Exhibit 4.1
CHEVY CHASE BANK, F.S.B.,
Seller and Servicer
and
FIRST BANK NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT,
Dated as of March 1, 1997
$209,433,212.14
Chevy Chase Auto Receivables Trust 1997-1
6.50% Auto Receivables Backed Certificates
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS................................................ 1
SECTION 1.1 DEFINITIONS........................................... 1
SECTION 1.2 USAGE OF TERMS........................................ 18
SECTION 1.3 CUT-OFF DATE AND RECORD DATE.......................... 18
SECTION 1.4 SECTION REFERENCES.................................... 18
SECTION 1.5 INTEREST CALCULATIONS................................. 18
ARTICLE II CREATION OF THE TRUST;
CONVEYANCE OF RECEIVABLES.................................. 19
SECTION 2.1 CREATION OF TRUST..................................... 19
SECTION 2.2 CONVEYANCE OF RECEIVABLES............................. 19
SECTION 2.3 ACCEPTANCE BY TRUSTEE................................. 21
ARTICLE III THE RECEIVABLES............................................ 21
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER.............. 21
SECTION 3.2 REPURCHASE UPON BREACH................................ 26
SECTION 3.3 CUSTODY OF RECEIVABLE FILES........................... 26
SECTION 3.4 DUTIES OF SERVICER AND SUB-SERVICER AS CUSTODIAN...... 27
SECTION 3.5 INSTRUCTIONS; AUTHORITY TO ACT........................ 28
SECTION 3.6 EFFECTIVE PERIOD AND TERMINATION...................... 28
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES................ 28
SECTION 4.1 DUTIES OF SERVICER.................................... 28
SECTION 4.2 COLLECTION OF RECEIVABLE PAYMENTS..................... 29
SECTION 4.3 REALIZATION UPON RECEIVABLES.......................... 30
SECTION 4.4 INSURANCE............................................. 30
SECTION 4.5 MAINTENANCE OF SECURITY INTERESTS IN
FINANCED VEHICLES..................................... 31
SECTION 4.6 COVENANTS OF SERVICER................................. 31
SECTION 4.7 PURCHASE OF RECEIVABLES UPON BREACH................... 35
SECTION 4.8 SERVICING FEES........................................ 35
SECTION 4.9 SERVICER'S CERTIFICATE................................ 36
SECTION 4.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.. 36
SECTION 4.11 ANNUAL INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS' REPORT................................... 37
SECTION 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES................................. 37
SECTION 4.13 SERVICER EXPENSES..................................... 38
SECTION 4.14 REPORTS TO CERTIFICATEHOLDERS......................... 38
i
ARTICLE V DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS............ 39
SECTION 5.1 ESTABLISHMENT OF ACCOUNTS............................. 39
SECTION 5.2 COLLECTIONS........................................... 41
SECTION 5.3 PURCHASE AMOUNTS...................................... 42
SECTION 5.4 DISTRIBUTIONS......................................... 42
SECTION 5.5 CERTIFICATE INSURANCE POLICY.......................... 43
SECTION 5.6 RESERVE ACCOUNT AND YIELD MAINTENANCE ACCOUNT......... 46
SECTION 5.7 STATEMENTS TO CERTIFICATEHOLDERS...................... 48
ARTICLE VI THE CERTIFICATES........................................... 49
SECTION 6.1 THE CERTIFICATES...................................... 49
SECTION 6.2 AUTHENTICATION OF CERTIFICATES........................ 50
SECTION 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES.......................................... 50
SECTION 6.4 MUTILATED, DESTROYED, LOST, OR STOLEN CERTIFICATES.... 51
SECTION 6.5 PERSONS DEEMED OWNERS................................. 51
SECTION 6.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES............................................. 52
SECTION 6.7 MAINTENANCE OF OFFICE OR AGENCY....................... 52
SECTION 6.8 BOOK-ENTRY CERTIFICATES............................... 52
SECTION 6.9 NOTICES TO CLEARING AGENCY............................ 54
SECTION 6.10 DEFINITIVE CERTIFICATES............................... 54
ARTICLE VII THE SELLER................................................. 54
SECTION 7.1 REPRESENTATIONS OF SELLER............................. 55
SECTION 7.2 LIABILITY OF SELLER................................... 57
SECTION 7.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE SELLER............................. 57
SECTION 7.4 LIMITATION ON LIABILITY OF CERTAIN PERSONS OF SELLER.. 57
ARTICLE VIII THE SERVICER............................................... 58
SECTION 8.1 REPRESENTATIONS OF SERVICER........................... 58
SECTION 8.2 LIABILITIES OF SERVICER, INDEMNITIES.................. 60
SECTION 8.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE SERVICER........................... 62
SECTION 8.4 LIMITATION ON LIABILITY OF CERTAIN PERSONS OF
SERVICER.............................................. 62
SECTION 8.5 SERVICER NOT TO RESIGN................................ 63
SECTION 8.6 DELEGATION OF DUTIES.................................. 64
ii
ARTICLE IX DEFAULT.................................................... 64
SECTION 9.1 EVENTS OF DEFAULT..................................... 64
SECTION 9.2 APPOINTMENT OF SUCCESSOR.............................. 66
SECTION 9.3 NOTIFICATION TO
CERTIFICATEHOLDERS.................................... 67
SECTION 9.4 WAIVER OF PAST DEFAULTS............................... 67
SECTION 9.5 EFFECT OF EVENT OF DEFAULT ON SUB-SERVICER............ 68
ARTICLE X THE TRUSTEE................................................ 68
SECTION 10.1 DUTIES OF TRUSTEE..................................... 68
SECTION 10.2 TRUSTEE'S CERTIFICATE................................. 70
SECTION 10.3 TRUSTEE'S ASSIGNMENT OF PURCHASED RECEIVABLES......... 70
SECTION 10.4 CERTAIN MATTERS AFFECTING THE TRUSTEE................. 71
SECTION 10.5 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES.... 72
SECTION 10.6 TRUSTEE MAY OWN CERTIFICATES.......................... 74
SECTION 10.7 TRUSTEE'S FEES........................................ 74
SECTION 10.8 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.................. 74
SECTION 10.9 RESIGNATION OR REMOVAL OF TRUSTEE..................... 74
SECTION 10.10 SUCCESSOR TRUSTEE..................................... 75
SECTION 10.11 MERGER OR CONSOLIDATION OF TRUSTEE.................... 76
SECTION 10.12 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE......... 76
SECTION 10.13 REPRESENTATIONS AND WARRANTIES OF TRUSTEE............. 78
SECTION 10.14 TAX RETURNS........................................... 79
ARTICLE XI TERMINATION................................................ 79
SECTION 11.1 TERMINATION OF THE TRUST.............................. 79
SECTION 11.2 OPTIONAL PURCHASE OF ALL RECEIVABLES.................. 80
ARTICLE XII MISCELLANEOUS PROVISIONS................................... 80
SECTION 12.1 AMENDMENT............................................. 80
SECTION 12.2 PROTECTION OF TITLE TO TRUST.......................... ▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ RIGHTS OF CERTIFICATEHOLDERS............ 84
SECTION 12.4 GOVERNING LAW......................................... 85
SECTION 12.5 NOTICES............................................... 85
SECTION 12.6 SEVERABILITY OF PROVISIONS............................ 85
SECTION 12.7 ASSIGNMENT............................................ 86
SECTION 12.8 CERTIFICATES NONASSESSABLE AND FULLY PAID............. 86
SECTION 12.9 COUNTERPARTS.......................................... 86
SECTION 12.10 BENEFITS OF AGREEMENT................................. 86
SECTION 12.11 TAX TREATMENT......................................... 87
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Exhibit A Schedule of Receivables
Exhibit B Form of Certificate
Exhibit C Form of Trustee's Certificate (assignment to Seller)
Exhibit D Form of Trustee's Certificate (assignment to Servicer)
Exhibit E Form of Servicer's Certificate
Exhibit F List of Designated Loans
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This POOLING AND SERVICING AGREEMENT (this "Agreement" or this "Pooling
and Servicing Agreement"), dated as of March 1, 1997, is made with respect to
the formation of the Chevy Chase Auto Receivables Trust 1997-1, among CHEVY
CHASE BANK, F.S.B., a federally chartered savings bank, as seller and servicer
(the "Seller" or the "Servicer" in its respective capacities as such), and First
Bank National Association, as trustee (the "Trustee").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
"ACCOUNT" means any of the Collection Account, the Certificate
Account, the Yield Maintenance Account and the Reserve Account.
"ADDITIONAL FEES" means any late fees, prepayment charges, extension
fees or other administrative fees or similar charges allowed by applicable law
with respect to the Receivables and collected by the Servicer.
"AMOUNT FINANCED", with respect to a Receivable, means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, except with respect to Receivables originated through
applications submitted by Obligors directly to the Seller, exclusive of the
amount allocable to the premium of credit life, disability or hospitalization
insurance covering the Financed Vehicle or the Obligor.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual
interest rate stated in the Receivable.
"APR": see "Annual Percentage Rate."
"AVAILABLE DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the sum of the amounts described in clauses (w), (x) and (y)
of Section 5.4(a) on such Distribution Date.
"AVAILABLE FUNDS" means the amount defined as such in Section 5.2(c).
The term "Available Funds" does not include
Insured Payments and does not include any amounts that cannot be distributed to
the Certificateholders by the Trustee as a result of proceedings under the
United States Bankruptcy Code.
"BALLOON PAYMENT" means, with respect to a Balloon Receivable, the
payment to be made by the Obligor on the stated maturity date of such Balloon
Receivable.
"BALLOON RECEIVABLE" means any Receivable that on the date of
origination provided for scheduled monthly payments in level amounts
substantially lower than the amount of the final scheduled payment.
"BOOK-ENTRY CERTIFICATES" means beneficial interests in the Definitive
Certificate described in Section 6.8, the ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 6.8.
"BUSINESS DAY" means, unless otherwise specified in this Agreement,
any day other than a Saturday, a Sunday, or a day on which banking institutions
in New York, New York, St. ▇▇▇▇, Minnesota or Chevy Chase, Maryland shall be
authorized or obligated by law, executive order, or governmental decree to be
closed.
"CERTIFICATE" means a security executed on behalf of the Trustee and
authenticated by the Trustee substantially in the form attached as Exhibit B.
"CERTIFICATE ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1.
"CERTIFICATE FACTOR" means, at any time, a seven digit decimal number
equal to the current Certificate Principal Balance divided by the Initial
Certificate Principal Balance.
"CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name the
respective Certificate shall be registered in the Certificate Register, except
that, solely for the purposes of giving any consent, waiver, request, or demand
pursuant to this Agreement, the interest evidenced by any Certificate registered
in the name of the Seller or the Servicer, or any Person controlling, controlled
by, or under common control with the Seller or the Servicer, shall not be taken
into account in determining whether the requisite percentage necessary to effect
any such consent, waiver, request, or demand shall have been obtained unless all
of the Certificates outstanding are registered in the name of the Seller, the
Servicer and any such Persons.
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"CERTIFICATE INSURANCE POLICY" means the certificate guaranty
insurance policy number AB0099BE, issued by the Certificate Insurer to the
Trustee for the benefit of the Certificateholders.
"CERTIFICATE INSURER" means AMBAC Indemnity Corporation, a Wisconsin-
domiciled stock insurance corporation, and any successor thereto.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a direct or indirect Clearing
Agency Participant.
"CERTIFICATE PRINCIPAL BALANCE" means, at any time, the Initial
Certificate Principal Balance minus all distributions of Monthly Principal made
up to such time plus all amounts referred to in Section 5.4(c) unless paid
pursuant to the Certificate Insurance Policy.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean the register
maintained and the registrar appointed pursuant to Section 6.3.
