Exhibit 4.2
FORM OF POOLING AND SERVICING AGREEMENT
RELATING TO
TRIAD AUTO RECEIVABLES TRUST 200[ ]-[ ]
among
[TRIAD FINANCIAL SPECIAL PURPOSE LLC,]
as Seller
and
TRIAD FINANCIAL CORPORATION,
as Servicer
and
[ ],
as Trustee and Backup Servicer
--------------------------------
Dated as of [ ]
--------------------------------
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................................1
SECTION 1.1. Definitions...........................................................1
SECTION 1.2. Usage of Terms.......................................................17
SECTION 1.3. Section References...................................................17
SECTION 1.4. Limitation on Trust Fund Activities..................................17
SECTION 1.5. Calculations.........................................................17
SECTION 1.6. Action by or Consent of Certificateholders...........................17
ARTICLE II THE TRUST AND TRUST PROPERTY....................................................17
SECTION 2.1. Creation of Trust....................................................17
SECTION 2.2. Conveyance of Receivables............................................17
SECTION 2.3. Transfer Intended as Sale; Precautionary Security Interest;
Tax Treatment........................................................18
SECTION 2.4. Acceptance by Trustee................................................19
SECTION 2.5. Representations and Warranties of Seller.............................20
SECTION 2.6. Repurchase Upon Breach...............................................23
SECTION 2.7. Conditions to Acceptance by Trustee..................................24
SECTION 2.8. Custody of Servicer Receivable Files.................................25
SECTION 2.9. Collecting Lien Certificates Not Delivered on the Closing Date.......27
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES....................................27
SECTION 3.1. Duties of Servicer...................................................27
SECTION 3.2. Collections; Modification and Amendment of Receivables;
Sub-servicing Account; Lockbox Account...............................28
SECTION 3.3. Realization Upon Defaulted Receivables...............................30
SECTION 3.4. Insurance............................................................31
SECTION 3.5. Maintenance of Security Interests in Financed Vehicles...............31
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SECTION 3.6. Additional Covenants of Servicer.....................................31
SECTION 3.7. Purchase of Receivables Upon Breach..................................32
SECTION 3.8. Servicing Fee, Additional Servicing Fee and Servicer Expenses........32
SECTION 3.9. Servicing Certificate................................................32
SECTION 3.10. Annual Statement as to Compliance; Notice of Default................33
SECTION 3.11. Annual Independent Certified Public Accountant's Report;
Audited Financials..................................................33
SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables...............................................34
SECTION 3.14. Fidelity Coverage; Errors and Omissions Insurance...................34
SECTION 3.15. Delegation of Duties................................................34
ARTICLE IV DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO CERTIFICATEHOLDERS................35
SECTION 4.1. Collection Account...................................................35
SECTION 4.2. Reimbursement from the Collection Account............................36
SECTION 4.3. Application of Collections...........................................36
SECTION 4.4. Additional Deposits..................................................36
SECTION 4.5. Distributions........................................................37
SECTION 4.6. Net Deposits.........................................................39
SECTION 4.7. The Reserve Account..................................................39
SECTION 4.8. Statements to Certificateholders; Tax Returns........................40
ARTICLE V THE CERTIFICATES.................................................................43
SECTION 5.1. The Certificates......................................................43
SECTION 5.2 Authentication of Certificates........................................43
SECTION 5.3. Registration of Transfer and Exchange of Certificates; Restrictions
on Transfer of Class C Certificates...................................43
SECTION 5.4. Mutilated, Destroyed, Lost or Stolen Certificates.....................44
SECTION 5.5. Persons Deemed Owners.................................................44
SECTION 5.6. Access to List of Certificateholders' Names and Addresses.............45
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SECTION 5.7. Maintenance of Office or Agency.......................................45
ARTICLE VI THE SELLER......................................................................45
SECTION 6.1. Representations of Seller.............................................45
SECTION 6.2. Liability of Seller; Indemnities......................................48
SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations
of Seller, Amendment of Certificate of Incorporation and
Certain Covenants of the Seller.......................................48
SECTION 6.4. Limitation on Liability of Seller and Others..........................49
SECTION 6.5. Seller May Own Certificates...........................................49
ARTICLE VII THE SERVICER AND BACKUP SERVICER................................................50
SECTION 7.1. Representations and Warranties of Servicer............................50
SECTION 7.2. Indemnities of Servicer...............................................51
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations..........52
SECTION 7.4. Limitation on Liability of Servicer, Backup Servicer and Others.......53
SECTION 7.5. Servicer and Backup Servicer Not to Resign............................55
SECTION 7.6. Representations and Warranties of Backup Servicer.....................55
SECTION 7.7. Duties of Backup Servicer.............................................57
ARTICLE VIII SERVICER TERMINATION EVENTS....................................................57
SECTION 8.1. Servicer Termination Events...........................................57
SECTION 8.2. Consequences of a Servicer Termination Event..........................59
SECTION 8.3. Appointment of Successor..............................................59
SECTION 8.4. Notification to Certificateholders....................................60
SECTION 8.5. Action Upon Certain Failures of the Servicer..........................60
SECTION 8.6. Waiver of Past Defaults...............................................60
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ARTICLE IX THE TRUSTEE......................................................................60
SECTION 9.1. Duties of Trustee.....................................................60
SECTION 9.2. Trustee's Certificate.................................................62
SECTION 9.3. Certain Matters Affecting Trustee.....................................62
SECTION 9.4. Trustee Not Liable for Certificates or Receivables....................64
SECTION 9.5. Trustee May Own Certificates..........................................65
SECTION 9.6. Indemnity of Trustee..................................................65
SECTION 9.7. Eligibility Requirements for Trustee..................................65
SECTION 9.8. Resignation or Removal of Trustee.....................................65
SECTION 9.9. Successor Trustee.....................................................66
SECTION 9.10. Merger or Consolidation of Trustee...................................67
SECTION 9.11. Co-Trustee; Separate Trustee.........................................67
SECTION 9.12. Representations and Warranties of Trustee............................68
SECTION 9.13. Trustee May Enforce Claims Without Possession of Certificates........69
SECTION 9.14. Suit for Enforcement.................................................69
SECTION 9.15. Appointment of Custodians............................................69
ARTICLE X TERMINATION.......................................................................70
SECTION 10.1. Termination of the Trust.............................................70
SECTION 10.2. Optional Purchase of All Receivables.................................71
ARTICLE XI MISCELLANEOUS PROVISIONS.........................................................71
SECTION 11.1. Amendment............................................................71
SECTION 11.2. Protection of Title to Trust.........................................72
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SECTION 11.3. Limitation on Rights of Certificateholders...........................74
SECTION 11.4. GOVERNING LAW........................................................75
SECTION 11.5. SUBMISSION TO JURISDICTION; WAIVERS..................................75
SECTION 11.6. WAIVER OF JURY TRIAL.................................................75
SECTION 11.7. Severability of Provisions...........................................75
SECTION 11.8. Assignment...........................................................76
SECTION 11.9. Certificates Nonassessable and Fully Paid............................76
SECTION 11.10. Third Party Beneficiaries............................................76
SECTION 11.11. Counterparts.........................................................76
SECTION 11.12. Notices..............................................................76
SECTION 11.13. Successors and Assigns...............................................76
SECTION 11.14. Nonpetition Covenant.................................................77
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SCHEDULES
SCHEDULE A - Schedule of Receivables
SCHEDULE B - Location of Servicer Receivable Files
SCHEDULE 4.8 - Form of Information Request
EXHIBITS
EXHIBIT A - Form of Class A Certificate
EXHIBIT B - Form of Class B Certificate
EXHIBIT C - Form of Class C Certificate
EXHIBIT D - Form of Servicing Certificate
EXHIBIT E-1 - Form of Trustee's Certificate (Seller Assignment)
EXHIBIT E-2 - Form of Trustee's Certificate (Servicer Assignment)
EXHIBIT F-1 - Form of Trust Receipt
EXHIBIT F-2 - Form of Servicing Officer's Certificate
EXHIBIT G - Form of Collateral Insurance
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THIS POOLING AND SERVICING AGREEMENT (this "Agreement") dated as of [ ]
is made with respect to the formation of the Triad Auto Receivables Trust 200[
]-[ ], among (1) Triad Financial Special Purpose LLC, a Delaware [limited
liability company], as seller (the "Seller"), (2) Triad Financial Corporation, a
California corporation ("Triad"), as servicer (the "Servicer") and (3) [ ], a [
] banking corporation, as trustee (the "Trustee") and backup servicer (the
"Backup Servicer").
In consideration of the premises and of the mutual agreements herein
contained, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever capitalized and used in this
Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
"Accountant's Report" shall have the meaning set forth in Section 3.11.
"Accredited Investor" means an entity meeting the requirements of an
institutional "accredited investor" under Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Act.
"Act" means the Securities Act of 1933, as it may be amended from time
to time.
"Actuarial Method" means the method of allocating a fixed level payment
between principal and interest, pursuant to which each scheduled monthly payment
is deemed to consist of an amount of interest equal to 1/12 of the stated APR of
the Receivable multiplied by the outstanding Principal Balance of the Receivable
and an amount of principal equal to the remainder of such scheduled monthly
payment.
"Actuarial Receivable" means any Receivable under which the portion of a
payment allocable to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
"Additional Servicing Fee" means the additional compensation payable to
the Servicer for services rendered during the respective Collection Period,
which shall be equal to all late payment penalties, return check fees prepayment
penalties, extension and administration fees payable by the Obligors in
connection with modifications, extensions and prepayments; provided, however,
that amounts paid in connection with the prepayment in full of a Precomputed
Receivable shall not be considered part of the Additional Servicing Fee in
accordance with Section 4.3(a) hereof.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of
this definition of "Affiliate", the term "control" (including the terms
"controlling", "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause a direction
of the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
of finance charges stated in the Receivable.
"Backup Servicing Fee" means the fee payable to the Backup Servicer on
each Distribution Date for services rendered during the respective Collection
Period, which shall be equal to the product of one-twelfth and $[ ].
"Backup Servicer" shall have the meaning set forth in the first
paragraph of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions or trust companies
in the City of New York, the state in which the Corporate Trust Office is
located or the state in which the executive offices of the Servicer are located
shall be authorized or obligated by law, executive order or governmental decree
to be closed.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Certificate" or "Certificates" means any one of the Class A
Certificates, Class B Certificates or Class C Certificates executed by the
Trustee on behalf of the Trust and authenticated by the Trustee in substantially
the form set forth in Exhibit A, Exhibit B, or Exhibit C hereto, respectively.
"Certificate Balance" as of any day, means the sum of the Class A
Certificate Balance, the Class B Certificate Balance and the Class C Certificate
Balance.
"Certificate Custodian" means initially, the Trustee; thereafter, any
other certificate custodian acceptable to the Trustee.
"Certificate Majority" means the Holders of Class A Certificates and the
Class B Certificates representing a majority of the sum of the Class A
Certificate Balance and the Class B Certificate Balance; provided, however, if
there are no Class A Certificates outstanding, Certificateholders representing a
majority of the Class B Certificate Balance shall constitute a
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Certificate Majority; and, provided, further, if there are no Class A
Certificates outstanding and no Class B Certificates outstanding,
Certificateholders representing a majority of the Class C Certificate Balance
shall constitute a Certificate Majority.
"Certificate Register" and "Certificate Registrar" mean, respectively,
the register maintained and the Certificate Registrar appointed pursuant to
Section 5.3.
"Certificateholder" or "Holder" means the Person in whose name a
Certificate shall be registered in the Certificate Register, except that so long
as any Certificates are outstanding, solely for the purposes of giving any
consent, waiver, request or demand pursuant to this Agreement, the interest
evidenced by any Certificate registered in the name of the Seller or the
Servicer, or any Affiliate of either of them, 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.
"Class" means a class of Certificates.
"Class A Certificate" means any one of the Class A Certificates,
executed by the Trustee on behalf of the Trust and authenticated by the Trustee
in substantially the form set forth in Exhibit A hereto.
"Class A Certificateholder" means the Person in whose name a Class A
Certificate shall be registered in the Certificate Register.
"Class A Certificate Balance" means initially, the Class A Percentage of
the Cutoff Date Pool Balance, and thereafter shall equal the initial Class A
Certificate Balance reduced by all amounts previously distributed to the Class A
Certificateholders and allocable to principal. If the date of determination is a
Distribution Date, then such Class A Certificate Balance shall be reduced by all
such amounts distributed on such date.
"Class A Interest Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of (a) the Class A Interest
Distributable Amount for such Distribution Date and any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date (calculated on the basis
of a 360-day year consisting of twelve 30-day months), over (b) the amount of
interest that the Holders of the Class A Certificates actually received on such
current Distribution Date.
"Class A Interest Distributable Amount" means, for any Distribution
Date, an amount equal to thirty (30) days of interest at the Class A
Pass-Through Rate on the Class A Certificate Balance as of the close of business
on the last day of the related Collection Period (calculated on the basis of a
360-day year consisting of twelve 30-day months).
"Class A Pass-Through Rate" means [ ]% per annum.
"Class A Percentage" shall be [ ] percent ([ ]%).
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"Class A Pool Factor" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class A Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class A Certificate
Balance. The Class A Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class A Pool Factor will decline to reflect reductions in the
Class A Certificate Balance.
"Class A Principal Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of (a) the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date, over (b) the amount of principal that the
Holders of the Class A Certificates actually received on such current
Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class A Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class A Principal Distributable
Amount will equal the remaining Class A Certificate Balance.
"Class B Certificate" means any one of the Class B Certificates,
executed by the Trustee on behalf of the Trust and authenticated by the Trustee
in substantially the form set forth in Exhibit B hereto.
"Class B Certificate Balance" means, initially, the Class B Percentage
of the Cutoff Date Pool Balance, and thereafter shall equal the initial Class B
Certificate Balance reduced by all amounts previously distributed to the Class B
Certificateholders and allocable to principal. If the date of determination is a
Distribution Date, then such Class B Certificate Balance shall be reduced by all
such amounts distributed on such date.
"Class B Certificateholder" means the Person in whose name a Class B
Certificate shall be registered in the Certificate Register.
"Class B Interest Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of (a) the Class B Interest
Distributable Amount for such Distribution Date and any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date, plus interest
on such outstanding Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Class B Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date (calculated on the basis
of a 360-day year consisting of twelve 30-day months), over (b) the amount of
interest that the Holders of the Class B Certificates actually received on such
current Distribution Date.
"Class B Interest Distributable Amount" means, for any Distribution
Date, an amount equal to thirty (30) days of interest at the Class B
Pass-Through Rate on the Class B Certificate Balance as of the close of business
on the last day of the related Collection Period (calculated on the basis of a
360-day year consisting of twelve 30-day months).
"Class B Pass-Through Rate" means [ ]% per annum.
"Class B Percentage" shall be [ ] percent ([ ]%).
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"Class B Pool Factor" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class B Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class B Certificate
Balance. The Class B Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class B Pool Factor will decline to reflect reductions in the
Class B Certificate Balance.
"Class B Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of (a) the Class B Principal Distributable Amount
and any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date, over (b) the amount of principal that the Holders of the
Class B Certificates actually received on such current Distribution Date.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class B Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class B Principal Distributable
Amount will equal the remaining Class B Certificate Balance.
"Class C Certificate" means any one of the Class C Certificates,
executed by the Trustee on behalf of the Trust and authenticated by the Trustee
in substantially the form set forth in Exhibit C hereto.
"Class C Certificate Balance" means, initially, the Class C Percentage
of the Cutoff Date Pool Balance, and thereafter shall equal the initial Class C
Certificate Balance reduced by all amounts previously distributed to the Class C
Certificateholder and allocable to principal. If the date of determination is a
Distribution Date, then such Class C Certificate Balance shall be reduced by all
such amounts distributed on such date.
"Class C Certificateholder" means the Person in whose name a Class C
Certificate shall be registered in the Certificate Register.
"Class C Interest Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of (a) the Class C Interest
Distributable Amount for such Distribution Date and any outstanding Class C
Interest Carryover Shortfall from the immediately preceding Distribution Date,
plus interest on such outstanding Class C Interest Carryover Shortfall, to the
extent permitted by law, at the Class C Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date (calculated on the basis
of a 360-day year consisting of twelve 30-day months), over (b) the amount of
interest that the Holders of the Class C Certificates actually received on such
current Distribution Date.
"Class C Interest Distributable Amount" means, for any Distribution
Date, an amount equal to thirty (30) days of interest at the Class C
Pass-Through Rate on the Class C Certificate Balance as of the close of business
on the last day of the related Collection Period (calculated on the basis of a
360-day year consisting of twelve 30-day months).
"Class C Pass-Through Rate" means [ ]% per annum.
"Class C Percentage" shall be [ ] percent ([ ]%).
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"Class C Pool Factor" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class C Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class C Certificate
Balance. The Class C Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class C Pool Factor will decline to reflect reductions in the
Class C Certificate Balance.
"Class C Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of (a) the Class C Principal Distributable Amount
and any outstanding Class C Principal Carryover Shortfall from the preceding
Distribution Date, over (b) the amount of principal that the Holders of the
Class C Certificates actually received on such current Distribution Date.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class C Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class C Principal Distributable
Amount will equal the remaining Class C Certificate Balance.
"Closing Date" means [ ].
"Closing Date Certificate Balance" means $[ ].
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Insurance" shall have the meaning specified in Section
3.4(a).
"Collection Account" means the account designated in, and which is
established and maintained pursuant to, Section 4.1.
"Collection Guidelines and Procedures" means the guidelines and
procedures of the Servicer with respect to servicing contracts attached to the
Purchase Agreement as Exhibit C.
"Collection Period" means, with respect to a Determination Date or a
Distribution Date, the calendar month immediately preceding the month in which
such Determination Date or Distribution Date occurs, or, in the case of the
initial Determination Date or Distribution Date, the period from and excluding
the Cutoff Date to and including the last day of the month following the month
in which the Cutoff Date occurred.
"Collector to Current Receivable Ratio" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which less than $40 of Scheduled Payments is 31 or more days past
due.
"Collector to Delinquent Receivable Ratio" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which $40 or more of all Scheduled Payments is 31 or more days past
due.
"Corporate Trust Office" means the office of the Trustee at which its
corporate trust business shall be principally administered, which office as of
the date hereof is located at [ ].
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"Cram Down Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to such
reduction in Principal Balance of such Receivable or the reduction in the net
present value (using as the discount rate the lower of the APR on such
Receivable or the rate of interest, if any, specified by the court in such
order) of the Scheduled Payments as so modified or restructured. A "Cram Down
Loss" shall be deemed to have occurred on the date of issuance of such order.
"Cumulative Default Ratio" means, with respect to any Record Date, a
fraction, (a) the numerator of which is equal to the sum of (i) the aggregate of
the Principal Balances as of the related Record Date of all Receivables which
have become Defaulted Receivables, and (ii) the aggregate amount of any Cram
Down Losses, and (b) the denominator of which is equal to the Cutoff Date Pool
Balance.
"Cutoff Date" means the close of business on [ ].
"Cutoff Date Pool Balance" means $[ ] as set forth in Schedule A.
"Dealer" means, with respect to a Receivable which is a retail
installment sale contract, the seller of the related Financed Vehicle, who
originated and assigned such Receivable to Triad.
"Dealer Agreement" means an agreement between Triad and a Dealer
relating to the sale of retail installment sale contracts to Triad and all
documents and instruments relating thereto.
"Dealer Assignment" means, with respect to a Receivable which is a
retail installment sale contract, the assignment executed by a Dealer conveying
such Receivable to Triad.
"Deemed Cured" means, as of a Record Date, (a) with respect to a
Servicer Termination Trigger Event that has occurred, that no Servicer
Termination Trigger Event shall have occurred as of such Record Date or as of
either of the two immediately preceding Record Dates, and (b) with respect to a
Reserve Account Trigger Event that has occurred, that no Reserve Account Trigger
Event shall have occurred as of such Record Date or as of either of the two
immediately preceding Record Dates; provided, however, that a Reserve Account
Trigger Event resulting from a Cumulative Default Ratio exceeding [ ]% shall
never be Deemed Cured until both the Class A Certificate Balance and the Class B
Certificate Balance have been reduced to zero.
"Defaulted Receivable" means any Receivable (a) for which the related
Financed Vehicle has been repossessed by the Servicer or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"Deficiency Claim Amount" shall have the meaning specified in Section
4.7.
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"Deficiency Claim Date" means, with respect to any Distribution Date,
the second Business Day preceding such Distribution Date.
"Deficiency Notice" shall have the meaning specified in Section 4.7.
"Delinquency Ratio" means, with respect to any Record Date, a fraction,
(a) the numerator of which is equal to the aggregate Principal Balances of all
Receivables which are not Defaulted Receivables and with respect to which all or
more than 10% of all Scheduled Payments is 61 or more days past due as of such
Record Date, and (b) the denominator of which is equal to the aggregate
Principal Balances of the Receivables as of such Record Date.
