Exhibit 4.2
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TRUST AGREEMENT
between
PARAGON ACCEPTANCE CORPORATION
[WILMINGTON TRUST COMPANY]
OWNER TRUSTEE
and
PARAGON AUTO RECEIVABLES CORPORATION
Dated as of __________ __, ____
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TABLE OF CONTENTS
Page
ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms..............................................1
SECTION 1.2. Usage of Terms.................................................3
ARTICLE II.
Organization
SECTION 2.1. Name...........................................................3
SECTION 2.2. Office.........................................................3
SECTION 2.3. Purposes and Powers............................................3
SECTION 2.4. Appointment of Owner Trustee...................................4
SECTION 2.5. Initial Capital Contribution of Trust Property.................4
SECTION 2.6. Declaration of Trust...........................................4
SECTION 2.7. No Liability of Certificateholder..............................5
SECTION 2.8. Title to Trust Property........................................5
SECTION 2.9. Situs of Trust.................................................5
SECTION 2.10. Representations and Warranties of each of PAC and the
Certificateholder(s)...........................................5
SECTION 2.11. Federal Income Tax Allocations.................................7
SECTION 2.12. Covenants of Paragon Auto......................................8
SECTION 2.13. Covenants of the Holders.......................................9
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership..............................................9
SECTION 3.2. The Certificates..............................................10
SECTION 3.3. Authentication of Certificates................................10
SECTION 3.4. Registration of Transfer and Exchange of Certificates.........10
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.............11
SECTION 3.6. Persons Deemed Certificateholder(s)...........................12
SECTION 3.7. Access to List of Certificateholder(s)' Names and Addresses...12
SECTION 3.8. Maintenance of Office or Agency...............................12
SECTION 3.9. ERISA Restrictions............................................13
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.......13
SECTION 4.2. Action by Certificateholder(s) with Respect to Certain
Matters.......................................................13
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SECTION 4.3. Action by Certificateholder(s) with Respect to Bankruptcy.....14
SECTION 4.4. Restrictions on Certificateholder(s)' Power...................14
SECTION 4.5. Majority Control..............................................15
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholder(s), the Internal Revenue Service and
Others........................................................15
SECTION 5.2. Signature on Returns; Tax Matters Partner.....................15
SECTION 5.3. Payments to Certificateholders................................16
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority.............................................16
SECTION 6.2. General Duties................................................16
SECTION 6.3. Action upon Instruction.......................................17
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions..................................................18
SECTION 6.5. No Action Except under Specified Documents or Instructions....18
SECTION 6.6. Restrictions..................................................18
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties...............................19
SECTION 7.2. Furnishing of Documents.......................................20
SECTION 7.3. Representations and Warranties................................20
SECTION 7.4. Reliance; Advice of Counsel...................................21
SECTION 7.5. Not Acting in Individual Capacity.............................21
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables......21
SECTION 7.7. Payments from Trust Property..................................22
SECTION 7.8. Doing Business in Other Jurisdictions.........................22
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses.............................23
SECTION 8.2. Indemnification...............................................23
SECTION 8.3. Payments to the Owner Trustee.................................23
SECTION 8.4. Non-recourse Obligations......................................24
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ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement................................24
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee...................25
SECTION 10.2. Resignation or Removal of Owner Trustee......................26
SECTION 10.3. Successor Owner Trustee......................................26
SECTION 10.4. Merger or Consolidation of Owner Trustee.....................27
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee................27
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments...................................29
SECTION 11.2. No Legal Title to Trust Property in Certificateholder(s).....30
SECTION 11.3. Limitations on Rights of Others..............................30
SECTION 11.4. Notices......................................................30
SECTION 11.5. Severability.................................................31
SECTION 11.6. Separate Counterparts........................................31
SECTION 11.7. Assignments..................................................31
SECTION 11.8. No Petition..................................................31
SECTION 11.9. Bankruptcy Matters...........................................31
SECTION 11.10. No Recourse..................................................32
SECTION 11.11. Headings.....................................................32
SECTION 11.12. GOVERNING LAW................................................32
SECTION 11.13. Servicer.....................................................32
EXHIBITS
Exhibit A Form of Certificate
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TRUST AGREEMENT, dated as of _________ __, ____, between
PARAGON ACCEPTANCE CORPORATION., a Delaware corporation ("PAC" or in its
capacity as Servicer, the "Servicer"), PARAGON AUTO RECEIVABLES
CORPORATION, a Delaware corporation, as trustor and as Holder of the
Certificate ("Paragon Auto"), and [Wilmington Trust Company, a Delaware
banking corporation], as Owner Trustee.
ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms. Capitalized terms used but
not defined herein shall have the meanings set forth in the Sale and Servicing
Agreement (as defined below). For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same
may be amended and supplemented from time to time.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.9.
"Certificate" means a certificate evidencing the
beneficial interest of a Certificateholder in the Issuer, substantially in
the form of Exhibit A.
"Certificate Balance" shall have the meaning assigned to
such term in Section 2.5.
"Certificate Percentage Interest" shall mean with respect
to any Certificate, the percentage interest of ownership in the Issuer
represented thereby as set forth on the face thereof.
"Certificate Register" and "Certificate Registrar" shall
mean the register mentioned in and the registrar appointed pursuant to
Section 3.4.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the
Owner Trustee, the principal corporate trust office of the Owner Trustee
located at [Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, Attention: Corporate Trust Administration], or at such
other address as the Owner Trustee may designate by notice to the
Certificateholder(s), and PAC, or the principal corporate trust office
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of any successor Owner Trustee (the address of which the successor owner
trustee will notify the Certificateholder(s), and PAC).
"Equity Interests" shall have the meaning assigned to
such term in Section 2.11.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Governmental Authority" shall mean any court or federal
or state regulatory body, administrative agency or other tribunal or other
governmental instrumentality.
"Holder" or "Certificateholder" shall mean the Person in
whose name a Certificate is registered on the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such
term in Section 8.2.
"Instructing Party" shall have the meaning assigned to such
term in Section 6.3(a).
"Issuer" shall mean the Trust established by this Agreement.
"Owner Trustee" shall mean [Wilmington Trust Company, a
Delaware banking corporation], not in its individual capacity but solely as
owner trustee under this Agreement, and any successor Owner Trustee
hereunder.
"Paragon Auto" shall mean Paragon Auto Receivables
Corporation, a Delaware corporation.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement, dated as of _________ __, ____, between the Issuer,
Paragon Auto, PAC, in its individual capacity and as Servicer, and [Norwest
Bank Minnesota, National Association], as Indenture Trustee and Backup
Servicer, as the same may be amended or supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References
herein to specific
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provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
SECTION 1.2. Usage of Terms. With respect to all terms
used in this Agreement, the singular includes the plural and the plural
includes the singular, words importing one gender include the other gender,
references to "writing" include printing, typing, lithography and other
means of reproducing words in a visible form, references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and
not prohibited by this Agreement, references to Persons include their
permitted successors and assigns, and the terms "include" or "including"
mean "include without limitation" or "including without limitation."
ARTICLE II.
Organization
SECTION 2.1. Name. There is hereby formed a trust to be
known as "Paragon Auto Receivables Owner Trust ____-_," in which name the
Owner Trustee may conduct the business of the Issuer, make and execute
contracts and other instruments on behalf of the Issuer and xxx and be sued
on behalf of the Issuer.
SECTION 2.2. Office. The office of the Issuer shall be
(a) in care of the Owner Trustee at the Corporate Trust Office or at such
other address in Delaware as the Owner Trustee may designate by written
notice to the Certificateholder(s) and PAC or (b) at the principal
corporate trust office of any successor Owner Trustee (the address of which
the successor Owner Trustee will notify the Certificateholder(s) and PAC).
