EXHIBIT 4.3
EXECUTION COPY
SALE AND SERVICING
AGREEMENT
among
TRIAD AUTOMOBILE RECEIVABLES TRUST 2002-A,
Issuer,
TRIAD FINANCIAL SPECIAL PURPOSE LLC,
Seller,
TRIAD FINANCIAL CORPORATION,
Servicer and Custodian
and
JPMORGAN CHASE BANK,
Backup Servicer and Indenture Trustee
Dated as of August 1, 2002
TABLE OF CONTENTS
Page
ARTICLE I Definitions.......................................................................1
SECTION 1.1. Definitions.............................................................1
SECTION 1.2. Other Definitional Provisions..........................................19
ARTICLE II Conveyance of Receivables.......................................................20
SECTION 2.1. Conveyance of Receivables..............................................20
SECTION 2.2. [Reserved].............................................................21
SECTION 2.3. Further Encumbrance of Trust Property..................................21
ARTICLE III The Receivables................................................................22
SECTION 3.1. Representations and Warranties.........................................22
SECTION 3.2. Repurchase upon Breach of Representations and Warranties...............22
SECTION 3.3. Custody of Receivables Files...........................................23
ARTICLE IV Administration and Servicing of Receivables.....................................25
SECTION 4.1. Duties of the Servicer.................................................25
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement.........................................26
SECTION 4.3. Realization upon Receivables...........................................28
SECTION 4.4. Insurance..............................................................29
SECTION 4.5. Maintenance of Security Interests in Vehicles..........................31
SECTION 4.6. Covenants, Representations, and Warranties of Servicer.................32
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant........................33
SECTION 4.8. Total Servicing Fee; Payment of Certain Expenses by Servicer...........33
SECTION 4.9. Servicer's Certificate.................................................33
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event......................................................34
SECTION 4.11. Annual Independent Accountants' Report.................................35
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables............................................................35
SECTION 4.13. Reserved...............................................................35
SECTION 4.14. Fidelity Bond and Errors and Omissions Policy..........................35
ARTICLE V Trust Accounts; Distributions; Statements to Noteholders.........................36
SECTION 5.1. Establishment of Trust Accounts........................................36
SECTION 5.2. [Reserved].............................................................38
SECTION 5.3. Certain Reimbursements to the Servicer.................................38
SECTION 5.4. Application of Collections.............................................38
SECTION 5.5. Spread Account.........................................................39
SECTION 5.6. Additional Deposits....................................................39
SECTION 5.7. Distributions..........................................................39
SECTION 5.8. Note Distribution Account..............................................41
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Page
SECTION 5.9. [Reserved].............................................................43
SECTION 5.10. Statements to Noteholders..............................................43
SECTION 5.11. [Optional Deposits by the Insurer......................................44
ARTICLE VI The Note Policy.................................................................44
SECTION 6.1. Claims Under Note Policy...............................................44
SECTION 6.2. Preference Claims Under Note Policy....................................46
SECTION 6.3. Surrender of Note Policy...............................................48
ARTICLE VII The Seller.....................................................................48
SECTION 7.1. Representations of Seller..............................................48
SECTION 7.2. Organizational Existence...............................................49
SECTION 7.3. Liability of Seller....................................................49
SECTION 7.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller.............................................................49
SECTION 7.5. Limitation on Liability of Seller and Others...........................50
SECTION 7.6. Ownership of the Certificates or Notes.................................50
ARTICLE VIII The Servicer..................................................................50
SECTION 8.1. Representations of Servicer............................................50
SECTION 8.2. Liability of Servicer; Indemnities.....................................52
SECTION 8.3. Merger or Consolidation of, or Assumption of the Obligations
of the Servicer or Backup Servicer.....................................52
SECTION 8.4. Limitation on Liability of Servicer, Backup Servicer and
Others.................................................................53
SECTION 8.5. Delegation of Duties...................................................54
SECTION 8.6. Servicer and Backup Servicer Not to Resign.............................55
ARTICLE IX Default.........................................................................55
SECTION 9.1. Servicer Termination Event.............................................55
SECTION 9.2. Consequences of a Servicer Termination Event...........................56
SECTION 9.3. Appointment of Successor...............................................57
SECTION 9.4. Notification to Noteholders............................................58
SECTION 9.5. Waiver of Past Defaults................................................58
ARTICLE X Termination......................................................................58
SECTION 10.1. Optional Purchase of All Receivables...................................58
ARTICLE XI Administrative Duties of the Servicer...........................................59
SECTION 11.1. Administrative Duties..................................................59
SECTION 11.2. Records................................................................61
SECTION 11.3. Additional Information to be Furnished to the Issuer...................61
ARTICLE XII Miscellaneous Provisions.......................................................61
SECTION 12.1. Amendment..............................................................61
SECTION 12.2. Protection of Title to Trust...........................................63
SECTION 12.3. Notices................................................................64
SECTION 12.4. Assignment.............................................................66
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Page
SECTION 12.5. Limitations on Rights of Others........................................66
SECTION 12.6. Severability...........................................................66
SECTION 12.7. Separate Counterparts..................................................66
SECTION 12.8. Headings...............................................................66
SECTION 12.9. Governing Law..........................................................66
SECTION 12.10. Assignment to Indenture Trustee........................................67
SECTION 12.11. Nonpetition Covenants..................................................67
SECTION 12.12. Limitation of Liability of Owner Trustee and Indenture Trustee.........67
SECTION 12.13. Independence of the Servicer...........................................68
SECTION 12.14. No Joint Venture.......................................................68
SCHEDULES
Schedule A Schedule of Receivables
Schedule B Representations and Warranties and the Servicer
Schedule C Servicing Policies and Procedures
Schedule D Custodian Third Party Vendors
EXHIBITS
Exhibit A [Reserved]
Exhibit B Form of Servicer's Certificate
Exhibit C Form of Note Guaranty Insurance Policy
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SALE AND SERVICING AGREEMENT dated as of August 1, 2002, among TRIAD
AUTOMOBILE RECEIVABLES TRUST 2002-A, a Delaware business trust (the "Issuer"),
TRIAD FINANCIAL SPECIAL PURPOSE LLC, a Delaware limited liability company (the
"Seller"), and TRIAD FINANCIAL CORPORATION, a California corporation ("Triad",
in its capacity as Servicer, the "Servicer", and in its capacity as Custodian,
the "Custodian"), and JPMORGAN CHASE BANK, a New York banking corporation, in
its capacity as Backup Servicer and Indenture Trustee (in such capacities, the
"Backup Servicer" and the "Indenture Trustee", respectively).
The Issuer desires to purchase the Receivables and Other Conveyed
Property;
The Seller has purchased the Receivables and Other Conveyed Property
from Triad and is willing to sell the Receivables and Other Conveyed Property to
the Issuer;
The Servicer is willing to service the Receivables;
The Custodian is willing to take custody of the Receivable Files.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases will have the following meanings:
"Accounting Date" means, with respect to any Collection Period the
last day of such Collection Period.
"Additional Funds Available" means, with respect to any Distribution
Date, the sum of: (1) the Spread Account Draw Amount, if any, received by the
Indenture Trustee with respect to the Distribution Date; plus (2) the Insurer
Optional Deposit, if any, received by the Indenture Trustee with respect to the
Distribution Date.
"Administrative Receivable" means, with respect to any Collection
Period, a Receivable which the Servicer is required to purchase pursuant to
Section 4.7 on the Determination Date with respect to such Collection Period.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
preceding Collection Period and (ii) any Receivable that became a Purchased
Receivable prior to the end of the preceding Collection Period) as of the date
of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced at the time the loan
is originated in respect of accessories, insurance premiums, service contracts,
car club and warranty contracts and other items customarily financed as part of
retail automobile installment sale contracts or promissory notes, and related
costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Auto Loan Purchase and Sale Agreement" means any agreement between
a Third-Party Lender and Triad relating to the acquisition of Receivables from a
Third Party Lender by Triad.
"Available Funds" means, for any Collection Period, the sum of (1)
the Collected Funds for the Collection Period; plus (2) all Purchase Amounts
deposited in the Collection Account with respect to the Collection Period, plus
income on investments held in the Collection Account, including earnings
transferred to the Collection Account pursuant to Section 5(b) hereof; plus (3)
the proceeds of any liquidation of the assets of the Issuer, other than Net
Liquidation Proceeds. For the avoidance of doubt, Available Funds do not include
any Policy Claim Amounts.
"Backup Servicer" means JPMorgan Chase Bank.
"Base Servicing Fee" means, with respect to any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period, which will be equal to one-twelfth of the Servicing Fee Rate multiplied
by the Pool Balance as of the opening of business on the first day of such
Collection Period.
"Basic Documents" means this Agreement, the Certificate of Trust,
the Trust Agreement, the Purchase Agreement, the Insurance Agreement, the
Indenture, and other documents and certificates delivered in connection
therewith.
"Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in the states of Delaware, California, or
New York are authorized or obligated to be closed.
"Certificate" means the trust certificate evidencing the beneficial
interest of the Certificateholder in the Trust.
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"Certificateholder" means the Person in whose name the Certificate
is registered.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes or the Class B Notes, as the context requires.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes and the Class A-4 Notes.
"Class A Noteholders" means holders of the Class A Notes.
"Class A Noteholders' Accelerated Principal Amount" means, for any
Distribution Date, the lesser of: (1) the sum of (a) the excess, if any, of the
amount of Available Funds on the Distribution Date over the amounts payable on
the Distribution Date under clauses (i) through (xiii) of Section 5.7(b); plus,
(b) the amounts, if any, on deposit in the Spread Account in excess of the
Spread Account Requirement for the Distribution Date; and (2) the excess, if
any, on the Distribution Date of (a) the Pro Forma Class A Note Balance for the
Distribution Date; minus (b) the Required Pro Forma Class A Note Balance for the
Distribution Date.
"Class A Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for each Class of Class A Notes for such Distribution Date
and the Class A Noteholders' Interest Carryover Amount, if any, for each Class
of Class A Notes, calculated as of such Distribution Date.
"Class A Noteholders' Interest Carryover Amount" means, for any
Class of Class A Notes and any Determination Date, all or any portion of the
Class A Noteholders' Interest Distributable Amount for the Class for the
immediately preceding Distribution Date still unpaid as of the Determination
Date, plus, to the extent permitted by law, interest on the unpaid amount at the
interest rate paid on the Class of Notes from the preceding Distribution Date to
but excluding the related Distribution Date.
"Class A Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date and any Class of Class A Notes, the interest accrued
at the applicable interest rates during the applicable interest period on the
principal amount of the Notes of each Class of the Class A Notes outstanding as
of the end of the prior Distribution Date or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the amount equal to the excess, if any,
of (x) the sum of (i) the principal portion of all Collected Funds received
during the immediately preceding Collection Period (other than with respect to
Liquidated Receivables), (ii) the Principal Balance of all Receivables that
became Liquidated Receivables during the related Collection Period (other than
Purchased Receivables), (iii) the Purchase Amounts received with respect to all
Receivables that became Purchased Receivables during the related Collection
Period, (iv) in the sole discretion of the Insurer, the Principal Balance of all
the Receivables that were required to be purchased pursuant to Sections 3.2 and
4.7, during such Collection Period but were not purchased, (v) the aggregate
amount of Cram Down Losses that occurred during the related Collection Period;
and (vi) following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding
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Determination Date by the Indenture Trustee or Controlling Party for
distribution pursuant to Section 5.7 over (y) the sum of the Step-Down Amount,
if any, for such Distribution Date and amounts distributed under Section
5.7(b)(iv), (v) and (vii), if any, for such Distribution Date.
"Class A Noteholders' Parity Deficit Amount" means, for any
Distribution Date, the excess, if any, of (1) the aggregate remaining principal
amount of the Class A Notes outstanding on the Distribution Date after giving
effect to all reductions in such aggregate principal amount from sources other
than the Spread Account and the Note Policy minus (2) the Pool Balance at the
end of the prior Collection Period.
"Class A Noteholders' Principal Carryover Amount" means, as of any
Determination Date, all or any portion of the Class A Noteholders' Principal
Distributable Amount from the preceding Distribution Date that remains unpaid.
"Class A Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Monthly Principal
Distributable Amount for the Distribution Date and the Class A Noteholders'
Principal Carryover Amount, if any, as of the Distribution Date.
"Class A Noteholders' Remaining Parity Deficit Amount" means, for
any Distribution Date (1) the Class A Noteholders' Parity Deficit Amount for the
Distribution Date minus (2) any reduction in the aggregate principal amount of
the Class A Notes on the Distribution Date that is funded from the Spread
Account.
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-3 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-4 Notes" has the meaning assigned to such term in the
Indenture.
"Class B Notes" has the meaning assigned to such term in the
Indenture.
"Class B Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class B Noteholders'
Interest Carryover Amount, if any, calculated as of such Distribution Date.
"Class B Noteholders' Interest Carryover Amount" means, for any
Determination Date, all or any portion of the Class B Noteholders' Interest
Distributable Amount for the immediately preceding Distribution Date, still
unpaid as of the Determination Date, plus, to the extent permitted by law,
interest on the unpaid amount at the interest rate paid on the Class B Notes
from the preceding Distribution Date to but excluding the related Distribution
Date.
"Class B Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the interest accrued during the applicable interest
period that will accrue on
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the principal amount of the Class B Notes outstanding as of the end of the prior
Distribution Date or, in the case of the first Distribution Date, as of the
Closing Date.
"Closing Date" means August 21, 2002.
"Collateral Insurance" has the meaning set forth in Section 4.4(a).
"Collected Funds" means, with respect to any Collection Period, the
amount of funds in the Collection Account representing collections on the
Receivables (other than Purchased Receivables) during such Collection Period,
including all Net Liquidation Proceeds collected during such Collection Period
(but excluding any Purchase Amounts).
"Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to the first Distribution
Date, the period beginning on the close of business on July 31, 2002 and ending
on the close of business on August 31, 2002. With respect to each subsequent
Distribution Date, "Collection Period" means the period beginning on the open of
business on the first day of the immediately preceding calendar month and ending
on the close of business on the last day of the immediately preceding calendar
month. Any amount stated "as of the close of business of the last day of a
Collection Period" will give effect to the following calculations as determined
as of the end of the day on such last day: (i) all applications of collections
and (ii) all distributions.
"Collection Records" means all manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
"Computer Tape" means the computer tapes or other electronic media
furnished by Triad to the Issuer and its assigns describing certain
characteristics of the Receivables as of the Cutoff Date.
"Contract" means a motor vehicle retail installment sale contract,
installment loan contract or note and security agreement.
"Controlling Party" means the Insurer, provided that if (i) an
Insurer Default has occurred and is continuing or (ii) all amounts payable to
the Class A Noteholders under the Indenture and the Insurer under the Insurance
Agreement have been paid in full, then the Controlling Party means the Indenture
Trustee acting at the direction of the Majority Noteholders.
"Copies" has the meaning set forth in Section 3.3(e).
"Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is Wilmington Trust Company, is Xxxxxx
Square North, 0000 X. Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, and (ii) with
respect to the Indenture Trustee and the Backup Servicer, the principal office
at which at any particular time its corporate trust business is administered,
which at the time of execution of this agreement is 000 Xxxx 00xx Xxxxxx, 00xx
5
Floor, New York, New York 10001, Attention: Institutional Trust
Services/Structured Finance Services, Triad 2002-A.
"Cram Down Loss" means, for any Receivable (other than a Purchased
Receivable or a Liquidated Receivable), if a court of appropriate jurisdiction
in an insolvency proceeding issued an order reducing the amount owed on the
Receivable or otherwise modifying or restructuring the scheduled payments to be
made on the Receivable, an amount equal to (i) the excess of the Receivable's
Principal Balance immediately prior to the order over the Receivable's Principal
Balance as reduced; and/or (ii) if the court issued an order reducing the
effective interest rate on the Receivable, the excess of the Receivable
Principal Balance immediately prior to the order over the Receivable's net
present value - using as the discount rate the higher of the APR on the
Receivable or the rate of interest, if any, specified by the court in the order
- of the scheduled payments as so modified or restructured. A Cram Down Loss is
deemed to have occurred on the order's issuance date.
"Custodian" means Triad as custodian hereunder acting as agent for
the Indenture Trustee, or any other Person named from time to time as custodian
hereunder, which Person must be reasonably acceptable to the Controlling Party
(the Custodian as of the Closing Date is acceptable to the Insurer as of the
Closing Date).
"Cutoff Date" means July 31, 2002.
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to Triad under a Dealer
Agreement or pursuant to a Dealer Assignment.
"Dealer Agreement" means any agreement between a Dealer and Triad
relating to the acquisition of Receivables from the Dealer by Triad.
"Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by the Dealer conveying such Receivable to Triad.
"Delinquency Rate" means, with respect to any Determination Date, a
fraction, expressed as a percentage, (a) the numerator of which is equal to the
Aggregate Principal Balance of all Receivables, other than Liquidated
Receivables, for which all or more than 10% of the Scheduled Receivables Payment
was 60 or more days delinquent as of the last day of the related Collection
Period and (b) the denominator of which is equal to the Aggregate Principal
Balance as of the last day of the related Collection Period.