"Determination Date" means, with respect to any Collection Period, the [
]th day of the following month, or if such day is not a Business Day, the next
Business Day.
"Distribution Date" means, for each Collection Period, the [ ]th day of
the following month, or if the [ ]th day is not a Business Day, the next
succeeding Business Day, commencing [ ].
"Eligible Account" means a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of the
United States of America, or any of the States thereof, or the District of
Columbia, having a certificate of deposit, short-term deposit or commercial
paper rating of at least "D-1" by the Rating Agency, or if not rated by the
Rating Agency, then at least "A-1" by Standard & Poor's and "P-1" by Moody's.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment of principal and interest by, the United States of
America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by federal or state
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall be rated "D-1" by
the Rating Agency, or if not rated by the Rating Agency, then at least "A-l+" by
Standard & Poor's and "P-1" by Moody's;
(c) commercial paper that, at the time of the investment or contractual
commitment to invest therein, is rated "D-1" by the Rating Agency, or if not
rated by the Rating Agency, then at least "A-l+" by Standard & Poor's and "P-1"
by Moody's;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
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(e) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to the full and timely payment of
principal and interest by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full faith
and credit of the United States of America, in either case entered into with (i)
a depository institution or trust company (acting as principal) described in
clause (b) or (ii) a depository institution or trust company whose commercial
paper or other short term unsecured debt obligations are rated "A-l+" by
Standard & Poor's and "P-1" by Moody's and if rated by the Rating Agency, "D-1",
and whose long term unsecured debt obligations are rated "AAA" by Standard &
Poor's and "Aaa" by Moody's and if rated by the Rating Agency, "AAA";
(f) money market mutual funds registered under the Investment Company
Act of 1940, as amended, having a rating, at the time of such investment, in the
highest investment category of Standard & Poor's and Moody's; and
(g) any other investment as may be acceptable to the Certificate
Majority and the Rating Agency, as may from time to time be confirmed in writing
to the Trustee by the Certificate Majority and the Rating Agency;
provided, however, that no such instrument shall be an Eligible Investment if
(w) such instrument evidences a right to receive either (A) only interest
payments with respect to the obligations underlying such instrument or (B) both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations; (x) its terms do not have a
predetermined fixed dollar amount of principal due at maturity that cannot vary
or change; (y) to the extent rated, an "r" highlighter is affixed to its rating;
or (z) to the extent the related interest rate is variable, interest thereon is
not tied to a single interest rate index plus a single fixed spread (if any), or
does not move proportionately with that index.
Any Eligible Investments may be purchased by or through the Trustee or
any of its Affiliates.
"Eligible Servicer" means Triad, the Backup Servicer (so long as the
Backup Servicer is not in default of any of its obligations under this Agreement
or any other agreement relating hereto) or another Person which at the time of
its appointment as the successor Servicer, (a) is servicing a portfolio of motor
vehicle retail installment sale contracts and/or motor vehicle installment loans
of not less than $100 million, (b) is legally qualified and has the capacity and
all necessary licenses, permits and approvals to service the Receivables, (c)
has demonstrated the ability to service a portfolio of motor vehicle retail
installment sales contracts and/or motor vehicle installment loans similar to
the Receivables with reasonable skill and care, (d) is approved by the Rating
Agency, (e) is approved by a Certificate Majority, (f) is qualified and entitled
to use, pursuant to a license or other written agreement, and agrees to maintain
the confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement and (g) has a tangible net worth as
9
determined in accordance with generally accepted accounting principles
consistently applied of at least $15 million.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as it may be
amended from time to time.
"Final Scheduled Distribution Date" shall be the Distribution Date
occurring in [ ].
"Financed Vehicle" means a new or used automobile or light duty truck,
together with all accessions thereto, securing an Obligor's indebtedness under a
Receivable.
"Independent Accountants" shall have the meaning specified in Section
3.11.
"Information Request" means a request for information delivered pursuant
to Section 3.11(d) or 4.8(d), substantially in the form of Schedule 4.8 hereto.
"Insurance Policy" means any insurance policy (a) covering physical
damage, theft, mechanical breakdown or similar event with respect to a Financed
Vehicle or loss of such Financed Vehicle or (b) such as credit life or credit
disability insurance with respect to payments due on a Receivable or (c)
otherwise benefiting the holder of the Receivable.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, including tax liens, mechanics' liens, and any liens
that may attach by operation of law.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the registrar of titles or comparable official or agency of the applicable
state to a secured party which indicates that the lien of the secured party on
the Financed Vehicle is recorded on the original certificate of title. In any
jurisdiction in which the original certificate of title is required to be given
to the Obligor, the term "Lien Certificate" shall mean only a certificate or
notification issued to a secured party.
"Liquidated Receivable" means any Receivable (a) which has been
liquidated by the Servicer through the sale of the Financed Vehicle or (b) for
which the Obligor is more than 120 days past due or (c) with respect to which
the Servicer has determined in good faith that no further proceeds are expected
to be received in respect of such Receivable.
"Lockbox Account" means an account maintained with a Lockbox Bank, into
which payments from Obligors under Triad's portfolio of serviced contracts are
deposited.
"Lockbox Agreement" means an agreement with a Lockbox Bank between the
Servicer and such Lockbox Bank pursuant to which a Lockbox Account is
maintained.
10
"Lockbox Bank" means, as of any date, a depository institution which
provides a Lockbox as part of its normal and customary services named by the
Servicer at which the Lockbox Account is established and maintained as of such
date.
"Managed Receivable" means any retail installment sale contract
(including any related promissory note) or note and security agreement for a
financed vehicle, and all rights and obligations thereunder, originated by or
assigned to Triad and currently serviced by Triad for non-prime Obligors.
["Moody's" means Xxxxx'x Investors Service, Inc., and any successors
thereof.]
"Obligor" on a Receivable means the purchaser or co-purchasers of the
related Financed Vehicle or any other Person who owes or may be liable for
payments under such Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president or
the treasurer of Triad, the Seller, or the Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel, which counsel
shall be acceptable to the Trustee and a Certificate Majority, which opinion
shall be in form and substance acceptable to the Trustee and a Certificate
Majority and which opinion shall not, except for the Opinion of Counsel referred
to in Section 9.3 hereof, be the expense of the Trustee.
"Person" means, any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof, or any other entity.
"Plan" means an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA or Code Section 4975, or a governmental plan
as defined in Section 3(32) of ERISA, or subject to any federal, state or local
law which is to a material extent similar to the foregoing provisions of ERISA
or the Code.
"Pool Balance" means the aggregate Principal Balance of the Receivables
(excluding Liquidated and Purchased Receivables) as of the close of business on
the last day of the immediately preceding Collection Period.
"Precomputed Receivable" means an Actuarial Receivable or a Rule of 78's
Receivable.
"Principal Balance" of a Receivable (a) as of the Cutoff Date, means the
Amount Financed minus (i) in the case of a Precomputed Receivable, that portion
of all payments (including all Scheduled Payments and any prepayments in full or
partial prepayments) actually received on or prior to such date and allocable to
principal in accordance with the Actuarial Method and (ii) in the case of a
Simple Interest Receivable, that portion of all payments (including all
Scheduled Payments and any prepayments in full or partial prepayments) actually
received on or prior to such date and allocable to principal in accordance with
the Simple Interest
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Method, and (b) as of any date after the Cutoff Date, means the Principal
Balance as of the Cutoff Date minus (1) in the case of a Precomputed Receivable,
that portion of all payments (including all Scheduled Payments and any
prepayments in full or partial prepayments) actually received on or prior to
such date (but after the Cutoff Date) and allocable to principal in accordance
with the Actuarial Method, (2) in the case of a Simple Interest Receivable, that
portion of all payments (including all Scheduled Payments and any prepayments in
full or partial prepayments) actually received on or prior to such date (but
after the Cutoff Date) and allocable to principal in accordance with the Simple
Interest Method, and (3) any Cram Down Loss in respect of such Receivable. The
Principal Balance of a Liquidated Receivable for purposes other than the
definition of Principal Distributable Amount shall be equal to $0.
"Principal Distributable Amount" means, with respect to any Distribution
Date other than the Final Scheduled Distribution Date, the sum of the following
amounts, without duplication: (a) the principal portion of all Scheduled
Payments received during the preceding Collection Period on Precomputed
Receivables (calculated in accordance with the Actuarial Method) and all
payments of principal received on Simple Interest Receivables (calculated in
accordance with the Simple Interest Method) during such Collection Period; (b)
the principal portion of all prepayments received during the preceding
Collection Period; (c) the portion of the Purchase Amount allocable to principal
of each Receivable that became a Purchased Receivable as of the last day of the
preceding Collection Period and the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased; (d) the Principal
Balance of each Receivable that first became a Liquidated Receivable during the
preceding Collection Period; and (e) the aggregate amount of Cram Down Losses
with respect to the Receivables that have occurred during the preceding
Collection Period.
"Purchase Agreement" means, the Purchase Agreement, dated as of [ ], by
and between Triad and the Seller, as amended, modified or supplemented from time
to time, relating to the purchase of Receivables from time to time by the Seller
from Triad.
"Purchase Amount" means, with respect to a Purchased Receivable, the
Principal Balance plus interest thereon at the respective APR from the last date
through which interest has been paid to the last day of the immediately
preceding Collection Period if purchased prior to the Determination Date
immediately following the end of such Collection Period, and otherwise through
the last day of the month of repurchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 3.7 or by the Seller pursuant to Section 2.6 or Section 2.9.
"Rating Agency" means [ ] and any successors thereof. If such
organization or successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical rating organization or other comparable
Person designated by the Seller, notice of which designation shall be given to
the Trustee and the Servicer.
"Receivable" means each retail installment sale contract (including any
related promissory note) or note and security agreement for a Financed Vehicle
which is listed on the
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Schedule of Receivables and all rights and obligations thereunder except for
Receivables that shall have become Purchased Receivables.
"Record Date" means, with respect to any Distribution Date or
Determination Date, the last day of the immediately preceding calendar month.
"Recoveries" means, with respect to a Liquidated Receivable, the monies
collected from whatever source subsequent to the date on which such Receivable
became a Liquidated Receivable, net of the reasonable costs of liquidation
including reasonable out-of-pocket expenses of the Servicer including Servicer
Expenses in connection with such liquidation plus any amounts required by law to
be remitted to the Obligor.
"Regulation D" means Regulation D under the Act.
"Related Documents" means the Certificates, the Pooling and Servicing
Agreement, the Purchase Agreement, the Reserve Account Agreement, the Lockbox
Agreement, the Underwriting Agreement and any other documents to be executed in
connection with the transactions contemplated hereby and thereby. The Related
Documents to be executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
"Repossession Inventory Ratio" means, with respect to any Record Date, a
fraction, (a) the numerator of which is equal to the aggregate Principal
Balances of all Receivables which have been repossessed by the Servicer and for
which the related Financed Vehicle has not been liquidated and (b) the
denominator of which is equal to the aggregate Principal Balances of the
Receivables as of such Record Date.
"Reserve Account" means, with respect to the Trust, the Reserve Account
established and maintained pursuant to the Reserve Account Agreement. The
Reserve Account shall be held by the Servicer and shall in no event be deemed
part of the Trust.
"Reserve Account Agreement" means the Reserve Account Agreement among
the Seller, Servicer and the Trustee, dated as of [ ], as the same may be
amended, supplemented or otherwise modified in accordance with the terms
thereof.
"Reserve Account Requirement" means an amount equal to (a) with respect
to the Closing Date, [ ]% of the initial Certificate Balance and (b) with
respect to each Distribution Date thereafter, [ ]% of the Certificate Balance,
after giving effect to distributions of principal to Certificateholders as of
the immediately preceding Record Date pursuant to Section 4.5 hereof on such
Distribution Date, unless a Reserve Account Trigger Event has occurred, in which
case the Reserve Account Requirement shall include all amounts required to be
deposited in the Reserve Account pursuant to Section 4.5(b) hereof, until such
Reserve Account Trigger Event has been Deemed Cured; provided, however, that the
Reserve Account Requirement shall be [ ]% of the Certificate Balance for each
Distribution Date following the point in time that the Cumulative Default Ratio
as described in clause (c)(v) of the definition of a Reserve Account Trigger
Event is greater than [ ]%, but less than [ ]%, notwithstanding such Reserve
Account Trigger Event being Deemed Cured.
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"Reserve Account Trigger Event" means that any one of the following
events shall have occurred: (a) the Delinquency Ratio for each of the three
preceding Collection Periods exceeds [ ]%; (b) the Repossession Inventory Ratio
is greater than [ ]%; or (c) the Cumulative Default Ratio exceeds (i) [ ]% as of
any Record Date from the initial Record Date through and including the sixth
Record Date, (ii) [ ]% as of any Record Date from the seventh Record Date
through and including the twelfth Record Date, (iii) [ ]% as of any Record Date
from the thirteenth Record Date through and including the eighteenth Record
Date, (iv) [ ]% as of any Record Date from the nineteenth Record Date through
and including the twenty-fourth Record Date or (v) [ ]% as of any Record Date
thereafter.
"Responsible Officer" of a Person means the president, vice president,
controller, treasurer or chief financial officer of such Person.
"Rule of 78's Receivable" means any Receivable under which the portion
of a payment allocable to interest earned during that month is determined by
multiplying the total amount of add-on interest payable over the term of the
Receivable by a fraction, the denominator of which is equal to the sum of a
series of numbers beginning with one and ending with the number of scheduled
monthly payments due under the related Receivable, and the numerator of which is
the number of payments remaining under such Receivable before giving effect to
the payment to which the fraction is being applied. The difference between the
amount of the scheduled monthly payment made by the Obligor and the amount of
earned add-on interest calculated for the month is applied to principal
reduction.
"Schedule of Receivables" means the schedule of all retail installment
sale contracts and promissory notes originally held as part of the Trust which
is attached as Schedule A hereto.
"Scheduled Payment" means, for any Collection Period for any Receivable,
the amount indicated in such Receivable as required to be paid by the Obligor in
such Collection Period (without giving effect to deferments of payments to the
extent permitted pursuant to Section 3.2 or any rescheduling of payments in any
insolvency or similar proceeding).
"Seller" means, [Triad Financial Special Purpose LLC,] a Delaware
[limited liability company].
"Seller's Retained Yield" means that portion of the interest earned on
the Receivable which is retained by the Seller for any Distribution Date, in an
amount equal to the excess of such interest over the sum of (i) the weighted
average of the Class A Pass-Through Rate, the Class B Pass-Through Rate and the
Class C Pass-Through Rate divided by 12 multiplied by the sum of the Class A
Certificate Balance, Class B Certificate Balance and Class C Certificate
Balance, each as of the related Record Date, (ii) the Servicing Fee, Additional
Servicing Fee and Servicer Expenses payable on such Distribution Date, (iii) the
Trustee Fee payable on such Distribution Date and (iv) the Backup Servicing Fee
payable on such Distribution Date.
"Servicer" shall have the meaning set forth in the first paragraph of
this Agreement.
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"Servicer Expenses" means for any Collection Period (i) any reasonable
liquidation expenses not otherwise reimbursed to the Servicer, (ii) reasonable
out-of-pocket expenses incurred in connection with collection efforts relating
to skip trace services, legal fees and field calls and (iii) [ ]% of any
deficiencies recovered from an Obligor.
"Servicer Receivable Files" shall have the meaning set forth in Section
2.8(b).
"Servicer Termination Event" means an event specified in Section 8.1.
"Servicer Termination Trigger Event" means that any one of the following
events shall have occurred: (a) the average of the Delinquency Ratios for each
of the three preceding Collection Periods exceeds [ ]%; (b) the Repossession
Inventory Ratio is greater than [ ]%; or (c) the Cumulative Default Ratio
exceeds (i) [ ]% as of any Record Date from the initial Record Date through and
including the sixth Record Date, (ii) [ ]% as of any Record Date from the
seventh Record Date through and including the twelfth Record Date, (iii) [ ]% as
of any Record Date from the thirteenth Record Date through and including the
eighteenth Record Date or (iv) [ ]% as of any Record Date thereafter; provided,
however, that following the appointment of a successor Servicer pursuant to
Section 8.3 hereof, no Servicer Termination Trigger Event shall have been deemed
to occur in accordance with this definition until the seventh Record Date
succeeding the appointment of such successor Servicer.
"Servicing Certificate" means a certificate completed and executed by a
Servicing Officer pursuant to Section 3.9, substantially in the form of Exhibit
D.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during the respective Collection Period, which shall be equal to the
product of (i) one-twelfth, (ii) the Servicing Fee Rate and (iii) the Pool
Balance as of the close of business on the first day of the related Collection
Period.
"Servicing Fee Rate" shall be [ ]% per annum.
"Servicing Officer" means any person whose name appears on a list of
Servicing Officers delivered to the Trustee, as the same may be amended from
time to time.
"Similar Law", as used in Section 5.3, means any federal, state or local
law which is to a material extent similar to the fiduciary responsibility
provisions of ERISA, Code Section 4975, or Section 3(32) of ERISA.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (based on the
number of days) elapsed since the preceding payment of interest was made and the
remainder of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
15
["Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc. and any successors thereof.]
"State" means any state of the United States of America, or the District
of Columbia.
"Total Distribution Amount" means, for each Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period,
without duplication: (a) all collections on Receivables; (b) proceeds from
Recoveries and liquidation proceeds; (c) the Purchase Amount of each Receivable
repurchased by the Seller or purchased by the Servicer as of the immediately
preceding Record Date; and (d) all interest, dividends, gains upon sale and
other income from, or earnings on, investments of funds in the Collection
Account.
"Triad" shall have the meaning set forth in the first paragraph of this
Agreement.
"Trust" has the meaning set forth in Section 2.1.
"Trust Property" means that property set forth in items (a) through (j)
in Section 2.2. Although the Certificateholders have directed that the Seller,
as their agent, place the Reserve Account in trust with and pledge the Reserve
Account to, the Trustee for the benefit of the Certificateholders pursuant to
the Reserve Account Agreement, the Reserve Account shall not under any
circumstances be deemed to be a part of or otherwise includable in the Trust or
the Trust Property.
"Trustee" shall have the meaning set forth in the first paragraph of
this Agreement.
"Trustee Fee" means the fee payable to the Trustee on each Distribution
Date for services rendered during the preceding Collection Period in an amount
equal to the product of one-twelfth and $[ ].
"Trustee Officer" means any vice president, any assistant vice
president, any assistant secretary, any assistant treasurer, any trust officer,
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"Trustee's Certificate" means a certificate completed and executed for
the Trustee by a Trustee Officer pursuant to Section 9.2, substantially in the
form of, in the case of an assignment to the Seller, Exhibit E-1 and in the case
of an assignment to the Servicer, Exhibit E-2.
"Underwriter" means [ ].
"Underwriting Agreement" means [ ].
"Underwriting Criteria" means the criteria used by Triad for purchasing
Contracts attached to the Purchase Agreement as Exhibit B.
16
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as
in effect in the respective jurisdiction.
SECTION 1.2. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation".
SECTION 1.3. Section References. All references to Articles, Sections,
paragraphs, subsections, Exhibits and Schedules herein shall be to such portions
of this Agreement unless otherwise specified.
SECTION 1.4. Limitation on Trust Fund Activities. Notwithstanding any
other provision in this Agreement to the contrary, the Trustee shall have no
power to vary the investment of the Certificateholders within the meaning of
Treasury Department Regulation ` 301.7701-4(c) or to engage in business on
behalf of the Trust unless the Trustee shall have received an Opinion of Counsel
that such activity shall not cause the Trust to be an association or a publicly
traded partnership taxable as a corporation for federal income tax purposes.
SECTION 1.5. Calculations. All calculations of the amount of interest
accrued on the Certificates and all calculations of the amount of fees to be
paid pursuant hereto, including without limitation, the fees to be paid to the
Servicer shall be made on the basis of a 360-day year consisting of twelve
30-day months.
SECTION 1.6. Action by or Consent of Certificateholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. The Trustee or Certificate Registrar may require such
additional proof of any matter referred to in this Section 1.6 as it shall deem
necessary.
ARTICLE II
THE TRUST AND TRUST PROPERTY
SECTION 2.1. Creation of Trust. The Seller does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement, a
trust (the "Trust"), which for convenience shall be known as "Triad Auto
Receivables Trust 200[ ]-[ ]."