SECTION 2.3. Purposes and Powers. (a) The purpose of the
Issuer is, and the Issuer shall have the power and authority, to engage in the
following activities:
(i) to acquire from time to time the Trust
Property;
(ii) to issue the Notes pursuant to the
Indenture and the Certificates pursuant to this Agreement, and to
sell the Notes and the Certificates;
(iii) with the proceeds of the sale of the
Notes, to fund Trust accounts, to pay the organizational, start-up
and transactional expenses of the Issuer and to pay the balance to
Paragon Auto pursuant to the Sale and Servicing Agreement;
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(iv) to assign, grant, transfer, pledge,
mortgage and convey the Trust Property to the Indenture Trustee
pursuant to the Indenture for the benefit of the Noteholders and
to hold, manage and distribute to the Certificateholder(s) and the
Seller pursuant to the terms of the Sale and Servicing Agreement
any portion of the Trust Property released from the Lien of, and
remitted to the Issuer pursuant to, the Indenture and the Sale and
Servicing Agreement;
(v) to enter into and perform its obligations
under the Related Documents to which it is a party;
(vi) to engage in those activities, including
entering into agreements, that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto
or connected therewith; and
(vii) subject to compliance with the Related
Documents, to engage in such other activities as may be required
in connection with conservation of the Trust Property and the
making of distributions to the Certificateholder(s) and the
Noteholders.
The Issuer is hereby authorized to engage in the foregoing activities. The
Issuer shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Related Documents.
SECTION 2.4. Appointment of Owner Trustee. Paragon Auto
hereby appoints the Owner Trustee as trustee of the Issuer effective as of
the date hereof, to have all the rights, powers and duties set forth
herein, and the Owner Trustee by execution hereof accepts such appointment.
SECTION 2.5. Initial Capital Contribution of Trust
Property. Paragon Auto hereby sells, assigns, transfers, conveys and sets
over to the Owner Trustee, as of the date hereof, the sum of $10 (the
"Initial Certificate Balance"). The Owner Trustee hereby acknowledges
receipt in trust from Paragon Auto, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Trust Property and shall
be deposited into the Collection Account.
SECTION 2.6. Declaration of Trust. The Owner Trustee
hereby declares that it will hold the Trust Property in trust upon and
subject to the conditions set forth herein for the use and benefit of the
Holders, subject to the obligations of the Issuer under the Related
Documents. The Issuer shall constitute a trust under Delaware
law, and this Agreement shall constitute the governing instrument of such
Delaware trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, until the Certificates are held by more
than one person or the Trust is recharacterized as a separate entity, the
Trust will be disregarded as an entity separate from its beneficial owner
and the Notes will be treated as debt of the
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Certificateholder. If the Certificates are held by more than one person or
the Trust is recharacterized as a separate entity, it is the intention of
the parties hereto that, solely for income and franchise tax purposes, the
Issuer shall be treated as a partnership with the assets of the partnership
being the Trust Property, the partners of the partnership being the
Certificateholders and the Notes being debt of the partnership. The parties
agree that, unless otherwise required by appropriate tax authorities, until
the Certificates are held by more than one person or the Trust is
recharacterized as a separate entity, the Trust will not file or cause to
be filed annual or other necessary returns, reports and other forms
characterizing the Issuer as a partnership for income and franchise tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein.
SECTION 2.7. No Liability of Certificateholder. No
Certificateholder shall have any personal liability for any liability or
obligation of the Issuer.
SECTION 2.8. Title to Trust Property. (a) Legal title to
all the Trust Property shall be vested at all times in the Issuer as a
separate legal entity except where applicable law in any jurisdiction
requires title to any part of the Trust Property to be vested in a trustee
or trustees, in which case title shall be deemed to be vested in the Owner
Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of
the Trust Property. The Holders shall be entitled to receive distributions
with respect to their undivided ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest by any Certificateholder of its
beneficial or other ownership interest in the Trust Property shall operate
to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any
part of the Trust Property.
SECTION 2.9. Situs of Trust. The Issuer shall be located
and administered in the State of Delaware or California. The Issuer's
assets shall be segregated. All bank accounts maintained by the Owner
Trustee on behalf of the Issuer shall be located in the State of Delaware.
Payments shall be received by the Issuer only in Delaware, Minnesota or
California and payments will be made by the Issuer only from Delaware. The
Issuer shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee, the Servicer or any agent of the Issuer from having employees
within or without the State of Delaware, Minnesota or California. The only
office of the Issuer shall be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of each of
PAC and the Certificateholder(s). Each of PAC and the Certificateholder(s)
makes the following representations and warranties as to itself upon which
the Owner Trustee relies in accepting the Trust Property in trust and
issuing the Certificates.
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(a) Organization and Good Standing. It is duly organized
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, 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, and has power and authority
to enter into and perform its obligations under its Related Documents.
(b) Due Qualification. It is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to
do so would have a material adverse effect on its ability to perform its
obligations under its Related Documents and its ability to enforce the
Receivables and the other Trust Property.
(c) Power and Authority. It has the power and authority
to execute and deliver this Agreement and its Related Documents and to
carry out its and their terms, and the execution, delivery and performance
of this Agreement and its Related Documents have been duly authorized by
all necessary corporate action.
(d) No Consent Required. No consent, license, approval,
authorization or order of, or registration, declaration or filing with, any
Governmental Authority or other Person is required to be made in connection
with the execution, delivery or performance of this Agreement or its
Related Documents or the consummation of the transactions contemplated
hereby or thereby, except such as have been duly made, effected or
obtained.
(e) No Violation. The execution, delivery and performance
by it of this Agreement and its Related Documents, the consummation of the
transactions contemplated hereby and thereby, 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, its certificate of incorporation or
bylaws, or any indenture, agreement, mortgage, deed of trust or other
instrument to which it 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 its
knowledge, violate any law, order, rule or regulation applicable to it of
any Governmental Authority having jurisdiction over it or any of its
properties.
(f) Binding Obligations. Its Related Documents, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of it enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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(g) No Proceedings. There are no proceedings or
investigations pending or, to the best of its knowledge, threatened against
it before any Governmental Authority having jurisdiction over it or its
properties (i) asserting the invalidity of any of the Related Documents,
(ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by the Related
Documents, (iii) seeking any determination or ruling that would have a
material adverse effect on the performance by it of its obligations under,
or the validity or enforceability of, any of the Related Documents or (iv)
seeking to materially and adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificates or seeking to
impose any excise, franchise, transfer or similar tax upon the Certificates
or the sale and assignment of the Receivables under the Related Documents.
SECTION 2.11. Federal Income Tax Allocations. If
Certificates are held by more than one person or the Trust is
recharacterized as a separate entity, interest payments on the Certificates
(or other interests in the Trust treated as equity in the Trust for
applicable tax purposes ("Equity Interests"), including interest on amounts
previously due on the Certificates or Equity Interests but not yet
distributed) shall be treated as "guaranteed payments" under Section 707(c)
of the Code. Net income of the Issuer for any month as determined for
Federal income tax purposes (and each item of income, gain, loss and
deduction entering into the computation thereof) shall be allocated:
(a) among the Certificateholders and Equity Interest
holders as of the close of business on the last day of such month,
in proportion to their ownership of principal amount of
Certificates and Equity Interests on such date, an amount of net
income up to the sum of: (i) the portion of the market discount on
the Receivables accrued during such month that is allocable to the
excess, if any, of the initial Certificate Balance over their
initial aggregate issue price, (ii) Certificateholders' and Equity
Interest holders' prepayment premium, if any, payable for such
month and (iii) any other amounts of income payable to the
Certificateholders or Equity Interest holders for such month; and
such sum of amounts specified in clauses (i) through (iii) of this
sentence shall be reduced by any amortization by the Trust of
premium on Receivables that corresponds to any excess of the issue
price of Certificates or Equity Interests over their principal
amount; and
(b) to Paragon Auto, and other holders of interests in
the Reserve Account, to the extent of any remaining net income, in
accordance with their respective interests therein.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a), subsequent net income shall first be
allocated to make up such shortfall before being allocated as provided in
the preceding sentence. Net losses of
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the Trust, if any, for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into
the computation thereof) shall be allocated to Paragon Auto (or other
holders of interests in the Reserve Account) to the extent Paragon Auto (or
such holders) are reasonably expected to bear the economic burden of such
net losses, and any remaining net losses shall be allocated among the
remaining Certificateholders and Equity Interest holders as of the close of
business on the last day of such month in proportion to their ownership of
principal amount of Certificates and Equity Interests on such day. Paragon
Auto is authorized to modify the allocations in this paragraph if necessary
or appropriate, in its sole discretion, for the allocations to fairly
reflect the economic income, gain or loss to Paragon Auto (or other holders
of interests in the Reserve Account) or to the Certificateholders or Equity
Interest holders, or as otherwise required by the Code. Notwithstanding
anything provided in this Section 2.11, if the Certificates are held solely
by one person or the Trust has not been recharacterized as a separate
entity, the application of this Section 2.11 shall be disregarded.
