1
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 2, 6, 11, 12, 29, 64, 70, 71 AND
83 HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT 10.1
EXECUTION COPY
INDENTURE AND SERVICING AGREEMENT
--------------------
MIDLAND RECEIVABLES 98-1 CORPORATION
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Backup Servicer
and
MIDLAND CREDIT MANAGEMENT, INC.,
as Servicer
and
ASSET GUARANTY INSURANCE COMPANY
as Note Insurer
Dated as of December 1, 1998
--------------------
MIDLAND RECEIVABLES-BACKED NOTES, SERIES 1998-1
---------------------------
2
TABLE OF CONTENTS
SECTION 1.01 Definitions .............................................. 1
SECTION 1.02 Interpretation ........................................... 14
SECTION 2.01 Creation of Trust Estate ................................. 15
SECTION 2.02 Custody Of Receivable Files ............................. 16
SECTION 2.03 Acceptance By Trustee .................................... 17
SECTION 2.04 Representations and Warranties of Issuer as to the
Receivables .............................................. 17
SECTION 2.05 Reacquisition of Receivables Upon Breach ................. 18
SECTION 2.06 Duties of Servicer as Custodian .......................... 19
SECTION 2.07 Instructions; Authority to Act ........................... 20
SECTION 2.08 Indemnification of Custodian ............................. 20
SECTION 2.09 Effective Period and Termination ......................... 21
SECTION 2.10 Agent for Service ........................................ 21
SECTION 2.11 Satisfaction and Discharge of Indenture .................. 21
SECTION 2.12 Application of Trust Money ............................... 22
SECTION 3.01 Duties of Servicer ....................................... 22
SECTION 3.02 Collection of Receivable Payments ........................ 23
SECTION 3.03 Covenants of Servicer .................................... 23
SECTION 3.04 Purchase of Receivables Upon Breach and Other Events ..... 25
SECTION 3.05 Servicing Fee; Payment of Certain Expenses By Servicer ... 25
SECTION 3.06 Monthly Servicer Report; Servicer's Remittance Date
Certificate .............................................. 26
SECTION 3.07 Annual Statement as to Compliance; Notice of Default ..... 26
-i-
3
SECTION 3.08 Periodic Accountants Report .............................. 27
SECTION 3.09 Quarterly Servicer's Compliance Report ................... 27
SECTION 3.10 Access to Certain Documentation and Information .......... 28
SECTION 3.11 Reports to Noteholders, the Rating Agency and the
Placement Agent .......................................... 28
SECTION 3.12 Tax Treatment ............................................ 28
SECTION 4.01 Accounts ................................................. 29
SECTION 4.02 Collections .............................................. 30
SECTION 4.03 Additional Deposits ...................................... 30
SECTION 4.04 Allocations and Payments ................................. 30
SECTION 4.05 Reserve Account .......................................... 33
SECTION 4.06 Note Payment Account ..................................... 34
SECTION 4.07 Statements to Noteholders ................................ 35
SECTION 5.01 The Policy ............................................... 35
SECTION 5.02 Claims Under Policy ...................................... 35
SECTION 5.03 Surrender of Policy ...................................... 36
SECTION 5.04 Rights of Subrogation and Assignment ..................... 36
SECTION 6.01 The Notes ................................................ 37
SECTION 6.02 Authentication and Delivery of the Notes ................. 38
SECTION 6.03 Registration of Transfer and Exchange of Notes ........... 38
SECTION 6.04 Mutilated, Destroyed, Lost or Stolen Notes ............... 42
SECTION 6.05 Persons Deemed Owners .................................... 43
SECTION 6.06 Access to List of Noteholders' Names and Addresses ....... 43
SECTION 6.07 Surrendering of Notes .................................... 43
SECTION 6.08 Maintenance of Office or Agency .......................... 43
SECTION 7.01 Representations of Issuer ................................ 44
-ii-
4
SECTION 7.02 Reacquisition of Receivables Upon Breach ................. 50
SECTION 7.03 Liability of Issuer ...................................... 51
SECTION 7.04 Merger or Consolidation of, or Assumption of the
Obligations of, the Issuer; Certain Limitations .......... 51
SECTION 7.05 Limitation on Liability of Issuer and Others ............. 53
SECTION 7.06 Issuer May Own Notes ..................................... 53
SECTION 7.07 Covenants of Issuer ...................................... 53
SECTION 8.01 Representations of Servicer .............................. 58
SECTION 8.02 Liability of Servicer; Indemnities ....................... 60
SECTION 8.03 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer ............................. 61
SECTION 8.04 Limitation on Liability of Servicer and Others ........... 62
SECTION 8.05 Servicer Not to Resign ................................... 62
SECTION 8.06 Backup Servicing ......................................... 63
SECTION 8.07 General Covenants of Servicer ............................ 64
SECTION 9.01 Servicer Default ......................................... 69
SECTION 9.02 Consequences of a Servicer Default ....................... 71
SECTION 9.03 Backup Servicer to Act; Appointment of
Successor Servicer........................................ 72
SECTION 9.04 Notification to Note Insurer, Noteholders, Rating Agency
and Placement Agent ...................................... 73
SECTION 9.05 Waiver of Past Servicer Defaults ......................... 73
SECTION 9.06 [Reserved] ............................................... 74
SECTION 9.07 Subservicers ............................................. 74
SECTION 9.08 Events of Default ........................................ 75
SECTION 9.09 Acceleration of Maturity; Rescission and Annulment ....... 76
-iii-
5
SECTION 9.10 Collection of Indebtedness and Suits for Enforcement by
Trustee .................................................. 77
SECTION 9.11 Remedies ................................................. 77
SECTION 9.12 Trustee May File Proofs of Claim ......................... 78
SECTION 9.13 Trustee May Enforce Claims without Possession of Notes ... 78
SECTION 9.14 Application of Money Collected ........................... 79
SECTION 9.15 Limitation on Suits ...................................... 79
SECTION 9.16 Unconditional Rights of Noteholders to Receive Principal
and Interest ............................................. 80
SECTION 9.17 Restoration of Rights and Remedies ....................... 80
SECTION 9.18 Rights and Remedies Cumulative ........................... 80
SECTION 9.19 Delay or Omission Not Waiver ............................. 80
SECTION 9.20 Control by Controlling Party ............................. 80
SECTION 9.21 Waiver of Past Defaults .................................. 81
SECTION 9.22 Undertaking for Costs .................................... 81
SECTION 9.23 Waiver of Stay or Extension Laws ......................... 81
SECTION 9.24 Sale of Trust Estate ..................................... 82
SECTION 9.25 Action on Notes .......................................... 83
SECTION 9.26 No Recourse to Other Trust Estates or Other Assets of the
Issuer ................................................... 84
SECTION 9.27 License .................................................. 84
SECTION 10.01 Duties of Trustee ........................................ 84
SECTION 10.02 Trustee's Certificate .................................... 86
SECTION 10.03 Trustee's Release of Removed Receivables ................. 86
SECTION 10.04 Certain Matters Affecting the Trustee .................... 86
SECTION 10.05 Limitation on Trustee's Liability ........................ 88
-iv-
6
SECTION 10.06 Trustee May Not Own Notes ................................ 89
SECTION 10.07 Trustee's Fees and Expenses .............................. 89
SECTION 10.08 Indemnity of Trustee, Backup Servicers and Successor
Servicer ................................................. 89
SECTION 10.09 Eligibility Requirements for Trustee ..................... 90
SECTION 10.10 Resignation or Removal of Trustee ........................ 90
SECTION 10.11 Successor Trustee ........................................ 91
SECTION 10.12 Merger or Consolidation of Trustee ....................... 92
SECTION 10.13 Appointment of Co-Trustee or Separate Trustee ............ 92
SECTION 10.14 Representations and Warranties of Trustee ................ 93
SECTION 10.15 Tax Returns .............................................. 94
SECTION 10.16 Trustee May Enforce Claims Without Possession of Notes ... 94
SECTION 10.17 Suit for Enforcement ..................................... 94
SECTION 10.18 Rights of Noteholders to Direct Trustee .................. 95
SECTION 10.19 Confidential Information ................................. 95
SECTION 11.01 Redemption at the Option of the Issuer; Election to
Redeem.................................................... 96
SECTION 11.02 Deposit of Redemption Amount ............................. 96
SECTION 11.03 Notice of Redemption by the Trustee ...................... 96
SECTION 11.04 Surrendering of Notes .................................... 96
SECTION 12.01 Amendment ................................................ 97
SECTION 12.02 Protection of Title to Trust Estate ...................... 98
SECTION 12.03 Limitation of Rights of Noteholders ...................... 100
SECTION 12.04 Governing Law ............................................ 101
SECTION 12.05 Notices .................................................. 101
-v-
7
SECTION 12.06 Severability of Provisions; Counterparts ................. 101
SECTION 12.07 Assignment ............................................... 101
SECTION 12.08 No Petition .............................................. 102
SECTION 12.09 Noteholder Direction ..................................... 102
SECTION 12.10 No Substantive Review of Compliance Documents ............ 102
-vi-
8
This Indenture and Servicing Agreement, dated as of December 1, 1998 (the
"Agreement") is executed by and among Midland Receivables 98-1 Corporation, as
issuer (the "Issuer"), Norwest Bank Minnesota, National Association, as trustee
(in such capacity, the "Trustee"), and as backup servicer (in such capacity, the
"Backup Servicer"), Midland Credit Management, Inc., as servicer (the
"Servicer") and Asset Guaranty Insurance Company, as note insurer (the "Note
Insurer").
In consideration of the mutual agreements herein contained, each party agrees as
follows for the benefit of the other parties and the Noteholders to the extent
provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS.
Except as otherwise provided in this Agreement, whenever used herein,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Accounts" means the Collection Account, the Reserve Account and the
Note Payment Account.
"Accredited Investor" shall have the meaning assigned to such term in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
"Acquisition Payment" means, with respect to any Removed Receivable
acquired by the Issuer or the Servicer under this Agreement and as of the
Remittance Date on which the "Acquisition Payment" must be made, the excess, if
any, of (i) the product of the Original Note Balance and a fraction, the
numerator of which is the Charged-Off Balance of such Receivable and the
denominator of which is the Charged-Off Balance of all the Receivables over (ii)
the product of the aggregate amount of all Net Proceeds collected, received or
otherwise recovered on and after the Closing Date with respect to such Removed
Receivable, and a factor equal to .80; in each case determined as of such
Remittance Date.
"Additional Servicing Fee" means the amount, calculated in accordance
with Section 9.03, which is payable to the Successor Servicer and which exceeds
the amount of the Servicing Fee.
"Adverse Claim" means a lien, security interest, charge, encumbrance or
other right or claim of any Person.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the term "controlling" and
"controlled" have meanings correlative to the foregoing.
-1-
9
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
"Agreement" means this Indenture and Servicing Agreement, relating to
Midland Receivables-Backed Notes, Series 1998-1 dated as of December 1, 1998
among Midland Receivables 98-1 Corporation, as Issuer, Norwest Bank Minnesota,
National Association, as Trustee and Backup Servicer, Midland Credit Management,
Inc., as Servicer, and Asset Guaranty Insurance Company, as Note Insurer, as the
same may be amended or supplemented from time to time.
"Applicants" shall have the meaning specified in Section 6.06.
"Asset Sale Agreement" means each agreement entered into between
Midland Credit Management, Inc., and each Originating Institution in connection
with the purchase of the Receivables therein from such Originating Institution.
"Available Funds" means, with respect to any Payment Date and the
immediately preceding Determination Date, the sum of (i) the Net Proceeds with
respect to each Receivable and received in the Collection Account during the
Collection Period then most recently concluded, plus (ii) all available funds on
deposit in the Collection Account (other than Net Proceeds of Receivables) as of
the opening of business of the Trustee on such Determination Date.
"Backup Servicer" means Norwest Bank Minnesota, National Association
and any successor in interest.
"Backup Servicing Fee" means the fee payable to the Backup Servicer on
each Payment Date for services rendered pursuant to this Agreement, which shall
be equal to the greater of [*] per month or an amount per month equal to [*]
per annum times the average daily Note Balance during the
preceding Collection Period.
"Benefit Plan" means with respect to any Person any employee benefit
plan as defined in Section 3(3) of ERISA in respect of which the Person or any
ERISA Affiliate of such Person is, or at any time during the immediately
preceding six years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of Kansas, the State of Minnesota or
the State of New York are required or authorized by law, regulation, executive
order or governmental decree to be closed.
"Bylaws" means the bylaws of Issuer.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer.
"Charged-Off Balance" means, with respect to each Receivable, the
original charged-off balance as required to be set forth in the related Schedule
of Receivables.
"Closing Date" means December 30, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
-2-
10
"Collection Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Midland Receivables-Backed Notes, Series 1998-1 Collection Account."
"Collection Period" means, with respect to any Remittance Date,
Determination Date or Payment Date, the period beginning on the first day of the
calendar month immediately preceding the month in which such Remittance Date,
Determination Date or Payment Date occurs and ending on the last day of such
calendar month; provided, however, that the initial Collection Period begins on
the Closing Date.
"Consumer Account" means any consumer bank or retail credit card
account.
"Controlling Party" means, at any time during which an Insurer Default
shall be in effect, the Noteholders with Voting Interests of at least 51% of all
outstanding Voting Interests and, at all other times, the Note Insurer.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Agreement is located
at Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000,
Attention: Corporate Trust Services/Asset-Backed Administration.
"Customary Procedures" means the customary practices, policies,
standards and procedures of the Servicer relating to the acquisition and
collection of comparable defaulted consumer receivables that it services for
itself or others, in each case as in effect on the Closing Date (which include
backup servicing files, disaster recovery plans and enforcement of rights under
Asset Sale Agreements), as the same may be modified by the Servicer from time to
time thereafter with, in each case of a material change thereto, prompt notice
to the Note Insurer.
"Cut-Off Date" means November 8, 1998.
"Determination Date" means, with respect to any Payment Date, the
second Business Day immediately preceding such Payment Date.
"Eligible Account" means (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by the Required Rating Agencies then providing a long term debt rating
for such institution and in the highest available short term rating category by
the Required Rating Agencies then providing a short term debt rating for such
institution, and that is (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking laws,
(ii) a banking or savings and loan association duly organized, validly existing
and in good standing under the applicable laws of any state, (iii) a national
banking association duly organized, validly existing and in good standing under
the federal banking laws, or (iv) a principal subsidiary of a bank holding
company, or (B) a segregated trust account (which shall be a "special deposit
account") maintained in the trust department of a federal or state chartered
depository institution or trust company, having capital and surplus of not less
than $50,000,000, acting in its fiduciary capacity. Any Eligible Accounts
maintained
-3-
11
with the Trustee shall conform to the preceding clause (B). Any Account
maintained at an institution other than the Trustee must be subject to an
agreement with such institution among Servicer, Issuer and Trustee which must be
satisfactory to Note Insurer in form and substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means with respect to any Person (a) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as such Person; (b) a trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with such Person, or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person, any corporation described in clause (a) above or any trade or
business described in clause (b) above.
"Event of Default" shall have the meaning specified in Section 9.08.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
"Final Payment Date" shall mean the earlier of January 15, 2004 or (ii)
the Payment Date which follows the Payment Date on which all proceeds of a sale
of the Trust Estate pursuant to Section 9.24 were distributed.
"FNMA" means the Federal National Mortgage Association, and its
successors.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (ii) consistently applied with past financial statements of the Servicer and
its subsidiaries; provided that a certified public accountant would, insofar as
the use of such accounting principles is pertinent, be in a position to deliver
an unqualified opinion (other than a qualification regarding changes in
generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing 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 bankruptcy, insolvency or other similar
law now or hereafter in effect, or the filing of a petition against such Person
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which case remains unstayed and
undismissed within 30 days of such filing, or the appointing of a receiver,
liquidator, assignee,. custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the ordering of the
winding-up or liquidation of such Persons business; or (b) the commencement by
such Person of a voluntary case under any applicable 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
-4-
12
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 admission by such Person of its inability to pay its debts generally as
they become due.
"Insolvency Proceeding" means any proceeding of the sort described in
the definition of Insolvency Event.
"Insurance Agreement" means the Insurance and Reimbursement Agreement
between the Servicer, the Issuer and Asset Guaranty Insurance Company, dated as
of the Closing Date.
"Insurer Default" means the occurrence of any of the following:
(i) the Note Insurer shall fail to pay when, as and in the
amounts required, any amount payable under the Policy and such failure
continues unremedied for two Business Days; (ii) the Superintendent of
Insurance of the State of New York (or any Person succeeding to the
duties of such Superintendent) (for the purpose of this paragraph (b),
the "Superintendent") shall apply for an order (A) pursuant to Section
7402 of the New York Insurance Law (or any successor provisions
thereto), directing him to rehabilitate the Note Insurer, (B) pursuant
to Section 7404 of the New York Insurance Law (or any successor
provision thereto), directing him to liquidate the business of the Note
Insurer or (C) pursuant to Section 7416 of the New York Insurance Law
(or any successor provision thereto), dissolving the corporate
existence of the Note Insurer and such application shall not be
dismissed or withdrawn during a period 60 consecutive days or a court
of competent jurisdiction enters an order granting the relief sought;
(iii) the Superintendent shall determine that the Note Insurer is
insolvent within the meaning of Section 1309 of the New York Insurance
Law; (iv) the Note Insurer shall commence a voluntary case or other
proceeding seeking rehabilitation, liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors; or (v) an involuntary case or other
proceeding shall be commenced against the Note Insurer seeking
rehabilitation, liquidation, reorganization or other relief with
respect to it or its debts under a bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property and such case or proceeding
is not dismissed or otherwise terminated within a period of 60
consecutive days or a court of competent jurisdiction enters an order
granting the relief sought in such case or proceeding.
"Interest Carryover Shortfall" means, with respect to any Payment Date,
the excess, if any, of (i) the Interest Distributable Amount for such Payment
Date and all prior Payment Dates, over (ii) the amount of interest, if any,
actually paid to Noteholders on such Payment Date and all prior Payment Dates.
-5-
13
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
"Interest Distributable Amount" means, with respect to any Payment
Date, the product of (A) one-twelfth of the Note Rate and (B) the Note Balance
as of the last day of the immediately preceding Collection Period or, in the
case of the initial Payment Date, the Original Note Balance; provided, however,
that with respect to the initial Payment Date, the amount calculated in
accordance with the preceding clause shall be multiplied by a fraction, the
numerator of which is the number of days from and including the Closing Date
through and including January 30, 1999 and the denominator of which is 30.
"Interest Distribution Period" means, with respect to any Payment Date,
the period of time from the Closing Date to the first Determination Date, and
thereafter from each Determination Date to the next Determination Date.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Issuer" means Midland Receivables 98-1 Corporation, in its capacity as
issuer of the Notes pursuant to this Agreement, and each successor thereto (in
the same capacity) pursuant to Section 7.04.
"Lien" means any security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Monthly Servicer Report" means an Officer's Certificate of the
Servicer completed and executed pursuant to Section 3.06, substantially in the
form attached hereto as Exhibit A.
"Nationally Recognized Statistical Rating Agency" means Duff & Xxxxxx
Credit Rating Co., Fitch IBCA, Inc., Xxxxx'x Investors Service, Inc. and
Standard & Poor's Ratings Services, or any successor thereto.
"Net Proceeds" means, with respect to a Receivable, all monies
representing collected available funds net of NSF checks received or otherwise
recovered from or for the account of the related Obligor on such Receivable
including, without limitation in connection with a Sale thereof. Third-Party
Fees incurred in connection with collecting a Receivable will be deducted from
collections on such Receivable by such third parties or by the Servicer on their
behalf and will not constitute Net Proceeds.
"Note" means one of the [*] Midland Receivables-Backed Notes, Series
1998-1 executed by the Issuer and authenticated by the Trustee in substantially
the form attached hereto as Exhibit C.
"Note Balance" shall initially equal, on the Closing Date, the Original
Note Balance and, as of any subsequent date of determination, shall equal the
Original Note Balance less all amounts paid to Noteholders on previous Payment
Dates and applied in reduction of the Note Balance pursuant to Section
4.04(b)(viii) or pursuant to Section 4.04(b)(ix)(A) through (D), inclusive.
"Note Insurer" means Asset Guaranty Insurance Company.
-6-
14
"Note Insurer Obligations" means all amounts from time to time payable
to the Note Insurer hereunder, under the Premium Letter or under the Insurance
Agreement, whether constituting principal or interest, whether fixed or
contingent, and howsoever arising (including, without limitation, all
Reimbursement Obligations, and any and all such interest, premiums, fees and
other obligations that accrue after the commencement of an Insolvency Proceeding
relating to the Issuer or the Servicer, in each such case whether or not allowed
as a claim in such Insolvency Proceeding).
"Note Insurer Premium" means the premium payable to the Note Insurer in
respect of the Policy, in an amount equal to the product of (i) one-twelfth of a
per annum rate equal to the Premium Rate and (ii) the average daily Note Balance
during the preceding Collection Period.
"Note Payment Account" means the segregated account or accounts, each
of which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Midland Receivables-Backed Notes, Series 1998-1, Note Payment
Account."
"Note Rate" means 8.63% per annum, calculated on the basis of a 360-day
year consisting of 12 30-day months.
"Note Register" means the register maintained pursuant to Section 6.03.
"Note Registrar" means the Trustee unless a successor thereto is
appointed pursuant to Section 6.03. The Note Registrar initially designates its
offices at Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
as its offices for purposes of Section 6.07.
"Noteholder" means the Person in whose name a Note is registered in the
Note Register, except that, solely for the purposes of giving certain consents,
waivers, requests or demands pursuant to this Agreement the interests evidenced
by any Note registered in the name of, or in the name of a Person or entity
holding for the benefit of, the Issuer, the Servicer or any Person actually
known to a Responsible Officer of the Trustee to be controlling, controlled by
or under common control with the Issuer or the Servicer, shall not be taken into
account in determining whether the requisite percentage necessary to effect any
such consent, waiver, request or demand shall have been obtained.
"Obligor" on a Receivable means any Person who owes or may be liable
for payments under such Receivable.
"Officer's Certificate" means a certificate signed by a Responsible
Officer of the Issuer or the Servicer, as the case may be, and delivered to the
Trustee and Note Insurer.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or outside counsel to the Person responsible for providing such
opinion, and which opinion shall be reasonably acceptable to the Trustee, the
Note Insurer and the other recipients thereof.
"Original Note Balance" means $33,000,000.
-7-
15
"Originating Institution" means any Person from which the Seller has
acquired any Receivables and their successors and assigns.
"Payment Date" means the fifteenth day of each calendar month or, if
such day is not a Business Day, the next succeeding Business Day, commencing
February 15, 1999.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Permitted Investments" means, at any time, any one or more of the
following obligations and securities:
(i) obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency thereof, provided such obligations are backed by the full faith
and credit of the United States;
(ii) general obligations of, or obligations guaranteed by,
FNMA or any state of the United States or the District of Columbia,
which are then rated the highest available credit rating for such
obligations by the Required Rating Agencies then providing such a
rating;
(iii) demand deposits, time deposits, or certificates of
deposit of any depository institution or trust company (including the
Trustee) organized under the laws of the United States or of any state
thereof, the District of Columbia (or any branch of a foreign bank
licensed under the laws of the United States of America or any State
thereof) and subject to supervision and examination by banking
authorities of one or more of such jurisdictions, provided that the
short-term unsecured debt obligations of such depository institution or
trust company are then rated the highest available credit rating for
such obligations by the Required Rating Agencies then providing such a
rating;
(iv) repurchase obligations held by the Trustee that are
acceptable to the Trustee with respect to any security described in
clauses (i) or (ii) hereof or any other security issued or guaranteed
by any other agency or instrumentality of the United States, in either
case entered into with a federal agency or a depository institution or
trust company (acting as principal) described in clause (iii) above,
provided that the party agreeing to repurchase such obligations shall
have the highest available short-term debt rating from the Required
Rating Agencies then providing such a rating; and
(v) freely redeemable shares in money market funds (including
such funds for which the Trustee or an Affiliate of the Trustee serves
as an investment advisor, administrator, shareholder servicing agent
and/or custodian or subcustodian) which invest solely in the types of
instruments and obligations described in clauses (i) through (iv)
above, so long as such funds are then rated in the highest available
rating category for money market funds by the Required Rating Agencies
then providing such a rating and notwithstanding that (i) the Trustee
or an Affiliate of the Trustee may charge and collect fees and expenses
from such funds for services rendered, (ii) the Trustee charges and
collects fees and expenses for services rendered pursuant to this
Agreement and (iii) services performed for such funds and pursuant to
this Agreement may converge at any
-8-
16
time. Each of the Issuer and the Servicer hereby specifically
authorizes the Trustee or an Affiliate of the Trustee to charge and
collect all fees and expenses from such funds for services rendered to
such funds, in addition to any fees and expenses the Trustee may charge
and collect for services rendered pursuant to this Agreement;
(vi) commercial paper having, at the time of the investment or
contractual commitment to invest therein, the highest available credit
rating for such obligations by the required Rating Agencies then
providing such a rating;
(vii) bankers' acceptances (with a maturity of one month or
less) issued by any depository institution or trust company referred to
in clause (iii) above;
(viii) money market mutual funds that can be liquidated on a
single day's notice and which are registered under the Investment
Company Act of 1940, as amended, whose shares are registered under the
Securities Act and have the highest available credit rating for such
obligations by the required Rating Agencies then providing such a
rating;
(ix) any other investment grade investment as may be
acceptable to the required Rating Agencies and the Controlling Party,
as evidenced by a writing to that effect;
provided that each of the foregoing investments above shall mature no later than
the Business Day prior to the Payment Date immediately following the date of
purchase thereof (other than in the case of the investment of monies in
instruments of which the entity at which the related Account is located is the
obligor, which may mature on the related Payment Date), and shall be required to
be held to such maturity; and provided further that each of the Permitted
Investments may be purchased by the Trustee through an Affiliate of the Trustee.
Permitted Investments are only those which are acquired by the Trustee
in its name and in its capacity as Trustee, and with respect to which (a) the
Trustee has noted its interest therein on its books and records, and (b) the
Trustee has purchased such investments for value without notice of any adverse
claim thereto (and, if such investments are securities or other financial assets
or interests therein, within the meaning of Section 8-102 of the UCC, without
acting in collusion with a securities intermediary in violating such securities
intermediary's obligations to entitlement holders in such assets, under Section
8-504 of the UCC, to maintain a sufficient quantity of such assets in favor of
such entitlement holders), and (c) either (i) such investments are in the
possession of the Trustee, or (ii) such investments, (A) if certificated
securities and in bearer form, have been delivered to the Trustee, or in
registered form, have been delivered to the Trustee and either registered by the
issuer in the name of the Trustee or endorsed by effective endorsement to the
Trustee or in blank; (B) if uncertificated securities, the ownership of which
has been registered to the Trustee on the books of the issuer thereof (or
another person, other than a securities intermediary, either becomes the
registered owner of the uncertified security on behalf of the Trustee or, having
previously become the registered owner, acknowledges that it holds for the
Trustee); or (C) if securities entitlements (within the meaning of Section 8-102
of the UCC) representing interests in securities or other financial assets (or
interests therein) held by a securities intermediary (within the meaning of said
Section 8-102), a securities intermediary indicates by book entry that a
security or other financial asset has been credited to the Trustee's
-9-
17
securities account with such securities intermediary. No Permitted Investment
may be purchased at a premium.
"Permitted Sale Receivable" means any Receivable that the Servicer has
determined to be uncollectable.
"Person" means any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agent" means Rothschild Inc.
"Policy" means the Financial Guaranty Insurance Policy issued pursuant
to the Insurance Agreement.
"Pool" means a particular group of Receivables designated as such in
the Schedule of Receivables.
"Premium Letter" means the letter agreement between the Note Insurer
and the Issuer, dated as of the Closing Date.
"Premium Rate" has the meaning assigned to such term in the Premium
Letter.
"Proprietary Information" shall have the meaning specified in Section
6.09.
"Purchase Price" means the amount paid by Seller to purchase a
Receivable.
"Purchaser" means Midland Receivables 98-1 Corporation, in its capacity
as transferee of the Receivables under the Receivables Contribution Agreement.
"Qualified Institutional Buyer" has the meaning assigned to such term
in Rule 144A under the Securities Act.
"Rating Agency" means Standard & Poor's Rating Services, a division of
XxXxxx-Xxxx Companies, Inc.
