EXHIBIT 4.2
SALE AND SERVICING
AGREEMENT
among
TRIAD AUTOMOBILE RECEIVABLES TRUST 200__-__,
Issuer,
TRIAD FINANCIAL SPECIAL PURPOSE LLC,
Depositor,
TRIAD FINANCIAL CORPORATION,
Servicer and Custodian
and
[INDENTURE TRUSTEE],
Backup Servicer and Indenture Trustee
Dated as of ________, 200__
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.................................................... 1
SECTION 1.1. Definitions.......................................... 1
SECTION 1.2. Other Definitional Provisions........................ 17
ARTICLE II CONVEYANCE OF RECEIVABLES..................................... 18
SECTION 2.1. Conveyance of Receivables............................ 18
SECTION 2.2. [Reserved]........................................... 19
SECTION 2.3. Further Encumbrance of Trust Property................ 19
ARTICLE III THE RECEIVABLES.............................................. 19
SECTION 3.1. Representations and Warranties....................... 19
SECTION 3.2. Repurchase upon Breach of Representations and
Warranties........................................... 20
SECTION 3.3. Custody of Receivables Files......................... 21
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES................... 23
SECTION 4.1. Duties of the Servicer............................... 23
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Blocked Account Agreement............... 24
SECTION 4.3. Realization upon Receivables......................... 26
SECTION 4.4. Insurance............................................ 27
SECTION 4.5. Maintenance of Security Interests in Vehicles........ 28
SECTION 4.6. Covenants, Representations, and Warranties of
Servicer............................................. 29
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant...... 30
SECTION 4.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer............................................. 31
SECTION 4.9. Servicer's Certificate............................... 31
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.................................... 31
SECTION 4.11. Annual Independent Accountants' Report............... 32
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables................................ 32
SECTION 4.13. Reserved............................................. 33
SECTION 4.14. Fidelity Bond and Errors and Omissions Policy........ 33
ARTICLE V TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS....... 33
SECTION 5.1. Establishment of Trust Accounts...................... 33
SECTION 5.2. [Reserved]........................................... 35
SECTION 5.3. Certain Reimbursements to the Servicer............... 35
SECTION 5.4. Application of Collections........................... 35
SECTION 5.5. Spread Account....................................... 36
SECTION 5.6. Additional Deposits.................................. 36
SECTION 5.7. Distributions........................................ 36
SECTION 5.8. Note Distribution Account............................ 38
SECTION 5.9. Reserved............................................. 39
SECTION 5.10. Statements to Noteholders............................ 40
i
SECTION 5.11. [Optional Deposits by the Insurer.................... 41
ARTICLE VI [THE NOTE POLICY.............................................. 41
SECTION 6.1. Claims Under Note Policy............................. 41
SECTION 6.2. Preference Claims Under Note Policy.................. 42
SECTION 6.3. Surrender of Note Policy............................. 44
ARTICLE VII THE DEPOSITOR................................................ 44
SECTION 7.1. Representations of Depositor......................... 44
SECTION 7.2. Organizational Existence............................. 45
SECTION 7.3. Liability of Depositor............................... 45
SECTION 7.4. Merger or Consolidation of, or Assumption of the
Obligations of, Depositor............................ 46
SECTION 7.5. Limitation on Liability of Depositor and Others...... 46
SECTION 7.6. Ownership of the Certificates or Notes............... 46
ARTICLE VIII THE SERVICER................................................ 46
SECTION 8.1. Representations of Servicer.......................... 46
SECTION 8.2. Liability of Servicer; Indemnities................... 48
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer or Backup Servicer....... 48
SECTION 8.4. Limitation on Liability of Servicer, Backup Servicer
and Others........................................... 49
SECTION 8.5. Delegation of Duties................................. 50
SECTION 8.6. Servicer and Backup Servicer Not to Resign........... 50
ARTICLE IX DEFAULT....................................................... 51
SECTION 9.1. Servicer Termination Event........................... 51
SECTION 9.2. Consequences of a Servicer Termination Event......... 52
SECTION 9.3. Appointment of Successor............................. 53
SECTION 9.4. Notification to Noteholders.......................... 53
SECTION 9.5. Waiver of Past Defaults.............................. 54
ARTICLE X TERMINATION.................................................... 54
SECTION 10.1. Optional Purchase of All Receivables................. 54
ARTICLE XI ADMINISTRATIVE DUTIES OF THE SERVICER......................... 54
SECTION 11.1. Administrative Duties................................ 54
SECTION 11.2. Records.............................................. 56
SECTION 11.3. Additional Information to be Furnished to the
Issuer............................................... 57
ARTICLE XII MISCELLANEOUS PROVISIONS..................................... 57
SECTION 12.1. Amendment............................................ 57
SECTION 12.2. Protection of Title to Trust......................... 58
SECTION 12.3. Notices.............................................. 59
SECTION 12.4. Assignment........................................... 60
SECTION 12.5. Limitations on Rights of Others...................... 60
SECTION 12.6. Severability......................................... 61
SECTION 12.7. Separate Counterparts................................ 61
ii
SECTION 12.8. Headings............................................. 61
SECTION 12.9. Governing Law........................................ 61
SECTION 12.10. Assignment to Indenture Trustee...................... 61
SECTION 12.11. Nonpetition Covenants................................ 61
SECTION 12.12. Limitation of Liability of Owner Trustee and
Indenture Trustee.................................... 62
SECTION 12.13. Independence of the Servicer......................... 62
SECTION 12.14. No Joint Venture..................................... 62
SECTION 12.15. Nonpublic Personal Information....................... 62
SECTION 12.16. Regulation AB........................................ 63
SCHEDULES
Schedule A Schedule of Receivables
Schedule B Representations and Warranties
Schedule C Servicing Policies and Procedures
Schedule D Custodian Third Party Vendors
EXHIBITS
Exhibit A Form of Servicer's Certificate
Exhibit B Form of Note Guaranty Insurance Policy
iii
SALE AND SERVICING AGREEMENT dated as of _______, 200_, among TRIAD
AUTOMOBILE RECEIVABLES TRUST 200_-_, a Delaware statutory trust (the "Issuer"),
TRIAD FINANCIAL SPECIAL PURPOSE LLC, a Delaware limited liability company (the
"Depositor"), and TRIAD FINANCIAL CORPORATION, a California corporation
("Triad", in its capacity as Servicer, the "Servicer", and in its capacity as
Custodian, the "Custodian"), and [INDENTURE TRUSTEE], in its capacity as Backup
Servicer and Indenture Trustee (in such capacities, the "Backup Servicer" and
the "Indenture Trustee", respectively).
The Issuer desires to purchase the Receivables and Other Conveyed
Property;
The Depositor has purchased the Receivables and Other Conveyed
Property from Triad and is willing to sell the Receivables and Other Conveyed
Property to the Issuer;
The Servicer is willing to service the Receivables;
The Custodian is willing to take custody of the Receivable Files.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases will have the following meanings:
"Accounting Date" means, with respect to any Collection Period the
last day of such Collection Period.
"Additional Funds Available" means, with respect to any Distribution
Date, the sum of: (1) the Spread Account Draw Amount, if any, received by the
Indenture Trustee with respect to the Distribution Date; plus [(2) the Insurer
Optional Deposit, if any, received by the Indenture Trustee with respect to the
Distribution Date].
"Administrative Receivable" means, so long as Triad is the Servicer,
with respect to any Collection Period, a Receivable which the Servicer is
required to purchase pursuant to Section 4.7 on the Determination Date with
respect to such Collection Period.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
preceding Collection Period and (ii) any Receivable
that became a Purchased Receivable prior to the end of the preceding Collection
Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced at the time the
Receivable is originated in respect of accessories, insurance premiums, service
contracts, car club and warranty contracts and other items customarily financed
as part of retail automobile installment sale contracts or promissory notes, and
related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Auto Loan Purchase and Sale Agreement" means any agreement between a
Third-Party Lender and Triad relating to the acquisition of Receivables from a
Third Party Lender by Triad.
"Available Funds" means, for any Collection Period, the sum of (1) the
Collected Funds for the Collection Period; plus (2) all Purchase Amounts
deposited in the Collection Account with respect to the Collection Period, plus
income on investments held in the Collection Account, including earnings
transferred to the Collection Account pursuant to Section 5.1(b) hereof; plus
(3) the proceeds of any liquidation of the assets of the Issuer, other than Net
Liquidation Proceeds.
"Backup Servicer" means [Indenture Trustee].
"Base Servicing Fee" means, with respect to any Collection Period, the
fee payable to the Servicer for services rendered during such Collection Period,
which will be equal to one-twelfth of the Servicing Fee Rate multiplied by the
Pool Balance as of the opening of business on the first day of such Collection
Period.
"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Purchase Agreement, the Insurance Agreement, the Indenture,
and the other documents and certificates delivered in connection therewith.
"Blocked Account Agreement" means the Blocked Account Agreement with
Notice, dated as of April 29, 2005, by and among Triad, the Processing Bank,
Mellon Financial Services Corporation #1, Triad Automobile Receivables Warehouse
Trust and JPMorgan Chase Bank, N.A., as such agreement may be amended or
supplemented from time to time, unless JPMorgan Chase Bank, N.A. will cease to
be a party thereunder, or such agreement will be terminated in accordance with
its terms, in which event "Blocked Account Agreement" will mean such other
agreement, in form and substance acceptable to the Controlling Party, among the
Servicer, the Indenture Trustee and the Processing Bank.
"Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in the states of Delaware, California, or
New York are authorized or obligated to be closed.
"Certificate" means the trust certificate evidencing the beneficial
interest of the Certificateholder in the Trust.
2
"Certificateholders" means the Persons in whose name the Certificates
are registered.
"Class" means the [Class A-1 Notes], the [Class A-2 Notes], the [Class
A-3 Notes], the [Class A-4 Notes] or the Class B Notes, as the context requires.
"Class A Notes" means, collectively, the [Class A-1 Notes], the [Class
A-2 Notes], the [Class A-3 Notes] and the [Class A-4 Notes].
"Class A Noteholders" means holders of the Class A Notes.
"Class A Noteholders' Accelerated Principal Amount" means, for any
Distribution Date, the lesser of: (1) the sum of (a) the excess, if any, of the
amount of Available Funds on the Distribution Date over the amounts payable on
the Distribution Date under clauses (i) through (xiii) of Section 5.7(a); plus,
(b) the amounts, if any, on deposit in the Spread Account in excess of the
Spread Account Requirement for the Distribution Date; and (2) the excess, if
any, on the Distribution Date of (a) the Pro Forma Class A Note Balance for the
Distribution Date; over (b) the Required Pro Forma Class A Note Balance for the
Distribution Date.
"Class A Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for each Class of Class A Notes for such Distribution Date
and the Class A Noteholders' Interest Carryover Amount, if any, for each Class
of Class A Notes, calculated as of such Distribution Date.
"Class A Noteholders' Interest Carryover Amount" means, for any Class
of Class A Notes and any Determination Date, all or any portion of the Class A
Noteholders' Interest Distributable Amount for the Class for the immediately
preceding Distribution Date still unpaid as of the Determination Date, plus, to
the extent permitted by law, interest on the unpaid amount at the interest rate
paid on the Class of Notes from the preceding Distribution Date to but excluding
the related Distribution Date.
"Class A Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date and any Class of Class A Notes, the interest accrued
at the applicable Interest Rates during the applicable Interest Period on the
principal amount of the Notes of each Class of the Class A Notes outstanding as
of the end of the prior Distribution Date or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the amount, which will not be less than
zero, equal to the excess, if any, of (x) the sum of (i) the principal portion
of all Collected Funds received during the immediately preceding Collection
Period (other than with respect to Liquidated Receivables), including any full
and partial principal prepayments during such Collection Period, (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Collection Period (other than Purchased Receivables), (iii) the
principal portion of any Purchase Amounts received with respect to all
Receivables that became Purchased Receivables during the related Collection
Period, (iv) in the sole discretion of [the Insurer], the Principal Balance of
all the Receivables that were required to be purchased pursuant to Sections 3.2
and 4.7, during such Collection Period but were not purchased, (v) the aggregate
amount of Cram Down Losses that occurred during the related Collection Period,
and (vi) if the Notes have been accelerated pursuant to Section 5.2 of the
Indenture, the amount of money or property collected in respect of principal
collections pursuant to Section 5.4 of the
3
Indenture following such acceleration by the Indenture Trustee or Controlling
Party to the extent not used to pay interest to the Class A Notes pursuant to
Section 5.6 of the Indenture over (y) the sum of the Step-Down Amount, if any,
for such Distribution Date and amounts distributed under Section 5.7(a)(iv) and
(vii), if any, for such Distribution Date.
"Class A Noteholders' Parity Deficit Amount" means, for any
Distribution Date, the excess, if any, of (1) the aggregate remaining principal
amount of the Class A Notes outstanding on the Distribution Date after giving
effect to all reductions in such aggregate principal amount from sources other
than the Note Policy over (2) the Pool Balance at the end of the prior
Collection Period.
"Class A Noteholders' Principal Carryover Amount" means, as of any
Determination Date, all or any portion of the Class A Noteholders' Principal
Distributable Amount from the immediately preceding Distribution Date that
remains unpaid.
"Class A Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Principal
Distributable Amount for the Distribution Date and the Class A Noteholders'
Principal Carryover Amount, if any, as of the Distribution Date.
["Class A-1 Notes" has the meaning assigned to such term in the
Indenture.]
["Class A-2 Notes" has the meaning assigned to such term in the
Indenture.]
["Class A-3 Notes" has the meaning assigned to such term in the
Indenture.]
["Class A-4 Notes" has the meaning assigned to such term in the
Indenture.]
"Class B Notes" has the meaning assigned to such term in the
Indenture.
"Class B Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class B Noteholders'
Interest Carryover Amount, if any, calculated as of such Distribution Date.
"Class B Noteholders' Interest Carryover Amount" means, for any
Determination Date, all or any portion of the Class B Noteholders' Interest
Distributable Amount for the immediately preceding Distribution Date still
unpaid as of the Determination Date, plus, to the extent permitted by law,
interest on the unpaid amount at the interest rate paid on the Class B Notes
from the preceding Distribution Date to but excluding the related Distribution
Date.
"Class B Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the interest accrued during the applicable interest
period on the principal amount of the Class B Notes outstanding as of the end of
the prior Distribution Date or, in the case of the first Distribution Date, as
of the Closing Date.
"Closing Date" means _______, 200_.
"Collateral Insurance" has the meaning set forth in Section 4.4(a).
4
"Collected Funds" means, with respect to any Collection Period, the
amount of funds in the Collection Account representing collections on the
Receivables (other than Purchased Receivables) during such Collection Period,
including all Net Liquidation Proceeds collected during such Collection Period
(but excluding any Purchase Amounts).
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to the first Distribution
Date, the period beginning on the close of business on __________, 200_ and
ending on the close of business on _________, 200_. With respect to each
subsequent Distribution Date, "Collection Period" means the period beginning on
the open of business on the first day of the immediately preceding calendar
month and ending on the close of business on the last day of the immediately
preceding calendar month. Any amount stated "as of the close of business of the
last day of a Collection Period" will give effect to the following calculations
as determined as of the end of the day on such last day: (i) all applications of
collections and (ii) all distributions.
"Collection Records" means all manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
"Commission" means the U.S. Securities and Exchange Commission.
"Computer Tape" means the computer tapes or other electronic media
furnished by Triad to the Issuer and its assigns describing certain
characteristics of the Receivables as of the Cutoff Date.
"Contract" means a motor vehicle retail installment sale contract,
installment loan contract or note and security agreement.
"Controlling Party" means [the Insurer, provided that if (i) an
Insurer Default has occurred and is continuing or (ii) all amounts payable to
the Class A Noteholders under the Indenture and the Insurer under the Insurance
Agreement have been paid in full, then the Controlling Party means] the
Indenture Trustee acting at the direction of the Majority Noteholders.
"Copies" has the meaning set forth in Section 3.3(c).
"Corporate Trust Office" means (i) with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is _________________________, and (ii) with respect
to the Indenture Trustee and the Backup Servicer, the principal office at which
at any particular time its corporate trust business is administered, which at
the time of execution of this agreement is __________________________.
"Cram Down Loss" means, for any Receivable (other than a Purchased
Receivable or a Liquidated Receivable), if a court of appropriate jurisdiction
in an insolvency proceeding issued an order reducing the amount owed on the
Receivable or otherwise modifying or restructuring the scheduled payments to be
made on the Receivable, an amount equal to (i) the excess of the Receivable's
Principal Balance immediately prior to the order over the Receivable's Principal
Balance as reduced.
5
"Cumulative Net Losses" means with respect to any Determination Date,
the aggregate principal balance of all Net Liquidation Losses for each
Collection Period from the Closing Date to and including the last day of the
related Collection Period.
"Cumulative Net Loss Ratio" means with respect to any Determination
Date, the ratio, expressed as a percentage, computed by dividing (i) Cumulative
Net Losses as of such Determination Date by (ii) the Original Pool Balance.
"Cumulative Net Loss Trigger Event" means, with respect to any
Determination Date, the Cumulative Net Loss Ratio with respect to such
Determination Date exceeds the amounts set forth below:
DISTRIBUTION DATE OCCURRING IN: PERCENTAGE:
------------------------------- -----------
"Custodian" means Triad as custodian hereunder acting as agent for the
Indenture Trustee, or any other Person named from time to time as custodian
hereunder, which Person must be reasonably acceptable to the Controlling Party
[(the Custodian as of the Closing Date is acceptable to the Insurer as of the
Closing Date)].
"Cutoff Date" means __________, 200_.
"Dealer" means a dealer who sold a Financed Vehicle and who originated
and assigned the respective Receivable to Triad under a Dealer Agreement or
pursuant to a Dealer Assignment.
"Dealer Agreement" means any agreement between a Dealer and Triad
relating to the acquisition of Receivables from the Dealer by Triad.
"Dealer Assignment" means, with respect to a Receivable, the executed
assignment executed by the Dealer conveying such Receivable to Triad.
"Delinquency Rate" means, with respect to any Determination Date, a
fraction, expressed as a percentage, (a) the numerator of which is equal to the
Aggregate Principal Balance of all Receivables, other than Liquidated
Receivables, for which 10% or more of a Scheduled Receivables Payment was 60 or
more days delinquent as of the last day of the related Collection
6
Period and (b) the denominator of which is equal to the Aggregate Principal
Balance as of the last day of the related Collection Period.
"Depositor" means Triad Financial Special Purpose LLC, a Delaware
limited liability company.
"Determination Date" means, with respect to any Collection Period, the
3rd Business Day preceding the Distribution Date in the next Collection Period.
"Distribution Date" means, with respect to each Collection Period, the
__ day of the following Collection Period, or, if such day is not a Business
Day, the immediately following Business Day, commencing ________, 200_.
