EXHIBIT 10.11
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H & T RECEIVABLE FUNDING CORPORATION
Transferor
BALLY TOTAL FITNESS CORPORATION
Servicer
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Trustee
on behalf of Certificateholders
of the H & T Master Trust
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AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of December 16, 1996
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................................1
Section 1.1 Definitions..................................................1
Section 1.2 Other Definitional Provisions................................1
ARTICLE II
CONVEYANCE OF CONTRACTS;
ISSUANCE OF CERTIFICATES....................................................3
Section 2.1 Conveyance of Contracts.......................................3
Section 2.2 Acceptance by Trustee.........................................3
Section 2.3 Representations and Warranties of the Transferor..............4
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and the Contracts...................6
Section 2.5 Covenants of the Transferor...................................9
Section 2.6 Addition of Contracts........................................10
Section 2.7 Release of Contracts Relating to Defaulted Receivables
and Ineligible Receivables...................................11
Section 2.8 Release of Contracts Relating to Included Clubs..............11
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES.............................................................12
Section 3.1 Acceptance of Appointment and Other Matters Relating
to the Servicer..............................................12
Section 3.2 Servicing Compensation.......................................13
Section 3.3 Representations, Warranties and Covenants of the Servicer....13
Section 3.4 Reports and Records for the Trustee..........................15
Section 3.5 Annual Servicer's Certificate................................16
Section 3.6 Annual Independent Accountants' Management Letter............16
Section 3.7 Tax Treatment................................................16
Section 3.8 Adjustments..................................................17
Section 3.9 Notices to BTFC..............................................18
Section 3.10 Certain Matters Affecting a Back-Up Servicer as the
Successor Servicer...........................................18
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS.............................................19
Section 4.1 Rights of Certificateholders.................................19
Section 4.2 Establishment of Accounts....................................19
Section 4.3 Collections and Allocations..................................20
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO ANY SERIES].....................................23
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ARTICLE VI
THE CERTIFICATES...........................................................24
Section 6.1 The Certificates.............................................24
Section 6.2 Authentication of Certificates...............................24
Section 6.3 Registration of Transfer and Exchange of Certificates........24
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates............26
Section 6.5 Persons Deemed Owners........................................26
Section 6.6 Appointment of Paying Agent..................................26
Section 6.7 Access to List of Certificateholders' Names and
Addresses....................................................27
Section 6.8 Authenticating Agent.........................................27
Section 6.9 Tender of Exchangeable Transferor Certificate................28
Section 6.10 Book-Entry Certificates......................................30
Section 6.11 Notices to Clearing Agency...................................31
Section 6.12 Definitive Certificates......................................31
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR...................................32
Section 7.1 Liability of the Transferor..................................32
Section 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor...............................32
Section 7.3 Limitation on Liability......................................32
Section 7.4 Liabilities..................................................33
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER............................................................34
Section 8.1 Liability of the Servicer....................................34
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer.................................34
Section 8.3 Limitation on Liability of the Servicer and Others...........34
Section 8.4 Servicer Indemnification of the Transferor, the Trust,
the Trustee, the Registrar and the Paying Agent..............35
Section 8.5 The Servicer Not to Resign...................................35
Section 8.6 Access to Certain Documentation and Information Regarding
the Receivables..............................................35
Section 8.7 Delegation of Duties.........................................36
ARTICLE IX
PAY OUT EVENTS.............................................................37
Section 9.1 Pay-Out-Events...............................................37
Section 9.2 Additional Rights Upon the Occurrence of Certain Events......37
ARTICLE X
SERVICER DEFAULTS..........................................................39
Section 10.1 Servicer Defaults...........................................39
Section 10.2 Trustee to Act; Appointment of Successor....................41
Section 10.3 Notification to Certificateholders..........................42
Section 10.4 Waiver of Past Defaults.....................................42
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ARTICLE XI
THE TRUSTEE................................................................43
Section 11.1 Duties of Trustee...........................................43
Section 11.2 Certain Matters Affecting the Trustee.......................44
Section 11.3 Trustee Not Liable for Recitals in Certificates.............45
Section 11.4 Trustee May Own Certificates................................45
Section 11.5 The Servicer to Pay Fees and Expenses.......................45
Section 11.6 Eligibility Requirements for Trustee. ......................46
Section 11.7 Resignation or Removal of Trustee...........................46
Section 11.8 Successor Trustee...........................................47
Section 11.9 Merger or Consolidation of Trustee..........................47
Section 11.10 Appointment of Co-Trustee or Separate Trustee...............47
Section 11.11 Tax Returns.................................................48
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates................................................48
Section 11.13 Suits for Enforcement.......................................48
Section 11.14 Rights of Certificateholders to Direct Trustee..............48
Section 11.15 Representations and Warranties of Trustee...................49
Section 11.16 Maintenance of Office or Agency.............................49
ARTICLE XII
TERMINATION................................................................50
Section 12.1 Termination of Trust........................................50
Section 12.2 Optional Termination........................................51
Section 12.3 Final Payment with Respect to any Series....................51
Section 12.4 Termination Rights of Holder of Exchangeable Transferor
Certificate.................................................52
ARTICLE XIII
MISCELLANEOUS PROVISIONS...................................................53
Section 13.1 Amendment...................................................53
Section 13.2 Protection of Right, Title and Interest to Trust............54
Section 13.3 Limitation on Rights of Certificateholders..................54
Section 13.4 Governing Law...............................................55
Section 13.5 Notices.....................................................55
Section 13.6 Severability of Provisions..................................55
Section 13.7 Assignment..................................................55
Section 13.8 TCB Dual Capacities.........................................56
Section 13.9 Certificates Non-Assessable and Fully Paid..................56
Section 13.10 Further Assurances..........................................56
Section 13.11 No Waiver; Cumulative Remedies..............................56
Section 13.12 Counterparts................................................56
Section 13.13 Binding Effect; Third-Party Beneficiaries...................56
Section 13.14 Actions by Certificateholders...............................56
Section 13.14A Rule 144A Information.......................................57
Section 13.15 Merger and Integration......................................57
Section 13.16 Headings....................................................57
Section 13.17 No Bankruptcy Petition Against the Transferor...............57
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Exhibit A Form of Exchangeable Transferor Certificate
Exhibit B Form of Daily Report
Exhibit C Form of Settlement Statement
Exhibit D Form of Annual Servicer's Certificate
Exhibit E Form of Annual Opinion of Counsel
Exhibit F Form of Reconveyance of Contracts
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This AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT (this
"Agreement"), dated as of December 16, 1996, is by and among H & T RECEIVABLE
FUNDING CORPORATION, a corporation organized and existing under the laws of the
State of Delaware (the "Transferor"), as Transferor, BALLY TOTAL FITNESS
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware ("BTFC"), as Servicer, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association organized under the laws of the United States, as
Trustee (the "Trustee" or "TCB").
WHEREAS, the parties hereto have previously entered into a Pooling and
Servicing Agreement, dated as of June 26, 1995 (the "Original Agreement") with
respect to the initial formation of the Trust (as defined herein) and the
concurrent issuance of a Series of Investor Certificates (as defined herein);
and
WHEREAS, in connection with and concurrently with the issuance of a
Replacement Series (as defined herein), constituting Series 1996-1, for such
previously issued Series of Investor Certificates, the parties hereto desire to
amend and restate the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, each party agrees as follows for the benefit of the other parties and
the Certificateholders that the Original Agreement is hereby amended and
restated as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement, the
capitalized terms used in this Agreement shall have the respective meanings
assigned to them in Appendix I, attached hereto.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in any Supplement or this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Appendix
I, and accounting terms partially defined in Appendix I to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date with respect to Series 1996-1 ("GAAP"). To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The agreements, representations and warranties of BTFC in this
Agreement and in any Supplement in its capacity as Servicer and of the
Transferor in its capacity as Transferor shall be deemed to be the agreements,
representations and warranties of BTFC and the Transferor solely in each such
capacity for so long as either of them acts in each such capacity under this
Agreement.
(d) All references herein to "this Agreement" are to this Amended and
Restated Pooling and Servicing Agreement, including any Supplement executed in
connection with the issuance of any Series, as the same may from time to time be
amended, supplemented or otherwise modified and in effect. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement or any Supplement as a whole and not to any
particular provision of this Agreement or any Supplement; and Section,
subsection, Schedule and Exhibit references contained in this Agreement or any
Supplement are references to Sections, subsections, Schedules and Exhibits in or
to this Agreement or any Supplement unless otherwise specified.
(e) The Daily Report and Settlement Statement shall be in substantially
the forms of Exhibits B and C, with such changes as the Servicer may determine
to be necessary or desirable; provided, however, that no such change shall serve
to exclude information required by this Agreement or any Supplement and each
such change shall be reasonably acceptable to the Trustee. The Servicer shall
not change the Daily Report or the Settlement Statement to delete any category
of information
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contained therein on the Closing Date for any Series of Investor Certificates
without the consent of the Holders of at least 50% of the Invested Amount of
such Series (in each case, as such terms are defined in the Supplement for such
Series), or in accordance with such other method or standard of approval as may
be set forth in the Supplement for any such Series. The Servicer shall, upon
making such determination and receiving the consent of the Trustee to such
change, deliver to the Trustee and each Rating Agency an Officer's Certificate
to which shall be annexed the form of the related Exhibit, as so changed. Upon
the delivery of such Officer's Certificate to the Trustee, the related Exhibit,
as so changed, shall for all purposes of this Agreement constitute such Exhibit.
The Trustee may conclusively rely upon such Officer's Certificate in determining
whether the related Exhibit, as changed, conforms to the requirements of this
Agreement.
[End of Article I]
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ARTICLE II
CONVEYANCE OF CONTRACTS;
ISSUANCE OF CERTIFICATES
Section 2.1 Conveyance of Contracts. The Transferor does hereby
transfer, assign, set-over, and otherwise convey to the Trust for the benefit of
the Certificateholders, without recourse, all of its right, title and interest
in, to and under (i) the Contracts now existing and hereafter created and all
monies due or to become due with respect thereto, including, without limitation,
the Receivables and the Additional Payments, (ii) the Purchase Agreement and the
Subsidiary Purchase Agreement, (iii) Recoveries and (iv) all investments and
proceeds of the foregoing. Such property, together with all monies as are from
time to time deposited in the Collection Account, any Distribution Account, any
Series Account and the Excess Funding Account and all amounts on deposit in or
credited to such accounts (including any interest and investment earnings on any
such deposited amounts except for such amounts as are on deposit in any Series
Account if so provided in the applicable Supplement) and any other account and
the right to draw upon or claim under, and all monies as are from time to time
available under, any Enhancement for any Series for payment to
Certificateholders shall constitute the property of the Trust (the "Trust
Property"). The foregoing transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Trust, the Trustee or any Investor Certificateholder of any obligation of the
Transferor, the Servicer or any other Person in connection with the Contracts,
the Receivables and the Additional Payments payable thereunder, or any agreement
or instrument relating thereto, including, without limitation, any obligation to
any Obligors or insurers, or in connection with the Purchase Agreement or the
Subsidiary Purchase Agreement.
In connection with such transfer, assignment, set-over and conveyance,
the Transferor agrees to record and file, within 10 days after the Closing Date
for Series 1996-1 (with respect to any new financing statements or amendments to
existing financing statements which may be required to be filed hereunder) (or,
in the case of any continuation statements, prior to the date required under
applicable state law), at its own expense, financing statements (including any
continuation statements with respect to such financing statements when
applicable) with respect to the Contracts and the related Receivables and the
other Trust Property now existing and hereafter created for the transfer of
accounts and general intangibles and the proceeds thereof (as defined in the UCC
as in effect in the Relevant UCC State) meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
the assignment of the Contracts and the related Receivables and the other Trust
Property constituting accounts and general intangibles and the proceeds thereof
to the Trust, and to deliver file-stamped copies of such financing statements or
continuation statements or other evidence of such filing (which may, for
purposes of this Section 2.1, consist of facsimile confirmation of such filing)
to the Trustee as soon as reasonably practicable following the return of such
statements to the Transferor by the respective filing offices. The foregoing
transfer, assignment, set-over and conveyance to the Trust shall be made to the
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, set-over and conveyance shall be construed accordingly.
To the extent that the transfer of the Trust Property or any portion
thereof from the Transferor to the Trust hereunder may be characterized as a
pledge rather than as a sale, the Transferor hereby grants and transfers to the
Trustee for the benefit of the Certificateholders a security interest in all of
the Transferor's right, title and interest in, to and under the Trust Property
to secure a loan in an amount equal to the unpaid principal amount of the
Investor Certificates issued hereunder or to be issued pursuant to this
Agreement and the interest accrued thereon at the related Certificate Rate and
to secure all of the Transferor's and Servicer's obligations hereunder,
including, without limitation, the Transferor's obligation to transfer Contracts
hereafter created to the Trust (the "Secured Obligations"), and agrees that this
Agreement shall constitute a security agreement under applicable law.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance, on behalf of the
Trust, of all right, title and interest previously held by the Transferor in, to
and under the Trust Property and declares that it shall maintain such right,
title and interest, upon the Trust herein set forth, for the benefit of all
Certificateholders.
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(b) The Trustee hereby irrevocably agrees to release from the Trust
Property an amount equal to the Released Amounts immediately upon identification
thereof, which release shall be automatic and shall require no further act by
the Trustee, provided, that the Trustee shall execute and deliver such
instruments of release and assignment, or otherwise confirm the foregoing
release of any Released Amounts, as may be reasonably requested by the
Transferor. Upon such release of Released Amounts, such Released Amounts shall
not constitute and shall not be included in the Trust Property, and shall be
paid or remitted as provided in subsection 4.3(a).
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the date hereof and, with respect to any Series of Certificates, as
of the date of the related Supplement and the related Closing Date for such
Series:
(a) Organization and Good Standing. The Transferor is a corporation
duly organized and validly existing in good standing under the laws of the State
of Delaware and has the corporate power and authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and the Purchase Agreement and to execute and
deliver to the Trustee the Certificates pursuant hereto.
(b) Due Qualification. The Transferor is duly qualified to do business
and is in good standing (or is exempt from such requirements) as a foreign
corporation in any state required in order to conduct its business and own its
respective properties, and has obtained all necessary licenses and approvals
with respect to the Transferor necessary for the due execution, delivery and
performance by it of this Agreement and the Purchase Agreement as required under
federal and Delaware law.
(c) Due Authorization. The execution and delivery of this Agreement
and the Purchase Agreement and the consummation of the transactions provided for
herein and therein, have been duly authorized by the Transferor by all necessary
corporate action on its part.
(d) Binding Obligation. Each of this Agreement and the Purchase
Agreement, and the consummation of the transactions provided for herein and
therein, constitutes a legal, valid, and binding obligation of the Transferor,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereinafter in effect, affecting the enforcement of
creditors' rights in general, and as such enforceability may be limited by
general principles of equity (whether considered in a proceeding at law or in
equity).
(e) No Conflicts. The execution and delivery of this Agreement and the
Purchase Agreement and the performance of the transactions contemplated hereby
and thereby, do not (i) contravene the Transferor's charter or By-Laws, (ii)
violate any material provision of law applicable to it or require any filing
(except for the filings under the UCC), registration, consent or approval under,
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Transferor, except for such filings, registrations, consents or approvals as
have already been obtained and are in full force and effect.
(f) Taxes. To the best of the Transferor's knowledge, the Transferor
and each prior owner of the Contracts has filed all tax returns required to be
filed in the normal course of business through the Closing Date and has paid or
made adequate provision for the payment of all taxes, assessments and other
governmental charges due from the Transferor or such prior owner or is
contesting any such tax, assessment or other governmental charge in good faith
through appropriate proceedings and adequate reserves consistent with GAAP have
been set aside.
(g) No Violation. The execution and delivery of this Agreement and the
Purchase Agreement and the execution and delivery to the Trustee of the
Certificates, the performance of the transactions contemplated by this Agreement
and the Purchase Agreement and the fulfillment of the terms hereof and thereof
will not violate any Requirements of Law applicable to the Transferor, will not
violate, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under any
Requirement of Law applicable to the Transferor or any material
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indenture, contract, agreement, mortgage, deed of trust or other material
instrument to which the Transferor is a party or by which it or its properties
are bound.
(h) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Transferor, threatened against the Transferor,
before any Governmental Authority (i) asserting the invalidity of this Agreement
or the Purchase Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated hereby or thereby, (iii) seeking any determination
or ruling that would materially and adversely affect the performance by the
Transferor of its obligations hereunder or thereunder, (iv) seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability hereof or thereof, (v) seeking any determination or ruling
that would materially and adversely affect the payment or enforceability of the
Receivables taken as a whole or (vi) seeking to affect adversely the tax
attributes of the Trust.
(i) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Governmental Authority required in connection
with the execution and delivery of this Agreement, the Purchase Agreement and
the Certificates, the performance of the transactions contemplated by this
Agreement and the Purchase Agreement and the fulfillment of the terms hereof and
thereof, have been obtained.
(j) Bona Fide Receivables; Not Executory. Each Receivable is or will be
an "account receivable" or "general intangible" not constituting "chattel paper"
(as defined in the UCC as in effect in the Relevant UCC State) owed under the
related Contract and arising out of the sale of a membership in health clubs by
BTFC or another Originator. The Transferor has no knowledge of any fact which
should have led it to expect at the time of the classification of any Receivable
as an Eligible Receivable that such Receivable would not be paid in full when
due, and each Receivable classified as an Eligible Receivable by the Transferor
in any document or report delivered under this Agreement satisfies the
requirements of eligibility contained in the definition of Eligible Receivable
set forth in Appendix I to this Agreement. In the case of a dues-paying
membership, consistent with its accounting treatment agreed upon with the
Securities and Exchange Commission, BTFC recognizes the related income for the
membership fee (exclusive of monthly dues) in full at the inception of the
Contract for financial reporting purposes. Accordingly, at the time of the
classification of any Receivable as an Eligible Receivable, the Transferor does
not believe that such Receivable constitutes an "executory contract" within the
meaning of Section 365 of the Federal Bankruptcy Code, and the Transferor
intends to consistently treat such Receivable as non-executory for all purposes,
subject to compliance by the Transferor with the express provisions of the
Contract related to such Receivable and Requirements of Law.
(k) Place of Business. The principal executive offices of the
Transferor are in Chicago, Illinois, and the offices where the Transferor keeps
its records concerning the Receivables and related Contracts are in Huntington
Beach, California and Towson, Maryland; and there are no other such locations
other than those locations of which notice has been given in accordance with
Section 13.2(c).
(l) Use of Proceeds. No proceeds of the issuance of any Certificate
will be used by the Transferor to purchase or carry any margin security.
(m) Pay-Out-Event. No Pay-Out-Event and no condition that with the
giving of notice and/or the passage of time would constitute a Pay-Out-Event (a
"Prospective Pay-Out-Event"), has occurred and is continuing.
(n) Not an Investment Company. The Transferor is not an "investment
company" within the meaning of the Investment Company Act, or is exempt from all
provisions of such Act.
(o) Other Names. The legal name of the Transferor is as set forth in
this Agreement and within the preceding five years the Transferor has not used,
and the Transferor currently does not use, any tradenames, fictitious names,
assumed names or "doing business as" names.
(p) Subsidiaries. The Transferor has no subsidiaries.
(q) Activities. The Transferor engages in no activities other than
those permitted by its charter documents and contemplated by this Agreement and
the Purchase Agreement.
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The representations and warranties set forth in this Section
2.3 shall survive the transfer and assignment of the respective Contracts to the
Trust, and termination of the rights and obligations of the Servicer pursuant to
Section 10.1 and shall expire upon the termination of the Trust in accordance
with Article XII hereof. The Transferor hereby represents and warrants to the
Trustee, on behalf of the Trust, with respect to any Series of Certificates, as
of its Closing Date, unless otherwise stated in the related Supplement, that the
representations and warranties of the Transferor set forth in this Section 2.3
are true and correct as of such date (and for the purposes of such
representations and warranties, "Certificates" shall mean the Certificates
issued on the related Closing Date) and that each representation and warranty
set forth in this Section 2.3 and in Section 2.4(a)(i) with respect to this
Agreement shall be made at such time with respect to the applicable Supplement.
Upon discovery by the Transferor, the Servicer or a Responsible Officer of the
Trustee of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give written notice to the others
immediately upon obtaining knowledge of such breach.
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and the Contracts.
(a) Binding Obligation; Valid Transfer and Assignment. The Transferor
hereby represents and warrants to the Trustee, on behalf of the Trust, that, as
of the Closing Date for Series 1996-1 and, with respect to any Series of
Certificates, as of the date of the related Supplement and related Closing Date
for such Series, and on each day on which any new Contract is purchased by the
Transferor:
(i) The Agreement and the Purchase Agreement each constitutes
the legal, valid and binding obligation of the Transferor, enforceable against
the Transferor in accordance with its terms, except (A) as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect, affecting the enforcement of
creditors' rights in general, and (B) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity).
(ii) The transfer of Contracts and the related Receivables by
the Transferor to the Trust under this Agreement constitutes either (A) a valid
transfer, assignment, set-over and conveyance to the Trust of all right, title
and interest of the Transferor in and to the Trust Property, and such Trust
Property will be held by the Trust free and clear of any Lien of any Person
claiming through or under the Transferor or any of its Affiliates except for (x)
Permitted Liens, (y) the interest of the Transferor as Holder of the
Exchangeable Transferor Certificate and any other Class of Certificates held by
the Transferor from time to time and (z) the Transferor's right, if any, to
interest accruing on, and investment earnings, if any, in respect of, the
Collection Account, any Distribution Account, any Series Account and the Excess
Funding Account, as provided in this Agreement or any Supplement, subject to the
release of the Released Amounts pursuant to Section 2.2(b), or (B) a grant of a
security interest (as defined in the UCC as in effect in the Relevant UCC State)
in, to and under the Trust Property, which grant is enforceable with respect to
the existing Contracts and the related Receivables and the proceeds thereof upon
execution and delivery of this Agreement, and which will be enforceable with
respect to such Contracts and the related Receivables hereafter created and the
proceeds thereof, upon such creation. If this Agreement constitutes the grant of
a security interest to the Trust in such property, upon the filing of the
financing statement described in Section 2.1 and in the case of the Contracts
and the related Receivables hereafter created and the proceeds thereof, upon
such creation, the Trust shall have a first priority perfected security interest
in such property, except for Permitted Liens, subject to the release of the
Released Amounts pursuant to Section 2.2(b). Except as contemplated in this
Agreement or any Supplement, neither the Transferor nor any Person claiming
through or under the Transferor shall have any claim to or interest in the
Collection Account, any Distribution Account, any Series Account and the Excess
Funding Account, except for the Transferor's rights to receive interest accruing
on, and investment earnings in respect of, any such account as provided in this
Agreement (or, if applicable, any Series Account as provided in any Supplement)
and, if this Agreement constitutes the grant of a security interest in such
property, except for the interest of the Transferor in such property as a debtor
for purposes of the UCC as in effect in the Relevant UCC State. The Purchase
Agreement constitutes a valid sale, transfer, assignment, set-over and
conveyance to the Transferor of all right, title and interest of BTFC in and to
the Contracts and the related Receivables purported to be sold thereunder,
whether then existing or thereafter created and the proceeds thereof, subject to
the release of the Released Amounts pursuant to Section 2.1(g) of the Purchase
Agreement. In accordance with Section 5.3 of the Purchase Agreement, the
Transferor is treating such conveyance for all purposes (including, without
limitation, tax and financial accounting purposes) as a sale to it, or to the
extent applicable, as a contribution to its capital on all relevant books,
records, tax returns, financial statements and other applicable documents.