"CLAIM DATE" shall have the meaning specified in Section 5.5(b).
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The initial Clearing Agency shall be The Depository Trust Company.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the Clearing
Agency.
"CLOSING DATE" means March 24, 1997.
"CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time, or any successor statute thereto, and applicable temporary or
final regulations of the U.S. Department of the Treasury promulgated thereunder.
"COLLATERAL INSURANCE" shall have the meaning specified in
Section 4.4(b).
"COLLECTION ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 5.1.
"COLLECTION PERIOD" means (i) initially, the period from and including
the Cut-off Date through and including the
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last day of the calendar month in which the Cut-off Date occurs and (ii)
thereafter, each calendar month until the Trust shall terminate pursuant to
Article XI.
"CORPORATE TRUST OFFICE" at the date hereof, is located at ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Structured Finance; the
telecopy number for the Corporate Trust Office on the date of the execution of
this Agreement is (▇▇▇) ▇▇▇-▇▇▇▇.
"CUT-OFF DATE" means March 1, 1997.
"DEALER" means the seller of a Financed Vehicle who arranged for a
sales contract or loan from a Lender to the purchaser of a Financed Vehicle
under an existing agreement with such Lender.
"DEFAULTED RECEIVABLE", with respect to a Distribution Date, means a
Receivable (other than a Purchased Receivable) as to which the earlier of the
following has occurred (i) a scheduled payment is 180 days past due as of the
end of the most recently completed Collection Period or (ii) the Servicer has
determined in accordance with its customary servicing practices, during the
Collection Period preceding such Distribution Date, that eventual payment in
full of the Amount Financed is unlikely.
"DEFICIENCY AMOUNT" shall have the meaning specified in
Section 5.5(b).
"DEFINITIVE CERTIFICATES" shall have the meaning specified in
Section 6.8.
"DELINQUENCY PERCENTAGE" means, with respect to any Distribution Date,
the fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Receivables 30 or more days delinquent (including any
Receivables relating to repossessed Financed Vehicles held in the Servicer's
inventory regardless of when repossessed, but exclusive of any Defaulted
Receivables) as of the last day of the related Collection Period divided by (y)
the Pool Balance (not including the Principal Balance of any Defaulted
Receivable) as of such date.
"DELIVERY" when used with respect to any Eligible Investments means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof by physical delivery to the Trustee
endorsed to, or
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registered in the name of, the Trustee or its nominee or endorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102
of the UCC) transfer thereof (i) by delivery of such certificated security
to the Trustee or its nominee or custodian or by delivery of such
certificated security to a financial intermediary endorsed to, or
registered in the name of, the Trustee or its nominee or custodian or
endorsed in blank to a financial intermediary (as defined in Section 8-313
of the UCC) and the making by such financial intermediary of entries on its
books and records identifying such certificated securities as belonging to
the Trustee and as having been credited to a securities account in the name
of the Trustee and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Trustee,
or (ii) by delivery thereof to a "clearing corporation" (as defined in
Section 8-102 (3) of the UCC) and the making by such clearing corporation
of appropriate entries on its books reducing the appropriate securities
account of the transferor and increasing the appropriate securities account
of the Trustee or a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of
the certificated securities for the sole and exclusive account of the
Trustee or such financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of a
confirmation by such financial intermediary of the purchase by the Trustee
of such securities and the making by such financial intermediary of entries
on its books and records identifying such certificated securities as
belonging to the Trustee and as having been credited to a securities
account in the name of the Trustee (all of the foregoing, "Physical
Property") and, in any event, any such Physical Property in registered form
shall be in the name of the Trustee or its nominee or custodian, and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of or a security interest in any
such Eligible Investment to the Trustee, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) 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, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and
5
Articles 8 and 9 of the UCC: book-entry registration of such Eligible
Investment to an appropriate Participant's Securities Account (as defined
in such applicable federal regulations) maintained with a Federal Reserve
Bank by a financial intermediary which is also a "Participant" pursuant to
applicable federal regulations and issuance by such financial intermediary
of a deposit advice or other written confirmation of such book-entry
registration to the Trustee of the purchase by the Trustee of such
book-entry securities; the making by such financial 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 Trustee and as having been credited to a securities
account in the name of the Trustee and indicating that such financial
intermediary holds such Eligible Investment solely as agent for the
Trustee; and
(c) with respect to any Eligible Investment that is an uncertificated
security under Article 8 of the UCC and that is not governed by clause (b)
above, registration on the books and records of the issuer thereof in the
name of the Trustee or a financial intermediary, the sending of a
confirmation by such financial intermediary of the purchase by the Trustee
of such uncertificated security, and the making by such financial
intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Trustee; and such
additional or alternative procedures as may be or hereafter become
requisite or appropriate to effect complete transfer of ownership of or a
security interest in any such Eligible Investment to the Trustee,
consistent with changes in applicable law or regulations or the
interpretation thereof.
"DEPOSIT DATE" means, with respect to any Distribution Date, the
Business Day immediately preceding such Distribution Date.
"DESIGNATED LOANS" means any Receivable with an APR below the Required
Rate, as listed on Exhibit F.
"DESIGNATED LOAN REQUIRED AMOUNT" means, with respect to any
Distribution Date, and with respect to each Designated Loan held by the Trust as
of the opening of business on the first day of the Collection Period in which
such Distribution Date occurs, the sum, for such Collection Period and each
future Collection Period (assuming that such Designated Loan amortizes in
accordance with its terms) of the products of (x) one-twelfth, (y) such
Designated Loan's principal balance as of the opening of business on the first
day of such Collection Period and all future Collection
6
Periods, assuming that such Designated Loan amortizes according to its terms and
(z) the excess of (i) the Required Rate over (ii) such Designated Loan's APR.
"DETERMINATION DATE" means the earlier of the eighth Business Day or
the eleventh calendar day of the month (or, if such eleventh calendar day is not
a Business Day, the Business Day preceding the eleventh calendar day of the
month).
"DISTRIBUTION DATE", with respect to each Collection Period, means the
fifteenth day of the following month, or if the fifteenth day shall not be a
Business Day, the next following Business Day, commencing April 15, 1997.
"ELIGIBLE ACCOUNT" means either (a) a segregated account with an
Eligible Bank or (b) a segregated trust account with the corporate trust
department of a depository institution with corporate trust powers organized
under the laws of the United States of America or any state thereof or the
District of Columbia (or any United States branch of a foreign bank) and whose
deposits are insured by the FDIC, provided that such institution must have a net
worth in excess of $50,000,000 and must have a rating of Baa3 or higher from
Moody's and a rating of BBB- or higher from Standard & Poor's with respect to
long-term deposit obligations. The Trustee shall give notice as the Servicer
and to the Certificate Insurer of any change in location of any Eligible
Account.
"ELIGIBLE BANK" shall mean a depository institution organized under
the laws of the United States or any one of the states thereof, including the
District of Columbia (or any United States branch or agency of a foreign bank)
having corporate trust powers and acting as a trustee for funds deposited in
such account, which is subject to supervision and examination by federal or
state banking authorities, the deposits of which are insured by the Federal
Deposit Insurance Corporation ("FDIC") and which at all times (a) has a net
worth in excess of $50,000,000 and (b) has either (x) a long-term unsecured debt
rating of at least A2 by Moody's and AA by Standard & Poor's or (y) a short-term
certificate of deposit rating of P-1 by Moody's and A-1+ by Standard & Poor's.
"ELIGIBLE INVESTMENT" means any of the following:
(i) Direct obligations of the United States of America and
securities fully and unconditionally guaranteed as to the timely payment of
principal and interest by the United States of America; PROVIDED, that the
full faith and credit of the United States of America must be pledged to
any such direct obligation or guarantee ("Direct Obligations");
7
(ii) Direct Obligations and fully guaranteed certificates of
beneficial interest of the Export-Import Bank of the United States;
consolidated debt obligations and letter of credit-backed issues of the
Federal Home Loan Banks; participation certificates and senior debt
obligations of the Federal Home Loan Mortgage Corporation ("FHLMCs");
debentures of the Federal Housing Administration; mortgage-backed
securities (except stripped mortgage securities which are valued greater
than par on the portion of unpaid principal) and senior debt obligations of
the Federal National Mortgage Association ("FNMAs"); participation
certificates of the General Services Administration; guaranteed mortgage
backed securities and guaranteed participation certificates of the
Government National Mortgage Association ("GNMAs"); guaranteed
participation certificates and guaranteed pool certificates of the Small
Business Administration; debt obligations and letter of credit-backed
issues of the Student Loan Marketing Association; local authority bonds of
the U.S. Department of Housing & Urban Development; guaranteed Title XI
financings of the U.S. Maritime Administration; guaranteed transit bonds of
the Washington Metropolitan Area Transit Authority; and Resolution Funding
Corporation securities; all of the foregoing rated, at the time of
purchase, "P-1" or "A2" by Moody's.
(iii) Direct obligations of any state of the United States of
America or any subdivision or agency thereof whose unsecured, uninsured and
unguaranteed general obligation debt is rated, at the time of purchase "A2"
or better by Moody's and "A" or better by Standard & Poor's, or any
obligation fully and unconditionally guaranteed by any state, subdivision
or agency whose unsecured, uninsured and unguaranteed general obligation
debt is rated, at the time of purchase, "A2" or better by Moody's and "A"
or better by Standard & Poor's;
(iv) Commercial paper (having original maturities of not more
than 270 days) rated, at the time of purchase, "P-1" by Moody's and "A-1"
or better by Standard & Poor's;
(v) Federal funds, unsecured certificates of deposit, time
deposits or bankers acceptances (in each case having maturities of not more
than 365 days) of any domestic bank including a branch office of a foreign
bank which branch office is located in the United States, provided legal
opinions are received to the effect that full and timely payment of such
deposit or similar obligation is enforceable against the principal office
or any branch of such bank, which, at the time of purchase, has a
short-term "Bank Deposit" rating of "P-1" by
8
Moody's, "Short-Term CD" rating of "A-1" or better by Standard & Poor's and
further provided that the bank is subject to the supervision and
examination of federal and state banking authorities.
(vi) Deposits of any bank or savings and loan association which
has combined capital, surplus and undivided profits of not less than $3
million, provided such deposits are continuously and fully insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC;
(vii) Investments in money-market funds rated "AAAm" or "AAAm-G"
by Standard & Poor's and "Aaa" by Moody's;
(viii) Repurchase agreements collateralized by Direct Obligations,
GNMAs, FNMAs or FHLMCs, as defined above, with any registered broker/dealer
subject to the Securities Investors' Protection Corporation jurisdiction or any
commercial bank insured by the FDIC, if such broker/dealer or bank has an
uninsured, unsecured and unguaranteed obligation rated "P-1" or "A2" or better
by Moody's, and "A-1" or "A-" or better by Standard Poor's, provided:
a. a master repurchase agreement or specific written repurchase
agreement governs the transaction; and
b. the securities are held free and clear of any lien by the
Trustee or an independent third party acting solely as agent ("Agent")
for the Trustee, and such third party is (i) a Federal Reserve Bank,
(ii) a bank which is a member of the FDIC and which has combined
capital, surplus and undivided profits of not less than $50 million
or (iii) a bank approved in writing for such purpose by the
Certificate Insurer, and the Trustee shall have received written
confirmation from such third party that it holds such securities, free
and clear of any lien, as agent for the Trustee; and
c. a perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 C.F.R.