"Electronic Ledger" means the electronic master record of the motor
vehicle retail installment sale contracts, installment loan contracts and note
and security agreements of the Servicer.
"Eligible Deposit Account" means a segregated trust account with the
corporate trust department of a depository institution acceptable to [the
Insurer] organized under the laws of the United States of America or any one of
the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution and its corporate parent have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade
and a rating of at least A-1 by Standard &Poor's and/or P-1 by Xxxxx'x.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities, in each case denominated in United States dollars,
represented by instruments in bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia
(or any domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depository institution
authorities (including depository receipts issued by any such institution
or trust company as custodian with respect to any obligation referred to in
clause (a) above or portion of such obligation for the benefit of the
holders of such depository receipts); provided, however, that at the time
of the investment or contractual commitment to invest therein (which will
be deemed to be made again each time funds are reinvested following each
Distribution Date), the commercial paper or other short-term senior
unsecured debt obligations (other than such obligations the rating of which
is based on the credit of a Person other than such depository institution
or trust company) of such depository institution or trust company will have
a credit rating from Standard & Poor's of A-1+ and from Xxxxx'x of P-1;
7
(c) commercial paper and demand notes investing solely in commercial
paper having, at the time of the investment or contractual commitment to
invest therein, a rating from Standard & Poor's of A-1+ and from Xxxxx'x of
P-1;
(d) investments in money market funds (including funds for which the
Indenture Trustee or the Owner Trustee in each of their individual
capacities or any of their respective Affiliates is investment manager,
controlling party or advisor) having a rating from Standard & Poor's of AAA
and from Xxxxx'x of Aaa;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) referred to in clause (b) above;
(g) any other investment which would satisfy the Rating Agency
Condition and is consistent with the ratings of the Securities [and which,
so long as no Insurer Default has occurred and is continuing, has been
approved by the Insurer,] or any other investment that by its terms
converts to cash within a finite period, if the Rating Agency Condition is
satisfied with respect thereto; and
(h) cash.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Indenture Trustee or any of their respective
Affiliates. None of the Eligible Investments may have an "r"subscript as part of
its S&P rating. Each of the Eligible Investments must have a predetermined fixed
dollar amount that is due at maturity.
"Eligible Servicer" means, Triad Financial Corporation, as Servicer,
[Indenture Trustee], as Backup Servicer, or another Person which at the time of
its appointment as Servicer or Backup Servicer, (i) is servicing a portfolio of
motor vehicle retail installment sale contracts and/or motor vehicle installment
loan contracts, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability professionally and competently
to service a portfolio of motor vehicle retail installment sale contracts and/or
motor vehicle installment loan contracts similar to the Receivables with
reasonable skill and care, (iv) is qualified and entitled to use, pursuant to a
license or other written agreement, and agrees to maintain the confidentiality
of, the software which the Servicer uses in connection with performing its
duties and responsibilities under this Agreement or otherwise has available
software which is adequate to perform its duties and responsibilities under this
Agreement, and [(v) so long as no Insurer Default has occurred and is
continuing, is reasonably acceptable to the Insurer].
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FDIC" means the Federal Deposit Insurance Corporation.
8
"Final Scheduled Distribution Date" means with respect to (i) the
[Class A-1 Notes], the _____ 20__ Distribution Date, (ii) the [Class A-2 Notes],
the ______ 20__ Distribution Date, (iii) the [Class A-3 Notes], the ____ 20__
Distribution Date, (iv) the [Class A-4 Notes], the ______ 20__ Distribution Date
and (v) the Class B Notes, the ________ 20__ Distribution Date.
"Financed Vehicle" means an automobile or light-duty truck, together
with all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.
["Fitch" means Fitch Ratings, or its successor.]
"Indenture" means the Indenture dated as of ______, 200_, between the
Issuer and [Indenture Trustee], as Indenture Trustee, as the same may be amended
and supplemented from time to time.
"Indenture Trustee" means [Indenture Trustee], its successors in
interest and any successor trustee hereunder and under the Indenture.
"Indenture Trustee Fee" means, with respect to any Collection Period,
the fee payable to the Indenture Trustee for services rendered during such
Collection Period, which will be equal to $___.
"Independent Accountants" has the meaning set forth in Section 4.11.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation or
such Person's affairs, and such petition, decree or order will remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insolvency Proceeds" has the meaning set forth in Section 10.1(b).
["Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of ______, 200_, among the Insurer, the Trust, the Depositor, Triad and
the Indenture Trustee.]
["Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Insurance Agreement.]
["Insured Payment" has the meaning set forth in the Note Policy.]
9
["Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4) benefiting
the holder of the Receivable providing loss or physical damage, credit life,
credit disability, theft, mechanical breakdown or similar coverage with respect
to the Financed Vehicle or the Obligor.]
["Insurer" means [Insurer], a _______________ or any successor
thereto, as issuer of the Note Policy.]
["Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer failing to make a payment required under the Note
Policy in accordance with its terms;
(b) the Insurer (i) filing a petition or commencing any case or
proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (ii) making a
general assignment for the benefit of its creditors, or (iii) having an
order for relief entered against it under the United States Bankruptcy Code
or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or
(c) a court of competent jurisdiction, the ____________ or other
competent regulatory authority has entered a final and nonappealable order,
judgment or decree (i) appointing a custodian, trustee, agent or receiver
for the Insurer or for all or any material portion of its property or (ii)
authorizing the taking of possession of all or any material portion of the
property of the Insurer by a custodian, trustee, agent or receiver.]
["Insurer Optional Deposit" means, for any Distribution Date, an
amount other than an Insured Payment delivered by the Insurer, at its sole
option, for deposit into the Collection Account for any of the following
purposes: to provide funds to pay the fees or expenses of any of the Issuer's
service providers for the Distribution Date; or to include those amounts as part
of Additional Funds Available for the Distribution Date to the extent that
without them a draw would be required to be made on the Note Policy.]
"Interest Period" means, with respect to any Distribution Date, (i)
with respect to the [Class A-1 Notes], the period from and including the
preceding Distribution Date (or in the case of the first Distribution Date, from
and including the Closing Date) to, but excluding, such Distribution Date and
(ii) with respect to the [Class A-2 Notes], the [Class A-3 Notes], the [Class
A-4 Notes] and the Class B Notes, the period from and including the ____ day of
the prior calendar month (or in the case of the first Distribution Date, from
and including the Closing Date) to, but excluding, the 12th day of the calendar
month in which such Distribution Date occurs.
"Interest Rate" means, with respect to (i) the [Class A-1 Notes], ___%
per annum, (ii) the [Class A-2 Notes], ___% per annum, (iii) the [Class A-3
Notes], ___% per annum, (v) the [Class A-4 Notes], ___% per annum and (vi) the
Class B Notes, ___% per annum (in the case of the [Class A-1 Notes], computed on
the basis of a 360 day year and the actual number of days in the related
Interest Period and in the case of the [Class A-2 Notes], [Class A-3 Notes],
[Class A-4 Notes] and Class B Notes computed on the basis of a 360-day year
consisting of twelve 30-day months).
10
"Investment Earnings" means, with respect to any date of determination
and Trust Account, the investment earnings on amounts on deposit in such Trust
Account on such date.
"Issuer" means Triad Automobile Receivables Trust 200_-_, a Delaware
statutory trust.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" will mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means, with respect to any Collection Period,
any Receivable with respect to which any of the following has occurred: (i) 10%
or more of any Scheduled Receivable Payment is 120 days or more past due, except
Receivables with respect to which the related Financed Vehicle has been
repossessed within such 120 days; (ii) the earlier of (A) 90 days have elapsed
since the Servicer repossessed the Financed Vehicle and (B) the sale of the
related Financed Vehicle; or (iii) the Servicer has determined in good faith
that it has received all amounts it expects to recover.
"Lockbox Account" means an account maintained by the Processingr Bank
pursuant to Section 4.2(d).
"Majority Noteholders" has the meaning set forth in the Indenture.
"Monthly Extension Rate" means, with respect to any Accounting Date,
the fraction, expressed as a percentage, the numerator of which is the aggregate
Principal Balance of Receivables whose payments were extended during the related
Collection Period and the denominator of which is the Aggregate Principal
Balance as of the immediately preceding Accounting Date.
"Monthly Records" means all records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the originating Dealer; Obligor name;
Obligor address; Obligor home phone number; Obligor business phone number, if
any; original Principal Balance; original term; Annual Percentage Rate; current
Principal Balance; current remaining term; origination date; first payment date;
final scheduled payment date; next payment due date; new/used classification;
collateral description; days currently delinquent; number of contract extensions
(months) to date; amount of Scheduled Receivables Payment; and past due late
charges.
"Moody's" means Xxxxx'x Investors Service, Inc., or its successor.
"Net Liquidation Losses" means, with respect to any Determination
Date, the amount, if any, by which (a) the sum of (i) the Principal Balance of
all Receivables which became Liquidated Receivables during the related
Collection Period, and (ii) the aggregate of all Cram Down Losses that
11
occurred during such Collection Period, exceeds (b) the Net Liquidation Proceeds
received during the related Collection Period in respect of all Liquidated
Receivables.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, (1) proceeds from the disposition of the underlying Financed
Vehicle; plus (2) any related insurance proceeds; plus (3) other monies received
from the Obligor that are allocable to principal and interest due under the
Receivable; minus (4) the Servicer's reasonable out-of-pocket costs, including
repossession and resale expenses not already deducted from the proceeds, and any
amounts required to be remitted to the Obligor by law.
"Net Loss Rate" means, with respect to a Collection Period, the
fraction, expressed as a percentage, the numerator of which is equal to the
aggregate of the Net Liquidation Losses for such Collection Period and the
denominator of which is the Aggregate Principal Balance as of the first day of
such Collection Period.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
["Note Policy" means the note guaranty insurance policy issued by the
Insurer to the Indenture Trustee for the benefit of the Class A Noteholders.]
"Note Pool Factor" means, for each Class of Notes as of the close of
business on any date of determination, a seven-digit decimal figure equal to the
outstanding principal amount of such Class of Notes divided by the original
principal amount of such Class of Notes.
"Note Preference Claim" has the meaning set forth in Section 6.2(b).
"Noteholders" means the holders of the Class A Notes and Class B
Notes.
"Notes" means the Class A Notes and the Class B Notes.
"Obligor" on a Receivable means the purchaser or co-purchaser(s) of a
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any executive vice president or any vice president,
any treasurer, assistant treasurer, secretary or assistant secretary of the
Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel [reasonably
acceptable to the Insurer, which opinion is] satisfactory in form and substance
to the Indenture Trustee [and, if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the Insurer].
"Original Pool Balance" means, as of any date of determination,
$___________ (which is the Pool Balance as of the Cutoff Date).
"Originator" means Triad.
"Other Conveyed Property" means all property conveyed by the Depositor
to the Trust pursuant to Section 2.1(b) through (h).
12
"Overcollateralization Target Percentage" means (a) ____%; provided
that, if no Spread Cap Event (as defined in the Insurance Agreement) and no
Insurance Agreement Event of Default shall have occurred on the __th
Distribution Date, the Overcollateralization Target Percentage shall decline to
____%, beginning on such Distribution Date; provided further that, if no Spread
Cap Event (as defined in the Insurance Agreement) and no Insurance Agreement
Event of Default shall have occurred on the __th Distribution Date, the
Overcollateralization Target Percentage shall decline to ____%, beginning on
such Distribution Date; and provided further that, if no Spread Cap Event (as
defined in the Insurance Agreement) and no Insurance Agreement Event of Default
shall have occurred on the __th Distribution Date, the Overcollateralization
Target Percentage shall decline to ____%, beginning on such Distribution Date.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Owner Trustee Fee" means with respect to any Collection Period, the
fee payable to the Owner Trustee for services rendered during such Collection
Period, which will be equal to $___.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
["Policy Claim Amount" has the meaning set forth in the Note Policy.]
"Pool Balance" means, as of any date of determination, the Aggregate
Principal Balance at the end of the preceding Collection Period.
["Preference Amount" has the meaning set forth in the Note Policy.]
["Premium" means the premium payable to the Insurer, as specified in
the Insurance Agreement.]
"Principal Balance" means, for any Receivable as of any date of
determination, (i) the Amount Financed; minus (ii) the sum of (a) that portion
of all amounts received on or prior to that date and allocable to principal
according to the Receivable's terms, and (b) any Cram Down Losses for the
Receivable accounted for as of that date.
"Processing Bank" means, initially, Mellon Bank, N.A. and its
successors in interest, and thereafter a depository institution named by the
Servicer and approved by [the Insurer (so long as no Insurer Default has
occurred and is continuing)] which provides a lockbox as part of its normal and
customary services at which the Lockbox Account is established and maintained as
of such date; provided, however, that upon the occurrence of a Servicer
Termination Event, the Controlling Party may, in its sole discretion, cause the
Lockbox Account to be established at another bank.
"Pro Forma Class A Note Balance" means, for any Distribution Date, the
aggregate remaining principal amount of the Class A Notes outstanding on the
Distribution Date, after giving effect to distributions to be made on such
Distribution Date under clauses (i) through (xiii) of Section 5.7(a).
13
"Purchase Agreement" means the Purchase Agreement between the
Depositor and Triad, dated as of ________, 200_, as such Purchase Agreement may
be amended from time to time.
"Purchase Amount" means, with respect to a Receivable, the sum of (i)
the Principal Balance as of the date of purchase and (ii) an amount of interest
accrued thereon at the related Annual Percentage Rate from the end of the prior
Collection Period through the last day of the month of purchase.
"Purchased Receivable" means, with respect to any Collection Period, a
Receivable purchased as of the close of business on the last day of the
Collection Period by Triad or the Servicer so long as [Indenture Trustee] is not
acting as Servicer, as the result of a breach of a covenant or as an exercise of
its optional redemption right.
"Rating Agency" means Moody's, Standard & Poor's [and Fitch]. If no
such organization or successor maintains a rating on the Securities, "Rating
Agency" will mean a nationally recognized statistical rating organization or
other comparable Person designated by the Issuer [and reasonably acceptable to
the Insurer (so long as no Insurer Default has occurred and is continuing)],
notice of which designation will be given by the Issuer to the Indenture
Trustee, the Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency has been given 10 days (or such shorter period as will be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies has notified the Depositor, the Servicer, [the Insurer,] the
Indenture Trustee, the Owner Trustee and the Issuer in writing that such action
will not result in a reduction or withdrawal of the then current rating of the
Notes.
"Receivable" means any Contract listed on Schedule A (which Schedule
may be in the form of microfiche or a disk).
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" has the meaning set forth in the Indenture.
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Regulation AB" means Subpart 229.1100 - Asset Backed Securities
(Regulation AB), 17 C.F.R. Sections 229.1100-229.1123, as such may be amended
from time to time and subject to such clarification and interpretation as have
been provided by the Commission in the adopting release (Asset Backed
Securities, Securities Act Release No. 33-8518.70 Fed. Reg. 1,506, 1,531
(January 7, 2005)) or by the staff of the Commission, or as may be provided by
the Commission or its staff from time to time.
"Required Pro Forma Class A Note Balance" means, with respect to any
Distribution Date, a dollar amount equal to the product of (1) the difference
between (a) 100% and (b) the Overcollateralization Target Percentage for that
Distribution Date and (2) the Pool Balance as of the end of the prior Collection
Period.
14
"Schedule of Receivables" means the schedule of all motor vehicle
retail installment sale contracts, installment loan contracts and note and
security agreements originally held as part of the Trust which is attached as
Schedule A.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached as Schedule B.
"Scheduled Receivables Payment" means, with respect to any Collection
Period for any Receivable, the amount set forth in the Receivable as required to
be paid by the Obligor in the Collection Period. If, after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Collection Period is
modified so as to differ from the amount specified in the Receivable as a result
of (i) the order of a court in an insolvency proceeding involving the Obligor,
(ii) pursuant to the Servicemembers Civil Relief Act or (iii) modifications or
extensions of the Receivable permitted by Section 4.2(b), the Scheduled
Receivables Payment with respect to such Collection Period will refer to the
Obligor's payment obligation with respect to the Collection Period as so
modified.
"Securities" means, collectively, the Class A Notes, the Class B Notes
and the Certificates.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Contract" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of the Financed Vehicle.
"Servicer" means Triad as the servicer of the Receivables, and each
successor Servicer pursuant to Section 9.3.
"Servicer Termination Event" means an event specified in Section 9.1.
"Servicer's Certificate" means an Officer's Certificate delivered
pursuant to Section 4.9, substantially in the form of Exhibit A.
"Servicing Fee" has the meaning specified in Section 4.8.
"Servicing Fee Rate" means ___% per annum.
"Servicing Policies and Procedures" has the meaning specified in
Section 4.1.
"Simple Interest Method" means the method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of the payment that is allocated to interest is equal to the product of
the fixed rate of interest on the obligation multiplied by the period of time
expressed as a fraction of a year, based on the actual number of days elapsed
since the preceding payment under the obligation was made and 365 days in the
calendar year.
"Spread Account" means the account designated as such, established and
maintained pursuant to Section 5.5.
"Spread Account Draw Amount" means, for any Determination Date, the
amount, after taking into account the application on the Distribution Date of
Available Funds for the related
15
Collection Period, equal to any shortfall in the payment of amounts described in
clauses (i) through (vii) of Section 5.7(a).
"Spread Account Initial Deposit" means $________.
"Spread Account Requirement" means, with respect to the Closing Date
and for any Distribution Date, a dollar amount equal to: the Spread Account
Initial Deposit or, if a Spread Cap Event (as such term is defined in the
Insurance Agreement) has occurred and is continuing, ___% of the Original Pool
Balance.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The XxXxxx-Xxxx Companies, Inc., or its successor.
"Statutory Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time to
time.
"Step-Down Amount" means, with respect to any Distribution Date, the
excess, if any, of (x) the Required Pro Forma Class A Note Balance over (y) the
Pro Forma Class A Note Balance on such Distribution Date, calculated for this
definition only without deduction for any Step-Down Amount (i.e., assuming that
the entire amount described in clause (x) of the definition of "Class A
Noteholders' Monthly Principal Distributable Amount" is distributed as principal
on the Class A Notes).
"Supplemental Servicing Fee" means, with respect to any Collection
Period, all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, prepayment fees, extension fees and liquidation
fees collected on the Receivables during the Collection Period and any expenses
incurred by the Servicer in connection with repossession and liquidation of the
Financed Vehicle.
"Third-Party Lender" means an entity that originated a loan to a
consumer or was the original assignee of a motor vehicle retail installment sale
contract from a dealer for the purchase of a motor vehicle and sold the loan or
motor vehicle retail installment sale contract to Triad pursuant to an Auto Loan
Purchase and Sale Agreement.
"Third-Party Lender Assignment" means, with respect to a Receivable,
the assignment executed by a Third-Party Lender conveying the Receivable to
Triad.