SECTION 2.12. Covenants of Paragon Auto. Paragon Auto
agrees and covenants for the benefit of each Holder and the Owner Trustee,
during the term of this Agreement, and to the fullest extent permitted by
applicable law, that:
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as permitted
by its certificate of incorporation and the other Related Documents;
(b) it shall not, for any reason, institute proceedings
for the Issuer to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Issuer, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to the bankruptcy of the Issuer,
or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Issuer or a substantial
part of the property of the Issuer or cause or permit the Issuer to make
any assignment for the benefit of creditors, or admit in writing the
inability of the Issuer to pay its debts generally as they become due, or
declare or effect a moratorium on the debt of the Issuer or take any action
in furtherance of any such action; and
(c) it shall not, for any reason, institute proceedings
for it to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consenting to reorganization or relief under any
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 it or a substantial part of its property, or
make any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts
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generally as they become due, or declare or effect a moratorium on its debt
or take any action in furtherance of any such action.
SECTION 2.13. Covenants of the Holders. Each Holder agrees:
(a) to be bound by the terms and conditions of the
Certificates of which such Holder is the owner and of this Agreement,
including any supplements or amendments hereto, and to perform the
obligations of a Holder as set forth therein or herein, in all respects as
if it were a signatory hereto. This undertaking is made for the benefit of
the Issuer, the Owner Trustee and all other Holders present and future;
(b) to hereby appoint Paragon Auto as such Holder's agent
and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Issuer and agree that, if requested by the Issuer,
it will sign such federal income tax information return in its capacity as
holder of an interest in the Issuer. Each Holder also hereby agrees that in
its tax returns it will not take any position inconsistent with those taken
in any tax returns filed by the Issuer;
(c) if such Holder is other than an individual or other
entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of
a Certificate in a taxable sale or exchange, within 30 days of the date of
the transfer; and
(d) until the completion of the events specified in
Section 9.1(e), not to, for any reason, institute proceedings for the
Issuer or Paragon Auto to be adjudicated a bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against
the Issuer or Paragon Auto, or file a petition seeking or consenting to
reorganization or relief under any 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 Issuer
or Paragon Auto or a substantial part of its property, or cause or permit
the Issuer or Paragon Auto to make any assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as
they become due, or declare or effect a moratorium on its debt or take any
action in furtherance of any such action.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the
Issuer by the contribution by Paragon Auto pursuant to Section 2.5 and upon the
issuance of the Certificates, Paragon Auto shall be the sole initial beneficiary
of the Issuer.
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SECTION 3.2. The Certificates. The Certificates shall be
initially issued to Paragon Auto in a Certificate Percentage Interest of
100%. The Certificates shall be executed on behalf of the Issuer by manual
or facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized
to sign on behalf of the Issuer shall be validly issued and entitled to the
benefit of this Agreement, notwithstanding that such individuals or any of
them shall have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of
authentication and delivery of such Certificates. A transferee of a
Certificate shall become a Certificateholder, and shall be entitled to the
rights and subject to the obligations of a Certificateholder hereunder,
upon due registration of such Certificate in such transferee's name
pursuant to Section 3.4.
SECTION 3.3. Authentication of Certificates. Concurrently
with the initial sale of the Receivables to the Issuer pursuant to the Sale
and Servicing Agreement, the Owner Trustee shall cause the Certificates in
an aggregate Certificate Percentage Interest equal to 100% to be executed
on behalf of the Issuer, authenticated and delivered to or upon the written
order of Paragon Auto, signed by its chairman of the board, its president
or any vice president, its treasurer or any assistant treasurer without
further corporate action by Paragon Auto, in authorized denominations. 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, executed by the Owner Trustee by manual signature. Such
authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 3.4. Registration of Transfer and Exchange of
Certificates. The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.8, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Owner Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein
provided. [Wilmington Trust Company] shall be the initial Certificate
Registrar.
The Certificate Registrar shall provide the Indenture
Trustee with a list of the names and addresses of the Certificateholder(s)
on the Closing Date. Upon any transfers of Certificates, the Certificate
Registrar shall promptly notify the Servicer and the Indenture Trustee of
the name and address of the transferee in writing, by facsimile.
Upon surrender for registration of transfer of any
Certificate at the office or agency maintained pursuant to Section 3.8, the
Owner Trustee shall execute,
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authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a
like class and aggregate Certificate Percentage Interest dated the date of
authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Certificates may be exchanged for other Certificates of
the same class in authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Certificateholder or his
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act. No transfer of a Certificate shall
be registered unless the transferee shall have provided an opinion of
counsel that no registration is required under the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended or any
applicable state laws. Each Certificate surrendered for registration of
transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
Notwithstanding the preceding provisions of this Section
3.4, the Owner Trustee shall not be required to make, and the Certificate
Registrar shall not be required to register, transfers or exchanges of
Certificates for a period of 15 days preceding the due date for any payment
with respect to the Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate shall be surrendered to
the Certificate Registrar, or if the Certificate Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there shall be delivered to the Certificate Registrar
and the Owner Trustee such security or indemnity as may be reasonably
required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Issuer shall execute and the
Owner Trustee, or the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any
11
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like class, tenor and Certificate Percentage Interest. In connection with
the issuance of any new Certificate under this Section 3.5, the Owner
Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Certificate issued pursuant
to this Section 3.5 shall constitute conclusive evidence of an ownership
interest in the Issuer, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
SECTION 3.6. Persons Deemed Certificateholder(s). Every
Person by virtue of becoming a Certificateholder in accordance with this
Agreement shall be deemed to be bound by the terms of this Agreement. Prior
to due presentation of a Certificate for registration of transfer, the
Owner Trustee and the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar, may treat the Person in whose name
any Certificate shall be registered in the Certificate Register as the
owner of such Certificate for the purpose of receiving distributions
pursuant to the Sale and Servicing Agreement and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar nor
any agent of the Owner Trustee or the Certificate Registrar shall be bound
by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholder(s)'
Names and Addresses. The Owner Trustee shall furnish or cause to be
furnished to the Servicer or PAC, within 15 days after receipt by the Owner
Trustee of a request therefor from such Person in writing, a list of the
names and addresses of the Certificateholder(s) as of the most recent
Record Date. If three or more Holders of Certificates or one or more
Holders of Certificates evidencing not less than a Certificate Percentage
Interest equal to 25% apply in writing to the Owner Trustee, and such
application states that the applicants desire to communicate with other
Certificateholder(s) with respect to their rights under this Agreement or
under the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to
the current list of Certificateholder(s). Each Holder or Owner, by
receiving and holding a Certificate, shall be deemed to have agreed not to
hold any of PAC, the Servicer, the Owner Trustee or any agent thereof
accountable by reason of the disclosure of its name and address, regardless
of the source from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner
Trustee shall maintain in [Wilmington, Delaware,] 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 Owner Trustee in
respect of the Certificates and the Related Documents may be served. The Owner
Trustee initially designates its Corporate Trust Office for such purposes.
The Owner Trustee shall give
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prompt written notice to PAC and the Certificateholder(s) of any change in
the location of the Certificate Register or any such office or agency.