306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created
for the benefit of the Trustee; and
d. the repurchase agreement has a term of 180 days or less,
and the Trustee or the Agent will value the collateral securities no
less frequently than weekly and will liquidate the collateral
securities if any deficiency in the
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required collateral percentage is not restored within two business
days of such valuation; and
e. the fair market value of the securities in relation to the
amount of the repurchase obligation, including principal and interest,
is equal to at least 103%.
f. the securities have a rating, at the time of purchase of
"P-1" or "A2" or better by Moody's.
(ix) Investment agreements, the issuer, form and substance of
which are specifically approved by the Certificate Insurer with notice to
Standard & Poor's and Moody's.
Notwithstanding the foregoing, Eligible Investments shall not include (i)
"stripped securities" and investments which contractually may return less than
the purchase price therefor, and (ii) instruments with a purchase price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
"EVENT OF DEFAULT" means an event specified in Section 9.1.
"FINANCED VEHICLE" means an automobile, light duty truck or van,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"FITCH" means Fitch Investors Service L.P.
"HOLDER" see "Certificateholder."
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement dated
as of March 18, 1997 by and among AMBAC Indemnity Corporation, Chevy Chase Bank,
F.S.B., and Credit Suisse First Boston Corporation as Representative of itself,
▇.▇. ▇▇▇▇▇▇ Securities Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
"INITIAL CERTIFICATE PRINCIPAL BALANCE" shall be $209,433,212.14.
"INITIAL YIELD MAINTENANCE AMOUNT" means $203,850.94.
"INSURANCE POLICIES" means the insurance policies described in
Section 3.1(xiii).
"INSURED PAYMENT" means (i) as of any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
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"LATE PAYMENT RATE" means, for any Distribution Date, the "Prime Rate"
of interest as published in THE WALL STREET JOURNAL in New York, New York plus
2%. The Late Payment Rate shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
"LENDERS" means, together, the Seller and the Seller's wholly-owned
subsidiary, Consumer Finance Corporation, a Virginia corporation, and "Lender"
means the Seller or Consumer Finance Corporation.
"LIEN" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics' liens, and any liens
which attach to the respective Receivable by operation of law.
"LIQUIDATION PROCEEDS" means, with respect to a Distribution Date, all
monies collected on a Defaulted Receivable from whatever source (other than
withdrawals from the Reserve Account or the Yield Maintenance Account and the
proceeds of a claim under the Certificate Insurance Policy), including insurance
proceeds and proceeds of Financed Vehicles which have been sold or otherwise
disposed of, during the preceding Collection Period, net of the sum of any
amounts expended by the Servicer for the account of the Obligor plus any amounts
required by law to be remitted to the Obligor.
"MONTHLY INTEREST" for any Distribution Date will equal one-twelfth of
the product of the Pass-Through Rate on the Certificate Principal Balance
immediately prior to such Distribution Date.
"MONTHLY PRINCIPAL" for any Distribution Date will equal the Principal
Balances of the Receivables on the last day of the second preceding Collection
Period (or, in the case of the first Distribution Date, the Initial Certificate
Principal Balance) less the Pool Balance of the Receivables on the last day of
the preceding Collection Period; PROVIDED, HOWEVER, that Monthly Principal on
the Stated Final Distribution Date will equal the Certificate Principal Balance
on such date. For the purpose of determining Monthly Principal, the Principal
Balance of a Defaulted Receivable or a Purchased Receivable is deemed to be zero
on and after the last day of the Collection Period in which such Receivable
became a Defaulted Receivable or a Purchased Receivable.
"MONTHLY SERVICING FEE" means, for any Distribution Date, one- twelfth
of the product of (a) the Pool Balance as of the beginning of the Collection
Period for the month prior to the month of such Distribution Date and (b) the
Servicing Fee Rate.
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"MONTHLY TRUSTEE'S FEE" means, for any Distribution Date, one twelfth
of the product of (a) the Certificate Principal Balance as of the end of the
Collection Period for the month prior to the month of such Distribution Date and
(b) 0.0027%.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NET AVAILABLE DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the excess of (x) the Available Distribution Amount for such
Distribution Date over (y) the amounts described in clauses (i) and (ii) of
Section 5.4(a) on such Distribution Date.
"NET AVAILABLE FUNDS" means the amount defined as such in Section
5.2(c).
"NET LOSSES" means with respect to a Collection Period and with
respect to each Receivable which became a Defaulted Receivable during such
Collection Period, the excess of (x) the combined Principal Balances of such
Defaulted Receivables over (y) the Liquidation Proceeds, if any, collected
during such Collection Period.
"NET LOSS PERCENTAGE" means, with respect to any Distribution Date,
the fraction, expressed as a percentage, equal to (x) twelve times the Net
Losses for the related Collection Period divided by (y) the Pool Balance (not
including the Principal Balance of any Defaulted Receivable) as of the last day
of such Collection Period.
"NOTICE" means the notice sent in writing by telecopy, substantially
in the form of Exhibit A attached to the Certificate Insurance Policy, from the
Trustee specifying the Insured Payment which shall be due and owing on the
applicable Distribution Date.
"OBLIGOR" on a Receivable means the purchaser or the co-purchasers of
the Financed Vehicle or any other Person who owes payments under the Receivable.
The phrase "payment made on behalf of an Obligor" shall mean all payments made
with respect to a Receivable except payments made by a Lender or the Servicer.
"OFFICERS' CERTIFICATE" means a certificate signed by any two of the
chairman of the board, the president, any vice chairman of the board, any
executive vice president, any senior vice president, any vice president, the
treasurer, or the controller of the Seller or the Servicer, as appropriate;
provided that no individual shall sign in a dual capacity.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
in-house counsel to the Seller or
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Servicer, which counsel shall be acceptable to the Trustee and the Certificate
Insurer.
"OPTIONAL PURCHASE PRICE" means the amount specified as such in
Section 11.2.
"ORIGINAL POOL BALANCE" shall be $209,433,212.14.
"PASS-THROUGH RATE" shall be 6.50% per annum.
"PERSON" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"POOL BALANCE" as of any date means the aggregate Principal Balance of
the Receivables as of such date.
"PREFERENCE AMOUNT" means, as to any Distribution Date, any amounts
included in previous distributions to Certificateholders of Required Payments
(exclusive of Insured Payments) which have been deemed a preferential transfer
and therefore recovered from such Certificateholders pursuant to the United
States Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance
with a final, nonappealable order of a court having competent jurisdiction and
which have not theretofore been repaid to such Certificateholders, provided such
Certificateholders have complied with the provisions of Section 5.5(e).
"PREFERENCE ORDER" shall have the meaning set forth in Section 5.5(e).
"PREMIUM AMOUNT" means, as to any Distribution Date, one-twelfth of
the product of (x) the Premium Percentage and (y) the Certificate Principal
Balance on such Distribution Date (after taking into account any distributions
of principal to the Certificateholders to be made on such Distribution Date).
"PREMIUM PERCENTAGE" has the meaning set forth in the letter agreement
between the Seller and the Certificate Insurer.
"PRINCIPAL BALANCE" of a Receivable, at any time, means the Amount
Financed minus that portion of all payments received by the Servicer on or
before such time allocable to principal of such Receivable.
"PURCHASE AMOUNT" means, with respect to a Purchased Receivable as of
a Distribution Date, the amount equal to the sum of the Principal Balance of
such Receivable as of the last
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day of the preceding Collection Period and any unpaid interest accrued thereon
through the date such Receivable is repurchased.
"PURCHASED RECEIVABLE" means, with respect to a Distribution Date, a
Receivable purchased not later than the Determination Date immediately preceding
such Distribution Date by the Servicer pursuant to Section 4.2, 4.7 or 11.2 or
repurchased not later than such Determination Date by the Seller pursuant to
Section 3.2.
"RATING AGENCIES" means Moody's, Standard & Poor's and Fitch.
"RECEIVABLE" means any motor vehicle retail installment sales contract
or motor vehicle installment loan executed by an obligor in respect of a
Financed Vehicle, including, without limitation, any extension or revision
agreement relating thereto and all payments due thereunder on or after the Cut-
off Date and all proceeds thereof, which Receivable appears on the Schedule of
Receivables.
"RECEIVABLE FILES" means the documents specified in Section 3.3.
"RECORD DATE" means, as to any Distribution Date, the close of
business, if applicable, on the day (whether or not a Business Day) immediately
preceding such Distribution Date or, if Definitive Certificates are issued
pursuant to Section 6.8, the last day of the calendar month immediately
preceding the month in which such Distribution Date occurs.
"REIMBURSEMENT AMOUNT" means, as of any Distribution Date, the sum of
(i) all Insured Payments previously paid by the Certificate Insurer and not
previously repaid to the Certificate Insurer pursuant to Section 5.4(a)(v) and
Section 5.5(d), plus the amount of any unpaid Premium Amount not paid to the
Certificate Insurer pursuant to Section 5.4(a)(ii), plus (ii) interest accrued
on each such Insured Payment not previously repaid and each such unpaid Premium
Amount, calculated at the Late Payment Rate in each case from the date the
Certificate Insurer paid the related Insured Payment, or the date the related
Premium Amount was due, as the case may be. The Certificate Insurer shall
notify in writing the Trustee and the Seller of the amount of any Reimbursement
Amount due in respect of any Distribution Date at least two days prior to the
related Determination Date.
"REQUIRED PAYMENTS" means, with respect to any Distribution Date, the
sum of the Monthly Interest and the Monthly Principal for such Distribution
Date.
"REQUIRED RATE" means 8.0827% per annum.
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"RESERVE ACCOUNT" means the Reserve Account established pursuant to
Section 5.6.
"RESERVE ACCOUNT DEPOSIT AMOUNT" means, with respect to any
Distribution Date, the lesser of (x) the excess of (i) the Specified Reserve
Balance on such Distribution Date over (ii) the amount on deposit in the Reserve
Account on such Distribution Date, after taking into account the amount of any
Reserve Account Withdrawal Amount on such Distribution Date and (y) the amount
remaining in the Certificate Account after taking into account the distributions
therefrom described in clauses (i) through (v) of Section 5.4(a).
"RESERVE ACCOUNT WITHDRAWAL AMOUNT" means, with respect to any
Distribution Date, the lesser of (x) the excess of (i) the sum of the amounts
described in clauses (i) through (v) of Section 5.4 (a) over (ii) the Available
Funds for such Distribution Date and (y) the amount on deposit in the Reserve
Account on such Distribution Date before taking into account any withdrawal
therefrom on such Distribution Date.
"RESERVE INITIAL DEPOSIT" shall be $6,282,996.36.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee,
any officer within the Corporate Trust Department (or any successor group of the
Trustee), including any senior vice president, vice president, assistant vice
president, assistant secretary, assistant treasurer or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred at the Corporate
Trust Department because of his knowledge of and familiarity with the particular
subject.
"SCHEDULE OF RECEIVABLES" shall be, as of any date, the schedule of
Receivables included in the Trust on such date. The initial Schedule of
Receivables as of the Cut-off Date is attached hereto as Exhibit A and sets
forth as to each Receivable, among other things, (a) its identifying number and
the state of residence of the related Obligor; (b) its date of origination; (c)
the original number of months to stated maturity; (d) the original stated
maturity; (e) the Principal Balance as of the Cut-off Date; (f) the original
Principal Balance; (g) the APR; (h) the scheduled monthly payment of principal
and interest; (i) the amount of the Balloon Payment, if any; and (j) whether
such Receivable is with recourse to any Dealer and the type of such recourse.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SELLER" means Chevy Chase Bank, F.S.B. in its capacity as the seller
of the Receivables under this Agreement, and each successor to Chevy Chase Bank,
F.S.B. (in the same capacity) pursuant to Section 2.2.