"Receivable" means any receivable generated under or in connection with
a Consumer Account identified in a Schedule of Receivables delivered by Seller
to Issuer in connection with the Receivables Contribution Agreement.
"Receivable File" means the documents described in Section 2.02
pertaining to a particular Receivable.
"Receivables Contribution Agreement" means the Receivables Contribution
Agreement, dated as of the Closing Date, between the Seller and the Purchaser.
"Record Date" means, with respect to each Payment Date, the last
Business Day of the Collection Period immediately preceding such Payment Date.
Any amount stated "as of a Record Date" or "on a Record Date" shall give effect
to all applications of collections, and all payments
-10-
18
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
to any party under this Agreement or to the related Obligor, as the case may be,
in each case as determined as of the opening of business of the Note Registrar
on the related Record Date.
"Redemption Amount" means, with respect to a redemption of the Notes by
the Issuer pursuant to Section 11.01, an amount equal to the sum of (i) the Note
Balance as of the date the Issuer elects to redeem the Notes, (ii) all accrued
and unpaid interest on the Notes through the end of the Collection Period
immediately preceding the Payment Date as of which such redemption will occur,
and (iii) all outstanding Note Insurer Obligations then due and payable.
"Reimbursement Obligations" means the sum of (i) each payment made
under the Policy and (ii) interest on any payment made under the Policy from the
date of the payment until the date the Note Insurer is repaid, in full and in
cash, at an annual rate equal to the "Prime Rate" (as hereinafter defined) plus
100 basis points (calculated on the basis of the actual number of days elapsed
in a 360 day year). The term "Prime Rate" means the interest rate published in
the "Money Rates" column in The Wall Street Journal and referred to therein as
the "Prime Rate;" any change in such Prime Rate shall correspondingly change the
interest rate as of the date of any such change.
"Remittance Date" means, with respect to any Payment Date, the third
Business Day next preceding such Payment Date.
"Removed Receivable" means a Receivable which the Servicer is obligated
to acquire pursuant to Section 3.04, or which the Issuer is obligated to
reacquire pursuant to Section 2.05 or 7.02, or the Issuer has elected to
reacquire pursuant to Section 11.01.
"Required Rating Agencies" means with respect to any debtor or
indebtedness the Rating Agency and one other Nationally Recognized Statistical
Rating Agency; provided that none of the other such Nationally Recognized
Statistical Rating Agencies has given a lower rating to the relevant debtor or
indebtedness than the Rating Agency and such other Nationally Recognized
Statistical Rating Agency (in which case, for the avoidance of doubt, such other
nationally recognized statistical rating agency giving the lower rating shall be
one of the "Required Rating Agencies").
"Required Reserve Amount" means the amount required to be deposited in
the Reserve Account on the Closing Date and thereafter maintained in the Reserve
Account for so long as the Notes are outstanding, such amount being equal to [*]
"Reserve Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Midland Receivables-Backed Notes, Series 1998-1, Reserve Account."
"Reserve Fund Reimbursement Amount" means, with respect to any Payment
Date, the excess of the Required Reserve Amount over the amount then on deposit
in the Reserve Account.
"Responsible Officer" means,
-11-
19
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
(i) when used with respect to the Trustee, any officer within
the Corporate Trust Office of the Trustee, including any vice
president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's
knowledge of and familiarity with such particular subject, and
(ii) when used with respect to the Issuer or the Servicer, the
president or the chief financial officer of the Issuer or the Servicer,
as the case may be.
"Sale" means any sale of any portion of the Trust Estate.
"Schedule of Receivables" means each Schedule of Receivables containing
a true and complete list of Receivables delivered to the Trustee by the Issuer
in connection with the Receivable Contribution Agreement and incorporated by
reference herein.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Midland Credit Management, Inc., in its capacity as
transferor of the Receivables under the Receivables Contribution Agreement.
"Servicer" means Midland Credit Management, Inc., in its capacity as
servicer of the Receivables pursuant to this Agreement, and each successor
thereto (in the same capacity) appointed pursuant to Section 9.03.
"Servicer Default" shall have the meaning specified in Section 9.01.
"Servicer's Remittance Date Certificate" means an Officer's Certificate
of the Servicer completed and executed pursuant to Section 3.06 and delivered to
the Trustee, in each case specifying Removed Receivables in respect of which the
making of an Acquisition Payment is required hereunder, prepared by the Servicer
as of the opening of business of the Trustee on each applicable Remittance Date.
"Servicing Fee" means the fee payable to the Servicer on each Payment
Date, calculated pursuant to Section 3.05, for services rendered during the
related Collection Period, which shall be, for any Payment Date, equal to [*]
The term "Servicing Fee" shall also mean the additional amounts payable to a
Successor Servicer for servicing pursuant to Section 9.03, but only to the
extent such amounts do not exceed the amount calculated in accordance with the
preceding sentence; all amounts in excess thereof are herein called the
"Additional Servicing Fee".
"Subservicers" shall have the meaning specified in Section 9.07.
"Successor Servicer" means any entity appointed as a successor to the
Servicer pursuant to Section 9.03.
-12-
20
"Third-Party Fees" means, with respect to a Receivable and any
Collection Period, the amount of any fees or compensation paid or owed to
unrelated third-parties (generally, contingency fee lawyers) retained or
otherwise engaged by the Servicer under fee or compensation arrangements that
are contingent upon, and determined by reference to, amounts recovered in
respect of the related Receivable.
"Transaction Documents" means, collectively, this Agreement, the
Receivables Contribution Agreement, the Schedule of Receivables, the Notes, the
Policy, the Insurance Agreement, the Premium Letter, and each of the other
documents, instruments and agreements entered into in connection with any of the
foregoing or the transactions contemplated thereby.
"Transfer" shall have the meaning specified in Section 6.03(g). It is
expressly provided that the term "Transfer" in the context of the Notes
includes, without limitation, any distribution of the Notes by (i) a corporation
to its shareholders, (ii) a partnership to its partners, (iii) a limited
liability company to its members, (iv) a trust to its beneficiaries or (v) any
other business entity to the owners of the beneficial interests in such entity.
"Transferee Certificate" means a certificate in the form of Exhibit D-2
or D-3.
"Transition Fees" shall have the meaning specified in Section 9.02.
"Trust" means the trust created by this Agreement.
"Trust Estate" or "Midland Receivables-Backed Notes, Series 1998-1
Trust Estate" means the trust estate established under this Agreement for, the
benefit of the Noteholders and the Note Insurer, which consists of the property
described in Section 2.01(b).
"Trust Property" means the property, or interests in property,
constituting the Trust Estate from time to time.
"Trustee" means Norwest Bank Minnesota, National Association, and any
successor trustee appointed pursuant to Section 10.11.
"Trustee Fee" means the fee payable to the Trustee on each Payment Date
for services rendered under this Agreement, which shall be equal to the greater
of $250 per month or an amount per month equal to one-twelfth of three and
one/half basis points (.035%) per annum times the average daily Note Balance.
"Trustee's Certificate" means a certificate completed and executed by a
Responsible Officer of the Trustee pursuant to Section 10.02 or 10.03,
substantially in the form attached hereto as Exhibit B.
"UCC" means the Uniform Commercial Code as in effect in the State of
Kansas.
"United States" means the United States of America.
-13-
21
"Vice President" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President," who is a duly elected officer of such Person.
"Voting Interests" means the aggregate voting power evidenced by the
Notes,; corresponding to the outstanding Note Balance of the Notes held by
individual Noteholders; provided, however, that where the Voting Interests are
relevant in determining whether the vote of the requisite percentage of
Noteholders necessary to effect any consent, waiver, request or demand shall
have been obtained, the Voting Interests shall be deemed to be reduced by the
amount equal to the Voting Interests (without giving effect to this provision)
represented by the interests evidenced by any Note registered in the name of, or
in the name of a Person or entity holding for the benefit of, the Issuer, the
Servicer or any Person actually known to a Responsible Officer of the Trustee to
be an Affiliate of either or both of the Issuer and the Servicer.
SECTION 1.02 INTERPRETATION.
Unless otherwise indicated in this Agreement:
(a) reference to and the definition of any document (including this
Agreement) shall be deemed a reference to such document as it may be amended or
modified from time to time;
(b) all references to an "Article," "Section," "Schedule" or "Exhibit"
are to an Article or Section hereof or to a Schedule or an Exhibit attached
hereto;
(c) defined terms in the singular shall include the plural and vice
versa, and the masculine, feminine or neuter gender shall include all genders;
(d) the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement;
(e) in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding";
(f) periods of days referred to in this Agreement shall be counted in
calendar days unless Business Days are expressly prescribed and references in
this Agreement to months and years shall be to calendar months and calendar
years unless otherwise specified;
(g) accounting terms not otherwise defined herein and accounting terms
partly defined herein to the extent not defined, shall have the respective
meanings given to them under GAAP; and
(h) the headings in this Agreement are for the purpose of reference
only and do not limit or affect its meaning.
-14-
22
ARTICLE II
CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES
REPRESENTATIONS REGARDING RECEIVABLES; DISCHARGE
SECTION 2.01 CREATION OF TRUST ESTATE.
(a) Upon the execution of this Agreement by the parties hereto, there
is hereby created for the benefit of the Noteholders and the Note Insurer the
Midland Receivables-Backed Notes, Series 1998-1 Trust Estate. The Issuer,
pursuant to the mutually agreed upon terms contained in this Agreement, hereby
grants a security interest to the Trustee on behalf of the Noteholders and the
Note Insurer, in all of its right, title and interest in and to the Trust
Estate, including, without limitation, Receivables and any proceeds related
thereto, and such other items as shall be specified in this Agreement.
(b) In consideration of the Trustee's delivery to the Issuer of
authenticated Notes, in authorized denominations, in an aggregate amount equal
to the Original Note Balance, the Issuer does hereby grant a security interest
to the Trustee, in trust for the benefit of the Noteholders and the Note
Insurer, all pursuant to the terms of this Agreement, in the following property
and rights in property, whether now owned or existing or hereafter acquired or
arising, whether tangible or intangible, and wheresoever located:
(i) all right, title and interest of the Issuer in and to the
Receivables and all monies due thereon or paid thereunder or in respect
thereof (including, without limitation, any fees and charges paid by
Obligors and any proceeds of any Sales) on and after the Closing Date
(including any Acquisition Payments made with respect to Removed
Receivables reacquired by the Issuer pursuant to Section 2.05 or 7.02
or Removed Receivables acquired by the Servicer pursuant to Section
3.04), net of any Third-Party Fees;
(ii) the rights of the Issuer as Purchaser under the
Receivables Contribution Agreement to enforce the obligations of the
Seller thereunder;
(iii) the Collection Account, the Note Payment Account and the
Reserve Account, and all monies, "securities," "instruments,"
"accounts" "general intangibles," "chattel paper," "financial assets,"
"investment property" (the terms in quotations are defined in the UCC)
and other property on deposit or credited to the Collection Account,
the Note Payment Account, and the Reserve Account from time to time
(whether or not constituting or derived from payments, collections or
recoveries received, made or realized in respect of the Receivables);
(iv) all right, title and interest of the purchaser in, to and
under each Asset Sale Agreement, and all related documents, instruments
and agreements pursuant to which the Seller acquired, or acquired an
interest in, any of the Receivables from an Originating Institution;
(v) all payments due under the Policy;
-15-
23
(vi) all books, records and documents relating to the
Receivables in any medium, including without limitation paper, tapes,
disks and other electronic media;
(vii) all other monies, securities, reserves and other
property now or at any time in the possession of the Trustee or its
bailee, agent or custodian and relating to any of the foregoing; and
(viii) all proceeds, products, rents and profits of any of the
foregoing and all other amounts payable in respect of the foregoing;
including, without limitation, proceeds of insurance policies insuring
any of the foregoing or any indemnity or warranty payable by reason of
loss or damage to or otherwise in respect of any of the foregoing.
(c) The parties hereto intend that the security interest granted under
this Agreement shall give the Trustee on behalf of the Noteholders and the Note
Insurer a first priority perfected security interest in, to and under the
Receivables, and all other property described in this Section 2.01 as a part of
the Trust Estate and all proceeds of any of the foregoing in order to secure the
Note Insurer obligations and the obligations of the Issuer to the Trustee, the
Noteholders and the Note Insurer under the Notes, this Agreement, the Insurance
Agreement and all of the other Transaction Documents. The Trustee on behalf of
the Noteholders and the Note Insurer shall have all the rights, powers and
privileges of a secured party under the UCC. The Issuer agrees to execute and
file all filings (including filings under the UCC) and take all other actions
reasonably necessary in any jurisdiction to provide third parties with notice of
the security interest granted pursuant to this Agreement and to perfect such
security interest under the UCC.
(d) The Issuer shall ensure that from and after the time of the grant
of the security interest in this Trust Estate, the master computer records
(including any back-up archives) maintained by or on behalf of the Issuer that
refer to any Receivable indicate clearly the interest in the Receivables and
that the Receivables is subject to a security interest in favor of the Trustee.
Indication of the interest of the Trustee in a Receivable shall be deleted from
or modified on such computer records when, and only when, the Receivable has
been paid in full or has been acquired, assigned or released pursuant to this
Agreement.
SECTION 2.02 CUSTODY OF RECEIVABLE FILES.
In order to assure uniform quality in servicing the Receivables and to
reduce administrative costs, the Trustee on behalf of the Noteholders and the
Note Insurer, upon the execution and delivery of this Agreement, revocably
appoints the Servicer, and the Servicer accepts such appointment, to act as the
agent of the Trustee as custodian of the following documents to each Receivable:
(i) the related Asset Sale Agreement;
(ii) any other documents received from or made available by
the related Originating Institution in respect of such Receivable;
-16-
24
(iii) a copy of the marked computer records indicating the
interest of the Trustee on behalf of the Noteholders and the Note
Insurer, as evidenced by the Schedule of Receivables; and
(iv) any and all other documents that the Issuer or the
Servicer, as the case may be, shall keep on file, in accordance with
its customary procedures, relating to such Receivable or the related
Obligor.
SECTION 2.03 ACCEPTANCE BY TRUSTEE.
The Trustee hereby acknowledges its acceptance, on behalf of the
Noteholders and the Note Insurer, pursuant to this Agreement, of the security
interest in and to the Receivables and the other Trust Property granted by the
Issuer pursuant to this Agreement, and declares and shall declare from and after
the date hereof that the Trustee, on behalf of the Noteholders and the Note
Insurer, holds and shall hold such Trust Property, pursuant to the trusts set
forth in this Agreement.
SECTION 2.04 REPRESENTATIONS AND WARRANTIES OF ISSUER AS TO THE
RECEIVABLES.
The Issuer does hereby make the following representations and
warranties as of the Closing Date on which (i) the Trustee is relying in
accepting the Receivables and the other Trust Property and authenticating the
Notes; (ii) the Noteholders are relying in purchasing the Notes; (iii) the Note
Insurer is relying in issuing the Policy; and (iv) the Rating Agency is relying
in providing its rating of the Notes.
(a) Characteristics of Receivables. Each such Receivable is payable in
United States dollars, has been purchased by Midland Credit Management, Inc.
from the related Originating Institution under an Asset Sale Agreement with such
Originating Institution in accordance with the Customary Procedures of Midland
Credit Management, Inc., and has been subsequently transferred, assigned and
conveyed by the Seller to the Issuer pursuant to the Receivables Contribution
Agreement.
(b) Schedule of Receivables. The information set forth in the Schedule
of Receivables is true and correct in all material respects as of the close of
business on the Cut-Off Date, and the Issuer owned no other Receivables as of
the Cut-Off Date.
(c) No Government Obligors. None of the Receivables are due from the
United States or any state or local government, or from any agency, department
or instrumentality of the United States or any state or local government.
(d) Employee Obligors. None of the Receivables are due from any
employee of the Seller, the Issuer or any of their respective Affiliates.
(e) Good Title. No Receivable has been transferred, assigned, conveyed
or pledged by the Issuer to any Person other than the Trustee. The Issuer has
good and marketable title to each Receivable, free and clear of all Liens and
rights of others; the Trustee on behalf of the
-17-
25
Noteholders and the Note Insurer has a first priority perfected security
interest in, each Receivable, free and clear of all Liens and rights of others;
and such security interest has been perfected under the UCC and any other
applicable law.
(f) No Impairment of Rights. As of the Closing Date, the Issuer has not
taken any action that, or failed to take any action the omission of which, would
impair the rights of the Trustee or the Noteholders or the Note Insurer with
respect to any such Receivable; provided, however, that the writing down of any
Receivable balance in accordance with Customary Procedures shall not be deemed
an impairment of the rights of any of the Trustee, the Noteholders or the Note
Insurer.
(g) No Fraudulent Use. As of the Closing Date, no Receivable has been
identified by the Issuer or reported to the Issuer by the related Originating
Institution as having resulted from fraud perpetrated by any Person with respect
to the related account.
(h) All Filings Made. All filings (including UCC filings) necessary in
any jurisdiction to provide third parties with notice of the transfer and
assignment herein contemplated, and to give the Trustee on behalf of the
Noteholders and the Note Insurer a first priority perfected security interest in
the Receivables shall have been made.
(i) UCC Status. No Receivable is secured by "real property" or
"fixtures" or evidenced by an "instrument" under and as defined in the UCC.
(j) Location of Receivable Files. As of the Closing Date, each
Receivable File is kept by the Servicer at its offices at 000 Xxxx Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxx 00000, or such other address permitted pursuant to Section
2.06(b).
SECTION 2.05 REACQUISITION OF RECEIVABLES UPON BREACH.
(a) Upon discovery by the Issuer or the Servicer or upon the actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
representations and warranties of the Issuer set forth in Section 2.04, the
party discovering such breach shall give prompt written notice to the others.
If, as a result of such breach, any Receivable is rendered uncollectible or the
Trustee's rights in, to or under such Receivable or the proceeds thereof are
materially impaired or such proceeds are not available for any reason to the
Trustee free and clear of any Lien, then (i) the Issuer shall repay a portion of
the Note Balance equal to the Acquisition Payment related to such Receivable or
(ii) if the Seller has the right to demand, or is obligated to accept,
substitution of Receivables of equal or greater value from the Originating
Institution (the "Substitute Receivables") of the affected Receivables upon such
a breach under the applicable Asset Sale Agreement, and the Seller has
contributed (or simultaneously with the removal of the Receivables affected by
such breach, will contribute) such Substitute Receivables to the Issuer pursuant
to the Receivables Contribution Agreement, the Issuer shall cause Substitute
Receivables to become subject to this lien under this Indenture; and, in each
case, if necessary, the Issuer shall enforce the obligation of the Seller under
the Receivables Contribution Agreement to reacquire such Receivable from the
Issuer, unless such breach shall have been cured within 30 days after the
earlier to occur of the discovery of such breach by the Issuer or receipt of
written notice of such breach by the Issuer, such that the relevant
representation and warranty shall be true and correct in all material respects
as if made on such day, and the Issuer
-18-
26
shall have delivered to the Trustee, the Note Insurer and each Noteholder an
Officer's Certificate describing the nature of such breach and the manner in
which the relevant representation and warranty became true and correct. This
reacquisition or substitution obligation shall pertain to all representations
and warranties of the Issuer contained in Section 2.04, whether or not the
Issuer has knowledge of the breach at the time of the breach or at the time the
representations and warranties were made. The Issuer will be obligated to the
accept any reassignment of a Receivable as set forth above on the Remittance
Date following the date on which such reassignment obligation arises. In
consideration of the reacquisition of any such Receivable, on the Remittance
Date immediately following the date on which such reassignment obligation
arises, the Issuer shall remit the Acquisition Payment of such Receivable to the
Collection Account in the manner specified in Section 4.03 or shall cause
Substitution Receivables to become a part of the Trust Property hereunder.
(b) Upon any such reacquisition or substitution, the Trustee on behalf
of the Noteholders and the Note Insurer shall, without further action, be deemed
to release its security interest in, to and under the Removed Receivable so
reacquired, all monies due or to become due with respect thereto after the
aforementioned Remittance Date and all proceeds thereof. The Trustee shall
execute such documents and instruments of release and take such other actions as
shall be reasonably requested by the Issuer to effect the security interest
release pursuant to this Section. The sole remedies of the Trustee, the
Noteholders and the Note Insurer with respect to a breach of the Issuer's
representations and warranties pursuant to Section 2.04 shall be to require the
Issuer to reacquire the related Receivable pursuant to this Section and to
enforce the Issuer's obligation hereunder to enforce the obligation of the
Seller under the Receivables Contribution Agreement to reacquire such Receivable
from the Issuer. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the reacquisition
of any Receivable pursuant to this Section, except as otherwise provided in
10.02.
SECTION 2.06 DUTIES OF SERVICER AS CUSTODIAN.
(a) Safekeeping. The Servicer, in its capacity as custodian, shall hold
the Receivable Files in its possession from time to time on behalf of the
Trustee for the use and benefit of the Note Insurer and all present and future
Noteholders, and maintain such accurate and complete accounts, records and
computer systems pertaining to each Receivable File as shall enable the Trustee
to comply with this Agreement. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of skill and
attention that it exercises with respect to the receivable files of comparable
defaulted receivables that the Servicer services for itself or others. The
Servicer shall conduct, or cause to be conducted, periodic examinations of the
files of receivables owned or serviced by it, which shall include the Receivable
Files held by it under this Agreement, and of the related accounts, records and
computer systems, in such a manner as shall enable the Trustee to verify the
accuracy of the Servicer's record keeping; provided however, that the Trustee
shall be under no obligation to verify the accuracy of the Servicer's
record-keeping unless requested to do so in writing by the Note Insurer, the
Noteholders with Voting Interest in excess of 50% or the Rating Agency. Any such
written request shall specify in detail the procedures to be employed by the
Trustee. The Servicer shall promptly report to the Trustee any failure on its
part to hold the Receivable Files and maintain its accounts, records and
-19-
27
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at its offices at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx
00000, or at such other office as shall be specified to the Trustee and the Note
Insurer by 30 days' prior written notice, provided that the Servicer shall have
taken all actions necessary or reasonably requested by the Trustee or the Note
Insurer to amend any existing financing statements and continuation statements,
and file additional financing statements and any other steps reasonably
requested by the Trustee or the Note Insurer to further perfect or evidence the
rights, claims or security interests of any of the Trustee or the Note Insurer
under any of the Transaction Documents. The Servicer shall make available to the
Trustee, the Note Insurer and the Noteholders or their duly authorized
representatives, attorneys or auditors the Receivable Files and the accounts,
records and computer systems maintained by the Servicer with respect thereto
upon not less than two Business Days prior written notice for examination during
normal business hours; provided, however, that the Noteholders will only be
entitled to the access provided in this subclause (b) in the event of a Servicer
Default.
(c) Release of Documents. Upon written instruction from the Trustee,
the Servicer shall release any document in the Receivable Files to the Trustee
or its agent or designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable. Nothing in this Section shall
impair the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, which obligation shall be
evidenced by an Opinion of Counsel to such effect, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. The Servicer shall not
be responsible for any loss occasioned by the failure of the Trustee to return
any document or any delay in doing so.
SECTION 2.07 INSTRUCTIONS; AUTHORITY TO ACT.
The Servicer shall be deemed to have received proper instructions with
respect to the Receivable Files upon its receipt of written instructions signed
by a Responsible Officer of the Trustee. A certified copy of a bylaw or of a
resolution of the board of directors of the Trustee shall constitute conclusive
evidence of the authority of any such Responsible Officer to act and shall be
considered in full force and effect until receipt by the Servicer of written
notice to the contrary given by the Trustee.
SECTION 2.08 INDEMNIFICATION OF CUSTODIAN.
The Servicer, as custodian of the Receivable Files, shall indemnify the
Trustee for any and all liabilities, obligations, losses, compensatory damages,
payments, costs or expenses of any kind whatsoever (including reasonable
attorney's fees and expenses incurred in connection with defending against any
such claim) that may be imposed on, incurred or asserted against the Trustee as
the result of any improper act or omission in any way relating to the
maintenance and custody of the Receivable Files by the Servicer, as custodian;
provided, however, that the
-20-
28
Servicer shall not be liable for any portion of any such amount resulting from
the willful misfeasance, bad faith or gross negligence of the Trustee.
SECTION 2.09 EFFECTIVE PERIOD AND TERMINATION.
The Servicer's appointment as custodian of the Receivable Files shall
become effective as of the Closing Date and shall continue in full force and
effect so long as it is the Servicer under this Agreement. If the Servicer shall
resign as Servicer pursuant to Section 8.05 or if all of the rights and
obligations of the Servicer have been terminated pursuant to Section 9.02, the
appointment of the Servicer as custodian of the Receivable Files shall
immediately terminate. As soon as practicable after any termination of such
appointment, the Servicer shall deliver the Receivable Files to the Trustee or
its agent at such place or places as the Trustee may reasonably designate.
SECTION 2.10 AGENT FOR SERVICE.
The agent for service for the Issuer shall be its President whose
address is 00 Xxxxxxxxxxx, Xxxxxxxxxx, Xxxxxx 00000, and the agent for service
for the Servicer shall be its President whose address is 000 Xxxx Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxx 00000.
SECTION 2.11 SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(a) an amount sufficient to pay and discharge the outstanding Note
Balance, plus accrued and unpaid interest on the Notes, has been paid to the
Noteholders;
(b) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer;
(c) the Issuer has paid or caused to be paid all Note Insurer
Obligations then outstanding to the Note Insurer;
(d) the obligation of the Note Insurer under the Policy shall have been
terminated; and
(e) the Issuer has delivered to the Trustee an Officers' Certificate of
the Issuer and an Opinion of Counsel each stating that all conditions precedent
herein provided for the satisfaction and discharge of this Agreement with
respect to the Notes and the Policy have been complied with;
then this Agreement and the lien, rights and interests created hereby shall
cease to be of further effect with respect to the Notes, and the Trustee shall,
at the expense of the Issuer, (i) execute and deliver all such instruments as
may be necessary to acknowledge the satisfaction and discharge of this Agreement
with respect to the Notes, (ii) pay, or assign or transfer and deliver, to the
Issuer, all cash, securities and other property held by it as part of the Trust
Estate or other assets remaining after satisfaction of the conditions specified
in clauses (a), (b) and (c) above,
-21-
29
and (iii) arrange for the cancellation, surrender and termination of the Policy
pursuant to the terms thereof and of the Insurance Agreement.
Notwithstanding the satisfaction and discharge of this Agreement with
respect to the Notes, the obligations of the Issuer to the Trustee under Section
10.07, the obligations of the Trustee to the Issuer, the Servicer and to the
Noteholders and the Note Insurer under Section 4.04, the obligations of the
Trustee to the Noteholders and the Note Insurer under Section 4.07, and rights
to receive payments of principal of and interest on the Notes, and payment of
Note Insurer Obligations, and the rights, privileges and immunities of the
Trustee under Article X, shall survive.
SECTION 2.12 APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Sections 4.02 and 4.03
shall be held in trust and applied by it, in accordance with the provisions of
the Notes, the Insurance Agreement and this Agreement to the payment to the
Persons entitled thereto, of the principal, interest, fees, costs and expenses
for whose payment such money has been deposited with the Trustee.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01 DUTIES OF SERVICER.
