RECEIVABLES PURCHASE AGREEMENT
between
PARAGON ACCEPTANCE CORPORATION
as Seller
and
PARAGON AUTO RECEIVABLES CORPORATION
as Purchaser
------------------------------
Dated as of March 30, 1999
-------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions................................................1
SECTION 1.2. Usage of Terms.............................................2
SECTION 1.3. Section References.........................................2
SECTION 1.4. Action by or Consent of Noteholders........................2
SECTION 1.5. No Recourse................................................2
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Initial Receivables and the Other
Conveyed Property........................................3
SECTION 2.2. Conveyance of the Subsequent Receivables and the Other
Conveyed Property..........................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of PAC as Seller............6
SECTION 3.2. Representations and Warranties of Paragon Auto
as Purchaser.............................................8
SECTION 3.3. Indemnification............................................9
ARTICLE IV
COVENANTS OF PAC
SECTION 4.1. Protection of Title of Paragon Auto and the Trust.........10
SECTION 4.2. Other Liens or Interests..................................12
SECTION 4.3. Costs and Expenses........................................12
ARTICLE V
REPURCHASES
SECTION 5.1. Repurchase of Receivables Upon Breach of Warranty.........12
SECTION 5.2. Reassignment of Purchased Receivables.....................13
SECTION 5.3. Waivers...................................................13
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Liability of PAC..........................................13
SECTION 6.2. Merger or Consolidation of PAC............................13
SECTION 6.3. Limitation on Liability of PAC and Others.................14
SECTION 6.4. Conveyance of the Receivables and the Other Conveyed
Property to the Trust.....................................14
SECTION 6.5. Amendment.................................................15
SECTION 6.6. Notices...................................................16
SECTION 6.7. Merger and Integration....................................16
SECTION 6.8. Severability of Provisions................................16
SECTION 6.9. GOVERNING LAW.............................................16
SECTION 6.10. Counterparts..............................................16
SECTION 6.11. Nonpetition Covenant......................................17
SECTION 6.12. Assignment................................................17
SECTION 6.13. Third-Party Beneficiaries.................................17
SECTION 6.14. Successors and Assigns....................................17
SECTION 6.15. Insurer Default...........................................17
SCHEDULE A -- Schedule of Receivables
SCHEDULE B -- Representations and Warranties of PAC
SCHEDULE C -- Legal Proceedings
EXHIBIT A -- Form of Subsequent Purchase Agreement
EXHIBIT B -- Form of Officer's Certificate
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RECEIVABLES PURCHASE AGREEMENT, dated as of March 30, 1999 (this
"Agreement"), between Paragon Acceptance Corporation, a Delaware
corporation, as seller ("PAC"), and Paragon Auto Receivables Corporation, a
Delaware corporation, as purchaser ("Paragon Auto").
WHEREAS, Paragon Auto, as Purchaser, has agreed to purchase from
PAC, as Seller, and PAC has agreed to sell and transfer to Paragon Auto,
the Receivables and the Other Conveyed Property.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, Paragon Auto and PAC hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used but not defined
herein shall have the meanings set forth in the Sale and Servicing
Agreement (as defined below). Whenever capitalized and used in this
Agreement, the following words shall have the following meanings:
"Other Conveyed Property" means, with respect to either the
Initial Receivables or the Subsequent Receivables, as applicable, or with
respect to the Receivables collectively: (1) all of the right, title and
interest of PAC in and to all monies received under the Receivables or in
respect thereof after the Initial Cutoff Date, in the case of the Initial
Receivables, or after the Subsequent Cutoff Date, in the case of the
Subsequent Receivables (including all Liquidation Proceeds and recoveries
received with respect to such Receivables); and (2) all of the right, title
and interest of PAC in and to (i) the security interests of PAC in the
related Financed Vehicles and any other interest of PAC in the related
Financed Vehicles, including the certificates of title with respect to such
Financed Vehicles, (ii) the Insurance Policies and any proceeds from any
Insurance Policies relating to the Receivables, the Obligors or the related
Financed Vehicles, including rebates or refunds of premiums relating to the
Receivables, (iii) the rights of PAC against Dealers with respect to the
Receivables under the Dealer Agreements and the Dealer Assignments, (iv)
all funds on deposit from time to time in the Trust Accounts (including all
income thereon and proceeds thereof), and (v) all proceeds and investments
of any of the foregoing, all present and future claims, demands, causes and
choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect
of any of the foregoing.
"PAC Repurchase Event" means the occurrence of a breach of any of
PAC's representations and warranties under Section 3.1(a) or the occurrence
of any other event that requires Paragon Auto to repurchase a Receivable
under Section 2.6 of the Sale and Servicing Agreement.
"Purchase Price" means, with respect to Receivables to be sold by
PAC to the Purchaser on the Closing Date or any Subsequent Transfer Date,
the net book value of such Receivables (as reflected on the books of PAC as
of the Initial Cutoff Date or the relevant Subsequent Cutoff Date),
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after giving effect to whatever adjustments are necessary, in the judgment
of PAC, to properly record the sale in accordance with generally accepted
accounting principles and the Related Documents.
"Purchaser" means Paragon Auto Receivables Corporation.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of March 30, 1999, between Paragon Acceptance
Corporation, in its individual capacity and as Servicer, Paragon Auto
Receivables Corporation, as Seller, the Trust and Norwest Bank Minnesota,
National Association, as Indenture Trustee and as Backup Servicer, as the
same may be amended or supplemented from time to time.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
"Seller" means Paragon Acceptance Corporation
SECTION 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the
singular; words importing one gender include the other gender; references
to "writing" include printing, typing, lithography, and other means of
reproducing words in a visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and
not prohibited by this Agreement or the Sale and Servicing Agreement;
references to Persons include their permitted successors and assigns; and
the terms "include" or "including" mean "include without limitation" or
"including without limitation."
SECTION 1.3. Section References. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.
SECTION 1.4. Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken or consented to by
Noteholders, such provision shall be deemed to refer to Noteholders of
record as of the Record Date preceding the date on which such action is to
be taken or consent given by Noteholders. Solely for the purposes of any
action to be taken, or consented to by Noteholders, any Note registered in
the name of Paragon Auto, PAC or any Affiliate thereof shall be deemed not
to be outstanding; provided, however, that, solely for the purpose of
determining whether the Indenture Trustee is entitled to rely upon any such
action or consent, only Notes which the Indenture Trustee knows to be so
owned shall be so disregarded.
SECTION 1.5. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer or director, as such, of PAC, Paragon Auto or of any predecessor or
successor of PAC or Paragon Auto.
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ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Initial Receivables and the Other
Conveyed Property.
(a) Conveyance. Subject to the terms and conditions of this
Agreement, PAC hereby sells, contributes, transfers, assigns and otherwise
conveys to Paragon Auto, without recourse (but without limitation of its
obligations in this Agreement), and Paragon Auto hereby purchases and
accepts, all right, title and interest of PAC in and to the Initial
Receivables and the Other Conveyed Property with respect thereto. It is the
intention of PAC and Paragon Auto that the transfer and assignment
contemplated by this Agreement shall constitute a sale and/or contribution
of the Initial Receivables and the Other Conveyed Property from PAC to
Paragon Auto and the beneficial interest in and title to the Initial
Receivables and the Other Conveyed Property shall not be part of PAC's
estate in the event of the filing of a bankruptcy petition by or against
PAC under any bankruptcy law. If, notwithstanding the intent of PAC and
Paragon Auto, the transfer and assignment contemplated hereby is held not
to be a sale and/or contribution, PAC hereby grants a first priority
security interest to Paragon Auto in the property conveyed pursuant to this
Section 2.1(a), and this Agreement shall be construed so as to further such
intent.
(b) Initial Receivables Purchase Price. Simultaneously with the
conveyance of the Initial Receivables and the Other Conveyed Property with
respect thereto by PAC to Paragon Auto, on the Closing Date, Paragon Auto
shall pay to PAC the Purchase Price of the Receivables sold by PAC to
Paragon Auto. An amount equal to $76,497,002.10 shall be paid to PAC in
cash by federal wire transfer (same day) funds. An amount equal to
$4,355,081.49 shall be deemed paid and returned to Paragon Auto as a
contribution to capital from PAC.