"Triad" means Triad Financial Corporation, a California corporation,
and its successors and assigns.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
16
"Trust Agreement" means the Trust Agreement dated as of _______, 200_
among Triad, as the Administrator, the Depositor and the Owner Trustee, as
amended and restated as of ______, 200_ as the same may be amended and
supplemented from time to time.
"Trust Officer" means, (i) in the case of the Indenture Trustee, the
chairman or vice-chairman of the board of directors, any managing director, the
chairman or vice-chairman of the executive committee of the board of directors,
the president, any vice president, assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
and any assistant controller or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject, and (ii) in
the case of the Owner Trustee, any officer in the corporate trust office of the
Owner Trustee or any agent of the Owner Trustee under a power of attorney with
direct responsibility for the administration of any of the Basic Documents on
behalf of the Owner Trustee.
"Trust Property" means all right, title and interest of the Trust in
and to the property and rights assigned to the Trust pursuant to Section 2.1
hereof, all funds on deposit from time to time in the Trust Accounts (including
all Eligible Investments therein and all proceeds therefrom) and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust under this Agreement.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture, or, if not defined therein, in the
Trust Agreement.
(b) All terms defined in this Agreement will have the defined meanings when
used in any instrument governed hereby and in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such instrument,
certificate or other document, and accounting terms partly defined in this
Agreement or in any such instrument, certificate or other document to the extent
not defined, will have the respective meanings given to them under U.S.
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under U.S. generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document will control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement will refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to
17
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" means "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Depositor on the Closing Date of the Notes
and the Certificates and the other amounts to be distributed from time to time
to the order of the Depositor in accordance with the terms of this Agreement,
the Depositor does hereby sell, transfer, assign, set over and otherwise convey
to the Issuer, without recourse, all right, title and interest of the Depositor
in and to:
(a) the Receivables and all moneys received thereon after the Cutoff Date;
(b) an assignment of the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of the
Originator or the Depositor in such Financed Vehicles;
(c) any proceeds and the right to receive proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors and any proceeds from
the liquidation of the Receivables;
(d) the right to cause the related Dealer or Third-Party Lender to
repurchase Receivables pursuant to a Dealer Agreement or an Auto Loan Purchase
and Sale Agreement, respectively, as a result of a breach of representation or
warranty in the related Dealer Agreement or Auto Loan Purchase and Sale
Agreement, respectively;
(e) all rights, if any, to refunds for the costs of Service Contracts on
the related Financed Vehicles;
(f) the related Receivable Files;
(g) all of the Depositor's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreement,
including the Depositor's rights under the Purchase Agreement, to enforce the
delivery requirements, representations and warranties and the cure and
repurchase obligations of Triad under the Purchase Agreement; and
(h) the proceeds of any and all of the foregoing.
18
It is the intention of the Depositor that the transfer and assignment
contemplated by this Agreement constitutes a sale of the Receivables and Other
Conveyed Property from the Depositor to the Issuer and the beneficial interest
in and title to the Receivables and the Other Conveyed Property will not be part
of the Depositor's estate in the event of the filing of a bankruptcy petition by
or against the Depositor under any bankruptcy law. In the event that,
notwithstanding the intent of the Depositor, the transfer and assignment
contemplated hereby is held by a court of competent jurisdiction not to be a
sale, this Agreement will constitute a grant by the Depositor of a security
interest in all of its right, title and interest, whether now owned or existing
or hereafter acquired or arising, in the property referred to in this Section to
the Issuer for the benefit of the Indenture Trustee, the Noteholders [and the
Insurer].
SECTION 2.2. [Reserved].
SECTION 2.3. Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Depositor of the
Trust Property, all right, title and interest of the Depositor in and to such
item of Trust Property will terminate, and all such right, title and interest
will vest in the Trust, in accordance with the Trust Agreement and the Statutory
Trust Statute.
(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust will have the sole right to pledge or otherwise encumber such Trust
Property. Pursuant to the Indenture, the Trust will grant a security interest in
the Trust Property to the Indenture Trustee securing the repayment of the Notes
and the Issuer's obligations to [the Insurer]. The Certificates will represent
the beneficial ownership interest in the Trust Property, and the
Certificateholders will be entitled to receive distributions with respect
thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III of the
Indenture will, until payment in full of the Certificates, remain as covenants
of the Issuer for the benefit of the Certificateholders, enforceable by the
Certificateholders to the same extent as such covenants were enforceable by the
Noteholders prior to the discharge of the Indenture. Any rights of the Indenture
Trustee under Article III of the Indenture, following the discharge of the
Indenture, will vest in Certificateholders.
(d) The Indenture Trustee will, at such time as there are no Notes
outstanding and all sums due to the Indenture Trustee[, the Insurer] and the
Backup Servicer pursuant to the Indenture and this Agreement have been paid,
release any remaining portion of the Trust Property to the Certificateholder.
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties. The Depositor hereby conveys
to the Issuer its rights, title and interest in and to the representations and
warranties made by the Originator in respect of the Receivables pursuant to the
Purchase Agreement. In addition, the Depositor makes the following
representations and warranties, on which the Issuer relies in accepting the
Receivables and delivering the Securities. Such representations and warranties
speak as of the
19
Closing Date, but shall survive the transfer and assignment of the Receivables
by the Depositor to the Issuer and the pledge thereof to the Indenture Trustee
in accordance with the terms of the Indenture:
(a) Title. The Depositor shall convey to the Issuer all right, title and
interest of the Depositor in and to the Receivables, including all right, title
and interest of the Depositor in and to the security interests in the related
Financed Vehicles.
(b) All Filings Made. The Depositor has caused all filings (including UCC
filings) to be made in Delaware with respect to the sale of the Receivables to
the Issuer and the pledge contemplated in the Basic Documents to the Indenture
Trustee.
(c) Liens. The Depositor has not taken any actions to create, incur or
suffer to exist any Lien on or restriction on transferability of any Receivable
except for the Lien of the Indenture and the restrictions on transferability
imposed by this Agreement.
SECTION 3.2. Repurchase upon Breach of Representations and Warranties.
(a) The Depositor, the Servicer, [the Insurer,] the Indenture Trustee or
the Trust, as the case may be, will inform the other parties to this Agreement
and Triad promptly, by notice in writing, upon the discovery of any breach of
the representations and warranties referenced in Section 3.1 and in Schedule B
hereto. As of the last day of the second (or, if Triad so elects, the first)
month following the discovery by Triad or receipt by Triad of notice of such
breach, unless such breach is cured by such date, Triad will repurchase any
Receivable in which the interests of the Noteholders [or the Insurer] are
materially and adversely affected by any such breach as of such date. The
"second month" will mean the month following the month in which discovery occurs
or notice is given, and the "first month" will mean the month in which discovery
occurs or notice is given.
In consideration of and simultaneously with the repurchase of the
Receivable, Triad will remit to the Collection Account the Purchase Amount in
the manner specified in Section 5.6 and the Issuer and the Indenture Trustee
will execute such assignments and other documents reasonably requested by such
person in order to effect such repurchase. The Issuer and the Indenture Trustee
will take such steps in assigning such Receivable to Triad as are described in
Section 5.2 of the Purchase Agreement.
The sole remedy of the Issuer, the Owner Trustee, the Indenture
Trustee or the Noteholders with respect to a breach of representations and
warranties pursuant to Section 3.1 and the agreement contained in this Section
will be the repurchase of Receivables pursuant to this Section, subject to the
conditions contained herein or to enforce the obligation of Triad to repurchase
such Receivables pursuant to the Purchase Agreement. Neither the Owner Trustee
nor the Indenture Trustee will have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase of
any Receivable pursuant to this Section.
In addition to the foregoing and notwithstanding whether the related
Receivable has been purchased by Triad, Triad will indemnify the Trust, the
Indenture Trustee, the Backup Servicer, and the officers, directors, agents and
employees thereof, [the Insurer,] the Certificateholders and the Noteholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.
20
(b) Pursuant to Section 2.1, the Depositor conveyed to the Trust all of the
Depositor's right, title and interest in its rights and benefits, but none of
its obligations or burdens, under the Purchase Agreement including the
Depositor's rights under the Purchase Agreement to enforce the delivery
requirements, representations and warranties, indemnities and the cure or
repurchase obligations of Triad thereunder. The Depositor hereby represents and
warrants to the Trust that such assignment is valid and enforceable against the
Depositor.
SECTION 3.3. Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the Receivables
and the Other Conveyed Property to the Trust pursuant to this Agreement, the
Indenture Trustee hereby revocably appoints the Custodian, and the Custodian
hereby accepts such appointment, to act as the agent of the Indenture Trustee as
custodian of the following documents or instruments in its possession or in the
possession of third party vendors on behalf of the Custodian which will be
delivered to the Custodian as agent of the Indenture Trustee on or before the
Closing Date (with respect to each Receivable):
(i) the fully executed original of the Contract related to such
Receivable (together with any agreements modifying the Receivable,
including any extension agreements);
(ii) the original certificate of title (when received) indicating that
the Financed Vehicle is owned by the Obligor and subject to the interest of
Triad as first lienholder or secured party (including any Lien Certificate
received by Triad) or that it has been assigned to Triad as first
lienholder or secured party, or, if such original certificate of title has
not yet been received, a copy of the application therefor, showing Triad as
secured party and otherwise such related documents, if any, that Triad
keeps on file in accordance with its customary procedures; and
(iii) in connection with Receivable Files pertaining to retail
installment sale contracts, the original credit application, or a copy
thereof (collectively, the "Receivable Files").
(b) Upon payment in full of any Receivable, the Servicer will notify the
Custodian pursuant to a certificate of an officer of the Servicer (which
certificate will include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.1 have been so deposited) and will
request delivery of the Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Custodian will, upon
written request of an officer of the Servicer and delivery to the Custodian of a
receipt signed by such officer, cause the related Receivable File to be released
to the Servicer. The Servicer's receipt of a Receivable File will obligate the
Servicer to return the Receivable File to the Custodian when its need by the
Servicer has ceased unless the Receivable is repurchased as described in Section
3.2 or 4.7.
(c) The Custodian, or its third-party vendor, will hold the Receivable
Files on behalf of the Indenture Trustee and will maintain such accurate and
complete accounts, records and computer systems pertaining to each Receivable
File as will enable the Indenture Trustee to comply with the terms and
conditions of this Agreement. For so long as Triad is the Custodian, the
Custodian will maintain the Receivable Files at (i) its office located at 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000, (ii) with a
third-party service provider identified on Schedule D hereto, as it
21
may be modified from time to time by the Custodian with the consent of [the
Insurer], which will not be unreasonably withheld, or (iii) subject to the prior
written consent of [the Insurer, so long as no Insurer Default has occurred and
is continuing,] at such other office as will from time to time be identified to
the Indenture Trustee [and the Insurer]. Each Receivable will be identified on
the books and records of the Custodian in a manner that (i) indicates that the
Receivables are held by the Custodian on behalf of the Indenture Trustee and
(ii) is otherwise necessary, as reasonably determined by the Custodian. So long
as [Indenture Trustee] is not the Custodian, the Custodian will conduct, or
cause to be conducted, periodic physical inspections of the Receivable Files
held by it, and of the related accounts, records and computer systems, in such a
manner as will enable the Indenture Trustee, [the Insurer] and the Custodian to
verify the accuracy of the Custodian's inventory and recordkeeping. Such
inspections will be conducted at such times, in such manner and by such persons
including independent accountants, [as the Insurer] or the Indenture Trustee may
reasonably request and the cost of such inspections will be borne directly by
the Custodian, so long as [Indenture Trustee] is not the Custodian, and not by
the Indenture Trustee, but such inspections are not to take place more than once
per year. The Custodian will promptly report to [the Insurer and] the Indenture
Trustee any failure on its part to hold the Receivable Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Upon request, the Custodian will,
at the expense of the party making such request, make copies or other electronic
file records (e.g., diskettes, CDs, etc.) (the "Copies") of the Receivable Files
and will deliver such Copies to the Indenture Trustee and the Indenture Trustee
will hold such Copies on behalf of the Issuer Secured Parties.
(d) The Custodian will, subject only to the Custodian's security
requirements applicable to its own employees having access to similar records
held by the Custodian, which requirements will be consistent with the practices
of an institution that maintains custody of Receivable Files for its own
account, and at such times as may be reasonably imposed by the Custodian, permit
only [the Insurer and] the Indenture Trustee or their duly authorized
representatives, attorneys or auditors to inspect the Receivable Files and the
related accounts, records, and computer systems maintained by the Custodian
pursuant hereto at such times as [the Insurer or] the Indenture Trustee may
reasonably request during normal business hours.
(e) The Custodian will be deemed to have received proper instructions with
respect to the Receivable Files upon its receipt of written instructions signed
by a Responsible Officer of the Indenture Trustee. Such instructions may be
general or specific in terms. The Indenture Trustee will provide a copy of any
such instructions to the Insurer.
(f) The Custodian will indemnify the Issuer, the Owner Trustee, the Backup
Servicer, [the Insurer,] the Noteholders, the Certificateholders and the
Indenture Trustee for any and all liabilities, obligations, losses, damage,
payments, costs or expenses of any kind whatsoever (including the fees and
expenses of counsel) that may be imposed on, incurred or asserted against such
Persons and their respective officers, directors, employees, agents, attorneys
and successors and assigns as the result of any act or omission in any way
relating to the maintenance and custody by the Custodian or any third-party
vendor of the Receivable Files; provided, however, that the Custodian will not
be liable for any portion of any such liabilities, obligations, losses, damages,
payments, costs or expenses due to the willful misfeasance, bad faith or gross
negligence of the Issuer, the Owner Trustee, the Backup Servicer, [the Insurer]
or the Indenture Trustee or the officers, directors, employees and agents
thereof. In no event will the Custodian be liable to any third party for acts or
omissions of the Custodian other than as specifically set forth in this Section.
22
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer. (a) The Servicer is hereby authorized
to act as agent for the Trust and in such capacity will manage, service,
administer and make collections on the Receivables (other than Purchased
Receivables after the date of purchase thereof by Triad or the Servicer), and
perform the other actions required by the Servicer under this Agreement. The
Servicer agrees that its servicing of the Receivables will be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Servicer exercises from
time to time with respect to all comparable motor vehicle receivables that it
services for itself or others. In performing such duties, so long as Triad is
the Servicer, it will substantially comply with the policies and procedures
described on Schedule C (the "Servicing Policies and Procedures"), as such
policies and procedures may be updated from time to time. The Servicer's duties
will include collection and posting of all payments, responding to inquiries of
Obligors on the Receivables, investigating delinquencies, sending payment
coupons or statements to Obligors, reporting any required tax information to
Obligors, monitoring the collateral, complying with the terms of the Blocked
Account Agreement, accounting for collections and furnishing monthly and annual
statements to the Indenture Trustee [and the Insurer] with respect to
distributions, and performing the other duties specified herein.
(b) The Servicer will also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements and Auto Loan Purchase and Sale Agreements (and will maintain
possession of the Dealer Agreements and Auto Loan Purchase and Sale Agreements,
to the extent it is necessary to do so), the Dealer Assignments, the Third-Party
Lender Assignments and the Insurance Policies, to the extent that such Dealer
Agreements, Auto Loan Purchase and Sale Agreements, Dealer Assignments,
Third-Party Lender Assignments and Insurance Policies relate to the Receivables,
the Financed Vehicles or the Obligors. To the extent consistent with the
standards, policies and procedures otherwise required hereby, the Servicer will
follow its customary standards, policies, and procedures and will have full
power and authority, acting alone, to do any and all things in connection with
such managing, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered by the Trust to execute and deliver,
on behalf of the Trust, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and with respect to the Financed
Vehicles; provided, however, that notwithstanding the foregoing, the Servicer
will not, except pursuant to an order from a court of competent jurisdiction,
release an Obligor from payment of any unpaid amount under any Receivable or
waive the right to collect the unpaid balance of any Receivable from the Obligor
except in accordance with the Servicer's customary practices.
(c) The Servicer is hereby authorized to commence, in its own name or in
the name of the Trust, a legal proceeding to enforce a Receivable pursuant to
Section 4.3 or to commence or participate in any other legal proceeding
(including a bankruptcy proceeding) relating to or involving a Receivable, an
Obligor or a Financed Vehicle. If the Servicer commences or participates in such
a legal proceeding in its own name, the Trust will thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Trust to execute and deliver in
the Servicer's name any notices, demands, claims, complaints, responses,
23
affidavits or other documents or instruments in connection with any such
proceeding. The Indenture Trustee and the Owner Trustee will furnish the
Servicer with any limited powers of attorney and other documents which the
Servicer may reasonably request and which the Servicer deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Blocked Account Agreement.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer will make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same will become due, and will follow such collection procedures as it follows
with respect to all comparable motor vehicle receivables that it services for
itself or others and otherwise act with respect to the Receivables, the Dealer
Agreements, the Dealer Assignments, the Auto Loan Purchase and Sale Agreements,
the Third-Party Lender Assignments, the Insurance Policies and the Other
Conveyed Property in such manner as will, in the reasonable judgment of the
Servicer, maximize the amount to be received by the Trust with respect thereto.
The Servicer is authorized in its discretion to waive any prepayment charge,
late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment of a
Receivable (i) in order to change the Obligor's regular due date in accordance
with its Servicing Policies and Procedures, (ii) in order to re-amortize the
Scheduled Receivables Payments on the Receivable following a partial prepayment
of principal or (iii) as may be required by law, in accordance with its
customary procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; provided,
however, that in no event may a Receivable be extended beyond the Collection
Period immediately preceding the last Final Scheduled Distribution Date.
(c) The Servicer may grant payment extensions on, or other modifications or
amendments to, a Receivable (in addition to those modifications permitted by
Section 4.2(b)) in accordance with the Servicing Policies and Procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; provided, however, that:
(i) The aggregate period of all extensions on a Receivable does not
exceed eight months;
(ii) In no event may a Receivable be extended beyond the Collection
Period immediately preceding the latest Final Scheduled Distribution Date;
(iii) The average Monthly Extension Rate for any three consecutive
Collection Periods does not exceed 4%;
(iv) The Servicer may not amend or modify a Receivable (except as
provided in Section 4.2(b) and this Section 4.2(c) or as otherwise required
by law) without the consent of
24
[the Insurer, so long as no Insurer Default has occurred and is
continuing,] or the Majority Noteholders [(if an Insurer Default has
occurred and is continuing)]; and
(v) In no event may a Receivable be extended more than once within a
twelve month period.
With respect to Section 4.2(c)(iii), in the event the average of the
Monthly Extension Rates calculated with respect to three consecutive Collection
Periods exceeds 4% (which information will be set forth in the related
Servicer's Certificate), the Servicer will, so long as the Servicer is not
[Indenture Trustee], acting as Backup Servicer, on the third such Accounting
Date, purchase from the Trust the Receivables with respect to which payment had
been extended (starting with the Receivables most recently so extended) in an
aggregate Principal Balance equal to the product of (i) the excess of such
average of Monthly Extension Rates over 4% and (ii) the Aggregate Principal
Balance, and pay the related Purchase Amount on the related Determination Date;
provided, however, that in the event the Backup Servicer will be acting as
Servicer hereunder, the foregoing sentence will apply only in respect of
Receivables as to which payments had been extended by such Backup Servicer.