"Delivery" means, with respect to Trust Account Property:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Article 9 of the UCC, transfer thereof:
(i) by physical delivery to the Indenture Trustee,
indorsed to, or registered in the name of, the Indenture Trustee
or its nominee or indorsed in blank;
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(ii) by the Indenture Trustee continuously maintaining
possession of such instrument; and
(iii) by the Indenture Trustee continuously indicating by
book-entry that such instrument is credited to the related Trust
Account;
(b) with respect to a "certificated security" (as defined in Article 8
of the UCC), transfer thereof:
(i) by (x) physical delivery of such certificated
security to the Indenture Trustee, provided that if the
certificated security is in registered form, it shall be indorsed
to, or registered in the name of, the Indenture Trustee or
indorsed in blank, and (y) the Indenture Trustee continuously
maintaining possession of such certificated security; or
(ii) by another Person (not a securities intermediary)
(1) acquiring possession of such certificated security on behalf
of the Indenture Trustee, provided that if the certificated
security is in registered form, it shall be indorsed to, or
registered in the name of, the Indenture Trustee or indorsed in
blank, or (2) having acquired possession of such certificated
security, acknowledging that it holds such certificated security
for the Indenture Trustee, and, in either such case, continuously
maintaining possession of such certificated security; and
(iii) by the Indenture Trustee continuously indicating by
book-entry that such certificated security is credited to the
related Trust Account;
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book entry regulations, transfer thereof pursuant to
the following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
(i) by (x) book-entry registration of such property to an
appropriate book-entry account maintained with a Federal Reserve
Bank by a securities intermediary that is also a "depositary"
pursuant to applicable federal regulations and issuance by such
securities intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Indenture
Trustee of the purchase by the securities intermediary on behalf
of the Indenture Trustee of such book-entry security; the making
by such securities intermediary of entries in its books and
records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations
as belonging to the Indenture Trustee and continuously indicating
that such securities intermediary holds such book-entry security
solely as agent for the Indenture Trustee or (y) continuous
book-entry registration of such property to a book-entry account
maintained by the Indenture Trustee with a Federal Reserve Bank;
and
(ii) by the Indenture Trustee continuously indicating by
book-entry that such property is credited to the related Trust
Account;
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(d) with respect to any asset in the Trust Accounts that is an
"uncertificated security" (as defined in Article 8 of the UCC) and that is not
governed by clause (c) above or clause (e) below:
(i) transfer thereof:
(A) by registration to the Indenture Trustee as the
registered owner thereof, on the books and records of the issuer
thereof; or
(B) by another Person (not a securities intermediary) (1)
becoming the registered owner of the uncertificated security on
behalf of the Indenture Trustee, or (2) having become the
registered owner of the uncertificated security, acknowledging
that it holds such uncertificated security for the Indenture
Trustee; or
(ii) the issuer of the uncertificated security has agreed
that it will comply with instructions originated by the Indenture
Trustee with respect to such uncertificated security without
further consent of the registered owner thereof; and
(iii) the Indenture Trustee continuously indicating by
book-entry that such uncertificated security is credited to the
related Trust Account;
(e) in the case of a security in the custody of or maintained on the
books of a clearing corporation (as defined in Article 8 of the UCC) or its
nominee, transfer thereof by causing:
(i) the relevant clearing corporation to credit such
security to a securities account of the Indenture Trustee at such
clearing corporation; and
(ii) the Indenture Trustee to continuously indicate by
book-entry that such security is credited to the related Trust
Account; or
(f) with respect to a "security entitlement" (as defined in Article 8 of
the UCC) to be transferred to or for the benefit of the Indenture Trustee and
not governed by clauses (c) or (e) above, transfer thereof by:
(i) a securities intermediary's (A) indicating by book
entry that the underlying "financial asset" (as defined in
Article 8 of the UCC) has been credited to the Indenture
Trustee's "securities account" (as defined in Article 8 of the
UCC), (B) receiving a financial asset from the Indenture Trustee
or acquiring the underlying financial asset for the Indenture
Trustee, and in either case, accepting it for credit to the
Indenture Trustee's securities account, or (C) becoming obligated
under other law, regulation or rule to credit the underlying
financial asset to the Indenture Trustee's securities account,
(ii) the making by the securities intermediary of entries
on its books and records continuously identifying such security
entitlement as belonging to the
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Indenture Trustee; and continuously indicating by book-entry that
such securities entitlement is credited to the Indenture
Trustee's securities account; and
(iii) the Indenture Trustee's continuously indicating by
book-entry that such security entitlement (or all rights and
property of the Indenture Trustee representing such securities
entitlement) is credited to the related Trust Account; and/or
In the case of any such asset, (i) compliance with such
additional or alternative procedures as are now or may hereafter become
appropriate to effect the complete transfer of ownership of, or control over,
any such Trust Account Property to the Indenture Trustee free and clear of any
adverse claims, consistent with changes in applicable law or regulations or the
interpretation thereof, and (ii) the Indenture Trustee's continuously indicating
by book entry that such asset is credited to the related Trust Account. In each
case of delivery contemplated herein, the Indenture Trustee shall make
appropriate notations on its records, and shall cause the same to be made on the
records of its nominees, indicating that securities are held in trust pursuant
to and as provided in this Agreement.
"Determination Date" means, with respect to any Collection
Period, the 3rd Business Day preceding the Distribution Date in the next
Collection Period.
"Distribution Date" means, with respect to each Collection
Period, the 12th day of the following Collection Period, or, if such day is not
a Business Day, the immediately following Business Day, commencing September 12,
2002.
"Electronic Ledger" means the electronic master record of the
motor vehicle retail installment sale contracts, installment loan contracts and
note and security agreements of the Servicer.
"Eligible Deposit Account" means a segregated trust account with
the corporate trust department of a depository institution acceptable to the
Insurer organized under the laws of the United States of America or any one of
the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade and a rating of at least A-1
by Standard &Poor's and/or P-1 by Moody's.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities, in each case denominated in United States dollars,
represented by instruments in bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depository institution authorities
9
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or contractual
commitment to invest therein (which will be deemed to be made again each time
funds are reinvested following each Distribution Date), the commercial paper or
other short-term senior unsecured debt obligations (other than such obligations
the rating of which is based on the credit of a Person other than such
depository institution or trust company) of such depository institution or trust
company will have a credit rating from Standard & Poor's of A-1+ and from
Moody's of P-1;
(c) commercial paper and demand notes investing solely in commercial
paper having, at the time of the investment or contractual commitment to invest
therein, a rating from Standard & Poor's of A-1+ and from Moody's of P-1;
(d) investments in money market funds (including funds for which the
Indenture Trustee or the Owner Trustee in each of their individual capacities or
any of their respective Affiliates is investment manager, controlling party or
advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G and from
Moody's of Aaa;
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the United States of America or any
agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
referred to in clause (b) above;
(g) any other investment which would satisfy the Rating Agency Condition
and is consistent with the ratings of the Securities and which, so long as no
Insurer Default has occurred and is continuing, has been approved by the
Insurer, or any other investment that by its terms converts to cash within a
finite period, if the Rating Agency Condition is satisfied with respect thereto;
and
(h) cash.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Indenture Trustee or any of their respective
Affiliates.
"Eligible Servicer" means, Triad Financial Corporation, as
Servicer, JPMorgan Chase Bank, as Back-up Servicer, or another Person which at
the time of its appointment as Servicer or Backup Servicer, (i) is servicing a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle installment loan contracts, (ii) is legally qualified and has the
capacity to service the Receivables, (iii) has demonstrated the ability
professionally and competently to service a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle installment loan contracts
similar to the Receivables with reasonable skill and care, (iv) is qualified and
entitled to use, pursuant to a license or other written agreement, and agrees to
maintain the confidentiality of, the software which the Servicer uses in
connection with
10
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement, and (v) so long as no Insurer Default has occurred and is
continuing, is reasonably acceptable to the Insurer.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means with respect to (i) the
Class A-1 Notes, the September 2003 Distribution Date, (ii) the Class A-2 Notes,
the January 2006 Distribution Date, (iii) the Class A-3 Notes, the February 2007
Distribution Date, (iv) the Class A-4 Notes, the August 2009 Distribution Date
and (v) the Class B Notes, the August 2009 Distribution Date.
"Financed Vehicle" means an automobile or light-duty truck,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"Fitch" means Fitch Ratings, or its successor.
"Indenture" means the Indenture dated as of August 1, 2002,
between the Issuer and JPMorgan Chase Bank, as Indenture Trustee, as the same
may be amended and supplemented from time to time.
"Indenture Trustee" means JPMorgan Chase Bank, its successors in
interest and any successor trustee hereunder and under the Indenture.
"Indenture Trustee Fee" means, with respect to any Collection
Period, the fee payable to the Indenture Trustee for services rendered during
such Collection Period, which will be equal to $250.
"Independent Accountants" has the meaning set forth in Section
4.11
"Insolvency Event" means, with respect to a specified Person, (a)
the filing of a petition against such Person or the entry of a decree or order
for relief by a court having jurisdiction in the premises in respect of such
Person or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation or
such Person's affairs, and such petition, decree or order will remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
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"Insolvency Proceeds" has the meaning set forth in Section
10.1(b).
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of August 1, 2002, among the Insurer, the Trust, the Seller,
Triad and the Indenture Trustee.
"Insurance Agreement Event of Default" means an "Event of
Default" as defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insurer" means Ambac Assurance Corporation, a Wisconsin
domiciled stock insurance corporation incorporated under the laws of the State
of Wisconsin, or any successor thereto, as issuer of the Note Policy.
"Insurer Default" means the occurrence and continuance of any of
the following events:
(a) the Insurer failing to make a payment required under the Note Policy
in accordance with its terms;
(b) the Insurer (i) filing a petition or commenced any case or
proceeding under any provision or chapter of the United States Bankruptcy Code
or any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (ii) making a general assignment
for the benefit of its creditors, or (iii) having an order for relief entered
against it under the United States Bankruptcy Code or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the Wisconsin Department of
Insurance or other competent regulatory authority has entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession of all or any material
portion of the property of the Insurer by a custodian, trustee, agent or
receiver .
"Insurer Optional Deposit" means, for any Distribution Date, an
amount other than a Policy Claim Amount delivered by the Insurer, at its sole
option, for deposit into the Collection Account for any of the following
purposes: to provide funds to pay the fees or expenses of any of the Issuer's
service providers for the Distribution Date; or to include those amounts as part
of Additional Funds Available for the Distribution Date to the extent that
without them a draw would be required to be made on the Note Policy.
"Interest Period" means, with respect to any Distribution Date,
the period from and including the most recent Distribution Date on which
interest has been paid (or in the case of the first Distribution Date, from and
including the Closing Date) to, but excluding, the following Distribution Date.
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"Interest Rate" means, with respect to (i) the Class A-1 Notes,
1.72313% per annum, (ii) the Class A-2 Notes, 1.9900% per annum, (iii) the Class
A-3 Notes, 2.6200% per annum, (iv) the Class A-4 Notes, 3.2400% per annum, and
(v) the Class B Notes, 8.0000% per annum (in the case of the Class A-1 Notes,
computed on the basis of a 360-day year and the actual number of days in the
related Interest Period and in the case of the Class A-2, Class A-3, Class A-4
and Class B Notes, computed on the basis of a 360-day year consisting of twelve
30-day months).
"Investment Earnings" means, with respect to any date of
determination and Trust Account, the investment earnings on amounts on deposit
in such Trust Account on such date.
"Issuer" means Triad Automobile Receivables Trust 2002-A, a
Delaware business trust.
"Lien" means a security interest, lien, charge, pledge, equity,
or encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" will mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means, with respect to any Collection
Period, any Receivable with respect to which any of the following has occurred:
(i) 10% or more of any Scheduled Receivable Payment is 120 days or more past
due, except Receivables with respect to which the related Financed Vehicles have
been repossessed within such 120 days; (ii) the earlier of (A) 90 days have
elapsed since the Servicer repossessed the Financed Vehicle and (B) the sale of
the related Financed Vehicle; or (iii) the Servicer has determined in good faith
that all amounts it expects to be recovered have been received.
"Lockbox Account" means an account maintained by the Lockbox Bank
pursuant to Section 4.2(d).
"Lockbox Agreement" means the Amended and Restated Master Account
Agreement, dated as of August l, 2002, by and among Triad, the Lockbox Bank and
the Indenture Trustee, as such agreement may be amended or supplemented from
time to time, unless the Indenture Trustee will cease to be a party thereunder,
or such agreement will be terminated in accordance with its terms, in which
event "Lockbox Agreement" will mean such other agreement, in form and substance
acceptable to the Controlling Party, among the Servicer, the Indenture Trustee
and the Lockbox Bank.
"Lockbox Bank" means, initially, Mellon Bank N.A. and its
successors in interest, and thereafter a depository institution named by the
Servicer and approved by the Insurer (so long as no Insurer Default has occurred
and is continuing) which provides a lockbox as part of its normal and customary
services at which the Lockbox Account is established and maintained as
13
of such date; provided, however, that upon the occurrence of a Servicer
Termination Event, the Controlling Party may, in its sole discretion, cause the
Lockbox Account to be established at another bank.
"Majority Noteholders" has the meaning set forth in the
Indenture.
"Monthly Extension Rate" means, with respect to any Accounting
Date, the fraction, expressed as a percentage, the numerator of which is the
aggregate Principal Balance of Receivables whose payments are extended during
the related Collection Period and the denominator of which is the aggregate
Principal Balance of Receivables as of the immediately preceding Accounting
Date.
"Monthly Records" means all records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the originating Dealer; Obligor name;
Obligor address; Obligor home phone number; Obligor business phone number, if
any; original Principal Balance; original term; Annual Percentage Rate; current
Principal Balance; current remaining term; origination date; first payment date;
final scheduled payment date; next payment due date; new/used classification;
collateral description; days currently delinquent; number of contract extensions
(months) to date; amount of Scheduled Receivables Payment; and past due late
charges.
"Moody's" means Xxxxx'x Investors Service, or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, (1) proceeds from the disposition of the underlying Financed
Vehicle; plus (2) any related insurance proceeds; plus (3) other monies received
from the Obligor that are allocable to principal and interest due under the
Receivable, minus (4) the Servicer's reasonable out-of-pocket costs, including
repossession and resale expenses not already deducted from the proceeds, and any
amounts required to be remitted to the Obligor by law.
"Net Loss Rate" means, with respect to a Collection Period, the
fraction, expressed as a percentage, the numerator of which is equal to the
aggregate of the net liquidation losses for such Collection Period and the
denominator of which is the Aggregate Principal Balance as of the first day of
such Collection Period.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Policy" means the financial guaranty insurance policy
issued by the Insurer to the Indenture Trustee for the benefit of the Class A
Noteholders.
"Note Pool Factor" means, for each Class of Notes as of the close
of business on any date of determination, a seven-digit decimal figure equal to
the outstanding principal amount of such Class of Notes divided by the original
outstanding principal amount of such Class of Notes.
"Note Preference Claim" has the meaning set forth in Section
6.2(b).
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"Noteholders" means the holders of the Class A Notes and Class B
Notes.
"Notes" means the Class A Notes and the Class B Notes.
"Obligor" on a Receivable means the purchaser or co-purchaser(s)
of the Financed Vehicle and any other Person who owes payments under the
Receivable.
"Officer's Certificate" means a certificate signed by the
chairman of the board, the president, any executive vice president or any vice
president, any treasurer, assistant treasurer, secretary or assistant secretary
of the Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel
reasonably acceptable to the Insurer, which opinion is satisfactory in form and
substance to the Indenture Trustee and, if such opinion or a copy thereof is
required by the provisions of this Agreement to be delivered to the Insurer, to
the Insurer.
"Original Pool Balance" means, as of any date of determination,
the sum of $879,123,207.32 (which is the Pool Balance as of the Cutoff Date).
"Other Conveyed Property" means all property conveyed by the
Seller to the Trust pursuant to Section 2.1(b) through (h).
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Owner Trustee Fee" means with respect to any Collection Period,
the fee payable to the Owner Trustee for services rendered during such
Collection Period, which will be equal to $250.
"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Policy Claim Amount" has the meaning set forth in the Note
Policy.
"Pool Balance" means, as of any date of determination, the
Aggregate Principal Balance at the end of the preceding Collection Period.
"Premium" means the premium payable to the Insurer, as specified
in the Insurance Agreement.
15
"Principal Balance" means, for any Receivable as of any date of
determination, (i) the Amount Financed; minus (ii) the sum of (a) that portion
of all amounts received on or prior to that date and allocable to principal
according to the Receivable's terms, and (b) any Cram Down Losses for the
Receivable accounted for as of that date.
"Pro Forma Class A Note Balance" means, for any Distribution
Date, the aggregate remaining principal amount of the Class A Notes outstanding
on the Distribution Date, after giving effect to distributions to be made on
such Distribution Date under clauses (i) through (xiii) of Section 5.7(b).
"Program" has the meaning set forth in Section 4.11.
"Purchase Agreement" means the Purchase Agreement between the
Seller and Triad, dated as of August 1, 2002, as such Purchase Agreement may be
amended from time to time.
"Purchase Amount" means, with respect to a Receivable, the
Principal Balance as of the date of purchase.
"Purchased Receivable" means, with respect to any Collection
Period, a Receivable purchased as of the close of business on the last day of
the Collection Period by Triad as the result of a breach of a covenant or as an
exercise of its optional redemption right.
"Rating Agency" means Xxxxx'x, Standard & Poor's and Fitch. If no
such organization or successor maintains a rating on the Securities, "Rating
Agency" will mean a nationally recognized statistical rating organization or
other comparable Person designated by the Issuer and reasonably acceptable to
the Insurer (so long as no Insurer Default has occurred and is continuing),
notice of which designation will be given by the Issuer to the Indenture
Trustee, the Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that
each of the Rating Agencies has notified the Servicer, the Seller, the Insurer,
the Owner Trustee and the Indenture Trustee in writing that such action will not
result in a reduction or withdrawal of the then current rating of any Class of
Notes.
"Realized Losses" means, with respect to any Receivable that
becomes a Liquidated Receivable, the excess of the Principal Balance of the
Liquidated Receivable over its Net Liquidation Proceeds to the extent allocable
to principal.
"Receivable" means any Contract listed on Schedule A (which
Schedule may be in the form of microfiche or a disk).
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" means, with respect to each Distribution Date, the
Business Day immediately preceding such Distribution Date, unless otherwise
specified in the Agreement.
16
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Required Pro Forma Class A Note Balance" means, with respect to
any Distribution Date, a dollar amount equal to the product of (x) 88% and (y)
the Pool Balance as of the end of the prior Collection Period.
"Rolling Average Net Loss Rate" means, with respect to any
Determination Date, the arithmetic average of the Net Loss Rates for each of the
three Collection Periods immediately preceding the Collection Period in which
such Determination Date occurs.
"Schedule of Receivables" means the schedule of all motor vehicle
retail installment sale contracts, installment loan contracts and note and
security agreements originally held as part of the Trust which is attached as
Schedule A.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached as Schedule B.
"Scheduled Receivables Payment" means, with respect to any
Collection Period for any Receivable, the amount set forth in the Receivable as
required to be paid by the Obligor in the Collection Period. If, after the
Closing Date, the Obligor's obligation under a Receivable with respect to a
Collection Period is modified so as to differ from the amount specified in the
Receivable as a result of (i) the order of a court in an insolvency proceeding
involving the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief
Act of 1940 or (iii) modifications or extensions of the Receivable permitted by
Section 4.2(b), the Scheduled Receivables Payment with respect to such
Collection Period will refer to the Obligor's payment obligation with respect to
the Collection Period as so modified.