SECTION 2.2. Conveyance of the Subsequent Receivables and the Other
Conveyed Property.
(a) Conveyance. On each Subsequent Transfer Date and subject to
the terms and conditions of this Agreement, PAC shall, upon execution of a
Subsequent Purchase Agreement in the form of Exhibit A, sell, transfer,
assign and otherwise convey to Paragon Auto, and Paragon Auto shall
purchase all right, title and interest of PAC in and to the Subsequent
Receivables specified in the applicable Subsequent Purchase Agreement and
the Other Conveyed Property with respect thereto. It is the intention of
PAC and Paragon Auto that the transfer and assignment contemplated by this
Agreement and the related Subsequent Purchase Agreement shall constitute a
sale and/or contribution of the Subsequent Receivables and the Other
Conveyed Property from PAC to Paragon Auto and the beneficial interest in
and title to the Subsequent Receivables and the Other Conveyed Property
shall not be part of PAC's estate in the event of the filing of a
bankruptcy petition by or against PAC under any bankruptcy law. If,
notwithstanding the intent of PAC and Paragon Auto, the transfer and
assignment contemplated hereby is held not to be a sale, PAC hereby grants
a first priority security interest to Paragon Auto in the property conveyed
pursuant to this Section 2.2(a), and this Agreement shall be construed so
as to further such intent.
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(b) Subsequent Receivables Purchase Price. Simultaneously with
each conveyance of Subsequent Receivables and the Other Conveyed Property
with respect thereto by PAC to Paragon Auto, on the applicable Subsequent
Transfer Date, Paragon Auto shall pay to PAC the Purchase Price of the
Subsequent Receivables sold by PAC to Paragon Auto.
(c) Conditions to Conveyance. On each Subsequent Transfer Date,
PAC shall transfer to Paragon Auto the Subsequent Receivables and the Other
Conveyed Property with respect thereto to be transferred on such date only
upon the satisfaction of each of the following conditions on or prior to
the Subsequent Transfer Date:
(i) Paragon Auto shall have provided the Owner Trustee on
behalf of the Trust, the Indenture Trustee, the Note Insurer, PAC
and the Rating Agencies with an Addition Notice not later than
five Business Days prior to such Subsequent Transfer Date and
shall have provided any information reasonably requested by any of
them with respect to such Subsequent Receivables;
(ii) Paragon Auto shall have delivered to the Indenture
Trustee and the Note Insurer a duly executed Subsequent Purchase
Agreement in the form of Exhibit A hereto, which shall include a
Schedule A listing such Subsequent Receivables;
(iii) on the Subsequent Transfer Date, Paragon Auto shall
have deposited in the Collection Account all collections received
in respect of such Subsequent Receivables received after the
related Subsequent Cutoff Date and prior to the second Business
Day preceding the Subsequent Transfer Date;
(iv) as of such Subsequent Transfer Date, neither PAC nor
Paragon Auto shall have been insolvent nor shall either of them
have been made insolvent by such transfer nor shall either of them
be aware of any pending insolvency;
(v) such addition shall not result in the Trust being
treated as an association (or a publicly traded partnership)
taxable as a corporation for federal or Delaware income tax
purposes;
(vi) the Funding Period shall not have terminated;
(vii) Paragon Auto shall have delivered to the Owner
Trustee on behalf of the Trust, the Indenture Trustee, the Note
Insurer and PAC an Officer's Certificate in the form of Exhibit D
to the Sale and Servicing Agreement confirming the satisfaction of
each condition precedent specified in this Section 2.2(c);
(viii) Paragon Auto shall have delivered to the Rating
Agencies, PAC, the Note Insurer and the Indenture Trustee an
Opinion of Counsel with respect to the transfer of such Subsequent
Receivables substantially similar to the form of the Opinion of
Counsel relating
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to certain bankruptcy, tax and security interest matters delivered
to the Rating Agencies, PAC, the Note Insurer and the Indenture
Trustee on the Closing Date;
(ix) Paragon Auto shall have deposited the Subsequent
Reserve Account Deposit, if any, in the Reserve Account;
(x) Paragon Auto shall have delivered to the Indenture
Trustee the Receivable Files relating to the Subsequent
Receivables in accordance with Section 2.3 of the Sale and
Servicing Agreement;
(xi) each Rating Agency shall have notified Paragon Auto,
the Indenture Trustee and the Note Insurer in writing that
following such transfer the rating on the Class A Notes will not
be withdrawn or reduced by such Rating Agency with and without
regard to the Policy;
(xii) the Receivables in the Trust, including such
Subsequent Receivables, shall meet the following criteria: (A) the
weighted average APR of the Receivables in the Trust shall not be
less than 10.60%; (B) no Receivables shall have an APR less than
6.75%; (C) the weighted average remaining term to maturity of the
Receivables on such Subsequent Transfer Date shall not be greater
than 64 months; (D) based upon the billing addresses of the
Dealers, not more than 10% of the aggregate Principal Balances of
the Receivables, including such Subsequent Receivables, are
located in any one state other than California, North Carolina,
Virginia or Texas; (E) at least 65% of the Receivables shall be
secured by automobiles and sports utility vehicles with a
manufacturer's suggested retail price when new of $20,000 or more;
(F) Pre-Computed Receivables shall not exceed 12% of the
Receivables by Aggregate Principal Balance; (G) no more than 45%
of the Receivables shall have an original term of more than 60
months but less than or equal to 72 months; (H) no Receivable
shall have a Principal Balance less than $1,000 or in excess of
$85,000; and (I) no more than 4% of Aggregate Principal Balance of
the Receivables shall be rated "Credit Tier A" as defined in
Paragon's credit and collection policy.
(xiii) Paragon Auto shall have taken any action required
to be taken by PAC or Paragon Auto to maintain the first priority
perfected ownership interest of the Trust and the first priority
perfected security interest of the Indenture Trustee in the assets
of the Trust;
(xiv) no selection procedures adverse to the interests of
the Noteholders or the Note Insurer shall have been utilized in
selecting such Subsequent Receivables; and
(xv) the representations and warranties set forth in
Section 3.1 and Section 3.2 shall be true and correct in all
material respects.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of PAC as Seller. By
its execution of this Agreement, PAC makes the following representations
and warranties on which Paragon Auto relies in purchasing the Receivables
and the Other Conveyed Property with respect thereto and in transferring
the Receivables and the Other Conveyed Property with respect thereto to the
Trust under the Sale and Servicing Agreement and on which the Note Insurer
will rely in issuing the Policy. Unless otherwise specified, such
representations and warranties speak as of the Closing Date with respect to
the Initial Receivables and as of the related Subsequent Transfer Date with
respect to the Subsequent Receivables, but shall survive the sale,
contribution, transfer and assignment of the Receivables and the Other
Conveyed Property hereunder, and the sale, transfer and assignment thereof
by Paragon Auto to the Trust under the Sale and Servicing Agreement. PAC
and Paragon Auto agree that Paragon Auto will assign to the Trust all of
Paragon Auto's rights and interests under this Agreement and the Trust will
pledge all of such interests of Paragon Auto to the Indenture Trustee, and
that the Indenture Trustee will thereafter be entitled to enforce this
Agreement directly against PAC in the Indenture Trustee's own name on
behalf of the Noteholders.
(a) Schedule of Representations. The representations and
warranties set forth on the Schedule of Representations are true and
correct in all material respects.
(b) Organization and Good Standing. PAC has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is currently conducted.
(c) Due Qualification. PAC is duly qualified to do business and
has obtained all necessary licenses and approvals in all jurisdictions
where the failure to do so would have a material adverse effect on (i)
PAC's ability to originate, own, sell and transfer the Receivables and the
Other Conveyed Property to Paragon Auto pursuant to this Agreement, (ii)
the validity or enforceability of the Receivables or the Other Conveyed
Property or (iii) PAC's ability to perform its obligations hereunder and
under its Related Documents.