SECTION 3.9. ERISA Restrictions. The Certificates may not
be acquired by or for the account of (i) an employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) that is subject to the provisions of Title 1 of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii)
any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding its beneficial ownership interest in its Certificate, the Holder
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to
Certain Matters. With respect to the following matters, the Owner Trustee
shall not take any of the actions set forth below unless at least 30 days
before the taking of such action, the Owner Trustee shall have notified the
Certificateholder(s) in writing of the proposed action and the
Certificateholder(s) shall have notified the Owner Trustee in writing that
such Certificateholder(s) have consented thereto:
(a) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(b) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any Noteholder is not
required and such amendment would materially and adversely affect the
interests of the Certificateholder(s); or
(c) the amendment, change or modification of the Sale and
Servicing Agreement, except to cure any ambiguity or defect or to amend or
supplement any provision in a manner that would not materially and
adversely affect the interests of the Certificateholder(s).
The Owner Trustee shall notify the Certificateholder(s) in writing of any
appointment of a successor Note Registrar, Indenture Trustee or Certificate
Registrar within five Business Days thereof.
SECTION 4.2. Action by Certificateholder(s) with Respect to
Certain Matters. The Owner Trustee shall not have the power, except upon the
direction of
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the Certificateholder(s) and in accordance with the Related Documents, to
(a) remove the Servicer under the Sale and Servicing Agreement or (b) sell
the Receivables after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon
written instructions signed by the Certificateholder(s) and the furnishing
of indemnification satisfactory to the Owner Trustee by the
Certificateholder(s).
SECTION 4.3. Action by Certificateholder(s) with Respect
to Bankruptcy. The Owner Trustee shall not have the power to, and shall
not, commence any proceeding or other actions contemplated by Section
2.12(b) relating to the Issuer without the unanimous prior approval of all
Certificateholder(s).
SECTION 4.4. Restrictions on Certificateholder(s)' Power.
(a) The Certificateholder(s) shall not direct the Owner Trustee to take or
refrain from taking any action if such action or inaction would be contrary
to any obligation of the Issuer or the Owner Trustee under this Agreement
or any of the Related Documents or would be contrary to Section 2.3 or
otherwise contrary to law nor shall the Owner Trustee be obligated to
follow any such direction, if given.
(b) To the fullest extent permitted by law, 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 or any Related Document, unless: (i) the Certificateholder(s) are
the Instructing Party pursuant to Section 6.3 and shall previously have
given to the Owner Trustee a written notice of default and of the
continuance thereof, as provided in this Agreement; (ii)
Certificateholder(s) evidencing not less than a Certificate Percentage
Interest equal to 25% shall have made written request to the Owner Trustee
to institute such action, suit or proceeding in its own name as Owner
Trustee under this Agreement and shall have offered to the Owner Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby; (iii) the Owner 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 Owner Trustee
pursuant to and in compliance with this Section 4.4(b) or Section 6.3;
provided, however, that each Certificateholder hereby agrees with every
other Certificateholder and the Owner 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 Certificateholder(s). For the protection and
enforcement
14
of the provisions of this Section 4.4, each and every Certificateholder and
the Owner Trustee shall be entitled to such relief as can be given either
at law or in equity.
SECTION 4.5. Majority Control. No Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Issuer except as expressly provided in this Agreement.
Except as expressly provided herein, any action that may be taken by the
Certificateholder(s) under this Agreement may be taken by the Instructing
Party. Except as expressly provided herein, any written notice of the
Certificateholder(s) delivered pursuant to this Agreement shall be
effective if signed by the Instructing Party.
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholder(s), the Internal Revenue Service and Others. Subject to
Section 2.6 of this Agreement, Paragon Auto shall: (a) maintain (or cause
to be maintained) the books of the Issuer on a calendar year basis on the
accrual method of accounting (including the allocations, net income and net
loss under Section 2.11); (b) prepare and deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required
(including Schedule K-1) to enable each Certificateholder to prepare its
federal and state income tax returns; (c) prepare and file or cause to be
filed such tax returns relating to the Issuer (including a partnership
information return, Form 1065), and direct the Owner Trustee or the
Servicer, as the case may be, to make such elections as may from time to
time be required or appropriate under any applicable state or federal
statute or rule or regulation thereunder so as to maintain the Issuer's
characterization as a partnership for federal income tax purposes; and (d)
collect or cause to be collected any withholding tax as required under the
Code with respect to income or distributions to Certificateholder(s) and
the appropriate forms relating thereto. Subject to Section 2.6, the Owner
Trustee shall make all elections pursuant to this Section 5.1 as directed
by Paragon Auto. The Owner Trustee shall sign all tax information returns
filed pursuant to this Section 5.1 and any other returns as may be required
by law, and in doing so shall rely entirely upon, and shall have no
liability for information provided by, or calculations provided by, Paragon
Auto or the Servicer, as the case may be. The Owner Trustee shall elect
under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Receivables. The Owner Trustee
shall not make the election provided under Section 754 of the Code.
SECTION 5.2. Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1 and subject to Section 2.6, the
Owner
15
Trustee shall sign on behalf of the Issuer the tax returns of the Issuer,
if any, unless applicable law requires a Certificateholder to sign such
documents, in which case such documents shall be signed by Paragon Auto.
(b) Subject to Section 2.6, Paragon Auto shall be the
"tax matters partner" of the Issuer pursuant to the Code.
SECTION 5.3. Payments to Certificateholders. On each
Payment Date, the Indenture Trustee will distribute to the
Certificateholder(s) as of the related Record Date each such
Certificateholder's Certificate Percentage Interest in the amount to be
distributed on such Payment Date pursuant to Section 4.5(a)(xii) of the
Sale and Servicing Agreement by wire transfer or check mailed to such
Certificateholder.
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is
authorized and directed to execute and deliver the Related Documents to
which the Issuer is named as a party and each certificate or other document
attached as an exhibit to or contemplated by the Related Documents to which
the Issuer is named as a party and any amendment thereto, in each case in
such form as Paragon Auto shall approve as evidenced conclusively by the
Owner Trustee's execution thereof, and on behalf of the Issuer, to direct
the Indenture Trustee to authenticate and deliver Class A Notes in the
aggregate principal amount of $_____________, and Class B Notes in the
aggregate principal amount of $____________. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all
actions required of the Issuer pursuant to the Related Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Instructing Party recommends with respect to the Related Documents so long
as such activities are consistent with the terms of the Related Documents.
Paragon Auto may execute any other closing certificates or receipts on
behalf of the Issuer.
SECTION 6.2. General Duties. It shall be the duty of the
Owner Trustee to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and to administer
the Issuer in the interest of the Holders, subject to the Related Documents
to which the Issuer is a party and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and
under the Related Documents to the extent the Servicer has agreed in the
Sale and Servicing Agreement or PAC or Paragon Auto has agreed in this
Agreement to perform any act or to discharge any duty of the Owner Trustee
or the Issuer hereunder or under any Related Document, and the Owner
Trustee shall not be liable for the
16
default or failure of the Servicer, PAC or Paragon Auto to carry out its
obligations under the Sale and Servicing Agreement or this Agreement,
respectively.
SECTION 6.3. Action upon Instruction. (a) Subject to
Article IV, the Certificateholder(s) acting by the Holders of Certificates
evidencing not less than a majority of the Certificate Percentage Interest
(the "Instructing Party") shall have the exclusive right to direct the
actions of the Owner Trustee in the management of the Issuer, so long as
such instructions are not inconsistent with the express terms set forth
herein or in any Related Document. The Instructing Party shall not instruct
the Owner Trustee in a manner inconsistent with this Agreement or the
Related Documents; provided, however, that the Owner Trustee in its
individual capacity shall not incur any liability for the good faith
compliance with any instructions received by it from an Instructing Party.