"Securities" means, collectively, the Class A Notes, the Class B
Notes and the Certificates.
"Seller" means Triad Financial Special Purpose LLC, a Delaware
limited liability company.
"Service Contract" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of the Financed Vehicle.
"Servicer" means Triad as the servicer of the Receivables, and
each successor Servicer pursuant to Section 9.3.
"Servicer Termination Event" means an event specified in Section
9.1.
"Servicer's Certificate" means an Officer's Certificate delivered
pursuant to Section 4.9, substantially in the form of Exhibit B.
"Servicing Fee" has the meaning specified in Section 4.8.
17
"Servicing Fee Rate" means 2.25% per annum.
"Simple Interest Method" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant to which
the portion of the payment that is allocated to interest is equal to the product
of the fixed rate of interest on the obligation multiplied by the period of time
expressed as a fraction of a year, based on the actual number of days elapsed
since the preceding payment under the obligation was made and 365 days in the
calendar year.
"Spread Account" means the account designated as such,
established and maintained pursuant to Section 5.5.
"Spread Account Draw Amount" means, for any Determination Date,
the amount, after taking into account the application on the Distribution Date
of Available Funds for the related Collection Period, equal to any shortfall in
the payment of amounts described in clauses (i) through (vii) of Section 5.7(b).
"Spread Account Initial Deposit" means an amount equal to 3% of
the aggregate principal balance of the Receivables on the Closing Date (which is
equal to $26,373,696.22).
"Spread Account Requirement" means, with respect to the Closing
Date, the Spread Account Initial Deposit and with respect to any Distribution
Date thereafter, an amount equal to the greater of (x) 3% of the Aggregate
Principal Balance at the end of the prior Collection Period or, if a Spread Cap
Event (as such term is defined in the Insurance Agreement) has occurred and is
continuing, 6% of the Aggregate Principal Balance at the end of the prior
Collection Period and (y) 1.5% of the Original Pool Balance.
"Standard & Poor's" means Standard & Poor's, a Division of The
XxXxxx-Xxxx Companies, Inc., or its successor.
"Step-Down Amount" means, with respect to any Distribution Date,
the excess, if any, of (x) the Required Pro Forma Class A Note Balance over (y)
the Pro Forma Class A Note Balance on such Distribution Date, calculated for
this definition only without deduction for any Step-Down Amount (i.e., assuming
that the entire amount described in clause (x) of the definition of "Class A
Noteholders' Monthly Principal Distributable Amount" is distributed as principal
on the Class A Notes).
"Supplemental Servicing Fee" means, with respect to any
Collection Period, all administrative fees, expenses and charges paid by or on
behalf of Obligors, including late fees, prepayment fees, extension fees and
liquidation fees collected on the Receivables during the Collection Period and
any expenses incurred by the Servicer in connection with repossession of the
Financed Vehicle.
"Third-Party Lender" means an entity that originated a loan to a
consumer or was the original assignee of a motor vehicle retail installment sale
contract from a dealer for the purchase of a motor vehicle and sold the loan or
motor vehicle retail installment sale contract to Triad pursuant to an Auto Loan
Purchase and Sale Agreement.
18
"Third-Party Lender Assignment" means, with respect to a
Receivable, the assignment executed by a Third-Party Lender conveying the
Receivable to Triad.
"Triad" means Triad Financial Corporation, a California
corporation, and its successors and assigns.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of April 3,
2002 among Triad, as the Administrator, the Seller and the Owner Trustee, as
amended and restated as of August 1, 2002 as the same may be amended and
supplemented from time to time.
"Trust Officer" means, (i) in the case of the Indenture Trustee,
the chairman or vice-chairman of the board of directors, any managing director,
the chairman or vice-chairman of the executive committee of the board of
directors, the president, any vice president, assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller and any assistant controller or any other officer of the
Indenture Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, and (ii) in the case of the Owner Trustee, any officer in
the corporate trust office of the Owner Trustee or any agent of the Owner
Trustee under a power of attorney with direct responsibility for the
administration of this Agreement or any of the Basic Documents on behalf of the
Owner Trustee.
"Trust Property" means the property and proceeds conveyed
pursuant to Section 2.1, together with certain monies paid on or after the
Cut-off Date, the Collection Account (including all Eligible Investments therein
and all proceeds therefrom), the Spread Account and certain other rights under
this Agreement.
"UCC" means the Uniform Commercial Code as in effect in the
relevant jurisdiction on the date of the Agreement.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture, or, if not defined therein, in
the Trust Agreement.
(b) All terms defined in this Agreement will have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
19
(c) As used in this Agreement, in any instrument governed hereby and in
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such instrument,
certificate or other document, and accounting terms partly defined in this
Agreement or in any such instrument, certificate or other document to the extent
not defined, will have the respective meanings given to them under U.S.
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under U.S. generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document will control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement will refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" means "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of the Notes and
the other amounts to be distributed from time to time to the order of the Seller
in accordance with the terms of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
all right, title and interest of the Seller in and to:
(a) the Receivables and all moneys received thereon after the Cutoff
Date;
(b) an assignment of the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of the
Originator or the Seller in such Financed Vehicles;
(c) any proceeds and the right to receive proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability
insurance policies covering Financed Vehicles or Obligors and any proceeds from
the liquidation of the Receivables;
20
(d) the right to cause the related Dealer or Third-Party Lender to
repurchase Receivables pursuant to a Dealer Agreement or an Auto Loan Purchase
and Sale Agreement, respectively, as a result of a breach of representation or
warranty in the related Dealer Agreement or Auto Loan Purchase and Sale
Agreement, respectively;
(e) all rights, if any, to refunds for the costs of Service Contracts on
the related Financed Vehicles;
(f) the related Receivables Files;
(g) all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreement,
including the Seller's rights under the Purchase Agreement, to enforce the
delivery requirements, representations and warranties and the cure and
repurchase obligations of Triad under the Purchase Agreement; and
(h) the proceeds of any and all of the foregoing.
It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement constitutes a sale of the Receivables
and other Trust Property from the Seller to the Issuer and the beneficial
interest in and title to the Receivables and the other Trust Property will not
be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. In the event that,
notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby is held by a court of competent jurisdiction not to be a
sale, this Agreement will constitute a grant of a security interest in the
property referred to in this Section for the benefit of the Noteholders and the
Insurer.
SECTION 2.2. [Reserved].
SECTION 2.3. Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Seller of the
Trust Property, all right, title and interest of the Seller in and to such item
of Trust Property will terminate, and all such right, title and interest will
vest in the Trust, in accordance with the Trust Agreement and the Business Trust
Statute.
(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust will have the sole right to pledge or otherwise encumber such Trust
Property. Pursuant to the Indenture, the Trust will grant a security interest in
the Trust Property to the Indenture Trustee securing the repayment of the Notes.
The Certificates will represent the beneficial ownership interest in the Trust
Property, and the Certificateholders will be entitled to receive distributions
with respect thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III of the
Indenture will, until payment in full of the Certificates, remain as covenants
of the Issuer for the benefit of the Certificateholders, enforceable by the
Certificateholders to the same extent as such covenants were enforceable by the
Noteholders prior to the discharge of the Indenture. Any rights of the Indenture
Trustee
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under Article III of the Indenture, following the discharge of the Indenture,
will vest in Certificateholders.
(d) The Indenture Trustee will, at such time as there are no Securities
outstanding and all sums due to the Indenture Trustee pursuant to the Indenture
and this Agreement have been paid, release any remaining portion of the Trust
Property to the Certificateholder.
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties. The Seller hereby conveys
its rights, title and interest in and to the representations and warranties made
in respect of the Receivables pursuant to the Purchase Agreement and this
Agreement.
SECTION 3.2. Repurchase upon Breach of Representations and Warranties.
(a) The Seller, the Servicer, the Insurer, the Indenture Trustee
or the Trust, as the case may be, will inform the other parties to this
Agreement and Triad promptly, by notice in writing, upon the discovery of any
breach of the representations and warranties referenced in Section 3.1 and in
Schedule B hereto. As of the last day of the second (or, if Triad so elects, the
first) month following the discovery by Triad or receipt by Triad of notice of
such breach, unless such breach is cured by such date, Triad will repurchase any
Receivable in which the interests of the Noteholders or the Insurer are
materially and adversely affected by any such breach as of such date. The
"second month" will mean the month following the month in which discovery occurs
or notice is given, and the "first month" will mean the month in which discovery
occurs or notice is given. In consideration of and simultaneously with the
repurchase of the Receivable, Triad will remit to the Collection Account the
Purchase Amount in the manner specified in Section 5.6 and the Issuer will
execute such assignments and other documents reasonably requested by such person
in order to effect such repurchase. The sole remedy of the Issuer, the Owner
Trustee, the Indenture Trustee or the Noteholders with respect to a breach of
representations and warranties pursuant to Section 3.1 and the agreement
contained in this Section will be the repurchase of Receivables pursuant to this
Section, subject to the conditions contained herein or to enforce the obligation
of Triad to repurchase such Receivables pursuant to the Purchase Agreement.
Neither the Owner Trustee nor the Indenture Trustee will have a duty to conduct
any affirmative investigation as to the occurrence of any conditions requiring
the repurchase of any Receivable pursuant to this Section.
In addition to the foregoing and notwithstanding whether the
related Receivable has been purchased by Triad, Triad will indemnify the Trust,
the Indenture Trustee, the Backup Servicer, and the officers, directors, agents
and employees thereof, the Insurer, and the Noteholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach.
(b) Pursuant to Section 2.1, the Seller conveyed to the Trust all
of the Seller's right, title and interest in its rights and benefits, but none
of its obligations or burdens, under the
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Purchase Agreement including the Seller's rights under the Purchase Agreement to
enforce the delivery requirements, representations and warranties, indemnities
and the cure or repurchase obligations of Triad thereunder. The Seller hereby
represents and warrants to the Trust that such assignment is valid and
enforceable against the Seller.
SECTION 3.3. Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, the Indenture Trustee hereby revocably appoints the Custodian, and
the Custodian hereby accepts such appointment, to act as the agent of the
Indenture Trustee as custodian of the following documents or instruments in its
possession or in the possession of third party vendors on behalf of the
Custodian which will be delivered to the Custodian as agent of the Indenture
Trustee on or before the Closing Date (with respect to each Receivable):
(i) the fully executed original of the Receivable (together with
any agreements modifying the Receivable, including any extension
agreements);
(ii) the original certificate of title (when received) indicating
that the Financed Vehicle is owned by the Obligor and subject to the
interest of Triad as first lienholder or secured party (including any
Lien Certificate received by Triad), or, if such original certificate of
title has not yet been received, a copy of the application therefor,
showing Triad as secured party and otherwise such related documents, if
any, that Triad keeps on file in accordance with its customary
procedures; and
(iii) in connection with Receivable Files pertaining to retail
installment sale contracts, the original credit application, or a copy
thereof.
(b) Upon payment in full of any Receivable, the Servicer will notify the
Custodian pursuant to a certificate of an officer of the Servicer (which
certificate will include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.1 have been so deposited) and will
request delivery of the Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Custodian will, upon
written request of an officer of the Servicer and delivery to the Custodian of a
receipt signed by such officer, cause the related Receivable File to be released
to the Servicer. The Servicer's receipt of a Receivable File will obligate the
Servicer to return the Receivable File to the Custodian when its need by the
Servicer has ceased unless the Receivable is repurchased as described in Section
3.2 or 4.7.
(c) The Custodian, or its third-party vendor, will hold the Receivable
Files on behalf of the Indenture Trustee and will maintain such accurate and
complete accounts, records and computer systems pertaining to each Receivable
File as will enable the Indenture Trustee to comply with the terms and
conditions of this Agreement. The Custodian will maintain the Receivable Files
at (i) its office located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx,
Xxxxxxxxxx 00000, (ii) with a third-party service provider identified on
Schedule D hereto, as it may be modified from time to time by the Custodian with
the consent of the Insurer, which will not be unreasonably withheld, or (iii)
subject to the prior written consent of the Insurer, so long
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as no Insurer Default has occurred and is continuing, at such other office as
will from time to time be identified to the Indenture Trustee and the Insurer.
Each Receivable will be identified on the books and records of the Custodian in
a manner that (i) indicates that the Receivables are held by the Custodian on
behalf of the Indenture Trustee and (ii) is otherwise necessary, as reasonably
determined by the Custodian. The Custodian will conduct, or cause to be
conducted, periodic physical inspections of the Receivable Files held by it, and
of the related accounts, records and computer systems, in such a manner as will
enable the Indenture Trustee, the Insurer and the Custodian to verify the
accuracy of the Custodian's inventory and recordkeeping. Such inspections will
be conducted at such times, in such manner and by such persons including
independent accountants, as the Insurer or the Indenture Trustee may reasonably
request and the cost of such inspections will be borne directly by the Custodian
and not by the Indenture Trustee, but such inspections are not to take place
more than once per year. The Custodian will promptly report to the Insurer and
the Indenture Trustee any failure on its part to hold the Receivable Files and
maintain its accounts, records and computer systems as herein provided and
promptly take appropriate action to remedy any such failure. Upon request, the
Custodian will, at the expense of the party making such request, make copies or
other electronic file records (e.g., diskettes, CDs, etc.) (the "Copies") of the
Receivable Files and will deliver such Copies to the Indenture Trustee and the
Indenture Trustee will hold such Copies on behalf of the Noteholders.
(d) The Custodian will, subject only to the Custodian's security
requirements applicable to its own employees having access to similar records
held by the Custodian, which requirements will be consistent with the practices
of an institution that maintains custody of Receivable Files for its own
account, and at such times as may be reasonably imposed by the Custodian, permit
only the Insurer and the Indenture Trustee or their duly authorized
representatives, attorneys or auditors to inspect the Receivable Files and the
related accounts, records, and computer systems maintained by the Custodian
pursuant hereto at such times as the Insurer or the Indenture Trustee may
reasonably request.
(e) The Custodian will be deemed to have received proper instructions
with respect to the Receivable Files upon its receipt of written instructions
signed by a Responsible Officer of the Indenture Trustee. Such instructions may
be general or specific in terms. The Indenture Trustee will provide a copy of
any such instructions to the Insurer.
(f) The Custodian will indemnify the Issuer, the Owner Trustee, the
Backup Servicer, the Insurer, the Noteholders and the Indenture Trustee for any
and all liabilities, obligations, losses, damage, payments, costs or expenses of
any kind whatsoever (including the fees and expenses of counsel) that may be
imposed on, incurred or asserted against such Persons and their respective
officers, directors, employees, agents, attorneys and successors and assigns as
the result of any act or omission in any way relating to the maintenance and
custody by the Custodian or third-party vendor of the Receivable Files;
provided, however, that the Custodian will not be liable for any portion of any
such liabilities, obligations, losses, damages, payments or costs or expenses
due to the willful misfeasance, bad faith or gross negligence of the Issuer, the
Owner Trustee, the Backup Servicer, the Insurer or the Indenture Trustee or the
officers, directors, employees and agents thereof. In no event will the
Custodian be liable to any third party for acts or omissions of the Custodian.
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ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. Duties of the Servicer.
(a) The Servicer is hereby authorized to act as agent for the Trust and
in such capacity will manage, service, administer and make collections on the
Receivables, and perform the other actions required by the Servicer under this
Agreement. The Servicer agrees that its servicing of the Receivables will be
carried out in accordance with customary and usual procedures of institutions
which service motor vehicle retail installment sales contracts and, to the
extent more exacting, the degree of skill and attention that the Servicer
exercises from time to time with respect to all comparable motor vehicle
receivables that it services for itself or others. In performing such duties, so
long as Triad is the Servicer, it will substantially comply with the policies
and procedures described on Schedule C, as such policies and procedures may be
updated from time to time. The Servicer's duties will include collection and
posting of all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting any
required tax information to Obligors, monitoring the collateral, complying with
the terms of the Lockbox Agreement, accounting for collections and furnishing
monthly and annual statements to the Indenture Trustee and the Insurer with
respect to distributions, and performing the other duties specified herein.
(b) The Servicer will also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements and Auto Loan Purchase and Sale Agreements (and will maintain
possession of the Dealer Agreements and Auto Loan Purchase and Sale Agreements,
to the extent it is necessary to do so), the Dealer Assignments, the Third-Party
Lender Assignments and the Insurance Policies, to the extent that such Dealer
Agreements, Auto Loan Purchase and Sale Agreements, Dealer Assignments,
Third-Party Lender Assignments and Insurance Policies relate to the Receivables,
the Financed Vehicles or the Obligors. To the extent consistent with the
standards, policies and procedures otherwise required hereby, the Servicer will
follow its customary standards, policies, and procedures and will have full
power and authority, acting alone, to do any and all things in connection with
such managing, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered by the Trust to execute and deliver,
on behalf of the Trust, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and with respect to the Financed
Vehicles; provided, however, that notwithstanding the foregoing, the Servicer
will not, except pursuant to an order from a court of competent jurisdiction,
release an Obligor from payment of any unpaid amount under any Receivable or
waive the right to collect the unpaid balance of any Receivable from the Obligor
except in accordance with the Servicer's customary practices.
(c) The Servicer is hereby authorized to commence, in its own name or in
the name of the Trust, a legal proceeding to enforce a Receivable pursuant to
Section 4.3 or to commence or participate in any other legal proceeding
(including a bankruptcy proceeding) relating to or involving a Receivable, an
Obligor or a Financed Vehicle. If the Servicer commences or participates in such
a legal proceeding in its own name, the Trust will thereupon be deemed to
25
have automatically assigned such Receivable to the Servicer solely for purposes
of commencing or participating in any such proceeding as a party or claimant,
and the Servicer is authorized and empowered by the Trust to execute and deliver
in the Servicer's name any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding. The Indenture Trustee and the Owner Trustee will furnish the
Servicer with any limited powers of attorney and other documents which the
Servicer may reasonably request and which the Servicer deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreement.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer will make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same will become due, and will follow such collection procedures as it
follows with respect to all comparable motor vehicle receivables that it
services for itself or others and otherwise act with respect to the Receivables,
the Dealer Agreements, the Dealer Assignments, the Auto Loan Purchase and Sale
Agreements, the Third-Party Lender Assignments, the Insurance Policies and the
Other Conveyed Property in such manner as will, in the reasonable judgment of
the Servicer, maximize the amount to be received by the Trust with respect
thereto. The Servicer is authorized in its discretion to waive any prepayment
charge, late payment charge or any other similar fees that may be collected in
the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment of
a Receivable (i) in order to change the Obligor's regular due date in accordance
with its servicing policies and procedures, (ii) in order to re-amortize the
Scheduled Receivables Payments on the Receivable following a partial prepayment
of principal or (iii) as may be required by law, in accordance with its
customary procedures if the Servicer believes in good faith that such extension,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; provided,
however, that in no event may a Receivable be extended beyond the Collection
Period immediately preceding the last Final Scheduled Distribution Date.