"SERVICER" means Chevy Chase Bank, F.S.B. in its capacity as the
servicer of the Receivables, and each successor to Chevy Chase Bank, F.S.B. (in
the same capacity) pursuant to Sections 3.3, 3.4 and 9.2.
"SERVICER'S CERTIFICATE" means a certificate completed and executed by
the Servicer by its chairman of the board, its president, any vice chairman of
its board, any executive vice president, any senior vice president, any vice
president, the treasurer, or the controller of the Servicer pursuant to Section
4.9.
"SERVICING FEE RATE" means 1.50%.
"SERVICING OFFICE" means, at the date of this Agreement, the office of
the Servicer specified in this Agreement, or such other address as the Servicer
may designate from time to time by notice to the Seller, the Trustee and the
Certificate Insurer.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Receivables whose name
appears on a list of servicing officers annexed to an Officers, Certificate
furnished to the Trustee by the Servicer, as the case may be, as such list may
from time to time be amended.
"SPECIFIED RESERVE BALANCE" means, with respect to any Distribution
Date, the greater of (i) $2,094,332.12, and (ii) 5.00% of the Pool Balance on
the first day of the related Collection Period; except that if on any
Distribution Date (a) the average of the Net Loss Percentage for the three
Collection Periods preceding such Distribution Date or for the three Collection
Periods preceding either of the two preceding Distribution Dates exceeds 3.25%,
or (b) the average of the Delinquency Percentages for the three Collection
Periods preceding such Distribution Date or for the three Collection Periods
preceding either of the two preceding Distribution Dates exceeds 6.00%, then the
Specified Reserve Balance applicable to such Distribution Date shall be an
amount equal to the greater of (x) $2,094,332.12 and (y) 6.00% of the Pool
Balance on the first day of the related Collection Period.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc.
"STATE" means (i) any state of the United States of America or (ii)
the District of Columbia.
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"STATED FINAL DISTRIBUTION DATE" means the Distribution Date in
October, 2003.
"SUB-SERVICER" means, as to the Sub-Serviced Receivables, the
Servicer's wholly-owned subsidiary, Consumer Finance Corporation, a Virginia
corporation.
"SUB-SERVICED RECEIVABLES" means those Receivables sold to Chevy Chase
Bank, F.S.B. pursuant to the Purchase and Sale Agreement dated as of March 1,
1997 between Chevy Chase Bank, F.S.B. as Purchaser and Consumer Finance
Corporation as Seller.
"TRUST" means the trust created by this Agreement, the estate of which
shall consist of the Receivables (other than Purchased Receivables) and all
monies due (including accrued interest) or received thereon on or after the Cut-
off Date; security interests in the Financed Vehicles, the Certificate Account
and the Collection Account; funds deposited in the Collection Account and the
Certificate Account; proceeds of Purchased Receivables; the right to receive
payments from funds deposited in the Reserve Account and the Yield Maintenance
Account (under the conditions specified herein); all rights to receive payments
under the Certificate Insurance Policy; any property (including the right to
receive future Liquidation Proceeds) that shall have secured a Receivable and
that shall have been acquired by or on behalf of the Trust; proceeds from
recourse to Dealers relating to the Receivables; proceeds from claims on any
physical damage, lender's single interest, credit life, disability, or
hospitalization insurance policies covering Financed Vehicles or obligors; the
rights of recourse of the Seller against any cosigner or under any personal
guarantee and any and all of the proceeds of the foregoing.
"TRUSTEE" means First Bank National Association, a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.
"TRUSTEE'S CERTIFICATE" means a certificate completed and executed by
the Trustee by a Responsible Officer pursuant to Section 10.2, substantially in
the form of, in the case of an assignment to the Seller, Exhibit C, and, in the
case of an assignment to the Servicer, Exhibit D.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"YIELD MAINTENANCE ACCOUNT" means the Yield Maintenance Account
established pursuant to Section 5.6.
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"YIELD MAINTENANCE AMOUNT" means, with respect to any Distribution
Date, the sum of all Designated Loan Required Amounts as of such Distribution
Date.
"YIELD MAINTENANCE WITHDRAWAL AMOUNT" means, as of any Distribution
Date, the lesser of (i) the sum of, with respect to each Designated Loan held by
the Trust as of the opening of business on the first day of the related
Collection Period, the products of (x) one-twelfth, (y) such Designated Loan's
Principal Balance as of such time and (z) the excess of (1) the Required Rate
over (2) such Designated Loan's APR and (ii) the amount on deposit in the Yield
Maintenance Account on such Distribution Date, exclusive of any net investment
earnings.
SECTION 1.2 USAGE OF TERMS.
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the term "including" means "including without
limitation."
SECTION 1.3 CUT-OFF DATE AND RECORD DATE.
All references to the Record Date prior to the first Record Date in
the life of the Trust shall be to the Cut-off Date.
SECTION 1.4 SECTION REFERENCES.
All section references in this Agreement shall be to sections in this
Agreement.
SECTION 1.5 INTEREST CALCULATIONS.
(a) All allocations of payments with respect to a Receivable to
principal and interest and determinations of periodic charges and the like shall
be made using the simple interest method, based on the actual number of days
elapsed and the actual number of days in the calendar year. Each payment on a
Receivable (net of fees and charges) shall be applied first to the amount of
interest accrued on such Receivable to the date of receipt and then to reduce
the principal amount outstanding on the Receivable.
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(b) All calculations of interest on the Certificates shall be made on
the basis of a 360-day year comprised of twelve 30-day months.
ARTICLE II
CREATION OF THE TRUST;
CONVEYANCE OF RECEIVABLES
SECTION 2.1 CREATION OF TRUST.
Upon the execution of this Pooling and Servicing Agreement by the
parties hereto and the concurrent conveyance of the Receivables by the Seller to
the Trustee pursuant to Section 2.2, there is hereby created the Chevy Chase
Auto Receivables Trust 1997-1.
SECTION 2.2 CONVEYANCE OF RECEIVABLES.
In consideration of the Trustee's delivery to or upon the order of the
Seller of authenticated Certificates with an initial Certificate Principal
Balance equal to $209,433,212.14, the Seller does hereby sell, transfer, assign,
and otherwise convey to the Trustee, in trust for the benefit of the
Certificateholders and the Certificate Insurer, without recourse (subject to the
obligations contained herein):
(i) all right, title, and interest of the Seller in and to
the Receivables listed in the Schedule of Receivables, including all
monies due or received thereunder on or after the Cut-off Date;
(ii) the security interests of the Seller in the Financed
Vehicles granted by obligors pursuant to the Receivables;
(iii) the Certificate Account and the Collection Account and
funds deposited therein;
(iv) the interest of the Seller in the documents
constructively delivered to the Trustee pursuant to Section 3.3;
(v) the interest of the Seller in any proceeds from
recourse to Dealers relating to the Receivables;
(vi) the interest of the Seller in any Liquidation Proceeds
and any proceeds from claims on any physical damage, theft, vendor's single
interest, credit life, disability or hospitalization insurance policies
covering Financed Vehicles or Obligors;
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(vii) the rights of the Seller to proceeds of Insurance
Policies;
(viii) the right to receive payments as set forth herein from
the Reserve Account and the Yield Maintenance Account;
(ix) the right to receive payments as set forth herein from
the Certificate Insurance Policy; and
(x) the proceeds of any and all of the foregoing.
It is the express intention of the Seller and the Trustee that (a) the
assignment and transfer herein contemplated constitute a sale of the Receivables
and the other property of the Trust described above, conveying good title
thereto free and clear of any liens, encumbrances, security interests or rights
of other Persons, from the Seller to the Trust and (b) the Receivables and the
other property of the Trust described above not be a part of the Seller's estate
in the event of an insolvency of the Seller. In the event that such conveyance
is deemed to be a pledge in connection with a financing, the parties intend that
the Seller shall have granted to the Trustee a first priority perfected security
interest in all of the Seller's right, title and interest in the items of
property listed in clauses (i) through (ix) above, and all proceeds of the
foregoing, and that this Agreement shall constitute a security agreement under
applicable law and the Trustee shall have all of the rights and remedies of a
secured party and creditor under the UCC as in force in the relevant
jurisdictions.
The Seller hereby pledges, grants, assigns and otherwise sets over to
the Trustee, in trust, the Yield Maintenance Account and the Reserve Account and
all amounts on deposit therein and all Eligible Investments held therein from
time to time and all proceeds thereof, and hereby grants to the Trustee for the
benefit of the Certificateholders and the Certificate Insurer a first priority
perfected security interest in such Accounts, amounts and Eligible Investments.
It is the intention of the Seller that, with respect to such Accounts and such
amounts and Eligible Investments, this Agreement shall constitute a security
agreement under applicable law and the Trustee shall have all of the rights and
remedies of a secured party and creditor under the UCC and other applicable law
as in force in the relevant jurisdictions.
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SECTION 2.3 ACCEPTANCE BY TRUSTEE.
The Trustee does hereby accept the assignment by the Seller pursuant
to Section 2.2 and declares that the Trustee accepts such assignment upon the
trusts herein set forth for the benefit of the Certificateholders and the
Certificate Insurer, as their respective interests may appear, subject to the
terms and provisions of this Agreement. The assignment will not constitute, and
is not intended to result in, an assumption by the Trustee, any
Certificateholder or the Certificate Insurer of any obligation of the Seller or
any other Persons in connection with the Receivables, the Receivables Files,
the Insurance Policies or under any agreements or instruments relating to any of
them.
ARTICLE III
THE RECEIVABLES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER.
The Seller makes the following representations and warranties as to
the Receivables on which the Trustee relies in accepting the Receivables in
trust and executing and authenticating the Certificates and upon which the
Certificate Insurer relies in executing and delivering the Certificate Insurance
Policy. Such representations and warranties speak as of the Closing Date, but
shall survive the sale, transfer, and assignment of the Receivables to the
Trustee.
(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable (a) shall
have been originated or purchased by a Lender, (b) shall have been fully
and properly executed by the parties thereto, (c) is a fully-amortizing
simple interest installment contract or installment loan which provides for
level monthly payments over its original term, provided that (x) some
Receivables may include a payment in the last month in the life of the
Receivable which due to delinquencies or partial prepayments may be
different from the level monthly payment and (y) 0.25% of the Receivables
(measured as a percentage of the Original Pool Balance) may be Balloon
Receivables, (d) shall have created or shall create a valid, subsisting,
and enforceable first priority security interest in favor of such Lender in
the Financed Vehicle, which security interest shall be assignable and shall
have been validly assigned by the Seller to the Trustee, (e) shall contain
customary and enforceable provisions such that the rights and remedies of
the holder thereof shall be adequate for realization against the collateral
of the benefits of the security and (f) is payable in United States
dollars.
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(ii) SCHEDULE OF RECEIVABLES. The information set forth in
the Schedule of Receivables shall be true and correct in all material
respects as of the opening of business on the Cut-off Date. The Seller
shall have caused each Lender's electronic ledger relating to each related
Receivable to be clearly and unambiguously marked to show that such
Receivable has been sold to the Trust for the benefit of the
Certificateholders pursuant to this Agreement.
(iii) COMPLIANCE WITH LAW. Each Receivable and each sale of
the related Financed Vehicle shall have complied at the time it was
originated or made and at the execution of this Agreement shall comply in
all material respects with all requirements of applicable federal, State,
and local laws, and regulations thereunder, including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the Federal Reserve Board's Regulations B and
Z, and State adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and other applicable consumer credit laws and equal
credit opportunity and disclosure laws.
