Exhibit 99.1
SALE AND SERVICING AGREEMENT
RELATING TO
PARAGON AUTO RECEIVABLES OWNER TRUST ____-_
between
PARAGON ACCEPTANCE CORPORATION
In its individual capacity
and as Servicer
PARAGON AUTO RECEIVABLES CORPORATION
as Seller
PARAGON AUTO RECEIVABLES OWNER TRUST ____-_
as Purchaser
and
[NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION]
as Indenture Trustee [and Backup Servicer]
-----------------------------------------
Dated as of ________ __, ____
-----------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions...........................................1
Section 1.2. Usage of Terms.......................................19
Section 1.3. Calculations.........................................20
Section 1.4. Section References...................................20
Section 1.5. Action by or Consent of Noteholders..................20
Section 1.6. No Recourse..........................................20
Section 1.7. Nonpetition Covenant.................................20
ARTICLE II
CONVEYANCE OF RECEIVABLES; ACCEPTANCE
BY INDENTURE TRUSTEE
Section 2.1. Conveyance of Receivables............................21
Section 2.2. Custody of Receivable Files..........................22
Section 2.3. Conditions Precedent to Issuance by Trust............23
Section 2.4. Representations and Warranties of Seller.............23
Section 2.5. Repurchase of Receivables Upon Breach of Warranty....25
Section 2.6. Indenture Trustee's Assignment of Receivables........25
Section 2.7. Collecting Lien Certificates.........................26
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer...............................26
Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement.......................27
Section 3.3. Realization Upon Receivables.........................28
Section 3.4. Insurance............................................29
Section 3.5. Maintenance of Security Interests in Vehicles........29
Section 3.6. Covenants, Representations and Warranties of Servicer30
Section 3.7. Purchase of Receivables Upon Breach of Covenant......32
Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer[; Backup Servicer Fee]......................33
Section 3.9. Servicer's Certificate...............................33
Section 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event...........................33
Section 3.11. Annual Independent Accountants' Report...............34
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Section 3.12. Access to Certain Documentation and Information
Regarding Receivables...............................34
Section 3.13. Monthly Tape; [Certain Duties of Backup Servicer]...34
Section 3.14. Insurance...........................................35
Section 3.15. Compliance with Laws................................36
ARTICLE IV
PAYMENTS; STATEMENTS TO NOTEHOLDERS
Section 4.1. Trust Accounts......................................36
Section 4.2. Servicer Reimbursements.............................38
Section 4.3. Application of Collections..........................39
Section 4.4. Additional Deposits.................................39
Section 4.5. Payments............................................39
Section 4.6. Net Deposits........................................41
Section 4.7. Statements to Noteholders...........................41
ARTICLE V
THE RESERVE ACCOUNT
Section 5.1. Initial Deposit.....................................42
Section 5.2. Deficiency Claim Amounts............................42
Section 5.3. Distribution of Excess..............................42
ARTICLE VI
THE SELLER
Section 6.1. Liability of Seller..................................43
Section 6.2. Merger or Consolidation of the Seller................43
Section 6.3. Limitation on Liability of Seller and Others.........43
Section 6.4. Special Purpose Entity...............................43
Section 6.5. Restrictions on Liens................................44
Section 6.6. Creation of Indebtedness; Guarantees.................45
Section 6.7. Compliance with Laws.................................45
Section 6.8. Further Instruments and Acts.........................45
Section 6.9 Investment Company Act...............................45
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ARTICLE VII
THE SERVICER
Section 7.1. Liability of Servicer; Indemnities..................45
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer [or Backup Servicer]...46
Section 7.3. Limitation on Liability of Servicer[, Backup
Servicer] and Others................................47
Section 7.4. Delegation of Duties................................48
Section 7.5. Servicer [and Backup Servicer] Not to Resign........48
Section 7.6. Administrative Duties...............................49
ARTICLE VIII
SERVICER TERMINATION EVENTS
Section 8.1. Servicer Termination Event..........................50
Section 8.2. Consequences of a Servicer Termination Event........50
Section 8.3. Appointment of Successor............................51
Section 8.4. Notification to Noteholders.........................52
Section 8.5. Waiver of Past Defaults.............................52
ARTICLE IX
TERMINATION
Section 9.1. Optional Purchase of All Receivables................52
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Amendment...........................................53
Section 10.2. Protection of Title to Trust........................54
Section 10.3. Limitation on Rights of Noteholders.................55
Section 10.4. GOVERNING LAW.......................................56
Section 10.5. Severability of Provisions..........................56
Section 10.6. Assignment..........................................57
Section 10.7. Third-Party Beneficiaries...........................57
Section 10.8. Counterparts........................................57
Section 10.9. Notices.............................................57
Section 10.10. Successors and Assigns..............................57
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SCHEDULES
Schedule A -- Schedule of Receivables
Schedule B -- Representations and Warranties of the Seller
EXHIBITS
Exhibit A -- Form of Servicer's Certificate
Exhibit B -- Request for Release and Receipt of Documents
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SALE AND SERVICING AGREEMENT, dated as of ________ __, ____ (this
"Agreement"), between PARAGON ACCEPTANCE CORPORATION, a Delaware
corporation, in its individual capacity ("Paragon") and as Servicer (the
"Servicer"), PARAGON AUTO RECEIVABLES CORPORATION, a Delaware corporation,
as Seller (the "Seller"), PARAGON AUTO RECEIVABLES OWNER TRUST ____-_, a
Delaware trust, as purchaser (the "Trust"), and [NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association], as Indenture Trustee
(in such capacity, the "Indenture Trustee") [and as Backup Servicer (in
such capacity, the "Backup Servicer")].
WHEREAS, pursuant to the Receivables Purchase Agreement (as
defined below), the Seller has purchased from Paragon certain receivables
arising in connection with motor vehicle retail installment contracts
acquired by Paragon through motor vehicle dealers;
WHEREAS, the Seller wishes to sell and the Trust wishes to purchase
certain of such receivables;
WHEREAS, the Servicer has agreed to service such receivables,
which constitute the principal assets of the trust estate; and
WHEREAS, [Norwest Bank Minnesota, National Association] is willing
to serve in the capacities of Indenture Trustee [and Backup Servicer
hereunder].
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, Paragon, the Servicer, the Seller, the Trust, the
Indenture Trustee [and the Backup Servicer] hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used but not defined
herein shall have the meanings set forth in the Trust Agreement or the
Indenture (each as defined below). Whenever capitalized and used in this
Agreement, the following words shall have the following meanings:
Accountants' Report: The report of a firm of nationally recognized
independent accountants described in Section 3.11.
Accounting Date: (a) The last day of a Collection Period and (b)
with respect to a Payment Date or Determination Date, the last day of the
Collection Period preceding such Payment Date or Determination Date (such
date being referred to as the "related Accounting Date" with respect to
such Payment Date or Determination Date).
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Administrative Receivable: With respect to any Collection Period,
a Receivable that the Servicer is required to purchase pursuant to Section
3.7 on or before the Deposit Date following such Collection Period.
Affiliate: With respect to any Person, any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
the term "control" (including the terms "controlling," "controlled by" and
"under common control with") means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Aggregate Principal Balance: With respect to the Closing Date, the
Cutoff Date Principal Balance, and with respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than Liquidated Receivables and Purchased
Receivables).
Agreement: This Agreement and all exhibits and schedules hereto.
Amount Financed: With respect to a Receivable, the "amount
financed" within the meaning of the Federal Truth-in-Lending Act, which is
the aggregate amount of credit initially extended under such Receivable
toward the purchase price of the related Financed Vehicle and related
costs, including amounts of credit extended in respect of accessories,
insurance premiums, service and warranty policies or contracts and other
items customarily financed as part of motor vehicle retail installment
contracts.
Annual Percentage Rate or APR: With respect to a Receivable, the
rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act);
provided, however, that if, after the Closing Date, the annual percentage
rate with respect to a Receivable as of the Closing Date is reduced as a
result of (i) an insolvency proceeding involving the related Obligor or
(ii) the Soldiers' and Sailors' Civil Relief Act of 1940, the Annual
Percentage Rate or APR shall refer to such reduced rate.
Available Funds: With respect to any Determination Date, the sum
of (i) the Collected Funds received by the Servicer during the related
Collection Period, (ii) all Purchase Amounts with respect to Purchased
Receivables deposited in the Collection Account since the preceding
Determination Date and on or before the related Deposit Date, and (iii) all
income from investments of funds in the Collection Account during the
related Collection Period.
[Backup Servicer: Norwest Bank Minnesota, National Association, its
successor in interest pursuant to Section 7.2 or such Person as shall have been
appointed as Backup Servicer pursuant to Section 8.3.]
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[Backup Servicer Fee: With respect to any Payment Date, the fee
payable to the Backup Servicer for services rendered during the related
Collection Period, as specified in a separate fee letter between the Backup
Servicer and Paragon.]
Basic Servicing Fee: With respect to any Payment Date, the fee
payable to the Servicer for services rendered during the related Collection
Period, which shall be equal to one-twelfth of 1.00% multiplied by the
Aggregate Principal Balance as of the open of business on the first day of
the related Collection Period.
Business Day: Any day other than a Saturday, Sunday or other day
on which commercial banking institutions or trust companies in St. Louis,
Missouri, Los Angeles, California, New York, New York, Minneapolis,
Minnesota or the principal place of business of any successor Servicer or
successor Indenture Trustee are authorized or obligated by law or order to
be closed.
Certificate: As defined in the Trust Agreement.
Certificated Security: As defined in Section 8-102(a)(4) of Revised
Article 8.
Certificateholder: As defined in the Trust Agreement.
Class: A class of Notes.
Class A Interest Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class A Interest Payment
Amount for such Payment Date, minus (ii) the amount of interest that the
holders of the Class A Notes actually received on such Payment Date.
Class A Interest Payment Amount: With respect to any Payment Date,
the sum of (i) for the initial Payment Date, 44 days of interest and for
any Payment Date thereafter, 30 days of interest, in each case calculated
on the basis of a 360-day year consisting of twelve 30-day months, at the
Class A Interest Rate on the Class A Note Balance as of the close of
business on the Cutoff Date (with respect to the initial Payment Date) or
the related Accounting Date (with respect to each Payment Date after the
initial Payment Date), plus (ii) any outstanding Class A Interest Carryover
Shortfall with respect to the preceding Payment Date, plus 30 days of
interest on such outstanding Class A Interest Carryover Shortfall, to the
extent permitted by law, at the Class A Interest Rate.
Class A Interest Rate: ___% per annum, calculated on a basis of a
360-day year consisting of twelve 30-day months.
Class A Note: Any Note executed on behalf of the Trust and issued
pursuant to the Indenture in substantially the form set forth in Exhibit A
to the Indenture.
Class A Note Balance: Initially, $____________ and, thereafter, an
amount equal to the initial Class A Note Balance reduced by all amounts
distributed to the Class A Noteholders that are allocable to principal.
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Class A Note Factor: As of any Payment Date, a seven-digit decimal
figure equal to the Class A Note Balance as of the close of business on
such Payment Date divided by the initial Class A Note Balance.
Class A Payment Amount: On any Payment Date, the sum of the Class A
Principal Payment Amount and the Class A Interest Payment Amount.
Class A Percentage: ____%.
Class A Principal Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class A Principal Payment
Amount, minus (ii) the amount of principal that the holders of the Class A
Notes actually received on such Payment Date.
Class A Principal Payment Amount: With respect to any Payment
Date, without duplication, the sum of: (i) the Class A Percentage of the
sum of: (A) the principal portion of all Collected Funds for the related
Determination Date (other than Collected Funds received with respect to
Liquidated Receivables following the respective dates such Receivables
became Liquidated Receivables), (B) the Principal Balance of all
Receivables that became Liquidated Receivables during the related
Collection Period (other than Purchased Receivables) as determined on the
respective dates such Receivables became Liquidated Receivables, (C) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the related Accounting Date, and (D) the
aggregate amount of Cram Down Losses that shall have been realized during
the related Collection Period; plus (ii) any Class A Principal Carryover
Shortfall with respect to the preceding Payment Date; provided, however,
that on the Final Scheduled Payment Date, the Class A Principal Payment
Amount shall equal the Class A Note Balance.
Class B Interest Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class B Interest Payment
Amount for such Payment Date, minus (ii) the amount of interest that the
holders of the Class B Notes actually received on such Payment Date.
Class B Interest Payment Amount: With respect to any Payment Date,
the sum of (i) for the initial Payment Date, 44 days of interest and for
any Payment Date thereafter, 30 days of interest, in each case calculated
on the basis of a 360-day year consisting of twelve 30-day months, at the
Class B Interest Rate on the Class B Note Balance as of the close of
business on the Cutoff Date (with respect to the initial Payment Date) or
the related Accounting Date (with respect to each Payment Date after the
initial Payment Date), plus (ii) any outstanding Class B Interest Carryover
Shortfall with respect to the preceding Payment Date, plus 30 days of
interest on such outstanding Class B Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Interest Rate.
Class B Interest Rate: ___% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months.
Class B Note: Any Note executed on behalf of the Trust and issued
pursuant to the Indenture in substantially the form set forth in Exhibit B
to the Indenture.
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Class B Note Balance: Initially, $____________ and, thereafter, an
amount equal to the initial Class B Note Balance reduced by all amounts
distributed to the Class B Noteholders that are allocable to principal.
Class B Note Factor: As of any Payment Date, a seven-digit decimal
figure equal to the Class B Note Balance as of the close of business on
such Payment Date divided by the initial Class B Note Balance.
Class B Payment Amount: On any Payment Date, the sum of the Class B
Interest Payment Amount and the Class B Principal Payment Amount.
Class B Percentage: ___%.
Class B Principal Carryover Shortfall: As of the close of business
on any Payment Date, an amount equal to (i) the Class B Principal Payment
Amount, minus (ii) the amount of principal that the holders of the Class B
Notes actually received on such Payment Date.
Class B Principal Payment Amount: With respect to any Payment
Date, without duplication, the sum of: (i) the Class B Percentage of the
sum of: (A) the principal portion of all Collected Funds for the related
Determination Date (other than Collected Funds received with respect to
Liquidated Receivables following the respective dates such Receivables
became Liquidated Receivables), (B) the Principal Balance of all
Receivables that became Liquidated Receivables during the related
Collection Period (other than Purchased Receivables) as determined on the
respective dates such Receivables became Liquidated Receivables, (C) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the related Accounting Date, and (D) the
aggregate amount of Cram Down Losses that shall have been realized during
the related Collection Period; plus (ii) any Class B Principal Carryover
Shortfall with respect to the preceding Payment Date; provided, however,
that on the Final Scheduled Payment Date, the Class B Principal Payment
Amount shall equal the Class B Note Balance.
Clearing Corporation: As defined in Section 8-102(3) of Old Article 8.
Closing: As defined in Section 2.1(d).
Closing Date: ________ __, ____.
Collected Funds: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables received by the Servicer during the related Collection Period,
including all Liquidation Proceeds collected during the related Collection
Period (but excluding any Purchase Amounts) and all amounts paid by the
Dealers under Dealer Agreements or Dealer Assignments with respect to the
Receivables during the related Collection Period.
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Collection Account: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 4.1.
Collection Period: (a) A calendar month and (b) with respect to a
Payment Date or Determination Date, the calendar month preceding the month
in which such Payment Date or Determination Date occurs (such calendar
month being referred to as the "related Collection Period" with respect to
such Payment Date or Determination Date).
Computer Tape: The computer tape or diskette generated on behalf of
the Seller that provides information relating to the Receivables.
Control: With respect to any Federal Book Entry Security, the
Indenture Trustee shall have obtained control if:
(i) the Indenture Trustee is a participant in the book
entry system maintained by the Federal Reserve Bank that is acting
as fiscal agent for the issuer of such Federal Book Entry
Security, and such Federal Reserve Bank has indicated by book
entry that such Federal Book Entry Security has been credited to
the Indenture Trustee's securities account in such book entry
system; or
(ii) (a) the Indenture Trustee (1) is registered on the
records of a Securities Intermediary as the person having a
Securities Entitlement in respect of such Federal Book Entry
Security against such Securities Intermediary; or (2) has obtained
the agreement, in writing, of the Securities Intermediary for such
Securities Entitlement that such Securities Intermediary will
comply with Entitlement Orders of the Indenture Trustee without
further consent of any other Person; and (b) the Securities
Intermediary is a participant in the book entry system maintained
by the Federal Reserve Bank that is acting as fiscal agent for the
issuer of such Federal Book Entry Security; and (c) such Federal
Reserve Bank has indicated by book entry that such Federal Book
Entry Security has been credited to the Securities Intermediary's
securities account in such book entry system.
Controlling Party: The Indenture Trustee for the benefit of the
Noteholders; provided, however, that the Owner Trustee for the benefit of
the Certificateholders shall be the Controlling Party after all unpaid
principal and interest on the Notes shall have been paid in full.