(d) Power and Authority. PAC has the power and authority to
execute and deliver this Agreement, the Sale and Servicing Agreement and
its Related Documents and to carry out its terms and their terms,
respectively; PAC has power and authority to sell and assign the
Receivables and Other Conveyed Property to be sold and assigned to and
deposited with Paragon Auto hereunder and has duly authorized such sale and
assignment to Paragon Auto by all necessary corporate action; and the
execution, delivery and performance of this Agreement, the Sale and
Servicing Agreement and its Related Documents have been duly authorized by
PAC by all necessary corporate action.
(e) Binding Obligations. This Agreement, the Sale and Servicing
Agreement and its Related Documents, when duly executed and delivered,
shall constitute legal, valid and binding obligations of PAC enforceable in
accordance with their respective terms, except as enforceability
6
may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless
of whether such enforceability is considered in a proceeding in equity or
at law.
(f) No Violation. The execution, delivery and performance by PAC
of its Related Documents, the consummation of the transactions contemplated
by this Agreement, the Sale and Servicing Agreement and the Related
Documents and the fulfillment of the terms hereof and thereof do not (i)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of PAC, or any indenture,
agreement, mortgage, deed of trust or other instrument to which PAC is a
party or by which it or its properties are bound, (ii) result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument or (iii) to the best of PAC's knowledge, violate any law,
order, rule or regulation applicable to PAC of any Governmental Authority
having jurisdiction over PAC or any of its properties.
(g) No Proceedings. Other than as set forth on Schedule C hereto,
there are no proceedings or investigations pending or, to the best of PAC's
knowledge, threatened against PAC before any Governmental Authority having
jurisdiction over PAC or its properties (A) asserting the invalidity of
this Agreement or any of the Related Documents, (B) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents, (C) seeking
any determination or ruling that would have a material adverse effect on
the performance by PAC of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, (D)
seeking to materially and adversely affect the federal income tax or other
federal, state or local tax attributes of the Notes or seeking to impose
any excise, franchise, transfer or similar tax upon the Notes or the sale
and assignment of the Receivables and the Other Conveyed Property.
(h) No Consents. No consent, approval, license, authorization or
order of, or declaration, registration or filing with, any Governmental
Authority or other Person, is required to be made by PAC in connection with
the execution, delivery or performance of its Related Documents or the
consummation of the transactions contemplated thereby, except such as have
been duly made, effected or obtained.
(i) Chief Executive Office; Name. The chief executive office of
PAC is located at 00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx
and there have been no other such locations during the past four months.
PAC has not been known by any name other than Paragon Acceptance
Corporation since July 1, 1996 and is not known by any trade names.
(j) Dealer Recourse. The Seller shall execute and deliver such
other instruments and agreements as the Purchaser may reasonably request in
order to enforce any rights against a Dealer and any obligations of a
Dealer in connection with a Receivable including any rights to recourse
against such Dealer.
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SECTION 3.2. Representations and Warranties of Paragon Auto as
Purchaser. By its execution of this Agreement, Paragon Auto makes the
following representations and warranties on which PAC relies in selling,
assigning, transferring and conveying the Receivables and the Other
Conveyed Property to Paragon Auto hereunder. Unless otherwise specified,
such representations and warranties speak as of the Closing Date with
respect to the Initial Receivables and as of the related Subsequent
Transfer Date with respect to the Subsequent Receivables, but shall survive
the sale, contribution, transfer and assignment of the Receivables and the
Other Conveyed Property hereunder, and the sale, transfer and assignment
thereof by Paragon Auto to the Trust under the Sale and Servicing
Agreement.
(a) Organization and Good Standing. Paragon Auto has been duly
organized and is validly existing as a corporation under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted.
(b) Due Qualification. Paragon Auto is duly qualified to do
business and has obtained all necessary licenses and approvals in all
jurisdictions where the failure to do so would have a material and adverse
effect on (i) Paragon Auto's ability to acquire the Receivables or the
Other Conveyed Property pursuant to this Agreement, (ii) the validity or
enforceability of the Receivables and the Other Conveyed Property or (iii)
Paragon Auto's ability to perform its obligations hereunder, under the Sale
and Servicing Agreement and under its Related Documents.
(c) Power and Authority. Paragon Auto has the power and authority
to execute and deliver this Agreement and to carry out its terms and their
terms, respectively; Paragon Auto has the power and authority to acquire
the Receivables and the Other Conveyed Property hereunder and to sell,
transfer or otherwise convey such Receivables and Other Conveyed Property
to the Trust and has duly authorized such acquisition and conveyance by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by Paragon Auto by all necessary
corporate action.
(d) Binding Obligation. This Agreement, when duly executed and
delivered, shall constitute legal, valid and binding obligation of Paragon
Auto 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
Paragon Auto of this Agreement, the consummation of the transactions
contemplated by this Agreement, the Sale and Servicing Agreement and
Paragon Auto's Related Documents, and the fulfillment of the terms of this
Agreement, the Sale and Servicing Agreement and Paragon Auto's Related
Documents, do not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of Paragon
Auto, or any indenture, agreement, mortgage, deed of trust or other
instrument to which Paragon
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Auto is a party or by which it or its properties are bound, (ii) result in
the creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument or (iii) to the best of Paragon Auto's knowledge, violate
any law, order, rule or regulation applicable to Paragon Auto of any
Governmental Authority having jurisdiction over Paragon Auto or any of its
properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to Paragon Auto's knowledge, threatened against Paragon Auto
before any Governmental Authority having jurisdiction over Paragon Auto or
its properties (A) asserting the invalidity of this Agreement, the Sale and
Servicing Agreement or any of the Related Documents, (B) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement,
the Sale and Servicing Agreement or any of Paragon Auto's Related
Documents, (C) seeking any determination or ruling that would have a
material adverse effect on the performance by Paragon Auto of its
obligations under, or the validity or enforceability of, this Agreement,
the Sale and Servicing Agreement or any of Paragon Auto's Related
Documents, or (D) seeking to materially and adversely affect the federal
income tax or other federal, state or local tax attributes of the Notes or
seeking to impose any excise, franchise, transfer or similar tax upon the
Notes or the transfer and acquisition of the Receivables and the Other
Conveyed Property hereunder, or the transfer by Paragon Auto of the
Receivables and the Other Conveyed Property to the Trust pursuant to the
Sale and Servicing Agreement or any Subsequent Transfer Agreement.
(g) No Consents. No consent, approval, license, authorization or
order of, or declaration, registration or filing with, any Governmental
Authority or other Person is required to be made by Paragon Auto in
connection with the execution, delivery or performance of its Related
Documents or the consummation of the transactions contemplated thereby,
except such as have been duly made, effected or obtained.
(h) Chief Executive Office. The chief executive office of Paragon
Auto is located at 00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx.
In the event of any breach of a representation and warranty made by Paragon
Auto hereunder, PAC covenants and agrees that PAC will not take any action
to pursue any remedy that it may have hereunder, in law, in equity or
otherwise, until a year and a day have passed since the date on which all
Notes or other similar securities issued by the Trust, or another trust or
similar vehicle formed by Paragon Auto, or any obligations, notes or other
securities issued by Paragon Auto have been paid in full. PAC and Paragon
Auto agree that damages will not be an adequate remedy for such breach and
that this covenant may be specifically enforced by Paragon Auto, the Note
Insurer or by the Indenture Trustee on behalf of the Noteholders.
