1
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 1, 2, 24, 25 AND 26 HAS BEEN
REPLACED WITH ASTERISKS.
EXHIBIT 10.4
INDENTURE AND SERVICING AGREEMENT
--------------------
MIDLAND FUNDING 98-A CORPORATION,
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS TRUSTEE AND BACKUP SERVICER
and
MIDLAND CREDIT MANAGEMENT, INC.,
AS SERVICER
and
ASSET GUARANTY INSURANCE COMPANY
as Note Insurer
Dated as of March 31, 1999
--------------------
FLOATING RATE MIDLAND RECEIVABLES-BACKED VARIABLE FUNDING NOTES, SERIES 1999-A
---------------------------
2
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS ......................................................... 1
Section 1.01 Definitions .................................................. 1
Section 1.02 Interpretation ............................................... 19
ARTICLE II. CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES;
REPRESENTATIONS REGARDING RECEIVABLES; DISCHARGE ......................... 20
Section 2.01 Creation of Trust Estate ..................................... 20
Section 2.02 Custody Of Receivable Files .................................. 22
Section 2.03 Acceptance By Trustee ........................................ 22
Section 2.04 Representations and Warranties of Issuer as to the
Receivables .................................................. 22
Section 2.05 Reacquisition for Receivables Upon Breach .................... 26
Section 2.06 Duties of Servicer as Custodian .............................. 27
Section 2.07 Instructions; Authority to Act ............................... 28
Section 2.08 Indemnification of Custodian ................................. 28
Section 2.09 Effective Period and Termination ............................. 29
Section 2.10 Agent for Service ............................................ 29
Section 2.11 Satisfaction and Discharge of Indenture ...................... 29
Section 2.12 Application of Trust Money ................................... 30
ARTICLE III. ADMINISTRATION AND SERVICING OF RECEIVABLES ....................... 30
Section 3.01 Duties of Servicer ........................................... 30
Section 3.02 Collection of Receivable Payments ............................ 31
Section 3.03 Covenants of Servicer ........................................ 31
Section 3.04 Repurchase in Respect of Receivables Upon Breach and Other
Events ....................................................... 32
Section 3.05 Servicing Fee; Payment of Certain Expenses By Servicer ....... 33
Section 3.06 Monthly Servicer Report; Servicer's Remittance Date
Certificate .................................................. 33
Section 3.07 Annual Statement as to Compliance; Notice of Default ......... 34
Section 3.08 Periodic Accountants Report .................................. 34
Section 3.09 Quarterly Servicer's Compliance Report ....................... 35
Section 3.10 Access to Certain Documentation and Information .............. 35
Section 3.11 Reports to Noteholders, the Rating Agency, the Note Insurer
and the Placement Agent ...................................... 35
Section 3.12 Tax Treatment ................................................ 36
ARTICLE IV. THE ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS .................. 36
Section 4.01 Accounts ..................................................... 36
Section 4.02 Collections .................................................. 37
Section 4.03 Additional Deposits .......................................... 37
Section 4.04 Allocations and Payments ..................................... 38
Section 4.05 Reserve Account .............................................. 41
Section 4.06 Note Payment Account ......................................... 42
i
3
Section 4.07 Statements to Noteholders .................................... 42
Section 4.08 Application of Trust Money ................................... 43
ARTICLE V ...................................................................... 43
THE POLICY ..................................................................... 43
Section 5.01 The Policy ................................................... 43
Section 5.02 Claims Under Policy .......................................... 43
Section 5.03 Surrender of Policy .......................................... 44
Section 5.04 Rights of Subrogation and Assignment ......................... 44
ARTICLE VI. THE NOTES AND FUNDINGS ............................................. 45
Section 6.01 The Notes .................................................... 45
Section 6.02 Authentication and Delivery of the Notes ..................... 45
Section 6.03 Increase in Maximum Principal Amount of Notes; Issuance of
Additional Notes; Increase in Maximum Facility Amount ........ 46
Section 6.04 Registration of Transfer and Exchange of Notes ............... 47
Section 6.05 Mutilated, Destroyed, Lost or Stolen Notes ................... 51
Section 6.06 Persons Deemed Owners ........................................ 52
Section 6.07 Access to List of Noteholders' Names and Addresses ........... 52
Section 6.08 Surrendering of Notes ........................................ 52
Section 6.09 Maintenance of Office or Agency .............................. 52
Section 6.10 Fundings ..................................................... 53
Section 6.11 Conditions Precedent to Each Funding ......................... 54
Section 6.12 Interest Calculations; Interest Payments ..................... 55
Section 6.13 Repayments of Principal and Reborrowings ..................... 55
Section 6.14 Confidential Information ..................................... 55
ARTICLE VII. THE ISSUER ........................................................ 56
Section 7.01 Representations of Issuer .................................... 56
Section 7.02 Repayment in Respect of Receivables Upon Breach .............. 62
Section 7.03 Liability of Issuer .......................................... 63
Section 7.04 Merger or Consolidation of, or Assumption of the
Obligations of, the Issuer; Certain Limitations .............. 63
Section 7.05 Limitation on Liability of Issuer and Others ................. 64
Section 7.06 Issuer May Own Notes ......................................... 65
Section 7.07 Covenants of Issuer .......................................... 65
ARTICLE VIII. THE SERVICER ..................................................... 70
Section 8.01 Representations of Servicer .................................. 70
Section 8.02 Liability of Servicer; Indemnities ........................... 72
Section 8.03 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer ................................. 73
Section 8.04 Limitation on Liability of Servicer and Others ............... 74
Section 8.05 Servicer Not to Resign ....................................... 74
ii
4
Section 8.06 Backup Servicing ............................................. 74
Section 8.07 General Covenants of Servicer ................................ 76
ARTICLE IX. SERVICER DEFAULT; EVENTS OF DEFAULT; REMEDIES ...................... 80
Section 9.01 Servicer Default ............................................. 80
Section 9.02 Consequences of a Servicer Default ........................... 83
Section 9.03 Backup Servicer to Act; Appointment of Successor Servicer .... 84
Section 9.04 Notification to Note Insurer, Noteholders, Rating Agency
and Placement Agent .......................................... 85
Section 9.05 Waiver of Past Servicer Defaults ............................. 85
Section 9.06 [Reserved] ................................................... 86
Section 9.07 Subservicers ................................................. 86
Section 9.08 Events of Default ............................................ 87
Section 9.09 Acceleration of Maturity; Rescission and Annulment ........... 88
Section 9.10 Collection of Indebtedness and Suits for Enforcement by
Trustee ...................................................... 89
Section 9.11 Remedies ..................................................... 89
Section 9.12 Trustee May File Proofs of Claim ............................. 90
Section 9.13 Trustee May Enforce Claims without Possession of Notes ....... 91
Section 9.14 Application of Money Collected ............................... 91
Section 9.15 Limitation on Suits .......................................... 91
Section 9.16 Unconditional Rights of Noteholders to Receive Principal
and Interest ................................................. 92
Section 9.17 Restoration of Rights and Remedies ........................... 92
Section 9.18 Rights and Remedies Cumulative ............................... 92
Section 9.19 Delay or Omission Not Waiver ................................. 92
Section 9.20 Control by Controlling Party ................................. 93
Section 9.21 Waiver of Past Defaults ...................................... 93
Section 9.22 Undertaking for Costs ........................................ 93
Section 9.23 Waiver of Stay or Extension Laws ............................. 93
Section 9.24 Sale of Trust Estate ......................................... 94
Section 9.25 Action on Notes .............................................. 95
Section 9.26 No Recourse to Other Trust Estates or Other Assets of the
Issuer ....................................................... 96
Section 9.27 License ...................................................... 96
ARTICLE X. THE TRUSTEE ......................................................... 96
Section 10.01 Duties of Trustee ............................................ 96
Section 10.02 Trustee's Certificate ........................................ 98
Section 10.03 Trustee's Release of Removed Receivables ..................... 98
Section 10.04 Certain Matters Affecting the Trustee ........................ 98
Section 10.05 Limitation on Trustee's Liability ............................ 99
Section 10.06 Trustee May Own Notes ........................................ 101
Section 10.07 Trustee's Fees and Expenses .................................. 101
Section 10.08 Indemnity of Trustee, Backup Servicers and Successor
Servicer ..................................................... 101
Section 10.09 Eligibility Requirements for Trustee ......................... 102
Section 10.10 Resignation or Removal of Trustee ............................ 102
Section 10.11 Successor Trustee ............................................ 103
iii
5
Section 10.12 Merger or Consolidation of Trustee ........................... 103
Section 10.13 Appointment of Co-Trustee or Separate Trustee ................ 104
Section 10.14 Representations and Warranties of Trustee .................... 105
Section 10.15 Tax Returns .................................................. 106
Section 10.16 Trustee May Enforce Claims Without Possession of Notes ....... 106
Section 10.17 Suit for Enforcement ......................................... 106
Section 10.18 Rights of Controlling Party to Direct Trustee ................ 106
Section 10.19 Confidential Information ..................................... 107
ARTICLE XI. REDEMPTION; PARTIAL PREPAYMENT; FULL REPAYMENT ..................... 107
Section 11.01 Redemption at the Option of the Issuer; Election to Redeem ... 107
Section 11.02 Deposit of Redemption Amount ................................. 108
Section 11.03 Notice of Redemption by the Trustee .......................... 108
Section 11.04 Surrendering of Notes ........................................ 108
Section 11.05 Partial Prepayment at the Option of the Issuer ............... 108
Section 11.06 Full Prepayment at the Option of the Issuer .................. 109
Section 11.07 Deposit and Payment of Prepayment Amount ..................... 109
Section 11.08 Release of Security Interest ................................. 109
ARTICLE XII. MISCELLANEOUS PROVISIONS .......................................... 110
Section 12.01 Amendment .................................................... 110
Section 12.02 Protection of Security Interest in Trust Estate ............. 111
Section 12.03 Limitation of Rights of Noteholders .......................... 113
Section 12.04 Governing Law ................................................ 113
Section 12.05 Notices ...................................................... 113
Section 12.06 Severability of Provisions; Counterparts ..................... 113
Section 12.07 Assignment ................................................... 114
Section 12.08 No Petition .................................................. 114
Section 12.09 Noteholder Direction ......................................... 114
Section 12.10 No Substantive Review of Compliance Documents ................ 114
Section 12.11 Prevention of Trading of Notes ............................... 115
Exhibit A Monthly Servicer Report
Exhibit B Trustee's Certificate
Exhibit C Form of Note
Exhibit D Transferee Certificate
Exhibit E List of Fields
iv
6
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
This Indenture and Servicing Agreement, dated as of March 31, 1999 (the
"Agreement") is executed by and among Midland Funding 98-A Corporation, as
issuer (the "Issuer"), Norwest Bank Minnesota, National Association, as trustee
(in such capacity, the "Trustee"), and as backup servicer (in such capacity, the
"Backup Servicer"), Midland Credit Management, Inc., as servicer (the
"Servicer") and Asset Guaranty Insurance Company, as note insurer (the "Note
Insurer").
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the Noteholders to
the extent provided herein:
ARTICLE I.
DEFINITIONS
SECTION 1.01 DEFINITIONS.
Except as otherwise provided in this Agreement, whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Accounts" means the Collection Account, the Reserve Account and the
Note Payment Account.
"Accredited Investor" shall have the meaning assigned to such term in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
"Acquisition Price" means, [*]
1
7
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
[*]
"Additional Servicing Fee" means the amount, calculated in accordance
with Section 9.03, which is payable to the Successor Servicer and which exceeds
the amount of the Servicing Fee.
"Adverse Claim" means a lien, security interest, charge, encumbrance or
other right or claim of any Person.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the term "controlling" and
"controlled" have meanings correlative to the foregoing.
2
8
"Agency Placement" means, with respect to any Receivable, the placement of
such Receivable with a collection agency or similar entity for the purpose of
collection thereof.
"Agreement" means this Indenture and Servicing Agreement, relating to
Floating Rate Midland Receivables-Backed Variable Funding Notes, Series 1998-A
dated as of March 31, 1999 among Midland Funding 98-A Corporation, as Issuer,
Norwest Bank Minnesota, National Association, as Trustee and Backup Servicer,
Midland Credit Management, Inc., as Servicer, and Asset Guaranty Insurance
Company, as Note Insurer, as the same may be amended or supplemented from time
to time.
"Applicants" shall have the meaning specified in Section 6.06.
"Asset Sale Agreement" means each agreement entered into between
Midland Credit Management, Inc. and each Originating Institution in
connection with the purchase of the Receivables therein from such Originating
Institution.
"Available Funds" means, with respect to any Payment Date and the
immediately preceding Determination Date, the sum of (i) the Net Proceeds with
respect to each Receivable received in the Collection Account during the
Collection Period then most recently concluded, plus (ii) all other available
funds on deposit in the Collection Account (other than Net Proceeds of
Receivables) as of the opening of business of the Trustee on such Determination
Date.
"Backup Servicer" means Norwest Bank Minnesota, National Association
and any successor in interest.
"Backup Servicing Fee" means the fee payable to the Backup Servicer on
each Payment Date for services rendered pursuant to this Agreement, which shall
be equal to the greater of $1,250 per month or an amount per month equal to
one-twelfth of fifteen basis points (0.15%) per annum times the average daily
Note Balance during the preceding Collection Period.
"Benefit Plan" means with respect to any Person any employee benefit plan
as defined in Section 3(3) of ERISA in respect of which the Person or any ERISA
Affiliate of such Person is, or at any time during the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in the State of Kansas, the State of Minnesota or the
State of New York are required or authorized by law, regulation, executive order
or governmental decree to be closed.
"Bylaws" means the bylaws of Issuer.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer.
"Charged-Off Balance" means, with respect to each Receivable, the original
charged-off balance as required to be set forth in the related Schedule of
Receivables.
"Closing Date" means March 31, 1999.
3
9
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Floating Rate Midland Receivables-Backed Variable Funding Notes,
Series 1999-A Collection Account."
"Collection Period" means, with respect to any Remittance Date,
Determination Date or Payment Date, the period beginning on the first day of the
calendar month immediately preceding the month in which such Remittance Date,
Determination Date or Payment Date occurs and ending on the last day of such
calendar month; provided, however, that the initial Collection Period begins on
the Closing Date.
"Consumer Account" means any consumer bank or retail credit card
account.
"Controlling Party" means, at any time during which an Insurer Default
shall be in effect, the Noteholders with Voting Interests of at least 51% of all
outstanding Voting Interests and, at all other times, the Note Insurer.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Agreement is located at Xxxxx
Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention:
Corporate Trust Services/Asset-Backed Administration.
"Customary Procedures" means the customary practices, policies, standards
and procedures of the Servicer relating to the acquisition and collection of
comparable defaulted consumer receivables that it services for itself or others,
in each case as in effect on the Closing Date (which include backup servicing
files, disaster recovery plans and enforcement of rights under Asset Sale
Agreements), as the same may be modified by the Servicer from time to time
thereafter with, in each case of a material change thereto, prompt notice to the
Note Insurer.
"Determination Date" means, with respect to any Payment Date, the second
Business Day immediately preceding such Payment Date.
"Eligible Account" means (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "AA" or better by the
Required Rating Agencies then providing a long term debt rating for such
institution and in the highest available short term rating category by the
Required Rating Agencies then providing a short term debt rating for such
institution, and that is (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking laws,
(ii) a banking or savings and loan association duly organized, validly existing
and in good standing under the applicable laws of any state, (iii) a national
banking association duly organized, validly existing and in good standing under
the federal banking laws, or (iv) a principal subsidiary of a bank holding
company, or (B) a segregated trust account (which shall be a "special deposit
account") maintained in the trust department of a
4
10
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $50,000,000, acting in its fiduciary
capacity. Any Eligible Accounts maintained with the Trustee shall conform to the
preceding clause (B). Any Account maintained at an institution other than the
Trustee must be subject to an agreement with such institution among Servicer,
Issuer and Trustee which must be satisfactory to Note Insurer in form and
substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means with respect to any Person (a) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as such Person; (b) a trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with such Person, or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person, any corporation described in clause (a) above or any trade or
business described in clause (b) above.
"Estimated Remaining Collections" means, as of any date of determination,
for any Pool then subject to this Agreement, or the aggregate amount of all
Pools then subject to this Agreement, as applicable, the Servicer's most recent
estimate prior to such date of the remaining amount to be collected over the
remaining estimated life of the applicable Pool or Pools, in accordance with its
standard valuation process for groups of Consumer Accounts. Unless otherwise
agreed to by the Controlling Party and the Servicer, the most recent estimate of
the Estimated Remaining Collections of any Pool at any time of determination in
accordance with Servicer's standard valuation process shall be the remainder of
the Estimated Remaining Collections for such Pool in effect on the date on which
such Pool is acquired by the Issuer minus the aggregate amount of collections on
Receivables of such Pool received in the Collection Account on or prior to such
date of determination.
"Event of Default" shall have the meaning specified in Section 9.08.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facility Fee" means, for each Collection Period during but not after the
Funding Period, an amount equal to (i) the Maximum Facility Amount minus the
average daily Note Balance during the Collection Period, times (ii) one-eighth
of one percent (0.125%) per annum, times (iii) one-twelfth; provided, that the
amount of the Facility Fee shall be prorated for the Collection Period in which
the Closing Date occurs and in which the Funding Period ends by multiplying (i)
the aforesaid amount times (ii) a fraction, the numerator of which is the number
of days in such Collection Period either from and including the Closing Date or
to and including the last day of the Funding Period, and the denominator of
which is the number of days in such month.
"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
"Final Payment Date" shall mean the earlier of (i) the Payment Date
occurring five (5) years after the end of the Funding Period or (ii) the Payment
5
11
Date which follows the Payment Date on which all proceeds of a sale of the Trust
Estate pursuant to Section 9.24(c) were distributed.
"FNMA" means the Federal National Mortgage Association, and its
successors.
"Funding" means an advance by the Noteholders to the Issuer pursuant to
Article VI.
"Funding Amount" means, with respect to a Pool and the Funding Date on
which such Pool is acquired by Issuer, the amount loaned to Issuer on such
Funding Date in respect of such Pool, which in no event shall be greater than
the least of (i) an amount equal to (A) Ninety-five Percent (95%) of the
Acquisition Price of any such Pool consisting solely of Receivables in respect
of Major Cards or Ninety Percent (90%) of the Acquisition Price of any such Pool
consisting solely of Receivables in respect of Other Cards, minus (B) any Net
Proceeds collected by the Seller from the date it acquired such Receivables to
the date which is three (3) Business Days prior to such Funding Date, (ii) an
amount equal to the aggregate of Fifty Percent (50%) of the Estimated Remaining
Collections for such Pool and (iii) the Maximum Facility Amount minus the
current Note Balance. The Funding Amount with respect to each Pool shall be
calculated in accordance with this definition and shall be the amount designated
as such on the Schedule of Receivables for that Pool.
"Funding Date" means any Business Day during the Funding Period on which
the Issuer obtains a Funding in accordance with the terms of this Agreement.
"Funding Date Minimum Amount" means $500,000.
"Funding Period" means the period of time which begins on the Closing Date
and which terminates upon the earlier to occur of (i) the Scheduled Termination
Date, and (ii) the occurrence of a Funding Termination Event.
"Funding Termination Event" means any of the following conditions or
events:
(a) the occurrence and continuation of any Event of Default;
(b) the occurrence and continuation of any Servicer Default;
(c) the twelfth Payment Date to occur after the Collection Period in which
the Funding occurred with respect to a Pool and there shall not have been
deposited to the Collection Account after the Funding Date for such Pool and
prior to such twelfth Payment Date aggregate Net Proceeds of Receivables of such
Pool equal to or exceeding the Funding Amount with respect to such Pool;
(d) on any Determination Date, with respect to all Pools then subject to
this Agreement (other than Pools which the Issuer has acquired during the six
Collection Periods immediately preceding such Determination Date) (such
non-excluded Pools being the "Relevant Pools"), the sum of the cumulative Net
Proceeds deposited in the Collection Account in respect of the Receivables of
all Relevant Pools, is less than the sum of the following amounts for each of
the
6
12
Relevant Pools: an amount equal to twenty-five percent (25%) of the Estimated
Remaining Collections as calculated at the time of acquisition for each of the
Relevant Pools, multiplied by a fraction, the numerator of which is the number
of months from the Funding Date for such Pool to the end of the Collection
Period preceding such Determination Date, and the denominator of which is 48;
(e) as of any Determination Date, the Note Balance is greater than the
amount equal to Fifty Percent (50%) of the Estimated Remaining Collections,
after giving effect to any reduction of the Note Balance to be made on the
Payment Date immediately following such Determination Date (but only to the
extent sufficient funds are on deposit in the Collection Account on such
Determination Date, without giving effect to proceeds of the Policy, to effect
such reduction of the Note Balance); or
(f) the redemption of the Notes in full pursuant to Section 11.01.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (ii) consistently applied with past financial statements of the Servicer and
its subsidiaries; provided that a certified public accountant would, insofar as
the use of such accounting principles is pertinent, be in a position to deliver
an unqualified opinion (other than a qualification regarding changes in
generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
"Holder" shall have the meaning specified in Section 6.13.
"Index Rate" means the rate of interest per annum appearing on Telerate
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) on the Reset Date
for a term of one week; provided, however, if more than one rate is specified on
Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such
rates. If, for any reason, such rate is not available, the term "Index Rate"
shall mean the rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) on the Reset Date for a term of one week; provided, however, if
more than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates.
"Initial Note Balance" means the Funding Amount on the first Funding Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or the filing of a petition against such Person
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which case remains unstayed and
undismissed within 30 days of such filing, or the appointing of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or
7
13
similar official for such Person or for any substantial part of its property, or
the ordering of the winding-up or liquidation of such Person's business; or (b)
the commencement by such Person of a voluntary case under any applicable
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 admission by such Person of its inability to pay
its debts generally as they become due.
"Insolvency Proceeding" means any proceeding of the sort described in the
definition of Insolvency Event.
"Insurance Agreement" means the Insurance and Reimbursement Agreement
between the Servicer, the Issuer and Asset Guaranty Insurance Company, dated as
of the Closing Date.
"Insurer Default" means the occurrence of any of the following:
(i) the Note Insurer shall fail to pay when, as and in the amounts
required, any amount payable under the Policy and such failure continues
unremedied for two Business Days; (ii) the Superintendent of Insurance of the
State of New York (or any Person succeeding to the duties of such
Superintendent) (for the purpose of this paragraph (b), the "Superintendent")
shall apply for an order (A) pursuant to Section 7402 of the New York Insurance
Law (or any successor provision thereto), directing him to rehabilitate the Note
Insurer, (B) pursuant to Section 7404 of the New York Insurance Law (or any
successor provision thereto), directing him to liquidate the business of the
Note Insurer or (C) pursuant to Section 7416 of the New York Insurance Law (or
any successor provision thereto), dissolving the corporate existence of the Note
Insurer and such application shall not be dismissed or withdrawn during a period
of 60 consecutive days or a court of competent jurisdiction enters an order
granting the relief sought; (iii) the Superintendent shall determine that the
Note Insurer is insolvent within the meaning of Section 1309 of the New York
Insurance Law or any successor section; (iv) the Note Insurer shall commence a
voluntary case or other proceeding seeking rehabilitation, liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors; (v) an involuntary
case or other proceeding shall be commenced against the Note Insurer seeking
rehabilitation, liquidation, reorganization or other relief with respect to it
or its debts under a bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property and such case or proceeding is not dismissed or otherwise
terminated within a period of 60 consecutive days or a court of competent
jurisdiction enters an order granting the relief sought in such case or
proceeding.
8
14
"Interest Carryover Shortfall" means, with respect to any Payment Date,
the excess, if any, of (i) the Interest Distributable Amount for such Payment
Date and all prior Payment Dates, over (ii) the amount of interest, if any,
actually paid to Noteholders on such Payment Date and all prior Payment Dates.
"Interest Distributable Amount" means, with respect to any Payment Date,
the sum of the amounts for each Note Rate Period during the preceding Interest
Distribution Period equal to the product of (i) the applicable Note Rate and
(ii) the daily Note Balance during each Note Rate Period, to the extent unpaid
on such Payment Date.
"Interest Distribution Period" means, with respect to any Payment Date,
the period of time from the Closing Date to the first Determination Date, and
thereafter from each Determination Date to the next Determination Date.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Issuer" means Midland Funding 98-A Corporation, in its capacity as issuer
of the Notes pursuant to this Agreement, and each successor thereto (in the same
capacity) pursuant to Section 7.04.
"Lien" means any security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"London Banking Day" means any day on which dealings in deposits in
Dollars are transacted in the London interbank market.
"Major Card" means a credit card with one of the following brand names:
Visa, Master Card, Discover Card, Optima, and American Express, or any other
brand name approved in writing by the Controlling Party.
"Maximum Facility Amount" means $20,000,000 or such greater amount not to
exceed $35,000,000 to which the Maximum Facility Amount may have been increased
pursuant to Section 6.03.
"Maximum Principal Amount" means the maximum principal amount of each Note
as set forth in such Note.
"Minimum Repayment Amount" means the minimum amount which must be prepaid
if Issuer makes a prepayment pursuant to Section 11.05 on any Prepayment Date,
which shall be an amount equal to the sum of (i) the amount by which the Note
Balance exceeds the Remaining Funding Amount plus (ii) all accrued and unpaid
Note Insurer Obligations, whether or not then due and payable, and any accrued
interest thereon.
"Monthly Servicer Report" means an Officer's Certificate of the Servicer
completed and executed pursuant to Section 3.06, substantially in the form
attached hereto as Exhibit A.
9
15
"Nationally Recognized Statistical Rating Agency" means Duff & Xxxxxx
Credit Rating Co., Fitch IBCA, Inc., Xxxxx'x Investors Service, Inc. and
Standard & Poor's Ratings Services, or any successor thereto.
"Net Collections" means, with respect to a Receivable, all monies
representing collected available funds, net of checks returned for insufficient
funds, received or otherwise recovered from or for the account of the related
Obligor on such Receivable other than in connection with a Sale thereof.
Third-Party Fees incurred in connection with collecting a Receivable will be
deducted from collections on such Receivable by such third parties or by the
Servicer on their behalf and will not constitute Net Collections.
"Net Proceeds" means, with respect to a Receivable, all monies
representing collected available funds, net of checks returned for insufficient
funds, received or otherwise recovered from or for the account of the related
Obligor on such Receivable including, without limitation in connection with a
Sale thereof. Third-Party Fees incurred in connection with collecting a
Receivable will be deducted from collections on such Receivable by such third
parties or by the Servicer on their behalf and will not constitute Net Proceeds.
"Note" means one of the variable rate Floating Rate Midland
Receivables-Backed Variable Funding Notes, Series 1999-A executed by the Issuer
and authenticated by the Trustee in substantially the form attached hereto as
Exhibit C.
"Note Balance" shall initially equal, on the first Funding Date, the
Initial Note Balance and, as of any subsequent date of determination, shall
equal the Initial Note Balance plus any subsequent Funding Amounts less all
amounts paid to Noteholders and applied in reduction of the Note Balance
pursuant to Section 4.04(b)(ix)(A) or (B); pursuant to Section 4.04(b)(x);
pursuant to Section 4.04(b)(xi)(A) through (D), inclusive; or pursuant to
Section 11.07.
"Note Insurer" means Asset Guaranty Insurance Company.
"Note Insurer Obligations" means all amounts from time to time payable to
the Note Insurer hereunder, under the Premium Letter or under the Insurance
Agreement, whether constituting principal or interest, whether fixed or
contingent, and howsoever arising (including, without limitation, all
Reimbursement Obligations, and any and all such interest, premiums, fees and
other obligations that accrue after the commencement of an Insolvency Proceeding
relating to the Issuer or the Servicer, in each such case whether or not allowed
as a claim in such Insolvency Proceeding).
"Note Insurer Premium" means the premium payable to the Note Insurer in
respect of the Policy, in an amount equal to the greater of (x) the product of
(i) one-twelfth of a per annum rate equal to the Premium Rate and (ii) the
average daily Note Balance during the preceding Collection Period, and (y) the
fixed minimum amount set forth for all premium payments in the Premium Letter.
"Note Payment Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled
10
16
"Norwest Bank Minnesota, National Association, as Trustee for Floating Rate
Midland Receivables-Backed Variable Funding Notes, Series 1999-A, Note Payment
Account."
"Note Rate" means for any day (i) the sum of (A) eighty basis points
(.80%) plus (B) the Index Rate (rounded upwards, if necessary, to the nearest
1/100 of 1%) (ii) divided by 365.
"Note Rate Period" means the period of time from the first Funding Date to
the following Thursday, and thereafter each Note Rate Period shall run from the
following Friday to the following Thursday, provided however, that if Thursday
is not a Business Day, the Note Rate Period shall end on the next preceding day
that is a Business Day.
"Note Register" means the register maintained pursuant to Section 6.04.
"Note Registrar" means the Trustee unless a successor thereto is appointed
pursuant to Section 6.03. The Note Registrar initially designates its offices at
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 as its
offices for purposes of Section 6.09.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register, except that, solely for the purposes of giving certain consents,
waivers, requests or demands pursuant to this Agreement the interests evidenced
by any Note registered in the name of, or in the name of a Person or entity
holding for the benefit of, the Issuer, the Servicer or any Person actually
known to a Responsible Officer of the Trustee to be controlling, controlled by
or under common control with the Issuer or the Servicer, shall not be taken into
account in determining whether the requisite percentage necessary to effect any
such consent, waiver, request or demand shall have been obtained.
"Obligor" on a Receivable means any Person who owes or may be liable for
payments under such Receivable.
"Officer's Certificate" means a certificate signed by a Responsible
Officer of the Issuer or the Servicer, as the case may be, and delivered to the
Trustee and Note Insurer.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or outside counsel to the Person responsible for providing such
opinion, and which opinion shall be reasonably acceptable to the Trustee, the
Note Insurer and the other recipients thereof.
"Originating Institution" means any Person from which the Seller has
acquired any Receivables and their successors and assigns.
"Originator" means the Person, whether banking institution or merchant,
that originated a Receivable.
"Other Cards" means any credit card other than a Major Card.
"Payment Date" means the fifteenth day of each calendar month or, if such
day is not a Business Day, the next succeeding Business Day, commencing May 17,
1999.
11
17
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permitted Investments" means, at any time, any one or more of the
following obligations and securities:
(i) obligations of, and obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of the United
States;
(ii) general obligations of, or obligations guaranteed by, FNMA or any
state of the United States or the District of Columbia, which are then rated the
highest available credit rating for such obligations by the Required Rating
Agencies then providing such a rating;
(iii) demand deposits, time deposits, or certificates of deposit of any
depository institution or trust company (including the Trustee) organized under
the laws of the United States or of any state thereof, the District of Columbia
(or any branch of a foreign bank licensed under the laws of the United States of
America or any State thereof) and subject to supervision and examination by
banking authorities of one or more of such jurisdictions, provided that the
short-term unsecured debt obligations of such depository institution or trust
company are then rated the highest available credit rating for such obligations
by the Required Rating Agencies then providing such a rating;
(iv) repurchase obligations held by the Trustee that are acceptable to
the Trustee with respect to any security described in clauses (i) or (ii) hereof
or any other security issued or guaranteed by any other agency or
instrumentality of the United States, in either case entered into with a federal
agency or a depository institution or trust company (acting as principal)
described in clause (iii) above, provided that the party agreeing to repurchase
such obligations shall have the highest available short-term debt rating from
the Required Rating Agencies then providing such a rating; and
(v) freely redeemable shares in money market funds (including such funds
for which the Trustee or an Affiliate of the Trustee serves as an investment
advisor, administrator, shareholder servicing agent and/or custodian or
subcustodian) which invest solely in the types of instruments and obligations
described in clauses (i) through (iv) above, so long as such funds are then
rated in the highest available rating category for money market funds by the
Required Rating Agencies then providing such a rating and notwithstanding that
(i) the Trustee or an Affiliate of the Trustee may charge and collect fees and
expenses from such funds for services rendered, (ii) the Trustee charges and
collects fees and expenses for services rendered pursuant to this Agreement and
(iii) services performed for such funds and pursuant to this Agreement may
converge at any time. Each of the Issuer and the Servicer hereby specifically
authorizes the Trustee or an Affiliate of the Trustee to charge and collect all
fees and expenses from such funds for services rendered to such funds, in
addition to any fees and expenses the Trustee may charge and collect for
services rendered pursuant to this Agreement;
12
18
(vi) commercial paper having, at the time of the investment or
contractual commitment to invest therein, the highest available credit rating
for such obligations by the Required Rating Agencies then providing such a
rating;
(vii) bankers' acceptances (with a maturity of one month or less) issued
by any depository institution or trust company referred to in clause (iii)
above;
(viii) money market mutual funds that can be liquidated on a single
day's notice and which are registered under the Investment Company Act of 1940,
as amended, whose shares are registered under the Securities Act and have the
highest available credit rating for such obligations by the Required Rating
Agencies then providing such a rating;
(ix) any other investment grade investment as may be acceptable to the
Required Rating Agencies and the Controlling Party, as evidenced by a writing to
that effect;
provided that each of the foregoing investments above shall mature no later than
the Business Day prior to the Payment Date immediately following the date of
purchase thereof (other than in the case of the investment of monies in
instruments of which the entity at which the related Account is located is the
obligor, which may mature on the related Payment Date), and shall be required to
be held to such maturity; and provided further that each of the Permitted
Investments may be purchased by the Trustee through an Affiliate of the Trustee.