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(iii) The Transferor is not insolvent and will not be rendered
insolvent upon the transfer of the Contracts to the Trust.
(iv) The Transferor is (or, with respect to Contracts arising
after the date hereof, will be) the legal and beneficial owner of all right,
title and interest in and to each Contract and the related Receivable and each
Contract and the related Receivable has been or will be transferred to the Trust
free and clear of any Lien other than Permitted Liens.
(v) All consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required in
connection with the transfer of Trust Property to the Trust have been obtained
and are in full force and effect.
(vi) Each Receivable classified as an "Eligible Receivable" by
the Transferor in any document or report delivered hereunder will satisfy the
requirements contained in the definition of Eligible Receivable as of the time
of such document or report.
(vii) Each Contract and the related Receivable then existing
has been conveyed to the Trust free and clear of any Lien of any Person claiming
through or under the Transferor or any of its Affiliates (other than Permitted
Liens) and in compliance, in all material respects, with all Requirements of Law
applicable to the Transferor.
(viii) Each Receivable transferred hereunder has been
originated on a Contract substantially in a form attached as Exhibit B to the
Purchase Agreement, as such form may have been modified or amended subsequent to
the date hereof in accordance with the standards set forth in subsection 2.5(c).
(b) Other Daily Representations and Warranties. On each day on which
any new Contract is purchased by the Transferor, the Transferor shall be deemed
to represent and warrant to the Trust that (A) each Contract and the related
Receivable purchased by the Transferor on such day has been conveyed to the
Trust in compliance, in all material respects, with all Requirements of Law
applicable to the Transferor and free and clear of any Lien of any Person
claiming through or under the Transferor or any of its Affiliates (other than
Permitted Liens) and (B) with respect to each such Contract, all consents,
licenses, approvals or authorizations of or registrations or declarations with,
any Governmental Authority required to be obtained, effected or given by the
Transferor in connection with the conveyance of such Contract and the related
Receivable to the Trust have been duly obtained, effected or given and are in
full force and effect.
(c) Notice of Breach. The representations and warranties set forth in
this Section 2.4 shall survive the transfer and assignment of the respective
Contracts to the Trust. Upon discovery by the Transferor, the Servicer or a
Responsible Officer of the Trustee of a breach of any of the representations and
warranties set forth in this Section 2.4, the party discovering such breach
shall give written notice to the others immediately upon obtaining knowledge of
such breach. The Transferor agrees to cooperate with the Servicer and the
Trustee in attempting to cure any such breach.
(d) Designation of Ineligible Receivables. In the event of a breach
with respect to a Contract or the related Receivable of any representations and
warranties set forth in subsection 2.3(j) or subsections 2.4(a)(iii) through
(viii) or subsection 2.4(b), or in the event that a Receivable is not an
Eligible Receivable on the date of its transfer to the Trust as a result of the
failure to satisfy the conditions set forth in the definition of Eligible
Receivable, such Receivable shall be designated an "Ineligible Receivable" and
shall be assigned an Outstanding Balance of zero for the purpose of determining
the aggregate amount of Principal Receivables on any day; provided, however,
that if such representations and warranties with respect to such Receivable
shall subsequently be true and correct in all material respects as if such
Receivable had been created on such day or such Receivable shall subsequently
satisfy the conditions set forth in the definition of Eligible Receivable, such
Receivable shall be designated an Eligible Receivable, and the Outstanding
Balance of such Receivable shall be included in determining the aggregate amount
of Principal Receivables on and after such subsequent day. On and after the date
of its designation as an Ineligible Receivable, unless it becomes an Eligible
Receivable as provided above, each Ineligible Receivable shall not be given
credit in determining the aggregate amount of Principal Receivables used in the
calculation of any Investor Percentage, the Transferor Percentage or the
Transferor Interest. In the event that on any Business Day the exclusion of an
Ineligible Receivable from the calculation of the Transferor Interest would
cause the Transferor Interest to be reduced below the Minimum Transferor
Interest, the Servicer shall not distribute to the Transferor any Shared
Principal Collections that would otherwise
7
be distributed to the Transferor, and the Servicer shall immediately make a
deposit of the Shared Principal Collections that would otherwise be distributed
to the Transferor into the Excess Funding Account in immediately available funds
prior to the next succeeding Business Day in an amount equal to the amount by
which the Transferor Interest would be reduced below the Minimum Transferor
Interest as a result of the exclusion of such Ineligible Receivable. In the
event that (1) a Receivable is designated as an Ineligible Receivable because of
a breach of the representations and warranties set forth in subsection 2.3(j) or
subsections 2.4(a)(iii) through (viii) or subsection 2.4(b) with respect to such
Receivable, (2) as a result of such designation a deposit into the Excess
Funding Account is required pursuant to the preceding sentence, and (3) Shared
Principal Collections that would otherwise be distributed to the Transferor are
insufficient to make such deposit in full, then the Transferor shall make a
deposit into the Excess Funding Account in immediately available funds no later
than the next succeeding Business Day in an amount equal to the amount of such
shortfall. The portion of such deposit allocated to the Investor Certificates of
each Series shall be distributed to the Investor Certificateholders of each
Series in the manner specified in Article IV.
(e) Reassignment of Trust Portfolio. In the event of a breach of any of
the representations and warranties set forth in subsections 2.3(a), (b), (c) and
(d) and 2.4(a)(i) and (ii) with respect to any Series, either the Trustee (if it
has actual knowledge) or the Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the Invested Amount of such
Series (or, in the case of a Series having more than one Class, each Class of
such Series), by notice then given in writing to the Investor Certificateholders
in accordance with Section 12.3 and the Transferor and the Servicer, if given by
the Trustee, and to the Trustee and the Servicer, if given by the Investor
Certificateholders of such Series, may direct the Transferor to accept
reassignment of Contracts and the related Receivables having Principal
Receivables in an amount equal to the face amount of the Invested Amount to be
repurchased (as specified below) within 30 days of such notice (or within such
longer period as may be specified in such notice), and the Transferor shall be
obligated to accept reassignment of such Contracts and the related Receivables
on a Distribution Date specified by the Transferor (such Distribution Date, the
"Reassignment Date") occurring within such applicable period on the terms and
conditions set forth below; provided, however, that no such reassignment shall
be required to be made, and no notice of such reassignment may be given, if, at
any time during such applicable period, the representations and warranties
contained in subsections 2.3(a), (b), (c) and (d) and subsections 2.4(a)(i) and
(ii) shall then be true and correct in all material respects. The Transferor
shall, on the Transfer Date preceding the Reassignment Date, deposit an amount
(in next day funds) equal to the reassignment deposit amount for such Series in
the related Distribution Account or Series Account, as provided in the related
Supplement, for distribution to the Investor Certificateholders pursuant to
Article XII. The reassignment deposit amount with respect to any Series, unless
otherwise stated in the related Supplement, shall be equal to (i) the then
current Invested Amount of such Series, less the amount, if any, previously
allocated and available for payment of principal to the Certificateholders of
such Series on the Reassignment Date, plus (ii) an amount equal to all interest
accrued but unpaid on the Investor Certificates of such Series at the applicable
Certificate Rate through and including the day preceding the Reassignment Date
(or, to the extent that, pursuant to the related Supplement, the Transferor
otherwise would be obligated to pay accrued interest on any portion of the
Invested Amount repaid on such Reassignment Date only through the end of a
specified interest accrual period, then interest on such portion shall be
payable only through the end of such interest accrual period), less the amount,
if any, previously allocated and available for payment of interest to the
Certificateholders of such Series on the Reassignment Date, plus (iii) any other
amounts accrued and owing as specified in the applicable Supplement. Payment of
the reassignment deposit amount with respect to any Series, and all other
amounts in the Distribution Account or the applicable Series Account in respect
of the preceding Monthly Period, shall be considered a prepayment in full of the
Receivables represented by the Investor Certificates of such Series. On the
Distribution Date following the Transfer Date on which such amount has been
deposited in full into the Distribution Account or the applicable Series
Account, the Contracts and the related Receivables and all monies due or to
become due with respect thereto and all proceeds thereof shall be released to
the Transferor after payment of all amounts otherwise due hereunder on or prior
to such dates and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as shall be prepared by and as are reasonably requested by the
Transferor to vest in the Transferor, or its designee or assignee, all right,
title and interest of the Trust in, to and under such Contracts and the related
Receivables, all monies due or to become due with respect thereto and all
proceeds thereof allocated to such Series pursuant to the related Supplement. If
the Trustee or the Investor Certificateholders of any Series give notice
directing the Transferor to accept reassignment as provided above, the
obligation of the Transferor to accept reassignment of the applicable Contracts
and the related Receivables and pay the reassignment deposit amount pursuant to
this subsection 2.4(e) shall constitute the sole remedy respecting a breach of
the representations and warranties contained in subsections 2.3(a), (b), (c) and
(d) and 2.4(a)(i) and (ii) available to the Investor Certificateholders of such
Series or the Trustee on behalf of the Investor Certificateholders of such
Series. The Trustee shall have no duty to conduct any affirmative investigation
as to the occurrence of any condition
8
requiring the repurchase of any Contract and the related Receivable by the
Transferor pursuant to this Agreement or any Supplement or the eligibility of
any Receivable for purposes of this Agreement or any Supplement.
Section 2.5 Covenants of the Transferor. The Transferor hereby
covenants that:
(a) Receivables to be Accounts or General Intangibles. The Transferor
will take no action to cause any Receivable to be evidenced by any "instrument"
(as defined in the UCC as in effect in the Relevant UCC State), except in
connection with the enforcement or collection of a Receivable. Except in such
circumstances, the Transferor will take no action to cause any Receivable to be
anything other than an "account" or "general intangible" not constituting
"chattel paper" (as defined in the UCC as in effect in the Relevant UCC State).
Notwithstanding the foregoing, BTFC's compliance with existing and future
statutes and regulations applicable to BTFC's business shall not constitute a
violation of this covenant, but to the extent that such compliance may result in
the characterization of any evidence of a Receivable as an instrument, the
Transferor shall cause BTFC to undertake all steps necessary to enable the
Transferor and the Trust to obtain a first priority perfected security interest
in such instrument in accordance with the Purchase Agreement and this Agreement.
(b) Security Interests. Except for the conveyances, hereunder, the
Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien, on the Receivables
(other than Liens relating to the Released Amounts in favor of certain bank
lenders to Bally and its subsidiaries arising pursuant to that certain Third
Amended and Restated Credit Agreement dated as of June 26, 1995, as amended) or
the related Contracts, whether now existing or hereafter created, or any
interest therein; the Transferor will immediately notify the Trustee of the
existence of any such Lien on any Contract or the related Receivable; and the
Transferor shall defend the right, title and interest of the Trust in, to and
under the Contracts and the related Receivables, whether now existing or
hereafter created, against all claims of third parties claiming through or under
the Transferor; provided, however, that nothing in this subsection 2.5(b) shall
prevent or be deemed to prohibit the Transferor from suffering to exist upon any
of the Contracts or the related Receivables any Permitted Lien.
(c) Contracts and Credit and Collection Policies. The Transferor shall
take all actions reasonably within its control to cause BTFC to comply with and
perform its obligations under the Contracts relating to the Receivables and the
Credit and Collection Policy except insofar as any failure to comply or perform
would not materially and adversely affect the rights of the Trust or the
Certificateholders hereunder or under the Certificates. The Transferor may
change, and permit BTFC to change, the terms and provisions of the Contracts or
the Credit and Collection Policy in any respect (i) if it would not, in the
reasonable belief of the Transferor and BTFC, (A) provide for cancellation
rights under the Contracts which would represent a material addition to, or
otherwise reasonably would be viewed as being materially more favorable to the
Obligor than, those in effect on the Closing Date with respect to Series 1996-1,
(B) materially impair the collectibility of the Receivables, or (C) cause,
immediately or with the passage of time, a Pay-Out-Event to occur, unless in
each case such change is required in order to comply with Requirements of Law,
(ii) if the Transferor or BTFC owns a comparable segment of contracts, such
change is made applicable to the comparable segment of the contracts owned by
the Transferor or BTFC, if any, which have characteristics the same as, or
substantially similar to, the Contracts that are the subject of such change, and
(iii) if such change is not made with the intent to materially benefit the
Transferor or BTFC over the Investor Certificateholders or to materially
adversely affect the Investor Certificateholders, except as otherwise restricted
by an endorsement, sponsorship, or other agreement between BTFC and an unrelated
third party or by the terms of the Contracts. Notwithstanding the foregoing, the
Transferor shall not change, and shall not permit BTFC to change, the payment
terms of any Receivable, provided, that BTFC may reduce the balance of
individual Receivables from time to time through allowances (including those
offered in connection with, or otherwise resulting from, cash out programs) and
cancellations, consistent with the Credit and Collection Policies, which
reductions shall constitute Dilutions in accordance with subsection 3.8(a).
(d) [Reserved]
(e) Delivery of Collections. In the event that the Transferor receives
Collections, the Transferor agrees to deposit such Collections into the
Collection Account as soon as practicable after the receipt thereof, but in no
event later than the third Business Day following the Date of Processing
thereof.
9
(f) Conveyance of Contracts. The Transferor covenants and agrees that
it will not permit BTFC to convey, assign, exchange or otherwise transfer any
Contract or the related Receivable, to any Person other than the Transferor
prior to the termination of this Agreement pursuant to Article XII; provided,
however, that the Transferor shall not be prohibited hereby from permitting BTFC
to convey, assign, exchange or otherwise transfer a Receivable in connection
with a transaction in which BTFC and its successor agree to comply with
provisions substantially similar to those of Section 7.2, or a transaction which
is effected subsequent to the date as of which BTFC terminates the sale of
Contracts and the related Receivables to the Transferor under the circumstances
provided for in the Purchase Agreement.
(g) Notice of Liens. The Transferor shall notify the Trustee promptly
after becoming aware of any Lien on any Contract or the related Receivable other
than Permitted Liens.
(h) Enforcement of Purchase Agreement. The Transferor agrees to take
all action necessary and appropriate to enforce its rights and claims under the
Purchase Agreement.
(i) Separate Business. Except in connection with the customary
operation of the cash management system as presently in effect, or such future
cash management system as BTFC may from time to time in the ordinary course of
business implement (provided, that any such cash management system shall be
operated such that all transfers of funds are properly documented and the
respective assets and liabilities of BTFC and the Transferor are ascertainable
at all times), for BTFC and its consolidated subsidiaries, the Transferor will
not permit its assets to be commingled with those of BTFC and the Transferor
shall maintain separate corporate records, books of account and banking records
from those of BTFC. The Transferor will not conduct its business in the name of
BTFC and will not permit BTFC to conduct its business in the name of the
Transferor so as not to mislead others as to the identity of the entity with
which those others are concerned. The Transferor will maintain an address and
telephone number distinguishable from those of BTFC. The Transferor will provide
for its own operating expenses and liabilities from its own funds, except for
the organizational expenses of the Transferor which were paid by BTFC. The
Transferor will not hold itself out, or permit itself to be held out, as having
agreed to pay, or as generally being liable for, the debts of BTFC. The
Transferor shall cause BTFC not to hold itself out, or permit itself to be held
out, as having agreed to pay, or as generally being liable for, the debts of the
Transferor, except that the organizational expenses of the Transferor were paid
by BTFC and that BTFC contributed to the Transferor a demand note in connection
with the issuance of Series 1995-1 pursuant to the Original Agreement. The
Transferor will cause any consolidated financial statements of BTFC and its
subsidiaries prepared for the benefit of third parties to disclose, through
appropriate footnotes or otherwise, the separate corporate existence of the
Transferor. The Transferor will not permit BTFC to be actively involved in the
day-to-day management of the Transferor. The Transferor will maintain an arm's
length relationship with BTFC with respect to any transactions between the
Transferor, on the one hand, and BTFC, on the other. The Transferor will cause
its certificate of incorporation to limit the Transferor's activities to,
generally, acquiring, owning, selling and financing receivables and activities
incidental thereto, substantially as set forth in such certificate as of the
Closing Date for Series 1996-1, and will maintain at least one independent
director as provided in such certificate. The Transferor shall otherwise operate
with respect to BTFC, and shall cause BTFC to otherwise operate with respect to
the Transferor, such that the separate corporate existence of the Transferor
would be respected and the assets and liabilities of the Transferor would not be
substantively consolidated with those of BTFC if BTFC were to become subject to
the circumstances described in subsections 10.1(d)(i) or (ii).
(j) Notices Under Purchase Agreement. The Transferor (i) shall promptly
give the Trustee copies of any notices, reports or certificates given or
delivered to the Transferor under either the Purchase Agreement or the
Subsidiary Purchase Agreement, (ii) shall not, without the consents, approvals
and opinions, if any, required by Section 13.1, as if Section 13.1 related to
the Purchase Agreement rather than this Agreement, enter into any amendment,
supplement or other modification to, or waiver of any provision of, the Purchase
Agreement and (iii) shall not permit the addition or removal of a Contract and
the related Receivable to or from the operation of the Purchase Agreement unless
there is a corresponding right or obligation of the Transferor to add or remove
such Contract and related Receivable to or from the Trust.
Section 2.6 Addition of Contracts.
(a) All retail installment sale contracts which meet the definition of
Contracts shall be included as Contracts from and after the date upon which such
Contracts are created and all such Contracts, whether such Contracts are then
existing or thereafter created, shall be transferred automatically to the Trust
upon purchase by the Transferor.
10
(b) Receivables relating to Contracts transferred to the Trust shall be
Eligible Receivables if the requirements of clauses (a) through (n) of the
definition of Eligible Receivables are met.
Section 2.7 Release of Contracts Relating to Defaulted
Receivables and Ineligible Receivables. The Trustee shall and does hereby
release all right, title and interest (including without limitation the security
interest evidenced by the financing statements filed in connection with the
issuance of Series 1995-1 under the Original Agreement and additional financing
statements or amendments, if any, filed in connection with the issuance of
Series 1996-1 under this Agreement) in any Contracts (i) relating to Defaulted
Receivables to be sold or otherwise disposed of by the Servicer in accordance
with its customary procedures subsequent to the date any such related Receivable
becomes a Defaulted Receivable, provided, that amounts realized upon such sale
or other disposition shall constitute Recoveries hereunder, (ii) relating to
Ineligible Receivables as to which the Transferor has made any required payment
in respect thereof, provided, that amounts, if any, realized by the Servicer
upon the sale or other disposition of any Ineligible Receivable shall constitute
Transferor Collections hereunder, or (iii) relating to any Receivable the
Outstanding Balance of which has been reduced to zero and as to which the
Trustee has received all amounts due hereunder and under any Supplement in
respect thereof. The Trustee shall, subject to the provisions of Article XI and
without expense to the Trustee, execute such additional forms and documentation,
and perform such additional acts requested by the Servicer or the Person
acquiring such Contracts relating to Defaulted Receivables or any Ineligible
Receivables so released as shall be reasonably necessary to effect such
releases.
Section 2.8 Release of Contracts Relating to Included Clubs. In
the event that subsection 5.1(i) of the Purchase Agreement shall become
applicable in connection with the sale or other disposition of the ownership or
management of an Included Club (as defined in such subsection), and BTFC either
(a) elects to repurchase from the Transferor all Contracts and
the related Receivables owing from Obligors enrolled in such Included Club
pursuant to clause (iii) of such subsection, and in all events subject to the
prior deposit by the Transferor (or by BTFC for the account of the Transferor)
into the Collection Account of an amount equal to the sum of (i) the aggregate
Principal Balances as of the date of such deposit of all Receivables relating to
such Contracts (which shall be treated as Principal Collections), plus (ii) an
amount equal to (A) the weighted average of all interest accrued but unpaid with
respect to all Series then outstanding and allocable to such aggregate Principal
Balances, through and including the day preceding the Distribution Date which
relates to the Monthly Period in which such deposit of principal occurs (or, to
the extent that, pursuant to the related Supplement, the Transferor otherwise
would be obligated to pay accrued interest on any portion of the Invested Amount
of any Series repaid on such Distribution Date only through the end of a
specified interest accrual period, then interest on such portion shall be
payable only through the end of such interest accrual period) (which shall be
treated as Imputed Yield Collections), less (B) the amount, if any, previously
allocated and available for payment of interest to the Certificateholders of
such Series on the related Distribution Date in the Monthly Period in which such
deposit is made, plus (iii) any other amounts accrued and owing as specified in
any applicable Supplement, or
(b) delivers an Officer's Certificate pursuant to clause (iv)
of such subsection stating that, after excluding all Eligible Receivables from
members enrolled in such Included Club, the Transferor Interest (after giving
effect to any amounts excluded therefrom pursuant to any Supplement) would not
be less than the greater of (x) the Minimum Transferor Interest or (y) any
Available Subordination Amount and such action will not otherwise result in the
occurrence of a Pay-Out- Event, and requesting that the Trustee release such
Contracts and the related Receivables (or such Contracts and the Related
Receivables are to be released through a combination of the actions described in
the preceding clauses (a) and (b)),
then the Trustee shall and does hereby release all right, title and interest
(including without limitation the security interest evidenced by the financing
statements filed pursuant to Section 2.1) in any Contracts relating to an
Included Club to be sold to BTFC pursuant to clause (iii) or otherwise released
to BTFC pursuant to clause (iv) of subsection 5.1(i) of the Purchase Agreement.
The Trustee shall, subject to the provisions of Article XI and without expense
to the Trustee, execute such additional forms and documentation, and perform
such additional acts requested by the Transferor or BTFC, as shall be reasonably
necessary to effect such releases.