SECTION 3.3. Indemnification. PAC shall defend, indemnify and hold harmless
Paragon Auto, the Indenture Trustee, the Backup Servicer, the Note Insurer, the
Trust and the Owner Trustee (the "Indemnified Parties"):
9
(a) for any liability they may incur as a result of the failure of
a Receivable to have been originated in compliance with all requirements of
law and for breach of its representations and warranties contained herein
or failure to perform in all material respects its obligations and duties
contained herein;
(b) from and against any and all costs, expenses, losses, damages,
claims and liabilities, arising out of or resulting from the use, ownership
or operation by PAC or any Affiliate thereof of a Financed Vehicle;
(c) from and against any and all costs (including attorneys' fees
and costs), expenses, losses, damages, claims, penalties, fines,
forfeitures, judgments and liabilities to the extent that such cost,
expense, loss, damage, claim, penalty, fine, forfeiture, judgment or
liability arose out of, or was imposed upon the Indemnified Parties
through, the negligence (other than errors in judgment), misfeasance or bad
faith of PAC in the performance of its duties under this Agreement
(including any violation of law); and
(d) from, and shall pay, taxes that may at any time be asserted
against the Indemnified Parties with respect to the conveyance or ownership
of the Receivables or the Other Conveyed Property hereunder, including any
sales, gross receipts, personal property, tangible or intangible personal
property, privilege or license taxes (but not including any income or
franchise taxes, arising out of the transactions contemplated hereby or
transfer taxes arising in connection with the transfer of the Notes), and
costs and expenses in defending against the same.
Notwithstanding the indemnity provisions contained in Sections
3.3(a) through 3.3(d), PAC shall not be required to indemnify any
Indemnified Party against any taxes, costs, expenses, losses, damages,
claims or liabilities to the extent the same shall arise out of or be based
upon (i) the misfeasance, bad faith or gross negligence of such party, or
(ii) losses suffered by reason of uncollectible or uncollected Receivables.
Indemnification under this Section 3.3 shall survive the
termination of this Agreement and shall include fees and expenses of
litigation. These indemnity obligations shall be in addition to any
obligation that PAC may otherwise have.
ARTICLE IV
COVENANTS OF PAC
SECTION 4.1. Protection of Title of Paragon Auto and the Trust.
(a) PAC shall execute, file, record and register such financing
statements and cause to be executed, filed, recorded and registered such
continuation and other statements or documents, all in such manner and in
such places as may be required by law fully to preserve, maintain and
protect the interests of Paragon Auto under this Agreement and each
Subsequent Purchase Agreement, and of the Trust, the Indenture Trustee and
the Note Insurer under the Indenture, the Sale and Servicing
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Agreement, this Agreement and each Subsequent Transfer Agreement in the
Receivables and the Other Conveyed Property, as the case may be, and in the
proceeds thereof. PAC shall deliver (or cause to be delivered) to Paragon
Auto, the Owner Trustee, the Note Insurer and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recordation, registration or filing. If PAC fails to perform its
obligations under this subsection, Paragon Auto, the Owner Trustee, the
Note Insurer or the Indenture Trustee may do so, at the expense of PAC.
(b) PAC shall not change its name, identity or corporate structure
in any manner that would make any financing statement or continuation
statement filed by PAC (or by Paragon Auto, the Trust or the Indenture
Trustee on behalf of PAC) in accordance with Section 4.1(a) seriously
misleading within the meaning of the applicable provisions of the UCC or
any title statute, unless PAC shall have given Paragon Auto, the Owner
Trustee, the Note Insurer and the Indenture Trustee at least 30 days prior
written notice thereof, and shall promptly file appropriate amendments to
all previously filed financing statements and continuation statements.
(c) PAC shall give Paragon Auto, the Owner Trustee, the Indenture
Trustee and the Note Insurer at least 30 days prior written notice of any
relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation
statement or of any new financing statement. PAC shall at all times
maintain each office from which it services Receivables and its principal
executive office within the United States of America.
(d) PAC, so long as PAC is 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) PAC shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to Paragon
Auto and the sale of the Receivables by Paragon Auto to the Trust, PAC's
master computer records (including any backup archives) that refer to any
Receivable indicate clearly that such Receivable is owned by the Trust.
Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on PAC's computer systems when, and only when, the Receivable
has been paid in full or purchased.
(f) If at any time PAC proposes to sell, grant a security interest
in, or otherwise transfer any interest in automotive receivables (other
than the Receivables) to any prospective purchaser, lender or other
transferee, PAC shall give to such prospective purchaser, lender or other
transferee computer tapes, records or print-outs (including any restored
from backup archives) that, if they shall refer in any manner whatsoever to
any Receivable, indicate clearly that such Receivable is owned by the Trust
(unless such Receivable has been paid in full or purchased).
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(g) Promptly after taking the foregoing actions described in
Sections 4.1(b) or (c), PAC shall deliver to the Indenture Trustee, the
Note Insurer and the Owner Trustee an Opinion of Counsel either (i) stating
that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary to
preserve and protect the interest of the Indenture Trustee in the Trust
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) stating that,
in the opinion of such counsel, no such action is necessary to preserve and
protect such interest.
SECTION 4.2. Other Liens or Interests. PAC shall not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
on, or restriction on transferability of, the Receivables, except for the
Lien in favor of Paragon Auto, the Lien in favor of the Trust, the Lien in
favor of the Indenture Trustee for the benefit of the Noteholders and the
Note Insurer and the restrictions on transferability imposed by the Related
Documents or (ii) sign or file under the UCC of any jurisdiction any
financing statement that names PAC or Paragon Auto as a debtor, or sign any
security agreement authorizing any secured party thereunder to file any
such financing statement, with respect to the Receivables, except in each
case any such instrument solely securing the rights and preserving the Lien
of Paragon Auto, the Lien of the Trust and the Lien of the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer or as
otherwise permitted under this Agreement or the Related Documents.
SECTION 4.3. Costs and Expenses. PAC shall pay all reasonable
costs and disbursements in connection with the performance of its
obligations hereunder, under each Subsequent Purchase Agreement and under
the Sale and Servicing Agreement and its Related Documents. PAC shall pay
or cause to be paid all reasonable costs and expenses of the Note Insurer,
including reasonable counsel fees and disbursements, incurred in connection
with the transfer of Subsequent Receivables.
ARTICLE V
REPURCHASES
SECTION 5.1. Repurchase of Receivables Upon Breach of Warranty.
Upon the occurrence of a PAC Repurchase Event, PAC shall, unless such
breach shall have been cured in all material respects, repurchase the
related Receivable from Paragon Auto as of the second Accounting Date (or
at PAC's election, the first Accounting Date) following its discovery or
its receipt of notice of any such PAC Repurchase Event and, on or before
the Deposit Date following such Accounting Date, PAC shall pay the Purchase
Amount to Paragon Auto and Paragon Auto shall deposit or cause to be
deposited such Purchase Amount into the Collection Account pursuant to
Section 4.4 of the Sale and Servicing Agreement; provided, however, that
the maximum aggregate purchase obligation of PAC with respect to breaches
of the representation and warranty made in clause (C) (II) of paragraph 4
of the Schedule B hereto shall not exceed an amount equal to 10% of the
aggregate principal balance of all Receivables originated after January 31,
1999. The obligation of PAC to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such
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obligation is fulfilled, constitute the sole remedy against PAC for such
breach available to Paragon Auto, the Note Insurer, the Indenture Trustee
on behalf of the Noteholders or the Noteholders.
SECTION 5.2. Reassignment of Purchased Receivables. Upon deposit
in the Collection Account of the Purchase Amount of any Receivables
repurchased by PAC under Section 5.1, Paragon Auto, the Owner Trustee and
the Indenture Trustee shall take any and all actions reasonably requested
by PAC, at the expense of PAC, to assign, without recourse, representation
or warranty, to PAC all of Paragon Auto's, the Indenture Trustee's and the
Trust's right, title and interest in and to such Receivables, such
assignment being an assignment outright and not for security; and PAC shall
thereupon own such Receivables and all such Other Conveyed Property with
respect to such Receivables, free of any further obligation to Paragon
Auto, the Trust, the Indenture Trustee, the Note Insurer or the Noteholders
with respect thereto. Paragon Auto shall take any and all actions
reasonably requested by PAC, at the expense of PAC, to release its security
interest in each such Receivable and in the Other Conveyed Property with
respect thereto. If, following the reassignment of a Purchased Receivable,
in any enforcement suit or legal proceeding, it is held that PAC may not
enforce any such Receivable on the ground that it shall not be a real party
in interest or a holder entitled to enforce the Receivable, Paragon Auto
shall, at the expense of PAC, take such steps as PAC deems reasonably
necessary to enforce the Receivable, including bringing suit in Paragon
Auto's name.