(iv) BINDING OBLIGATION. Each Receivable represents the
genuine, legal, valid, and binding payment obligation in writing of the
related Obligor, enforceable by the holder thereof in accordance with its
terms. All parties to such Receivable have full legal capacity to execute
and deliver such Receivable and all other documents related thereto and to
grant the security interest granted thereby and the terms of such
Receivable have not been waived or modified in any respect (other than
extensions of payments granted in the ordinary course of the Servicer's
collection procedures and the term of which does not extend beyond the last
day of the Collection Period immediately preceding the Stated Final
Distribution Date).
(v) NO GOVERNMENT OBLIGOR. None of the Receivables shall
be due from the United States of America or any State or local government
or from any agency, department, or instrumentality of the United States of
America or any State or local government.
(vi) SECURITY INTEREST IN FINANCED VEHICLE. Immediately
prior to the sale, assignment, and transfer thereof to the Trustee, each
Receivable shall be secured by a validly perfected first priority security
interest
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in the Financed Vehicle in favor of the Lender that originated or purchased
such Receivable as secured party and all necessary and appropriate actions
with respect to such Receivable shall have been taken to perfect a first
priority security interest in the Financed Vehicle in favor of such Lender
as secured party, which security interest is assignable and has been so
assigned to the Trustee.
(vii) RECEIVABLES IN FORCE. No Receivable shall have been
satisfied, subordinated, or rescinded, nor shall any Financed Vehicle have
been released from the lien granted by the related Receivable in whole or
in part.
(viii) NO WAIVER. No provision of a Receivable shall have been
waived (other than extensions of payments granted in the ordinary course of
the collection procedures of the Servicer (or of the Sub-Servicer, with
respect to the Sub-Serviced Receivables) and the term of which does not
extend beyond the last day of the Collection Period immediately preceding
the Stated Final Distribution Date).
(ix) NO AMENDMENTS. No Receivable shall have been amended
such that the number of the Obligor's scheduled payments shall have been
increased.
(x) NO DEFENSES. No facts exist which would give rise to
any right of rescission, setoff, counterclaim or defense nor shall have any
right of rescission, setoff, counterclaim, or defense been asserted or
threatened with respect to any Receivable.
(xi) NO LIENS. No liens or claims shall have been filed,
including liens for work, labor, materials or taxes relating to a Financed
Vehicle, that shall be liens prior to, or equal or coordinate with, the
security interest in the Financed Vehicle granted by the Obligor pursuant
to the Receivable.
(xii) NO DEFAULT. Except for payment defaults continuing
for a period of not more than 59 days as of the Cut-off Date, no default,
breach, violation or event permitting acceleration under the terms of any
Receivable shall exist; no continuing condition that with notice or lapse
of time would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable shall exist; and the related
Lender shall not have waived any of the foregoing.
(xiii) INSURANCE. The Servicer, in accordance with its
customary procedures, shall have (i) required
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that the Obligor obtain physical damage and theft insurance covering the
Financed Vehicle as of the date of related contract and (ii) obtained
vendor's single interest insurance covering the Financed Vehicle.
(xiv) TITLE. It is the intention of the Seller that the
transfer and assignment herein contemplated, taken as a whole, constitutes
a sale of the Receivables and other property of the Trust from the Seller
to the Trust and that the beneficial interest in and title to the
Receivables and other Trust property not be part of the receivership or
conservatorship estate in the event of the appointment of a receiver or
conservator for the Seller. No Receivable has been sold, transferred,
assigned, or pledged by the Seller to any Person other than the Trustee.
Immediately prior to the transfer and assignment herein contemplated, the
Seller had good and marketable title to each Receivable free and clear of
all Liens, and, immediately upon the transfer thereof, the Trustee for the
benefit of the Certificateholders and the Certificate Insurer shall have
good and marketable title to each Receivable, free and clear of all Liens
and rights of others, except for the rights of the Certificateholders and
the Certificate Insurer; and the transfer has been perfected under the UCC.
(xv) LAWFUL ASSIGNMENT. No Receivable shall have been
originated in, or shall be subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Receivable under this
Agreement or transfers of the Certificates would be unlawful, void, or
voidable.
(xvi) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the Trustee
a first priority perfected ownership interest in the Receivables shall have
been made.
(xvii) ONE ORIGINAL. There shall be only one original executed
copy of each Receivable, and immediately prior to the constructive delivery
thereof to the Trustee pursuant to Section 3.3, such copy shall have been
in the custody and possession of the applicable Lender.
(xviii) NO BANKRUPT OBLIGOR. None of the Receivables shall be
due from an Obligor who has commenced a voluntary case under the United
States Bankruptcy Code or consented to the entry of or failed to have
stayed within 60 days of entry an order for relief against it in an
involuntary case under the United States Bankruptcy Code.
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(xix) CHATTEL PAPER. The Receivables constitute "chattel
paper" within the meaning of the UCC as in effect in the State of
Maryland. The chief executive office of the Seller is located in the State
of Maryland.
(xx) MAXIMUM AMOUNT FINANCED. No Obligor shall be the
Obligor on Receivables on which the sum of the Principal Balances of such
Receivables is greater than $59,000.00.
(xxi) NO ASSIGNMENT. The related Lender has not taken any
action to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable that is senior to or
equal with that of the Trust.
(xxii) COMPOSITION OF RECEIVABLES. Each Receivable is secured
by a Financed Vehicle which is a new or used automobile, light duty truck
or van.
(xxiii) MATURITY OF RECEIVABLES. Each Receivable shall have an
original term to stated maturity of at least 12 months and not more than 72
months.
(xxiv) MINIMUM AND MAXIMUM ANNUAL PERCENTAGE RATE. Each
Receivable shall have an Annual Percentage Rate no less than 6.250% and no
more than 31.000%.
(xxv) MINIMUM AND MAXIMUM PRINCIPAL BALANCE. Each Receivable
shall have a Principal Balance no less than $2,138.00 and no more than
$39,416.91.
(xxvi) PAYMENT. With respect to Sub-Serviced Receivables only,
the Obligor under each Sub-Serviced Receivable has made at least one
payment with respect thereto as of the Cut-off Date.
(xxvii) STATES OF OBLIGOR RESIDENCE. Except with respect to
Receivables with an aggregate Principal Balance representing 10.09% of the
Original Pool Balance, the Obligor under each Receivable has a billing
address in Maryland, Virginia, North Carolina or Georgia.
(xxviii) LOCATION OF RECEIVABLE FILES. The Receivable Files
shall be kept by the Servicer as custodian for the Trustee at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location or
locations as may be designated from time to time by notice to the Trustee
and the Certificate Insurer.
(xxix) ADVANCE PAYMENTS. No Receivable has been paid more than
six months in advance.
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(xxx) NO ADVERSE SELECTION. The Receivables were selected
from retail installment sales contracts and motor vehicle installment loans
in the Seller's portfolio that had met the applicable conditions specified
in this Section 3.1 utilizing no selection procedures adverse to the
Certificateholders or the Certificate Insurer relative to similar retail
installment sales contracts and motor vehicle installment loans in the
Seller's portfolio.
SECTION 3.2 REPURCHASE UPON BREACH.
The Seller, the Servicer, the Trustee or the Certificate Insurer, as
the case may be, shall inform the other parties promptly, in writing, upon the
discovery of any breach of the Seller's representations and warranties contained
in Section 3.1; PROVIDED, that the Trustee shall have no duty to inquire
concerning, or to investigate, the breach of any of such representations and
warranties. Unless the breach shall have been cured by the last day of the
Collection Period following the Collection Period during which the Seller
becomes aware of, or receives written notice of, such breach, the Seller shall
repurchase as of such day (or, at the Seller's option, as of the last day of the
month in which such breach was discovered) any Receivable materially and
adversely affected by such breach and any Receivable in which the interest of
the Trust is materially and adversely affected by such breach. In consideration
of the purchase of the Receivable, the Seller shall remit the Purchase Amount,
in the manner specified in Section 5.3. The sole remedy of the Trustee, the
Trust or the Certificateholders with respect to a breach of the Seller's
representations and warranties contained in Section 3.1 shall be to require the
Seller to repurchase Receivables pursuant to this Section 3.2. The Seller shall
notify the Certificate Insurer of any repurchase of any Receivable pursuant to
this Section.
SECTION 3.3 CUSTODY OF RECEIVABLE FILES.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee, upon the execution and delivery of this
Agreement, hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Trustee as custodian of the
following documents or instruments which are hereby constructively delivered to
the Trustee with respect to each Receivable:
(i) The original of the Receivable fully executed by the
Obligor.
(ii) The original credit application fully executed by the
Obligor.
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(iii) The original certificate of title held by the Lender
that originated or purchased such Receivable evidencing the security
interest of such Lender in the Financed Vehicle.
(iv) Any and all other documents that the Servicer or the
applicable Lender shall keep on file, in accordance with its customary
procedures, relating to a Receivable, an Obligor, or a Financed Vehicle.
SECTION 3.4 DUTIES OF SERVICER AND SUB-SERVICER AS CUSTODIAN.
(a) SAFEKEEPING. The Servicer, in its capacity as custodian, shall
hold the Receivable Files on behalf of the Trustee for the use and benefit of
all present and future Certificateholders and the Certificate Insurer and
maintain such accurate and complete accounts, records, and computer systems
pertaining to each Receivable File as shall enable the Trustee to comply with
this Agreement. In performing its duties as custodian, the Servicer shall act
with reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to the receivable files relating to all comparable
automotive receivables that the Servicer services for itself. The Servicer
shall conduct, or cause to be conducted, periodic audits of the Receivable Files
held by it under this Agreement, and of the related accounts, records, and
computer systems, in such a manner as shall enable the Trustee to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report
to the Trustee and the Certificate Insurer any failure on the Servicer's 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.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall maintain
each Receivable File at its office specified in this Agreement, or at such other
office or offices as shall be specified by the Servicer to the Trustee and the
Certificate Insurer by prior written notice. The Servicer shall make available
to the Trustee and the Certificate Insurer or their respective duly authorized
representatives, attorneys, or auditors a list of locations of the Receivable
Files, and the related accounts, records, and computer systems maintained by the
Servicer at such times during normal business hours as the Trustee or the
Certificate Insurer shall instruct, which does not unreasonably interfere with
the Servicer's normal operations or customer or employee relations.
(c) RELEASE OF DOCUMENTS. Upon instruction from the Trustee, the
Servicer shall release any document in a Receivable File to the Trustee, the
Trustee's agent, or the
27
Trustee's designee, as the case may be, at such place or places as the Trustee
may designate, as soon as practicable.
(d) SERVICER TO REMAIN LIABLE. The Servicer shall require the Sub-
Servicer to comply with the preceding provisions of this Section 3.4 with
respect to the Sub-Serviced Receivables. Notwithstanding anything to the
contrary, the Servicer shall remain primarily liable for its duties as custodian
with respect to all Receivables, including the Sub-Serviced Receivables.
SECTION 3.5 INSTRUCTIONS; AUTHORITY TO ACT.
The Servicer and the Sub-Servicer shall be deemed to have received
proper instructions with respect to the Receivable Files upon its receipt of
written instructions signed by a Responsible officer of the Trustee.
SECTION 3.6 EFFECTIVE PERIOD AND TERMINATION.