(b) The Owner Trustee shall not be required to take any
action hereunder or under any Related Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that
such action is likely to result in liability on the part of the Owner
Trustee or is contrary to the terms hereof or of any Related Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide
between alternative courses of action permitted or required by the terms of
this Agreement or any Related Document, the Owner Trustee shall promptly
give notice (in such form as shall be appropriate under the circumstances)
to the Certificateholder(s) requesting instruction as to the course of
action to be adopted, and to the extent the Owner Trustee acts in good
faith in accordance with any written instruction of the Instructing Party
received, the Owner Trustee shall not be liable on account of such action
to any Person. If the Owner Trustee shall not have received appropriate
instruction within ten days of delivery of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action, not inconsistent with this
Agreement or the Related Documents, as it shall deem to be in the best
interests of the Certificateholder(s), and shall have no liability to any
Person for such action or inaction.
(d) If the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Related Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or if this Agreement permits
any determination by the Owner Trustee or is silent or is incomplete as to
the course of action that the Owner Trustee is required to take with
respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholder(s) requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with
any such instruction
17
received, the Owner Trustee shall not be liable, on account of such action
or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of delivery of such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent
with this Agreement or the Related Documents, as it shall deem to be in the
best interests of the Certificateholder(s), and shall have no liability to
any Person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this
Agreement or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record,
sell, dispose of or otherwise deal with the Trust Property, or to otherwise
take or refrain from taking any action under, or in connection with, any
document contemplated hereby to which the Owner Trustee is a party, except
as expressly provided by the terms of this Agreement or in any document or
written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or
any Related Document against the Owner Trustee. The Owner Trustee shall
have no responsibility for preparing or filing any tax or securities law
filing or report with respect to the Issuer of the Notes or for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to record this Agreement or any Related
Document. The Owner Trustee nevertheless agrees that it will, at its own
cost and expense, promptly take all action as may be necessary to discharge
any Liens on any part of the Trust Property that result from actions by, or
claims against, the Owner Trustee (solely in its individual capacity) and
that are not related to the ownership or the administration of the Trust
Property.
SECTION 6.5. No Action Except under Specified Documents
or Instructions. The Owner Trustee shall not manage, control, use, sell,
dispose of or otherwise deal with any part of the Trust Property or take
any action on the part of the Issuer except (a) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (b) in accordance with the Related Documents
and (c) in accordance with any document or instruction delivered to the
Owner Trustee pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not
take any action that, to the actual knowledge of the Owner Trustee, would
result in the Issuer's becoming taxable as a corporation for federal income
tax purposes or for the purposes of any applicable state tax on
corporations. The Certificateholder(s) shall not direct the Owner Trustee
to take action that would violate the provisions of this Section 6.6.
18
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner
Trustee accepts the trusts hereby created and agrees to perform its duties
hereunder with respect to such trusts but only upon the terms of this
Agreement. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Property upon the terms of
the Related Documents and this Agreement. The Owner Trustee (in its
individual or trust capacities) shall not be answerable or accountable
hereunder or under any Related Document under any circumstances, except (i)
for its own willful misconduct, bad faith or gross negligence (or ordinary
negligence in the handling of funds), (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 7.3 expressly made by
the Owner Trustee in its individual capacity, (iii) for liabilities arising
from the failure of the Owner Trustee to perform obligations expressly
undertaken by it in the last sentence of Section 6.4 or (iv) for taxes,
fees or other charges on, based on or measured by, any fees, commissions or
compensation received by the Owner Trustee. In particular, but not by way
of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee (in its individual or trust
capacities) shall not be liable for any error of judgment made by a
Responsible Officer of the Owner Trustee;
(b) the Owner Trustee (in its individual or trust
capacities) shall not be liable with respect to any action taken or omitted
to be taken by it in accordance with the instructions of the Instructing
Party, the Servicer or any Certificateholder;
(c) no provision of this Agreement or any Related
Document shall require the Owner Trustee (in its individual or trust
capacities) to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Related Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured or provided to it;
(d) the Owner Trustee (in its individual or trust
capacities) shall not be responsible for or in respect of the validity or
sufficiency of this Agreement or for the due execution hereof by PAC or
Paragon Auto or for the form, character, genuineness, sufficiency, value or
validity of any of the Trust Property or for or in respect of the validity
or sufficiency of the Related Documents, other than the certificate of
authentication on the Certificates, and the Owner Trustee shall in no event
assume or incur any liability, duty or obligation to PAC or Paragon Auto,
the Indenture Trustee, the Collateral Agent, any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the
Related Documents;
19
(e) the Owner Trustee (in its individual or trust
capacities) shall not be liable for the default or misconduct of Paragon
Auto, the Indenture Trustee, the Collateral Agent or the Servicer under any
of the Related Documents or otherwise, and the Owner Trustee shall have no
obligation or liability to perform the obligations under this Agreement or
the Related Documents that are required to be performed by Paragon Auto
under this Agreement, the Indenture Trustee under the Indenture or the
Servicer under the Sale and Servicing Agreement; and
(f) the Owner Trustee (in its individual or trust
capacities) 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 otherwise or in relation to this
Agreement or any Related Document, at the request, order or direction of
the Instructing Party or any of the Certificateholder(s), unless such
Instructing Party or Certificateholder(s) have offered to the Owner Trustee
security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that may reasonably be incurred by the Owner
Trustee therein or thereby. The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any Related Document
shall not be construed as a duty, and the Owner Trustee (in its individual
or trust capacities) shall not be answerable for other than its gross
negligence (or ordinary negligence in the handling of funds), bad faith or
willful misconduct in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee
shall furnish to the Certificateholder(s), promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other
instruments furnished to the Owner Trustee under the Related Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee
hereby represents and warrants in its individual capacity to PAC and the
Holders, that:
(a) It is a Delaware banking corporation, duly organized
and validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof will
20
contravene any federal or Delaware state law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper believed by it to be
genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that
the same is in full force and effect. As to any fact or matter the method
of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by
the president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and
such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance
thereon.
(b) In the exercise or administration of the trusts
hereunder and in the performance of its duties and obligations under this
Agreement or the Related Documents, the Owner Trustee (i) may act directly
or through its agents or attorneys pursuant to agreements entered into with
any of them, and the Owner Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such agents or attorneys shall
have been selected by the Owner Trustee with reasonable care, and (ii) may
consult with counsel, accountants and other skilled persons to be selected
with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in
accordance with the written opinion or advice of any such counsel,
accountants or other such persons and according to such opinion not
contrary to this Agreement or any Related Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as
provided in this Article VII, in accepting the trusts hereby created, the
Owner Trustee acts solely as Owner Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Related Document shall look only to the Trust Property for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or
Receivables. The recitals contained herein and in the Certificates (other than
the signature and countersignature of the Owner Trustee on the Certificates)
shall be taken as the statements of PAC and the Owner Trustee assumes no
responsibility for the
21
correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Related Document, the
Certificates (other than the signature and countersignature of the Owner
Trustee on the Certificates), the Notes or any Receivable or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability
of any Receivable, or the perfection and priority of any security interest
created by any Receivable in any Financed Vehicle or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of
the Trust Property or its ability to generate the payments to be
distributed to Certificateholder(s) under this Agreement or the Noteholders
under the Indenture, including: the existence, condition and ownership of
any Financed Vehicle; the existence and enforceability of any insurance
thereon; the existence and contents of any Receivable on any computer or
other record thereof; the validity of the assignment of any Receivable to
the Issuer or of any intervening assignment; the completeness of any
Receivable; the performance or enforcement of any Receivable; the
compliance by PAC, the Servicer or any other Person with any warranty or
representation made under any Related Document or in any related document
or the accuracy of any such warranty or representation or any action of the
Indenture Trustee or the Servicer or any subservicer taken in the name of
the Owner Trustee.