Permitted Investments are only those which are acquired by the Trustee in
its name and in its capacity as Trustee, and with respect to which (a) the
Trustee has noted its interest therein on its books and records, and (b) the
Trustee has purchased such investments for value without notice of any adverse
claim thereto (and, if such investments are securities or other financial assets
or interests therein, within the meaning of Section 8-102 of the UCC, without
acting in collusion with a securities intermediary in violating such securities
intermediary's obligations to entitlement holders in such assets, under Section
8-504 of the UCC, to maintain a sufficient quantity of such assets in favor of
such entitlement holders), and (c) either (i) such investments are in the
possession of the Trustee, or (ii) such investments, (A) if certificated
securities and in bearer form, have been delivered to the Trustee, or in
registered form, have been delivered to the Trustee and either registered by the
issuer in the name of the Trustee or endorsed by effective endorsement to the
Trustee or in blank; (B) if uncertificated securities, the ownership of which
has been registered to the Trustee on the books of the issuer thereof (or
another person, other than a securities intermediary, either becomes the
registered owner of the uncertified security on behalf of the Trustee or, having
previously become the registered owner, acknowledges that it holds for the
Trustee); or (C) if securities entitlements (within the meaning of Section 8-102
of the UCC) representing interests in securities or other financial assets (or
interests therein) held by a securities intermediary (within the meaning of said
Section 8-102), a securities intermediary indicates by book entry that a
security or other financial asset has been credited to the Trustee's securities
account with such securities intermediary. No Permitted Investment may be
purchased at a premium.
13
19
"Person" means any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agent" means Rothschild Inc.
"Policy" means the Financial Guaranty Insurance Policy issued pursuant to
the Insurance Agreement.
"Pool" means a particular group of Receivables purchased by Seller and
contributed by Seller to Issuer, which must constitute all of the Receivables
purchased under a particular Asset Sale Agreement owned by the Seller at the
time of such contribution.
"Premium Letter" means the letter agreement between the Note Insurer and
the Issuer, dated as of the Closing Date.
"Premium Rate" has the meaning assigned to such term in the Premium
Letter.
"Prepaid Receivables" means the Receivables designated by Issuer under
Section 11.05 or 11.06 to be released upon payment of the Prepayment Amount, and
all of the property and rights in property described in Section 2.01(b) which
are related to such Receivables.
"Prepayment Amount" means, (a) with respect to a partial prepayment
pursuant to Section 11.05, an amount equal to at least the Minimum Repayment
Amount and (b) with respect to a prepayment in full pursuant to Section 11.06,
an amount equal to the sum of (i) the Note Balance as of the date the Issuer
elects to prepay the Notes in full, (ii) all accrued and unpaid interest on the
Notes through the date of which such prepayment will occur, and (iii) all
accrued and outstanding Note Insurer Obligations, whether or not then due and
payable.
"Prepayment Date" means a Business Day on which a Prepayment Amount is
paid.
"Principal Distributable Amount" means, with respect to any Payment Date,
an amount equal to the remaining Available Funds as provided in Section
4.04(b)(xi).
"Proprietary Information" shall have the meaning specified in Section
10.19.
"Purchase Agreement" means each Purchase and Funding Agreement signed by a
Noteholder.
"Purchase Price" means the amount paid by Seller to purchase a Pool or
portion thereof.
"Purchaser" means Midland Funding 98-A Corporation, in its capacity as
transferee of the Receivables under the Receivables Contribution Agreement.
"Qualified Institutional Buyer" has the meaning assigned to such term in
Rule 144A under the Securities Act.
14
20
"Rating Agency" means Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc.
"Receivable" means any receivable generated under or in connection with a
Consumer Account identified in a Schedule of Receivables delivered by Seller to
Issuer in connection with the Receivables Contribution Agreement.
"Receivable File" means the documents described in Section 2.02 pertaining
to a particular Receivable.
"Receivables Contribution Agreement" means the Receivables Contribution
Agreement, dated as of the Closing Date, between the Seller and the Purchaser.
"Record Date" means, with respect to each Payment Date, the last Business
Day of the Collection Period immediately preceding such Payment Date. Any amount
stated "as of a Record Date" or "on a Record Date" shall give effect to all
applications of collections, and all payments to any party under this Agreement
or to the related Obligor, as the case may be, in each case as determined as of
the opening of business of the Note Registrar on the related Record Date.
"Redemption Amount" means, with respect to a redemption of the Notes by
the Issuer pursuant to Section 11.01, an amount equal to the sum of (i) the Note
Balance as of the date the Issuer elects to redeem the Notes, (ii) all accrued
and unpaid interest on the Notes through the end of the Collection Period
immediately preceding the Payment Date as of which such redemption will occur,
and (iii) all accrued and outstanding Note Insurer Obligations, whether or not
then due and payable.
"Reimbursement Obligations" means the sum of (i) each payment made under
the Policy and (ii) interest on any payment made under the Policy from the date
of the payment until the date the Note Insurer is repaid, in full and in cash,
at an annual rate equal to the "Prime Rate" (as hereinafter defined) plus 100
basis points (calculated on the basis of the actual number of days elapsed in a
360 day year). The term "Prime Rate" means the interest rate published in the
"Money Rates" column in The Wall Street Journal and referred to therein as the
"Prime Rate;" any change in such Prime Rate shall correspondingly change the
interest rate as of the date of any such change.
"Release Payment" means, with respect to any Removed Receivable in respect
of which a payment is required to be made by the Issuer or the Servicer under
this Agreement and as of the Remittance Date on which the "Release Payment" must
be made, the excess, if any, of (i) the product of the original Funding Amount
loaned with respect to the Pool containing such Removed Receivable and a
fraction, the numerator of which is the Charged-Off Balance of such Receivable
and the denominator of which is the Charged-Off Balance of all the Receivables
in such Pool over (ii) the product of the aggregate amount of all Net Proceeds
on and after such Funding Date with respect to such Removed Receivable, and a
factor equal to .70; in each case determined as of such Remittance Date.
15
21
"Remaining Funding Amount" means on any Prepayment Date, the Funding
Amount with respect to all Remaining Receivables on such Prepayment Date
minus the Remaining Receivables Collected Amount.
"Remaining Receivables" means with to any Prepayment Date, all
Receivables that are not Prepaid Receivables.
"Remaining Receivables Collected Amount" means an amount equal to the
positive difference between (A) all Net Proceeds recovered with respect to all
Remaining Receivables and received in the Collection Account from the Funding
Date for each such Remaining Receivable to the date which is three (3) Business
Days prior to the Prepayment Date minus (B) the sum of (i) twenty percent (20%)
of such Net Proceeds, (ii) an amount equal to interest paid or accrued on the
Funding Amount for the Remaining Receivables from the Funding Date for each
Remaining Receivable to the date which is three (3) Business Days prior to the
Prepayment Date, (iii) the Note Insurer Premium attributable to the Funding
Amount for each Remaining Receivable from the Funding Date to the date which is
three (3) Business Days prior to the Prepayment Date, (iv) the Trustee Fee
Premium attributable to the Funding Amount for each Remaining Receivable from
the Funding Date to the date which is three (3) Business Days prior to the
Prepayment Date and (v) the Backup Servicer Fee attributable to the Funding
Amount for each Remaining Receivable from the Funding Date to the date which is
three (3) Business Days prior to the Prepayment Date.
"Remittance Date" means, with respect to any Payment Date, the third
Business Day next preceding such Payment Date.
"Removed Receivable" means a Receivable which the Servicer is obligated to
acquire pursuant to Section 3.04, or which the Issuer is obligated to make a
payment in respect of, pursuant to Section 2.05 or 7.02, or in the event the
Issuer has elected to make a redemption pursuant to Section 11.01, all of the
Receivables.
"Required Rating Agencies" means with respect to any debtor or
indebtedness the Rating Agency and one other Nationally Recognized Statistical
Rating Agency; provided that none of the other such Nationally Recognized
Statistical Rating Agencies has given a lower rating to the relevant debtor or
indebtedness than the Rating Agency and such other Nationally Recognized
Statistical Rating Agency (in which case, for the avoidance of doubt, such other
nationally recognized statistical rating agency giving the lower rating shall be
one of the "Required Rating Agencies").
"Required Reserve Amount" means the amount required to be deposited in the
Reserve Account on the Closing Date and thereafter maintained in the Reserve
Account for so long as the Notes are outstanding, such amount being equal to the
greater of (a) three percent (3%) of the Note Balance and (b) one percent (1%)
of the Maximum Facility Amount.
"Reserve Account" means the segregated account or accounts, each of which
shall be an Eligible Account, established and maintained pursuant to Section
4.01 and entitled "Norwest
16
22
Bank Minnesota, National Association, as Trustee for Floating Rate Midland
Receivables-Backed Variable Funding Notes, Series 1999-A, Reserve Account."
"Reserve Fund Reimbursement Amount" means, with respect to any Payment
Date, the excess of the Required Reserve Amount over the amount then on deposit
in the Reserve Account.
"Reset Date" means (i) with respect to first Note Rate Period, the second
Business Day preceding the first Funding Date, and (ii) thereafter, two (2)
Business Days prior to the commencement of the Note Rate Period; provided,
however, that if such date is not a Business Day, the Reset Date shall be the
next preceding day that is a Business Day.
"Responsible Officer" means,
(i) when used with respect to the Trustee, any officer within the
Corporate Trust Office of the Trustee, including any vice president, assistant
vice president, assistant treasurer, assistant secretary or any other officer of
the 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 such particular subject, and
(ii) when used with respect to the Issuer or the Servicer, the president
or the chief financial officer of the Issuer or the Servicer, as the case may
be.
"Sale" means any sale of any portion of the Trust Estate.
"Schedule of Receivables" means each Schedule of Receivables to the
Receivables Contribution Agreement, delivered to the Trustee by the Issuer in
connection with the Receivables Contribution Agreement.
"Scheduled Termination Date" means the 24th Payment Date after the Closing
Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Midland Credit Management, Inc., in its capacity as
transferor of the Receivables under the Receivables Contribution Agreement.
"Servicer" means Midland Credit Management, Inc., in its capacity as
servicer of the Receivables pursuant to this Agreement, and each successor
thereto (in the same capacity) appointed pursuant to Section 9.03.
"Servicer Default" shall have the meaning specified in Section 9.01.
"Servicer's Remittance Date Certificate" means an Officer's Certificate of
the Servicer completed and executed pursuant to Section 3.06 and delivered to
the Trustee, in each case specifying Removed Receivables in respect of which the
making of a Release Payment is required hereunder, prepared by the Servicer as
of the opening of business of the Trustee on each applicable Remittance Date.
17
23
"Servicing Fee" means the fee payable to the Servicer on each Payment
Date, calculated pursuant to Section 3.05, for services rendered during the
related Collection Period, which shall be, for each Pool, and for any Payment
Date, equal to the sum of (A) 30% of all Net Collections collected, received or
otherwise recovered from or for the account of the Obligors during such
Collection Period with respect to Receivables acquired by a Seller within the
six Collection Periods immediately preceding such Payment Date, (B) 25% of all
Net Collections collected, received or otherwise recovered from or for the
account of the Obligors during such Collection Period with respect to
Receivables acquired by a Seller in the seventh through the twelfth Collection
Periods immediately preceding such Payment Date and (C) 20% of all Net
Collections collected, received or otherwise recovered from or for the account
of the Obligors during such Collection Period with respect to Receivables with a
Funding Date that occurred in a Collection Period more than twelve months
preceding such Payment Date. The term "Servicing Fee" shall also mean the
additional amounts payable to a Successor Servicer for servicing pursuant to
Section 9.03, but only to the extent such amounts do not exceed the amount
calculated in accordance with the preceding sentence; all amounts in excess
thereof are herein called the "Additional Servicing Fee".
"Subservicers" shall have the meaning specified in Section 9.07.
"Successor Servicer" means any entity appointed as a successor to the
Servicer pursuant to Section 9.03.
"Third-Party Fees" means, with respect to a Receivable and any Collection
Period, the amount of any fees or compensation paid or owed to unrelated
third-parties (generally, contingency fee lawyers) retained or otherwise engaged
by the Servicer under fee or compensation arrangements that are contingent upon,
and determined by reference to, amounts recovered in respect of the related
Receivable.
"Transaction Documents" means, collectively, this Agreement, the
Receivables Contribution Agreement, each Schedule of Receivables, the Notes, the
Policy, the Insurance Agreement, the Premium Letter, each Purchase Agreement,
and each of the other documents, instruments and agreements entered into in
connection with any of the foregoing or the transactions contemplated thereby.
"Transfer" shall have the meaning specified in Section 6.03(g). It is
expressly provided that the term "Transfer" in the context of the Notes
includes, without limitation, any distribution of the Notes by (i) a corporation
to its shareholders, (ii) a partnership to its partners, (iii) a limited
liability company to its members, (iv) a trust to its beneficiaries or (v) any
other business entity to the owners of the beneficial interests in such entity.
"Transferee Certificate" means a certificate in the form of Exhibit D-2
or D-3.
"Transition Fees" shall have the meaning specified in Section 9.02.
"Trust" means the trust created by this Agreement.
18
24
"Trust Estate" or "Floating Rate Midland Receivables-Backed Variable
Funding Notes, Series 1999-A Trust Estate" means the trust estate established
under this Agreement for, the benefit of the Noteholders and the Note Insurer,
which consists of the property described in Section 2.01 (b).
"Trust Property" means the property, or interests in property,
constituting the Trust Estate from time to time.
"Trustee" means Norwest Bank Minnesota, National Association, and any
successor trustee appointed pursuant to Section 10.11.
"Trustee Fee" means the fee payable to the Trustee on each Payment Date
for services rendered under this Agreement, which shall be equal to the greater
of $250 per month or an amount per month equal to one-twelfth of three and
one/half basis points (0.035%) per annum times the average daily Note Balance
during the preceding Collection Period.
"Trustee's Certificate" means a certificate completed and executed by a
Responsible Officer of the Trustee pursuant to Section 10.02 or 10.03,
substantially in the form attached hereto as Exhibit B.
"UCC" means the Uniform Commercial Code as in effect in the State of
Kansas.
"United States" means the United States of America.
"Voting Interests" means the aggregate voting power evidenced by the
Notes, corresponding to the outstanding Note Balance of the Notes held by
individual Noteholders; provided, however, that where the Voting Interests are
relevant in determining whether the vote of the requisite percentage of
Noteholders necessary to effect any consent, waiver, request or demand shall
have been obtained, the Voting Interests shall be deemed to be reduced by the
amount equal to the Voting Interests (without giving effect to this provision)
represented by the interests evidenced by any Note registered in the name of, or
in the name of a Person or entity holding for the benefit of, the Issuer, the
Servicer or any Person actually known to a Responsible Officer of the Trustee to
be an Affiliate of either or both of the Issuer and the Servicer.
SECTION 1.02 INTERPRETATION.
Unless otherwise indicated in this Agreement:
(a) reference to and the definition of any document (including this
Agreement) shall be deemed a reference to such document as it may be amended or
modified from time to time;
(b) all references to an "Article," "Section," "Schedule" or "Exhibit" are
to an Article or Section hereof or to a Schedule or an Exhibit attached hereto;
(c) defined terms in the singular shall include the plural and vice versa
and the masculine, feminine or neuter gender shall include all genders;
19
25
(d) the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement;
(e) in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding";
(f) periods of days referred to in this Agreement shall be counted in
calendar days unless Business Days are expressly prescribed and references in
this Agreement to months and years shall be to calendar months and calendar
years unless otherwise specified;
(g) accounting terms not otherwise defined herein and accounting terms
partly defined herein to the extent not defined, shall have the respective
meanings given to them under GAAP; and
(h) the headings in this Agreement are for the purpose of reference only
and do not limit or affect its meaning.
ARTICLE II.
CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES; REPRESENTATIONS
REGARDING RECEIVABLES; DISCHARGE
SECTION 2.01 CREATION OF TRUST ESTATE.
(a) Upon the execution of this Agreement by the parties hereto, there is
hereby created for the benefit of the Noteholders and the Note Insurer the
Floating Rate Midland Receivables-Backed Variable Funding Notes, Series 1999-A
Trust Estate. The Issuer, pursuant to the mutually agreed upon terms contained
in this Agreement, hereby grants a security interest to the Trustee on behalf of
the Noteholders and the Note Insurer, in all of its right, title and interest in
and to the Trust Estate, including, without limitation, Receivables and any
proceeds related thereto, and such other items as shall be specified in this
Agreement.
(b) In consideration of the Trustee's delivery to the Issuer of
authenticated Notes, in authorized denominations, in an aggregate amount equal
to the Maximum Facility Amount, the Issuer does hereby grant a security interest
to the Trustee, in trust for the benefit of the Noteholders and the Note
Insurer, in the following property and rights in property, whether now owned or
existing or hereafter acquired or arising, whether tangible or intangible, and
wheresoever located:
(i) all right, title and interest of the Issuer in and to the
Receivables and all monies due thereon or paid thereunder or in respect thereof
(including, without limitation, any fees and charges paid by Obligors and any
proceeds of any Sales) on and after each Funding Date (including any Release
Payments made with respect to Removed Receivables for which a payment is made by
the Issuer pursuant to Section 2.05 or 7.02 or Removed Receivables acquired by
the Servicer pursuant to Section 3.04), net of any Third-Party Fees;
20
26
(ii) the rights of the Issuer as Purchaser under each Receivables
Contribution Agreement, including, without limitation, to enforce the
obligations of the Seller thereunder;
(iii) the Collection Account, the Note Payment Account and the Reserve
Account, and all monies, "securities," "instruments," "accounts" "general
intangibles," "chattel paper," "financial assets," "investment property" (the
terms in quotations are defined in the UCC) and other property on deposit or
credited to the Collection Account, the Note Payment Account, and the Reserve
Account from time to time (whether or not constituting or derived from payments,
collections or recoveries received, made or realized in respect of the
Receivables);
(iv) all right, title and interest of the Issuer as assignee of the
purchaser in, to and under each Asset Sale Agreement, and all related documents,
instruments and agreements pursuant to which the Seller acquired, or acquired an
interest in, any of the Receivables from an Originating Institution;
(v) all payments due under the Policy;
(vi) all books, records and documents relating to the Receivables in any
medium, including without limitation paper, tapes, disks and other electronic
media;
(vii) all other monies, securities, reserves and other property now or
at any time in the possession of the Trustee or its bailee, agent or custodian
and relating to any of the foregoing; and
(viii) all proceeds, products, rents and profits of any of the foregoing
and all other amounts payable in respect of the foregoing; including, without
limitation, proceeds of insurance policies insuring any of the foregoing or any
indemnity or warranty payable by reason of loss or damage to or otherwise in
respect of any of the foregoing.
(c) The parties hereto intend that the security interest granted under
this Agreement shall give the Trustee on behalf of the Noteholders and the Note
Insurer a first priority perfected security interest in, to and under the
Receivables, and all other property described in this Section 2.01 as a part of
the Trust Estate and all proceeds of any of the foregoing in order to secure the
Note Insurer Obligations and the obligations of the Issuer to the Trustee, the
Noteholders and the Note Insurer under the Notes, this Agreement, the Purchase
Agreement, the Insurance Agreement and all of the other Transaction Documents.
The Trustee on behalf of the Noteholders and the Note Insurer shall have all the
rights, powers and privileges of a secured party under the UCC. The Issuer
agrees to execute and file all filings (including filings under the UCC) and
take all other actions reasonably necessary in any jurisdiction to provide third
parties with notice of the security interest granted pursuant to this Agreement
and to perfect such security interest under the UCC.
(d) The Issuer shall ensure that from and after the time of the grant of
the security interest in the Trust Estate, the master computer records
(including any back-up archives) maintained by or on behalf of the Issuer that
refer to any Receivable indicate clearly the interest of the Trustee in such
Receivable and that the Receivable is subject to a security interest in favor
of the
21
27
Trustee. Indication of the interest of the Trustee in a Receivable shall be
deleted from or modified on such computer records when, and only when, the
Receivable has been paid in full or has been acquired, assigned or released
pursuant to this Agreement.
SECTION 2.02 CUSTODY OF RECEIVABLE FILES.
In order to assure uniform quality in servicing the Receivables and to
reduce administrative costs, the Trustee on behalf of the Noteholders and the
Note Insurer, upon the execution and delivery of this Agreement, revocably
appoints the Servicer, and the Servicer accepts such appointment, to act as the
agent of the Trustee as custodian of the following documents to each Receivable:
(i) the related Asset Sale Agreement;
(ii) any other documents received from or made available by the related
Originating Institution in respect of such Receivable;
(iii) a copy of the marked computer records indicating the interest of
the Trustee on behalf of the Noteholders and the Note Insurer, as evidenced by
the Schedule of Receivables; and
(iv) any and all other documents that the Issuer or the Servicer, as the
case may be, shall keep on file, in accordance with its customary procedures,
relating to such Receivable or the related Obligor.
SECTION 2.03 ACCEPTANCE BY TRUSTEE.
The Trustee hereby acknowledges its acceptance, on behalf of the
Noteholders and the Note Insurer, pursuant to this Agreement, of the security
interest in and to the Receivables and the other Trust Property granted by the
Issuer pursuant to this Agreement, and declares and shall declare from and after
the date hereof that the Trustee, on behalf of the Noteholders and the Note
Insurer, holds and shall hold such Trust Property, pursuant to the trusts set
forth in this Agreement.
SECTION 2.04 REPRESENTATIONS AND WARRANTIES OF ISSUER AS TO THE
RECEIVABLES.
The Issuer does hereby make the following representations and warranties as of
each Funding Date and each Prepayment Date except and to the extent otherwise
specifically provided in clause 2.04(l), on which (i) the Trustee is relying in
accepting the Receivables and the other Trust Property which become a part of
the Trust Estate as of such Funding Date or permitting the release of any
Prepaid Receivable as of such Prepayment Date, as the case may be; (ii) the
Noteholders are relying in purchasing the Notes and making Fundings; (iii) the
Note Insurer is relying in issuing the Policy; and (iv) the Rating Agency is
relying in providing its rating of the Notes. Except as specifically provided
below, (i) in the case of the following representations and warranties made on a
Funding Date, such representations and warranties shall be deemed made with
respect to all Receivables then subject to this Agreement after giving effect to
any addition of Receivables on such Funding Date and (ii) in the case of the
following representations and
22
28
warranties made on a Prepayment Date, such representations and warranties shall
be deemed made with respect to all Remaining Receivables and Pools thereof.
(a) Characteristics of Receivables. Each such Receivable is payable in
United States dollars, has been purchased by Midland Credit Management, Inc.
from the related Originating Institution under an Asset Sale Agreement with such
Originating Institution in accordance with the Customary Procedures of Midland
Credit Management, Inc. and has been subsequently transferred, assigned and
conveyed by the Seller to the Issuer pursuant to the Receivables Contribution
Agreement. Each such Originating Institution is the Person that made the
original extension of credit giving rise to such Receivables or, if such
Originating Institution did not make such original extension of credit, no more
that $200,000 in aggregate Purchase Price of Receivables have been purchased
from such Person and subsequently transferred, assigned and conveyed by the
Seller to the Issuer pursuant to the Receivables Contribution Agreement. No more
than $1,000,000 in aggregate Purchase Price of Receivables from all Persons that
did not make such original extensions of credit have been transferred, assigned
and conveyed by the Seller to the Issuer pursuant to the Receivables
Contribution Agreement.
(b) Schedule of Receivables. The information set forth in the Schedule of
Receivables is true and correct in all material respects as of such Funding
Date.
(c) No Government Obligors. None of such Receivables are due from the
United States or any state or local government, or from any agency, department
or instrumentality of the United States or any state or local government.
(d) Employee Obligors. None of the Receivables are due from any employee
of the Seller, the Issuer or any of their respective Affiliates.
(e) Good Title. No such Receivable has been transferred, assigned,
conveyed or pledged by the Issuer to any Person other than the Trustee. The
Issuer has good and marketable title to each Receivable, free and clear of all
Liens and rights of others; the Trustee on behalf of the Noteholders and the
Note Insurer has a first priority perfected security interest in, each
Receivable, free and clear of all Liens and rights of others; and such security
interest has been perfected under the UCC and any other applicable law.
(f) No Impairment of Rights. As of such Funding Date, the Issuer has not
taken any action that, or failed to take any action the omission of which, would
impair the rights of the Trustee or the Noteholders or the Note Insurer with
respect to any such Receivable; provided, however, that the writing down of any
Receivable balance in accordance with Customary Procedures shall not be deemed
an impairment of the rights of any of the Trustee, the Noteholders or the Note
Insurer.
(g) No Fraudulent Use. As of such Funding Date, no such Receivable has
been identified by the Issuer or reported to the Issuer by the related
Originating Institution as having resulted from fraud perpetrated by any Person
with respect to the related account.
23
29
* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
(h) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to provide third parties with notice of the transfer and assignment
herein contemplated, and to give the Trustee on behalf of the Noteholders and
the Note Insurer a first priority perfected security interest in such
Receivables shall have been made.
(i) UCC Status. No Receivable is secured by "real property" or "fixtures"
or evidenced by an "instrument" under and as defined in the UCC.
(j) Location of Receivable Files. As of such Funding Date, each Receivable
File is kept by the Servicer at its offices at 000 Xxxx Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxx 00000, or such other address permitted pursuant to Section
2.06(b).
(k) Pool Status. Each such Receivable is part of a Pool which satisfies
each of the requirements set forth in Section 2.04(l), provided that such Pools
are aggregated with all other Pools to the extent set forth therein.
(l) Pools and Concentration Limits.
Each of the following representations and warranties may be waived with
prior written consent of the Issuer and the Note Insurer and receipt of a letter
from the Rating Agency that the waiver shall not result in a downgrading of the
rating of the Notes without giving effect to the Policy:
(i) Each Pool was acquired by the Seller within [*]
prior to the Funding Date on which such Pool was made subject to this Agreement,
or with respect to Pools contributed to the Issuer on the first Funding Date,
such longer period as may be acceptable to the Note Insurer.
(ii) Since the acquisition of a Pool by the Seller, there shall have
been no sales of Receivables from such Pool other than arm's length sales of
randomly selected Receivables to third parties who are not Affiliates of the
Seller or the Servicer.
(iii) Each Pool consists solely of Receivables which comply with the
representations set forth in Section 2.04(a) through (k).
(iv) (A) Each Pool consists solely of Receivables originated by a single
Originator under a single Major Card or Other Card and (B) the addition of the
Receivables of any such Pool to the Receivables then subject to this Agreement
would not cause the Charged-Off Balances of all Receivables acquired from any
single Originator to exceed an amount equal to 45% of the Charged-Off Balances
of all Receivables calculated as of the date each Pool was acquired by Seller.
[*]
24
30
*Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
[*]
25
31
*Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
[*]
Notwithstanding the foregoing, the representations and warranties set
forth in clauses 2.04(l)(iv) through (xi) shall not apply to any addition of
Receivables to this Agreement which occurs (i) less than sixty (60) days after
the Closing Date (or, in the case of paragraph (iv)(B) of this subsection,
ninety (90) days) or (ii) less than sixty (60) days after the occurrence of any
Prepayment Date on which all Pools then subject to this Agreement (other than
Pools made subject to this Agreement within 70 days prior to such Prepayment
Date) were released.
SECTION 2.05 REACQUISITION FOR RECEIVABLES UPON BREACH.
Upon discovery by the Issuer or the Servicer or upon the actual knowledge
of a Responsible Officer of the Trustee of a breach of any of the
representations and warranties of the Issuer set forth in Section 2.04, the
party discovering such breach shall give prompt written notice to the others.
If, as a result of such breach, any Receivable is rendered uncollectible or the
Trustee's rights in, to or under such Receivable or the proceeds thereof are
materially impaired or such proceeds are not available for any reason to the
Trustee free and clear of any Lien, then (i) the Issuer shall repay a portion of
the Note Balance equal to the Release Payment related to such Receivable or (ii)
if the Seller has the right to demand, or is obligated to accept, substitution
of Receivables of equal or greater value from the Originating Institution (the
"Substitute Receivables") of the affected Receivables upon such a breach under
the applicable Asset Sale Agreement, and the Seller has contributed (or
simultaneously with the removal of the Receivables affected by such breach, will
contribute) such Substitute Receivables to the Issuer pursuant to the
Receivables Contribution Agreement, the Issuer shall cause such Substitute
Receivables to become subject to the lien of this Indenture; and, in each case,
if necessary, the Issuer shall enforce the obligation of the Seller under the
Receivables Contribution Agreement to reacquire such Receivable from the Issuer,
unless such breach shall have been cured within 30 days after the earlier to
occur of the discovery of such breach by the Issuer or receipt of written notice
of such breach by the Issuer, such that the relevant representation and warranty
shall be true and correct in all material respects as if made on such day, and
the Issuer shall have delivered to the Trustee, the Note Insurer and each
Noteholder an Officer's Certificate describing the nature of such breach and the
manner in which the relevant representation and warranty became true and
correct. This repayment or substitution obligation shall pertain to all
representations and warranties of the Issuer contained in Section 2.04, whether
or not the Issuer has knowledge of the breach at the time of the breach or at
the time the representations and
26
32
warranties were made. The Issuer will be obligated to make the repayment or
substitution related to the Receivable as set forth above on the Remittance Date
following the date on which such repayment or substitution obligation arises. In
consideration of the release of any such Receivable, on the Remittance Date
immediately following the date on which such repayment obligation arises, the
Issuer shall remit the Release Payment of such Receivable to the Collection
Account in the manner specified in Section 4.03 or shall cause Substitute
Receivables to become subject to the lien hereof.
Upon any such repayment or substitution, the Trustee on behalf of the
Noteholders and the Note Insurer shall, without further action, be deemed to
release its security interest in, to and under the Removed Receivable so
released, all monies due or to become due with respect thereto after the
aforementioned Remittance Date and all proceeds thereof. The Trustee shall
execute such documents and instruments of release and take such other actions as
shall be reasonably requested by the Issuer to effect the security interest
release pursuant to this Section. The sole remedies of the Trustee, the
Noteholders and the Note Insurer with respect to a breach of the Issuer's
representations and warranties pursuant to Section 2.04 shall be to require the
Issuer to make repayment for the related Receivable or cause Substitute
Receivables to become subject to the lien hereof pursuant to this Section and to
enforce the Issuer's obligation hereunder to enforce the obligation of the
Seller under the Receivables Contribution Agreement to reacquire such Receivable
from the Issuer. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repayment for
any Receivable pursuant to this Section, except as otherwise provided in Section
10.02.