(c) The Servicer may grant payment extensions on, or other modifications
or amendments to, a Receivable (in addition to those modifications permitted by
Section 4.2(b)) in accordance with its customary procedures if the Servicer
believes in good faith that such extension, modification or amendment is
necessary to avoid a default on such Receivable, will maximize the amount to be
received by the Trust with respect to such Receivable, and is otherwise in the
best interests of the Trust; provided, however, that:
(i) The aggregate period of all extensions on a Receivable does
not exceed eight months;
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(ii) In no event may a Receivable be extended beyond the
Collection Period immediately preceding the latest Final Scheduled
Distribution Date;
(iii) The average Monthly Extension Rate for any three
consecutive Collection Periods does not exceed 4%; and
(iv) The Servicer may not amend or modify a Receivable (except as
provided in Section 4.2(b) and this Section 4.2(c) or as otherwise
required by law) without the consent of the Insurer, so long as no
Insurer Default has occurred and is continuing, or the Majority
Noteholders (if an Insurer Default has occurred and is continuing).
With respect to Section 4.2(c)(iii), in the event the average of
the Monthly Extension Rates calculated with respect to three consecutive
Collection Periods exceeds 4% (which information will be set forth in the
related Servicer's Certificate), the Servicer will, on the third such Accounting
Date, purchase from the Trust the Receivables with respect to which payment had
been extended (starting with the Receivables most recently so extended) in an
aggregate Principal Balance equal to the product of (i) the difference between
such average of Monthly Extension Rates and 4% and (ii) the Aggregate Principal
Balance, and pay the related Purchase Amount on the related Determination Date;
provided, however, that in the event the Backup Servicer will be acting as
Servicer hereunder, the foregoing sentence will apply only in respect of
Receivables as to which payments had been extended by such Backup Servicer.
(d) The Servicer will use its best efforts to notify or direct Obligors
to make all payments on the Receivables, whether by check or by direct debit of
the Obligor's bank account, to be made directly to one or more Lockbox Banks
pursuant to a Lockbox Agreement. The Servicer will use its best efforts to
notify or direct any Lockbox Bank to deposit all payments on the Receivables in
the Lockbox Account no later than the Business Day after receipt, and to cause
all amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account no later than the second Business Day
after receipt of available funds with respect to such payments. The Lockbox
Account will be a demand deposit account held by the Lockbox Bank.
On the Closing Date, the Servicer will deposit or cause to be
deposited in immediately available funds into the Collection Account all amounts
collected with respect to the Receivables from the Cutoff Date to the fourth
(4th) Business Day preceding the Closing Date. As soon as possible thereafter
and in accordance with the provisions of this Agreement, all amounts collected
with respect to the Receivables from such date to the Closing Date will be
deposited into the Collection Account.
Notwithstanding any Lockbox Agreement, or any of the provisions
of this Agreement relating to the Lockbox Agreement, the Servicer will remain
obligated and liable to the Trust, the Indenture Trustee and Noteholders for
servicing and administering the Receivables and the Other Conveyed Property in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue thereof; provided, however, that the foregoing
will not apply to any Backup Servicer for so long as a Lockbox Bank is
performing its obligations pursuant to the terms of a Lockbox Agreement.
27
If the Servicer is terminated, the successor Servicer will assume
all of the rights and obligations of the outgoing Servicer under the Lockbox
Agreement subject to the terms hereof. In such event, the successor Servicer
will be deemed to have assumed all of the outgoing Servicer's interest therein
and to have replaced the outgoing Servicer as a party to each such Lockbox
Agreement to the same extent as if such Lockbox Agreement had been assigned to
the successor Servicer, except that the outgoing Servicer will not thereby be
relieved of any liability or obligations on the part of the outgoing Servicer to
the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer will, upon
request of the Indenture Trustee, but at the expense of the outgoing Servicer,
deliver to the successor Servicer all documents and records relating to each
such Lockbox Agreement and an accounting of amounts collected and held by the
Lockbox Bank and otherwise use its best efforts to effect the orderly and
efficient transfer of any Lockbox Agreement to the successor Servicer. In the
event that the Insurer (so long as no Insurer Default has occurred and is
continuing) or the Majority Noteholders (if an Insurer Default has occurred and
is continuing) elects to change the identity of the Lockbox Bank, the outgoing
Servicer, at its expense, will cause the Lockbox Bank to deliver, at the
direction of the Insurer (so long as an Insurer Default has not occurred) or the
Majority Noteholders (if an Insurer Default has occurred and is continuing) to
the Indenture Trustee or a successor Lockbox Bank, all documents and records
relating to the Receivables and all amounts held (or thereafter received) by the
Lockbox Bank (together with an accounting of such amounts) and will otherwise
use its best efforts to effect the orderly and efficient transfer of the lockbox
arrangements and the Servicer will notify the Obligors to make payments to the
Lockbox established by the successor.
(e) The Servicer will remit all payments by or on behalf of the Obligors
received in the form of checks with payment coupons directly by the Servicer to
the Lockbox Bank for deposit into the Collection Account, in either case, and as
soon as practicable, but in no event later than the second Business Day after
receipt thereof. Other payments received by each of the Servicer, Triad and the
Seller will be deposited into a local servicing account for processing
immediately upon receipt, and then transferred in immediately available funds to
the Lockbox Account for deposit to the Collection Account no later than the
second (2nd) Business Day after receipt of available amounts.
SECTION 4.3. Realization upon Receivables.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer will use commercially reasonable efforts to
repossess (or otherwise comparably convert the ownership of) and liquidate any
Financed Vehicle securing a Receivable with respect to which the Servicer has
determined that payments thereunder are not likely to be resumed, as soon as is
practicable after default on such Receivable but in no event later than the date
on which all or more than 10% of a Scheduled Receivables Payment has become 91
days delinquent; provided, however, that the Servicer may elect not to repossess
a Financed Vehicle within such time period if in its good faith judgment it
determines that the proceeds ultimately recoverable with respect to such
Receivable would be increased by forbearance. The Servicer is authorized to
follow such customary practices and procedures as it will deem necessary or
advisable, consistent with the standard of care required by Section 4.1, which
practices and procedures may include reasonable efforts to realize upon any
recourse to Dealers and Third-Party Lenders, the sale of the related Financed
Vehicle at public or private sale, the submission
28
of claims under an Insurance Policy and other actions by the Servicer in order
to realize upon such a Receivable. The foregoing is subject to the provision
that, in any case in which the Financed Vehicle will have suffered damage, the
Servicer will not expend funds in connection with any repair or towards the
repossession of such Financed Vehicle unless it will determine in its discretion
that such repair and/or repossession will increase the proceeds of liquidation
of the related Receivable by an amount greater than the amount of such expenses.
All amounts received upon liquidation of a Financed Vehicle will be remitted by
the Servicer to the Collection Account as soon as practicable, but in no event
later than the second Business Day after receipt of available funds thereof. The
Servicer will be entitled to recover all reasonable expenses incurred by it in
the course of repossessing and liquidating a Financed Vehicle into cash
proceeds, as provided in Section 5.7(b) or out of the cash proceeds of such
Financed Vehicle, any deficiency obtained from the Obligor or any amounts
received from the related Dealer or Third-Party Lender, which amounts in
reimbursement may be retained by the Servicer (and will not be required to be
deposited as provided in Section 4.2(e)) to the extent of such expenses. The
Servicer will pay on behalf of the Trust any personal property taxes assessed on
repossessed Financed Vehicles. The Servicer will be entitled to reimbursement of
any such tax from Net Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer Assignment or
Third-Party Lender Assignment, the act of commencement will be deemed to be an
automatic assignment from the Trust to the Servicer of the rights under such
Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer Assignment or
Third-Party Lender Assignment for purposes of collection only. If, however, in
any enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer
Assignment or Third-Party Lender Assignment on the grounds that it is not a real
party in interest or a Person entitled to enforce the Dealer Agreement, Auto
Loan Purchase and Sale Agreement, Dealer Assignment or Third-Party Lender
Assignment, the Owner Trustee and/or the Indenture Trustee, at the Servicer's
expense, will take such steps as the Servicer deems reasonably necessary to
enforce the Dealer Agreement, Auto Loan Purchase and Sale Agreement, Dealer
Assignment or Third-Party Lender Assignment, including bringing suit in its name
or the name of the Trust and the Owner Trustee and/or the Indenture Trustee for
the benefit of the Noteholders. All amounts recovered will be remitted directly
by the Servicer as provided in Section 4.2(e).
SECTION 4.4. Insurance.
(a) The Servicer will require, in accordance with its customary
servicing policies and procedures, that each Financed Vehicle be insured by the
related Obligor under the Insurance Policies referred to in Paragraph 24 of the
Schedule of Representations and Warranties. Each Receivable requires the Obligor
to maintain such physical loss and damage insurance, naming Triad and its
successors and assigns as additional insureds, and permits the holder of such
Receivable to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to maintain such insurance. If the Servicer
determines that an Obligor has failed to obtain or maintain a physical loss and
damage Insurance Policy covering the related Financed Vehicle as described in
Paragraph 24 (including during the repossession of such Financed Vehicle) the
Servicer may enforce the rights of the holder of the Receivable under the
Receivable to require the Obligor to obtain such physical loss and damage
insurance in
29
accordance with its customary servicing policies and procedures. The Servicer
may, at its sole option, maintain a vendor's single interest or other collateral
protection insurance policy with respect to all Financed Vehicles ("Collateral
Insurance") which policy by its terms insures against physical loss and damage
in the event any Obligor fails to maintain physical loss and damage insurance
with respect to the related Financed Vehicle. The parties acknowledge that the
Servicer does not now have, nor does it intend to obtain, Collateral Insurance.
All policies of Collateral Insurance will be endorsed with clauses providing for
loss payable to the Servicer. Costs incurred by the Servicer in maintaining such
Collateral Insurance will be paid by the Servicer.
(b) The Servicer may, at its sole option, if an Obligor fails to obtain
or maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such Obligor,
as required under the terms of the insurance policy, the premiums for such
"force-placed" insurance. The parties hereto acknowledge that the Servicer does
not now have, nor does it intend to obtain, forced-place insurance. All policies
of force-placed insurance will be endorsed with clauses providing for loss
payable to the Servicer. Any cost incurred by the Servicer in maintaining such
force-placed insurance will only be recoverable out of premiums paid by the
Obligors or Net Liquidation Proceeds with respect to the Receivable, as provided
in Section 4.4(c).
In connection with any force-placed insurance obtained hereunder,
the Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay the entire premium to the Servicer. In no event
will the Servicer include the amount of the premium in the Amount Financed under
the Receivable. "Insurance add-on amounts," which are the premiums charged to
Obligors in the event that the Servicer obtains force-placed insurance, with
respect to any Receivable will be treated as a separate obligation of the
Obligor and will not be added to the Principal Balance of such Receivable, and
amounts allocable thereto will not be available for distribution on the Notes
and the Certificates. The Servicer will retain and separately administer the
right to receive payments from Obligors with respect to insurance add-on amounts
or rebates of forced-placed insurance premiums. If an Obligor makes a payment
with respect to a Receivable having force-placed insurance, but the Servicer is
unable to determine whether the payment is allocable to the Receivable or to the
insurance add-on amount, the payment will be applied first to any unpaid
Scheduled Receivables Payments and then to the insurance add-on amount. Net
Liquidation Proceeds on any Receivable will be used first to pay the Principal
Balance and accrued interest on such Receivable and then to pay the related
insurance add-on amount. If an Obligor under a Receivable with respect to which
the Servicer has placed force-placed insurance fails to make scheduled payments
of such insurance add-on amount as due, and the Servicer has determined that
eventual payment of the insurance add-on amount is unlikely, the Servicer may,
but will not be required to, purchase such Receivable from the Trust for the
Purchase Amount on any subsequent Determination Date. Any such Receivable, and
any Receivable with respect to which the Servicer has placed force-placed
insurance which has been paid in full (excluding any insurance add-on amounts)
will be assigned to the Servicer.
(c) The Servicer may xxx to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement will be deemed to be an automatic
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assignment of the rights of the Trust under such Insurance Policy to the
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce an Insurance
Policy on the grounds that it is not a real party in interest or a holder
entitled to enforce the Insurance Policy, the Owner Trustee and/or the Indenture
Trustee, at the Servicer's expense, will take such steps as the Servicer deems
necessary to enforce such Insurance Policy, including bringing suit in its name
or the name of the Trust and the Owner Trustee and/or the Indenture Trustee for
the benefit of the Noteholders.
(d) The Servicer will cause itself and may cause the Indenture Trustee
to be named as named insured under all policies of Collateral Insurance.
SECTION 4.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer will take such steps on behalf of the Trust as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle, including obtaining the execution by
the Obligors and the recording, registering, filing, re-recording, re-filing,
and re-registering of all security agreements, financing statements and
continuation statements as are necessary to maintain the security interest
granted by the Obligors under the respective Receivables. The Indenture Trustee
hereby authorizes the Servicer, and the Servicer agrees, to take any and all
steps necessary to re-perfect such security interest on behalf of the Trust as
necessary because of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Trust, the
Servicer agrees that Triad's designation as the secured party on the certificate
of title is in its capacity as Servicer as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Insurer may (so long as no Insurer Default has occurred and is continuing)
instruct the Indenture Trustee and the Servicer to take or cause to be taken,
or, if an Insurer Default has occurred, upon the occurrence of a Servicer
Termination Event, the Indenture Trustee and the Servicer will take or cause to
be taken such action as may, in the opinion of counsel to the Controlling Party,
be necessary to perfect or re-perfect the security interests in the Financed
Vehicles securing the Receivables in the name of the Trust by amending the title
documents of such Financed Vehicles or by such other reasonable means as may, in
the opinion of counsel to the Controlling Party, be necessary or prudent.
Triad hereby agrees to pay all expenses related to such
perfection or reperfection and to take all action necessary therefor. In
addition, prior to the occurrence of an Insurance Agreement Event of Default,
the Controlling Party may instruct the Servicer to take or cause to be taken
such action as may, in the opinion of counsel to the Controlling Party, be
necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Receivables in the name of the Trust, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent; provided, however, that if the Controlling Party requests
that the title
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documents be amended prior to the occurrence of an Insurance Agreement Event of
Default, the out-of-pocket expenses of the Servicer or the Indenture Trustee in
connection with such action will be reimbursed to the Servicer or the Indenture
Trustee, as applicable, by the Controlling Party. Triad hereby appoints the
Indenture Trustee as its attorney-in-fact to execute certificates of title or
any other documents, prepared by the Servicer, in the name and stead of Triad
(it being understood that and agreed that the Indenture Trustee has no
obligation to take such steps with respect to any perfection or reperfection,
except as pursuant to the Basic Documents to which it is a party and to which
Triad has paid all expenses) and the Indenture Trustee hereby accepts such
appointment.
SECTION 4.6. Covenants, Representations, and Warranties of Servicer. By
its execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Indenture Trustee relies
in accepting the Receivables, on which the Indenture Trustee relies in
authenticating the Notes and on which the Insurer relies in issuing the Note
Policy.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each Receivable
will not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable
or as otherwise contemplated herein;
(ii) No Impairment. The Servicer will do nothing to impair the
rights of the Trust or the Noteholders in the Receivables, the Dealer
Agreements, the Auto Loan Purchase and Sale Agreements, the Dealer
Assignments, the Third-Party Lender Assignments, the Insurance Policies
or the Other Conveyed Property except as otherwise expressly provided
herein;
(iii) No Amendments. The Servicer will not extend or otherwise
amend the terms of any Receivable, except in accordance with Section
4.2; and
(iv) Restrictions on Liens. The Servicer will not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or restriction on transferability of the Receivables except for the
Lien in favor of the Indenture Trustee for the benefit of the
Noteholders and Insurer, and the restrictions on transferability imposed
by this Agreement or (ii) sign or file under the Uniform Commercial Code
of any jurisdiction any financing statement which names Triad or the
Servicer as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect
to the Receivables, except in each case any such instrument solely
securing the rights and preserving the Lien of the Indenture Trustee,
for the benefit of the Noteholders and the Insurer.
(b) The Servicer represents, warrants and covenants as of the Closing
Date as to itself that the representations and warranties set forth on the
Schedule of Representations attached hereto as Schedule B are true and correct,
provided that such representations and warranties contained therein and herein
will not apply to any entity other than Triad.
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SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Insurer, the Trust or a Responsible
Officer of the Indenture Trustee of a breach of any of the representations,
warranties and covenants set forth in Sections 4.5(a) or 4.6, the party
discovering such breach will give prompt written notice to the others; provided,
however, that the failure to give any such notice will not affect any obligation
of Triad as Servicer under this Section 4.7. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any
representation, warranty or covenant set forth in Sections 4.5(a) or 4.6 which
materially and adversely affects the interests of the Noteholders or the Insurer
in any Receivable (including any Liquidated Receivable) (or, at Triad's
election, the first Accounting Date so following) or the related Financed
Vehicle, Triad will, unless such breach has been cured in all material respects,
purchase from the Trust the Receivable affected by such breach and, on the
related Determination Date, Triad will pay the related Purchase Amount. It is
understood and agreed that the obligation of Triad to purchase any Receivable
(including any Liquidated Receivable) with respect to which such a breach has
occurred and is continuing will, if such obligation is fulfilled, constitute the
sole remedy against Triad for such breach available to the Insurer, the
Noteholders, the Owner Trustee or the Indenture Trustee; provided, however, that
Triad will indemnify the Trust, the Backup Servicer, the Insurer, the Owner
Trustee, the Indenture Trustee and the Noteholders from and against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach. The indemnification provided pursuant to this section will survive
the removal or resignation of the Indenture Trustee and or the Backup Servicer.