[End of Article II]
11
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters Relating
to the Servicer.
(a) BTFC agrees to act as the Servicer under this Agreement. The
Investor Certificateholders of each Series by their acceptance of the related
Certificates consent to BTFC acting as Servicer. Notwithstanding the foregoing
or any other provisions of this Agreement or any Supplement, the Investor
Certificateholders consent to an Affiliate of BTFC acting as Servicer hereunder,
in full substitution thereof; provided that such Affiliate shall expressly
assume in writing (unless such assumption occurs by operation of law), by an
agreement supplemental hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the Servicer, as applicable
hereunder, and shall in all respects be designated the Servicer under this
Agreement; provided, further, that BTFC will remain jointly and severally liable
for the performance of such covenant and obligation with such Affiliate.
(b) The Servicer shall service and administer the Receivables and shall
collect payments due under the Receivables in accordance with its customary and
usual servicing procedures and, unless the Servicer is a Back-up Servicer or its
agent, the Credit and Collection Policies, and shall have full power and
authority, acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such servicing and
administration that it may deem necessary or desirable. Without limiting the
generality of the foregoing and subject to Section 10.1, the Servicer is hereby
authorized and empowered (i) unless such power and authority is revoked by the
Trustee on account of the occurrence of a Servicer Default pursuant to Section
10.1, to make payment to or for the account of the Transferor of amounts
otherwise to be deposited in the Collection Account as set forth in this
Agreement, (ii) unless such power and authority is revoked by the Trustee on
account of the occurrence of a Servicer Default pursuant to Section 10.1, to
instruct the Trustee in writing pursuant to the Daily Report or otherwise to
make withdrawals and payments from the Collection Account, any Distribution
Account, any Series Account and the Excess Funding Account, in accordance with
such instructions as set forth in this Agreement, (iii) unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to Section 10.1, to instruct the Trustee in writing to take any
action permitted or required under any Enhancement at such time as set forth in
this Agreement and any Supplement, (iv) to execute and deliver, on behalf of the
Trust for the benefit of the Certificateholders, 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 Contracts or the related
Receivables and, after the delinquency of any Receivable and to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such Receivable or the related
Contract, (v) to make any filings, reports, notices, applications, registrations
with, and to seek any consents or authorizations from, the Securities and
Exchange Commission and any state securities authority on behalf of the Trust as
may be necessary or advisable to comply with any federal or state securities or
reporting requirements, and (vi) to delegate certain of its servicing,
collection, enforcement and administrative duties hereunder with respect to the
Contracts and the related Receivables to any Person who agrees to conduct such
duties in accordance with the requirements of this Agreement, if such delegation
shall be made by a Back-up Servicer, otherwise in accordance with the Credit and
Collection Policies; provided, however, that the Servicer shall notify the
Trustee in writing of any such delegation; and provided further that the
Servicer shall remain jointly and severally liable with such Person. So long as
the Servicer's power and authority has not been revoked and to the extent
consistent with the provisions of this Agreement, the Trustee agrees that it
shall promptly follow the instructions of the Servicer to withdraw funds from
the Collection Account, any Distribution Account, any Series Account and the
Excess Funding Account, and to take any action required under any Enhancement at
such time as required under this Agreement. The Trustee shall execute at the
Servicer's written request such documents prepared by the Transferor and
acceptable to the Trustee as the Servicer certifies are necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.
(c) The Servicer agrees that, with respect to all Collections,
Transferor Collections and other Trust Property or proceeds thereof from time to
time received by it, except during the period which precedes the third Business
Day following the Date of Processing with respect to any Collections or
Transferor Collections received, during which period the Servicer may commingle
such Collections and Transferor Collections with its own funds or other property
not constituting Trust Property,
12
the Servicer will not commingle Collections, Transferor Collections and other
Trust Property or proceeds thereof from time to time received by it with its own
funds or other property not constituting Trust Property.
(d) The Servicer shall not be obligated to use separate servicing
procedures, offices or employees for servicing the Contracts and the related
Receivables from the procedures, offices and employees used by the Servicer in
connection with servicing other contracts and the related receivables.
Section 3.2 Servicing Compensation. As compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph, the Servicer shall be entitled to
receive the Servicing Fee in respect of each Monthly Period prior to the
termination of the Trust pursuant to Section 12.1, payable in arrears on each
related Distribution Date or on such other date as may be specified and in the
manner specified in the applicable Supplement. The portion of the Servicing Fee
allocable to each Series with respect to a Monthly Period shall be the amount
with respect to such Series specified in clause (a) of the definition of
Servicing Fee. The remainder of the Servicing Fee shall be the amount specified
in clause (b) of such definition and shall be paid by the Transferor, or
retained by the Servicer as provided in Article IV, and in no event shall the
Trust, the Trustee, any Enhancement Provider, or the Investor Certificateholders
be liable for the share of the Servicing Fee to be paid by the Transferor;
provided, to the extent that any portion of the Transferor Interest is
subordinated for the benefit of a Series pursuant to the related Supplement, the
Servicing Fee allocable to such subordinated portion may be combined and paid in
conjunction with the Servicing Fee allocable to such Series if so provided in
such Supplement.
The Servicer shall be responsible for its own expenses, which shall
include the amounts due to the Trustee pursuant to Section 11.5 (but only for so
long as BTFC shall be the Servicer) and the reasonable fees and disbursements of
Independent Public Accountants and all other expenses incurred by the Servicer
in connection with its activities hereunder; provided, that the Servicer shall
not be liable for any liabilities, costs or expenses of the Trust, the Investor
Certificateholders or the Certificate Owners 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,
penalties or additions with respect thereto or arising from a failure to comply
therewith). The Servicer shall be required to pay such expenses for its own
account and shall not be entitled to any payment therefor other than the
Servicing Fee. In the event that BTFC or any Successor Servicer (other than a
Back-Up Servicer), while the Servicer, fails to pay any amounts due to the
Trustee pursuant to Section 11.5, the Trustee shall be entitled to deduct and
receive such amounts from the Servicing Fee prior to the payment thereof to the
Servicer (but only for so long as BTFC or any Successor Servicer other than a
Back-Up Servicer shall be the Servicer), and the obligation of the Trust to pay
any such amounts to the Servicer shall thereby be fully satisfied.
Section 3.3 Representations, Warranties and Covenants of the
Servicer. BTFC, as initial Servicer, hereby makes, and any Successor Servicer by
its appointment hereunder shall make, the following representations, warranties
and covenants on which the Trustee has relied in accepting the Contracts and the
related Receivables in trust and in authenticating Certificates issued on any
related Closing Date:
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation and has the power, authority and legal right to own
its properties and conduct its business as such properties are presently owned
and such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement.
(b) Due Qualification. The Servicer is duly qualified to do business
and is in good standing (or is exempt from such requirements) as a foreign
corporation (or other legal entity) in any state where such qualification is
necessary in order to service the Contracts and the related Receivables as
required by this Agreement and has obtained all necessary licenses and approvals
with respect to the Servicer necessary for the due execution, delivery and
performance by it of this Agreement as required under federal and state law in
order to service the Contracts and the related Receivables as required by this
Agreement, and if the Servicer shall be required by any Requirement of Law to so
qualify or register or obtain such license or approval, then it shall do so
except where the failure to obtain such license or approval does not materially
affect the Servicer's ability to perform its obligations hereunder or the
enforceability of the Contracts and the related Receivables; provided, however,
that, with respect to any Successor Servicer, this representation will be deemed
to be satisfied by such successor Servicer if its provisions are true and
correct within sixty (60) days of the Servicing Transfer Date.
13
(c) Due Authorization. The execution and delivery of this Agreement
and the consummation of the transactions provided for herein, have been duly
authorized by the Servicer by all necessary corporate action on the part of the
Servicer.
(d) Binding Obligation. This Agreement and the consummation of the
transactions provided for herein, constitutes a legal, valid and binding
obligation of the Servicer, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect,
affecting the enforcement of creditors' rights in general and as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) No Violation. The execution and delivery of this Agreement by the
Servicer, and the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof applicable to the Servicer, will not
violate, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under,
any Requirement of Law applicable to the Servicer or any material indenture,
contract, agreement, mortgage, deed of trust or other material instrument to
which the Servicer is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Servicer, threatened against the Servicer
before any Governmental Authority (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, (iii)
seeking any determination or ruling that would materially and adversely affect
the performance by the Servicer of its obligations under this Agreement, (iv)
seeking any determination or ruling that would materially and adversely affect
the validity or enforceability of this Agreement, seeking any determination or
ruling that would materially and adversely affect the payment or enforceability
of the Receivables taken as a whole or (v) seeking to affect adversely the tax
attributes of the Trust.
(g) Compliance with Requirements of Law. The Servicer shall duly
satisfy all obligations on its part to be fulfilled under or in connection with
each Contract and the related Receivable, will maintain in effect all
qualifications required under Requirements of Law in order to service properly
each Contract and the related Receivable and will comply in all material
respects with all other Requirements of Law in connection with servicing each
Contract and the related Receivable the failure to comply with which would have
a material adverse effect on the Certificateholders or any Enhancement Provider.
(h) Protection of Certificateholders' Rights. Except as may be required
to comply with Requirements of Law, the Servicer shall take no action which, nor
omit to take any action the omission of which, would impair the rights of
Certificateholders in any Contract or the related Receivable or the rights of
any Enhancement Provider, nor shall it reschedule, revise or defer payments due
on any Contract and the related Receivable except as provided in subsection
2.5(c).
(i) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Governmental Authority required in connection
with the execution and delivery of this Agreement and the performance of the
transactions contemplated by this Agreement and the fulfillment of the terms
hereof, have been obtained; provided, however, that the Servicer makes no
representation or warranty regarding state securities or "Blue Sky" laws in
connection with the distribution of the Certificates and if TCB is the Servicer
shall additionally make no representation or warranty regarding federal
securities laws in connection with the distribution of the Certificates.
(j) Rescission or Cancellation. The Servicer shall not permit any
rescission or cancellation of any Contract or the related Receivable except as
ordered by a court of competent jurisdiction or other Governmental Authority or
in accordance with the Credit and Collection Policy or the normal operating
procedures of the Servicer.
(k) Receivables Not to Be Evidenced by Promissory Notes. Except in
connection with its enforcement or collection of a Receivable (in which case any
such promissory note is to be made in the name of the Trust on behalf of the
Certificateholders), the Servicer will take no action to cause any Receivable to
be evidenced by an instrument (as defined in the UCC as in effect in the
Relevant UCC State). Except in such circumstances, the Servicer will take no
action to cause any Receivable to be anything other than an "account" or
"general intangible" not constituting "chattel paper" (as defined in the UCC as
in effect in the Relevant UCC State). Notwithstanding the foregoing, the
Servicer's compliance with existing and future statutes and regulations
applicable to the Servicer's business shall not constitute a violation of this
covenant, but to the extent that such compliance may result in the
characterization of any evidence of a Receivable as an instrument, the Servicer
shall
14
undertake all steps necessary to enable the Transferor and the Trust to obtain a
first priority perfected security interest in such instrument in accordance with
the Purchase Agreement and this Agreement.
(l) Principal Place of Business. The Servicer shall at all times
maintain its principal executive offices within the United States, and shall
provide prompt notice to the Trustee and each Rating Agency of any change in the
address of such principal executive office.
Upon discovery by the Transferor, the Servicer or a Responsible Officer
of the Trustee of a breach of any of the foregoing representations, warranties
and covenants, the party discovering such breach shall give written notice to
the others immediately upon obtaining knowledge of such breach.
Section 3.4 Reports and Records for the Trustee.
(a) Daily Records. Upon reasonable prior notice by the Trustee, the
Servicer shall make available at an office of the Servicer (or other location
designated by the Servicer if such records are not accessible by the Servicer at
an office of the Servicer) selected by the Servicer for inspection by the
Trustee or an agent thereof (reasonably acceptable to the Servicer unless
legally required in connection with regulation of the Trustee) on a Business Day
during the Servicer's normal business hours a record setting forth (i) the
Collections on the Receivables, (ii) the amount of Receivables, and (iii) such
other information relating to the Receivables as may reasonably have been
requested in such prior notice to the extent readily available to the Servicer
in the ordinary course of business, in each case for the Business Day preceding
the date of the inspection. The Servicer shall, at all times, maintain its
computer files with respect to the Contracts and the related Receivables in such
a manner so that the Receivables may be specifically identified and, upon
reasonable prior request of the Trustee, shall make available to the Trustee, at
an office of the Servicer (or other location designated by the Servicer if such
computer files are not located at an office of the Servicer) selected by the
Servicer, on any Business Day of the Servicer during the Servicer's normal
business hours, any computer programs, reports, files or data necessary to make
such identification. The Servicer, however, will not notify club members of the
transfer of the Contracts and Receivables to the Transferor or Trust.
(b) Daily Report.
(i) On each Business Day the Servicer shall prepare a
completed Daily Report substantially in the form of Exhibit B hereto.
(ii) The Servicer shall deliver to the Trustee (and
the Paying Agent if other than the Trustee) the Daily Report by 1:00
p.m. (Central Standard time) on each Business Day with respect to
Collections received and activity in the Receivables for the third
preceding Business Day (or, in the case of a Daily Report delivered on
the third Business Day following a Saturday, Sunday or other
non-Business Day, or following the first day of any calendar month if
otherwise a Business Day, the aggregate Collections received and
activity in the Receivables for the preceding Business Day and such
preceding non-Business Days or first day of the month).
(iii) Upon discovery of any error or receipt of
notice of any error in any Daily Report, the Servicer, the Transferor
and the Trustee shall arrange to confer and shall agree upon any
adjustments necessary to correct any such errors. The Servicer, the
Transferor and the Trustee shall each use its best efforts to correct
any such errors as soon as practicable, and in any event by the
Determination Date which relates to the Monthly Period with respect to
which such error occurs. If any such error is material, the Trustee
shall provide notice thereof to each Investor Certificateholder and
shall retain all Collections which would otherwise be paid from the
Trust (or, provided the Investor Certificateholders shall have been
notified of such error, such lesser amount as the Trustee and the
Servicer shall agree to be necessary to cover any such error) in the
Collection Account until such material error is corrected. Unless the
Trustee has received written notice of any error or discrepancy, the
Trustee may rely on each Daily Report delivered to it for all purposes
hereunder.
(c) Settlement Statement. On the Determination Date prior to each
Distribution Date, the Servicer shall, prior to 3:00 p.m. (New York City time)
on such day, deliver to the Trustee (and the Paying Agent if other than the
Trustee) the Settlement Statement for the related Monthly Period substantially
in the form of Exhibit C hereto, including the following
15
information (which, in the case of clauses (iii), (iv) and (v) below, will be
stated on the basis of an original principal amount of $1,000 per Certificate):
(i) the aggregate amount of Collections received in the Collection Account for
the Monthly Period preceding such Determination Date and the aggregate amount of
Imputed Yield Collections and the aggregate amount of Principal Collections
processed during such Monthly Period; (ii) with respect to the preceding Monthly
Period for each Series of Certificates the aggregate amount of the applicable
Investor Percentage of Principal Collections, and the aggregate amount of the
applicable Investor Percentage of Imputed Yield Collections; (iii) for each
Series and for each Class within any such Series, the total amount to be
distributed to Investor Certificateholders on the next succeeding Distribution
Date; (iv) for each Series and for each Class within any such Series, the amount
of such distribution to Certificateholders allocable to principal; (v) for each
Series and for each Class within any such Series, the amount of such
distribution to Certificateholders allocable to interest; (vi) for each Series
and for each Class within any such Series, the Investor Default Amount for the
immediately preceding Monthly Period; (vii) for each Series and for each Class
within any such Series, the amount of the Investor Charge-Offs and the amount of
the reimbursements of Investor Charge-Offs for such Distribution Date; (viii)
for each Series, the monthly Servicing Fee for such Distribution Date; (ix) for
each Series, the existing deficit controlled amortization amount, if applicable;
(x) the Aggregate Principal Receivables in the Trust at the close of business on
the last day of the Monthly Period preceding such Distribution Date; (xi) for
each Series and for each Class within any such Series, the Invested Amount at
the close of business on the last day of the Monthly Period immediately
preceding such Distribution Date; (xii) the available amount of any Enhancement
for each Series and for each Class within any such Series, if any; (xiii) for
each Series and for each Class within any such Series, the Pool Factor as of the
end of the related Monthly Period; (xiv) whether a Pay-Out-Event or a
Prospective Pay-Out-Event with respect to any Series, or a Servicer Default,
shall have occurred during or with respect to the related Monthly Period; (xv)
the aggregate amount of Dilutions and the amount of any deposits into the Excess
Funding Account resulting therefrom for the related Monthly Period; (xvi) the
aggregate amount of such Dilutions allocated to each Series and each Class
within any such Series, if applicable; and (xvii) such other calculations as may
be required by any Supplement. The Trustee shall be under no duty to
recalculate, verify or recompute the information supplied to it under this
Section 3.4 or such other matters as are set forth in any Settlement Statement.
The Servicer shall also provide a copy of the Settlement Statement in a prompt
manner to each Rating Agency.
Section 3.5 Annual Servicer's Certificate. The Servicer will
deliver, in accordance with Section 13.5, to the Trustee, any Enhancement
Provider and each Rating Agency, within 100 days of the end of each fiscal year,
beginning with the 1996 fiscal year, an Officer's Certificate substantially in
the form of Exhibit D stating that (a) a review of the activities of the
Servicer during the preceding fiscal year and of its performance under this
Agreement was made under the supervision of the officer signing such certificate
and (b) to such officer's knowledge, based on such review, the Servicer has
fully performed all its obligations under this Agreement throughout such period,
or, if there has been a default in the performance of any such obligation,
specifying each such default known to such officer and the nature and status
thereof and remedies being pursued. A copy of such certificate may be obtained
by any Investor Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office. Notwithstanding the foregoing, the
requirements of this Section 3.5 shall not apply to a Back-Up Servicer which
becomes Successor Servicer hereunder.
Section 3.6 Annual Independent Accountants' Management Letter.
Within 100 days of the end of each fiscal year (beginning with the 1996 fiscal
year), the Servicer at its expense shall cause a firm of Independent Public
Accountants (who may also render other services to the Servicer or the
Transferor) to issue to Bally a "management letter" addressed to members of its
Board of Directors with respect to the prior fiscal year, a copy of which shall
be provided to the Trustee and each Rating Agency, to the effect that such firm
has considered the internal accounting controls of Bally (of which BTFC is a
subsidiary) in connection with their audit of the consolidated financial
statements of Bally for such year, which letter shall identify any internal
control weaknesses that would materially adversely affect the servicing of the
Receivables. Notwithstanding the foregoing, the requirements of this Section 3.6
shall not apply to a Back-Up Servicer which becomes Successor Servicer
hereunder.
Section 3.7 Tax Treatment. The Transferor has structured this
Agreement and the Investor Certificates intending for the Investor Certificates
to qualify under applicable federal, state, local and foreign tax law as
indebtedness. Except to the extent expressly specified to the contrary in any
Supplement, the Transferor, the Servicer, the Trustee, the Holder of the
Exchangeable Transferor Certificate, each Investor Certificateholder and each
Certificate Owner agree to treat and to take no action inconsistent with the
treatment of the Investor Certificates (or beneficial interest therein) as
indebtedness that is secured by the Trust Property for purposes of federal,
state, local and foreign income or franchise taxes and any other tax imposed on
16
or measured by income. Each Investor Certificateholder and the Holder of the
Exchangeable Transferor Certificate, by acceptance of its Certificate and each
Certificate Owner, by acquisition of a beneficial interest in a Certificate,
agree to be bound by the provisions of this Section 3.7. Each Certificateholder
agrees that it will cause any Certificate Owner acquiring an interest in a
Certificate through it to agree to comply with this Agreement as to treatment as
indebtedness under applicable tax law, as described in this Section 3.7.
Furthermore, subject to Section 11.11, the Trustee shall treat the Trust as a
security device only, and shall not file tax returns or obtain an employer
identification number on behalf of the Trust.
Section 3.8 Adjustments.
(a) If the Servicer adjusts downward the amount of any Eligible
Receivable because of (i) a cancellation permitted under the terms of the
related Contract, (ii) a rebate, refund or allowance offered to Obligors in
connection with promotional or incentive programs (including without limitation
any cash out programs), (iii) its customary policy of writing off small balances
that do not justify the administrative expense of collection, or (iv) correction
of an erroneous charge to an Obligor, or if the Servicer otherwise adjusts
downward the amount of any Eligible Receivable without receiving Collections
therefor or without charging off such amount as uncollectible, or if any
Eligible Receivable is discovered as having been created fraudulently or with
respect to which the covenant contained in subsection 2.5(b) was breached, then
the amount of any such reduction in the Principal Balance of such Eligible
Receivable or, in the case of an Eligible Receivable created fraudulently or
breach of the covenant in subsection 2.5(b), the entire Principal Balance of
such Eligible Receivable, shall constitute a "Dilution" as of the effective date
of such adjustment downward or discovery. Pursuant to subsection 4.3(b), unless
otherwise specified in any Supplement pursuant to subsection 4.3(d) hereof, the
Dilutions for each Business Day during a Monthly Period shall be allocated
solely to the Holder of the Exchangeable Transferor Certificate and, in any such
case, the Transferor Interest will be reduced by the amount of such Dilutions
allocated (or, if provided in any Supplement, reallocated) to the Holder of the
Exchangeable Transferor Certificate for such Business Day. To the extent
Dilutions are allocated to any Series pursuant to the applicable Supplement, the
Invested Amount of such Series will be reduced by the amount of Dilutions
allocated to such Series for such Business Day unless otherwise paid or
reallocated to the Holder of the Exchangeable Transferor Certificate pursuant to
such Supplement. Regardless of whether Dilutions are allocated to the Holder of
the Exchangeable Transferor Certificate or to one or more Series or Classes
within any such Series, the aggregate amount of the Principal Receivables used
to calculate the Investor Percentages applicable to any Series (and allocation
percentages related to the Available Subordination Amount for such Series, if
applicable) will be reduced by the amount of Dilutions for any Business Day. Any
reduction to the Transferor Interest required by the allocation of Dilutions to
the Holder of the Exchangeable Transferor Certificate shall be made on the
effective date of each such Dilution, or as soon thereafter as reasonably
practicable, but in no event later than the end of the Monthly Period in which
such Dilution arises. In the event that, following any such allocation and
reduction, the Transferor Interest would be less than the Minimum Transferor
Interest, the Servicer shall immediately make a deposit of the Shared Principal
Collections that would otherwise be distributed to the Transferor into the
Excess Funding Account, to the extent allocable to such Series, in immediately
available funds prior to the next succeeding Business Day in an amount equal to
the amount by which the Transferor Interest would be reduced below the Minimum
Transferor Interest as a result of such allocation and reduction. In the event
that (i) following any such allocation and reduction, the Transferor Interest
would be less than the Minimum Transferor Interest, (ii) as a result thereof a
deposit into the Excess Funding Account is required pursuant to the preceding
sentence, and (iii) Shared Principal Collections that would otherwise be
distributed to the Transferor are insufficient to make such deposit in full,
then the Transferor shall make a deposit into the Excess Funding Account in
immediately available funds no later than the next succeeding Business Day in an
amount equal to the amount of such shortfall. Any amount required to be
deposited into the Excess Funding Account in connection with Dilutions (an
"Adjustment Payment") shall be applied in accordance with Article IV and the
terms of each Supplement. Any Adjustment Payment Shortfall resulting from the
failure of the Transferor to make an Adjustment Payment pursuant to this
subsection 3.8(a) shall be allocated among the Series based on the Series
Allocation Percentage.