SECTION 5.3. Waivers. No failure or delay on the part of Paragon
Auto, the Note Insurer or the Trust, as purchaser and assignee of Paragon
Auto, in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or remedy preclude any other or future exercise
thereof or the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Liability of PAC. PAC shall be liable in accordance
herewith only to the extent of the obligations of this Agreement
specifically undertaken by PAC and its representations and warranties.
SECTION 6.2. Merger or Consolidation of PAC. PAC shall not merge
or consolidate with any other Person or permit any other Person to become
the successor to all or substantially all of PAC's business or assets
unless any such successor corporation shall execute an agreement of
assumption of every obligation of PAC under its Related Documents and,
whether or not such assumption agreement is executed, shall be the
successor to PAC under this Agreement without the execution or filing of
any document (or any further act on the part of any of the parties to this
Agreement). PAC shall provide prompt notice of any merger, consolidation or
succession pursuant to this Section 6.2 to the Owner Trustee, the Indenture
Trustee, the Note Insurer and the Rating Agency and the Note Insurer shall
have consented thereto; provided, however, if the successor to the Servicer
is rated at least investment grade by the Rating Agencies and is in the
business of
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servicing assets similar to the Receivables the Note Insurer's consent may
not be unreasonably withheld. Notwithstanding the foregoing, PAC shall not
merge or consolidate with any other Person or permit any other Person to
become a successor to PAC's business, unless: (i) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.1 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the
consummation of such transaction); (ii) PAC shall have delivered to the
Owner Trustee, the Indenture Trustee, the Rating Agency and the Note
Insurer an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of
assumption comply with this Section 6.2 and that all conditions precedent,
if any, provided for in this Agreement relating to such transaction have
been complied with; and (iii) PAC shall have delivered to the Owner
Trustee, the Indenture Trustee, the Rating Agency and the Note Insurer 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
interests of Paragon Auto, the Trust and the Indenture Trustee in the
Receivables or (B) no such action shall be necessary to preserve and
protect such interest.
SECTION 6.3. Limitation on Liability of PAC and Others. PAC and
any director or officer or employee or agent of PAC may rely in good faith
on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters
arising under this Agreement. PAC shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to
its obligations under this Agreement and that in its opinion may involve it
in any expense or liability.
SECTION 6.4. Conveyance of the Receivables and the Other Conveyed
Property to the Trust. PAC acknowledges that Paragon Auto intends, pursuant
to the Sale and Servicing Agreement, to convey the Receivables and the
Other Conveyed Property, together with its respective rights under this
Agreement and each Subsequent Purchase Agreement, to the Trust on the date
hereof with respect to the Initial Receivables, and on each Subsequent
Transfer Date, with respect to the related Subsequent Receivables. PAC
acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of
PAC contained in this Agreement and each Subsequent Purchase Agreement, and
the rights of Paragon Auto hereunder and each Subsequent Purchase
Agreement, are intended to benefit the Note Insurer, the Indenture Trustee,
the Trust and the Noteholders. In furtherance of the foregoing, PAC
covenants and agrees to perform its duties and obligations hereunder and
under each Subsequent Purchase Agreement in accordance with the terms
hereof for the benefit of the Note Insurer, the Indenture Trustee, the
Trust and the Noteholders and that, notwithstanding anything to the
contrary in this Agreement or any Subsequent Purchase Agreement, PAC shall
be directly liable to the Indenture Trustee, the Note Insurer and the Trust
(notwithstanding any failure by the Servicer, the Backup Servicer or
Paragon Auto to perform its duties and obligations hereunder or under the
Sale and Servicing Agreement), and that the Owner Trustee, the Note Insurer
and the Indenture Trustee may enforce the duties and obligations of PAC
under this Agreement or any Subsequent Purchase Agreement against PAC for
the benefit of the Trust, the Note Insurer or the Noteholders,
respectively.
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SECTION 6.5. Amendment.
(a) This Agreement may be amended by PAC and Paragon Auto, with
the prior written consent of the Note Insurer (so long as an Insurer
Default shall not have occurred and be continuing), which consent shall not
be unreasonably withheld, without the consent of any of the
Certificateholder or the Noteholders, (i) to cure any ambiguity, (ii) to
correct or supplement any provisions in this Agreement or (iii) for the
purpose of adding any provision to or changing in any manner or eliminating
any provision of this Agreement or of modifying in any manner the rights of
the Noteholders, provided, that any such action under this clause (a) shall
not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee,
the Note Insurer, the Indenture Trustee and the Rating Agency, adversely
affect in any material respect the interests of the Noteholders and the
Note Insurer.
(b) This Agreement may also be amended from time to time by PAC
and Paragon Auto, with the prior written consent of the Note Insurer (so
long as an Insurer Default shall not have occurred and be continuing), and
with the consent of a Note Majority (which consent of any Holder of a Note
given pursuant to this Section 6.5(b) or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all
future Holders of such Note and of any Note issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation
of such consent is made upon the Note), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of
the Noteholders; provided, however, that the Rating Agency Condition shall
have been satisfied with respect to any such amendment prior to the
execution thereof; and provided, further, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables, payments that shall be
required to be made on any Note, the Class A Interest Rate or (ii) reduce
the aforesaid percentage required to consent to any such amendment or any
waiver hereunder, without the consent of the Holders of all Notes then
outstanding.
(c) Prior to the execution of any such amendment or consent under
Section 6.5(a) or (b), PAC shall furnish five days prior written
notification of such amendment or consent to the Rating Agency. If an
Insurer Default has occurred and is continuing, written consent of the Note
Insurer shall be required prior to the execution of such amendment unless
such action shall not, as evidenced by an Opinion of Counsel delivered to
the Note Insurer and the Indenture Trustee, adversely affect in any
material respect the interests of the Note Insurer.
(d) Promptly after the execution of any such amendment or consent
under Section 6.5(b), the Indenture Trustee shall furnish a copy of such
amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 6.5(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Noteholders shall
be subject to such reasonable requirements as the Indenture Trustee may
prescribe.
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SECTION 6.6. Notices. All demands, notices and communications
under this agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of PAC and Paragon Auto, at the
following address: 27405 Puerta Real, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, Telecopy No.: (000) 000-0000, (b) in the case of the Indenture
Trustee, at the Corporate Trust Services/Asset- Backed Administration,
Norwest Center, Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000-0000, Telecopy No.: (000) 000-0000, (c) in the case of Xxxxx'x, at
the following address: 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: ABS Monitoring Group, Telecopy No: (000) 000-0000, (d) in the
case of S&P, at the following address: 00 Xxxxxxxx, 00xx xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attn: ABS Surveillance, Telecopy No: (000) 000-0000, and
(e) in the case of the Owner Trustee, at 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Trust Administration, and
(f) in the case of the Note Insurer, at the following address: 000 Xxxx
Xxxxxx, Xxxxxx, Xxx Xxxx, 00000, or at such other address as shall be
designated by any such party in a written notice to the other parties. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown
in the Note Register, and any notice so mailed within the time prescribed
in this Agreement shall be conclusively presumed to have been duly given,
whether or not the Noteholder receives such notice.
SECTION 6.7. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement, the Sale and Servicing Agreement and the
Related Documents set forth the entire understanding of the parties
relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement, the Sale and Servicing
Agreement and the Related Documents. This Agreement may not be modified,
amended, waived or supplemented except as provided herein.
SECTION 6.8. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this
Agreement.
SECTION 6.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 6.10. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute
but one and the same instrument.
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SECTION 6.11. Nonpetition Covenant. Until one year and one day
following the payment in full of all amounts due in respect of the Notes,
PAC shall not petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against Paragon Auto under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of Paragon Auto or any
substantial part of its property, or ordering the winding up or liquidation
of the affairs of Paragon Auto.