SECTION 7.7. Payments from Trust Property. All payments
to be made by the Owner Trustee under this Agreement or any of the Related
Documents to which the Issuer or the Owner Trustee is a party shall be made
only from the income and proceeds of the Trust Property, only to the extent
not otherwise directed to be made by the Indenture Trustee and only to the
extent that the Owner Trustee shall have received income or proceeds from
the Trust Property to make such payments in accordance with the terms
hereof. [Wilmington Trust Company] or any successor thereto, in its
individual capacity, shall not be liable for any amounts payable under this
Agreement or any of the Related Documents to which the Issuer or the Owner
Trustee is a party, except any Expenses arising from or resulting from any
of the matters described in the third sentence of Section 7.1.
SECTION 7.8. Doing Business in Other Jurisdictions.
Notwithstanding anything contained to the contrary, neither [Wilmington
Trust Company] or any successor thereto, nor the Owner Trustee shall be
required to take any action in any jurisdiction other than in the State of
Delaware if the taking of such action will, even after the appointment of a
co-trustee or separate trustee in accordance with Section 10.5, (a) require
the consent or approval or authorization or order of or the giving of
notice to, or the registration with or the taking of any other action in
respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (b) result in any fee, tax
or other governmental charge under the laws of the State of Delaware
becoming payable by [Wilmington Trust Company] (or any successor thereto);
or (c) subject [Wilmington Trust Company] (or any successor thereto) to
personal jurisdiction in any jurisdiction other than the State of
22
Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by [Wilmington Trust Company] (or any
successor thereto) or the Owner Trustee, as the case may be, contemplated
hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive from the Issuer or Paragon Auto as compensation for
its services hereunder such fees as have been separately agreed upon before
the date hereof between PAC and the Owner Trustee, and the Owner Trustee
shall be entitled to be reimbursed by the Issuer or Paragon Auto for its
other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and
counsel as the Owner Trustee may employ in connection with the exercise and
performance of its rights and its duties hereunder and under the Related
Documents. The Owner Trustee shall also be entitled to be reimbursed by
Paragon Auto for any organizational expenses of the Issuer. Fees and
expenses of the Owner Trustee shall be paid pursuant to Section 4.5 of the
Sale and Servicing Agreement or by Paragon Auto.
SECTION 8.2. Indemnification. PAC shall indemnify the
Owner Trustee (in its individual and trust capacities) and its officers,
directors, successors, assigns, agents and servants (collectively, the
"Indemnified Parties") from and against, any and all liabilities,
obligations, losses, damages, taxes, penalties, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred
by, or asserted against any Indemnified Party in any way relating to or
arising out of this Agreement, the Related Documents, the Trust Property,
the administration of the Trust Property or the action or inaction of the
Owner Trustee hereunder; provided, however, that PAC shall not be liable
for or required to indemnify the Owner Trustee from and against Expenses
arising or resulting from any of the matters described in the third
sentence of Section 7.1. The indemnities contained in this Section 8.2 and
the rights under Section 8.1 shall survive the resignation or termination
of the Owner Trustee or the termination of this Agreement. In any event of
any claim, action or proceeding for which indemnity will be sought pursuant
to this Section 8.2, the Owner Trustee's choice of legal counsel shall be
subject to the approval of Paragon Auto, which approval shall not be
unreasonably withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid
to the Owner Trustee pursuant to this Article VIII or the Sale and Servicing
Agreement
23
shall be deemed not to be a part of the Trust Property immediately after such
payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding
anything in this Agreement or any Related Document, the Owner Trustee
agrees in its individual capacity and in its capacity as Owner Trustee for
the Issuer that all obligations of the Issuer to the Owner Trustee
individually or as Owner Trustee for the Issuer shall be recourse to the
Trust Property only and specifically shall not be recourse to the assets of
any Holder except as otherwise specifically agreed in this Agreement or the
Related Documents.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) The
Issuer shall dissolve and this Agreement shall terminate and be of no
further force or effect upon the later of (i) the maturity or other
liquidation of the last Receivable (including the purchase by the Servicer
at its option of the Receivables and other Trust Property of the Issuer as
described in Section 9.1 of the Sale and Servicing Agreement) and the
subsequent distribution of amounts in respect of such Receivables as
provided in the Related Documents, and (ii) the payment to
Certificateholders and Noteholders of all amounts required to be paid to
them pursuant to this Agreement and the Sale and Servicing Agreement;
provided, however, that the rights to indemnification under Section 8.2 and
the rights under Section 8.1 shall survive the dissolution of the Issuer.
The Servicer shall promptly notify the Owner Trustee of any prospective
termination or dissolution pursuant to this Section 9.1. The bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder,
shall not (x) operate to terminate this Agreement or dissolve the Issuer,
nor (y) entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the affairs of the Issuer or
Trust Property nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a), neither PAC nor
Paragon Auto nor any Certificateholder shall be entitled to revoke the
trust created hereby or otherwise dissolve the Issuer.
(c) Notice of any dissolution of the Issuer, specifying
the Payment Date upon which the Certificateholder(s) shall surrender their
Certificates to the Indenture Trustee for payment of the final distribution
and cancellation, shall be given by the Owner Trustee by letter to
Certificateholder(s) mailed within five Business Days of receipt of notice
of such termination from the Servicer given pursuant to Section
24
9.1 of the Sale and Servicing Agreement, stating (i) the Payment Date upon
or with respect to which final payment of the Certificates shall be made
upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final
payment, (iii) that the Record Date otherwise applicable to such Payment
Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Indenture Trustee
therein specified and (iv) that no amount will thereafter be payable under
the Certificates. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Indenture
Trustee at the time such notice is given to Certificateholder(s). Upon
presentation and surrender of the Certificates, the Indenture Trustee shall
cause to be distributed to Certificateholder(s) amounts distributable on
such Payment Date pursuant to Section 4.5(b)(xii) of the Sale and Servicing
Agreement.
If all of the Certificateholder(s) shall not surrender
their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall
give a second written notice to the remaining Certificateholder(s) 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 Owner Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining
Certificateholder(s) concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds held by the Issuer after
exhaustion of such remedies shall be distributed, subject to applicable
escheat laws, by the Indenture Trustee to Paragon Auto and Holders shall
look solely to Paragon Auto for payment.
(d) Any funds held by the Issuer after funds for final
payment have been distributed or set aside for payment shall be distributed
by the Owner Trustee to Paragon Auto.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee.
The Owner Trustee shall at all times be a corporation: (a) authorized to
exercise corporate trust powers; and (b) having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination
by federal or state authorities. 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 10.1, 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
25
report of condition so published. If at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section
10.1, the Owner Trustee shall resign immediately in the manner and with the
effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee.
The Owner Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to Paragon Auto and the
Servicer. Upon receiving such notice of resignation, Paragon Auto shall
promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee and one copy to the successor Owner Trustee. If no successor
Owner Trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee may petition any court of competent jurisdiction
for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be
eligible in accordance with the provisions of Section 10.1 and shall fail
to resign after written request therefor by Paragon Auto or any other
entity authorized to make such request, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent,
or a receiver of the Owner Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Owner Trustee or
of its property or affairs for the purpose of rehabilitation, conservation
or liquidation, then such requesting party may remove the Owner Trustee. If
Paragon Auto shall remove the Owner Trustee under the authority of the
immediately preceding sentence, Paragon Auto shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so
removed and one copy to the successor Owner Trustee and payment of all fees
owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions
of this Section 10.2 shall not become effective until acceptance of
appointment by the successor Owner Trustee pursuant to Section 10.3 and
payment of all fees and expenses owed to the outgoing Owner Trustee. The
Servicer shall provide notice of such resignation or removal of the Owner
Trustee to the Rating Agency.
SECTION 10.3. Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and
deliver to Paragon Auto, the Servicer and to its predecessor Owner Trustee
an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like
effect as if originally named as Owner Trustee. The predecessor
26
Owner Trustee shall upon payment of its fees and expenses deliver to the
successor Owner Trustee all documents and statements and monies held by it
under this Agreement. Paragon Auto and the predecessor Owner 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 Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such
successor Owner Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner
Trustee pursuant to this Section, the Servicer shall mail notice of the
successor of such Owner Trustee to all Certificateholder(s), the Indenture
Trustee, the Noteholders and the Rating Agency. If the Servicer shall fail
to mail such notice within 10 days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such
notice to be mailed at the expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee.