SECTION 2.06 DUTIES OF SERVICER AS CUSTODIAN
(a) Safekeeping. The Servicer, in its capacity as custodian, shall hold
the Receivable Files in its possession from time to time on behalf of the
Trustee for the use and benefit of the Note Insurer and all present and future
Noteholders, and maintain such accurate and complete accounts, records and
computer systems pertaining to each Receivable File as shall enable the Trustee
to comply with this Agreement. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of skill and
attention that it exercises with respect to the receivable files of comparable
defaulted receivables that the Servicer services for itself or others. The
Servicer shall conduct, or cause to be conducted, periodic examinations of the
files of receivables owned or serviced by it, which shall include the Receivable
Files held by it under this Agreement, and of the related accounts, records and
computer systems, in such a manner as shall enable the Trustee to verify the
accuracy of the Servicer's record keeping; provided however that the Trustee
shall be under no obligation to verify the accuracy of the Servicer's
record-keeping unless requested to do so in writing by the Note Insurer, the
Noteholders with Voting Interest in excess of 50% or the Rating Agency. Any such
written request shall specify in detail the procedures to be employed by the
Trustee. The Servicer shall promptly report to the Trustee any failure on its
part to hold the Receivable Files and maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain each
Receivable File at its offices at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx
00000, or at such other office as
27
33
shall be specified to the Trustee and the Note Insurer by 30 days' prior written
notice, provided that the Servicer shall have taken all actions necessary or
reasonably requested by the Trustee or the Note Insurer to amend any existing
financing statements and continuation statements, and file additional financing
statements and any other steps reasonably requested by the Trustee or the Note
Insurer to further perfect or evidence the rights, claims or security interests
of any of the Trustee or the Note Insurer under any of the Transaction
Documents. The Servicer shall make available to the Trustee, the Note Insurer
and the Noteholders or their duly authorized representatives, attorneys or
auditors the Receivable Files and the accounts, records and computer systems
maintained by the Servicer with respect thereto upon not less than two Business
Days' prior written notice for examination during normal business hours;
provided, however, that the Noteholders will only be entitled to the access
provided in this subclause (b) in the event of a Servicer Default.
(c) Release of Documents. Upon written instruction from the Trustee, the
Servicer shall release any document in the Receivable Files to the Trustee or
its agent or designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable. Nothing in this Section shall
impair the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, which obligation shall be
evidenced by an Opinion of Counsel to such effect, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. The Servicer shall not
be responsible for any loss occasioned by the failure of the Trustee to return
any document or any delay in doing so.
SECTION 2.07 INSTRUCTIONS; AUTHORITY TO ACT.
The Servicer shall be deemed to have received proper instructions with
respect to the Receivable Files upon its receipt of written instructions signed
by a Responsible Officer of the Trustee. A certified copy of a bylaw or of a
resolution of the board of directors of the Trustee shall constitute conclusive
evidence of the authority of any such Responsible Officer to act and shall be
considered in full force and effect until receipt by the Servicer of written
notice to the contrary given by the Trustee.
SECTION 2.08 INDEMNIFICATION OF CUSTODIAN.
The Servicer, as custodian of the Receivable Files, shall indemnify the
Trustee for any and all liabilities, obligations, losses, compensatory damages,
payments, costs or expenses of any kind whatsoever (including reasonable
attorney's fees and expenses incurred in connection with defending against any
such claim) that may be imposed on, incurred or asserted against the Trustee as
the result of any improper act or omission in any way relating to the
maintenance and custody of the Receivable Files by the Servicer, as custodian;
provided, however, that the Servicer shall not be liable for any portion of any
such amount resulting from the willful misfeasance, bad faith or gross
negligence of the Trustee.
28
34
\ SECTION 2.09 EFFECTIVE PERIOD AND TERMINATION.
The Servicer's appointment as custodian of the Receivable Files shall
become effective as of the Closing Date and shall continue in full force and
effect so long as it is the Servicer under this Agreement. If the Servicer shall
resign as Servicer pursuant to Section 8.05 or if all of the rights and
obligations of the Servicer have been terminated pursuant to Section 9.02, the
appointment of the Servicer as custodian of the Receivable Files shall
immediately terminate. As soon as practicable after any termination of such
appointment, the Servicer shall deliver the Receivable Files to the Trustee or
its agent at such place or places as the Trustee may reasonably designate.
SECTION 2.10 AGENT FOR SERVICE.
The agent for service for the Issuer shall be its President whose address
is 0000 Xxxxx Xxxxxxxx, Xxxxxxxxxx, Xxxxxx 00000, and the agent for service for
the Servicer shall be its President whose address is 000 Xxxx Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxx 00000.
SECTION 2.11 SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(a) an amount sufficient to pay and discharge the outstanding Note
Balance, plus accrued and unpaid interest on the Notes, has been paid to the
Noteholders;
(b) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer;
(c) the Issuer has paid or caused to be paid all Note Insurer Obligations
then outstanding to the Note Insurer;
(d) the obligation of the Note Insurer under the Policy shall have been
terminated; and
(e) the Issuer has delivered to the Trustee an Officers' Certificate of
the Issuer and an Opinion of Counsel each stating that all conditions precedent
herein provided for the satisfaction and discharge of this Agreement with
respect to the Notes and the Policy have been complied with;
then this Agreement and the lien, rights and interests created hereby shall
cease to be of further effect with respect to the Notes, and the Trustee shall,
at the expense of the Issuer, (i) execute and deliver all such instruments as
may be necessary to acknowledge the satisfaction and discharge of this Agreement
with respect to the Notes, (ii) pay, or assign or transfer and deliver, to the
Issuer, all cash, securities and other property held by it as part of the Trust
Estate or other assets remaining after satisfaction of the conditions specified
in clauses (a), (b) and (c) above, and (iii) arrange for the cancellation,
surrender and termination of the Policy pursuant to the terms thereof and of the
Insurance Agreement.
29
35
Notwithstanding the satisfaction and discharge of this Agreement with
respect to the Notes, the obligations of the Issuer to the Trustee under Section
10.07, the obligations of the Trustee to the Issuer, the Servicer and to the
Noteholders and the Note Insurer under Section 4.04, the obligations of the
Trustee to the Noteholders and the Note Insurer under Section 4.07, and rights
to receive payments of principal of and interest on the Notes, and payment of
Note Insurer Obligations, and the rights, privileges and immunities of the
Trustee under Article X, shall survive.
SECTION 2.12 APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Sections 4.02 and 4.03
shall be held in trust and applied by it, in accordance with the provisions of
the Notes, the Insurance Agreement and this Agreement, to the payment to the
Persons entitled thereto, of the principal, interest, fees, costs and expenses
for whose payment such money has been deposited with the Trustee.
ARTICLE III.
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01 DUTIES OF SERVICER.
The Servicer, as agent for the Trustee, shall manage, service,
administer and make collections on and in respect of the Receivables with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable defaulted consumer receivables that it
services for itself or others (whether or not the Servicer shall then be
servicing comparable defaulted consumer receivables for itself or others). The
Servicer's duties shall include collecting and posting all payments, responding
to inquiries of Obligors or by federal, state or local government authorities
with respect to the Receivables, investigating delinquencies, implementation of
payment plans, sending payment information to Obligors, reporting tax
information to Obligors in accordance with its customary practices, accounting
for collections, publishing monthly and annual statements to the Trustee with
respect to payments, generating federal income tax information and performing
the other duties specified herein. In performing the above-referenced services,
the Servicer shall perform in accordance with Customary Procedures and shall
have full power and authority, acting alone, to do any and all things in
connection with such managing, servicing, administration and collection that it
may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer shall be
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trustee, the Noteholders, the Note Insurer, or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge and all other comparable instruments, with respect to the
Receivables. To the extent not prohibited by applicable law, the Servicer is
hereby authorized to commence, in its own name or in the name of the Issuer or
the Trustee, a legal proceeding to enforce a Receivable or to commence or
participate in a legal proceeding (including without limitation a bankruptcy
proceeding) relating to or involving a Receivable. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trustee
30
36
and the Issuer shall thereupon be deemed to have automatically assigned, solely
for the purpose of collection on behalf of the party retaining an interest in
such Receivable, such Receivable and the other property conveyed as part of the
Trust Estate pursuant to Section 2.01 with respect to such Receivable to the
Servicer for purposes of commencing or participating in any such proceeding as a
party or claimant, and the Servicer is authorized and empowered by the Trustee
and the Issuer 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 proceeding (to the fullest extent
permitted by applicable law). If in any enforcement suit or legal proceeding it
shall be held that the Servicer may not enforce a Receivable on the grounds that
it shall not be a real party in interest or a holder entitled to enforce such
Receivable, the Trustee on behalf of the Noteholders and the Note Insurer shall,
at the Servicer's expense and written direction, take reasonable steps to
enforce such Receivable. To the extent an assignment is prohibited, prior
consent by the Trustee is hereby given to Servicer authorizing the forwarding of
Receivables to legal counsel (selected by Servicer) for the purpose of
commencing legal proceedings on behalf of the Issuer or the Trustee. It being
understood by Servicer that nothing contained herein will permit or allow
Servicer to control or interfere with the relationship between counsel, Issuer
or the Trustee, but Servicer is hereby authorized on behalf of the Issuer or the
Trustee to receive and convey information and instructions in order to
facilitate and coordinate the collection of forwarded Receivables. The Servicer
shall deposit or cause to be deposited into the Collection Account, within one
Business Day of its receipt thereof, all Net Proceeds realized in connection
with any such action pursuant to Section 4.02. The Trustee and the Issuer shall
furnish the Servicer with any powers of attorney and other documents and take
any other steps which the Servicer may deem reasonably necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
under this Agreement.
SECTION 3.02 COLLECTION OF RECEIVABLE PAYMENTS.
The Servicer shall make reasonable efforts to collect all payments due
and payable in connection with the Receivables, and shall at all times follow
the Customary Procedures in so doing. The Servicer shall be authorized to write
down the balance of any Receivable in accordance with the Customary Procedures
without the prior consent of the Trustee; provided however, that such write-down
will not affect the rights of the Noteholders or the Note Insurer to any amounts
thereafter collected with respect to such Receivable. The Servicer may, in
accordance with the Customary Procedures, waive any charges or fees that
otherwise may be collected in the ordinary course of servicing the Receivables.
SECTION 3.03 COVENANTS OF SERVICER.
The Servicer hereby makes the following covenants with respect to each
Receivable on which the Trustee is relying in accepting the Receivables in trust
and authenticating the Notes:
(a) Fulfillment of Obligations. The Servicer shall duly fulfill all
obligations on its part to be fulfilled pursuant to this Indenture under or in
connection with the Receivables, shall perform such obligations in accordance
with the Customary Procedures, and shall maintain in effect all licenses and
qualifications required in order to service the Receivables and shall comply in
all
31
37
respects with all other requirements of law in connection with servicing the
Receivables, the failure to comply with which would have a material adverse
effect on the rights or interests of the Noteholders or the Note Insurer.
(b) No Rescission or Cancellation. The Servicer shall not permit any
rescission or cancellation of the Receivables except as ordered by a court of
competent jurisdiction or other governmental authority; provided, however, that
the writing down of the Receivables balance in accordance with Customary
Procedures shall not be deemed a rescission or cancellation of such Receivables.
(c) No Impairment. The Servicer shall not take or fail to take any
action in breach of this Indenture that would impair the rights of the Trustee,
the Trust Estate, the Noteholders or the Note Insurer with respect to the
Receivables; provided, however, that the writing down of the Receivables balance
in accordance with Customary Procedures shall not be deemed an impairment of the
rights of the Trustee, the Noteholders or the Note Insurer. The Servicer shall
not engage in any pattern of conduct under which it intentionally elects (i) to
write down a Receivables balance from an Obligor rather than writing down
amounts due from the same Obligor which are not a part of the Receivables or
(ii) to apply a payment received from an Obligor to a Consumer Account which is
not a Receivable rather than to a Receivable (unless expressly instructed to do
so by the Obligor), if the Servicer has actual knowledge that such write-downs
or payment applications discriminate against the Noteholders, or with knowledge
that the effect of such intentional election is to discriminate against the
Noteholders.
(d) No Instruments. Except in connection with its enforcement or
collection of the Receivables, the Servicer shall take no action to cause any
Receivables to be evidenced by any instruments (as defined in the UCC) and if
any Receivable is so evidenced (whether or not in connection with such
enforcement or collection), it shall be assigned to the Servicer as provided in
Section 3.04.
SECTION 3.04 REPURCHASE IN RESPECT OF RECEIVABLES UPON BREACH AND OTHER
EVENTS.
Upon discovery by the Issuer or the Servicer or upon the actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
covenants of the Servicer set forth in Section 3.03 that materially and
adversely affects the rights or interests of the Noteholders or the Note
Insurer, the party discovering such breach shall give prompt written notice to
the others. If, as a result of such breach, any Receivables are rendered
uncollectible or the Trustee's rights in, to or under such Receivables or the
proceeds thereof are materially impaired or such proceeds are not available for
any reason to the Trustee free and clear of any Lien, the Servicer shall acquire
from the Issuer such Receivables, unless such breach shall have been cured
within thirty (30) days after the earlier to occur of the discovery of such
breach by the Servicer or receipt of written notice of such breach by the
Servicer, such that the relevant covenant shall be true and correct in all
material respects as if made on such day, and the Servicer shall have delivered
to the Trustee a certificate of a Responsible Officer of the Servicer describing
the nature of such breach and the manner in which the relevant covenant became
true and correct. The Servicer will be obligated to accept the assignment of
such Receivables as set forth above on the Remittance Date
32
38
following the date on which such assignment obligation arises. In consideration
of the acquisition of any such Receivables, on the Remittance Date immediately
following the date on which such acquisition obligation arises, the Servicer
shall remit the Release Payment of such Receivables to the Collection Account in
the manner specified in Section 4.03. Upon any such acquisition, and the
remitting of the Release Payment to the Collection Account, the Trustee on
behalf of the Noteholders and the Note Insurer shall, without further action, be
deemed to have released its security interest in, to and under such Removed
Receivables, all monies due or to become due with respect thereto after the
aforementioned Remittance Date and all proceeds thereof. The Trustee shall
execute such documents and take such other actions as shall be reasonably
requested by the Servicer to further evidence such release. The sole remedy of
the Trustee, the Noteholders and the Note Insurer with respect to a breach
pursuant to Section 3.03 shall be to require the Servicer to acquire the related
Receivables pursuant to this Section, except as otherwise provided in Section
8.02, 9.01 or 9.08. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the acquisition of
any Receivable pursuant to this Section except as otherwise provided in Section
10.02.
SECTION 3.05 SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER.
As compensation for the performance of its obligations hereunder, the
Servicer shall be entitled to receive on each Payment Date the Servicing Fee as
provided in Section 4.04. Except to the extent otherwise provided herein, the
Servicer shall be required to pay from its servicing compensation all expenses
incurred in connection with servicing the Receivables including, without
limitation, recovery and collection expenses related to the enforcement of the
Receivables (other than those specified in the following proviso), payment of
the fees and disbursements of the Rating Agency and independent accountants and
all other fees and expenses that are not expressly stated in this Agreement to
be payable by the Trustee, the Noteholders, the Note Insurer or the Issuer;
provided, however, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trustee, the Noteholders or the Note Insurer arising
under any tax law, including without limitation any federal, state or local
income or franchise taxes or any other tax imposed on or measured by income (or
any interest or penalties with respect thereto or arising from a failure to
comply therewith), except as otherwise expressly provided in this Agreement.
SECTION 3.06 MONTHLY SERVICER REPORT; SERVICER'S REMITTANCE DATE
CERTIFICATE.
(a) On or before 11:00 a.m. New York, New York time on each
Determination Date, the Servicer shall deliver to the Trustee and to the Note
Insurer a Monthly Servicer Report executed by a Responsible Officer of the
Servicer substantially in the form attached hereto as Exhibit A, including a
CD-ROM or computer tape listing all Receivables subject to this Agreement at the
end of such Collection Period (and setting forth such additional information as
requested by the Trustee, the Note Insurer, the Rating Agency or any Noteholder
from time to time, which information the Servicer is able to reasonably provide)
containing all information necessary to make the payments required by Section
4.04 in respect of the Collection Period and Interest Distribution Period
immediately preceding the date of such Monthly Servicer Report and all
33
39
information necessary for the Trustee to send statements to Noteholders and the
Note Insurer pursuant to Section 4.07(a).
(b) On or before 11:00 a.m. New York, New York time on each Remittance
Date on which the Issuer or the Servicer, as applicable, shall be obligated
hereunder to acquire a Removed Receivable, the Servicer shall deliver to the
Trustee and the Note Insurer a Servicer's Remittance Date Certificate
identifying each such Removed Receivable acquired by reference to the related
Obligor's account number (as specified in the Schedule of Receivables), and the
amount of the Release Payment with respect thereto.
SECTION 3.07 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Note Insurer and the Trustee, on
or before March 1 of each calendar year, beginning in March 2000, an Officer's
Certificate executed by the chief financial officer of the Servicer, stating
that (i) a review of the activities of the Servicer during the preceding
12-month period ended December 31 (or, in the case of the first such statement,
from the Closing Date through December 31, 1999) and of its performance under
this Agreement has been made under the supervision of the officer executing the
Officer's Certificate, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement in
all material respects throughout such period or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Note Insurer and the Trustee,
promptly after having obtained knowledge thereof, but in no event later than
three Business Days thereafter, an Officer's Certificate specifying the nature
and status of any Servicer Default or Event of Default, or other occurrence
which would have a material adverse effect on the rights or interests of the
Note Insurer.
SECTION 3.08 PERIODIC ACCOUNTANTS REPORT.
The Servicer, at its own expense, shall cause Ernst & Young LLP or
another firm of nationally recognized independent public accountants acceptable
to the Note Insurer (who may also render other services to the Servicer or to
the Issuer) to deliver to the Note Insurer and Trustee a report of agreed upon
procedures acceptable to the Controlling Party with respect to the Servicer's
accounting for matters regarding the Trust Estate including cash receipts,
account posting and remittances to the Accounts during the preceding reporting
period. The first reporting period is from the Closing Date through April 30,
1999, and each subsequent reporting period is each subsequent month thereafter
through July 31, 1999, and thereafter the reporting period shall be each
subsequent calendar quarter commencing September 30, 1999, unless any report is
not reasonably acceptable to the Note Insurer then such shorter or longer time
as the Note Insurer shall determine from time to time by written notice to the
Servicer (with a copy to the Trustee). Each such report must be delivered within
forty-five (45) days after the end of each reporting period. Such report shall
also indicate that the firm is independent with respect to the Issuer and the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants. In the event such independent public
accountants
34
40
require the Trustee to agree to the procedures to be performed by such firm in
any of the reports required to be prepared pursuant to this Section 3.08, the
Servicer shall direct the Trustee in writing to so agree; it being understood
and agreed that the Trustee will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and the Trustee has not made any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
SECTION 3.09 QUARTERLY SERVICER'S COMPLIANCE REPORT.
The Servicer, at its own expense, shall cause Ernst & Young LLP or
another firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or to the Issuer) to deliver to the
Trustee and the Note Insurer, within thirty days after the end of each calendar
quarter of each year, beginning with the calendar quarter ending in June of
1999, a report concerning the activities of the Servicer during the preceding
calendar quarter to the effect that such accountants have performed agreed-upon
procedures acceptable to the Controlling Party with respect to each of the
Monthly Servicer Reports for the period under review. The report should specify
the procedures performed on such Monthly Servicer Reports (which procedures
should include recalculating all calculations contained in such Monthly Servicer
Reports and taking other pertinent information from supporting schedules of the
Servicer) and any exceptions, if any, shall be set forth therein. Such report
shall also indicate that the firm is independent with respect to the Issuer and
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants. In the event such
independent public accountants require the Trustee to agree to the procedures to
be performed by such firm in any of the reports required to be prepared pursuant
to this Section 3.09, the Servicer shall direct the Trustee in writing to so
agree; it being understood and agreed that the Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Trustee has not made any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
SECTION 3.10 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION.
The Servicer shall provide the Note Insurer, the Trustee and the
Noteholders with access to the documentation relating to the Receivables as
provided in Section 2.06(b). In each case, access to documentation relating to
the Receivables shall be afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. Nothing
in this Section shall impair the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors,
which obligation shall be evidenced by an Opinion of Counsel to such effect, and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.
SECTION 3.11 REPORTS TO NOTEHOLDERS, THE RATING AGENCY, THE NOTE
INSURER AND THE PLACEMENT AGENT.
The Trustee shall provide to the Note Insurer, each Noteholder, the
Rating Agency and the Placement Agent a copy of each (i) Servicer's Remittance
Date Certificate, (ii) Monthly
35
41
Servicer Report, (iii) Officer's Certificate of annual statement as to
compliance described in Section 3.07(a), (iv) Officer's Certificate with respect
to Servicer Defaults and Events of Default, described in Section 3.07(b), (v)
accountants' report described in Section 3.08, (vi) accountants' report
described in Section 3.09, and (vii) Trustee's Certificate delivered pursuant to
Section 10.02 or 10.03.
SECTION 3.12 TAX TREATMENT.
Notwithstanding anything to the contrary set forth herein, the Issuer
has entered into this Agreement with the intention that for federal, state and
local income and franchise tax purposes (i) the Notes, which are characterized
as indebtedness at the time of their issuance, will qualify as indebtedness
secured by the Receivables and (ii) neither the Trust nor the Trust Estate shall
be treated as an association or publicly traded partnership taxable as a
corporation. The Issuer, by entering into this Agreement, each Noteholder, by
its acceptance of a Note and each purchaser of a beneficial interest therein, by
accepting such beneficial interest, agree to treat such Notes as debt for
federal, state and local income and franchise tax purposes. The Trustee shall
treat the Trust Estate as a security device only, and shall not file tax returns
or obtain an employer identification number on behalf of the Trust Estate. The
provisions of this Agreement shall be construed in furtherance of the foregoing
intended tax treatment.
Notwithstanding the foregoing, if the Trust is required to be
recognized as a partnership for federal or state income tax purposes, including
by reason of a determination by the Internal Revenue Service or any other taxing
authority that the Trust constitutes a partnership for income tax purposes, the
Issuer and the Noteholders agree that payments made to the Noteholders pursuant
to Section 4.04(b)(iv) shall be treated as "guaranteed payments" (within the
meaning of Section 707(c) of the Code) and all remaining taxable income or loss
and any separably allocable items thereof shall be allocated to the Issuer.
ARTICLE IV.
THE ACCOUNTS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
SECTION 4.01 ACCOUNTS.
The Trustee shall establish and maintain, or cause to be established
and maintained, the Collection Account, the Reserve Account and the Note Payment
Account, each of which shall be an Eligible Account, for the benefit of the
Noteholders and the Note Insurer. All amounts held in the Collection Account,
the Reserve Account or the Note Payment Account shall, to the extent permitted
by this Agreement and applicable laws, rules and regulations, be invested in
Permitted Investments by the depository institution or trust company then
maintaining such Account only upon written direction of the Issuer, provided,
however, in the event the Issuer fails to provide such written direction to the
Trustee, and until the Issuer provides such written direction, the Trustee shall
invest in Permitted Investments satisfying the requirements of clause (iii) of
the definition thereof. Investments held in Permitted Investments in the
Accounts shall not be sold or disposed of prior to their maturity. Earnings on
investment of funds in the Collection Account
36
42
and Reserve Account shall remain in such Accounts for disposition in accordance
with this Agreement. Earnings on investment of funds in the Note Payment Account
shall be remitted by the Trustee to the Collection Account promptly upon receipt
thereof in the Note Payment Account. Any losses and investment expenses relating
to any investment of funds in any of the Accounts shall be for the account of
the Issuer, which shall deposit or cause to be deposited the amount of such loss
(to the extent not offset by income from other investments of funds in the
related Account) in the related Account immediately upon the realization of such
loss. The taxpayer identification number associated with each of the Accounts
shall be that of the Issuer and the Issuer will report for federal, state and
local income tax purposes the income, if any, earned on funds in the relevant
Account. The Issuer hereby acknowledges that all amounts on deposit in each
Account (including investment earnings thereon) are held in trust by the Trustee
for the benefit of the Noteholders and the Note Insurer, subject to any express
rights of the Issuer set forth herein, and shall remain at all times during the
term of this Agreement under the sole dominion and control of the Trustee.
Payments from the Collection Account shall be made only on the Business Day
prior to the Payment Date and only to the Note Payment Account.
SECTION 4.02 COLLECTIONS.
Each of the Servicer and the Issuer shall remit to the Collection
Account all Net Proceeds it receives or otherwise obtains on the next Business
Day after receipt thereof, by ACH transfer from the account into which payments
from or on behalf of Obligors are initially deposited. Other than as
specifically contemplated pursuant to Section 4.03, the Servicer shall not remit
to the Collection Account, and shall take all reasonable actions to prevent
other Persons from remitting to the Collection Account, amounts which do not
constitute payments, collections or recoveries received, made or realized in
respect of the Receivables, and the Trustee will return to Issuer any such
amounts upon receiving written evidence reasonably satisfactory to the Trustee
that such amounts are not a part of the Trust Estate.
SECTION 4.03 ADDITIONAL DEPOSITS.
(a) The following additional deposits shall be made to the Collection
Account, as applicable: (i) the Issuer shall remit the aggregate Release
Payments with respect to Removed Receivables for which a payment is to be made
pursuant to Section 2.05 or 7.02; and (ii) the Servicer shall remit the
aggregate Release Payments with respect to Removed Receivables for which a
payment is to be made pursuant to Section 3.04.
(b) The following deposits shall be made to the Note Payment Account,
as applicable: (i) the Issuer shall remit the Redemption Amount pursuant to
Section 11.02; (ii) the Issuer shall remit such amounts as may be necessary to
pay the Prepayment Amount pursuant to Section 11.07; (iii) the Note Insurer
shall remit any required payment pursuant to the Policy; (iv) the Trustee shall
transfer all Available Funds from the Collection Account to the Note Payment
Account on the Business Day prior to each Payment Date.
(c) All deposits required to be made pursuant to this Section by the
Issuer or the Servicer, as the case may be, may be made in the form of a single
deposit. All deposits required to be
37
43
made by the Note Insurer, shall be made in immediately available funds, no later
than the date and time required pursuant to the terms of the Policy.
SECTION 4.04 ALLOCATIONS AND PAYMENTS.
(a) On each Determination Date, the Servicer shall calculate (i) the
amount of funds on deposit in each of the Accounts and the amount of Available
Funds, and (ii) as applicable, the Trustee Fee, the Backup Servicing Fee, the
Servicing Fee, the Additional Servicing Fee, the average daily Note Balance for
the Collection Period, the Interest Distributable Amount, the Required Reserve
Amount, the Reserve Fund Reimbursement Amount, the aggregate Principal
Distributable Amount, the unpaid Note Balance before and after giving effect to
any Principal Distributable Amount, the Prepayment Amount, the Release Payment,
the Facility Fee, and the amount payable by the Note Insurer pursuant to the
Policy, which amounts shall be set forth in the Monthly Servicer Report for the
related Payment Date. The Servicer shall send the Monthly Servicer Report to the
Trustee and the Note Insurer by 11:00 a.m. New York, New York time on each such
Determination Date.
(b) On each Payment Date, the Trustee shall make the following payments
from the applicable Accounts in the following order of priority and in the
amounts set forth in the Monthly Servicer Report for such Payment Date; provided
however, such payments shall be made only to the extent of funds then on deposit
in the applicable Account, and provided further that payments from the Note
Payment Account shall be made only on the Payment Date.
(i) to the Trustee (A) from Available Funds transferred from the
Collection Account to the Note Payment Account, an amount equal to the sum of
the Trustee Fee for such Payment Date, plus all accrued and unpaid Trustee Fees,
if any, for prior Payment Dates, plus all reasonable out of pocket expenses (but
only up to $200,000 during the term of this Agreement) to which the Trustee is
entitled to payment (to the extent expressly set forth under this Agreement)
provided that (B) if Available Funds transferred from the Collection Account to
the Note Payment Account are insufficient to pay the amount described in clause
(A) above, the Trustee will withdraw from the Reserve Account an amount equal to
the lesser of the amount then on deposit in the Reserve Account and the amount
of such shortfall for disbursement to the Trustee in reduction of such
shortfall.
(ii) to the Servicer, from the Available Funds transferred from the
Collection Account to the Note Payment Account, an amount equal to the sum of
the Servicing Fee for the related Collection Period, plus all accrued and unpaid
Servicing Fees, if any, for prior Collection Periods (plus an amount equal to
any Transition Fees then owing to the Successor Servicer, if any);
(iii) to the Backup Servicer (A) from Available Funds transferred
from the Collection Account to the Note Payment Account, the Backup Servicer Fee
for such Payment Date, plus all accrued and unpaid Backup Servicer Fees, if any,
for prior Payment Dates, plus all reasonable out of pocket expenses to which the
Backup Servicer is entitled to payment (to the extent expressly set forth under
this Agreement) provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay the
amount
38
44
described in clause (A) above, the Trustee will withdraw from the Reserve
Account an amount equal to the lesser of the amount then on deposit in the
Reserve Account and the amount of such shortfall for disbursement to the Backup
Servicer in reduction of such shortfall;
(iv) to the Noteholders, pro rata, based on their respective Note
Balances (A) from Available Funds transferred from the Collection Account to the
Note Payment Account, an amount equal to the sum of the Interest Distributable
Amount for such Payment Date, plus any outstanding amount of Interest Carryover
Shortfall, if any, for prior Payment Dates provided that (B) if Available Funds
transferred from the Collection Account to the Note Payment Account, are
insufficient to pay the amount described in clause (A) above, the Trustee will
withdraw from the Reserve Account an amount equal to the lesser of the amount
then on deposit in the Reserve Account and the amount of such interest shortfall
for disbursement to the Noteholders in reduction of such shortfall, and provided
further that (C) if the amount described in clause (A) above remains unpaid
after the application of amounts withdrawn from the Reserve Account in
accordance with clause (B) above, the Trustee will withdraw from the amount
remitted by the Note Insurer to the Note Payment Account for disbursement to the
Noteholders in reduction of such shortfall an amount equal to the lesser of the
amount then on deposit in the Note Payment Account pursuant to a payment by the
Note Insurer and the amount of such interest shortfall;
(v) for so long as no Insurer Default shall have occurred and be
continuing, to the Note Insurer, (A) from Available Funds transferred from the
Collection Account to the Note Payment Account the sum of (x) the Note Insurer
Premium for such Payment Date, plus (y) all accrued but unpaid Note Insurer
Premiums, if any, for prior Payment Dates plus (z) the aggregate amount of all
other Note Insurer Obligations payable to the Note Insurer and outstanding on
such Payment Date, provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay the
amounts due the outstanding Note Insurer Obligations then payable, the Trustee
will withdraw from the Reserve Account an amount equal to the lesser of the
amount then on deposit in the Reserve Account and the amount of such shortfall,
and remit such lesser amount to the Note Insurer in reduction of such shortfall;
(vi) to the Reserve Account, from Available Funds transferred from
the Collection Account to the Note Payment Account, an amount equal to the
lesser of remaining Available Funds and the Reserve Fund Reimbursement Amount
for such Payment Date, if applicable;
(vii) to the Successor Servicer, from Available Funds transferred
from the Collection Account to the Note Payment Account, an amount equal to (A)
the Additional Servicing Fee for the related Collection Period, plus all accrued
and unpaid Additional Servicing Fees, if any, for prior Collection Periods,
provided that (B) if Available Funds transferred from the Collection Account to
the Note Payment Account are insufficient to pay the amount described in clause
(A) above, the Trustee will withdraw from the Reserve Account an amount equal to
the lesser of the amount then on deposit in the Reserve Account and the amount
of such shortfall for disbursement to the Successor Servicer in reduction of
such shortfall;
(viii) to the Noteholders, pro rata, based on their respective Note
Balances (or, at such time as the Note Balance is zero, based on the Maximum
Principal Amount of their
39
45
respective Notes) from Available Funds transferred from the Collection Accounts
to the Note Payment Account, an amount equal to the Facility Fee for such
Payment Date, plus any outstanding amount of Facility Fee, if any, for prior
Payment Dates;
(ix) to the Noteholders, pro rata based on their respective Note
Balances, if such Payment Date is a Payment Date on which the Issuer is
effecting an optional prepayment pursuant to Section 11.05 or 11.06, (A) any
remaining Available Funds transferred from the Collection Account to the Note
Payment Account to the extent of the Prepayment Amount, and (B) if any portion
of the Prepayment Amount is unpaid after payment of the amounts described in
clause (A) above, the Trustee will disburse to the Noteholders for payment on
the Prepayment Amount any amounts deposited in the Note Payment Account by the
Issuer in respect of the Prepayment Amount pursuant to Section 11.07;
(x) to the Noteholders, pro rata based on their respective Note
Balances, if such Payment Date is a Payment Date on which the Issuer is making
or is required to make a Release Payment, any remaining Available Funds
transferred from the Collection Account to the Note Payment Account to the
extent of the required Release Payment;
(xi) to the Noteholders, pro-rata, based on their respective Note
Balances (A) any remaining Available Funds transferred from the Collection
Account to the Note Payment Account in reduction of the Note Balance of the
Notes, until such Note Balance is reduced to zero, (B) if such Payment Date is
the Payment Date on which the Issuer is effecting an optional redemption of the
Notes pursuant to Section 11.01, and there is an outstanding Note Balance after
payment of the amounts described in clause (A) above, the Trustee will disburse
to the Noteholders for payment on the Note Balance any amounts deposited in the
Note Payment Account by the Issuer in respect of the Redemption Amount pursuant
to Section 11.02, (C) if such Payment Date is the Final Payment Date or the
Payment Date on which the Issuer is effecting an optional redemption of the
Notes pursuant to Section 11.01, and there is an outstanding Note Balance (after
payment of the amounts described in clauses (A) and (B) above), the Trustee will
withdraw from all remaining funds on deposit in the Collection Account and remit
to the Note Payment Account, an amount equal to the lesser of the amount then on
deposit in the Collection Account and the amount of the outstanding Note Balance
and remit such lesser amount to the Noteholders in reduction of the outstanding
Note Balance, (D) if on the Final Payment Date there is an outstanding Note
Balance (after payment of the amounts described in clauses (A), (B) and (C)
above), the Trustee will withdraw from the Reserve Account an amount equal to
the lesser of the amount then on deposit in the Reserve Account and the amount
of the outstanding Note Balance and remit such lesser amount to the Noteholders
in reduction of the outstanding Note Balance, and (E) if on the Final Payment
Date there is an outstanding Note Balance after all amounts have been withdrawn
from the Reserve Account in accordance with clause (D) above, the Trustee will
disburse to the Noteholders for payment on the Note Balance any amounts
deposited in the Note Payment Account by the Note Insurer; and
(xii) remaining amounts in the following order of priority: (A) any
of the Trustee's reasonable, out of pocket expenses to which the Trustee is
entitled to payment (to the extent expressly set forth in this Agreement) which
have exceeded $200,000 in the aggregate during the
40
46
term of this Agreement; then to (B) any amounts which would have been paid to
the Note Insurer under subsection (b)(v) but for the occurrence and continuation
of an Insurer Default; and then (C) to the Issuer.