Corporate Trust Office: The principal office of the Indenture
Trustee at which its corporate trust business shall be administered, which
office at the Closing Date is located at [Norwest Center, Xxxxx Xxxxxx xxx
Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate
Trust Services/Asset-Backed Administration]; or such other address or the
Indenture Trustee may designate from time to time by notice to the
Noteholders and the Seller.
Cram Down Loss: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an
order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on a Receivable, an
6
amount equal to the principal balance of such Receivable immediately prior
to such order, minus the principal balance of such Receivable as so
reduced. A "Cram Down Loss" shall be deemed to have been realized on the
date of issuance of such order.
[CTS: ContiTrade Services L.L.C., a Delaware limited liability
company.]
[CTS Liens: The security interests in the Receivables and other
Trust Property granted by Paragon as debtor/seller in favor of CTS as
secured party/purchaser in connection with the Warehouse Credit and
Servicing Agreement, dated as of March 29, 1996, as amended, between
Paragon and CTS.]
Cumulative Net Loss Ratio: With respect to any Determination Date,
the fraction (expressed as a percentage) the numerator of which is equal to
the sum of (i) the Principal Balance of all Receivables that have become
Liquidated Receivables as of the related Accounting Date less all
Liquidation Proceeds and recoveries received with respect to such
Receivables and (ii) the aggregate Cram Down Losses with respect to the
Receivables as of the related Accounting Date, and the denominator of which
is equal to the Aggregate Principal Balance as of the Cutoff Date.
Cutoff Date: The close of business on _______ __, ____.
Cutoff Date Principal Balance: $_______________.
DCR: Duff & Xxxxxx Credit Rating Co., or any successor thereto.
Dealer: A seller of new or used automobiles, light trucks or
sports utility vehicles that originated one or more of the Receivables and
sold the respective Receivable to Paragon under a Dealer Agreement or
Dealer Assignment.
Dealer Agreement: An agreement between Paragon and a Dealer relating
to the sale of retail installment contracts to Paragon and all documents
and instruments relating thereto.
Dealer Assignment: With respect to a Receivable, the assignment
executed by a Dealer conveying such Receivable to Paragon.
Deemed Cured: As of any Determination Date, with respect to a
Trigger Event that has occurred, that no Trigger Event shall have occurred
as of such Determination Date or as of either of the two consecutively
preceding Determination Dates.
Deficiency Claim Amount: As defined in Section 5.2.
Delinquency Ratio: With respect to any Determination Date, the
fraction (expressed as a percentage) the numerator of which is the
Principal Balance of all Receivables, of which 10% or more of any Scheduled
Payment (including any Receivable for which the related Financed Vehicle
7
has been repossessed but not yet sold by the Servicer) is 60 or more days
past due as of the related Accounting Date, and the denominator of which is
the Aggregate Principal Balance.
Delivery: When used with respect to Trust Account Property,
"Delivery" means:
(i) with respect to Physical Property other than a
"certificated security" as defined under Old Article 8, transfer
thereof to the Indenture Trustee or its nominee or custodian by
physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank;
(ii) with respect to a "certificated security" as defined
under Old Article 8 that will, upon compliance with the following
procedures, be held by a Person located in an Old Article 8
Jurisdiction, transfer thereof:
(A) by delivery of such certificated security
endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank
to a Financial Intermediary, and the making by such
Financial Intermediary of entries on its books and
records identifying such certificated security as
belonging to the Indenture Trustee or its nominee or
custodian and the sending by such Financial Intermediary
of a confirmation of the transfer to the Indenture
Trustee or its nominee or custodian of such certificated
security; or
(B)(1) by delivery thereof to a Clearing
Corporation and the registering by such Clearing
Corporation of appropriate entries on its books reducing
the appropriate securities account of the transferor and
increasing the appropriate securities account of a
Financial Intermediary by the amount of such certificated
security, (2) the identification by the Clearing
Corporation of the certificated securities for the sole
and exclusive account of the Financial Intermediary, (3)
the maintenance of such certificated securities by such
Clearing Corporation or a "custodian bank" (as defined in
Section 8-102(4) of Old Article 8) or the nominee of
either subject to the Clearing Corporation's exclusive
control, (4) the sending of a confirmation by the
Financial Intermediary of the transfer to the Indenture
Trustee or its nominee or custodian of such securities
and the registering by such Financial Intermediary of
entries on its books and records identifying such
certificated security as belonging to the Indenture
Trustee or its nominee or custodian, and, in any event,
any such Physical Property in registered form shall be in
the name of the Indenture Trustee or its nominee or
custodian, and (5) such additional or alternative
procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or
custodian, consistent with applicable law or regulations
or the interpretation thereof;
(iii) with respect to a Certificated Security that will,
upon compliance with the following procedures, be held by a person
located in a Revised Article 8 Jurisdiction,
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transfer of such Certificated Security to the Indenture Trustee or
its nominee or custodian by physical delivery to the Indenture
Trustee or its nominee or custodian, endorsed to, or registered in
the name of, the Indenture Trustee or its nominee or custodian or
endorsed in blank;
(iv) with respect to any such Trust Account Property that
constitutes an "uncertificated security" under Old Article 8 (and
that is not a Federal Book Entry Security) and where the issuer
thereof is organized in an Old Article 8 Jurisdiction,
registration of the transfer to, and ownership of such Trust
Account Property by the Indenture Trustee or any Financial
Intermediary acting on behalf of the Indenture Trustee by the
issuer of such Trust Account Property, and (B) in the case of
registration in the name of any Financial Intermediary, (1) the
making by any such Financial Intermediary of entries in its books
and records identifying such uncertificated security as belonging
to the Indenture Trustee, and (2) delivery by any such Financial
Intermediary to the Indenture Trustee of a written confirmation of
the transfer of the uncertificated securities to the Indenture
Trustee; and
(v) with respect to any such Trust Account Property that
constitutes an Uncertificated Security (including any investments
in money market mutual funds, but excluding any Federal Book Entry
Security) and where the issuer thereof is organized in a Revised
Article 8 Jurisdiction, (A) registration of the Indenture Trustee
as the registered owner by the issuer, or (B) satisfaction of the
requirements for obtaining "control" pursuant to Section 8-
106(c)(2) of Revised Article 8.
Deposit Date: With respect to any Determination Date, the Business
Day preceding such Determination Date.
Determination Date: With respect to any Payment Date, the eighth
day of the calendar month in which such Payment Date occurs (or, if such
day is not a Business Day, the next Business Day).
Electronic Ledger: The electronic master record of the retail
installment contracts of the Servicer.
Eligible Account: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution,
or (ii) a segregated direct deposit account maintained with a depository
institution or trust company organized under the laws of the United States
of America, any of the States thereof or the District of Columbia having a
certificate of deposit, short-term deposit or commercial paper rating of at
least ["D-1" by DCR (or, if not rated by DCR, "A-l" by S&P or "P-1" by
Moody's)].
Eligible Investments: Any one or more of the following types of
investments:
(a) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or
9
instrumentality of the United States the obligations of which are
backed by the full faith and credit of the United States;
(b) demand or time deposits in, certificates of deposit
of, demand notes of, or bankers' acceptances issued by any
depository institution or trust company organized under the laws
of the United States or any State and subject to supervision and
examination by federal and/or state banking authorities
(including, if applicable, the Indenture Trustee or any agent of
the Indenture Trustee acting in their respective commercial
capacities); provided, however, that the short-term unsecured debt
obligations of such depository institution or trust company at the
time of such investment, or contractual commitment providing for
such investment, are rated in one of the two highest short-term
rating categories by [DCR (or, if not rated by DCR, in one of the
two highest short-term rating categories by S&P or Moody's)];
(c) repurchase obligations pursuant to a written
agreement (i) with respect to any obligation described in clause
(a) above, where the Indenture Trustee has taken actual or
constructive delivery of such obligation in accordance with
Section 4.1, and (ii) entered into with a depository institution
or trust company organized under the laws of the United States or
any State thereof, the deposits of which are insured by the
Federal Deposit Insurance Corporation and the short-term unsecured
debt obligations of which are rated in one of the two highest
short-term rating categories by [DCR (or, if not rated by DCR, in
one of the two highest short-term rating categories by S&P or
Moody's)] (including, if applicable, the Indenture Trustee, or any
agent of the Indenture Trustee acting in its commercial capacity);
(d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the
United States or any State whose long-term unsecured debt
obligations are rated in one of the two highest long-term rating
categories by [DCR (or, if not rated by DCR, in one of the two
highest long-term rating categories by S&P or Moody's)] at the
time of such investment or contractual commitment providing for
such investment; provided, however, that securities issued by any
particular corporation shall not be Eligible Investments with
respect to the Collection Account to the extent that an investment
therein will cause the then outstanding principal amount of
securities issued by such corporation and held in the Collection
Account to exceed 10% of the Eligible Investments held in the
Collection Account (with Eligible Investments held in the
Collection Account valued at par);
(e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in one of the two highest short-term
rating categories by [DCR (or, if not rated by DCR, in one of the
two highest short-term rating categories by S&P or Moody's)];
(f) money market mutual funds that are rated in the
highest credit rating category by [Moody's or S&P]; or
10
(g) any other demand or time deposit, obligation,
security or investment as may be acceptable to the Rating Agency,
as evidenced by the prior written consent of the Rating Agency.
Any such Eligible Investments may be purchased by or through the Trustee or
any of its Affiliates.
Eligible Servicer: Paragon[, the Backup Servicer] or another
Person that, at the time of its appointment as Servicer, (i) is servicing a
portfolio of motor vehicle retail installment contracts and/or motor
vehicle installment loans comparable to the Receivables, (ii) is legally
qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability to service with reasonable skill and care a
portfolio of motor vehicle retail installment contracts and/or motor
vehicle installment loans similar to the Receivables, (iv) is qualified and
entitled to use, pursuant to a license or other written agreement, and
agrees to maintain the confidentiality of, the software that the Servicer
uses in connection with performing its duties and responsibilities under
this Agreement or otherwise has available software that is adequate to
perform its duties and responsibilities under this Agreement and (v) has
been approved by Noteholders constituting a Note Majority.
Entitlement Order: As defined in Section 8-102(a)(8) of Revised
Article 8.
Executive Officer: With respect to any corporation, the President,
Chief Financial Officer or any Vice President.
Federal Book Entry Security: An obligation (i) issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association, or any other direct obligation of, or
obligation fully guaranteed as to timely payment or principal and interest
by, the United States of America, that is a book-entry security held
through the Federal Reserve System pursuant to Federal book entry
regulations, and (ii) the perfection of a security interest in which is
governed pursuant to federal regulations by Revised Article 8.
Final Scheduled Payment Date: _______ __, 20__ (or, if such day is not
a Business Day, the next Business Day).
Financed Vehicle: A new or used automobile, light truck or sports
utility vehicle, together with all accessories thereto, securing or
purporting to secure an Obligor's indebtedness under a Receivable.
Financial Asset: As defined in Section 8-102(a)(9) of Revised
Article 8.
Financial Intermediary: As defined in Section 8-313(4) of Old
Article 8.
Floor Amount: The lesser of (i) the Note Balance and (ii) $500,000.
11
Governmental Authority: Any court or federal or state regulatory
body, administrative agency or other tribunal or other governmental
instrumentality.
Indenture: The Indenture, dated as of ________ __, ____, between the
Trust and the Indenture Trustee, as the same may be amended or supplemented
from time to time.
Indenture Trustee: The Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor Indenture
Trustee under the Indenture, as specified in a separate fee letter between
the Indenture Trustee and Paragon.
Indenture Trustee Fee: With respect to any Payment Date, the fee
payable to the Indenture Trustee for services rendered during the related
Collection Period.
Independent Accountants: As defined in Section 3.11.
Insolvency Event: With respect to a specified Person, (a) 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 of such Person's affairs, or the
commencement of an involuntary case under the federal bankruptcy laws, as
now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law and such case is not dismissed within
60 days; 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.
Instruments: As defined in Section 9-105(l)(i) of Revised Article 8.
Insurance Policy: With respect to a Receivable, any insurance
policy benefiting the holder of the Receivable and providing loss or
physical damage, credit life, accident and health, theft, mechanical
breakdown or similar coverage with respect to the Financed Vehicle or the
related Obligor.
Investment Property: As defined in Section 9-115(1)(f) of Revised
Article 8.
Lien: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens
and any liens that attach by operation of law.
12
Lien Certificate: 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 that
indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which
the original certificate of title is required to be given to the Obligor,
the term "Lien Certificate" shall mean only a certificate or notification
issued to a secured party.
Liquidated Receivable: With respect to any Collection Period, a
Receivable as to which (i) the related Financed Vehicle has been
repossessed and sold by the Servicer, (ii) at least 10% of any Scheduled
Payment has become 120 or more days delinquent, or (iii) the Servicer has
determined in good faith that all amounts it expects to recover with
respect thereto have been received. Any Receivable that becomes a Purchased
Receivable on or before the related Deposit Date shall not be a Liquidated
Receivable.
Liquidation Proceeds: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts
withdrawn from the Reserve Account) net of (i) reasonable expenses incurred
by the Servicer in connection with the collection of such Receivable and
the repossession and disposition of the related Financed Vehicle and (ii)
amounts that are required to be refunded to the Obligor on such Receivable;
provided, however, that the Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero.
Lockbox Account: As defined in Section 3.2(d).
Lockbox Agreement: As defined in Section 3.2(d).
Lockbox Bank: As defined in Section 3.2(d).
Monthly Records: All records and data maintained by the Servicer
with respect to the Receivables and the Obligors, including the following
with respect to each Receivable: the account number; the identity of the
originating Dealer; Obligor name, Obligor address; Obligor home phone
number; Obligor business phone number (if any); original Amount Financed or
Principal Balance; original total of payments; original term; Annual
Percentage Rate; current balance; pay off balance; current remaining term;
contract origination date; first payment date; final scheduled payment
date; next payment due date; collateral description; days currently
delinquent; new/used classification; amount of the Scheduled Payment; and
past due late charges, if any.
Moody's: Xxxxx'x Investors Service, Inc., or any successor thereto.
Note: Any one of the Class A Notes or Class B Notes executed on
behalf of the Trust and issued pursuant to the Indenture in substantially
the form set forth in Exhibit A or B to the Indenture, respectively.
Note Balance: As of any date of determination, the sum the Class A
Note Balance and the Class B Note Balance.
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Note Majority: As of any date of determination, Holders of Class A
Notes and Class B Notes representing more than 50% of the Note Balance.
Note Register: As defined in the Indenture.
Noteholder or Holder: Registered holders of Notes.
Obligor: With respect to a Receivable, the purchaser or the
co-purchasers of the related Financed Vehicle and any other Person or
Persons who are primarily or secondarily obligated to make payments under
such Receivable.
Officer's Certificate: A certificate signed by an Executive Officer.
Old Article 8: Article 8 of the UCC as in effect in the State of
Missouri as of the date hereof.
Old Article 8 Jurisdiction: A jurisdiction which has not adopted
Revised Article 8.
Opinion of Counsel: A written opinion of counsel reasonably
acceptable in form and substance and from counsel acceptable to the Issuer
and, if such opinion or a copy thereof is required to be delivered to the
Indenture Trustee or the Owner Trustee, reasonably acceptable (as to form
and substance) to the Indenture Trustee or the Owner Trustee, respectively.
Owner Trustee: As defined in the Trust Agreement.
Paragon: As defined in the first paragraph of this Agreement.
Payment Amount: With respect to a Payment Date, the sum of (i) the
Available Funds as of the related Determination Date, plus (ii) the
Deficiency Claim Amount, if any, with respect to such Payment Date.
Payment Date: The 15th day of each calendar month, or if such 15th
day is not a Business Day, the next Business Day, commencing ________ 15,
____ and including the Final Scheduled Payment Date.
Permitted Lien: (i) the Lien in favor of the Trust, (ii) the Lien
in favor of the Indenture Trustee for the benefit of the Noteholders, (iii)
the restrictions on transferability imposed by the Related Documents and
(iv) inchoate Liens for taxes not yet payable and mechanics' or suppliers'
liens for services or materials supplied the payment of which is not yet
overdue.
Person: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
14
Physical Property: Personal property constituting Instruments or
constituting "certificated securities" under Old Article 8, including
bankers' acceptances, commercial paper, negotiable certificates of deposit
and other obligations that are susceptible of physical delivery.
Pre-Computed Receivable: Any Receivable under which the portion of
a payment allocable to earned interest (which may be referred to in the
related Receivable as an add-on finance charge) and the portion allocable
to the Amount Financed is determined according to the sum of periodic
balances or the sum of monthly balances or any equivalent method or are
monthly actuarial receivables.
Principal Balance: With respect to any Receivable, as of any date,
the Amount Financed minus (i) in the case of a Pre-Computed Receivable,
that portion of all payments (including all Scheduled Payments and any
prepayments in full or partial prepayment) received on or prior to such
date and allocable to principal in accordance with the actuarial method,
(ii) in the case of a Simple Interest Receivable, that portion of all
payments (including all Scheduled Payments and any prepayments in full or
partial prepayment) received on or prior to such date and allocable to
principal in accordance with the simple interest method, and (iii) any Cram
Down Loss in respect of such Receivable.