The appointment of the Servicer as custodian shall become effective as
of the Cut-off Date and shall continue in full force and effect for the term of
the Trust unless terminated earlier pursuant to this Section 3.6. If the
Servicer shall resign in accordance with the provisions of Section 8.5 or if all
of the rights and obligations of the Servicer shall have been terminated under
Section 9.1, the appointment of the Servicer and the Sub-Servicer as custodian
may be terminated (1) by the Trustee or by the Holders of Certificates
evidencing not less than a majority of the Certificate Principal Balance, in
either case, with the consent of the Certificate Insurer or (2) by the
Certificate Insurer, by written notification to the Servicer. The Trustee with
the consent of the Certificate Insurer may, or at the direction of the
Certificate Insurer, shall terminate the Servicer's appointment as custodian
with cause at any time upon written notification to the Servicer, in which case
the Sub-Servicer shall also be terminated as a custodian. The Trustee shall
notify the Rating Agencies of any termination of the Servicer's appointment as
custodian pursuant to this Section 3.6. As soon as practicable after any
termination of such appointment, the Servicer and the Sub-Servicer shall deliver
the Receivable Files to the Trustee or the Trustee's agent at such place or
places as the Trustee may reasonably designate.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1 DUTIES OF SERVICER.
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The Servicer as agent for the Trustee shall manage, service,
administer, and make collections on the Receivables with reasonable care, using
that degree of skill and attention that the Servicer exercises with respect to
all comparable automotive receivables that it services for itself. The
Servicer's duties shall include the collection and posting of all payments,
responding to inquiries of Obligors or of federal, state or local governmental
authorities with respect to the Receivables, investigating delinquencies,
sending payment coupons to Obligors, accounting for collections, and furnishing
monthly and annual statements to the Trustee and the Certificate Insurer with
respect to distributions. The Servicer shall follow its customary standards,
policies, and procedures in performing its duties as Servicer; PROVIDED, that
with respect to the Sub-Serviced Receivables and for so long as the Sub-Servicer
is sub-servicing the Sub-Serviced Receivables, the Servicer shall follow the
Sub-Servicer's customary standards, policies and procedures. Without limiting
the generality of the foregoing, the Servicer is authorized and empowered by the
Trustee to execute and deliver, on behalf of itself, the Trust, the
Certificateholders, or the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Trustee shall thereupon be deemed
to have automatically assigned, solely for the purpose of collection, such
Receivable to the Servicer. The Trustee shall execute any documents prepared by
the Servicer and delivered to the Trustee for execution that are necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.2 COLLECTION OF RECEIVABLE PAYMENTS.
The Servicer shall use its best efforts to collect all payments called
for under the terms and provisions of the Receivables as and when the same shall
become due and shall follow such collection procedures as it follows with
respect to all comparable automotive receivables that it services for itself.
If payments are extended in the ordinary course of the Servicer's collection
procedures, and, as a result, any Receivable would be outstanding on the first
day after the end of the Collection Period immediately preceding the Stated
Final Distribution Date, then the Servicer shall be obligated to purchase such
Receivable in the manner set forth in Section 4.7 (unless such Receivable is
otherwise being purchased pursuant to Section 11.2) as of the last day of the
Collection Period following the Collection Period in which the extension was
made (or, at the Servicer's option, as of the last day of the Collection Period
in which the extension was made);
29
PROVIDED, HOWEVER, that the purchase obligation with respect to a Receivable
shall be the obligation of the Servicer which granted the extension, and not of
any successor Servicer; and PROVIDED, FURTHER, that the purchase obligation of
any Servicer shall survive the termination of such Servicer as Servicer. The
Servicer may in its discretion waive any Additional Fees.
SECTION 4.3 REALIZATION UPON RECEIVABLES.
On behalf of the Trust, the Servicer shall use its best efforts,
consistent with its customary servicing procedures, to repossess or otherwise
convert the ownership of the Financed Vehicle securing any Receivable as to
which the Servicer shall have determined that eventual payment in full is
unlikely. The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of
automotive receivables, which may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at a public or private
sale. The foregoing shall be subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with the repair or the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
repossession will increase the Liquidation Proceeds of the related Receivable by
an amount equal to or greater than the amount of such expenses.
SECTION 4.4 INSURANCE.
(a) The Servicer may ▇▇▇ 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 shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Trustee, on behalf of the Trust, at the Servicer's expense, or the
Seller, at the Seller's expense, shall take such steps as the Servicer deems
necessary to enforce such Insurance Policy, including bringing suit in its name
or the name of the Trustee for the benefit of the Certificateholders.
(b) The Servicer shall 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
damage in the event any Obligor fails to maintain physical damage
30
insurance with respect to the related Financed Vehicles. The Seller will be the
named insured under all policies of Collateral Insurance. The Servicer shall
maintain Collateral Insurance at all times unless the Certificate Insurer
otherwise consents in writing.
(c) Costs incurred by the Servicer in maintaining Collateral Insurance
shall be paid by the Servicer.
SECTION 4.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES.
The Servicer shall, in accordance with its customary servicing
procedures, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Trustee hereby authorizes the Servicer to take such steps as are necessary
to re-perfect such security interest on behalf of the Trust in the event 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 grant to the Trust a perfected security interest
in the related Financed Vehicle, the Seller hereby agrees on behalf of itself
and the other Lender that the listing of the applicable Lender as the secured
party on the certificate of title is in its capacity as agent of the Trust.
SECTION 4.6 COVENANTS OF SERVICER.
(a) The Servicer shall not release the Financed Vehicle securing any
Receivable from the security interest granted by such Receivable in whole or in
part except in the event of payment in full by or on behalf of the Obligor
thereunder or repossession, nor shall the Servicer impair the rights of the
Trust or the Certificateholders in the Receivables, nor shall the Servicer
change the amount of the scheduled payment under a Receivable (except for an
extension permitted pursuant to Section 4.2) or change the APR of or the Amount
Financed under a Receivable, nor shall the Servicer fail to comply with the
provisions of any Insurance Policy, if the failure to so comply would impair the
protection or benefit to be afforded by such Insurance Policy.
(b) COMPLIANCE WITH APPLICABLE LAWS. The Servicer shall comply with
any law or, to the best of the Servicer's knowledge, any order, rule or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties, the failure to comply
with which may materially
31
and adversely affect the performance by the Servicer of its obligations under,
or the validity or enforceability of, this Agreement or the Certificates.
(c) CORPORATE EXISTENCE. The Servicer shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws of
its jurisdiction of incorporation and duly qualified and duly authorized and
shall conduct its business in accordance with the terms of its charter and
bylaws, PROVIDED, HOWEVER, that the Servicer shall not be required to maintain
its existence as a federally chartered thrift if the board of directors of the
Servicer shall determine that the preservation of such status is no longer
desirable and that the loss thereof is not disadvantageous in any material
respect to the Certificateholders or the Certificate Insurer.
(d) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. The
Servicer shall keep or cause to be kept in reasonable detail books and records
of account of its assets and business, including, but not limited to, books and
records relating to this Agreement. The Servicer shall furnish or cause to be
furnished to the Certificate Insurer:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Servicer, the audited consolidated statements of financial condition of the
Servicer and its subsidiaries as of the end of such fiscal year and the
related audited consolidated statements of operations, shareholders' equity
and cash flows for such fiscal year, all in reasonable detail and stating
in comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
the audit opinion of the Servicer's independent accountants (which shall be
a nationally recognized independent public accounting firm or otherwise
acceptable to the Certificate Insurer).
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 90 days after each of the first three fiscal quarters
of each fiscal year of the Servicer, the unaudited statements of financial
condition of the Servicer and its subsidiaries as of the end of such fiscal
quarter and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows for such fiscal quarter, all in
reasonable detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal year,
prepared in accordance with
32
generally accepted accounting principles, consistently applied.
(iii) CERTAIN INFORMATION. Upon the reasonable request of the
Certificate Insurer, the Servicer shall promptly provide copies of any
requested proxy statements, financial statements, reports and registration
statements which the Servicer files with, or delivers to, the Securities
and Exchange Commission or any national securities exchange.
All financial statements specified in clause (i) above shall be
furnished in consolidated form for the Servicer and its subsidiaries in the
event the Servicer shall consolidate its financial statements with its
subsidiaries.
The Certificate Insurer, by the issuance of the Certificate Insurance
Policy, agrees that it and its agents, accountants and attorneys shall keep
confidential all financial statements, reports and other information delivered
by the Servicer pursuant to this Section 4.6(d).
Nothing in this Section shall be construed to apply to such
information delivered by the Certificate Insurer to any reinsurer or potential
reinsurer, rating agency or regulator of the Certificate Insurer.
(e) MAINTENANCE OF INSURANCE. The Servicer shall maintain with a
responsible company, and at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy in a minimum amount generally maintained
by prudent federally chartered thrift institutions engaged in the servicing of
automotive receivables and having servicing portfolios of a similar size.
(f) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of (x) an Event of Default, (y) an event
that could have a material adverse effect on the ability of the Servicer to
perform its obligations under, or (z) the validity or enforceability of, this
Agreement or the Certificates, the Servicer shall, upon the reasonable request
of the Certificate Insurer, permit the Certificate Insurer or its authorized
agents:
(i) to discuss the affairs, finances and accounts of the Servicer
with the chief operating officer and the chief financial officer of the
Servicer, in each case, to the extent related to the Receivables, or the
duties of the Servicer hereunder; and
(ii) with the Servicer's consent, which consent shall not be
unreasonably withheld, to discuss the
33
affairs, finances and accounts of the Servicer with the Servicer's
independent accountants, in each case, to the extent related to the
Receivables, or the duty of the Servicer hereunder, provided that an
officer of the Servicer shall have the right to be present during such
discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the Servicer.
The Certificate Insurer, by the issuance of the Certificate Insurance
Policy, agrees that it and its shareholders, directors, agents, accountants and
attorneys shall keep confidential any matter of which it becomes aware through
such inspections or discussions (unless readily available from public sources),
except as may be otherwise required by regulation, law or court order or
requested by appropriate governmental authorities or as necessary to preserve
its rights or security under or to enforce this Agreement, provided that the
foregoing shall not limit the right of the Certificate Insurer to make such
information available to its regulators, securities rating agencies, reinsurers,
credit and liquidity providers, counsel and accountants. If the Certificate
Insurer is requested or required (by oral questions, interrogatories, requests
for information or documents subpoena, civil investigative demand or similar
process) to disclose any information of which it becomes aware through such
inspections or discussions, the Certificate Insurer will promptly notify the
Servicer of such request(s) so that the Servicer may seek an appropriate
protective order and/or waive the Certificate Insurer's compliance with the
provisions of this Agreement. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Certificate Insurer is, nonetheless, in the
opinion of its counsel, compelled to disclose such information to any tribunal
or else stand liable for contempt or suffer other censure or significant
penalty, the Certificate Insurer may disclose such information to such tribunal
that the Certificate Insurer is compelled to disclose, provided that a copy of
all information disclosed is provided to the Servicer promptly upon such
disclosure. Nothing in this Section shall be construed to apply to such
information delivered by the Certificate Insurer to any reinsurer or potential
reinsurer, rating agency or regulator of the Certificate Insurer.
(g) NOTICE OF MATERIAL EVENTS. The Servicer shall promptly inform the
Certificate Insurer and the Rating Agencies in writing of the receipt of notice
of any proceeding by any regulatory body 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
the Certificates.
34
(h) MAINTENANCE OF LICENSES. The Servicer shall maintain all
licenses, permits, charters and registrations which are material to the
performance of its obligations under this Agreement or the Certificates.
(i) RETIREMENT OF CERTIFICATES. The Servicer shall instruct the
Trustee upon retirement or other payment of all of the Certificates, to
surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
SECTION 4.7 PURCHASE OF RECEIVABLES UPON BREACH.