SECTION 2.2. Conveyance of Receivables. In consideration of the
Trustee's delivery of Certificates in an aggregate principal amount equal to the
Closing Date Certificate Balance to or upon the written order of the Seller, and
subject to the terms and conditions of this Agreement, the Seller does hereby
sell, transfer, assign, set over and otherwise convey to the
17
Trustee, on behalf of the Trust, in trust for the benefit of the
Certificateholders, without recourse, except as provided in Sections 2.6, 2.8(b)
and 2.9 (subject to the obligations herein):
(a) all right, title and interest of the Seller in and to the
Receivables listed on the Schedule of Receivables and all monies paid or payable
thereon or in respect thereof after the Cutoff Date (including amounts due on or
before the Cutoff Date but received by Triad, the Seller or the Servicer after
the Cutoff Date) and all liquidation proceeds and Recoveries received with
respect to such Receivables;
(b) all right, title and interest of the Seller in and to the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title and all other evidence
of ownership with respect to such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any Insurance
Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Financed Vehicles or the Obligors thereunder, including rebates
of unearned premiums;
(d) all right, title and interest (but none of the obligations) of the
Seller in and to the Purchase Agreement, including a direct right to cause Triad
to purchase Receivables from the Trust under certain circumstances;
(e) all right, title and interest of the Seller in and to refunds for
the costs of extended service contracts with respect to the Financed Vehicles;
(f) all right, title and interest of Triad and the Seller against
Dealers with respect to the Receivables, including any reserves or collateral
established or posted by Dealers with respect to the Receivables;
(g) all items contained in the Servicer Receivable File related to each
Receivable, and all other documents or electronic records that Triad keeps on
file in accordance with its customary procedures relating to the Receivables,
the Obligors or the Financed Vehicles;
(h) all amounts and property from time to time held in or credited to
the Collection Account or to the extent such amounts and property relate to the
Receivables;
(i) all property (including the right to receive Recoveries) that
secures a Receivable and that has been acquired by or on behalf of the Trust
pursuant to liquidation of such Receivable; and
(j) the payments on and proceeds of any and all of the foregoing.
SECTION 2.3. Transfer Intended as Sale; Precautionary Security Interest;
Tax Treatment. (a) The conveyance of the Receivables and the other Trust
Property pursuant to this Agreement is intended by each of the parties hereto as
a sale free and clear of all Liens, and it is intended that the beneficial
interest in and title to the Receivables and the other Trust Property shall not
be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. In the event,
however, that notwithstanding the
18
intent of the parties hereto, the transfer under this Agreement is held not to
be a sale, this Agreement shall constitute a grant of, and the Seller hereby
grants, a security interest in the Receivables and the other Trust Property to
the Trustee for the benefit of the Certificateholders. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller that
it intends to establish (for federal tax purposes) a trust, rather than an
association taxable as a corporation.
(b) In connection with the grant of the security interest in paragraph
(a) above, the following financing statements will be filed by the Seller:
(i) Form UCC-1 filed with the Secretary of State of California,
naming Triad as the debtor, the Trust as the secured party and the
Receivables as collateral;
(ii) Form UCC-1 filed with the Secretary of State of Delaware
and the Secretary of State of New York and New York County, naming the
Seller as the debtor, the Trust as the secured party and the Receivables
as collateral; and
(iii) Form UCC-1 filed with the Secretary of State of Delaware,
naming the Trust as the debtor, the Trustee as the secured party and the
Receivables as collateral.
(c) The Seller has entered into this Agreement, and the Certificates
will be issued, with the intention that (i) the Trust will be classified as a
grantor trust under subpart E, part I of subchapter J of the Code and not as an
association taxable as a corporation or a publicly traded partnership taxable as
a corporation for purposes of federal income tax law, and (ii) the
Certificateholders will be treated as the owners of a pro rata undivided
interest in each Receivable and any other assets of the Trust (other than the
interest in the Trust represented by the Seller's Retained Yield). The Seller,
the Trustee, the Servicer, the Backup Servicer, and each Certificateholder agree
to treat and to take no action inconsistent with the treatment of the
Certificates (or beneficial interest therein) as interests in a grantor trust
for purposes of federal, state and local income and franchise taxes, and agree
to take no action with respect to the Trust or any interest therein which would
cause the Trust to be treated as an association or publicly traded partnership
taxable as a corporation for purposes of federal income tax law. Each
Certificateholder, by acceptance of its Certificate, and each owner of a
Certificate, by acquisition of a beneficial interest in a Certificate, agree to
be bound by the provisions of this Section 2.3. Each Certificateholder agrees
that it will cause any owner of a Certificate acquiring an interest in a
Certificate through it to comply with this Agreement as to the tax treatment
described in this Section 2.3. The provisions of this Agreement shall be
construed in light of the foregoing intended tax treatment.
SECTION 2.4. Acceptance by Trustee. The Seller hereby directs the
Trustee to, and the Trustee, on behalf of the Trust, does hereby, accept the
Trust Property conveyed by the Seller pursuant to Section 2.2. The Trustee
declares that it shall hold such consideration upon the trusts herein set forth
for the benefit of all present and future Certificateholders, subject to the
terms and provisions of this Agreement.
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SECTION 2.5. Representations and Warranties of Seller. The Seller hereby
makes the following representations and warranties as to the Receivables to the
other parties hereto, on which the Trustee on behalf of itself and the
Certificateholders relies in accepting the Receivables and the other Trust
Property in trust and issuing the Certificates. Unless otherwise specified, such
representations and warranties are made as of the Closing Date. Such
representations and warranties shall survive the sale, transfer, and assignment
of the Receivables to the Trustee.
(a) Each Receivable (1) arises from the delivery and acceptance of a
Financed Vehicle and which delivery and acceptance has been fully performed by
the Obligor and the Dealer party thereto, (2) arises from the normal course of
the Dealer's business, (3) as of the Cutoff Date, is not a Receivable for which
10% or more of all Scheduled Payments is 31 or more days past due, (4) the
Obligor of which is a natural person residing in any State, (5) the Obligor of
which is not a government or a governmental subdivision or agency, (6) the
Obligor of which has full power and capacity to enter into such Receivable, (7)
is denominated and payable in dollars in the United States, (8) is in full force
and effect and constitutes the legal, valid and binding obligation of the
Obligor in accordance with its terms, (9) is not subject to any dispute,
litigation, counterclaim or defense, or any offset or right of offset, and to
the best of the Seller's knowledge, any exercisable right of rescission, (10)
has an original term to maturity of not less than [ ] nor more than [ ] months,
(11) provides for equal monthly payments which will cause the Receivable to
fully amortize during its term, (12) has an Amount Financed that has been fully
disbursed of not less than $[ ] or more than $[ ], (13) has an Annual Percentage
Rate of not less than the lesser of (A) [ ]% and (B) the maximum interest rate
permissible by law with respect to such Receivable, (14) together with the note
or contract applicable thereto, does not contravene any requirements of law
applicable thereto, (15) is a Receivable with respect to which all required
consents, approvals and authorizations have been obtained, (16) is a Receivable
secured by a security interest in the Financed Vehicle that has been recorded or
applied for in the name of Triad and assigned to the Seller, which security
interest is or is reasonably expected to be in full force and effect, in each
case, subject to no prior or equal liens, claims or encumbrances, (17) was
purchased or originated by Triad using and materially conforming to the
Underwriting Criteria, (18) requires Triad to be named as loss payee or
beneficiary (as applicable) under an Insurance Policy (described in clause (a)
of the definition of such term), with respect to the Financed Vehicle related to
such Receivable and entitles Triad to the benefits of such Insurance Policy, and
(19) requires no additional action by Triad or the Seller before becoming a
valid and binding obligation of the Obligor thereunder, enforceable against such
Obligor in accordance with its terms.
(b) As of the Cutoff Date at least [ ]% of the Receivables, based on the
outstanding Principal Balance of the Receivables as of the Cutoff Date, have had
the first Scheduled Payment, which payment was not delinquent, made by the
related Obligor.
(c) Each Receivable that is a retail installment sale contract was
originated by a Dealer that had all necessary licenses and permits to originate
Receivables in the State where such Dealer was located, was fully and properly
executed by the parties thereto, was purchased by Triad from such Dealer under
an existing Dealer Agreement with Triad and was validly assigned by the Dealer
to Triad.
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(d) At least [ ]% of the Dealers originating Receivables are franchise
dealers.
(e) Each Receivable contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for
realization against the collateral security.
(f) To the best of the Seller's knowledge, each Receivable that is a
retail installment sale contract was originated by a Dealer to an Obligor and
was sold by the Dealer to Triad without any fraud or material misrepresentation
on the part of such Dealer or on the part of the Obligor.
(g) No Receivable represents a loan exceeding [ ]% of the wholesale book
value of the related Financed Vehicle.
(h) The information set forth in the Schedule of Receivables attached
hereto as it relates to such Receivable is true and correct in all material
respects as of the close of business on the Cutoff Date.
(i) Such Receivable complied at the time it was purchased or originated
by Triad and each Receivable, as of the date hereof complies in all material
respects with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the federal Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Xxxxxxxx-Xxxx Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Xxxx-Xxxxxxxx Act, the Consumer Legal Remedies Act of California and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, other consumer credit laws and equal credit opportunity and disclosure
laws and other applicable legal requirements.
(j) Such Receivables have not been satisfied, subordinated or rescinded,
nor has the related Financed Vehicle been released from the Lien granted by such
Receivable, in whole or in part.
(k) Since the Cutoff Date, no provision of any Receivable has been
waived, except in accordance with the Collection Guidelines and Procedures.
(l) Since the Cutoff Date, no Receivable has been amended, except in
accordance with the Collection Guidelines and Procedures and the terms of this
Agreement.
(m) Subject to Section 3.2(b) of this Agreement, no provision of any
Receivable has been waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the Servicer
Receivable File held by the Trustee. No Receivable has been modified as a result
of the Soldier's and Sailor's Civil Relief Act of 1940, as amended.
(n) No right of rescission, setoff, counterclaim or defense has been
asserted or, to the best of the Seller's knowledge, threatened against Triad or
the Seller with respect to such Receivable.
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(o) The Lien Certificate for each Financed Vehicle either (i) shows
Triad as the original secured party under each Receivable or (ii) has been
applied for to identify Triad as the secured party. If the Receivable was
originated in a State in which a filing or recording is required of the secured
party to perfect a security interest in motor vehicles, such filing or recording
has been duly made to show Triad as the original secured party under the Related
Receivable. Such security interest in the Financed Vehicle has been validly
assigned by Triad to the Seller pursuant to the Purchase Agreement and by the
Seller to the Trustee pursuant to this Agreement. Immediately after the sale,
transfer and assignment thereof to the Trust, each Receivable will be secured by
an enforceable and perfected security interest in the Financed Vehicle in favor
of the Trust as secured party, which security interest is prior to all other
liens and security interests in such Financed Vehicle (except, as to priority,
for any lien for taxes, labor or materials affecting a Financed Vehicle).
(p) To the best of Seller's knowledge, no Liens or claims have been
asserted or filed for taxes, work, labor or materials relating to the Financed
Vehicle that are Liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by any Receivable, and the Obligor has
good and marketable title to the Financed Vehicles subject to no Liens other
than the security interest under the Receivable.
(q) Other than Scheduled Payment defaults not more than thirty (30) days
past due as of the Cutoff Date, defaults arising out of the failure of the
Obligor to obtain and maintain insurance as required by the Receivable or by
applicable law and other defaults which will not have a material adverse affect
on the ability of the Obligor to make Scheduled Payments under the Receivable:
(1) no default, breach, violation or event permitting acceleration under the
terms of such Receivable has occurred; (2) no continuing condition that with
notice or the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any Receivable has
arisen; and (3) the Seller has not waived any of the foregoing.
(r) Such Receivable has not been sold, transferred, assigned or pledged
by the Seller to any Person other than the Trustee; the Seller has good and
marketable title to such Receivable free and clear of all Liens and rights of
others claiming by or through the Seller (other than the rights of the Obligor
to the Financed Vehicle thereunder) and, following the Closing Date, the Trustee
shall have good and marketable title to such Receivable, free and clear of all
Liens and rights of others claiming by or through the Seller (other than the
rights of the Obligor to the Financed Vehicle thereunder); and the transfer has
been perfected under the UCC for the applicable jurisdiction.
(s) Such Receivable has not been purchased by Triad from a Dealer in,
nor is subject to the laws of, any jurisdiction under which the sale, transfer
and assignment of such Receivable pursuant to this Agreement is unlawful, void
or voidable. No agreement has been entered into with any Obligor that prohibits,
restricts or conditions the assignment of any portion of the Receivables.
(t) There is only one original executed contract for each Receivable.
(u) The related Financed Vehicle securing such Receivable is not in
repossession status.
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(v) Such Receivable constitutes "chattel paper" as defined in the UCC.
(w) Such Receivable has not been included in a "fleet sale" (i.e., a
sale to a single Obligor of more than five vehicles).
(x) All amounts due and payable by Triad to the Dealer under the Dealer
Agreement with respect to Receivables that are retail installment sale contracts
have been paid and no dealer has any rights in, or claims against, such
Receivables.
(y) The Seller has indicated in its computer files that such Receivable
has been sold to the Trustee and constitutes Trust Property.
(z) The Seller has taken such action as is necessary to obtain a first
perfected security interest in favor of the Trustee in such Receivable, the
proceeds thereof, other Trust Property and the Reserve Account.
(aa) The Seller has done nothing to convey any right to any Person that
would result in such Person having a right to payments due under such Receivable
or otherwise to impair the rights of the Trust and the Certificateholders in any
Receivable or the proceeds thereof.
(bb) No Receivable is assumable by another Person in a manner which
would release the Obligor thereof from such Obligor's obligations to the Seller
with respect to such Receivable.
(cc) No selection procedures adverse to the Certificateholders have been
utilized in selecting such Receivable from all other Receivables owned by Triad.
(dd) As of the Cutoff Date, no Obligor had been identified on the
records of Triad as being the subject of a current bankruptcy proceeding.
(ee) Each Receivable is a fully amortizing Simple Interest Receivable,
Rule of 78's Receivable or Actuarial Receivable which provides for level monthly
payments which, if made when due, shall fully amortize the Amount Financed over
the original term.
SECTION 2.6. Repurchase Upon Breach. The Seller, the Servicer, the
Trustee, and the Backup Servicer, as the case may be, shall inform the other
parties to this Agreement promptly, in writing, upon the discovery of any breach
of the Seller's representations and warranties made pursuant to Section 2.5 that
has a material adverse effect on a Receivable or the interest herein of the
Trust or the Certificateholders; provided, however, that the failure to give any
such notice shall not derogate from any obligation of the Seller. Unless such
breach shall have been cured by the last day of the first full calendar month
following the discovery by or notice to the Seller of such breach, the Seller
shall have an obligation on or prior to such date to repurchase any Receivable
with respect to which such breach has a material adverse effect on such
Receivable or the interest therein of the Trust or the Certificateholders. If
necessary, to the extent that the Seller fails to effect its repurchase
obligation the Trustee shall notify Triad and Triad shall (pursuant to the
Purchase Agreement) repurchase any Receivable with respect to which such breach
has a material adverse effect on such Receivable or the interest therein of the
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Trust or the Certificateholders. In consideration of the purchase of the
Receivables, the Seller shall remit, or the Seller, or upon a failure by the
Seller to act, the Trustee, shall notify Triad to remit, the Purchase Amount, in
the manner specified in Section 4.4. The sole remedy hereunder (absent fraud,
reckless disregard, willful misconduct or gross negligence of the Seller) of the
Trustee, the Trust and the Certificateholders with respect to a breach of the
Seller's representations and warranties pursuant to Section 2.5 shall be to
require the Seller to repurchase Receivables pursuant to this Section or to
enforce the obligation of Triad to repurchase such Receivables pursuant to the
Purchase Agreement; provided, however, notwithstanding whether the related
Receivable shall have been purchased by the Seller, or Triad, the Seller shall
indemnify the Trustee and the Backup Servicer, and each of their respective
officers, directors, employees and agents, as well as the Trust and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount and written instructions from the Servicer, the Trustee
shall release to the Seller, or Triad, as applicable, or any of their designees,
the related Servicer Receivable File and shall execute and deliver all
reasonable instruments of transfer or assignment, without recourse, as are
prepared by the Seller and delivered to the Trustee and necessary to vest in the
Seller, or Triad, as applicable, or such designee, title to the Receivable. The
Trustee shall be under no duty or obligation (i) to inspect, review or examine
any documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face or (ii) to determine
whether there is a breach of any of the Seller's representations and warranties.
SECTION 2.7. Conditions to Acceptance by Trustee. As conditions to the
execution and delivery of the Certificates by the Trustee on the Closing Date,
the Trustee shall have received the following on or before the Closing Date:
(a) The Schedule of Receivables certified by a Responsible Officer of
the Seller;
(b) Copies of resolutions of the Board of Directors of the Seller
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, certified by the Secretary of the Seller;
(c) Copies of resolutions of the Board of Directors of the Servicer
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, certified by the Secretary of the Servicer;
(d) A certification from a Responsible Officer of the Seller stating
that all filings (including, without limitation, UCC filings) required to be
made by any Person and actions required to be taken or performed by any Person
in any jurisdiction to give the Trustee a first priority perfected lien on, or
ownership interest in, the Receivables and the other Trust Property have been
made, taken or performed; and
(e) An executed copy of the Reserve Account Agreement and each other
Related Document.
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SECTION 2.8. Custody of Servicer Receivable Files. (a) On or prior to
the Closing Date, the Servicer shall directly or through its agents maintain
with respect to each Receivable the following (the "Servicer Receivable Files"):
(i) The fully executed original of the Receivable (together with
any agreements modifying the Receivable, including without limitation,
any extension agreements); and
(ii) The Lien Certificate, or, if not yet received, a copy of
the application therefor or a representation from the Dealer certifying
as to the application thereof, showing Triad as secured party and such
documents, if any, that Triad keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by
the Obligor and subject to the interest of Triad as first lienholder or
secured party.
(b) In connection with the sale, transfer and assignment of the
Receivables and other Trust Property to the Trust pursuant to this Agreement,
the Servicer shall additionally retain, on behalf of the Trustee, the following
documents or instruments in its possession with respect to each Receivable (the
"Servicer Receivable Files"):
(i) documents evidencing or relating to any Insurance Policy;
and
(ii) any and all other documents (other than the documents
referred to in Section 2.8(a) hereof) (in original or electronic form)
that the Servicer keeps on file in accordance with its customary
procedures relating to the individual Receivable, Obligor or Financed
Vehicle.
(c) The Servicer agrees that it shall duly discharge its duties of
receiving and holding the Servicer Receivable Files in accordance with this
Agreement. As to any matters not expressly provided for by this Agreement with
respect to the Servicer Receivable Files, the Servicer shall be required to act
or to refrain from acting (and shall be fully protected in so acting) upon the
written instructions of the Trustee.
(d) The Servicer acknowledges that with respect to each Receivable
identified in the Schedule of Receivables (a) it has possession of the
applicable Servicer Receivable File and (b) such Servicer Receivable File
contains the documents referred to in Section 2.8(b). The Servicer declares that
it holds and will continue to hold such files and any amendments, replacements
or supplements thereto as Servicer on behalf of the Trustee in trust for the use
and benefit of all present and future Certificateholders. If at a later date the
Servicer is unable to locate a file for a Receivable, or finds that a file is
unrelated to the Receivables identified in the Schedule of Receivables or that
any of the documents referred to in Section 2.8(b) are not contained in a
Servicer Receivable File, the Servicer shall inform the Seller and the Trustee
promptly, in writing, of the failure to locate a file with respect to such
Receivable (or of the failure of any of the aforementioned documents to be
included in the Servicer Receivable File) or shall return to the Seller any file
unrelated to a Receivable identified in the Schedule of Receivables (it being
understood that the Servicer's obligation to review the contents of any Servicer
Receivable File shall be limited as set forth in the preceding sentence).
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(e) In connection with the repurchase of a Receivable pursuant to
Section 2.6 or 10.2 hereof, upon receipt of the Purchase Amount and written
instructions from the Trustee, the Servicer shall release to the Seller or its
designee the related Servicer Receivables File. The Trustee shall be under no
duty or obligation to inspect, review or examine any documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other what they purport
to be on their face and shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form, whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, or whether a
blanket assignment is permitted in any applicable jurisdiction.
(f) Without in any way limiting the respective rights of the Trustee,
the Backup Servicer or the Certificateholders under Section 3.12 or otherwise
set forth in this Agreement, at any time from time to time upon the giving of
reasonable prior notice, during normal business hours, the Trustee, the Backup
Servicer, the Holder of a Certificate Majority and any of their respective
agents, employees or representatives (including, without limitation, an
independent accounting firm performing an audit of the Servicer), shall have the
right but not the obligation (which right the Trustee shall exercise upon the
written request of a Certificate Majority) (i) to visit the office of the
Servicer where the Servicer Receivable Files are kept, (ii) to examine the
facilities for the storage and safekeeping thereof, (iii) to review the
procedures with which such documents are stored and catalogued, (iv) to examine
and make copies of and abstracts from such documents, and (v) to discuss matters
relating to the Servicer Receivable Files and the Servicer's performance
hereunder with any of the officers or employees of the Servicer having knowledge
of such matters. Any expenses reasonably incurred by the Trustee or the Backup
Servicer in connection with such activities shall be paid by the Servicer to the
extent such visits and examinations are not more frequent than once in every 12
month period, unless a Servicer Termination Event has occurred and not been
deemed cured.