(a) The Servicer, as agent for the Trustee, shall manage, service,
administer and make collections on and in respect of the Receivables with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable defaulted consumer receivables that it
services for itself or others (whether or not the Servicer shall then be
servicing comparable defaulted consumer receivables for itself or others). The
Servicer's duties shall include collecting and posting all payments, responding
to inquiries of Obligors or by federal, state or local government authorities
with respect to the Receivables, investigating delinquencies, implementation of
payment plans, sending payment information to Obligors, reporting tax
information to Obligors in accordance with its customary practices, accounting
for collections, publishing monthly and annual statements to the Trustee with
respect to payments, generating federal income tax information and performing
the other duties specified herein. In performing the above-referenced services,
the Servicer shall perform in accordance with Customary Procedures and shall
have full power and authority, acting alone, to do any and all things in
connection with such managing, servicing, administration and collection that it
may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer shall be
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trustee, the Noteholders, the Note Insurer, or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge and all other comparable instruments, with respect to the
Receivables. To the extent not prohibited by applicable law, the Servicer is
hereby authorized to commence, in its own name or in the name of the Issuer or
the Trustee, a legal proceeding to enforce a Receivable or to commence or
participate in a legal proceeding (including without limitation a bankruptcy
-22-
30
proceeding) relating to or involving a Receivable. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trustee and the
Issuer shall thereupon be deemed to have automatically assigned, solely for the
purpose of collection on behalf of the party retaining an interest in such
Receivable, such Receivable and the other property conveyed as part of the Trust
Estate pursuant to Section 2.01 with respect to such Receivable to the Servicer
for purposes of commencing or participating in any such proceeding as a party or
claimant, and the Servicer is authorized and empowered by the Trustee and the
Issuer to execute and deliver in the Servicer's name any notices, demands,
claims, complaints, responses, affidavits or other documents or instruments in
connection with any such proceeding (to the fullest extent permitted by
applicable law). If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the grounds that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Trustee on behalf of the Noteholders and the Note Insurer shall, at the
Servicer's expense and written direction, take reasonable steps to enforce such
Receivable. To the extent an assignment is prohibited, prior consent by the
Trustee is hereby given to Servicer authorizing the forwarding of Receivables to
legal counsel (selected by Servicer) for the purpose of commencing legal
proceedings on behalf of the Issuer or the Trustee. It being understood by
Servicer that nothing contained herein will permit or allow Servicer to control
or interfere with the relationship between counsel, Issuer or the Trustee, but
Servicer is hereby authorized on behalf of the Issuer or the Trustee to receive
and convey information and instructions in order to facilitate and coordinate
the collection of forwarded Receivables. The Servicer shall deposit or cause to
be deposited into the Collection Account, within one Business Day of its receipt
thereof, all Net Proceeds realized in connection with any such action pursuant
to Section 4.02. The Trustee and the Issuer shall furnish the Servicer with any
powers of attorney and other documents and take any other steps which the
Servicer may deem reasonably necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement.
SECTION 3.02 COLLECTION OF RECEIVABLE PAYMENTS.
The Servicer shall make reasonable efforts to collect all payments due
and payable in connection with the Receivables, and shall at all times follow
the Customary Procedures in so doing. The Servicer shall be authorized to write
down the balance of any Receivable in accordance with the Customary Procedures
without the prior consent of the Trustee; provided however, that such write-down
will not affect the rights of the Noteholders or the Note Insurer to any amounts
thereafter collected with respect to such Receivable. The Servicer may, in
accordance with the Customary Procedures, waive any charges or fees that
otherwise may be collected in the ordinary course of servicing the Receivables.
SECTION 3.03 COVENANTS OF SERVICER.
The Servicer hereby makes the following covenants with respect to each
Receivable on which the Trustee is relying in accepting the Receivables in trust
and authenticating the Notes:
(a) Fulfillment of Obligations. The Servicer shall duly
fulfill all obligations on its part to be fulfilled
pursuant to this Indenture under or in connection
with the Receivables, shall perform such
-23-
31
obligations in accordance with the Customary
Procedures, and shall maintain in effect all licenses
and qualifications required in order to service the
Receivables and shall comply in all respects with all
other requirements of law in connection with
servicing the Receivables, the failure to comply with
which would have a material adverse effect on the
rights or interests of the Noteholders or the Note
Insurer.
(b) No Rescission or Cancellation. The Servicer shall not
permit any rescission or cancellation of the
Receivables except as ordered by a court of competent
jurisdiction or other governmental authority;
provided, however, that the writing down of the
Receivables balance in accordance with Customary
Procedures shall not be deemed a rescission or
cancellation of such Receivables.
(c) No Impairment. The Servicer shall not take or fail to
take any action in breach of this Indenture that
would impair the rights of the Trustee, the Trust
Estate, the Noteholders or the Note Insurer with
respect to the Receivables; provided, however, that
the writing down of the Receivables balance in
accordance with Customary Procedures shall not be
deemed an impairment of the rights of the Trustee,
the Noteholders or the Note Insurer. The Servicer
shall not engage in any pattern of conduct under
which it intentionally elects (i) to write down a
Receivables balance from an Obligor rather than
writing down amounts due from the same Obligor which
are not a part of the Receivables or (ii) to apply a
payment received from an Obligor to a Consumer
Account which is not a Receivable rather than to a
Receivable (unless expressly instructed to do so by
the Obligor), if the Servicer has actual knowledge
that such write-downs or payment applications
discriminate against the Noteholders, or with
knowledge that the effect of such intentional
election is to discriminate against the Noteholders.
(d) No Instruments. Except in connection with its
enforcement or collection of the Receivables, the
Servicer shall take no action to cause any
Receivables to be evidenced by any instruments (as
defined in the UCC) and if any Receivable is so
evidenced (whether or not in connection with such
enforcement or collection), it shall be assigned to
the Servicer as provided in Section 3.04.
-24-
32
SECTION 3.04 PURCHASE OF RECEIVABLES UPON BREACH AND OTHER EVENTS.
Upon discovery by the Issuer or the Servicer or upon the actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
covenants of the Servicer set forth in Section 3.03 that materially and
adversely affects the rights or interests of the Noteholders or the Note
Insurer, the party discovering such breach shall give prompt written notice to
the others. If, as a result of such breach, any Receivables are rendered
uncollectible or the Trustee's rights in, to or under such Receivables or the
proceeds thereof are materially impaired or such proceeds are not available for
any reason to the Trustee free and clear of any Lien, the Servicer shall acquire
from the Issuer such Receivables, unless such breach shall have been cured
within thirty (30) days after the earlier to occur of the discovery of such
breach by the Servicer or receipt of written notice of such breach by the
Servicer, such that the relevant covenant shall be true and correct in all
material respects as if made on such day, and the Servicer shall have delivered
to the Trustee a certificate of a Responsible Officer of the Servicer describing
the nature of such breach and the manner in which the relevant covenant became
true and correct. The Servicer will be obligated to accept the assignment of
such Receivables as set forth above on the Remittance Date following the date on
which such assignment obligation arises. In consideration of the acquisition of
any such Receivables, on the Remittance Date immediately following the date on
which such acquisition obligation arises, the Servicer shall remit the
Acquisition Payment of such Receivables to the Collection Account in the manner
specified in Section 4.03. Upon any such acquisition, and the remitting of the
Release Payment to the Collection Account, the Trustee on behalf of the
Noteholders and the Note Insurer shall, without further action, be deemed to
have released its security interest in, to and under such Removed Receivables,
all monies due or to become due with respect thereto after the aforementioned
Remittance Date and all proceeds thereof. The Trustee shall execute such
documents and take such other actions as shall be reasonably requested by the
Servicer to further evidence such release. The sole remedy of the Trustee, the
Noteholders and the Note Insurer with respect to a breach pursuant to Section
3.03 shall be to require the Servicer to acquire the related Receivables
pursuant to this Section, except as otherwise provided in Section 8.02, 9.01 or
9.08. The Trustee shall have no duty to conduct any affirmative investigation as
to the occurrence of any condition requiring the acquisition of any Receivable
pursuant to this Section except as otherwise provided in Section 10.02.
SECTION 3.05 SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER.
As compensation for the performance of its obligations hereunder, the
Servicer shall be entitled to receive on each Payment Date the Servicing Fee as
provided in Section 4.04. Except to the extent otherwise provided herein, the
Servicer shall be required to pay from its servicing compensation all expenses
incurred in connection with servicing the Receivables including, without
limitation, recovery and collection expenses related to the enforcement of the
Receivables (other than those specified in the following proviso), payment of
the fees and disbursements of the Rating Agency and independent accountants and
all other fees and expenses that are not expressly stated in this Agreement to
be payable by the Trustee, the Noteholders, the Note Insurer or the Issuer;
provided, however, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trustee, the Noteholders or the Note Insurer
-25-
33
arising under any tax law, including without limitation any federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith), except as otherwise expressly provided in this
Agreement.
SECTION 3.06 MONTHLY SERVICER REPORT; SERVICER'S REMITTANCE DATE
CERTIFICATE.
(a) On or before 11:00 a.m. New York, New York time on each
Determination Date, the Servicer shall deliver to the Trustee and to the Note
Insurer a Monthly Servicer Report executed by a Responsible Officer of the
Servicer substantially in the form attached hereto as Exhibit A, including a
CD-ROM or computer tape listing all Receivables subject to this Agreement at the
end of such Collection Period (and setting forth such additional information as
requested by the Trustee, the Note Insurer, the Rating Agency or any Noteholder
from time to time, which information the Servicer is able to reasonably provide)
containing all information necessary to make the payments required by Section
4.04 in respect of the Collection Period and Interest Distribution Period
immediately preceding the date of such Monthly Servicer Report and all
information necessary for the Trustee to send statements to Noteholders and the
Note Insurer pursuant to Section 4.07(a).
(b) On or before 11:00 a.m. New York, New York time on each Remittance
Date on which the Issuer or the Servicer, as applicable, shall be obligated
hereunder to acquire a Removed Receivable, the Servicer shall deliver to the
Trustee and the Note Insurer a Servicer's Remittance Date Certificate
identifying each such Removed Receivable acquired by reference to the related
Obligor's account number (as specified in the Schedule of Receivables), and the
amount of the Acquisition Payment with respect thereto.
SECTION 3.07 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Note Insurer and the Trustee, on
or before March 1 of each calendar year, beginning in March 2000, an Officer's
Certificate executed by the chief financial officer of the Servicer, stating
that (i) a review of the activities of the Servicer during the preceding
12-month period ended December 31 (or, in the case of the first such statement,
from the Closing Date through December 31, 1999) and of its performance under
this Agreement has been made under the supervision of the officer executing the
Officer's Certificate, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement in
all material respects 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 Note Insurer and the Trustee,
promptly after having obtained knowledge thereof, but in no event later than
three Business Days thereafter, an Officer's Certificate specifying the nature
and status of any Servicer Default or Event of Default, or other occurrence
which would have a material adverse effect on the rights or interests of the
Note Insurer.
-26-
34
SECTION 3.08 PERIODIC ACCOUNTANTS REPORT.
The Servicer, at its own expense, shall cause Ernst & Young LLP or
another firm of nationally recognized independent public accountants acceptable
to the Note Insurer (who may also render other services to the Servicer or to
the Issuer) to deliver to the Note Insurer and Trustee a report of agreed upon
procedures acceptable to the Controlling Party with respect to the Servicer's
accounting for matters regarding the Trust Estate including cash receipts,
account posting and remittances to the Accounts during the preceding reporting
period. The first reporting period is from the Closing Date through January 31,
1999, and each subsequent reporting period is each subsequent month thereafter
through April 30, 1999, and thereafter the reporting period shall be each
subsequent calendar quarter commencing June 30, 1999, unless any report is not
reasonably acceptable to the Note Insurer then such shorter or longer time as
the Note Insurer shall determine from time to time by written notice to the
Servicer (with a copy to the Trustee). Each such report must be delivered within
forty-five (45) days after the end of each reporting period. Such report shall
also indicate that the firm is independent with respect to the Issuer and the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants. In the event such independent public
accountants require the Trustee to agree to the procedures to be performed by
such firm in any of the reports required to be prepared pursuant to this Section
3.08, the Servicer shall direct the Trustee in writing to so agree; it being
understood and agreed that the Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Trustee has not
made any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
SECTION 3.09 QUARTERLY SERVICER'S COMPLIANCE REPORT.
The Servicer, at its own expense, shall cause Ernst & Young LLP or
another firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or to the Issuer) to deliver to the
Trustee and the Note Insurer, within thirty days after the end of each calendar
quarter of each year, beginning with the calendar quarter ending in March of
1999, a report concerning the activities of the Servicer during the preceding
calendar quarter to the effect that such accountants have performed agreed-upon
procedures acceptable to the Controlling Party with respect to each of the
Monthly Servicer Reports for the period under review. The report should specify
the procedures performed on such Monthly Servicer Reports (which procedures
should include recalculating all calculations contained in such Monthly Servicer
Reports and taking other pertinent information from supporting schedules of the
Servicer) and any exceptions, if any, shall be set forth therein. Such report
shall also indicate that the firm is independent with respect to the Issuer and
the Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants. In the event such
independent public accountants require the Trustee to agree to the procedures to
be performed by such firm in any of the reports required to be prepared pursuant
to this Section 3.09, the Servicer shall direct the Trustee in writing to so
agree; it being understood and agreed that the Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Trustee has not made any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
-27-
35
SECTION 3.10 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION.
The Servicer shall provide the Note Insurer, the Trustee and the
Noteholders with access to the documentation relating to the Receivables as
provided in Section 2.06(b). In each case, access to documentation relating to
the Receivables shall be afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. Nothing
in this Section shall impair the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors,
which obligation shall be evidenced by an Opinion of Counsel to such effect, and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.
SECTION 3.11 REPORTS TO NOTEHOLDERS, THE RATING AGENCY AND THE
PLACEMENT AGENT.
The Trustee shall provide to the Note Insurer, each Noteholder, the
Rating Agency and the Placement Agent a copy of each (i) Servicer's Remittance
Date Certificate, (ii) Monthly Servicer Report, (iii) Officer's Certificate of
annual statement as to compliance described in Section 3.07(a), (iv) Officer's
Certificate with respect to Servicer Defaults and Events of Default, described
in Section 3.07(b), (v) accountants' report described in Section 3.08, (vi)
accountants' report described in Section 3.09, and (vii) Trustee's Certificate
delivered pursuant to Section 10.02 or 10.03.
SECTION 3.12 TAX TREATMENT.
Notwithstanding anything to the contrary set forth herein, the Issuer
has entered into this Agreement with the intention that for federal, state and
local income and franchise tax purposes (i) the Notes, which are characterized
as indebtedness at the time of their issuance, will qualify as indebtedness
secured by the Receivables and (ii) neither the Trust nor the Trust Estate shall
be treated as an association or publicly traded partnership taxable as a
corporation. The Issuer, by entering into this Agreement, each Noteholder, by
its acceptance of a Note and each purchaser of a beneficial interest therein, by
accepting such beneficial interest, agree to treat such Notes as debt for
federal, state and local income and franchise tax purposes. The Trustee shall
treat the Trust Estate as a security device only, and shall not file tax returns
or obtain an employer identification number on behalf of the Trust Estate. The
provisions of this Agreement shall be construed in furtherance of the foregoing
intended tax treatment.
Notwithstanding the foregoing, if the Trust is required to be
recognized as a partnership for federal or state income tax purposes, including
by reason of a determination by the Internal Revenue Service or any other taxing
authority that the Trust constitutes a partnership for income tax purposes, the
Issuer and the Noteholders agree that payments made to the Noteholders pursuant
to Section 4.04(b)(iv) shall be treated as "guaranteed payments" (within the
meaning of Section 707(c) of the Code) and all remaining taxable income or loss
and any separably allocable items thereof shall be allocated to the Issuer.
-28-
36
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
[*]
ARTICLE IV
THE ACCOUNTS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
SECTION 4.01 ACCOUNTS.
The Trustee shall establish and maintain, or cause to be established
and maintained, the Collection Account, the Reserve Account and the Note Payment
Account, each of which shall be an Eligible Account, for the benefit of the
Noteholders and the Note Insurer. All amounts held in the Collection Account,
the Reserve Account or the Note Payment Account shall, to the extent permitted
by this Agreement and applicable laws, rules and regulations, be invested in
Permitted Investments by the depository institution or trust company then
maintaining such Account only upon written direction of the Issuer, provided,
however, in the event the Issuer fails to provide such written direction to the
Trustee, and until the Issuer provides such written direction, the Trustee shall
invest in Permitted Investments satisfying the requirements of clause (v) of the
definition thereof. Investments held in Permitted Investments in the Accounts
shall not be sold or disposed of prior to their maturity. Earnings on investment
of funds in the Collection Account and Reserve Account shall remain in such
Accounts for disposition in accordance with this Agreement. Earnings on
investment of funds in the Note Payment Account shall be remitted by the Trustee
to the Collection Account promptly upon receipt thereof in the Note Payment
Account. Any losses and investment expenses relating to any investment of funds
in any of the Accounts shall be for the account of the Issuer, which shall
deposit or cause to be deposited the amount of such loss (to the extent not
offset by income from other investments of funds in the related Account) in the
related Account immediately upon the realization of such loss. The taxpayer
identification number associated with each of the Accounts shall be that of the
Issuer and the Issuer will report for federal, state and local income tax
purposes the income, if any, earned on funds in the relevant Account. The Issuer
hereby acknowledges that all amounts on deposit in each Account (including
investment earnings thereon) are held in trust by the Trustee for the benefit of
the Noteholders and the Note Insurer, subject to any express rights of the
Issuer set forth herein, and shall remain at all times during the term of this
Agreement under the sole dominion and control of the Trustee. Payments from the
Collection Account shall be made only on the Business Day prior to the Payment
Date and only to the Note Payment Account.
-29-
37
SECTION 4.02 COLLECTIONS.
Each of the Servicer and the Issuer shall remit to the Collection
Account all Net Proceeds it receives or otherwise obtains from or on behalf of
the Obligors from or in respect of the Receivables on the next Business Day
after receipt thereof, by ACH transfer from the account into which payments from
or on behalf of Obligors are initially deposited. Other than as specifically
contemplated pursuant to Section 4.03, the Servicer shall not remit to the
Collection Account, and shall take all reasonable actions to prevent other
Persons from remitting to the Collection Account, amounts which do not
constitute payments, collections or recoveries received, made or realized in
respect of the Receivables, and the Trustee will return to Issuer any such
amounts upon receiving written evidence reasonably satisfactory to the Trustee
that such amounts are not a part of the Trust Estate.
SECTION 4.03 ADDITIONAL DEPOSITS.
(a) The following additional deposits shall be made to the Collection
Account, as applicable: (i) the Issuer shall remit the aggregate Acquisition
Payments with respect to Removed Receivables reacquired pursuant to Section 2.05
or 7.02; and (ii) the Servicer shall remit the aggregate Acquisition Payments
with respect to Removed Receivables acquired pursuant to Section 3.04.
(b) The following deposits shall be made to the Note Payment Account,
as applicable: the Issuer shall remit the Redemption Amount pursuant to Section
11.02; (ii) the Note Insurer shall remit any required payment pursuant to the
Policy; (iii) the Trustee shall transfer all Available Funds from the Collection
Account to the Note Payment Account on the Business Day prior to the Payment
Date.
(c) All deposits required to be made pursuant to this Section by the
Issuer or the Servicer, as the case may be, may be made in the form of a single
deposit. All deposits required to be made by the Note Insurer, shall be made in
immediately available funds, no later than the date and time required pursuant
to the terms of the Policy.
SECTION 4.04 ALLOCATIONS AND PAYMENTS.
(a) On each Determination Date, the Servicer shall calculate (i) the
amount of funds on deposit in each of the Accounts and the amount of Available
Funds, and (ii) as applicable, the Trustee Fee, the Backup Servicing Fee, the
Servicing Fee, the Additional Servicing Fee, the Interest Distributable Amount,
the Required Reserve Amount, the Reserve Fund Reimbursement Amount, the amount
to be paid to Noteholders in respect of principal, and the amount payable by the
Note Insurer pursuant to the Policy, which amounts shall be set forth in the
Monthly Servicer Report for the related Payment Date. The Servicer shall send
the Monthly Servicer Report to the Trustee and the Note Insurer by 11:00 a.m.
New York, New York time on each such Determination Date.
(b) On each Payment Date, the Trustee shall make the following payments
from the applicable Accounts in the following order of priority and in the
amounts set forth in the Monthly Servicer Report for such Payment Date; provided
however, such payments shall be
-30-
38
made only to the extent of funds then on deposit in the applicable Account, and
provided, further that payments from the Note Payment Account shall be made only
on the Payment Date:
(i) to the Trustee (A) from Available Funds transferred from
the Collection Account to the Note Payment Account, an amount equal to
the sum of the Trustee Fee for such Payment Date, plus all accrued and
unpaid Trustee Fees, if any, for prior Payment Dates, plus all
reasonable out of pocket expenses (but only up to $200,000 during the
term of this Agreement) to which the Trustee is entitled to payment (to
the extent expressly set forth under this Agreement) provided that (B)
if Available Funds transferred from the Collection Account to the Note
Payment Account are insufficient to pay the amount described in clause
(A) above, the Trustee will withdraw from the Reserve Account an amount
equal to the lesser of the amount then on deposit in the Reserve
Account and the amount of such shortfall for disbursement to the
Trustee in reduction of such shortfall;
(ii) to the Servicer, from the Available Funds transferred
from the Collection Account to the Note Payment Account, an amount
equal to the sum of the Servicing Fee for the related Collection
Period, plus all accrued and unpaid Servicing Fees, if any, for prior
Collection Periods (plus an amount equal to any Transition Fees then
owing to the Successor Servicer, if any);
(iii) to the Backup Servicer (A) from Available Funds
transferred from the Collection Account to the Note Payment Account,
the Backup Servicer Fee for such Payment Date, plus all accrued and
unpaid Backup Servicer Fees, if any, for prior Payment Dates, plus all
reasonable out of pocket expenses to which the Backup Servicer is
entitled to payment (to the extent expressly set forth under this
Agreement) provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay
the amount described in clause (A) above, the Trustee will withdraw
from the Reserve Account an amount equal to the lesser of the amount
then on deposit in the Reserve Account and the amount of such shortfall
for disbursement to the Backup Servicer in reduction of such shortfall;
(iv) to the Noteholders, pro rata, based on their respective
Note Balances (A) from Available Funds transferred from the Collection
Account to the Note Payment Account, an amount equal to the sum of the
Interest Distributable Amount for such Payment Date, plus any
outstanding amount of Interest Carryover Shortfall, if any, for prior
Payment Dates provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account, are insufficient to pay
the amount described in clause (A) above, the Trustee will withdraw
from the Reserve Account an amount equal to the lesser of the amount
then on deposit in the Reserve Account and the amount of such interest
shortfall for disbursement to the Noteholders in reduction of such
shortfall, and provided further that (C) if the amount described in
clause (A) above remains unpaid after the application of amounts
withdrawn from the Reserve Account in accordance with clause (B) above,
the Trustee will withdraw from the amount remitted by the Note Insurer
to the Note Payment Account for disbursement to the Noteholders in
reduction of such shortfall an amount equal to the lesser of the amount
then on deposit in the Note
-31-
39
Payment Account pursuant to a payment by the Note Insurer and the
amount of such interest shortfall;
(v) for so long as no Insurer Default shall have occurred and
be continuing, to the Note Insurer, (A) from Available Funds
transferred from the Collection Account to the Note Payment Account the
sum of (x) the Note Insurer Premium for such Payment Date, plus (y) all
accrued but unpaid Note Insurer Premiums, if any, for prior Payment
Dates plus (z) the aggregate amount of all other Note Insurer
Obligations payable to the Note Insurer and outstanding on such Payment
Date, provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay
the amounts due the outstanding Note Insurer Obligations then payable,
the Trustee will withdraw from the Reserve Account an amount equal to
the lesser of the amount then on deposit in the Reserve Account and the
amount of such shortfall, and remit such lesser amount to the Note
Insurer in reduction of such shortfall;
(vi) to the Reserve Account, from Available Funds transferred
from the Collection Account to the Note Payment Account, an amount
equal to the lesser of remaining Available Funds and the Reserve Fund
Reimbursement Amount for such Payment Date, if applicable;
(vii) to the Successor Servicer, from Available Funds
transferred from the Collection Account to the Note Payment Account, an
amount equal to (A) the Additional Servicing Fee for the related
Collection Period, plus all accrued and unpaid Additional Servicing
Fees, if any, for prior Collection Periods, provided that (B) if
Available Funds transferred from the Collection Account to the Note
Payment Account are insufficient to pay the amount described in clause
(A) above, the Trustee will withdraw from the Reserve Account an amount
equal to the lesser of the amount then on deposit in the Reserve
Account and the amount of such shortfall for disbursement to the
Successor Servicer in reduction of such shortfall;
(viii) to the Noteholders, pro rata based on their respective
Note Balances, if such Payment Date is a Payment Date on which the
Issuer is making or is required to make an Acquisition Payment, any
remaining Available Funds transferred from the Collection Account to
the Note Payment Account to the extent of the required Acquisition
Payment;
(ix) to the Noteholders, pro-rata, based on their respective
Note Balances (A) any remaining Available Funds transferred from the
Collection Account to the Note Payment Account in reduction of the Note
Balance of the Notes, until such Note Balance is reduced to zero, (B)
if such Payment Date is the Payment Date on which the Issuer is
effecting an optional redemption of the Notes pursuant to Section
11.01, and there is an outstanding Note Balance after payment of the
amounts described in clause (A) above, the Trustee will disburse to the
Noteholders for payment on the Note Balance any amounts deposited in
the Note Payment Account by the Issuer in respect of the Redemption
Amount pursuant to Section 11.02, (C) if such Payment Date is the Final
Payment Date or the Payment Date on which the Issuer is effecting an
optional redemption of the Notes pursuant to Section 11.01, and there
is an outstanding Note
-32-
40
Balance (after payment of the amounts described in clauses (A) and (B)
above), the Trustee will withdraw from all remaining funds on deposit
in the Collection Account and remit to the Note Payment Account, an
amount equal to the lesser of the amount then on deposit in the
Collection Account and the amount of the outstanding Note Balance and
remit such lesser amount to the Noteholders in reduction of the
outstanding Note Balance, (D) if on the Final Payment Date there is an
outstanding Note Balance (after payment of the amounts described in
clauses (A), (B) and (C) above), the Trustee will withdraw from the
Reserve Account an amount equal to the lesser of the amount then on
deposit in the Reserve Account and the amount of the outstanding Note
Balance and remit such lesser amount to the Noteholders in reduction of
the outstanding Note Balance, and (E) if on the Final Payment Date
there is an outstanding Note Balance after all amounts have been
withdrawn from the Reserve Account in accordance with clause (D) above,
the Trustee will disburse to the Noteholders for payment on the Note
Balance any amounts deposited in the Note Payment Account by the Note
Insurer; and
(x) remaining amounts in the following order of priority: (A)
any of the Trustee's reasonable, out of pocket expenses to which the
Trustee is entitled to payment (to the extent expressly set forth in
this Agreement) which have exceeded $200,000 in the aggregate during
the term of this Agreement; then to (B) any amounts which would have
been paid to the Note Insurer under subsection (b)(v) but for the
occurrence and continuation of an Insurer Default; and then (C) to the
Issuer.
If the Trust is required to be recognized as a partnership for federal or state
income tax purposes, including by reason of a determination by the Internal
Revenue Service or any other taxing authority that the Trust constitutes a
partnership for income tax purposes, amounts withheld by the Trust in compliance
with federal and state income tax laws, including without limitation, amounts
withheld with respect to foreign persons in accordance with the Code, shall be
treated for all purposes of this Agreement as amounts actually paid to the
relevant Noteholder.
(c) The Servicer shall on each Payment Date instruct the Trustee to
distribute to each Noteholder of record on the related Record Date by wire
transfer of immediately available funds, the amount to be paid to such
Noteholder in respect of the related Note on such Payment Date. The Servicer
shall on each Payment Date instruct the Trustee to distribute to the Note
Insurer by wire transfer of immediately available funds, the amount to be paid
to the Note Insurer on such Payment Date.
SECTION 4.05 RESERVE ACCOUNT.
(a) Pursuant to Section 4.01, the Trustee shall establish and maintain
the Reserve Account which shall be an Eligible Account, for the benefit of the
Noteholders and the Note Insurer. On or prior to the Closing Date, the Issuer
shall deposit an amount equal to the Required Reserve Amount into the Reserve
Account. Thereafter, the Trustee shall deposit into the Reserve Account on each
Payment Date, to the extent of funds then on deposit in the Note Payment Account
an amount equal to the lesser of (x) Available Funds remaining on such Payment
Date after required payments pursuant to Section 4.04(b)(i) through (v), and (y)
the Reserve Fund Reimbursement Amount.
-33-
41
(b) Consistent with the limited purposes for which the Reserve Account
is to be established, (x) on each Payment Date, an amount equal to the aggregate
of amounts described in Sections 4.04(b)(i)(B), 4.04(b)(iii)(B), 4.04(b)(iv)(B),
4.04(b)(v)(B) (if no Insurer Default has occurred and is continuing) and
4.04(b)(vii)(B) and 4.04(b)(ix)(D), if any, shall be withdrawn from the Reserve
Account by the Trustee and remitted to the Trustee, the Backup Servicer, the
Noteholders or the Note Insurer (as the case may be) for payment as described in
those Sections, and (y) upon payment of all sums payable hereunder with respect
to the Notes, any amounts then on deposit in the Reserve Account shall be
remitted by the Trustee to the Note Insurer to the extent of any unpaid Note
Insurer Obligations then outstanding, until all such Note Insurer Obligations
are paid in full, and any remaining amounts then on deposit in the Reserve
Account shall be released from the lien of the Trust Estate and paid to the
Issuer.