Any corporation into which the Owner Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Owner Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Owner Trustee, shall be the successor of
the Owner Trustee hereunder, provided such corporation shall be eligible
pursuant to Section 10.1, without the execution or filing of any instrument
or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Owner Trustee shall mail notice
of such merger or consolidation to the Rating Agency.
SECTION 10.5. Appointment of Co-Trustee or Separate
Trustee. Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust Property or any Financed Vehicle may at the
time be located, the Servicer and the Owner Trustee acting jointly shall
have the power and shall execute and deliver all instruments to appoint one
or more Persons to act as co-trustee, jointly with the Owner Trustee, or
separate trustee or separate trustees, of all or any part of the Trust
Property, and to vest in such Person, in such capacity, such title to the
Issuer, or any part thereof, and, subject to the other provisions of this
Section 10.5, such powers, duties, obligations, rights and trusts as the
Servicer and the Owner Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee 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
27
successor trustee pursuant to Section 10.1 and no notice of the appointment
of any co-trustee or separate trustee shall be required pursuant to Section
10.3.
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 Owner Trustee shall be conferred
upon and exercised or performed by the Owner 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 Owner 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, the Owner Trustee
shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations
(including the holding of title to the Issuer 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 Owner 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 Owner 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 Owner
Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Section 10.5. 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 Owner 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
Owner Trustee. Each such instrument shall be filed with the Owner Trustee
and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time
appoint the Owner 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 Owner Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
28
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments. (a) This
Agreement may be amended by PAC, Paragon Auto and the Owner Trustee, with
prior written notice to the Rating Agency, without the consent of any of
the Noteholders or any other Certificateholder(s): (i) to cure any
ambiguity or defect; (ii) to correct or supplement any provisions in this
Agreement; or (iii) for the purpose of adding any provision to or changing
in any manner or eliminating any provision of this Agreement or of
modifying in any manner the rights of the Certificateholders, provided,
that any such action under this clause (iii) shall not, as evidenced by an
Opinion of Counsel (which may be based upon a certificate of the Servicer)
delivered to the Owner Trustee and the Rating Agency, adversely affect in
any material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time
by PAC, Paragon Auto and the Owner Trustee, with prior written notice to
the Rating Agency and with the consent of the holders of Notes evidencing
not less than the Note Majority and the consent of the Certificateholder(s)
evidencing not less than a majority Certificate Percentage Interest (which
consent of any Holder of a Certificate or Note given pursuant to this
Section 11.1(b) or pursuant to any other provision of this Agreement shall
be conclusive and binding on such Holder and on all future Holders of such
Certificate or Note and of any Certificate or 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 Certificate or 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 or the Certificateholder(s); 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 Certificate
or Note, or yield on the Certificates or the Class A Interest Rate or the
Class B 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 Certificates then outstanding.
Promptly after the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the
substance of such amendment or consent to each Certificateholder, the
Noteholders, the Indenture Trustee and the Rating Agency.
It shall not be necessary for the consent of
Certificateholder(s), the Noteholders or the Indenture Trustee pursuant to
this Section 11.1(b) to approve the
29
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Certificateholder(s)
or Noteholders provided for in this Agreement or in any other Related
Document) and of evidencing the authorization of the execution thereof by
Certificateholder(s) or Noteholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Prior to the execution of any amendment to this
Agreement, the Owner 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 Section 11.1 and that all conditions
precedent to the execution and delivery of such amendment have been
satisfied. The Owner Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
SECTION 11.2. No Legal Title to Trust Property in
Certificateholder(s). The Certificateholder(s) shall not have legal title
to any part of the Trust Property. The Certificateholder(s) shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Articles V and IX. No transfer, by
operation of law or otherwise, of any right, title or interest of the
Certificateholder(s) to and in their ownership interest in the Trust
Property shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Trust Property.
SECTION 11.3. Limitations on Rights of Others. Except for
Section 2.7, the provisions of this Agreement are solely for the benefit of
the Owner Trustee (in its individual and trust capacities), PAC, the
Certificateholder(s), the Servicer and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Trust
Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing
and shall be deemed given upon receipt personally delivered, delivered by
overnight courier or mailed first class mail or certified mail, in each
case return receipt requested, and shall be deemed to have been duly given
upon receipt: (i) if to the Trust or the Owner Trustee, addressed to the
Corporate Trust Office; (ii) if to Paragon Auto, addressed to Paragon Auto
Receivables Corporation, 27405 Puerta Real, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Vice President-Finance, Telecopy No.: (949)
348-8707; and (iii) if to PAC, addressed to Paragon Acceptance Corporation,
27405 Puerta Real, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Vice President-Finance, Telecopy No.:
30
(000) 000-0000; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, 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, whether or not the
Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may
be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 11.7. Assignments. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
SECTION 11.8. No Petition. The Owner Trustee (not in its
individual capacity but solely as Owner Trustee), by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the
Indenture Trustee and each Noteholder by accepting the benefits of this
Agreement, hereby covenants and agrees that they will not at any time
institute against Paragon Auto, or join in any institution against Paragon
Auto of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States
federal or state bankruptcy or similar law in connection with any
obligations relating to the Certificates, the Notes, this Agreement or any
of the Related Documents.
SECTION 11.9. Bankruptcy Matters. No Certificateholder or
any party to this Agreement shall take any action to cause the Issuer to
dissolve in whole or in part or file a voluntary petition or otherwise
initiate proceedings to have the Issuer adjudicated bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings
against the Issuer, or file a petition seeking or consenting to
reorganization or relief of the Issuer as debtor under any applicable
federal or state law relating to bankruptcy, insolvency or other relief for
debtors with respect to the Issuer; or seek or consent to the appointment
of any trustee, receiver, conservator, assignee, sequestrator, custodian,
liquidator (or other similar official) of the Issuer or of all or any
31
substantial part of the properties and assets of the Issuer, or cause the
Issuer to make any general assignment for the benefit of creditors of the
Issuer or take any action in furtherance of any of the above actions unless
each Certificateholder and the Indenture Trustee shall have provided its
written consent.
SECTION 11.10. No Recourse. Each Certificateholder by
accepting a Certificate acknowledges that such Certificateholder's
Certificates represent beneficial interests in the Issuer only and do not
represent interests in or obligations of the Seller, the Servicer, Paragon
Auto, the Owner Trustee, the Indenture Trustee or any Affiliate thereof and
no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Certificates
or the Related Documents.
SECTION 11.11. Headings. The headings of the various
Articles and Sections herein are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Servicer. The Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the
Issuer all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer or Owner Trustee to prepare,
file or deliver pursuant to the Related Documents. Upon written request,
the Owner Trustee shall execute and deliver to the Servicer a limited power
of attorney appointing the Servicer the Issuer's agent and attorney-in-fact
to prepare, or cause to be prepared, execute and deliver all such
documents, reports, filings, instruments, certificates and opinions.
32
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed by their respective officers hereunto
duly authorized as of the day and year first above written.
[WILMINGTON TRUST COMPANY],
not in its individual capacity (except as
otherwise expressly set forth herein) but solely
as Owner Trustee
By:_____________________________________
Name: _______________________________
Title: ______________________________
PARAGON AUTO RECEIVABLES
CORPORATION, as Holder of the Certificate
By:______________________________________
Name: ________________________________
Title: _______________________________
Acknowledged and Agreed:
PARAGON ACCEPTANCE CORPORATION, as Servicer
By:____________________________
Name: _______________________________
Title: _______________________________
EXHIBIT A
____% Certificate Percentage Interest
NUMBER
R-
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT UNDER THE LIMITED
CIRCUMSTANCES SPECIFIED IN THE TRUST AGREEMENT.1
--------------------------
ASSET BACKED CERTIFICATE
--------------------------
evidencing a beneficial ownership interest in certain distributions of the
Issuer, as defined below, the property of which includes a pool of motor
vehicle retail installment contracts secured by new or used automobiles or
light trucks and sold by Paragon Acceptance Corporation, a Delaware
corporation ("PAC" or in its capacity as Servicer under the Sale and
Servicing Agreement (as defined below), the "Servicer") to Paragon Auto
Receivables Corporation., a Delaware corporation ("Paragon Auto"), and by
Paragon Auto to the Issuer.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. ANY RESALE,
TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION
OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE
SUCH REGISTRATION OR QUALIFICATION.