(b) If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Receivable and such Collection was received in the
form of a check or by credit card, charge card or debit card which is not
honored for any reason or (ii) the Servicer makes a mistake with respect to the
amount of any Collection and deposits an amount that is less than or more than
the actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Receivable in respect of which a dishonored
payment is received shall be deemed not to have been paid. Notwithstanding the
first two sentences of this paragraph, any adjustments made pursuant to this
paragraph will be reflected in a current report but will not change any amount
of Collections
17
previously reported pursuant to subsection 3.4(b), provided, that if after
giving effect to any adjustment made pursuant to this subsection (b) the
Transferor Interest would be less than the Minimum Transferor Interest, the
Transferor shall deposit into the Excess Funding Account an amount equal to the
lesser of (i) the amount by which the Transferor Interest would be less than the
Minimum Transferor Interest, and (ii) the amount of any overpayment received by
the Transferor from amounts subject to such adjustment.
Section 3.9 Notices to BTFC. In the event that BTFC or any
Affiliate thereof is no longer acting as Servicer, any Successor Servicer
appointed pursuant to Section 10.2 shall deliver or make available to BTFC each
certificate and report required to be prepared, forwarded or delivered
thereafter pursuant to Sections 3.4, 3.5 and 3.6.
Section 3.10 Certain Matters Affecting a Back-Up Servicer as the
Successor Servicer. In the event that a Back-Up Servicer is appointed as
Successor Servicer hereunder, it shall be entitled to the following rights,
remedies and protections in carrying out its duties as Servicer hereunder: (i)
it shall not be liable for any act or omission in carrying out its duties
hereunder except for its own negligence, reckless disregard of its duties, bad
faith or willful misconduct; (ii) it may rely on and be fully protected in
acting or refraining from acting in accordance with any resolution, certificate,
letter, statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond, or other documents received by it which it has reason to
believe is genuine and signed or presented to it by a proper party; (iii) it may
consult with counsel, and any opinion from such counsel (so long as such counsel
is not an employee of the Successor Servicer or an employee of an Affiliate of
the Successor Servicer) shall be full and complete authorization and protection
in respect of any action taken, suffered, or omitted by the Successor Servicer
in good faith in accordance with such opinion; and (iv) it shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of its duties hereunder if it reasonably believes that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
[End of Article III]
18
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Certificateholders. Each Series of Investor
Certificates shall represent Undivided Interests in the Trust, including the
benefits of any Enhancement issued with respect to such Series and the right to
receive the Collections and other amounts at the times and in the amounts
specified in this Article IV to be deposited in the Investor Accounts or to be
paid to the Investor Certificateholders of such Series; provided, however, that
the aggregate interest represented by such Certificates at any time in the
Principal Receivables and other Trust Property shall not exceed an amount equal
to the Invested Amount of such Certificates. The Exchangeable Transferor
Certificate shall represent the remaining undivided interest in the Trust,
including the right to receive the Collections, the Transferor Collections and
other amounts at the times and in the amounts specified in this Article IV to be
paid to the Holder of the Exchangeable Transferor Certificate; provided,
however, that the aggregate interest represented by such Certificate at any time
in the Principal Receivables shall not exceed the Transferor Interest at such
time and such Certificate shall not represent any interest in the Investor
Accounts, except as provided in this Agreement, or the benefits of any
Enhancement issued with respect to any Series.
Section 4.2 Establishment of Accounts.
(a) The Collection Account. The Trustee, for the benefit of the
Certificateholders, shall cause to be established and maintained in the name of
the Trustee, on behalf of the Certificateholders, a segregated trust account
(the "Collection Account") within its corporate trust department, which shall be
a Qualified Account within the meaning of clause (a) of the definition thereof,
and which shall bear a designation clearly indicating that such account is the
Collection Account and that the funds deposited therein are held in trust for
the benefit of the Certificateholders. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Collection
Account and in all proceeds thereof. The Collection Account shall, except as
otherwise provided herein, be under the sole dominion and control of the Trustee
for the benefit of the Certificateholders. Pursuant to subsection 3.1(b), the
Servicer shall have the power, revocable by the Trustee upon the occurrence of a
Servicer Default pursuant to Section 10.1, to make payment to or for the account
of the Transferor of amounts otherwise to be deposited in the Collection Account
as set forth in this Agreement, and to instruct the Trustee in writing pursuant
to the Daily Report or otherwise to make withdrawals and payments from the
Collection Account for the purpose of carrying out the Servicer's or the
Trustee's duties under this Agreement or any Supplement. If, at any time, the
Collection Account ceases to be a Qualified Account by reason of the Trustee
holding such account, then the Trustee shall establish within 10 Business Days a
new Collection Account as a Qualified Account (meeting the requirements of
clause (a), (b) or (c) of such definition), transfer any cash and/or investments
to such new Collection Account, and from the date such new Collection Account is
established, it shall be the "Collection Account."
(b) Distribution Accounts. The Trustee, for the benefit of the Investor
Certificateholders of each Series, shall cause to be established and maintained
in the name of the Trustee, on behalf of the Investor Certificateholders of such
Series, a segregated trust account for each Series (a "Distribution Account")
within its corporate trust department, which shall be a Qualified Account within
the meaning of clause (a) of the definition thereof, and which shall bear a
designation clearly indicating that such account is a Distribution Account and
that the funds deposited therein are held in trust for the benefit of the
Investor Certificateholders of such Series. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in each
Distribution Account and in all proceeds thereof. Each Distribution Account
shall, except as otherwise provided herein, be under the sole dominion and
control of the Trustee for the benefit of the Investor Certificateholders of the
related Series. Pursuant to the authority granted to the Paying Agent herein,
the Paying Agent shall have the power, revocable by the Trustee, to make
withdrawals and payments from each Distribution Account for the purpose of
carrying out the Paying Agent's duties hereunder. If, at any time, a
Distribution Account ceases to be a Qualified Account by reason of the Trustee
holding such account, then the Trustee shall establish within 10 Business Days a
new Distribution Account as a Qualified Account (meeting the requirements of
clause (a), (b) or (c) of such definition), transfer any cash and/or investments
to such new Distribution Account, and from the date such new Distribution
Account is established, it shall be the "Distribution Account" for the related
Series.
19
(c) The Excess Funding Account. The Trustee, for the benefit of the
Certificateholders, shall cause to be established and maintained in the name of
the Trustee, on behalf of the Certificateholders, a segregated trust account
(the "Excess Funding Account") within its corporate trust department, which
shall be a Qualified Account within the meaning of clause (a) of the definition
thereof, and which shall bear a designation clearly indicating that such account
is the Excess Funding Account and that the funds deposited therein are held in
trust for the benefit of the Certificateholders. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Excess Funding Account and in all proceeds thereof. The Excess Funding Account
shall, except as otherwise provided herein (including without limitation in
subsection 4.3(f)), be under the sole dominion and control of the Trustee for
the benefit of the Certificateholders. Pursuant to subsection 3.1(b), the
Servicer shall have the power, revocable by the Trustee upon the occurrence of a
Servicer Default pursuant to Section 10.1, to instruct the Trustee in writing
pursuant to the Daily Report or otherwise to make withdrawals and payments from
the Excess Funding Account for the purpose of carrying out the Servicer's or the
Trustee's duties under this Agreement or any Supplement. If, at any time, the
Excess Funding Account ceases to be a Qualified Account by reason of the Trustee
holding such account, then the Trustee shall establish within 10 Business Days a
new Excess Funding Account as a Qualified Account and otherwise meeting the
conditions specified above, transfer any cash and/or any investments to such new
Excess Funding Account and from the date such new Excess Funding Account is
established, it shall be the "Excess Funding Account."
(d) Administration of the Collection Account. Funds on deposit in the
Collection Account shall at all times be invested by the Trustee in Cash
Equivalents in accordance with written instructions from the Servicer as
provided below or, in the absence of such instructions, in the Designated Cash
Equivalent. Any such investment shall mature and such funds shall be available
for withdrawal on or prior to the Transfer Date following the Monthly Period in
which such funds were processed for collection. The Trustee shall maintain for
the benefit of the Investor Certificateholders possession of the negotiable
instruments or securities evidencing the Cash Equivalents described in clause
(a) of the definition thereof from the time of purchase thereof until the time
of sale or maturity. To the extent such Cash Equivalents are held in book-entry
form, the Trustee shall cause the book-entry registration with respect thereto
to show that the ownership of such Cash Equivalents is in the name of the
Trustee or its financial intermediary. All interest and earnings (net of losses
and investment expenses) on funds on deposit in the Collection Account shall be
retained in the Collection Account and shall be treated as Imputed Yield
Collections from the Monthly Period in which such interest and earnings were
actually deposited into the Collection Account. Subject to the restrictions set
forth above, the Servicer, or a Person designated in writing by the Servicer, of
which the Trustee shall have received written notification, shall have the
authority to instruct the Trustee with respect to the investment of funds on
deposit in the Collection Account. Any investment instructions to the Trustee
shall be in writing, and shall be given no later than 1:00 p.m. (Central
Standard Time) on a Business Day that such investment is proposed to be made.
All interest and earnings (net of losses and investment expenses) on funds on
deposit in the Collection Account, in the Excess Funding Account and, unless
otherwise provided in the applicable Supplement, on any other Investor Account
established and maintained from time to time, shall be reported for federal and
applicable state income tax purposes under the federal tax identification number
of the Transferor as income of the Transferor.
(e) Status of Certain Investments in Trust Accounts. The Transferor
agrees and acknowledges that the Trustee is to have "control" (within the
meaning of Section 8-102 of the UCC as enacted in Illinois) of investments held
in the Collection Account, any Distribution Account, the Excess Funding Account
or any Series Account, which are comprised of "Investment Property" (within the
meaning of Section 9-115 of the UCC as enacted in Illinois) for all purposes of
this Agreement.
Section 4.3 Collections and Allocations.
(a) Collections. For purposes of the deposits to the Collection Account
hereinafter provided for, the Servicer may, at its option, make net deposits
such that the Servicer need not deposit the Transferor Collections, or any other
amounts allocated to the Exchangeable Transferor Certificate into the Collection
Account unless otherwise provided in any Supplement, and if making such net
deposits shall pay, or be deemed to pay, the Transferor Collections and such
other amounts to the Holder of the Exchangeable Transferor Certificate.
Obligors shall be directed to make payments on the Receivables to the
Servicer who shall deposit all such payments, to the extent constituting either
Collections or Transferor Collections on the Receivables, in the Collection
Account no later than the third Business Day following the Date of Processing
thereof, subject to the right of the Servicer to make net deposits
20
as provided above. Prior to remitting all such Collections and Transferor
Collections (as identified by the Servicer) to the Collection Account, the
Servicer shall identify the amounts included within such payments from Obligors
as constitute Released Amounts and, in accordance with subsection 2.1(h) of the
Purchase Agreement, the Transferor hereby authorizes and directs the Servicer,
for so long as BTFC shall be the Servicer, to retain all such Released Amounts
for its own account (provided, that if BTFC shall not be the Servicer, the
Servicer shall remit such Released Amounts to BTFC unless otherwise directed by
the Transferor).
The Servicer shall allocate such Collections and Transferor Collections
to each Series of Investor Certificates and to the Holder of the Exchangeable
Transferor Certificate in accordance with this Article IV and shall cause the
Trustee to withdraw the required amounts from the Collection Account or pay such
amounts to the Holder of the Exchangeable Transferor Certificate in accordance
with this Article IV. Pursuant to authority granted to it pursuant to subsection
3.1(b), the Servicer shall have the power, revocable by the Trustee, to withdraw
or pay, or to instruct the Trustee to withdraw or pay, such amounts for the
purpose of carrying out the Servicer's or the Trustee's duties hereunder. The
Servicer shall make such deposits or payments on the date indicated herein by
wire transfer or as otherwise provided in the Supplement for any Series of
Certificates with respect to such Series.
(b) Allocations for the Exchangeable Transferor Certificate. Throughout
the existence of the Trust, unless otherwise stated in any Supplement, with
respect to each Business Day the Servicer shall allocate to the Holder of the
Exchangeable Transferor Certificate an amount equal to the product of the
Transferor Percentage and each of (i) the aggregate amount of Imputed Yield
Collections which are deposited in the Collection Account with respect to such
Business Day, and shall pay such amount (together with any corresponding amount
allocable to the Holder of the Exchangeable Transferor Certificate pursuant to
subsection 4.3(c)) to the Holder of the Exchangeable Transferor Certificate on
such date of deposit, (ii) the aggregate amount of Principal Collections which
are deposited into the Collection Account with respect to such Business Day, and
shall pay such amount (together with any corresponding amount allocable to the
Holder of the Exchangeable Transferor Certificate pursuant to subsection 4.3(c))
to the Holder of the Exchangeable Transferor Certificate on such date of
deposit, and (iii) the aggregate Default Amount with respect to all Defaulted
receivables for such Business Day, and shall reduce the Transferor Interest by
such amount (together with any corresponding amount allocable to the Holder of
the Exchangeable Transferor Certificate pursuant to subsection 4.3(c)), and also
shall allocate to the Holder of the Exchangeable Transferor Certificate 100% of
the aggregate Dilutions for such Business Day, and shall reduce the Transferor
Interest by such amount as provided in subsection 3.8(a), provided, however,
that unless otherwise stated in any Supplement, amounts payable to the Holder of
the Exchangeable Transferor Certificate pursuant to either clause (i) or (ii)
above shall instead be deposited in the Excess Funding Account to the extent
necessary to prevent the Transferor Interest from being less than the Minimum
Transferor Interest. In addition, throughout the existence of the Trust, unless
otherwise stated in any Supplement, with respect to each Business Day the
Servicer shall allocate to the Holder of the Exchangeable Transferor Certificate
an amount equal to all Transferor Collections which are deposited into the
Collection Account, and shall pay such amount to the Holder of the Exchangeable
Transferor Certificate on such date of deposit.
(c) Allocations for Available Subordination Amounts. To the extent that
on any Business Day one or more outstanding Series of Certificates has the
benefit of a related Available Subordination Amount, then Principal Collections,
Imputed Yield Collections, Defaulted Receivables and, if provided in the related
Supplement, Dilutions for such Business Day shall be allocated to the Available
Subordination Amount for each such Series based on the ASA Allocation Percentage
to be used for such category of Collections or Receivables for such Business Day
as specified in the related Supplement. The amounts so allocated for each
category of Collections or Receivables shall be further allocated to the Holder
of the Exchangeable Transferor Certificate, combined with the amounts in each
such category otherwise allocated to the Holder of the Exchangeable Transferor
Certificate and treated as provided in subsection 4.3(b) with respect to each
such category on such day, except as otherwise provided in the Supplement for
any such Series.
(d) Allocation for Series. Throughout the existence of the Trust,
unless otherwise stated in any Supplement, with respect to each Business Day,
(i) the amount of Imputed Yield Collections which are deposited in the
Collection Account with respect to such Business Day and which are allocable to
each Series shall be determined by multiplying the aggregate amount of such
Imputed Yield Collections by the Floating Allocation Percentage for such Series,
(ii) the amount of Principal Collections which are deposited in the Collection
Account with respect to such Business Day and which are allocable to each Series
shall be determined by multiplying the aggregate amount of such Principal
Collections by (A) during the Revolving Period for a
21
Series, the Floating Allocation Percentage for such Series and (B) during any
Amortization Period for a Series, the Fixed/Floating Allocation Percentage for
such Series, (iii) the aggregate Default Amount with respect to all Defaulted
Receivables for such Business Day which are allocable to each Series shall be
determined by multiplying such aggregate Default Amount by the Floating
Allocation Percentage for such Series, (iv) the Dilutions, if any, allocable to
each Series shall be determined in the manner stated in the related Supplement
and (v) Adjustment Payment Shortfalls, if any, shall be allocated among Series
based on the Series Allocation Percentage.
The Servicer shall, prior to the close of business on the day any
Collections are deposited in the Collection Account, cause the Trustee to
withdraw the required amounts from the Collection Account and cause the Trustee
to deposit such amounts into the Excess Funding Account or any Series Account or
pay such amounts to the Holder of the Exchangeable Transferor Certificate in
accordance with the provisions of this Article IV.
(e) Unallocated Principal Collections; Excess Funding Account. On each
Business Day, Shared Principal Collections shall be allocated to each
outstanding Series pro rata based on the Principal Shortfall, if any, for each
such Series. The Servicer shall pay any remaining Shared Principal Collections
on such Business Day to the Transferor; provided, that if the Transferor
Interest (after giving effect to any amounts excluded therefrom pursuant to any
Supplement) as determined on such Business Day does not exceed the Minimum
Transferor Interest, then such remaining Shared Principal Collections shall be
deposited in the Excess Funding Account to the extent necessary to increase the
Transferor Interest above the Minimum Transferor Interest; provided, further,
that if an Amortization Period has commenced and is continuing with respect to
more than one outstanding Series, such remaining Shared Principal Collections
shall be allocated to such Series pro rata based on the Investor Percentage for
Principal Collections applicable for such Series.
(f) Amounts in Excess Funding Account. Amounts on deposit in the Excess
Funding Account on any Business Day shall be invested by the Trustee in Cash
Equivalents in accordance with written instructions from the Servicer (which
instructions shall satisfy the requirements of subsection 4.2(d) with respect to
instructions given thereunder) or, in the absence of such instructions, in the
Designated Cash Equivalent. Any such investment shall mature and such funds
shall be available for withdrawal on or prior to the next Business Day on which
amounts may be released from the Excess Funding Account. All interest and
earnings (net of losses and investment expenses) on funds on deposit in the
Excess Funding Account shall be deposited in the Collection Account and treated
as Imputed Yield Collections, such deposit to be made no later than the last day
of the Monthly Period in which such earnings arise. If on any Business Day other
than a Business Day on which a a Pay- Out-Event or Prospective Pay-Out-Event has
occurred and is continuing, the Transferor Interest (after giving effect to any
amounts excluded therefrom pursuant to any Supplement) is greater than the
Minimum Transferor Interest, amounts on deposit in the Excess Funding Account
may, at the option of the Transferor, be released to the Holder of the
Exchangeable Transferor Certificate to the extent of such excess. On the first
Business Day of the Rapid Amortization Period for any Series, funds on deposit
in the Excess Funding Account shall be deposited into the Distribution Account
for such Series to the extent of the lesser of (i) the Invested Amount of such
Series and (ii) the amount then on deposit in the Excess Funding Account,
provided, that if any other Series is then outstanding, such deposit into the
Distribution Account shall be limited to an amount equal to the Series
Allocation Percentage (for the Series beginning its Rapid Amortization Period)
of the amount then on deposit in the Excess Funding Account if, after giving
effect to a deposit of the full amount, the Transferor Interest would be less
than the Minimum Transferor Interest. In the event that more than one Series
begins its Rapid Amortization Period at the same time, subject to the proviso to
the preceding sentence amounts shall be paid out of the Excess Funding Account
to each such Series pro rata based on the Investor Percentage for Principal
Collections applicable for such Series.
[THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL BE SPECIFIED IN
ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]
[End of Article IV]
22
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
[End of Article V]
23
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates. Subject to Section 6.10, the
Investor Certificates of each Series and any Class shall be issued in fully
registered form (the "Registered Certificates"), and shall be substantially in
the form of the exhibits with respect thereto attached to the related
Supplement. The Exchangeable Transferor Certificate shall be substantially in
the form of Exhibit A. The Investor Certificates and the Exchangeable Transferor
Certificate shall, upon issue pursuant hereto or to Section 6.9 or Section 6.10,
be executed and delivered by the Transferor to the Trustee for authentication
and redelivery as provided in Sections 2.1 and 6.2. Any Investor Certificate
shall be issuable in a minimum denomination of $1,000,000 Undivided Interest and
integral multiples of $1,000 in excess thereof, unless otherwise specified in
any Supplement, and shall be issued upon original issuance in an original
aggregate principal amount equal to the Initial Invested Amount. The
Exchangeable Transferor Certificate shall be issued as a single certificate.
Each Certificate shall be executed by manual or facsimile signature on behalf of
the Transferor by its President or any Vice President. Certificates bearing the
manual or facsimile signature of the individual who was, at the time when such
signature was affixed, authorized to sign on behalf of the Transferor or the
Trustee shall not be rendered invalid, notwithstanding that such individual has
ceased to be so authorized prior to the authentication and delivery of such
Certificates or does not hold such office at the date of such Certificates. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein, executed by or on
behalf of the Trustee by the manual signature of a duly authorized signatory,
and such certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been validly issued and duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Section 6.2 Authentication of Certificates. Contemporaneously
with the initial assignment and transfer of the Receivables, whether now
existing or hereafter created and the other components to the Trust, the Trustee
shall authenticate and deliver the initial Series of Investor Certificates, upon
the written order of the Transferor. Upon the issuance of such Investor
Certificates, such Investor Certificates shall be validly issued, fully paid and
non-assessable. The Trustee shall authenticate and deliver the Exchangeable
Transferor Certificate to the Transferor simultaneously with its delivery of the
initial Series of Investor Certificates. Upon an Exchange as provided in Section
6.9 and the satisfaction of certain other conditions specified therein, the
Trustee shall authenticate and deliver the Investor Certificates of additional
Series (with the designation provided in the related Supplement), upon the
written order of the Transferor. Upon the written order of the Transferor, the
Certificates of any Series shall be duly authenticated by or on behalf of the
Trustee, in authorized denominations equal to (in the aggregate) the Initial
Invested Amount of such Series of Investor Certificates. If specified in the
related Supplement for any Series, the Trustee shall authenticate Book-Entry
Certificates that are issued upon original issuance thereof, upon the written
order of the Transferor, to a Clearing Agency or its nominee as provided in
Section 6.10.