SECTION 6.12. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 6.2, this Agreement
may not be assigned by PAC.
SECTION 6.13. Third-Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties hereto, the Trust,
the Indenture Trustee, the Note Insurer and their respective successors and
permitted assigns. Except as otherwise provided in this Article VI, no
other Person shall have any right or obligation hereunder. Nothing in this
Agreement, express or implied, shall give to any Person, other than the
parties hereto, the Trust, the Indenture Trustee, the Note Insurer and
their successors hereunder and permitted assigns, any benefit or any legal
or equitable right, remedy or claim under this Agreement.
SECTION 6.14. Successors and Assigns. This Agreement shall be
binding upon the parties hereof and their respective successors and
assigns, and shall inure to the benefit of and be enforceable by the
parties hereof, the Trust, the Indenture Trustee, the Note Insurer and
their respective successors and assigns permitted hereunder. All covenants
and agreements contained herein shall be binding upon, and inure to the
benefit of the Trust, the Indenture Trustee, the Note Insurer and the
Noteholders and their respective permitted successors and assigns, if any.
Any request, notice, direction, consent, waiver or other instrument or
action by any Noteholder shall bind its successors and assigns.
SECTION 6.15. Insurer Default. In the event any right of the Note
Insurer hereunder is suspended during the continuation of an Insurer
Default, such right automatically and forthwith shall be assigned to the
Indenture Trustee, and may be exercised by the Indenture Trustee, during
the continuation of such Insurer Default. Upon the cessation of such
Insurer Default, any such rights shall revert to the Note Insurer and shall
be exercisable solely by the Note Insurer.
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IN WITNESS WHEREOF, the parties have caused this Receivables
Purchase Agreement to be duly executed by their respective officers,
effective as of the day and year first above written.
PARAGON ACCEPTANCE CORPORATION, as
Seller
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
PARAGON AUTO RECEIVABLES
CORPORATION, as Purchaser
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
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SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Indenture Trustee.
A-1
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF SELLER
WITH RESPECT TO RECEIVABLES
1. Contract Origination Date. Each Initial Receivable has
a contract origination date on or before February 28, 1999, and
each Subsequent Receivable has a contract origination date on or
before the applicable Subsequent Cutoff Date.
2. Term of Receivables. Each Initial Receivable has an
original term of at least 18 months and not more than 72 months
and had a remaining term as of the Initial Cutoff Date of at least
12 months and not more than 72 months; each Subsequent Receivable
has an original term of at least 18 months and not more than 72
months and had a remaining term as of the Subsequent Cutoff Date
of at least 12 months and not more than 72 months; the weighted
average original contracted term of the Initial Receivables was 64
months as of the Initial Cutoff Date; the weighted average
remaining contracted term of the Initial Receivables was 61 months
as of the Initial Cutoff Date.
3. Characteristics of Receivables. (A) Each Receivable
(1) is denominated in U.S. dollars and has been originated in the
United States of America by PAC or by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's
business in each case in accordance in all material respects with
PAC's credit approval guidelines, and, to the best knowledge of
Seller, such Dealer had all necessary licenses and permits to
originate Receivables in the state where such Dealer was located,
(2) was fully and properly executed by the parties thereto, (3)
and if originated by a Dealer, was transferred to PAC from such
Dealer under an existing Dealer Agreement and Dealer Assignment
and was transferred to Paragon Auto pursuant to the Receivables
Purchase Agreement, (4) contains customary and enforceable
provisions such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the
collateral of the benefits of the security, (5) provides for level
monthly payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be greater
or smaller than the level payment), provided payments are made on
the applicable due dates, (6) as of the Initial Cutoff Date has an
Annual Percentage Rate of not less than 6.83% and not more than
17%, (7) provides for, if such contract is prepaid, a prepayment
that fully pays the Principal Balance and accrued interest at the
Annual Percentage Rate and (8) is a Simple Interest Receivable or
a Pre-Computed Receivable provided that not more than 12% of the
Receivables are Pre-Computed Receivables by Aggregate Principal
Balance; (B) as of the Initial Cutoff Date in the case of an
Initial Receivable, or as of the applicable Subsequent Cutoff
Date, in the case of a Subsequent Receivable, no Receivable has a
payment more than 10% of which is more than 29 days past due; (C)
each Receivable has a final scheduled payment due no later than
May 15, 2005; (D) as of the Initial Cutoff Date, not more than
93.40% of the aggregate principal balance of the Initial
Receivables represented financing of used vehicles, and the
remainder of the Initial Receivables represented financing of new
B-1
vehicles; (E) as of the Initial Cutoff Date, the average remaining
principal balance of the Initial Receivables was not more than
$18,648; and (F) as of the Initial Cutoff Date, the weighted
average Annual Percentage Rate of the Initial Receivables was not
less than 10.63%.
4. Principal Balance; Scheduled Payments. (A) Each
Receivable has an outstanding principal balance as of the Initial
Cutoff Date in the case of an Initial Receivable, or as of the
applicable Subsequent Cutoff Date in the case of a Subsequent
Receivable, of not less than $1,000 and not more than $85,000; (B)
each Receivable originated on or prior to January 31, 1999 had at
least one scheduled payment made prior to the date that is two
Business Days prior to the Closing Date; and (C) each Receivable
originated after January 31, 1999 either (I) has had (and each
Subsequent Receivable will have) at least one scheduled payment
made prior to the date that is two Business Days prior to the
Closing Date (or the Subsequent Transfer Date with respect to a
Subsequent Receivable) or (II) will have a first scheduled payment
made within 29 days of the due date thereof.
5. Characteristics of Obligors. As of the Initial Cutoff
Date with respect to an Initial Receivable and as of the
applicable Subsequent Cutoff Date with respect to a Subsequent
Receivable, no Obligor on any Receivable (A) was the subject of
any federal, state or other bankruptcy, insolvency or similar
proceeding pending on the date of application that is not
discharged, (B) was currently the subject of a judgment in favor
of PAC, and (C) had its related Financed Vehicle repossessed (or
subject to repossession).
6. Billing Addresses for Obligors. Based on the billing
addresses of the Dealers and the Principal Balances as of the
Initial Cutoff Date, the Obligors of approximately 28.42% of the
Receivables were located in California, the Obligors of
approximately 15.46% of the Receivables were located in North
Carolina, the Obligors of approximately 12.78% of the Receivables
were located in Texas, the Obligors of approximately 11.48% of the
Receivables were located in Virginia and no other state had a
concentration of more than 10% of the Receivables.
7. Location of Receivable Files. There exists a complete
Receivable File with respect to each Receivable that will have
been delivered to the Indenture Trustee on or prior to the Closing
Date with respect to the Initial Receivables and on or prior to
the applicable Subsequent Transfer Date with respect to Subsequent
Receivables and any exceptions set forth in the Indenture
Trustee's certificate will be corrected within 30 days.
8. Schedule of Receivables. The information with respect
to the Receivables set forth in the Schedule of Receivables has
been produced from the Electronic Ledger and is true and correct
in all material respects as of the close of business on the
Initial Cutoff Date and each Subsequent Cutoff Date.
9. Adverse Selection. No selection procedures having a
material adverse effect on the Trust, the Note Insurer or
Noteholders have been utilized in selecting the Receivables
B-2
from those receivables owned by PAC that met the selection
criteria contained in this Agreement. No advances were made to
qualify the Receivables under the eligibility criteria set forth
in this Schedule B.
10. Compliance with Law. Neither the Receivables nor the
sale of the related Financed Vehicles, at the time the related
Receivable was originated or made, contravened in any material
respect, and, at the date of transfer thereof contravenes in any
material respect, any requirements of applicable federal, state
and local laws, and regulations thereunder including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission
Act, the Xxxxxxxx-Xxxx Warranty Act, the Federal Reserve Board's
Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act
of 1940, each applicable state Motor Vehicle Retail Installment
Sales Act, and state adaptations of the National Consumer Act and
of the Uniform Consumer Credit Code, and other consumer credit
laws and equal credit opportunity and disclosure laws.