THIS CERTIFICATE MAY NOT BE PURCHASED BY EMPLOYEE BENEFIT PLANS THAT ARE
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), OR PERSONS USING ASSETS OF SUCH PLANS.
(This Certificate does not represent an interest in or obligation of PAC,
the Servicer, Paragon Auto or any Affiliate thereof, except to the limited
extent described below.)
---------------------
1 To be inserted on the Certificate to be held by Paragon Auto.
THIS CERTIFIES THAT _____________ is the registered owner of a __%
Certificate Percentage Interest that is a nonassessable, fully-paid,
beneficial ownership interest in certain distributions of Paragon Auto
Receivables Owner Trust ____-_ (the "Issuer") formed by Paragon Auto.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
[Wilmington Trust Company], [Wilmington Trust Company],
not in its individual not in its individual
capacity but solely as capacity but solely as
Owner Trustee or Owner Trustee
By: _______________________ By: __________________________
Authenticating Agent
By: __________________________
The Issuer was created pursuant to a Trust Agreement, dated as of
_________ ___, ____ (the "Trust Agreement"), between PAC, Paragon Auto and
[Wilmington Trust Company], as owner trustee (the "Owner Trustee"), a
summary of certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Asset Backed Certificates" (herein called the
"Certificates"). Also issued under the Indenture, dated as of _________ __,
____, between the Issuer, [Norwest Bank Minnesota, National Association],
as Indenture Trustee (the "Indenture Trustee"), are two classes of Notes
designated as "Class A _____% Asset Backed Notes" (the "Class A Notes") and
"Class B _____% Asset Backed Notes" (the "Class B Notes") (the "Class A
Notes", together with the Class B Notes, the "Notes"). This Certificate is
issued under and is subject to the terms, provisions and conditions of the
Trust Agreement, to which Trust Agreement the holder of this Certificate by
virtue of the acceptance hereof assents and by which such holder is bound.
The property subject to the Trust Agreement includes a pool of motor
vehicle retail installment contracts secured by new and used automobiles
and light trucks (the "Receivables"), all monies received thereunder or in
respect thereof on or after the Cutoff Date, security interests in the
vehicles financed thereby, certain bank accounts and the proceeds thereof,
proceeds from claims on certain insurance policies and certain other rights
under the
A-2
Trust Agreement and the Sale and Servicing Agreement, dated as of
__________ __, ____ (the "Sale and Servicing Agreement"), between PAC,
Paragon Auto and the Indenture Trustee, all right to and interest of
Paragon Auto in and to the Receivables Purchase Agreement, dated as of
__________ __, ____, between PAC and Paragon Auto, and all proceeds of the
foregoing.
Under the Trust Agreement, there will be distributed on the 15th
day of each month (or, if such 15th day is not a Business Day, the next
Business Day) (the "Payment Date"), commencing on ____________ 15, ____, to
the Person in whose name this Certificate is registered at the close of
business on the Business Day preceding such Payment Date (the "Record
Date"), such Certificateholder's Certificate Percentage Interest in the
amount to be distributed to Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
It is the intent of the Seller, the Servicer, Paragon Auto and
the Certificateholders that, for purposes of all applicable federal and
state income taxes, until the Certificates are held by more than one person
or the Trust is recharacterized as a separate entity, the Trust will be
disregarded as an entity separate from its owner. If the Certificates are
held by more than one person or the Trust is recharacterized as a separate
entity, it is the intent of Paragon Auto, the Servicer and the
Certificateholder that, for purposes of all applicable federal and state
income taxes, the Issuer will be treated as a partnership and the
Certificateholders (including Paragon Auto) will be treated as partners in
that partnership. Paragon Auto and any other Certificateholders by
acceptance of a Certificate, agree to treat, and to take no action
inconsistent with such treatment of, the Certificates for such tax
purposes.
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time
institute against the Issuer or Paragon Auto, or join in any institution
against the Issuer or Paragon Auto of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings
under any United States federal or state bankruptcy or similar law in
connection with any obligations relating to the Certificates, the Notes,
the Trust Agreement or any of the Related Documents.
Distributions on this Certificate will be made on behalf of the
Trust by the Indenture Trustee as provided in the Sale and Servicing
Agreement by wire transfer or check mailed to the Certificateholder of
record in the Certificate Register without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as otherwise
provided in the Trust Agreement and notwithstanding the above,
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the final distribution on this Certificate will be made after due notice by
the Indenture Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for the purpose by the Indenture Trustee in Minneapolis,
Minnesota.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, 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 Owner Trustee, on behalf of the Issuer
and not in its individual capacity, has caused this Certificate to be duly
executed.
PARAGON AUTO RECEIVABLES OWNER
TRUST ____-_
By: [WILMINGTON TRUST COMPANY],
not in its individual capacity but solely
as Owner Trustee
Dated: By:_________________________________________
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(Reverse of Certificate)
The Certificates do not represent an obligation of, or an
interest in, PAC, the Servicer, Paragon Auto, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated
herein or in the Trust Agreement, the Sale and Servicing Agreement or the
Related Documents. In addition, this Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment
to certain collections with respect to the Receivables, all as more
specifically set forth herein and in the Trust Agreement and the Sale and
Servicing Agreement. A copy of each of the Sale and Servicing Agreement and
the Trust Agreement may be examined during normal business hours at the
principal office of the Seller, and at such other places, if any,
designated by the Seller, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of PAC and the rights of the Certificateholder(s) under the
Trust Agreement at any time by PAC and the Owner Trustee with the consent
of Holders of Certificates evidencing not less than a majority of the
outstanding Certificate Percentage Interest of the Certificates. Any such
consent by the holder of this Certificate shall be conclusive and binding
on such holder and on all future holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the holders of any of
the Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate
for registration of transfer at the offices or agencies of the Certificate
Registrar maintained by the Owner Trustee in the City of Wilmington, State
of Delaware, accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Certificates in authorized
denominations evidencing the same aggregate interest in the Issuer will be
issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is [Wilmington Trust Company].
As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates in authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but
the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
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The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trust or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar, nor any such agent
shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust
Agreement and the Sale and Servicing Agreement and the Trust created by the
Trust Agreement shall terminate upon the payment to Certificateholder(s)
and Noteholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement. The Servicer of the
Receivables may at its option purchase Receivables and other property of
the Issuer at a price specified in the Sale and Servicing Agreement, and
such purchase of the Receivables and other property of the Issuer will
effect early retirement of the Certificates; provided, however, such right
of purchase is exercisable, subject to certain restrictions, only as of the
last day of any Collection Period as of which the Aggregate Principal
Balance has declined to less than 10% of the Cutoff Date Principal Balance.
The Certificates may not be purchased by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1)
of the Code or (c) any entity whose underlying assets include plan assets
by reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding this Certificate, the Holder hereof shall be deemed
to have represented and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of
PAC, Paragon Auto or the Servicer, as the case may be, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Certificate or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or
facsimile signature, this Certificate shall not entitle the holder hereof
to any benefit under the Trust Agreement or the Sale and Servicing
Agreement or be valid for any purpose.
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ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
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(Please print or type name and address, including postal zip code, of assignee)
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the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________ Attorney to transfer said Certificate on
the books of the Certificate Registrar, with full power of substitution in
the premises.
Dated:
___________________ *
Signature Guaranteed:
___________________ *
------------------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or
any change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
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