SECTION 4.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer. On each Distribution Date, the Servicer will be entitled to receive
out of the Collection Account the Base Servicing Fee and any Supplemental
Servicing Fee for the related Collection Period (together, the "Servicing Fee")
pursuant to Section 5.7. The Servicer will be required to pay all expenses
incurred by it in connection with its activities under this Agreement (including
taxes imposed on the Servicer, expenses incurred in connection with
distributions and reports made by the Servicer to Noteholders or the Insurer
and, to the extent not provided for pursuant to Section 5.7, all other fees and
out-of-pocket expenses of the Owner Trustee, the Backup Servicer, and the
Indenture Trustee, except taxes levied or assessed against the Trust, the Owner
Trustee, the Backup Servicer or the Indenture Trustee, and claims against the
Trust, the Owner Trustee, the Backup Servicer or the Indenture Trustee in
respect of indemnification, which taxes and claims in respect of indemnification
against the Trust are expressly stated to be for the account of Triad). The
Servicer will, to the extent not provided for pursuant to Section 5.7, be liable
for the fees and out-of-pocket expenses of the Owner Trustee, the Backup
Servicer, the Indenture Trustee, the Custodian, the Lockbox Bank (and any fees
under the Lockbox Agreement) and the Independent Accountants except taxes levied
or assessed against such parties. Notwithstanding the foregoing, if the Servicer
is not Triad, a successor to Triad as Servicer including the Backup Servicer
permitted by Section 9.3 will not be liable for taxes levied or assessed against
the Trust or claims against the Trust in respect of indemnification, or the fees
and expenses referred to above.
SECTION 4.9. Servicer's Certificate. No later than 10:00 a.m. Eastern
time on each Determination Date, the Servicer will deliver (facsimile delivery
being acceptable; and in the case of the Servicer's Certificate to be delivered
to the Indenture Trustee, the Seller and the
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Backup Servicer, an e-mail in a computer file, the format of which will be
agreed upon between the Servicer and such parties) to the Indenture Trustee, the
Owner Trustee, the Backup Servicer, the Insurer and each Rating Agency a
Servicer's Certificate containing among the other things set forth in Exhibit B,
(i) all information necessary to enable the Indenture Trustee to give any notice
required by Section 6.1 and to make the distributions required by Section 5.7,
(ii) a listing of all Purchased Receivables and Administrative Receivables
purchased as of the related Accounting Date, (iii) all information necessary to
enable the Indenture Trustee to send the statements to Noteholders and the
Insurer required by Section 5.10, (iv) all information necessary to enable the
Indenture Trustee to reconcile the aggregate cash flows, the Collection Account
for the related Collection Period and Distribution Date, including the
accounting required by Section 5.10, (v) the Delinquency Rate, Net Loss Rate and
Rolling Average Net Loss Ratio for such Determination Date, and (vi) whether to
the knowledge of the Servicer an Insurance Agreement Event of Default, a Spread
Cap Event (as defined in the Insurance Agreement) or a Trigger Event (as defined
in the Insurance Agreement) has occurred. Receivables purchased by the Servicer
or by Triad on the related Accounting Date and each Receivable that became a
Liquidated Receivable or that was paid in full during the related Collection
Period will be identified by account number (as set forth in the Schedule of
Receivables).
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer will deliver to the Indenture Trustee, the Owner
Trustee, the Backup Servicer, the Insurer and each Rating Agency, on or before
April 30 (or 120 days after the end of the Servicer's fiscal year, if other than
December 31) of each year, beginning on April 30, 2003, an Officer's
Certificate, dated as of December 31 (or other applicable date) of such year,
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as has elapsed from the Closing Date to
the date of the first such certificate) and of its performance under this
Agreement has been made under such officer's supervision, and (ii) to such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
(b) The Servicer will deliver to the Indenture Trustee, the Owner
Trustee, the Backup Servicer, the Insurer, and each Rating Agency, promptly
after having obtained knowledge thereof, but in no event later than two (2)
Business Days thereafter, written notice in an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Termination Event under Section 9.1(a). The Servicer will deliver to
the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Insurer, the
Seller and each Rating Agency promptly after having obtained knowledge thereof,
but in no event later than two (2) Business Days thereafter, written notice in
an Officer's Certificate of any event which with the giving of notice or lapse
of time, or both, would become a Servicer Termination Event under any other
clause of Section 9.1.
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SECTION 4.11. Annual Independent Accountants' Report.
The Servicer will cause a firm of independent certified public
accountants (the "Independent Accountants"), who may also render other services
to the Servicer or to its Affiliates, to deliver to the Indenture Trustee, the
Owner Trustee, the Backup Servicer, the Insurer and each Rating Agency, on or
before April 30 (or 120 days after the end of the Servicer's fiscal year, if
other than December 31) of each year, beginning on April 30, 2003 with respect
to the twelve months ended the immediately preceding December 31 (or other
applicable date) (or such other period as has elapsed from the Closing Date to
the date of such certificate), a report addressed to the board of directors of
the Servicer, to the Indenture Trustee, the Owner Trustee, the Backup Servicer
and to the Insurer, to the effect that such firm has audited the financial
statements of Triad and issued its report thereon and that such audit (1) was
made in accordance with generally accepted auditing standards, (2) included
tests relating to automotive loans serviced for others in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers (the
"Program"), to the extent the procedures in such Program are applicable to the
servicing obligations set forth in the Agreement, and (3) except as described in
the report, disclosed no exceptions or errors in the records relating to
automobile and light duty truck loans serviced for others that such firm is
required to report under the Program. Except to the extent otherwise required by
the applicable law, the Servicer is not required to deliver the report hereunder
if Triad is reported solely as a consolidated subsidiary and there are no
separate audits of the books and records of Triad; provided, however, the
Servicer is required to notify the Indenture Trustee in writing that there are
no separate audits of the books and records of Triad and that therefore the
Servicer will not be delivering the report.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer will upon reasonable prior notice provide to
representatives of the Indenture Trustee, the Owner Trustee, the Backup Servicer
and the Insurer reasonable access to the documentation regarding the
Receivables. In each case, such access will be afforded without charge but only
upon reasonable request and during normal business hours. Any expense incident
to the exercise by the Indenture Trustee, Owner Trustee, Backup Servicer or the
Insurer will be borne by the Servicer to the extent such visits and examinations
are not more frequent than once in any twelve-month period, or a Servicer
Termination Event has occurred and is continuing. Nothing in this Section will
affect the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section 4.12 as a result of such
obligation will not constitute a breach of this Section 4.12.
SECTION 4.13. Reserved.
SECTION 4.14. Fidelity Bond and Errors and Omissions Policy. The
Servicer will not be required to maintain an errors and omissions policy. The
Servicer will maintain a fidelity bond of a type and in an amount customary for
servicers engaged in the business of servicing motor vehicle receivables.
ARTICLE V
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Trust Accounts; Distributions;
Statements to Noteholders
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Indenture Trustee, on behalf of the Noteholders and the
Insurer, will establish and maintain in its own name one or more Eligible
Deposit Accounts reasonably acceptable to the Insurer (collectively, the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Indenture Trustee on behalf of
the Noteholders and the Insurer. The Collection Account will initially be
established with the Indenture Trustee.
(ii) The Indenture Trustee, on behalf of the Noteholders, will
establish and maintain in its own name an Eligible Deposit Account (the "Note
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Indenture Trustee on behalf of
the Noteholders and the Insurer. The Note Distribution Account will initially be
established with the Indenture Trustee.
(iii) The Servicer will cause the Indenture Trustee to establish and
maintain an Eligible Deposit Account (the "Spread Account") with the Indenture
Trustee, bearing a designation clearly indicating that the funds deposited
therein are held in trust for the benefit of the Noteholders and the Insurer.
(iv) Funds on deposit in the Collection Account, the Note
Distribution Account, and the Spread Account (collectively, the "Trust
Accounts") will be invested by the Indenture Trustee (or any custodian with
respect to funds on deposit in any such account) in Eligible Investments
selected in writing by the Servicer (pursuant to standing instructions or
otherwise). All such Eligible Investments will be held by or on behalf of the
Indenture Trustee for the benefit of the Noteholders and the Insurer, as
applicable. Funds on deposit in any Trust Account will be invested in Eligible
Investments that will mature so that such funds will be available at the close
of business on the Business Day immediately preceding the following Distribution
Date. However, if each of the Rating Agencies confirms that it would not affect
the ratings assigned to the Notes and the Insurer consents, funds on deposit in
the Spread Account may be invested in Eligible Investments that will mature so
that funds will be available on the following Distribution Date. All Eligible
Investments will be held to maturity.
(b) All investment earnings of moneys deposited in the Trust Accounts
will be deposited (or caused to be deposited) by the Indenture Trustee in the
Collection Account, and any loss resulting from such investments will be charged
to such account. The Servicer will not direct the Indenture Trustee to make any
investment of any funds held in any of the Trust Accounts unless the security
interest granted and perfected in such account will continue to be perfected in
such investment, in either case without any further action by any Person.
(c) The Indenture Trustee will not in any way be held liable by reason
of any insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Indenture Trustee's negligence or bad faith
36
or its failure to make payments on such Eligible Investments issued by the
Indenture Trustee, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms.
(d) If (i) the Servicer fails to give investment directions in writing
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 1:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and
Indenture Trustee) on any Business Day; or (ii) a Default or Event of Default
has occurred and is continuing with respect to the Notes but the Notes have not
been declared due and payable, or, if such Notes will have been declared due and
payable following an Event of Default, amounts collected or receivable from the
Trust Property are being applied as if there had not been such a declaration;
then the Indenture Trustee will, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in the investment described in clause (d)
of the definition of Eligible Investments.
(e) (i) The Indenture Trustee will possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof and all such funds, investments, proceeds and income will be
part of the Owner Trust Estate. Except as otherwise provided herein, the Trust
Accounts will be under the sole dominion and control of the Indenture Trustee
for the benefit of the Noteholders and the Insurer. If, at any time, any of the
Trust Accounts ceases to be an Eligible Deposit Account, the Indenture Trustee
(or the Servicer on its behalf) will within five Business Days (or such longer
period as to which each Rating Agency and the Insurer may consent) establish a
new Trust Account as an Eligible Deposit Account and will transfer any cash
and/or any investments to such new Trust Account. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Trust Accounts
are not accounts with the Indenture Trustee, the Servicer will notify the
Indenture Trustee in writing promptly upon any of such Trust Accounts ceasing to
be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture Trustee
agrees that:
(A) any Trust Account Property that is held in deposit
accounts will be held solely in the Eligible Deposit Accounts;
and, except as otherwise provided herein, each such Eligible
Deposit Account will be subject to the exclusive custody and
control of the Indenture Trustee, and the Indenture Trustee will
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property will be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and will be
held, pending maturity or disposition, solely by the Indenture
Trustee or a securities intermediary (as such term is defined in
Section 8-102(14) of the UCC) acting solely for the Indenture
Trustee;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations will be delivered in accordance with
paragraph (b) of the definition of "Delivery" and will be
maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph;
37
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above will be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
will be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security; and
(E) the "securities intermediary's jurisdiction," for
purposes of Section 8-110 of the UCC, shall be the State of New
York.
(f) The Servicer will have the power, revocable by the Insurer or, with
the consent of the Insurer by the Indenture Trustee with, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer and the Indenture Trustee to carry out
its respective duties hereunder.
SECTION 5.2. [Reserved].
SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. To
extent that such amounts are owed to the Lockbox Bank, the Servicer will cause
such amounts to be returned to the Lockbox Bank. The amount to be reimbursed
hereunder will be paid to the Servicer on the related Distribution Date pursuant
to Section 5.7(b)(i) upon certification by the Servicer of such amounts and the
provision of such information to the Indenture Trustee and the Insurer as may be
necessary in the opinion of the Insurer to verify the accuracy of such
certification; provided, however, that the Servicer must provide such
clarification within 12 months of such mistaken deposit, posting, or returned
check. In the event that the Insurer has not received evidence satisfactory to
it of the Servicer's entitlement to reimbursement pursuant to this Section 5.3,
the Insurer will (unless an Insurer Default has occurred and is continuing) give
the Indenture Trustee notice in writing to such effect, following receipt of
which the Indenture Trustee will not make a distribution to the Servicer in
respect of such amount pursuant to Section 5.7, or if the Servicer prior thereto
has been reimbursed pursuant to Section 5.7, the Indenture Trustee will withhold
such amounts from amounts otherwise distributable to the Servicer on the next
succeeding Distribution Date. The Servicer will additionally be entitled to
receive from amounts on deposit in the Collection Account with respect to a
Collection Period any amounts paid by Obligors that were collected in the
Lockbox Account but that do not relate to (i) principal and interest payments
due on the Receivables and (ii) any fees or expenses related to extensions due
on the Receivables.
SECTION 5.4. Application of Collections. All collections for the
Collection Period will be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor (other than Supplemental
Servicing Fees with respect to such Receivable, to the extent collected) will be
applied to interest and principal in accordance with the Simple Interest Method.
38
All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder will be deposited in the Collection
Account and paid to the Servicer in accordance with Section 5.7(b).
SECTION 5.5. Spread Account.
(a) On or prior to the Closing Date, the Seller will deposit an amount
equal to the Spread Account Initial Deposit into the Spread Account from the
proceeds of the Notes. On each Distribution Date, to the extent of funds
available therefor pursuant to the priority of payments, amounts will be
deposited into the Spread Account in accordance with Section 5.7(b)(xii) until
the amount on deposit therein is equal to the Spread Account Requirement.
(b) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Spread Account Draw Amount then on the
related Distribution Date, the Indenture Trustee will withdraw such Spread
Account Draw Amount and deposit such amount into the Collection Account for
distribution in accordance with Section 5.7(b).
(c) After considering all required distributions made on a Distribution
Date, amounts on deposit in the Spread Account on that Distribution Date that
are in excess of the Spread Account Requirement for that Distribution Date will
be applied by the Indenture Trustee in accordance with Section 5.7(b)(x), then
5.7(b)(xiii) through (xv).
SECTION 5.6. Additional Deposits.
(a) The Servicer and Triad, as applicable, will deposit or cause to be
deposited in the Collection Account on the Determination Date on which such
obligations are due the aggregate Purchase Amount with respect to Purchased
Receivables.
(b) The proceeds of any purchase or sale of the assets of the Trust
described in Section 10.1 will be deposited in the Collection Account.
(c) If the Indenture Trustee receives any Additional Funds Available of
the type described in clause (2) of the definition thereof it will deposit them
into the Collection Account and on each Distribution Date it will transfer any
such funds to the Note Distribution Account.
SECTION 5.7. Distributions.
(a) [Reserved].
(b) On each Distribution Date, the Indenture Trustee will (based solely
on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date) distribute the following amounts from
Available Funds on deposit in the Collection Account unless otherwise specified,
to the extent of the sources of funds stated to be available therefor, and in
the following order of priority:
(i) to the Servicer, the Servicing Fee for the related Collection
Period, and, to the extent the Servicer has not reimbursed itself or to
the extent not retained by the
39
Servicer, other amounts relating to mistaken deposits, postings or
checks returned for insufficient funds, and to the extent available, any
amounts paid by the borrowers during the preceding Collection Period
that were collected in the Collection Account but that do not relate to
principal payments or interest payments;
(ii) to the Owner Trustee, the Indenture Trustee and the Backup
Servicer, the Owner Trustee Fee, the Indenture Trustee Fee, and any
accrued and unpaid servicer transition expenses of any incoming servicer
then due to the Indenture Trustee, the Backup Servicer or any other
successor servicer, up to a maximum amount of $200,000 in the aggregate;
(iii) to the Note Distribution Account, the Class A Noteholders'
Interest Distributable Amount;
(iv) to the Note Distribution Account, to make a payment of
principal on the Class A Notes to the extent necessary to reduce the
Class A Note principal balance to the Pool Balance;
(v) to the Note Distribution Account, to make a payment of the
remaining principal balance of any of the Class A Notes on their Final
Scheduled Distribution Date;
(vi) to the Insurer, any unpaid amounts owed to the Insurer under
the Insurance Agreement with respect to unpaid Premiums and unreimbursed
Policy Claim Amounts;
(vii) to the Note Distribution Account, to make a payment of
principal on the Class A Notes to the extent necessary to reduce the
combined Class A and Class B Note principal balance to the Pool Balance;
(viii) to the Note Distribution Account, the Class B Noteholders'
Interest Distributable Amount;
(ix) to the Note Distribution Account, to make a payment of the
remaining principal balance of any of the Class B Notes on their Final
Scheduled Distribution Date;
(x) to the Insurer, any other unpaid amounts owed to the Insurer
under the Insurance Agreement, subject to a cumulative maximum amount of
$250,000;
(xi) to the Note Distribution Account, to make a payment of the
Class A Noteholders' Principal Distributable Amount;
(xii) to the Spread Account, any amount required to increase the
amount in the Spread Account to the Spread Account Requirement;
(xiii) to the Insurer, any other unpaid amounts owed to the
Insurer under the Insurance Agreement;
40
(xiv) to the Note Distribution Account, to make a payment of the
Class A Noteholders' Accelerated Principal Amount; and
(xv) to the Note Distribution Account, to make a payment of
principal to the holders of the Class B Notes, or, if the Class B Notes
are no longer outstanding, to make a payment of all remaining amounts to
the Certificateholder.
(c) On each Distribution Date, the Indenture Trustee will (based solely
on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date, unless the Insurer has notified the
Indenture Trustee in writing of any errors or deficiencies with respect thereto)
distribute from the Collection Account the Additional Funds Available, if any,
plus the Policy Claim Amount, if any, in each case then on deposit in the
Collection Account, and deposit in the Note Distribution Account any excess of
the Scheduled Payments (as defined in the Note Policy) due on such Distribution
Date over the amount of all Available Funds previously deposited in the Note
Distribution Account with respect to the related Distribution Date, which amount
will be applied solely to the payment of amounts then due and unpaid on the
Class A Notes in accordance with the priorities set forth in Section 5.8(a).
(d) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Servicer will instruct and
cause such institution to make all deposits and distributions pursuant to
Sections 5.7(b) and 5.7(c) on the related Distribution Date.
SECTION 5.8. Note Distribution Account.