If the Trust is required to be recognized as a partnership for federal or state
income tax purposes, including by reason of a determination by the Internal
Revenue Service or any other taxing authority that the Trust constitutes a
partnership for income tax purposes, amounts withheld by the Trust in compliance
with federal and state income tax laws, including without limitation, amounts
withheld with respect to foreign persons in accordance with the Code (and the
corresponding provisions of state and local law), shall be treated for all
purposes of this Agreement as amounts actually paid to the relevant Noteholder.
Additionally all other amounts withheld in accordance with the terms of the Code
(and the corresponding provisions of state and local law) shall be treated for
all purposes of this Agreement as amounts actually paid to the relevant
Noteholder.
(c) The Servicer shall on each Payment Date instruct the Trustee to
distribute to each Noteholder of record on the related Record Date by wire
transfer of immediately available funds, the amount to be paid to such
Noteholder in respect of the related Note on such Payment Date. The Servicer
shall on each Payment Date instruct the Trustee to distribute to the Note
Insurer by wire transfer of immediately available funds, the amount to be paid
to the Note Insurer on such Payment Date.
SECTION 4.05 RESERVE ACCOUNT.
(a) Pursuant to Section 4.01, the Trustee shall establish and maintain
the Reserve Account which shall be an Eligible Account, for the benefit of the
Noteholders and the Note Insurer. On or prior to the Closing Date and on or
before the date of any increase in the Maximum Funding Amount pursuant to
Section 6.03, the Issuer shall deposit an amount equal to the Required Reserve
Amount into the Reserve Account. Thereafter, on each Payment Date, to the extent
of funds then on deposit in the Note Payment Account an amount equal to the
lesser of (x) Available Funds remaining on such Payment Date after required
payments pursuant to Section 4.04(b)(i) through (v), and (y) the Reserve Fund
Reimbursement Amount, shall be deposited into the Reserve Account.
(b) Consistent with the limited purposes for which the Reserve Account
is to be established, (x) on each Payment Date, an amount equal to the aggregate
of amounts described in Sections 4.04(b)(i)(B), 4.04(b)(iii)(B), 4.04(b)(iv)(B),
4.04(b)(v)(B) (if no Insurer Default has occurred and is continuing) and
4.04(b)(vii)(B) and 4.04(b)(xii)(D), if any, shall be withdrawn from the Reserve
Account by the Trustee and remitted to the Trustee, the Backup Servicer, the
Noteholders or the Note Insurer (as the case may be) for payment as described in
those Sections, and (y) upon payment of all sums payable hereunder with respect
to the Notes, any amounts then on deposit in the Reserve Account shall be
remitted by the Trustee to the Note Insurer to the extent of any unpaid Note
Insurer Obligations then outstanding, until all such Note Insurer Obligations
are paid in full, and any remaining amounts then on deposit in the Reserve
Account shall be released from the lien of the Trust Estate and paid to the
Issuer.
41
47
(c) Amounts held in the Reserve Account shall be invested in Permitted
Investments at the direction of the Issuer as provided in Section 4.01. Such
investments shall not be sold or disposed of prior to their maturity.
(d) The Trustee shall pay to the Issuer on each Payment Date the amount
by which the amount in the Reserve Account exceeds the Required Reserve Amount,
after giving effect to all distributions required to be made from the Reserve
Account or the Note Payment Account on such date.
SECTION 4.06 NOTE PAYMENT ACCOUNT
(a) Pursuant to Section 4.01, the Trustee shall establish and maintain
the Note Payment Account which shall be an Eligible Account, for the benefit of
the Noteholders and the Note Insurer. The Note Payment Account shall be funded
to the extent that (w) the Issuer shall remit the Redemption Amount pursuant to
Section 11.02, (x) the Issuer shall remit all or a portion of the Prepayment
Amount pursuant to Section 11.07, (y) the Note Insurer shall remit any required
payment pursuant to the Policy, or (z) the Trustee shall remit the Available
Funds from the Collection Account pursuant to Section 4.03.
(b) On each Payment Date, an amount equal to the aggregate of amounts
described in Section 4.04(b) shall be withdrawn from the Note Payment Account by
the Trustee and remitted to the Noteholders and other persons or Accounts
described therein for payment as described in that Section, and upon payments of
all sums payable hereunder with respect to the Notes, any amounts then on
deposit in the Note Payment Account shall be remitted by the Trustee to the Note
Insurer to the extent of any unpaid Note Insurer Obligations then outstanding,
until all such Note Insurer Obligations are paid in full, and any remaining
amounts then on deposit in the Note Payment Account shall be released from the
lien of the Trust Estate and paid to the Issuer.
(c) Amounts held in the Note Payment Account shall be invested in
Permitted Investments at the direction of the Issuer as provided in Section
4.01. Such investments shall not be sold or disposed of prior to their maturity.
SECTION 4.07 STATEMENTS TO NOTEHOLDERS.
(a) On each Payment Date, the Trustee shall include with each payment
to each Noteholder of record and the Note Insurer the Monthly Servicer Report
furnished pursuant to Section 3.06, setting forth for the related Collection
Period the information provided in Exhibit A.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Trustee shall
mail a statement or statements prepared by the Servicer to the Note Insurer and
each Person who at any time during such calendar year shall have been a
Noteholder that provides the information that the Servicer actually knows is
necessary under applicable law for the preparation of the income tax returns of
such Noteholder.
42
48
SECTION 4.08 APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Sections 4.02 and 4.03
shall be held in trust and applied by the Trustee, in accordance with the
provisions of the Notes, the Insurance Agreement and this Agreement to the
payment to the Persons entitled thereto, of the principal, interest, fees, costs
and expenses for whose payment such money has been deposited with the Trustee.
ARTICLE V.
THE POLICY
SECTION 5.01 THE POLICY.
The Servicer and the Issuer agree, simultaneously with the execution
and delivery of this Agreement, to cause the Note Insurer to issue the Policy to
the Trustee for the benefit of the Trust in accordance with the terms thereof
and the Insurance Agreement.
SECTION 5.02 CLAIMS UNDER POLICY.
(a) If on any Determination Date the Servicer has reported to the Trustee
in the Monthly Servicer Report that the Servicer has determined that (A) as of
the opening of business of the Trustee on such Determination Date, the amount of
Available Funds on deposit in the Collection Account, together with any amounts
on deposit in the Reserve Account and the Note Payment Account, are insufficient
to provide for the payment in full of the Interest Distributable Amount payable
on the related Payment Date (after giving effect to each payment required to be
made prior to such payment on such Payment Date pursuant to Section 4.04(b)),
and/or (B) if such Payment Date is the Final Payment Date and the Note Balance
has not been reduced to zero prior to such Determination Date, and all amounts
then on deposit in the Collection Account, together with any amounts then on
deposit in the Reserve Account and the Note Payment Account are insufficient to
make a payment to the Noteholders reducing the Note Balance to zero (after
giving effect to each payment required to be made prior to such payment on the
Final Payment Date pursuant to Section 4.04(b)), then by 2:00 p.m., New York
time on such Determination Date, the Trustee shall deliver to the Note Insurer
and the Servicer a completed notice for payment in the form set forth as Exhibit
A to the Policy (the "Notice for Payment"), and shall confirm delivery of such
Notice for Payment, each as specified in the Policy. The Notice for Payment
shall specify the amount of the Interest Deficiency Draw Amount and/or the Final
Principal Deficiency Amount (as each such term is defined in the Policy) and
shall constitute a claim pursuant to the Policy. Upon receipt of any payments on
behalf of the Trust under the Policy, the Trustee shall deposit any Interest
Deficiency Draw Amount and/or Principal Deficiency Draw Amount in the Note
Payment Account. Such amounts shall be distributed pursuant to Section 4.04.
(b) The Trustee shall receive in the Note Payment Account, as
attorney-in-fact of each Noteholder, any payment from the Note Insurer and
disburse the same to each Noteholder, for
43
49
the purposes and in the respective amounts required in accordance with the
provisions of Section 4.04.
(c) The Trustee shall keep complete and accurate records of the amount of
payments received from the Note Insurer and the Note Insurer shall have the
right to inspect such records at reasonable times upon one Business Day's prior
notice to the Trustee. The statements the Trustee prepares in the normal course
of business with respect to accounts similar in nature to the Note Payment
Account shall fulfill the record requirements of this Section.
(d) If any of the payments guaranteed by the Policy are voided (a
"Preference Event") pursuant to a final and non-appealable order under any
applicable bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding and, as a result of such a Preference Event, the Trustee is required
to return such voided payment, or any portion of such voided payment, made in
respect of the Notes (an "Avoided Payment"), the Trustee shall furnish to the
Note Insurer (x) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Trustee is
required to return any such payment or portion thereof during the term of the
Policy because such payment was voided under applicable law, with respect to
which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (y) an assignment, in form reasonably satisfactory to the
Note Insurer, irrevocably assigning to the Note Insurer all rights and claims of
the Trustee relating to or arising under such Avoided Payment and (z) a Notice
for Payment appropriately completed and executed by the Trustee. Such payment
shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Final Order and not to the Trustee directly. The
Trustee is not permitted to make a claim on the Trust or on any Noteholder for
payments made to Noteholders which are characterized as preference payments by
any bankruptcy court having jurisdiction over any bankrupt Obligor unless
ordered to do so by such bankruptcy court.
SECTION 5.03 SURRENDER OF POLICY.
The Trustee shall surrender the Policy to the Note Insurer for
cancellation upon its expiration in accordance with the terms thereof.
SECTION 5.04 RIGHTS OF SUBROGATION AND ASSIGNMENT.
(a) The parties hereto agree that to the extent the Note Insurer makes any
payment with respect to the Notes under the Policy, the Note Insurer shall
become subrogated to the rights of the recipients of such payments to the extent
of such payments (including, without limitation, to the fullest extent permitted
by law, all rights of the Trustee and each Noteholder in the conduct of any
related Insolvency Proceeding). In furtherance and not by way of limitation of
the foregoing, and subject to and conditioned upon any payment with respect to
the Notes by or on behalf of the Note Insurer, the Trustee shall assign, and the
Noteholders, by reason of their acquisition and holding of the Notes, shall be
deemed to have agreed to the assignment, to the Note Insurer, of all rights to
the payment of interest or principal with respect to the Notes which are then
due for payment, together with all other rights and remedies of the Trustee or
the Noteholders with respect to the Notes (including, without limitation, all
rights of the Trustee and each Noteholder in the conduct of any related
Insolvency Proceeding), to the extent of all
44
50
payments made by the Note Insurer with respect to the Notes. The Trustee shall
take all such actions and deliver all such instruments as may be reasonably
requested or required by the Note Insurer to effectuate the purpose or
provisions of the foregoing subrogation and/or assignment. For the avoidance of
doubt, any payment made under the Policy in respect of interest or principal due
under the Notes shall not reduce in any manner the amount of interest or
principal (or the Note Balance) otherwise due hereunder or under the Notes.
(b) The foregoing rights of subrogation and assignment described in clause
(a) above are in all cases in addition to, and not in limitation of, all
equitable rights of subrogation and other rights and remedies otherwise
available to the Note Insurer in respect of payments under the Policy, and the
Note Insurer hereby specifically reserves all such rights and remedies.
ARTICLE VI.
THE NOTES AND FUNDINGS
SECTION 6.01 THE NOTES.
(a) The Notes shall be non-recourse obligations of the Issuer and the Trust
Estate shall be the sole source of payments of principal thereof and interest
thereon. Notwithstanding anything else to the contrary contained herein, the
Notes shall not be considered a general obligation of the Issuer for any
purpose.
(b) The Notes shall be issued on the Closing Date or such later date of
issuance as may be specified pursuant to Section 6.03 and the Note Balance shall
accrue interest at the Note Rate from and including the first Funding Date.
(c) The Notes shall be substantially in the form attached hereto as Exhibit
C, and shall be issuable in minimum denominations of $1,000,000 and integral
multiples of $1,000 in excess thereof. The Notes shall each be executed by the
Issuer and authenticated by the Trustee by the manual or facsimile signature of
a Responsible Officer of the Trustee. Notes bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures were
affixed, authorized to sign on behalf of the Issuer or the Trustee shall be
valid and binding obligations of the Issuer, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Notes or did not hold such offices at the
date of such Notes. The Notes shall be dated the date of their authentication.
(d) The Notes shall be issued only in a transaction (or transactions) that
was not required to be registered under the Securities Act. For purposes of the
preceding sentence, the term "Securities Act" shall mean the provisions thereof
exclusive of Regulation S (17 CFR 230.901 through 230.904).
SECTION 6.02 AUTHENTICATION AND DELIVERY OF THE NOTES.
The Trustee shall cause to be authenticated and delivered to or upon
the order of the Issuer, in consideration of the grant by the Issuer of a
security interest in the Receivables and the other property included in the
Trust Estate, simultaneously with the assignment, transfer and
45
51
conveyance to the Trustee of the Receivables and the constructive delivery to
the Trustee on behalf of the Noteholders of the Receivable Files and the other
components of the Trust Estate, the Notes duly authenticated by the Trustee, in
authorized denominations equaling in the aggregate the Maximum Facility Amount.
No Note shall be entitled to any benefit under this Agreement or be valid for
any purpose, unless there appears thereon a certificate of authentication
substantially in the form set forth in the form of such Note attached hereto as
Exhibit C, executed by the Trustee by manual or facsimile signature, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered under this Agreement.
SECTION 6.03 INCREASE IN MAXIMUM PRINCIPAL AMOUNT OF NOTES; ISSUANCE OF
ADDITIONAL NOTES; INCREASE IN MAXIMUM FACILITY AMOUNT.
(a) Existing Noteholder. Upon the request of the Seller at any time and
from time to time, the initial Noteholder may, but shall have no obligation to,
increase the Maximum Principal Amount of its Note to an amount which, when
aggregated with the Maximum Principal Amounts of all other Notes outstanding,
shall not exceed $35,000,000. The Maximum Facility Amount shall be automatically
increased by the amount of such increase in the Maximum Principal Amount of the
initial Noteholder's Note. Any such increase shall be subject to the written
consent of the Note Insurer, which consent shall not be unreasonably withheld.
Each such increase shall be effected by delivery to the Trustee (i) of a written
notice (a "Notice of Increase in Maximum Principal Amount"), executed by the
Seller, the Servicer, the initial Noteholder and the Note Insurer, stating among
other things, the amount to which the Maximum Principal Amount of the Note held
by such Noteholder is being increased, the effective date thereof, which
effective date shall be at least three Business Days after the delivery of such
notice, and stating that the Trustee is authorized to exchange such Note for a
new Note in such increased Maximum Principal Amount upon surrender of the
existing Note in accordance with Section 6.04(c) and the deposit by the Seller
of the Required Reserve Amount pursuant to Section 4.05.
(b) Additional Noteholders. The Seller shall have the right, at any time
and from time to time, with the written consent of the Note Insurer (which
consent shall not be unreasonably withheld), to increase the Maximum Facility
Amount to an aggregate amount not to exceed $35,000,000 and to cause Notes to be
issued hereunder to additional Noteholders with an aggregate Maximum Principal
Amount which, when aggregated with the Maximum Principal Amounts of all other
Notes outstanding shall not exceed $35,000,000. Each such increase shall be
effected by delivery to the Trustee of a written notice (a "Notice of Addition
of Noteholder"), executed by the Seller, the Servicer and the Note Insurer,
stating among other things, the identity of the additional Noteholder or
Noteholders, the amount to which the Maximum Facility Amount is to be increased,
the Maximum Principal Amount of the Note or Notes to be issued to such
additional Noteholder or Noteholders, the issuance date thereof, which issuance
date shall be at least three Business Days after the delivery of such notice,
and authorizing the Trustee to issue a new Note or Notes in such increased
Maximum Principal Amount to the additional Noteholder or Noteholders. Upon
receipt of such Notice of Addition of Noteholder, compliance with the provisions
of Section 6.04 and the deposit by the Seller of the Required Reserve
46
52
Amount pursuant to Section 4.05, but not earlier than the date specified in such
Notice, the Trustee shall issue a new Note or Notes to the additional Noteholder
or Noteholders. On the Payment Date next succeeding the date on which any such
new Note is issued, the additional Noteholder shall cause such amounts to be
paid to the existing Noteholders such that, taking into account all outstanding
Notes on such Payment Date, the amounts funded under each Note shall be pro rata
based on the Maximum Principal Amounts of all outstanding Notes. Any such
amounts so paid by the additional Noteholder shall be deemed a Funding with
respect to the Note held by such Additional Noteholder and shall reduce the
Fundings made by any existing Noteholder so paid.
SECTION 6.04 REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES.
(a) The Note Registrar shall maintain a Note Register in which, subject to
such reasonable regulations as it may prescribe, the Note Registrar shall
provide for the registration of the Notes and issuances, transfers and exchanges
thereof as provided in this Agreement. The Trustee is hereby initially appointed
Note Registrar for the purpose of registering the Notes and issuances, transfers
and exchanges thereof as provided in this Agreement. In the event that,
subsequent to the Closing Date, the Trustee notifies the Servicer that it is
unable to act as Note Registrar, the Servicer shall appoint another bank or
trust company, agreeing to act in accordance with the provisions of this
Agreement applicable to it, and otherwise acceptable to the Trustee, to act as
successor Note Registrar under this Agreement.
(b) Subject to the provisions of this Agreement, upon surrender for
registration of transfer of any Note at the Corporate Trust Office, or the
direction to issue an additional Note pursuant to Section 6.03(b) the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes in authorized
denominations of a like aggregate principal amount.
(c) Notes may be exchanged for other Notes of authorized denominations of a
like aggregate principal amount, at the option of the related Noteholder upon
surrender of the Note to be exchanged at any such office or agency. Whenever any
Note is so surrendered for exchange, the Issuer shall execute and the Trustee
shall authenticate and deliver the Note that the Noteholder making the exchange
is entitled to receive. Every Note presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Note Registrar duly executed by the
Noteholder thereof or his or her attorney duly authorized in writing.
(d) No service or other charge shall be made for any registration of
issuance, transfer or exchange of Notes by the Trustee or the Servicer, 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 Notes.
(e) Any Notes surrendered for registration of transfer or exchange shall be
canceled and subsequently destroyed by the Trustee.
47
53
(f) Each purchaser of a Note or of a beneficial interest therein shall be
deemed to have represented and warranted, by accepting such Note or beneficial
interest as follows:
(i) it is acquiring the Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it or
such account is a Qualified Institutional Buyer or an Accredited Investor
acquiring the Notes for investment purposes and not for distribution;
(ii) it acknowledges that the Notes have not been registered under the
Securities Act or any state securities laws and may not be sold except as
permitted below;
(iii) it understands and agrees that such Notes are being offered only
in a transaction not involving any public offering within the meaning of the
Securities Act, and that such Notes may be resold, pledged or transferred only
in accordance with Section 6.04(g) below (1) to a person who the transferor
reasonably believes after due inquiry is, and who has certified that it is, a
Qualified Institutional Buyer that purchases for its own account or for the
account of a Qualified Institutional Buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A or (2) to an
institution that is an Accredited Investor who has certified that it is an
Accredited Investor purchasing for its own account or for the account of another
Accredited Investor (unless the purchaser is a bank acting in its fiduciary
capacity);
(iv) it understands that the following legend will be placed on the
Notes, unless otherwise agreed by the Issuer:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF THIS NOTE IS SUBJECT
TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN THE INDENTURE AND
SERVICING AGREEMENT UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS
AVAILABLE FROM THE TRUSTEE UPON REQUEST). PROSPECTIVE PURCHASERS ARE
HEREBY NOTIFIED THAT THE SELLER OF ANY NOTES MAY BE RELYING ON THE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT."
(v) it (x) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its prospective
investment in the Notes; and (y) it (or any account for which it is purchasing)
has the ability to bear the economic risks of its prospective investment for an
indefinite period and can afford the complete loss of such investment;
(vi) it understands that the Issuer, the Placement Agent and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and
48
54
agreements and agrees that if any of the acknowledgments, representations,
warranties and agreements deemed to have been made by it by its purchase of the
Notes are no longer accurate, it shall promptly notify the Issuer and the
Placement Agent. If it is acquiring the Notes as a fiduciary or agent for one or
more investor accounts, it represents that it has sole investment discretion
with respect to each such account and it has full power to make the foregoing
acknowledgments, representations, warranties and agreements on behalf of each
such account;
(vii) it understands that the Notes may not be transferred to an
Employee Plan (as defined in Section 6.04(i)), or an entity, account or other
pooled investment fund the underlying assets of which include or are deemed to
include Employee Plan assets by reason of an Employee Plan's involvement in the
entity, account or other pooled investment fund unless the Holder or prospective
transferee delivers to the Trustee an opinion of counsel (which counsel and
opinion shall be reasonably acceptable to the Issuer, Servicer and Trustee) as
provided in this Agreement. The Issuer, Servicer, Trustee and Backup Servicer
shall not be responsible for confirming or otherwise investigating whether a
proposed transferee is an employee benefit plan, trust or account subject to
ERISA, or described in Section 4975(e)(1) of the Code;
(viii) In the case of the acquisition of Notes, directly or indirectly,
by a partnership, limited liability company, S corporation, grantor trust, or
any other "flow through entity" (within the meaning of Untied States Treasury
Regulations Section 1.7704-1(h)(3)) (a "Flow-Through Entity"), the Flow-Through
Entity, on behalf of each beneficial owner of interests, directly or indirectly,
in such Flow-Through Entity, acknowledges that use of such Flow-Through Entity
to acquire and hold Notes (as opposed to direct acquisition or ownership of
Notes by the beneficial owners of the Flow-Through Entity) is not motivated by,
or a direct consequence of, efforts to qualify for the "private placement" safe
harbor of United States Treasury Regulations Section 1.7704-1(h) pursuant to
which the Flow-Through Entity, rather than each beneficial owner owning a direct
or indirect interest in the Flow-Through Entity, is counted as a partner in
determining whether there are fewer than one hundred (100) partners in the Trust
(assuming for purposes of the foregoing that the Trust were classified as a
partnership for federal and state income tax purposes and not solely as a
security device for such purposes) and, hence, whether the Notes are not treated
as "readily tradable" on a "secondary market") or the "substantial equivalent
thereof" (all as defined in United States Treasury Regulations Section 1.7704-1
et. seq.) by reason of such safe harbor; and
(ix) it understands that there are restrictions on the transfer of
Notes that are intended to avoid classification of the Trust as a "publicly
traded partnership" within the meaning of Section 7704(b) of the Code.
(g) No sale, pledge or other transfer or issuance pursuant to Section
6.03(b) (a "Transfer") of any Notes shall be made unless that Transfer is made
pursuant to an effective registration statement under the Securities Act, and
effective registration or qualification under applicable state securities laws,
or is made in a transaction that does not require such registration or
qualification. If such a Transfer is made without registration under the
Securities Act (other than in connection with the initial issuance thereof by
the Issuer, the Placement Agent or the initial purchasers), then the Note
Registrar shall refuse to register such Transfer unless it
49
55
receives (and upon receipt, may conclusively rely upon) either: (i) a
certificate from the Noteholder desiring to effect such Transfer substantially
in the form attached as Exhibit D-1 hereto (except that no such certificate
shall be required in the case of an issuance of additional Notes under Section
6.03(b)), and a certificate from such Noteholder's prospective transferee
substantially in the form attached as either Exhibit D-2 hereto or as Exhibit
D-3 hereto; or (ii) an Opinion of Counsel reasonably satisfactory to the Issuer
and the Note Registrar to the effect that such Transfer may be made without
registration under the Securities Act and/or applicable state securities laws
(which Opinion of Counsel shall not be an expense of the Trust Estate or of the
Issuer, the Servicer, the Trustee or the Note Registrar in their respective
capacities as such), together with the written certification(s) as to the facts
surrounding such Transfer from the Noteholder desiring to effect such Transfer
and/or such Noteholder's prospective transferee on which such Opinion of Counsel
is based. None of the Issuer, the Trustee or the Note Registrar is obligated to
register or qualify the Notes under the Securities Act or any other securities
law or to take any action not otherwise required under this Agreement to permit
the transfer of any Note without registration or qualification. Any Holder of a
Note desiring to effect such a Transfer shall, and upon acquisition of such a
Note shall be deemed to have agreed to, indemnify the Trustee, the Note
Registrar and the Issuer against any liability that may result if the Transfer
is not so exempt or is not made in accordance with such federal and state laws.
In connection with a Transfer of the Notes, the Issuer shall furnish upon
request of a Noteholder to such Holder and any prospective purchaser designated
by such Noteholder the information required to be delivered under paragraph
(d)(4) of Rule 144A of the Securities Act.
(h) No Issuance or Transfer of any Notes shall be made if such Transfer
would result in the beneficial ownership of Notes by more than 75 Persons;
provided, however, that no Transfer of Notes shall be made if the transferee of
Notes is a Flow-Through Entity (as defined in Section 6.04(f)(viii)), unless
such Flow-Through Entity is able to make and makes the acknowledgment in Section
6.04(f)(viii). The Trustee shall be authorized to rely on a determination by the
Servicer or the Issuer, in written form, as to whether or not any Transfer is
authorized under this Section 6.04(h). Each Noteholder, by its acceptance of a
Note, acknowledges and agrees that the foregoing restriction on transfer of the
Notes is reasonable given the potentially adverse treatment to the Trust and the
Noteholders of classification of the Partnership as a "publicly traded
partnership" within the meaning of Section 7704(b) of the Code.
(i) In no event shall a Note be issued or transferred to an employee
benefit plan, trust annuity or account subject to ERISA or a plan described in
Section 4975(e)(1) of the Code (or any such plan, trust or account, including
any Xxxxx (HR-10) plans, individual retirement accounts or annuities and other
employee benefit plans subject to Section 408 of ERISA or Section 4975 of the
Code being referred to herein as an "Employee Plan") or an entity, account or
other pooled investment fund the underlying assets of which include or are
deemed to include Employee Plan assets by reason of an Employee Plan's
investment in the entity, account or other pooled investment fund, unless the
Holder or prospective transferee delivers to the Trustee an opinion of counsel
(which counsel and opinion shall be reasonably acceptable to the Issuer,
Servicer and Trustee) to the effect that (i) such issuance or transfer would not
reasonably be likely to cause the underlying assets of the Trust to constitute
Employee Plan assets, or (ii) that the issuance, transfer or sale of the Note to
the prospective Holder or transferee, the subsequent
50
56
management, administration, servicing and operation of the Trust and the
ownership of the Note by the prospective transferee would not reasonably be
likely to constitute a violation of the prohibited transaction rules of ERISA or
the Code for which no statutory exception or administrative exemption applies.
In connection with the delivery of such opinion, the Issuer, the Servicer, the
Trustee and the Backup Servicer shall cooperate with the Holder and the
prospective transferee and, upon reasonable request of such Holder or
prospective transferee, provide such information as may be necessary to render
or evaluate such opinion. Such opinion of counsel shall be at the expense of the
Holder or the proposed transferee providing the opinion. The Issuer, Servicer,
Trustee and Backup Trustee shall not be responsible for confirming or otherwise
investigating whether a proposed transferee is an employee benefit plan, trust
or account subject to ERISA, or described in Section 4975(e)(1) of the Code.
Notwithstanding anything to the contrary herein, the foregoing restriction on
sale or transfer to an Employee Plan or an entity, account or other pooled
investment fund deemed to include Employee assets shall not apply to or prevent
the initial issuance, transfer or sale, or any subsequent issuance, transfer or
sale, of a Note to an insurance company, insurance servicer or insurance
organization qualified to do business in a state that purchases Notes with funds
held in one or more of its general accounts.
(j) To the extent permitted under applicable law, the Trustee shall be
under no liability to any Person for any registration of transfer of any Note
that is in fact not permitted by this Section 6.04 or for making any payments
due to the Noteholder thereof or taking any other action with respect to such
Noteholder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the requirements of this Agreement.
SECTION 6.05 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
If (i) any mutilated Note is surrendered to the Note Registrar, or the
Note Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Note Registrar, the Note
Insurer, the Trustee and the Issuer such security or indemnity as may be
required by them to save each of them harmless (the general obligation of an
institutional investor that is investment grade rated being sufficient
indemnity), then, in the absence of notice that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute and the Trustee shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a new Note of like tenor and denomination or ownership interest,
as applicable. In connection with the issuance of any new Note under this
Section, the Issuer or the Trustee may require the payment by the Noteholder
thereof of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
If, after the delivery of such replacement Note or payment with respect
to a destroyed, lost or stolen Note, a bona fide purchaser of the original Note
in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of any such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the
51
57
extent of any loss, damage, cost or expense incurred by the Issuer or the
Trustee in connection therewith.
SECTION 6.06 PERSONS DEEMED OWNERS.
Prior to due presentation of a Note for registration of transfer, the
Trustee, the Note Registrar and any of their respective agents may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payments pursuant to Section 4.04 and for all other
purposes whatsoever, and neither the Trustee, the Note Registrar nor any of
their respective agents shall be affected by any notice to the contrary.
SECTION 6.07 ACCESS TO LIST OF NOTEHOLDERS' NAMES AND ADDRESSES.
The Note Registrar shall furnish or cause to be furnished to the
Servicer, within 15 days after receipt by the Note Registrar of a written
request therefor from the Servicer, a list of the names and addresses of the
Noteholders as of the most recent Record Date. If three or more Noteholders, or
one or more Noteholders evidencing not less than 25% of the Voting Interests
(hereinafter referred to as "Applicants"), apply in writing to the Trustee, and
such application states that the Applicants desire to communicate with other
Noteholders with respect to their rights under this Agreement or under the Notes
and such application is accompanied by a copy of the communication that such
Applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, afford such Applicants access,
during normal business hours, to the current list of Noteholders as reflected in
the Note Register. Every Noteholder, by receiving and holding a Note, agrees
with the Servicer and the Trustee that neither the Servicer nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Noteholders under this Agreement, regardless
of the source from which such information was derived.
SECTION 6.08 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note within 14 days after receipt
of the final payment received in connection therewith, whether by optional
redemption of the Issuer or otherwise. Each Noteholder, by its acceptance of the
final payment with respect to its Note, will be deemed to have relinquished any
further right to receive payments under this Agreement and any interest in the
Trust Estate. Each Noteholder shall indemnify and hold harmless the Issuer, the
Trustee and any other Person against whom a claim is asserted in connection with
such Noteholder's failure to tender the Note to the Trustee for cancellation.
SECTION 6.09 MAINTENANCE OF OFFICE OR AGENCY.