(d) The Servicer will use its best efforts to notify or direct Obligors to
make all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to one or more Processing Banks
pursuant to a Blocked Account Agreement. The Servicer will use its best efforts
to notify or direct any Processing Bank to deposit all payments on the
Receivables in the Lockbox Account no later than the Business Day after receipt,
and to cause all amounts credited to the Lockbox Account on account of such
payments to be transferred to the Collection Account no later than the second
Business Day after receipt of available funds with respect to such payments. The
Lockbox Account will be a demand deposit account held by the Processing Bank.
On the Closing Date, the Servicer will deposit or cause to be
deposited in immediately available funds into the Collection Account all amounts
collected with respect to the Receivables from the Cutoff Date to the fourth
(4th) Business Day preceding the Closing Date. As soon as possible thereafter
and in accordance with the provisions of this Agreement, all amounts collected
with respect to the Receivables from such date to the Closing Date will be
deposited into the Collection Account.
Notwithstanding any Blocked Account Agreement, or any of the
provisions of this Agreement relating to the Blocked Account Agreement, the
Servicer will remain obligated and liable to the Trust, the Indenture Trustee
and Noteholders for servicing and administering the Receivables and the Other
Conveyed Property in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof; provided, however,
that the foregoing will not apply to any Backup Servicer for so long as a
Processing Bank is performing its obligations pursuant to the terms of a Blocked
Account Agreement.
If the Servicer is terminated, the successor Servicer will assume all
of the rights and obligations of the outgoing Servicer under the Blocked Account
Agreement subject to the terms hereof. In such event, the successor Servicer
will be deemed to have assumed all of the outgoing Servicer's interest therein
and to have replaced the outgoing Servicer as a party to each such Blocked
Account Agreement to the same extent as if such Blocked Account Agreement had
been assigned to the successor Servicer, except that the outgoing Servicer will
not thereby be relieved of any liability
25
or obligations on the part of the outgoing Servicer to the Processing Bank under
such Blocked Account Agreement. The outgoing Servicer will, upon request of the
Indenture Trustee, but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such Blocked
Account Agreement and an accounting of amounts collected and held by the
Processing Bank and otherwise use its best efforts to effect the orderly and
efficient transfer of any Blocked Account Agreement to the successor Servicer.
In the event that [the Insurer (so long as no Insurer Default has occurred and
is continuing) or] the Majority Noteholders [(if an Insurer Default has occurred
and is continuing)] elects to change the identity of the Processing Bank, the
outgoing Servicer, at its expense, will cause the Processing Bank to deliver, at
the direction [of the Insurer (so long as no Insurer Default has occurred and is
continuing) or] the Majority Noteholders [(if an Insurer Default has occurred
and is continuing)] to the Indenture Trustee or a successor Processing Bank, all
documents and records relating to the Receivables and all amounts held (or
thereafter received) by the Processing Bank (together with an accounting of such
amounts) and will otherwise use its best efforts to effect the orderly and
efficient transfer of the lockbox arrangements and the Servicer will notify the
Obligors to make payments to the Lockbox established by the successor.
(e) The Servicer will remit all payments by or on behalf of the Obligors
received in the form of checks with payment coupons directly by the Servicer to
the Processing Bank for deposit into the Collection Account, in either case, and
as soon as practicable, but in no event later than the second Business Day after
receipt thereof. Other payments received by each of the Servicer, Triad and the
Depositor will be deposited into a local servicing account for processing
immediately upon receipt, and then transferred in immediately available funds to
the Lockbox Account for deposit to the Collection Account no later than the
second (2nd) Business Day after receipt of available amounts.
SECTION 4.3. Realization upon Receivables.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer will use commercially reasonable efforts to repossess
(or otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
10% or more of a Scheduled Receivables Payment has become 91 days delinquent;
provided, however, that the Servicer may elect not to repossess a Financed
Vehicle within such time period if in its good faith judgment it determines that
the proceeds ultimately recoverable with respect to such Receivable would be
increased by forbearance. The Servicer is authorized to follow such customary
practices and procedures as it will deem necessary or advisable, consistent with
the standard of care required by Section 4.1, which practices and procedures may
include reasonable efforts to realize upon any recourse to Dealers and
Third-Party Lenders, the sale of the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions by the Servicer in order to realize upon such a Receivable. The Servicer
will have the discretion to retain or sell to a third-party any of the
Liquidated Receivables. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle will have suffered damage, the Servicer will
not expend funds in connection with any repair or towards the repossession of
such Financed Vehicle unless it will determine in its discretion that such
repair and/or repossession will increase the proceeds of liquidation of the
related Receivable by an amount greater than the amount of such expenses. All
amounts received upon liquidation of a Financed Vehicle will be remitted by the
Servicer to the Collection Account as soon as practicable, but in no event later
than the second Business Day after receipt of available funds thereof. The
Servicer will be entitled to recover all reasonable expenses incurred by it in
the course of repossessing and liquidating a Financed Vehicle into cash
proceeds, as
26
provided in Section 5.7(a) or out of the cash proceeds of such Financed Vehicle,
any deficiency obtained from the Obligor or any amounts received from the
related Dealer or Third-Party Lender, which amounts in reimbursement may be
retained by the Servicer (and will not be required to be deposited as provided
in Section 4.2(e)) to the extent of such expenses. The Servicer will pay on
behalf of the Trust any personal property taxes assessed on repossessed Financed
Vehicles. The Servicer will be entitled to reimbursement of any such tax from
Net Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer Assignment or
Third-Party Lender Assignment, the act of commencement will be deemed to be an
automatic assignment from the Trust to the Servicer of the rights under such
Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer Assignment or
Third-Party Lender Assignment for purposes of collection only. If, however, in
any enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer
Assignment or Third-Party Lender Assignment on the grounds that it is not a real
party in interest or a Person entitled to enforce the Dealer Agreement, Auto
Loan Purchase and Sale Agreement, Dealer Assignment or Third-Party Lender
Assignment, the Owner Trustee and/or the Indenture Trustee, at the Servicer's
expense, will take such steps as the Servicer deems reasonably necessary to
enforce the Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer
Assignment or Third-Party Lender Assignment, including bringing suit in its name
or the name of the Trust and the Owner Trustee and/or the Indenture Trustee for
the benefit of the Issuer Secured Parties. All amounts recovered will be
remitted directly by the Servicer as provided in Section 4.2(e).
SECTION 4.4. Insurance.
(a) The Servicer will require, in accordance with the Servicing Policies
and Procedures, that each Financed Vehicle be insured by the related Obligor
under the Insurance Policies referred to in Paragraph 24 of the Schedule of
Representations and Warranties. Each Receivable requires the Obligor to maintain
such physical loss and damage insurance, naming Triad and its successors and
assigns as additional insureds, and permits the holder of such Receivable to
obtain physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to maintain such insurance. If the Servicer determines that an
Obligor has failed to obtain or maintain a physical loss and damage Insurance
Policy covering the related Financed Vehicle as described in Paragraph 24
(including during the repossession of such Financed Vehicle) the Servicer may
enforce the rights of the holder of the Receivable under the Receivable to
require the Obligor to obtain such physical loss and damage insurance in
accordance with the Servicing Policies and Procedures. The Servicer may, at its
sole option, maintain a vendor's single interest or other collateral protection
insurance policy with respect to all Financed Vehicles ("Collateral Insurance")
which policy by its terms insures against physical loss and damage in the event
any Obligor fails to maintain physical loss and damage insurance with respect to
the related Financed Vehicle. The parties acknowledge that the Servicer does not
now have, nor does it intend to obtain, Collateral Insurance. All policies of
Collateral Insurance will be endorsed with clauses providing for loss payable to
the Servicer. Costs incurred by the Servicer in maintaining such Collateral
Insurance will be paid by the Servicer.
(b) The Servicer may, at its sole option, if an Obligor fails to obtain or
maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such Obligor,
as required under the terms of the insurance policy, the premiums for such
"force-placed" insurance. The parties hereto acknowledge that the Servicer
27
does not now have, nor does it intend to obtain, force-placed insurance. All
policies of force-placed insurance will be endorsed with clauses providing for
loss payable to the Servicer. Any cost incurred by the Servicer in maintaining
such force-placed insurance will only be recoverable out of premiums paid by the
Obligors or Net Liquidation Proceeds with respect to the Receivable, as provided
in Section 4.4(c).
In connection with any force-placed insurance obtained hereunder, the
Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay the entire premium to the Servicer. In no event
will the Servicer include the amount of the premium in the Amount Financed under
the Receivable. "Insurance add-on amounts," which are the premiums charged to
Obligors in the event that the Servicer obtains force-placed insurance, with
respect to any Receivable will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable, and
amounts allocable thereto will not be available for distribution on the Notes
and the Certificates. The Servicer will retain and separately administer the
right to receive payments from Obligors with respect to insurance add-on amounts
or rebates of force-placed insurance premiums. If an Obligor makes a payment
with respect to a Receivable having force-placed insurance, but the Servicer is
unable to determine whether the payment is allocable to the Receivable or to the
insurance add-on amount, the payment will be applied first to any unpaid
Scheduled Receivables Payments and then to the insurance add-on amount. Net
Liquidation Proceeds on any Receivable will be used first to pay the Principal
Balance and accrued interest on such Receivable and then to pay the related
insurance add-on amount. If an Obligor under a Receivable with respect to which
the Servicer has placed force-placed insurance fails to make scheduled payments
of such insurance add-on amount as due, and the Servicer has determined that
eventual payment of the insurance add-on amount is unlikely, the Servicer may,
but will not be required to, purchase such Receivable from the Trust for the
Purchase Amount on any subsequent Determination Date. Any such Receivable, and
any Receivable with respect to which the Servicer has placed force-placed
insurance which has been paid in full (excluding any insurance add-on amounts)
will be assigned to the Servicer.
(c) The Servicer may xxx to enforce or collect upon the Insurance Policies,
in its own name, if possible, or as agent of the Trust. If the Servicer elects
to commence a legal proceeding to enforce an Insurance Policy, the act of
commencement will be deemed to be an automatic assignment of the rights of the
Trust under such Insurance Policy to the Servicer for purposes of collection
only. If, however, in any enforcement suit or legal proceeding it is held that
the Servicer may not enforce an Insurance Policy on the grounds that it is not a
real party in interest or a holder entitled to enforce the Insurance Policy, the
Owner Trustee and/or the Indenture Trustee, at the Servicer's expense, will take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Trust and the Owner
Trustee and/or the Indenture Trustee for the benefit of the Noteholders.
(d) The Servicer will cause itself and may cause the Indenture Trustee to
be named as named insured under all policies of Collateral Insurance.
SECTION 4.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this Agreement,
the Servicer will take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle, including obtaining the execution by the Obligors and
the recording, registering, filing, re-recording, re-filing, and re-
28
registering of all security agreements, financing statements and continuation
statements as are necessary to maintain the security interest granted by the
Obligors under the respective Receivables. The Indenture Trustee hereby
authorizes the Servicer, and the Servicer agrees, to take any and all steps
necessary to re-perfect such security interest on behalf of the Trust as
necessary because of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Trust, the
Servicer agrees that Triad's designation as the secured party on the certificate
of title is in its capacity as Servicer as agent of the Trust.
(b) [Upon the occurrence of an Insurance Agreement Event of Default, the
Insurer may (so long as no Insurer Default has occurred and is continuing)
instruct the Indenture Trustee and the Servicer to take or cause to be taken,
or, if an Insurer Default has occurred and is continuing,] upon the occurrence
of a Servicer Termination Event, the Indenture Trustee and the Servicer will
take or cause to be taken such action as may, in the opinion of counsel to the
Controlling Party, be necessary to perfect or re-perfect the security interests
in the Financed Vehicles securing the Receivables in the name of the Trust by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent.
Triad hereby agrees to pay all expenses related to such perfection or
reperfection and to take all action necessary therefor. In addition, prior to
the occurrence of an Insurance Agreement Event of Default, the Controlling Party
may instruct the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of the Trust, including by amending the title documents
of such Financed Vehicles or by such other reasonable means as may, in the
opinion of counsel to the Controlling Party, be necessary or prudent; provided,
however, that if the Controlling Party requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default, the
out-of-pocket expenses of the Servicer or the Indenture Trustee in connection
with such action will be reimbursed to the Servicer or the Indenture Trustee, as
applicable, by the Controlling Party. Triad hereby appoints the Indenture
Trustee as its attorney-in-fact to execute certificates of title or any other
documents, prepared by the Servicer, in the name and stead of Triad (it being
understood that and agreed that the Indenture Trustee has no obligation to take
such steps with respect to any perfection or reperfection, except as pursuant to
the Basic Documents to which it is a party and for which Triad has paid all
expenses) and the Indenture Trustee hereby accepts such appointment.
(c) Upon the occurrence of a Servicer Termination Event, at the option of
the Controlling Party, Triad shall be terminated as Custodian and all original
receivable contracts and related title documents must be transferred to a
successor custodian acceptable to the Controlling Party.
SECTION 4.6. Covenants, Representations, and Warranties of Servicer. By its
execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Issuer relies in
accepting the Receivables, on which the Indenture Trustee relies in
authenticating the Notes and on which [the Insurer relies in issuing the Note
Policy].
(a) The Servicer covenants as follows:
29
(i) Liens in Force. The Financed Vehicle securing each Receivable will
not be released in whole or in part from the security interest granted by
the Receivable, except upon payment in full of the Receivable or as
otherwise contemplated herein;
(ii) No Impairment. The Servicer will do nothing to impair the rights
of the Trust or the Noteholders in the Receivables, the Dealer Agreements,
the Auto Loan Purchase and Sale Agreements, the Dealer Assignments, the
Third-Party Lender Assignments, the Insurance Policies or the Other
Conveyed Property except as otherwise expressly provided herein;
(iii) No Amendments. The Servicer will not extend or otherwise amend
the terms of any Receivable, except in accordance with Section 4.2; and
(iv) Restrictions on Liens. The Servicer will not (i) create, incur or
suffer to exist, or agree to create, incur or suffer to exist, or consent
to cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien or restriction
on transferability of the Receivables except for the Lien in favor of the
Indenture Trustee for the benefit of the Noteholders [and the Insurer,] and
the restrictions on transferability imposed by this Agreement or (ii) sign
or file under the UCC of any jurisdiction any financing statement which
names Triad or the Servicer as a debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing statement,
with respect to the Receivables or other Conveyed Property, except in each
case any such instrument solely securing the rights and preserving the Lien
of the Indenture Trustee, for the benefit of the Noteholders [and the
Insurer].
(b) The Servicer represents, warrants and covenants as of the Closing Date
as to itself that the representations and warranties set forth on the Schedule
of Representations attached hereto as Schedule B are true and correct, provided
that such representations and warranties contained therein and herein will not
apply to any entity other than Triad.
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, [the Insurer,] the Trust or a Responsible
Officer of the Indenture Trustee of a breach of any of the representations,
warranties and covenants set forth in Sections 4.5(a) or 4.6, the party
discovering such breach will give prompt written notice to the others; provided,
however, that the failure to give any such notice will not affect any obligation
of Triad as Servicer under this Section 4.7. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any
representation, warranty or covenant set forth in Sections 4.5(a) or 4.6 which
materially and adversely affects the interests of the Noteholders [or the
Insurer] in any Receivable (including any Liquidated Receivable) (or, at Triad's
election, the first Accounting Date so following) or the related Financed
Vehicle, Triad will, unless such breach has been cured in all material respects,
purchase from the Trust the Receivable affected by such breach and, on the
related Determination Date, Triad will pay the related Purchase Amount. It is
understood and agreed that the obligation of Triad to purchase any Receivable
(including any Liquidated Receivable) with respect to which such a breach has
occurred and is continuing will, if such obligation is fulfilled, constitute the
sole remedy against Triad for such breach available to [the Insurer,] the
Noteholders, the Owner Trustee or the Indenture Trustee; provided, however, that
Triad will indemnify the Trust, the Backup Servicer, [the Insurer,] the Owner
Trustee, the Indenture Trustee, the Certificateholders and the Noteholders from
and against all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel, which may be asserted against
or incurred by any
30
of them as a result of third party claims arising out of the events or facts
giving rise to such breach. The indemnification provided pursuant to this
section will survive the removal or resignation of the Indenture Trustee and or
the Backup Servicer. In no event shall [Indenture Trustee], in its capacity as
the Backup Servicer or successor Servicer, be obligated to repurchase any
Receivable pursuant to this Section 4.7.
SECTION 4.8. Total Servicing Fee; Payment of Certain Expenses by Servicer.
On each Distribution Date, the Servicer will be entitled to receive out of the
Collection Account the Base Servicing Fee and any Supplemental Servicing Fee for
the related Collection Period (together, the "Servicing Fee") pursuant to
Section 5.7. The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed on
the Servicer, expenses incurred in connection with distributions and reports
made by the Servicer to Noteholders [or the Insurer] and, to the extent not
provided for pursuant to Section 5.7, all other fees and out-of-pocket expenses
of the Owner Trustee, the Backup Servicer, and the Indenture Trustee, except
taxes levied or assessed against the Trust, the Owner Trustee, the Backup
Servicer or the Indenture Trustee, and claims against the Trust, the Owner
Trustee, the Backup Servicer or the Indenture Trustee in respect of
indemnification, which taxes and claims in respect of indemnification against
the Trust are expressly stated to be for the account of Triad). The Servicer
will, to the extent not provided for pursuant to Section 5.7, be liable for the
fees and out-of-pocket expenses of the Owner Trustee, the Backup Servicer, the
Indenture Trustee, the Custodian, the Processing Bank (and any fees under the
Blocked Account Agreement) and the Independent Accountants except taxes levied
or assessed against such parties. Notwithstanding the foregoing, if the Servicer
is not Triad, a successor to Triad as Servicer including the Backup Servicer
permitted by Section 9.3 will not be liable for taxes levied or assessed against
the Trust or claims against the Trust in respect of indemnification, or the fees
and expenses referred to above.