Amounts held in the Reserve Account shall be invested in Permitted Investments
at the direction of the Issuer as provided in Section 4.01. Such investments
shall not be sold or disposed of prior to their maturity.
(c) The Trustee shall pay to the Issuer on each Payment Date the amount
by which the amount in the Reserve Account exceeds the Required Reserve Amount,
after giving effect to all distributions required to be made from the Reserve
Account or the Note Payment Account on such date.
SECTION 4.06 NOTE PAYMENT ACCOUNT.
(a) Pursuant to Section 4.01, the Trustee shall establish and maintain
the Note Payment Account which shall be an Eligible Account, for the benefit of
the Noteholders and the Note Insurer. The Note Payment Account shall be funded
to the extent that (x) the Issuer shall remit the Redemption Amount pursuant to
Section 11.02, (y) the Note Insurer shall remit any required payment pursuant to
the Policy, or (z) the Trustee shall remit the Available Funds from the
Collection Account pursuant to Section 4.03.
(b) On each Payment Date, an amount equal to the aggregate of amounts
described in Section 4.04(b) shall be withdrawn from the Note Payment Account by
the Trustee and remitted to the Noteholders and other persons or Accounts
described therein for payment as described in that Section, and upon payments of
all sums payable hereunder with respect to the Notes, any amounts then on
deposit in the Note Payment Account shall be remitted by the Trustee to the Note
Insurer to the extent of any unpaid Note Insurer Obligations then outstanding,
until all such Note Insurer Obligations are paid in full, and any remaining
amounts then on deposit in the Note Payment Account shall be released from the
lien of the Trust Estate and paid to the Issuer.
(c) Amounts held in the Note Payment Account shall be invested in
Permitted Investments at the direction of the Issuer as provided in Section
4.01. Such investments shall not be sold or disposed of prior to their maturity.
-34-
42
SECTION 4.07 STATEMENTS TO NOTEHOLDERS.
(a) On each Payment Date, the Trustee shall include with each payment
to each Noteholder of record and the Note Insurer the Monthly Servicer Report
furnished pursuant to Section 3.06, setting forth for the related Collection
Period the information provided in Exhibit A.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Trustee shall
mail a statement or statements prepared by the Servicer to the Note Insurer and
each Person who at any time during such calendar year shall have been a
Noteholder that provides the information that the Servicer actually knows is
necessary under applicable law for the preparation of the income tax returns of
such Noteholders.
ARTICLE V
THE POLICY
SECTION 5.01 THE POLICY.
The Servicer and the Issuer agree, simultaneously with the execution
and delivery of this Agreement, to cause the Note Insurer to issue the Policy to
the Trustee for the benefit of the Trust in accordance with the terms thereof
and the Insurance Agreement.
SECTION 5.02 CLAIMS UNDER POLICY.
(a) If on any Determination Date the Servicer has reported to the
Trustee in the Monthly Servicer Report that the Servicer has determined that (A)
as of the opening of business of the Trustee on such Determination Date, the
amount of Available Funds on deposit in the Collection Account, together with
any amounts on deposit in the Reserve Account and the Note Payment Account, are
insufficient to provide for the payment in full of the Interest Distributable
Amount payable on the related Payment Date (after giving effect to each payment
required to be made prior to such payment on such Payment Date pursuant to
Section 4.04(b)), and/or (B) if such Payment Date is the Final Payment Date and
the Note Balance has not been reduced to zero prior to such Determination Date,
and all amounts then on deposit in the Collection Account, together with any
amounts then on deposit in the Reserve Account and the Note Payment Account are
insufficient to make a payment to the Noteholders reducing the Note Balance to
zero (after giving effect to each payment required to be made prior to such
payment on the Final Payment Date pursuant to Section 4.04(b)), then by 2:00
p.m., New York time on such Determination Date, the Trustee shall deliver to the
Note Insurer and the Servicer a completed notice for payment in the form set
forth as Exhibit A to the Policy (the "Notice for Payment"), and shall confirm
delivery of such Notice for Payment, each as specified in the Policy. The Notice
for Payment shall specify the amount of the Interest Deficiency Draw Amount
and/or the Final Principal Deficiency Amount (as each such term is defined in
the Policy) and shall constitute a claim pursuant to the Policy. Upon receipt of
any payments on behalf of the Trust under the Policy, the Trustee shall deposit
any Interest Deficiency Draw Amount and/or Principal Deficiency Draw Amount in
the Note Payment Account. Such amounts shall be distributed pursuant to Section
4.04.
-35-
43
(b) The Trustee shall receive in the Note Payment Account, as
attorney-in-fact of each Noteholder, any payment from the Note Insurer and
disburse the same to each Noteholder, for the purposes and in the respective
amounts required in accordance with the provisions of Section 4.04.
(c) The Trustee shall keep complete and accurate records of the amount
of payments received from the Note Insurer and the Note Insurer shall have the
right to inspect such records at reasonable times upon one Business Days' prior
notice to the Trustee. The statements the Trustee prepares in the normal course
of business with respect to accounts similar in nature to the Note Payment
Account shall fulfill the record requirements of this Section.
(d) If any of the payments guaranteed by the Policy are voided (a
"Preference Event") pursuant to a final and non-appealable order under any
applicable bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding and, as a result of such a Preference Event, the Trustee is required
to return such voided payment, or any portion of such voided payment, made in
respect of the Notes (an "Avoided Payment"), the Trustee shall furnish to the
Note Insurer (x) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Trustee is
required to return any such payment or portion thereof during the term of the
Policy because such payment was voided under applicable law, with respect to
which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (y) an assignment, in form reasonably satisfactory to the
Note Insurer, irrevocably assigning to the Note Insurer all rights and claims of
the Trustee relating to or arising under such Avoided Payment and (z) a Notice
for Payment appropriately completed and executed by the Trustee. Such payment
shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Final Order and not to the Trustee directly. The
Trustee is not permitted to make a claim on the Trust or on any Noteholder for
payments made to Noteholders which are characterized as preference payments by
any bankruptcy court having jurisdiction over any bankrupt Obligor unless
ordered to do so by such bankruptcy court.
SECTION 5.03 SURRENDER OF POLICY.
The Trustee shall surrender the Policy to the Note Insurer for
cancellation upon its expiration in accordance with the terms thereof.
SECTION 5.04 RIGHTS OF SUBROGATION AND ASSIGNMENT.
(a) The parties hereto agree that to the extent the Note Insurer makes
any payment with respect to the Notes under the Policy, the Note Insurer shall
become subrogated to the rights of the recipients of such payments to the extent
of such payments (including, without limitation, to the fullest extent permitted
by law, all rights of the Trustee and each Noteholder in the conduct of any
related Insolvency Proceeding). In furtherance and not by way of limitation of
the foregoing, and subject to and conditioned upon any payment with respect to
the Notes by or on behalf of the Note Insurer, the Trustee shall assign, and the
Noteholders, by reason of their acquisition and holding of the Notes, shall be
deemed to have agreed to the assignment, to the Note Insurer, of all rights to
the payment of interest or principal with respect to the Notes which are then
due for payment, together with all other rights and remedies of the Trustee or
the
-36-
44
Noteholders with respect to the Notes (including, without limitation, all rights
of the Trustee and each Noteholder in the conduct of any related Insolvency
Proceeding), to the extent of all payments made by the Note Insurer with respect
to the Notes. The Trustee shall take all such actions and deliver all such
instruments as may be reasonably requested or required by the Note Insurer to
effectuate the purpose or provisions of the foregoing subrogation and/or
assignment. For the avoidance of doubt, any payment made under the Policy in
respect of interest or principal due under the Notes shall not reduce in any
manner the amount of interest or principal (or the Note Balance) otherwise due
hereunder or under the Notes.
(b) The foregoing rights of subrogation and assignment described in
clause (a) above are in all cases in addition to, and not in limitation of, all
equitable rights of subrogation and other rights and remedies otherwise
available to the Note Insurer in respect of payments under the Policy, and the
Note Insurer hereby specifically reserves all such rights and remedies.
ARTICLE VI
THE NOTES
SECTION 6.01 THE NOTES.
(a) The Notes shall be non-recourse obligations of the Issuer and the
Trust Estate shall be the sole source of payments of principal thereof and
interest thereon. Notwithstanding anything else to the contrary contained
herein, the Notes shall not be considered a general obligation of the Issuer for
any purpose.
(b) The Notes shall be issued on the Closing Date and the Note Balance
shall accrue interest at the Note Rate from and including the Closing Date.
(c) The Notes shall be substantially in the form attached hereto as
Exhibit C, and shall be issuable in minimum denominations of $1,000,000 and
integral multiples of $1,000 in excess thereof. The Notes shall each be executed
by the Issuer and authenticated by the Trustee by the manual or facsimile
signature of a Responsible Officer of the Trustee. Notes bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
were affixed, authorized to sign on behalf of the Issuer or the Trustee shall be
valid and binding obligations of the Issuer, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Notes or did not hold such offices at the
date of such Notes. The Notes shall be dated the date of their authentication.
(d) The Notes shall be issued only in a transaction (or transactions)
that was not required to be registered under the Securities Act. For purposes of
the preceding sentence, the term "Securities Act" shall mean the provisions
thereof exclusive of Regulation S (17 CFR 230.901 through 230.904).
SECTION 6.02 AUTHENTICATION AND DELIVERY OF THE NOTES.
The Trustee shall cause to be authenticated and delivered to or upon
the order of the Issuer, in exchange for the Receivables and the other property
included in the Trust Estate, simultaneously with the assignment, transfer and
conveyance to the Trustee of the Receivables
-37-
45
and the constructive delivery to the Trustee on behalf of the Noteholders of the
Receivable Files and the other components of the Trust Estate, the Notes duly
authenticated by the Trustee, in authorized denominations equaling in the
aggregate the Note Balance. No Note shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless there appears thereon a
certificate of authentication substantially in the form set forth in the form of
such Note attached hereto as Exhibit C, executed by the Trustee by manual or
facsimile signature, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered under this Agreement.
SECTION 6.03 REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES.
(a) The Note Registrar shall maintain a Note Register in which, subject
to such reasonable regulations as it may prescribe, the Note Registrar shall
provide for the registration of the Notes and transfers and exchanges thereof as
provided in this Agreement. The Trustee is hereby initially appointed Note
Registrar for the purpose of registering the Notes and transfers and exchanges
thereof as provided in this Agreement. In the event that, subsequent to the
Closing Date, the Trustee notifies the Servicer that it is unable to act as Note
Registrar, the Servicer shall appoint another bank or trust company, agreeing to
act in accordance with the provisions of this Agreement applicable to it, and
otherwise acceptable to the Trustee, to act as successor Note Registrar under
this Agreement.
(b) Subject to the provisions of this Agreement, upon surrender for
registration of transfer of any Note at the Corporate Trust Office, the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes in authorized
denominations of a like aggregate principal amount.
(c) Notes may be exchanged for other Notes of authorized denominations
of a like aggregate principal amount, at the option of the related Noteholder
upon surrender of the Note to be exchanged at any such office or agency.
Whenever any Note is so surrendered for exchange, the Issuer shall execute and
the Trustee shall authenticate and deliver the Note that the Noteholder making
the exchange is entitled to receive. Every Note presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Note
Registrar duly executed by the Noteholder thereof or his or her attorney duly
authorized in writing.
(d) No service or other charge shall be made for any registration of
transfer or exchange of Notes by the Trustee or the Servicer, but the Trustee
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Notes.
(e) Any Notes surrendered for registration of transfer or exchange
shall be canceled and subsequently destroyed by the Trustee.
(f) Each purchaser of a Note or of a beneficial interest therein shall
be deemed to have represented and warranted, by accepting such Note or
beneficial interest as follows:
-38-
46
(i) it is acquiring the Notes for its own account or for an
account with respect to which it exercises sole investment discretion,
and that it or such account is a Qualified Institutional Buyer or an
Accredited Investor acquiring the Notes for investment purposes and not
for distribution;
(ii) it acknowledges that the Notes have not been registered
under the Securities Act or any state securities laws and may not be
sold except as permitted below;
(iii) it understands and agrees that such Notes are being
offered only in a transaction not involving any public offering within
the meaning of the Securities Act, and that such Notes may be resold,
pledged or transferred only in accordance with Section 6.03(g) below
(1) to a person who the transferor reasonably believes after due
inquiry is, and who has certified that it is, a Qualified Institutional
Buyer that purchases for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A or (2) to an
institution that is an Accredited Investor who has certified that it is
an Accredited Investor purchasing for its own account or for the
account of another Accredited Investor [(unless the purchaser is a bank
acting in its fiduciary capacity)];
(iv) it understands that the following legend will be placed
on the Notes, unless otherwise agreed by the Issuer:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE
TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET
FORTH IN THE INDENTURE AND SERVICING AGREEMENT UNDER WHICH THIS NOTE IS ISSUED
(A COPY OF WHICH IS AVAILABLE FROM THE TRUSTEE UPON REQUEST). PROSPECTIVE
PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLER OF ANY NOTES MAY BE RELYING ON
THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT."
(v) it (x) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
its prospective investment in the Notes; and (y) it (or any account for
which it is purchasing) has the ability to bear the economic risks of
its prospective investment for an indefinite period and can afford the
complete loss of such investment; and
(vi) it understands that the Issuer, the Placement Agent and
others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations, warranties and agreements and agrees
that if any of the acknowledgments,
-39-
47
representations, warranties and agreements deemed to have been made by
it by its purchase of the Notes are no longer accurate, it shall
promptly notify the Issuer and the Placement Agent. If it is acquiring
the Notes as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each
such account and it has full power to make the foregoing
acknowledgments, representations, warranties and agreements on behalf
of each such account; and
(vii) it understands that the Notes may not be transferred to
an Employee Plan, or an entity, account or other pooled investment fund
the underlying assets of which include or are deemed to include
Employee Plan assets by reason of an Employee Plans involvement in the
entity, account or other pooled investment fund unless the Holder or
prospective transferee delivers to the Trustee an opinion of counsel
(which counsel and opinion shall be reasonably acceptable to the
Issuer, Servicer and Trustee) as provided in this Agreement. The
Issuer, Servicer, Trustee and Backup Servicer shall not be responsible
for confirming or otherwise investigating whether a proposed transferee
is an employee benefit plan, trust or account subject to ERISA, or
described in Section 4975(e)(1)of the Code
(viii) in the case of the acquisition of Notes, directly or
indirectly, by a partnership, limited liability company, S corporation,
grantor trust, or any other "flow-through entity" (within the meaning
of United States Treasury Regulations Section 1.7704-1(h)(3)) ( a
"Flow-Through Entity"), the Flow-Through Entity, on behalf of each
beneficial owner of interests, directly and indirectly, in such
Flow-Through Entity, acknowledges that (A) use of such Flow-Through
Entity to acquire and hold Notes (as opposed to direct acquisition or
ownership of Notes by the beneficial owners of the Flow- Through
Entity) is not motivated by, or a direct consequence of, efforts to
qualify for the "private placement" safe harbor of United States
Treasury Regulations Section 1.7704-1(h) pursuant to which the
Flow-Through Entity, rather than each beneficial owner owning a direct
or indirect interest in the Flow-Through Entity, is counted as a
partner in determining whether there are fewer than one hundred (100)
partners in the Trust (assuming for purposes of the foregoing that the
Trust were classified as a partnership for federal and state income tax
purposes and not solely as a security device for such purposes) and,
hence, whether the Notes are not treated as "readily tradable" on a
"secondary market' or the "substantial equivalent thereof" (all as
defined in United States Treasury Regulations Section 1.7704-1 et.
seq.) by reason of such safe harbor.
(ix) it understands that there are restrictions on the
transfer of Notes that are intended to avoid classification of the
Trust as a "publicly traded partnership" within the meaning of the
Section 7704(b) of the Code.
(g) No sale, pledge or other transfer (a "Transfer") of any Notes shall
be made unless that Transfer is made pursuant to an effective registration
statement under the Securities Act, and effective registration or qualification
under applicable state securities laws, or is made in a transaction that does
not require such registration or qualification. If such a Transfer is made
without registration under the Securities Act (other than in connection with the
initial issuance thereof by the Issuer, the Placement Agent or the initial
purchasers),then the Note Registrar shall refuse to register such Transfer
unless it receives (and upon receipt, may conclusively rely upon)
-40-
48
either: (i) a certificate from the Noteholder desiring to effect such Transfer
substantially in the form attached as Exhibit D-1 hereto, and a certificate from
such Noteholder's prospective transferee substantially in the form attached as
either Exhibit D-2 hereto or as Exhibit D-3 hereto; or (ii) an Opinion of
Counsel reasonably satisfactory to the Issuer and the Note Registrar to the
effect that such Transfer may be made without registration under the Securities
Act and/or applicable state securities laws(which Opinion of Counsel shall not
be an expense of the Trust Estate or of the Issuer, the Servicer, the Trustee or
the Note Registrar in their respective capacities as such), together with the
written certification(s) as to the facts surrounding such Transfer from the
Noteholder desiring to effect such Transfer and/or such Noteholder's prospective
transferee on which such Opinion of Counsel is based. None of the Issuer, the
Trustee or the Note Registrar is obligated to register or qualify the Notes
under the Securities Act or any other securities law or to take any action not
otherwise required under this Agreement to permit the transfer of any Note
without registration or qualification. Any Holder of a Note desiring to effect
such a Transfer shall, and upon acquisition of such a Note shall be deemed to
have agreed to, indemnify the Trustee, the Note Registrar and the Issuer against
any liability that may result if the Transfer is not so exempt or is not made in
accordance with such federal and state laws. In connection with a Transfer of
the Notes, the Issuer shall furnish upon request of a Noteholder to such Holder
and any prospective purchaser designated by such Noteholder the information
required to be delivered under paragraph (d)(4) of Rule 144A of the Securities
Act.
(h) No Transfer of any Notes shall be made if such Transfer would
result in the beneficial ownership of Notes by more than 75 Persons; provided,
however, that no Transfer of Notes shall be made if the transferee of Notes is a
Flow-Through Entity (as defined in Section 6.3(f)(viii)), unless such
Flow-Through Entity is able to make and makes the acknowledgment in Section
6.3(f)(viii). The Trustee shall be authorized to rely on a determination by the
Servicer or the Issuer, in written form, as to whether or not any Transfer is
authorized under this Section 6.03(h). Each Noteholder, by its acceptance of a
Note, acknowledges and agrees that the foregoing restriction on transfer of the
Notes is reasonable given the potentially adverse treatment to the Trust and the
Noteholders of classification of the Partnership as a "publicly traded
partnership" within the meaning of Section 7704(b) of the Code.
(i) In no event shall a Note be transferred to an employee benefit
plan, trust annuity or account subject to ERISA or a plan described in Section
4975(e)(1) of the Code (or any such plan, trust or account, including any Xxxxx
(HR-10) plans, individual retirement accounts or annuities and other employee
benefit plans subject to Section 408 of ERISA or Section 4975 of the Code being
referred to herein as an "Employee Plan") or an entity, account or other pooled
investment fund the underlying assets of which include or are deemed to include
Employee Plan assets by reason of an Employee Plan's investment in the entity,
account or other pooled investment fund, unless the Holder or prospective
transferee delivers to the Trustee an opinion of counsel (which counsel and
opinion shall be reasonably acceptable to the Issuer, Servicer and Trustee) to
the effect that (i) such transfer would not reasonably be likely to cause the
underlying assets of the Trust to constitute Employee Plan assets, or (ii) that
the transfer or sale of the Note to the prospective transferee, the subsequent
management, administration, servicing and operation of the Trust and the
ownership of the Note by the prospective transferee would not reasonably be
likely to constitute a violation of the prohibited transaction rules of ERISA or
the Code for which no statutory exception or administrative exemption applies.
In connection with the delivery of such opinion, the Issuer, the Servicer, the
Trustee and the Backup Servicer shall
-41-
49
cooperate with the Holder and the prospective transferee and, upon reasonable
request of such Holder or prospective transferee, provide such information as
may be necessary to render or evaluate such opinion. Such opinion of counsel
shall be at the expense of the Holder or the proposed transferee providing the
opinion. The Issuer, Servicer, Trustee and Backup Trustee shall not be
responsible for confirming or otherwise investigating whether a proposed
transferee is an employee benefit plan, trust or account subject to ERISA, or
described in Section 4975(e)(1) of the Code. Notwithstanding anything to the
contrary herein, the foregoing restriction on sale or transfer to an Employee
Plan or an entity, account or other pooled investment fund deemed to include
Employee assets shall not apply to or prevent the initial issuance, transfer or
sale, or any subsequent issuance, transfer or sale, of a Note to an insurance
company, insurance servicer or insurance organization qualified to do business
in a state that purchases Notes with funds held in one or more of its general
accounts.
(j) To the extent permitted under applicable law, the Trustee shall be
under no liability to any Person for any registration of transfer of any Note
that is in fact not permitted by this Section 6.03 or for making any payments
due to the Noteholder thereof or taking any other action with respect to such
Noteholder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the requirements of this Agreement.
SECTION 6.04 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
(a) If (i) any mutilated Note is surrendered to the Note Registrar, or
the Note Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Note, and (ii) there is delivered to the Note Registrar,
the Note Insurer, the Trustee and the Issuer such security or indemnity as may
be required by them to save each of them harmless (the general obligation of an
institutional investor that is investment grade rated being sufficient
indemnity), then, in the absence of notice that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute and the Trustee shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a new Note of like tenor and denomination or ownership interest,
as applicable. In connection with the issuance of any new Note under this
Section, the Issuer or the Trustee may require the payment by the Noteholder
thereof of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
(b) If, after the delivery of such replacement Note or payment with
respect to a destroyed, lost or stolen Note, a bona fide purchaser of the
original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of any such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.
-42-
50
SECTION 6.05 PERSONS DEEMED OWNERS.
Prior to due presentation of a Note for registration of transfer, the
Trustee, the Note Registrar and any of their respective agents may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payments pursuant to Section 4.04 and for all other
purposes whatsoever, and neither the Trustee, the Note Registrar nor any of
their respective agents shall be affected by any notice to the contrary.
SECTION 6.06 ACCESS TO LIST OF NOTEHOLDERS' NAMES AND ADDRESSES.
The Note Registrar shall furnish or cause to be furnished to the
Servicer, within 15 days after receipt by the Note Registrar of a written
request therefor from the Servicer, a list of the names and addresses of the
Noteholders as of the most recent Record Date. If three or more Noteholders, or
one or more Noteholders evidencing not less than 25% of the Voting Interests
(hereinafter referred to as "Applicants"), apply in writing to the Trustee, and
such application states that the Applicants desire to communicate with other
Noteholders with respect to their rights under this Agreement or under the Notes
and such application is accompanied by a copy of the communication that such
Applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, afford such Applicants access,
during normal business hours, to the current list of Noteholders as reflected in
the Note Register. Every Noteholder, by receiving and holding a Note, agrees
with the Servicer and the Trustee that neither the Servicer nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Noteholders under this Agreement, regardless
of the source from which such information was derived.
SECTION 6.07 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note within 14 days after receipt
of the final payment received in connection therewith, whether by optional
redemption of the Issuer or otherwise. Each Noteholder, by its acceptance of the
final payment with respect to its Note, will be deemed to have relinquished any
further right to receive payments under this Agreement and any interest in the
Trust Estate. Each Noteholder shall indemnify and hold harmless the Issuer, the
Trustee and any other Person against whom a claim is asserted in connection with
such Noteholder's failure to tender the Note to the Trustee for cancellation.
SECTION 6.08 MAINTENANCE OF OFFICE OR AGENCY.
The Trustee shall maintain in the City of Minneapolis, Minnesota, an
office or offices or agency or agencies where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Notes and this Agreement may be served. The
Trustee initially shall designate the Corporate Trust Office as its office for
such purposes. The Trustee shall give prompt written notice to the Issuer, the
Servicer and the Noteholders of any change in the location of the Note Register
or any such office or agency.
-43-
51
SECTION 6.09 CONFIDENTIAL INFORMATION.
Each purchaser of a Note or of a beneficial interest therein (a
"Holder") shall be deemed to have agreed to comply by this Section 6.09 by
accepting such Note or beneficial interest. Each Holder acknowledges that it may
obtain information relating to the Servicer or the Issuer which is of a
confidential and proprietary nature ("Proprietary Information"). Such
Proprietary Information may include, but is not limited to, non-public trade
secrets, know how, invention techniques, processes, programs, schematics, source
documents, data, and financial information. Each Holder shall at all times, both
during the term of this Agreement and for a period of three (3) years after its
termination, keep in trust and confidence all such Proprietary Information, and
shall not use such Proprietary Information other than as required to enforce its
rights under its Note, nor shall any Holder disclose any such Proprietary
Information without the written consent of the Servicer or the Issuer. Each
Holder further agrees to immediately return all Proprietary Information
(including copies thereof) in its possession, custody, or control upon
termination of this Agreement for any reason.
No Holder shall disclose, advertise or publish the existence or the
terms or conditions of this Agreement without prior written consent of the
Servicer or the Issuer. Notwithstanding the foregoing, this Section 6.09 shall
not prohibit disclosure of information that is required to be disclosed by each
Holder pursuant to federal or state laws or regulation. In particular each
Holder agrees that it shall not, without the prior consent of the Servicer or
the Issuer, disclose the existence of this Agreement or any of the terms herein
to any Person other than (i) counsel to each Holder (ii) an employee or director
of each Holder with a need to know in order to implement this Agreement and only
if such employee or director or counsel agrees to maintain the confidentiality
of this Agreement or (iii) a bona fide purchaser or potential purchaser of the
Note. The parties hereto agree that the Servicer and/or the Issuer shall have
the right to enforce these nondisclosure provisions by an action for specific
performance filed in any court of competent jurisdiction in the State of Kansas.
ARTICLE VII
THE ISSUER
SECTION 7.01 REPRESENTATIONS OF ISSUER.
The Issuer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The representations
shall speak as of the execution and delivery of this Agreement and shall survive
the grant of a security interest in or the transfer of the Receivables to the
Trustee.
(a) Organization and Good Standing. The Issuer is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is presently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own, hold, transfer, assign and convey the Receivables.
-44-
52
(b) Due Qualification. The Issuer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in Kansas and in all other jurisdictions in which the ownership or
lease of property or the conduct of its business requires such qualifications,
licenses or approvals, the noncompliance with which would have a material
adverse effect on the Note Insurer or the Noteholders.
(c) Power and Authority. The Issuer has the power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party, and to carry out their respective terms; the Issuer has full
power and authority to grant a security interest in the Trust Estate and has
duly authorized such grant to the Trustee by all necessary action; and the
execution, delivery and performance by the Issuer of this Agreement and each of
the other Transaction Documents to which it is a party has been duly authorized
by all necessary action of the Issuer.
(d) Valid Transfers; Binding Obligations. This Agreement evidences a
valid grant of a first priority perfected security interest under the UCC in the
Receivables, and such other portion of the Trust Estate as to which a security
interest may be perfected under the UCC, which is effective for so long as the
Notes or the Note Insurer Obligations remain outstanding, enforceable against
creditors of and purchasers from the Issuer, and each of the Transaction
Documents to which the Issuer is a party constitutes a legal, valid and binding
obligation of the Issuer enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally or by general equity
principles.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the other Transaction Documents and the fulfillment of the
terms of this Agreement and the other Transaction Documents do not conflict
with, result in any breach of any of the terms or provisions of, nor constitute
(with or without notice or lapse of time) a default under, its Certificate of
Incorporation or Bylaws of the Issuer or any indenture, agreement or other
instrument to which the Issuer is a party or by which it shall be bound, nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement), nor violate any law, order, rule or regulation
applicable to the Issuer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Issuer or its properties, which breach, default, conflict,
Lien or violation would have a material adverse effect on the rights or
interests of the Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending, or
to the Issuer's knowledge, threatened, against or affecting the Issuer: (i)
asserting the invalidity of this Agreement, the Notes or any of the other
Transaction Documents to which the Issuer is a party, (ii) seeking to prevent
the issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or any of the other Transaction Documents, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Issuer of its obligations under, or the validity or
enforceability of, this Agreement, the Notes or any other Transaction Documents,
or (iv) relating to the Issuer and which might adversely affect the federal
income tax attributes of the Notes.