(g) From time to time, with not less than one Business Day's prior
written notice delivered to the Trustee, the Servicer may request the Trustee to
release certain Servicer Receivable Files held by the Trustee to the Servicer;
provided, that the Trustee shall release such Servicer Receivable Files only
upon receipt of a certificate of the Servicer (substantially in the form of
Exhibit F-1 hereto) signed by a Servicing Officer to the effect that (i) the
applicable Receivables with respect to such Servicer Receivable Files have been
paid in full and the related Receivables have been terminated in accordance with
their terms, (ii) the Seller or Triad has repurchased such Receivables in
accordance with the terms of this Agreement or the Purchase Agreement, as
applicable or (iii) the Servicer requires such Servicer Receivable Files in
connection with the compromise, extension, release, adjustment, foreclosure or
repossession of the related Receivables or Financed Vehicles, as applicable, in
accordance with the terms of this Agreement and the Purchase Agreement. Such
certificate shall obligate the Servicer to return such document(s) to the
Trustee when the need therefor no longer exists unless the Receivable shall be
liquidated or repurchased, in each case, the Servicer shall provide a
certificate (substantially in the form of Exhibit F-2 hereto) of a Servicing
Officer to the effect that all amounts required to be deposited in the
Collection Account with respect to such Receivable have been so deposited.
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(h) On or prior to the Closing Date, the Servicer shall cause to be
delivered to the Certificateholders and the Rating Agency certification that it
or it's agent has received the Servicer Receivables Files, in its capacity as
custodian under the Custodian Agreement, and that such Service Receivables Files
contain all documents required to be contained therein, except for any Lien
Certificates not available on the Closing Date.
SECTION 2.9. Collecting Lien Certificates Not Delivered on the Closing
Date. In the case of any Receivable in respect of which written evidence from
the Dealer selling the related Financed Vehicle that the Lien Certificate for
such Financed Vehicle showing Triad as first lienholder has been applied for
from the registrar of titles was delivered to the Trustee on the Closing Date in
lieu of a Lien Certificate, or in respect of which a Lien Certificate was
otherwise not delivered to the Trustee on the Closing Date, the Servicer shall
use its best efforts to collect such Lien Certificate from the registrar of
titles as promptly as practicable. If such Lien Certificate showing Triad as
first lienholder is not received by the Trustee within 120 days after the
Closing Date, the Servicer shall inform the Seller and the other parties to this
Agreement, and the Servicer shall repurchase any such Receivable as of the last
day of the then current Collection Period in accordance with the provisions of
Section 3.7 of this Agreement.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. Duties of Servicer. (a) The Servicer is hereby authorized
to act as agent for the Trust and the Certificateholders, and in such capacity
shall manage, service, administer and make collections on the Receivables, and
perform the other actions required by the Servicer under this Agreement. The
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sale contracts similar to the Receivables and
with the same degree of skill and care exercised by such institutions and, to
the extent more exacting, with the degree of skill and care that the Servicer
exercises with respect to all comparable motor vehicle receivables which it
services for itself or others and, in all cases, in accordance with the
Collection Guidelines and Procedures and all applicable laws. The Servicer's
duties shall include, without limitation, notifying each Obligor to make its
Scheduled Payments and all other payments on the Receivables directly to the
Lockbox Bank, collecting and posting of all payments, responding to inquiries of
Obligors on such Receivables, investigating delinquencies, sending payment
statements to Obligors, reporting tax information to Obligors, accounting for
collections, furnishing monthly and annual statements to the Trustee with
respect to distributions, and performing the other duties specified herein. The
Servicer shall also administer and enforce all rights and responsibilities of
the holder of the Receivables provided for in the Dealer Agreements (and shall
maintain possession of the Dealer Agreements, to the extent it is necessary to
do so), the Dealer Assignments and the Insurance Policies, to the extent that
such Dealer Agreements, Dealer Assignments and Insurance Policies relate to the
Receivables, the Financed Vehicles or the Obligors.
(b) Subject to Section 3.2(b), to the extent consistent with the
standards, policies and procedures otherwise required by this Agreement, the
Servicer shall follow its customary standards, policies and procedures and shall
have full power and authority, acting
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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 is hereby authorized and
empowered by the Trustee to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and with
respect to the Financed Vehicles; provided, however, that notwithstanding the
foregoing, the Servicer shall not, except pursuant to an order from a court of
competent jurisdiction, release an Obligor from payment of any unpaid amount
under any Receivable or waive the right to collect the unpaid balance of any
Receivable from the Obligor, except that the Servicer may forego collection
efforts if the amount subject to collection is deemed uncollectible or de
minimis and if it would forego collection of such amount in accordance with its
customary procedures.
(c) The Servicer is hereby authorized to commence, in its own name or in
the name of the Trustee (provided that if the Servicer is acting in the name of
the Trustee, the Servicer has obtained the Trustee's written consent, which
consent shall not be unreasonably withheld), a legal proceeding to enforce a
Receivable pursuant to Section 3.3 or to commence or participate in any other
legal proceeding (including, without limitation, a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If the
Servicer commences or participates in such a legal proceeding in its own name,
the Trustee shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely 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 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. The Trustee shall furnish
the Servicer with any powers of attorney and other documents which the Servicer
may reasonably request in writing and which the Servicer reasonably deems
necessary or appropriate and take any other steps which the Servicer may
reasonably deem necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
SECTION 3.2. Collections; Modification and Amendment of Receivables;
Lockbox Account. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable motor vehicle
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Trust Property in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Trust with
respect thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.
(b) Notwithstanding anything to the contrary provided in this Agreement,
the Servicer will not (i) forgive any periodic or other scheduled payment due on
such Receivable, (ii) unless the Obligor is in default under a Receivable or is
likely to default on such Receivable in the foreseeable future, permit any
modification with respect to any Receivable that would increase or decrease the
Annual Percentage Rate on such Receivable, or defer the payment of
28
any principal or interest or any periodic or other scheduled payment due on such
Receivable unless any such modification is required by court order, (iii) reduce
or increase the Principal Balance on such Receivable (except in connection with
actual payments of periodic or other scheduled payments or principal
prepayments) unless any such modification is required by court order or (iv)
extend the final maturity date of any Receivable; provided, however, that the
Servicer may grant an extension of the final maturity date of a Receivable, if
the Servicer, in its sole discretion, determines that (A) the Receivable is in
default or default on such Receivable is likely to occur in the foreseeable
future, and (B) that the value of the Receivable will be enhanced by such
extension; and, provided, further, that the Servicer shall not (1) grant more
than three extensions with respect to a Receivable, (2) grant more than one
extension per calendar year with respect to a Receivable or (3) grant an
extension for more than one calendar month with respect to a Receivable.
(c) The Servicer shall, prior to the Closing Date, notify each Obligor
to make its payments with respect to the Receivables directly to the Lockbox
Bank. The Servicer shall use its best efforts to cause Obligors to make all
payments on the Receivables whether by check or by direct debit of the Obligor's
bank account, to be made to the Lockbox Bank. The Servicer shall use its best
efforts to cause the Lockbox Bank to deposit all available Scheduled Payments
with respect to the Receivables in the Lockbox Accounts no later than the second
Business Day after receipt of available funds, and to cause all available
amounts on deposit in the Lockbox Accounts with respect to such payments to be
transferred to the Collection Account not later than the second Business Day
after receipt of such payments in the Lockbox Account. All amounts received by
the Servicer, Triad or the Seller in respect of the Receivables in the form of
checks with payments coupon shall be deposited directly to the Lockbox Bank
immediately upon receipt, but in no event later than the second Business Day
after receipt of such payment. Other payments received by each of the Servicer,
Triad and the Seller shall be deposited into a local servicing account for
processing immediately upon receipt, and then transferred to the Collection
Account no later than the second Business Day after receipt of available
amounts.
(d) On the Closing Date the Servicer shall deposit or cause to be
deposited into the Collection Account all amounts collected with respect to the
Receivables from the Cutoff Date to the fourth Business Day preceding the
Closing Date. As soon as possible thereafter and in accordance with the
provisions of this Agreement, amounts collected with respect to the Receivables
from such date to the Closing Date shall be deposited into the Collection
Account.
(e) In the event the Servicer shall for any reason no longer be acting
as such, the Backup Servicer or successor Servicer shall thereupon (i) assume
the rights and obligations of the Servicer relating to the Receivables and (ii)
(1) assume all of the rights and, from the date of assumption, all of the
obligations of the outgoing Servicer relating to the Receivables under any
Lockbox Agreement to which the Servicer is a party or (2) establish a different
Lockbox Account for the benefit of the Trust and notify each Obligor of the new
Lockbox Bank to which its payments should be sent. If the Backup Servicer or
successor Servicer assumes an existing Lockbox Agreement to which the Servicer
is a party, the Backup Servicer or any other successor Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession. In such event, the successor Servicer shall be deemed to have
assumed all of the outgoing Servicer's interest therein relating to the
Receivables and to have replaced the outgoing
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Servicer as a party to each such Lockbox Agreement to the same extent as if such
Lockbox Agreement had been assigned to the successor Servicer, except that the
outgoing Servicer shall not thereby be relieved of any liability, or obligations
on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox
Agreement. The outgoing Servicer shall, upon request of the Trustee, but at the
expense of the outgoing Servicer, deliver to the successor Servicer all
documents and records relating to the Lockbox Agreement and an accounting of
amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the successor Servicer.
(f) Notwithstanding any third-party processing arrangement, or any of
the provisions of this agreement relating to any third-party processing
arrangement, the Servicer shall remain obligated and liable to the Trust and the
Noteholders for servicing and administering the Receivables and the other Trust
Property serviced by it in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue thereof.
SECTION 3.3. Realization Upon Defaulted Receivables. (a) Consistent with
the standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, promptly after default on such Receivable. The Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by Section
3.1, which practices and procedures may include reasonable efforts to realize
upon any recourse to Dealers, selling the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions by the Servicer in order to realize upon such a Receivable. The
foregoing is subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
shall increase the proceeds of liquidation of the related Receivable by an
amount greater than the amount of such expenses. All Recoveries and liquidation
proceeds received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer, to a servicing account of the Servicer for transfer to
the Collection Account. The Servicer shall pay on behalf of the Trust any
personal property taxes assessed on repossessed Financed Vehicles; the Servicer
shall be entitled to reimbursement of any such tax from Recoveries with respect
to such Receivable. The Servicer shall not lease any repossessed Financed
Vehicle to any party. In selling or otherwise disposing of any repossessed
Financed Vehicle, the Servicer shall do so as expeditiously as possible and in a
manner such that such activities shall not rise to the level of a trade or
business of selling or otherwise transferring such repossessed Financed
Vehicles.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trustee to the Servicer of the rights
under such Dealer Agreement and Dealer Assignment but only to the extent needed
for purposes of collection thereunder. If, however, in any enforcement suit or
legal proceeding, it is held that the Servicer may not enforce a Dealer
Agreement or Dealer Assignment on the grounds that it is not a real party in
interest or a Person entitled to enforce the Dealer Agreement or Dealer
Assignment, the Trustee, at the
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Seller's expense, shall take such steps as the Servicer deems necessary to
enforce the Dealer Agreement or Dealer Assignment, including bringing suit in
its name or the name of the Seller or of the Trustee for the benefit of the
Certificateholders. All amounts recovered shall be remitted directly by the
Servicer into the Collection Account, as applicable.
SECTION 3.4. Insurance. (a) The Servicer may xxx to enforce or collect
upon the Insurance Policies, in its own name, if possible, or as agent of the
Trust. If the Servicer elects to commence a legal proceeding to enforce an
Insurance Policy, the act of commencement shall be deemed to be an automatic
assignment of the rights of the Trust under such Insurance Policy to the
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce an Insurance
Policy on the grounds that it is not a real party in interest or a holder
entitled to enforce the Insurance Policy, the Trustee, on behalf of the Trust,
at the Seller's expense, shall take such steps as the Servicer deems reasonably
necessary to enforce such Insurance Policy, including bringing suit in its name
or the name of the Trustee for the benefit of the Certificateholders.
SECTION 3.5. Maintenance of Security Interests in Financed Vehicles.
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
first priority perfected security interest created by each Receivable in the
related Financed Vehicle, including but not limited to obtaining the execution
by the Obligors and the recording, registering, filing, re-recording,
re-registering and re-filing of all security agreements, financing statements
and continuation statements or instruments as are necessary to maintain the
first priority security interest granted by the Obligors to Triad under the
respective Receivables. The Trustee hereby authorizes the Servicer to take such
steps as are necessary to re-perfect or continue the perfection of such security
interest on behalf of the Trust in the event of the relocation of a Financed
Vehicle or for any other reason. In the event that the assignment of a
Receivable to the Trustee on behalf of the Trust is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a first priority
security interest in the related Financed Vehicle in favor of the Trust, the
parties hereto agree that Triad's designation as the secured party on the
certificate of title is in its capacity as agent of the Trust.
SECTION 3.6. Additional Covenants of Servicer. The Servicer hereby
covenants to the Trustee and the Certificateholders that it (a) shall not
release the Financed Vehicle securing any Receivable from the security interest
granted by such Receivable in whole or in part except upon payment in full by
the Obligor thereunder, (b) shall not impair the rights of the
Certificateholders in such Receivables, the Dealer Agreements, the Dealer
Assignments, the Insurance Policies, or the other Trust Property, (c) shall not
amend a Receivable, other than in accordance with Section 3.2, and (d) shall not
amend, modify, supplement or waive any provision of any Related Document to
which it is a party, as it relates to the transactions contemplated in this
Agreement, in a manner that shall adversely affect any Certificateholder without
the consent of a Certificate Majority. The covenants contained in this Section
3.6 shall survive and be binding on the Servicer notwithstanding the resignation
of the Servicer pursuant to Section 7.5 or the termination of the Servicer
pursuant to Section 8.2.
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SECTION 3.7. Purchase of Receivables Upon Breach. The Seller, the
Servicer, the Backup Servicer, or the Trustee, as the case may be, shall, and a
Certificate Majority may, inform the other parties to this Agreement promptly,
in writing, upon the discovery of any breach of Sections 3.2, 3.4, 3.5 or 3.6;
provided, however, that the failure to give such notice shall not affect any
obligation of the Servicer hereunder. Unless the breach shall have been cured by
the last day of the first full calendar month following such discovery by or
notice to the Servicer of the breach, the Servicer shall have an obligation, and
the Trustee shall (provided that a Trustee Officer either has made such
discovery or has received notice thereof) enforce such obligation of the
Servicer, to repurchase any Receivable with respect to which such breach has a
material adverse effect on such Receivable or the interest therein of the Trust
or the Certificateholders. In consideration of the purchase of such Receivable,
the Servicer shall remit the Purchase Amount in the manner specified in Section
4.4. The Servicer shall indemnify the Seller, the Trustee, the Backup Servicer,
and their respective officers, directors, employees and agents, the Trust and
the Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
SECTION 3.8. Servicing Fee, Additional Servicing Fee and Servicer
Expenses. On each Distribution Date, the Servicer shall be entitled to receive
the Servicing Fee, and so long as Triad is the Servicer, any Additional
Servicing Fee and Servicer Expenses for the related Collection Period pursuant
to Section 4.5; provided, however, that the Servicer shall certify such Servicer
Expenses to the Trustee with a copy of such certification to the Rating Agency
on or prior to each Determination Date. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities under this
Agreement (including taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and all other
fees and expenses of the Trust including taxes levied or assessed against the
Trust, and claims against the Trust in respect of indemnification not expressly
stated under this Agreement to be for the account of the Trust). The Servicer
shall be liable for the fees and expenses of the Independent Accountants and,
the Lockbox Bank.
SECTION 3.9. Servicing Certificate. No later than 12:00 noon, New York
City time, on each Determination Date, the Servicer shall deliver to the
Trustee, the Rating Agency and the Seller, a Servicing Certificate containing
(a) all information necessary to enable the Trustee to make the distributions
pursuant to Section 4.5 (including, if required, withdrawals from the Reserve
Account) for the Collection Period preceding the date of such Servicing
Certificate, (b) all information necessary to enable the Trustee to reconcile
all deposits to, and withdrawals from, the Collection Account for the related
Collection Period and Distribution Date, and (c) all information necessary for
the Trustee to send statements to Certificateholders pursuant to Section 4.8. A
copy of such Servicing Certificate may be obtained by any Certificateholder by a
request in writing to the Trustee addressed to the Corporate Trust Office.
Receivables to be purchased by the Servicer, the Seller, or by Triad and each
Receivable which, during the preceding Collection Period became a Liquidated
Receivable or was paid in full, shall be identified by the Servicer by account
number with respect to such Receivable (as specified in the Schedule of
Receivables).
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SECTION 3.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Trustee, the Backup Servicer, and the Rating
Agency, on or before [ ] of each year, commencing [ ], an Officer's Certificate,
dated as of December 31 of the prior year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period ended [ ] (or,
in the case of the first such certificate, the period from the Cutoff Date to [
] and of its performance under this Agreement has been made under such officer's
supervision and (ii) to such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
period; or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. A copy of such certificate may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee, the Backup Servicer and
the Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 8.1.
SECTION 3.11. Annual Independent Certified Public Accountant's Report;
Audited Financials. (a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer, to deliver to the Trustee, the
Backup Servicer and the Rating Agency on or before December 31 of each year,
commencing March 31, [ ], with respect to the fiscal year ended on the
immediately preceding March 31, a report (the "Accountant's Report") addressed
to the Board of Directors of the Servicer, to the Trustee for the benefit of the
Certificateholders, the Backup Servicer and the Rating Agency, to the effect
that such firm has (1) included tests relating to auto loans serviced for others
in accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers (the "Program"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; (2)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile and light duty truck installment contracts
(setting forth the statistics so reviewed); and (3) except as described in the
report, disclosed no exceptions or errors in the records relating to automobile
and light duty truck loans serviced for others that, in the firm's opinion, the
Program requires such firm to report. The accountant's report shall further
state that (1) a review in accordance with agreed upon procedures was made of
three randomly selected Servicer Certificates; (2) except as disclosed in the
report, no exceptions or errors in the Servicer Certificates were found; and (3)
the delinquency and loss information, relating to the Receivables contained in
the Servicer Certificates were found to be accurate.
(b) The Accountant's Report shall also indicate that the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(c) Copies of the Accountant's Report shall also be available to any
Certificateholder from the Trustee upon reasonable request. Any
Certificateholder desiring such documents shall have delivered to the Trustee an
executed Information Request.
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SECTION 3.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to any Certificateholder, the Trustee,
the Backup Servicer and their respective representatives reasonable access to
documentation, computer systems and information regarding the Receivables. Upon
receipt of a non-disclosure agreement satisfactory to the Servicer, the Servicer
will permit any authorized representative or agent designated by the Trustee,
the Rating Agency, the Backup Servicer or any Certificateholder to visit and
inspect any of the properties of the Servicer, to examine the corporate books
and financial records of the Servicer as they relate to the conduct of its
servicing obligations hereunder, its records relating to the Receivables, and
make copies thereof or extracts therefrom and to discuss the affairs, finances,
and accounts of the Servicer as they relate to the conduct of its servicing
obligations hereunder with its principal officers, as applicable, and its
independent accountants. Any expense incident to the exercise by the Trustee,
the Rating Agency or the Backup Servicer of any right under this Section shall
be borne by the Servicer subject to the limitations set forth in Section 2.8(f).
Any expense incident to the exercise by any Certificateholder of any right under
this Section shall be borne by such Certificateholder, and shall not be an
expense of the Servicer, the Trust or the Trustee; provided, however, that
unless a Servicer Termination Event shall have occurred, any such expense shall
be borne by the Servicer. In each case, such access to documentation, computer
systems and information shall be afforded without charge but only upon
reasonable request and during normal business hours. Nothing in this Section
3.12 shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as provided in this Section 3.12
as a result of such obligation shall not constitute a breach of this Section
3.12.
SECTION 3.13. [Reserved].
SECTION 3.14. Fidelity Coverage; Errors and Omissions Insurance. The
Servicer shall maintain fidelity coverage in such form and amount as is
customary for entities acting as custodian of funds and documents in respect of
consumer contracts on behalf of institutional investors, but in no event less
than $1 million per occurrence. In addition, the Servicer shall use commercially
reasonable efforts to obtain, and the Servicer shall thereafter maintain, an
errors and omissions insurance policy with such provisions as are customary for
originators and servicers of assets similar to the Receivables.