SECTION 4.9. Servicer's Certificate. No later than 11:00 a.m. New York City
time on each Determination Date, the Servicer will deliver (facsimile delivery
being acceptable; and in the case of the Servicer's Certificate to be delivered
to the Indenture Trustee, the Depositor and the Backup Servicer, an e-mail in a
computer file, the format of which will be agreed upon between the Servicer and
such parties) to the Indenture Trustee, the Owner Trustee, the Backup Servicer,
[the Insurer] and each Rating Agency a Servicer's Certificate containing among
the other things set forth in Exhibit A, (i) all information necessary to enable
the Indenture Trustee to give any notice required by Section 6.1 and to make the
distributions required by Section 5.7, (ii) a listing of all Purchased
Receivables and Administrative Receivables purchased as of the related
Accounting Date, (iii) all information necessary to enable the Indenture Trustee
to send the statements to Noteholders [and the Insurer] required by Section
5.10, (iv) the Delinquency Rate, Net Loss Rate and Cumulative Net Loss Ratio for
such Determination Date[, and (v) whether to the knowledge of the Servicer an
Insurance Agreement Event of Default, a Spread Cap Event (as defined in the
Insurance Agreement) or a Trigger Event (as defined in the Insurance Agreement)
has occurred]. Receivables purchased by the Servicer or by Triad on the related
Accounting Date and each Receivable that became a Liquidated Receivable or that
was paid in full during the related Collection Period will be identified by
account number (as set forth in the Schedule of Receivables).
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) To the extent required by Regulation AB, the Servicer will deliver to
the Indenture Trustee, the Owner Trustee, the Backup Servicer, [the Insurer] and
each Rating Agency, on or before
31
March 31 of each year (or 90 days after the end of each calendar year),
beginning on March 31, ______, an Officer's Certificate, dated as of December 31
(or other applicable date) of the preceding year, stating that (i) a review of
the Servicer's activities during the preceding calendar year (or such other
period as has elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement in all material respects throughout such reporting period, or, if
there has been a failure to fulfill any such obligation in any material respect,
specifying each such failure known to such officer and the nature and status
thereof.
(b) The Servicer will deliver to the Indenture Trustee, the Owner Trustee,
the Backup Servicer, [the Insurer] and each Rating Agency, on or before March 31
of each year (or 90 days after the end of each calendar year), beginning on
March 31, _____, a report, dated as of December 31 (or other applicable date) of
the preceding year, on its assessment of compliance with the minimum servicing
criteria during the preceding calendar year, including disclosure of any
material instance of non-compliance identified by the Servicer, as required by
Rule 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB.
(c) If the Issuer is not required to file periodic reports under the
Exchange Act or any other law, the reports referred to in this section may be
delivered on or before April 30 of each calendar year (or 120 days after the end
of each calendar year), beginning April 30, ____.
(d) The Servicer will deliver to the Indenture Trustee, the Owner Trustee,
the Backup Servicer, [the Insurer,] and each Rating Agency, promptly after
having obtained knowledge thereof, but in no event later than two (2) Business
Days thereafter, written notice in an Officer's Certificate of any event which
with the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under Section 9.1.
SECTION 4.11. Annual Independent Accountants' Report.
(a) The Servicer will cause a firm of independent certified public
accountants (the "Independent Accountants"), who may also render other services
to the Servicer or to its Affiliates, to deliver to the Indenture Trustee, the
Owner Trustee, the Backup Servicer, [the Insurer] and each Rating Agency, on or
before March 31 (or 90 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on March 31, 200__, a report,
dated as of December 31 of the preceding calendar year, addressed to the board
of directors of the Servicer, providing its assessment of compliance with the
minimum servicing criteria during the preceding calendar year, including
disclosure of any material instance of non-compliance, as required by Rule
13a-18 and 15d-18 of the Exchange Act and Item 1122(b) of Regulation AB. Such
attestation will be in accordance with Rules 1-02(a)(3) and 2-02(g) of
Regulation S-X under the Securities Act and the Exchange Act.
(b) If the Issuer is not required to file periodic reports under the
Exchange Act or any other law, the reports referred to in this section may be
delivered on or before April 30 of each calendar year (or 120 days after the end
of calendar year), beginning April 30, 200__.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer will upon reasonable prior notice provide to
representatives of the Indenture Trustee, the Owner Trustee, the Backup Servicer
[and the Insurer] reasonable access to the
32
documentation regarding the Receivables. In each case, such access will be
afforded without charge but only upon reasonable request and during normal
business hours. Any expense incident to the exercise by the Indenture Trustee,
Owner Trustee, Backup Servicer [or the Insurer] will be borne by the Servicer to
the extent such visits and examinations are not more frequent than once in any
twelve-month period, or a Servicer Termination Event has occurred and is
continuing. Nothing in this Section will affect the obligation of the Servicer
to observe any applicable law prohibiting disclosure of information regarding
the Obligors, and the failure of the Servicer to provide access as provided in
this Section 4.12 as a result of such obligation will not constitute a breach of
this Section 4.12.
SECTION 4.13. Reserved
SECTION 4.14. Fidelity Bond and Errors and Omissions Policy. The Servicer
will not be required to maintain an errors and omissions policy. The Servicer
will maintain a fidelity bond of a type and in an amount customary for servicers
engaged in the business of servicing motor vehicle receivables.
ARTICLE V
Trust Accounts; Distributions;
Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Indenture Trustee, on behalf of the Noteholders [and the
Insurer], will establish and maintain in its own name one or more Eligible
Deposit Accounts (collectively, the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Indenture Trustee on behalf of the Noteholders [and the Insurer]. The
Collection Account will initially be established with the Indenture Trustee.
(ii) The Indenture Trustee, on behalf of the Noteholders [and the
Insurer], will establish and maintain in its own name an Eligible Deposit
Account (the "Note Distribution Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Indenture Trustee on behalf of the Noteholders and the Insurer. The Note
Distribution Account will initially be established with the Indenture
Trustee.
(iii) The Indenture Trustee, on behalf of the Noteholders [and the
Insurer], will establish and maintain in its own name an Eligible Deposit
Account (the "Spread Account"), bearing a designation clearly indicating
that the funds deposited therein are held in trust for the benefit of the
Indenture Trustee on behalf of the Noteholders [and the Insurer]. The
Spread Account will initially be established with the Indenture Trustee.
(iv) Funds on deposit in the Collection Account, the Note Distribution
Account (but only to the extent of deposits therein for more than one
Business Day), and the Spread Account (collectively, the "Trust Accounts")
will be invested by the Indenture Trustee (or any custodian with respect to
funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (pursuant to standing instructions or otherwise).
All such Eligible Investments will be held by or on behalf of the Indenture
Trustee for the benefit of the Noteholders [and the Insurer], as their
interests arise. Funds on deposit in any Trust Account will be invested in
Eligible Investments that will mature so that such funds will be
33
available at the close of business on the Business Day immediately
preceding the following Distribution Date. However, if each of the Rating
Agencies confirms that it would not affect the ratings assigned to the
Notes [and the Insurer consents], funds on deposit in the Spread Account
may be invested in Eligible Investments that will mature so that funds will
be available on the following Distribution Date. All Eligible Investments
will be held to maturity.
(b) All investment earnings of moneys deposited in the Trust Accounts will
be deposited (or caused to be deposited) by the Indenture Trustee in the
Collection Account, and any loss resulting from such investments will be charged
to the applicable Trust Account. The Servicer will not direct the Indenture
Trustee to make any investment of any funds held in any of the Trust Accounts
unless the security interest granted and perfected in such account will continue
to be perfected in such investment, in either case without any further action by
any Person.
(c) The Indenture Trustee will not in any way be held liable by reason of
any insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Indenture Trustee's negligence or bad faith or its failure to make payments on
such Eligible Investments issued by the Indenture Trustee, in its commercial
capacity as principal obligor and not as trustee, in accordance with their
terms.
(d) If (i) the Servicer fails to give investment directions in writing for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 1:00 p.m.
New York City Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default or Event of Default
has occurred and is continuing with respect to the Notes but the Notes have not
been declared due and payable, or, if such Notes will have been declared due and
payable following an Event of Default, amounts collected or receivable from the
Trust Property are being applied as if there had not been such a declaration;
then the Indenture Trustee will, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in the investment described in clause (d)
of the definition of Eligible Investments.
(e) (i) The Indenture Trustee will possess all right, title and interest in
all funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof and all such funds, investments, proceeds and income will be part of the
Owner Trust Estate. Except as otherwise provided herein, the Trust Accounts will
be under the sole dominion and control of the Indenture Trustee for the benefit
of the Noteholders [and the Insurer]. If, at any time, any of the Trust Accounts
ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer
on its behalf) will within ten Business Days (or such longer period as to which
each Rating Agency [and the Insurer] may consent) establish a new Trust Account
as an Eligible Deposit Account and will transfer any cash and/or any investments
to such new Trust Account. In connection with the foregoing, the Servicer agrees
that, in the event that any of the Trust Accounts are not accounts with the
Indenture Trustee, the Servicer will notify the Indenture Trustee in writing
promptly upon any of such Trust Accounts ceasing to be an Eligible Deposit
Account.
(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees that:
(A) any Trust Account Property that is held in deposit accounts
will be held solely in the Eligible Deposit Accounts; and, except as
otherwise provided herein, each such Eligible Deposit Account will be
subject to the exclusive custody
34
and control of the Indenture Trustee, and the Indenture Trustee will
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes "securities
entitlements" will be delivered to the Indenture Trustee in accordance
with the UCC and will be held, pending maturity or disposition, solely
by the Indenture Trustee or a securities intermediary (as such term is
defined in Section 8-102(14) of the UCC) acting solely for the
Indenture Trustee; and
(C) the "securities intermediary's jurisdiction," for purposes of
Section 8-110 of the UCC, shall be the State of New York.
(f) The Servicer will have the power, revocable by [the Insurer or, with
the consent of the Insurer,] by the Indenture Trustee, to instruct the Indenture
Trustee to make withdrawals and payments from the Trust Accounts for the purpose
of permitting the Servicer and the Indenture Trustee to carry out its respective
duties hereunder.
SECTION 5.2. [Reserved].
SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. To the
extent that such amounts are owed to the Processing Bank, the Servicer will
cause such amounts to be returned to the Processing Bank. The amount to be
reimbursed hereunder will be paid to the Servicer on the related Distribution
Date pursuant to Section 5.7(a)(i) upon certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee [and the
Insurer] as may be necessary in the opinion of [the Insurer] to verify the
accuracy of such certification; provided, however, that the Servicer must
provide such clarification within 12 months of such mistaken deposit, posting,
or returned check. In the event that [the Insurer] has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
this Section 5.3, [the Insurer will (unless an Insurer Default has occurred and
is continuing)] give the Indenture Trustee notice in writing to such effect,
following receipt of which the Indenture Trustee will not make a distribution to
the Servicer in respect of such amount pursuant to Section 5.7, or if the
Servicer prior thereto has been reimbursed pursuant to Section 5.7, the
Indenture Trustee will withhold such amounts from amounts otherwise
distributable to the Servicer on the next succeeding Distribution Date. The
Servicer will additionally be entitled to receive from amounts on deposit in the
Collection Account with respect to a Collection Period any amounts paid by
Obligors that were collected in the Lockbox Account but that do not relate to
(i) principal and interest payments due on the Receivables and (ii) any
Supplemental Servicing Fees.
SECTION 5.4. Application of Collections. All collections for the Collection
Period will be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor (other than Supplemental Servicing Fees
with respect to such Receivable, to the extent collected) will be applied to
interest and principal in accordance with the Simple Interest Method.
35
All amounts collected that are payable to the Servicer as Supplemental
Servicing Fees hereunder will be deposited in the Collection Account and paid to
the Servicer in accordance with Section 5.7(a).
SECTION 5.5. Spread Account.
(a) On or prior to the Closing Date, the Depositor will deposit an amount
equal to the Spread Account Initial Deposit into the Spread Account from the
proceeds of the Notes. On each Distribution Date, to the extent of funds
available therefor pursuant to the priority of payments, amounts will be
deposited into the Spread Account in accordance with Section 5.7(a)(xii) until
the amount on deposit therein is equal to the Spread Account Requirement.
(b) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Spread Account Draw Amount, then on
the related Distribution Date, the Indenture Trustee will withdraw such Spread
Account Draw Amount from the Spread Account to the extent of funds on deposit
therein and deposit such amount into the Collection Account for distribution in
accordance with Section 5.7(a).
(c) After considering all required distributions made on a Distribution
Date, amounts on deposit in the Spread Account on that Distribution Date that
are in excess of the Spread Account Requirement for that Distribution Date will
be applied by the Indenture Trustee in accordance with Section 5.7(a)(x), then
5.7(a)(xiii) through (xv).
SECTION 5.6. Additional Deposits.
(a) The Servicer and Triad, as applicable, will deposit or cause to be
deposited in the Collection Account on the Determination Date on which such
obligations are due the aggregate Purchase Amount with respect to Purchased
Receivables.
(b) The proceeds of any sale of the assets of the Trust described in
Section 10.1 will be deposited in the Collection Account on the date of such
sale.
(c) If the Indenture Trustee receives any Additional Funds Available of the
type described in clause (2) of the definition thereof it will deposit them into
the Collection Account and on each Distribution Date it will transfer any such
funds to the Note Distribution Account.
SECTION 5.7. Distributions.
(a) On each Distribution Date, unless payments are required to be made in
accordance with Article V of the Indenture, the Indenture Trustee will (based
solely on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date) distribute the following amounts from
Available Funds on deposit in the Collection Account unless otherwise specified,
to the extent of the sources of funds stated to be available therefor, and in
the following order of priority:
(i) to the Servicer, the Servicing Fee for the related Collection
Period, and, to the extent the Servicer has not reimbursed itself or to the
extent not retained by the Servicer, other amounts relating to mistaken
deposits, postings or checks returned for insufficient funds, and to the
extent available, any amounts paid by the Obligors during the preceding
Collection Period that were collected in the Collection Account but that do
not relate to
36
principal payments or interest payments such as late fees, prepayment
charges and other administrative charges;
(ii) to the Owner Trustee, the Indenture Trustee and the Backup
Servicer, the Owner Trustee Fee, the Indenture Trustee Fee, the Backup
Servicer fee, if any, and any accrued and unpaid servicer transition
expenses of any incoming servicer then due to the Indenture Trustee, the
Backup Servicer or any other successor servicer, up to a maximum amount of
$200,000 in the aggregate;
(iii) to the Note Distribution Account, the Class A Noteholders'
Interest Distributable Amount;
(iv) to the Note Distribution Account, to make a payment of principal
on the Class A Notes to the extent necessary to reduce the Class A Note
principal balance to the Pool Balance;
(v) to the Note Distribution Account, on the Final Scheduled
Distribution Date for any class of Class A Notes to make a payment of the
remaining principal balance of such class of the Class A Notes;
(vi) [to the Insurer, any unpaid amounts owed to the Insurer under the
Insurance Agreement with respect to unpaid Premiums and unreimbursed
Insured Payment;]
(vii) to the Note Distribution Account, to make a payment of principal
on the Class A Notes to the extent necessary to reduce the combined Class A
and Class B Note principal balance to the Pool Balance;
(viii) to the Note Distribution Account, the Class B Noteholders'
Interest Distributable Amount;
(ix) to the Note Distribution Account, to make a payment of the
remaining principal balance of any of the Class B Notes on their Final
Scheduled Distribution Date;
(x) [to the Insurer, so long as no Insurer Default has occurred and is
continuing, any other unpaid amounts owed to the Insurer under the
Insurance Agreement;]
(xi) to the Note Distribution Account, to make a payment of the Class
A Noteholders' Principal Distributable Amount;
(xii) to the Spread Account, any amount required to increase the
amount in the Spread Account to the Spread Account Requirement;
(xiii) [to the Insurer, if an Insurer Default has occurred or is
continuing, the amounts described under clause (x) above;]
(xiv) to the Note Distribution Account, to make a payment of the Class
A Noteholders' Accelerated Principal Amount[, provided that if a Cumulative
Net Loss Trigger Event or an Insurance Agreement Event of Default has
occurred and is continuing, all remaining Available Funds shall be applied
to pay principal on the Class A Notes until they have been paid in full, in
either case, for payment to the Class A Noteholders]; and
37
(xv) to the Note Distribution Account, to make a payment of principal
to the holders of the Class B Notes, or, if the Class B Notes are no longer
outstanding, to make a payment of all remaining amounts to the
Certificateholder.
(b) On each Distribution Date, the Indenture Trustee will (based solely on
the information contained in the Servicer's Certificate delivered with respect
to the related Determination Date[, unless the Insurer has notified the
Indenture Trustee in writing of any errors or deficiencies with respect
thereto]) distribute from the Collection Account the Additional Funds Available,
if any, plus the Policy Claim Amount, if any, in each case then on deposit in
the Collection Account, and deposit in the Note Distribution Account the excess,
if any, of the Scheduled Payments (as defined in the Note Policy) due on such
Distribution Date over the amount of all Available Funds previously deposited in
the Note Distribution Account with respect to the related Distribution Date,
which amount will be applied solely to the payment of amounts then due and
unpaid on the Class A Notes in accordance with the priorities set forth in
Section 5.8(a).
(c) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Servicer will instruct and
cause such institution to make all deposits and distributions pursuant to
Sections 5.7(a) and 5.7(b) on the related Distribution Date.
SECTION 5.8. Note Distribution Account.
(a) On each Distribution Date (based solely on the information contained in
the Servicer's Certificate) the Indenture Trustee will distribute all amounts on
deposit in the Note Distribution Account to Noteholders in respect of the Notes
to the extent of amounts due and unpaid on the Notes for principal and interest
in the following amounts:
- From amounts transferred pursuant to Section 5.7(a)(iii), accrued
and unpaid interest on the Class A Notes; provided that if such
amount is insufficient to pay the entire amount of accrued and
unpaid interest then due on each Class of Class A Notes, the
amount in the Note Distribution Account will be applied to the
payment of such interest on each Class of Class A Notes pro rata
on the basis of the amount of accrued and unpaid interest due on
each Class of Class A Notes.
- From amounts transferred pursuant to Section 5.7(a)(viii),
accrued and unpaid interest on the Class B Notes.
- From amounts transferred pursuant to Section 5.7(a)(iv), (v),
(vii), (xi) and (xiv), in the following order of priority:
(1) to the holders of the [Class A-1 Notes], the total amount
paid out on each Distribution Date until the outstanding principal
balance of the [Class A-1 Notes] has been reduced to zero;
(2) to the holders of the [Class A-2 Notes], the total amount
paid out on each Distribution Date until the outstanding principal
balance of the [Class A-2 Notes] has been reduced to zero;
38
(3) to the holders of the [Class A-3 Notes], the total amount
paid out on each Distribution Date until the outstanding principal
balance of the [Class A-3 Notes] has been reduced to zero; and
(4) to the holders of the [Class A-4 Notes], the total amount
paid out on each Distribution Date until the outstanding principal
balance of the [Class A-4 Notes] is reduced to zero.
- From amounts transferred pursuant to section 5.7(a)(ix) and (xv),
to the holders of the Class B Notes, until the outstanding
principal balance of the Class B Notes is reduced to zero.
provided, that after the acceleration of the Notes following the occurrence of
an Event of Default under the Indenture, payments of principal on the Notes will
be made, instead of as provided above after payment of all amounts owing to the
Indenture Trustee pursuant to Section 6.7 of the Indenture, first to the [Class
A-1 Notes] until the [Class A-1 Notes] have been paid in full, second to the
other Classes of Class A Notes pro rata until they are paid in full, and third,
to the Class B Notes.