-45-
53
(g) No Subsidiaries. The Issuer has no subsidiaries.
(h) Not an Investment Company. Neither the Issuer nor the Trust Estate
is an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act, and none of the issuance of
the Notes, the execution and delivery of the Transaction Documents to which the
Issuer is a party, the acquisition by the Issuer of one or more Pools of
Receivables, or the performance by the Issuer of its obligations under the
Transaction Documents, or the use of the proceeds of the Notes by the Issuer
will violate any provision of the Investment Company Act, or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder.
(i) No Violation of Securities Act. The Issuer has not offered or sold,
and will not offer or sell, any Notes in any manner that would render the
issuance and sale of the Notes a violation of the Securities Act, or any state
securities or "Blue Sky" laws or require registration pursuant thereto, nor has
it authorized, nor will it authorize, any Person to act in such manner. No
registration under the Securities Act is required for the sale of the Notes as
contemplated hereby, assuming the accuracy of the Purchaser's representations
and warranties set forth in the Purchase Agreement and the compliance of
Placement Agent with its obligations under the Placement Agreement.
(j) Truth and Completeness of Private Placement Memorandum. As of the
Closing Date, the Private Placement Memorandum does not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(k) No Violation of Exchange Act or Regulations T, U or X. None of the
transactions contemplated in the Transaction Documents (including the use of the
proceeds from the sale of the Notes) will result in a violation of Section 8 of
the Exchange Act, or any regulations issued pursuant thereto, including
Regulations T, U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II. The Issuer does not own nor does it intend to carry or
purchase any "margin security" within the meaning of said Regulation U,
including margin securities originally issued by it or any "margin stock" within
the meaning of said Regulation U.
(l) All Tax Returns, True, Correct and Timely Filed. All material tax
returns required to be filed by the Issuer in any jurisdiction have in fact been
filed and all taxes, assessments, fees and other governmental charges upon the
Issuer or upon any of its properties, income of franchises shown to be due and
payable on such returns have been paid. To the best of the Issuers knowledge all
such tax returns were true and correct and the Issuer knows of no proposed
material additional tax assessment against it nor of any basis therefor. The
provisions for taxes on the books of the Issuer are in accordance with generally
accepted accounting principles.
(m) No Restriction on Issuer Affecting its Business. The Issuer is not
a party to any contract or agreement, or subject to any charter or other
restriction which materially and adversely affects its business nor has it
agreed or consented to cause any of its properties to become subject to any Lien
other than the Lien created hereby.
-46-
54
(n) Perfection of Security Interest. All filings and recordings as may
be necessary to perfect the interest of the Issuer in the Receivables and such
other portion of the Trust Estate as to which a security interest may be
perfected under the UCC, have been accomplished and are in full force and
effect. All filings and recordings against the Issuer required to perfect the
security interest of the Trustee on such Receivables and such other portion of
the Trust Estate as to which a security interest may be perfected under the UCC,
have been accomplished and are in full force and effect. The Issuer will from
time to time, at its own expense, execute and file such additional financing
statements (including continuation statements) as may be necessary to ensure
that at any time, the interest of the Issuer in all of the Receivables and such
other portion of the Trust Estate as to which a security interest may be
perfected under the UCC, and the security interest of the Trustee on all of the
Receivables and such other portion of the Trust Estate as to which a security
interest may be perfected under the UCC are fully protected.
(o) All Taxes, Fees and Charges Relating to Transaction and Transaction
Documents Paid. Any taxes, fees and other governmental charges in connection
with the execution and delivery of the Transaction Documents and the execution
and delivery and sale of the Notes have been or will be paid by the Issuer at or
prior to the Closing Date.
(p) No Requirement that Issuer File a Registration Statement. There are
no contracts, agreements or understandings between the Issuer and any person
granting said person the right to require the Issuer to file a registration
statement under the Securities Act with respect to any Notes owned or to be
owned by such person.
(q) No Broker, Finder or Financial Adviser Other than Rothschild. The
Issuer or any of its respective officers, directors, employees or agents has not
employed any broker, finder or financial adviser other than Rothschild Inc. or
incurred any liability for fees or commissions to any person other than
Rothschild Inc. in connection with the offering, issuance or sale of the Notes.
(r) Notes Authorized, Executed, Authenticated, Validly Issued and
Outstanding. The Notes have been duly and validly authorized and, when duly and
validly executed and authenticated by the Trustee in accordance with the terms
of this Agreement and delivered to and paid for by each Purchaser as provided
herein, will be validly issued and outstanding and entitled to the benefits
hereof.
(s) Location of Chief Executive Office and Records. The principal place
of business and chief executive office of the Issuer, and the office where
Issuer maintains all of its records, is located at 00 Xxxxxxxxxxx, Xxxxxxxxxx,
Xxxxxx 00000; provided that, at any time after the Closing Date, upon 30 days
prior written notice to each of the Servicer, the Note Insurer and the Trustee,
the Issuer may relocate its principal place of business and chief executive
office, and/or the office where it maintains all of its records, to another
location within the United States to the extent that the Issuer shall have taken
all actions necessary or reasonably requested by the Servicer, the Trustee or
the Note Insurer to amend its existing financing statements and continuation
statements, and file additional financing statements and to take any other steps
reasonably requested by the Servicer, the Trustee or the Note Insurer to further
perfect or evidence the rights, claims or security interests of any of the
Servicer, the Trustee or the Note Insurer under any of the Transaction
Documents.
-47-
55
(t) Ownership of the Issuer. One hundred percent (100%) of the issued
and outstanding shares of capital stock of the Issuer are directly owned (both
beneficially and of record) by Midland Credit Management, Inc. Such shares are
validly issued, fully paid and nonassessable and no one other than Midland
Credit Management, Inc. has any options, warrants or other rights to acquire
shares of capital stock of and from the Issuer.
(u) Solvency. The Issuer, both prior to and after giving effect to each
transfer and sale of Receivables identified in a Schedule of Receivables on the
Closing Date (i) is not "insolvent" (as such term is defined in Section
101(32)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they become
due; and (iii) does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.
(v) Reporting and Accounting Treatment. For reporting and accounting
purposes, and in its books of account and records, the Issuer will treat each
transfer of Receivables pursuant to the Receivables Contribution Agreement as an
absolute sale and assignment of Midland Credit Management, Inc.'s full right,
title and ownership interest in each such Receivable and the Issuer has not in
any other manner accounted for or treated the transactions.
(w) Governmental and Other Consents. No consents, approvals,
authorization or orders of, registration or filing with, or notice to any
governmental authority or court is required for the execution, delivery and
performance of, or compliance with, the Transaction Documents by the Issuer,
except such consent, approvals, authorizations, filings and notices that have
already been made or obtained.
(x) Enforceability of Transaction Documents. Each of the Transaction
Documents to which it is a party has been duly authorized, executed and
delivered by the Issuer and constitutes the legal, valid and binding obligation
of the Issuer, enforceable against it in accordance with its terms.
(y) Accuracy of Information. The representations and warranties of the
Issuer in the Transaction Documents are true and correct in all material
respects as of the Closing Date and, except for representations and warranties
expressly made as of a different date, each Funding Date.
(z) Separate Identity. The Issuer is operated as an entity separate
from Midland Credit Management, Inc. In addition, the Issuer:
(i) has its own board of directors,
(ii) has at least two independent directors who satisfy the
definition of Independent Director provided in the Certificate of
Incorporation who are not direct, indirect, or beneficial stockholders,
officers, directors, employees, affiliates, associates, customers or
suppliers of any of the Servicer or its Affiliates (other than, in the
case of the Issuer, directors thereof) or relatives of any thereof,
(iii) maintains its assets in a manner which facilitates their
identification and segregation from those of the Servicer,
-48-
56
(iv) has all office furniture, fixtures and equipment
necessary to operate its business,
(v) conducts all intercompany transactions with the Servicer
on terms which the Issuer reasonably believes to be on an arm's-length
basis,
(vi) has not guaranteed any obligation of the Servicer or any
of its Affiliates, nor has it had any of its obligations guaranteed by
any such entities and has not held itself out as responsible for debts
of any such entity or for the decisions or actions with respect to the
business affairs of any such entity,
(vii) has not permitted the commingling or pooling of its
funds or other assets with the assets of the Servicer (other than in
respect of items of payment and funds which may be commingled until
deposit into the Collection Account in accordance with this Agreement),
(viii) has separate deposit and other bank accounts to which
neither the Servicer nor any of its Affiliates has any access and does
not at any time pool any of its funds with those of the Servicer or any
of its Affiliates, except for such funds which may be commingled until
deposit into the Collection Account in accordance with this Agreement,
(ix) maintains financial records which are separate from those
of the Servicer or any of its Affiliates,
(x) compensates all employees, consultants and agents, or
reimburses the Servicer from the Issuer's own funds, for services
provided to the Issuer by such employees, consultants and agents,
(xi) conducts all of its business (whether in writing or
orally) solely in its own name,
(xii) is not, directly or indirectly, named as a direct or
contingent beneficiary or loss payee on any insurance policy covering
the property of the Servicer or any of its Affiliates and has entered
into no agreement to be named as such a beneficiary or payee,
(xiii) acknowledges that the Trustee and the Note Insurer are
entering into the transactions contemplated by this Agreement and the
other Transaction Documents in reliance on the Issuers identity as a
separate legal entity from the Servicer, and
(xiv) practices and adheres to company formalities such as
complying with its By-laws and resolutions and the holding of regularly
scheduled board of directors meetings.
(aa) ERISA Compliant. The Issuer and all ERISA Affiliates are in
compliance with all applicable federal or state laws, including the rule and
regulations promulgated thereunder, relating to discrimination in the hiring,
promotion or pay of employees, any applicable federal or state wages and hours
law, and the provisions of the ERISA applicable to its business, except where
such noncompliance would not, individually or in the aggregate, have a Material
Adverse
-49-
57
Effect. The employee benefit plans, including employee welfare benefit plans
(the "Employee Plans") of the Issuer and all ERISA Affiliates have been operated
in compliance with the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations (except to the extent such noncompliance would not, individually or
in the aggregate, have a Material Adverse Effect). No reportable event under
Section 4043(b) of ERISA or any prohibited transaction under Section 406 of
ERISA has occurred with respect to any employee benefit Plan maintained by the
Issuer or any ERISA Affiliate (except to the extent that any such event or
transaction would not, individually or in the aggregate, have a Material Adverse
Effect). There are no pending or, to the Issuer's best knowledge, threatened,
claims by or on behalf of any employee plan, by any employee or beneficiary
covered under any such plan or by any governmental authority or otherwise
involving such plans or any of their respective fiduciaries (other than for
routine claims for benefits). All Employee Plans that are group health plans
have been operated in compliance with the group health plan continuation
coverage requirements of Section 4980B of the Code in all material respects
(except to the extent that such noncompliance would not, individually or in the
aggregate, have a Material Adverse Effect). "Material Adverse Effect" means,
when used in connection with the Issuer, any development, change or effect that
is materially adverse to the business, properties, assets, net worth, condition
(financial or other), or results of operations of the Issuer or that reasonably
could be expected to be materially adverse to the prospects of the Issuer.
Neither the Issuer nor any of its ERISA Affiliates have a "defined benefit plan"
as defined in ERISA.
SECTION 7.02 REACQUISITION OF RECEIVABLES UPON BREACH.
(a) Upon discovery by the Issuer or the Servicer (which discovery shall
be deemed to have occurred upon the receipt of notice by a Responsible Officer
of the Issuer or the Servicer) or upon the actual knowledge of a Responsible
Officer of the Trustee of a breach of any of the representations and warranties
of the Issuer set forth in Section 7.01, the party discovering such breach shall
give prompt written notice to the others. If such breach has or would have a
material adverse effect on the rights or interests of the Noteholders or the
Note Insurer with respect to all or a portion of the Receivables, the Issuer
shall reacquire the Receivables and, if necessary, the Issuer shall enforce the
obligation of the Seller under the Receivables Contribution Agreement to
reacquire the Receivables from the Issuer, unless such breach shall have been
cured within thirty (30) days after the earlier to occur of the discovery of
such breach by the Issuer or receipt of written notice of such breach by the
Issuer, such that the relevant representation and warranty shall be true and
correct in all material respects as if made on such day, and the Issuer shall
have delivered to the Trustee a certificate of any Responsible Officer of the
Issuer describing the nature of such breach and the manner in which the relevant
representation and warranty became true and correct. This repurchase obligation
shall pertain to all representations and warranties of the Issuer contained in
Section 7.01, whether or not the Issuer has knowledge of the breach at the time
of the breach or at the time the representations and warranties were made. The
Issuer will be obligated to accept the reassignment of the Receivables as set
forth above on the Remittance Date next succeeding the date on which such
reassignment obligation arises. In consideration of the reacquisition of the
Receivables, on such Remittance Date, the Issuer shall remit the aggregate
Acquisition Payments of the Receivables to the Note Account in the manner
specified
-50-
58
in Section 4.03. The payment of such consideration, in immediately available
funds, will be considered a payment in full of the Receivables.
(b) Upon any such reacquisition, the Trustee on behalf of the
Noteholders and the Note Insurer shall, without further action, be deemed to
have released its interest in, to and under the Removed Receivables, all monies
due or to become due with respect thereto after the aforementioned Remittance
Date and all proceeds thereof. The Trustee shall execute such documents and
instruments and take such other actions as shall be reasonably requested by the
Issuer to effect the security interest release pursuant to this Section.
Notwithstanding the foregoing, the Controlling Party may by delivery of prior
written notice waive any breach and repurchase the obligation of the Issuer
pursuant to this Section 7.02. The Trustee shall have no duty to conduct any
affirmative investigation as to the occurrence of any condition requiring the
reacquisition of the Receivables pursuant to this Section, except as otherwise
provided in Section 10.02.
SECTION 7.03 LIABILITY OF ISSUER.
The Issuer shall be liable in accordance with this Agreement only to
the extent of the obligations in this Agreement specifically undertaken by the
Issuer in such capacity under this Agreement and shall have no other obligations
or liabilities hereunder.
SECTION 7.04 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE ISSUER; CERTAIN LIMITATIONS.
(a) Merger, Etc. Any corporation (i) into which the Issuer may be
merged or consolidated, (ii) which may result from any merger, conversion or
consolidation to which the Issuer shall be a party, or (iii) which may succeed
to all or substantially all of the business of the Issuer, which corporation or
in any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Issuer under this Agreement, shall be the successor to
the Issuer 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, except
that if the Issuer in any of the foregoing cases is not the surviving entity,
then the surviving entity shall execute an agreement of assumption to perform
every obligation of the Issuer hereunder, and the surviving entity shall have
taken all actions necessary or reasonably requested by the Issuer, the Trustee
or the Note Insurer to amend its existing financing statements and continuation
statements, and file additional financing statements and to take any other steps
reasonably requested by the Issuer, the Trustee or the Note Insurer to further
perfect or evidence the rights, claims or security interests of any of the
Issuer, the Trustee or the Note Insurer under any of the Transaction Documents.
The Issuer (1) shall provide notice of any merger, consolidation or succession
pursuant to this Section to the Rating Agency, the Trustee, the Note Insurer,
the Noteholders and the Placement Agent, (2) for so long as the Notes are
outstanding, shall receive from the Rating Agency a letter to the effect that
such merger, consolidation or succession will not result in a qualification,
downgrading or withdrawal of the then-current rating on the Notes, and (3) shall
receive from the Controlling Party its prior written consent to such merger,
consolidation or succession, absent which consent, the Issuer shall not become a
party to such merger, consolidation or succession.
-51-
59
(b) Certain Limitations.
(i) The business, activities and purpose of the Issuer shall
be limited as specified in its Certificate of Incorporation
(ii) So long as any outstanding debt of the Issuer or the
Notes is rated by the Rating Agency, the Issuer shall not issue
unsecured notes or otherwise borrow money unless (A) the Issuer has
made a written request to the Rating Agency to issue unsecured notes or
incur indebtedness and such notes or borrowings are rated by the Rating
Agency the same as or higher than the rating afforded any outstanding
rated debt or the Notes, and (B) such notes or borrowings (1) are fully
subordinated (and which shall provide for payment only after payment in
respect of all outstanding rated debt and/or the Notes) or are
nonrecourse against any assets of the Issuer other than the assets
pledged to secure such notes or borrowings, (2) do not constitute a
claim against the Issuer in the event such assets are insufficient to
pay such notes or borrowings and (3) where such notes or borrowings are
secured by the collateral securing the rated debt or the Notes, such
notes or borrowings are fully subordinated (and which shall provide for
payment only after payment in respect of all outstanding rated debt
and/or the Notes) to such rated debt or the Notes.
(iii) The Issuer shall not issue unsecured notes or otherwise
borrow money, or otherwise grant any consensual Lien in favor of any
Person (other than the Lien granted pursuant hereto) absent the prior
written consent of the Controlling Party.
(c) Unanimous Consent. Notwithstanding any other provision of this
Section and any provision of law, the Issuer shall not do any of the following
without the affirmative unanimous vote of all members of the Board of Directors
of the Issuer (which includes both Independent Directors, as such term is
defined in the Certificate of Incorporation).
(i) (A) dissolve or liquidate, in whole or in part, or
institute proceedings to be adjudicated bankrupt or insolvent, (B)
consent to the institution of bankruptcy or insolvency proceedings
against it, (C) file a petition seeking or consent to reorganization or
relief under any applicable federal or state law relating to
bankruptcy, (D) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
corporation or a substantial part of its property, (E) make any
assignment for the benefit of creditors, (F) admit in writing its
inability to pay its debts generally as they become due, or (G) take
any action in furtherance of the actions set forth in clauses (A)
through (F) above; or
(ii) merge or consolidate with or into any other person or
entity or sell or lease its property and all or substantially all of
its assets to any person or entity; or
(iii) modify any provision of its Certificate of Incorporation
or Bylaws.
-52-
60
SECTION 7.05 LIMITATION ON LIABILITY OF ISSUER AND OTHERS.
The Issuer and any director or officer or employee or agent of the
Issuer 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 Issuer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Issuer under this Agreement or as the acquirer
of the Receivables under the Receivables Contribution Agreement, and that in its
opinion may involve it in any expense or liability.
SECTION 7.06 ISSUER MAY OWN NOTES.
The Issuer and any Person controlling, controlled by or under common
control with the Issuer may, in its individual or any other capacity, become the
owner or pledgee of one or more Notes with the same rights as it would have if
it were not the Issuer or an affiliate thereof, except as otherwise specifically
provided in the definition of the term "Noteholder." The Notes so owned by or
pledged to the Issuer or such controlling or commonly controlled Person shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority or distinction as among any of the Notes, except as
set forth herein with respect to, among other things, certain rights to vote,
consent or give directions to the Trustee as a Noteholder.
SECTION 7.07 COVENANTS OF ISSUER.
(a) Bylaws and Certificate of Incorporation. The Issuer hereby
covenants not to change, or agree to any change of, its Bylaws or Certificate of
Incorporation without (i) notice to the Trustee, the Rating Agency and the Note
Insurer, and (ii) the prior written consent of the Controlling Party.
(b) Merger of the Issuer, Asset Sales and Purchases. Without the prior
written consent of the Controlling Party, the Issuer shall not merge with or
into or, or transfer or sell all or substantially all of its assets to, or buy
all or substantially all the assets of, any person.
(c) Preservation of Existence. The Issuer hereby covenants to do or
cause to be done all things necessary on its part to preserve and keep in full
force and effect its existence as a corporation, and to maintain each of its
licenses, approvals, registrations or qualifications in all jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such licenses, approvals, registrations or qualifications, except for failures
to maintain any such licenses, approvals, registrations or qualifications which,
individually or in the aggregate, would not have a material adverse effect on
the ability of Issuer to perform its obligations hereunder or under any of the
other Transaction Documents.
(d) Compliance with Laws. The Issuer hereby covenants to comply in all
material respects with all applicable laws, rules and regulations and orders of
any governmental authority, the noncompliance with which would have a material
adverse effect on the business, financial condition or results of operations of
the Issuer or on the ability of the Issuer to repay the Notes or
-53-
61
the Note Insurer Obligations, or perform any of its other obligations under this
Agreement or the other Transaction Documents.
(e) Payment of Taxes. The Issuer hereby covenants to pay and discharge
promptly or cause to be paid and discharged promptly all taxes, assessments and
governmental charges or levies imposed upon the Issuer or upon its income and
profits, or upon any of its property or any part thereof, before the same shall
become in default, provided that the Issuer shall not be required to pay and
discharge any such tax, assessment, charge or levy so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Issuer shall have set aside on its books adequate reserves with respect to
any such tax, assessments, charge or levy so contested, or so long as the
failure to pay any such tax, assessment, charge or levy would not have a
material adverse effect on the ability of the Issuer to perform its obligations
hereunder.
(f) Exercise of Rights Under the Transaction Documents. The Issuer
hereby covenants to exercise its rights as the Purchaser under the Receivables
Contribution Agreement and take such other action in connection with the
Transaction Documents as may be appropriate or desirable, taking into account
the associated costs, to maximize the collection of amounts payable to the Trust
Estate.
(g) Investments. The Issuer hereby covenants that it will not without
the prior written consent of the Controlling Party, acquire or hold any
indebtedness for borrowed money of another person, or any capital stock,
debentures, partnership interests or other ownership interests or other
securities of any Person, other than the Receivables acquired under any
Receivables Contribution Agreement.
(h) Keeping Records and Books of Account. The Issuer hereby covenants
and agrees to maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing the
Receivables in the event of the destruction or loss of the originals thereof)
and keep and maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Receivables
(including, without limitation, records adequate to permit the daily
identification of all collections with respect to, and adjustments of amounts
payable under, each Receivable).
(i) Benefit Plan. The Issuer hereby covenants and agrees to comply in
all material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Issuer covenants that it
will not:
(i) engage in any non-exempt prohibited transaction (within
the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the
Issuer;
(ii) permit to exist any accumulated funding deficiency as
defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan which is subject to Section 302(q) of ERISA
or 412 of the Code; or
-54-
62
(iii) terminate any Benefit Plan of the Issuer or any ERISA
Affiliate if such termination would result in any material liability to
the Issuer or an ERISA Affiliate.
(j) No Release. The Issuer shall not take any action and shall use its
best efforts not to permit any action to be taken by others that would release
any Person from any of such Persons covenants or obligations under any document,
instrument or agreement included in the Trust Estate, or which would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such document, instrument or
agreement.
(k) Separate Identity. The Issuer hereby covenants and agrees to take
all actions required to maintain the Issuers status as a separate legal entity.
Without limiting the foregoing, the Issuer shall:
(i) conduct all of its business, and make all communications
to third parties (including all invoices (if any), letters, checks and
other instruments) solely in its own name (and not as a division of any
other Person), and require that its employees, if any, when conducting
its business identify themselves as such (including, without
limitation, by means of providing appropriate employees with business
or identification cards identifying such employees as the Issuer's
employees);
(ii) compensate all employees, consultants and agents directly
or indirectly through reimbursement of the Servicer, from the Issuer's
bank accounts, for services provided to the Issuer by such employees,
consultants and agents and, to the extent any employee, consultant or
agent of the Issuer is also an employee, consultant or agent of the
Servicer, allocate the compensation of such employee, consultant or
agent between the Issuer and the Servicer on a basis which reflects the
respective services rendered to the Issuer and the Servicer;
(iii) (A) pay its own incidental administrative costs and
expenses from its own funds, (B) allocate all other shared overhead
expenses (including, without limitation, telephone and other utility
charges, the services of shared employees, consultants and agents, and
reasonable legal and auditing expenses) which are not reflected in the
Servicing Fee, and other items of cost and expense shared between the
Issuer and the Servicer, on the basis of actual use to the extent
practicable, and to the extent such allocation is not practicable, on a
basis reasonably related to actual use or the value of services
rendered;
(iv) at all times have at least two (2) independent directors
who satisfy the definition of Independent Director provided in the
Certificate of Incorporation, and have at least one officer responsible
for managing its day-to-day business and manage such business by or
under the direction of its board of directors;
(v) maintain its books and records separate from those of any
Affiliate;
(vi) prepare its financial statements separately from those of
its Affiliates and ensure that any consolidated financial statement
have notes to the effect that the Issuer is a separate entity whose
creditors have a claim on its assets prior to those assets becoming
-55-
63
available to its equity holders and therefore to any of their
respective creditors, as the case may be;
(vii) not commingle its funds or other assets with those of
any of its Affiliates (other than in respect of items of payment or
funds which may be commingled until deposit into the Collection Account
in accordance with this Agreement), and not to hold its assets in any
manner that would create an appearance that such assets belong to any
such Affiliate, not maintain bank accounts or other depository accounts
to which any such Affiliate is an account party, into which any such
Affiliate makes deposits or from which any such Affiliate has the power
to make withdrawals, and not act as an agent or representative of any
of its Affiliates in any capacity;
(viii) not permit any of its Affiliates to pay the Issuer's
operating expenses;
(ix) not guarantee any obligation of any of its Affiliates nor
have any of its obligations guaranteed by any such Affiliate (either
directly or by seeking credit based on the assets of such Affiliate),
or otherwise hold itself out as responsible for the debts of any
Affiliate;
(x) maintain at all times stationery separate from that of any
Affiliate and have all its officers and employees conduct all of its
business solely in its own name;
(xi) hold regular meetings of its board of directors in
accordance with the provisions of its Certificate of Incorporation and
otherwise take such actions as are necessary on its part to ensure that
all corporate procedures required by its Certificate of Incorporation
and Bylaws are duly and validly taken;
(xii) respond to any inquires with respect to ownership of a
Receivable by stating that it is the owner of such contributed
Receivable, and, if requested to do so, that the Trustee has been
granted a security interest in such Receivable;
(xiii) on or before March 31 of each year, beginning in 1999,
the Issuer shall deliver to the Trustee an Officer's Certificate
stating that Issuer has, during the preceding year, observed all of the
requisite company formalities and conducted its business and operations
in such a manner as required for the Issuer to maintain its separate
company existence from any other entity; and
(xiv) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the
non-consolidation opinion delivered by Issuer's counsel remain true and
correct at all times.
(l) Compliance with all Transaction Documents. The Issuer hereby
covenants and agrees to comply in all material respects with the terms of,
employ the procedures outlined in and enforce the obligations of the parties to
all of the Transaction Documents to which the Issuer is a party, and take all
such action to such end as may be from time to time reasonably requested by the
Trustee, and/or the Controlling Party, maintain all such Transaction Documents
in full force and effect and make to the parties thereto such reasonable demands
and requests for
-56-
64
information and reports or for action as the Issuer is entitled to make
thereunder and as may be from time to time reasonably requested by the Trustee.
(m) No Sales, Liens, Etc. Against Receivables and Trust Property. The
Issuer hereby covenants and agrees, except for releases specifically permitted
hereunder, not to sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, any Lien (other than the Lien created
hereby) upon or with respect to, any Receivables or Trust Estate, or any
interest in either thereof, or upon or with respect to any Account, or assign
any right to receive income in respect thereof. The Issuer shall promptly, but
in no event later than one (1) Business Day after a Responsible Officer has
obtained actual knowledge thereof, notify the Trustee of the existence of any
Lien on any Receivables or Trust Estate, and the Issuer shall defend the right,
title and interest of each of the Issuer and the Trustee in, to and under the
Receivables and Trust Estate, against all claims of third parties.
(n) No Change in Business. The Issuer covenants that it shall not make
any change in the character of its business.
(o) No Change in Name, Etc. The Issuer covenants that it shall not make
any change to its corporate name, or use any trade names, fictitious names,
assumed names or "doing business as" names.
(p) No Institution of Insolvency Proceedings. The Issuer covenants that
it shall not institute Insolvency Proceedings with respect to the Issuer or any
Affiliate thereof or consent to the institution of Insolvency Proceedings
against the Issuer or any affiliate thereof or take any action in furtherance of
any such action, or seek dissolution or liquidation in whole or in part of the
Issuer or any Affiliate thereof.