The Servicer, the Trustee or the Certificate Insurer shall inform the
other parties promptly, in writing, upon the discovery of any breach by the
Servicer of its obligations under Section 4.5 or 4.6; PROVIDED, that the Trustee
shall have no duty to inquire concerning, or to investigate, the breach of any
of such obligations. Unless the breach shall have been cured by the last day of
the Collection Period following the Collection Period during which the Seller
becomes aware of, or receives written notice of such breach, the Servicer shall
purchase as of such day (or, at the Servicer's option, as of the last day of the
month in which such breach was discovered) any Receivable materially and
adversely affected by such breach and any Receivable in which the interest of
the Trust is materially and adversely affected by such breach. In consideration
of the purchase of such Receivable, the Servicer shall remit the Purchase Amount
with respect to such Receivable in the manner specified in Section 5.3. The
sole remedy of the Trustee, the Trust or the Certificateholders with respect to
a breach pursuant to Section 4.5 or 4.6 shall be to require the Servicer to
purchase Receivables pursuant to this Section 4.7. The Servicer shall notify the
Certificate Insurer of any purchase of a Receivable pursuant to this Section
4.7.
SECTION 4.8 SERVICING FEES.
The servicing fee for a Collection Period shall equal the Monthly
Servicing Fee (except that in the case of a successor Servicer, the servicing
fee shall equal such amount as is arranged in accordance with Section 9.2). The
Servicer shall deposit into the Collection Account all Additional Fees.
Investment earnings on the Collection Account, the Certificate Account, the
Yield Maintenance Account and the Reserve Account, if any, shall be deposited
into the respective accounts. The Monthly Servicing Fee may be retained by the
Servicer from the aggregate interest collections on the Receivables during the
related Collection Period, prior to the deposit in the Collection Account
pursuant to Section 5.2; in no event shall the Servicer retain with respect to
any Collection Period, an amount of base servicing compensation in excess of the
Monthly Servicing Fee, even if multiple payments
35
("advance payments" or "payaheads") are received from the Obligors during such
Collection Period.
SECTION 4.9 SERVICER'S CERTIFICATE.
On or before each Determination Date, the Servicer shall deliver to
the Trustee and the Certificate Insurer by 12:00 pm New York City time a
Servicer's Certificate in the form of Exhibit E attached hereto containing all
information necessary to make the distributions pursuant to Section 5.4, to make
any transfers of funds pursuant to Sections 5.1, 5.2 and 5.6, and to make any
demands on the Certificate Insurance Policy pursuant to Section 5.5 for the
Collection Period preceding the date of such Servicer's Certificate and all
information necessary for the Trustee to send statements to Certificateholders
pursuant to Section 5.7. Receivables purchased by the Servicer or repurchased by
the Seller as of the last day of such Collection Period shall be identified by
the Seller's account number with respect to such Receivable (as specified in the
Schedule of Receivables).
SECTION 4.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Trustee and the Certificate
Insurer, on or before December 31 of each year, beginning December 31, 1998, an
Officers' Certificate stating that (i) a review of the activities of the
Servicer during the preceding 12-month period ended September 30 of such year
(or such longer period since the date of this Agreement) and of its performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all of its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officers and the nature and status
thereof.
(b) The Servicer shall deliver to the Trustee and the Certificate
Insurer, promptly after having obtained knowledge thereof, but in no event later
than one Business Day thereafter, written notice in an Officers' Certificate of
any event which with the giving of notice or lapse of time, or both, would
become an Event of Default under clause (i) of Section 9.1. The Seller shall
deliver to the Trustee and the Certificate Insurer, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become an Event of Default
under any other clause of Section 9.1.
36
SECTION 4.11 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
The Servicer shall cause a firm of independent certified public
accountants, who may also render other services to the Servicer, to deliver to
the Trustee and the Certificate Insurer on or before December 31 of each year
concerning the 12-month period ended September 30 of such year (or such longer
period since the date of this Agreement), beginning December 31, 1998, a report
addressed to the Board of Directors of the Servicer, the Trustee and the
Certificate Insurer, to the effect that such firm has read the monthly
Servicer's Certificates delivered pursuant to Section 4.9 with respect to each
Collection Period during such one-year (or longer) period and reviewed the
servicing of the Receivables by the Servicer and that such review (1) included
tests relating to automobile, light duty truck and van loans serviced for others
in accordance with the requirements of the Uniform Single Attestation Program
for Mortgage Bankers, to the extent the procedures in such program are
applicable to the servicing obligations set forth in this Agreement, and (2)
except as described in the report, disclosed no exceptions or errors in the
records relating to automobile, light duty truck and van loans serviced for
others that, in the firm's opinion, paragraph four of such program requires such
firm to report.
The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES.
The Servicer shall provide (and shall require the Sub-Servicer to
provide) to the Certificateholders and the Trustee access to the Receivables
Files in such cases where the Certificateholder or the Trustee shall be required
by applicable statutes or regulations to review such documentation. The
Certificate Insurer shall be afforded such access at any time, subject to the
requirements of the next sentence. Access shall be afforded without charge, but
only upon reasonable request and during the normal business hours at the
respective offices of the Servicer. Nothing in this Section shall 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 to information as a result of such obligation shall not
constitute a breach of this Section 4.12.
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SECTION 4.13 SERVICER EXPENSES.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and taxes imposed on the Servicer.
SECTION 4.14 REPORTS TO CERTIFICATEHOLDERS.
The Trustee shall provide to any Certificateholder, who so requests in
writing (addressed to the Corporate Trust Office) and the Rating Agencies a copy
of any certificate described in Section 4.9, or the annual statement described
in Section 4.10, or the annual report described in Section 4.11. The Trustee may
require the Certificateholder to pay a reasonable sum to cover the cost of the
Trustee's compliance with such request.
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ARTICLE V
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
SECTION 5.1 ESTABLISHMENT OF ACCOUNTS.
(a) The Trustee, on behalf of the Trust, shall establish the
Collection Account and the Certificate Account as segregated trust accounts in
the name of the Trust for the benefit of Certificateholders and the Certificate
Insurer with the Corporate Trust Office of the Trustee. The Servicer shall
direct the Trustee to invest the amounts in the Collection Account and the
Certificate Account in Eligible Investments that, with respect to the Collection
Account, mature not later than the Business Day prior to the next succeeding
Determination Date or, with respect to the Certificate Account, mature not later
than the next succeeding Deposit Date, and to hold such Eligible Investments to
maturity. The Collection Account and the Certificate Account shall always be
maintained as Eligible Accounts. The Trustee may trade with itself or an
affiliate in the purchase or sale of Eligible Investments.
(b)(i) The Seller shall establish and maintain the Reserve Account and
the Yield Maintenance Account in the name of the Trustee, each as an
Eligible Account for the benefit of the Trust, the Certificateholders and
the Certificate Insurer. The Reserve Account and the Yield Maintenance
Account shall not be property of the Trust.
(ii) Funds on deposit in the Reserve Account and the Yield Maintenance
Account shall be invested by the Trustee in Eligible Investments, in each
case selected by the Servicer by a written direction or by oral direction,
promptly confirmed in writing, which shall certify that any such investment
is authorized by this Section; PROVIDED, HOWEVER, the Trustee shall not be
liable for any loss arising from such investment in Eligible Investments
(other than as Obligor under any Eligible Investment). All such Eligible
Investments shall be held by the Trustee for the benefit of the
beneficiaries of the Reserve Account and the Yield Maintenance Account;
PROVIDED that on each Distribution Date all interest and other investment
income (net of investment losses and expenses) on funds on deposit in the
Yield Maintenance Account shall be withdrawn from the Yield Maintenance
Account at the direction of the Servicer and shall be paid to the Seller;
all interest and other investment income (net of investment losses and
expenses) on funds on deposit in the Reserve Account shall be deposited to
the Reserve Account. Funds on deposit in the Reserve Account and the Yield
Maintenance
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Account shall be invested in Eligible Investments that will mature so that
such funds will be available at the close of business on the related
Deposit Date. Funds deposited in the Reserve Account and the Yield
Maintenance Account on the day which immediately precedes a Distribution
Date upon the maturity of any Eligible Investments are not required to be
(but may be) invested overnight in accordance with the investment
provisions contained herein. The Seller shall treat the funds and other
assets in the Reserve Account and the Yield Maintenance Account as its own
for federal, state and local income tax and franchise tax purposes and
shall report on its tax returns all income and gain from the Reserve
Account and the Yield Maintenance Account.
(iii) The Trustee agrees as follows with respect to the Eligible
Investments, and the proceeds thereof, held from time to time in the
Reserve Account and the Yield Maintenance Account:
(A) any Eligible Investment that is held in deposit accounts
shall be subject to the exclusive custody and control of the Trustee,
and the Trustee shall have sole signature authority with respect
thereto;
(B) any Eligible Investment that constitutes Physical Property
(as defined in the definition of Delivery) shall be delivered to the
Trustee in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition, solely
by the Trustee or a financial intermediary (as such term is defined in
Section 8-313 (4) of the UCC) acting solely for the Trustee;
(C) any Eligible Investment that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee,
pending maturity or disposition, through continued book entry
registration of such Eligible Investment as described in such
paragraph; and
(D) any Eligible Investment that is an "uncertificated security"
under Article 8 of the UCC and that is not governed by clause (C)
above shall be delivered to the Trustee in accordance with paragraph
(c) of the definition of "Delivery" and shall be maintained by the
Trustee, pending maturity or disposition, through continued
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registration of the Trustee's (or its nominee's) ownership of such
security directly or through one or more financial intermediaries.
(iv) The Servicer shall have the power, revocable by the Trustee,
to instruct the Trustee to make withdrawals and payments from the Reserve
Account and the Yield Maintenance Account for the purpose of making
distributions of funds on deposit in such Accounts in accordance with the
provisions hereof.
(c) In the event of any change of law regarding matters relating to
the perfection of security interests in any Account, the amounts or any Eligible
Investments held therein, the Seller shall cause to be furnished to the Trustee,
the Certificate Insurer and each Rating Agency, an Opinion of Counsel addressing
such matters and if necessary, the Seller shall cooperate with the Trustee in
taking all actions necessary to comply with the change in law.
SECTION 5.2 COLLECTIONS.
(a) The Servicer shall remit to the Collection Account within two
Business Days following receipt thereof all payments by or on behalf of the
obligors on the Receivables and all Liquidation Proceeds (including payments
made under any of the Insurance Policies or the Collateral Insurance to the
extent applicable to payments due on the Receivables) , both as collected during
the Collection Period, net of (i) the Servicer's actual out-of-pocket expenses
reasonably incurred with respect to Defaulted Receivables or Vehicles, which
shall be paid from amounts actually recovered with respect to any Defaulted
Receivable or Vehicle, (ii) charge backs attributable to errors in posting,
returned checks, or rights of offset for amounts that should not have been paid
or that must be refunded as the result of a successful claim or defense under
bankruptcy or similar laws and (iii) the Monthly Servicing Fee, as provided in
Section 4.8.
(b) On the Determination Date in each month, the Servicer shall
instruct the Trustee to withdraw from the Collection Account the amount
collected with respect to Receivables, including Additional Fees and Liquidation
Proceeds, received during the Collection Period and investment earnings related
to such Determination Date and deposit such amount in immediately available
funds or by wire transfer in immediately available funds into the Certificate
Account.