Section 6.3 Registration of Transfer and Exchange of Certificates
(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar") in accordance with the provisions of Section 11.16, a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Investor Certificates of each Series (unless otherwise
provided in the related Supplement) and of transfers and exchanges of the
Investor Certificates as herein provided. Whenever reference is made in this
Agreement to the transfer or exchange of the Certificates by the Trustee, such
reference shall be deemed to include the transfer or exchange on behalf of the
Trustee by a Transfer Agent and Registrar. The Trustee is hereby initially
appointed Transfer Agent and Registrar for the purposes of registering the
Investor Certificates and transfers and exchanges of the Investor Certificates
as herein provided. Any reference in this Agreement to the Transfer Agent and
Registrar shall include any co-transfer agent and co-registrar unless the
context otherwise requires. The Trustee shall be permitted to resign as Transfer
Agent and Registrar upon 30 days' written notice to the Servicer. In the event
that the Trustee shall no longer be the Transfer Agent and Registrar, the
Transferor shall appoint a successor Transfer Agent and Registrar. If any Series
with respect to which Book Entry Certificates were originally issued is no
longer issued as Book-Entry Certificates, then the Servicer may appoint a
successor Transfer Agent and Registrar.
24
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose, the Transferor shall execute, subject to the provisions of subsection
6.3(c), and the Trustee shall (unless the Transfer Agent and Registrar is
different than the Trustee, in which case the Transfer Agent and Registrar
shall) authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate Undivided Interests.
At the option of any Holder of Registered Certificates, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose.
Whenever any Investor Certificates of any Series are so surrendered for
exchange, the Transferor shall execute, and the Trustee shall (unless the
Transfer Agent and Registrar is different than the Trustee, in which case the
Transfer Agent and Registrar shall) authenticate and deliver, the Investor
Certificates of such Series which the Certificateholder making the exchange is
entitled to receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Trustee and the Transfer
Agent and Registrar duly executed by the Certificateholder thereof or his
attorney-in-fact duly authorized in writing.
The preceding provisions of this Section 6.3 notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not be
required to register the transfer of or exchange any Investor Certificate of any
Series for the period from the Record Date preceding the due date for any
payment to the Distribution Date with respect to the Investor Certificates of
such Series.
Unless otherwise provided in the related Supplement, no service charge
shall be made for any registration of transfer or exchange of Certificates, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Transfer Agent and Registrar and disposed of
in a manner satisfactory to the Trustee.
The Transferor shall execute and deliver to the Trustee or the Transfer
Agent and Registrar, as applicable, Registered Certificates in such amounts and
at such times as are necessary to enable the Trustee to fulfill its
responsibilities under this Agreement and the Certificates.
(b) Except as provided in Section 6.9 or 7.2 or in any Supplement, in
no event shall the Exchangeable Transferor Certificate or any interest therein
be transferred, sold, exchanged, pledged, participated or otherwise assigned
hereunder, in whole or in part, unless the Transferor shall have consented in
writing to such transfer and unless the Trustee shall have received (i)
confirmation in writing that the Rating Agency Condition shall have been
satisfied with respect to such transfer and (ii) an Opinion of Counsel that such
transfer does not (A) adversely affect the conclusions reached in any of the
federal income tax opinions issued in connection with the original issuance of
any Series of Investor Certificates or (B) result in a taxable event to the
Holders of any such Series.
(c) Unless otherwise provided in the related Supplement, registration
of transfer of Registered Certificates containing a legend relating to the
restrictions on transfer of such Registered Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates) shall be
effected only if the conditions set forth in such related Supplement are
satisfied, including without limitation the delivery of any certification or
opinion of counsel required thereunder.
(d) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, The City of New York, an office or offices or an
agency or agencies where Investor Certificates of such Series may be surrendered
for registration of transfer or exchange.
25
(e) Prior to the transfer of any portion of a Transferor Retained
Class, the Trustee shall have received an Opinion of Counsel to the effect that
such proposed transfer will not adversely affect the federal or any then
Applicable Tax State income tax characterization of any outstanding Series of
Investor Certificates or the taxability (or tax characterization) of the Trust
under federal or any then Applicable Tax State income tax laws.
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
is delivered to the Transfer Agent and Registrar and the Trustee such written
security or indemnity as may be required by them to hold each of them and the
Trust harmless (provided that if the Holder is a "Qualified Institutional Buyer"
within the meaning of Rule 144A under the Securities Act the Trustee may, in its
reasonable discretion, accept an unsecured indemnity), then, in the absence of
notice to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall (unless the Transfer Agent and Registrar is
different from the Trustee, in which case the Transfer Agent and Registrar
shall) authenticate and deliver (in compliance with applicable law), in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and aggregate Undivided Interest. In connection
with the issuance of any new Certificate under this Section 6.4, the Trustee or
the Transfer Agent and Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and the Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 6.4 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 6.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Article V (as described in
any Supplement) and Article XII and for all other purposes whatsoever, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any
agent of any of them shall be affected by any notice to the contrary; provided,
however, that in determining whether the Holders of Investor Certificates
evidencing the requisite Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Investor
Certificates owned by the Transferor, the Servicer or any Affiliate thereof
shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Investor Certificates which a Responsible Officer in the Corporate Trust Office
of the Trustee knows to be so owned shall be so disregarded. Investor
Certificates so owned that have been pledged in good faith shall not be
disregarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Investor Certificates
and that the pledgee is not the Transferor, the Servicer or an Affiliate
thereof.
Section 6.6 Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Investor
Certificateholders from the appropriate account or accounts maintained for the
benefit of Certificateholders as specified in this Agreement or the related
Supplement for any Series pursuant to Articles IV and V hereof. Any Paying Agent
shall have the revocable power to withdraw funds from such appropriate account
or accounts for the purpose of making distributions referred to above. The
Trustee (or the Servicer if the Trustee is the Paying Agent) may revoke such
power and remove the Paying Agent, if the Trustee (or the Servicer if the
Trustee is the Paying Agent) determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any
material respect or for other good cause. The Paying Agent, unless the
Supplement with respect to any Series states otherwise, shall initially be the
Trustee. The Trustee shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Servicer. Upon the resignation of the Paying Agent, if the
Paying Agent was not the Trustee, the Trustee shall be the successor Paying
Agent unless and until another successor has been appointed as Paying Agent. In
the event that the Trustee shall no longer be the Paying Agent, the Transferor
shall promptly appoint a successor to act as Paying Agent (which shall be a bank
or trust company). Any reference in this Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
(b) The Paying Agent (if other than the Trustee) shall execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee that such Paying Agent will hold all sums, if any, held by it for
payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto and waive all rights of setoff the Paying
Agent
26
may have against any sums held by it until such sums shall be paid to such
Certificateholders and shall agree, and if the Trustee is the Paying Agent it
hereby agrees, that it shall comply with all requirements of the Internal
Revenue Code regarding the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate Owners.
Section 6.7 Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five Business
Days after receipt by the Trustee of a request therefor from the Servicer or the
Paying Agent, respectively, in writing, a list in such form as the Servicer or
the Paying Agent may reasonably require, of the names and addresses of the
Investor Certificateholders as of the most recent Record Date for payment of
distributions to Investor Certificateholders. Unless otherwise provided in the
related Supplement, Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 10% of the Invested Amount of the Investor
Certificates of any Series (the "Applicants") may apply in writing to the
Trustee, and if such application states that the Applicants desire to
communicate with other Investor Certificateholders of any Series with respect to
their rights under this Agreement or under the Investor Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business
hours to the most recent list of Certificateholders held by the Trustee and
shall give the Servicer notice that such request has been made, within five
Business Days after the receipt of such application. Such list shall be as of a
date no more than 45 days prior to the date of receipt of such Applicants'
request. Every Certificateholder, by receiving and holding a Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was obtained.
Section 6.8 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents (each, an
"Authenticating Agent") with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. The Trustee will appoint any Transfer Agent and
Registrar to be an Authentication Agent. Whenever reference is made in this
Agreement to the authentication of Certificates by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent must be acceptable to the
Transferor. The Trustee shall authenticate the Certificates, and initially does
not appoint any other Authenticating Agent.
(b) Any institution succeeding to the corporate agency business of an
Authenticating Agent shall continue to be an Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such Authenticating Agent.
(c) An Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Transferor. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving notice of
termination to such Authenticating Agent and to the Transferor. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an Authenticating Agent shall cease to be acceptable to the Trustee or the
Transferor, the Trustee promptly may appoint a successor Authenticating Agent.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless acceptable to the
Trustee and the Transferor.
(d) The Servicer agrees to pay each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.8.
(e) The provisions of Sections 11.2 and 11.3 shall be applicable to any
Authenticating Agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
27
Trustee's Certificate of Authentication
This is one of the certificates described in the Pooling and Servicing
Agreement.
-----------------------------
as Authenticating Agent
for the Trustee,
By:__________________________
Authorized Signatory
Dated:
Section 6.9 Tender of Exchangeable Transferor Certificate.
(a) Upon any Exchange, the Transferor shall deliver to the Trustee for
authentication under Section 6.2, one or more new Series of Investor
Certificates. Any such Series of Investor Certificates shall be substantially in
the form specified in the related Supplement and shall bear, upon its face, the
designation for such Series to which it belongs, as selected by the Transferor.
Except as specified in any Supplement for a related Series, all Investor
Certificates of any Series shall rank pari passu and be equally and ratably
entitled as provided herein to the benefits hereof (except that the Enhancement
provided for any Series shall not be available for any other Series) without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Agreement and the related Supplement.
(b) The Holder of the Exchangeable Transferor Certificate may (i)
tender the Exchangeable Transferor Certificate to the Trustee in exchange for
(A) one or more newly issued Series of Investor Certificates or, with respect to
any prefunded Series, interests therein and (B) a reissued Exchangeable
Transferor Certificate, (ii) request the Trustee to issue to it one or more
Classes of any newly issued Series of Investor Certificates (which may include
one or more Replacement Series to the extent permitted for any Series (or, if
permitted in the related Supplement, Class) of Investor Certificates as
specified in the related Supplement) which upon payment by the purchaser thereof
of the Initial Invested Amount of such Certificates to a Defeasance Account,
will represent an interest in the Trust equal to such Initial Invested Amount
(an "Unfunded Certificate") or (iii) take a combination of the actions specified
in clauses (i) and (ii), provided that (A) the sum of the amount of Transferor
Interest which is tendered under clause (i) and the amount to be paid to the
Defeasance Account under clause (ii) equals the Initial Invested Amount of the
Investor Certificates delivered to the Holder of the Exchangeable Transferor
Certificate and (B) in the event the Series to be issued is a Replacement
Series, the sum of the amount to be paid to the Defeasance Account under clause
(ii) (which shall not be less than the Invested Amount of the Series or Class to
be replaced) and the amount deposited by the Transferor into the Distribution
Account for any Series (or, if authorized in the related Supplement, Class) so
replaced upon issuance of such Replacement Series is not less (after taking
account of any other amounts then held on deposit for application to final
payment of any Series so replaced) than the amount required to be distributed in
final payment to any Series so replaced pursuant to the related Supplement (any
such event under clauses (i), (ii) or (iii), a "Transferor Exchange"). In
addition, to the extent permitted for any Series (or if applicable, Class) of
Investor Certificates as specified in the related Supplement, the Investor
Certificateholders of such Series may tender their Investor Certificates and the
Holder of the Exchangeable Transferor Certificate may tender the Exchangeable
Transferor Certificate to the Trustee pursuant to the terms and conditions set
forth in such Supplement in exchange for (i) one or more newly issued Series of
Investor Certificates and (ii) a reissued Exchangeable Transferor Certificate
(an "Investor Exchange"). Notwithstanding anything to the contrary herein, the
Transferor shall not be permitted to deposit money into any Defeasance Account.
The Transferor Exchange and Investor Exchange are referred to collectively
herein as an "Exchange."
The Holder of the Exchangeable Transferor Certificate may perform an
Exchange by notifying the Trustee, in writing, at least five Business Days in
advance (an "Exchange Notice") of the date upon which the Exchange is to occur
(an "Exchange Date"). Any Exchange Notice shall state the designation of any
Series to be issued on the Exchange Date and, with respect to each such Class or
Series: (a) its Initial Invested Amount (or the method for calculating such
Initial Invested Amount), which
28
at any time may not be greater than the current principal amount of the
Exchangeable Transferor Certificate at such time (or, (i) in the case of a
Replacement Series, the sum of the Invested Amount of any Series (or, if
applicable, Class) to be replaced plus the current principal amount of the
Exchangeable Transferor Certificate and (ii) in the case of an Investor
Exchange, the sum of the Invested Amount of any Class or Series of Investor
Certificates to be exchanged plus the current principal amount of the
Exchangeable Transferor Certificate) taking into account any Receivables
transferred to the Trust simultaneous with such Exchange, (b) its Certificate
Rate (or the method for allocating interest payments or other cash flows to such
Series), if any, (c) the Enhancement Provider, if any, with respect to such
Series and (d) the CUSIP Numbers for such Series or, in the case of a Series
having more than one Class, the CUSIP Numbers for each Class of such Series. On
the Exchange Date, the Trustee shall authenticate and deliver any such Class or
Classes of Series of Investor Certificates only upon delivery to it of the
following: (a) a Supplement satisfying the criteria set forth in subsection
6.9(c) and in form reasonably satisfactory to the Trustee executed by the
Transferor and the Servicer and specifying the Principal Terms of such Series,
(b) the applicable Enhancement, if any, (c) the agreement, if any, pursuant to
which the Enhancement Provider agrees to provide the Enhancement, if any, (d) an
Opinion of Counsel to the effect that (i) any Class of the newly issued Series
of Investor Certificates sold to third parties should be characterized as either
indebtedness or partnership interests for federal or any then Applicable Tax
State income tax purposes and (ii) that the issuance of the newly issued Series
of Investor Certificates will not adversely affect the federal or any then
Applicable Tax State income tax characterization of any outstanding Series of
Investor Certificates or the taxability of the Trust under federal or any then
Applicable Tax State income tax laws, (e) that the Rating Agency Condition shall
have been satisfied with respect to such Exchange, (f) an Officer's Certificate
of the Transferor, that on the Exchange Date after giving effect to such
Exchange (and, in the case of a Replacement Series, assuming the payment in full
of the Series (or, if applicable, Class) being replaced) (i) the Transferor
Interest (after giving effect to any amounts excluded therefrom pursuant to any
Supplement) would be at least equal to the Minimum Transferor Interest, (ii) the
Retained Interest would be at least equal to the Minimum Retained Interest,
(iii) the sum of the Aggregate Principal Receivables and the principal amount on
deposit in the Excess Funding Account and other specified accounts, if
applicable pursuant to the related Supplement, would be at least equal to the
Minimum Aggregate Principal Receivables, and (iv) a Pay-Out-Event would not
otherwise occur with respect to any outstanding Series, (g) the existing
Exchangeable Transferor Certificate or applicable Investor Certificates, as the
case may be, and (h) such other documents, certificates and Opinions of Counsel
as may be required by the applicable Supplement. Upon satisfaction of such
conditions, the Trustee shall cancel the existing Exchangeable Transferor
Certificate or applicable Investor Certificates, as the case may be, and issue,
as provided above, such Series of Investor Certificates and a new Exchangeable
Transferor Certificate, dated the Exchange Date. In the case of a Replacement
Series, the Trustee shall provide the notice of final distribution to the Series
(or, if applicable, Class) so replaced in accordance with Section 12.3, stating
that the Invested Amount of such Series or Class is to be repaid from proceeds
obtained through the issuance of a Replacement Series. Amounts deposited into a
Defeasance Account upon issuance of the Replacement Series shall be transferred
(to the extent required) to the Distribution Account for the Series or Class so
replaced, and final payment of such Series or Class otherwise shall be effected
in accordance with Section 12.3. There is no limit to the number of Exchanges
that may be performed under this Agreement.
(c) In conjunction with an Exchange, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include without limitation:
(i) its name or designation, (ii) the Initial Invested Amount or the method of
calculating the Initial Invested Amount, (iii) the Certificate Rate (or formula
for the determination thereof), (iv) the Closing Date, (v) the rating agency or
agencies rating such Series, (vi) the name of the Clearing Agency, if any, (vii)
the rights of the Holder of the Exchangeable Transferor Certificate that have
been transferred to the Holders of such Series pursuant to such Exchange
(including any rights to allocations of Collections of Imputed Yield Receivables
and Principal Receivables), (viii) the interest payment date or dates and the
date or dates from which interest shall accrue, (ix) the method of allocating
Principal Collections for such Series and the method by which the principal
amount of Investor Certificates of such Series shall amortize or accrete and the
method for allocating Imputed Yield Collections and Defaulted Receivables, (x)
the names of any accounts to be used by such Series and the terms governing the
operation of any such account, (xi) the Series Servicing Fee Percentage, (xii)
the Minimum Transferor Interest, (xiii) the Series Termination Date, (xiv) the
terms of any Enhancement with respect to such Series, (xv) the Enhancement
Provider, if applicable, (xvi) the base rate applicable to such Series, (xvii)
the terms on which the Certificates of such Series may be repurchased or
remarketed to other investors, (xviii) any deposit into any account provided for
such Series, (xix) the number of Classes of such Series and, if more than one
Class, the rights and priorities of each such Class, (xx) whether any fees will
be included in the funds available to be paid for such Series, (xxi) the
subordination of such Series to any other Series, (xxii) the Pool Factor,
(xxiii) the Minimum Aggregate Principal Receivables, (xxiv) whether such Series
will be a part of a
29
group or subject to being paired with any other Series, (xxv) whether such
Series will be prefunded, and (xxvi) any other relevant terms of such Series
(including whether or not such Series will be pledged as collateral for an
issuance of any other securities, including commercial paper) (all such terms,
the "Principal Terms" of such Series). The terms of such Supplement may modify
or amend the terms of this Agreement solely as applied to such new Series. If on
the date of the issuance of such Series there is issued and outstanding one or
more Series of Investor Certificates and no Series of Investor Certificates is
currently rated by a Rating Agency, then as a condition to such Exchange a
nationally recognized investment banking firm or commercial bank shall also
deliver to the Trustee an officer's certificate stating, in substance, that the
Exchange will not have an adverse effect on the timing or distribution of
payments to such other Series of Investor Certificates then issued and
outstanding.
(d) The Transferor may surrender the Exchangeable Transferor
Certificate to the Trustee in exchange for a newly issued Exchangeable
Transferor Certificate and a second certificate (a "Supplemental Certificate"),
the terms of which shall be defined in a supplement to this Agreement (which
supplement shall be subject to Section 13.10 hereof to the extent that it amends
any of the terms of this Agreement), to be delivered to or upon the order of the
Transferor (or a Person designated by the Transferor, in the case of the
transfer or exchange thereof, as provided below), upon satisfaction of the
following conditions: (i) following such exchange, the Transferor Interest (less
any interest therein represented by any Supplemental Certificates) in the
Principal Receivables in the Trust equals or exceeds the greater of the Minimum
Transferor Interest and the Minimum Retained Interest following such exchange,
(ii) following such exchange the sum of (a) the Transferor Interest (less any
interest therein represented by any Supplemental Certificates) in the Principal
Receivables and (b) the interest in Principal Receivables represented by the
Transferor Retained Certificates equals or exceeds, on the day following such
exchange, 20% of the sum of (x) the Transferor Interest (including any interest
therein represented by any Supplemental Certificate) and (y) the interest in
Principal Receivables represented by the Transferor Retained Certificates on
such date, and (iii) the Trustee received prior to such exchange (A) written
confirmation that the Rating Agency Condition shall have been satisfied with
respect to the issuance of such Supplemental Certificate and (B) an Opinion of
Counsel to the effect that (i) such Supplemental Certificate should be
characterized as either indebtedness or a partnership interest for federal and
any then Applicable Tax State income tax purposes or (ii) that such Supplemental
Certificate will not adversely affect the federal or any then Applicable Tax
State income tax characterization of any outstanding Series of Investor
Certificates or the taxability of the Trust under federal or any then Applicable
Tax State income tax laws.
Section 6.10 Book-Entry Certificates. If so provided in the
related Supplement, the Investor Certificates of any Series, upon original
issuance, may be issued in the form of typewritten Certificates representing the
Book-Entry Certificates, to be delivered to the depositary specified in such
Supplement (the "Depositary") which shall be the Clearing Agency, by or on
behalf of such Series. The Investor Certificates of any such Series shall,
unless otherwise provided in the related Supplement, initially be registered on
the Certificate Register in the name of the nominee of the Clearing Agency. No
Certificate Owner will receive a definitive certificate representing such
Certificate Owner's interest in the related Series of Investor Certificates,
except as provided in Section 6.12. Unless and until definitive, fully
registered Investor Certificates of any Series ("Definitive Certificates") have
been issued to such Certificate Owners pursuant to Section 6.12:
(i) the provisions of this Section 6.10 shall be in full force
and effect with respect to each such Series;
(ii) the Transferor, the Servicer, the Paying Agent, the
Transfer Agent and Registrar and the Trustee may deal with the Clearing Agency
and the Clearing Agency Participants for all purposes (including the making of
distributions on the Investor Certificates of each such Series) as the
authorized representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.10
conflict with any other provisions of this Agreement, the provisions of this
Section 6.10 shall control with respect to each such Series; and
(iv) the rights of Certificate Owners of Investor Certificates
of each such Series shall be exercised only through the Clearing Agency and the
applicable Clearing Agency Participants and shall be limited to those
established by law and agreements between such Certificate Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depositary Agreement applicable to a Series, unless and until Definitive
Certificates of such Series are issued pursuant to Section 6.12, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and interest on
the Investor Certificates to such Clearing Agency Participants.
30
Section 6.11 Notices to Clearing Agency. With respect to any
Series of Investor Certificates which has been issued as Book-Entry Certificates
pursuant to Section 6.10, whenever notice or other communication to the
Certificateholders is required under this Agreement, unless and until Definitive
Certificates shall have been issued to Certificate Owners pursuant to Section
6.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of such Investor Certificates to the Clearing
Agency.