(a) On each Distribution Date (based solely on the information contained
in the Servicer's Certificate) the Indenture Trustee will distribute all amounts
on deposit in the Note Distribution Account to Noteholders in respect of the
Notes to the extent of amounts due and unpaid on the Notes for principal and
interest in the following amounts:
- From amounts transferred pursuant to Section 5.7(b)(iii),
accrued and unpaid interest on the Class A Notes; provided that if such
amount is insufficient to pay the entire amount of accrued and unpaid
interest then due on each Class of Class A Notes, the amount in the Note
Distribution Account will be applied to the payment of such interest on
each Class of Class A Notes pro rata on the basis of the amount of
accrued and unpaid interest due on each Class of Class A Notes.
- From amounts transferred pursuant to Section 5.7(b)(ix),
accrued and unpaid interest on the Class B Notes.
- From amounts transferred pursuant to Section 5.7(b)(iv), (v),
(vii) and (xi), in the following order of priority:
(1) to the holders of the Class A-1 Notes, the total amount
paid out on each Distribution Date until the outstanding
principal balance of the Class A-1 Notes has been reduced to
zero;
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(2) to the holders of the Class A-2 Notes, the total amount
paid out on each Distribution Date until the outstanding
principal balance of the Class A-2 Notes and Class A-2 Notes has
been reduced to zero;
(3) to the holders of the Class A-3 Notes, the total amount
paid out on each Distribution Date until the outstanding
principal balance of the Class A-3 Notes has been reduced to
zero; and
(4) to the holders of the Class A-4 Notes, the total amount
paid out on each Distribution Date until the outstanding
principal balance of the Class A-4 Notes is reduced to zero.
- From amounts transferred pursuant to section 5.7(b)(ix) and
(xv), to the holders of the Class B Notes, until the outstanding
principal balance of the Class B Notes is reduced to zero.
provided, that after the acceleration of the Notes following the occurrence of
an Event of Default under the Indenture, payments of principal on the Notes will
be made, instead of as provided above after payment of all amounts owing to the
Indenture Trustee pursuant to Section 6.7 of the Indenture, first to the Class
A-1 Notes until the Class A-1 Notes have been paid in full, second to the other
Classes of Class A Notes pro rata until they are paid in full, and third, to the
Class B Notes.
(b) On each Distribution Date, the Indenture Trustee will post on its
website at xxx.xxxxxxxx.xxx/xxxxxx, which posting will be accessible to each
Noteholder and to the Insurer, the statement provided to the Indenture Trustee
by the Servicer pursuant to Section 5.10 hereof on such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Noteholder, such tax will reduce the
amount otherwise distributable to the Noteholder in accordance with this Section
5.8. The Indenture Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Noteholders sufficient funds for the
payment of any tax attributable to the Trust (but such authorization will not
prevent the Indenture Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Noteholder will be treated as cash distributed to such Noteholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-US Noteholder), the
Indenture Trustee may in its sole discretion withhold such amounts in accordance
with this Section 5.8(c). In the event that a Noteholder wishes to apply for a
refund of any such withholding tax, the Indenture Trustee will reasonably
cooperate with such Noteholder in making such claim so long as such Noteholder
agrees to reimburse the Indenture Trustee for any out-of-pocket expenses
(including legal fees and expenses) incurred.
(d) Distributions required to be made to Noteholders on any Distribution
Date will be made to each Noteholder of record on the preceding Record Date
either by (i) wire transfer, in
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immediately available funds, to the account of such Holder at a bank or other
entity having appropriate facilities therefore, if such Noteholder has provided
to the Note Registrar appropriate written instructions at least five Business
Days prior to such Distribution Date and such Holder's Notes in the aggregate
evidence a denomination of not less than $1,000,000 or (ii) by check mailed to
such Noteholder at the address of such Holder appearing in the Note Register.
Notwithstanding the foregoing, the final distribution in respect of any Note
(whether on the Final Scheduled Distribution Date or otherwise) will be payable
only upon presentation and surrender of such Note at the office or agency
maintained for that purpose by the Note Registrar pursuant to Section 2.4 of the
Indenture.
(e) Subject to Section 5.1 and this Section 5.8, monies received by the
Indenture Trustee hereunder need not be segregated in any manner except to the
extent required by law and may be deposited under such general conditions as may
be prescribed by law, and the Indenture Trustee will not be liable for any
interest thereon.
SECTION 5.9. [Reserved].
SECTION 5.10. Statements to Noteholders.
(a) On or prior to each Distribution Date, the Indenture Trustee will
make available to each Noteholder and to the Insurer and the Rating Agencies a
statement setting forth at least the following information (which will be
included in the Servicer's Certificate delivered to the Indenture Trustee) as to
the Notes to the extent applicable:
(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on or
with respect to each Class of Notes;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Note
Policy;
(iv) the Pool Balance as of the close of business on the last day
of the preceding Collection Period;
(v) the aggregate outstanding principal amount of each Class of
the Notes and the Note Pool Factor for each such Class after giving
effect to payments allocated to principal reported under Section
5.10(a)(i);
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and/or due but unpaid with
respect to such Collection Period or prior Collection Periods, as the
case may be;
(vii) the Class A Noteholders' Interest Carryover Amount, the
Class B Noteholders' Interest Carryover Amount and the Class A
Noteholders' Principal Carryover Amount;
43
(viii) the Delinquency Rate (as such term is defined in the
Insurance Agreement) with respect to such Distribution Date;
(ix) the Net Loss Rate and Rolling Average Net Loss Rate (as such
terms are defined in the Insurance Agreement) with respect to such
Distribution Date;
(x) the aggregate Purchase Amounts for Receivables, if any, that
were repurchased by Triad prior to the related Determination Date; and
(xi) the Note Pool Factor for each Class of Notes.
Each amount set forth pursuant to Section 5.10(a)(i), (ii), (iii), (vi) and
(vii) will be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or Class thereof).
(b) The Indenture Trustee will make the statements referred to in
Section 5.10(a) (and, at its option, any additional files containing the same
information in an alternative format) available each month via the Indenture
Trustee's internet website, which is presently located at
xxx.xxxxxxxx.xxx/xxxxxx. Persons that are entitled to receive such statements
but are unable to use the above website are entitled to have a paper copy mailed
to them via first class mail by calling the Indenture Trustee at (000) 000-0000.
The Indenture Trustee will have the right to change the way the statements
referred to in Section 5.10(a) are distributed in order to make such
distribution more convenient and/or more accessible to the parties entitled to
receive such statements. The Indenture Trustee will provide notification of any
such change to all parties entitled to receive such statements in the manner
described in Section 12.3, Section 11.4 of the Indenture or Section 11.5 of the
Indenture, as appropriate.
SECTION 5.11. Optional Deposits by the Insurer. The Insurer will at any
time, and from time to time, with respect to a Distribution Date, have the
option (but will not be required, except in accordance with the terms of the
Note Policy) to deliver amounts to the Indenture Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Note Policy.
ARTICLE VI
The Note Policy
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date states that there is a Policy Claim Amount, the Indenture
Trustee will furnish to the Insurer no later than 12:00 noon Eastern time on the
Business Day after the related Determination Date a completed Notice (as
attached as a form to the Note Policy) specifying the amount of the Policy Claim
Amount, provided, that if such Notice is received after 12:00 noon, New York
City time, on such Business Day, it will be deemed to be received before 12:00
noon, New York City time, on the following Business Day. If any such Notice is
not in proper form or is otherwise
44
insufficient for the purpose of making a claim under the Note Policy, it will be
deemed not to have been received for purposes of making such claim, and the
Insurer will promptly so advise the Indenture Trustee in writing and the
Indenture Trustee may submit an amended or corrected Notice. If such an amended
or corrected Notice is in proper form and is otherwise sufficient for the
purpose of making a claim under the Note Policy, it will be deemed to have been
timely received on the Business Day of such resubmission; provided, that if such
notice is received after 12:00 noon, New York City time, it shall be deemed to
be received before 12:00 noon, New York City time, on the following Business
Day.
(b) Any notice delivered by the Indenture Trustee to the Insurer
pursuant to Section 6.1(a) will specify the Policy Claim Amount claimed under
the Note Policy and will constitute a "Notice" under the Note Policy. In
accordance with the provisions of the Note Policy, the Insurer is required to
pay to the Indenture Trustee the Policy Claim Amount properly claimed thereunder
by 11:00 A.M., New York City time, on the later of (i) the Distribution Date on
which the related Policy Claim Amount is due for payment under the Indenture or
(ii) the second Business Day following actual receipt in New York, New York on a
Business Day by the Insurer of a Notice, appropriately completed and executed by
the Indenture Trustee; provided, that if such Notice is received after 12:00
noon, New York City time, on such Business Day, it will be deemed to be received
before 12:00 noon, New York City time, on the following Business Day. The
Indenture Trustee will deposit amounts paid by the Insurer pursuant to a claim
submitted under this Section 6.1 into the Note Distribution Account for payment
to Holders (as defined in the Note Policy) on the related Distribution Date. Any
payment made by the Insurer under the Note Policy will be applied solely to the
payment of the Class A Notes, and for no other purpose. Amounts payable in
respect of any Policy Claim Amounts due under the Note Policy, unless otherwise
stated therein, will be distributed by the Insurer to, or at the direction of,
the Indenture Trustee, by wire transfer of immediately available funds. The
Insurer's payment obligations under the Note Policy with respect to particular
Policy Claim Amounts will be discharged to the extent funds equal to the
applicable Policy Claim Amounts are paid by the Insurer to, or at the direction
of, the Indenture Trustee in accordance with the Indenture Trustee's request,
whether or not such funds are properly applied by the Indenture Trustee. Payment
of Policy Claim Amounts will be made only at the time set forth in the Note
Policy, and no accelerated Insured Payments (as defined in the Note Policy) will
be made except to the extent that the Insurer has specified an earlier date for
payment at its sole option. The Note Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation (as defined in the Note Policy), other than at
the sole option of the Insurer, nor against any risk other than Nonpayment (as
defined in the Note Policy), including failure of the Indenture Trustee to remit
any Policy Claim Amounts or Scheduled Payments due to Holders. Notwithstanding
anything to the contrary set forth in the Note Policy, in no event will the
aggregate amount paid by the Insurer thereunder exceed the Maximum Insured
Amount (as defined in the Note Policy).
(c) The Indenture Trustee will (i) receive as attorney-in-fact of each
Holder any Policy Claim Amount from the Insurer and (ii) deposit the same in the
Note Distribution Account for distribution to Noteholders. Any and all Policy
Claim Amounts disbursed by the Indenture Trustee from claims made under the Note
Policy will not be considered payment by the Trust or from the Spread Account
with respect to such Class A Notes, and will not discharge the obligations of
the Trust with respect thereto. The Insurer will, upon any payment pursuant to
45
the Note Policy, in furtherance and not in limitation of its equitable right of
subrogation and its rights under the Insurance Agreement, to the extent it makes
any payment with respect to the Class A Notes, become subrogated to the rights
of any Holders to receive any and all amounts due in respect of the Insured
Obligations as to which such payment was made. The Insurer will be a
co-beneficiary of the Indenture Trustee's lien under the Indenture. Subject to
and conditioned upon any payment with respect to the Class A Notes by or on
behalf of the Insurer, the Indenture Trustee will assign to the Insurer all
rights to the payment of interest or principal with respect to the Notes which
are then due for payment to the extent of all payments made by the Insurer, and
the Insurer may exercise any option, vote, right, power or the like with respect
to the Notes to the extent that it has made payment pursuant to the Note Policy.
To evidence such subrogation, the Note Registrar will note the Insurer's rights
as subrogee upon the register of Holders. The foregoing subrogation will in all
cases be subject to the rights of the Holders to receive all Scheduled Payments
(as defined in the Note Policy) in respect of the Class A Notes.
(d) The Indenture Trustee will keep a complete and accurate record of
all funds deposited into the Note Distribution Account with respect to the Note
Policy and the allocation of such funds to payment of interest on and principal
paid in respect of any Class A Note. The Insurer will have the right to inspect
such records at reasonable times upon one Business Day's prior notice to the
Indenture Trustee.
(e) Only the Indenture Trustee on behalf of the Holders will entitled to
make a claim for an Insured Payment under the Note Policy. Notwithstanding any
other provision of this Agreement or any Basic Document, the Noteholders are not
entitled to institute proceedings directly against the Insurer.
SECTION 6.2. Preference Claims Under Note Policy.
(a) In the event that the Indenture Trustee has received a certified
copy of a final, nonappealable order of an appropriate court or other body
exercising jurisdiction that any interest on or principal of the Class A Notes
which has become due for payment under the Indenture, the nonpayment of which
would have been covered by the Note Policy, and which was made to a Holder by or
on behalf of the Issuer has been deemed a preferential transfer and recoverable,
or theretofore recovered, from such Holder pursuant to Title 11 of the United
States Code in accordance with an Order (as defined below) (such amount, a
"Preference Amount"), the Indenture Trustee will so notify the Insurer, will
comply with the provisions of the Note Policy to obtain payment by the Insurer
of such avoided payment, and will, at the time it provides notice to the
Insurer, notify Holders by mail that, in the event that any Holder's payment is
so recoverable, such Holder will be entitled to payment pursuant to the terms of
the Note Policy. The Insurer will pay any Preference Amount when due to be paid
pursuant to an Order (as defined below), but in any event no earlier than the
fifth Business Day following actual receipt by the Insurer of (i) a certified
copy of a final, nonappealable order of a court or other body exercising
jurisdiction to the effect that a Holder is required to return such Preference
Amount paid during the term of the Note Policy because the payments of such
amounts were avoided as a preferential transfer or otherwise rescinded or
required to be restored by the Indenture Trustee or such Holder (the "Order"),
(ii) an opinion of counsel satisfactory to the Insurer that the Order has been
entered and is final and not subject to any stay, (iii) an assignment, in form
and substance satisfactory to the Insurer, duly executed and delivered by such
Holder and the Indenture
46
Trustee, irrevocably assigning to the Insurer all rights and claims of the
Indenture Trustee and such Holder relating to or arising under the Indenture or
otherwise with respect to such Preference Amount, (iv) appropriate instruments
in form satisfactory to the Insurer to effect the appointment of the Insurer as
agent for such Holder in any legal proceeding related to such Preference Amount,
and (v) a Notice appropriately completed and executed by the Indenture Trustee
in the form attached as Exhibit B to the Note Policy; provided, that (I) if such
documents are received by the Insurer after 12:00 noon, New York City time, on
such Business Day, they will be deemed to be received before 12:00 noon, New
York City time, on the following Business Day and (II) the Insurer will not be
obligated to pay any Preference Amount in respect of principal (other than the
Class A Noteholders' Remaining Parity Deficit Amount) prior to the Final
Scheduled Distribution Date for the relevant class of Class A Notes. Such
payment will be disbursed to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order, and not to the Indenture Trustee or
the Holder directly, unless the Indenture Trustee or the relevant Holder has
made a payment of the Preference Amount to the court or such receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case the Insurer will pay the Indenture Trustee, or as directed by the
Indenture Trustee, to the extent of the payment of the Preference Amount,
subject to the delivery of (a) the items referred to in clauses (i), (ii),
(iii), (iv) and (v) above to the Insurer and (b) evidence satisfactory to the
Insurer that payment has been made to such court or receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order; provided,
further, that any Preference Amount that constitutes interest will be limited to
the amount of interest on the outstanding principal amount of the Class A Notes
(calculated at the Interest Rate for the relevant class of Class A Notes)
accrued as of the last day of the applicable interest accrual period with
respect to the Class A Notes and will not, in any event, include any interest on
the Class A Notes accrued after such date or any interest on such interest
amount; provided, further, that in no event will the Insurer be obligated to
make any payment (i) in respect to any Preference Amount to the extent that such
payment, when added to all prior payments of Policy Claim Amounts, would exceed
the Maximum Insured Amount (as defined in the Note Policy) or (ii) prior to the
time the Insurer would have been required to make an Insured Payment pursuant to
Section 3 of the Policy.
(b) The Indenture Trustee will promptly notify the Insurer of any
proceeding or the institution of any action (of which a Responsible Officer of
the Indenture Trustee has actual knowledge) seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "Note Preference Claim") of any payment made to
a Holder that has been deemed a preferential transfer and recoverable, or
theretofore recovered, from such Holder pursuant to Title 11 of United States
Code in accordance with an Order. Each Holder, by its purchase of Class A Notes,
and the Indenture Trustee hereby agree that so long as no Insurer Default has
occurred and is continuing, the Insurer may at any time during the continuation
of any proceeding relating to a Note Preference Claim direct all matters
relating to such Note Preference Claim, including (i) the direction of any
appeal of any order relating to any Note Preference Claim and (ii) the posting
of any surety, supersedeas or performance bond pending any such appeal at the
expense of the Insurer, but subject to reimbursement as provided in the
Insurance Agreement. In addition, and without limitation of the foregoing, as
set forth in Section 6.1(c), the Insurer will be subrogated to, and each Holder
and the Indenture Trustee hereby delegate and assign, to the fullest extent
permitted by law, the rights of the trustee and each Holder in the conduct of
any proceeding with respect to
47
a Note Preference Claim, including all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Note Preference Claim.
SECTION 6.3. Surrender of Note Policy. The Indenture Trustee will
surrender the Note Policy to the Insurer for cancellation upon the expiration of
such policy in accordance with the terms thereof.
ARTICLE VII
The Seller
SECTION 7.1. Representations of Seller. The Seller makes the following
representations on which the Insurer will be deemed to have relied in executing
and delivering the Note Policy and on which the Issuer is deemed to have relied
in acquiring the Receivables and on which the Indenture Trustee and Backup
Servicer may rely. The representations are true and correct as of the execution
and delivery of this Agreement and as of the Closing Date, in the case of
Receivables, and will survive the sale of the Receivables to the Issuer and the
pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a limited liability company in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the Receivables
and the Other Conveyed Property transferred to the Trust.
(b) Due Qualification. The Seller is duly qualified to do business as a
foreign limited liability company in good standing and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect the Seller's ability to transfer the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, or the validity or enforceability of the Receivables and the Other
Conveyed Property or to perform the Seller's obligations hereunder and under the
Basic Documents to which it is a party.