The Trustee shall maintain in the City of Minneapolis, Minnesota, an
office or offices or agency or agencies where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Notes and this Agreement may be served. The
Trustee initially shall designate the Corporate Trust Office as its office for
such purposes. The Trustee shall give prompt written notice to the Issuer, the
Servicer and the Noteholders of any change in the location of the Note Register
or any such office or agency.
52
58
SECTION 6.10 FUNDINGS
(a) Each initial Noteholder, by its execution of a Purchase Agreement and
acceptance of a Note, has agreed, and each subsequent Noteholder, by its
execution of a Transferee Certificate and acceptance of a Note, shall have
agreed, on the terms and conditions set forth herein and in the related Purchase
Agreement or Transferee Certificate as applicable, to make Fundings to the
Issuer in the Funding Amount requested by Issuer on each Funding Date in
accordance with this Agreement. Each Funding Date after the first Funding Date
must be the first day of a Note Rate Period unless otherwise agreed by the
Noteholders. On the initial Funding Date, the Noteholders agree to make a
Funding in an amount equal to the Initial Note Balance. The Noteholders shall
not in any event be obligated to make any Funding to the extent it is less than
the Funding Date Minimum Amount. Notwithstanding anything to the contrary in
this Agreement, each Noteholder which signs a Purchase Agreement shall remain
obligated to make all Fundings, upon compliance by Issuer with all conditions to
such Funding, whether or not such Noteholder sells all or any portion of the
Notes to a subsequent Noteholder, and whether or not such subsequent Noteholder
assumes an obligation to make all or a portion of the Fundings; provided,
however, that Issuer shall have not unreasonably withhold its consent to release
any selling Noteholder from its obligation to make Fundings.
(b) The Notes shall be issued in an aggregate principal amount equal to the
Maximum Facility Amount although the Note Balance may at any time be zero or an
amount less than the Maximum Facility Amount. The Noteholders may endorse on a
schedule, which shall be attached to each Note, or record on their internal
records, the date and amount of each Funding made by such Noteholder and the
amount of each payment of principal made by the Issuer with respect to such
Note. The Noteholders are authorized and directed by the Issuer to make such
endorsements or records but each Noteholder's records shall be effective only if
such records are in agreement with the Note Register maintained by the Note
Registrar, absent manifest error in such Note Register. Failure by any
Noteholder to make, or an error by any Noteholder in making, such endorsement or
record with respect to any Funding or principal payments shall not limit or
otherwise affect the obligations of any party hereunder or under any Note.
(c) Each Noteholder shall remit its pro rata share of the Funding Amount
specified in the Schedule of Receivables (as described in Section 6.10) by wire
transfer in immediately available funds to the wire transfer address specified
in the Schedule of Receivables by 3:00 p.m. on the related Funding Date subject
to the terms hereof and of each Purchase Agreement. Each Noteholder's pro rata
share of a Funding shall be determined by multiplying the relevant Funding
Amount by a fraction, the numerator of which shall be equal to the Maximum
Principal Amount of such Noteholder's Note, as indicated on the face of such
Note, and the denominator of which shall be equal to the Maximum Facility
Amount.
(d) The failure of any Noteholder to remit its pro rata share of any
Funding Amount on any Funding Date shall not relieve any other Noteholder of its
obligation to remit its pro rata share of a Funding Amount on the related
Funding Date. Any non-defaulting Noteholder may, but is not required to, fund
all or a portion of the Funding Amount not funded by the defaulting Noteholder.
If such non-defaulting Noteholder does not fund all or any portion of such
53
59
defaulting Noteholder's pro rata share of the Funding Amount, the related
Funding Amount shall be reduced by the defaulted portion of the Funding Amount.
(e) Immediately following each Funding or payment of principal of the
Notes, the Trustee shall make an appropriate notation in the applicable Note
Register indicating (i) the amount and date of (A) the Funding or (B) payment of
principal; and (ii) the available Maximum Facility Amount after giving effect to
such Funding or payment of principal.
(f) The Funding Period may be extended at the request of the Issuer with
the prior written consent of the Noteholders, the Backup Servicer and the Note
Insurer upon written notice given by Issuer to the Noteholders, the Backup
Servicer and the Note Insurer no later than six months prior to the Scheduled
Termination Date, and upon confirmation by the Rating Agency of a rating of BB
or higher for the Notes after giving effect to the extension but without giving
effect to the Policy.
SECTION 6.11 CONDITIONS PRECEDENT TO EACH FUNDING
Each Funding is subject to the satisfaction of each condition precedent
set forth herein:
(a) No later than 11:00 a.m. (New York time) on the second Business Day
prior to a Funding Date, the Issuer shall deliver by facsimile transmission to
the Note Insurer and the Trustee, a Schedule of Receivables for the Receivables
to be contributed to the Issuer by the Seller on the Funding Date and setting
forth information regarding the proposed Funding. Such delivery shall constitute
notice of the Funding and Funding Amount.
(b) The Schedule of Receivables must comply with the requirements set forth
in the Receivables Contribution Agreement, and shall be signed by the Issuer and
Servicer. All of the Seller's and Issuer's representations and warranties
regarding such Receivables as set forth in the Transaction Documents must be
true and correct.
(c) The Funding Amount shall not be less than the Funding Date Minimum
Amount. After giving effect to such Funding, the Note Balance shall not exceed
the Maximum Facility Amount, and the aggregate Funding Amounts loaned in the
month in which the Funding Date occurs (other than the month in which the first
Funding Date occurs) shall not exceed $10,000,000.
(d) No Event of Default or Servicer Default shall have occurred and be
continuing or shall reasonably be expected to result from such Funding.
(e) The Policy shall be in full force and effect and no Insurer Default
shall have occurred and be continuing.
(f) The Funding Date shall occur prior to the end of the Funding Period and
no Funding Termination Event shall have occurred or would occur but for the
giving of notice or the passage of time, or both, as a result of such Funding.
54
60
(g) The Rating Agency has not rated the financial strength of the Note
Insurer below BBB.
(h) The Required Reserve Amount is on deposit in the Reserve Account.
(i) The Trustee shall have no duty or responsibility to verify the
conditions precedent contained in this Section 6.11.
SECTION 6.12 INTEREST CALCULATIONS; INTEREST PAYMENTS
(a) The amount of interest to be paid in respect of the Notes on each
Payment Date in accordance with Section 4.04(b) shall equal the Interest
Distributable Amount. Interest shall be due and payable in arrears on each
Payment Date.
(b) On or before the second business day prior to the Determination Date,
each Noteholder shall calculate the Interest Distributable Amount with respect
to its Note and will notify the Trustee, in writing, of that amount.
(c) On or before 2:00 p.m. (New York time) on the Business Day prior to the
Determination Date, the Trustee shall give written notice to the Issuer of the
total Interest Distributable Amount for the prior Interest Distribution Period.
The determination of the Interest Distributable Amount by the Trustee shall (in
the absence of manifest error) be final and binding on each Noteholder, and on
each of the parties hereto.
(d) The Trustee will maintain a record of the Funding Amount for each Pool,
and the average daily Note Balance for each Collection Period as provided to the
Trustee pursuant to Section 4.04(a).
SECTION 6.13 REPAYMENTS OF PRINCIPAL AND REBORROWINGS
On each Payment Date, the Issuer shall make payments in respect of
principal on the Notes in the amount, if any, of the Principal Distributable
Amount for the Notes for such Payment Date. Notwithstanding that the Note
Balance may be reduced to zero, the Notes shall remain outstanding and the
Noteholders shall continue to make Fundings during the Funding Period to the
extent provided in this Agreement. The Issuer shall also have the right to make
prepayments, in whole or in part, of the Note Balance on days other than Payment
Dates, pursuant to the terms of this Agreement.
SECTION 6.14 CONFIDENTIAL INFORMATION
Each purchaser of a Note or of a beneficial interest therein (a
"Holder") shall be deemed to have agreed to comply with this Section 6.14 by
accepting such Note or beneficial interest. Each Holder acknowledges that it may
obtain information relating to the Servicer or the Issuer which is of a
confidential and proprietary nature ("Proprietary Information"). Such
Proprietary Information may include, but is not limited to, non-public trade
secrets, know how, invention techniques, processes, programs, schematics, source
documents, data, and financial information.
55
61
Each Holder shall at all times, both during the term of this Agreement and for a
period of three (3) years after its termination, keep in trust and confidence
all such Proprietary Information, and shall not use such Proprietary Information
other than as required to enforce its rights under its Note, nor shall any
Holder disclose any such Proprietary, Information without the written consent of
the Servicer or the Issuer. Each Holder further agrees to immediately return all
Proprietary Information (including copies thereof) in its possession, custody,
or control upon termination of this Agreement for any reason.
No Holder shall disclose, advertise or publish the existence or the
terms or conditions of this Agreement without prior written consent of the
Servicer or the Issuer. Notwithstanding the foregoing, this Section 6.13 shall
not prohibit disclosure of information that is required to be disclosed by the
Holder pursuant to federal or state laws or regulation. In particular each
Holder and the Trustee agrees that it shall not, without the prior consent of
the Servicer or the Issuer, disclose the existence of this Agreement or any of
the terms herein to any Person other than (i) counsel to the Holder (ii) an
employee or director of the Trustee with a need to know in order to implement
this Agreement and only if such employee or director or counsel agrees to
maintain the confidentiality of this Agreement or (iii) a bona fide purchaser or
potential purchaser of the Note. The parties hereto agree that the Servicer
and/or the Issuer shall have the right to enforce these nondisclosure provisions
by an action for specific performance filed in any court of competent
jurisdiction in the State of Kansas or Arizona.
ARTICLE VII.
THE ISSUER
SECTION 7.01 REPRESENTATIONS OF ISSUER.
The Issuer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The representations
shall speak as of the execution and delivery of this Agreement and as of each
Funding Date and shall survive the grant of a security interest in or the
transfer of the Receivables to the Trustee.
(a) Organization and Good Standing. The Issuer is duly organized and
validly existing as a corporation in good standing 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 presently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own, hold, transfer, assign and convey the Receivables.
(b) Due Qualification. The Issuer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in Kansas and in all other jurisdictions in which the ownership or
lease of property or the conduct of its business requires such qualifications,
licenses or approvals, the noncompliance with which would have a material
adverse effect on the Note Insurer or the Noteholders.
56
62
(c) Power and Authority. The Issuer has the power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party, and to carry out their respective terms; the Issuer has full power and
authority to grant a security interest in the Trust Estate and has duly
authorized such grant to the Trustee by all necessary action; and the execution,
delivery and performance by the Issuer of this Agreement and each of the other
Transaction Documents to which it is a party has been duly authorized by all
necessary action of the Issuer.
(d) Valid Transfers; Binding Obligations. This Agreement evidences a valid
grant of a first priority perfected security interest under the UCC in the
Receivables, and such other portion of the Trust Estate as to which a security
interest may be perfected under the UCC, which is effective for so long as the
Notes or the Note Insurer Obligations remain outstanding, enforceable against
creditors of and purchasers from the Issuer, and each of the Transaction
Documents to which the Issuer is a party constitutes a legal, valid and binding
obligation of the Issuer enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally or by general equity
principles.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents and the fulfillment of the terms
of this Agreement and the other Transaction Documents do not conflict with,
result in any breach of any of the terms or provisions of, nor constitute (with
or without notice or lapse of time) a default under the Certificate of
Incorporation or Bylaws of the Issuer or any indenture, agreement or other
instrument to which the Issuer is a party or by which it shall be bound, nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement), nor violate any law, order, rule or regulation
applicable to the Issuer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Issuer or its properties, which breach, default, conflict,
Lien or violation would have a material adverse effect on the rights or
interests of the Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or to
the Issuer's knowledge, threatened, against or affecting the Issuer: (i)
asserting the invalidity of this Agreement, the Notes or any of the other
Transaction Documents to which the Issuer is a party, (ii) seeking to prevent
the issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Transaction Documents, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Issuer of its obligations under, or the validity or
enforceability of, this Agreement, the Notes or any other Transaction Documents,
or (iv) relating to the Issuer and which might adversely affect the federal
income tax attributes of the Notes.
(g) No Subsidiaries. The Issuer has no subsidiaries.
57
63
(h) Not an Investment Company. Neither the Issuer nor the Trust Estate is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act, and none of the issuance of
the Notes, the execution and delivery of the Transaction Documents to which the
Issuer is a party, the acquisition by the Issuer of one or more Pools of
Receivables, or the performance by the Issuer of its obligations under the
Transaction Documents, or the use of the proceeds of the Notes by the Issuer
will violate any provision of the Investment Company Act, or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder.
(i) No Violation of Securities Act. The Issuer has not offered or sold, and
will not offer or sell, any Notes in any manner that would render the issuance
and sale of the Notes a violation of the Securities Act, or any state securities
or "Blue Sky" laws or require registration pursuant thereto, nor has it
authorized, nor will it authorize, any Person to act in such manner. No
registration under the Securities Act is required for the sale of the Notes as
contemplated hereby, assuming the accuracy of the Purchaser's representations
and warranties set forth in the Purchase Agreement and the compliance of the
Placement Agent with its obligations under the Placement Agency Agreement.
(j) Truth and Completeness of Private Placement Memorandum. As of the
Closing Date, the Private Placement Memorandum does not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(k) No Violation of Exchange Act or Regulations T, U or X. None of the
transactions contemplated in the Transaction Documents (including the use of the
proceeds from the sale of the Notes) will result in a violation of Section 8 of
the Exchange Act, or any regulations issued pursuant thereto, including
Regulations T, U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II. The Issuer does not own nor does it intend to carry or
purchase any "margin security" within the meaning of said Regulation U,
including margin securities originally issued by it or any "margin stock" within
the meaning of said Regulation U.
(l) All Tax Returns, True, Correct and Timely Filed. All material tax
returns required to be filed by the Issuer in any jurisdiction have in fact been
filed and all taxes, assessments, fees and other governmental charges upon the
Issuer or upon any of its properties, income of franchises shown to be due and
payable on such returns have been paid. To the best of the Issuer's knowledge
all such tax returns were true and correct and the Issuer knows of no proposed
material additional tax assessment against it nor of any basis therefor. The
provisions for taxes on the books of the Issuer are in accordance with generally
accepted accounting principles.
(m) No Restriction on Issuer Affecting its Business. The Issuer is not a
party to any contract or agreement, or subject to any charter or other
restriction which materially and adversely affects its business nor has it
agreed or consented to cause any of its properties to become subject to any Lien
other than the Lien created hereby.
58
64
(n) Perfection of Security Interest. All filings and recordings as may be
necessary to perfect the interest of the Issuer in the Receivables and such
other portion of the Trust Estate as to which a security interest may be
perfected under the UCC, have been accomplished and are in full force and
effect. All filings and recordings against the Issuer required to perfect the
security interest of the Trustee on such Receivables and such other portion of
the Trust Estate as to which a security interest may be perfected under the UCC,
have been accomplished and are in full force and effect. The Issuer will from
time to time, at its own expense, execute and file such additional financing
statements (including continuation statements) as may be necessary to ensure
that at any time, the interest of the Issuer in all of the Receivables and such
other portion of the Trust Estate as to which a security interest may be
perfected under the UCC, and the security interest of the Trustee on all of the
Receivables and such other portion of the Trust Estate as to which a security
interest may be perfected under the UCC are fully protected.
(o) All Taxes, Fees and Charges Relating to Transaction and Transaction
Documents Paid. Any taxes, fees and other governmental charges in connection
with the execution and delivery of the Transaction Documents and the execution
and delivery and sale of the Notes have been or will be paid by the Issuer at or
prior to the Closing Date.
(p) No Requirement that Issuer File a Registration Statement. There are no
contracts, agreements or understandings between the Issuer and any person
granting said person the right to require the Issuer to file a registration
statement under the Securities Act with respect to any Notes owned or to be
owned by such person.
(q) No Broker, Finder or Financial Adviser Other than Rothschild. The
Issuer or any of its respective officers, directors, employees or agents has not
employed any broker, finder or financial adviser other than Rothschild Inc. or
incurred any liability for fees or commissions to any person other than
Rothschild Inc. in connection with the offering, issuance or sale of the Notes.
(r) Notes Authorized, Executed, Authenticated, Validly Issued and
Outstanding. The Notes have been duly and validly authorized and, when duly and
validly executed and authenticated by the Trustee in accordance with the terms
of this Agreement and delivered to and paid for by each Purchaser as provided
herein, will be validly issued and outstanding and entitled to the benefits
hereof.
(s) Location of Chief Executive Office and Records. The principal place of
business and chief executive office of the Issuer, and the office where Issuer
maintains all of its records, is located at 0000 X. Xxxxxxxx, Xxxxxxxxxx, Xxxxxx
00000; provided that, at any time after the Closing Date, upon 30 days' prior
written notice to each of the Servicer, the Note Insurer and the Trustee, the
Issuer may relocate its principal place of business and chief executive office,
and/or the office where it maintains all of its records, to another location
within the United States to the extent that the Issuer shall have taken all
actions necessary or reasonably requested by the Servicer, the Trustee or the
Note Insurer to amend its existing financing statements and continuation
statements, and file additional financing statements and to take any other steps
reasonably requested by the Servicer, the Trustee or the Note Insurer to further
perfect or
59
65
evidence the rights, claims or security interests of any of the Servicer, the
Trustee or the Note Insurer under any of the Transaction Documents.
(t) Ownership of the Issuer. One hundred percent (100%) of the issued and
outstanding shares of capital stock of the Issuer are directly owned (both
beneficially and of record) by Midland Credit Management, Inc. Such shares are
validly issued, fully paid and nonassessable and no one other than Midland
Credit Management, Inc. has any options, warrants or other rights to acquire
shares of capital stock of and from the Issuer.
(u) Solvency. The Issuer, both prior to and after giving effect to each
transfer of Receivables identified in a Schedule of Receivables on the Closing
Date (or on any Funding Date thereafter, as the case may be) (i) is not
"insolvent" (as such term is defined in Section 101(32)(A) of the Bankruptcy
Code); (ii) is able to pay its debts as they become due; and (iii) does not have
unreasonably small capital for the business in which it is engaged or for any
business or transaction in which it is about to engage.
(v) Reporting and Accounting Treatment. For reporting and accounting
purposes, and in its books of account and records, the Issuer will treat each
transfer of Receivables pursuant to the Receivables Contribution Agreement as an
absolute sale and assignment of Midland Credit Management, Inc.'s full right,
title and ownership interest in each such Receivable and the Issuer has not in
any other manner accounted for or treated the transactions.
(w) Governmental and Other Consents. No consents, approvals, authorization
or orders of, registration or filing with, or notice to any governmental
authority or court is required for the execution, delivery and performance of,
or compliance with, the Transaction Documents by the Issuer, except such
consent, approvals, authorizations, filings and notices that have already been
made or obtained.
(x) Enforceability of Transaction Documents. Each of the Transaction
Documents to which it is a party has been duly authorized, executed and
delivered by the Issuer and constitutes the legal, valid and binding obligation
of the Issuer, enforceable against it in accordance with its terms.
(y) Accuracy of Information. The representations and warranties of the
Issuer in the Transaction Documents are true and correct in all material
respects as of the Closing Date and, except for representations and warranties
expressly made as of a different date, each Funding Date.
(z) Separate Identity. The Issuer is operated as an entity separate from
Midland Credit Management, Inc. In addition, the Issuer:
(i) has its own board of directors,
(ii) has at least two independent directors who satisfy the definition
of Independent Director provided in the Certificate of Incorporation,
60
66
(iii) maintains its assets in a manner which facilitates their
identification and segregation from those of the Servicer,
(iv) has all office furniture, fixtures and equipment necessary to
operate its business,
(v) conducts all intercompany transactions with the Servicer on terms
which the Issuer reasonably believes to be on an arm's-length basis,
(vi) has not guaranteed any obligation of the Servicer or any of its
Affiliates, nor has it had any of its obligations guaranteed by any such
entities and has not held itself out as responsible for debts of any such entity
or for the decisions or actions with respect to the business affairs of any such
entity,
(vii) has not permitted the commingling or pooling of its funds or
other assets with the assets of the Servicer (other than in respect of items of
payment and funds which may be commingled until deposit into the Collection
Account in accordance with this Agreement),
(viii) has separate deposit and other bank accounts to which neither
the Servicer nor any of its Affiliates has any access and does not at any time
pool any of its funds with those of the Servicer or any of its Affiliates,
except for such funds which may be commingled until deposit into the Collection
Account in accordance with this Agreement,
(ix) maintains financial records which are separate from those of the
Servicer or any of its Affiliates,
(x) compensates all employees, consultants and agents, or reimburses
the Servicer from the Issuer's own funds, for services provided to the Issuer by
such employees, consultants and agents,
(xi) conducts all of its business (whether in writing or orally) solely
in its own name,
(xii) is not, directly or indirectly, named as a direct or contingent
beneficiary or loss payee on any insurance policy covering the property of the
Servicer or any of its Affiliates and has entered into no agreement to be named
as such a beneficiary or payee,
(xiii) acknowledges that the Trustee and the Note Insurer are entering
into the transactions contemplated by this Agreement and the other Transaction
Documents in reliance on the Issuer's identity as a separate legal entity from
the Servicer, and
(xiv) practices and adheres to company formalities such as complying
with its Bylaws and resolutions and the holding of regularly scheduled board of
directors meetings.
(aa) ERISA Compliant. The Issuer and all ERISA Affiliates are in compliance
with all applicable federal or state laws, including the rule and regulations
promulgated thereunder, relating to discrimination in the hiring, promotion or
pay of employees, any applicable federal or
61
67
state wages and hours law, and the provisions of the ERISA applicable to its
business, except where such noncompliance would not, individually or in the
aggregate, have a Material Adverse Effect. The employee benefit plans, including
employee welfare benefit plans (the "Employee Plans") of the Issuer and all
ERISA Affiliates have been operated in compliance with the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations (except to the extent such
noncompliance would not, individually or in the aggregate, have a Material
Adverse Effect). No reportable event under Section 4043(b) of ERISA or any
prohibited transaction under Section 406 of ERISA has occurred with respect to
any Employee Plan maintained by the Issuer or any ERISA Affiliate (except to the
extent that any such event or transaction would not, individually or in the
aggregate, have a Material Adverse Effect). There are no pending or, to the
Issuer's best knowledge, threatened, claims by or on behalf of any employee
plan, by any employee or beneficiary covered under any such plan or by any
governmental authority or otherwise involving such plans or any of their
respective fiduciaries (other than for routine claims for benefits). All
Employee Plans that are group health plans have been operated in compliance with
the group health plan continuation coverage requirements of Section 4980B of the
Code in all material respects (except to the extent that such noncompliance
would not, individually or in the aggregate, have a Material Adverse Effect).
"Material Adverse Effect" means, when used in connection with the Issuer, any
development, change or effect that is materially adverse to the business,
properties, assets, net worth, condition (financial or other), or results of
operations of the Issuer or that reasonably could be expected to be materially
adverse to the prospects of the Issuer. Neither the Issuer nor any of its ERISA
Affiliates have a "defined benefit plan" as defined in ERISA.
SECTION 7.02 REPAYMENT IN RESPECT OF RECEIVABLES UPON BREACH.
Upon discovery by the Issuer or the Servicer (which discovery shall be
deemed to have occurred upon the receipt of notice by a Responsible Officer of
the Issuer or the Servicer) or upon the actual knowledge of a Responsible
Officer of the Trustee of a breach of any of the representations and warranties
of the Issuer set forth in Section 7.01, the party discovering such breach shall
give prompt written notice to the others. If such breach has or would have a
material adverse effect on the rights or interests of the Noteholders or the
Note Insurer with respect to all or a portion of the Receivables, the Issuer
shall repay a portion of the Note Balance equal to the Release Payment related
to such Receivables and, if necessary, the Issuer shall enforce the obligation
of the Seller under the Receivables Contribution Agreement to reacquire
Receivables from the Issuer, unless such breach shall have been cured within
thirty (30) days after the earlier to occur of the discovery of such breach by
the Issuer or receipt of written notice of such breach by the Issuer, such that
the relevant representation and warranty shall be true and correct in all
material respects as if made on such day, and the Issuer shall have delivered to
the Trustee a certificate of any Responsible Officer of the Issuer describing
the nature of such breach and the manner in which the relevant representation
and warranty became true and correct. This repayment obligation shall pertain to
all representations and warranties of the Issuer contained in Section 7.01,
whether or not the Issuer has knowledge of the breach at the time of the breach
or at the time the representations and warranties were made. The Issuer will be
obligated to make the repayment related to such Receivables as set forth above
on the Remittance Date next
62
68
succeeding the date on which such repayment obligation arises. In consideration
of the release of the Receivables, on such Remittance Date, the Issuer shall
remit the aggregate Release Payments of the Receivables to the Collection
Account in the manner specified in Section 4.03.
Upon any such repayment, the Trustee on behalf of the Noteholders and
the Note Insurer shall, without further action, be deemed to have released its
security interest in, to and under the Removed Receivables, all monies due or to
become due with respect thereto after the aforementioned Remittance Date and all
proceeds thereof. The Trustee shall execute such documents and instruments and
take such other actions as shall be reasonably requested by the Issuer to effect
the security interest release pursuant to this Section. Notwithstanding the
foregoing, the Controlling Party may by delivery of prior written notice waive
any breach and repayment obligation of the Issuer pursuant to this Section 7.02.
The Trustee shall have no duty to conduct any affirmative investigation as to
the occurrence of any condition requiring the repayment for any Receivables
pursuant to this Section, except as otherwise provided in Section 10.02.
SECTION 7.03 LIABILITY OF ISSUER
The Issuer shall be liable in accordance with this Agreement only to
the extent of the obligations in this Agreement specifically undertaken by the
Issuer in such capacity under this Agreement and shall have no other obligations
or liabilities hereunder.
SECTION 7.04 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE ISSUER; CERTAIN LIMITATIONS.
(a) Merger, Etc. Any corporation (i) into which the Issuer may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Issuer shall be a party, or (iii) which may succeed to all or
substantially all of the business of the Issuer, which corporation in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Issuer under this Agreement, shall be the successor to the Issuer 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, except that if the
Issuer in any of the foregoing cases is not the surviving entity, then the
surviving entity shall execute an agreement of assumption to perform every
obligation of the Issuer hereunder, and the surviving entity shall have taken
all actions necessary or reasonably requested by the Issuer, the Trustee or the
Note Insurer to amend its existing financing statements and continuation
statements, and file additional financing statements and to take any other steps
reasonably requested by the Issuer, the Trustee or the Note Insurer to further
perfect or evidence the rights, claims or security interests of any of the
Issuer, the Trustee or the Note Insurer under any of the Transaction Documents.
The Issuer (1) shall provide notice of any merger, consolidation or succession
pursuant to this Section to the Rating Agency, the Trustee, the Note Insurer,
the Noteholders and the Placement Agent, (2) for so long as the Notes are
outstanding, shall receive from the Rating Agency a letter to the effect that
such merger, consolidation or succession will not result in a qualification,
downgrading or withdrawal of the then-current rating on the Notes, and (3) shall
receive from the Controlling Party its prior written consent to such merger,
consolidation or
63
69
succession, absent which consent, the Issuer shall not become a party to such
merger, consolidation or succession.
(b) Certain Limitations. (i) The business, activities and purpose of the
Issuer shall be limited as specified in its Certificate of Incorporation.
(ii) So long as any outstanding debt of the Issuer or the Notes is
rated by the Rating Agency, the Issuer shall not issue unsecured notes or
otherwise borrow money unless (A) the Issuer has made a written request to the
Rating Agency to issue unsecured notes or incur indebtedness and such notes or
borrowings are rated by the Rating Agency the same as or higher than the rating
afforded any outstanding rated debt or the Notes, and (B) such notes or
borrowings (1) are fully subordinated (and which shall provide for payment only
after payment in respect of all outstanding rated debt and/or the Notes) or are
nonrecourse against any assets of the Issuer other than the assets pledged to
secure such notes or borrowings, (2) do not constitute a claim against the
Issuer in the event such assets are insufficient to pay such notes or
borrowings, and (3) where such notes or borrowings are secured by the rated debt
or the Notes, are fully subordinated (and which shall provide for payment only
after payment in respect of all outstanding rated debt and/or the Notes) to such
rated debt or the Notes.
(iii) The Issuer shall not issue unsecured notes or otherwise borrow
money, or otherwise grant any consensual Lien in favor of any Person (other than
the Lien granted pursuant hereto) absent the prior written consent of the
Controlling Party.
(c) Unanimous Consent. Notwithstanding any other provision of this Section
and any provision of law, the Issuer shall not do any of the following without
the affirmative unanimous vote of all members of the Board of Directors of the
Issuer (which includes both Independent Directors as such term is defined in the
Certificate of Incorporation);
(i) (A) dissolve or liquidate, in whole or in part, or institute
proceedings to be adjudicated bankrupt or insolvent, (B) consent to the
institution of bankruptcy or insolvency proceedings against it, (C) file a
petition seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (D) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the corporation or a substantial part of its property, (E) make any
assignment for the benefit of creditors, (F) admit in writing its inability to
pay its debts generally as they become due, or (G) take any action in
furtherance of the actions set forth in clauses (A) through (F) above; or
(ii) merge or consolidate with or into any other person or entity or
sell or lease its property and all or substantially all of its assets to any
person or entity; or
(iii) modify any provision of its Certificate of Incorporation or
Bylaws.
SECTION 7.05 LIMITATION ON LIABILITY OF ISSUER AND OTHERS.
The Issuer and any director or officer or employee or agent of the
Issuer may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and
64
70
submitted by any Person respecting any matters arising under this Agreement. The
Issuer shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations as Issuer under this
Agreement or as the acquirer of the Receivables under the Receivables
Contribution Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 7.06 ISSUER MAY OWN NOTES.
The Issuer and any Person controlling, controlled by or under common
control with the Issuer may, in its individual or any other capacity, become the
owner or pledgee of one or more Notes with the same rights as it would have if
it were not the Issuer or an affiliate thereof, except as otherwise specifically
provided in the definition of the term "Noteholder." The Notes so owned by or
pledged to the Issuer or such controlling or commonly controlled Person shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority or distinction as among any of the Notes, except as
set forth herein with respect to, among other things, certain rights to vote,
consent or give directions to the Trustee as a Noteholder.
SECTION 7.07 COVENANTS OF ISSUER.
(a) Bylaws and Certificate of Incorporation. The Issuer hereby covenants
not to change, or agree to any change of, its Bylaws or Certificate of
Incorporation without (i) notice to the Trustee, the Rating Agency and the Note
Insurer, and (ii) the prior written consent of the Controlling Party.
(b) Merger of the Issuer, Asset Sales and Purchases. Without the prior
written consent of the Controlling Party, the Issuer shall not merge with or
into or, or transfer or sell all or substantially all of its assets to, or buy
all or substantially all the assets of, any person, except that Issuer may sell
all or substantially all of the Receivables in connection with a prepayment of
all or a portion of the Note Balance, as provided in Section 11.06.
(c) Preservation of Existence. The Issuer hereby covenants to do or cause
to be done all things necessary on its part to preserve and keep in full force
and effect its existence as a corporation, and to maintain each of its licenses,
approvals, registrations or qualifications in all jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
licenses, approvals, registrations or qualifications, except for failures to
maintain any such licenses, approvals, registrations or qualifications which,
individually or in the aggregate, would not have a material adverse effect on
the ability of Issuer to perform its obligations hereunder or under any of the
other Transaction Documents.
(d) Compliance with Laws. The Issuer hereby covenants to comply in all
material respects with all applicable laws, rules and regulations and orders of
any governmental authority, the noncompliance with which would have a material
adverse effect on the business, financial condition or results of operations of
the Issuer or on the ability of the Issuer to repay the Notes or the Note
Insurer Obligations, or perform any of its other obligations under this
Agreement or the other Transaction Documents.
65
71
(e) Payment of Taxes. The Issuer hereby covenants to pay and discharge
promptly or cause to be paid and discharged promptly all taxes, assessments and
governmental charges or levies imposed upon the Issuer or upon its income and
profits, or upon any of its property or any part thereof, before the same shall
become in default, provided that the Issuer shall not be required to pay and
discharge any such tax, assessment, charge or levy so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Issuer shall have set aside on its books adequate reserves with respect to
any such tax, assessments, charge or levy so contested, or so long as the
failure to pay any such tax, assessment, charge or levy would not have a
material adverse effect on the ability of the Issuer to perform its obligations
hereunder.
(f) Exercise of Rights Under the Transaction Documents. The Issuer hereby
covenants to exercise its rights as the Purchaser under the Receivables
Contribution Agreement and take such other action in connection with the
Transaction Documents as may be appropriate or desirable, taking into account
the associated costs, to maximize the collection of amounts payable to the Trust
Estate.