(b) On each Distribution Date, the Indenture Trustee will post on its
website at _______________, which posting will be accessible to each Noteholder
[and to the Insurer], the statement provided to the Indenture Trustee by the
Servicer pursuant to Section 5.10 hereof on such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Noteholder, such tax will reduce the amount
otherwise distributable to the Noteholder in accordance with this Section 5.8.
The Indenture Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Noteholders sufficient funds for the payment of
any withholding tax attributable to the Trust (but such authorization will not
prevent the Indenture Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Noteholder will be treated as cash distributed to such Noteholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S. Noteholder), the
Indenture Trustee may in its sole discretion withhold such amounts in accordance
with this Section 5.8(c). In the event that a Noteholder wishes to apply for a
refund of any such withholding tax, the Indenture Trustee will reasonably
cooperate with such Noteholder in making such claim so long as such Noteholder
agrees to reimburse the Indenture Trustee for any out-of-pocket expenses
(including legal fees and expenses) incurred.
(d) Distributions required to be made to Noteholders on any Distribution
Date will be made to each Noteholder of record on the related Record Date either
by wire transfer, or by check mailed to such Noteholder, as provided in Section
2.7 of the Indenture.
(e) Subject to Section 5.1 and this Section 5.8, monies received by the
Indenture Trustee hereunder need not be segregated in any manner except to the
extent required by law and may be deposited under such general conditions as may
be prescribed by law, and the Indenture Trustee will not be liable for any
interest thereon.
SECTION 5.9. Reserved.
39
SECTION 5.10. Statements to Noteholders.
(a) On each Distribution Date, the Indenture Trustee will make available to
each Noteholder [and to the Insurer] and the Rating Agencies a statement setting
forth at least the following information (which will be included in the
Servicer's Certificate delivered to the Indenture Trustee) to the extent
applicable:
(i) the amount of such distribution allocable to principal of each
Class of Notes;
(ii) the amount of such distribution allocable to interest on or with
respect to each Class of Notes;
(iii) the amount of such distribution payable out of amounts withdrawn
from the Spread Account or pursuant to a claim on the Note Policy;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(v) the aggregate outstanding principal amount of each Class of the
Notes and the Note Pool Factor for each such Class after giving effect to
payments allocated to principal reported under Section 5.10(a)(i);
(vi) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period and/or due but unpaid with respect to such
Collection Period or prior Collection Periods, as the case may be;
(vii) the Class A Noteholders' Interest Carryover Amount, the Class B
Noteholders' Interest Carryover Amount and the Class A Noteholders'
Principal Carryover Amount if any;
(viii) the Delinquency Rate with respect to such Distribution Date;
(ix) the Net Loss Rate and Cumulative Net Loss Ratio with respect to
such Distribution Date; and
(x) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased by Triad or the Servicer on or prior to the related
Determination Date.
Each amount set forth pursuant to Section 5.10(a)(i), (ii), (iii), (vi) and
(vii) will be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or Class thereof).
(b) The Indenture Trustee will make the statements referred to in Section
5.10(a) (and, at its option, any additional files containing the same
information in an alternative format) available each month via the Indenture
Trustee's internet website, which is presently located at [______]. Persons that
are entitled to receive such statements but are unable to use the above website
are entitled to have a paper copy mailed to them via first class mail by calling
the Indenture Trustee at [_______]. The Indenture Trustee will have the right to
change the way the statements referred to in Section 5.10(a) are distributed in
order to make such distribution more convenient and/or more accessible to the
parties entitled to receive such statements. The Indenture Trustee will provide
notification of any such change to all parties entitled to receive such
statements in the manner
40
described in Section 12.3, Section 11.4 of the Indenture or Section 11.5 of the
Indenture, as appropriate.
SECTION 5.11. [Optional Deposits by the Insurer. The Insurer will at any
time, and from time to time, with respect to a Distribution Date, have the
option (but will not be required, except in accordance with the terms of the
Note Policy) to deliver an Insurer Optional Deposit to the Indenture Trustee for
deposit into the Collection Account.]
ARTICLE VI
[The Note Policy
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Policy Claim Amount, the Indenture
Trustee will furnish to the Insurer no later than 12:00 noon New York City time
on the Business Day after the related Determination Date a completed Notice (as
attached as a form to the Note Policy) specifying the amount of the Policy Claim
Amount, provided, that if such Notice is received after 12:00 noon, New York
City time, on such Business Day, it will be deemed to be received before 12:00
noon, New York City time, on the following Business Day. If any such Notice is
not in proper form or is otherwise insufficient for the purpose of making a
claim under the Note Policy, it will be deemed not to have been received for
purposes of making such claim, and the Insurer will promptly so advise the
Indenture Trustee in writing and the Indenture Trustee may submit an amended or
corrected Notice. If such an amended or corrected Notice is in proper form and
is otherwise sufficient for the purpose of making a claim under the Note Policy,
it will be deemed to have been timely received on the Business Day of such
resubmission; provided, that if such notice is received after 12:00 noon, New
York City time, it shall be deemed to be received before 12:00 noon, New York
City time, on the following Business Day.
(b) Any notice delivered by the Indenture Trustee to the Insurer pursuant
to Section 6.1(a) will specify the Policy Claim Amount claimed under the Note
Policy and will constitute a "Notice" under the Note Policy. In accordance with
the provisions of the Note Policy, the Insurer is required to pay to the
Indenture Trustee the Policy Claim Amount properly claimed thereunder by 12:00
noon, New York City time, on the later of (i) the Distribution Date on which the
related Policy Claim Amount is due for payment under the Indenture or (ii) the
second Business Day following actual receipt in New York, New York on a Business
Day by the Insurer of a Notice, appropriately completed and executed by the
Indenture Trustee; provided, that if such Notice is received after 12:00 noon,
New York City time, on such Business Day, it will be deemed to be received
before 12:00 noon, New York City time, on the following Business Day. The
Indenture Trustee will deposit amounts paid by the Insurer pursuant to a claim
submitted under this Section 6.1 into the Note Distribution Account for payment
to Holders (as defined in the Note Policy) on the related Distribution Date (or,
if funds are received from the Insurer after the related Distribution Date, for
payment to Holders promptly after such receipt). Any payment made by the Insurer
under the Note Policy will be applied solely to the payment of the Class A
Notes, and for no other purpose. Amounts payable in respect of any Policy Claim
Amounts due under the Note Policy, unless otherwise stated therein, will be
distributed by the Insurer to, or at the direction of, the Indenture Trustee, by
wire transfer of immediately available funds. The Insurer's payment obligations
under the Note Policy with respect to particular Policy Claim Amounts will be
discharged to the extent funds equal to the applicable Policy Claim Amounts are
paid by the Insurer to, or at the direction of,
41
the Indenture Trustee in accordance with the Indenture Trustee's request,
whether or not such funds are properly applied by the Indenture Trustee. Payment
of Policy Claim Amounts will be made only at the time set forth in the Note
Policy, and no accelerated Insured Payments (as defined in the Note Policy) will
be made except to the extent that the Insurer has specified an earlier date for
payment at its sole option. The Note Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation (as defined in the Note Policy), other than at
the sole option of the Insurer, nor against any risk other than Nonpayment (as
defined in the Note Policy), including failure of the Indenture Trustee to remit
any Policy Claim Amounts or Scheduled Payments due to Holders. Notwithstanding
anything to the contrary set forth in the Note Policy, in no event will the
aggregate amount paid by the Insurer thereunder exceed the Maximum Insured
Amount (as defined in the Note Policy).
(c) The Indenture Trustee will (i) receive as attorney-in-fact of each
Holder any Policy Claim Amount from the Insurer and (ii) deposit the same in the
Note Distribution Account for distribution to Noteholders. Any and all Policy
Claim Amounts disbursed by the Indenture Trustee from claims made under the Note
Policy will not be considered payment by the Trust with respect to such Class A
Notes, and will not discharge the obligations of the Trust with respect thereto.
The Insurer will, upon any payment pursuant to the Note Policy, in furtherance
and not in limitation of its equitable right of subrogation and its rights under
the Insurance Agreement, to the extent it makes any payment with respect to the
Class A Notes, become subrogated to the rights of any Holders to receive any and
all amounts due in respect of the Insured Obligations as to which such payment
was made. The Insurer will be a co-beneficiary of the Indenture Trustee's lien
under the Indenture. Subject to and conditioned upon any payment with respect to
the Class A Notes by or on behalf of the Insurer, the Indenture Trustee will
assign to the Insurer all rights to the payment of interest or principal with
respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote,
right, power or the like with respect to the Notes to the extent that it has
made payment pursuant to the Note Policy. To evidence such subrogation, the Note
Registrar will note the Insurer's rights as subrogee upon the register of
Holders. The foregoing subrogation will in all cases be subject to the rights of
the Holders to receive all Scheduled Payments (as defined in the Note Policy) in
respect of the Class A Notes.
(d) The Indenture Trustee will keep a complete and accurate record of all
funds deposited into the Note Distribution Account with respect to the Note
Policy and the allocation of such funds to payment of interest on and principal
paid in respect of any Class A Note. The Insurer will have the right to inspect
such records at reasonable times upon one Business Day's prior notice to the
Indenture Trustee.
(e) Only the Indenture Trustee on behalf of the Holders will be entitled to
make a claim for Policy Claim Amounts and Preference Amounts under the Note
Policy. Notwithstanding any other provision of this Agreement or any Basic
Document, the Noteholders are not entitled to institute proceedings directly
against the Insurer.
SECTION 6.2. Preference Claims Under Note Policy.
(a) In the event that the Indenture Trustee has received a certified copy
of a final, nonappealable order of an appropriate court or other body exercising
jurisdiction that any interest on or principal of the Class A Notes which has
become due for payment under the Indenture or this Agreement, the nonpayment of
which would have been covered by the Note Policy, and which was made to a Holder
by or on behalf of the Issuer has been deemed a preferential transfer and
42
recoverable, or theretofore recovered, from such Holder pursuant to Title 11 of
the United States Code in accordance with an Order (such amount, a "Preference
Amount"), the Indenture Trustee will so notify the Insurer, will comply with the
provisions of the Note Policy to obtain payment by the Insurer of such avoided
payment, and will, at the time it provides notice to the Insurer, notify Holders
by mail that, in the event that any Holder's payment is so recoverable, such
Holder will be entitled to payment pursuant to the terms of the Note Policy. The
Insurer will pay any Preference Amount when due to be paid pursuant to an Order
(as defined below), but in any event no earlier than the fifth Business Day
following actual receipt by the Insurer of (i) a certified copy of a final,
nonappealable order of a court or other body exercising jurisdiction to the
effect that a Holder is required to return such Preference Amount paid during
the term of the Note Policy because the payments of such amounts were avoided as
a preferential transfer or otherwise rescinded or required to be restored by the
Indenture Trustee or such Holder (the "Order"), (ii) an opinion of counsel
satisfactory to the Insurer stating that the Order has been entered and is final
and not subject to any stay, (iii) an assignment, in form and substance
satisfactory to the Insurer, duly executed and delivered by such Holder and the
Indenture Trustee, irrevocably assigning to the Insurer all rights and claims of
the Indenture Trustee and such Holder relating to or arising under the Indenture
or otherwise with respect to such Preference Amount, (iv) appropriate
instruments in form satisfactory to the Insurer to effect the appointment of the
Insurer as agent for such Holder in any legal proceeding related to such
Preference Amount, and (v) a Notice appropriately completed and executed by the
Indenture Trustee in the form attached as Exhibit B to the Note Policy;
provided, that (I) if such documents are received by the Insurer after 12:00
noon, New York City time, on such Business Day, they will be deemed to be
received before 12:00 noon, New York City time, on the following Business Day
and (II) the Insurer will not be obligated to pay any Preference Amount in
respect of principal (other than the Class A Noteholders' Parity Deficit Amount)
prior to the Final Scheduled Distribution Date for the relevant class of Class A
Notes. Such payment will be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, and not to the
Indenture Trustee or the Holder directly, unless the Indenture Trustee or the
relevant Holder has made a payment of the Preference Amounts to the court or
such receiver, conservator, debtor-in-possession or trustee in bankruptcy named
in the Order, in which case the Insurer will pay the Indenture Trustee, or as
directed by the Indenture Trustee, to the extent of the payment of the
Preference Amount, subject to the delivery of (a) the items referred to in
clauses (i), (ii), (iii), (iv) and (v) above to the Insurer and (b) evidence
satisfactory to the Insurer that payment has been made to such court or
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order; provided, further, that any Preference Amount that constitutes
interest will be limited to the amount of interest on the outstanding principal
amount of the Class A Notes (calculated at the Interest Rate for the relevant
class of Class A Notes) accrued as of the last day of the applicable interest
accrual period with respect to the Class A Notes and will not, in any event,
include any interest on the Class A Notes accrued after such date or any
interest on such interest amount; provided, further, that in no event will the
Insurer be obligated to make any payment (i) in respect to any Preference Amount
to the extent that such payment, when added to all prior payments of Policy
Claim Amounts, would exceed the Maximum Insured Amount (as defined in the Note
Policy) or (ii) prior to the time the Insurer would have been required to pay a
Policy Claim Amount pursuant to Section 3 of the Policy.
(b) The Indenture Trustee will promptly notify the Insurer of any
proceeding or the institution of any action (of which a Responsible Officer of
the Indenture Trustee has actual knowledge) seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "Note Preference Claim") of any payment made to
a Holder that has been deemed a preferential transfer and recoverable, or
theretofore recovered, from such Holder pursuant to Title 11 of United States
Code in accordance with an Order. Each Holder,
43
by its purchase of Class A Notes, and the Indenture Trustee hereby agree that so
long as no Insurer Default has occurred and is continuing, the Insurer may at
any time during the continuation of any proceeding relating to a Note Preference
Claim direct all matters relating to such Note Preference Claim, including (i)
the direction of any appeal of any order relating to any Note Preference Claim
and (ii) the posting of any surety, supersedeas or performance bond pending any
such appeal at the expense of the Insurer, but subject to reimbursement as
provided in the Insurance Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 6.1(c), the Insurer will be subrogated to,
and each Holder and the Indenture Trustee hereby delegate and assign, to the
fullest extent permitted by law, the rights of the Indenture Trustee and each
Holder in the conduct of any proceeding with respect to a Note Preference Claim,
including all rights of any party to an adversary proceeding action with respect
to any court order issued in connection with any such Note Preference Claim.
SECTION 6.3. Surrender of Note Policy. The Indenture Trustee will surrender
the Note Policy to the Insurer for cancellation upon the expiration of such
policy in accordance with the terms thereof.]
ARTICLE VII
The Depositor
SECTION 7.1. Representations of Depositor. The Depositor makes the
following representations on which [the Insurer will be deemed to have relied in
executing and delivering the Note Policy and on which] the Issuer is deemed to
have relied in acquiring the Receivables and on which the Indenture Trustee and
Backup Servicer may rely. The representations are true and correct as of the
execution and delivery of this Agreement and as of the Closing Date, in the case
of Receivables, and will survive the sale of the Receivables to the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor has been duly organized
and is validly existing as a limited liability company in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times, and now
has, limited liability company power, authority and legal right to acquire, own
and sell the Receivables and the Other Conveyed Property transferred to the
Trust.
(b) Due Qualification. The Depositor is duly qualified to do business as a
foreign limited liability company in good standing and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect the Depositor's ability to transfer the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, or the validity or enforceability of the Receivables and the Other
Conveyed Property or to perform the Depositor's obligations under the Basic
Documents to which it is a party.
(c) Power and Authority. The Depositor has the power and authority to
execute and deliver the Basic Documents to which it is a party and to carry out
their respective terms; the Depositor has full power and authority to sell and
assign the Receivables and the Other Conveyed Property to be sold and assigned
to and deposited with the Trust by it and has duly authorized such sale and
assignment to the Trust by all necessary action; and the execution, delivery and
performance
44
of the Basic Documents to which it is a party have been duly authorized by the
Depositor by all necessary action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Receivables and the Other Conveyed Property,
enforceable against the Depositor and creditors of and purchasers from the
Depositor; and the Basic Documents to which the Depositor is a party, when duly
executed and delivered, will constitute legal, valid and binding obligations of
the Depositor 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.
(e) No Violation. The consummation of the transactions contemplated by the
Basic Documents and the fulfillment of the terms of the Basic Documents to which
the Depositor is a party will not conflict with, result in any breach of any of
the terms and provisions of or constitute (with or without notice, lapse of time
or both) a default under the limited liability company agreement or operating
agreement of the Depositor, or any material indenture, agreement, mortgage, deed
of trust or other instrument to which the Depositor is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than the Basic Documents, or violate
any law, order, rule or regulation applicable to the Depositor of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or any of
its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the Depositor's best knowledge, threatened against the Depositor, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Depositor or its properties (A)
asserting the invalidity of any of the Basic Documents, (B) seeking to prevent
the issuance of the Securities or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, any of the Basic Documents.
(g) True Sale. The Receivables are being transferred with the intention of
removing them from the Depositor's estate pursuant to Section 541 of the
Bankruptcy Code, as the same may be amended from time to time.
SECTION 7.2. Organizational Existence. During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a limited liability company under the laws of Delaware and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or will be necessary to protect the validity and
enforceability of the Basic Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
SECTION 7.3. Liability of Depositor. The Depositor will be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Depositor under this Agreement.
45
SECTION 7.4. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor will be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, will be the successor to the Depositor hereunder
without the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that the Depositor will have
delivered to the Owner Trustee, the Backup Servicer, the Indenture Trustee [and
the Insurer] an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Issuer and the Indenture Trustee, respectively, in
the Receivables and the Other Conveyed Property and reciting the details of such
filings or (B) no such action will be necessary to preserve and protect such
interest.
SECTION 7.5. Limitation on Liability of Depositor and Others. The Depositor
and any director or manager or officer or employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document. The Depositor will not be under any obligation
to appear in, prosecute or defend any legal action that will not be incidental
to its obligations under this Agreement, and that in its opinion may involve it
in any expense or liability.
SECTION 7.6. Ownership of the Certificates or Notes. The Depositor may in
its individual or any other capacity become the owner or pledgee of Certificates
or Notes with the same rights as it would have if it were not the Depositor,
except as expressly provided herein or in any Basic Document. Notes or
Certificates so owned by the Depositor will have an equal and proportionate
benefit under the provisions of the Basic Documents, without preference,
priority, or distinction as among all of the Notes or Certificates.
ARTICLE VIII
The Servicer
SECTION 8.1. Representations of Servicer. The Servicer makes the following
representations [on which the Insurer is deemed to have relied in executing and
delivering the Note Policy] and on which the Issuer is deemed to have relied in
acquiring the Receivables and on which the Indenture Trustee and the Backup
Servicer may rely. The representations are true and correct as of the execution
and delivery of this Agreement and as of the Closing Date, in the case of the
Receivables, and will survive the sale of the Receivables to the Issuer and the
pledge thereof to the Indenture Trustee pursuant to the Indenture.