(q) No Change in Chief Executive Office or Location of Records. The
Issuer covenants that it shall maintain its principal place of business and
chief executive office, and the office where it maintains its records, at 00
Xxxxxxxxxxx Xxxxxxxxxx, Xxxxxx 00000; provided that, at any time after the
Closing Date, upon 30 days' prior written notice to each of the Servicer, the
Note Insurer and the Trustee, the Issuer may relocate its principal place of
business and chief executive office, and/or the office where it maintains all of
its records, to another location within the United States to the extent that the
Issuer shall have taken all actions necessary or reasonably requested by the
Servicer, the Trustee or the Note Insurer to amend its existing financing
statements and continuation statements, and file additional financing statements
and to take any other steps reasonably requested by the Servicer, the Trustee or
the Note Insurer to further perfect or evidence the rights, claims or security
interests of any of the Servicer, the Trustee or the Note Insurer under any of
the Transaction Documents. As of the Funding Date, each Receivable File shall be
kept by the Servicer at its offices at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx
00000, or at such other office of the Servicer permitted pursuant to Section
2.06(b).
(r) Access to Certain Documentation and Information. The Issuer shall
provide the Note Insurer, the Trustee and the Noteholders with reasonable access
to the documentation relating to the Receivables required to be maintained at
the location described in Section 7.07(q). In each case, access to documentation
relating to the Receivables shall be afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Issuer.
-57-
65
Nothing in this Section shall impair the obligation of the Issuer to observe any
applicable law prohibiting disclosure of information regarding the Obligors,
which obligation shall be evidenced by an Opinion of Counsel to such effect, and
the failure of the Issuer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.
(s) Benefit Plan. The Issuer hereby covenants and agrees to comply in
all material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Issuer covenants that it
will not, and it will cause any ERISA Affiliate to not:
(i) engage in any non-exempt prohibited transaction (within
the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the
Issuer or the Servicer;
(ii) permit to exist any accumulated funding deficiency, as
defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan of the Issuer or any ERISA affiliate which
is subject to Section 302(q) of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Issuer or any ERISA
Affiliate so as to result in any material liability to the Issuer or an
ERISA Affiliate; or
(iv) create any defined benefit plan (as defined in ERISA).
ARTICLE VIII
THE SERVICER
SECTION 8.01 REPRESENTATIONS OF SERVICER.
The Servicer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The representations
shall speak as of the execution and delivery of this Agreement and as of each
Funding Date and shall survive the grant of a security interest to the Trustee.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the State
of its incorporation, with corporate power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and now has,
corporate power, authority and legal right to acquire, own, hold, transfer,
convey and service the Receivables and to hold the Receivable Files as custodian
on behalf of the Issuer and Trustee.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) requires such qualification, licenses and approvals
except where the failure to be qualified or to obtain such qualifications,
-58-
66
licenses and approvals would not materially and adversely affect the rights or
interests of any of the Noteholders, the Note Insurer or the Trust Estate.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, and to carry out its terms; and
the execution, delivery and performance of this Agreement has been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligations. This Agreement and each of the other
Transaction Documents to which the Servicer is a party constitutes a legal,
valid and binding obligation of the Servicer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally or by general principles of equity.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and each of the other Transaction Documents and the fulfillment
of the terms of this Agreement and each of the other Transaction Documents does
not conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Servicer, or conflict with or breach
any of the material terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture, agreement or other
instrument to which the Servicer is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement); nor violate, any law, order, rule or regulation
applicable to the Servicer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties; which breach, default,
conflict, Lien or violation would have, or would have, a material adverse effect
on the rights or interests of the Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending, or
to the Servicer's knowledge, threatened, against or affecting the Servicer: (i)
asserting the invalidity of this Agreement, the Notes, or any of the other
Transaction Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or any of
the other Transaction Documents, (iii) seeking any determination or ruling that
could reasonably be expected to materially and adversely affect the performance
by the Servicer of its obligations under, or the validity or enforceability of,
this Agreement, the Notes or any of the other Transaction Documents, or (iv)
relating to the Servicer and which might adversely affect the federal income tax
attributes of the Notes.
(g) No Subsidiaries. The Servicer has no subsidiaries other than the
Issuer and Midland Funding 98-A Corporation.
(h) Not an Investment Company. The Servicer is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act, and none of the issuance of the Notes, the
execution and delivery of the Transaction Documents to which the Servicer is a
party, or the performance by the Servicer of its
-59-
67
obligations thereunder, will violate any provision of the Investment Company
Act, or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
(i) Year 2000. The Servicer represents and warrants that, to the best
of its knowledge, its computer and other systems used in servicing the
Receivables currently are capable of operating in a manner so that on and after
January 1, 2000 (i) the Servicer can service the Receivables in accordance with
the terms of this Agreement and (ii) the Servicer can operate its business in
the same manner as it is operating on the date hereof.
(j) Finders Fee. No broker, finder or financial adviser other than
Rothschild Inc. has been employed by any of the Servicer or the Issuer in
connection with the offering and sale of the Notes or the transactions
contemplated hereby and neither the Servicer nor the Issuer has incurred any
liability for fees or commissions to any person other than Rothschild Inc. in
connection with the offering and sale of the Notes or the transactions
contemplated hereby.
(k) No Violation of Securities Act. The Servicer has not offered or
sold, and will not offer or sell, any Notes in any manner that would render the
issuance and sale of the Notes a violation of the Securities Act or any state
securities or "Blue Sky" laws or require registration pursuant thereto, nor has
it authorized, nor will it authorize, any Person to act in such manner. No
registration under the Securities Act is required for the sale of the Notes as
contemplated hereby, assuming the accuracy of the Purchaser's representations
and warranties set forth in any Purchase Agreement and satisfaction by the
Placement Agent of its obligations set forth in paragraph 7 of the Placement
Agency Agreement.
(l) No Violation of Exchange Act or Regulations T, U or X. None of the
transactions contemplated in the Transaction Documents (including the use of the
proceeds from the sale of the Notes) will result in a violation of Section 7 of
the Securities and Exchange Act, or any regulations issued pursuant thereto,
including Regulations T, U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II.
SECTION 8.02 LIABILITY OF SERVICER; INDEMNITIES.
(a) Obligations. The Servicer shall be liable in accordance herewith
only to the extent of the obligations specifically undertaken by the Servicer
under this Agreement and shall have no other obligations or liabilities under
this Agreement. Such obligations shall include the following:
(i) the Servicer shall indemnify, defend and hold harmless the
Trustee, the Note Insurer and the Trust Estate from and against any
taxes that may at any time be asserted against the Trustee or the Trust
Estate with respect to the transactions contemplated in this Agreement
or any of the other Transaction Documents, including, without
limitation, any sales, gross receipts, general corporation, tangible or
intangible personal property, privilege or license taxes (but not
including any taxes asserted with respect to, and as of the date of,
the transfer of the Receivables to the Trust, the issuance and original
sale of the Notes, or asserted with respect to ownership of the
Receivables, or federal, state or local income or franchise taxes or
any other tax, or other income taxes arising out of payments on the
Notes, or any interest or penalties with respect thereto or
-60-
68
arising from a failure to comply therewith) and costs and expenses in
defending against the same;
(ii) the Servicer shall indemnify, defend and hold harmless the
Trustee, the Trust Estate, the Noteholders and the Note Insurer from
and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage
or liability arose out of, and was imposed upon the Trustee, the Trust
Estate, any Noteholder or the Note Insurer through the gross
negligence, willful misfeasance or bad faith of the Servicer in
connection with the transactions contemplated by this Agreement and the
other Transaction Documents, or by reason of the breach by the Servicer
of any of its representations, warranties or covenants hereunder or
under any of the other Transaction Documents; and
(iii) the Servicer shall indemnify, defend and hold harmless the
Trustee from and against all reasonable costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties
contained in this Agreement, except to the extent that such cost
expense, loss, claim, damage or liability: (A) shall be due to the
willful misfeasance, bad faith or gross negligence of the Trustee, (B)
shall arise from the breach by the Trustee of any of its
representations or warranties set forth in Section 10.14, (C) relates
to any tax other than the taxes with respect to which either the Issuer
or the Servicer shall be required to indemnify the Trustee, or (D)
shall arise out of or be incurred in connection with the performance by
the Trustee of the duties as the Backup Servicer under this Agreement.
(b) Expenses. Indemnification under this Section shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest,
so long as no amounts are outstanding to the Trustee then due and owing to the
Trustee by the Servicer in which event such amounts shall offset such
obligations.
(c) Survival. The provisions of this Section shall survive the
resignation or removal of the Servicer or the Trustee and the termination of
this Agreement.
(d) Successor Servicer Liability. Notwithstanding anything to the
contrary contained in this Agreement, the Successor Servicer shall have no
liability or obligation with respect to any Servicer indemnification obligations
of any prior Servicer. Upon assuming its role as Successor Servicer, the
Successor Servicer shall be responsible only for the indemnification obligations
set forth in 7.02(a).
SECTION 8.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER.
Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Servicer shall be a party, or (iii) which may succeed to all or
substantially all of the business of the Servicer, which corporation in any of
the foregoing cases executes an agreement of assumption to perform every
-61-
69
obligation of the Servicer under this Agreement, 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; provided,
however, that (i) such merger, consolidation or conversion shall not cause a
Servicer Default and (ii) prior to any such merger, consolidation or conversion
the Servicer shall have provided to the Trustee and the Noteholders a letter
from the Rating Agency indicating that such merger, consolidation or conversion
will not result in the qualification, reduction or withdrawal of the rating then
assigned to the Notes by the Rating Agency. The Servicer shall provide notice of
any merger, consolidation or succession pursuant to this Section to the Trustee,
the Noteholders, the Note Insurer, the Rating Agency and the Placement Agent.
SECTION 8.04 LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
(a) Neither the Servicer nor any of its directors, officers, employees
or agents shall be under any liability to the Note Insurer, the Trustee or the
Noteholders, except as provided in this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement, or for
errors in judgment; provided however, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence of the
Servicer in connection with the transactions contemplated by this Agreement and
any of the other Transaction Documents, or the breach by the Servicer of any of
its representations, warranties or covenants hereunder or under any of the other
Transaction Documents. The Servicer and any director, officer, employee or agent
of the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement.
(b) The Servicer shall not be under any obligation to appear in,
prosecute, or defend any legal action that shall not be incidental to its duties
to service the Receivables in accordance with this Agreement; provided, however,
that the Servicer may undertake any reasonable action that it may deem necessary
or desirable in respect of this Agreement and the rights and duties of the
parties to this Agreement and the interests of the Noteholders under this
Agreement.
(c) The Servicer and any director, officer, employee or agent of the
Servicer 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.
SECTION 8.05 SERVICER NOT TO RESIGN.
Subject to the provisions of Section 8.03, Midland Credit Management,
Inc. shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon determination that the performance of
its duties under this Agreement shall no longer be permissible under applicable
law. Notice of any such determination permitting the resignation of Midland
Credit Management, Inc. shall be communicated to the Trustee, the Note Insurer,
the Noteholders and the Rating Agency at the earliest practicable time and any
such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Noteholders concurrently with or promptly after
such notice. No such resignation shall become effective until the Backup
Servicer or a Successor Servicer shall have assumed the
-62-
70
responsibilities and obligations of Midland Credit Management, Inc. in
accordance with Sections 9.02 or 9.03.
SECTION 8.06 BACKUP SERVICING.
(a) Norwest Bank Minnesota, National Association is hereby appointed to
act as Backup Servicer with respect to this Agreement and the transactions
contemplated hereby and by the other Transaction Documents.
(b) The Servicer agrees to provide monthly to the Backup Servicer a
computer diskette or computer tape with all information necessary for the Backup
Servicer to perform all of the servicing obligations of the Servicer under this
Agreement. The Servicer further agrees to provide all updates with respect to
its computer processing necessary for the Backup Servicer to maintain a
continuous ability to fulfill the role of Successor Servicer under this
Agreement.
(c) The Backup Servicer shall assume its duties as Successor Servicer
in accordance with Sections 9.02 and 9.03 except upon determination that the
Backup Servicer is legally unable to perform the duties of the Servicer under
this Agreement as provided in Section 9.03.
(d) On or before 11 a.m., New York, New York time on each Determination
Date, the Servicer will deliver to the Backup Servicer a computer diskette (or
other electronic transmission) in a format acceptable to the Backup Servicer
containing the fields listed in Exhibit E hereto, which fields contain
information with respect to the Receivables as of the close of business on the
last day of the related Collection Period. The Backup Servicer shall not be
obligated to verify the information contained in such transmission or the
Monthly Servicer Report.
(e) Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including without
limitation 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. The duties and obligations of the Backup Servicer shall
be determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer. The Backup Servicer shall be entitled to all of the benefits and
indemnities afforded the Trustee pursuant to the provisions of this Agreement.
The Backup Servicer shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers (other than in the
ordinary course of the performance of such duties or the exercise of such rights
or powers), if the repayment of such funds or adequate written indemnity against
such risk or liability is not reasonably assured to it in writing prior to the
expenditure or risk of such funds or incurrence of financial liability.
(f) Neither the Backup Servicer nor any of its directors, officers,
employees or agents shall be under any liability to any of the parties hereto,
except as specifically provided in this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided however, that this provision shall not protect the
Backup Servicer against any misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. The
-63-
71
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
Backup Servicer and any of its directors, officers, employees or agents 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.
(g) The parties expressly acknowledge and consent to Norwest Bank
Minnesota, National Association acting in the possible dual capacity of Backup
Servicer or successor Servicer and in the capacity as Trustee. Norwest Bank
Minnesota, National Association may, in such dual capacity, discharge its
separate functions fully, without hindrance or regard to conflict of interest
principals, 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, bad faith and willful misconduct by Norwest Bank Minnesota, National
Association.
SECTION 8.07 GENERAL COVENANTS OF SERVICER.
Midland Credit Management, Inc. covenants and agrees that from the
Closing Date until it is no longer the Servicer hereunder:
[*]
(c) Related Person Transaction. Without the prior written consent of
the Controlling Party (which consent shall not be unreasonably withheld or
delayed), Servicer shall not enter into any Related Person Transaction other
than on terms that are no less favorable to Servicer than those that would have
been obtained in a comparable transaction by Servicer with a non-Related Person.
The term "Related Person" means, as to Servicer, any shareholder, director,
officer or employee thereof or any Affiliate thereof or any relative of any of
them. The term "Related Person Transaction" means (i) any sale, lease, transfer
or other disposition of Servicer's property to any Related Person, or (ii) the
purchase, lease or other acquisition by Servicer of any property from any
Related Person, or (iii) the making of any contract, agreement, understanding,
loan, advance, guarantee, or other credit support with or for the benefit of any
Related Person.
(d) Investments. The Servicer hereby covenants that it will not without
the prior written consent of the Controlling Party (which consent shall not be
unreasonably withheld or delayed), acquire or hold any indebtedness for borrowed
money of another person, or any capital stock, debentures, partnership interests
or other ownership interests or other securities of any Person,
-64-
72
other than (i) Issuer and Midland Funding 98-A Corporation, and (ii) receivables
of similar type to the Receivables.
(e) Sale of Assets. Without the prior written consent of the
Controlling Party (which consent shall not be unreasonably withheld or delayed),
Servicer shall not convey, sell, lease, license, transfer or otherwise dispose
of, in one transaction or in a series of transactions, all or substantially all
of its assets, other than with respect to securitization transactions of its
receivables.
(f) Bankruptcy. Servicer shall not take any action in any capacity to
file any bankruptcy, reorganization or Insolvency Proceedings against Issuer, or
cause Issuer to commence any reorganization, bankruptcy proceedings, or
Insolvency Proceedings under any applicable state or federal law, including
without limitation any readjustment of debt, or marshaling of assets or
liabilities or similar proceedings.
(g) Legal Existence. Servicer shall do or cause to be done all things
necessary on its part to preserve and keep in full force and effect its
existence as a corporation in the jurisdiction of its incorporation, and to
maintain each of its licenses, approvals, registrations or qualifications in all
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such licenses, approvals, registrations or qualifications;
except for failures to maintain any such licenses, approvals, registrations or
qualifications which, individually or in the aggregate, would not have a
material adverse effect on the ability of Servicer to perform its obligations
hereunder or under any of the other Transaction Documents.
(h) Compliance With Laws. Servicer shall comply in all material
respects, with all laws, rules and regulations and orders of any governmental
authority applicable to its operation, the noncompliance with which failures
which would have a material adverse effect on the business, financial condition
or results of operations of the Servicer or on the ability of the Servicer to
perform its obligations hereunder or under any of the other Transaction
Documents.
(i) Taxes. Servicer shall pay and discharge all taxes, assessments and
governmental charges or levies imposed upon Servicer or upon its income and
profits, or upon any of its property or any part thereof, before the same shall
become in default, provided that Servicer shall not be required to pay and
discharge any such tax, assessment, charge or levy so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
Servicer shall have set aside on its books adequate reserves with respect to any
such tax, assessment, charge or levy so contested, or so long as the failure to
pay any such tax, assessment, charge or levy would not have a material adverse
effect on the ability of the Servicer to perform its obligations hereunder.
(j) Financial Statements. Servicer shall maintain its financial books
and records in accordance with GAAP. Servicer shall furnish to the Note Insurer
and the Backup Servicer:
(i) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each of the calendar quarters of
each fiscal year of the Servicer, the consolidated balance sheet of the
Servicer and the related statements of income, shareholders' equity and
cash flows, each for the period commencing at the end of the
-65-
73
preceding fiscal year and ending with the end of such fiscal quarter,
prepared in accordance with GAAP consistently applied; and
(ii) Annual Statements. As soon as available and in any event
within 90 days after the end of each fiscal year of the Servicer, the
balance sheets of the Servicer and the related statements of income,
shareholder's equity and cash flows for, the fiscal year then ended,
each prepared in accordance with GAAP consistently applied and reported
on by a firm of nationally recognized independent public accountants.
(k) Compliance with all Transaction Documents. The Servicer hereby
covenants and agrees to comply in all material respects with the terms of,
employ the procedures outlined in and enforce the obligations of the parties to
all of the Transaction Documents to which the Servicer is a party, and take all
such action to such end as may be from time to time reasonably requested by the
Trustee, maintain all such Transaction Documents in full force and effect and
make to the parties thereto such reasonable demands and requests for information
and reports or for action as the Servicer is entitled to make thereunder and as
may be from time to time reasonably requested by the Trustee.
(l) No Change in Chief Executive Office or Location of Records. The
Servicer covenants that it shall maintain its principal place of business and
chief executive office, and the office where it maintains all of its records, at
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx 00000; provided that, at any time
after the Closing Date, upon 30 days' prior written notice to each of the
Issuer, the Note Insurer and the Trustee, the Servicer may relocate its
principal place of business and chief executive office, and/or the office where
it maintains all of its records, to another location within the United States to
the extent that the Servicer shall have taken all actions necessary or
reasonably requested by the Issuer, the Trustee or the Note Insurer to amend its
existing financing statements and continuation statements, and file additional
financing statements and to take any other steps reasonably requested by the
Issuer, the Trustee or the Note Insurer to further perfect or evidence the
rights, claims or security interests of any of the Issuer, the Trustee or the
Note Insurer under any of the Transaction Documents. As of the Funding Date,
each Receivable File shall be kept by the Servicer at its offices at 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxx 00000.
(m) Maintenance of Insurance. The Servicer hereby covenants and agrees
to maintain one or more policies of "all-risk" property and general liability
insurance with financially sound and reputable insurers, providing coverage in
scope and amount which is at least consistent with the scope and amount of such
insurance coverage obtained by prudent and similarly situated Persons in the
same jurisdiction and the same business as Servicer.
(n) Separate Identity. The Servicer hereby covenants and agrees to take
all actions required to maintain the Issuer's status as a separate legal entity.
Without limiting the foregoing, the Servicer shall not take any action or fail
to take any action that would result in the Issuer not satisfying any of the
following:
-66-
74
(i) Issuer shall conduct all of its business, and make all
communications to third parties (including all invoices (if any),
letters, checks and other instruments) solely in its own name (and not
as a division of any other Person), and require that its employees, if
any, when conducting its business identify themselves as such;
(ii) Issuer shall compensate all employees, consultants and
agents directly or indirectly through reimbursement of the Servicer,
from the Issuer's bank accounts, for services provided to the Issuer by
such employees, consultants and agents and, to the extent any employee,
consultant or agent of the Issuer is also an employee, consultant or
agent of the Servicer, allocate the compensation of such employee,
consultant or agent between the Issuer and the Servicer on a basis
which reflects the respective services rendered to the Issuer and the
Servicer;
(iii) Issuer shall (A) pay its own incidental administrative
costs and expenses from its own funds, (B) allocate all other shared
overhead expenses (including, without limitation, telephone and other
utility charges, the services of shared employees, consultants and
agents, and reasonable legal and auditing expenses) which are not
reflected in the Servicing Fee, and other items of cost and expense
shared between the Issuer and the Servicer, on the basis of actual use
to the extent; practicable, and to the extent such allocation is not
practicable, on a basis reasonably related to actual use or the value
of services rendered;
(iv) Issuer shall at all times have at least two independent
directors who satisfy the definition of Independent Director provided
in the Certificate of Incorporation, and have at least one officer
responsible for managing its day-to-day business and manage such
business by or under the direction of its board of directors;
(v) Issuer shall maintain its books and records separate from
those of any Affiliate;
(vi) Issuer shall prepare its financial statements separately
from those of its Affiliates and ensure that any consolidated financial
statement have notes to the effect that the Issuer is a separate entity
whose creditors have a claim on its assets prior to those assets
becoming available to its equity holders and therefore to any of their
respective creditors, as the case may be;
(vii) Issuer shall not commingle its funds or other assets
with those of any of its Affiliates (other than in respect of items of
payment or funds which may be commingled until deposit into the
Collection Account in accordance with this Agreement), and not to hold
its assets in any manner that would create an appearance that such
assets belong to any such Affiliate, not maintain bank accounts or
other depository accounts to which any such Affiliate is an account
party, into which any such Affiliate makes deposits or from which any
such Affiliate has the power to make withdrawals, and not act as an
agent or representative of any of its Affiliates in any capacity;
(viii) Issuer shall not permit any of its Affiliates to pay
the Issuer's operating expenses;
-67-
75
(ix) Issuer shall not permit Issuer to guarantee any
obligation of any of its Affiliates nor have any of its obligations
guaranteed by any such Affiliate (either directly or by seeking credit
based on the assets of such Affiliate), or otherwise hold itself out as
responsible for the debts of any Affiliate;
(x) Issuer shall maintain at all times stationery separate
from that of any Affiliate and have all its officers and employees
conduct all of its business solely in its own name;
(xi) Issuer shall hold regular meetings of its board of
directors in accordance with the provisions of its Certificate of
Incorporation and otherwise take such actions as are necessary on its
part to ensure that all company procedures required by its Certificate
of Incorporation and Bylaws are duly and validly taken;
(xii) Issuer shall respond to any inquires made directly to it
with respect to ownership of a Receivable by stating that it is the
owner of such contributed Receivable, and, if requested to do so, that
the Trustee has been granted a security interest in such Receivable;
and
(xiii) Issuer shall take such other actions as are necessary
on its part to ensure that the facts and assumptions set forth in the
non-consolidation opinion delivered by Issuers counsel remain true and
correct at all times.
(o) Benefit Plan. The Servicer hereby covenants and agrees to comply in
all material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Servicer covenants that it
will not, and it will cause any ERISA Affiliate to not:
(i) engage in any non-exempt prohibited transaction (within
the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the
Servicer;
(ii) permit to exist any accumulated funding deficiency, as
defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan of the Servicer or any ERISA affiliate
which is subject to Section 302 of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Servicer or any ERISA
Affiliate so as to result in any material liability to the Servicer or
an ERISA Affiliate; or
(iv) create any defined benefit plan (as defined in ERISA).
-68-
76
ARTICLE IX
SERVICER DEFAULT; EVENTS OF DEFAULT; REMEDIES
SECTION 9.01 SERVICER DEFAULT.
For purposes of this Agreement, each of the following shall constitute
a "Servicer Default":
(a) any failure by the Servicer to deliver to the Trustee or the Note
Insurer the Monthly Servicer Report for the related Collection Period, or any
failure by the Servicer to make any payment, transfer or deposit, or deliver to
the Trustee any proceeds or payment required to be so delivered under the terms
of the Notes, this Agreement or any of the other Transaction Documents to which
it is a party, or to make any payment of the Note Insurer Obligations on the day
when due, in each case that continues unremedied for a period of one Business
Day after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer, or (y) the date on which written notice requiring the same to
be remedied has been given to the Servicer by the Trustee or the Controlling
Party; or
(b) any failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer set forth in the Notes, this
Agreement, the Insurance Agreement, or any of the other Transaction Documents to
which the Servicer is a party, which failure (i) would have a material adverse
effect on the rights or interests of the Note Insurer, the Noteholders, the
Trustee or the Trust Estate and (ii) continues unremedied for a period of 30
days after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Controlling Party or the Trustee; or the Servicer delegates its duties under the
Notes, this Agreement, the Insurance Agreement or any of the other Transaction
Documents to which it is a party, except as specifically permitted pursuant to
Section 9.07, and such delegation continues unremedied for a period of 15 days
after written notice, requiring such delegation to be remedied, shall have been
given to the Servicer by the Trustee or the Controlling Party; or
(c) the entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a trustee
in bankruptcy, conservator, receiver or liquidator for the Servicer in any
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of
their respective affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 30 consecutive days; or
(d) the consent by the Servicer to the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Servicer or substantially all of its property,
or the Servicer shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations; or
-69-
77
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
(e) any representation, warranty or certification made by Midland
Credit Management, Inc. in this Agreement, the Insurance Agreement or in any
other Transaction Document to which it is a party, or in any certificate
delivered pursuant to this Agreement, the Insurance Agreement or in any other
Transaction Document to which it is a party, proves to have been incorrect when
made, which (i) would have a material adverse effect on the rights of the
Noteholders, the Note Insurer or the Trust Estate, respectively (without regard
to any amount deposited in the Reserve Account), and (ii) if capable of remedy,
continues unremedied for a period of 30 days after the earlier to occur of (x)
actual discovery by a Responsible Officer of the Servicer or (y) the date on
which written notice thereof, requiring the same to be remedied, shall have been
given to the Servicer by the Controlling Party or the Trustee; or
[*]
-70-
78
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
[*]
Notwithstanding the foregoing, the cure periods referred to in each of clauses
(a), (f) and (h) above may be extended for an additional period of five Business
Days each, or such longer period not to exceed 30 Business Days as may be
acceptable to the Controlling Party, if such delay or failure was caused by an
act of God or other similar occurrence. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Trustee, the Note Insurer, the Rating Agency,
the Placement Agent and the Noteholders prompt notice of such failure or delay
by it, together with a description of its effort to so perform its obligations.
The Servicer shall notify the Trustee and the Note Insurer in writing of any
Servicer Default that it discovers within one Business Day of such discovery.
The Trustee shall have no duty or obligation to determine whether or not a
Servicer Default has occurred.
SECTION 9.02 CONSEQUENCES OF A SERVICER DEFAULT.
(a) If a Servicer Default shall occur and be continuing, so long as
such Servicer Default has not been cured or waived pursuant to Section 9.05, the
Trustee shall, upon the direction of the Controlling Party, by notice then given
in writing to the Servicer and the Note Insurer terminate all (but not less than
all) of the rights and obligations of the Servicer, as Servicer under this
Agreement and the other Transaction Documents, and in and to the Receivables and
proceeds thereof. On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes, the Receivables, the Transaction Documents or
otherwise, shall, without further action, pass to and be vested in the Backup
Servicer pursuant to and under this Section or such Successor Servicer as may be
appointed under Section 9.03; and, without limitation, the Backup Servicer or
such Successor Servicer shall be hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivables and related documents, or otherwise. The predecessor Servicer shall
cooperate with the Backup Servicer or the Successor Servicer, as applicable, in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including, without limitation, the transfer to
the Backup Servicer or the Successor Servicer, as applicable, for administration
by it of all cash amounts that shall at the time be held by the predecessor
Servicer for deposit with respect to the Receivables, or have been deposited by
the predecessor Servicer in the Accounts with respect to the Receivables or
thereafter received by the predecessor Servicer with respect to the Receivables.