SECTION 3.15. Delegation of Duties. So long as Triad is the Servicer,
the Servicer may delegate duties under this Agreement to sub-contractors who are
in the business of servicing motor vehicle receivables which are similar to the
Receivables and who are willing to accept such delegations and to perform such
duties in accordance with the customary procedures of Triad and this Agreement,
with the prior written consent of the Trustee, which consent shall not be
unreasonably withheld. The Servicer also may at any time, without the consent of
the Trustee, or any other Person, perform the specific duty of title tracking,
repossession of Financed Vehicles through sub-contractors who are in those
respective businesses. No such delegation or subcontracting duties by the
Servicer as described in this Section 3.15 shall relieve the Servicer of its
responsibility with respect to such duties. The Servicer shall pay the fees and
expenses of all such sub-contractors from its own funds.
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ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
SECTION 4.1. Collection Account. (a) The Servicer shall establish the
Collection Account in the name of the Trustee for the benefit of the
Certificateholders. The Collection Account shall be an Eligible Account and
initially shall be a segregated trust account established and maintained with
the Trustee.
(b) The Servicer shall cause the following amounts to be deposited into
the Collection Account no later than four Business Days following receipt of
available amounts thereof by the Lockbox Bank or the Servicer, but in any event
no later than the time specified in Section 3.2: (i) all Scheduled Payments,
(ii) all Recoveries, (iii) all Purchase Amounts, (iv) all amounts on deposit in
any Lockbox Account with respect to the Receivables, except as provided in
Section 4.3(a) hereof in connection with the prepayment of any Rule of 78's
Receivable, (v) the proceeds of any Insurance Policy, Collateral Insurance,
fidelity policy or other insurance policy relating to the Receivables or the
Servicer's activities with respect thereto, and (vi) all other amounts of any
nature whatsoever in respect of the Receivables.
(c) All amounts held in the Collection Account shall, to the extent
permitted by applicable laws, rules and regulations, be invested, as directed in
writing by the Seller, in Eligible Investments that mature not later than one
Business Day prior to the Distribution Date for the Collection Period to which
such amounts relate. Any such written direction shall certify that any such
investment is authorized by this Section 4.1. Investments in Eligible
Investments shall be made in the name of the Trustee on behalf of the Trust, and
such investments shall not be sold or disposed of prior to their maturity. The
Trustee may trade with itself or an Affiliate in the purchase or sale of
Eligible Investments. Any investment of funds in the Collection Account shall be
made in Eligible Investments held by a financial institution with respect to
which (a) such institution has noted the Trustee's interest therein by book
entry or otherwise and (b) a confirmation of the Trustee's interest has been
sent to the Trustee by such institution, provided that such Eligible Investments
are (i) specific certificated securities (as such term is used in the UCC), and
(ii) either (A) in the possession of such institution or (B) in the possession
of a clearing corporation as such term is used in the UCC, registered in the
name of such clearing corporation, not endorsed for collection or surrender or
any other purpose not involving transfer, not containing any evidence of a right
or interest inconsistent with the Trustee's security interest therein, and held
by such clearing corporation in an account of such institution. Subject to the
other provisions hereof, the Trustee shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Trustee or its agent, together with each document of transfer, if any, necessary
to transfer title to such investment to the Trustee in a manner which complies
with this Section 4.1. All interest, dividends, gains upon sale and other income
from, or earnings on, investments of funds in the Collection Account shall be
deposited in the Collection Account and distributed on the next Distribution
Date pursuant to Section 4.5. The Trustee shall not be liable for any investment
loss or other charge resulting therefrom unless the Trustee's failure to perform
in accordance with this Agreement is the cause of such loss or charge.
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SECTION 4.2. Reimbursement from the Collection Account. The Servicer
will be entitled to be reimbursed from amounts on deposit in the Collection
Account with respect to a Collection Period for amounts previously deposited in
the Collection Account but later determined by the Servicer or the Lockbox Bank
to have resulted from mistaken deposits or postings or checks returned for
insufficient funds or amounts required to be paid as prepayment rebates. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to Section 4.5(a) upon certification by the Servicer
of such amounts and the provision of such information to the Trustee as may be
necessary in the opinion of the Trustee to verify the accuracy of such written
certification. In the event that the Trustee has not received evidence of the
Servicer's entitlement to reimbursement pursuant to this Section 4.2, the
Trustee shall not make a distribution to the Servicer in respect of such amount
pursuant to Section 4.5, or if the Servicer prior thereto has been reimbursed
pursuant to Section 4.5 or Section 4.6, the Trustee shall withhold such amounts
from amounts otherwise distributable to the Servicer on the next succeeding
Distribution Date and, to the extent necessary, subsequent Distribution Dates.
SECTION 4.3. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
(a) With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor (other than of Additional Servicing Fees
with respect to such Receivable, to the extent collected) shall be applied, in
the case of a Simple Interest Receivable, to interest and principal in
accordance with the Simple Interest Method, and in the case of a Precomputed
Receivable, to interest and principal in accordance with the Actuarial Method.
With respect to Simple Interest Receivables, any prepayment of principal during
each Collection Period shall be applied to reduce the principal balance of the
Receivable during such Collection Period. Amounts received upon prepayment in
full of a Rule of 78's Receivable in excess of the then outstanding principal
balance of such Receivable and accrued interest thereon (calculated pursuant to
the Actuarial Method) will not be passed through to Certificateholders, but
shall be paid by the Servicer to the related Obligor to the extent required by
the terms of such Receivable and by law and otherwise paid to the Seller.
(b) With respect to each Receivable that has become a Purchased
Receivable, the Purchase Amount shall be applied, for purposes of this Agreement
only, to interest and principal on the Receivable in accordance with the terms
of the Receivable as if the Purchase Amount has been paid by the Obligor on the
Record Date. Nothing contained herein shall relieve any Obligor of any
obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as Additional
Servicing Fees hereunder shall be deposited in the Collection Account and paid
to the Servicer in accordance with Section 4.5(a).
SECTION 4.4. Additional Deposits. The Seller, Triad or the Servicer, as
the case may be, shall deposit or cause to be deposited in the Collection
Account the aggregate Purchase Amount with respect to Purchased Receivables and
the Servicer or the Seller, as the case may be, shall deposit therein all
amounts to be paid under Section 10.2. All such deposits shall be made, in
immediately available funds, on the Business Day preceding the Determination
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Date. On or before the first Business Day preceding each Distribution Date, the
Trustee shall remit to the Collection Account any amounts delivered to the
Trustee by the Servicer pursuant to Section 4.7.
SECTION 4.5. Distributions. (a) On each Distribution Date, the Trustee
(based solely on the information contained in the Servicing Certificate
delivered on the related Determination Date pursuant to Section 3.9) shall,
subject to subsection (b) hereof, make the following distributions from the
amounts on deposit in the Collection Account, in the following order of
priority:
(i) first, to the Servicer, the Servicing Fee for the related
Collection Period, any Additional Servicing Fee for the related
Collection Period and, so long as Triad is the Servicer, any Servicer
Expenses for the related or any prior Collection Period and any amounts
specified in Section 4.2, to the extent the Servicer has not reimbursed
itself in respect of such amounts pursuant to Section 4.6;
(ii) second, to any Lockbox Bank, the Trustee and the Backup
Servicer (including the Trustee if acting in any such additional
capacity), any accrued and unpaid fees and expenses (including
reasonable legal fees and expenses) (in each case, to the extent such
Person has not previously received such amount from the Servicer or the
Seller);
(iii) third, to the Class A Certificateholders, an amount equal
to the sum of the Class A Interest Distributable Amount for such
Distribution Date, and the Class A Interest Carryover Shortfall, if any;
(iv) fourth, to the Class B Certificateholders, an amount equal
to the sum of the Class B Interest Distributable Amount for such
Distribution Date, and the Class B Interest Carryover Shortfall, if any;
(v) fifth, to the Class A Certificateholders, an amount equal to
the sum of the Class A Principal Distributable Amount for such
Distribution Date, and the Class A Principal Carryover Shortfall, if
any;
(vi) sixth, to the Class B Certificateholders, an amount equal
to the sum of the Class B Principal Distributable Amount for such
Distribution Date, and, the Class B Principal Carryover Shortfall, if
any;
(vii) seventh, to the Class C Certificateholder, an amount equal
to the sum of the Class C Interest Distributable Amount for such
Distribution Date, and the Class C Interest Carryover Shortfall, if any;
(viii) eighth, to the Class C Certificateholder, an amount equal
to the sum of the Class C Principal Distributable Amount for such
Distribution Date, and the Class C Principal Carryover Shortfall, if
any; and
(ix) ninth, to the Seller, the Seller's Retained Yield;
37
provided, however, that (a) any amounts distributable to the Seller in respect
of item (ix) above shall instead be paid by the Trustee to the Servicer for
deposit into the Reserve Account to the extent necessary to satisfy the Reserve
Account Requirement and (b) to the extent not satisfied with amounts under
clause (a) of this proviso, any amounts distributable to the Class C
Certificateholder in respect of items (viii) and (vii) above shall be paid,
respectively, by the Trustee to the Servicer for deposit into the Reserve
Account to the extent necessary to satisfy the Reserve Account Requirement.
(b) If a Reserve Account Trigger Event has occurred, all amounts
otherwise distributable to the Class C Certificateholder and the Seller shall be
deposited in the Reserve Account without regard to the Reserve Account
Requirement; if a Reserve Account Trigger Event shall have been Deemed Cured,
the amounts on deposit in the Reserve Account in excess of the Reserve Account
Requirement shall be distributed in accordance with the terms of the Reserve
Account Agreement.
(c) The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates pursuant to Section
4.5(a)(iv) on a Distribution Date shall be and hereby are subordinated to the
payment of the amounts distributable pursuant to Sections 4.5(a)(i) through and
including (iii). The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates pursuant to Section
4.5(a)(vi) on a Distribution Date shall be and hereby are subordinated to the
payment of the amounts distributable pursuant to Sections 4.5(a)(i) through and
including (v). At such time as the Class A Certificates are paid in full, the
Class B Certificateholders shall be entitled to exercise all rights granted to
the Class A Certificateholders under this Agreement to the extent that the
exercise of such rights does not conflict with the provisions of the Reserve
Account Agreement. The rights of the Class C Certificateholder to receive
distributions in respect of the Class C Certificates pursuant to Section
4.5(a)(vii) and (viii) on a Distribution Date shall be and hereby are
subordinated to the payment of the amounts distributable pursuant to Sections
4.5(a)(i) through and including (vi) and the satisfaction of the Reserve Account
Requirement. At such time as the Class A Certificates and the Class B
Certificates are paid in full, the Class C Certificateholder shall be entitled
to exercise all rights granted to the Class A Certificateholders under this
Agreement to the extent that the exercise of such rights does not conflict with
the provisions of the Reserve Account Agreement. The rights of the holder of the
Seller's Retained Yield to receive distributions pursuant to Section 4.5(a)(ix)
on a Distribution Date shall be and hereby are subordinated to the payment of
the amounts distributable pursuant to Section 4.5(a)(i) through and including
(viii) and the satisfaction of the Reserve Account Requirement. At such time as
the Certificates are paid in full, the holder of the Seller's Retained Yield
shall be entitled to exercise all rights granted to the Certificateholders under
this Agreement to the extent that the exercise of such rights does not conflict
with the provisions of the Reserve Account Agreement.
(d) Subject to Section 10.1 respecting the final payment upon retirement
of each Certificate, and provided that the Trustee has received the applicable
Servicing Certificate, on each Distribution Date the Trustee shall distribute to
each Certificateholder of record on the preceding Record Date either (i) by wire
transfer, in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Trustee appropriate instructions
not later than fifteen days prior to the Record Date for such Distribution Date
and such Holder's Certificates in the
38
aggregate evidence an original principal balance of at least $1,000,000, or (ii)
by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register, the amounts to be distributed to such
Certificateholder pursuant to such Holder's Certificates, to the extent funds
therefor are distributed under Section 4.5(a).
(e) Each Certificateholder, by its acceptance of its Certificate, will
be deemed to have consented to the provisions of paragraph (b) above relating to
the priority of distributions. Each Certificateholder, by its acceptance of its
Certificate, further specifically acknowledges that it has no right to or
interest in any moneys at any time held pursuant to the Reserve Account
Agreement prior to the release of such moneys as aforesaid, such moneys being
held in trust for the benefit of the Certificateholders, as their interests may
appear prior to such release. Notwithstanding the foregoing, the provisions of
this Agreement and the Reserve Account Agreement shall be considered to
constitute a security agreement and the Seller hereby grants to the [Servicer] a
first priority perfected security interest in such amounts, to be applied as set
forth in Section 3.03 of the Reserve Account Agreement in the case of Reserve
Account moneys.
SECTION 4.6. Net Deposits. The Servicer may make the remittances to be
made by it pursuant to Sections 3.2, 4.1 and 4.4 without including amounts
(which amounts may be excluded prior to any such remittance for a Collection
Period) to be distributed to it pursuant to Section 4.2 and 4.5(a)(i), for so
long as no Servicer Termination Event has occurred and is continuing; provided,
however, that the Servicer shall account for all of such amounts in the related
Servicing Certificate as if such amounts were deposited and distributed
separately; and, provided, further, that if an error is made by the Servicer in
calculating the amount to be deposited or retained by it, with the result that
an amount less than required is deposited in the Collection Account, the
Servicer shall make a payment of the deficiency to the Collection Account,
immediately upon becoming aware, or receiving notice from the Trustee, the
Backup Servicer or any Certificateholder of such error.
SECTION 4.7. The Reserve Account. In order to effectuate and to secure
the subordination provided for herein, there shall be established and maintained
with the Servicer, the Reserve Account to include the money and other property
deposited and held therein pursuant to this Section 4.7, and the Seller agrees,
simultaneously with the execution and delivery of this Agreement, to execute and
deliver the Reserve Account Agreement and, pursuant to the terms thereof, to
deposit $[ ] in the Reserve Account. Although the Seller has pledged the Reserve
Account to the Servicer pursuant to the Reserve Account Agreement, the Reserve
Account shall not under any circumstances be deemed to be a part of or otherwise
includable in the Trust or the Trust Property, but instead represents property
beneficially owned by the Seller and the Class C Certificateholder, which has
been pledged and deposited with the Servicer (as secured party on behalf of the
Class A Certificateholders, Class B Certificateholders, Class C
Certificateholder and the Servicer) in accordance with the terms hereof and of
the Reserve Account Agreement. The Seller and the Class C Certificateholder, by
the acceptance of its Certificate, hereby acknowledge and accept that the assets
in the Reserve Account (and all earnings thereon) are owned beneficially by
them, and the Seller and the Class C Certificateholder agree to treat such
assets (and all earnings thereon) as their assets (and earnings) for federal,
state, and local tax and all other purposes, as their interest shall appear, and
not to sell, transfer, or otherwise dispose of their interests therein. In the
event that the Servicing
39
Certificate with respect to any Determination Date shall state that the Total
Distribution Amount with respect to such Determination Date is insufficient to
make the payments required to be made on the related Distribution Date pursuant
to Section 4.5(a)(i) through (vi), (the amount of such deficiency being a
"Deficiency Claim Amount"), then on the second Business Day immediately
following the related Determination Date, the Trustee shall deliver to the
Servicer, by hand delivery, telex or facsimile transmission, a written notice (a
"Deficiency Notice") specifying the Deficiency Claim Amount for such
Distribution Date. Such Deficiency Notice shall direct the Servicer to remit
such Deficiency Claim Amount (to the extent of the funds available to be
distributed pursuant to the Reserve Account Agreement) to the Trustee for
deposit in the Collection Account and distribution pursuant to Sections
4.5(a)(i) through (vi), as applicable.
Any Deficiency Notice shall be delivered by 10:00 a.m., New York City
time, on the second Business Day following such Determination Date. The amounts
distributed by the Servicer to the Trustee pursuant to a Deficiency Notice shall
be deposited by the Trustee into the Collection Account pursuant to Section 4.4.
SECTION 4.8. Statements to Certificateholders; Tax Returns. (a) On each
Distribution Date, the Trustee shall include with each distribution to each
Certificateholder and shall forward by mail to the Rating Agency, a statement
based solely on the information in the Servicing Certificate delivered on the
related Determination Date pursuant to Section 3.9, setting forth the following
information, among other things, with respect to the Collection Period relating
to such Distribution Date:
(i) the amount of such distribution allocable to principal of
the Class A Certificates, the Class B Certificates and the Class C
Certificates, respectively;
(ii) the amount of such distribution allocable to interest on
the Class A Certificates, the Class B Certificates and the Class C
Certificates, respectively;
(iii) the Pool Balance, the Class A Pool Factor, the Class B
Pool Factor, and the Class C Pool Factor (A) as of the close of business
on the last day of the preceding Collection Period and (B) after giving
effect to distributions made on such Distribution Date;
(iv) the Class A Certificate Balance, the Class B Certificate
Balance, and the Class C Certificate Balance as of the close of business
on the last day of the preceding Collection Period, after giving effect
to distributions allocated to principal reported under (i) above;
(v) the amount of the Servicing Fee, the Additional Servicing
Fee and the Servicer Expenses paid to the Servicer with respect to the
related Collection Period and the Class A Percentage, the Class B
Percentage, and the Class C Percentage of the Servicing Fee, the amount
of any unpaid Servicing Fees and the change in such amount from that of
the prior Distribution Date, and the amount of any other fees paid by
the Trust with respect to such Collection Period;
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(vi) the amount of the Class A Interest Carryover Shortfall, if
applicable, on such Distribution Date and the Class A Principal
Carryover Shortfall, if applicable, on such Distribution Date, and the
change in such amounts from the prior Distribution Date;
(vii) the amount of the Class B Interest Carryover Shortfall, if
applicable, on such Distribution Date and the amount of the Class B
Principal Carryover Shortfall, if applicable, on such Distribution Date,
and the change in such amounts from the prior Distribution Date;
(viii) the amount of the Class C Interest Carryover Shortfall,
if applicable, on such Distribution Date and the amount of the Class C
Principal Carryover Shortfall, if applicable, on such Distribution Date,
and the change in such amounts from the prior Distribution Date;
(ix) the aggregate amount in the Reserve Account and the change
in such amount from the preceding Distribution Date;
(x) the number of Receivables and the aggregate Principal
Balance due thereof, for which the related Obligors are delinquent in
making scheduled payments (A) between 31 and 60 days, (B) between 61 and
90 days, (C) between 91 and 120 days and (D) more than 120 days;
(xi) the number of Receivables which became Liquidated
Receivables, and the aggregate principal amount thereof net of
Recoveries;
(xii) the number of Receivables which became Defaulted
Receivables, and the aggregate principal amount thereof;
(xiii) the number and the aggregate Purchase Amount of
Receivables that became Purchased Receivables during the related
Collection Period and the number and aggregate Purchase Amount of
Receivables that were required to be repurchased during the related
Collection Period but were not so repurchased;
(xiv) the number and aggregate Principal Balance of Receivables
with respect to which, to the knowledge of the Servicer, Obligors became
the subject of bankruptcy proceedings during such Collection Period (or
during a prior Collection Period, if the Servicer first became aware of
such proceedings during the current Collection Period);
(xv) the Seller's Retained Yield for such Distribution Date and
the portion thereof (A) distributed to the Seller and (B) deposited in
the Reserve Account;
(xvi) the Cumulative Default Ratio;
(xvii) the Delinquency Ratio;
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(xviii) the Repossession Inventory Ratio;
(xix) the amount of any Deficiency Claim Amounts deposited in
the Collection Account from the Reserve Account;
(xx) whether a Reserve Fund Trigger Event, Servicer Termination
Trigger Event or Servicer Termination Event has occurred; and
(xxi) the Collector to Current Receivable Ratio and the
Collector to Delinquent Receivable Ratio;
provided, however, the Trustee may deliver a copy of the Servicing Certificate
to each Certificateholder and the Rating Agency in satisfaction of the
requirements set forth in this Section if such Servicing Certificate otherwise
contains the information required to be distributed to each Certificateholder in
accordance herewith. Each amount set forth pursuant to subclauses (i), (ii),
(iv), (v), (vi), (vii) and (viii) above shall be expressed in the aggregate and
as a dollar amount per $1,000 of original principal balance of a Certificate of
the related Class.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of this Agreement, the
Trustee shall mail, provided it has received the necessary information from the
Servicer, to each Person who at any time during such calendar year shall have
been a Holder of a Certificate and received any payment thereon, a report as to
the aggregate of amounts reported pursuant to clauses (i), (ii) and (v) of
Section 4.8(a) (separately indicating amounts in respect of each Class of
Certificates) and such other information reasonably requested in writing by the
Certificateholder necessary to permit the Certificateholder to ascertain its
share of the gross income and deductions of the Trust (exclusive of the
Additional Servicing Fee), for such calendar year or, in the event such Person
shall be a Holder of a Certificate during a portion of such calendar year for
the applicable portion of such year, for the purposes of such
Certificateholder's preparation of federal and state income tax returns. The
Trustee shall furnish such statements to the Internal Revenue Service annexed to
Form 1041 in the manner and at the time provided by the Code and applicable
Regulations thereunder. The obligation of the Trustee set forth in this
paragraph shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer pursuant
to any requirements of the Code.