(i) Representations and Warranties. The representations and warranties
set forth on the Schedule of Representations attached hereto as Schedule B
are true and correct;
(ii) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
California, with corporate power, authority and legal right to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times,
46
and now has, power, authority and legal right to enter into and perform its
obligations under the Basic Documents to which it is a party;
(iii) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business of servicing the
Receivables as required by this Agreement requires or will require such
qualification;
(iv) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver the Basic Documents to which it is a party
and to carry out their respective terms, and the execution, delivery and
performance of the Basic Documents to which it is a party have been duly
authorized by the Servicer by all necessary corporate action;
(v) Binding Obligation. The Basic Documents to which the Servicer is a
party constitute legal, valid and binding obligations of the Servicer
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(vi) No Violation. The consummation of the transactions contemplated
by the Basic Documents, and the fulfillment of the terms of the Basic
Documents, will not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of the Servicer,
or any indenture, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument, other than the Basic Documents, or violate any law,
order, rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or any
of its properties;
(vii) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Servicer or its properties (A) asserting the invalidity of any of the Basic
Documents, (B) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by any of the Basic
Documents, or (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, any of the Basic Documents or
(D) seeking to adversely affect the federal income tax or other federal,
state or local tax attributes of the Securities;
(viii) No Consents. The Servicer is not required to obtain the consent
of any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery,
47
performance, validity or enforceability of this Agreement which has not
already been obtained.
SECTION 8.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) will be liable hereunder only to
the extent of the obligations in this Agreement specifically undertaken by the
Servicer and the representations made by the Servicer.
(b) The Servicer will defend, indemnify and hold harmless the Trust, the
Depositor, the Indenture Trustee, the Owner Trustee, the Backup Servicer, [the
Insurer,] their respective officers, directors, agents and employees, the
Certificateholders and the Noteholders from and against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation (i) arising out of or resulting
from the use, ownership or operation by the Servicer or any Affiliate thereof of
any Financed Vehicle or (ii) to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Trust, the Indenture
Trustee, the Depositor, the Owner Trustee, the Backup Servicer, [the Insurer,]
the Certificateholders or the Noteholders by reason of the breach of this
Agreement by the Servicer, the negligence (other than errors in judgment),
misfeasance, or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(c) Indemnification under this Section 8.2 will include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Section 8.2 and
the recipient thereafter collects any of such amounts from others, the recipient
will promptly repay such amounts collected to the Servicer, without interest.
(d) The Servicer will pay, reimburse and indemnify the Indenture Trustee
and the Backup Servicer in accordance with Section 6.7 of the Indenture.
SECTION 8.3. Merger or Consolidation of, or Assumption of the Obligations
of the Servicer or Backup Servicer.
(a) The Servicer will not merge or consolidate with any other person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to the Servicer's
business unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity will be capable of fulfilling the
duties of the Servicer contained in this Agreement [and, subject to Section 4.6
of the Insurance Agreement,] will be acceptable to the Controlling Party, [and,
if an Insurer Default has occurred or is continuing,] will be an Eligible
Servicer. Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Servicer will be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases will execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, will be the
successor to the Servicer under this Agreement without the execution or filing
of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; provided,
however, that nothing contained herein will be deemed to release the Servicer
from any obligation. The Servicer will provide notice of any merger,
consolidation or succession pursuant to this Section
48
8.3 to the Owner Trustee, the Depositor, the Indenture Trustee, the Noteholders,
[the Insurer] and each Rating Agency. Notwithstanding the foregoing, the
Servicer will not merge or consolidate with any other Person or permit any other
Person to become a successor to the Servicer's business, unless (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 4.6 will have been breached (for purposes hereof, such
representations and warranties will be true and correct as of the date of the
consummation of such transaction) and no Servicer Termination Event has occurred
and is continuing other than in connection with a change in control as provided
in the Insurance Agreement, (y) the Servicer will have delivered to the Owner
Trustee, the Indenture Trustee, Backup Servicer, the Rating Agencies [and the
Insurer] an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 8.3 and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (z) the
Servicer will have delivered to the Owner Trustee, the Indenture Trustee, the
Rating Agencies [and the Insurer] an Opinion of Counsel, stating in the opinion
of such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to
preserve and protect the interest of the Trust in the Receivables and the Other
Conveyed Property and reciting the details of the filings or (B) no such action
will be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer will be a party, (iii) which acquires by conveyance, transfer or
lease substantially all of the assets of the Backup Servicer, or (iv) succeeding
to the business of the Backup Servicer, in any of the foregoing cases will
execute an agreement of assumption to perform every obligation of the Backup
Servicer under this Agreement and, whether or not such assumption agreement is
executed, will be the successor to the Backup Servicer under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein will be deemed
to release the Backup Servicer from any obligation.
SECTION 8.4. Limitation on Liability of Servicer, Backup Servicer and
Others.
(a) Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup Servicer will be
liable to the Trust or the Noteholders, except as provided in this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement; provided, however, that this provision will not protect the
Servicer, the Backup Servicer or any such person against any liability that
would otherwise be imposed by reason of a breach of this Agreement or willful
misfeasance, bad faith or negligence (excluding errors in judgment) in the
performance of duties; provided further that this provision will not affect any
liability of Triad to indemnify the Indenture Trustee and the Owner Trustee for
costs, taxes, expenses, claims, liabilities, losses or damages paid by the
Indenture Trustee and the Owner Trustee, in their individual capacities pursuant
to the Purchase Agreement. The Servicer, the Backup Servicer and any director,
officer, employee or agent of the Servicer or Backup Servicer may rely in good
faith on the written advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement.
(b) The Backup Servicer will not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer file, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must
49
rely in order to perform its obligations hereunder, and the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Depositor [and the Insurer] and the
Noteholders will look only to the Servicer to perform such obligations. The
Backup Servicer, the Indenture Trustee, the Owner Trustee and the Custodian will
have no responsibility and will not be in default hereunder or incur any
liability for any failure, error, malfunction or any delay in carrying out any
of their respective duties under this Agreement if such failure or delay results
from the Backup Servicer acting in accordance with information prepared or
supplied by a Person other than the Backup Servicer (or contractual agents of
the Backup Servicer) or the failure of any such other Person to prepare or
provide such information. The Backup Servicer will have no responsibility, will
not be in default and will incur no liability for (i) any act or failure to act
of any third party (other than its contractual agents), including the Servicer
or the Controlling Party, (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party (other than
its contractual agents), (iii) the invalidity or unenforceability of any
Receivable under applicable law, (iv) the breach or inaccuracy of any
representation or warranty made with respect to any Receivable, or (v) the acts
or omissions of any successor Backup Servicer. The provisions of this Section
8.4(b) will not limit the Backup Servicer's obligations pursuant to Section
4.14.
(c) The parties expressly acknowledge and consent to [Indenture Trustee]
acting in the possible dual capacity of Backup Servicer or successor Servicer
and in the capacity as Indenture Trustee. [Indenture Trustee] may, in such dual
or other capacity, discharge its separate functions fully, without hindrance or
regard to conflict of interest principles, duty of loyalty principles or other
breach of fiduciary duties to the extent that any such conflict or breach arises
from the performance by [Indenture Trustee] of express duties set forth in the
this Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto and the
Noteholders except in the case of gross negligence and willful misconduct by
[Indenture Trustee].
SECTION 8.5. Delegation of Duties. The Servicer may delegate duties under
this Agreement to an Affiliate of Triad [with the prior written consent of the
Insurer (unless an Insurer Default has occurred and is continuing)]. The
Servicer also may at any time perform through sub-contractors the specific
duties of (i) repossession of Financed Vehicles, (ii) tracking Financed
Vehicles' Lien Certificates and (iii) pursuing the collection of deficiency
balances or other amounts due on certain Liquidated Receivables, in each case,
without the consent of [the Insurer] and may perform other specific collection
and repossession duties through such sub-contractors in accordance with
Servicer's customary servicing policies and procedures; provided, however, that
no such delegation or sub-contracting of duties by the Servicer will relieve the
Servicer of its responsibility with respect to such duties. [So long as no
Insurer Default has occurred and is continuing neither Triad nor any party
acting as Servicer hereunder will appoint any subservicer hereunder without the
prior written consent of the Insurer.]
SECTION 8.6. Servicer and Backup Servicer Not to Resign. Subject to Section
8.3, neither the Servicer nor the Backup Servicer may resign from the
obligations and duties imposed on it by this Agreement as Servicer or Backup
Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer or the Backup Servicer, as the case may
be, [and the Insurer (so long as an Insurer Default has not occurred) or] the
Majority Noteholders [(if an Insurer Default has occurred and is continuing)]
does not elect to waive the obligations of the Servicer or the Backup Servicer,
as the case may be, to perform the duties which render it legally unable to act
or to delegate those duties to another Person. Any such determination permitting
the resignation of the Servicer or Backup
50
Servicer will be evidenced by an Opinion of Counsel to such effect delivered at
other than the Indenture Trustee's expense, and acceptable to the Indenture
Trustee, the Owner Trustee [and the Insurer (unless an Insurer Default has
occurred and is continuing)]. No resignation of the Servicer will become
effective until, [so long as no Insurer Default has occurred and is continuing,]
the Backup Servicer [or an entity acceptable to the Insurer] has assumed the
responsibilities and obligations of the Servicer or, [if an Insurer Default has
occurred and is continuing,] the Backup Servicer or a successor Servicer that is
an Eligible Servicer has assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup Servicer will become effective until, [so
long as no Insurer Default has occurred and is continuing, an entity acceptable
to the Insurer has assumed the responsibilities and obligations of the Backup
Servicer or, if an Insurer Default has occurred and is continuing,] a Person
that is an Eligible Servicer has assumed the responsibilities and obligations of
the Backup Servicer; provided, however, that (i) in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 8.6, the Backup Servicer may petition a court for its removal, (ii)
the Backup Servicer may resign with the written consent of [the Insurer] and
(iii) notwithstanding anything to the contrary, if [Indenture Trustee] resigns
or is removed as the Indenture Trustee under the Indenture it will no longer be
the Backup Servicer.
ARTICLE IX
Default
SECTION 9.1. Servicer Termination Event. For purposes of this Agreement,
each of the following will constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee for
distribution to Noteholders any proceeds or payment required to be so delivered
under this Agreement that continues unremedied for a period of two Business Days
(one Business Day with respect to payment of Purchase Amounts) after written
notice is received by the Servicer from the Indenture Trustee [or (unless an
Insurer Default has occurred and is continuing) the Insurer] or after discovery
of such failure by a Responsible Officer of the Servicer;
(b) Failure by the Servicer to deliver the Servicer's Certificate by the
Determination Date;
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or, if
the Servicer is Triad, failure of Triad duly to perform any other covenants or
agreements of Triad set forth in the Purchase Agreement which failure (i)
materially and adversely affects the rights of Noteholders (determined without
regard to the availability of funds under the Note Policy), [or of the Insurer
(unless an Insurer Default has occurred and is continuing),] and (ii) continues
unremedied for a period of 30 days after the date on which written notice of
such failure, requiring the same to be remedied, has been given to the Servicer
by the Indenture Trustee, the Issuer [or the Insurer (or, if an Insurer Default
has occurred and is continuing, by any Noteholder)];
(d) An Insolvency Event has occurred with respect to the Servicer;
(e) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
will prove to be incorrect in any
51
material respect as of the time when the same will have been made, and the
incorrectness of such representation, warranty or statement has a material
adverse effect on the Trust, [the Insurer] or the Noteholders' interests and,
within 30 days after knowledge thereof by the Servicer or after written notice
thereof will have been given to the Servicer by the Indenture Trustee [or the
Insurer (or, if an Insurer Default has occurred and is continuing, a
Noteholder)], the circumstances or conditions in respect of which such
representation, warranty or statement was incorrect will not have been
eliminated or otherwise cured;
(f) [So long as no Insurer Default has occurred and is continuing, an
Insurance Agreement Event of Default occurs;
(g) A claim is made under the Note Policy; or
(h) The occurrence of a Trigger Event under the Insurance Agreement.]
SECTION 9.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event has occurred and is continuing, [the Insurer may (or, if an
Insurer Default has occurred and is continuing,] the Indenture Trustee (to the
extent it has knowledge thereof) may, and will at the direction of the Majority
Noteholders), by notice given in writing to the Servicer [(and to the Indenture
Trustee if given by the Insurer)] terminate all of the rights and obligations of
the Servicer under this Agreement[; provided that if no Insurer Default has
occurred and is continuing, neither the Indenture Trustee nor the Majority
Noteholders may deliver such notice, and termination will be in the Insurer's
sole and absolute discretion]. On or after the receipt by the Servicer of such
written notice all authority, power, obligations and responsibilities of the
Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Other Conveyed Property or otherwise, automatically will
pass to, be vested in and become obligations and responsibilities of the Backup
Servicer (or such other successor Servicer appointed by the Controlling Party);
provided, however, that the successor Servicer will have no liability with
respect to any obligation which was required to be performed by the terminated
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the Other Conveyed Property and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with the
Controlling Party and the successor Servicer in effecting the termination of the
responsibilities and rights of the terminated Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that will at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the delivery
to the successor Servicer of all Receivable Files, Monthly Records and
Collection Records and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable the successor
Servicer to service the Receivables and the Other Conveyed Property. If
requested by the Controlling Party, the successor Servicer will terminate the
Blocked Account Agreement and direct the Obligors to make all payments under the
Receivables directly to the successor Servicer (in which event the successor
Servicer will process such payments in accordance with Section 4.2(e)), or to a
lockbox established by the successor Servicer at the direction of the
Controlling Party, at the successor Servicer's expense. The terminated Servicer
will grant the
52
Indenture Trustee, the successor Servicer and the Controlling Party reasonable
access to the terminated Servicer's premises at the terminated Servicer's
expense.
SECTION 9.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 9.2, or upon the resignation of the Servicer pursuant to
Section 8.6, the Backup Servicer (unless the Controlling Party will have
exercised its option pursuant to Section 9.3(b) to appoint an alternate
successor Servicer) will be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and will be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Servicer by the terms and provisions of this
Agreement except as otherwise stated herein. The Indenture Trustee and such
successor will take such action, consistent with this Agreement, as will be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it will be subject to termination under Section 9.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint as
Backup Servicer or as successor to the Servicer a Person other than the Person
serving as Backup Servicer at the time, and (without limiting its obligations
under the Note Policy) will have no liability to the Indenture Trustee, Triad,
the Depositor, the Person then serving as Backup Servicer, any Noteholders or
any other Person if it does so. Notwithstanding the above, if the Backup
Servicer will be legally unable or unwilling to act as Servicer, and an Insurer
Default has occurred and is continuing, the Backup Servicer, the Indenture
Trustee or the Majority Noteholders may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment pursuant to the preceding sentence, the Backup Servicer,
subject to Section 8.6(iii), will act as successor Servicer unless it is legally
unable to do so, in which event the outgoing Servicer will continue to act as
Servicer until a successor has been appointed and accepted such appointment.
Subject to Section 8.6, no provision of this Agreement will be construed as
relieving the Backup Servicer of its obligation to succeed as successor Servicer
upon the termination of the Servicer pursuant to Section 9.2 or the resignation
of the Servicer pursuant to Section 8.6. If upon the termination of the Servicer
pursuant to Section 9.2 or the resignation of the Servicer pursuant to Section
8.6, the Controlling Party appoints a successor Servicer other than the Backup
Servicer, the Backup Servicer will not be relieved of its duties as Backup
Servicer hereunder.
(c) Any successor Servicer will be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder. [The Insurer, if the Class A Notes are outstanding and no
Insurer Default has occurred and is continuing,] and such successor Servicer may
agree on additional compensation to be paid to such successor Servicer, which
additional compensation will be payable as provided herein and will in no event
exceed $150,000 in the aggregate and which will be deemed to be part of the
"Servicing Fee" described in Section 4.8. The Backup Servicer will not be liable
for any Servicing Fee, additional compensation or other amounts to be paid to
such successor Servicer in connection with its assumption and performance of the
servicing duties described herein.
SECTION 9.4. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer, the Indenture Trustee will give
prompt written notice thereof to each Noteholder and to the Rating Agencies.
53
SECTION 9.5. Waiver of Past Defaults. [So long as no Insurer Default has
occurred and is continuing, the Insurer (or, if an Insurer Default has occurred
and is continuing,] the Majority Noteholders) may, on behalf of all Noteholders,
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any such waiver of a past default, such
default will cease to exist, and any Servicer Termination Event arising
therefrom will be deemed to have been remedied for every purpose of this
Agreement. No such waiver will extend to any subsequent or other default or
impair any right consequent thereto.
ARTICLE X
Termination
SECTION 10.1. Optional Purchase of All Receivables.
(a) On any Distribution Date after the last day of any Collection Period as
of which the Pool Balance will be less than or equal to 10% of the Original Pool
Balance, the Servicer will have the option to purchase the Owner Trust Estate,
other than the Trust Accounts [(with the consent of the Insurer if such purchase
would result in a claim on the Note Policy or would result in any amount owing
to the Insurer under the Insurance Agreement remaining unpaid)]; provided,
however, that the amount to be paid for such purchase (as set forth in the
following sentence) will be sufficient to pay the full amount of principal,
premium, if any, and interest due and payable on the Notes on such Distribution
Date. To exercise such option, the Servicer will deposit at least two Business
Days prior to such Distribution Date pursuant to Section 5.6 in the Collection
Account an amount equal to the aggregate Purchase Amount for the Receivables
(other than Receivables that became Liquidated Receivables on or before the last
day of the Collection Period preceding such Distribution Date), plus the
appraised value of any other property held by the Trust (other than the Trust
Accounts), such value to be determined by an appraiser mutually agreed upon by
the Servicer, [the Insurer] and the Indenture Trustee, and will succeed to all
interests in and to the Trust.
(b) Upon any sale of the assets of the Trust pursuant to Section 8.1 of the
Trust Agreement, the Servicer will instruct the Indenture Trustee to deposit the
proceeds from such sale after all payments and reserves therefrom (including the
expenses of such sale) have been made (the "Insolvency Proceeds") in the
Collection Account.
(c) Notice of any termination of the Trust will be given by the Servicer to
the Owner Trustee, the Indenture Trustee, the Backup Servicer, [the Insurer] and
the Rating Agencies as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Trust will succeed to the rights of, and assume the obligations of, the
Indenture Trustee pursuant to this Agreement.
ARTICLE XI
Administrative Duties of the Servicer
SECTION 11.1. Administrative Duties.