(g) Investments. The Issuer hereby covenants that it will not without the
prior written consent of the Controlling Party, acquire or hold any indebtedness
for borrowed money of another person, or any capital stock, debentures,
partnership interests or other ownership interests or other securities of any
Person, other than the Receivables acquired under any Receivables Contribution
Agreement.
(h) Keeping Records and Books of Account. The Issuer hereby covenants and
agrees to maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing the
Receivables in the event of the destruction or loss of the originals thereof)
and keep and maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Receivables
(including, without limitation, records adequate to permit the daily
identification of all collections with respect to, and adjustments of amounts
payable under, each Receivable).
(i) Benefit Plan. The Issuer hereby covenants and agrees to comply in all
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Issuer covenants that it
will not, and it will cause any ERISA Affiliate to not:
(i) engage in any non-exempt prohibited transaction (within the meaning
of Code Section 4975 or ERISA Section 406) with respect to any Benefit Plan
which would result in a material liability to the Issuer;
(ii) permit to exist any accumulated funding deficiency as defined in
Section 302(a) of ERISA and Section 412(a) of the Code, with respect to any
Benefit Plan which is subject to Section 302(q) of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Issuer or any ERISA Affiliate
if such termination would result in any material liability to the Issuer or an
ERISA Affiliate; or
66
72
(iv) create any defined benefit plan (as defined in ERISA).
(j) No Release. The Issuer shall not take any action and shall use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's covenants or obligations under any document,
instrument or agreement included in the Trust Estate, or which would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such document, instrument or
agreement, except in connection with the release of the Prepaid Receivables from
this Agreement.
(k) Separate Identity. The Issuer hereby covenants and agrees to take all
actions required to maintain the Issuer's status as a separate legal entity.
Without limiting the foregoing, the Issuer shall:
(i) conduct all of its business, and make all communications to third
parties (including all invoices (if any), letters, checks and other instruments)
solely in its own name (and not as a division of any other Person), and require
that its employees, if any, when conducting its business identify themselves as
such (including, without limitation, by means of providing appropriate employees
with business or identification cards identifying such employees as the Issuer's
employees);
(ii) compensate all employees, consultants and agents directly or
indirectly through reimbursement of the Servicer, from the Issuer's bank
accounts, for services provided to the Issuer by such employees, consultants and
agents and, to the extent any employee, consultant or agent of the Issuer is
also an employee, consultant or agent of the Servicer, allocate the compensation
of such employee, consultant or agent between the Issuer and the Servicer on a
basis which reflects the respective services rendered to the Issuer and the
Servicer;
(iii) (A) pay its own incidental administrative costs and expenses from
its own funds, (B) allocate all other shared overhead expenses (including,
without limitation, telephone and other utility charges, the services of shared
employees, consultants and agents, and reasonable legal and auditing expenses)
which are not reflected in the Servicing Fee, and other items of cost and
expense shared between the Issuer and the Servicer, on the basis of actual use
to the extent practicable, and to the extent such allocation is not practicable,
on a basis reasonably related to actual use or the value of services rendered;
(iv) at all times have at least two (2) independent directors who
satisfy the definition of Independent Director provided in the Certificate of
Incorporation, and have at least one officer responsible for managing its
day-to-day business and manage such business by or under the direction of its
board of directors;
(v) maintain its books and records separate from those of any
Affiliate;
(vi) prepare its financial statements separately from those of its
Affiliates and ensure that any consolidated financial statement have notes to
the effect that the Issuer is a
67
73
separate entity whose creditors have a claim on its assets prior to those assets
becoming available to its equity holders and therefore to any of their
respective creditors, as the case may be;
(vii) not commingle its funds or other assets with those of any of its
Affiliates (other than in respect of items of payment or funds which may be
commingled until deposit into the Collection Account in accordance with this
Agreement), and not to hold its assets in any manner that would create an
appearance that such assets belong to any such Affiliate, not maintain bank
accounts or other depository accounts to which any such Affiliate is an account
party, into which any such Affiliate makes deposits or from which any such
Affiliate has the power to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity;
(viii) not permit any of its Affiliates to pay the Issuer's operating
expenses;
(ix) not guarantee any obligation of any of its Affiliates nor have any
of its obligations guaranteed by any such Affiliate (either directly or by
seeking credit based on the assets of such Affiliate), or otherwise hold itself
out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery separate from that of any
Affiliate and have all its officers and employees conduct all of its business
solely in its own name;
(xi) hold regular meetings of its board of directors in accordance with
the provisions of its Certificate of Incorporation and otherwise take such
actions as are necessary on its part to ensure that all corporate procedures
required by its Certificate of Incorporation and Bylaws are duly and validly
taken;
(xii) respond to any inquires with respect to ownership of a Receivable
by stating that it is the owner of such contributed Receivable, and, if
requested to do so, that the Trustee has been granted a security interest in
such Receivable;
(xiii) on or before March 31 of each year, beginning in 1999, the
Issuer shall deliver to the Trustee an Officer's Certificate stating that Issuer
has, during the preceding year, observed all of the requisite company
formalities and conducted its business and operations in such a manner as
required for the Issuer to maintain its separate company existence from any
other entity; and
(xiv) take such other actions as are necessary on its part to ensure
that the facts and assumptions set forth in the non-consolidation opinion
delivered by Issuer's counsel remain true and correct at all times.
(l) Compliance with all Transaction Documents. The Issuer hereby covenants
and agrees to comply in all material respects with the terms of, employ the
procedures outlined in and enforce the obligations of the parties to all of the
Transaction Documents to which the Issuer is a party, and take all such action
to such end as may be from time to time reasonably requested by the Trustee,
and/or the Controlling Party, maintain all such Transaction Documents in full
force and effect and make to the parties thereto such reasonable demands and
requests for information
68
74
and reports or for action as the Issuer is entitled to make thereunder and as
may be from time to time reasonably requested by the Trustee.
(m) No Sales, Liens, Etc. Against Receivables and Trust Property. The
Issuer hereby covenants and agrees, except for releases specifically permitted
hereunder, not to sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, any Lien (other than the Lien created
hereby) upon or with respect to, any Receivables or Trust Estate, or any
interest in either thereof, or upon or with respect to any Account, or assign
any right to receive income in respect thereof. The Issuer shall promptly, but
in no event later than one (1) Business Day after a Responsible Officer has
obtained actual knowledge thereof, notify the Trustee of the existence of any
Lien on any Receivables or Trust Estate, and the Issuer shall defend the right,
title and interest of each of the Issuer and the Trustee in, to and under the
Receivables and Trust Estate, against all claims of third parties.
(n) No Change in Business. The Issuer covenants that it shall not make any
change in the character of its business.
(o) No Change in Name, Etc. The Issuer covenants that it shall not make any
change to its corporate name, or use any trade names, fictitious names, assumed
names or "doing business as" names.
(p) No Institution of Insolvency Proceedings. The Issuer covenants that it
shall not institute Insolvency Proceedings with respect to the Issuer or any
Affiliate thereof or consent to the institution of Insolvency Proceedings
against the Issuer or any Affiliate thereof or take any action in furtherance of
any such action, or seek dissolution or liquidation in whole or in part of the
Issuer or any Affiliate thereof.
(q) No Change in Chief Executive Office or Location of Records. The Issuer
covenants that it shall maintain its principal place of business and chief
executive office, and the office where it maintains its records, at 0000 X.
Xxxxxxxx, Xxxxxxxxxx, Xxxxxx 00000; provided that, at any time after the Closing
Date, upon 30 days' prior written notice to each of the Servicer, the Note
Insurer and the Trustee, the Issuer may relocate its principal place of business
and chief executive office, and/or the office where it maintains all of its
records, to another location within the United States to the extent that the
Issuer shall have taken all actions necessary or reasonably requested by the
Servicer, the Trustee or the Note Insurer to amend its existing financing
statements and continuation statements, and file additional financing statements
and to take any other steps reasonably requested by the Servicer, the Trustee or
the Note Insurer to further perfect or evidence the rights, claims or security
interests of any of the Servicer, the Trustee or the Note Insurer under any of
the Transaction Documents. As of the Funding Date, each Receivable File shall be
kept by the Servicer at its offices at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx
00000, or at such other office of the Servicer permitted pursuant to Section
2.06(b).
(r) Access to Certain Documentation and Information. The Issuer shall
provide the Note Insurer, the Trustee and the Noteholders with reasonable access
to the documentation relating to the Receivables required to be maintained at
the location described in Section 7.07(q). In each case, access to documentation
relating to the Receivables shall be afforded without charge but
69
75
only upon reasonable request and during normal business hours at the offices of
the Issuer. Nothing in this Section shall impair the obligation of the Issuer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, which obligation shall be evidenced by an Opinion of Counsel to such
effect, and the failure of the Issuer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.
ARTICLE VIII.
THE SERVICER
SECTION 8.01 REPRESENTATIONS OF SERVICER.
The Servicer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The representations
shall speak as of the execution and delivery of this Agreement and as of each
Funding Date and shall survive the grant of a security interest to the Trustee.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the State
of its incorporation, with corporate power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and now has,
corporate power, authority and legal right to acquire, own, hold, transfer,
convey and service the Receivables and to hold the Receivable Files as custodian
on behalf of the Issuer and Trustee.
(b) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) requires such qualification, licenses and approvals
except where the failure to be qualified or to obtain such qualifications,
licenses and approvals would not materially and adversely affect the rights or
interests of any of the Noteholders, the Note Insurer or the Trust Estate.
(c) Power and Authority. The Servicer has the corporate power and authority
to execute and deliver this Agreement and each of the other Transaction
Documents to which it is a party, and to carry out its terms; and the execution,
delivery and performance of this Agreement has been duly authorized by the
Servicer by all necessary corporate action.
(d) Binding Obligations. This Agreement and each of the other Transaction
Documents to which the Servicer is a party constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally or by general principles of equity.
70
76
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and each of the other Transaction Documents and the fulfillment of the
terms of this Agreement and each of the other Transaction Documents does not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Servicer, or conflict with or breach
any of the material terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture, agreement or other
instrument to which the Servicer is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement); nor violate, any law, order, rule or regulation
applicable to the Servicer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties; which breach, default,
conflict, Lien or violation would have, or would have, a material adverse effect
on the rights or interests of the Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending, or to
the Servicer's knowledge, threatened, against or affecting the Servicer: (i)
asserting the invalidity of this Agreement, the Notes, or any of the other
Transaction Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or any of
the other Transaction Documents, (iii) seeking any determination or ruling that
could reasonably be expected to materially and adversely affect the performance
by the Servicer of its obligations under, or the validity or enforceability of,
this Agreement, the Notes or any of the other Transaction Documents, or (iv)
relating to the Servicer and which might adversely affect the federal income tax
attributes of the Notes.
(g) No Subsidiaries. The Servicer has no subsidiaries other than the Issuer
and Midland Receivables 98-1 Corporation.
(h) Not an Investment Company. The Servicer is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act, and none of the issuance of the Notes, the execution and
delivery of the Transaction Documents to which the Servicer is a party, or the
performance by the Servicer of its obligations thereunder, will violate any
provision of the Investment Company Act, or any rule, regulation or order issued
by the Securities and Exchange Commission thereunder.
(i) Year 2000. The Servicer represents and warrants that, to the best of
its knowledge, its computer and other systems used in servicing the Receivables
currently are capable of operating in a manner so that on and after January 1,
2000 (i) the Servicer can service the Receivables in accordance with the terms
of this Agreement and (ii) the Servicer can operate its business in the same
manner as it is operating on the date hereof.
(j) Finders Fee. No broker, finder or financial adviser other than
Rothschild Inc. has been employed by any of the Servicer or the Issuer in
connection with the offering and sale of the Notes or the transactions
contemplated hereby and neither the Servicer nor the Issuer has
71
77
incurred any liability for fees or commissions to any person other than
Rothschild Inc. in connection with the offering and sale of the Notes or the
transactions contemplated hereby.
(k) No Violation of Securities Act. The Servicer has not offered or sold,
and will not offer or sell, any Notes in any manner that would render the
issuance and sale of the Notes a violation of the Securities Act or any state
securities or "Blue Sky" laws or require registration pursuant thereto, nor has
it authorized, nor will it authorize, any Person to act in such manner. No
registration under the Securities Act is required for the sale of the Notes as
contemplated hereby, assuming the accuracy of the Purchaser's representations
and warranties set forth in any Purchase Agreement and satisfaction by the
Placement Agent of its obligations set forth in paragraph 7 of the Placement
Agency Agreement.
(l) No Violation of Exchange Act or Regulations T, U or X. None of the
transactions contemplated in the Transaction Documents (including the use of the
proceeds from the sale of the Notes) will result in a violation of Section 7 of
the Exchange Act, or any regulations issued pursuant thereto, including
Regulations T, U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.
SECTION 8.02 LIABILITY OF SERVICER; INDEMNITIES.
(a) Obligations. The Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken by the Servicer under
this Agreement and shall have no other obligations or liabilities under this
Agreement. Such obligations shall include the following:
(i) the Servicer shall indemnify, defend and hold harmless the Trustee,
the Note Insurer and the Trust Estate from and against any taxes that may at any
time be asserted against the Trustee or the Trust Estate with respect to the
transactions contemplated in this Agreement or any of the other Transaction
Documents, including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege or license
taxes (but not including any taxes asserted with respect to, and as of the date
of, the transfer of the Receivables to the Trust, the issuance and original sale
of the Notes, or asserted with respect to ownership of the Receivables, or
federal, state or local income or franchise taxes or any other tax, or other
income taxes arising out of payments on the Notes, or any interest or penalties
with respect thereto or arising from a failure to comply therewith) and costs
and expenses in defending against the same;
(ii) the Servicer shall indemnify, defend and hold harmless the
Trustee, the Trust Estate, the Noteholders and the Note Insurer from and against
any and all costs, expenses, losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose out of,
and was imposed upon the Trustee, the Trust Estate, any Noteholder or the Note
Insurer through the gross negligence, willful misfeasance or bad faith of the
Servicer in connection with the transactions contemplated by this Agreement and
the other Transaction Documents, or by reason of the breach by the Servicer of
any of its representations, warranties or covenants hereunder or under any of
the other Transaction Documents; and
72
78
(iii) the Servicer shall indemnify, defend and hold harmless the
Trustee from and against all reasonable costs, expenses, losses, claims, damages
and liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties contained in this Agreement, except to the
extent that such cost expense, loss, claim, damage or liability: (A) shall be
due to the willful misfeasance, bad faith or gross negligence of the Trustee,
(B) shall arise from the breach by the Trustee of any of its representations or
warranties set forth in Section 10.14, (C) relates to any tax other than the
taxes with respect to which either the Issuer or the Servicer shall be required
to indemnify the Trustee, or (D) shall arise out of or be incurred in connection
with the performance by the Trustee of the duties as the Backup Servicer under
this Agreement.
(b) Expenses. Indemnification under this Section shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest,
so long as no amounts are outstanding to the Trustee then due and owing to the
Trustee by the Servicer in which event such amounts shall offset such
obligations.
(c) Survival. The provisions of this Section shall survive the resignation
or removal of the Servicer or the Trustee and the termination of this Agreement.
(d) Successor Servicer Liability. Notwithstanding anything to the contrary
contained in this Agreement, the Successor Servicer shall have no liability or
obligation with respect to any Servicer indemnification obligations of any prior
Servicer. Upon assuming its role as Successor Servicer, the Successor Servicer
shall be responsible only for the indemnification obligations set forth in
8.02(a).
SECTION 8.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE SERVICER.
Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Servicer shall be a party, or (iii) which may succeed to all or
substantially all of the business of the Servicer, which corporation in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Servicer under this Agreement, shall be the successor to the
Servicer under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties to this Agreement; provided,
however, that (i) such merger, consolidation or conversion shall not cause a
Servicer Default and (ii) prior to any such merger, consolidation or conversion
the Servicer shall have provided to the Trustee and the Noteholders a letter
from the Rating Agency indicating that such merger, consolidation or conversion
will not result in the qualification, reduction or withdrawal of the rating then
assigned to the Notes by the Rating Agency. The Servicer shall provide notice of
any merger, consolidation or succession pursuant to this Section to the Trustee,
the Noteholders, the Note Insurer, the Rating Agency and the Placement Agent.
73
79
SECTION 8.04 LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
(a) Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Note Insurer, the Trustee or the
Noteholders, except as provided in this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement, or for
errors in judgment; provided however, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence of the
Servicer in connection with the transactions contemplated by this Agreement and
any of the other Transaction Documents, or the breach by the Servicer of any of
its representations, warranties or covenants hereunder or under any of the other
Transaction Documents. The Servicer and any director, officer, employee or agent
of the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement.
(b) The Servicer shall not be under any obligation to appear in, prosecute,
or defend any legal action that shall not be incidental to its duties to service
the Receivables in accordance with this Agreement; provided, however, that the
Servicer may undertake any reasonable action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
to this Agreement and the interests of the Noteholders under this Agreement.
(c) The Servicer and any director, officer, employee or agent of the
Servicer 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.
SECTION 8.05 SERVICER NOT TO RESIGN.
Subject to the provisions of Section 8.03, Midland Credit Management,
Inc. shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon determination that the performance of
its duties under this Agreement shall no longer be permissible under applicable
law. Notice of any such determination permitting the resignation of Midland
Credit Management, Inc. shall be communicated to the Trustee, the Note Insurer,
the Noteholders and the Rating Agency at the earliest practicable time and any
such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Noteholders concurrently with or promptly after
such notice. No such resignation shall become effective until the Backup
Servicer or a Successor Servicer shall have assumed the responsibilities and
obligations of Midland Credit Management, Inc. in accordance with Sections 9.02
or 9.03.
SECTION 8.06 BACKUP SERVICING.
(a) Norwest Bank Minnesota, National Association is hereby appointed to act
as Backup Servicer with respect to this Agreement and the transactions
contemplated hereby and by the other Transaction Documents.
(b) The Servicer agrees to provide monthly to the Backup Servicer a
computer diskette or tape with all information necessary for the Backup Servicer
to perform all of the servicing
74
80
obligations of the Servicer under this Agreement. The Servicer further agrees to
provide all updates with respect to its computer processing necessary for the
Backup Servicer to maintain a continuous ability to fulfill the role of
Successor Servicer under this Agreement.
(c) The Backup Servicer shall assume its duties as Successor Servicer in
accordance with Sections 9.02 and 9.03 except upon determination that the Backup
Servicer is legally unable to perform the duties of the Servicer under this
Agreement as provided in Section 9.03.
(d) On or before 11 a.m., New York, New York time on each Determination
Date, the Servicer will deliver to the Backup Servicer a computer diskette (or
other electronic transmission) in a format acceptable to the Backup Servicer
containing the fields listed in Exhibit E hereto, which fields contain
information with respect to the Receivables as of the close of business on the
last day of the related Collection Period. The Backup Servicer shall not be
obligated to verify the information contained in such transmission or the
Monthly Servicer Report.
(e) Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including without
limitation 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. The duties and obligations of the Backup Servicer shall
be determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer. The Backup Servicer shall be entitled to all of the benefits and
indemnities afforded the Trustee pursuant to the provisions of this Agreement.
The Backup Servicer shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers (other than in the
ordinary course of the performance of such duties or the exercise of such rights
or powers), if the repayment of such funds or adequate written indemnity against
such risk or liability is not reasonably assured to it in writing prior to the
expenditure or risk of such funds or incurrence of financial liability.
(f) Neither the Backup Servicer nor any of its directors, officers,
employees or agents shall be under any liability to any of the parties hereto,
except as specifically provided in this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided however, that this provision shall not protect the
Backup Servicer against any misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. The Backup Servicer and any of its directors,
officers, employees or agents 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.
(g) 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
75
81
principals, 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, bad faith and willful misconduct by Norwest Bank Minnesota, National
Association.
SECTION 8.07 GENERAL COVENANTS OF SERVICER.
Midland Credit Management, Inc. covenants and agrees that from the
Closing Date until it is no longer the Servicer hereunder:
(a) Board. Servicer will maintain a board of directors with not less than
two "independent directors" within the meaning of NASD Rule 4460(c) as in effect
on the date hereof.
(b) Stockholder's Equity. On and after June 30, 1999, Servicer shall not
permit its consolidated stockholder's equity as required to be shown on its
consolidated financial statements to be less than the sum of (i) $1,750,000 plus
(ii) 50% of the net earnings of the Servicer for the period commencing on
October 1, 1998 and ending at the end of the Servicer's then most recent fiscal
quarter (treated for this purpose as a single accounting period). For purposes
of this section, if net earnings of the Servicer for any period shall be less
than zero, the amount calculated pursuant to clause (ii) above for such period
shall be zero.
(c) Related Person Transaction. Without the prior written consent of the
Controlling Party (which consent shall not be unreasonably withheld or delayed),
Servicer shall not enter into any Related Person Transaction other than on terms
that are no less favorable to Servicer than those that would have been obtained
in a comparable transaction by Servicer with a non-Related Person. The term
"Related Person" means, as to Servicer, any shareholder, director, officer or
employee thereof or any Affiliate thereof or any relative of any of them. The
term "Related Person Transaction" means (i) any sale, lease, transfer or other
disposition of Servicer's property to any Related Person, or (ii) the purchase,
lease or other acquisition by Servicer of any property from any Related Person,
or (iii) the making of any contract, agreement, understanding, loan, advance,
guarantee, or other credit support with or for the benefit of any Related
Person.
(d) Investments. The Servicer hereby covenants that it will not without the
prior written consent of the Controlling Party (which consent shall not be
unreasonably withheld or delayed), acquire or hold any indebtedness for borrowed
money of another person, or any capital stock, debentures, partnership interests
or other ownership interests or other securities of any Person, other than (i)
the Issuer and Midland Receivables 98-1 Corporation, and (ii) receivables of
similar type to the Receivables.
(e) Sale of Assets. Without the prior written consent of the Controlling
Party (which consent shall not be unreasonably withheld or delayed), Servicer
shall not convey, sell, lease, license, transfer or otherwise dispose of, in one
transaction or in a series of transactions, all or
76
82
substantially all of its assets, other than with respect to securitization
transactions of its receivables.
(f) Bankruptcy. Servicer shall not take any action in any capacity to file
any bankruptcy, reorganization or Insolvency Proceedings against Issuer, or
cause Issuer to commence any reorganization, bankruptcy proceedings, or
Insolvency Proceedings under any applicable state or federal law, including
without limitation any readjustment of debt, or marshaling of assets or
liabilities or similar proceedings.
(g) Legal Existence. Servicer shall do or cause to be done all things
necessary on its part to preserve and keep in full force and effect its
existence as a corporation in the jurisdiction of its incorporation, and to
maintain each of its licenses, approvals, registrations or qualifications in all
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such licenses, approvals, registrations or qualifications;
except for failures to maintain any such licenses, approvals, registrations or
qualifications which, individually or in the aggregate, would not have a
material adverse effect on the ability of Servicer to perform its obligations
hereunder or under any of the other Transaction Documents.
(h) Compliance With Laws. Servicer shall comply in all material respects,
with all laws, rules and regulations and orders of any governmental authority
applicable to its operation, the noncompliance with which would have a material
adverse effect on the business, financial condition or results of operations of
the Servicer or on the ability of the Servicer to perform its obligations
hereunder or under any of the other Transaction Documents.
(i) Taxes. Servicer shall pay and discharge all taxes, assessments and
governmental charges or levies imposed upon Servicer or upon its income and
profits, or upon any of its property or any part thereof, before the same shall
become in default, provided that Servicer shall not be required to pay and
discharge any such tax, assessment, charge or levy so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
Servicer shall have set aside on its books adequate reserves with respect to any
such tax, assessment, charge or levy so contested, or so long as the failure to
pay any such tax, assessment, charge or levy would not have a material adverse
effect on the ability of the Servicer to perform its obligations hereunder.
(j) Financial Statements. Servicer shall maintain its financial books and
records in accordance with GAAP. Servicer shall furnish to the Note Insurer and
the Backup Servicer:
(i) Quarterly Statements. As soon as available and in any event within
45 days after the end of each of the calendar quarters of each fiscal year of
the Servicer, the consolidated balance sheet of the Servicer and the related
statements of income, shareholders' equity and cash flows, each for the period
commencing at the end of the preceding fiscal year and ending with the end of
such fiscal quarter, prepared in accordance with GAAP consistently applied; and
(ii) Annual Statements. As soon as available and in any event within 90
days after the end of each fiscal year of the Servicer, the balance sheets of
the Servicer and the related statements of income, shareholder's equity and cash
flows for, the fiscal year then ended, each
77
83
prepared in accordance with GAAP consistently applied and reported on by a firm
of nationally recognized independent public accountants.
(k) Compliance with all Transaction Documents. The Servicer hereby
covenants and agrees to comply in all material respects with the terms of,
employ the procedures outlined in and enforce the obligations of the parties to
all of the Transaction Documents to which the Servicer is a party, and take all
such action to such end as may be from time to time reasonably requested by the
Trustee, maintain all such Transaction Documents in full force and effect and
make to the parties thereto such reasonable demands and requests for information
and reports or for action as the Servicer is entitled to make thereunder and as
may be from time to time reasonably requested by the Trustee.
(l) No Change in Chief Executive Office or Location of Records. The
Servicer covenants that it shall maintain its principal place of business and
chief executive office, and the office where it maintains all of its records, at
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx 00000; provided that, at any time
after the Closing Date, upon 30 days' prior written notice to each of the
Issuer, the Note Insurer and the Trustee, the Servicer may relocate its
principal place of business and chief executive office, and/or the office where
it maintains all of its records, to another location within the United States to
the extent that the Servicer shall have taken all actions necessary or
reasonably requested by the Issuer, the Trustee or the Note Insurer to amend its
existing financing statements and continuation statements, and file additional
financing statements and to take any other steps reasonably requested by the
Issuer, the Trustee or the Note Insurer to further perfect or evidence the
rights, claims or security interests of any of the Issuer, the Trustee or the
Note Insurer under any of the Transaction Documents. As of the Funding Date,
each Receivable File shall be kept by the Servicer at its offices at 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx 00000.
(m) Maintenance of Insurance. The Servicer hereby covenants and agrees to
maintain one or more policies of "all-risk" property and general liability
insurance with financially sound and reputable insurers, providing coverage in
scope and amount which is at least consistent with the scope and amount of such
insurance coverage obtained by prudent and similarly situated Persons in the
same jurisdiction and the same business as Servicer.
(n) Separate Identity. The Servicer hereby covenants and agrees to take all
actions required to maintain the Issuer's status as a separate legal entity.
Without limiting the foregoing, the Servicer shall not take any action or fail
to take any action that would result in the Issuer not satisfying any of the
following:
(i) Issuer shall conduct all of its business, and make all
communications to third parties (including all invoices (if any), letters,
checks and other instruments) solely in its own name (and not as a division of
any other Person), and require that its employees, if any, when conducting its
business identify themselves as such;
(ii) Issuer shall compensate all employees, consultants and agents
directly or indirectly through reimbursement of the Servicer, from the Issuer's
bank accounts, for services provided to the Issuer by such employees,
consultants and agents and, to the extent any
78
84
employee, consultant or agent of the Issuer is also an employee, consultant or
agent of the Servicer, allocate the compensation of such employee, consultant or
agent between the Issuer and the Servicer on a basis which reflects the
respective services rendered to the Issuer and the Servicer;
(iii) Issuer shall (A) pay its own incidental administrative costs and
expenses from its own funds, (B) allocate all other shared overhead expenses
(including, without limitation, telephone and other utility charges, the
services of shared employees, consultants and agents, and reasonable legal and
auditing expenses) which are not reflected in the Servicing Fee, and other items
of cost and expense shared between the Issuer and the Servicer, on the basis of
actual use to the extent; practicable, and to the extent such allocation is not
practicable, on a basis reasonably related to actual use or the value of
services rendered;
(iv) Issuer shall at all times have at least two independent directors
who satisfy the definition of Independent Director provided in the Certificate
of Incorporation, and have at least one officer responsible for managing its
day-to-day business and manage such business by or under the direction of its
board of directors;
(v) Issuer shall maintain its books and records separate from those of
any Affiliate;
(vi) Issuer shall prepare its financial statements separately from
those of its Affiliates and ensure that any consolidated financial statement
have notes to the effect that the Issuer is a separate entity whose creditors
have a claim on its assets prior to those assets becoming available to its
equity holders and therefore to any of their respective creditors, as the case
may be;
(vii) Issuer shall not commingle its funds or other assets with those
of any of its Affiliates (other than in respect of items of payment or funds
which may be commingled until deposit into the Collection Account in accordance
with this Agreement), and not hold its assets in any manner that would create an
appearance that such assets belong to any such Affiliate, not maintain bank
accounts or other depository accounts to which any such Affiliate is an account
party, into which any such Affiliate makes deposits or from which any such
Affiliate has the power to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity;
(viii) Issuer shall not permit any of its Affiliates to pay the
Issuer's operating expenses;
(ix) Issuer shall not permit Issuer to guarantee any obligation of any
of its Affiliates nor have any of its obligations guaranteed by any such
Affiliate (either directly or by seeking credit based on the assets of such
Affiliate), or otherwise hold itself out as responsible for the debts of any
Affiliate;
(x) Issuer shall maintain at all times stationery separate from that of
any Affiliate and have all its officers and employees conduct all of its
business solely in its own name;
79
85
(xi) Issuer shall hold regular meetings of its board of directors in
accordance with the provisions of its Certificate of Incorporation and otherwise
take such actions as are necessary on its part to ensure that all company
procedures required by its Certificate of Incorporation and Bylaws are duly and
validly taken;
(xii) Issuer shall respond to any inquires made directly to it with
respect to ownership of a Receivable by stating that it is the owner of such
contributed Receivable, and, if requested to do so, that the Trustee has been
granted a security interest in such Receivable; and
(xiii) Issuer shall take such other actions as are necessary on its
part to ensure that the facts and assumptions set forth in the non-consolidation
opinion delivered by Issuer's counsel remain true and correct at all times.
(o) Benefit Plan. The Servicer hereby covenants and agrees to comply in all
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Servicer covenants that it
will not, and it will cause any ERISA Affiliate to not:
(i) engage in any non-exempt prohibited transaction (within the meaning
of Code Section 4975 or ERISA Section 406) with respect to any Benefit Plan
which would result in a material liability to the Servicer;
(ii) permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of the Code, with respect to any
Benefit Plan of the Servicer or any ERISA affiliate which is subject to Section
302(q) of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Servicer or any ERISA Affiliate
so as to result in any material liability to the Servicer or an ERISA Affiliate;
or
(iv) create any defined benefit plan (as defined in ERISA).
ARTICLE IX.
SERVICER DEFAULT; EVENTS OF DEFAULT; REMEDIES
SECTION 9.01 SERVICER DEFAULT.