(c) The Trustee shall prepare and file any tax returns required to be
filed by the Trust. The Servicer will furnish the Trustee with all such
information known to it as may be reasonably required in connection with the
preparation of all tax returns of the Trust. The fees and expenses incurred in
connection with the preparation and filing of all tax returns of the Trust shall
be paid for by the Trustee out of the Trustee Fee.
(d) The Trustee shall provide any Holder of Certificates representing at
least 25% of the Certificate Balance, with such additional information available
to the Trustee relating to the Certificates, the Trust Property or the Reserve
Account as such Holder may reasonably request from time to time. Such additional
information (to the extent provided to the Trustee by the Servicer) shall also
be available to any Certificateholder from the Trustee upon reasonable request
and upon payment of the Trustee's and the Servicer's reasonable fees and
expenses in
42
connection with providing and preparing such information. Any Certificateholder
desiring such additional information shall have delivered to the Trustee an
executed Information Request.
ARTICLE V
THE CERTIFICATES
SECTION 5.1. The Certificates. The Certificates shall be issued only in
fully registered form in minimum denominations of $250,000 and integral
multiples of $1,000 in excess thereof; provided, however, that one Certificate
of each Class may be issued in a different amount if the aggregate initial
Certificate Principal Balance of the Certificates is not an integral multiple of
$1,000. The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of a Trustee Officer of the Trustee. Certificates 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 Trustee, shall
be valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates.
SECTION 5.2. Authentication of Certificates. The Trustee shall cause the
Certificates to be executed on behalf of the Trust, authenticated, and delivered
to the or upon the written order of the Seller, such order signed by the
Seller's chairman of the board, president, or any vice president, without
further corporate action by the Seller, in authorized denominations, pursuant to
this Agreement. No Certificate shall entitle its Holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Certificate a certificate of authentication substantially in the form set
forth in Exhibit A, Exhibit B, or Exhibit C hereto, executed by the Trustee by
manual signature of an authorized signatory; such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates issued on the Closing
Date shall be dated the Closing Date. All Certificates issued upon transfer or
exchange thereafter shall be dated the date of their authentication.
Registration of Transfer and Exchange of Certificates; Restrictions on
Transfer of Class C Certificates.
(i) The Trustee shall keep or cause to be kept at the Corporate
Trust Office books (the "Certificate Register") for the registration,
transfer and exchange of Certificates (the Trustee, in such capacity,
being the "Certificate Registrar"). The names and addresses of all
Certificateholders and the names and addresses of the transferees of any
Certificates shall be registered in the Certificate Register. The Person
in whose name any Certificate is so registered shall be deemed and
treated as the sole owner and Holder thereof for all purposes of this
Agreement and the Certificate Registrar and the Trustee and any agent of
any of them shall not be affected by any notice or knowledge to the
contrary. A Certificate is transferable or exchangeable only upon the
surrender of such Certificate to the Certificate Registrar at the
Corporate Trust Office together with an assignment and transfer
(executed by the Holder or his duly authorized attorney), subject to the
requirements of Sections 5.3(c), (d), (e), (f) and (g).
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Upon request of the Trustee, the Certificate Registrar shall provide the
Trustee with the names, addresses and percentage interests of the
Holders.
(ii) Upon surrender for registration of transfer of any
Certificate, subject to the requirements of Sections 5.3(c), (d), (e),
(f) and (g), the Trustee shall execute and the Trustee shall duly
authenticate in the name of the designated transferee or transferees,
one or more new Certificates in authorized denominations of a like
aggregate initial Certificate Balance. Such Certificates shall be
delivered by the Certificate Registrar in accordance with Section
5.3(e). Each Certificate surrendered for registration of transfer shall
be canceled and subsequently destroyed by the Certificate Registrar.
Each new Certificate issued pursuant to this Section 5.3 shall be
registered in the name of any Person as the transferring Holder may
request, subject to the provisions of Sections 5.3(c), (d), (e), (f) and
(g).
(iii) Notwithstanding anything to the contrary provided in this
Agreement, no sale, transfer, or other disposition of the Class C
Certificate shall be made unless: (i) the Trustee is provided with an
opinion of independent counsel or a ruling of the Internal Revenue
Service that establishes to the reasonable satisfaction of the majority
of the Holders of each of the Class A Certificates, and the Class B
Certificates, that such disposition will not have any material adverse
consequences under federal or state tax laws resulting from the
classification or status of this Agreement, or the Trust created
hereunder, or otherwise, and (ii) the Rating Agency shall have indicated
in writing that such sale, transfer, or other disposition will not
result in a reduction or withdrawal of the then current rating of the
Class A Certificates and the Class B Certificates.
SECTION 5.3. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss, or theft of any Certificate and (b) there is delivered to the Certificate
Registrar and the Trustee such security or indemnity as may be required by them
to save each of them harmless which in the case of any investor with a credit
rating of at least "BBB" by Standard & Poor's, "Baa" by Xxxxx'x or "BBB" by the
Rating Agency shall be deemed satisfied by the delivery of an unsecured
agreement of indemnity), then in the absence of notice that such Certificate
shall have been acquired by a bona fide purchaser, the Trustee on behalf of the
Trust shall execute, authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 5.4, the Trustee and the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee and the Certificate Registrar) connected
therewith. Any replacement Certificate issued pursuant to this Section 5.4 shall
constitute conclusive evidence of a beneficial interest in the Trust Property,
as if originally issued, whether or not the lost, stolen, or destroyed
Certificate shall be found at any time.
SECTION 5.4. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate Registrar
and any agent of the
44
Trustee or the Certificate Registrar may treat the Person in whose name any
Certificate shall be registered as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 4.5 and for all other purposes
whatsoever, and neither the Trustee, nor the Certificate Registrar nor any
agents of the Trustee or the Certificate Registrar shall be bound by any notice
to the contrary.
SECTION 5.5. Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish or cause to be furnished to the Servicer, at the
expense of the Trust, within 10 days after receipt by the Trustee of a request
therefor from the Servicer, a written list of the names and addresses of the
Certificateholders as of the most recent Record Date for payment of
distributions to Certificateholders. If three or more Certificateholders, or one
Certificateholder evidencing not less than [ ]% of any Class of Certificates, so
request in writing to the Trustee, then the Trustee shall, within five Business
Days after the receipt of such request furnish to the requesting
Certificateholder or Certificateholders a copy of the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate, shall
be deemed to have agreed with the Servicer and the Trustee that neither the
Servicer nor the Trustee shall be held accountable by reason of the disclosure
of its name and address, regardless of the source from which such information
was derived.
SECTION 5.6. Maintenance of Office or Agency. The Trustee shall maintain
in [ ], an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served. The Trustee initially designates [ ] as its office for such
purposes. The Trustee shall give prompt written notice to the Servicer and to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
ARTICLE VI
THE SELLER
SECTION 6.1. Representations of Seller. The Seller hereby makes the
following representations and warranties to the other parties hereto, on which
the Trustee on behalf of itself and the Certificateholders relies in accepting
the Receivables and the other Trust Property in trust and executing and
authenticating the Certificates. Unless otherwise specified, the representations
are made as of the execution and delivery of this Agreement, but shall survive
the sale, transfer and assignment of the Receivables to the Trustee.
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a [limited liability company] in good standing under
the laws of the State of Delaware, with power and authority to execute, deliver
and perform its obligations under this Agreement and its Related Documents and
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
and sell the Receivables.
45
(b) Due Qualification. The Seller is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualifications, licenses
or approvals.
(c) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and each of its Related Documents and to
carry out their respective terms and the transactions contemplated thereby; the
Seller has full power and authority to sell and assign the Trust Property to be
sold and assigned to and deposited with the Trustee and has duly authorized such
sale and assignment to the Trustee by all necessary action; and the execution,
delivery and performance of this Agreement and each of its Related Documents has
been duly authorized by the Seller by all necessary action.
(d) Valid Sale; Binding Obligation. This Agreement and each of its
Related Documents has been duly executed and delivered by the Seller and shall
effect a valid sale, transfer and assignment of the Receivables and the other
Trust Property, and the grant of a valid security interest in the Reserve
Account, in each case enforceable against the Seller and creditors of and
purchasers from the Seller, and this Agreement and each of its Related
Documents, when duly executed and delivered, shall constitute the legal, valid
and binding obligations of the Seller enforceable in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The execution, delivery and performance by the Seller
of this Agreement and its Related Documents and the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof do not and shall not conflict with, result in any breach of
any of the terms and provisions of or constitute (with or without notice, lapse
of time or both) a default under, the [limited liability company agreement] of
the Seller, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Seller is a party or by which it is bound or to which
any of its properties is subject, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument (other than this
Agreement), or violate any law, order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties, or in any way materially adversely affect the interest of the
Certificateholders or the Trust in any Receivable, or affect the Seller's
ability to perform its obligations under this Agreement.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Seller's knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties: (1) asserting the invalidity of this
Agreement, any of its Related Documents or the Certificates, (2) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of its Related Documents, (3)
seeking any determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, any of its Related
46
Documents or the Certificates, (4) relating to the Seller and which might
adversely affect the federal or state income, excise, franchise or similar tax
attributes of the Certificates, or (5) that could have a material adverse effect
on the Receivables or the interest of the Trustee therein.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Certificates or the consummation of the transactions
contemplated by this Agreement or any of the Seller's Related Documents, except
such as have been duly made or obtained on or prior to the Closing Date.
(h) Tax Returns. The Seller has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The principal place of business and chief
executive office of the Seller is, and for the four months preceding the date of
this Agreement has been, located at: 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx
Xxxxx, Xxxxxxxxxx 00000.
(j) No Injunctions. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect the
performance by the Seller of its obligations under, or the validity and
enforceability of, this Agreement or any of the Related Documents.
(k) Compliance with Law. The Seller is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Seller, its business or its properties, or the ability of the Seller to perform
its obligations under this Agreement, or any of the Related Documents.
(l) Solvency; No Fraudulent Transfer. (A) The Seller is assigning the
Receivables to the Trust without any intent to hinder, delay, or defraud any
current or future creditor of the Seller; (B) the Seller is not insolvent and
will not become insolvent as a result of the assignment; (C) the Seller is not
engaged and is not about to engage in any business or transaction for which any
property remaining with the Seller is an unreasonably small capital or for which
the remaining assets of the Seller are unreasonably small in relation to the
business of the Seller or the transaction; (D) the Seller does not intend to
incur, and does not believe or reasonably should not believe that it would
incur, debts beyond its ability to pay as they become due; and (E) the
consideration paid by the Certificateholders to the Seller for the Receivables
absolutely assigned by the Seller hereunder is equivalent to a fair market value
of such Receivables under the circumstances of the transaction, including but
not limited to, timing of such assignment.
(m) Legal Name. "[ ]" is the only legal name under which the Seller has
ever operated its business, and the Seller does not have any tradenames,
fictitious names, assumed names or "doing business as" names.
(n) Subsidiaries. The Seller does not own, directly or indirectly, any
equity securities of any entity or enterprise and does not conduct any of its
business through any subsidiary, entity or enterprise.
47
(o) Other Activities. The Seller has not in the past, and does not
currently, engage in any business activity other than transactions of the type
contemplated pursuant to this Agreement and the Related Documents.
SECTION 6.2. Liability of Seller; Indemnities. (a) The Seller shall be
liable hereunder only to the extent of the obligations specifically undertaken
by the Seller under this Agreement and the representations made by the Seller in
this Agreement. The Seller shall indemnify, defend and hold harmless the
Trustee, the Certificateholders, the Backup Servicer, the Servicer, and their
respective officers, directors, employees and agents from and against any loss,
liability or expense incurred by reason of (a) the Seller's willful misfeasance,
bad faith, or gross negligence in the performance of its duties under this
Agreement, or by reason of reckless disregard of its obligations and duties
under this Agreement or (b) the inaccuracy of any representation made in Section
6.1, or (c) the Seller's violation of federal or state securities laws in
connection with the sale of the Certificates. The indemnification provided for
in this Section 6.2 shall survive the termination of this Agreement and the
resignation or removal of the Trustee and the Backup Servicer.
(b) Indemnification under this Section 6.2 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made full indemnity payments to the Trustee, the
Certificateholders, the Servicer or the Backup Servicer pursuant to this Section
and the Trustee, the Certificateholders, the Servicer or the Backup Servicer
thereafter shall collect any of such amounts from others, the Trustee, the
Certificateholders, the Servicer or the Backup Servicer shall repay such amounts
to the Seller, without interest.
(c) The Seller shall be liable for the fees and expenses of the Trustee
and the Backup Servicer only to the extent such parties are not compensated in
full in accordance with the provisions of Section 4.5.
SECTION 6.3. Merger or Consolidation of, or Assumption of the
Obligations of Seller, Amendment of Certificate of Incorporation and Certain
Covenants of the Seller. (a) The Seller shall not (i) consolidate or merge with
or into any other entity or Person, or dissolve, liquidate or transfer, in whole
or in part, its properties and assets substantially as an entirety to any entity
(other than to a trust established by the Seller), or lend or advance any moneys
to, or make an investment in, any Person or amend or repeal its Certificate of
Incorporation or (ii) engage in any other activity that bears on whether the
separate legal identity of the Seller will be respected including, without
limitation, (A) forming, or causing to be formed, any subsidiaries or (B) acting
other than in its corporate name and through its officers or directors;
(b) The Seller shall not engage in any joint activity or transaction of
any kind with or for the benefit of any related company, including loans to or
from any related company and any guarantee of the indebtedness of any related
company, except for (i) purchasing management services and leasing office space
or equipment, in each case only to the extent necessary for the conduct of the
corporation's business, (ii) purchasing assets or subordinate interests in any
pool of assets created or serviced by one or more related companies for fair and
reasonable consideration, (iii) payment of capital dividends to the
shareholders, (iv) arranging for letters of credit to be provided without
recourse to the Seller beyond the extent contemplated in
48
its [limited liability company agreement] by banks with which such related
company maintains banking relationships and (v) obtaining any financial guaranty
insurance policy without recourse to the Seller beyond the extent contemplated
in its [limited liability company agreement];
(c) The Seller shall not create, incur, assume or in any manner become
liable in respect of any indebtedness or assume or guaranty any indebtedness of
any other entity, other than (i) indebtedness pursuant to which the Seller is
liable solely to the extent contemplated by its [limited liability company
agreement], (ii) accounts payable and expense accruals incurred in the ordinary
course of business of the Seller and which are incidental to the business
purpose of the Seller as stated in its [limited liability company agreement],
but excluding any liability in respect of the unpaid purchase price of any
subordinate interest, (iii) indebtedness without recourse to the Seller other
than to the extent of any security interest in one or more residual or
subordinate interests and (iv) indebtedness relating to the letters of credit or
obligations arising out of a financial guaranty insurance policy described in
(c) above;
(d) The Seller shall not (i) institute proceedings to be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or consent to, or file a petition seeking,
reorganization or relief under applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Seller or a substantial
part of its property, or make any assignment for the benefit of creditors, (ii)
admit in writing its inability to pay its debts generally as they become due, or
(iii) take corporate action in furtherance of any such action; and
(e) The Seller shall: (i) maintain books and records separate from any
other person or entity; (ii) maintain its accounts separate from any other
person or entity; (iii) not commingle assets with those of any other entity;
(iv) conduct its own business in its own name; (v) maintain separate financial
statements; (vi) pay its own liabilities out of its own funds; (vii) observe all
corporate formalities; (viii) maintain an arm's-length relationship with each
related company; (ix) pay the salaries of its own employees and maintain a
sufficient number of employees in light of its contemplated business operations;
(x) not guarantee or become obligated for the debts of any other entity or hold
out its credit as being available to satisfy the obligations of others; (xi) not
acquire obligations or securities of its shareholders; (xii) allocate fairly and
reasonably any overhead for shared office space; (xiii) use separate stationery,
invoices and checks; (xiv) not pledge its assets for the benefit of any other
entity or make any loans or advances to any entity; (xv) hold itself out as a
separate entity; (xvi) correct any known misunderstanding regarding its separate
identity; and (xvii) maintain adequate capital in light of its contemplated
business operations.
SECTION 6.4. Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
SECTION 6.5. Seller May Own Certificates. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof. Certificates so owned by or pledged
to the Seller or such Affiliate shall have an equal and
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proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Certificates except as
otherwise provided herein or by the definition of Certificateholder. The Seller
shall notify the Trustee promptly after it or any of its Affiliates become the
owner or pledgee of a Certificate.
ARTICLE VII
THE SERVICER AND BACKUP SERVICER
SECTION 7.1. Representations and Warranties of Servicer. The Servicer
hereby makes the following representations and warranties to the other parties
hereto, on which the Trustee on behalf of itself and the Certificateholders
relies in accepting the Receivables in trust and executing and authenticating
the Certificates. Unless otherwise specified, the representations and warranties
are made as of the Closing Date and shall survive the sale, transfer and
assignment of the Receivables to the Trustee.
(a) Organization and Good Standing. The Servicer has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of California, with power, authority and legal right 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 and service the Receivables and
to enter into and perform its obligations under this Agreement and each of its
Related Documents.
(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 or shall require such qualifications,
licenses or approvals.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery, and performance of this Agreement have been duly authorized
by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement has been duly executed and
delivered by the Servicer and 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, or
other similar laws affecting the enforcement of creditors' rights generally and
by equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The execution, delivery and performance by the
Servicer of this Agreement and the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof as each of the foregoing relate
to the Servicer shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice, lapse of time or
both) a default under, the articles of incorporation or by-laws of the Servicer,
or any indenture, agreement, mortgage, deed of trust or other instrument to
which the
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Servicer is a party or by which it is bound or to which any of its properties is
subject, or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any indenture, agreement, mortgage, deed of
trust 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 any its properties, or
in any way materially adversely affect the interest of the Certificateholders or
the Trust in any Receivable, or affect the Servicer's ability to perform its
obligations under this Agreement.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Servicer's knowledge, threatened against the Servicer, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties: (1)
asserting the invalidity of this Agreement, (2) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement as the
same relate to the Servicer, (3) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement, (4)
relating to the Servicer and which might adversely affect the federal or state
income, excise, franchise or similar tax attributes of the Certificates, or (5)
that could have a material adverse effect on the Receivables or the Trust
Property.
(g) No Consents. No consent, approval, license, authorization or order
of or declaration or filing with any governmental authority, bureau or agency is
required for the consummation of the other transactions contemplated by this
Agreement as the same relate to the Servicer, except such as have been duly made
or obtained.
(h) Taxes. The Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The principal place of business and chief
executive office of the Servicer is, and for the four months preceding the date
of this Agreement has been, located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx
Xxxxx, Xxxxxxxxxx.
(j) No Injunctions. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect the
performance by the Servicer or its obligations under, or the validity and
enforceability of, this Agreement.
(k) Compliance with Law. The Servicer is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Servicer, its business or its properties, or the ability of the Servicer to
perform its obligations under this Agreement.
SECTION 7.2. Indemnities of Servicer. (a) The Servicer shall be liable
hereunder only to the extent of the obligations specifically undertaken by the
Servicer under this Agreement and the representations made by the Servicer
herein.
(b) The Servicer shall defend, indemnify, and hold harmless the Trustee,
the Backup Servicer, the Seller, their respective officers, directors, agents
and employees, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, damages, claims
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and liabilities arising out of or resulting from the use, ownership, or
operation by the Servicer or any Affiliate or agent thereof of a Financed
Vehicle.
(c) The Servicer shall defend, indemnify and hold harmless the Trustee,
the Backup Servicer, the Seller, their respective officers, directors, agents
and employees, the Trust and the Certificateholders from and against any taxes
(other than franchise and income taxes other than income taxes imposed on the
Trust) that may at any time be asserted against the Trustee, the Backup
Servicer, the Trust, the Seller or the Certificateholders, with respect to the
transactions contemplated herein, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes and costs and expenses in defending against the same.
(d) The Servicer shall defend, indemnify, and hold harmless the Trustee,
the Backup Servicer, the Seller, their respective officers, directors, agents
and employees, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages, fines, forfeitures, legal fees and
related costs, judgments and liabilities to the extent that such cost, expense,
loss, claim, damage, fine, forfeiture, legal fee, related cost, judgment or
liability arose out of, or was imposed upon the Trustee, the Backup Servicer,
the Seller, the Trust or the Certificateholders through the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement or because of a breach of any representation in Section 7.1
hereof.
(e) For purposes of this Section, in the event of the termination of the
rights and obligations of a Servicer (or any successor thereto pursuant to
Section 7.3) as Servicer pursuant to Section 8.2, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 8.3.
The provisions of this Section 7.2(e) shall in no way affect the survival
pursuant to Section 7.2(f) of the indemnification by the Servicer provided by
Section 7.2(a), (b), (c) or (d).