54
(a) Duties with Respect to the Basic Documents. The Servicer will perform
all its duties and the duties of the Issuer under the Basic Documents. In
addition, the Servicer will consult with the Owner Trustee as the Servicer deems
appropriate regarding the duties of the Issuer under the Basic Documents. The
Servicer will monitor the performance of the Issuer and will advise the Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Basic Documents. The Servicer will prepare for execution by the Issuer or will
cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it will be the duty
of the Issuer to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Servicer will take all necessary action that
is the duty of the Issuer to take pursuant to the Indenture, including pursuant
to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 4.1, 5.4, 7.3, 8.3, 9.2, 9.3,
11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in the Basic
Documents, the Servicer will perform such calculations and will prepare for
execution by the Issuer or the Owner Trustee or will cause the preparation
by other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it will be the duty of the Issuer
or the Owner Trustee to prepare, file or deliver pursuant to any of the
Basic Documents or under state and federal tax and securities laws, and at
the request of the Owner Trustee will take all appropriate action that it
is the duty of the Issuer to take pursuant to any of the Basic Documents.
In accordance with the directions of the Issuer or the Owner Trustee, the
Servicer will administer, perform or supervise the performance of such
other activities in connection with the Collateral (including the Basic
Documents) as are not covered by any of the foregoing provisions and as are
expressly requested by the Issuer or the Owner Trustee and are reasonably
within the capability of the Servicer.
(ii) Notwithstanding anything in any of the Basic Documents to the
contrary, the Servicer will be responsible for promptly notifying the Owner
Trustee and the Indenture Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) as contemplated in this Agreement. Any such
notice will be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee or the Indenture Trustee
pursuant to such provision.
(iii) Notwithstanding anything in the Basic Documents to the contrary,
the Servicer will be responsible for performance of any duties of the
Issuer set forth in any amended Trust Agreement (as contemplated by Section
2.12 of the Trust Agreement) with respect to, among other things,
accounting and reports to Certificateholders (as defined in the Trust
Agreement); provided, however, that once prepared by the Servicer the Owner
Trustee will retain responsibility for the distribution of the Schedule
K-1s upon request of the Certificateholder in order to enable the
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer will perform the duties of the Servicer specified in
Section 9.2 of the Trust Agreement required to be performed in connection
with the resignation or removal of the Owner Trustee, and any other duties
expressly required to be performed by the Servicer under any of the Basic
Documents.
55
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings will be in accordance with
any directions received from the Issuer and will be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer will prepare and file, on behalf of the
Trust, all tax returns, tax elections, financial statements and such annual or
other reports attributable to the activities engaged in by the Issuer as are
necessary for preparation of tax reports, including forms 1099. All tax returns
will be signed by the Servicer unless applicable law requires a
Certificateholder to sign such documents.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer will not take any
action pursuant to this Article XI unless within a reasonable time before the
taking of such action, the Servicer will have notified the Owner Trustee and the
Indenture Trustee of the proposed action and the Owner Trustee and, with respect
to items (A), (B), (C) and (D) below, the Indenture Trustee [and, so long as no
Insurer Default has occurred and is continuing, the Insurer] will not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the
Receivables);
(C) the amendment, change or modification of any of the Basic
Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent to
the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(e) Exceptions. Except as expressly set forth herein, the Servicer, in its
capacity hereunder, will not be obligated to, and will not, (1) make any
payments to the Noteholders or Certificateholders under the Basic Documents, (2)
sell the Trust Estate pursuant to Section 5.5 of the Indenture, (3) take any
other action that the Issuer directs the Servicer not to take on its behalf or
(4) in connection with its duties hereunder assume any indemnification
obligation of any other Person.
(f) The Backup Servicer or any successor Servicer will not be responsible
for any obligations or duties of the Servicer under this Section 11.1.
SECTION 11.2. Records. The Servicer will maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records will be accessible for inspection by the Issuer at
any time during normal business hours upon reasonable prior notice.
56
SECTION 11.3. Additional Information to be Furnished to the Issuer. The
Servicer will furnish to the Issuer [and, so long as no Insurer Default has
occurred and is continuing, the Insurer,] from time to time such additional
information regarding the Collateral as the Issuer [and, so long as no Insurer
Default has occurred and is continuing, the Insurer,] will reasonably request.
ARTICLE XII
Miscellaneous Provisions
SECTION 12.1. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto,
with the consent of the Indenture Trustee (which consent may not be unreasonably
withheld) [and, with the prior written consent of the Insurer (which consent
will not be unreasonably withheld; provided that no Insurer Default has occurred
and is continuing)] but without the consent of any of the Noteholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement, to
comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which will not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action will not, as evidenced by an Opinion of
Counsel delivered to Owner Trustee and the Indenture Trustee, adversely affect
in any material respect the interests of any Noteholder[; provided further that
if an Insurer Default has occurred and is continuing, such action will not
materially adversely affect the interests of the Insurer].
(b) This Agreement may also be amended from time to time by the parties
hereto, with the consent [of the Insurer, the consent] of the Indenture Trustee,
and the consent of the Noteholders evidencing not less than a majority of the
outstanding principal amount of the Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment will (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that will be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
outstanding principal amount of the Notes, the Noteholders of which are required
to consent to any such amendment, without the consent of the Noteholders of all
the outstanding Notes of each class affected thereby; [provided, further, that
if an Insurer Default has occurred and is continuing, such action will not
materially adversely affect the interest of the Insurer].
(c) The party requesting such amendment will furnish written notification
of the substance of such amendment or consent to the Rating Agencies before the
execution thereof and the Indenture Trustee will furnish written notification of
the substance of such amendment or consent to each Noteholder promptly after the
execution thereof.
(d) It will not be necessary for the consent of Noteholders pursuant to
this Section 12.1 to approve the particular form of any proposed amendment or
consent, but it will be sufficient if such consent will approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Agreement) and of evidencing the authorization
of any action by Noteholders will be subject to such reasonable requirements as
the Indenture Trustee or the Owner Trustee, as applicable, may prescribe.
57
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee, the Indenture Trustee, [the Insurer] and Backup Servicer will be
entitled to receive and conclusively rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement and the Opinion of Counsel referred to in Section 12.2(h) has been
delivered. The Owner Trustee, the Backup Servicer and the Indenture Trustee may,
but will not be obligated to, enter into any such amendment which affects the
Issuer's, the Owner Trustee's, the Backup Servicer's or the Indenture Trustee's,
as applicable, own rights, duties or immunities under this Agreement or
otherwise.
SECTION 12.2. Protection of Title to Trust.
(a) Triad will cause to be executed and filed such financing statements and
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Indenture Trustee in the Receivables, the Other
Conveyed Property and in the proceeds thereof. Triad will deliver (or cause to
be delivered) to [the Insurer,] the Owner Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Depositor nor the Servicer will change its name, identity,
corporate structure or jurisdiction of formation or take any action that would,
could or might make any financing statement or continuation statement filed in
accordance with Section 12.2(a) ineffective to continue the first priority
perfected security interest in that portion of the Trust Property in which a
security interest may be perfected by filing under the applicable Uniform
Commercial Code. If any refiling is required, the Depositor or Servicer, as the
case may be, will promptly give notice and file new financing statements or
amendments thereto or continuation statements thereof. Promptly upon such
filing, the Depositor or the Servicer, as the case may be, will deliver an
Opinion of Counsel in form and substance reasonably satisfactory to [the
Insurer], stating either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Indenture Trustee in the Receivables
and Other Conveyed Property, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (B)
no such action will be necessary to preserve and protect such interest.
(c) The Servicer will at all times maintain each office from which it will
service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer will maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) The Servicer will maintain its computer systems so that, from and after
the time of sale under this Agreement of the Receivables to the Issuer, the
Servicer's master computer records (including any backup archives) that refer to
a Receivable will indicate clearly the interest of the Trust in such Receivable
and that such Receivable is owned by the Trust. Indication of the Trust's
interest in a Receivable will be deleted from or modified on the Servicer's
computer systems when, and only when, the related Receivable will have been paid
in full or repurchased.
58
(f) If at any time the Servicer proposes to sell, grant a security interest
in or otherwise transfer any interest in motor vehicle receivables to any
prospective purchaser, lender or other transferee, the Servicer will give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they refer
in any manner whatsoever to any Receivable, indicate clearly that such
Receivable has been sold and is owned by the Trust unless such Receivable has
been paid in full or repurchased.
(g) Upon request, the Servicer will furnish to [the Insurer,] the Owner
Trustee or to the Indenture Trustee, within five Business Days, a list of all
Receivables (by contract number and name of Obligor) then held as part of the
Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.
(h) The Servicer will deliver to [the Insurer,] the Owner Trustee and the
Indenture Trustee promptly after the execution and delivery of the Agreement
and, if required pursuant to Section 12.1, of each amendment, an Opinion of
Counsel stating that, in the opinion of such counsel, [in form and substance
reasonably satisfactory to the Insurer], either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Indenture Trustee in the
Receivables and the Other Conveyed Property, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (B) no such action will be necessary to preserve and protect such
interest. Each Opinion of Counsel referred to in this paragraph (h) will specify
any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 12.3. Notices. All demands, notices and communications hereunder
will be in writing and will be deemed to have been duly given to the addressee
if mailed, by first-class registered mail, postage prepaid service, confirmed
facsimile transmission, or a nationally recognized express courier, as follows:
If to the Depositor: Triad Financial Special Purpose LLC
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
If to the Servicer: Triad Financial Corporation
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
If to the Issuer or
Owner Trustee: [_________________]
[_________________]
[_________________]
[_________________]
If to the Indenture Trustee: [_________________]
[_________________]
[_________________]
[_________________]
59
[If to the Insurer: [_________________]
[_________________]
[_________________]
[_________________]
In each case in which notice or other communication to the Insurer refers to a
Servicer Termination Event, a claim on the Note Policy, or with respect to which
failure on the part of the Insurer to respond will be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of General Counsel and will be marked to indicate
"URGENT MATERIAL ENCLOSED."]
If to Moody's: Xxxxx'x Investors Service, Inc.
ABS Monitoring Department
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Standard & Poor's: Standard & Poor's Ratings Group
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset Backed Surveillance
Department
[If to Fitch: Fitch Ratings
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000.]
Any such demand, notice or communication hereunder will be deemed to have been
received on the date delivered to or received at the premises of the addressee
as evidenced by the date noted on the return receipt.
Subject to Section 5.10(b) hereof, any notice required or permitted to
be mailed to a Noteholder will be given by first class mail, postage prepaid, at
the address of such Noteholder as shown in the Note Register. Any notice so
mailed within the time prescribed in the Agreement will be conclusively presumed
to have been duly given, whether or not the Noteholder receives such notice.
SECTION 12.4. Assignment. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 7.4 and 8.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Depositor or the Servicer without the prior written consent of
the Trust, the Backup Servicer, the Indenture Trustee and [the Insurer (or if an
Insurer Default has occurred and is continuing] the Noteholders evidencing not
less than 66-2/3% of the principal amount of the outstanding Notes).
SECTION 12.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto, the Indenture
Trustee, the Owner Trustee, the Certificateholders and the Noteholders, as
third-party beneficiaries. [The Insurer and its successors and assigns will be a
third-party beneficiary to the provisions of this Agreement, and will be
entitled to rely upon and directly enforce such provisions of this Agreement so
long as no Insurer Default has
60
occurred and is continuing. Except as expressly stated otherwise herein, any
right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, will be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee.] Except as
provided in this Agreement, no other Person will have any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 12.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will, 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 will not invalidate or render unenforceable
such provision in any other jurisdiction.
SECTION 12.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered will be an original, but all such counterparts will together
constitute but one and the same instrument.
SECTION 12.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and will not define or limit any of
the terms or provisions hereof.
SECTION 12.9. Governing Law. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
WILL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 12.10. Assignment to Indenture Trustee. The Depositor hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and the Other Conveyed Property
and/or the assignment of any or all of the Issuer's rights and obligations
hereunder to the Indenture Trustee.
SECTION 12.11. Nonpetition Covenants.
(a) Notwithstanding any termination of this Agreement, the Servicer, the
Backup Servicer, the Indenture Trustee and the Depositor will not, prior to the
date that is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer.
(b) Notwithstanding any termination of this Agreement, the Issuer, the
Servicer, the Backup Servicer and the Indenture Trustee will not, prior to the
date that is one year and one day after the termination of this Agreement with
respect to the Depositor, acquiesce to, petition or
61
otherwise invoke or cause the Depositor to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Depositor under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Depositor.
SECTION 12.12. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed by [Owner Trustee] not in its individual capacity
but solely in its capacity as Owner Trustee of the Issuer and in no event will
[Owner Trustee] in its individual capacity or, except as expressly provided in
the Trust Agreement, as Owner Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse will be had solely to the assets of
the Issuer. For all purposes of this Agreement, in the performance of its duties
or obligations hereunder or in the performance of any duties or obligations of
the Issuer hereunder, the Owner Trustee will be subject to, and entitled to the
benefits of, the terms and provisions of Articles V, VI and VII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by [Indenture Trustee], not in its
individual capacity but solely as Indenture Trustee and Backup Servicer and in
no event will [Indenture Trustee] have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse will be had solely to the assets of the Issuer.
(c) In no event will [Indenture Trustee], in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Statutory Trust Statute, common law, or the Trust Agreement.
SECTION 12.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer will be an independent contractor and will not be
subject to the supervision of the Issuer, the Indenture Trustee and Backup
Servicer or the Owner Trustee with respect to the manner in which it
accomplishes the performance of its obligations hereunder. Unless expressly
authorized by this Agreement, the Servicer will have no authority to act for or
represent the Issuer or the Owner Trustee in any way and will not otherwise be
deemed an agent of the Issuer or the Owner Trustee.
SECTION 12.14. No Joint Venture. Nothing contained in this Agreement (i)
will constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) will be construed to
impose any liability as such on any of them or (iii) will be deemed to confer on
any of them any express, implied or apparent authority to incur any obligation
or liability on behalf of the others.
SECTION 12.15. Nonpublic Personal Information. In the course of carrying
out their duties under this Agreement, the Indenture Trustee, the Backup
Servicer, the Issuer and the Depositor shall develop or receive certain
information regarding the "consumers" and "customers" of the Servicer, including
but not limited to "nonpublic personal information," (as those terms are defined
in Title V of the Xxxxx-Xxxxx-Xxxxxx Act and the privacy regulations adopted
thereunder).
62
Notwithstanding any other provision of the Agreement, with respect to nonpublic
personal information about the customers and consumers of the Servicer, each of
the Indenture Trustee, the Backup Servicer, the Issuer and the Depositor agrees
as follows: (i) except as may be reasonably necessary in the ordinary course of
business to carry out the activities to be performed by the Indenture Trustee,
the Backup Servicer, the Issuer or the Depositor under this Agreement or as may
be required by law or legal process, it will not disclose any such nonpublic
personal information to any third party; (ii) it will not use any such nonpublic
personal information other than to carry out the purposes for which it was
disclosed to the Indenture Trustee, the Backup Servicer, the Issuer or the
Depositor, as applicable, unless such other use is expressly permitted by a
written agreement executed by the Servicer or required by law or legal process;
(iii) it shall restrict disclosure of the information solely to those of its
employees with a need to know and will advise employees who receive the
information of the obligation of confidentiality hereunder; and (iv) it will
take all reasonable measures, including without limitation such measures as it
takes to safeguard its own confidential information, to ensure the security and
confidentiality of all such nonpublic personal information, to protect against
anticipated threats or hazards to the security or integrity of such nonpublic
personal information and to protect against unauthorized access to or use of
such nonpublic personal information. The Servicer shall have access (during
normal business hours, upon reasonable prior notice) to review such books and
records of the Indenture Trustee, the Backup Servicer, Issuer and the Depositor
as may be necessary to assess compliance with the requirements of this Section
12.15. All costs and expenses of such a review shall be borne solely by the
Servicer, unless the results of such review indicate a breach of this Section
12.15 by the Indenture Trustee, the Backup Servicer, the Issuer or the
Depositor. The Indenture Trustee, the Backup Servicer, the Issuer or the
Depositor, as applicable, shall promptly notify the Servicer if it receives any
complaint or notice concerning a violation of privacy rights or becomes aware of
a breach of customer data security. Upon termination of this Agreement, the
Indenture Trustee, the Backup Servicer, the Issuer and the Depositor shall
return or destroy all nonpublic personal information, without retaining any
copies of such documents and records.
SECTION 12.16. Regulation AB.
The Depositor and the Servicer acknowledge and agree that the purpose of
this Section 12.16 is to facilitate compliance by the Depositor with the
provisions of Regulation AB and related rules and regulations of the Commission.
The Depositor shall not exercise its right to request delivery of information or
other performance under these provisions other than in good faith, or for
purposes other than compliance with the Securities Act, the Exchange Act and the
rules and regulations of the Commission under the Securities Act and the
Exchange Act. The Servicer acknowledges that interpretations of the requirements
of Regulation AB may change over time, whether due to interpretive guidance
provided by the Commission or its staff, consensus among participants in the
asset-backed securities market, advice of counsel, or otherwise, and agrees to
comply with requests made by the Depositor in good faith for delivery of
information under these provisions on the basis of evolving interpretations of
Regulation AB. The Servicer shall cooperate fully with the Depositor to deliver
to the Depositor (including any of its assignees or designees) any and all
statements, reports, certifications, records and any other information necessary
in the good faith determination of the Depositor to permit the Depositor to
comply with the provisions of Regulation AB, together with such disclosures
relating to the Servicer and the Receivables, reasonably believed by the
Servicer to be necessary in order to effect such compliance.
[Signature page to follow]
63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and the year first above written.
TRIAD AUTOMOBILE RECEIVABLES TRUST
200_-_
By: [OWNER TRUSTEE], not in its
individual capacity but solely as
Owner Trustee of the Trust
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TRIAD FINANCIAL SPECIAL PURPOSE LLC, as
Depositor
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TRIAD FINANCIAL CORPORATION, as Servicer
and Custodian
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[Signature Page to Sale and Servicing Agreement (p. 1 of 2)]
[INDENTURE TRUSTEE],
not in its individual capacity but
solely as Backup Servicer
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Acknowledged and accepted by
[INDENTURE TRUSTEE],
not in its individual capacity but
solely as Indenture Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
[Signature page to Sale and Servicing Agreement (p. 2 of 2)]
SCHEDULE A
SCHEDULE OF RECEIVABLES
[See Schedule A to the Purchase Agreement]
SCH-A-1
SCHEDULE B
REPRESENTATIONS AND WARRANTIES
[See Schedule B to the Purchase Agreement]
SCH-B-1
SCHEDULE C
SERVICING POLICIES AND PROCEDURES
Note: Applicable Time Periods Will Vary by State
SCH-C-1
SCHEDULE D
CUSTODIAN THIRD PARTY VENDORS
SCH-D-1
EXHIBIT A
SERVICER'S CERTIFICATE
B-1
EXHIBIT B
FORM OF NOTE GUARANTY INSURANCE POLICY
C-1