(c) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and the Basic Documents and to carry out its
terms and their terms, respectively; the Seller has full power and authority to
sell and assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Trust by it and has duly authorized such sale
and assignment to the Trust by all necessary action; and the execution, delivery
and performance of this Agreement and the Basic Documents to which it is a party
have been duly authorized by the Seller by all necessary action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers from
the Seller; and this Agreement and the Basic Documents to which it is a party,
when duly executed and delivered, will constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their respective terms,
except as
48
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Basic Documents and the fulfillment of the terms of this
Agreement and the Basic Documents will not conflict with, result in any breach
of any of the terms and provisions of or constitute (with or without notice,
lapse of time or both) a default under the limited liability company agreement
or operating agreement of the Seller, or any indenture, agreement, mortgage,
deed of trust or other instrument to which the Seller is a party or by which it
is bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than this Agreement, or violate any
law, order, rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Seller's knowledge, threatened against the Seller, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Agreement or any of the Basic Documents, (B)
seeking to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or any of the Basic Documents,
or (C) seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement or any of the Basic Documents.
(g) True Sale. The Receivables are being transferred with the intention
of removing them from the Seller's estate pursuant to Section 541 of the
Bankruptcy Code, as the same may be amended from time to time.
SECTION 7.2. Organizational Existence. During the term of this
Agreement, the Seller will keep in full force and effect its existence, rights
and franchises as a limited liability company under the laws of Delaware and
will obtain and preserve its qualification to do business in each jurisdiction
in which such qualification is or will be necessary to protect the validity and
enforceability of this Agreement, the Basic Documents and each other instrument
or agreement necessary or appropriate to the proper administration of this
Agreement and the transactions contemplated hereby.
SECTION 7.3. Liability of Seller. The Seller will be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
SECTION 7.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller will be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the
49
Seller under this Agreement, will be the successor to the Seller hereunder
without the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that the Seller will have
delivered to the Owner Trustee, the Backup Servicer, the Indenture Trustee and
the Insurer an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the the Issuer and the Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings or (B) no such
action will be necessary to preserve and protect such interest.
SECTION 7.5. Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller will not be under any obligation to appear
in, prosecute or defend any legal action that will not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 7.6. Ownership of the Certificates or Notes. The Seller may in
its individual or any other capacity become the owner or pledgee of Certificates
or Notes with the same rights as it would have if it were not the Seller, except
as expressly provided herein or in any Basic Document. Notes or Certificates so
owned by the Seller will have an equal and proportionate benefit under the
provisions of the Basic Documents, without preference, priority, or distinction
as among all of the Notes or Certificates. The Seller intends to convey the
Certificates to the Seller. The Seller will notify the Owner Trustee, the
Indenture Trustee and the Insurer with respect to any other transfer of any
Certificate.
ARTICLE VIII
The Servicer
SECTION 8.1. Representations of Servicer. The Servicer makes the
following representations on which the Insurer is deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables. The representations are true and
correct as of the execution and delivery of this Agreement and as of the Closing
Date, in the case of the Receivables, and will survive the sale of the
Receivables to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(i) Representations and Warranties. The representations and
warranties set forth on the Schedule of Representations attached hereto
as Schedule B are true and correct;
(ii) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
California, with power, authority and legal right to own its properties
and to conduct its business as such properties are currently owned and
such business is currently conducted, and had at all
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relevant times, and now has, power, authority and legal right to enter
into and perform its obligations under the Basic Documents;
(iii) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business of
servicing the Receivables as required by this Agreement requires or will
require such qualification;
(iv) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and the Basic Documents
and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Basic
Documents have been duly authorized by the Servicer by all necessary
corporate action;
(v) Binding Obligation. This Agreement and the Basic Documents
constitute legal, valid and binding obligations of the Servicer
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(vi) No Violation. The consummation of the transactions
contemplated by this Agreement and the Basic Documents, and the
fulfillment of the terms of this Agreement and the Basic Documents, will
not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Servicer,
or any indenture, agreement, mortgage, deed of trust or other instrument
to which the Servicer is a party or by which it is bound, or result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed
of trust or other instrument, other than this Agreement, or violate any
law, order, rule or regulation applicable to the Servicer of any court
or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Servicer
or any of its properties;
(vii) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties (A) asserting the invalidity of this
Agreement or any of the Basic Documents, (B) seeking to prevent the
issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
Documents, or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of
the Securities;
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(viii) No Consents. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement which has not
already been obtained.
SECTION 8.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) will be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Servicer and the representations made by the Servicer.
(b) The Servicer will defend, indemnify and hold harmless the Trust, the
Seller, the Indenture Trustee, the Owner Trustee, the Backup Servicer, the
Insurer, their respective officers, directors, agents and employees, and the
Noteholders from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation (i) arising out of or resulting from the use, ownership
or operation by the Servicer or any Affiliate thereof of any Financed Vehicle or
(ii) to the extent that such cost, expense, loss, claim, damage, or liability
arose out of, or was imposed upon the Trust, the Indenture Trustee, the Seller,
the Owner Trustee, the Backup Servicer, the Insurer or the Noteholders by reason
of the breach of this Agreement by the Servicer, the negligence (other than
errors in judgment), misfeasance, or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(c) Indemnification under this Section 8.2 will include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Section 8.2 and
the recipient thereafter collects any of such amounts from others, the recipient
will promptly repay such amounts collected to the Servicer, without interest.
(d) The Servicer will pay, reimburse and indemnify the Indenture Trustee
and the Backup Servicer in accordance with Section 6.7 of the Indenture.
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer or Backup Servicer.
(a) The Servicer will not merge or consolidate with any other person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to the Servicer's
business unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity will be capable of fulfilling the
duties of the Servicer contained in this Agreement and, subject to Section 4.6
of the Insurance Agreement, will be acceptable to the Controlling Party, and, if
an Insurer Default has occurred or is continuing, will be an Eligible Servicer.
Any corporation (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer will be a
party, (iii) which acquires by conveyance, transfer, or lease substantially all
of the assets of the Servicer, or (iv) succeeding to the business of the
Servicer, in
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any of the foregoing cases will execute an agreement of assumption to perform
every obligation of the Servicer under this Agreement and, whether or not such
assumption agreement is executed, will be the successor to the Servicer under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; provided, however, that nothing contained
herein will be deemed to release the Servicer from any obligation. The Servicer
will provide notice of any merger, consolidation or succession pursuant to this
Section 8.3 to the Owner Trustee, the Seller, the Indenture Trustee, the
Noteholders, the Insurer and each Rating Agency. Notwithstanding the foregoing,
the Servicer will not merge or consolidate with any other Person or permit any
other Person to become a successor to the Servicer's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 4.6 will have been breached (for purposes
hereof, such representations and warranties will be true and correct as of the
date of the consummation of such transaction) and no Servicer Termination Event
has occurred and is continuing other than in connection with a change in control
as provided in the Insurance Agreement, (y) the Servicer will have delivered to
the Owner Trustee, the Indenture Trustee, Backup Servicer and Collateral Agent,
the Rating Agencies and the Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 8.3 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) the Servicer will have delivered to the Owner
Trustee, the Indenture Trustee, the Rating Agencies and the Insurer an Opinion
of Counsel, stating in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary to preserve and protect the interest of the Trust
in the Receivables and the Other Conveyed Property and reciting the details of
the filings or (B) no such action will be necessary to preserve and protect such
interest.
(b) Any corporation (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer will be a party, (iii) which acquires by conveyance, transfer or
lease substantially all of the assets of the Backup Servicer, or (iv) succeeding
to the business of the Backup Servicer, in any of the foregoing cases will
execute an agreement of assumption to perform every obligation of the Backup
Servicer under this Agreement and, whether or not such assumption agreement is
executed, will be the successor to the Backup Servicer under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein will be deemed
to release the Backup Servicer from any obligation.
SECTION 8.4. Limitation on Liability of Servicer, Backup Servicer and
Others.
(a) Neither the Servicer, the Backup Servicer nor any of the directors
or officers or employees or agents of the Servicer or Backup Servicer will be
liable to the Trust or the Noteholders, except as provided in this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement; provided, however, that this provision will not protect the
Servicer, the Backup Servicer or any such person against any liability that
would otherwise be imposed by reason of a breach of this Agreement or willful
misfeasance, bad faith or negligence (excluding errors in judgment) in the
performance of duties; provided further that
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this provision will not affect any liability of Triad to indemnify the Indenture
Trustee and the Owner Trustee for costs, taxes, expenses, claims, liabilities,
losses or damages paid by the Indenture Trustee and the Owner Trustee, in their
individual capacities pursuant to the Purchase Agreement. The Servicer, the
Backup Servicer and any director, officer, employee or agent of the Servicer or
Backup Servicer may rely in good faith on the written advice of counsel or on
any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising under this Agreement.
(b) The Backup Servicer will not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer file, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Owner Trustee, the Indenture Trustee,
the Backup Servicer, the Seller and the Insurer and the Noteholders will look
only to the Servicer to perform such obligations. The Backup Servicer, the
Indenture Trustee, the Owner Trustee and the Custodian will have no
responsibility and will not be in default hereunder or incur any liability for
any failure, error, malfunction or any delay in carrying out any of their
respective duties under this Agreement if such failure or delay results from the
Backup Servicer acting in accordance with information prepared or supplied by a
Person other than the Backup Servicer (or contractual agents) or the failure of
any such other Person to prepare or provide such information. The Backup
Servicer will have no responsibility, will not be in default and will incur no
liability for (i) any act or failure to act of any third party (other than its
contractual agents), including the Servicer or the Controlling Party, (ii) any
inaccuracy or omission in a notice or communication received by the Backup
Servicer from any third party (other than its contractual agents), (iii) the
invalidity or unenforceability of any Receivable under applicable law, (iv) the
breach or inaccuracy of any representation or warranty made with respect to any
Receivable, or (v) the acts or omissions of any successor Backup Servicer. The
provisions of this Section 8.4(b) will not limit the Backup Servicer's
obligations pursuant to Section 4.13.
(c) The parties expressly acknowledge and consent to JPMorgan Chase Bank
acting in the possible dual capacity of Backup Servicer or successor Servicer
and in the capacity as Indenture Trustee. JPMorgan Chase Bank may, in such dual
or other capacity, discharge its separate functions fully, without hindrance or
regard to conflict of interest principles, duty of loyalty principles or other
breach of fiduciary duties to the extent that any such conflict or breach arises
from the performance by JPMorgan Chase Bank of express duties set forth in the
this Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto and the
Noteholders except in the case of gross negligence and willful misconduct by
JPMorgan Chase Bank.
SECTION 8.5. Delegation of Duties. The Servicer may delegate duties
under this Agreement to an Affiliate of Triad with the prior written consent of
the Insurer (unless an Insurer Default has occurred and is continuing). The
Servicer also may at any time perform through sub-contractors the specific
duties of (i) repossession of Financed Vehicles, (ii) tracking Financed
Vehicles' Lien Certificates and (iii) pursuing the collection of deficiency
balances or other amounts due on certain Liquidated Receivables, in each case,
without the consent of the Insurer and may perform other specific collection and
repossession duties through such sub-contractors in accordance with Servicer's
customary servicing policies and procedures; provided,
54
however, that no such delegation or sub-contracting of duties by the Servicer
will relieve the Servicer of its responsibility with respect to such duties. So
long as no Insurer Default has occurred and is continuing neither Triad nor any
party acting as Servicer hereunder will appoint any subservicer hereunder
without the prior written consent of the Insurer.
SECTION 8.6. Servicer and Backup Servicer Not to Resign. Subject to
Section 8.3, neither the Servicer nor the Backup Servicer may resign from the
obligations and duties imposed on it by this Agreement as Servicer or Backup
Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer or the Backup Servicer, as the case may
be, and the Insurer (so long as an Insurer Default has not occurred) or the
Majority Noteholders (if an Insurer Default has occurred and is continuing) does
not elect to waive the obligations of the Servicer or the Backup Servicer, as
the case may be, to perform the duties which render it legally unable to act or
to delegate those duties to another Person. Any such determination permitting
the resignation of the Servicer or Backup Servicer will be evidenced by an
Opinion of Counsel to such effect delivered and acceptable to the Indenture
Trustee, the Owner Trustee and the Insurer (unless an Insurer Default has
occurred and is continuing). No resignation of the Servicer will become
effective until, so long as no Insurer Default has occurred and is continuing,
the Backup Servicer or an entity acceptable to the Insurer has assumed the
responsibilities and obligations of the Servicer or, if an Insurer Default has
occurred and is continuing, the Backup Servicer or a successor Servicer that is
an Eligible Servicer has assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup Servicer will become effective until, so
long as no Insurer Default has occurred and is continuing, an entity acceptable
to the Insurer has assumed the responsibilities and obligations of the Backup
Servicer or, if an Insurer Default has occurred and is continuing, a Person that
is an Eligible Servicer has assumed the responsibilities and obligations of the
Backup Servicer; provided, however, that (i) in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 8.6, the Backup Servicer may petition a court for its removal, (ii)
the Backup Servicer may resign with the written consent of the Insurer and (iii)
notwithstanding anything to the contrary, if JPMorgan Chase Bank resigns or is
removed as the Indenture Trustee under the Indenture it will no longer be the
Backup Servicer.
ARTICLE IX
Default
SECTION 9.1. Servicer Termination Event. For purposes of this Agreement,
each of the following will constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Indenture Trustee for
distribution to Noteholders any proceeds or payment required to be so delivered
under this Agreement that continues unremedied for a period of two Business Days
(one Business Day with respect to payment of Purchase Amounts) after written
notice is received by the Servicer from the
55
Indenture Trustee or (unless an Insurer Default has occurred and is continuing)
the Insurer or after discovery of such failure by a Responsible Officer of the
Servicer;
(b) Failure by the Servicer to deliver the Servicer's Certificate by the
Determination Date;
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or, if
the Servicer is Triad, failure of Triad duly to perform any other covenants or
agreements of Triad set forth in the Purchase Agreement which failure (i)
materially and adversely affects the rights of Noteholders (determined without
regard to the availability of funds under the Note Policy), or of the Insurer
(unless an Insurer Default has occurred and is continuing), and (ii) continues
unremedied for a period of 30 days after the date on which written notice of
such failure, requiring the same to be remedied, has been given to the Servicer
by the Indenture Trustee, the Issuer or the Insurer (or, if an Insurer Default
has occurred and is continuing, by any Noteholder);
(d) An Insolvency Event has occurred with respect to the Servicer;
(e) Any representation, warranty or statement of the Servicer made in
this Agreement or any certificate, report or other writing delivered pursuant
hereto will prove to be incorrect in any material respect as of the time when
the same will have been made, and the incorrectness of such representation,
warranty or statement has a material adverse effect on the Trust, the Insurer or
the Noteholders' interests and, within 30 days after knowledge thereof by the
Servicer or after written notice thereof will have been given to the Servicer by
the Indenture Trustee or the Insurer (or, if an Insurer Default has occurred and
is continuing, a Noteholder), the circumstances or conditions in respect of
which such representation, warranty or statement was incorrect will not have
been eliminated or otherwise cured;
(f) So long as no Insurer Default has occurred and is continuing, an
Insurance Agreement Event of Default occurs;
(g) A claim is made under the Note Policy to make a payment under
Section 5.7(b)(iv); or
(h) the occurrence of a Trigger Event under the Insurance Agreement.
SECTION 9.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event has occurred and is continuing, the Insurer (or, if an Insurer
Default has occurred and is continuing, either the Indenture Trustee (to the
extent it has knowledge thereof) or the Majority Noteholders), by notice given
in writing to the Servicer (and to the Indenture Trustee if given by the Insurer
or the Noteholders) may terminate all of the rights and obligations of the
Servicer under this Agreement; provided that if no Insurer Default has occurred
and is continuing, neither the Indenture Trustee nor the Majority Noteholders
may deliver such notice, and termination will be in the Insurer's sole and
absolute discretion. On or after the receipt by the Servicer of such written
notice or upon termination of the term of the Servicer, all authority, power,
obligations and responsibilities of the Servicer under this Agreement, whether
with respect to the Notes, the Certificates or the Other Conveyed Property or
otherwise, automatically will pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or
56
such other successor Servicer appointed by the Controlling Party); provided,
however, that the successor Servicer will have no liability with respect to any
obligation which was required to be performed by the terminated Servicer prior
to the date that the successor Servicer becomes the Servicer or any claim of a
third party based on any alleged action or inaction of the terminated Servicer.
The successor Servicer is authorized and empowered by this Agreement to execute
and deliver, on behalf of the terminated Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivables and the Other Conveyed Property and related documents to show the
Trust as lienholder or secured party on the related Lien Certificates, or
otherwise. The terminated Servicer agrees to cooperate with the successor
Servicer in effecting the termination of the responsibilities and rights of the
terminated Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that will at the
time be held by the terminated Servicer for deposit, or have been deposited by
the terminated Servicer, in the Collection Account or thereafter received with
respect to the Receivables and the delivery to the successor Servicer of all
Receivable Files, Monthly Records and Collection Records and a computer tape in
readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer to service the Receivables and the
Other Conveyed Property. If requested by the Controlling Party, the successor
Servicer will terminate the Lockbox Agreement and direct the Obligors to make
all payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer will process such payments in accordance with
Section 4.2(e)), or to a lockbox established by the successor Servicer at the
direction of the Controlling Party, at the successor Servicer's expense. The
terminated Servicer will grant the Indenture Trustee, the successor Servicer and
the Controlling Party reasonable access to the terminated Servicer's premises at
the terminated Servicer's expense.
SECTION 9.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 9.2, or upon the resignation of the Servicer pursuant to
Section 8.6, the Backup Servicer (unless the Controlling Party will have
exercised its option pursuant to Section 9.3(b) to appoint an alternate
successor Servicer) will be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and will be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Servicer by the terms and provisions of this
Agreement except as otherwise stated herein. The Indenture Trustee and such
successor will take such action, consistent with this Agreement, as will be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it will be subject to termination under Section 9.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint
as Backup Servicer or as successor to the Servicer a Person other than the
Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Note Policy) will have no liability to the Indenture
Trustee, Triad, the Seller, the Person then serving as Backup Servicer, any
Noteholders or any other Person if it does so. Notwithstanding the above, if the
Backup Servicer will be legally unable or unwilling to act as Servicer, and an
Insurer Default has
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occurred and is continuing, the Backup Servicer, the Indenture Trustee or the
Majority Noteholders may petition a court of competent jurisdiction to appoint
any Eligible Servicer as the successor to the Servicer. Pending appointment
pursuant to the preceding sentence, the Backup Servicer, subject to Section
8.6(iii), will act as successor Servicer unless it is legally unable to do so,
in which event the outgoing Servicer will continue to act as Servicer until a
successor has been appointed and accepted such appointment. Subject to Section
8.6, no provision of this Agreement will be construed as relieving the Backup
Servicer of its obligation to succeed as successor Servicer upon the termination
of the Servicer pursuant to Section 9.2 or the resignation of the Servicer
pursuant to Section 8.6. If upon the termination of the Servicer pursuant to
Section 9.2 or the resignation of the Servicer pursuant to Section 8.6, the
Controlling Party appoints a successor Servicer other than the Backup Servicer,
the Backup Servicer will not be relieved of its duties as Backup Servicer
hereunder.