(f) Indemnification under this Section 7.2 shall survive the termination
of this Agreement and any resignation or removal of Triad as Servicer or any
successor Servicer and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer shall have made full indemnity payments
pursuant to this Section and the recipient thereafter collects any of such
amounts from others, the recipient shall promptly repay such amounts to the
Servicer, without interest.
SECTION 7.3. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer or Backup Servicer. (a) The Servicer shall not merge or
consolidate with any other Person or, other than sales of assets in its ordinary
course of business, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the successor
to the Servicer's business or its duties hereunder unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity shall be an Eligible Servicer, as determined by the Trustee,
and shall be capable of fulfilling the duties of the Servicer contained in this
Agreement. Any Person (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer
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shall be a party, (iii) which acquires by conveyance, transfer or lease
substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and making representations substantially equivalent to those made by
the Servicer hereunder and, whether or not such assumption agreement is
executed, shall be the successor to the Servicer under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall provide
notice of any proposed merger, consolidation or succession pursuant to this
Section 7.3(a) to the Seller, the Backup Servicer, the Trustee, the Rating
Agency and the Certificateholders. Notwithstanding the foregoing, as a condition
to the consummation of the transactions referred to in clauses (i), (ii), (iii)
and (iv) above, (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 7.1 shall have been breached
(for purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction), (y) the Servicer shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 7.3(a) and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (z) the Servicer shall have delivered to the Trustee an
Opinion of Counsel stating, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the interest
of the Trustee in the Trust Property and reciting the details of the filings or
(B) no such action shall be necessary to preserve and protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; provided, however, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation under this
Agreement.
SECTION 7.4. Limitation on Liability of Servicer, Backup Servicer and
Others. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Seller, the Trust or the Certificateholders, except
as provided under this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer, the Backup Servicer or any such
Person against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith, or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement or any violation of law, or the inaccuracy of any
representation made, by the Servicer, Backup Servicer or such Person, as the
53
case may be; and, provided, further, that this provision shall not affect any
liability to indemnify the Trustee for costs, expenses, claims, liabilities,
losses or damages paid by the Trustee in its individual capacity. The Servicer,
the Backup Servicer and any director or officer or employee or agent of the
Servicer or the Backup Servicer may reasonably 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.
Except as provided in this Agreement, neither the Servicer nor the
Backup Servicer shall 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, and that in its opinion may
involve it in any expense or liability.
Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligation hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer (however, in the event the Backup Servicer shall have knowledge of the
Servicer's failure to perform its duties as required in this Agreement, the
Backup Servicer shall promptly notify the Trustee and the Initial
Certificateholder of such failure). The Backup Servicer shall have no liability
for any action 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 not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder (unless as a result of the Backup Servicer's failure to perform
its duties as required therein), or in the exercise of any of its 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.
The Backup Servicer will not be responsible for delays attributable to
the Servicer's failure to deliver information, defects in the information
supplied by the Servicer or other circumstances beyond the control of the Backup
Servicer.
The Backup Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Backup Servicer acting in accordance with the
terms of this Agreement and in accordance with information prepared or supplied
by a Person other than the Backup Servicer or the agent of the Backup Servicer
or the failure of any such Person to prepare or provide such information. The
Backup Servicer shall have no responsibility, shall not be in default and shall
incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Seller, or the Trustee (if the Person acting in such
capacity is other than the Person acting as Backup Servicer) or for any
inaccuracy or omission in a notice or communication received by the Backup
Servicer from any third party (other than the Trustee if the Person acting as
Trustee and Backup Servicer is one and the same) or (ii) which is due to or
results from the invalidity, unenforceability of any Receivable with applicable
law or the breach or the inaccuracy of any representation or warranty made with
respect to any Receivable.
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SECTION 7.5. Servicer and Backup Servicer Not to Resign. Subject to the
provisions of Section 7.3, neither the Servicer nor the Backup Servicer may
resign from the obligations and duties hereby imposed on it as Servicer or
Backup Servicer, as the case may be, under this Agreement except upon
determination that by reason of a change in legal requirements the performance
of its duties under this Agreement would cause it to be in violation of such
legal requirements in a manner which would result in a material adverse effect
on the Servicer or the Backup Servicer, as the case may be. Notice of any such
determination permitting the resignation of the Servicer or the Backup Servicer,
as the case may be, shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee. No such resignation of the Servicer shall become
effective until the Backup Servicer or other successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 8.3. No such resignation of the Backup Servicer shall become effective
until the Trustee or an entity appointed by the Trustee acceptable to a
Certificate Majority shall have assumed the responsibilities of the Backup
Servicer; provided, however, that if no such entity shall have assumed such
responsibilities and obligations of the Backup Servicer within 60 days of the
resignation of the Backup Servicer, the Backup Servicer may petition a court of
competent jurisdiction for the appointment of a successor to the Backup
Servicer. No resignation of the Servicer or the Backup Servicer shall relieve
the Servicer or the Backup Servicer, as the case may be, of any liability to
which it has previously become subject under this Agreement or any Related
Document.
SECTION 7.6. Representations and Warranties of Backup Servicer. The
Backup Servicer hereby makes the following representations and warranties to the
other parties hereto, on which the Trustee on behalf of itself and the
Certificateholders relies in accepting the Receivables in trust and executing
and authenticating the Certificates. Unless otherwise specified, the
representations and warranties are made as of the Closing Date and shall survive
the sale, transfer and assignment of the Receivables to the Trustee.
(a) Organization and Good Standing. The Backup Servicer has been duly
organized and is validly existing as a New York banking corporation in good
standing under the laws of the State of New York, with power, authority and
legal right 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 service the
Receivables and to enter into and perform its obligations under this Agreement
and each of its Related Documents.
(b) Due Qualification. The Backup 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) requires or shall require such qualifications, licenses or
approvals.
(c) Power and Authority. The Backup Servicer has the power and authority
to execute and deliver this Agreement and each of its Related Documents has been
duly executed and delivered by the Backup Servicer, and to carry out its terms;
and the execution, delivery, and performance of this Agreement and each of its
Related Documents have been duly authorized by the Backup Servicer by all
necessary corporate action.
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(d) Binding Obligation. This Agreement and each of its Related Documents
constitutes a legal, valid and binding obligation of the Backup Servicer
enforceable in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Violation. The execution, delivery and performance by the Backup
Servicer of this Agreement and each of its Related Documents, and the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof shall not conflict with, result in any breach of any of the terms
and provisions of or constitute (with or without notice, lapse of time or both)
a default under, the articles of incorporation or by-laws of the Backup
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Backup Servicer is a party or by which it is bound or to
which any of its properties is subject, or result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any indenture,
agreement, mortgage, deed of trust or other instrument (other than this
Agreement), nor violate any law, order, rule, or regulation applicable to the
Backup Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Backup Servicer or any its properties, or in any way materially
adversely affect the interest of the Certificateholders or the Trust in any
Receivable, or affect the Backup Servicer's ability to perform its obligations
under this Agreement.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Backup Servicer's knowledge, threatened against the Backup Servicer,
before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Backup Servicer or its properties:
(A) asserting the invalidity of this Agreement or any of its Related Documents,
(B) seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by this Agreement or any of its Related
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Backup Servicer of its obligations
under, or the validity or enforceability of, this Agreement or any of its
Related Documents, (D) relating to the Backup Servicer and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Certificates, or (E) that could have a material adverse effect on the
Receivables or the Trust Property.
(g) No Consents. No consent, approval, license, authorization or order
of or declaration or filing with any governmental authority, bureau or agency is
required for the consummation of the other transactions contemplated by this
Agreement or any of the Backup Servicer's Related Documents, except such as have
been duly made or obtained.
(h) Taxes. The Backup Servicer has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) No Injunctions. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect the
performance by the Backup Servicer or its obligations under, or the validity and
enforceability of, this Agreement.
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(j) Compliance with Law. The Backup Servicer is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Backup Servicer, its business or its properties, or the ability of the Backup
Servicer to perform its obligations under this Agreement.
SECTION 7.7. Duties of Backup Servicer. (a) The Backup Servicer hereby
agrees, on the date (the "Assumption Date") specified in the written notice to
the Backup Servicer from the Trustee of the termination of the rights and
obligations of the Servicer pursuant to Section 8.2 hereof or the resignation of
the Servicer pursuant to Section 7.5 hereof, and without any further notice, to
assume the obligations of the Servicer hereunder, to be the successor in all
respects to the Servicer and to be subject to all the responsibilities, duties
and liabilities arising thereafter relating thereto placed on the Servicer. From
and after the Assumption Date, the Backup Servicer shall be entitled to all of
the rights granted to the Servicer by the terms and provisions of this
Agreement.
(b) Notwithstanding the Backup Servicer's assumption of, and its
agreement to perform and observe, all duties, responsibilities and obligations
of the Servicer under this Agreement arising on and after the Assumption Date,
the Backup Servicer shall not be deemed to have assumed or to become liable for,
or otherwise have any liability for, any duties, responsibilities, obligations
or liabilities of the Servicer arising on or before the Assumption Date, whether
provided for by the terms of this Agreement, arising by operation of law or
otherwise, including, without limitation, any liability for any duties,
responsibilities, obligations or liabilities of the Servicer arising on or
before the Assumption Date regardless of when the liability, duty,
responsibility or obligation of the Servicer arose, whether provided by the
terms of this Agreement, arising by operation of law or otherwise.
(c) Up to but not including the Assumption Date, the Backup Servicer
shall be paid the Backup Servicing Fee, as provided in Section 4.5 of this
Agreement, for services rendered hereunder on each Distribution Date.
(d) On each Distribution Date following the Assumption Date, the Backup
Servicer shall be entitled to the Servicing Fee.
(e) The Backup Servicer agrees to execute, acknowledge and deliver from
time to time all such further instruments and documents and to take all
reasonable actions as the Trustee may from time to time request to better assure
the Trustee and to preserve the rights and obligations created hereunder.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. Servicer Termination Events. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Trustee for
distribution to Certificateholders or deposit in the Reserve Account any
proceeds or payment required to be so delivered under the terms of the
Certificates or this Agreement (including deposits of the
57
Purchase Amount pursuant to Section 2.6 and Section 3.7) that continues
unremedied for a period of two Business Days (or one Business Day with respect
to payment of Purchase Amounts) after the date such payment is due;
(b) Failure by the Servicer to deliver to the Trustee (i) any Servicing
Certificate required by Section 3.9, (ii) any annual statement as to compliance
pursuant to Section 3.10, in each case within five (5) Business Days after the
date such certificate is required to be delivered and (iii) any Accountant's
Report pursuant to Section 3.11;
(c) Failure on the part of the Servicer to observe its covenants and
agreements set forth in Section 7.3(a) or repudiation by the Servicer of any of
its covenants and agreements in this Agreement;
(d) Failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set forth
in this Agreement, which failure continues unremedied for a period of 30 days
after the earlier of the date on which (i) it obtains actual knowledge of such
failure and (ii) written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or
Certificateholders evidencing not less than [ ]% of the Certificate Balance;
(e) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or another
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 60 consecutive days or the commencement of an involuntary case
under the federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar law and
such case is not dismissed within 60 days;
(f) 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;
(g) Any representation, warranty or statement of the Servicer made in
this Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time when
the same shall have been made, and the incorrectness of such representation,
warranty or statement has a material adverse effect on the Trust and, within 30
days after the earlier of the date on which (i) it obtains actual knowledge of
such inaccuracy and (ii) written notice thereof shall have been given to the
Servicer by the
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Trustee the circumstances or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or otherwise
cured; and
(h) The occurrence of a Servicer Termination Trigger Event that has not
been Deemed Cured.
SECTION 8.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, any of the Trustee or the
Holders of Certificates evidencing not less than a Certificate Majority, by
notice given in writing to the Servicer (and to the Trustee if given by the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement; provided, however, that no termination shall
relieve the Servicer of any liability to which it has previously become subject
under this Agreement. Upon receipt by the Servicer of such written notice, all
authority, power, obligations and responsibilities of the Servicer under this
Agreement, whether with respect to the Certificates or the Trust Property or
otherwise, automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer; and, provided, further, that the Backup
Servicer shall have no liability with respect to any obligation which was
required to be performed by the prior Servicer prior to the date that the Backup
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer. Each successor Servicer is authorized
and empowered by this Agreement to execute and deliver, on behalf of the prior
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 the other Trust
Property and the applicable Related Documents to show the Trustee as lienholder
or secured party on the related Lien Certificates, or otherwise. The prior
Servicer agrees to cooperate with the Backup Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer under this
Agreement, including, without limitation, the transfer to the Backup Servicer
for administration by it of all cash amounts that shall at the time be held by
the prior Servicer for deposit, or have been deposited by the prior Servicer, in
the Collection Account or thereafter received with respect to the Receivables
and the delivery to the Backup Servicer of all Servicer Receivable Files and a
computer tape in readable form containing all information necessary to enable
the Backup Servicer or a successor Servicer to service the Receivables and the
other Trust Property. The Servicer shall, if requested, cooperate with the
successor Servicer in the establishment of a new Lockbox Account pursuant to
Section 3.2(e) hereof. The Trustee and the Backup Servicer may set off and
deduct any amounts owed by the terminated Servicer from any amounts payable to
the terminated Servicer pursuant to this Agreement. The terminated Servicer
shall grant the Trustee and the Backup Servicer reasonable access to the
terminated Servicer's premises for the purposes described in this Section 8.2 at
the terminated Servicer's expense.
SECTION 8.3. Appointment of Successor. (a) On and after (i) the time the
Servicer receives a notice of termination pursuant to Section 8.2 or (ii) upon
the resignation of the Servicer pursuant to Section 7.5, the Backup Servicer
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for in
this Agreement, and shall be subject to all the responsibilities, restrictions,
duties, liabilities and termination provisions relating thereto placed on the
Servicer by the terms and provisions of this Agreement; provided, however, that
the Backup Servicer shall not be liable for
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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 or in any of its Related Documents. The Trustee and
such successor Servicer shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession. If a successor Servicer
is acting as Servicer hereunder, it shall be subject to termination under
Section 8.2 upon the occurrence of any Servicer Termination Event applicable to
it as Servicer.
(b) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed for any
reason, a Certificate Majority and such successor Servicer may agree on
additional compensation to be paid to such successor Servicer. In addition, any
successor Servicer shall be entitled to reasonable transition expenses incurred
in acting as successor Servicer, such expenses to be paid by the outgoing
Servicer.
SECTION 8.4. Notification to Certificateholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Trustee shall give prompt written notice thereof to Certificateholders
at their respective addresses appearing in the Certificate Register and to the
Rating Agency.
SECTION 8.5. Action Upon Certain Failures of the Servicer. If either the
Seller or the Backup Servicer shall obtain actual knowledge of any Servicer
Termination Event or event but for the lapse of time or the giving of notice, or
both, would constitute a Servicer Termination Event, it shall be obligated to
notify promptly the Trustee and the Rating Agency of such occurrence or
circumstance. In the event a Trustee Officer of the Trustee shall have received
such notice (or any comparable notice from the Servicer or by a
Certificateholder) or otherwise obtained actual knowledge of any failure of the
Servicer specified in Section 8.1 which would give rise to a right of
termination under such Section upon the Servicer's failure to remedy the same
after notice, the Trustee shall give prompt notice thereof to the Servicer, the
Rating Agency and the Certificateholders. The Trustee shall be under no duty or
obligation to investigate or inquire as to any potential failure of the Servicer
specified in Section 8.1.
SECTION 8.6. Waiver of Past Defaults. A Certificate Majority may, on
behalf of all Holders of all Certificates, waive in writing any default by the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
ARTICLE IX
THE TRUSTEE
SECTION 9.1. Duties of Trustee. (a) Subject to paragraph (c) of this
Section 9.1, the Trustee, in its capacity as trustee, shall undertake to perform
such duties and only such duties as are specifically set forth in this Agreement
with the same degree of skill and care as a
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prudent person would exercise under the circumstance in the conduct of such
Person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are 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; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Seller hereunder.
(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, or its own bad faith or willful misfeasance; provided, however, that:
(i) 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 shall be specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against the Trustee and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely on the truth of the
statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment
made in good faith by a Trustee Officer, unless it shall be proven that
the Trustee shall have been negligent in performing its duties in
accordance with the terms of this Agreement; and
(iii) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement.
(d) Notwithstanding any other provision of this Agreement, 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 hereunder (unless as
a result of the Trustee's failure to perform its duties as required herein), 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 indemnity satisfactory
to it against such risk or liability shall not be reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee, shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
(e) The Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer referred to in this
Agreement, or of any
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failure by the Seller to comply with the obligations of the Seller in this
Agreement, unless a Trustee Officer obtains actual knowledge of such failure or
the Trustee receives written notice of such failure from the Servicer or the
Seller, as the case may be, or the Holders of Certificates evidencing not less
than [ ]% of the Certificate Balance.
(f) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle. 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.
(g) Except as expressly provided in this Agreement and without limiting
the generality of this Section 9.1, the Trustee shall have no duty (A) to see to
any recording, filing, or depositing of this Agreement or any agreement referred
to herein or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of the Trust Fund
from funds available in the Collection Account, or (D) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to the Trustee
pursuant to this Agreement believed by the Trustee to be genuine and to have
been signed or presented by the proper party or parties.
SECTION 9.2. Trustee's Certificate. On or as soon as practicable after
each Distribution Date on which Receivables shall be assigned to the Seller or
the Servicer, as applicable, pursuant to this Agreement, based on amounts
deposited to the Collection Account, notices received pursuant to this Agreement
and the information contained in the Servicing Certificate for the related
Collection Period, identifying the Receivables purchased by the Seller pursuant
to Section 2.6 or 10.2 or purchased by the Servicer pursuant to Section 2.9, 3.7
or 10.2, the Trustee shall execute a Trustee's Certificate (in the form of
Exhibit E-1 or E-2, as applicable), and shall deliver such Trustee's
Certificate, accompanied by a copy of the Servicing Certificate for such
Collection Period to the Seller or the Servicer, as the case may be. The
Trustee's Certificate submitted with respect to such Distribution Date shall
operate, as of such Distribution Date, as an assignment, without recourse,
representation, or warranty, to the Seller or the Servicer, as the case may be,
of all the Trustee's right, title, and interest in and to such repurchased
Receivable, and all security and documents relating thereto, such assignment
being an assignment outright and not for security. In addition, the Trustee
shall execute and deliver additional documents and releases as necessary for the
release of the Trustee's right, title and interest in and to such Repurchased
Receivable.
SECTION 9.3. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 9.1:
(a) The Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
Servicing Certificate, certificate
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of auditors, or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) The Trustee may consult with counsel, and any written 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 written advice of
counsel or Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct, or
defend any litigation under this Agreement or in relation to this Agreement, at
the request, order or direction of any of the Certificateholders pursuant to the
provisions of this Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however, that the
Trustee shall, upon the occurrence of a Servicer Termination Event (that shall
not have been cured or waived), exercise the rights and powers vested in it by
this Agreement with reasonable care and skill;
(d) 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 Holders of Certificates
evidencing not less than [ ]% of the Certificate Balance; 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 shall be, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require indemnity satisfactory to it against such cost, expense, or
liability as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Person making such request or, if paid by the
Trustee, shall be reimbursed by the Person making such request upon demand,
unless a Servicer Termination Event shall have occurred and is continuing, in
which case to the extent such investigation is related to the Servicer
Termination Event, such reasonable expenses shall be paid by the Servicer;
provided, however, if Triad shall no longer be the Servicer, such expenses shall
be paid by the requesting party. Nothing in this clause (d) shall affect the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors;
(e) The Trustee may execute any of the trusts or powers hereunder or
perform any duties under this Agreement either directly or by or through agents
or attorneys or a custodian. The Trustee shall not be responsible for any
misconduct or negligence of any such agent or attorney appointed with due care
by it hereunder. The Trustee shall not be responsible for any misconduct or
negligence attributable to the acts or omissions of the Servicer;
(f) The Trustee may conclusively rely, as to factual matters relating to
the Seller or the Servicer, on an Officer's Certificate of the Seller or
Servicer, respectively;
(g) The Trustee shall not be required to take any action or refrain from
taking any action under this Agreement, or any Related Documents referred to
herein, nor shall any provision of this Agreement, or any such related document
be deemed to impose a duty on the
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Trustee to take action, if the Trustee shall have been advised by counsel that
such action is contrary to (i) the terms of this Agreement, (ii) any such
related document or (iii) law; and
(h) The Trustee shall not be personally liable for any 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.