11. No Government Obligor. None of the Receivables is due
from the United States of America or any state or from any other
Governmental Authority.
12. Security Interest in Financed Vehicle. Each
Receivable has created, or will create when all required
procedures are completed by the Servicer, a valid, subsisting and
enforceable first priority perfected security interest in the
related Financed Vehicle in favor of PAC as secured party, and
such security interest is, or will be upon the completion of all
required procedures by the Servicer, prior to all other liens upon
and security interests in such Financed Vehicle that now exist or
may hereafter arise or be created (except, as to priority, for any
tax liens or mechanics' liens that may arise after the Closing
Date with respect to the Initial Receivables or after the
applicable Subsequent Transfer Date with respect to Subsequent
Receivables).
13. Binding Obligation; Receivables in Force. Each
Receivable is a binding obligation of its related Obligor and no
Receivable has been satisfied, subordinated or rescinded, nor has
any Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
14. No Amendments. As of the Initial Cutoff Date with
respect to the Initial Receivables or as of the applicable
Subsequent Cutoff Date with respect to Subsequent Receivables, no
Receivable has been amended, altered or modified; no provision of
any Receivable has been waived, other than any provisions
requiring vendor single interest insurance or late payment fees
and those waivers, alterations or modifications specifically
permitted pursuant to this Agreement or the Sale and Servicing
Agreement, and no more than 0.05% of the Receivables have been
extended beyond their original maturity dates. As of the Initial
Cutoff Date with respect to the Initial Receivables or as of the
applicable Subsequent Cutoff Date with respect to Subsequent
Receivables, no Receivable has been
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modified as a result of application of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended.
15. No Defenses. As of the Initial Cutoff Date with
respect to the Initial Receivables or as of the applicable
Subsequent Cutoff Date with respect to the Subsequent Receivables,
no right of rescission, setoff, counterclaim or defense exists
with respect to any Receivable. The operation of the terms of any
Receivable or the exercise of any right thereunder will not render
such Receivable unenforceable in whole or in part or subject to
any such right of rescission, setoff, counterclaim or defense.
16. No Liens. As of the Initial Cutoff Date with respect
to the Initial Receivables or as of the applicable Subsequent
Cutoff Date with respect to Subsequent Receivables, there are no
liens or claims existing or that have been filed for work, labor,
storage or materials relating to any of the related Financed
Vehicles that are liens prior to the security interest in the
related Financed Vehicles granted by the related Receivables.
17. No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer and was sold by the Dealer to PAC without
fraud or misrepresentation on the part of such Dealer in either
case.
18. No Default; Repossession. Except for payment
delinquencies continuing for a period of less than 31 days as of
the Initial Cutoff Date with respect to the Initial Receivables or
as of the applicable Subsequent Cutoff Date with respect to
Subsequent Receivables, no default, breach, violation or event
permitting acceleration under the terms of any Receivable has
occurred; no continuing condition that with notice or the lapse of
time would constitute a default, breach, violation, or event
permitting acceleration under the terms of any Receivable has
arisen; the Seller shall not waive and has not waived any of the
foregoing; and no related Financed Vehicle has been repossessed as
of the Initial Cutoff Date with respect to the Initial Receivables
or as of the applicable Subsequent Cutoff Date with respect to
Subsequent Receivables.
19. Insurance; Other. PAC, in accordance with its
customary procedures, has determined (A) that each Obligor, at the
time of origination, had obtained or agreed to obtain insurance
covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage (i) in an amount at least
equal to the lesser of (x) its maximum insurable value or (y) the
principal amount due from the Obligor under the related Receivable
and (ii) naming PAC as loss payee, (B) each Receivable that
finances the cost of premiums for credit life and accident or
health insurance is covered by an insurance policy and certificate
of insurance naming PAC as creditor under each such insurance
policy and certificate of insurance, and (C) as to each Receivable
that includes financing for the cost of a service contract, the
respective Financed Vehicle that secures the Receivable is covered
by a service contract. No Receivable has force-placed insurance.
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20. Title. No Receivable has been sold, transferred,
assigned or pledged by PAC to any Person other than the Seller or
a Warehouse Lender (and the Warehouse Liens shall be released as
of the Closing Date) or any such pledge that has been released on
or prior to the Closing Date with respect to the Initial
Receivables or the applicable Subsequent Transfer Date with
respect to the Subsequent Receivables. Immediately prior to the
transfer and assignment herein contemplated, PAC had good and
marketable title to each Receivable, and was the sole owner
thereof, free and clear of all Liens and, immediately upon the
transfer thereof, the Purchaser shall have good and marketable
title to each such Receivable, and will be the sole owner thereof,
free and clear of all Liens (other than Permitted Liens), and the
transfer has been perfected under the UCC. No Dealer has a
participation in, or other right to receive, proceeds of any
Receivable. PAC has not taken any action to convey any right to
any Person that would result in such Person having a right to
payments received under the related Insurance Policies or the
related Dealer Agreements or Dealer Assignments or to payments due
under such Receivables.
21. Marking of Receivables. On the Closing Date and each
Subsequent Transfer Date, PAC will have caused the portions of the
Electronic Ledger relating to the Receivables to be clearly and
unambiguously marked to show that the Receivables have been sold
by PAC to Paragon Auto in accordance with the terms of the
Receivables Purchase Agreement or the applicable Subsequent
Purchase Agreement and sold by Paragon Auto to the Trust in
accordance with the terms of the Sale and Servicing Agreement and
pledged to the Indenture Trustee for the benefit of the
Noteholders under the Indenture.
22. Computer Tape. The Computer Tape made available by
PAC to Paragon Auto on the Closing Date was complete and accurate
in all material respects as of the Initial Cutoff Date and
includes a description of the same Receivables that are described
in the Schedule of Receivables.
23. Lawful Assignment. No Receivable has been originated
in, or is subject to the laws of, any jurisdiction under which the
sale, contribution, transfer and assignment of such Receivable
under this Agreement shall be unlawful, void or voidable. PAC has
not entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion
of the Receivables.
24. All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Indenture Trustee a first priority perfected ownership interest in
the Receivables and the other Trust Property have been made.
25. One Original. There is only one original executed
copy of each Receivable.
26. Valid and Binding Obligation of Obligor. Each
Receivable is the legal, valid and binding obligation of the
Obligor thereunder and is enforceable in accordance with its
terms, except only as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally; all parties to such contract had
full
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legal capacity to execute and deliver such contract and all other
documents related thereto and to grant the security interest
purported to be granted thereby.
27. Title Documents. (A) If any Financed Vehicle was
originated in a state in which notation of security interest on
the title document is required or permitted to perfect such
security interest, the title document for such Financed Vehicle
shows, or if a new or replacement title document is being applied
for with respect to such Financed Vehicle, the title document will
be received within 180 days and will show, PAC named as the
original secured party under the related Receivables as the Holder
of a first priority security interest in such Financed Vehicle,
and (B) if any Financed Vehicle was originated in a state in which
the filing of a financing statement under the UCC is required to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show PAC named as the original
secured party under the related Receivable, and in either case, no
further action is required under the UCC or any titling statute or
act to continue the perfected status of the first priority
security interest in the Financed Vehicle against creditors of and
transferees from the original Obligor.
28. Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
29. Tax Liens. As of the Initial Cutoff Date with respect
to the Initial Receivables and as of the applicable Subsequent
Cutoff Date with respect to Subsequent Receivables, there is no
Lien against the related Financed Vehicles for delinquent taxes.
30. No Proceedings. There are no proceedings or
investigations pending, or to the best of PAC's knowledge,
threatened, before any Governmental Authority having jurisdiction
over PAC asserting the invalidity of any Receivable or seeking any
determination or ruling that could reasonably be expected to
materially and adversely affect payment on or enforceability of
any Receivable.
31. Valid Transfer. The conveyance by PAC hereunder
constitutes a valid transfer of all of PAC's right, title and interest
in and to the Receivables and the Other Conveyed Property.