(c) Any successor Servicer will be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under this Agreement if the Servicer had not
resigned or been terminated hereunder. The Insurer, if the Class A Notes are
outstanding and no Insurer Default has occurred and is continuing, and such
successor Servicer may agree on additional compensation to be paid to such
successor Servicer, which additional compensation will be payable as provided
herein and will in no event exceed $150,000 in the aggregate. The Backup
Servicer will not be liable for any Servicing Fee, additional compensation or
other amounts to be paid to such successor Servicer in connection with its
assumption and performance of the servicing duties described herein.
SECTION 9.4. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer, the Indenture Trustee will give
prompt written notice thereof to each Noteholder and to the Rating Agencies.
SECTION 9.5. Waiver of Past Defaults. So long as no Insurer Default has
occurred and is continuing, the Insurer (or, if an Insurer Default has occurred
and is continuing, the Majority Noteholders) may, on behalf of all Noteholders,
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any such waiver of a past default, such
default will cease to exist, and any Servicer Termination Event arising
therefrom will be deemed to have been remedied for every purpose of this
Agreement. No such waiver will extend to any subsequent or other default or
impair any right consequent thereto.
ARTICLE X
Termination
SECTION 10.1. Optional Purchase of All Receivables.
(a) On the last day of any Collection Period as of which the Pool
Balance will be less than or equal to 10% of the Original Pool Balance, the
Servicer will have the option to purchase the Owner Trust Estate, other than the
Trust Accounts (with the consent of the Insurer if such purchase would result in
a claim on the Note Policy or would result in any amount owing to the Insurer
under the Insurance Agreement remaining unpaid); provided, however, that the
amount
58
to be paid for such purchase (as set forth in the following sentence) will be
sufficient to pay the full amount of principal, premium, if any, interest then
due and payable on the Notes. To exercise such option, the Servicer will deposit
pursuant to Section 5.6 in the Collection Account an amount equal to the
aggregate Purchase Amount for the Receivables (including Liquidated
Receivables), plus the appraised value of any other property held by the Trust,
such value to be determined by an appraiser mutually agreed upon by the
Servicer, the Insurer and the Indenture Trustee, and will succeed to all
interests in and to the Trust.
(b) Upon any sale of the assets of the Trust pursuant to Section 8.1 of
the Trust Agreement, the Servicer will instruct the Indenture Trustee to deposit
the proceeds from such sale after all payments and reserves therefrom (including
the expenses of such sale) have been made (the "Insolvency Proceeds") in the
Collection Account.
(c) Notice of any termination of the Trust will be given by the Servicer
to the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Insurer
and the Rating Agencies as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Trust will succeed to the rights of, and assume the obligations of, the
Indenture Trustee pursuant to this Agreement.
ARTICLE XI
Administrative Duties of the Servicer
SECTION 11.1. Administrative Duties.
(a) Duties with Respect to the Basic Documents. The Servicer will
perform all its duties and the duties of the Issuer under the Basic Documents.
In addition, the Servicer will consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Basic Documents.
The Servicer will monitor the performance of the Issuer and will advise the
Owner Trustee when action is necessary to comply with the Issuer's duties under
the Basic Documents. The Servicer will prepare for execution by the Issuer or
will cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it will be the duty
of the Issuer to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Servicer will take all necessary action that
is the duty of the Issuer to take pursuant to the Indenture, including pursuant
to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 7.3, 8.3, 9.2, 9.3,
11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer will perform such
calculations and will prepare for execution by the Issuer or the Owner
Trustee or will cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and
opinions as it will be the duty of the Issuer or the Owner Trustee to
prepare, file or
59
deliver pursuant to this Agreement or any of the Basic Documents or
under state and federal tax and securities laws, and at the request of
the Owner Trustee will take all appropriate action that it is the duty
of the Issuer to take pursuant to this Agreement or any of the Basic
Documents. In accordance with the directions of the Issuer or the Owner
Trustee, the Servicer will administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or the
Owner Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer will be responsible for
promptly notifying the Owner Trustee and the Indenture Trustee in the
event that any withholding tax is imposed on the Issuer's payments (or
allocations of income) to an Owner (as defined in the Trust Agreement)
as contemplated this Agreement. Any such notice will be in writing and
specify the amount of any withholding tax required to be withheld by the
Owner Trustee or the Indenture Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer will be responsible for
performance of the duties of the Issuer set forth in Section 5.1(a) and
(b) of the Trust Agreement with respect to, among other things,
accounting and reports to Owners (as defined in the Trust Agreement);
provided, however, that once prepared by the Servicer the Owner Trustee
will retain responsibility for the distribution of the Schedule K-1s
upon request of the Certificateholder in order to enable the
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer will perform the duties of the Servicer
specified in Section 9.2 of the Trust Agreement required to be performed
in connection with the resignation or removal of the Owner Trustee, and
any other duties expressly required to be performed by the Servicer
under this Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
will be in accordance with any directions received from the Issuer and
will be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
(c) Tax Matters. The Servicer will prepare and file, on behalf of the
Trust, all tax returns, tax elections, financial statements and such annual or
other reports attributable to the activities engaged in by the Issuer as are
necessary for preparation of tax reports, including forms 1099. All tax returns
will be signed by the Servicer unless applicable law requires a
Certificateholder to sign such documents.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer will not
take any action pursuant to this Article XI unless within a reasonable time
before the taking of such action, the Servicer will have notified the Owner
Trustee and the Indenture Trustee of the proposed action and the Owner Trustee
and, with respect to items (A), (B), (C) and (D) below, the Indenture Trustee
and, so long
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as no Insurer Default has occurred and is continuing, the Insurer will not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables);
(C) the amendment, change or modification of this Agreement
or any of the Basic Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent
to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(e) Exceptions. Except as expressly set forth herein, the Servicer, in
its capacity hereunder, will not be obligated to, and will not, (1) make any
payments to the Noteholders or Certificateholders under the Basic Documents, (2)
sell the Trust Estate pursuant to Section 5.5 of the Indenture, (3) take any
other action that the Issuer directs the Servicer not to take on its behalf or
(4) in connection with its duties hereunder assume any indemnification
obligation of any other Person.
(f) The Backup Servicer or any successor Servicer will not be
responsible for any obligations or duties of the Servicer under this Section
11.1.
SECTION 11.2. Records. The Servicer will maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records will be accessible for inspection by the Issuer at
any time during normal business hours upon reasonable prior notice.
SECTION 11.3. Additional Information to be Furnished to the Issuer. The
Servicer will furnish to the Issuer and, so long as no Insurer Default has
occurred and is continuing, the Insurer, from time to time such additional
information regarding the Collateral as the Issuer and, so long as no Insurer
Default has occurred and is continuing, the Insurer, will reasonably request.
ARTICLE XII
Miscellaneous Provisions
SECTION 12.1. Amendment.
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(a) This Agreement may be amended from time to time by the parties
hereto, with the consent of the Indenture Trustee (which consent may not be
unreasonably withheld), with the prior written consent of the Insurer (which
consent will not be unreasonably withheld; provided that no Insurer Default has
occurred and is continuing) but without the consent of any of the Noteholders,
to cure any ambiguity, to correct or supplement any provisions in this
Agreement, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which will not be inconsistent with the provisions of this Agreement and the
Insurance Agreement; provided, however, that such action will not, as evidenced
by an Opinion of Counsel delivered to Owner Trustee and the Indenture Trustee,
adversely affect in any material respect the interests of any Noteholder;
provided further that if an Insurer Default has occurred and is continuing, such
action will not materially adversely affect the interests of the Insurer.
(b) This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Insurer, the consent of the Indenture Trustee,
and with the consent of the Holders of Notes evidencing not less than a majority
of the outstanding principal amount of the Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment will (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that will be required to be made for
the benefit of the Noteholders or (b) reduce the aforesaid percentage of the
outstanding principal amount of the Notes, the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes of each class affected thereby; provided, further, that if an
Insurer Default has occurred and is continuing, such action will not materially
adversely affect the interest of the Insurer.
(c) Promptly after the execution of any such amendment or consent, the
Indenture Trustee will furnish written notification of the substance of such
amendment or consent to each Noteholder and the Rating Agencies.
(d) It will not be necessary for the consent of Noteholders pursuant to
this Section 12.1 to approve the particular form of any proposed amendment or
consent, but it will be sufficient if such consent will approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Agreement) and of evidencing the authorization
of any action by Noteholders will be subject to such reasonable requirements as
the Indenture Trustee or the Owner Trustee, as applicable, may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee, the Indenture Trustee, the Insurer and Backup Servicer will be entitled
to receive and conclusively rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and the
Opinion of Counsel referred to in Section 12.2(h)(1) has been delivered. The
Owner Trustee, the Backup Servicer and the Indenture Trustee may, but will not
be obligated to, enter into any such amendment which affects the Issuer's, the
Owner Trustee's, the Backup Servicer's or the Indenture Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
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SECTION 12.2. Protection of Title to Trust.
(a) Triad will cause to be executed and filed such financing statements
and continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Indenture Trustee in the Receivables and in the
proceeds thereof. Triad will deliver (or cause to be delivered) to the Insurer,
the Owner Trustee and the Indenture Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller nor the Servicer will change its name, identity,
corporate structure or jurisdiction of formation or take any action that would,
could or might make any financing statement or continuation statement filed in
accordance with Section 12.2(a) ineffective to continue the first priority
perfected security interest in that portion of the trust estate in which a
security interest may be perfected by filing under the applicable Uniform
Commercial Code. If any refiling is required, the Seller or Servicer, as the
case may be, will promptly give notice and file new financing statements or
amendments thereto or continuation statements thereof. Promptly upon such
filing, the Seller or the Servicer, as the case may be, will deliver an Opinion
of Counsel in form and substance reasonably satisfactory to the Insurer, stating
either (A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the interest
of the Trust and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) no such action will be necessary to preserve and
protect such interest.
(c) The Servicer will at all times maintain each office from which it
will service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer will maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer will maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Issuer,
the Servicer's master computer records (including any backup archives) that
refer to a Receivable will indicate clearly the interest of the Trust in such
Receivable and that such Receivable is owned by the Trust. Indication of the
Trust's interest in a Receivable will be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable will
have been paid in full or repurchased.
(f) If at any time the Servicer proposes to sell, grant a security
interest in or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, the Servicer will give to
such prospective purchaser, lender or other transferee computer tapes, records
or printouts (including any restored from backup archives) that, if they
63
refer in any manner whatsoever to any Receivable, indicate clearly that such
Receivable has been sold and is owned by the Trust.
(g) Upon request, the Servicer will furnish to the Insurer, the Owner
Trustee or to the Indenture Trustee, within five Business Days, a list of all
Receivables (by contract number and name of Obligor) then held as part of the
Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.
(h) The Servicer will deliver to the Insurer, the Owner Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of the
Agreement and, if required pursuant to Section 12.1, of each amendment,
an Opinion of Counsel stating that, in the opinion of such counsel, in
form and substance reasonably satisfactory to the Insurer, either (A)
all financing statements and continuation statements have been executed
and filed that are necessary fully to preserve and protect the interest
of the Trust and the Indenture Trustee in the Receivables, and reciting
the details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) no such action will be necessary to
preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar
year beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a date
during such 90-day period, stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect
the interest of the Trust and the Indenture Trustee in the Receivables,
and reciting the details of such filings or referring to prior Opinions
of Counsel in which such details are given, or (B) no such action will
be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above
will specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
SECTION 12.3. Notices. All demands, notices and communications hereunder
will be in writing and will be deemed to have been duly given to the addressee
if mailed, by first-class registered mail, postage prepaid service, confirmed
facsimile transmission, or a nationally recognized express courier, as follows:
If to the Seller: Triad Financial Special Purpose LLC
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
If to the Servicer: Triad Financial Corporation
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
64
If to the Issuer or
Owner Trustee: Wilmington Trust Company
Xxxxxx Square North,
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Trust Administration
If to the Indenture Trustee: JPMorgan Chase Bank
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Institutional Trust
Services/Structured
Finance Services, Triad
2002-A
If to the Insurer: Ambac Assurance Corporation
Xxx Xxxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
In each case in which notice or other communication to the Insurer refers to a
Servicer Termination Event, a claim on the Note Policy, or with respect to which
failure on the part of the Insurer to respond will be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and will be marked to
indicate "URGENT MATERIAL ENCLOSED."
If to Moody's: Xxxxx'x Investors Service, Inc.
ABS Monitoring Department
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Standard & Poor's: Standard & Poor's Ratings Group
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Asset Backed Surveillance
Department
If to Fitch: Fitch Ratings
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000.
Any such demand, notice or communication hereunder will be deemed to have been
received on the date delivered to or received at the premises of the addressee
as evidenced by the date noted on the return receipt.
Subject to Section 5.10(b) hereof, any notice required or
permitted to be mailed to a Noteholder will be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Note Register.
Any notice so mailed within the time prescribed in the Agreement
65
will be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice.
SECTION 12.4. Assignment. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained herein,
except as provided in Sections 7.4 and 8.3 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Seller or the Servicer without the prior written consent
of the Trust, the Backup Servicer, the Indenture Trustee and the Insurer (or if
an Insurer Default has occurred and is continuing the Holders of Notes
evidencing not less than 66-2/3% of the principal amount of the outstanding
Notes).
SECTION 12.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto, the Indenture
Trustee, the Owner Trustee and the Noteholders, as third-party beneficiaries.
The Insurer and its successors and assigns will be a third-party beneficiary to
the provisions of this Agreement, and will be entitled to rely upon and directly
enforce such provisions of this Agreement so long as no Insurer Default has
occurred and is continuing. Except as expressly stated otherwise herein, any
right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, will be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Owner Trustee. Except as
provided in this Agreement, no other Person will have any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 12.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision in any other jurisdiction.
SECTION 12.7. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered will be an original, but all such counterparts will together
constitute but one and the same instrument.
SECTION 12.8. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and will not define or
limit any of the terms or provisions hereof.
SECTION 12.9. Governing Law. THIS AGREEMENT WILL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER WILL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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SECTION 12.10. Assignment to Indenture Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 12.11. Nonpetition Covenants.
(a) Notwithstanding any termination of this Agreement, the Servicer, the
Indenture Trustee and the Seller will not, prior to the date that is one year
and one day after the termination of this Agreement, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any termination of this Agreement, the Servicer and
the Indenture Trustee will not, prior to the date that is one year and one day
after the termination of this Agreement with respect to the Seller, acquiesce
to, petition or otherwise invoke or cause the Seller to invoke the process of
any court or government authority for the purpose of commencing or sustaining a
case against the Seller under any federal or state bankruptcy, insolvency or
similar law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Seller or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Seller.
SECTION 12.12. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed by Wilmington Trust Company not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event will Wilmington Trust Company in its individual capacity or, except as
expressly provided in the Trust Agreement, as Owner Trustee have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse will be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
its duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee will be subject to, and
entitled to the benefits of, the terms and provisions of Articles V, VI and VII
of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by JPMorgan Chase Bank, not in its
individual capacity but solely as Indenture Trustee and Backup Servicer and in
no event will JPMorgan Chase Bank, have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse will be had solely to the assets of the Issuer.
67
(c) In no event will JPMorgan Chase Bank, in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Business Trust Statute, common law, or the Trust Agreement.
SECTION 12.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer will be an independent contractor and will not be
subject to the supervision of the Issuer, the Indenture Trustee and Backup
Servicer or the Owner Trustee with respect to the manner in which it
accomplishes the performance of its obligations hereunder. Unless expressly
authorized by this Agreement, the Servicer will have no authority to act for or
represent the Issuer or the Owner Trustee in any way and will not otherwise be
deemed an agent of the Issuer or the Owner Trustee.
SECTION 12.14. No Joint Venture. Nothing contained in this Agreement (i)
will constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) will be construed to
impose any liability as such on any of them or (iii) will be deemed to confer on
any of them any express, implied or apparent authority to incur any obligation
or liability on behalf of the others.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective duly authorized officers
as of the day and the year first above written.
TRIAD AUTOMOBILE RECEIVABLES TRUST 2002-A
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
of the Trust.
By: /s/ XXXXX X. XXXXXXX
----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Financial Services Officer
TRIAD FINANCIAL SPECIAL PURPOSE LLC,
as Seller,
By: /s/ XXXX X. XXXXXXXX
----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer
TRIAD FINANCIAL CORPORATION, as Servicer
and Custodian,
By: /s/ XXXX X. XXXXXXXX
----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer
[Signature Page to Sale and Servicing Agreement]
JPMORGAN CHASE BANK,
not in its individual capacity but solely as
Backup Servicer
By: /s/ XXXXXX XXXXXXX
-------------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Trust Officer
Acknowledged and accepted by
JPMORGAN CHASE BANK,
not in its individual capacity but solely
as Indenture Trustee
By: /s/ XXXXXX XXXXXXX
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Trust Officer
[Sale and Servicing Agreement]
SCHEDULE A
SCHEDULE OF RECEIVABLES
[On File with Xxxxx Xxxxxxxxxx LLP]
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SERVICER
See Schedule B to the Purchase Agreement
SCH-B-1
SCHEDULE C
SERVICING POLICIES AND PROCEDURES
Note: Applicable Time Periods Will Vary by State
[to be provided]
SCH-C-1
SCHEDULE D
Custodian Third Party Vendors
Arcus Data Security Inc., an Iron Mountain Company
FDI Computer Consulting, Inc.
SCH-D-1
EXHIBIT A
[Reserved]
EX-A-1
EXHIBIT B
SERVICER'S CERTIFICATE
[On File with Xxxxx Xxxxxxxxxx LLP]
B-1
EXHIBIT C
Form of Note Guaranty Insurance Policy
[Please See Exhibit 4.4]
C-1