All reasonable costs and expenses (including reasonable attorneys' fees)
incurred in connection with transferring the Receivable Files to the Backup
Servicer or the Successor Servicer, as applicable, and amending this Agreement
to reflect such succession as Servicer pursuant to this Section shall be paid
first, pursuant to Section 4.04(b)(ii),
-71-
79
and second, by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses; provided, however, that the amount of
such costs and expenses shall not exceed $75,000 (the amount of such costs and
expenses are referred to herein as the "Transition Fees").
(b) In addition to the remedial provisions set forth in clause (a)
above, and not by way of limitation of any remedies to which any of the Trustee,
the Note Insurer or the Noteholders are entitled upon the occurrence of a
Servicer Default, the Issuer and the Servicer acknowledge and agree that, so
long as a Servicer Default shall occur and be continuing, and such Servicer
Default has not been cured or waived pursuant to Section 9.05, the Trustee
shall, upon the direction of the Controlling Party by notice then given in
writing to the Servicer and the Note Insurer, direct the Servicer (or Backup
Servicer or Successor Servicer as the case may be) to (x) deposit all checks and
other items of collections received in respect of Receivables directly into an
Account immediately upon receipt, and/or (y) instruct each Obligor to remit all
collections in respect of receivables directly to an Account designated for such
purpose.
SECTION 9.03 BACKUP SERVICER TO ACT; APPOINTMENT OF SUCCESSOR SERVICER.
On and after the time the Servicer receives a notice of termination
pursuant to Section 9.02 or tenders its resignation pursuant to Section 8.05,
the Backup Servicer shall, by an instrument in writing, assume the rights and
responsibilities of the Servicer in its capacity as Servicer under this
Agreement and the Insurance Agreement and the transactions set forth or provided
for in this Agreement and the Insurance Agreement, and shall be subject to all
the responsibilities, restrictions, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions of this Agreement and the
Insurance Agreement; provided, however, that the Backup Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession or for any breach by the Servicer of any of its representations and
warranties contained in this Agreement, in the Insurance Agreement or in any
related Transaction Document. Notwithstanding any other Section in this
Agreement to the contrary, should the Backup Servicer by any means become
successor servicer, the Backup Servicer shall not inherit any of the
indemnification obligations of any prior servicer including the original
servicer. The indemnification obligations of the Backup Servicer, upon becoming
a successor Servicer are expressly limited to the indemnification of the
Trustee, the Trust Estate, the Noteholders and the Note Insurer from and against
any and all costs, expenses, losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose out of,
and was imposed upon, the Trustee, the Trust Estate, any Noteholder or the Note
Insurer through the gross negligence, willful misfeasance or bad faith of the
Backup Servicer in its capacity as successor Servicer in connection with the
transactions contemplated by this Agreement and the other Transaction Documents.
As compensation therefor, the Backup 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, plus any additional
amounts determined in the manner set forth below, if no such notice of
termination or resignation had been given. Notwithstanding anything herein to
the contrary, Norwest Bank Minnesota, National Association shall not resign from
the obligations and duties imposed on it as Backup Servicer under this Agreement
except upon determination that the performance of its duties under this
-72-
80
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of Norwest Bank Minnesota,
National Association shall be communicated to the Trustee, the Noteholders, the
Note Insurer, and the Rating Agency at the earliest practicable time and any
such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Noteholders concurrently with or promptly after
such notice. In the event the Backup Servicer is unable or unwilling so to act,
it shall appoint or petition a court of competent jurisdiction to appoint any
established institution having a net worth of not less than $5,000,000 and whose
regular business includes the servicing of consumer receivables as a successor
servicer (a "Successor Servicer"). In connection with such appointment and
assumption, or the assumption by the Backup Servicer of the status of Successor
Servicer, the Backup Servicer may make such arrangements for the compensation of
such Successor Servicer (including itself) out of payments on or in respect of
the Receivables as determined in accordance with the next sentence. Any
Successor Servicer appointed pursuant to this Section 9.03 must have, and must
certify that it has, computer systems that will be used in its duties as
Servicer which will properly utilize dates beyond December 31, 1999, and shall
be entitled to compensation equal to the greater of (A) the Servicing Fee and
(B) the current "market rate" paid for servicing receivables similar to the
Receivables which rate shall be determined by averaging bids obtained from not
less than three entities experienced in the servicing of receivables similar to
the Receivables and that are not Affiliates of the Trustee, the Backup Servicer,
the Servicer or the Issuer and are reasonably acceptable to the Note Insurer;
provided however, that no such compensation shall be in excess of an amount
acceptable to the Controlling Party and the Rating Agency and provided that if
the Successor Servicer is an Affiliate of the Trustee, such fees will not exceed
the greater of the Servicing Fee or the lowest of the three bids obtained as
provided in this sentence. The Backup Servicer and such Successor Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Backup Servicer shall not be relieved of its
duties as Successor Servicer under this Section until the newly appointed
Successor Servicer shall have assumed the responsibilities and obligations of
the Servicer under this Agreement.
SECTION 9.04 NOTIFICATION TO NOTE INSURER, NOTEHOLDERS, RATING AGENCY
AND PLACEMENT AGENT.
Upon a Responsible Officer of the Trustee obtaining actual knowledge of
(i) the occurrence of a Servicer Default and the expiration of any cure period
applicable thereto or (ii) any termination of, or appointment of a successor to,
the Servicer pursuant to this Agreement, the Trustee shall give prompt written
notice thereof to Noteholders at their respective addresses appearing in the
Note Register and to the Rating Agency, the Note Insurer and the Placement
Agent.
SECTION 9.05 WAIVER OF PAST SERVICER DEFAULTS.
The Trustee shall at the direction of the Controlling Party waive any
Servicer Default or other default by the Servicer in the performance of its
obligations hereunder and its consequences, except a default in making any
required deposits to or payments from the Accounts in accordance with this
Agreement or in respect of a covenant or provision of this Agreement that under
Section 12.01 cannot be modified or amended without the consent of each
-73-
81
Noteholder. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default 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 except to the
extent expressly so waived.
SECTION 9.06 [RESERVED]
SECTION 9.07 SUBSERVICERS.
(a) The Backup Servicer may, at its own expense, enter into
subservicing agreements with subservicers (the "Subservicers") for the servicing
and administration of all or any part of the Receivables. References in this
Agreement to actions taken or to be taken by the Backup Servicer in servicing
and managing the Receivables include actions taken by a Subservicer on behalf of
the Backup Servicer. Each Subservicer shall be authorized to transact business
in the state or states in which the related Receivables it is to service or
manage are situated, if and to the extent required by applicable law to enable
the Subservicer to perform its obligations hereunder and under the applicable
subservicing agreement. Each subservicing agreement shall be upon such terms and
conditions as are not inconsistent with this Agreement and as to which the
Backup Servicer and the Subservicer have agreed. For purposes of this Agreement,
the Backup Servicer shall be deemed to have received any payment when the
Subservicer receives such payment. The Backup Servicer shall notify the Trustee,
the Issuer, the Note Insurer and the Rating Agency in writing promptly upon the
appointment of any Subservicer.
(b) As part of its servicing activities hereunder, the Backup Servicer,
for the benefit of the Trustee, the Note Insurer and the Noteholders, shall
enforce the obligations of each Subservicer under the related subservicing
agreement. Such enforcement, including, without limitation, the legal
prosecution of claims, termination of subservicing agreements and pursuit of
other appropriate remedies, shall be in accordance with the servicing standards
set forth herein. The Backup Servicer shall pay the costs of such enforcement at
its own expense and shall be reimbursed therefor only from (i) a general
recovery resulting from such enforcement only to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Receivables, or (ii)
a specific recovery of costs, expenses or attorneys fees against the party
against whom such enforcement is directed.
(c) Notwithstanding any subservicing agreement any of the provisions of
this Agreement relating to agreements or arrangements between the Backup
Servicer and a Subservicer, or reference to actions taken through a Subservicer
or otherwise, the Back-up Servicer shall remain obligated and liable to the
Trustee, the Note Insurer and the Noteholders for the servicing, managing,
collecting and administering of the Receivables and the other assets included in
the Trust Estate in accordance with the provisions of Section 2.1 without
diminution of such obligation or liability by virtue of such subservicing
agreement or arrangements or by virtue of indemnification from a Subservicer and
to the same extent and under the same terms and conditions as if the Backup
Servicer alone were servicing, managing, collecting and administering the
Receivables and the other assets included in the Trust Estate.
-74-
82
SECTION 9.08 EVENTS OF DEFAULT.
"Event of Default" wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest, premiums or any other
amounts due and owing on any Note or in respect of the Note Insurer Obligations
(which default continues for a period of two Business Days) or failure to pay
the Notes or the Note Insurer Obligations in full on or before the Final
Maturity Date;
(b) the Note Insurer is required to make a payment under the Policy;
(c) if the Issuer shall breach or default in the due observance of any
of the covenants of the Issuer set forth in Section 7.07, other than the
covenants contained in Subsections (e), (f) or (h) thereof;
(d) if the Issuer shall breach or default in the due observance or
performance of, any other of its covenants in this Agreement, which breach or
default would have a material adverse effect on the rights or interests of the
Note Insurer or the Noteholders, and such default shall continue for a period of
30 days after the earlier to occur of (x) actual discovery by a Responsible
Officer of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Note Insurer or the Trustee;
(e) if any representation or warranty of the Issuer made in this
Agreement or any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to have been breached in any material respect as
of the time when the same shall have been made or deemed made, which breach
would have a material adverse effect on the rights or interests of the Note
Insurer or the Noteholders, and such breach shall continue for a period of 30
days after the earlier to occur of (x) actual discovery by a Responsible Officer
of the Servicer or (y) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Note Insurer or the Trustee;
(f) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
30 consecutive days; or
(g) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or the consent by
the Issuer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property or the making by the Issuer of
an assignment for
-75-
83
the benefit of creditors or the failure by the Issuer generally to pay its debts
as such debts become due or the taking of corporate action by the Issuer in
furtherance of any of the foregoing;
(h) the occurrence and continuation of a Servicer Default;
(i) The IRS or the PBGC shall have filed notice of one or more Adverse
Claims against the Servicer, the Issuer or any of their ERISA Affiliates under
ERISA or the Code, which constitutes a Lien on the Receivables, and such notice
shall have remained in effect for more than thirty (30) Business Days unless,
prior to the expiration of such period, such Adverse Claims shall have been
adequately bonded by such Servicer, Issuer, or the ERISA Affiliate (as the case
may be) in a transaction with respect to which the Controlling Party has given
its prior written approval; or
(j) The Issuer or the Trust Estate shall have become subject to
registration as an "investment company" within the meaning of the Investment
Company Act as determined by a court of competent jurisdiction in a final and
non-appealable order.
SECTION 9.09 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in
every such case, so long as such Event of Default has not been cured or
waived pursuant hereto, the Trustee shall, upon the direction of the
Controlling Party, by notice then given in writing to the Issuer, the
Servicer and the Note Insurer, declare all of the Notes to be
immediately due and payable and upon on any such declaration such
Notes, in an amount equal to the Note Balance of such Notes, together
with accrued and unpaid interest thereon to the date of such
acceleration, and together with all unpaid Trustee Fees, Backup
Servicing Fees, and Servicing Fees, shall become immediately due and
payable. At any time after such a declaration of acceleration of
maturity of the Notes has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Note Insurer by written
notice to the Issuer and the Trustee, may rescind and annul such
declaration and its consequences if:
(a) the Issuer has paid or deposited with the Trustee a sum sufficient
to pay:
(i) all payments of principal of, and interest on, all Notes
and all other amounts which would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had not
occurred; and
(ii) all sums paid by the Trustee hereunder and the reasonable
compensation, expenses and disbursements of the Trustee, its agents and
counsel; and
(b) all Events of Default, other than the nonpayment of the principal
of Notes which have become due solely by such acceleration, have been cured or
waived as provided in Section 9.21.
-76-
84
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 9.10 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
Subject to the following sentence, if an Event of Default occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Note Insurer and the Noteholders by any proceedings
the Trustee deems appropriate to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Agreement or
in aid of the exercise of any power granted herein, or enforce any other proper
remedy. Any proceedings brought by the Trustee on behalf of the Note Insurer or
the Noteholders or by the Note Insurer or any Noteholder against the Issuer
shall be limited to the preservation, enforcement and foreclosure of the liens,
assignments, rights and security interests under this Agreement and the other
Transaction Documents and no attachment, execution or other suit or process
shall be sought, issued or levied upon any assets, properties or funds of the
Issuer, other than the Trust Estate relative to the Notes in respect of which
such Event of Default has occurred. If there is a foreclosure of any such liens,
assignments, rights and security interests under this Agreement, by private
power of sale or otherwise, no judgment for any deficiency upon the indebtedness
represented by the Notes may be sought or obtained by the Trustee or any
Noteholder against the Issuer. The Trustee shall be entitled to recover the
costs and expenses expended by it pursuant to this Section 9.10 including
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 9.11 REMEDIES.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee (subject to
Section 9.24, to the extent applicable) shall, at the direction of the
Controlling Party, and may (with the written consent of the Controlling Party)
at its discretion, do one or more of the following:
(a) institute proceedings for the collection of all amounts then
payable on the Notes, or under this Agreement or under any of the other
Transaction Documents, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer monies adjudged due, subject in all cases
to the provisions of Section 9.10;
(b) in accordance with Section 9.24, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute proceedings from time to time for the complete or partial
foreclosure of this Agreement with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the UCC and take any
other appropriate action to protect and enforce the rights and remedies of the
Trustee, the Note Insurer or the Noteholders hereunder subject in all cases to
the provisions of Section 9.10; and
-77-
85
(e) refrain from selling the Trust Estate and apply all Available Funds
pursuant to Section 9.14.
SECTION 9.12 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of any overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise to:
(a) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and the Note Insurer
Obligations and file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Noteholders allowed in such
Proceeding, and
(b) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such proceeding is hereby authorized by each Noteholder and the Note Insurer
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 10.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder or the
Note Insurer any plan of reorganization, arrangement, adjustment or composition
affecting any of the Notes or the rights of any Noteholder or the Note Insurer,
or to authorize the Trustee to vote in respect of the claim of any Noteholder or
the Note Insurer in any such Proceeding.
SECTION 9.13 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Agreement or any of the
Notes or any of the other Transaction Documents may be prosecuted and enforced
by the Trustee without the possession of any of the Notes or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the Noteholders
in respect of which such judgment has been recovered and shall be paid as
provided in Section 9.14.
-78-
86
SECTION 9.14 APPLICATION OF MONEY COLLECTED.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to such Notes pursuant
to this Article or otherwise and any other monies that may then be held or
thereafter received by the Trustee as security for such Notes shall be treated
like Available Funds and applied as provided in Section 4.04(b).
SECTION 9.15 LIMITATION ON SUITS.
No Noteholder shall have any right to institute any proceedings,
judicial or otherwise, with respect to this Agreement, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Noteholder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Noteholders representing not less than 25% of the Voting
Interests shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder (and such request shall have not been rescinded);
(c) such Noteholders have offered to the Trustee indemnity in full
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding;
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Controlling Party; and
(f) for so long as no Insurer Default is then in effect, the Note
Insurer shall have given its written consent to the Trustee to the pursuit by
the Trustee of such remedies;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Agreement, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders, each representing
less than 50% of the Voting Interests, and the Trustee shall not have received
any conflicting or inconsistent requests and indemnity from the Note Insurer at
such time, the Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
-79-
87
SECTION 9.16 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST.
Subject to the provisions in this Agreement (including Section 9.10)
limiting the right to recover amounts due on a Note to recovery from amounts in
the Trust Estate, the Noteholder shall have the right to the extent permitted by
applicable law, which right is absolute and unconditional, to receive payment of
principal of and interest on such Note on the Final Payment Date and to
institute suit for the enforcement of any such payment and such right shall not
be impaired without the consent of such Noteholder.
SECTION 9.17 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, the Note Insurer or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Noteholder, then and in every
such case the Issuer, the Trustee, the Note Insurer and the Noteholders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
proceeding had been instituted.
SECTION 9.18 RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee, to
the Note Insurer or to the Noteholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 9.19 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, of the Note Insurer or of any
Noteholder to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee, to the Note Insurer or to the Noteholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Note Insurer or by the Noteholders, as the case may be.
SECTION 9.20 CONTROL BY CONTROLLING PARTY.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law, with
this Agreement or any inconsistent direction of the Controlling Party;
-80-
88
(b) any direction by Noteholders (if the Note Insurer is not the
Controlling Party) to the Trustee to undertake a Sale of the Trust Estate shall
be by the Noteholders representing the percentage of the outstanding Note
Balance of the Outstanding Notes specified in Section 9.24(b)(i), unless Section
9.24(b)(ii) is applicable; and
(c) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; provided, however, that, subject
to Section 10.01, the Trustee need not take any action which it determines might
involve it in liability or be unjustly prejudicial to the Noteholders not
consenting.
SECTION 9.21 WAIVER OF PAST DEFAULTS.
The Controlling Party may on behalf of the Noteholders of all
the Notes waive any past default hereunder and its consequences, except
a default:
(a) in the payment of any installment of principal of or interest on,
any Note; or
(b) in respect of a covenant or provision hereof which under Section
12.01 cannot be modified or amended without the consent of the Noteholders.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 9.22 UNDERTAKING FOR COSTS.
All parties to this Agreement agree, and each Noteholder by his
acceptance of a Note hereunder shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Agreement, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 9.22 shall not apply to any suit instituted by the
Trustee or the Note Insurer, to any suit instituted by any Noteholder, or group
of Noteholders representing more than 30% of the Voting Interests, or to any
suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on the Final Maturity Date.
SECTION 9.23 WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension of law wherever enacted,
now or at any time hereafter in force, which may affect the covenants in, or the
performance of, this Agreement; and the Issuer (to the extent that
-81-
89
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 9.24 SALE OF TRUST ESTATE.
(a) The power to effect any sale (a "Sale") of any portion of the Trust
Estate pursuant to Section 9.11 shall not be exhausted by any one or more Sales
as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Notes and under this Agreement with respect thereto, and all Note
Insurer Obligations shall have been paid. The Trustee may from time to time
postpone any public Sale by public announcement made at the time and place of
such Sale.
(b) To the extent permitted by law, the Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(i) the Controlling Party shall consent to, or direct the
Trustee to make such Sale; or
(ii) to the extent that an Insurer Default is then in effect,
the proceeds of such Sale would be not less than the sum of all amounts
due to the Trustee hereunder and the entire amount which would be
distributable to the Note Insurer and the Noteholders, in full payment
thereof in accordance with Section 9.14, on the Payment Date next
succeeding the date of such Sale, together with any amounts then owing
to the Note Insurer.
The purchase by the Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or disposition thereof for purposes
of this Section 9.24(b).
(c) Unless the Controlling Party has otherwise consented or directed
the Trustee, at any public Sale of all or any portion of the Trust Estate at
which a minimum bid equal to or greater than the amount described in paragraph
(ii) of subsection (b) of this Section 9.24 has not been established by the
Trustee and no Person bids an amount equal to or greater than such amount, the
Trustee shall prevent such sale and bid an amount at least $1.00 more than the
highest other bid in order to preserve the Trust Estate.
(d) In connection with a Sale of all or any portion of the Trust
Estate:
(i) any of the Noteholders or the Note Insurer may bid for and
purchase the property offered for Sale, and upon compliance with the
terms of sale may hold, retain and possess and dispose of such
property, without further accountability, and may, in paying the
purchase money therefor, deliver any of the Notes or claims for
interest thereon in lieu of cash up to the amount which shall, upon
distribution of the Net Proceeds of such Sale, be payable thereon, and
such Notes, in case the amounts so payable thereon shall be less than
the amount due thereon, shall be returned to the holders thereof after
being appropriately stamped to show such partial payment;
-82-
90
* Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential treatment
request.
(ii) the Trustee may bid for and acquire the property offered
for Sale in connection with any public Sale thereof, and, in lieu of
paying cash therefor, may make settlement for the purchase price by
crediting the gross Sale price against the sum of (A) the amount which
would be distributable to the Noteholders and the Note Insurer as a
result of such Sale in accordance with Section 9.14 on the Payment Date
next succeeding the date of such Sale and (B) the expenses of the Sale
and of any proceedings in connection therewith which are reimbursable
to it, without being required to produce the Notes in order to complete
any such Sale or in order for the net Sale price to be credited against
such Notes, and/or the Note Insurer Obligations, and any property so
acquired by the Trustee shall be held and dealt with by it in
accordance with the provisions of this Agreement;
(iii) the Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(iv) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and
to take all action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be bound
to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(e) Notwithstanding anything in this Agreement to the contrary, if an
Event of Default specified in Section 9.08(a) is the Event of Default, or one of
the Events of Default, on the basis of which the Notes have been declared due
and payable, then the Trustee shall, at the direction of the Controlling Party,
sell the Trust Estate without compliance with this Section 9.24.
[*]
SECTION 9.25 ACTION ON NOTES.
The Trustee's right to seek and recover judgment under this Agreement
shall not be affected by the seeking, obtaining or application of any other
relief under or with respect to this Agreement. Neither the Lien of this
Agreement nor any rights or remedies of the Trustee, the Note Insurer or the
Noteholders shall be impaired by the recovery of any judgment by the
-83-
91
Trustee against the Issuer or by the levy of any execution under such judgment
upon any portion of the Trust Estate.
SECTION 9.26 NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF THE
ISSUER.
The Trust Estate granted to the Trustee as security for the Notes
serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
SECTION 9.27 LICENSE.
Servicer hereby licenses to each Successor Servicer on a non-exclusive
basis, a copy of the Servicer's software currently in use by Servicer for the
collection of accounts by Servicer, solely for the limited purpose of collecting
the Receivables. The licensee shall have no right to copy the software or
sub-license or assign this license except to another Successor Servicer. The
licensee shall not be obligated to pay any royalty or other fee to Servicer for
such license.
ARTICLE X
THE TRUSTEE
SECTION 10.01 DUTIES OF TRUSTEE.
(a) The Trustee, both prior to and after the occurrence of a Servicer
Default, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. The Trustee shall exercise such of the
rights and powers vested in it by this Agreement and use the same degree of care
and skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; provided, however, that
if the Trustee in its capacity as Backup Servicer assumes the duties of the
Servicer pursuant to Section 9.02 or 9.03, the Trustee in performing such duties
shall use the degree of skill and attention customarily exercised by a servicer
with respect to defaulted consumer receivables that it services for itself or
others.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Agreement shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, its own bad faith or its own willful misfeasance; provided, however,
that:
-84-
92
(i) prior to the occurrence of a Servicer Default actually
known to a Responsible Officer of the Trustee, and after the curing or
waiving of all such Servicer Defaults that may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied rights or
obligations shall be read into this Agreement against the Trustee, the
permissive right of the Trustee to do things enumerated in this
Agreement shall not be construed as a duty and, in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in performing
its duties in accordance with the terms of this Agreement; and
(iii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken in good faith in
accordance with
(A) the direction or consent of the Note Insurer (to
the extent that an Insurer Default is not then in
effect), or
(B) the direction of Noteholders evidencing not less
than 25% of the Voting Interests (unless a
different percentage is otherwise specifically set
forth herein with respect to any applicable
action), together with the written consent of the
Note Insurer (to the extent that an Insurer
Default is not then in effect),
in each case relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
under this Agreement, or in the exercise of any of its rights or powers, if
there shall be reasonable grounds for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee in its capacity as Backup Servicer shall be
the successor to, and be vested with the rights, duties, powers and privileges
of, the Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or to impair the value of any
Receivable.
-85-
93
(f) All information obtained by the Trustee regarding the Obligors and
the Receivables, whether upon the exercise of its rights under this Agreement or
otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, unless such disclosure is required by this
Agreement or any applicable law or regulation.
SECTION 10.02 TRUSTEE'S CERTIFICATE.
On or as soon as practicable after each date on which the Servicer or
Issuer acquires Removed Receivables, the Trustee, upon receipt of written notice
of such acquisition, shall submit to the Servicer or the Issuer, as applicable,
a Trustee's Certificate (substantially in the form attached hereto as Exhibit
B), identifying the acquirer and the Receivables so acquired, executed by the
Trustee and completed as to its date and the date of this Agreement, and
accompanied by a copy of the Monthly Servicer Report and the Servicer's
Remittance Date Certificate for the related Collection Period. The Trustee's
Certificate submitted with respect to such Payment Date shall operate, as of
such Payment Date, as an assignment without recourse, representation or
warranty, to the Issuer or the Servicer, as the case may be, of all the
Trustee's right, title and interest in and to such Removed Receivable and to the
other property conveyed to the Trust Estate pursuant to Section 2.01 with
respect to such Removed Receivable, and all security and documents relating
thereto, such assignment being an assignment outright and not for security.
SECTION 10.03 TRUSTEE'S RELEASE OF REMOVED RECEIVABLES.
With respect to all Removed Receivables, the Trustee shall, by a
Trustee's Certificate (substantially in the form attached hereto as Exhibit B)
release, all the Trustee's right, title and interest in and to each Removed
Receivable and the other property included in the Trust Estate pursuant to
Section 2.01 with respect to such Removed Receivable, and all security and any
documents relating thereto; and the Issuer or the Servicer, as applicable, shall
thereupon own each such Removed Receivable, and all such related security and
documents, free of any further obligation to the Trustee or the Note Insurer or
the Noteholders with respect thereto. If in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Removed Receivable on
the ground that it is not a real party in interest or a holder entitled to
enforce such Removed Receivable, the Trustee on behalf of the Note Insurer and
the Noteholders shall, at the Servicer's written direction and expense, take
such reasonable steps as the Trustee deems necessary to enforce the Removed
Receivable, including bringing suit in the Trustee's name or the names of the
Note Insurer or of the Noteholders.
SECTION 10.04 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 10.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
-86-
94
(ii) the Trustee may consult with counsel and any advice of
counsel or Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by
it under this Agreement in good faith and in accordance with such
advice of counsel or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or in
relation to this Agreement, at the request, order or direction of the
Note Insurer or any of the Noteholders pursuant to the provisions of
this Agreement, unless the Note Insurer or any such Noteholders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities that may be incurred therein or
thereby (the general obligation of an institutional investor that is
investment grade rated being sufficient indemnity); nothing contained
in this Agreement shall, however, relieve the Trustee of the
obligations, upon the occurrence of a Servicer Default actually known
to a Responsible Officer of the Trustee (that shall not have been cured
or waived), to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of a Servicer Default and after
the curing or waiving of all Servicer Defaults that may have occurred,
the Trustee shall not be bound to make any investigation into the facts
of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, Consent order, approval,
bond or other paper or document, unless requested in writing to do so
by the Note Insurer or the Noteholders evidencing not less than 25% of
the Voting Interests; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee
may require reasonable indemnity against such cost, expense or
liability as a condition to so proceeding; the reasonable expense of
every such examination shall be paid by the Issuer or, if paid by the
Trustee, shall be reimbursed by the Issuer upon demand; and nothing in
this clause shall derogate from the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information
regarding the Obligors; and
(vi) the Trustee may execute any of the trusts or powers under
this Agreement or perform any duties under this Agreement either
directly or by or through agents or attorneys or a custodian and shall
not be liable or responsible for the misconduct or negligence of any of
its agents or attorneys or a custodian appointed with due care by the
Trustee.
-87-
95
(b) No Noteholder will have any right to institute any proceeding with
respect to this Agreement, unless such Noteholder shall have given to the
Trustee written notice of default and shall have obtained the prior written
consent of the Note Insurer to the institution of such proceeding (in the event
that no Insurer Default is in effect at such time) and (i) the Servicer Default
arises from the Servicer's failure to remit collections or payments when due or
(ii) Noteholders evidencing not less than 25% of the Voting Interests have made
written request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder, and have offered to the Trustee reasonable indemnity, and
the Trustee for 30 days has neglected or refused to institute any such
proceedings.
SECTION 10.05 LIMITATION ON TRUSTEE'S LIABILITY.