Purchase Amount: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable as of the Accounting
Date as of which such Receivable is to be purchased.
Purchased Receivable: With respect to any Collection Period, any
Warranty Receivable or Administrative Receivable as to which the Purchase
Amount has been deposited in the Collection Account by or on behalf of the
Seller or the Servicer, as applicable, on or before the related Deposit
Date and any Receivable purchased by the Servicer pursuant to Section 9.1
as to which the Purchase Amount has been deposited in the Collection
Account by or on behalf of the Servicer.
Rating Agency: ____, so long as ____ maintains a rating on the
Class A Notes and the Class B Notes; and if ____ no longer maintains a
rating on the Class A Notes or Class B Notes, such other nationally
recognized statistical rating organization selected by the Seller.
Rating Agency Condition: With respect to any action, that the
Rating Agency shall have been given prior notice thereof and that the
Rating Agency shall have notified Paragon, the Seller, the Servicer and the
Indenture Trustee in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Class A Notes or
the Class B Notes.
Receivable: A retail installment contract (and related security
agreement) for a new or used automobile, light truck or sports utility
vehicle (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract.
Receivable File: The documents, electronic entries, instruments and
writings listed in Section 2.2 pertaining to a particular Receivable.
15
Receivables Purchase Agreement: The Receivables Purchase Agreement,
dated as of ________ __, ____, between the Seller and Paragon.
Record Date: The Business Day preceding the related Payment Date.
Registrar of Titles: With respect to any state, the Governmental
Authority responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
Related Documents: This Agreement, the Indenture, the Trust
Agreement, the Notes, the Receivables Purchase Agreement, the Certificate
of Incorporation of Paragon Auto Receivables Corporation and the other
agreements executed in connection with the Closing. The Related Documents
executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
Reserve Account: The Reserve Account established and maintained
pursuant to Section 4.1(a)(ii).
Reserve Account Required Amount: With respect to a Payment Date,
the greater of (i) 5% of the Note Balance as of the related Accounting Date
and (ii) the Floor Amount; provided, however, that if a Trigger Event has
occurred and has not been Deemed Cured as of such Payment Date, the Reserve
Fund Required Amount shall be 10% of the Note Balance as of the related
Accounting Date.
Responsible Officer: When used with respect to the Indenture
Trustee, any officer of the Indenture Trustee assigned by the Indenture
Trustee to administer its corporate trust affairs relating to the Trust.
When used with respect to any other Person that is not an individual, the
President, any Vice-President or Assistant Vice-President or the Controller
of such Person, or any other officer or employee having similar functions.
Revised Article 8: UCC, Revised Article 8, Investment Securities
(with conforming and miscellaneous amendments to Articles 1, 3, 4, 5, 9 and
10), 1994 Official Text, as adopted by the American Law Institute and the
National Conference of Commissioners on Uniform State Laws. Unless the
context requires otherwise, "Revised Article 8" means such version in the
form in which it is adopted in the applicable jurisdiction.
Revised Article 8 Jurisdiction: A jurisdiction which has adopted
Revised Article 8.
Rule 144A: Rule 144A under the Securities Act.
S&P: Standard & Poor's a division of the XxXxxx-Xxxx Companies,
Inc., or any successor thereto.
16
Schedule of Receivables: The schedule of all retail installment
contracts sold and transferred to the Trust on the Closing Date attached
hereto as Schedule A, as it may be amended from time to time, including to
remove Purchased Receivables pursuant to Section 2.6.
Schedule of Representations: The Schedule of Representations and
Warranties of the Seller attached as Schedule B.
Scheduled Payment: With respect to any Collection Period for any
Receivable, the amount set forth in such Receivable as required to be paid
by the Obligor thereon in such Collection Period. If, after the Closing
Date, the Obligor's obligation under a Receivable with respect to a
Collection Period has been modified so as to differ from the amount
specified in such Receivable as a result of (i) the order of a court in an
insolvency proceeding involving the Obligor, (ii) the Soldiers' and
Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of
the Receivable permitted by Section 3.2(b) or 3.2(c), the Scheduled Payment
with respect to such Collection Period shall refer to the Obligor's payment
obligation with respect to such Collection Period as so modified.
Securities Account: As defined in Section 8-501(a) of Revised
Article 8.
Securities Act: The Securities Act of 1933, as amended.
Securities Entitlement: As defined in Section 8-102(a)(17) of Revised
Article 8.
Securities Intermediary: As defined in Section 8-102(a)(14) of Revised
Article 8.
Seller: As defined in the first paragraph of this Agreement.
Servicer: Paragon Acceptance Corporation, a Delaware corporation,
its successor in interest pursuant to Section 7.2 or, after any termination
of the Servicer upon a Servicer Termination Event, the [Backup Servicer or
any other] successor Servicer.
Servicer Termination Event: An event described in Section 8.1.
Servicer's Certificate: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached as Exhibit
A.
Simple Interest Receivable: Any Receivable under which principal and
interest is allocated according to the simple interest method.
Supplemental Servicing Fee: With respect to any Collection Period,
all administrative fees, expenses and charges paid by or on behalf of
Obligors, including any late fees, NSF fees and liquidation fees collected
on the Receivables during such Collection Period and reimbursement of any
personal property taxes assessed on repossessed Financed Vehicles paid by
the Servicer.
17
Total Servicing Fee: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
Trigger Event: With respect to any Determination Date, (a) the
average of the Delinquency Ratios for the three preceding Collection
Periods exceeds ___% or (b) the Cumulative Net Loss Ratio exceeds the
percentage shown opposite the number of the applicable Determination Date
(after the Closing Date) below:
Determination Date Cumulative Net Loss Ratio
------------------ -------------------------
(after the Closing Date)
1st through 12th %
13th through 18th %
19th through 24th %
25th through 30th %
31st and on %
Trust: As defined in the first paragraph of this Agreement.
Trust Account: As defined in Section 4.1(b).
Trust Account Property: 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 Agreement: The Trust Agreement, dated as of ________ __,
____, between Paragon, Paragon Auto Receivables Corporation, as holder of
the Certificate, and Wilmington Trust Company, as Owner Trustee.
Trust Property: The property and proceeds conveyed pursuant to
Section 2.1, together with certain monies paid after the Cutoff Date with
respect to the Receivables, the Trust Accounts (including all Eligible
Investments therein and all proceeds therefrom), the rights of the Trust
under this Agreement and the rights of the Seller under the Receivables
Purchase Agreement.
Uncertificated Security: As defined in Section 8-102(a)(18) of Revised
Article 8.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
Warranty Receivable: With respect to any Collection Period, a
Receivable that the Seller has become obligated to repurchase pursuant to
Section 2.5.
18
Section 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural includes
the singular, words importing one gender include the other gender,
references to "writing" include printing, typing, lithography and other
means of reproducing words in a visible form, references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and
not prohibited by this Agreement, references to Persons include their
permitted successors and assigns, and the terms "include" or "including"
mean "include without limitation" or "including without limitation."
Section 1.3. Calculations. All calculations of the amount of
interest accrued on the Notes shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All references to the Principal Balance
of a Receivable as of a Accounting Date shall refer to the close of
business on such day.
Section 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken or consented to by
Noteholders, such provision shall be deemed to refer to Noteholders of
record as of the Record Date preceding the date on which such action is to
be taken or consent given by Noteholders. Solely for purposes of any action
to be taken or consented to by Noteholders, any Note registered in the name
of Paragon, the Seller or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that, solely for the purpose of determining
whether the Indenture Trustee is entitled to rely upon any such action or
consent, only Notes that the Indenture Trustee knows to be so owned shall
be so disregarded.
Section 1.6. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer or director, as such, of Paragon, the Seller, the Servicer, [the
Backup Servicer,] the Owner Trustee (in its individual or trust capacities)
or the Indenture Trustee or of any predecessor or successor of Paragon, the
Seller, the Servicer, [the Backup Servicer,] the Owner Trustee (in its
individual or trust capacities) or the Indenture Trustee.
Section 1.7. Nonpetition Covenant. Until one year and one day
following the payment in full of all amounts due in respect of the Notes,
none of the Seller, the Servicer, the Indenture Trustee, [the Backup
Servicer,] nor Paragon shall petition or otherwise invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against the Seller or the Trust 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 Seller or the Trust or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Seller or the Trust.
19
ARTICLE II
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY INDENTURE TRUSTEE
Section 2.1. Conveyance of Receivables. (a) Subject to the terms
and conditions of this Agreement, the Seller hereby sells, transfers,
assigns and otherwise conveys to the Trust, without recourse (but without
limitation of its obligations under this Agreement): (1) all of the right,
title and interest of the Seller in and to the Receivables and all monies
due or received thereunder or in respect thereof after the Cutoff Date
(including all Liquidation Proceeds and recoveries received with respect to
such Receivables); and (2) all of the right, title and interest of Paragon
and the Seller in and to (i) the security interests of Paragon and the
Seller in the related Financed Vehicles and any other interest of Paragon
and the Seller in the related Financed Vehicles, including the certificates
of title with respect to such Financed Vehicles, (ii) the Insurance
Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Obligors or the related Financed Vehicles, including
rebates or refunds of premiums, (iii) the rights of Paragon and the Seller
against Dealers with respect to the Receivables under the Dealer Agreements
and the Dealer Assignments, (iv) the rights of the Seller under the
Receivables Purchase Agreement, (v) all funds on deposit from time to time
in the Collection Account and the Reserve Account, including all income
thereon and proceeds thereof, and (vi) all proceeds and investments of any
of the foregoing, all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any of the foregoing.
(b) It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
Receivables and the other Trust Property from the Seller to the Trust and
the beneficial interest in and title to the Receivables and the other Trust
Property shall not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. If, notwithstanding the intent of the Seller, the transfer
and assignment contemplated hereby is held not to be a sale, the Seller
hereby grants a first priority security interest to the Trust in the
property referred to in this Section 2.1, and this Agreement shall
constitute a security agreement. The execution and delivery of this
Agreement shall constitute an acknowledgment by the Seller and the
Indenture Trustee on behalf of the Noteholders that, solely for income and
franchise tax purposes, until the Certificates are held by more than one
Person or the Trust is recharacterized as a separate entity, the Trust will
be disregarded as an entity separate from its owner and the Notes will be
treated as debt of the Seller. The powers granted and obligations
undertaken in this Agreement shall be construed so as to further such
intent.
(c) The Seller hereby directs the Trust to, and the Trust does
hereby, accept the Trust Property conveyed by the Seller to the Trust
pursuant to this Section 2.1.
(d) The conveyance of the Receivables and the other Trust Property
with respect thereto shall take place at a closing (the "Closing") at the
offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000 on the Closing Date.
Section 2.2. Custody of Receivable Files.
20
(a) Simultaneously with the execution and delivery of this
Agreement and the sale, transfer and assignment of the Receivables and the
other Trust Property to the Trust pursuant to this Agreement, the Seller
shall deliver the following documents or instruments in its possession to
the Indenture Trustee, other than the documents referred to in clause (iii)
which shall be delivered no later than 30 days following the Closing Date:
(i) The fully executed original of the Receivable
(together with any agreements modifying the Receivable including
any extension agreements, provided that the Indenture Trustee
shall not have to certify the receipt of any such agreements
modifying or extending the Receivable);
(ii) The original credit application, or a copy thereof,
of each Obligor, fully executed by each such Obligor; and
(iii) The original Lien Certificate (when received) and
any such other documents, if any, that Paragon keeps on file in
accordance with its customary procedures indicating that the
Financed Vehicle is owned by the Obligor and subject to the
interest of Paragon as first lienholder or secured party
(including any Lien Certificate received by Paragon), or, if such
original Lien Certificate has not yet been received, a copy of the
application therefor, if any, showing Paragon as secured party.
(b) Upon payment in full of any Receivable, the Servicer shall
notify the Indenture Trustee pursuant to a certificate of an officer of the
Servicer in the form of Exhibit B hereto and shall request delivery of the
Receivable and the Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Indenture
Trustee shall, upon written request of an officer of the Servicer and
delivery to the Indenture Trustee of a receipt signed by such officer cause
the original Receivable and the Receivable File to be released to the
Servicer. The Servicer's receipt of a Receivable and/or a Receivable File
shall obligate the Servicer to return the original Receivable and
Receivable File to the Indenture Trustee when its need by the Servicer has
ceased, unless the Receivable is repurchased as described in Section 2.5 or
Section 3.7.
(c) The Indenture Trustee shall maintain the Receivable Files it
has received at its principal office or at such other office as shall from
time to time be identified to the Servicer and the Owner Trustee, and the
Indenture Trustee will hold such Receivable File in such office on behalf
of the Noteholders, clearly identified as being separate from any other
instruments and files on its records, including other instruments and files
held by the Indenture Trustee. Each Receivable shall be identified on the
books and records of the Indenture Trustee in a manner that (i) is
consistent with practices of a commercial bank acting in the capacity of
custodian with respect to similar receivables and (ii) is otherwise
necessary, as reasonably determined by the Indenture Trustee, to comply
with the terms of this Agreement.
21
Section 2.3. Conditions Precedent to Issuance by Trust. As
conditions to the Indenture Trustee's authentication and delivery of the
Notes on the Closing Date, the Indenture Trustee shall have received the
following on or before the Closing Date:
(a) The Schedule of Receivables certified by an Executive
Officer of the Seller;
(b) The acknowledgment (including an exceptions listing,
if any) of the Indenture Trustee stating that it holds the
Receivable Files relating to the Receivables and has reviewed such
Receivable Files and such Receivable Files contain the items set
forth in Section 2.2(i), (ii) and (iii);
(c) Copies of resolutions of the Board of Directors of
the Seller approving the execution, delivery and performance of
the Seller's Related Documents and the transactions contemplated
hereby and thereby, certified by a Secretary or an Assistant
Secretary of the Seller;
(d) Copies of resolutions of the Board of Directors of
Paragon approving the execution, delivery and performance of its
Related Documents and the transactions contemplated hereby and
thereby, certified by a Secretary or an Assistant Secretary of
Paragon; and
(e) Opinions from Xxxxx, Xxxxx & Xxxxx and Xxxxx X.
Xxxxxxxx, General Counsel of Paragon, and Xxxxxx Xxxx, LLP with
respect to the Trust's first priority perfected security interest
or ownership interest in the Receivables and the Financed Vehicles
and copies of any financing statements which have been or will be
attached to such opinions.
Section 2.4. Representations and Warranties of Seller. By its
execution of this Agreement, the Seller makes the following representations
and warranties on which the Trust relies in accepting the Receivables and
the other Trust Property and in issuing the Notes and on which the
Indenture Trustee relies in authenticating the Notes. Unless otherwise
specified, such representations and warranties speak as of the Closing
Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trust.
(a) Schedule of Representations. The representations and
warranties set forth on the Schedule of Representations are true and
correct in all material respects.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted.
(c) Due Qualification. The Seller is duly qualified to do business
and has obtained all necessary licenses and approvals in all jurisdictions
where the failure to do so would have a material adverse effect on (i) the
Seller's ability to transfer the Receivables and the other Trust Property
to
22
the Trust pursuant to this Agreement, (ii) the validity or enforceability
of the Receivables and the other Trust Property or (iii) the Seller's
ability to perform its obligations hereunder and under its Related
Documents.
(d) Power and Authority. The Seller has the power and authority to
execute and deliver its Related Documents and to carry out their terms; the
Seller has power and authority to sell and assign the Receivables and the
other Trust Property to be sold and assigned to and deposited with the
Trust by it and has duly authorized such sale and assignment to and deposit
with the Trust by all necessary corporate action; and the execution,
delivery and performance of the Seller's Related Documents have been duly
authorized by the Seller by all necessary corporate action.
(e) Binding Obligations. The Seller's Related Documents, when duly
executed and delivered, shall constitute valid and binding obligations of
the Seller 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.
(f) No Violation. The execution, delivery and performance by the
Seller of its Related Documents, the consummation of the transactions
contemplated thereby and the fulfillment of the terms thereof do not (i)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the Seller
is a party or by which it or its properties are bound, (ii) result in the
creation or imposition of any Lien (other than Permitted Liens) upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument or (iii) to the Seller's
knowledge, violate any law, order, rule or regulation applicable to the
Seller of any Governmental Authority having jurisdiction over the Seller or
any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any Governmental Authority having jurisdiction over the Seller or
its properties (i) asserting the invalidity of any of the Related
Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by any of the Related
Documents, (iii) seeking any determination or ruling that would have a
material adverse effect on the performance by the Seller of its obligations
under, or the validity or enforceability of, any of the Related Documents,
or (iv) seeking to materially and adversely affect the federal income tax
or other federal, state or local tax attributes of the Notes or seeking to
impose any excise, franchise, transfer or similar tax upon the Notes or the
sale and assignment of the Receivables and the other Trust Property
hereunder.