SECTION 9.4. Trustee Not Liable for Certificates or Receivables. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the execution and authentication of
the Certificates) or of any Receivable or related document, except to the extent
otherwise expressly provided herein. The Trustee shall at no time (except during
such time, if any, as it is acting as successor Servicer) have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation, the existence, condition, location and ownership of any Financed
Vehicle; the existence and enforceability of any insurance thereon; the
existence of any Receivable or any computer or other record thereof (it being
understood that the Trustee has not reviewed and does not intend to review such
matters, the sole responsibility for such review being vested in the Seller and
the Servicer as applicable); the completeness of any Receivable; the receipt by
the Servicer of any Receivable; the performance or enforcement of any
Receivable; the compliance by the Seller and the Servicer with any covenant or
the breach by the Seller and 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 or at the direction of the Servicer or any loss resulting therefrom
(it being understood, however, that the Trustee shall remain responsible for any
Trust Property that it may hold directly); the acts or omissions of the Seller,
the Servicer, or any Obligor; any action of the Servicer taken in the name of
the Trustee; the accuracy, content or completeness of any offering documents
used in connection with the sale of the Certificates or any action by the
Trustee taken at the instruction of the Servicer, the Seller or the
Certificateholders holding the requisite percentage of Certificates; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement in accordance with the standard of care
set forth in Section 9.1 hereof, whether as Trustee or as successor Servicer. It
is expressly understood and agreed by the parties hereto that (a) this Agreement
and the Certificates are executed and delivered by [ ], not individually or
personally but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it, and (b) under no circumstances shall [ ]
be personally liable for the payment of any indebtedness or expenses of the
Trust or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Agreement and
the Certificates. The Trustee shall not be accountable for the use or
application by the Seller of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer in
respect of the Receivables prior to the time such funds are deposited in the
Collection Account.
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SECTION 9.5. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates and may
deal with the Seller and the Servicer in banking transactions with the same
rights as it would have if it were not Trustee.
SECTION 9.6. Indemnity of Trustee. The Seller and the Trustee hereby
agree that the Trustee shall be entitled to the Trustee Fee (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
created by this Agreement and in the exercise and performance of any of the
powers and duties under this Agreement of the Trustee. To the extent not covered
by Article VII, the Seller shall indemnify, defend, and hold harmless the
Trustee and the Backup Servicer, and their respective officers, directors,
employees and agents, from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance of the performance of the trusts and duties contained in this
Agreement, except to the extent that such cost, expense, loss, claim, damage or
liability is due to the bad faith or negligence (except for errors in judgment)
of the Trustee or the Backup Servicer, respectively. Such indemnity shall be
made from the Seller's own funds and not from any Trust Property or the Reserve
Account. In addition, the Seller in Section 6.2 has agreed to indemnify the
Trustee with respect to certain matters, the Servicer in Section 7.2 has agreed
to indemnify the Trustee with respect to certain matters, and the
Certificateholders in their individual capacity under Section 9.3(c) or (d) may
agree to indemnify the Trustee under certain circumstances.
SECTION 9.7. Eligibility Requirements for Trustee. The Trustee under
this Agreement shall at all times be organized and doing business under the laws
of the United States of America; 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 having a rating, both with respect to long-term and short-term
unsecured obligations, of not less than investment grade by the Rating Agency.
If such corporation shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 9.7, 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 9.7, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.8.
SECTION 9.8. Resignation or Removal of Trustee. (a) Subject to the
provisions of subsection (c) of this Section 9.8, the Trustee may at any time
resign and be discharged from the trusts hereby created by giving 30 days' prior
written notice thereof to the Servicer and the Seller. Upon receiving such
notice of resignation, the Seller, with the prior written consent of a
Certificate Majority, shall promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee, one copy to the successor Trustee and one copy to the Rating
Agency. If no successor Trustee shall have been so appointed and have accepted
appointment within 60 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.
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(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.7 and shall fail to resign after written
request therefor by the Seller, or if at any time the Trustee shall be unable to
act, or shall be adjudged bankrupt or insolvent, or a receiver, conservator or
liquidator of the Trustee, or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee, or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Seller or a Certificate Majority may remove the Trustee. A Certificate Majority
may also remove the Trustee at any time with cause by written request to the
Trustee by the Certificate Majority with a copy to the Seller. If the Trustee
shall be removed under the authority of the immediately preceding two sentences,
the Seller, with the prior written consent of a Certificate Majority, shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee or so removed and one
copy to the successor Trustee, and pay all fees and expenses owed to the
outgoing Trustee. A copy of such notice shall be furnished promptly to the
Rating Agency.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.8 shall
not become effective until acceptance of appointment by the successor Trustee
pursuant to Section 9.9 and payment of all fees and expenses owed to the
outgoing Trustee. The Seller shall provide prompt notice of such resignation or
removal of the Trustee to the Rating Agency.
(d) The retiring Trustee shall not be liable for the acts or omissions
of any successor Trustee.
(e) All reasonable fees, charges and expenses shall be paid to the
retiring Trustee upon the appointment of a successor Trustee pursuant to Section
9.9.
SECTION 9.9. Successor Trustee. (b) Any successor Trustee appointed as
provided in Section 9.8 shall execute, acknowledge and deliver to the Servicer,
the Seller 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 (except as provided below), 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; but, on request of the Seller or the successor Trustee, such
predecessor Trustee shall, upon payment of its charges then unpaid, execute and
deliver an instrument transferring to such successor Trustee all of the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such Trustee so ceasing to act hereunder. Upon request of any such successor
Trustee, the Seller, on behalf of the Trust, shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts. The predecessor Trustee
shall deliver to the successor Trustee all documents and statements held by it
under this Agreement or any Related Document; and the predecessor Trustee and
the other parties to such Related Documents shall amend any related document to
make the successor Trustee the successor to the predecessor Trustee thereunder;
and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties and obligations.
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No successor Trustee shall accept appointment as provided in this Section 9.9
unless at the time of such acceptance such successor Trustee shall be eligible
under the provisions of Section 9.7. Upon acceptance of appointment by a
successor Trustee as provided in this Section 9.9, the Seller shall mail notice
by first-class mail of the successor of such Trustee and the address of the
successor Trustee's Corporate Trust Office under this Agreement, to the Rating
Agency, and all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Seller fails to mail such notice within 10 days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Seller.
SECTION 9.10. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible pursuant to Section
9.7, 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; provided, however, that the Trustee shall mail notice of such
merger or consolidation to the Rating Agency and the Certificateholders.
SECTION 9.11. Co-Trustee; 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 or any Financed
Vehicle may at the time be located, the Seller and the Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more persons approved by the Trustee to act as co-trustee, jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 9.11, such powers, duties, obligations,
rights, and trusts as the Seller and the Trustee may consider necessary or
desirable. If the Seller shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, the Trustee alone shall have
the power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Trustee pursuant to Section 9.7, except that the co-trustee or its parent shall
comply with the rating requirements set forth therein, and no notice of a
successor Trustee pursuant to Section 9.9 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 9.9.
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
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or acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust 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; and
(iii) The Servicer and the Trustee acting jointly may, at any
time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the other 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 Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
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.
SECTION 9.12. Representations and Warranties of Trustee. The Trustee
hereby makes the following representations and warranties with respect to itself
as of the date of this Agreement on which the Seller and the Certificateholders
shall rely:
(a) it is a New York banking corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
(b) it has full power, authority and legal right to execute, deliver and
perform this Agreement and its Related Documents, and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement and its Related Documents;
(c) the execution, delivery and performance by it of this Agreement and
its Related Documents (i) do not violate any provision of any law or regulation
governing the banking and trust powers of it or any order, writ, judgment, or
decree of any court, arbitrator, or governmental authority applicable to it or
any of its assets, (ii) do not violate any provision of its corporate charter or
by-laws, or (iii) to the best of its knowledge do 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 of the Trust Property
pursuant to the provisions of any mortgage,
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indenture, contract, agreement or other undertaking other than this Agreement to
which it is a party;
(d) the execution, delivery and performance by it of this Agreement and
its Related Documents do 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 its
banking and corporate trust activities; and
(e) this Agreement and its Related Documents has been duly executed and
delivered by it and constitutes the legal, valid and binding agreement of it,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
SECTION 9.13. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as Trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
SECTION 9.14. Suit for Enforcement. If a Servicer Termination Event
shall occur and be continuing, the Trustee, in its discretion may (but shall
have no duty or obligation so to proceed), subject to the provisions of Section
9.1, proceed to protect and enforce its rights and the rights of the
Certificateholders 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 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 or the
Certificateholders.
SECTION 9.15. Appointment of Custodians. If a Servicer Termination Event
shall occur and be continuing, (but shall have no duty or obligations so to
proceed), the Trustee may, appoint one or more Custodians to hold all or a
portion of the Trust Property as agent for the Trustee, by entering into a
Custodial Agreement. Subject to this Article IX, the Trustee agrees to comply
with the terms of each Custodial Agreement and to enforce the terms and
provisions thereof against the Custodian for the benefit of the
Certificateholders. The Trustee shall be liable for the fees of any Custodian
appointed hereunder. Each Custodian shall be a depository institution subject to
supervision by federal or state authority and shall be qualified to do business
in the jurisdiction in which it holds any Trust Property. Each Custodial
Agreement may be amended only as provided in Section 11.1.
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ARTICLE X
TERMINATION
SECTION 10.1. Termination of the Trust. (c) The respective obligations
and responsibilities of the Seller, the Servicer, the Backup Servicer and the
Trustee created by this Agreement and the Trust created by this Agreement shall
terminate upon the earlier of (i) the latest of (A) the payment in full at
maturity or other liquidation of the last Receivable (including the purchase by
the Seller or the Servicer at its option of the corpus of the Trust as described
in Section 10.2) and the subsequent distribution to Certificateholders pursuant
to Section 4.5 of the amount required to be deposited pursuant to Section 10.2
or (B) the payment to Certificateholders of all amounts required to be paid to
them pursuant to this Agreement and the expiration of any preference period
related thereto and the disposition of all property held as part of the Trust;
and (ii) the expiration of 21 years from the death of the last survivor of the
descendants of Xxxxxx X. Xxxxxxx, the late ambassador of the United States of
America to the Court of St. Xxxxx, living on the date of this Agreement. The
Servicer or Seller, as applicable, shall promptly notify the Trustee and the
Rating Agency of any prospective termination pursuant to this Section 10.1.
(b) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not earlier than the 15th day
and not later than the 25th day of the month next preceding the specified
Distribution Date stating (A) the Distribution Date upon which final payment of
the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated, (B) the amount of
any such final payment, and (C) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments shall be made
only upon presentation and surrender of the Certificates at the office of the
Trustee therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 4.5. Notwithstanding
the foregoing, if on the Distribution Date upon which final payment of the
Certificates is to be made, there are only five or less initial
Certificateholders of record, the amounts distributable to such initial
Certificateholders pursuant to Section 4.5 will be paid on the final
Distribution Date by wire transfer or check as set forth in Section 4.5(d), and
each such initial Certificateholder shall present and surrender its Certificates
at the office of the Trustee designated in the notice referred to above as
promptly as practicable after such Distribution Date.
(c) In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee shall take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their
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Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement or, if none, from such
Certificateholders.
SECTION 10.2. Optional Purchase of All Receivables. On the last day of
any Collection Period as of which the Pool Balance shall be less than or equal
to ten percent (10%) multiplied by the Cutoff Date Pool Balance, the Seller may
at its option, and if such option is not exercised, the Servicer may at its
option, purchase the corpus of the Trust; provided, however, that the Seller or
the Servicer, as applicable, may not effect any such purchase unless the Trustee
shall have received an Opinion of Counsel to the effect that such purchase would
not constitute a fraudulent conveyance. To exercise such option the Seller or
the Servicer, as applicable, shall deposit pursuant to Section 4.4 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including any Liquidated Receivables not previously deposited),
plus the appraised value of any other property held by the Trust, such value to
be determined by an appraiser mutually agreed upon by the Seller or the
Servicer, as applicable, the Trustee, and the Initial Certificateholder, and
shall succeed to all interests in and to the Trust. Such deposit shall be
allocated and paid as set forth in Section 4.5 hereof. The fees and expenses
related to such appraisal shall be paid by the party exercising the option to
purchase.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Amendment.
(a) This Agreement may be amended from time to time by the Seller, the
Servicer, the Trustee and the Backup Servicer with the consent (which consent of
any Certificateholder given pursuant to this Section or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such Certificate and of any Certificate issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Certificate) of the Holders of a
Certificate Majority for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of the Certificates; provided,
however, that no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, or change the allocation or
priority of, collections of payments on Receivables or distributions that shall
be required to be made on any Certificate or change the Class A Pass-Through
Rate, the Pass-Through Rate or the Class C Pass-Through Rate without the consent
of each Certificateholder affected thereby, (ii) reduce the aforesaid percentage
of the Class A Certificate Balance, the Certificate Balance or the Class C
Certificate Balance required to consent to any such amendment, without the
consent of the Holders of all Certificates of the applicable Class then
outstanding, (iii) result in a downgrade or withdrawal of the then current
rating of any Class of Certificates by the Rating Agency without the consent of
each Certificateholder, or (iv) change the Reserve Account Requirement without
the consent of each Certificateholder and the Rating Agency. This Agreement may
be amended from time to time by the Seller, the Servicer and the Trustee,
without the consent of the Certificateholders, to cure any ambiguity, correct or
supplement any provision therein which may be inconsistent with any other
provision therein, or make any other provisions with respect to matters or
questions arising under this Agreement
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which are not inconsistent with the provisions of this Agreement; provided that
such action will not, in the opinion of counsel satisfactory to the Trustee,
which opinion shall not be delivered at the expense of the Trustee, materially
and adversely affect the interest of any Certificateholder.
(b) Prior to the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to the Rating Agency. Prior to the execution of any such amendment or consent,
the Trustee shall furnish a true copy of such amendment or consent to each
Certificateholder.
(c) The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
(d) 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.
SECTION 11.2. Protection of Title to Trust. (a) The Seller or the
Servicer or both shall take or cause to be taken such actions and execute and
file such documents and instruments including without limitation, 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 (or
deemed reasonably necessary by a Certificate Majority) fully to preserve,
maintain and protect the interest of the Certificateholders, the Trust and the
Trustee under this Agreement in the Trust Property and in the proceeds thereof
against all other Persons. The Seller 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.
(b) The Seller shall not change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed by the Seller in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-503 of the UCC,
unless it shall have given the Trustee at least 60 days' prior written notice
thereof, shall have promptly filed appropriate amendments to all previously
filed financing statements and continuation statements and shall have delivered
an Opinion of Counsel (i) stating that, in the opinion of such counsel, all
amendments to all previously filed financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trustee in the Receivables and the other Trust
Property, and reciting the details of such filings, or (ii) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
(c) The Seller shall give the Trustee at least 30 days' prior written
notice of any relocation of its chief executive office or principal place of
business if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed financing
or continuation statement or of any new financing statement, shall promptly file
any such amendment and shall deliver an Opinion of Counsel (i) stating that, in
the
72
opinion of such counsel, all amendments to all previously filed financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in the
Receivables and the other Trust Property, and reciting the details of such
filings, or (ii) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest. The Servicer shall at
all times maintain each office from which it services Receivables and its chief
executive office and principal place of business within the United States of
America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any backup archives) that
refer to any Receivable indicate clearly the interest of Triad Auto Receivables
Trust 200[ ]-[ ] in such Receivable and that the Receivable is owned by the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, the
Receivable has been paid in full or repurchased by Triad, the Seller or the
Servicer.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
(unless such Receivable has been paid in full or repurchased by Triad, the
Seller, the Seller or the Servicer).
(g) The Servicer shall permit the Trustee, the Rating Agency, the Backup
Servicer, the Seller and their respective agents, at any time during normal
business hours, to inspect, audit and make copies of and abstracts from the
Servicer's records regarding any Receivable or any other portion of the Trust
Property in its possession; any Certificateholder shall be afforded the same
rights as described in this clause (g), provided that such Certificateholder
agrees to pay for its own fees and expenses incurred in such inspection, audit
and making copies and abstracts.
(h) The Servicer shall promptly furnish to the Trustee, the Backup
Servicer and the Seller at any time upon reasonable prior request a list of all
Receivables then held as part of the Trust, together with a reconciliation of
such list to the Schedule of Receivables and to each of the Servicing
Certificates furnished before such request indicating removal of Receivables
from the Trust. A copy of such list and reconciliation may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
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(i) In the event any of the events described in Section 8.1(e) or (f)
shall have occurred, or in the event Triad shall have been removed or replaced
as Servicer for any reason, then Triad and/or the Servicer shall immediately
cause, at the expense of Triad, each Certificate of Title for a Financed Vehicle
to be marked to reflect the security interest of the Trustee in the Financed
Vehicle, and Triad hereby appoints the Trustee its attorney-in-fact to effect
such marking, and the Trustee hereby accepts such appointment. The appointment
of the Trustee hereunder shall not operate to relieve Triad and/or the Servicer
of its obligations to xxxx each certificate of title under this provision. Triad
shall be liable for all costs, fees and expenses incurred under this Section
11.2(i).
SECTION 11.3. Limitation on Rights of Certificateholders. (a) The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
specifically provided herein including in Section 11.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything set forth in this
Agreement, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision of this Agreement.
(c) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless (i) such Holder previously shall have given to the Trustee a written
notice of default and of the continuance thereof, (ii) the Holders of
Certificates evidencing not less than [ ]% of the Certificate Balance shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee under this Agreement and shall have
offered to the Trustee such indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, (iii) the Trustee,
for 30 days after its receipt of such notice, request, and offer of indemnity,
shall have neglected or refused to institute any such action, suit or proceeding
and (iv) during such 30-day period, no request or waiver inconsistent with such
written request has been given to the Trustee pursuant to this Section or
Section 8.6; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb, or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right, under this
Agreement except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 11.3, each Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
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SECTION 11.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.5. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
(2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS
AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN ANY INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH
IN SECTION 11.12 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE OTHER PARTIES
HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(4) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO XXX IN
ANY OTHER JURISDICTION; AND
(5) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS
SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
SECTION 11.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 11.7. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no
75
way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.8. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Sections 6.3 and 7.3 and as
provided in the provisions of the Agreement concerning the resignation of the
Servicer and the Backup Servicer, this Agreement may not be assigned by the
Seller or the Servicer without the prior written consent of a Certificate
Majority. The assignor shall furnish prompt written notice of any proposed
assignment to the Rating Agency.
SECTION 11.9. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and Certificates
upon cancellation thereof by the Trustee pursuant to Section 5.2 are and shall
be deemed fully paid.
SECTION 11.10. Third Party Beneficiaries. Except as otherwise
specifically provided herein with respect to Certificateholders, the parties to
this Agreement hereby manifest their intent that no third party shall be deemed
a third party beneficiary of this Agreement, and specifically that the Obligors
are not third party beneficiaries of this Agreement.
SECTION 11.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which counterpart shall be deemed to be an
original, and all of which counterparts taken together shall constitute but one
and the same instrument.
SECTION 11.12. Notices. All demands, notices and communications under
this Agreement shall be in writing, and delivered (a) personally, (b) by
certified mail, return receipt requested, (c) by Federal Express or similar
overnight courier service or (d) by telecopy (with telephonic confirmation of
receipt), and shall be deemed to have been duly given upon receipt (i) in the
case of Triad or the Servicer, at the following address: One Pacific Plaza, 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (Telecopy: (714)
934-6062), (ii) in the case of the Seller, at the following address: 0000 Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (Telecopy: (000) 000-0000,
(iii) in the case of the Trustee, at the following address: [ ], (iv) in the
case of the Backup Servicer, at the following address: [ ], and (v) in the case
of the Rating Agency, at the following address: [ ], or at such other address as
shall be designated by any such party in a written notice to each of the other
parties. Any notice required or permitted to be mailed to a Certificateholder
shall be given by Federal Express or similar overnight courier service, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given upon receipt by such
Certificateholder.
SECTION 11.13. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns, and shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Trustee, the Backup Servicer and the Certificateholders and their respective
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permitted successors and assigns, if any. Any request, notice, direction,
consent, waiver or other instrument or action by any Certificateholder shall
bind its successors and assigns.
SECTION 11.14.Nonpetition Covenant. Until the date that is one year plus
one day shall have elapsed since the termination of the Trust, none of the
Seller, the Servicer, the Trustee, the Backup Servicer or any Holder of a
Certificate shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust or the Seller under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Trust or the Seller.
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IN WITNESS WHEREOF, the Seller, the Servicer, the Trustee and the Backup
Servicer have caused this Pooling and Servicing Agreement to be duly executed by
their respective officers, effective as of the day and year first above written.
[TRIAD FINANCIAL SPECIAL PURPOSE LLC, ]
as Seller
By:
-------------------------------------
Name:
Title:
TRIAD FINANCIAL CORPORATION,
as Servicer
By:
-------------------------------------
Name:
Title:
[ ], as Trustee and
Backup Servicer
By:
-------------------------------------
Name:
Title:
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Schedule A
Schedule of Receivables
79
Schedule B
[ ]
80