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SCHEDULE C
LEGAL PROCEEDINGS
-----------------
None.
C-1
EXHIBIT A
SUBSEQUENT PURCHASE AGREEMENT
THIS SUBSEQUENT PURCHASE AGREEMENT, dated as of _______ __, 1999 (the
"Subsequent Purchase Agreement") is between Paragon Auto Receivables
Corporation, a Delaware corporation, as Purchaser ("Paragon Auto") and
Paragon Acceptance Corporation, a Delaware limited partnership, as Seller
("PAC").
WHEREAS, Paragon Auto, as Purchaser, has agreed to purchase from
PAC, as Seller, and PAC, pursuant to the Receivables Purchase Agreement,
dated as of March 30, 1999 (the "Receivables Purchase Agreement"), between
Paragon Auto, as Purchaser and PAC, as Seller, is selling and transferring
to Paragon Auto the Receivables listed on the Schedule of Subsequent
Receivables attached as Schedule A (the "Subsequent Receivables") and the
Other Conveyed Property with respect thereto.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, Paragon Auto and PAC hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the Receivables
Purchase Agreement.
SECTION 2. Conveyance of Subsequent Receivables. For value
received, in accordance with the Receivables Purchase Agreement, PAC does
hereby sell, assign, transfer and otherwise convey to Paragon Auto, all
right, title and interest of PAC in and to the Subsequent Receivables and
the Other Conveyed Property with respect thereto. It is the intention of
PAC and Paragon Auto that the transfer and assignment contemplated by this
Subsequent Purchase Agreement shall constitute a sale of the Subsequent
Receivables and the Other Conveyed Property with respect thereto from PAC
to Paragon Auto and the beneficial interest in and title to the Subsequent
Receivables and the Other Conveyed Property with respect thereto shall not
be part of PAC's estate in the event of the filing of a bankruptcy petition
by or against PAC under any bankruptcy law. If, notwithstanding the intent
of PAC and Paragon Auto, the transfer and assignment contemplated hereby is
held not to be a sale, PAC hereby grants a first priority security interest
to Paragon Auto in the property conveyed pursuant to this Section 2, and
this Subsequent Purchase Agreement shall be construed so as to further such
intent.
SECTION 3. Representations and Warranties of Paragon Auto. This
Agreement is made pursuant to and upon the representations, warranties,
covenants and agreements on the part of Paragon Auto contained in the
Receivables Purchase Agreement and is to be governed by the Receivables
Purchase Agreement. All of such representations, warranties, covenants and
agreements are hereby incorporated herein and are in full force and effect
as though specifically set forth herein.
A-1
SECTION 4. Representations and Warranties of PAC. This Agreement
is made pursuant to and upon the representations, warranties, covenants and
agreements on the part of PAC contained in the Receivables Purchase
Agreement and is to be governed by the Receivables Purchase Agreement. All
of such representations, warranties, covenants and agreements are hereby
incorporated herein and are in full force and effect as though specifically
set forth herein.
SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREFORE (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
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IN WITNESS WHEREOF, the undersigned has caused this Subsequent
Purchase Agreement to be duly executed this __ day of 1999, but effective
as of the date and year first written above.
PARAGON AUTO RECEIVABLES
CORPORATION, as Purchaser
By:__________________________________
Name:
Title:
PARAGON ACCEPTANCE CORPORATION, as
Seller
By:__________________________________
Name:
Title:
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SCHEDULE A
SUPPLEMENT TO SCHEDULE OF RECEIVABLES
FOR SUBSEQUENT TRANSFER DATE: ___________ ___, 1999
EXHIBIT B
FORM OF OFFICER'S CERTIFICATE
The undersigned hereby certifies that he is a duly authorized
officer of Paragon Acceptance Corporation, an Delaware Corporation
("Paragon"), and Paragon Auto Receivables Corporation, an Delaware
corporation ("Paragon Auto"), and that as such he is authorized to execute
and deliver this certificate in the name of and on behalf of Paragon and
Paragon Auto and represents, warrants and further certifies in his official
capacity, in the name and on behalf of Paragon and Paragon Auto, as follows
in connection with the transfer on __________, 1999 (the "Subsequent
Transfer Date") of Subsequent Receivables and Other Conveyed Property with
respect thereto by Paragon to Paragon Auto and by Paragon Auto to the
Trust:
1. Paragon Auto has provided Paragon, the Owner Trustee on behalf of
the Trust, the Indenture Trustee, the Note Insurer and the Rating
Agencies with an Addition Notice not later than ten days prior to
the Subsequent Transfer Date and has provided any information
reasonably requested by any of them with respect to such
Subsequent Receivables;
2. Paragon Auto has delivered to Paragon, the Owner Trustee on behalf
of the Trust, the Note Insurer and the Indenture Trustee a duly
executed Subsequent Purchase Agreement, including a Schedule of
Subsequent Receivables;
3. Paragon Auto, or Paragon on its behalf, has deposited in the
Collection Account all collections received in respect of such
Subsequent Receivables received after the related Subsequent
Cutoff Date;
4. As of the Subsequent Transfer Date, neither Paragon nor Paragon
Auto is insolvent nor have any of them been made insolvent by such
transfer nor are any of them aware of any pending insolvency;
5. The Funding Period has not terminated;
6. Paragon Auto has deposited the Subsequent Reserve Account Deposit in
the Reserve Account;
7. Paragon Auto has delivered to the Indenture Trustee the Receivable
Files relating to such Subsequent Receivables;
8. Both Paragon Auto and Paragon have delivered to the Rating
Agencies, the Note Insurer and the Indenture Trustee an Opinion of
Counsel with respect to the transfer of Subsequent Receivables
substantially in the form of the Opinion of Counsel relating to
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certain bankruptcy, insolvency, tax and security interest matters
delivered to the Rating Agencies, Paragon, the Note Insurer and
the Indenture Trustee on the Closing Date;
9. The Receivables in the Trust, including such Subsequent Receivables,
meet the following criteria: (A) the weighted average APR of the
Receivables in the Trust shall not be less than 10.60%; (B) no
Receivables shall have an APR less than 6.75%; (C) the weighted
average remaining term to maturity of the Receivables on the
Subsequent Transfer Date shall not be greater than 64 months;
(D) based upon the billing addresses of the Dealers, not more
than 10% of the aggregate Principal Balances of the
Receivables, including such Subsequent Receivables, are located
in any one state other than California, North Carolina,
Virginia or Texas; (E) at least 65% of the Receivables shall be
secured by automobiles and sports utility vehicles with a
manufacturer's suggested retail price when new of $20,000 or
more; (F) Pre-Computed Receivables shall not exceed 12% of the
Receivables by Aggregate Principal Balance; (G) no more than
45% of the Receivables shall have an original term of more than
60 months but less than or equal to 72 months; (H) no
Receivable shall have a Principal Balance less than $1,000 or
in excess of $85,000; and (I) no more than 4% of Aggregate
Principal Balance of the Receivables shall be rated "Credit
Tier A" as defined in Paragon's credit and collection policy;
10. No selection procedures adverse to the interests of the
Noteholders or the Note Insurer were utilized in selecting such
Subsequent Receivables;
11. Each of the conditions precedent specified in either Section
2.2(c) of the Receivables Purchase Agreement or Section 2.2(b) of
the Sale and Servicing Agreement has been satisfied; and
12. The representations and warranties set forth in Section 3.1 of the
Receivables Purchase Agreement are true and correct in all
material respects.
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Capitalized terms used herein which are not defined herein shall
have the meanings ascribed thereto in the Sale and Servicing Agreement,
dated as of March 30, 1999, between Paragon Auto, as Seller, Paragon Auto
Receivables Owner Trust 1999-A, as purchaser, Paragon, in its individual
capacity and as Servicer, and Norwest Bank Minnesota, National Association,
as Indenture Trustee and as Backup Servicer.
PARAGON AUTO RECEIVABLES CORPORATION
By:_________________________________
Name:
Title:
PARAGON ACCEPTANCE CORPORATION
By:_________________________________
Name:
Title:
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