(h) No Consents. No consent, approval, license, authorization or
order of, or declaration, registration or filing with, any Governmental
Authority or other Person is required to be made by the Seller in
connection with the execution, delivery or performance of its Related
Documents or
23
the consummation of the transactions contemplated thereby, except such as
have been duly made, effected or obtained.
(i) Chief Executive Office. The chief executive office of the
Seller is at 27405 Puerta Real, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
(j) Dealer Recourse. The Seller shall execute and deliver such
other instruments and agreements as the Issuer may reasonably request in
order to enforce any rights against a Dealer assigned to the Seller under
the Receivables Purchase Agreement and assigned to the Purchaser hereunder
and any obligations of a Dealer in connection with a Receivable including
any rights to recourse against such Dealer.
Section 2.5. Repurchase of Receivables Upon Breach of Warranty.
Upon discovery by any of the Seller, the Servicer or the Indenture Trustee
of a breach of any of the representations and warranties of the Seller
contained in Section 2.4(a) that has a material adverse effect on the
interests of the Noteholders in any Receivable, the party discovering such
breach shall give prompt written notice to the others; provided, however,
that the failure to give any such notice shall not affect any obligation of
the Seller under this Section 2.5; and provided, further, that the maximum
aggregate purchase obligation of the Seller with respect to breaches of the
representation and warranty made in clause (C) of paragraph 4 of the
Schedule of Representations shall not exceed an amount equal to 10% of the
aggregate Principal Balance of all Receivables originated after September
30, 1997. As of the second Accounting Date (or, at the Seller's election,
the first Accounting Date) following its discovery or its receipt of notice
of any such breach the Seller shall, unless such breach shall have been
cured in all material respects, repurchase such Receivable from the Trust
and, on or before the Deposit Date following such Accounting Date, the
Seller shall pay the Purchase Amount to the Trust pursuant to Section 4.4.
The obligation of the Seller to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against the Seller for such breach
available to the Trust, the Noteholders or the Indenture Trustee on behalf
of the Noteholders. The Indenture Trustee shall not be under any duty or
obligation to investigate the occurrence of a breach of representation or
warranty in accordance with this Section 2.5.
Section 2.6. Indenture Trustee's Assignment of Receivables. With
respect to all Administrative Receivables and all Warranty Receivables
purchased by the Servicer or the Seller and all Receivables purchased by
the Servicer pursuant to Section 9.1, the Trust and the Indenture Trustee
shall take any and all actions reasonably requested by the Seller or the
Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller or the Servicer, as
applicable, all the Trust's and the Indenture Trustee's right, title and
interest in and to such Purchased Receivables and the other Trust Property
with respect thereto, such assignment being an assignment outright and not
for security; and the Seller or the Servicer, as applicable, shall
thereupon own such Purchased Receivables and the other Trust Property
related thereto, free of any further obligation to the Trust, the Indenture
Trustee or the Noteholders with respect thereto. The Trust and the
Indenture Trustee shall take any and all actions reasonably requested by
the Seller or the Servicer, at the expense of the requesting party, to
release its security interest in each Purchased
24
Receivable and in the other Trust Property with respect thereto. The
Servicer shall remove each Purchased Receivable from the Schedule of
Receivables and xxxx the Electronic Ledger accordingly. The Servicer shall
deliver any supplements to the Schedule of Receivables to the Seller and
the Indenture Trustee. Notwithstanding the foregoing, although the Trust
and the Indenture Trustee, as applicable, shall be required to execute
documentation related to the foregoing, neither the Trust nor the Indenture
Trustee shall be required to prepare any such documentation.
Section 2.7. Collecting Lien Certificates. The Servicer shall use
its best efforts to collect each Lien Certificate from the applicable
Registrar of Titles as promptly as practicable and, pending receipt of each
Lien Certificate from such Registrar of Titles, shall supply written
evidence that each such Lien Certificate has been applied for. If a Lien
Certificate with respect to a Receivable showing Paragon as first
lienholder is not received by the Indenture Trustee within 180 days after
the Closing Date, the Servicer shall be obligated to purchase such
Receivable under Section 3.7.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions that service
motor vehicle retail installment contracts and, to the extent more
exacting, with the degree of skill and attention that the Servicer
exercises from time to time with respect to comparable motor vehicle
receivables that it services for itself or others. In performing such
duties, it shall comply with its current servicing policies and procedures,
as such servicing policies and procedures may be amended from time to time,
so long as such amendments shall not materially and adversely affect the
interests of the Noteholders or the Trust. The Servicer's duties shall
include collection and posting of all payments, responding to inquiries of
Obligors on the Receivables, investigating delinquencies, sending
statements or payment coupons to Obligors, monitoring the collateral,
accounting for collections and furnishing monthly and annual statements to
the Indenture Trustee with respect to distributions and performing the
other duties specified herein. To the extent consistent with the standards,
policies and procedures otherwise required hereby, the Servicer shall
follow its customary standards, policies and procedures and shall have full
power and authority, acting alone, to do any and all things in connection
with management, 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 the Financed
Vehicles. The Servicer is authorized to release Liens on Financed Vehicles
granted by the Receivables in order to collect insurance proceeds with
respect thereto and to liquidate such Financed Vehicles in accordance with
its customary standards, policies and procedures. The Servicer is hereby
authorized to commence, in its own name or in the name of the Trust or the
Indenture Trustee (provided that, if the Servicer is acting in the name of
the Indenture
25
Trustee, it has obtained the Indenture Trustee's consent, which consent
shall not be unreasonably withheld), legal proceedings to enforce
Receivables or to commence or participate in any other legal proceedings
(including bankruptcy proceedings) relating to or involving Receivables,
Obligors or Financed Vehicles. If the Servicer commences or participates in
such legal proceedings in its own name, the Trust shall thereupon be deemed
to have automatically assigned such Receivables to the Servicer solely for
purposes of commencing or participating in any such proceedings 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, affidavits or other documents or instruments in
connection with any such proceedings. The Indenture Trustee and the Trust
shall furnish the Servicer with any powers of attorney and other documents
that the Servicer may reasonably request and that the Servicer deems
necessary or appropriate and take any other steps that the Servicer may
deem reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties under this Agreement.
Section 3.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement. (a) Consistent with the standards, policies
and procedures required by this Agreement, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due, and
shall follow such collection procedures as it follows with respect to
comparable motor vehicle receivables that it services for itself or others
and otherwise act with respect to the Receivables, the Dealer Agreements,
the Dealer Assignments, the Insurance Policies and the other Trust Property
in such manner as will, in the reasonable judgment of the Servicer,
maximize the amount to be received by the Trust with respect thereto. The
Servicer is authorized in its discretion to waive any prepayment charge,
late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the Obligor's regular due
date to another date within fifteen calendar days of such due date, or (ii)
re-amortize the Scheduled Payments on the Receivable following a partial
prepayment of principal, or (iii) add an additional Obligor to the
Receivable.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) 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
Noteholders; provided, however, that, with respect to any Receivable, the
Servicer shall not grant more than one extension per year and shall not
grant extensions for a cumulative total of more than six months during the
life of the Receivable.
(d) Paragon has entered into a Lockbox Agreement, dated as of
November 25, 1997 (as it may be amended or supplemented from time to time,
the "Lockbox Agreement"), with NationsBank, N.A. (the "Lockbox Bank"),
ContiTrade Services L.L.C., the Servicer and [Norwest Bank Minnesota,
National Association] as agent for the various parties described therein.
The bank
26
account established pursuant to the Lockbox Agreement (the "Lockbox
Account") shall be maintained at the Lockbox Bank. The Servicer shall
direct funds in the Lockbox Account relating to the Receivables to be
transferred on a daily basis to the Collection Account established in the
name of [Norwest Bank Minnesota, National Association,] as Indenture
Trustee. All payments made by or on behalf of Obligors or received by the
Servicer with respect to the Receivables and all Liquidation Proceeds
received by the Servicer with respect to the Receivables shall be sent to
the Lockbox Account within one Business Day after receipt. The Servicer
shall transfer such payments, and any payments made by Obligors directly to
the Lockbox Account, to the Collection Account within two Business Days
after receipt of available funds in the Lockbox Account; provided, however,
that if the Servicer is not able to transfer such payments within two
Business Days due to circumstances outside the Servicer's control, the
Servicer shall transfer such payments to the Collection Account as soon as
is practicable; and, provided, further, that if the Servicer is not able to
transfer any such payment within two Business Days because the Obligor or
Receivable to which such payment relates is not readily identifiable, the
Servicer shall use its best efforts to identify the related Obligor or
Receivable as soon as practicable and shall transfer such payment within
one Business Day after identifying such related Obligor or Receivable.
(e) Notwithstanding any third-party processing arrangement, or any
of the provisions of this Agreement relating to any third-party processing
arrangement, the Servicer shall remain obligated and liable to the Trust
and the Noteholders for servicing and administering the Receivables and the
other Trust Property in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue thereof.
Section 3.3. Realization Upon Receivables. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert
the ownership of) and liquidate any Financed Vehicle securing a Receivable
with respect to which the Servicer has determined that payments thereunder
are not likely to be resumed, as soon as practicable after default on such
Receivable but in no event later than the date on which at least 10% of a
Scheduled Payment has become 120 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; and provided, further, that the Servicer shall not be
required to repossess a Financed Vehicle if prohibited by law. The Servicer
is authorized to follow such customary practices and procedures as it shall
deem necessary or advisable, consistent with the standard of care required
by Section 3.1, which practices and procedures may include reasonable
efforts to realize upon any recourse to Dealers, 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 a Receivable. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with any repair or towards the
repossession of such Financed Vehicle unless it shall determine in its
discretion that such repair or repossession shall increase the proceeds of
liquidation of the related Receivable by an amount greater than the amount
of such expenses. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle into cash proceeds, but only out
27
of the cash proceeds of such Financed Vehicle, any deficiency obtained from
the Obligor or any amounts received from the related Dealer, which amounts
in reimbursement may be retained by the Servicer (and shall not be required
to be deposited as provided in Section 3.2(d) to the extent of such
expenses). All amounts received upon liquidation of a Financed Vehicle
(less reasonable expenses as described in the preceding sentence) shall be
remitted directly by the Servicer as provided in Section 3.2(d).
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement
shall be deemed to be an automatic assignment from the Trust and the
Indenture Trustee to the Servicer of the rights under such agreements for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce any such agreement
on the grounds that it is not a real party in interest or a Person entitled
to enforce such agreement, the Trust or the Indenture Trustee, at the
Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems reasonably necessary to enforce such agreement,
including bringing suit in its name or the name of the Seller, the Trust or
the Indenture Trustee for the benefit of the Noteholders. All amounts
recovered shall be remitted directly by the Servicer as provided in Section
3.2(d).
Section 3.4. Insurance. The Servicer may xxx to enforce or collect
upon the Insurance Policies in its own name or as agent of the Trust. If
the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic
assignment of the rights of the Trust and the Indenture Trustee 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 Trust or the Indenture Trustee, at the Servicer's expense, or
the Seller, at the Seller's expense, shall take such steps as the Servicer
deems reasonably necessary to enforce such Insurance Policy, including
bringing suit in its name or the name of the Trust and the Indenture
Trustee for the benefit of the Noteholders.
Section 3.5. Maintenance of Security Interests in Vehicles.
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the first priority security interest created by each
Receivable in the related Financed Vehicle, including the recording,
registering, filing, re-recording, re-filing and re-registering of all
security agreements, financing statements and continuation statements as
are necessary to maintain the security interest under the respective
Receivables. The Trust and the Indenture Trustee each hereby authorize the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest in the name of Paragon or the Seller on
behalf of the Trust as necessary because of the relocation of a Financed
Vehicle or for any other reason. If the assignment of a Receivable to the
Trust and the pledge of such Receivables to the Indenture Trustee are
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 Indenture Trustee, the Servicer hereby agrees that Paragon's
designation as the secured party
28
on the certificate of title is in its capacity as agent of the Indenture
Trustee, solely for purposes of providing perfection of the security
interest therein.
Section 3.6. 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
Trust relies in accepting the Receivables and issuing the Notes and on
which the Indenture Trustee relies in authenticating the Notes. Unless
otherwise specified, such representations and warranties speak as of the
Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trust.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each
Receivable shall 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 shall do nothing to
impair the rights of the Trust, the Indenture Trustee or the
Noteholders in the Receivables or the other Trust Property. The
Servicer shall take such action as is necessary (including the
filing of appropriate UCC financing statements and continuation
statements) to preserve the rights of the Trust, the Indenture
Trustee and the Noteholders in the Receivables and the other Trust
Property;
(iii) No Amendments. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance
with Section 3.2; and
(iv) Restrictions on Liens. The Servicer shall not (A)
create, incur or suffer to exist, or agree to create, incur or
suffer to exist, or consent to cause or permit in the future (upon
the happening of a contingency or otherwise) the creation,
incurrence or existence of any Lien on, or restriction on
transferability of, the Receivables, except for Permitted Liens or
(B) sign or file under the UCC of any jurisdiction any financing
statement that names 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,
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 or as otherwise permitted under this Agreement
or the Related Documents.
(v) Servicing of Receivables. The Servicer shall service
the Receivables as described in this Agreement until such time as
it has been replaced by a successor Servicer.
(b) The Servicer represents, warrants and covenants as of the
Closing Date as to itself:
(i) Organization and Good Standing. The Servicer has been
duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of
29
organization, 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;
(ii) 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
where the failure to do so would have a material adverse effect on
its ability to perform its obligations under its Related Documents
and its ability to enforce the Receivables and the other Trust
Property;
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, and the
execution, delivery and performance of the Servicer's Related
Documents have been duly authorized by the Servicer by all
necessary corporate action;
(iv) Binding Obligation. The Servicer's Related
Documents, when duly executed and delivered, shall 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;
(v) No Violation. The execution, delivery and performance
by the Servicer of its Related Documents, the consummation of the
transactions contemplated thereby and the fulfillment of the terms
thereof do not (A) 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 certificate 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 or its properties are
bound, (B) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (C) to
the best of the Servicer's knowledge, violate any law, order, rule
or regulation applicable to the Servicer of any Governmental
Authority having jurisdiction over the Servicer or any of its
properties;
(vi) No Proceedings. There are no proceedings or
investigations pending or, to the best of the Servicer's
knowledge, threatened against the Servicer, before any
Governmental Authority having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of any of the Related
Documents, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by the
Related Documents, (C) seeking any determination or ruling that
would have a material adverse effect on the performance by the
Servicer of its obligations under, or the validity or
enforceability of, any of the Related Documents or (D) seeking to
materially and adversely affect the federal income tax or other
federal, state or local tax attributes of the Notes or
30
seeking to impose any excise, franchise, transfer or similar tax upon
the Notes or the sale and assignment of the Receivables hereunder; and
(vii) No Consents. No consent, license, approval,
authorization or order of, or registration, declaration or filing
with, any Governmental Authority or other Person is required to be
made in connection with the execution, delivery or performance of
the Servicer's Related Documents or the consummation of the
transactions contemplated thereby, except such as have been duly
made, effected or obtained.
(c) The Servicer covenants and agrees:
(i) [Backup Servicer and] Indenture Trustee
Indemnification. The Servicer shall defend, indemnify and hold
[the Backup Servicer and] the Indenture Trustee and any officers,
directors, employees or agents of [the Backup Servicer and] the
Indenture Trustee harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs,
judgments and any other costs, fees and expenses that [the Backup
Servicer and] the Indenture Trustee may sustain in connection with
claims asserted at any time by third parties against [the Backup
Servicer or] the Indenture Trustee that result from (A) any
willful or negligent act taken or omission by the Servicer (other
than errors in judgment) or (B) a material breach of any
representations of the Servicer in this Section 3.6; and
[(ii) The Servicer shall make arrangements for the prompt
and safe transfer of, and the Servicer shall provide to the Backup
Servicer, all necessary servicing files and records, including (as
deemed necessary by the Backup Servicer at such time): (A) account
documentation, (B) servicing system tapes (in a format acceptable
to the Backup Servicer), (C) account payment history, (D)
collections history and (E) the trial balances, as of the close of
business on the day immediately preceding conversion to the Backup
Servicer, reflecting all applicable loan information.]
Section 3.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by the Servicer or the Indenture Trustee of (a) a breach of any
of the covenants set forth in Sections 3.5 or 3.6(a) that has a material
adverse effect on the interests of the Trust or the Noteholders in any
Receivable, or (b) a failure to obtain a Lien Certificate within 180 days
as described in Section 2.7, the party discovering such breach shall give
prompt written notice to the others and the Owner Trustee; provided,
however, that the failure to give any such notice shall not affect any
obligation of the Servicer under this Section 3.7. As of the second
Accounting Date (or, at the Servicer's election, the first Accounting Date)
following its discovery or receipt of notice of any such breach, the
Servicer shall, unless such breach shall have been cured in all material
respects, purchase from the Trust the Receivables affected by such breach
and, on or before the related Deposit Date, the Servicer shall pay the
related Purchase Amount to the Trust pursuant to Section 4.4. The
obligation of the Servicer to purchase any Receivable with respect to which
such a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against the Servicer for such breach
available to the Trust, the Noteholders or the Indenture Trustee on behalf
of
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Noteholders. The Indenture Trustee shall not be under any duty or obligation
to investigate the occurrence of a breach of a covenant in accordance with
this Section 3.7.
Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer[; Backup Servicer Fee.] On each Payment Date, the Servicer shall
be entitled to receive out of the Collection Account the Total Servicing
Fee for the related Collection Period pursuant to Section 4.5. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities under this Agreement, including taxes imposed on the Servicer,
costs and expenses of independent accountants, expenses incurred in
connection with distributions and reports made by the Servicer to
Noteholders. [On each Payment Date, the Backup Servicer shall be entitled
to receive out of the Collection Account the Backup Servicer Fee for the
related Collection Period pursuant to Section 4.5.]
Section 3.9. Servicer's Certificate. No later than 2:00 p.m., New
York City time, on each Determination Date, the Servicer shall deliver to
the Indenture Trustee, the Owner Trustee, [the Backup Servicer,] the Rating
Agency, any Noteholder and Xxxxx Xxx & Xxxxxxx Incorporated (or its
successor as agent for a Noteholder), a Servicer's Certificate executed by
a Responsible Officer of the Servicer containing, among other things, (i)
all information necessary to enable the Indenture Trustee to make any
withdrawal required by Section 5.2, to give any notice required by Section
5.2 and to make the distributions required by Section 4.5, (ii) all
information necessary to enable the Indenture Trustee to send the
statements required by Section 4.7 to Noteholders, (iii) a listing of all
Purchased Receivables purchased as of the related Deposit Date with respect
to the related Collection Period and (iv) all information necessary to
enable the Indenture Trustee to reconcile all deposits to, and withdrawals
from, the Collection Account for the related Collection Period and Payment
Date, including the accounting required by Section 4.6. Receivables
purchased by the Servicer or repurchased by the Seller on or before the
related Deposit Date and each Receivable that became a Liquidated
Receivable or that was paid in full during the related Collection Period
shall be identified by account number (as set forth in the Schedule of
Receivables). In addition to the information set forth in the preceding
sentence, the Servicer's Certificate shall also contain the following
information: (a) the Delinquency Ratio and the Cumulative Net Loss Ratio
for such Determination Date; (b) whether any Trigger Event has occurred as
of such Determination Date; and (c) whether any Trigger Event that may have
occurred as of a prior Determination Date is Deemed Cured as of such
Determination Date. A copy of such certificate may be obtained by any
Noteholder by a request in writing to the Indenture Trustee addressed to
the Corporate Trust Office.
Section 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. (a) The Servicer shall deliver to the Indenture
Trustee, the Owner Trustee, [the Backup Servicer,] and the Rating Agency,
on or before April 30 (or 120 days after the end of the Servicer's fiscal
year, if other than December 31) of each year, beginning on April 30, 1999,
an officer's certificate signed by any Responsible Officer of the Servicer,
dated as of the preceding December 31 (or other applicable date), stating
that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as shall have 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 such officer's knowledge, based on such review,
the Servicer has
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fulfilled all its obligations under this Agreement throughout such period,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and
status thereof.
(b) The Servicer shall deliver to the Indenture Trustee, the Owner
Trustee, [the Backup Servicer] and the Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than two Business Days
thereafter, written notice in an Officer's Certificate of any event that,
with the giving of notice or lapse of time, would become a Servicer
Termination Event under Section 8.1.
Section 3.11. Annual Independent Accountants' Report. The Servicer
shall cause KPMG Peat Marwick LLP or another firm of nationally recognized
independent certified public accountants (the "Independent Accountants"),
who may also render other services to the Servicer, to deliver to the
Servicer, on or before April 30 (or 120 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning
on April 30, 1999, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as
shall have elapsed from the Closing Date to the date of such certificate),
a statement (the "Accountants' Report") addressed to the Servicer, to the
effect that such firm has audited the books and records of the Servicer and
issued its report thereon and that: (1) such audit was made in accordance
with generally accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing procedures as such
firm considered necessary in the circumstances; and (2) the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants. The
Servicer shall also cause the Independent Accountants to deliver to the
Servicer on such dates a letter to the effect that certain agreed upon
procedures were performed relating to three randomly selected Servicer's
Certificates (or, for the twelve months ending December 31, ____, the
Servicer's Certificate for the December ____ Collection Period), and,
except as disclosed in such report, no errors or exceptions were found in
the Servicer's Certificate(s) based on the performance of such agreed upon
procedures. The Servicer shall deliver a copy of the Accountants' Report,
within 15 days of receipt, to the Seller, the Owner Trustee, the Indenture
Trustee[, the Backup Servicer] and the Rating Agency.
Section 3.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Indenture Trustee, [the Backup Servicer] and the Owner Trustee reasonable
access to the documentation regarding the Receivables. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours. Nothing in this Section 3.12 shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the
failure of the Servicer to provide access as a result of such obligation
shall not constitute a breach of this Section 3.12.
Section 3.13. Monthly Tape[; Certain Duties of Backup Servicer]. (a)
On or before each Determination Date, the Servicer shall deliver to the
Indenture Trustee [and the Backup Servicer] a computer tape or a diskette
(or any other electronic transmission acceptable to the Indenture
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Trustee [and the Backup Servicer]) in a format acceptable to the Indenture
Trustee [and the Backup Servicer] containing the information with respect
to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the next
Determination Date.
[(b) Prior to each such Payment Date, the Backup Servicer shall
use such tape or diskette (or other means of electronic transmission
acceptable to the Indenture Trustee and the Backup Servicer) and review the
related Servicer's Certificate in order to perform the following:
(i) confirm that the Servicer's Certificate is complete on
its face;
(ii) calculate and confirm the Class A Principal Payment
Amount, the Class A Interest Payment Amount, the Class B Principal
Payment Amount and the Class B Interest Payment Amount for the
next Payment Date; and
(iii) verify the mathematical accuracy of any
calculations on the face of the Servicer's Certificate.]
[(c) In the event of any discrepancy between the information set
forth in (ii) or (iii) in clause (b) above as calculated by the Servicer
from that determined or calculated by the Backup Servicer, the Backup
Servicer shall promptly report such discrepancy to the Servicer and the
Indenture Trustee. In the event of a discrepancy as described in the
preceding sentence, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies prior to the related Payment Date, but in the
absence of a reconciliation, distributions on the related Payment Date
shall be made by the Indenture Trustee consistent with the information
provided by the Servicer and the Servicer and the Backup Servicer shall
attempt to reconcile such discrepancies prior to the next Determination
Date. If the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to such Servicer's Certificate by the next
Determination Date that falls in April, July, October or January, the
Servicer shall cause the Independent Accountants, at the Servicer's
expense, to examine the Servicer's Certificate and attempt to reconcile the
discrepancies at the earliest possible date. The effect, if any, of such
reconciliation shall be reflected in the Servicer's Certificate for such
next succeeding Determination Date.]
[(d) Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder,
including to supervise, verify, monitor or administer the performance of
the Servicer. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer, except for the express duties of the
Backup Servicer set forth herein.]
Section 3.14. Insurance. The Servicer shall maintain customary
amounts of insurance coverage, including errors and omissions liability,
fidelity bond, commercial general liability, property, directors and
officers liability and workers' compensation coverage. The Servicer shall
be entitled to self-insure with respect to such insurance so long as the
long-term unsecured debt obligations of the Servicer are rated in the
second highest long-term debt category by the Rating Agency (or, if not
rated by the Rating Agency, by ____ or _____).
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Section 3.15. Compliance with Laws. The Servicer shall comply with
the requirements of all applicable laws (including any federal or state
laws regulating the collection or enforcement of consumer debts and/or the
foreclosure upon, and repossession of, vehicles) in the discharge of its
duties and obligations hereunder.
ARTICLE IV
PAYMENTS; STATEMENTS TO NOTEHOLDERS
Section 4.1. Trust Accounts. (a) (i) On or prior to the Closing
Date, the Servicer or the Indenture Trustee on behalf of and at the
direction of the Servicer shall establish the Collection Account in the
name of the Indenture Trustee for the benefit of the Noteholders. The
Collection Account shall be an Eligible Account and shall be a segregated
trust account initially established with the Indenture Trustee.
(ii) On or prior to the Closing Date, the Servicer or the
Indenture Trustee on behalf of and at the direction of the
Servicer shall establish the Reserve Account in the name of the
Indenture Trustee for the benefit of the Noteholders. The Reserve
Account shall be an Eligible Account and shall be a segregated
trust account initially established with the Indenture Trustee.
(b) All amounts held in the Collection Account and the Reserve
Account (collectively, the "Trust Accounts"), shall, to the extent
permitted by applicable laws, rules and regulations, be invested by the
Indenture Trustee, as directed by the Servicer in writing (or, if the
Servicer fails to provide such direction, amounts in the Collection Account
shall be invested in investments described in clause (f) of the definition
of Eligible Investments), in Eligible Investments that mature not later
than one Business Day prior to the Payment Date for the Collection Period
to which such amounts relate. Any such written direction shall certify that
any such investment is authorized by this Section 4.1. Investments in
Eligible Investments shall be made in the name of the Indenture Trustee on
behalf of the Noteholders, and such investments shall not be sold or
disposed of prior to their maturity. Each and every investment of funds in
a Trust Account shall be made in Eligible Investments held by a financial
institution that is a Securities Intermediary:
(i) in an account pursuant to an agreement with such
financial institution, governed by the law of the State of
Missouri or any other jurisdiction which has adopted Revised
Article 8, that requires such financial institution to (A) comply
with Entitlement Orders pertaining to such account originated by
the Indenture Trustee, in its capacity as trustee under the
Indenture, without further consent of the Seller, (B) not enter
into any agreement which grants "control" (as defined in Section
8-106 of Revised Article 8) of such account (or any interest or
property therein) to any Person other than the Indenture Trustee,
(C) subordinate any security interest, banker's lien, right of
setoff or other similar right which such financial institution may
have in such account to the interest of the Indenture Trustee and
(D) expressly treat each item of property as a Financial Asset and
such account as a Securities Account; and
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(ii) with respect to which such institution has noted
the Indenture Trustee's interest therein by book entry or
otherwise, and with respect to which a confirmation of the
Indenture Trustee's interest has been sent to the Indenture
Trustee by such institution, provided that such Eligible
Investments are (A) specific "certificated securities" (as defined
under Old Article 8), and (B) either (1) in the possession of such
institution or (2) in the possession of a Clearing Corporation,
registered in the name of such Clearing Corporation, not endorsed
for collection or surrender or any other purpose not involving
transfer, not containing any evidence of a right or interest
inconsistent with the Indenture Trustee's security interest
therein, and held by such Clearing Corporation in an account of
such institution.
Subject to the other provisions hereof, the Indenture Trustee shall have
sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any,
shall be delivered directly to the Indenture Trustee or its agent, together
with each document of transfer, if any, necessary to transfer title to such
investment to the Indenture Trustee in a manner that complies with this
Section 4.1. All interest, dividends, gains upon sale and other income
from, or earnings on, investments of funds in the Collection Account shall
be deposited in the Collection Account and distributed on the next Payment
Date pursuant to Section 4.5. All interest, dividends, gains upon sale and
other income from or earnings on, investments of funds in the Reserve
Account shall be deposited in the Reserve Account and distributed on the
next Payment Date pursuant to Section 4.5. If the Indenture Trustee is
given instructions to invest funds in a Trust Account in investments other
than investments of the type described in clause (f) of the definition of
"Eligible Investments", the Person giving such instructions agrees to
assist the Indenture Trustee in complying with the requirements herein with
respect to such investments.
(c) With respect to the Trust Account Property:
(i) any Trust Account Property that is held in
deposit accounts shall be held solely in the name of the Indenture
Trustee in accounts which satisfy clause (ii) of the definition of
Eligible Account; each such deposit account shall be subject to
the exclusive custody and control of the Indenture Trustee, and
the Indenture Trustee shall have sole signature authority with
respect thereto;
(ii) any Trust Account Property that constitutes
Physical Property (other than a "certificated security" as defined
under Old Article 8) shall be delivered to the Indenture Trustee
in accordance with paragraph (i) of the definition of "Delivery"
and shall be held, pending maturity or disposition, solely by the
Indenture Trustee;
(iii) any Trust Account Property that
constitutes a "certificated security" as defined under Old Article
8 that will, upon compliance with the procedures set forth in
paragraph (ii) of the definition of "Delivery," be held by a
Person located in an Old Article 8 Jurisdiction, shall be
delivered to the Indenture Trustee in accordance with paragraph
(ii) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Indenture Trustee or a
Financial Intermediary acting solely for the Indenture Trustee;
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(iv) any Trust Account Property that constitutes
a Certificated Security that will, upon compliance with the
procedures set forth in paragraph (iii) of the definition of
"Delivery," be held by a Person located in a Revised Article 8
Jurisdiction shall be delivered to the Indenture Trustee in
accordance with paragraph (iii) of the definition of "Delivery"
and shall be held, pending maturity or disposition, solely by the
Indenture Trustee;
(v) any Trust Account Property that constitutes
an "uncertificated security" under Old Article 8 (and that is not
a Federal Book Entry Security) and where the issuer thereof is
organized in an Old Article 8 Jurisdiction, shall be delivered to
the Indenture Trustee in accordance with paragraph (iv) of the
definition of "Delivery" and shall be maintained, pending maturity
or disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security;
(vi) any such Trust Account Property that
constitutes an Uncertificated Security (including any investments
in money market mutual funds, but excluding any Federal Book Entry
Security) and where the issuer thereof is organized in a Revised
Article 8 Jurisdiction, shall be delivered to the Indenture
Trustee in accordance with paragraph (v) of the definition of
"Delivery" and shall be maintained, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security; and
(vii) with respect to any Trust Account Property
that constitutes a Federal Book Entry Security, the Indenture
Trustee shall maintain and obtain Control over such property.
Effective upon Delivery of any Trust Account Property in the form
of Physical Property, book-entry securities or uncertificated
securities, the Indenture Trustee shall be deemed to have
represented that it has purchased such Trust Account Property for
value, in good faith and without notice of any adverse claim
thereto.
(d) On or within three Business Days of the Closing Date, the
Servicer shall deposit in the Collection Account (i) all Scheduled Payments
and prepayments of Receivables with respect to which available funds have
been received in the Lockbox Account after the Cutoff Date and prior to the
Closing Date and (ii) all Liquidation Proceeds and proceeds of Insurance
Policies realized in respect of Financed Vehicles and applied by the
Servicer after the Cutoff Date.
Section 4.2. Servicer Reimbursements. The Servicer shall be
entitled to be reimbursed from amounts on deposit in, or to be deposited
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. The amount to be reimbursed hereunder
shall be paid to the Servicer on the related Payment Date pursuant to
Section 4.5(a)(ii). Upon the request of the Indenture Trustee, the Servicer
shall certify any amount to be reimbursed hereunder and shall supply such
other information as may be
37
necessary in the opinion of the Indenture Trustee to verify the accuracy of
such certification. The Indenture Trustee shall not be under any obligation
to make the request described in the immediately preceding sentence.
Section 4.3. Application of Collections. For purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on
behalf of the Obligor (other than Supplemental Servicing Fees with
respect to such Receivable, to the extent collected) shall be
applied to reduce the balance thereof in accordance with the terms
of such Receivable.
(b) With respect to each Receivable that has become a
Purchased Receivable on any Deposit Date, the Purchase Amount
shall be applied to interest and principal on the Receivable in
accordance with Section 4.3(a) as if the Purchase Amount had been
paid by the Obligor on the related Accounting Date. Nothing
contained herein shall relieve any Obligor of any obligation
relating to any Receivable.
(c) All amounts collected that are payable to the
Servicer as Supplemental Servicing Fees hereunder shall be
deposited in the Collection Account and paid to the Servicer in
accordance with Section 4.5(a)(ii).
(d) All payments by or on behalf of an Obligor received
with respect to any Purchased Receivable after the Accounting Date
preceding the Deposit Date on which the Purchase Amount was paid
by the Seller or the Servicer shall be paid to the Seller or the
Servicer, respectively, and shall not be included in the Available
Funds.
Section 4.4. Additional Deposits. On or before each Deposit Date,
the Servicer or the Seller shall deposit into the Collection Account the
aggregate Purchase Amounts with respect to Purchased Receivables. All such
deposits of Purchase Amounts shall be made in immediately available funds.
On or before each Payment Date, the Indenture Trustee shall remit to the
Collection Account any amounts to be transferred into the Collection
Account by the Indenture Trustee from the Reserve Account pursuant to
Section 5.2.
