate to be duly executed.
PARAGON AUTO RECEIVABLES TRUST ____-_
By: _________________,
as Trustee
By: _____________________________________________
Authorized Officer
DATED:
[SEAL]
ATTEST:
________________________________________________
Authorized Officer
Trustee's Certificate of
Authentication:
This is one of the Class B Certificates referred
to in the within-mentioned Agreement.
____________________,
as Trustee
By: __________________________________________
Authorized Officer
D-4