Section 6.12 Definitive Certificates. Unless otherwise specified
in the related Supplement, Series of Investor Certificates shall be issued as
Definitive Certificates. With respect to any Series of Investor Certificates
which has been issued as Book-Entry Certificates pursuant to Section 6.10, if
(i) (A) the Transferor advises the Trustee in writing that the Clearing Agency
is no longer willing or able to discharge properly its responsibilities under
the applicable Depositary Agreement, and (B) the Transferor is unable to locate
a qualified successor, (ii) the Transferor, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency with respect to any such Series of Certificates or (iii) after
the occurrence of a Servicer Default, Certificate Owners of a Series
representing beneficial interests aggregating not less than 50% of the Invested
Amount of such Series advise the Trustee and the applicable Clearing Agency
through the applicable Clearing Agency Participants in writing that the
continuation of a book-entry system through the applicable Clearing Agency is no
longer in the best interests of the Certificate Owners, the Trustee shall notify
all Certificate Owners of such Series, through the applicable Clearing Agency
Participants, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners of such Series requesting the
same. Upon surrender to the Trustee of the Investor Certificates of such Series
by the applicable Clearing Agency for registration, accompanied by registration
instructions from the applicable Clearing Agency, the Trustee shall issue the
Definitive Certificates of such Series. Neither the Transferor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates of such Series, all references
herein to obligations imposed upon or to be performed by the applicable Clearing
Agency shall be deemed to be imposed upon and performed by the Trustee, to the
extent applicable with respect to such Definitive Certificates, and the Trustee
shall recognize the Holders of the Definitive Certificates of such Series as
Certificateholders of such Series hereunder.
[End of Article VI]
31
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The Transferor shall be
liable in accordance herewith solely to the extent of the obligations
specifically undertaken by the Transferor.
Section 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.
(a) The Transferor shall not consolidate with or merge into any other
business entity or convey or transfer its properties and assets substantially as
an entirety to any Person, unless:
(i) the business entity formed by such consolidation or into
which the Transferor is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Transferor
substantially as an entirety shall be, if the Transferor is not the
surviving entity, organized and existing under the laws of the United
States of America or any state or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Transferor, as
applicable hereunder and shall benefit from all the rights granted to
the Transferor, as applicable hereunder. To the extent that any right,
covenant or obligation of the Transferor, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity. In
furtherance hereof, in applying this Section 7.2 to a successor entity,
Section 9.2 hereof shall be applied by reference to events of
involuntary liquidation, receivership or conservatorship applicable to
such successor entity as shall be set forth in the officer's
certificate described in subsection 7.2(a)(ii);
(ii) the Transferor shall have delivered to the Trustee an
Officer's Certificate signed by a Vice President (or any more senior
officer) of the Transferor stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this
Section 7.2 and that all conditions precedent herein provided for
relating to such transaction have been complied with and an Opinion of
Counsel that such supplemental agreement is legal, valid and binding
and that the entity surviving such consolidation, conveyance or
transfer is organized and existing under the laws of the United States
of America or any State or the District of Columbia and, subject to
customary limitations and qualifications, such entity will not be
substantively consolidated with BTFC or the Servicer;
(iii) the Transferor shall have delivered notice to each
Rating Agency of such consolidation, merger, conveyance or transfer and
the Rating Agency Condition shall have been satisfied with respect
thereto;
(iv) the successor entity shall be a special purpose
bankruptcy remote entity; and
(v) if the Transferor is not the surviving entity, the
surviving entity shall file new UCC-1 financing statements with respect
to the interest of the Trust in the Receivables.
(b) The obligations of the Transferor hereunder shall not be assignable
nor shall any Person succeed to the obligations of the Transferor hereunder
except for mergers, consolidations, assumptions or transfers in accordance with
the provisions of the foregoing paragraph.
Section 7.3 Limitation on Liability. The directors, officers,
employees or agents of the Transferor shall not be under any liability to the
Trust, the Trustee, the Certificateholders, any Enhancement Provider or any
other Person hereunder or pursuant to any document delivered hereunder, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
any Supplement and the issuance of the Certificates; provided, however, that
this provision shall not protect the officers, directors, employees, or agents
of the Transferor against any liability which would otherwise be imposed upon
them by reason of willful misfeasance, bad faith or negligence in the
performance of obligations or duties or by reason of reckless disregard of
obligations or duties hereunder. Except as provided in Sections 7.1 and 7.4 with
respect to the Trust and the Trustee and its officers, directors, employees and
32
agents, the Transferor shall not be under any liability to the Trust, the
Trustee, its officers, directors, employees and agents, the Certificateholders,
any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Transferor pursuant
to this Agreement or any Supplement whether arising from express or implied
duties under this Agreement or any Supplement or otherwise; provided, however,
that this provision shall not protect the Transferor against any liability which
would otherwise be imposed upon it by reason of willful misfeasance, bad faith
or negligence in the performance of obligations or duties or by reason of
reckless disregard of obligations or duties hereunder. The Transferor and any
director, officer, employee or agent may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
Section 7.4 Liabilities. Notwithstanding Section 7.3, by entering
into this Agreement, the Transferor agrees to be liable, directly to the injured
party, for the entire amount of any losses, claims, damages, penalties or
liabilities (other than those incurred by a Certificateholder in the capacity of
an investor in the Investor Certificates as a result of the performance of the
Contracts or the related Receivables, market fluctuations, a shortfall or
failure by the Enhancement Provider to make payment under any Enhancement or
other similar market or investment risks associated with ownership of the
Investor Certificates) arising out of or based on the arrangement created by
this Agreement and the actions of the Servicer taken pursuant hereto as though
this Agreement created a partnership under the Revised Uniform Limited
Partnership Act, in which the Transferor is a general partner. The Transferor
agrees to pay, indemnify and hold harmless each Investor Certificateholder
against and from any and all such losses, claims, damages and liabilities (other
than those incurred by a Certificateholder in the capacity of an investor in the
Investor Certificates as a result of the performance of the Contracts or the
related Receivables, market fluctuations, a shortfall or failure by an
Enhancement Provider to make payment under an Enhancement or other similar
market or investment risks) except to the extent that they arise from any action
by such Investor Certificateholder. To the extent any property taxes are imposed
by any jurisdiction on the Receivables or other Trust assets, the Transferor
will bear the liability for such taxes under this Section 7.4. Subject to
Sections 8.3 and 8.4, in the event of a Service Transfer, the Successor Servicer
will indemnify and hold harmless the Transferor for any losses, claims, damages
and liabilities of the Transferor as described in this Section 7.4 arising from
the actions or omissions of such Successor Servicer.
[End of Article VII]
33
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. Subject to subsection 3.1(a) and the last sentence
of this Section 8.2, the Servicer shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which
the Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Servicer substantially as an
entirety shall be a corporation organized and existing under the laws
of the United States of America or any state or the District of
Columbia and, if the Servicer is not the surviving entity, shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Servicer hereunder
(to the extent that any right, covenant or obligation of the Servicer,
as applicable hereunder, is inapplicable to the successor entity, such
successor entity shall be subject to such covenant or obligation, or
benefit from such right, as would apply, to the extent practicable, to
such successor entity); and
(ii) the Servicer shall have delivered to the Trustee an
Officer's Certificate that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 8.2
and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that such
supplemental agreement is legal, valid and binding with respect to the
Servicer and that the entity surviving such consolidation, conveyance
or transfer is organized and existing under the laws of the United
States of America or any State or the District of Columbia; and
(iii) the Servicer shall have delivered notice to each Rating
Agency of such consolidation, merger, conveyance or transfer.
Notwithstanding the foregoing, it is expressly understood and agreed by
the parties hereto that the restrictions imposed by this Section 8.2 shall not
be applied to prevent a Back-Up Servicer which becomes Successor Servicer from
consolidating with or merging into a Person not organized and existing under the
laws of the United States, or from conveying or transferring its properties and
assets substantially as an entirety to such a Person, or as to which such
Successor Servicer would otherwise be unable to satisfy the provisions of this
Section 8.3, provided that, in such event, such Successor Servicer shall comply
with the resignation provisions of Section 8.5.
Section 8.3 Limitation on Liability of the Servicer and Others.
The directors, officers, employees or agents of the Servicer shall not be under
any liability to the Trust, the Trustee, the Certificateholders, any Enhancement
Provider or any other Person hereunder or pursuant to any document delivered
hereunder, it being expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration for, the execution
of this Agreement and any Supplement and the issuance of the Certificates;
provided, however, that this provision shall not protect the directors,
officers, employees and agents of the Servicer against any liability which would
otherwise be imposed upon them by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties or by reason of reckless
disregard of obligations or duties hereunder. Except as provided in Sections 8.1
and 8.4, the Servicer shall not be under any liability to the Trust, the
Trustee, its officers, directors, employees and agents, the Certificateholders,
any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Servicer pursuant to
this Agreement or any Supplement; provided, however, that this provision shall
not protect the Servicer against any liability which would otherwise be imposed
upon it by reason of willful misfeasance, bad faith or negligence in the
performance of obligations or duties or by reason of its reckless disregard of
its obligations or duties hereunder or under any Supplement. 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 hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not
34
incidental to its duties to service the Receivables in accordance with this
Agreement which in its reasonable opinion may involve it in any expense or
liability. Notwithstanding the preceding sentence, a Back-Up Servicer which
becomes Successor Servicer hereunder shall not be under any obligation to appear
in, prosecute or defend any legal action, including without limitation any such
legal action which ordinarily is or may be considered incidental to its duties
to service the Receivables in accordance with this Agreement, which in its
reasonable opinion may involve it in any expense or liability.
Section 8.4 Servicer Indemnification of the Transferor, the
Trust, the Trustee, the Registrar and the Paying Agent. Subject to the
limitations on liability set forth in Section 8.3, the Servicer shall indemnify
and hold harmless the Transferor, the Trust, the Trustee, the Registrar and the
Paying Agent (each, an "Indemnified Party") from and against any loss,
liability, reasonable expense, damage or injury, including, but not limited to,
any judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with respect to matters
arising under this Agreement or any Supplement for which the Servicer is
responsible pursuant to this Agreement or such Supplement; provided, however,
that the Servicer shall not indemnify or hold harmless an Indemnified Party if
such acts, omissions or alleged acts or omissions constitute or are caused by
fraud, negligence, or willful misconduct by such Indemnified Party (or any of
such Indemnified Party's officers, directors, employees or agents) or the
Investor Certificateholders; provided further, that the Servicer shall not
indemnify or hold harmless the Trust, the Investor Certificateholders or the
Certificate Owners for any losses, liabilities, expenses, damages or injuries
suffered or sustained by any of them with respect to any action taken by the
Trustee at the request of the Investor Certificateholders; provided further,
that the Servicer shall not indemnify or hold harmless the Trust, the Investor
Certificateholders or the Certificate Owners as to any losses, liabilities,
expenses, damages or injuries suffered or sustained by any of them in their
capacities as investors, including without limitation losses incurred as a
result of Defaulted Receivables; provided further, that the Servicer shall not
indemnify or hold harmless the Transferor, the Trust, the Investor
Certificateholders or the Certificate Owners for any losses, liabilities,
expenses, damages or injuries suffered or sustained by the Trust, the Investor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by income (or any
interest, penalties or additions with respect thereto or arising from a failure
to comply therewith) required to be paid by the Trust, the Investor
Certificateholders or the Certificate Owners in connection herewith to any
taxing authority; and, provided further, that in no event will the Servicer be
liable, directly or indirectly, for or in respect of any indebtedness or
obligation evidenced or created by any Certificate, recourse as to which shall
be limited solely to the assets of the Trust allocated for the payment thereof
as provided in this Agreement and any applicable Supplement. Any such
indemnification shall not be payable from the assets of the Trust, but the
Servicer shall be subrogated to the rights of the Trust with respect to the
foregoing matters if and to the extent that the Servicer shall have indemnified
the Trust with respect thereto. The Servicer (if other than TCB) shall indemnify
and hold harmless the Trustee and its officers, directors, employees or agents
from and against any loss, liability, reasonable expense (including reasonable
attorneys' fees), damage or injury suffered or sustained by reason of the
acceptance of this Trust by the Trustee, the issuance by the Trust of the
Certificates or any of the other matters contemplated herein or in any
Supplement; provided, however, that the Servicer shall not indemnify the Trustee
or its officers, directors, employees or agents for any loss, liability,
expense, damage or injury caused by the fraud, negligence or willful misconduct
of any of them. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the resignation or removal of the Servicer, the resignation or removal
of the Trustee and/or the termination of the Trust and shall survive the
termination of this Agreement.
Section 8.5 The Servicer Not to Resign. Subject to subsection
3.1(a), the Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that (i) the performance of its duties
hereunder is no longer permissible under applicable law and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
above by an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.2 hereof. If the Trustee is unable within 120 days of
the date of delivery to it of such Opinion of Counsel to appoint a Successor
Servicer, the Trustee shall serve as Successor Servicer hereunder (but shall
have continued authority to appoint another qualified Person as Successor
Servicer).
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee and its
agents (who shall be reasonably acceptable to the Servicer) access to the
documentation regarding
35
the Receivables in such cases where the Trustee is required in connection with
the enforcement of the rights of the Investor Certificateholders, or by
applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon reasonable request, (ii) during
normal business hours, (iii) subject to the Servicer's normal security and
confidentiality procedures and (iv) at offices designated by the Servicer.
Nothing in this Section 8.6 shall derogate from the obligation of the
Transferor, the Trustee or 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 8.6 as a result of
such obligations shall not constitute a breach of this Section 8.6.
Section 8.7 Delegation of Duties. In the ordinary course of
business, the Servicer may at any time delegate any duties hereunder to any
Person who agrees to conduct such duties in accordance with the Credit and
Collection Policies provided, that if such delegation is made by TCB, the Person
to which any such duties are delegated shall conduct such duties in accordance
with this Agreement, and not the Credit and Collection Policies. Any such
delegations shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 8.5 hereof and the Servicer will remain jointly and severally
liable with such Person for any amounts which would otherwise be payable
pursuant to this Article VIII as if the Servicer had performed such duty;
provided, however, that in the case of any significant delegation to a Person
other than an Affiliate of BTFC, such Person shall satisfy the requirements
applicable to a Successor Servicer as provided in Section 10.2 and written
notice shall be given to the Trustee and to each Rating Agency of such
delegation.
[End of Article VIII]
36
ARTICLE IX
PAY OUT EVENTS
Section 9.1 Pay-Out-Events. If any one of the following events
(each, a "Trust Pay-Out-Event") shall occur:
(a) a decree or order is entered by a court having competent
jurisdiction (i) for relief in respect of the Transferor, BTFC or Bally in an
involuntary case or proceeding under the Federal Bankruptcy Code or any other
federal or state bankruptcy, insolvency, reorganization or similar law or (ii)
adjudging the Transferor, BTFC or Bally as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Transferor, BTFC or Bally under the Federal
Bankruptcy Code or any other similar applicable federal or state law for the
relief of debtors, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Transferor, BTFC or
Bally or of any substantial part of their respective properties, or ordering the
winding up or liquidation of any of their respective affairs, and any such
decree or order remains unstayed and in effect for a period of 60 consecutive
days; or
(b) the Transferor, BTFC or Bally institutes a voluntary case or
proceeding under the Federal Bankruptcy Code or any other similar applicable
federal or state law for the relief of debtors or any other case or proceedings
to be adjudicated as bankrupt or insolvent, or the Transferor, BTFC or Bally
consents to the entry of a decree or order for relief in respect of the
Transferor, BTFC or Bally in any involuntary case or proceeding under the
Federal Bankruptcy Code or any other similar applicable federal or state law for
the relief of debtors or to the institution of bankruptcy or insolvency
proceedings against the Transferor, BTFC or Bally, or the Transferor, BTFC or
Bally files a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other similar applicable federal or
state law for the relief of debtors, or consents to the filing of any such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Transferor, BTFC or Bally or of any substantial part of their respective
properties, or makes an assignment for the benefit of creditors, or is unable to
pay debts generally as they come due, or admits in writing its inability to pay
its debts generally as they become due or takes corporate action in furtherance
of any such action;
(c) the Trust shall become subject to regulation by the Securities and
Exchange Commission as an "investment company" within the meaning of the
Investment Company Act;
then a Pay-Out-Event with respect to all Series of Certificates shall occur
without any notice or other action on the part of the Trustee or the Investor
Certificateholders immediately upon the occurrence of such event. The Trustee
shall provide notice of a Pay-Out-Event in a prompt manner to each Rating
Agency.
Section 9.2 Additional Rights Upon the Occurrence of Certain
Events.
(a) If (x) the Transferor shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs shall have been entered against the Transferor (an "Insolvency
Event"), on the day of such Insolvency Event (the "Appointment Day") or (y) the
Retained Percentage shall at any time be equal to or less than 2% (a "Trigger
Event"), the following actions shall be taken and processes begun:
(i) If an Insolvency Event shall have occurred, the Transferor
shall immediately cease to transfer Contracts and the related
Receivables to the Trust and shall promptly give written notice to the
Trustee of such Insolvency Event. Notwithstanding any cessation of the
transfer to the Trust of additional Contracts and the related
Receivables, Collections with respect thereto shall continue to be
allocated and paid in accordance with Article IV.
(ii) If an Insolvency Event or a Trigger Event shall have
occurred this Agreement and the Trust shall be deemed to have
terminated, subject to the liquidation, winding-up and dissolution
procedures described below; provided, however, that within 15 days of
the date of written notice to the Trustee, the Trustee shall (i)
publish a notice in an Authorized Newspaper that an Insolvency Event or
a Trigger Event has occurred, that the Trust has terminated,
37
and that the Trustee intends to sell, dispose of or otherwise liquidate
the Contracts and the related Receivables pursuant to this Agreement in
a commercially reasonable manner and on commercially reasonable terms,
which shall include the solicitation of competitive bids (a
"Disposition"), and (ii) send written notice to the Investor
Certificateholders describing the provisions of this Section 9.2 and
requesting each Investor Certificateholder to advise the Trustee in
writing that it elects one of the following options: (A) the Investor
Certificateholder wishes the Trustee to instruct the Servicer not to
effectuate a Disposition, or (B) the Investor Certificateholder refuses
to advise the Trustee as to the specific action the Trustee shall
instruct the Servicer to take or (C) the Investor Certificateholder
wishes the Servicer to effect a Disposition. If after 90 days from the
day notice pursuant to clause (i) above is first published (the
"Publication Date"), the Trustee shall not have received the written
instruction described in clause (A) above from Holders of Investor
Certificates representing Undivided Interests aggregating in excess of
50% of the related Invested Amount of each Series (or, in the case of a
Series having more than one Class, each Class of such Series, provided
Class voting is mandated pursuant to the related Series Supplement) and
the holders of any Supplemental Certificates or any other interest in
the Exchangeable Transferor Certificate other than the Transferor as
provided in Section 6.3(b) (for each Series, a "Holders' Majority"),
the Trustee shall instruct the Servicer to effectuate a Disposition,
and the Servicer shall proceed to consummate a Disposition. If,
however, with respect to the portion of the Contracts and the related
Receivables allocable to any outstanding Series, a Holders' Majority
instruct the Trustee not to effectuate a Disposition of the portion of
the Contracts and the related Receivables allocable to such Series, the
Trust shall be reconstituted and continue with respect to such Series
pursuant to the terms of this Agreement and the applicable Supplement
(as amended in connection with such reconstitution). The portion of the
Contracts and the related Receivables allocable to any Series shall be
equal to the sum of (1) the product of (A) the Transferor Percentage,
(B) the aggregate outstanding Principal Receivables and (C) a fraction
the numerator of which is the Invested Amount of such Series on the
date of determination and the denominator of which is the sum of all
Invested Amounts for all Series then outstanding and (2) the Invested
Amount of such Series. The Transferor or any of its Affiliates shall be
permitted to bid for the Contracts and the related Receivables. In
addition, the Transferor or any of its Affiliates shall have the right
to match any bid by a third person and be granted the right to purchase
the Contracts and the related Receivables at such matched bid price.
The Trustee may obtain a prior determination from any such bankruptcy
trustee, receiver or liquidator that the terms and manner of any
proposed Distribution are commercially reasonable. The provisions of
Sections 9.1 and 9.2 shall not be deemed to be mutually exclusive.
(b) The proceeds from the Disposition pursuant to subsection (a) above
shall be treated as Collections on the Receivables and shall be allocated and
deposited in accordance with the provisions of Article IV; provided, however,
that the proceeds from a Disposition with respect to any Series shall be applied
solely to make payments to such Series; provided further, that the Trustee shall
determine conclusively in its sole discretion, but in a manner consistent with
the determination of the Principal Balances of the Receivables subject to such
Disposition to the extent use of such methodology is practicable under the then
existing facts and circumstances, the amount of such proceeds that are allocable
to Imputed Yield Collections and the amount of such proceeds that are allocable
to Collections of Principal Receivables. Unless the Trustee receives written
instructions from Investor Certificateholders of one or more Series to continue
the Trust with respect to such Series as provided in subsection 9.2(a) above, on
the day following the last Distribution Date in the Monthly Period during which
such proceeds are distributed to the Investor Certificateholders of each Series,
the Trust shall terminate.
(c) The Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Article IX with respect to competitive bids.