Section 4.5. Payments. (a) From the Collection Account, on each
Payment Date, the Indenture Trustee shall (based solely on the information
contained in the Servicer's Certificate delivered with respect to the
related Determination Date) distribute the following amounts in the
following order of priority:
(i) first, from the Payment Amount, to the Indenture
Trustee, any accrued and unpaid Indenture Trustee Fees and any
other accrued and unpaid fees and expenses of the Indenture
Trustee; [to the Backup Servicer, any accrued and unpaid Backup
Servicer Fees and any other accrued and unpaid fees and expenses
of the Backup Servicer;] and to the Owner
38
Trustee, any accrued and unpaid fees and expenses of the Owner
Trustee, in each case in accordance with the Related Documents;
(ii) second, from the remaining Payment Amount, to the
Servicer, any accrued and unpaid Basic Servicing Fees and
Supplemental Servicing Fees with respect to the related Collection
Period and the amounts specified in Section 4.2 to the extent the
Servicer has not reimbursed itself in respect of such amounts
pursuant to Section 4.6;
(iii) third, from the remaining Payment Amount, to the
Class A Noteholders, the Class A Interest Payment Amount for such
Payment Date;
(iv) fourth, from the remaining Payment Amount, to the
Class B Noteholders, the Class B Interest Payment Amount for such
Payment Date;
(v) fifth, from the remaining Payment Amount, to the
Class A Noteholders, the Class A Principal Payment Amount for such
Payment Date;
(vi) sixth, from the remaining Payment Amount, to the
Class B Noteholders, the Class B Principal Payment Amount for such
Payment Date;
(vii) seventh, from the remaining Payment Amount, to the
Reserve Account to the extent necessary to make the amount on
deposit in the Reserve Account equal to the Reserve Account
Required Amount (after giving effect to all withdrawals from the
Reserve Account on such date); and
(viii) eighth, from the remaining Payment Amount,
together with any funds to be released from the Reserve Account
pursuant to this Agreement, to the Certificateholder, in
accordance with Section 5.3 of the Trust Agreement.
(b) Subject to Section 9.1 respecting the final payment upon
retirement of each Note, and provided that the Indenture Trustee has
received the applicable Servicer's Certificate, on each Payment Date, the
Indenture Trustee shall distribute to each Noteholder and Certificateholder
of record on the preceding Record Date either (i) by wire transfer, in
immediately available funds to the account of such holder at a bank or
other entity having appropriate facilities therefor, if such Noteholder
holds Notes representing at least $1,000,000 in Class A Note Balance or
Class B Note Balance as of the Closing Date, and if such Noteholder shall
have provided to the Indenture Trustee appropriate instructions not later
than 15 days prior to such Payment Date, or (ii) by check mailed to such
Noteholder at the address of such Holder appearing in the Note Register,
the amount of the Class A Payment Amount or the Class B Payment Amount, as
applicable, allocable to such Holder to the extent funds therefor are
distributed under Section 4.5(a). The Indenture Trustee agrees to provide
notice of final payment to the Certificateholder in accordance with Section
9.1 of the Trust Agreement.
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Section 4.6. Net Deposits. So long as no Servicer Termination
Event has occurred and is continuing, the Servicer may make the remittances
to be made by it pursuant to Sections 4.2 net of amounts (which amounts may
be netted prior to any such remittance for a Collection Period) to be
distributed to it pursuant to Section 4.2; provided, however, that the
Servicer shall account for all of such amounts in the related Servicer's
Certificate as if such amounts were deposited and distributed separately;
and provided, further, that if an error is made by the Servicer in
calculating the amount to be deposited or retained by it, with the result
that an amount less than required is deposited in the Lockbox Account or
the Collection Account, the Servicer shall make a payment of the deficiency
to the Lockbox Account or the Collection Account, as applicable,
immediately upon becoming aware, or receiving notice from the Indenture
Trustee, of such error.
Section 4.7. Statements to Noteholders. (a) On each Payment Date,
the Indenture Trustee shall include with each payment to each Noteholder, a
statement prepared by the Servicer (which statement shall also be provided
to the Certificateholder(s) and to the Rating Agency), based on information
in the Servicer's Certificate delivered on the related Determination Date
pursuant to Section 3.9, setting forth for such Payment Date and the
Collection Period relating to such Payment Date the following information:
(i) in the case of the Class A and Class B Noteholders, the
amount of such payment allocable to principal;
(ii) in the case of the Class A and Class B Noteholders,
the amount of such payment allocable to interest;
(iii) the amount of such payment payable out of amounts
withdrawn from the Reserve Account and the amount remaining in the
Reserve Account;
(iv) the Class A Note Balance and the Class B Note
Balance, as applicable (after giving effect to all payments made
on such Payment Date);
(v) the amount of fees paid by the Trust with respect to
such Collection Period;
(vi) the amount of the Class A Interest Carryover
Shortfall, Class A Principal Carryover Shortfall, Class B Interest
Carryover Shortfall and Class B Principal Carryover Shortfall, if
any, on such Payment Date and the change in such amounts from
those of the prior Payment Date;
(vii) the Class A Note Factor and the Class B Note Factor
as of such Payment Date (after giving effect to payments made on
such Payment Date);
(viii) the Delinquency Ratio and Cumulative Net Loss Ratio
for such Determination Date;
40
(ix) whether any Trigger Event has occurred as of such
Determination Date; and
(x) whether any Trigger Event that may have occurred as
of a prior Determination Date is Deemed Cured as of such
Determination Date.
Each amount set forth pursuant to clauses (i) (such amounts broken down by
Class of Note), (ii) (such amounts broken down by Class of Note) and (iv)
above shall be expressed as a dollar amount per $1,000 of original
principal balance of a Note of the related Class.
(b) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this
Agreement, the Indenture Trustee shall mail, to each Person who at any time
during such calendar year shall have been a Holder of a Note, a statement
containing the sum of the amounts set forth in clauses (i), (ii), and (v)
(separately indicating amounts in respect of the Class A Notes and the
Class B Notes in the case of (i) and (ii)) and such other information,
requested in writing by the Servicer, if any, as the Servicer determines is
reasonably necessary to permit such Noteholder to ascertain its share of
the gross income and deductions of the Trust (exclusive of the Supplemental
Servicing Fee), for such calendar year or, in the event such Person shall
have been a Holder of a Note during a portion of such calendar year, for
the applicable portion of such year, for the purposes of such Noteholder's
preparation of federal income tax returns.
ARTICLE V
THE RESERVE ACCOUNT
Section 5.1. Initial Deposit. On the Closing Date, the Seller shall
deposit $__________ into the Reserve Account.
Section 5.2. Deficiency Claim Amounts. If the Servicer's
Certificate with respect to any Determination Date shall state that the
amount of the Available Funds with respect to such Determination Date is
less than the sum of the amounts payable on the related Payment Date
pursuant to clauses (i) through (vi) of Section 4.5(a) (such deficiency
being a "Deficiency Claim Amount"), then the Indenture Trustee shall
transfer funds in the amount of such Deficiency Claim Amount (to the extent
of the funds available therein) from the Reserve Account to the Collection
Account on the related Deposit Date.
Section 5.3. Distribution of Excess. If (i) the amount on deposit
in the Reserve Account on any Payment Date (after giving effect to all
deposits therein or withdrawals therefrom on such Payment Date) exceeds the
Reserve Account Required Amount and (ii) (a) no Trigger Event has occurred
or (b) all Trigger Events which have occurred have been Deemed Cured, the
Indenture Trustee shall distribute an amount equal to any such excess
pursuant to the Servicer's Certificate and Section 4.5(a)(viii).
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ARTICLE VI
THE SELLER
Section 6.1. Liability of Seller. The Seller shall be liable
hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Seller and the representations made by the
Seller.
Section 6.2. Merger or Consolidation of the Seller. The Seller
shall not merge or consolidate with any other Person or permit any other
Person to become the successor to all or substantially all of the Seller's
business or assets unless the conditions precedent set forth in this
Section 6.2 have been satisfied. Any such successor corporation shall
execute an agreement of assumption of every obligation of the Seller under
its Related Documents and, whether or not such assumption agreement is
executed, shall be the successor to the Seller under this Agreement without
the execution or filing of any document (or any further act on the part of
any of the parties to this Agreement). The Seller shall provide prompt
notice of any merger, consolidation or succession pursuant to this Section
6.2 to the Owner Trustee, the Indenture Trustee, the Noteholders and the
Rating Agency. Notwithstanding the foregoing, the Seller shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Seller's business, unless: (a) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 2.4 shall have been breached in any material respect (for purposes
hereof, such representations and warranties shall speak as of the date of
the consummation of such transaction) and no event that, after notice or
lapse of time, would become an Event of Default shall have occurred and be
continuing; (b) the Seller shall have delivered to the Owner Trustee, the
Indenture Trustee and the Rating Agency an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 6.2
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with; and (c) the Seller
shall have delivered to the Owner Trustee, the Indenture Trustee and the
Rating Agency an Opinion of Counsel, stating, in the opinion of such
counsel, either (i) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to
preserve and protect the interests of the Trust and the Indenture Trustee
in the Receivables or (ii) no such action shall be necessary to preserve
and protect such interest.
Section 6.3. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Seller of the Receivables under this
Agreement and that in its opinion may involve it in any expense or
liability.
Section 6.4. Special Purpose Entity. (a) The Seller shall conduct
its business solely in its own name through its duly authorized officers or
agents so as not to mislead others as to the identity of the entity with
which such persons are concerned, and shall use its best efforts to avoid
the appearance that it is conducting business on behalf of any Affiliate
thereof or that the assets of the
42
Seller are available to pay the creditors of Paragon or any Affiliate
thereof (other than as expressly provided herein).
(b) The Seller shall maintain corporate records and books of
account separate from those of Paragon and any Affiliate thereof.
(c) The Seller shall obtain proper authorization for all corporate
action requiring such authorization.
(d) The Seller shall pay its own operating expenses and
liabilities from its own funds.
(e) The annual financial statements of Paragon shall disclose the
effects of the transactions contemplated hereby in accordance with
generally accepted accounting principles.
(f) The resolutions, agreements and other instruments of the
Seller underlying the transactions described in the Related Documents shall
be continuously maintained by the Seller as official records of the Seller.
(g) The Seller shall maintain an arm's-length relationship with
Paragon and its Affiliates, and shall not hold itself out as being liable
for the debts of Paragon or any of its Affiliates.
(h) The Seller shall keep its assets and liabilities separate from
those of all other entities other than as permitted by the Related
Documents.
(i) The books and records of the Seller shall be maintained at the
address designated herein for receipt of notices, unless the Seller shall
otherwise advise the parties hereto in writing.
(j) The Seller shall not maintain bank accounts or other
depository accounts to which any Affiliate is an account party, into which
any Affiliate makes deposits or from which any Affiliate has the power to
make withdrawals, except as otherwise permitted by the Related Documents.
(k) The Seller shall insure that any consolidated financial
statements of Paragon has notes to the effect that the Seller is a separate
entity whose creditors have a claim on its assets prior to those assets
becoming available to its equity holders.
(l) The Seller shall not amend, supplement or otherwise modify its
certificate of incorporation or bylaws except in accordance therewith.
Section 6.5. Restrictions on Liens. The Seller shall not (i)
create, incur or suffer to exist, or agree to create, incur or suffer to
exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
on, or restriction on transferability of, the Receivables except for
Permitted Liens or (ii) sign or file under the UCC of any jurisdiction any
financing statement that names Paragon or the Seller as a debtor,
43
or sign any security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Receivables, except in
each case any such instrument solely securing the rights and preserving the
Lien of the Trust and the Lien of the Indenture Trustee for the benefit of
the Noteholders.
Section 6.6. Creation of Indebtedness; Guarantees. The Seller
shall not create, incur, assume or suffer to exist any indebtedness other
than indebtedness permitted under the Related Documents. The Seller shall
incur no additional borrowed money indebtedness secured by the Trust
Property other than the Notes. The Seller shall not assume guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital.
Section 6.7. Compliance with Laws. The Seller shall comply with
the requirements of all applicable laws, the non-compliance with which
would, individually or in the aggregate, materially and adversely affect
the ability of the Seller to perform its obligations under any Related
Document.
Section 6.8 Further Instruments and Acts. Upon request of the
Trust or the Indenture Trustee, the Seller shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Agreement.
Section 6.9 Investment Company Act. The Seller shall conduct its
operations in a manner that will not subject it to registration as an
"Investment Company" under the Investment Company Act of 1940, as amended.
ARTICLE VII
THE SERVICER
Section 7.1. Liability of Servicer; Indemnities. (a) The Servicer (in
its capacity as such) shall 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 shall defend, indemnify and hold harmless the
Seller, the Indenture Trustee, the Owner Trustee, the Trust[, the Backup
Servicer] and the Noteholders, and their respective officers, directors,
agents and employees, from and against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, arising out of or resulting from (i)
the use, ownership or operation, if any, by the Servicer or any Affiliate
thereof of a Financed Vehicle or (ii) any violation by the Seller, the
Servicer or the Trust of state or federal securities laws relating to the
Notes or the Certificates.
(c) The Servicer shall indemnify, defend and hold harmless the
Seller, the Indenture Trustee, the Owner Trustee, the Trust, [the Backup
Servicer,] and their respective officers, directors, agents and employees,
from and against any and all costs, expenses, losses, claims, penalties,
fines,
44
forfeitures, judgments, damages and liabilities to the extent that such
cost, expense, loss, claim, penalty, fine, forfeiture, judgment, damage or
liability arose out of, or was imposed upon the Seller, the Indenture
Trustee, the Owner Trustee, [the Backup Servicer] or the Trust 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 negligent
disregard of its obligations and duties under this Agreement.
(d) Indemnification under this Section 7.1 shall survive the
termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer has made
any indemnity payments pursuant to this Section 7.1 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts collected to the Servicer, without interest.
(e) Notwithstanding the indemnity provisions contained in Sections
7.1(b) through (d), the Servicer shall not be required to indemnify the
Seller, the Indenture Trustee, the Owner Trustee, the Trust, [the Backup
Servicer] or their respective officers, directors, agents or employees,
against any costs, expenses, losses, damages, claims or liabilities to the
extent the same shall have been (i) caused by the misfeasance, bad faith or
gross negligence (or ordinary negligence in the handling of funds) of such
party or (ii) suffered by reason of uncollectible or uncollected
Receivables not caused by the Servicer's negligence (other than errors in
judgment), misfeasance or bad faith. Notwithstanding the indemnity
provisions contained in Section 7.1(b), the Servicer shall not be required
to indemnify the Noteholders for any losses suffered in their capacity as
investors in the Notes.
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer [or Backup Servicer]. (a) The Servicer shall
not merge or consolidate with any other Person, convey, transfer or lease
all or substantially all its assets as an entirety to another Person, or
permit any other Person to become the successor to all or substantially all
of its business or assets, unless, after the merger, consolidation,
conveyance, transfer, lease or succession, the successor or surviving
entity shall be capable of fulfilling the duties of the Servicer contained
in this Agreement and shall 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 shall be a party, (iii)
that acquires by conveyance, transfer, or lease substantially all of the
assets of the Servicer, or (iv) succeeding to the business of the Servicer,
in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement and, whether
or not such assumption agreement is executed, shall be the successor to the
Servicer under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided,
however, that nothing contained herein shall be deemed to release the
Servicer from any obligation hereunder. The Servicer shall provide notice
of any merger, consolidation or succession pursuant to this Section 7.2(a)
to the Owner Trustee, the Indenture Trustee[, the Backup Servicer] and the
Rating Agency and the Rating Agency Condition in respect of such merger,
consolidation or succession shall have been satisfied. Notwithstanding the
foregoing, the Servicer shall not merge or consolidate with any other
Person or permit any other Person to become a successor to all or
substantially all
45
of its business or assets, unless (x) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section
3.6 shall have been breached in any material respect (for purposes hereof,
such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse
of time, would become an Event of Default shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Owner Trustee, the
Indenture Trustee and the Rating Agency an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 7.2(a)
and (z) the Servicer shall have delivered to the Owner Trustee, the
Indenture Trustee and the Rating Agency 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 and
the Indenture Trustee in the Receivables and the proceeds thereof or (B) no
such action shall be necessary to preserve and protect such interest.
[(b) Any corporation (i) into which the Backup Servicer may be
merged, consolidated or converted, (ii) resulting from any merger,
consolidation or conversion to which the Backup Servicer shall be a party,
(iii) that acquires by conveyance, transfer or lease substantially all of
the assets of the Backup Servicer, or (iv) succeeding to the business of
the Backup Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Backup Servicer
under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Backup Servicer from any
obligation.]