For purposes of this Agreement, each of the following shall constitute
a "Servicer Default":
(a) any failure by the Servicer to deliver to the Trustee or the Note
Insurer the Monthly Servicer Report for the related Collection Period, or any
failure by the Servicer to make any payment, transfer or deposit, or deliver to
the Trustee any proceeds or payment required to be so delivered under the terms
of the Notes, this Agreement or any of the other Transaction Documents to which
it is a party, or to make any payment of the Note Insurer Obligations on the day
when due, in each case that continues unremedied for a period of one Business
Day after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer, or (y) the date
80
86
on which written notice requiring the same to be remedied has been given to the
Servicer by the Trustee or the Controlling Party; or
(b) any failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in the Notes, this
Agreement, the Insurance Agreement, or any of the other Transaction Documents to
which the Servicer is a party, which failure (i) would have a material adverse
effect on the rights or interests of the Note Insurer, the Noteholders, the
Trustee or the Trust Estate and (ii) continues unremedied for a period of 30
days after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Controlling Party or the Trustee; or the Servicer delegates its duties under the
Notes, this Agreement, the Insurance Agreement or any of the other Transaction
Documents to which it is a party, except as specifically permitted pursuant to
Section 9.07, and such delegation continues unremedied for a period of 15 days
after written notice, requiring such delegation to be remedied, shall have been
given to the Servicer by the Trustee or the Controlling Party; or
(c) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Servicer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Servicer and the
continuance of any such decree or order unstayed and in effect for a period of
30 consecutive days; or
(d) the commencement by the Servicer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or the consent by the
Servicer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Servicer or of any substantial part of its property or the making by the
Servicer of an assignment for the benefit of creditors or the failure by the
Servicer generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing; or
(e) the Note Balance exceeds zero on the Scheduled Termination Date unless
such date has been extended in accordance with the terms hereof; or
(f) any representation, warranty or certification made by Midland Credit
Management, Inc. in this Agreement, the Insurance Agreement or in any other
Transaction Document to which it is a party, or in any certificate delivered
pursuant to this Agreement, the Insurance Agreement or in any other Transaction
Document to which it is a party, proves to have been incorrect when made, which
(i) would have a material adverse effect on the rights of the Noteholders, the
Note Insurer or the Trust Estate, respectively (without regard to any amount
deposited in the Reserve Account), and (ii) if capable of remedy, continues
unremedied for a period of 30 days after the earlier to occur of (x) actual
discovery by a Responsible Officer of the Servicer or (y) the date
81
87
on which written notice thereof, requiring the same to be remedied, shall have
been given to the Servicer by the Controlling Party or the Trustee; or
(g) The failure by the Servicer to make any required payment in excess of
$100,000 on any obligation of Servicer, other than Servicer's obligations to
make payment on account of trade accounts payable which are in dispute in the
normal course of business, within two (2) Business Days after Servicer has
received written notice from any such creditor of Servicer's failure to make
such payment; or
(h) Beginning on July 1, 1999 and on the first date of each month
thereafter, for the preceding three calendar months (including any portion of
the month in which the first Funding Date occurs), the weighted average current
payment plan for the Receivables for which a repayment plan has been agreed upon
is less than 50% of the weighted average Charged-Off Balance related to such
Receivables; or
(i) Servicer suffers the loss, suspension or other material impairment of
any required license or permit in any State of the United States (or the
District of Columbia) where Obligors are located which, in the aggregate for
such State (or the District of Columbia), accounts for more than $50,000,000 in
the initial Charge-Off Balances of Receivables, unless such loss, suspension or
impairment is cured within 60 days after any Responsible Officer of the Servicer
has actual knowledge of such loss, suspension or material impairment; or
(j) The shareholders, on the Closing Date, of Midland Corporation of Kansas
("MCK"), and their affiliates, do not own and control, directly or indirectly
(x) 15 % or more of the voting shares of MCK or (y) 15% or more of the voting
shares of the Seller, in each case in the aggregate on a fully diluted basis, or
such lesser amount as may be acceptable to the Controlling Party; or
(k) On or before December 31, 2000, the beneficial owners of C.P.
International Investments Limited, MCM Holding Company LLC and/or Xxxxx X.X.
Xxxxxx and their affiliates do not own and control, directly or indirectly (x)
10% or more of the voting shares of MCK or (y) 10% or more of the voting shares
of the Seller, in each case in the aggregate on a fully diluted basis or such
lesser amount as may be acceptable to the Controlling Party; or
(l) Servicer sells, transfers, pledges or otherwise disposes of any of its
stock in Issuer, whether voluntarily or by operation of law, foreclosure or
other enforcement by a Person of its remedies against the Servicer, except
pursuant to a merger, consolidation or a sale of all or substantially all the
assets of Servicer in a transaction not prohibited by this Agreement; provided,
however, that the Servicer may pledge its stock in the Issuer to a secured
lender (x) in connection with a pledge of all or substantially all of the assets
of the Servicer to secure indebtedness owed to such lender for borrowed money,
or (y) with the prior written consent of the Note Insurer; or
(m) the existence in any audit of Servicer required to be provided
hereunder of a material exception, which may have a material adverse effect on
the Noteholders or the Note Insurer, as determined by the Note Insurer in the
reasonable exercise of its judgment.
82
88
Notwithstanding the foregoing, the cure periods referred to in each of
clauses (a), (f) and (h) above may be extended for an additional period of five
Business Days each, or such longer period not to exceed 30 Business Days as may
be acceptable to the Controlling Party, if such delay or failure was caused by
an act of God or other similar occurrence. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Trustee, the Note Insurer, the Rating Agency,
the Placement Agent and the Noteholders prompt notice of such failure or delay
by it, together with a description of its effort to so perform its obligations.
The Servicer shall notify the Trustee and the Note Insurer in writing of any
Servicer Default that it discovers within one Business Day of such discovery.
The Trustee shall have no duty or obligation to determine whether or not a
Servicer Default has occurred.
SECTION 9.02 CONSEQUENCES OF A SERVICER DEFAULT.
(a) If a Servicer Default shall occur and be continuing, so long as
such Servicer Default has not been cured or waived pursuant to Section 9.05, the
Trustee shall, upon the direction of the Controlling Party, by notice then given
in writing to the Servicer and the Note Insurer terminate all (but not less than
all) of the rights and obligations of the Servicer, as Servicer under this
Agreement and the other Transaction Documents, and in and to the Receivables and
proceeds thereof. On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes, the Receivables, the Transaction Documents or
otherwise, shall, without further action, pass to and be vested in the Backup
Servicer pursuant to and under this Section or such Successor Servicer as may be
appointed under Section 9.03; and, without limitation, the Backup Servicer or
such Successor Servicer shall be hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivables and related documents, or otherwise. The predecessor Servicer shall
cooperate with the Backup Servicer or the Successor Servicer, as applicable, in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including, without limitation, the transfer to
the Backup Servicer or the Successor Servicer, as applicable, for administration
by it of all cash amounts that shall at the time be held by the predecessor
Servicer for deposit with respect to the Receivables, or have been deposited by
the predecessor Servicer in the Accounts with respect to the Receivables or
thereafter received by the predecessor Servicer with respect to the Receivables.
All reasonable costs and expenses (including reasonable attorneys' fees)
incurred in connection with transferring the Receivable Files to the Backup
Servicer or the Successor Servicer, as applicable, and amending this Agreement
to reflect such succession as Servicer pursuant to this Section shall be paid
first, pursuant to Section 4.04(b)(ii), and second, by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses;
provided, however, that the amount of such costs and expenses shall not exceed
$75,000 (the amount of such costs and expenses are referred to herein as the
"Transition Fees").
83
89
(b) In addition to the remedial provisions set forth in clause (a)
above, and not by way of limitation of any remedies to which any of the Trustee,
the Note Insurer or the Noteholders are entitled upon the occurrence of a
Servicer Default, the Issuer and the Servicer acknowledge and agree that, so
long as a Servicer Default shall occur and be continuing, and such Servicer
Default has not been cured or waived pursuant to Section 9.05, the Trustee
shall, upon the direction of the Controlling Party, by notice then given in
writing to the Servicer and the Note Insurer, direct the Servicer (or Backup
Servicer or Successor Servicer as the case may be) to (x) deposit all checks and
other items of collections received in respect of Receivables directly into an
Account immediately upon receipt, and/or (y) instruct each Obligor to remit all
collections in respect of receivables directly to an Account designated for such
purpose.
(c) Promptly upon the occurrence of an Event of Default or Servicer
Default, the Servicer shall deliver all material, data, back-up files, software,
licenses, and all other information relating to the Receivables, in its control,
which may be necessary or convenient for the collection of the Receivables by a
party other than Midland Credit Management, Inc. to the Back-up Servicer, the
Successor Servicer or the Note Insurer, as the Controlling Party may direct in
writing to the Servicer.
SECTION 9.03 BACKUP SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER.
On and after the time the Servicer receives a notice of termination
pursuant to Section 9.02 or tenders its resignation pursuant to Section 8.05,
the Backup Servicer shall, by an instrument in writing, assume the rights and
responsibilities of the Servicer in its capacity as Servicer under this
Agreement and the Insurance Agreement and the transactions set forth or provided
for in this Agreement and the Insurance Agreement, and shall be subject to all
the responsibilities, restrictions, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions of this Agreement and the
Insurance Agreement; provided, however, that the Backup Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession or for any breach by the Servicer of any of its representations and
warranties contained in this Agreement, in the Insurance Agreement or in any
related Transaction Document. Notwithstanding any other Section in this
Agreement to the contrary, should the Backup Servicer by any means, become
Successor Servicer, the Backup Servicer shall not inherit any of the
indemnification obligations of any prior servicer including the original
servicer. The indemnification obligations of the Backup Servicer, upon becoming
a Successor Servicer are expressly limited to the indemnification of the
Trustee, the Trust Estate, the Noteholders and the Note Insurer from and against
any and all costs, expenses, losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose out of,
and was imposed upon, the Trustee, the Trust Estate, any Noteholder or the Note
Insurer through the gross negligence, willful misfeasance or bad faith of the
Backup Servicer in its capacity as Successor Servicer in connection with the
transactions contemplated by this Agreement and the other Transaction Documents.
As compensation therefor, the Backup 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, plus any additional
amounts determined in the manner set forth below, if no such notice of
termination or resignation had been given. Notwithstanding anything herein to
the contrary, Norwest Bank Minnesota, National
84
90
Association shall not resign from the obligations and duties imposed on it as
Backup Servicer under this Agreement except upon determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law. Notice of any such determination permitting the
resignation of Norwest Bank Minnesota, National Association shall be
communicated to the Trustee, the Noteholders, the Note Insurer, and the Rating
Agency at the earliest practicable time and any such determination shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee and
the Noteholders concurrently with or promptly after such notice. In the event
the Backup Servicer is unable or unwilling so to act, it shall appoint or
petition a court of competent jurisdiction to appoint any established
institution having a net worth of not less than $5,000,000 and whose regular
business includes the servicing of consumer receivables as a successor servicer
(a "Successor Servicer"). In connection with such appointment and assumption, or
the assumption by the Backup Servicer of the status of Successor Servicer, the
Backup Servicer may make such arrangements for the compensation of such
Successor Servicer (including itself) out of payments on or in respect of the
Receivables as determined in accordance with the next sentence. Any Successor
Servicer appointed pursuant to this Section 9.03 must have, and must certify
that it has, computer systems that will be used in its duties as Servicer which
will properly utilize dates beyond December 31, 1999, and shall be entitled to
compensation equal to the greater of (A) the Servicing Fee and (B) the current
"market rate" paid for servicing receivables similar to the Receivables which
rate shall be determined by averaging bids obtained from not less than three
entities experienced in the servicing of receivables similar to the Receivables
and that are not Affiliates of the Trustee, the Backup Servicer, the Servicer or
the Issuer and are reasonably acceptable to the Note Insurer; provided however,
that no such compensation shall be in excess of an amount acceptable to the
Controlling Party and the Rating Agency and provided that if the Successor
Servicer is an Affiliate of the Trustee, such fees will not exceed the greater
of the Servicing Fee or the lowest of the three bids obtained as provided in
this sentence. The Backup Servicer and such Successor Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Backup Servicer shall not be relieved of its duties as
Successor Servicer under this Section until the newly appointed Successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
under this Agreement.
SECTION 9.04 NOTIFICATION TO NOTE INSURER, NOTEHOLDERS, RATING
AGENCY AND PLACEMENT AGENT.
Upon a Responsible Officer of the Trustee obtaining actual knowledge of
(i) the occurrence of a Servicer Default and the expiration of any cure period
applicable thereto or (ii) any termination of, or appointment of a successor to,
the Servicer pursuant to this Agreement, the Trustee shall give prompt written
notice thereof to Noteholders at their respective addresses appearing in the
Note Register and to the Rating Agency, the Note Insurer and the Placement
Agent.
SECTION 9.05 WAIVER OF PAST SERVICER DEFAULTS.
The Trustee shall at the direction of the Controlling Party waive any
Servicer Default or other default by the Servicer in the performance of its
obligations hereunder and its
85
91
consequences, except a default in making any required deposits to or payments
from the Accounts in accordance with this Agreement or in respect of a covenant
or provision of this Agreement that under Section 12.01 cannot be modified or
amended without the consent of each Noteholder. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Default 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 except to the extent expressly so waived.
SECTION 9.06 [RESERVED]
SECTION 9.07 SUBSERVICERS.
(a) The Backup Servicer may, at its own expense, enter into
subservicing agreements with subservicers (the "Subservicers") for the servicing
and administration of all or any part of the Receivables. References in this
Agreement to actions taken or to be taken by the Backup Servicer in servicing
and managing the Receivables include actions taken by a Subservicer on behalf of
the Backup Servicer. Each Subservicer shall be authorized to transact business
in the state or states in which the related Receivables it is to service or
manage are situated, if and to the extent required by applicable law to enable
the Subservicer to perform its obligations hereunder and under the applicable
subservicing agreement. Each subservicing agreement shall be upon such terms and
conditions as are not inconsistent with this Agreement and as to which the
Backup Servicer and the Subservicer have agreed. For purposes of this Agreement,
the Backup Servicer shall be deemed to have received any payment when the
Subservicer receives such payment. The Backup Servicer shall notify the Trustee,
the Issuer, the Note Insurer and the Rating Agency in writing promptly upon the
appointment of any Subservicer.
(b) As part of its servicing activities hereunder, the Backup Servicer,
for the benefit of the Trustee, the Note Insurer and the Noteholders, shall
enforce the obligations of each Subservicer under the related subservicing
agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of subservicing agreements and pursuit of
other appropriate remedies, shall be in accordance with the servicing standards
set forth herein. The Backup Servicer shall pay the costs of such enforcement at
its own expense and shall be reimbursed therefor only from (i) a general
recovery resulting from such enforcement only to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Receivables, or (ii)
a specific recovery of costs, expenses or attorneys fees against the party
against whom such enforcement is directed.
(c) Notwithstanding any subservicing agreement any of the provisions of
this Agreement relating to agreements or arrangements between the Backup
Servicer and a Subservicer, or reference to actions taken through a Subservicer
or otherwise, the Backup Servicer shall remain obligated and liable to the
Trustee, the Note Insurer and the Noteholders for the servicing, managing,
collecting and administering of the Receivables and the other assets included in
the Trust Estate in accordance with the provisions of Section 2.1 without
diminution of such obligation or liability by virtue of such subservicing
agreement or arrangements or by virtue of indemnification from a Subservicer and
to the same extent and under the same terms and
86
92
conditions as if the Backup Servicer alone were servicing, managing, collecting
and administering the Receivables and the other assets included in the Trust
Estate.
SECTION 9.08 EVENTS OF DEFAULT.
"Event of Default" wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest, premiums or any other
amounts due and owing on any Note or in respect of the Note Insurer Obligations
(which default continues for a period of two Business Days) or failure to pay
the Notes or the Note Insurer Obligations in full on or before the Final
Maturity Date;
(b) the Note Insurer is required to make a payment under the Policy;
(c) if the Issuer shall breach or default in the due observance of any
of the covenants of the Issuer set forth in Section 7.07, other than the
covenants contained in Subsections (e), (f) or (h) thereof;
(d) if the Issuer shall breach or default in the due observance or
performance of, any other of its covenants in this Agreement, which breach or
default would have a material adverse effect on the rights or interests of the
Note Insurer or the Noteholders, and such default shall continue for a period of
30 days after the earlier to occur of (x) actual discovery by a Responsible
Officer of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Note Insurer or the Trustee;
(e) if any representation or warranty of the Issuer made in this
Agreement or any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to have been breached in any material respect as
of the time when the same shall have been made or deemed made, which breach
would have a material adverse effect on the rights or interests of the Note
Insurer or the Noteholders, and such breach shall continue for a period of 30
days after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Note Insurer or the Trustee;
(f) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
30 consecutive days;
87
93
(g) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or the consent by
the Issuer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property or the making by the Issuer of
an assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of corporate
action by the Issuer in furtherance of any of the foregoing;
(h) the Note Balance exceeds zero on the Scheduled Termination Date
unless such date has been extended in accordance with the terms hereof;
(i) the occurrence and continuation of a Servicer Default;
(j) The Internal Revenue Service or the PBGC shall have filed notice of
one or more Adverse Claims against the Servicer, the Issuer or any of their
ERISA Affiliates under ERISA or the Code, which constitutes a Lien on the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by such Servicer, Issuer, or the ERISA
Affiliate (as the case may be) in a transaction with respect to which the
Controlling Party has given its prior written approval; or
(k) The Issuer or the Trust Estate shall have become subject to
registration as an "investment company" within the meaning of the Investment
Company Act as determined by a court of competent jurisdiction in a final and
non-appealable order.
SECTION 9.09 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case, so long as such Event of Default has not been cured or waived pursuant
hereto, the Trustee shall, upon the direction of the Controlling Party, by
notice then given in writing to the Issuer, the Servicer and the Note Insurer,
declare all of the Notes to be immediately due and payable and upon on any such
declaration such Notes, in an amount equal to the Note Balance of such Notes,
together with accrued and unpaid interest thereon to the date of such
acceleration, and together with all unpaid Trustee Fees, Backup Servicing Fees,
and Servicing Fees, shall become immediately due and payable.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
Note Insurer by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Trustee a sum sufficient
to pay:
88
94
(i) all payments of principal of, and interest on, all Notes and all
other amounts which would then be due hereunder or upon such Notes if the Event
of Default giving rise to such acceleration had not occurred; and
(ii) all sums paid by the Trustee hereunder and the reasonable
compensation, expenses and disbursements of the Trustee, its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the principal
of Notes which have become due solely by such acceleration, have been cured or
waived as provided in Section 9.21.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 9.10 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
Subject to the following sentence, if an Event of Default occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Note Insurer and the Noteholders by any proceedings
the Trustee deems appropriate to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Agreement or
in aid of the exercise of any power granted herein, or enforce any other proper
remedy. Any proceedings brought by the Trustee on behalf of the Note Insurer or
the Noteholders or by the Note Insurer or any Noteholder against the Issuer
shall be limited to the preservation, enforcement and foreclosure of the liens,
assignments, rights and security interests under this Agreement and the other
Transaction Documents and no attachment, execution or other suit or process
shall be sought, issued or levied upon any assets, properties or funds of the
Issuer, other than the Trust Estate relative to the Notes in respect of which
such Event of Default has occurred. If there is a foreclosure of any such liens,
assignments, rights and security interests under this Agreement, by private
power of sale or otherwise, no judgment for any deficiency upon the indebtedness
represented by the Notes may be sought or obtained by the Trustee or any
Noteholder against the Issuer. The Trustee shall be entitled to recover the
costs and expenses expended by it pursuant to this Section 9.10 including
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 9.11 REMEDIES.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee (subject to
Section 9.24, to the extent applicable) shall, at the direction of the
Controlling Party, and may (with the written consent of the Controlling Party)
at its discretion, do one or more of the following:
(a) institute proceedings for the collection of all amounts then
payable on the Notes, or under this Agreement or under any of the other
Transaction Documents, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer monies adjudged due, subject in all cases
to the provisions of Section 9.10;
89
95
(b) in accordance with Section 9.24, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute proceedings from time to time for the complete or partial
foreclosure of this Agreement with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the UCC and take any
other appropriate action to protect and enforce the rights and remedies of the
Trustee, the Note Insurer or the Noteholders hereunder subject in all cases to
the provisions of Section 9.10; and
(e) refrain from selling the Trust Estate and apply all Available Funds
pursuant to Section 9.14.
SECTION 9.12 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of any overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise to:
(a) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and the Note Insurer
Obligations and file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Noteholders allowed in such
Proceeding, and
(b) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such proceeding is hereby authorized by each Noteholder and the Note Insurer
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 10.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder or the
Note Insurer any plan of reorganization, arrangement, adjustment or composition
affecting any of the Notes or the rights of any Noteholder or the Note Insurer,
or to authorize the Trustee to vote in respect of the claim of any Noteholder or
the Note Insurer in any such Proceeding.
90
96
SECTION 9.13 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES.
All rights of action and claims under this Agreement or any of the
Notes or any of the other Transaction Documents may be prosecuted and enforced
by the Trustee without the possession of any of the Notes 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 trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the Noteholders
in respect of which such judgment has been recovered and shall be paid as
provided in Section 9.14.
SECTION 9.14 APPLICATION OF MONEY COLLECTED.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to such Notes pursuant
to this Article or otherwise and any other monies that may then be held or
thereafter received by the Trustee as security for such Notes shall be treated
like Available Funds and applied as provided in Section 4.04(b).
SECTION 9.15 LIMITATION ON SUITS.
No Noteholder shall have any right to institute any proceedings,
judicial or otherwise, with respect to this Agreement, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Noteholder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Noteholders representing not less than 25% of the Voting
Interests shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder (and such request shall have not been rescinded);
(c) such Noteholders have offered to the Trustee indemnity in full
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding;
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Controlling Party; and
(f) for so long as no Insurer Default is then in effect, the Note
Insurer shall have given its written consent to the Trustee to the pursuit by
the Trustee of such remedies;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Agreement, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders.
91
97
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders, each representing
less than 50% of the Voting Interests, and the Trustee shall not have received
any conflicting or inconsistent requests and indemnity from the Note Insurer at
such time, the Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
SECTION 9.16 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST.
Subject to the provisions in this Agreement (including Section 9.10)
limiting the right to recover amounts due on a Note to recovery from amounts in
the Trust Estate, the Noteholder shall have the right to the extent permitted by
applicable law, which right is absolute and unconditional, to receive payment of
principal of and interest on such Note on the Final Payment Date and to
institute suit for the enforcement of any such payment and such right shall not
be impaired without the consent of such Noteholder.
SECTION 9.17 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, the Note Insurer or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Noteholder, then and in every
such case the Issuer, the Trustee, the Note Insurer and the Noteholders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
proceeding had been instituted.
SECTION 9.18 RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee, to
the Note Insurer or to the Noteholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 9.19 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, of the Note Insurer or of any
Noteholder to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee, to the Note Insurer or to the Noteholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Note Insurer or by the Noteholders, as the case may be.
92
98
SECTION 9.20 CONTROL BY CONTROLLING PARTY.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law, with
this Agreement or any inconsistent direction of the Controlling Party; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; provided, however, that, subject
to Section 10.01, the Trustee need not take any action which it determines might
involve it in liability or be unjustly prejudicial to the Noteholders not
consenting.
SECTION 9.21 WAIVER OF PAST DEFAULTS.
The Controlling Party may on behalf of the Noteholders of all the Notes
waive any past default hereunder and its consequences, except a default:
(a) in the payment of any installment of principal of or interest on,
any Note; or
(b) in respect of a covenant or provision hereof which under Section
12.01 cannot be modified or amended without the consent of the Noteholders.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Agreement; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 9.22 UNDERTAKING FOR COSTS.
All parties to this Agreement agree, and each Noteholder by his
acceptance of a Note hereunder shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Agreement, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 9.22 shall not apply to any suit instituted by the
Trustee or the Note Insurer, to any suit instituted by any Noteholder, or group
of Noteholders representing more than 30% of the Voting Interests, or to any
suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on the Final Maturity Date.
SECTION 9.23 WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any
93
99
stay or extension of law wherever enacted, now or at any time hereafter in
force, which may affect the covenants in, or the performance of, this Agreement;
and the Issuer (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 9.24 SALE OF TRUST ESTATE.
(a) The power to effect any Sale of any portion of the Trust Estate
pursuant to Section 9.11 shall not be exhausted by any one or more Sales as to
any portion of the Trust Estate remaining unsold, but shall continue unimpaired
until the entire Trust Estate shall have been sold or all amounts payable on the
Notes and under this Agreement with respect thereto, and all Note Insurer
Obligations, shall have been paid. The Trustee may from time to time postpone
any public Sale by public announcement made at the time and place of such Sale.
(b) To the extent permitted by law, the Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(i) the Controlling Party shall consent to, or direct the Trustee to
make such Sale; or
(ii) to the extent that an Insurer Default is then in effect, the
proceeds of such Sale would be not less than the sum of all amounts due to the
Trustee hereunder and the entire amount which would be distributable to the Note
Insurer and the Noteholders, in full payment thereof in accordance with Section
9.14, on the Payment Date next succeeding the date of such Sale, together with
any amounts then owing to the Note Insurer.
The purchase by the Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or disposition thereof for purposes
of this Section 9.24(b).
(c) Unless the Controlling Party has otherwise consented or directed
the Trustee, at any public Sale of all or any portion of the Trust Estate at
which a minimum bid equal to or greater than the amount described in paragraph
(ii) of subsection (b) of this Section 9.24 has not been established by the
Trustee and no Person bids an amount equal to or greater than such amount, the
Trustee shall prevent such sale and bid an amount at least $1.00 more than the
highest other bid in order to preserve the Trust Estate.
(d) In connection with a Sale of all or any portion of the Trust
Estate:
(i) any of the Noteholders or the Note Insurer may bid for and
purchase the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without further
accountability, and may, in paying the purchase money therefor, deliver any of
the Notes or claims for interest thereon in lieu of cash up to the amount which
shall, upon distribution of the Net Proceeds of such Sale, be payable thereon,
and such Notes, in case the amounts so payable thereon shall be less than the
amount
94
100
due thereon, shall be returned to the holders thereof after being appropriately
stamped to show such partial payment;
(ii) the Trustee may bid for and acquire the property offered for
Sale in connection with any public Sale thereof, and, in lieu of paying cash
therefor, may make settlement for the purchase price by crediting the gross Sale
price against the sum of (A) the amount which would be distributable to the
Noteholders and the Note Insurer as a result of such Sale in accordance with
Section 9.14 on the Payment Date next succeeding the date of such Sale and (B)
the expenses of the Sale and of any proceedings in connection therewith which
are reimbursable to it, without being required to produce the Notes in order to
complete any such Sale or in order for the net Sale price to be credited against
such Notes, and/or the Note Insurer Obligations, and any property so acquired by
the Trustee shall be held and dealt with by it in accordance with the provisions
of this Agreement;
(iii) the Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Trust
Estate in connection with a Sale thereof;
(iv) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(e) Notwithstanding anything in this Agreement to the contrary, if an
Event of Default specified in Section 9.08(a) is the Event of Default, or one of
the Events of Default, on the basis of which the Notes have been declared due
and payable, then the Trustee shall, at the direction of the Controlling Party,
sell the Trust Estate without compliance with this Section 9.24.
(f) This Section 9.24(f) only applies during such time as the Rating
Agency has rated the financial strength of the Note Insurer below BBB-. If,
during such time, an Event of Default has occurred and is continuing, then
notwithstanding any provision of this Agreement to the contrary, the Note
Insurer hereby agrees that the Noteholders with Voting Interests in excess of
50% of all outstanding Voting Interests shall have the right to direct the
Trustee to sell all or substantially all the Trust Estate pursuant to this
Agreement and applicable law, whether or not the Note Insurer is the Controlling
Party at such time. If the Note Insurer is the Controlling Party, then it shall
direct the Trustee to effect such a Sale of all or substantially all of the
Trust Estate promptly upon receiving written direction to do so from the
Noteholders with Voting Interests in excess of 50% of all outstanding Voting
Interests.
SECTION 9.25 ACTION ON NOTES.
The Trustee's right to seek and recover judgment under this Agreement
shall not be affected by the seeking, obtaining or application of any other
relief under or with respect to this Agreement. Neither the Lien of this
Agreement nor any rights or remedies of the Trustee, the
95
101
Note Insurer or the Noteholders shall be impaired by the recovery of any
judgment by the Trustee against the Issuer or by the levy of any execution under
such judgment upon any portion of the Trust Estate.
SECTION 9.26 NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF
THE ISSUER.
The Trust Estate granted to the Trustee as security for the Notes
serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
SECTION 9.27 LICENSE.
Servicer hereby licenses to each Successor Servicer on a non-exclusive
basis, a copy of the Servicer's software currently in use by Servicer for the
collection of accounts by Servicer, solely for the limited purpose of collecting
the Receivables. The licensee shall have no right to copy the software or
sub-license or assign this license except to another Successor Servicer. The
licensee shall not be obligated to pay any royalty or other fee to Servicer for
such license.
ARTICLE X.
THE TRUSTEE
SECTION 10.01 DUTIES OF TRUSTEE.
(a) The Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. The Trustee shall exercise such
of the rights and powers vested in it by this Agreement and use the same degree
of care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; provided,
however, that if the Trustee in its capacity as Backup Servicer assumes the
duties of the Servicer pursuant to Section 9.02 or 9.03, the Trustee in
performing such duties shall use the degree of skill and attention customarily
exercised by a servicer with respect to defaulted consumer receivables that it
services for itself or others.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required 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 bad faith or its own willful misfeasance; provided, however,
that:
(i) prior to the occurrence of a Servicer Default actually known to
a Responsible Officer of the Trustee, and after the curing or waiving of all
such Servicer Defaults that may have
96
102
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 rights or obligations shall be read into
this Agreement against the Trustee, the permissive right of the Trustee 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, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon 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 a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was 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
1) the direction or consent of the Note Insurer (to the extent that an
Insurer Default is not then in effect), or
2) the direction of Noteholders evidencing not less than 25% of the
Voting Interests (unless a different percentage is otherwise
specifically set forth herein with respect to any applicable
action), together with the written consent of the Note Insurer (to
the extent that an Insurer Default is not then in effect),
in each case relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
under this Agreement, or in the exercise of any of its rights or powers, if
there shall be reasonable grounds for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not 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 in its capacity as Backup Servicer 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 to impair the value of any
Receivable.
(f) All information obtained by the Trustee regarding the Obligors and
the Receivables, whether upon the exercise of its rights under this Agreement or
otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, unless such disclosure is required by this
Agreement or any applicable law or regulation.
97
103
SECTION 10.02 TRUSTEE'S CERTIFICATE.
On or as soon as practicable after each date on which the Servicer or
Issuer acquires Removed Receivables, the Trustee, upon receipt of written notice
of such acquisition, shall submit to the Servicer or the Issuer, as applicable,
a Trustee's Certificate (substantially in the form attached hereto as Exhibit
B), identifying the acquirer and the Receivables so acquired, executed by the
Trustee and completed as to its date and the date of this Agreement, and
accompanied by a copy of the Monthly Servicer Report and the Servicer's
Remittance Date Certificate for the related Collection Period. The Trustee's
Certificate submitted with respect to such Payment Date shall operate, as of
such Payment Date, as an assignment without recourse, representation or
warranty, to the Issuer or the Servicer, as the case may be, of all the
Trustee's right, title and interest in and to such Removed Receivable and to the
other property conveyed to the Trust Estate pursuant to Section 2.01 with
respect to such Removed Receivable, and all security and documents relating
thereto, such assignment being an assignment outright and not for security.
SECTION 10.03 TRUSTEE'S RELEASE OF REMOVED RECEIVABLES.
With respect to all Removed Receivables, the Trustee shall, by a
Trustee's Certificate (substantially in the form attached hereto as Exhibit B),
release all the Trustee's right, title and interest in and to each Removed
Receivable and the other property included in the Trust Estate pursuant to
Section 2.01 with respect to such Removed Receivable, and all security and any
documents relating thereto; and the Issuer or the Servicer, as applicable, shall
thereupon own each such Removed Receivable, and all such related security and
documents, free of any further obligation to the Trustee or the Note Insurer or
the Noteholders with respect thereto. If in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Removed Receivable on
the ground that it is not a real party in interest or a holder entitled to
enforce such Removed Receivable, the Trustee on behalf of the Note Insurer and
the Noteholders shall, at the Servicer's written direction and expense, take
such reasonable steps as the Trustee deems necessary to enforce the Removed
Receivable, including bringing suit in the Trustee's name or the names of the
Note Insurer or of the Noteholders.
SECTION 10.04 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 10.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(ii) the Trustee may consult with counsel and any advice of counsel
or 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 advice of counsel or Opinion of Counsel;
98
104
(iii) 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 the Note Insurer or any of the Noteholders
pursuant to the provisions of this Agreement, unless the Note Insurer or any
such Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby (the general obligation of an institutional investor that is
investment grade rated being sufficient indemnity); nothing contained in this
Agreement shall, however, relieve the Trustee of the obligations, upon the
occurrence of a Servicer Default actually known to a Responsible Officer of the
Trustee (that shall not have been cured or waived), 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 person would exercise or use under
the circumstances in the conduct of his or her own affairs;
(iv) 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 or rights or powers conferred upon it by
this Agreement;
(v) prior to the occurrence of a Servicer Default and after the
curing or waiving of all Servicer Defaults that may have occurred, the Trustee
shall not be bound to make any investigation into the facts of matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent order, approval, bond or other paper or document, unless
requested in writing to do so by the Note Insurer or the Noteholders evidencing
not less than 25% of the Voting Interests; 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 such investigation 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
reasonable indemnity against such cost, expense or liability as a condition to
so proceeding; the reasonable expense of every such examination shall be paid by
the Issuer or, if paid by the Trustee, shall be reimbursed by the Issuer upon
demand; and nothing in this clause shall derogate from the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors; and
(vi) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by or
through agents or attorneys or a custodian and shall not be liable or
responsible for the misconduct or negligence of any of its agents or attorneys
or a custodian appointed with due care by the Trustee.