[End of Article IX]
38
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee pursuant to Article IV
or to instruct the Trustee to make any required drawing, withdrawal, or payment
under any Enhancement on or before the date such payment, transfer, deposit,
withdrawal or drawing or such instruction or notice is required to be made or
given, as the case may be, under the terms of this Agreement; provided, however,
that any such failure caused by a non-willful act of the Servicer shall not
constitute a Servicer Default if the Servicer promptly remedies such failure
within five Business Days after receiving notice of such failure or otherwise
becoming aware of such failure; or
(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer set forth in this
Agreement, which has a material adverse effect on the Investor
Certificateholders of any Series and which continues unremedied for a period of
30 days after the date on which either the Servicer obtains actual knowledge of
such failure or written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 50% of the Invested Amount of any
Series materially adversely affected thereby, and continues to materially
adversely affect such Investor Certificateholders for such period; provided,
that if prior to the end of the 30 day period specified above, the Servicer
shall have commenced actions reasonably designed to cure such failure and, at
the end of such 30 day period is engaged diligently and in good faith in
effecting such cure, then such 30 day period shall be extended by such
additional period of time as may reasonably be required to effect such cure, but
not in excess of an additional 30 days, unless the Trustee shall agree that a
longer extension is appropriate under the circumstances and shall consent
thereto; or the Servicer shall delegate its duties under this Agreement, except
as permitted by subsection 3.1(a) or Section 8.7; or
(c) any representation, warranty or certification made by the Servicer
in this Agreement or in any certificate delivered pursuant to this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the Investor Certificateholders of any Series and which continues to
be incorrect in any material respect for a period of 30 days after the date on
which the Servicer obtains actual knowledge of such failure or written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by the Holders of
Investor Certificates evidencing Undivided Interests aggregating not less than
50% of the Invested Amount of any Series materially adversely affected thereby
and continues to materially adversely affect such Investor Certificateholders
for such period; provided, that if prior to the end of the 30 day period
specified above, the Servicer shall have commenced actions reasonably designed
to cure such failure and, at the end of such 30 day period is engaged diligently
and in good faith in effecting such cure, then such 30 day period shall be
extended by such additional period of time as may reasonably be required to
effect such cure, but not in excess of an additional 30 days, unless the Trustee
shall agree that a longer extension is appropriate under the circumstances and
shall consent thereto; or
(d) (i) a decree or order is entered by a court having competent
jurisdiction (x) for relief in respect of the Servicer or Bally (for so long as
the Servicer is an Affiliate of Bally) in an involuntary case or proceeding
under the Federal Bankruptcy Code or any other federal or state bankruptcy,
insolvency, reorganization or similar law or (y) adjudging the Servicer or Bally
(for so long as the Servicer is an Affiliate of Bally) as bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Servicer or Bally under the
Federal Bankruptcy Code or any other similar applicable federal or state law for
the relief of debtors, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Servicer or
Bally (for so long as the Servicer is an Affiliate of Bally) or of any
substantial part of their respective properties, or ordering the winding up or
liquidation of any of their respective affairs, and any such decree or order
remains unstayed and in effect for a period of 60 consecutive days; or
(ii) the Servicer or Bally (for so long as the Servicer is an
Affiliate of Bally) institutes a voluntary case or proceeding under the Federal
Bankruptcy Code or any other similar applicable federal or state law for the
relief of debtors or any other case or proceedings to be adjudicated as bankrupt
or insolvent, or the Servicer or Bally (for so long as the Servicer
39
is an Affiliate of Bally) consents to the entry of a decree or order for relief
in respect of the Servicer or Bally (for so long as the Servicer is an Affiliate
of Bally) in any involuntary case or proceeding under the Federal Bankruptcy
Code or any other similar applicable federal or state law for the relief of
debtors or to the institution of bankruptcy or insolvency proceedings against
the Servicer or Bally (for so long as the Servicer is an Affiliate of Bally), or
the Servicer or Bally (for so long as the Servicer is an Affiliate of Bally)
files a petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other similar applicable federal or state law for
the relief of debtors, or consents to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Servicer or
Bally (for so long as the Servicer is an Affiliate of Bally) or of any
substantial part of their respective properties, or makes an assignment for the
benefit of creditors, or is unable to pay debts generally as they come due, or
admits in writing its inability to pay its debts generally as they become due or
takes corporate action in furtherance of any such action;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee (if it has actual knowledge), or the Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the Aggregate
Invested Amount, by notice then given in writing to the Servicer (and to the
Trustee if given by the Investor Certificateholders) (a "Termination Notice"),
may terminate all of the rights and obligations of the Servicer as Servicer
under this Agreement. After receipt by the Servicer of such Termination Notice,
and on the date that a Successor Servicer shall have been appointed by the
Trustee pursuant to Section 10.2, all authority and power of the Servicer under
this Agreement shall pass to and be vested in a Successor Servicer; and, without
limitation, the Trustee is hereby authorized and empowered (upon the failure of
the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments, and
to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights and obligations. The Servicer
agrees to cooperate with the Trustee and such Successor Servicer in effecting
the termination of the responsibilities and rights of the Servicer to conduct
servicing hereunder including, without limitation, the transfer to such
Successor Servicer of all authority of the Servicer to service the Receivables
provided for under this Agreement, including, without limitation, all authority
over all Collections which shall on the date of transfer be held by the Servicer
for deposit, or which have been deposited by the Servicer, in the Collection
Account, any Distribution Account, any Series Account and the Excess Funding
Account, or which shall thereafter be received with respect to the Receivables.
The Servicer shall promptly transfer its electronic records or electronic copies
thereof relating to the Receivables to the Successor Servicer in such electronic
form as the Successor Servicer may reasonably request and shall promptly
transfer to the Successor Servicer all other records, correspondence and
documents necessary for the continued servicing of the Receivables in the manner
and at such times as the Successor Servicer shall reasonably request. Effective
as of the appointment of the Successor Servicer, the Servicer hereby grants to
the Successor Servicer a nonexclusive license or sublicense, as applicable, to
use all computer software either owned or licensed to the Servicer to the extent
required to service and collect Receivables, provided, that such sublicense by
the Servicer shall not apply to any software licensed by others to the Servicer
as to which a sublicense in favor of or use by the Successor Servicer would be
in violation of an express contractual restriction or otherwise illegal, or
would require the Servicer to incur any license fee or other cost or expense. To
the extent that compliance with this Section 10.1 shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
deems to be confidential, the Successor Servicer shall be required to enter into
such customary licensing and confidentiality agreements as the Servicer shall
deem necessary to protect its interests. The Servicer shall, on the date of any
servicing transfer, transfer all of its rights and obligations under the
Enhancement with respect to any Series to the Successor Servicer. In connection
with any service transfer, all reasonable costs and expenses (including
reasonable attorneys' fees) incurred in connection with transferring the
records, electronic records and related copies, correspondence and other
documents with respect to the Receivables and the other Trust Property to the
Successor Servicer, securing the license or sub-license to computer software
either owned or used by BTFC as original Servicer and amending this Agreement to
reflect such succession as Successor Servicer pursuant to this Section 10.1 and
Section 10.2 shall be paid by the Servicer (unless the Trustee is acting as the
Servicer on a temporary basis, in which case the original Servicer shall be
responsible therefor) upon presentation of reasonable documentation of such
costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in subsection 10.1(a) which continues for a period in excess of the
five Business Days provided for a cure thereunder, or under subsection 10.1(b)
or (c) which continues for a period in excess of the 30 days (as extended for up
to 30 days or more, if applicable) provided for a cure thereunder, shall not
constitute a Servicer Default if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or
40
undeclared war, public disorder, rebellion, riot or sabotage, epidemics,
landslides, lightning, fire, hurricanes, tornadoes, earthquakes, nuclear
disasters or meltdowns, floods, power outages, bank closings, communications
outages (beyond the reasonable control of the Servicer), computer failure
(beyond the reasonable control of the Servicer) or similar causes. The preceding
sentence shall not relieve the Servicer 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, any Enhancement Provider,
the Transferor and the Holders of Investor Certificates with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts so to perform
its obligations.
Section 10.2 Trustee to Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 10.1, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or as otherwise specified by the Trustee in writing or, if no such date
is specified in such Termination Notice, or otherwise specified by the Trustee,
until a date mutually agreed upon by the Servicer and Trustee. The Trustee shall
notify each Rating Agency of such removal of the Servicer. The Trustee shall, as
promptly as possible after the giving of a Termination Notice, appoint a
successor servicer (the "Successor Servicer"), and such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Trustee. If such Successor Servicer is unable to accept such appointment, the
Trustee may obtain bids from any potential Successor Servicer. If the Trustee is
unable to obtain any bids from any potential successor servicer and the Servicer
delivers an Officer's Certificate to the effect that it cannot in good faith
cure the Servicer Default which gave rise to a transfer of servicing, and if the
Trustee is legally unable to act as Successor Servicer, then the Trustee shall
offer the Transferor the right to accept reassignment of all of the Receivables
for an amount equal to the sum of (i) the Aggregate Invested Amount on the date
of such purchase, less the amount, if any, previously allocated and available
for payment of principal to Certificateholders on the Distribution Date which
relates to the Monthly Period in which such purchase occurs, plus (ii) all
interest accrued but unpaid on all of the outstanding Investor Certificates at
the applicable Certificate Rate through and including the day preceding the
Distribution Date which relates to the Monthly Period in which such purchase
occurs (or, to the extent that, pursuant to the related Supplement, the
Transferor otherwise would be obligated to pay accrued interest on any portion
of the Invested Amount of any Series repaid on such Distribution Date only
through the end of a specified interest accrual period, then interest on such
portion shall be payable only through the end of such interest accrual period),
less the amount, if any, previously allocated and available for payment of
interest to the Certificateholders on such Distribution Date, plus (iii) any
other amounts accrued and owing as specified in any applicable Supplement;
provided, however, that no such purchase by the Transferor shall occur unless
the Transferor shall deliver an Opinion of Counsel reasonably acceptable to the
Trustee that such purchase would not constitute a fraudulent conveyance by the
Transferor. The proceeds of such sale shall be deposited in the Distribution
Account or any Series Account, as provided in the related Supplement, for
distribution to the Investor Certificateholders of each outstanding Series
pursuant to Section 12.3 of this Agreement. In the event that a Successor
Servicer has not been appointed or has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the Trustee without further action
shall automatically be appointed the Successor Servicer (but shall have
continued authority to appoint another Person as Successor Servicer). The
Trustee may delegate any of its servicing obligations to an affiliate or agent
of the Trustee in accordance with Article III hereof. Any such delegations shall
not relieve the Trustee of its liability and responsibility with respect to such
servicing duties. Notwithstanding the above, the Trustee shall, if it is legally
unable to act, petition a court of competent jurisdiction to appoint any
established financial institution or other entity having, in the case of an
entity that is subject to risk-based capital adequacy requirements, risk-based
capital of at least $50,000,000 or, in the case of an entity that is not subject
to risk-based capital requirements, having a tangible net worth of not less than
$50,000,000 and whose regular business includes the servicing of contracts and
receivables similar to the Contracts and the related Receivables as the
Successor Servicer hereunder.
(b) Upon its appointment, the Successor Servicer shall be the successor
in all respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the rights, responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer, unless otherwise expressly provided herein. Any
Successor Servicer, by its acceptance of its appointment, will automatically
agree to be bound by the terms and provisions of each Enhancement.
41
(c) In connection with such appointment and assumption, the Trustee
shall be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no such compensation
shall be in excess of the Servicing Fee permitted to the Servicer pursuant to
Section 3.2. The Transferor agrees that if the Servicer is terminated hereunder,
it will agree to deposit a portion of the Collections in respect of Imputed
Yield Receivables that it is entitled to receive pursuant to Article IV to pay
its ratable share of the compensation of the Successor Servicer.
(d) All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.1 and shall pass to and be vested in the Transferor
and, without limitation, the Transferor is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Successor Servicer agrees to cooperate with
the Transferor in effecting the termination of the responsibilities and rights
of the Successor Servicer to conduct servicing on the Contracts and the related
Receivables. The Successor Servicer shall transfer its electronic records
relating to the Contracts and the related Receivables to the Transferor in such
electronic form as the Transferor may reasonably request and shall transfer all
other records, correspondence and documents to the Transferor in the manner and
at such times as the Transferor shall reasonably request. To the extent that
compliance with this Section 10.2 shall require the Successor Servicer to
disclose to the Transferor information of any kind which the Successor Servicer
deems to be confidential, the Transferor shall be required to enter into such
customary licensing and confidentiality agreements as the Successor Servicer
shall deem necessary to protect its interests.
(e) Notwithstanding any other provision of this Agreement, any
Successor Servicer shall service and administer the Receivables in accordance
with applicable law and customary and usual servicing procedures for other
institutional servicers engaged in servicing receivables substantially similar
to the Receivables, and to the extent not inconsistent with the foregoing, shall
exercise that degree of skill and care it uses in servicing assets held for its
own account.
Section 10.3 Notification to Certificateholders. Within five
Business Days of the Servicer becoming aware of any Servicer Default, the
Servicer shall provide written notice thereof to the Trustee, each Rating Agency
and any Enhancement Provider and, upon receipt of such written notice or upon
the Trustee's actual knowledge, the Trustee shall give notice to the Investor
Certificateholders at their respective addresses appearing in the Certificate
Register. Upon any termination or appointment of a Successor Servicer pursuant
to this Article X, the Trustee shall give prompt written notice thereof to
Investor Certificateholders at their respective addresses appearing in the
Certificate Register and to each Rating Agency.
Section 10.4 Waiver of Past Defaults. The Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Invested Amount of each Series materially adversely affected by any default
by the Servicer or Transferor may, on behalf of all Certificateholders of such
Series, waive any default by the Servicer or Transferor in the performance of
its obligations hereunder and its consequences, except a default in the failure
to make any required deposits or payments of interest or principal relating to
such Series pursuant to Article IV, which default does not result from the
failure of the Paying Agent to perform its obligations to make any required
deposits or payments of interest and principal in accordance with Article IV.
Upon any such waiver of a past default, such default shall cease to exist, and
any 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.
[End of Article X]
42
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of any Servicer Default (as to
which the Trustee has received written notice or of which a Responsible Officer
of the Trustee otherwise has actual knowledge) and after the curing of all
Servicer Defaults which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement, and no implied
covenants or duties shall be read into this Agreement against the Trustee. If
the Trustee receives written notice or a Responsible Officer of the Trustee
otherwise has actual knowledge that a Servicer Default has occurred (and such
Servicer Default has not been cured or waived), 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 its exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs; provided,
however, that if the Trustee shall assume the duties of the Servicer pursuant to
Section 8.5 or 10.2, the Trustee in performing such duties shall use the degree
of skill and attention customarily exercised by a servicer with respect to
comparable contracts and 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 are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement. The Trustee shall
retain all such items for at least one year after receipt and shall make such
items available for inspection by any Investor Certificateholder at the
Corporate Trust Office, such inspection to be made during regular business hours
and upon reasonable prior written notice to the Trustee.
(c) Subject to subsection 11.1(a), 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 or its own misconduct; provided, however, that:
(i) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests in the amounts described in
Section 11.14 hereof relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee with
respect to such Series, or exercising any trust or power conferred upon
the Trustee with respect to such Series, under this Agreement; and
(iii) the Trustee shall not be charged with knowledge of any
failure by the Servicer referred to in clauses (a) and (b) of Section
10.1, or of any breach by the Servicer contemplated by clause (c) of
Section 10.1, or of the occurrence of any event contemplated by clauses
(d)(i) or (d)(ii) of Section 10.1, or of any Pay-Out-Event unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure, breach or Pay-Out-Event or the Trustee receives written notice
of such failure, breach or Pay-Out-Event. To the extent not otherwise
provided for in this Agreement or any Supplement, the Trustee agrees
that upon obtaining knowledge of any Servicer Default or Pay-Out- Event
with respect to the Trust or any Series in accordance with the
preceding sentence, the Trustee will promptly provide written notice
thereof to each Rating Agency. To the extent expressly requested by any
Rating Agency, the Trustee will provide such Rating Agency with notice,
no more frequently than monthly, to the effect that the Trustee has not
obtained actual knowledge of any Servicer Default or Pay-Out-Event with
respect to the Trust or any Series in accordance with the second
preceding sentence during or with respect to the period specified in
any such notice.
(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
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground 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
43
the Trustee 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 or required by this
Agreement or under Requirements of Law, the Trustee shall take no action
reasonably likely to release from the lien of the Trust or otherwise materially
impair the interests of the Trust in any Contract or the related Receivable now
existing or hereafter created or to materially impair the value of any Contract
or the related Receivable now existing or hereafter created.
(f) Except as provided in this Agreement, the Trustee shall have no
power to vary the corpus of the Trust.
(g) If a Responsible Officer of the Trustee, has received written
notice that the Paying Agent or the Transfer Agent and Registrar shall fail to
perform any obligation, duty or agreement in the manner or on the day required
to be performed by the Paying Agent or the Transfer Agent and Registrar, as the
case may be, under this Agreement, the Trustee shall be obligated promptly upon
its obtaining knowledge thereof by a Responsible Officer of the Trustee to
perform such obligation, duty or agreement in the manner so required.
(h) If the Transferor has agreed to transfer any of its contracts or
receivables (other than the Contracts and the related Receivables) to another
Person, upon the written request of the Transferor, the Trustee on behalf of the
Trust will enter into such intercreditor agreements with the transferee of such
contracts or receivables as are customary and necessary to identify separately
the rights, if any, of the Trust and such other Person in the Transferor's
contracts and receivables; provided, however, that the Trust shall not be
required to enter into any intercreditor agreement that could adversely affect
the interests of the Certificateholders or the Trustee and, upon the request of
the Trustee, the Transferor will deliver an Opinion of Counsel on any matters
relating to such intercreditor agreement, reasonably requested by the Trustee.
Section 11.2 Certain Matters Affecting the Trustee. In acting
hereunder:
(a) the Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, the initial report, the Daily Report,
the Settlement Statement, the annual Servicer's certificate, the monthly payment
instructions and notification to the Trustee, the monthly Certificateholder's
statement, 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 to it pursuant to this Agreement by
the proper party or parties;
(b) the Trustee may consult with counsel, and the advice or any Opinion
of Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Enhancement, or to,
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or any
Enhancement Provider, pursuant to the provisions of this Agreement, unless such
Certificateholders or Enhancement Provider shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of any
Servicer Default (which has not been cured or waived) of which a Responsible
Officer of the Trustee has knowledge, to exercise such of the rights and powers
vested in it by this Agreement and any Enhancement, and to use the same degree
of care and skill in its exercise as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs;
(d) 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;
(e) the Trustee shall not be bound to make any investigation into the
facts of matters stated in the initial report, the Daily Report, the Settlement
Statement, the annual Servicer's certificate, the monthly payment instructions
and notification to the Trustee, the monthly Certificateholders statement, any
resolution, certificate, statement, instrument, opinion, report,
44
notice, request, consent, order, approval, bond or other paper or document,
unless requested in writing so to do by Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the Invested Amount
of any Series which could be adversely affected if the Trustee does not perform
such acts;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
appointed with due care by it hereunder;
(g) except as may otherwise be required pursuant to subsection 11.1(a),
the Trustee shall not be required to make any initial or periodic examination of
any documents or records related to the Contracts or the related Receivables for
the purpose of establishing the presence or absence of defects, the compliance
by the Transferor with its representations and warranties or for any other
purpose;
(h) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate; and
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement or any Supplement shall not be construed as a duty,
and the Trustee shall not be answerable for performance of any such act.
Section 11.3 Trustee Not Liable for Recitals in Certificates. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates)
or of any Contract and the related Receivable or related document. The Trustee
shall not be accountable for the use or application by the Transferor of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor in respect of the Contracts and
the related Receivables or deposited in or withdrawn from the Collection
Account, any Distribution Account, any Series Account or the Excess Funding
Account or other accounts now or hereafter established to effectuate the
transactions contemplated herein and in accordance with the terms hereof. 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 shall have become the Successor Servicer) or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Supplement.
Section 11.4 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Investor
Certificates and may deal with the Transferor, the Servicer or any Enhancement
Provider with the same rights as it would have if it were not the Trustee. The
Trustee in its capacity as Trustee shall exercise its duties and
responsibilities hereunder independent of and without reference to its
investment, if any, in Investor Certificates.
Section 11.5 The Servicer to Pay Fees and Expenses. The Servicer
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to receive, 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 the Trustee in the execution of the
trust hereby created and in the exercise and performance of any of the powers
and duties hereunder of the Trustee. Subject to Section 8.4, the Servicer will
pay or reimburse the Trustee (without reimbursement from any Investor Account,
any Series Account or otherwise) upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable fees and
expenses of its agents and counsel) except any such expense, disbursement or
advance as may arise from its own negligence or bad faith and except as provided
in the following sentence; provided, that if BTFC is not then the Servicer, or
if BTFC fails to make any such payment or reimbursement duly owing and such
amount cannot be paid from the Servicing Fee otherwise payable to BTFC as
provided in Section 3.2, then the Transferor shall pay (or shall cause the
Servicer to pay) such amounts to the Trustee from amounts that otherwise would
not be subject to the claims of Investor Certificateholders under this Agreement
or any Supplement and would be available free and clear for payment and release
to the Transferor pursuant to Article IV hereof; provided, further, that if,
with respect to any Series of Investor Certificates, either (i) a scheduled
distribution of interest shall
45
not have been made in full when due (after giving effect to any grace period
allowed under the related Supplement), (ii) a charge-off of any portion of the
Invested Amount shall have occurred, or (iii) the Series Termination Date shall
have occurred and such Certificates shall not have been paid in full, then the
Trustee shall have a first lien on the Trust Property, including without
limitation the Collections and other proceeds thereof, allocable pursuant to
this Agreement and the related Supplement(s) to the Transferor Interest and to
any and each such Series as to which any of the events described in the
preceding clauses (i), (ii) and (iii) shall have occurred, in order to secure
payment and reimbursement to the Trustee of all amounts payable or reimbursable
to it as provided above or as otherwise provided in this Agreement or the
Supplement related to any such Series, to the extent such amounts are expended
or incurred, on or after the date on which any of the events described in the
preceding clauses (i), (ii) and (iii) shall have occurred, either for the
benefit of any Series affected thereby or as a result of or in connection with
the occurrence of such event. If the Trustee is appointed Successor Servicer
pursuant to Section 10.2, the provisions of this Section 11.5 shall not apply to
expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Servicer (which shall be paid out of the Servicing Fee).
The obligations of the Servicer under this Section 11.5 shall survive
the termination of the Trust and the resignation or removal of the Trustee.
Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times (a) be a corporation organized and doing business
under the laws of the United States of America or any state thereof authorized
under such laws to exercise corporate trust powers, having, in the case of an
entity that is subject to risk-based capital adequacy requirements, risk-based
capital of at least $50,000,000 or, in the case of an entity that is not subject
to risk-based capital adequacy requirements, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority and (b) not be a Related Person. If such corporation
publishes 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 11.6, 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 11.6, the Trustee shall resign immediately in the manner and with the
effect specified in Section 11.7.
Section 11.7 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged from the Trust
hereby created by giving written notice thereof to the Servicer. Upon receiving
such notice of resignation, the Servicer shall promptly appoint a successor
trustee 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 appointed and have accepted such
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 11.6 hereof and shall fail to resign after
written request therefor by the Transferor, 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
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee 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.
(c) If (i) the Trustee shall fail to perform any of its obligations
hereunder (a notice of failure shall be promptly provided to all
Certificateholders by the Trustee describing such failure), (ii) a
Certificateholder shall deliver written notice of such failure to the Trustee,
and (iii) the Trustee shall not have corrected such failure for 60 days
thereafter, then the Holders of Investor Certificates representing more than 50%
of the Aggregate Invested Amount shall have the right to remove the Trustee and
(with the consent of the Transferor, which shall not be unreasonably withheld)
promptly appoint a successor trustee 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.