The Trustee makes no representations as to the validity or sufficiency
of this Agreement or of the Notes (other than the certificate of authentication
thereon, as applicable), or of any Receivable or related document. The Trustee
shall have no obligation to perform any of the duties of the Issuer or the
Servicer unless explicitly set forth in this Agreement. The Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any security interest in any Receivable, or the
perfection and priority of such a security interest or the maintenance of any
such perfection and priority, or for or with respect to the efficacy of the
Trust Estate or its ability to generate the payments to be paid to Noteholders
and the Note Insurer under this Agreement, including without limitation the
existence and contents of any Receivable or any computer file or other record
thereof; the validity of the assignment of any Receivable to the Trustee or of
any intervening assignment; the completeness of any Receivable; the performance
or enforcement of any Receivable; the compliance by the Issuer or the Servicer
with any covenant or the breach by the Issuer or the Servicer of any warranty or
representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any noncompliance therewith or any breach
thereof, any investment of monies by the Issuer or any loss resulting therefrom
(it being understood that the Trustee shall remain responsible as Trustee for
any property that it may hold as part of the Trust Estate); the acts or
omissions of the Issuer, the Servicer or any Obligor; any action of the Servicer
taken in the name of or as the agent of the Trustee; or any action by the
Trustee taken at the instruction of the Servicer; provided however, that the
foregoing shall not relieve the Trustee of its obligation to perform its duties
under this Agreement. Except with respect to a claim based on the failure of the
Trustee to perform its duties under this Agreement or based on the Trustee's
gross negligence, willful misconduct or bad faith, no recourse shall be had for
any claim based on any provision of this Agreement, the Notes or any Receivable
or assignment thereof against the institution serving as Trustee in its
individual capacity. The Trustee shall not have any personal obligation,
liability or duty whatsoever to any Noteholder, the Note Insurer or any other
Person with respect to any such claim, and any such claim shall be asserted
solely against the Trust Estate or any indemnitor who shall furnish indemnity as
provided in this Agreement. The Trustee shall not be accountable for the use or
application by the Issuer of the Notes or the proceeds thereof, if any, or for
the use or application of any funds paid to or collected by the Servicer in
respect of the Receivables. The Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder (unless the Trustee
-88-
96
in its capacity as Backup Servicer shall have become the Successor Servicer) or
to prepare or file any Securities and Exchange Commission filing with respect to
the Notes or to record this Agreement.
The recitals contained in this Agreement and in the Notes, except the
certificates of authentication on the Notes, shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness or
completeness. The Trustee makes no representations as to the validity or
condition of any Trust Estate or any part thereof, or as to the title of the
Issuer thereto or as to the security afforded thereby or hereby, or as to the
validity or genuineness of any securities at any time pledged and deposited with
the Trustee hereunder or as to the validity or sufficiency of this Agreement or
the Notes. The Trustee shall not be accountable for the use or application by
the Issuer of the Notes or the proceeds thereof or of any money paid to the
Issuer under any provisions hereof.
The Trustee will not be responsible for any losses incurred in
connection with investments in Permitted Investments made in accordance with the
terms of this Agreement, other than losses arising out of the Trustee's gross
negligence, bad faith or willful misconduct.
SECTION 10.06 TRUSTEE MAY OWN NOTES.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes. The Trustee in its individual or any other capacity
may deal with the Issuer and the Servicer in banking transactions, with the same
rights as it would have if it were not the Trustee.
SECTION 10.07 TRUSTEE'S FEES AND EXPENSES.
The Trustee shall be entitled to reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts created by this Agreement and in the exercise and performance of any
of the powers and duties of the Trustee under this Agreement, which shall equal
the Trustee Fee, paid as provided in Section 4.04, and payment or reimbursement
for all reasonable expenses and disbursements (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) incurred or made by the Trustee in defense
of any action brought against it in connection with this Agreement except any
such expense or disbursement as may arise from its gross negligence, willful
misfeasance or bad faith or that is the responsibility of Noteholders under this
Agreement. Additionally, the Servicer, pursuant to Section 8.02, shall indemnify
the Trustee with respect to certain matters.
SECTION 10.08 INDEMNITY OF TRUSTEE, BACKUP SERVICERS AND SUCCESSOR
SERVICER.
Upon the appointment of a Backup Servicer or a Successor Servicer
pursuant to Section 9.02 or 9.03, such Backup Servicer, Successor Servicer and
the Trustee and their respective agents and employees shall be indemnified by
the Trust Estate and held harmless against any loss, liability, or expense
(including reasonable attorney's fees and expenses) arising out of or
-89-
97
incurred in connection with the acceptance of performance of the trusts and
duties contained in this Agreement to the extent that (i) the Successor
Servicer, Backup Servicer or the Trustee, as the case may be, shall not be
indemnified for such loss, liability or expense by the Servicer pursuant to
Section 9.02 or 9.03; (ii) such loss, liability, or expense shall not have been
incurred by reason of the Successor Servicer's, the Backup Servicer's or the
Trustee's willful misfeasance, bad faith or gross negligence; and (iii) such
loss, liability or expense shall not have been incurred by reason of the
Successor Servicer's, the Backup Servicer's or the Trustee's breach of its
respective representations and warranties pursuant to Sections 9.02, 9.03, 10.09
and 10.14, respectively.
The Successor Servicer, the Backup Servicer and/or the Trustee shall be
entitled to the indemnification provided by this Section only to the extent all
amounts due the Servicer, the Note Insurer and all Noteholders pursuant to
Section 4.04 have been paid in full and all amounts required to be deposited in
the Reserve Account with respect to any Payment Date pursuant to Section 4.05
have been so deposited.
SECTION 10.09 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
Except as otherwise provided in this Agreement, the Trustee under this
Agreement shall at all times be a bank having its corporate trust office in the
same state (or the District of Columbia or the Commonwealth of Puerto Rico) as
the location of the Corporate Trust Office as specified in this Agreement;
organized and doing business under the laws of such state (or the District of
Columbia or the Commonwealth of Puerto Rico) or the United States; authorized
under such laws to exercise corporate trust powers; having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authorities; and shall have the highest available long-term
unsecured debt rating by the Required Rating Agencies then providing such a
rating or be otherwise acceptable to the Rating Agency and the Controlling
Party, as evidenced by a letter to such effect from the Rating Agency (which
acceptance may be evidenced in the form of a letter, dated on or shortly before
the Closing Date, assigning an initial rating to the Notes) and the Note Insurer
(as applicable).
If the Trustee shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 10.10.
SECTION 10.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the
trusts created by this Agreement by giving at least 30 days' prior written
notice thereof to the Servicer, the Note Insurer and the Noteholders. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor Trustee acceptable to the Noteholders and the Note Insurer by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor Trustee. If no successor Trustee
shall have been so
-90-
98
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.09 and shall fail to resign after written
request therefor by the Servicer or the Controlling Party, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Controlling Party may remove the Trustee. If the Trustee
is removed under the authority of the immediately preceding sentence, the
Servicer shall promptly appoint a successor Trustee acceptable to the
Controlling Party, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee, and pay all fees owed to the outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 10.11. The Servicer shall give the Rating Agency, the
Placement Agent, the Note Insurer and the Noteholders notice of any such
resignation or removal of the Trustee and appointment and acceptance of a
successor Trustee.
SECTION 10.11 SUCCESSOR TRUSTEE.
Any successor Trustee appointed as provided in Section 10.10 shall
execute, acknowledge and deliver to the Servicer and to its predecessor Trustee
an instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement; and the Servicer, the
Note Insurer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties and obligations. No successor Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Trustee shall be eligible under the provisions of Section 10.09. Upon acceptance
of appointment by a successor Trustee as provided in this Section, the Servicer
shall mail notice of the successor of such Trustee under this Agreement to all
Noteholders at their addresses as shown in the Note Register and shall give
notice. by mail to the Rating Agency and the Placement Agent and the Note
Insurer. If the Servicer fails to mail such notice within ten (10) days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Servicer.
-91-
99
SECTION 10.12 MERGER OR CONSOLIDATION OF TRUSTEE.
Any corporation (i) into which the Trustee may be merged or
consolidated, (ii) which may result from any merger, conversion, or
consolidation to which the Trustee shall be a party or (iii) which may succeed
to all or substantially all the corporate trust business of the Trustee, which
corporation executes an agreement of assumption to perform every obligation of
the Trustee under this Agreement, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
10.09, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding. Notice of any such merger shall be given by the Trustee to the
Rating Agency, the Placement Agent and the Noteholders and the Note Insurer.
SECTION 10.13 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee, jointly with the Trustee or separate trustee or separate trustees,
of all or any part of the Trust Estate, and to vest in such Person, in such
capacity and for the benefit of the Noteholders and the Note Insurer, such title
to the Trust Estate, or any part thereof, and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case a Servicer Default shall have occurred and
be continuing, the Trustee alone shall have the power to make such appointment.
Each co-trustee or separate trustee under this Agreement shall be required to
meet the terms of eligibility as a successor trustee pursuant to Section 10.09
but no notice of a successor Trustee pursuant to Section 10.11 and no notice to
Noteholders or the Note Insurer of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.11.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or
performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Trustee joining in such
act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed (whether as
Trustee under this Agreement or as successor to the Servicer under this
Agreement), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
-92-
100
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement;
(iii) the Servicer and the Trustee acting jointly (or during
the continuation of a Servicer Default, the Trustee alone) may at any
time accept the resignation of or remove any separate trustee or
co-trustee; and
(iv) the Trustee shall remain primarily liable for the actions
of any separate trustees and co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Section. Each separate trustee and co-trustee, upon its acceptance of
the mats conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
including, but not limited to, every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the Trustee.
Each such instrument shall be filed with the Trustee and a copy thereof given to
the Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee
its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in this Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties under this Agreement.
SECTION 10.14 REPRESENTATIONS AND WARRANTIES OF TRUSTEE.
The Trustee hereby makes the following representations and warranties
on which the Issuer and the Noteholders are relying:
(i) Organization and Good Standing. The Trustee is a national
banking association duly organized, validly existing and in good
standing;
(ii) Power and Authority. The Trustee has full power,
authority and right to execute, deliver and perform this Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement;
(iii) No Violation. The execution, delivery and performance by
the Trustee of this Agreement (a) shall not violate any provision of
any law governing the banking and trust powers of the Trustee or, to
the best of the Trustee's knowledge, any order, writ, judgment, or
decree of any court, arbitrator, or governmental authority applicable
to the Trustee or any of its assets, (b) shall not violate any
provision of the charter or bylaws of
-93-
101
the Trustee, and (c) shall not violate any provision of, or constitute,
with or without notice or lapse of time, a default under, or result in
the creation or imposition of any Lien on any properties included in
the Trust Estate pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking to which it is a party, which
violation, default or Lien could reasonably be expected to materially
and adversely affect the Trustee's performance or ability to perform
its duties under this Agreement or the transactions contemplated in
this Agreement;
(iv) No Authorization Required. The execution, delivery and
performance by the Trustee of this Agreement shall not require the
authorization, consent, or approval of, the giving of notice to, the
filing or registration with, or the taking of any other action in
respect of, any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee; and
(v) Duly Executed. This Agreement shall have been duly
executed and delivered by the Trustee and shall constitute the legal,
valid, and binding agreement of the Trustee, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights generally or by general principles of equity.
SECTION 10.15 TAX RETURNS.
In the event the Trustee shall be required to file tax returns on
behalf of the Trust Estate, the Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust Estate and shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee, upon request, shall furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust
Estate, and shall, upon request, execute such returns.
SECTION 10.16 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Agreement or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as
Trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses and disbursements of the Trustee, its agents
and counsel, be for the ratable benefit of the Note Insurer and the Noteholders
in respect of which such judgment has been obtained, in the order of priority
specified in Section 4.04(b)(i).
SECTION 10.17 SUIT FOR ENFORCEMENT.
If a Servicer Default shall occur and be continuing, the Trustee, in
its discretion may, subject to the provisions of Section 10.01, proceed to
protect and enforce its rights and the rights of the Note Insurer and the
Noteholders under this Agreement by a suit, action or proceeding in equity or at
law or otherwise, whether for the specific performance of any covenant or
agreement
-94-
102
contained in this Agreement or in aid of the execution of any power granted in
this Agreement or for the enforcement of any other legal, equitable or other
remedy as the Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Trustee, the Note Insurer or the
Noteholders.
SECTION 10.18 RIGHTS OF NOTEHOLDERS TO DIRECT TRUSTEE.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided however,
that subject to Section 10.01, the Trustee shall have the right to decline to
follow any such direction if the Trustee being advised by counsel determines
that the action so directed may not lawfully be taken, or if the Trustee in good
faith shall, by a Responsible Officer of the Trustee, determine that the
proceedings so directed would be illegal or subject it to personal liability or
be unduly prejudicial to the rights of the Note Insurer or Noteholders not
parties to such direction; provided, further, however, that nothing in this
Agreement shall impair the right of the Trustee to take any action deemed proper
by the Trustee and which is not inconsistent with such direction by the
Noteholders.
SECTION 10.19 CONFIDENTIAL INFORMATION.
The Trustee acknowledges that, in the course of meeting its respective
duties and obligations under this Agreement, it may obtain Proprietary
Information relating to the Servicer or the Issuer. Such Proprietary Information
may include, but is not limited to, non-public trade secrets, know how,
invention techniques, processes, programs, schematics, source documents, data,
and financial information. The Trustee shall at all times, both during the term
of this Agreement and for a period of three (3) years after its termination,
keep in trust and confidence all such Proprietary Information, and shall not use
such Proprietary Information other than in the course of its duties under this
Agreement, nor shall the Trustee disclose any such Proprietary, Information
without the written consent of the Servicer or the Issuer unless legally
required to disclose such information. The Trustee further agrees to immediately
return all Proprietary Information (including copies thereof) in its possession,
custody, or control upon termination of this Agreement for any reason.
The Trustee shall not disclose, advertise or publish the existence or
the terms or conditions of this Agreement without prior written consent of the
Servicer or the Issuer. Notwithstanding the foregoing, this Section 10.19 shall
not prohibit disclosure of information that is required to be disclosed by the
Trustee pursuant to federal or state laws or regulation. Notwithstanding any
provision of this Agreement to the contrary, this Section 10.19 shall not
prohibit disclosure of information that is required in a judicial,
administrative or governmental proceeding to disclose any Proprietary
Information, nor shall it prohibit disclosure of information that is required in
the event of a Servicer Default. In particular the Trustee agrees that it shall
not, without the prior consent of the Servicer or the Issuer, disclose the
existence of this Agreement or any of the terms herein to any Person other than
counsel to the Trustee or an employee or director of the Trustee with a need to
know in order to implement this Agreement and only if such employee or director
or counsel agrees to maintain the confidentiality of this Agreement. The parties
hereto agree that the Servicer and/or the Issuer shall have the right to
-95-
103
enforce these nondisclosure provisions by an action for specific performance
filed in any court of competent jurisdiction in the State of Kansas or Arizona.
ARTICLE XI
REDEMPTION
SECTION 11.01 REDEMPTION AT THE OPTION OF THE ISSUER; ELECTION TO REDEEM.
The Issuer shall have the option to redeem the Notes in full on any
Payment Date on or after the Payment Date on which the Note Balance is less than
10% of the Original Note Balance. The election of the Issuer to redeem the Notes
pursuant to this Section shall be evidenced by delivery to the Trustee no later
than the last Business Day of the month preceding the month in which the Payment
Date as of which such redemption will be effected occurs of an Officer's
Certificate of the Issuer stating the Issuer's intention to redeem the Notes and
specifying the Redemption Amount therefor. No prepayment premium or penalty is
payable with respect to any such redemption.
SECTION 11.02 DEPOSIT OF REDEMPTION AMOUNT.
In the case of any redemption pursuant to Section 11.01, the Issuer
shall, on or before the Remittance Date preceding the Payment Date on which such
redemption is to be effected, deposit in the Note Payment Account pursuant to
Section 4.03 an amount equal to the Redemption Amount and shall thereafter
succeed to all interests in and to the Trust Estate subject to Section 2.11. The
Redemption Amount shall be paid as provided in Section 4.04(b).
SECTION 11.03 NOTICE OF REDEMPTION BY THE TRUSTEE.
Upon receipt of notice from the Issuer of its election to redeem the
Notes pursuant to Section 11.01 and deposit by the Issuer of the Redemption
Amount pursuant to Section 11.02, the Trustee shall provide notice of redemption
of the Notes by first class mail, postage prepaid, mailed no later than the
Business Day following the date on which such deposit was made, to the Note
Insurer at its address herein and to each Noteholder at such Noteholder's
address as listed in the Note Register. Notice of redemption of Notes shall be
given by the Trustee in the name and at the expense of the Issuer, as
applicable.
SECTION 11.04 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note within fourteen (14) days
after receipt of the final payment due in connection therewith. Each Noteholder,
by its acceptance of the final payment with respect to its Note, will be deemed
to have relinquished any further right to receive payments under this Agreement
and any interest in the Trust Estate. Each Noteholder shall indemnify and hold
harmless the Issuer, the Trustee, the Note Insurer and any other Person against
whom a claim is asserted in connection with such Noteholder's failure to tender
the Note to the Trustees for cancellation.
-96-
104
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01 AMENDMENT.
(a) This Agreement may be amended by the Issuer, the Servicer and the
Trustee, without the consent of the Note Insurer or any of the Noteholders, to
cure any ambiguity, to correct or supplement any provision in this Agreement
which may be inconsistent with any other provision of this Agreement, to add,
change or eliminate any other provision of this Agreement with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement or to add or provide for any credit
enhancement (other than the Policy) provided that any such action shall not, as
evidenced by an Officer's Certificate of the Issuer delivered to the Trustee and
the Note Insurer by the Issuer, adversely affect in any material respect the
interests of the Note Insurer or the Noteholders, provided further, that any
such action shall not, as evidenced by an Officer's Certificate of the Issuer
delivered to the Trustee and the Note Insurer by the Issuer, adversely affect in
any material respect the interests of the Note Insurer or the Noteholders.
(b) This Agreement may also be amended from time to time by the Issuer,
the Servicer and the Trustee, and the Note Insurer, with the consent of
Noteholders evidencing not less than 66-2/3% of the Voting Interests (which
consent of any Noteholder given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such
Noteholder 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 such Noteholders;
provided, however, that no such amendment shall (i) except as otherwise provided
in Section 12.01(a), reduce in any manner the amount of, or delay the timing of,
any payments that shall be required to be made on any Note or deposits of
amounts to be so paid or the Required Reserve Amount of the Reserve Account
without the consent of each Noteholder (provided that an amendment of the terms
of a Servicer Default shall not be deemed to be within the scope of this clause
(i)); (ii) change the definition or the manner of calculating the interest
accrued on the Notes without the consent of each Noteholder; (iii) reduce the
aforesaid percentage of the Voting Interest required to consent to any such
amendment, without the consent of each Noteholder; or (iv) adversely affect the
rating of the Notes by the Rating Agency without the consent of Noteholders
evidencing not less then 66-2/3% of the Voting Interests (but excluding for
purposes of such calculation and action all Notes held by the Issuer, the
Servicer or any of their affiliates).
(c) Prior to the execution of any amendment or consent thereto pursuant
to this Section 12.01, the Trustee shall furnish written notification of the
substance of such amendment or consent to the Rating Agency and the Placement
Agent.
(d) Promptly after the execution of any amendment or consent thereto
pursuant to Section 12.01(b), the Trustee shall furnish written notification of
the substance of such amendment or consent to each Noteholder. It shall not be
necessary for the consent of Noteholders pursuant to Section 12.01(b) to approve
the particular form of any proposed amendment or consent, but it
-97-
105
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization by
Noteholders of the execution thereof shall be subject to such reasonable
requirements as the Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
(f) There will be no change in the identity of the Servicer, the Backup
Servicer or the Trustee without the prior written consent of the Controlling
Party, subject to the rights of the Backup Servicer and the Trustee to resign in
accordance with the provisions of this Agreement.
(g) This Agreement may be amended by the Issuer, the Servicer, the
Trustee and the Note Insurer with the consent of the Noteholders to make any
change required to minimize the possibility of classification of the Company as
a "publicly traded partnership" within the meaning of Code Section 7704(b),
assuming for purposes of the foregoing that the Trust were classified as a
partnership for federal or state income tax purposes and not solely as a
security device for such purposes. Further, this Agreement may be amended by the
Issuer, the Servicer, the Trustee and the Note Insurer without the consent of
the Noteholders to minimize the restrictions on transfers of the Notes described
in Section 6.03(h) if the Issuer, in reliance upon an opinion of counsel
delivered to the Trustee and the Note Insurer, determines that such amendment
would not otherwise result in classification of the trust or render the Trust
susceptible to classification as a "publicly traded partnership" within the
meaning of Code Section 7704(b) assuming for purposes of the foregoing that the
Trust were classified as a partnership for federal or state income tax purposes
and not solely as a security device for such purposes.
SECTION 12.02 PROTECTION OF TITLE TO TRUST ESTATE.
(a) Either of the Issuer or the Servicer or both shall execute and file
such financing statements and cause to be executed and filed such continuation
and other statements, all in such manner and in such places as may be required
by law fully to preserve, maintain and protect the interests of the Note
Insurer, the Noteholders and the Trustee under this Agreement in the Receivables
and in the proceeds thereof. Each of the Issuer and the Servicer shall deliver
(or cause to be delivered) to the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided, above, as soon as available
following such filing.
(b) Neither the Issuer nor the Servicer shall change its name, identity
or organizational structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with paragraph
(a) above seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given the Trustee at least ten (10) days' prior
written notice thereof and shall have filed within thirty (30) days after such
change appropriate amendments to all such previously filed financing statements
or continuation statements.
-98-
106
(c) Each of the Issuer and the Servicer shall give the Trustee at least
ten (10) 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
statement or continuation statement or of any new financing statement, and shall
within thirty (30) days after such relocation file any such amendment or 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.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each, if applicable) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Accounts (or any
of them) in respect of such Receivables.
(e) The Servicer shall maintain its computer records so that, from and
after the time of transfer, assignment and conveyance under this Agreement of
the Receivables to the Trustee, the Servicer's master computer records
(including any back-up archives) that refer to any Receivables indicate clearly
the interest of the Trustee in such Receivables and that the Receivable is held
by the Trustee on behalf of the Note Insurer and the Noteholders. Indication of
the Trustee's interest in a Receivable shall be deleted from or modified on the
Servicer's computer records when, and only when, the Receivable has been paid in
full, acquired or assigned pursuant to this Agreement.
(f) If at any time Issuer or Servicer propose to assign, convey, grant
a security interest in, or otherwise transfer any interest in defaulted consumer
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective acquirer, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been transferred, assigned and
conveyed and is owned by the Trustee unless such Receivable has been paid in
full, acquired or assigned pursuant to this Agreement.
(g) The Servicer shall permit the Trustee and its agents, upon not less
than two Business Days' prior written notice and during normal business hours,
to inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables then or previously included in the Trust Estate.
Nothing in this Section shall impair the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the Obligors,
and the failure of the Servicer to provide access as provided in this Section as
a result of such obligation shall not constitute a breach of this Section.
(h) Upon request, the Servicer shall furnish to the Trustee and/or the
Note Insurer, within five Business Days of such request, a list of all
Receivables (by account number and name of Obligor) then held as part of the
Trust Estate.
(i) The Servicer shall deliver to the Trustee, promptly after the
execution and delivery of each amendment to any financing statement, an Opinion
of Counsel stating that, in the opinion of such Counsel, either (i) all
financing statements and continuation statements have been executed
-99-
107
and filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (ii)
no such action is necessary to preserve and protect such interest.
SECTION 12.03 LIMITATION OF RIGHTS OF NOTEHOLDERS.
(a) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust Estate, nor entitle its 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
Estate, 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 expressly
provided in this Agreement) or in any manner otherwise control the operation and
management of the Trust Estate, 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 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 pursuant to any
provision of this Agreement.
(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
Noteholder previously shall have given to the Trustee a written notice of
default and of the continuance thereof and have obtained the consent of the Note
Insurer to the institution of such action, suit or proceeding (to the extent
that there shall be no Insurer Default in effect at such time), as hereinbefore
provided, and unless Noteholders evidencing not less than 25% of the Voting
Interests shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Agreement and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses, and liabilities to be incurred therein or thereby,
and the Trustee, for 30 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action suit,
or proceeding and during such 30-day period, no request or waiver inconsistent
with such written request has been given to the Trustee pursuant to this Section
or Section 10.04; it being understood and intended, and being expressly
covenanted by each Noteholder with every other Noteholder and the Trustee, that
no one or more Noteholders 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 other Noteholders, or to obtain
or seek to obtain priority over or preference to any other Noteholder, other
than as provided in this Agreement, 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, each and every Noteholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
-100-
108
SECTION 12.04 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and the obligations, rights and remedies of
the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 12.05 NOTICES.
All demand, notices and communications under this Agreement shall be in
writing, and either personally delivered, mailed by certified mail, return
receipt requested, or sent by facsimile transmission, and shall be deemed to
have been duly given upon receipt (i) in the case of the Issuer or the Servicer,
to the agent for service as specified in Section 2.10 of this Agreement, or at
such other address as shall be designated by the Issuer or the Servicer in a
written notice to the Trustee; (ii) in the case of the Trustee, at the Corporate
Trust Office; (iii) in the case of the Rating Agency at 00 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 0000, and (iv) in the case of the Note Insurer, at 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Fax: (000) 000-0000). 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 Noteholder as shown in the Note
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder shall receive such notice.
SECTION 12.06 SEVERABILITY OF PROVISIONS; COUNTERPARTS.
(a) If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid or
unenforceable in any jurisdiction, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Notes, or the
rights of the Noteholders.
(b) This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall constitute but one and the same instrument.
SECTION 12.07 ASSIGNMENT.
Notwithstanding anything to the contrary contained in this Agreement, except as
provided in Sections 7.04 and 8.03 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Issuer or the Servicer without the prior written consent of the
Note Insurer and Noteholders evidencing not less than 66-2/3% of the Voting
Interests.
-101-
109
SECTION 12.08 NO PETITION.
Each of the Servicer and the Trustee and the Note Insurer covenants and
agrees that prior to the date which is one year and one day after the
termination of this Agreement, it will not institute against, or join any other
Person in instituting against, the Issuer any bankruptcy, reorganization
arrangement, insolvency or liquidation proceeding or other proceedings under any
federal or state bankruptcy or similar law. Notwithstanding the foregoing,
nothing herein shall be deemed to prohibit the Trustee from filing proofs of
claim or otherwise participating in any such proceeding instituted by another
person. This Section 12.08 shall survive the termination of this Agreement or
the termination of the Servicer or the Trustee, as the case may be, under this
Agreement.
SECTION 12.09 NOTEHOLDER DIRECTION.
Notwithstanding anything to the contrary contained in this Agreement,
provided the Trustee has sent out notices to Noteholders in accordance with this
Agreement, the Trustee may act as directed by a majority of the outstanding
Noteholders (but only to the extent the Noteholders are entitled under this
Agreement to so direct the Trustee with respect to such action) responding in
writing to the request contained in such notice; provided, however, that
Noteholders representing at least 66-2/3% of the outstanding principal balance
of the Notes as of the time such notice is sent to Noteholders must have
responded to such notice from the Trustee. In addition, the Trustee shall not
have any liability to any Noteholder with respect to any action taken pursuant
to such notice if the Noteholder does not respond to such notice within the time
period set forth in such Notice.
SECTION 12.10 NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS.
Other than as specifically set forth in this Agreement, any reports,
information or other documents provided to the Trustee are for purposes only of
enabling the sending party to comply with its document delivery requirements
hereunder and the Trustee's receipt of any such information shall not constitute
constructive or actual notice of any information contained therein or
determinable from any information contained therein, including the Issuer's or
the Servicer's compliance with any of its covenants, representations or
warranties hereunder.
SECTION 12.11
The Servicer shall, to the extent practicable and in an effort to
reduce the likelihood of classification of the Trust as "publicly traded
partnership" (within the meaning of Code Section 7704(b)), assuming that the
Trust were classified as a partnership for federal or state income tax purposes
and not solely as a security device for such purposes, take all steps necessary
to prevent the trading of Notes on an "established securities market" (within
the meaning of United States Treasury Regulations Section 1.7704-1(b)) or other
trading of Notes that is comparable, economically, to trading on an "established
securities market."
* * * *
-102-
110
signatures appear on next page
-103-
111
IN WITNESS WHEREOF, the parties have caused this Indenture and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
MIDLAND RECEIVABLES 98-1 CORPORATION, as Issuer
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Treasurer
MIDLAND CREDIT MANAGEMENT, INC., as Servicer
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee and as Backup Servicer
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Assistant Vice President
ASSET GUARANTY INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