Section 7.3. Limitation on Liability of Servicer[, Backup
Servicer] and Others. (a) Neither the Servicer[, the Backup Servicer] nor
any of the directors, officers, employees or agents of the Servicer [or the
Backup Servicer] shall be under any liability to the Trust, the
Noteholders, the Indenture Trustee, the Owner Trustee or the Seller, 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 shall not protect the Servicer[, the Backup Servicer]
or any such Person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful misfeasance, bad faith or
negligence (other than errors in judgment) in the performance of its
duties. The Servicer, [the Backup Servicer] and any director, officer,
employee or agent of the Servicer [or the 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) Unless acting as Servicer hereunder, the Backup Servicer
shall not be liable for any obligation of the Servicer contained in this
Agreement, and the Indenture Trustee, the Owner Trustee, the Seller and the
Noteholders shall look only to the Servicer to perform such obligations.]
[(c) The parties expressly acknowledge and consent to [Norwest
Bank Minnesota, National Association] acting in the possible dual capacity
of Backup Servicer or successor Servicer
46
and in the capacity as Indenture Trustee. [Norwest Bank Minnesota, National
Association] may, in such dual 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 [Norwest
Bank Minnesota, National Association] of express duties set forth in this
Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto except
in the case of negligence (other than errors in judgment) and willful
misconduct by [Norwest Bank Minnesota, National Association].]
[(d) The Backup Servicer shall have no responsibility and shall
not be in default hereunder nor incur any liability for any failure, error,
malfunction or any delay in carrying out any of its duties under this
Agreement if any such failure or delay results from the Backup Servicer
acting in accordance with information prepared or supplied by a Person
other than the Backup Servicer or the failure of any such Person to prepare
or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability (i)
for any act or failure to act by any third party, including the Servicer,
the Seller, the Controlling Party, the Indenture Trustee or the Owner
Trustee or for any inaccuracy or omission in a notice or communication
received by the Backup Servicer from any third party or (ii) that is due to
or results from the invalidity, unenforceability of any Receivable under
applicable law or the breach or the inaccuracy of any representation or
warranty made with respect to any Receivable.]
Section 7.4. Delegation of Duties. The Servicer may at any time
perform through sub-contractors the specific duties of (i) repossession of
Financed Vehicles and (ii) pursuing the collection of deficiency balances
on defaulted Receivables, in each case without the consent of the Owner
Trustee[, the Backup Servicer] or the Indenture Trustee . The Servicer may
also perform other specific duties through such sub-contractors in
accordance with its customary servicing policies and procedures without the
prior consent of the Owner Trustee, [, the Backup Servicer] or the
Indenture Trustee. No such delegation or sub-contracting of duties by the
Servicer shall relieve the Servicer of its responsibility with respect to
such duties.
Section 7.5. Servicer [and Backup Servicer] Not to Resign. Subject
to the provisions of Section 7.2, [neither] the Servicer [nor the Backup
Servicer] shall [not] 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, and a Note Majority does not elect to
waive the obligations of the Servicer [or the Backup Servicer, as the case
may be,] to perform the duties that 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 Servicer] shall be evidenced by
an Opinion of Counsel to such effect delivered and acceptable to the Owner
Trustee and the Indenture Trustee. No resignation of the Servicer shall
become effective until [the Backup Servicer or] a successor Servicer that
is an Eligible Servicer shall have assumed the responsibilities and
obligations of the Servicer. [No resignation of the Backup Servicer shall
become effective until a Person that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Backup Servicer;
provided, however, that if a successor Backup Servicer is not appointed
within 60
47
days after the Backup Servicer has given notice of its resignation and has
provided the Opinion of Counsel required by this Section 7.5, the Backup
Servicer may petition a court for its removal. Notwithstanding the
foregoing, the Backup Servicer may resign for any reason, provided an
entity acceptable to the Controlling Party shall have assumed the
responsibilities and obligations of the Backup Servicer prior to the
effectiveness of any such resignation and the Rating Agency Condition is
satisfied with respect thereto.]
Section 7.6. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Issuer under the Indenture. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture.
The Servicer shall monitor the performance of the Issuer and shall advise
the Owner Trustee when action is necessary to comply with the Issuer's
duties under the Indenture. The Servicer shall prepare for execution by the
Owner Trustee or shall cause the preparation by other appropriate Persons
of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or deliver
pursuant to the Indenture. In furtherance of the foregoing, the Servicer
shall take all necessary action that is the duty of the Issuer to take
pursuant to Sections 2.9, 3.3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.19, 3.21,
3.23, 4.1, 5.1, 5.16, 8.4, 8.5, 9.1, 9.2, 9.5 and 11.1 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth
in this Agreement or any of the Related Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Owner
Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Related Documents or under
state and federal tax and securities laws and shall take all appropriate
action that it is the duty of the Issuer to take pursuant to this Agreement
or any of the Related Documents. In accordance with the directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with the
Related 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 this Agreement or any of
the Basic Documents to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee if any withholding tax is imposed on
the Issuer's payments (or allocations of income) to any Certificateholder.
Any such notice shall be in writing and specify the amount of any
withholding tax required to be withheld by the Owner Trustee pursuant to
such provision.
(c) Records. The Servicer shall maintain appropriate books of
account and records relating to the services performed under this
Agreement, which books of account and records shall be accessible for
inspection by the Owner Trustee at any time during normal business hours.
48
ARTICLE VIII
SERVICER TERMINATION EVENTS
Section 8.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to make deposits into the
Collection Account or to deliver to the Indenture Trustee for distribution
any proceeds or payment required to be so deposited or delivered under the
terms of this Agreement that continues unremedied for a period of two
Business Days (one Business Day with respect to payment of Purchase
Amounts) after the earlier of receipt of written notice by the Servicer
from the Owner Trustee or the Indenture Trustee or discovery of such
failure by a Responsible Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the Indenture Trustee
the Servicer's Certificate by 2:00 p.m., New York City time, on each
Determination Date (or within two Business Days thereafter, if such failure
by the Servicer is due to circumstances outside the Servicer's control), or
failure on the part of the Servicer to observe in all material respects its
covenants and agreements set forth in Section 7.2(a); or
(c) Failure or failures on the part of the Servicer duly to
observe or perform any other covenants or agreements of the Servicer set
forth in this Agreement, which failure or failures, individually or in the
aggregate, (i) materially and adversely affect the rights of Noteholders
and (ii) continue unremedied for a period of 30 days after the earlier of
knowledge thereof by a Responsible Officer of the Servicer or the date on
which written notice of such failure or failures, requiring the same to be
remedied, shall have been given to the Servicer by the Owner Trustee, the
Indenture Trustee or Holders of more than 25% of the Note Balance; or
(d) The occurrence of an Insolvency Event with respect to the
Servicer; or
(e) Any representation or warranty of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time
when the same shall have been made, and the incorrectness of such
representation or warranty has a material adverse effect on the Noteholders
and, within 30 days after the earlier of knowledge thereof by a Responsible
Officer of the Servicer or the date written notice thereof shall have been
given to the Servicer by the Owner Trustee, the Indenture Trustee or
Holders of more than 25% of the sum of the then outstanding Class A and
Class B Note Balances, the circumstances or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or otherwise cured.
Section 8.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, either the
Indenture Trustee (to the extent it has knowledge thereof) or a Note
Majority, by notice given in writing to the Servicer and the Rating Agency
(and to the Indenture Trustee if given by the Noteholders), may terminate
all of the rights and obligations
49
of the Servicer under this Agreement. 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 Receivables, the other Trust Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the [Backup Servicer (or such other] successor Servicer
appointed by the Indenture Trustee[)]; provided, however, that the
successor Servicer shall have no liability with respect to (i) any
obligation that was required to be performed by the terminated Servicer
prior to the date that the successor Servicer becomes the Servicer or (ii)
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, the other
Trust Property and related documents to show the Trust or the Indenture
Trustee as lienholder or secured party on the related Lien Certificates, or
otherwise. The terminated Servicer agrees to cooperate with 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 shall
at the time be held by the terminated Servicer for deposit, or have been
deposited by the terminated Servicer, in the Collection Account or the
Lockbox Account or thereafter received with respect to the Receivables and
the delivery to the successor Servicer of all Receivable Files and Monthly
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 Trust Property. The terminated Servicer shall grant the
Indenture Trustee and the successor Servicer reasonable access during
normal business hours to the terminated Servicer's premises.
Section 8.3. Appointment of Successor. (a) On and after the time
the Servicer receives a notice of termination pursuant to Section 8.2 or
upon the resignation of the Servicer pursuant to Section 7.5, the [Backup]
[successor] Servicer shall be the successor in all respects to the Servicer
in its capacity as Servicer under this Agreement and the transactions set
forth or provided for in this Agreement, and shall be subject to all the
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 shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such
succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to termination under Section 8.2 upon the occurrence of
any Servicer Termination Event applicable to it as Servicer. Any successor
Servicer appointed pursuant to this Section 8.3 shall be entitled to
compensation equal to the greater of (i) the Total Servicing Fee or (ii)
the then-current "market rate" fee for servicing assets comparable to the
Receivables, which rate shall be determined by averaging three servicing
fee bids obtained by the [Backup] [successor] Servicer from third party
servicers selected by the [Backup] [successor] Servicer.
[(b) If the Backup Servicer shall be legally unable or unwilling
to act as Servicer, the Backup Servicer, the Indenture Trustee or a Note
Majority may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment
50
pursuant to the preceding sentence, the Backup Servicer shall act as
successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has
been appointed and accepted such appointment. Subject to Section 7.5, no
provision of this Agreement shall be construed as relieving the Backup
Servicer of its obligation to succeed as successor Servicer upon the
termination of the Servicer pursuant to Section 8.2 or the resignation of
the Servicer pursuant to Section 7.5.]
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if the Servicer
had not resigned or been terminated hereunder.
Section 8.4. Notification to Noteholders. Upon any termination of,
or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Indenture Trustee shall give prompt written notice thereof to the
Rating Agency and to the Noteholders at their respective addresses
appearing in the Note Register.
Section 8.5. Waiver of Past Defaults. A Note Majority may, on
behalf of the 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 shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon.
The Indenture Trustee shall provide the Noteholders and the Rating Agency
with notice of any waiver of any default by the Servicer hereunder.
ARTICLE IX
TERMINATION
Section 9.1. Optional Purchase of All Receivables. As an
administrative convenience, the Servicer shall have the option to purchase
the Receivables and the other Trust Property on any Payment Date if, as of
the related Accounting Date, the Aggregate Principal Balance has declined
to less than 10% of the Cutoff Date Principal Balance. To exercise such
option, the Servicer shall pay the aggregate Purchase Amounts for the
Receivables (which amount shall in no event be less than the sum of the
Class A Note Balance and the Class B Note Balance plus accrued and unpaid
interest thereon) and shall succeed to all interests in and to the Trust
Property. Not later than 10 days prior to any proposed exercise of such
option, the Servicer or Seller shall notify the Rating Agency, the
Indenture Trustee, the Certificateholder and the Owner Trustee of any
proposed exercise of such option. The purchase price paid by the Servicer
shall be deposited into the Collection Account on or before such Payment
Date and distributed pursuant to Section 4.5.
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ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Amendment. (a) This Agreement may be amended by the
Trust, the Seller, the Servicer, Paragon[, the Backup Servicer] and the
Indenture Trustee without the consent of any of the Certificateholder or
the Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement
any provisions in this Agreement or (iii) for the purpose of adding any
provision to or changing in any manner or eliminating any provision of this
Agreement or of modifying in any manner the rights of the Noteholders,
provided that such action in this clause (iii) shall not, as evidenced by
an Opinion of Counsel delivered to the Indenture Trustee and the Rating
Agency, adversely affect in any material respect the interests of the
Noteholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, Paragon[, the Backup Servicer] and the Indenture
Trustee with the consent of a Note Majority (which consent of any Holder of
a Note given pursuant to this Section 10.1(b) or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder
and on all future Holders of such Note and of any Note issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note), for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of
the Holders of Notes; provided, however, that the Rating Agency Condition
shall have been satisfied with respect to any such amendment prior to the
execution thereof; and provided, further, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables, distributions that shall
be required to be made on any Note, the Class A Interest Rate or the Class
B Interest Rate, (ii) amend any provisions of Section 4.5 in such a manner
as to affect the priority of payment of interest or principal to
Noteholders, or (c) reduce the aforesaid percentage required to consent to
any such amendment or any waiver hereunder, without the consent of the
Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent under
Section 10.1(a) or (b), the Seller shall furnish the Indenture Trustee with
a written notice describing the substance of such amendment and the
Indenture Trustee shall forward such written notification of the substance
of such amendment or consent to the Rating Agency and the Owner Trustee
within five days of receipt thereof.
(d) Promptly after the execution of any such amendment and receipt
thereof by the Indenture Trustee or consent under Section 10.1(b), the
Indenture Trustee shall furnish written notification of the substance of
such amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization
52
of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
(f) Prior to the execution of any amendment to this Agreement, the
Indenture Trustee, upon request, shall be entitled to receive and rely upon
an Opinion of Counsel (delivered at the expense of the Seller) stating that
the execution of such amendment is authorized or permitted by this
Agreement, in addition to the Opinion of Counsel referred to in Section
10.2(i). The Indenture Trustee may, but shall not be obligated to, enter
into any such amendment that affects the Indenture Trustee's own rights,
duties or immunities under this Agreement or otherwise.
Section 10.2. Protection of Title to Trust. (a) The Servicer shall
execute, file, record and register such financing statements and cause to
be executed, filed, recorded and registered such continuation and other
statements or documents, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Trust and the Indenture Trustee under this Agreement in the Trust Property
and in the proceeds thereof. The Servicer shall deliver (or cause to be
delivered) to the Indenture Trustee file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above,
as soon as available following such recordation, registration or filing.
Paragon and the Seller shall cooperate fully with the Servicer in
connection with the obligations set forth above and shall execute any and
all documents reasonably required to fulfill the intent of this Section
10.2(a).
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would make any financing
statement or continuation statement filed by the Servicer in accordance
with Section 10.2(a) seriously misleading within the meaning of the
applicable provisions of the UCC or any title statute, unless it shall have
given the Owner Trustee and the Indenture Trustee at least 30 days prior
written notice thereof, and shall promptly file appropriate amendments to
all previously filed financing statements and continuation statements.
(c) Each of the Seller and the Servicer shall give the Owner
Trustee and the Indenture Trustee at least 30 days prior written notice of
any relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation
statement or of any new financing statement. The Servicer shall at all
times maintain each office from which it services Receivables and its
principal executive office within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing and (ii) reconciliation
between payments or recoveries on (or with respect to) each Receivable and
the amounts from time to time deposited in the Collection Account in
respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement, the Servicer's master
computer records (including any backup archives) that refer to any
Receivable indicate clearly that such Receivable is owned by the Trust.
Indication
53
of the Trust's ownership of a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the Receivable
shall become a Purchased Receivable or shall have been paid in full.
(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables (other than the Receivables) to any prospective
purchaser, lender or other transferee, the Servicer shall give to such
prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they
refer in any manner whatsoever to any Receivable, indicate clearly that
such Receivable has been sold and is owned by the Trust (unless such
Receivable shall become a Purchased Receivable or shall have been paid in
full).
(g) Upon reasonable notice, the Servicer shall permit the
Indenture Trustee, [the Backup Servicer,] the Seller and their respective
agents, at any time during normal business hours to inspect and make copies
of and abstracts from the Servicer's records regarding any Receivables or
any other portion of the Trust Property.
(h) The Servicer shall furnish to the Owner Trustee, the Indenture
Trustee[, the Backup Servicer] and the Seller upon request within a
reasonable period of time the Schedule of Receivables, setting forth the
Receivables then held as part of the Trust. The Indenture Trustee shall
hold the Schedule of Receivables for examination by interested parties
during normal business hours at the Corporate Trust Office upon reasonable
notice by such Persons of their desire to conduct an examination.
(i) The Seller and the Servicer (or the applicable party in the
case of Section 10.2(b) or (c)) shall deliver to the Owner Trustee and the
Indenture Trustee simultaneously with the execution and delivery of this
Agreement and of each amendment thereto and upon the occurrence of the
events giving rise to an obligation to give notice pursuant to Section
10.2(b) or (c), an Opinion of Counsel (i) stating that, in the opinion of
such counsel, all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect
the interests of the Trust and the Indenture Trustee in the Receivables,
and reciting the details of such filing or referring to prior Opinions of
Counsel in which such details are given or (ii) stating that, in the
opinion of such counsel, no such action is necessary to preserve and
protect such interest.
Section 10.3. Limitation on Rights of Noteholders. (a) The death
or incapacity of any Noteholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Noteholder's legal representatives
or heirs to claim an accounting or to take any action or commence any
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Noteholder shall have any right to vote (except as provided
in this Section 10.3 or Sections 8.2, 8.5 or 10.1) or in any manner
otherwise control the operation and management of the Trust, or the
obligations of the parties to this Agreement, nor shall anything set forth
in this Agreement, or contained in the terms of the Notes, be construed so
as to constitute the Noteholders
54
from time to time as partners or members of an association; nor shall any
Noteholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision of
this Agreement or any Related Document.