46
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8 hereof and any liability of the Trustee arising
hereunder shall survive such appointment of a successor trustee. Notice of any
resignation or removal of the Trustee and appointment of a successor trustee
shall be provided to each Rating Agency by the Servicer in a prompt manner.
Section 11.8 Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.7 hereof
shall execute, acknowledge and deliver to the Transferor and to its predecessor
Trustee an instrument accepting such appointment hereunder, 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 hereunder, with the like effect as if originally named as Trustee
herein. The predecessor Trustee shall deliver to the successor trustee all
documents and statements held by it hereunder, and the Transferor 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.
(b) No successor trustee shall accept appointment as provided in this
Section 11.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.6 hereof.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.9 Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6 hereof, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) 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 may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Certificateholders, such
title to the trust, or any part thereof, and, subject to the other provisions of
this Section 11.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.8 hereof.
(b) Every 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 or imposed 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 laws of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), 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 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;
47
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) 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 Article XI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee as 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 to 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.
Section 11.11 Tax Returns. Consistent with Section 3.7, the Trustee
shall not file any federal tax returns on behalf of the Trust or seek an
Employer Identification Number unless otherwise notified by the Internal Revenue
Service.
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any Series
of Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates 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,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of any Series of Certificateholders in respect of which such
judgment has been obtained.
Section 11.13 Suits for Enforcement. If a Servicer Default of which
a Responsible Officer of the Trustee has knowledge shall occur and be
continuing, the Trustee, in its discretion may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and the rights of any
Series of Certificateholders 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 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 or any Series of Certificateholders.
Section 11.14 Rights of Certificateholders to Direct Trustee.
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 66-2/3% of the Aggregate Invested Amount (or, with respect to any remedy,
trust or power that does not relate to all Series, 66-2/3% of the Aggregate
Invested Amount of the Investor Certificates of all Series to which such remedy,
trust or power relates) 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
Holders of Investor Certificates aggregating more than 66-2/3% of the Aggregate
Invested Amount of any Class may direct the Trustee to exercise its rights under
Section 8.6; provided, further, that, subject to Section 11.1, 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 or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Certificateholders not parties to such direction; and provided,
further, 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 of such Holders of Investor Certificates.
48
Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) the Trustee is a corporation organized, existing and
authorized to engage in the business of banking under the laws of the
United States of America;
(ii) the Trustee is an entity that satisfies the eligibility
requirements of Section 11.6;
(iii) 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; and
(iv) this Agreement has been duly executed and delivered by
the Trustee.
Section 11.16 Maintenance of Office or Agency. The Trustee will
maintain at its expense an office or offices, or agency or agencies, where
notices and demands to or upon the Trustee in respect of the Certificates and
this Agreement may be served. The Trustee initially appoints its Corporate Trust
Office as its office for such purposes. The Trustee will give prompt written
notice to the Servicer and to Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
[End of Article XI]
49
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust.
(a) The respective obligations and responsibilities of the Transferor,
the Servicer and the Trustee created hereby (other than the obligation of the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate, except with respect to the duties described in Section 8.4 and 11.5
and subsection 12.3(b), on the Trust Termination Date; provided, however, that
the Trust shall not terminate on the date specified in clause (i) of the
definition of "Trust Termination Date" if each of the Servicer and the Holder of
the Exchangeable Transferor Certificate notify the Trustee in writing, not later
than five Business Days preceding such date, that they desire that the Trust not
terminate on such date, which notice (such notice, a "Trust Extension") shall
specify the date on which the Trust shall terminate (such date, the "Extended
Trust Termination Date"); provided, however, that in no event shall the trust
created by this Agreement (and the Extended Trust Termination Date) continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Xxxxxx Xxxxxxx Xxxxxx Xxxx, formerly President of the United
States, living on the date of this Agreement. The Servicer and the Holder of the
Exchangeable Transferor Certificate may, on any date following the Trust
Extension, so long as no Series of Certificates is outstanding, deliver a notice
in writing to the Trustee changing the Extended Trust Termination Date.
(b) In the event that (i) the Trust has not terminated by the
Distribution Date occurring in the second month preceding the Trust Termination
Date, and (ii) the Invested Amount of any Series, exclusive of any Transferor
Retained Class (after giving effect to all transfers, withdrawals, deposits and
drawings to occur on such date and the payment of principal on any Series of
Certificates to be made on the related Distribution Date during such month
pursuant to Article IV), would be greater than zero, the Servicer shall sell
within 30 days after such Transfer Date an amount of Contracts and the related
Receivables up to the remaining Invested Amount if it can do so in a
commercially reasonable manner. The Servicer shall notify each Enhancement
Provider of the proposed sale of the Contracts and the related Receivables and
shall provide each Enhancement Provider an opportunity to bid on the Contracts
and the related Receivables. The Transferor shall have the right of first
refusal to purchase the Contracts and the related Receivables on terms
equivalent to the best purchase offer as determined by the Trustee in its sole
discretion. The proceeds of any such sale shall be treated as Collections on the
Receivables and shall be allocated and deposited in accordance with Article IV;
provided, however, that the Trustee shall determine conclusively in its sole
discretion the amount of such proceeds which are allocable to Imputed Yield
Collections and the amount of such proceeds which are allocable to Principal
Collections. During such 30 day period, the Servicer shall continue to collect
payments on the Receivables and allocate and deposit such payments in accordance
with the provisions of Article IV.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement, in the
event that the Invested Amount of any Series of Certificates is greater than
zero, exclusive of any Class held by the Transferor, on its Series Termination
Date (the "Affected Series"), after giving effect to all transfers, withdrawals,
deposits and drawings to occur on such date and the payment of principal to be
made on such Series on such date, then the Trustee will sell or cause to be
sold, and the Trustee will pay the proceeds to all Certificateholders of such
Series pro rata in final payment of all principal of and accrued interest on
such Series of Certificates or, if any Class of such Series is subordinated, in
order of their respective seniorities, an amount of Contracts and the related
Principal Receivables and the related Imputed Yield Receivables (or interests
therein) up to 110% of the Invested Amount of such Series at the close of
business on such date (but the amount of such Principal Receivables not to be
more than an amount of Receivables equal to the sum of (1) the product of (A)
the Transferor Percentage, (B) the Aggregate Principal Receivables and (C) a
fraction the numerator of which is the Invested Amount of such Series on such
date and the denominator of which is the sum of the Invested Amounts of all
Series on such date and (2) the Invested Amount of such Series). Receivables on
which the Obligor has not made the full monthly payment for the prior months
shall be deemed to be in default for purposes of this Section 12.1(c) to the
extent that the cash allocated to any Class of Transferor Retained Certificates
of such Series pursuant to a sale under Section 12.1(c) is less than the amount
that would have been allocated to the Exchangeable Transferor Certificate and
the Transferor Retained Certificates had the proceeds from such sale been
allocated pursuant to Section 4.3. The Servicer shall notify each Enhancement
Provider of the proposed sale of
50
such Contracts and the related Receivables and shall provide each Enhancement
Provider an opportunity to bid on such Contracts and the related Receivables.
The Transferor shall be permitted to purchase such Contracts and the related
Receivables in such case and shall have a right of first refusal with respect
thereto to the extent of a bona fide offer by an unrelated third party or to the
extent the Receivables represent Defaulted Receivables. Any proceeds of such
sale in excess of such principal and interest paid shall be paid to the Holder
of the Exchangeable Transferor Certificate. Upon such Series Termination Date
with respect to the applicable Series of Certificates, final payment of all
amounts allocable to any Investor Certificates of such Series shall be made in
the manner provided in Section 12.3.
Section 12.2 Optional Termination. (a) If so provided in any
Supplement, the Transferor may, but shall not be obligated to, cause a final
distribution to be made in respect of the related Series of Certificates on a
Distribution Date specified in such Supplement by depositing into the
Distribution Account or the applicable Series Account, not later than the
Transfer Date preceding such Distribution Date, for application in accordance
with Section 12.3, the amount specified in such Supplement.
(b) The amount deposited pursuant to subsection 12.2(a) shall be paid
to the Investor Certificateholders of the related Series pursuant to Section
12.3 on the related Distribution Date following the date of such deposit. All
Certificates of a Series with respect to which a final distribution has been
made pursuant to subsection 12.2(a) shall be delivered by the Holder to, and be
canceled by, the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor. The Invested Amount of each
Series with respect to which a final distribution has been made pursuant to
subsection 12.2(a) shall, for the purposes of the definition of "Transferor
Interest," be deemed to be equal to zero on the Distribution Date following the
making of the deposit, and the Transferor Interest shall thereupon be deemed to
have been increased by the Invested Amount of such Series.
Section 12.3 Final Payment with Respect to any Series.
(a) Written notice of any termination, specifying the Distribution Date
upon which the Investor Certificateholders of any Series may surrender their
Certificates for payment of the final distribution with respect to such Series
and cancellation, shall be given (subject to at least five Business Days' prior
notice from the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution (or in the manner provided by the Supplement
relating to such Series) specifying (i) the Distribution Date (which shall be
the Distribution Date in the month (x) in which the deposit is made pursuant to
subsection 2.4(e), 9.2(a), 10.2(a), or 12.2(a) of the Agreement or such other
section as may be specified in the related Supplement, or (y) in which the
related Series Termination Date occurs) upon which final payment of such
Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officers' Certificate
setting forth the information specified in Article V of this Agreement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent at the time
such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to subsection
12.1(a) or the occurrence of the Series Termination Date with respect to any
Series, all funds then on deposit in the Collection Account, the Excess Funding
Account, the Distribution Account or any Series Account applicable to the
related Series shall continue to be held in trust for the benefit of the
Certificateholders of the related Series and the Paying Agent or the Trustee
shall pay such funds to the Certificateholders of the related Series upon
surrender of their Certificates. In the event that all of the Investor
Certificateholders of any Series shall not surrender their Certificates for
cancellation within six months after the date specified in the above-mentioned
written notice, the Trustee shall give a second written notice to the remaining
Investor Certificateholders of such Series upon receipt of the appropriate
records from the Transfer Agent and Registrar to surrender their Certificates
for cancellation and receive the final distribution with respect thereto. If
within one and one half years after the second notice with respect to a Series,
all the Investor Certificates of such Series shall not have been surrendered for
cancellation, the Trustee may take appropriate steps or may appoint an agent to
take appropriate steps, to contact the remaining Investor Certificateholders of
such Series concerning surrender of their Certificates, and the cost thereof
shall be paid out of the funds in the Distribution Account or any Series
51
Account held for the benefit of such Investor Certificateholders. The Trustee
and the Paying Agent shall pay to the Transferor upon request any monies held by
them for the payment of principal or interest which remains unclaimed for two
years. After payment to the Transferor, Investor Certificateholders entitled to
the money must look to the Transferor for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be canceled by the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferor.
Section 12.4 Termination Rights of Holder of Exchangeable
Transferor Certificate. Upon the termination of the Trust pursuant to Section
12.1, and after payment of all amounts due hereunder on or prior to such
termination and the surrender of the Exchangeable Transferor Certificate, the
Trustee shall execute a written reconveyance substantially in the form of
Exhibit F pursuant to which it shall reconvey to the Holder of the Exchangeable
Transferor Certificate (without recourse, representation or warranty) all right,
title and interest of the Trust in the Contracts and the related Receivables,
whether then existing or thereafter created, all moneys due or to become due
with respect thereto (including all amounts theretofore posted as Imputed Yield
Receivables) allocable to the Trust pursuant to any Supplement, except for
amounts held by the Trustee pursuant to subsection 12.3(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
prepared by the Transferor and without recourse, representation or warranty
(other than a warranty that such property is conveyed free and clear of any Lien
of any Person claiming by or through the Trustee) as shall be reasonably
requested by the Holder of the Exchangeable Transferor Certificate to vest in
such Holder all right, title and interest which the Trust had in the Contracts
and the related Receivables and other Trust Property.
[End of Article XII]
52
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.
(a) This Agreement (including any Supplement) may be amended from time
to time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Certificateholders, (i) to cure any ambiguity, to revise any exhibits
or Schedules, to correct or supplement any provisions herein or thereon which
may be inconsistent with any other provisions herein or thereon, (ii) to add any
other provisions with respect to matters or questions raised under this
Agreement which shall not be inconsistent with the provisions of this Agreement,
or (iii) to add to or change any of the provisions of this Agreement to permit
the issuance of Certificates in uncertificated form; provided, that (x) each of
the Transferor and the Servicer shall have delivered to the Trustee an Officer's
Certificate to the effect that the Transferor or the Servicer, as the case may
be, reasonably believes that such amendment shall not adversely affect in any
material respect the interests of any Investor Certificateholder and (y) the
Servicer shall have provided at least ten Business Days' prior written notice to
each Rating Agency of such amendment and the Rating Agency Condition shall have
been satisfied with respect thereto.
This Agreement (including any Supplement), and any schedule or exhibit
thereto may also be amended from time to time by the Servicer, the Transferor
and the Trustee, without the consent of any of the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Holders of Certificates; provided, however, that (i) each of the Transferor
and the Servicer shall have delivered to the Trustee an Officer's Certificate to
the effect that the Transferor or the Servicer, as the case may be, reasonably
believes that such amendment shall not adversely affect in any material respect
the interests of any Investor Certificateholder, (ii) such amendment shall not,
as evidenced by an Opinion of Counsel, cause the Trust to be characterized for
federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the Federal income taxation of any
outstanding Series of Investor Certificates or any Certificate Owner, and (iii)
the Servicer shall have provided at least ten Business Days' prior written
notice to each Rating Agency of such amendment and the Rating Agency Condition
shall have been satisfied with respect thereto; provided, further, that such
amendment shall not reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of the related Investor Certificateholder, change the
definition of or the manner of calculating the interest of any Investor
Certificateholder of such Series without the consent of the related Investor
Certificateholder or reduce the percentage pursuant to Subsection 13.1(b)
required to consent to any such amendment, in each case without the consent of
all such Investor Certificateholders.
(b) This Agreement and any Supplement may also be amended from time to
time by the Servicer, the Transferor and the Trustee with the consent of the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 66-2/3% of the Invested Amount of each and every Series adversely
affected, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Investor Certificateholders of any Series then issued
and outstanding; provided, however, that no such amendment under this subsection
shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of all of the related Investor Certificateholders;
(ii) change the definition of or the manner of calculating the interest of any
Investor Certificateholder of such Series without the consent of the related
Investor Certificateholder or (iii) reduce the aforesaid percentage required to
consent to any such amendment, in each case without the consent of all such
Investor Certificateholders.
(c) Notwithstanding anything in this Section 13.1 to the contrary, the
Supplement with respect to any Series may be amended on the terms and in
accordance with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment (other than an
amendment pursuant to paragraph (a)), the Trustee shall furnish notification of
the substance of such amendment to each Investor Certificateholder of each
Series adversely affected and ten Business Days prior to the proposed effective
date for such amendment the Servicer shall furnish notification of the substance
of such amendment to each Rating Agency providing a rating for such Series.
53
(e) It shall not be necessary to obtain the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section 6.9,
executed in accordance with the provisions hereof, shall not be considered
amendments to this Agreement for the purpose of subsections 13.1(a) and (b).
(g) In connection with any amendment, the Trustee may request an
Opinion of Counsel from the Transferor or Servicer to the effect that the
amendment complies with all requirements of this Agreement. The Trustee may, but
shall not be obligated to, enter into any amendment which affects the Trustee's
rights, duties or immunities under this Agreement or otherwise.
Section 13.2 Protection of Right, Title and Interest to Trust.
(a) The Servicer shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders and the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the Trustee, as the case
may be, hereunder to all property comprising the Trust. The Servicer shall
deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Transferor shall cooperate
fully with the Servicer in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with paragraph (a) above materially
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
Relevant UCC State, the Transferor shall give the Trustee written notice of any
such change and shall file such financing statements or amendments as may be
necessary or advisable to continue the perfection of the Trust's security
interest in the Contracts and the related Receivables and the proceeds thereof.
(c) Each of the Transferor and the Servicer will give the Trustee
prompt written notice of any relocation of any office from which it services
Contracts or the related Receivables or keeps records concerning the Contracts
or the related Receivables or of its principal executive office and whether, as
a result of such relocation, the applicable provisions of the UCC would require
or make advisable the filing of any amendment of any previously filed financing
or continuation statement or of any new financing statement and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the Trust's security interest in the Contracts and the related
Receivables and the proceeds thereof. Each of the Transferor and the Servicer
will at all times maintain each office from which it services Contracts or the
related Receivables and its principal executive office within the United States
of America, provided, that neither the Transferor nor the Servicer shall
relocate its principal executive office to within the jurisdiction of the Court
of Appeals of the United States for the 10th Circuit unless the Rating Agency
Condition shall have been satisfied with respect thereto.
(d) The Servicer will deliver to the Trustee on or before March 31 of
each year, beginning with March 31, 1998, an Opinion of Counsel, substantially
in the form of Exhibit E.
Section 13.3 Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Investor Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
54
(b) No Investor Certificateholder shall have any right to vote (except
with respect to the Investor Certificateholders as provided in Section 13.1
hereof) or in any manner otherwise control the operation and management of the
Trust, or the obligations of the parties hereto, nor shall anything herein set
forth, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as members of an
association; nor shall any Investor Certificateholder be under any liability to
any third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue 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
Certificateholder previously shall have given written notice to the Trustee, and
unless the Holders of Certificates evidencing Undivided Interests aggregating
more than 50% of the Invested Amount of any Series which may be adversely
affected but for the institution of such suit, action or proceeding, shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder 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 60 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; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the 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 Certificateholders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Certificateholder, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 13.3, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 13.4 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, PROVIDED,
HOWEVER, THE LAWS OF THE STATE OF NEW YORK SHALL CONTINUE TO GOVERN THE
FORMATION OF THE TRUST.
Section 13.5 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at, sent by facsimile to, sent by courier at or mailed by
registered mail, return receipt requested, to (a) in the case of the Transferor,
H & T Receivable Funding Corporation, 0000 Xxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx
00000, Attention: Box HTRFC, with a copy to the Servicer as provided below, (b)
in the case of the Servicer, Bally Total Fitness Corporation, 0000 Xxxx Xxxx
Xxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: General Counsel, (c) in the case of
the Trustee, to the Corporate Trust Office, (d) in the case of the Enhancement
Provider for a particular Series, the address, if any, specified in the
Supplement relating to such Series and (e) in the case of the Rating Agency for
a particular Series, the address, if any, specified in the Supplement relating
to such Series; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. Unless
otherwise provided with respect to any Series in the related Supplement any
notice required or permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at the address of such Certificateholder
as shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.
Section 13.6 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
Section 13.7 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.2, this Agreement may not be
assigned by the Servicer without the prior consent of Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Invested Amount of each Series on a Series by Series basis.
55
Section 13.8 TCB Dual Capacities. The parties expressly
acknowledge and consent to TCB acting in the possible dual capacity of Back-Up
Servicer or Successor Servicer and in the capacity as Trustee. TCB may, in such
dual capacity, discharge its separate functions fully, without hindrance or
regard to conflict of interest principles, duty or loyalty principles or other
breach of fiduciary duties, all of which defenses, claims or assertions are
hereby expressly waived by the other parties hereto. It is expressly
acknowledged, consented and agreed that TCB may discharge its respective Back-Up
Servicing and Trustee obligations to the full in accord with the appropriate
documents and to the extent it is performing its functions in accordance with
the terms of such documents, shall be fully protected and shall be indemnified
against any such claim, assertion or lawsuit alleging breach of fiduciary duty,
conflict of interest or similar defense or claim.
Section 13.9 Certificates Non-Assessable and Fully Paid. Except to
the extent otherwise expressly provided in Section 7.4 with respect to the
Transferor, it is the intention of the parties to this Agreement that the
Investor Certificateholders shall not be personally liable for obligations of
the Trust, that the Undivided Interests represented by the Certificates shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever, and that Certificates upon authentication thereof by the Trustee
pursuant to Sections 2.1 and 6.2 are and shall be deemed fully paid.
Section 13.10 Further Assurances. The Transferor and the Servicer
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including, without limitation,
the execution of any financing statements or continuation statements relating to
the Contracts and the related Receivables and the other Trust Property for
filing under the provisions of the UCC of any applicable jurisdiction.
Section 13.11 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, any Enhancement
Provider or the Investor Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
Section 13.12 Counterparts. This Agreement may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
Section 13.13 Binding Effect; Third-Party Beneficiaries. This
Agreement shall inure to the benefit of and the obligations hereunder shall be
binding upon the parties hereto, the Certificateholders and, to the extent
provided in the related Supplement, to the Enhancement Provider named therein,
and their respective successors and permitted assigns. Except as otherwise
provided in this Article XIII, no other Person will have any right or obligation
hereunder.
Section 13.14 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is made that an action may
be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder, unless such provision requires a specific
percentage of Investor Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement or any Supplement to be given
or taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by agent duly appointed in writing; and except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, when required, to the Transferor
or the Servicer. Proof of execution of any such instrument or
56
of a writing appointing any such agent shall be sufficient for any purpose of
this Agreement or any Supplement and conclusive in favor of the Trustee, the
Transferor and the Servicer, if made in the manner provided in this Section.
(d) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
Section 13.14A Rule 144A Information. For so long as any of the
Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, each of the
Transferor, the Servicer, the Trustee and the Enhancement Provider for such
Series agree to cooperate with each other to provide to any Investor
Certificateholders of such Series or Class and to any prospective purchaser of
Certificates designated by such an Investor Certificateholder upon the request
of such Investor Certificateholder or prospective purchaser, any information
required to be provided to such Investor Certificateholder or prospective
purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the
Securities Act.
Section 13.15 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral (including the Original Agreement), are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
Section 13.16 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 13.17 No Bankruptcy Petition Against the Transferor. The
Trustee, the Transfer Agent and Registrar and Paying Agent and the Servicer each
hereby covenants and agrees that, prior to the day which is one year and one day
after the payment in full of all Invested Amounts, it will not institute
against, or join any other Person in instituting against the Transferor any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.
[End of Article XIII]
57
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
H & T RECEIVABLE FUNDING
CORPORATION
Transferor
By: /s/ Xxxx X. Xxxxx
Printed Name: Xxxx X. Xxxxx
Title: Senior Vice President
BALLY TOTAL FITNESS
CORPORATION
Servicer
By: /s/ Xxxx X. Xxxxx
Printed Name: Xxxx X. Xxxxx
Title: Senior Vice President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
not individually but solely
as Trustee
By: /s/ Xxxx X. Xxxxxx
Printed Name: Xxxx X. Xxxxxx
Title: Assistant Vice President
58