SECTION 10.05 LIMITATION ON TRUSTEE'S LIABILITY.
The Trustee makes no representations as to the validity or sufficiency
of this Agreement or of the Notes (other than the certificate of authentication
thereon, as applicable), or of any Receivable or related document. The Trustee
shall have no obligation to perform any of the duties of the Issuer or the
Servicer unless explicitly set forth in this Agreement. The Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any security interest in any Receivable, or the
perfection and priority of such a
99
105
security interest or the maintenance of any such perfection and priority, or for
or with respect to the efficacy of the Trust Estate or its ability to generate
the payments to be paid to Noteholders and the Note Insurer under this
Agreement, including without limitation the existence and contents of any
Receivable or any computer file or other record thereof; the validity of the
grant of a security interest in any Receivable to the Trustee or of any
intervening assignment; the completeness of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Issuer or the Servicer with
any covenant or the breach by the Issuer or the Servicer of 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 Issuer or any loss resulting therefrom
(it being understood that the Trustee shall remain responsible as Trustee for
any property that it may hold as part of the Trust Estate); the acts or
omissions of the Issuer, the Servicer or any Obligor; any action of the Servicer
taken in the name of or as the agent of the Trustee; or any action by the
Trustee taken at the instruction of the Servicer; 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 or based on the Trustee's
gross negligence, willful misconduct or bad faith, no recourse shall be had for
any claim based on any provision of this Agreement, the Notes or any Receivable
or assignment thereof against the institution serving as Trustee in its
individual capacity. The Trustee shall not have any personal obligation,
liability or duty whatsoever to any Noteholder, the Note Insurer or any other
Person with respect to any such claim, and any such claim shall be asserted
solely against the Trust Estate or any indemnitor who shall furnish indemnity as
provided in this Agreement. The Trustee shall not be accountable for the use or
application by the Issuer of the Notes or the proceeds thereof, if any, or for
the use or application of any funds paid to or collected by the Servicer in
respect of the Receivables. The Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder (unless the Trustee in its capacity as Backup Servicer
shall have become the Successor Servicer) or to prepare or file any Securities
and Exchange Commission filing with respect to the Notes or to record this
Agreement.
The Trustee shall have no responsibility to determine whether any
Funding Termination Event specified in clauses (e) or (f) of the definition of
"Funding Termination Event" has occurred, or to determine whether any of the
conditions precedent to a Funding have occurred except to the extent that a
Responsible Officer of Trustee has knowledge that any such conditions have not
been satisfied.
The recitals contained in this Agreement and in the Notes, except the
certificates of authentication on the Notes, shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness or
completeness. The Trustee makes no representations as to the validity or
condition of any Trust Estate or any part thereof, or as to the title of the
Issuer thereto or as to the security afforded thereby or hereby, or as to the
validity or genuineness of any securities at any time pledged and deposited with
the Trustee hereunder or as to the validity or sufficiency of this Agreement or
the Notes. The Trustee shall not be
100
106
accountable for the use or application by the Issuer of the Notes or the
proceeds thereof or of any money paid to the Issuer under any provisions hereof.
The Trustee will not be responsible for any losses incurred in
connection with investments in Permitted Investments made in accordance with the
terms of this Agreement, other than losses arising out of the Trustee's gross
negligence, bad faith or willful misconduct.
SECTION 10.06 TRUSTEE MAY OWN NOTES.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes. The Trustee in its individual or any other capacity
may deal with the Issuer and the Servicer in banking transactions, with the same
rights as it would have if it were not the Trustee.
SECTION 10.07 TRUSTEE'S FEES AND EXPENSES.
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 of the Trustee under this Agreement, which shall equal
the Trustee Fee, paid as provided in Section 4.04, and payment or reimbursement
for all reasonable expenses and disbursements (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) incurred or made by the Trustee in defense
of any action brought against it in connection with this Agreement except any
such expense or disbursement as may arise from its gross negligence, willful
misfeasance or bad faith or that is the responsibility of Noteholders under this
Agreement. Additionally, the Servicer, pursuant to Section 8.02, shall indemnify
the Trustee with respect to certain matters.
SECTION 10.08 INDEMNITY OF TRUSTEE, BACKUP SERVICERS AND SUCCESSOR
SERVICER.
Upon the appointment of a Backup Servicer or a Successor Servicer
pursuant to Section 9.02 or 9.03, such Backup Servicer, Successor Servicer and
the Trustee and their respective agents and employees shall be indemnified by
the Trust Estate and held harmless against any loss, liability, or expense
(including reasonable attorney's fees and expenses) arising out of or incurred
in connection with the acceptance of performance of the trusts and duties
contained in this Agreement to the extent that (i) the Successor Servicer,
Backup Servicer or the Trustee, as the case may be, shall not be indemnified for
such loss, liability or expense by the Servicer pursuant to Section 9.02 or
9.03; (ii) such loss, liability, or expense shall not have been incurred by
reason of the Successor Servicer's, the Backup Servicer's or the Trustee's
willful misfeasance, bad faith or gross negligence; and (iii) such loss,
liability or expense shall not have been incurred by reason of the Successor
Servicer's, the Backup Servicer's or the Trustee's breach of its respective
representations and warranties pursuant to Sections 9.02, 9.03, 10.09 and 10.14,
respectively.
The Successor Servicer, the Backup Servicer and/or the Trustee shall be
entitled to the indemnification provided by this Section only to the extent all
amounts due the Servicer, the
101
107
Note Insurer and all Noteholders pursuant to Section 4.04 have been paid in full
and all amounts required to be deposited in the Reserve Account with respect to
any Payment Date pursuant to Section 4.05 have been so deposited.
SECTION 10.09 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
Except as otherwise provided in this Agreement, the Trustee under this
Agreement shall at all times be a bank having its corporate trust office in the
same state (or the District of Columbia or the Commonwealth of Puerto Rico) as
the location of the Corporate Trust Office as specified in this Agreement;
organized and doing business under the laws of such state (or the District of
Columbia or the Commonwealth of Puerto Rico) or the United States; authorized
under such laws to exercise corporate trust powers; having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authorities; and shall have the highest available long-term
unsecured debt rating by the Required Rating Agencies then providing such a
rating or be otherwise acceptable to the Rating Agency and the Controlling
Party, as evidenced by a letter to such effect from the Rating Agency (which
acceptance may be evidenced in the form of a letter, dated on or shortly before
the Closing Date, assigning an initial rating to the Notes) and the Note Insurer
(as applicable).
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, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent 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, the Trustee shall resign immediately in the manner
and with the effect specified in Section 10.10.
SECTION 10.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the
trusts created by this Agreement by giving at least 30 days' prior written
notice thereof to the Servicer, the Note Insurer and the Noteholders. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor Trustee acceptable to the Noteholders and the Note Insurer 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.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.09 and shall fail to resign after written
request therefor by the Servicer or the Controlling Party, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver 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 Controlling Party 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 acceptable to the
Controlling
102
108
Party, by written instrument, in duplicate, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor Trustee,
and pay all fees owed to the outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 10.11. The Servicer shall give the Rating Agency, the
Placement Agent, the Note Insurer and the Noteholders notice of any such
resignation or removal of the Trustee and appointment and acceptance of a
successor Trustee.
SECTION 10.11 SUCCESSOR TRUSTEE.
Any successor Trustee appointed as provided in Section 10.10 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 the rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement; and the Servicer, the
Note Insurer 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. No successor Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Trustee shall be eligible under the provisions of Section 10.09. Upon acceptance
of appointment by a successor Trustee as provided in this Section, the Servicer
shall mail notice of the successor of such Trustee under this Agreement to all
Noteholders at their addresses as shown in the Note Register and shall give
notice by mail to the Rating Agency and the Placement Agent and the Note
Insurer. If the Servicer fails to mail such notice within ten (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.
SECTION 10.12 MERGER OR CONSOLIDATION OF TRUSTEE.
Any corporation (i) into which the Trustee may be merged or
consolidated, (ii) which may result from any merger, conversion, or
consolidation to which the Trustee shall be a party or (iii) which may succeed
to all or substantially all the corporate trust business of the Trustee, which
corporation executes an agreement of assumption to perform every obligation of
the Trustee under this Agreement, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
10.09, 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. Notice of any such merger shall be given by the Trustee to the
Rating Agency, the Placement Agent and the Noteholders and the Note Insurer.
103
109
SECTION 10.13 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
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 Estate 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 Estate, and to vest in such Person, in such
capacity and for the benefit of the Noteholders and the Note Insurer, such title
to the Trust Estate, or any part thereof, and, subject to the other provisions
of this Section, 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 the case a Servicer Default shall have occurred and
be continuing, the Trustee alone shall have the power to make such appointment.
Each co-trustee or separate trustee under this Agreement shall be required to
meet the terms of eligibility as a successor trustee pursuant to Section 10.09
but no notice of a successor Trustee pursuant to Section 10.11 and no notice to
Noteholders or the Note Insurer of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.11.
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 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 Estate 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 (or during the
continuation of a Servicer Default, the Trustee alone) may at any time accept
the resignation of or remove any separate trustee or co-trustee; and
(iv) the Trustee shall remain primarily liable for the actions of
any separate trustees and co-trustee.
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 the conditions
of this Section. Each separate trustee and co-trustee, upon its
104
110
acceptance of the rights 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 the provisions of this
Agreement, including, but not limited to, 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.
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. Notwithstanding anything to the contrary in this Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties under this Agreement.
SECTION 10.14 REPRESENTATIONS AND WARRANTIES OF TRUSTEE.
The Trustee hereby makes the following representations and warranties
on which the Issuer and the Noteholders are relying:
(i) Organization and Good Standing. The Trustee is a national
banking association duly organized, validly existing and in good standing;
(ii) Power and Authority. The Trustee has full power, authority and
right to execute, deliver and perform this Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement;
(iii) No Violation. The execution, delivery and performance by the
Trustee of this Agreement (a) shall not violate any provision of any law
governing the banking and trust powers of the Trustee or, to the best of the
Trustee's knowledge, any order, writ, judgment, or decree of any court,
arbitrator, or governmental authority applicable to the Trustee or any of its
assets, (b) shall not violate any provision of the charter or bylaws of the
Trustee, and (c) shall not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of any Lien on any properties included in the Trust Estate pursuant
to the provisions of any mortgage, indenture, contract, agreement or other
undertaking to which it is a party, which violation, default or Lien could
reasonably be expected to materially and adversely affect the Trustee's
performance or ability to perform its duties under this Agreement or the
transactions contemplated in this Agreement;
(iv) No Authorization Required. The execution, delivery and
performance by the Trustee of this Agreement shall not require the
authorization, consent, or approval of, the giving of notice to, the filing or
registration with, or the taking of any other action in respect of, any
governmental authority or agency regulating the banking and corporate trust
activities of the Trustee; and
105
111
(v) Duly Executed. This Agreement shall have been duly executed and
delivered by the Trustee and shall constitute the legal, valid, and binding
agreement of the Trustee, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally or by
general principles of equity.
SECTION 10.15 TAX RETURNS.
In the event the Trustee shall be required to file tax returns on
behalf of the Trust Estate, the Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust Estate 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, shall furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust
Estate, and shall, upon request, execute such returns.
SECTION 10.16 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES.
All rights of action and claims under this Agreement or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes 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
Trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses and disbursements of the Trustee, its agents
and counsel, be for the ratable benefit of the Note Insurer and the Noteholders
in respect of which such judgment has been obtained, in the order of priority
specified in Section 4.04(b).
SECTION 10.17 SUIT FOR ENFORCEMENT.
If a Servicer Default shall occur and be continuing, the Trustee, in
its discretion may, subject to the provisions of Section 10.01, proceed to
protect and enforce its rights and the rights of the Note Insurer and the
Noteholders under this Agreement by a suit, action or proceeding in equity or at
law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable
or other remedy as the Trustee, being advised by counsel, shall deem most
effectual to protect and enforce any of the rights of the Trustee, the Note
Insurer or the Noteholders.
SECTION 10.18 RIGHTS OF CONTROLLING PARTY TO DIRECT TRUSTEE.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided however,
that subject to Section 10.01, the Trustee shall have the right to decline to
follow any such direction if the Trustee being advised by counsel determines
that the action so directed may not lawfully be taken, or if the Trustee in good
faith shall, by a Responsible Officer of the Trustee, determine that the
proceedings so directed would be illegal or subject it to personal liability or
be unduly prejudicial to the rights of the Note Insurer or Noteholders not
parties to such direction; provided, further, however, that
106
112
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Controlling Party.
SECTION 10.19 CONFIDENTIAL INFORMATION.
The Trustee acknowledges that, in the course of meeting its respective
duties and obligations under this Agreement, it may obtain Proprietary
Information relating to the Servicer or the Issuer. Such Proprietary Information
may include, but is not limited to, non-public trade secrets, know how,
invention techniques, processes, programs, schematics, source documents, data,
and financial information. The Trustee shall at all times, both during the term
of this Agreement and for a period of three (3) years after its termination,
keep in trust and confidence all such Proprietary Information, and shall not use
such Proprietary Information other than in the course of its duties under this
Agreement, nor shall the Trustee disclose any such Proprietary Information
without the written consent of the Servicer or the Issuer unless legally
required to disclose such information. The Trustee further agrees to immediately
return all Proprietary Information (including copies thereof) in its possession,
custody, or control upon termination of this Agreement for any reason.
The Trustee shall not disclose, advertise or publish the existence or
the terms or conditions of this Agreement without prior written consent of the
Servicer or the Issuer. Notwithstanding the foregoing, this Section 10.19 shall
not prohibit disclosure of information that is required to be disclosed by the
Trustee pursuant to federal or state laws or regulation. Notwithstanding any
provision of this Agreement to the contrary, this Section 10.19 shall not
prohibit disclosure of any Proprietary Information that is required to be
disclosed to a judicial, administrative or governmental proceeding to disclose
any Proprietary Information, nor shall it prohibit disclosure of information
that is required in the event of a Servicer Default. In particular the Trustee
agrees that it shall not, without the prior consent of the Servicer or the
Issuer, disclose the existence of this Agreement or any of the terms herein to
any Person other than counsel to the Trustee or an employee or director of the
Trustee with a need to know in order to implement this Agreement and only if
such employee or director or counsel agrees to maintain the confidentiality of
this Agreement. The parties hereto agree that the Servicer and/or the Issuer
shall have the right to enforce these nondisclosure provisions by an action for
specific performance filed in any court of competent jurisdiction in the State
of Kansas or Arizona.
ARTICLE XI.
REDEMPTION; PARTIAL PREPAYMENT; FULL REPAYMENT
SECTION 11.01 REDEMPTION AT THE OPTION OF THE ISSUER; ELECTION TO
REDEEM.
The Issuer shall have the option to redeem the Notes in full on any
Payment Date. The election of the Issuer to redeem the Notes pursuant to this
Section shall be evidenced by delivery to the Trustee no later than the last
Business Day of the month preceding the month in which the Payment Date as of
which such redemption will be effected occurs of an Officer's Certificate of the
Issuer stating the Issuer's intention to redeem the Notes and specifying the
Redemption
107
113
Amount therefor. No prepayment premium or penalty is payable with respect to any
such redemption.
SECTION 11.02 DEPOSIT OF REDEMPTION AMOUNT.
In the case of any redemption pursuant to Section 11.01, the Issuer
shall, on or before the Remittance Date preceding the Payment Date on which such
redemption is to be effected, deposit in the Note Payment Account, pursuant to
Section 4.03, an amount equal to the Redemption Amount, and the lien, rights and
interests created hereby shall cease to be of further effect, subject to Section
2.11. The Redemption Amount shall be paid as provided in Section 4.04(b).
SECTION 11.03 NOTICE OF REDEMPTION BY THE TRUSTEE.
Upon receipt of notice from the Issuer of its election to redeem the
Notes pursuant to Section 11.01 and deposit by the Issuer of the Redemption
Amount pursuant to Section 11.02, the Trustee shall provide notice of redemption
of the Notes by first class mail, postage prepaid, mailed no later than the
Business Day following the date on which such deposit was made, to the Note
Insurer at its address herein and to each Noteholder at such Noteholder's
address as listed in the Note Register. Notice of redemption of Notes shall be
given by the Trustee in the name and at the expense of the Issuer, as
applicable.
SECTION 11.04 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note within fourteen (14) days
after receipt of the final payment due in connection therewith. Each Noteholder,
by its acceptance of the final payment with respect to its Note, will be deemed
to have relinquished any further right to receive payments under this Agreement
and any interest in the Trust Estate. Each Noteholder shall indemnify and hold
harmless the Issuer, the Trustee, the Note Insurer and any other Person against
whom a claim is asserted in connection with such Noteholder's failure to tender
the Note to the Trustees for cancellation.
SECTION 11.05 PARTIAL PREPAYMENT AT THE OPTION OF THE ISSUER.
The Issuer shall have the option to partially prepay the Note Balance
on any Business Day which is the last day of a Note Rate Period, and to obtain a
release of the Trustee's security interest in Receivables from one or more of
the Pools, provided that (a) no Funding Termination Event shall have occurred
and be continuing either before or after giving effect to such prepayment and
release, (b) all representations and warranties contained in Section 2.04 shall
be true and correct with respect to all Remaining Receivables after giving
effect to such prepayment and release, and (c) Issuer shall receive the proceeds
necessary to effect such prepayment from proceeds of a sale of all of the
Receivables in one or more Pools. For the avoidance of doubt, only sales of
whole Pools and optional prepayments resulting therefrom are permitted
hereunder; nothing contained herein shall permit the sale or release of
Receivables constituting only a portion of any Pool. The election of the Issuer
to partially prepay the Notes pursuant to this Section shall be evidenced by
delivery to the Trustee and the Noteholders and the Note Insurer
108
114
no later than three Business Days preceding the date on which such prepayment
will be effected of an Officer's Certificate of the Issuer stating the Issuer's
intention to partially prepay the Notes, specifying the Minimum Repayment Amount
therefor and the portion payable to each Noteholder, identifying the Prepaid
Receivables, and identifying the transaction which will provide proceeds to the
Issuer in order to effect the prepayment. No prepayment premium or penalty is
payable with respect to any such prepayment. Midland hereby warrants and agrees
that Prepaid Receivables will not be disposed of for the primary purpose of
recognizing gains or decreasing losses resulting from market value changes.
SECTION 11.06 FULL PREPAYMENT AT THE OPTION OF THE ISSUER.
The Issuer shall have the option to prepay in full the Note Balance on
any Business Day which is the last day of a Note Rate Period, and to obtain a
release of the Trustee's security interest from all Pools then subject to this
Agreement, without redeeming the Notes and without terminating the obligation of
the Noteholders to make Fundings. The election of the Issuer to prepay the Note
Balance in full pursuant to this Section shall be evidenced by delivery to the
Trustee and the Noteholders and the Note Insurer no later than three Business
Days preceding the date on which such prepayment will be effected of an
Officer's Certificate of the Issuer stating the Issuer's intention to prepay the
Note Balance in full plus accrued interest and expenses and specifying the
Prepayment Amount therefor and the portion payable to each Noteholder. No
prepayment premium or penalty is payable with respect to any such prepayment.
SECTION 11.07 DEPOSIT AND PAYMENT OF PREPAYMENT AMOUNT.
In the case of any prepayment pursuant to Section 11.05 or 11.06, the
Issuer shall by the Prepayment Date, deposit in the Note Payment Account
pursuant to Section 4.03 an amount equal to the Prepayment Amount, or if the
Prepayment Date is also a Payment Date, then the Issuer shall deposit in the
Note Payment Account an amount in excess of the amount already on deposit in the
Note Payment Account necessary to pay the Prepayment Amount. The Prepayment
Amount shall be paid by the Trustee to the Noteholders on the Prepayment Date,
pro rata based on their respective Note Balances. The Servicer shall on the
Prepayment Date instruct the Trustee to distribute to each Noteholder of record
on the Record Date prior to the Prepayment Date by wire transfer of immediately
available funds, the amount to be paid to such Noteholder in respect of its Note
on such date.
SECTION 11.08 RELEASE OF SECURITY INTEREST.
Whenever an amount sufficient to pay the Prepayment Amount has been
paid to the Noteholders in connection with a partial prepayment or a prepayment
in full, and the Issuer has delivered to the Trustee an Officer's Certificate of
the Issuer stating that all conditions precedent herein for the release of the
security interest in the Prepaid Receivables have been complied with, then this
Agreement and the lien, rights and interests created hereby shall cease to be of
further force and effect with respect to the Prepaid Receivables, and the
Trustee shall, at the expense of the Issuer, execute and deliver all such
instruments as may be necessary to acknowledge the satisfaction and discharge of
and release of the liens granted under this Agreement with respect to such
Prepaid Receivables. Without limiting the generality of the foregoing, the
Trustee will
109
115
sign and deliver to the Issuer an undertaking in such form as the Issuer may
request (i) which evidences the release of the Trustee's security interest in
the Prepaid Receivables subject only to the receipt by the Trustee in the Note
Payment Account of an amount to be specified in such undertaking, which amount
must be at least equal to the Prepayment Amount, and (ii) under which the
Trustee agrees to sign and deliver such termination statements as the Issuer may
request which terminate of record the Trustee's security interest in the Prepaid
Receivables.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
SECTION 12.01 AMENDMENT.
(a) This Agreement may be amended by the Issuer, the Servicer and the
Trustee, without the consent of the Note Insurer or any of the Noteholders, to
cure any ambiguity, to correct or supplement any provision in this Agreement
which may be inconsistent with any other provision of this Agreement, to add,
change or eliminate any other provision of this Agreement with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement or to add or provide for any credit
enhancement (other than the Policy) provided that any such action shall not, as
evidenced by an Officer's Certificate of the Issuer delivered to the Trustee and
the Note Insurer by the Issuer, adversely affect in any material respect the
interests of the Note Insurer or the Noteholders and that in connection with any
such amendment, the Servicer shall deliver to the Trustee a letter from the
Rating Agency to the effect that such amendment will not cause the then current
rating on the Notes to be qualified, reduced or withdrawn (without giving effect
to the Policy).
(b) This Agreement may also be amended from time to time by the Issuer,
the Servicer and the Trustee, and the Note Insurer, with the consent of
Noteholders evidencing not less than 66-2/3% of the Voting Interests (which
consent of any Noteholder given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such
Noteholder and on all future holders of such Note and of any Note issued upon
the transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note), 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 such Noteholders;
provided, however, that no such amendment shall (i) except as otherwise provided
in Section 12.01(a), reduce in any manner the amount of, or delay the timing of,
any payments that shall be required to be made on any Note or deposits of
amounts to be so paid or the Required Reserve Amount of the Reserve Account
without the consent of each Noteholder (provided that an amendment of the terms
of a Servicer Default shall not be deemed to be within the scope of this clause
(i)); (ii) change the definition or the manner of calculating the interest
accrued on the Notes without the consent of each Noteholder; (iii) reduce the
aforesaid percentage of the Voting Interest required to consent to any such
amendment, without the consent of each Noteholder; or (iv) adversely affect the
rating of the Notes by the Rating Agency without the consent of Noteholders
evidencing not less then 66 2/3% of the Voting Interests (but excluding for
purposes of such calculation and action all Notes held by the Issuer, the
Servicer or any of their affiliates).
110
116
(c) Prior to the execution of any amendment or consent thereto pursuant
to this Section 12.01, the Trustee shall furnish written notification of the
substance of such amendment or consent to the Rating Agency and the Placement
Agent.
(d) Promptly after the execution of any amendment or consent thereto
pursuant to Section 12.01(b), the Trustee shall furnish written notification of
the substance of such amendment or consent to each Noteholder. It shall not be
necessary for the consent of Noteholders pursuant to Section 12.01(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 of evidencing the authorization by Noteholders of
the execution thereof shall be subject to such reasonable requirements as the
Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
(f) There will be no change in the identity of the Servicer, the Backup
Servicer or the Trustee without the prior written consent of the Controlling
Party, subject to the rights of the Backup Servicer and the Trustee to resign in
accordance with the provisions of this Agreement.
(g) This Agreement may be amended by the Issuer, the Servicer, the
Trustee and the Note Insurer with the consent of Noteholders with Voting
Interests equal to at least 51% of all outstanding Voting Interests to make any
change required to minimize the possibility of classification of the Issuer as a
"publicly traded partnership" within the meaning of Code Section 7704(b),
assuming for purposes of the foregoing that the Trust were classified as a
partnership for federal or state income tax purposes and not solely as a
security device for such purposes. Further, this Agreement may be amended by the
Issuer, the Servicer, the Trustee and the Note Insurer without the consent of
the Noteholders to minimize the restrictions on transfers of the Notes described
in Section 6.03(h) if the Issuer, in reliance upon an Opinion of Counsel
delivered to the Trustee and the Note Insurer, determines that such amendment
would not otherwise result in classification of the Trust or render the Trust
susceptible to classification as a "publicly traded partnership" within the
meaning of Code Section 7704(b) assuming for purposes of the foregoing that the
Trust were classified as a partnership for federal or state income tax purposes
and not solely as a security device for such purposes.
SECTION 12.02 PROTECTION OF SECURITY INTEREST IN TRUST ESTATE.
(a) Either of the Issuer or the Servicer or both shall execute and file
such financing statements and cause to be executed and filed such continuation
and other statements, all in such manner and in such places as may be required
by law fully to preserve, maintain and protect the interests of the Note
Insurer, the Noteholders and the Trustee under this Agreement in the Receivables
and in the proceeds thereof. Each of the Issuer and the Servicer shall deliver
(or cause to be delivered) to the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
111
117
(b) Neither the Issuer nor the Servicer shall change its name, identity
or organizational structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with paragraph
(a) above seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given the Trustee at least thirty (30) days' prior
written notice thereof and shall have filed prior to such change appropriate
amendments to all such previously filed financing statements or continuation
statements.
(c) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each, if applicable) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Accounts (or any
of them) in respect of such Receivables.
(d) The Servicer shall maintain its computer records so that, from and
after the time of the granting of the security interest under this Agreement of
the Receivables to the Trustee, the Servicer's master computer records
(including any back-up archives) that refer to any Receivables indicate clearly
the interest of the Trustee in such Receivables and that the Receivable is held
by the Trustee on behalf of the Note Insurer and the Noteholders. Indication of
the Trustee's interest in a Receivable shall be deleted from or modified on the
Servicer's computer records when, and only when, the Receivable has been paid in
full, acquired or assigned pursuant to this Agreement.
(e) If at any time Issuer or Servicer propose to assign, convey, grant
a security interest in, or otherwise transfer any interest in defaulted consumer
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective acquirer, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable is subject to a security interest in favor
of the Trustee unless such Receivable has been paid in full, acquired or
assigned pursuant to this Agreement.
(f) The Servicer shall permit the Trustee and its agents, upon not less
than two Business Days' prior written notice and during normal business hours,
to inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables then or previously included in the Trust Estate.
Nothing in this Section shall impair 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 provided in this Section as
a result of such obligation shall not constitute a breach of this Section.
(g) Upon request, the Servicer shall furnish to the Trustee and/or the
Note Insurer, within five Business Days of such request, a list of all
Receivables (by account number and name of Obligor) then held as part of the
Trust Estate.
(h) The Servicer shall deliver to the Trustee, promptly after the
execution and delivery of each amendment to any financing statement, an Opinion
of Counsel stating that, in the opinion of such counsel, either (i) all
financing statements and continuation statements have been
112
118
executed and filed that are necessary fully to preserve and protect the interest
of the Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (ii)
no such action is necessary to preserve and protect such interest.
SECTION 12.03 LIMITATION OF RIGHTS OF NOTEHOLDERS.
(a) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust Estate, nor entitle its 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
Estate, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Noteholder shall have any right to vote (except as expressly
provided in this Agreement) or in any manner otherwise control the operation and
management of the Trust Estate, or the obligations of the parties to this
Agreement, nor shall anything set forth in this Agreement, or contained in the
terms of the Notes, be construed so as to constitute the Noteholders from time
to time as partners or members of an association; nor shall any Noteholder be
under any liability to any third person by reason of any action pursuant to any
provision of this Agreement.
SECTION 12.04 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and the obligations, rights and remedies of
the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 12.05 NOTICES.
All demand, notices and communications under this Agreement shall be in
writing, and either personally delivered, mailed by certified mail, return
receipt requested, or sent by facsimile transmission, and shall be deemed to
have been duly given upon receipt (i) in the case of the Issuer or the Servicer,
to the agent for service as specified in Section 2.10 of this Agreement, or at
such other address as shall be designated by the Issuer or the Servicer in a
written notice to the Trustee; (ii) in the case of the Trustee, at the Corporate
Trust Office; (iii) in the case of the Rating Agency at 00 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 0000, and (iv) in the case of the Note Insurer, at 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Fax: (000) 000-0000). Any notice required
or permitted to be mailed to a Noteholder shall be given by first class mail,
postage prepaid, at the address of such Noteholder as shown in the Note
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder shall receive such notice.
SECTION 12.06 SEVERABILITY OF PROVISIONS; COUNTERPARTS.
(a) If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid or
unenforceable in any jurisdiction,
113
119
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 the Notes, or the rights of the Noteholders.
(b) This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall constitute but one and the same instrument.
SECTION 12.07 ASSIGNMENT.
Notwithstanding anything to the contrary contained in this Agreement,
except as provided in Sections 7.04 and 8.03 and as provided in the provisions
of this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Issuer or the Servicer without the prior written consent
of the Note Insurer and Noteholders evidencing not less than 66-2/3% of the
Voting Interests.
SECTION 12.08 NO PETITION.
Each of the Servicer and the Trustee and the Note Insurer covenants and
agrees that prior to the date which is one year and one day after the
termination of this Agreement, it will not institute against, or join any other
Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceedings under any
federal or state bankruptcy or similar law. Notwithstanding the foregoing,
nothing herein shall be deemed to prohibit the Trustee from filing proofs of
claim or otherwise participating in any such proceeding instituted by another
person. This Section 12.08 shall survive the termination of this Agreement or
the termination of the Servicer or the Trustee, as the case may be, under this
Agreement.
SECTION 12.09 NOTEHOLDER DIRECTION.
Notwithstanding anything to the contrary contained in this Agreement,
provided the Trustee has sent out notices to Noteholders in accordance with this
Agreement, the Trustee may act as directed by a majority of the outstanding
Noteholders (but only to the extent the Noteholders are entitled under this
Agreement to so direct the Trustee with respect to such action) responding in
writing to the request contained in such notice; provided, however, that
Noteholders representing at least 66-2/3% of the outstanding principal balance
of the Notes as of the time such notice is sent to Noteholders must have
responded to such notice from the Trustee. In addition, the Trustee shall not
have any liability to any Noteholder with respect to any action taken pursuant
to such notice if the Noteholder does not respond to such notice within the time
period set forth in such Notice.
SECTION 12.10 NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS.
Other than as specifically set forth in this Agreement, any reports,
information or other documents provided to the Trustee are for purposes only of
enabling the sending party to comply
114
120
with its document delivery requirements hereunder and the Trustee's receipt of
any such information shall not constitute constructive or actual notice of any
information contained therein or determinable from any information contained
therein, including the Issuer's or the Servicer's compliance with any of its
covenants, representations or warranties hereunder.
SECTION 12.11 PREVENTION OF TRADING OF NOTES.
The Servicer shall, to the extent practicable and in an effort to
reduce the likelihood of classification of the Trust as "publicly traded
partnership" (within the meaning of Code Section 7704(b)), assuming that the
Trust were classified as a partnership for federal or state income tax purposes
and not solely as a security device for such purposes, take all steps necessary
to prevent the trading of Notes on an "established securities market" (within
the meaning of United States Treasury Regulations Section 1.7704-1(b)) or other
trading of Notes that is comparable, economically, to trading on an "established
securities market."
* * * *
[signatures appear on next page]
115
121
IN WITNESS WHEREOF, the parties have caused this Indenture and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
MIDLAND FUNDING 98-A CORPORATION,
as Issuer
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
----------------------------------------
Title: Treasurer
MIDLAND CREDIT MANAGEMENT, INC., as Servicer
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
----------------------------------------
Title: Sr. Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Trustee and as Backup Servicer
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxxx
----------------------------------------
Title: Assistant Vice President
ASSET GUARANTY INSURANCE COMPANY
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
----------------------------------------
Title: Vice President