(c) No Noteholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action,
or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Indenture
Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and unless also the Holders of Notes evidencing
not less than 25% of the Note Balance shall have made written request upon
the Indenture Trustee to institute such action, suit or proceeding in its
own name as Indenture Trustee under this Agreement and shall have offered
to the Indenture Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or
thereby, and the Indenture Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding and during such 30-day
period, no request or waiver inconsistent with such written request has
been given to the Indenture Trustee pursuant to and in compliance with this
Section 10.3 or Section 8.5; it being understood and intended, and being
expressly covenanted by each Noteholder with every other Noteholder and the
Indenture Trustee, that no one or more Holders of Notes shall have any
right in any manner whatever by virtue or by availing itself or themselves
of any provisions of this Agreement to affect, disturb, or prejudice the
rights of the Holders of any other of the Notes, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner provided in this
Agreement and for the equal, ratable and common benefit of all Noteholders.
For the protection and enforcement of the provisions of this Section 10.3,
each and every Noteholder and the Indenture Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 10.4. GOVERNING LAW. THIS AGREEMENT (OTHER THAN ARTICLE V
AND, SOLELY FOR THE PURPOSE OF INTERPRETING ARTICLE V, ANY DEFINITIONS
REFERRED TO THEREIN) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS. ARTICLE V (AND, SOLELY FOR THE PURPOSE OF INTERPRETING ARTICLE V, ANY
DEFINITIONS REFERRED TO THEREIN) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 10.5. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way
affect the validity or
55
enforceability of the other provisions of this Agreement or of the Notes or
the rights of the Holders thereof.
Section 10.6. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 6.2 or Section
7.2 and as provided in the provisions of the Agreement concerning the
resignation of the Servicer [and the Backup Servicer], this Agreement may
not be assigned by the Seller or the Servicer without the prior written
consent of the Owner Trustee[, the Backup Servicer] and the Indenture
Trustee. Prior written notice of any such assignment shall be provided to
the Rating Agency.
Section 10.7. Third-Party Beneficiaries. Nothing in this
Agreement, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and permitted assigns, any
benefit or any legal or equitable right, remedy or claim under this
Agreement.
Section 10.8. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
Section 10.9. Notices. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, and shall be deemed to have been
duly given upon receipt (a) in the case of the Seller, at the following
address: Paragon Auto Receivables Corporation, 27405 Puerta Real, Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Vice President-Finance,
Telecopy No.: (000) 000-0000, (b) in the case of the Servicer, at the
following address: Paragon Acceptance Corporation, 27405 Puerta Real, Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Vice President - Finance,
Telecopy No.: (000) 000-0000, (c) in the case of the Indenture Trustee,
[and for so long as the Indenture Trustee is the Backup Servicer, the
Backup Servicer,] at the following address: [Norwest Bank Minnesota,
National Association, Norwest Center, Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Services/Asset-Backed Administration, Telecopy No.: (000) 000-0000], (d) in
the case of the Trust or the Owner Trustee, at the following address:
[Wilmington Trust Company, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx
00000, Attention: Corporate Trust Administration] and (e) in the case of
the Rating Agency, at the following address: _________________, or at such
other address as shall be designated by any such party in a written notice
to the other parties. Any notice required or permitted to be mailed to a
Noteholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Note Register, and any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Noteholder receives
such notice.
Section 10.10. Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors and
assigns, and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns permitted
hereunder. All covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, the Trust, the Indenture Trustee and the
Noteholders and their respective permitted successors and assigns, if any.
Any request, notice, direction, consent, waiver or other instrument or
action by any
56
Noteholder shall bind its successors and assigns. Except as otherwise
provided in this Article X, no other Person shall have any right or
obligation hereunder.
57
IN WITNESS WHEREOF, the Seller, the Servicer, the Trust[, the
Backup Servicer] and the Indenture Trustee have caused this Sale and
Servicing Agreement to be duly executed by their respective officers,
effective as of the day and year first above written.
PARAGON ACCEPTANCE CORPORATION, in its
individual capacity and as Servicer
By:___________________________________
Name:_________________________________
Title:________________________________
[NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], as Indenture Trustee [and as
Backup Servicer]
By:____________________________________
Name:__________________________________
Title:_________________________________
PARAGON AUTO RECEIVABLES CORPORATION, as
Seller
By:____________________________________
Name:__________________________________
Title:_________________________________
58
PARAGON AUTO RECEIVABLES OWNER TRUST
____- _, as Purchaser
By: [WILMINGTON TRUST COMPANY]
not in its individual capacity but solely as
Owner Trustee
By:___________________________________
Name:_________________________________
Title:________________________________
59
SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Servicer and the Indenture Trustee.
60
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF SELLER
WITH RESPECT TO RECEIVABLES
1. Contract Origination Date. Each Receivable has a
contract origination date on or before _______ __, ____.
2. Term of Receivables. Each Receivable has an original
term of at least __ months and not more than __ months and had a
remaining term as of the Cutoff Date of at least __ months and not
more than __ months; the weighted average original contracted term
of the Receivables was __ months as of the Cutoff Date; the
weighted average remaining contracted term of the Receivables was
__ months as of the Cutoff Date.
3. Characteristics of Receivables. (A) Each Receivable
(1) has been originated in the United States of America by a
Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business in accordance in all material
respects with Paragon's credit approval guidelines, and, to the
best knowledge of Seller, such Dealer had all necessary licenses
and permits to originate Receivables in the state where such
Dealer was located, (2) was fully and properly executed by the
parties thereto, (3) was purchased by Paragon from such Dealer
under an existing Dealer Agreement and Dealer Assignment and was
purchased by the Seller from Paragon pursuant to the Receivables
Purchase Agreement, (4) contains customary and enforceable
provisions such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the
collateral of the benefits of the security, (5) provides for level
monthly payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be greater
or smaller than the level payment), provided payments are made on
the applicable due dates, (6) has an Annual Percentage Rate of not
less than ____% and not more than ____%, (7) provides for, if such
contract is prepaid, a prepayment that fully pays the Principal
Balance and accrued interest at the Annual Percentage Rate and (8)
is a Simple Interest Receivable or a Pre-Computed Receivable; (B)
as of the Cutoff Date no Receivable has a payment more than 10% of
which is more than 29 days past due; (C) each Receivable has a
final scheduled payment due no later than ________ __, 20__; (D)
as of the Cutoff Date, not more than ____% of the aggregate
principal balance of the Receivables represented financing of used
vehicles, and the remainder of the Receivables represented
financing of new vehicles; (E) as of the Cutoff Date, the average
remaining principal balance of the Receivables was not more than
$_________; and (F) as of the Cutoff Date, the weighted average
Annual Percentage Rate of the Receivables was not more than ____%.
4. Principal Balance; Scheduled Payments. (A) Each
Receivable has an outstanding principal balance as of the Cutoff
Date of not less than $_____ and not more than $______; (B) each
Receivable originated on or prior to _________ __, ____ had at
least one scheduled payment made prior to the date that is two
Business Days prior to the Closing Date; and (C) each Receivable
originated after _________ __, ____ either (I) has had at least
B-1
one scheduled payment made prior to the date that is two Business
Days prior to the Closing Date or (II) will have a first scheduled
payment made within 45 days of the due date thereof.
5. Characteristics of Obligors. As of the Cutoff Date, no
Obligor on any Receivable (A) was the subject of any federal,
state or other bankruptcy, insolvency or similar proceeding
pending on the date of application that is not discharged, (B) was
currently the subject of a judgment in favor of Paragon, and (C)
had its related Financed Vehicle repossessed (or subject to
repossession).
6. Billing Addresses for Obligors. Based on the billing
addresses of the Dealers and the Principal Balances as of the
Cutoff Date, the Obligors of approximately ___% of the Receivables
were located in ___________, the Obligors of approximately ___% of
the Receivables were located in ___________, the Obligors of
approximately ___% of the Receivables were located in ___________
and the Obligors of approximately ___% of the Receivables were
located in other states.
7. Location of Receivable Files. There exists a complete
Receivable File with respect to each Receivable that will have
been delivered to the Indenture Trustee on or prior to the Closing
Date and any exceptions set forth in the Indenture Trustee's
certificate will be corrected within 30 days.
8. Schedule of Receivables. The information with respect
to the Receivables set forth in the Schedule of Receivables has
been produced from the Electronic Ledger and is true and correct
in all material respects as of the close of business on the Cutoff
Date.
9. Adverse Selection. No selection procedures having a
material adverse effect on the Trust or Noteholders have been
utilized in selecting the Receivables from those receivables owned
by Paragon that met the selection criteria contained in this
Agreement.
10. Compliance with Law. Neither the Receivables nor the
sale of the related Financed Vehicles, at the time the related
Receivable was originated or made, contravened in any material
respect, and, at the execution of this Agreement contravenes in
any material respect, any requirements of applicable federal,
state and local laws, and regulations thereunder including,
without limitation, usury laws, the Federal Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Xxxxxxxx-Xxxx Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, each applicable state Motor Vehicle
Retail Installment Sales Act, and state adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and
disclosure laws.
11. No Government Obligor. None of the Receivables is due
from the United States of America or any state or from any other
Governmental Authority.
B-2
12. Security Interest in Financed Vehicle. Each
Receivable has created, or will create when all required
procedures are completed by the Servicer, a valid, subsisting and
enforceable first priority perfected security interest in the
related Financed Vehicle in favor of Paragon as secured party, and
such security interest is, or will be upon the completion of all
required procedures by the Servicer, prior to all other liens upon
and security interests in such Financed Vehicle that now exist or
may hereafter arise or be created (except, as to priority, for any
tax liens or mechanics' liens that may arise after the Closing
Date).
13. Binding Obligation; Receivables in Force. Each
Receivable is a binding obligation of its related Obligor and no
Receivable has been satisfied, subordinated or rescinded, nor has
any Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
14. No Amendments. As of the Cutoff Date, no Receivable has
been amended, altered or modified; and no provision of any Receivable
has been waived, other than any provisions requiring vendor single
interest insurance or late payment fees and those waivers,
alterations or modifications specifically permitted pursuant to
Section 3.2 of this Agreement. As of the Cutoff Date, no
Receivable has been modified as a result of application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
15. No Defenses. As of the Cutoff Date, no right of
rescission, setoff, counterclaim or defense exists with respect to
any Receivable. The operation of the terms of any Receivable or
the exercise of any right thereunder will not render such
Receivable unenforceable in whole or in part or subject to any
such right of rescission, setoff, counterclaim or defense.
16. No Liens. As of the Cutoff Date, there are no liens
or claims existing or that have been filed for work, labor,
storage or materials relating to any of the related Financed
Vehicles that are liens prior to the security interest in the
related Financed Vehicles granted by the related Receivables.
17. No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer and was sold by the Dealer to Paragon
without fraud or misrepresentation on the part of such Dealer in
either case.
18. No Default; Repossession. Except for payment
delinquencies continuing for a period of less than 31 days as of
the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Receivable has occurred; no
continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has arisen; the
Seller shall not waive and has not waived any of the foregoing;
and no related Financed Vehicle has been repossessed as of the
Cutoff Date.
B-3
19. Insurance; Other. Paragon, in accordance with its
customary procedures, has determined (A) that each Obligor, at the
time of origination, had obtained or agreed to obtain insurance
covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage (i) in an amount at least
equal to the lesser of (x) its maximum insurable value or (y) the
principal amount due from the Obligor under the related Receivable
and (ii) naming Paragon as loss payee, (B) each Receivable that
finances the cost of premiums for credit life and accident or
health insurance is covered by an insurance policy and certificate
of insurance naming Paragon as creditor under each such insurance
policy and certificate of insurance, and (C) as to each Receivable
that includes financing for the cost of a service contract, the
respective Financed Vehicle that secures the Receivable is covered
by a service contract. No Receivable has force-placed insurance.
20. Title. No Receivable has been sold, transferred,
assigned or pledged by Paragon to any Person other than the Seller
[or CTS (and the CTS Liens shall be released as of the Closing
Date)] or any such pledge has been released on or prior to the
Closing Date. Immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to
each Receivable, and was the sole owner thereof, free and clear of
all Liens and, immediately upon the transfer thereof, the Trust
shall have good and marketable title to each such Receivable, and
will be the sole owner thereof, free and clear of all Liens (other
than Permitted Liens), and the transfer has been perfected under
the UCC. No Dealer has a participation in, or other right to
receive, proceeds of any Receivable. The Seller has not taken any
action to convey any right to any Person that would result in such
Person having a right to payments received under the related
Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
21. Marking of Receivables. On the Closing Date, Paragon
or the Seller will have caused the portions of the Electronic
Ledger relating to the Receivables to be clearly and unambiguously
marked to show that the Receivables have been sold by Paragon to
the Seller in accordance with the terms of the Receivables
Purchase Agreement and sold by the Seller to the Trust in
accordance with the terms of this Agreement and pledged to the
Indenture Trustee for the benefit of the Noteholders under the
Indenture.
22. Computer Tape. The Computer Tape made available by
the Seller to the Indenture Trustee on the Closing Date was
complete and accurate in all material respects as of the Cutoff
Date and includes a description of the same Receivables that are
described in the Schedule of Receivables.
23. Lawful Assignment. No Receivable has been originated
in, or is subject to the laws of, any jurisdiction under which the
sale, contribution, transfer and assignment of such Receivable
under this Agreement shall be unlawful, void or voidable. The
Seller has not entered into any agreement with any account debtor
that prohibits, restricts or conditions the assignment of any
portion of the Receivables.
B-4
24. All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Indenture Trustee a first priority perfected ownership interest in
the Receivables and the other Trust Property have been made.
25. One Original. There is only one original executed
copy of each Receivable.
26. Valid and Binding Obligation of Obligor. Each
Receivable is the legal, valid and binding obligation of the
Obligor thereunder and is enforceable in accordance with its
terms, except only as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally; all parties to such contract had
full legal capacity to execute and deliver such contract and all
other documents related thereto and to grant the security interest
purported to be granted thereby.
27. Title Documents. (A) If any Financed Vehicle was
originated in a state in which notation of security interest on
the title document is required or permitted to perfect such
security interest, the title document for such Financed Vehicle
shows, or if a new or replacement title document is being applied
for with respect to such Financed Vehicle, the title document will
be received within 180 days and will show, Paragon named as the
original secured party under the related Receivables as the Holder
of a first priority security interest in such Financed Vehicle,
and (B) if any Financed Vehicle was originated in a state in which
the filing of a financing statement under the UCC is required to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show Paragon named as the
original secured party under the related Receivable, and in either
case, no further action is required under the UCC or any titling
statute or act to continue the perfected status of the first
priority security interest in the Financed Vehicle against
creditors of and transferees from the original Obligor.
28. Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
29. Tax Liens. As of the Cutoff Date, there is no Lien
against the related Financed Vehicles for delinquent taxes.
3300191.2 111898 1424C 97386502
B-5
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
[Attached.]
A-1
EXHIBIT B
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
--------------------------------------------
To: [Norwest Bank Minnesota, National Association]
Re: Sale and Servicing Agreement (the "Servicing
Agreement"), dated as of ________ __, ____,
between Paragon Auto Receivables Corporation
(the "Seller"), Paragon Auto Receivables Owner
Trust ____-_, as purchaser (the "Trust"),
Paragon Acceptance Corporation, individually and
in its capacity as Servicer (the "Servicer"),
and [Norwest Bank Minnesota, National
Association,] as Indenture Trustee [and Backup
Servicer] (the "Indenture Trustee")
In connection with the administration of the Receivables held by
you as the Indenture Trustee, we request the release, and acknowledge
receipt, of the Receivable and related Receivable File described below, for
the reason indicated.
Obligor's Name, Customer Account Number and Vehicle Identification Number
-------------------------------------------------------------------------
Reason for Requesting Documents (check one)
-------------------------------------------
_____ 1. Receivable Paid in Full. All amounts received in connection
with such payments have been deposited into the Lockbox
Account as required pursuant to Section 3.2 of the Servicing
Agreement -----------
_____ 2. Receivable Purchased from Trust pursuant to Section 2.5 or
3.7 of the Servicing Agreement -----------
---
_____ 3. Receivable is being serviced or subject to enforcement of
rights and remedies pursuant to Section 2.2(b) of the Servicing
Agreement --------------
_____ 4. Other (explain)_______________________________
If item 1 or 2 above is checked, and if all or part of the Receivable or
Receivable File was previously released to us, please release to us any
additional documents in your possession relating to the above specified
Receivable.
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If item 3 or 4 above is checked, upon our return of all of the above
documents to you as the Indenture Trustee, please acknowledge your receipt
by signing in the space indicated below, and returning this form.
PARAGON ACCEPTANCE CORPORATION
as Servicer
By:____________________________
Name:__________________________
Title:_________________________
Date:__________________________
DOCUMENTS RETURNED TO THE INDENTURE TRUSTEE
[Norwest Bank Minnesota, National Association]
(Indenture Trustee)
By:____________________________
Name:__________________________
Title:_________________________
DAte:__________________________
B-2