(c) On or before each Determination Date, the Servicer shall determine
(i) the sum of (x) the amount of payments on all Receivables, including all
Additional Fees and Liquidation Proceeds (including payments made under any of
the Insurance Policies or the Collateral Insurance to the extent
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applicable to payments due on the Receivables), received during the related
Collection Period, investment earnings deposited in the Collection Account or
Certificate Account during the related Collection Period, investment earnings
earned through such Determination Date and not yet deposited in the Collection
Account or Certificate Account, and the Purchase Amounts for all Receivables to
be purchased or repurchased with respect to such Collection Period which have
been deposited in the Certificate Account (the "Net Available Funds") and (y)
the Yield Maintenance Withdrawal Amount for the related Distribution Date (the
sum of (x) and (y) being the "Available Funds"), and (ii) the amount of funds
necessary to make the distributions required pursuant to clauses (i) through
(iv) of Section 5.4(a) on the next Distribution Date. The Servicer shall by a
Servicer's Certificate notify the Trustee of such amounts by telecopy to the
Corporate Trust office (or such other number as the Trustee may from time to
time provide), followed promptly by mailing such notice to the Trustee at the
Corporate Trust Office, and the Trustee shall provide such notice to the
Certificate Insurer.
SECTION 5.3 PURCHASE AMOUNTS.
On the Determination Date following each Collection Period, the
Servicer or the Seller, as the case may be, shall remit to the Certificate
Account the aggregate Purchase Amount for such Collection Period pursuant to
Sections 3.2, 4.2 and 4.7.
SECTION 5.4 DISTRIBUTIONS.
(a) On each Distribution Date, the Trustee shall apply or cause to be
applied the sum of (w) the Net Available Funds in the Certificate Account (after
withdrawing amounts deposited in error and Liquidation Proceeds relating to
Purchased Receivables) for the prior Collection Period, (x) the Yield
Maintenance Withdrawal Amount, (y) the Reserve Account Withdrawal Amount and (z)
the amount of any Insured Payment to make the following distributions in the
listed order of priority:
(i) the Monthly Trustee's Fee, including any overdue Monthly
Trustee's Fee, to the Trustee;
(ii) the Premium Amount, including any overdue Premium Amount,
to the Certificate Insurer;
(iii) Monthly Interest, including any overdue Monthly Interest,
to the Certificateholders;
(iv) Monthly Principal, including any overdue Monthly
Principal, to the Certificateholders;
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(v) the Reimbursement Amount, to the Certificate Insurer;
(vi) the Reserve Account Deposit Amount, to the Reserve
Account; and
(vii) the remainder, to the Seller.
If the Servicer exercises the purchase option on any Distribution Date
pursuant to Section 11.2, the Optional Purchase Price shall be deposited into
the Certificate Account on the Determination Date related to such Distribution
Date.
In making such distributions, the Trustee shall be entitled to rely
upon (without investigation, confirmation or recalculation) all information and
calculations contained in the Servicer's Certificate delivered to the Trustee
pursuant to Section 4.9.
(b) All monthly distributions to Certificateholders shall be made by
wire transfer (if wiring instructions are received from the Certificateholders),
or, in the absence of such instructions, by check mailed to each
Certificateholder of record on the preceding Record Date at its address
appearing on the Certificate Register, or by such other means as the
Certificateholder and the Trustee shall agree. Payments to the Certificate
Insurer or the Seller shall be made by wire transfer based on instructions
received by the Trustee from either of them. Notwithstanding the foregoing, the
final payment on each Certificate shall be made only against the presentation
and surrender of the Certificate at the office or agency then maintained by the
Trustee.
(c) Each Certificateholder shall promptly notify the Trustee and the
Certificate Insurer in writing upon the receipt of a nonappealable court order
of a court having competent jurisdiction seeking to recover payments to
Certificateholders or the Trust as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code and shall enclose a
copy of such order with such notice to the Trustee and the Certificate Insurer.
(d) If the Servicer has failed to provide the Trustee with the notice
required pursuant to Section 5.2, the Trustee may calculate Monthly Interest and
apply funds, if any, in the Certificate Account as of the last day of the prior
Collection Period, plus any payments from the Certificate Insurer, to make a
distribution of Monthly Interest to the Certificateholders.
SECTION 5.5 CERTIFICATE INSURANCE POLICY.
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(a) By 12:00 noon New York City time on each Determination Date the
Trustee shall, based solely on the information set forth in the related
Servicer's Certificate, determine the Net Available Distribution Amount with
respect to the immediately following Distribution Date.
(b) If the Required Payments for any Distribution Date exceed the Net
Available Distribution Amount for such Distribution Date (such excess being a
"Deficiency Amount") and the Certificate Insurer does not otherwise fund such
Deficiency Amount by 12:00 p.m. New York City time on the third Business Day
preceding the related Distribution Date (the "Claim Date"), the Trustee shall
complete a Notice in the form of Exhibit A attached to the Certificate Insurance
Policy and submit such notice to the Certificate Insurer no later than 12:00
p.m. New York City time on the Claim Date as a claim for an Insured Payment in
an amount equal to such Deficiency Amount. The Notice shall specify the amount
of the Insured Payment and shall constitute a claim for an Insured Payment
pursuant to the Certificate Insurance Policy.
(c) The Trustee shall report to the Seller and the Certificate Insurer
with respect to the amounts then held in each Account held by the Trustee and
the identity of the investments included therein, as the Seller or the
Certificate Insurer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the Seller or
the Certificate Insurer, transmit promptly to the Certificate Insurer and the
Seller copies of all accountings of receipts in respect of the Receivables
furnished to it by the Servicer.
(d) The Trustee shall (i) receive as attorney-in-fact of the
Certificateholders any Insured Payment from the Certificate Insurer and (ii)
disburse the same to such Certificateholders as set forth in Section 5.4.
Insured Payments disbursed by the Trustee from proceeds of the Certificate
Insurance Policy shall not be considered payment by the Trust with respect to
the Certificates, and the Certificate Insurer shall become the owner of such
unpaid amounts due from the Trust in respect of Insured Payments as the deemed
assignee of such Certificateholders, as hereinafter provided. The Trust and the
Trustee hereby agree on behalf of each Certificateholder for the benefit of the
Certificate Insurer that to the extent the Certificate Insurer pays Insured
Payments, either directly or indirectly (as by paying through the Trustee), to
the Certificateholders, the Certificate Insurer shall be subrogated to the
rights of the Certificateholders with respect to such Insured Payments, shall be
deemed to the extent of the Insured Payments so made to be a Certificateholder
and shall receive future distributions until all such Insured Payments by the
Certificate Insurer have been fully reimbursed, as described
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in the following paragraph. To evidence such subrogation, the Trustee shall
note the Certificate Insurer's rights as subrogee on the Certificate Register
upon receipt from the Certificate Insurer of proof of the payment of any Insured
Payment, after making the distribution on any such future Distribution Date to
the Certificateholders other than to the Certificate Insurer.
The Certificate Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Section 5.4 with respect to each Insured
Payment made by the Certificate Insurer. The Trustee hereby agrees on behalf of
each Certificateholder and the Trust for the benefit of the Certificate Insurer
that it recognizes that to the extent the Certificate Insurer makes Insured
Payments, either directly or indirectly (as by paying through the Trustee), to
the Certificateholders, or to the extent any Premium Amount remains unpaid, as
the case may be, the Certificate Insurer shall be entitled to receive the
related Reimbursement Amount pursuant to Section 5.4. It is understood and
agreed that the intention of the parties is that the Certificate Insurer shall
not be entitled to reimbursement on any Distribution Date for amounts previously
paid by it unless on such Distribution Date the Certificateholders shall also
have received the full amount of the Required Payments for such Distribution
Date.
(e) Each Certificateholder which pays any Preference Amounts
theretofore received by such Certificateholder on account of such Certificate
will be entitled to receive reimbursement for such amounts from the Certificate
Insurer in accordance with the terms of the Certificate Insurance Policy, but
only after (i) delivering a copy to the Certificate Insurer of a final,
nonappealable order (a "Preference Order") of a court having competent
jurisdiction under the United States Bankruptcy Code demanding payment of such
amount to the bankruptcy court and (ii) irrevocably assigning such
Certificateholder's claim with respect to such Preference Order to the
Certificate Insurer in such form as is required by the Certificate Insurer. In
no event shall the Certificate Insurer pay more than one Insured Payment in
respect of any Preference Amount. Consequently, the Trustee shall not be
entitled to reimbursement with respect to any Preference Order relating to the
Certificateholder's receipt of funds representing Insured Payments made by the
Certificate Insurer in respect of such Distribution Date.
The Trustee, for itself and on behalf of the Certificateholders,
agrees that the Certificate Insurer may at any time during the continuation of
any proceeding relating to a Preference Order direct all matters relating to
such Preference Order, including, without limitation, the direction of any
appeal of any order relating to such Preference Order
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and the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Certificate
Insurer shall be subrogated, to the extent of Insured Payments, to the rights of
the Seller, the Servicer, the Trustee and each Certificateholder in the conduct
of any such preference claim, including, without limitation, all rights of any
party to any adversarial proceeding or action with respect to any court order
issued in connection with any such preference claim.
(f) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Certificate from moneys
received under the Certificate Insurance Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(g) The Certificate Insurer shall have the right to give
participations in its rights under this Agreement and to enter into contracts of
reinsurance with respect to the Certificate Insurance Policy; PROVIDED that no
such grant of participation shall operate to relieve the Certificate Insurer of
liability on the Certificate Insurance Policy, and provided further that no such
participation or contract of reinsurance shall require the Servicer, the Trustee
or the Seller to deal with any person other than the Certificate Insurer.
SECTION 5.6 RESERVE ACCOUNT AND YIELD MAINTENANCE ACCOUNT.
(a) On the Closing Date, the Seller shall deposit the Reserve Initial
Deposit into the Reserve Account. Amounts held from time to time in the Reserve
Account shall be held by the Trustee for the benefit of Seller, subject to the
first priority security interest granted under Section 2.2 hereof to the Trustee
for the benefit of the Certificateholders and the Certificate Insurer, but the
Reserve Account shall not be an asset of the Trust.
The Certificate Insurer may, by written notice to the Trustee, direct
the Trustee to reduce the amount of the Specified Reserve Balance; PROVIDED,
HOWEVER, that no such notice given to the Trustee shall be effective unless
accompanied by written evidence from each Rating Agency that such reduction in
the Specified Reserve Balance will not result in the reduction or withdrawal of
any rating then assigned to the Certificates.
On each Distribution Date (i) if the amount on deposit in the Reserve
Account is less than the Specified Reserve Balance, the Trustee shall, after
payment of any amounts required to be distributed pursuant to clauses (i)
46
through (v) of Section 5.4(a) deposit in the Reserve Account the Reserve Account
Deposit Amount and (ii) if the amount on deposit in the Reserve Account on any
Distribution Date (after giving effect to all other deposits thereto and
withdrawals therefrom to be made on such Distribution Date) is greater than the
Specified Reserve Balance, the Trustee shall distribute the amount of such
excess to the Seller on such Distribution Date.
(b) On each Distribution Date, the Servicer shall instruct the Trustee
(based on the information contained in the Servicer's Certificate delivered on
the related Determination Date) to withdraw the Reserve Account Withdrawal
Amount from the Reserve Account and deposit such amount in the Certificate
Account.
(c) On the Closing Date, the Seller shall deposit the Initial Yield
Maintenance Amount into the Yield Maintenance Account. Amounts held from time
to time in the Yield Maintenance Account shall be held by the Trustee for the
benefit of the Seller, subject to the first priority security interest granted
under Section 2.2 hereof to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, but the Yield Maintenance
Account shall not be an asset of the Trust.
On each Distribution Date (i) the Trustee shall withdraw the Yield
Maintenance Withdrawal Amount from the Yield Maintenance Account and distribute
such amount to the Certificateholders pursuant to Section 5.4 hereof, (ii) the
Trustee shall withdraw from the Yield Maintenance Account the net investment
earnings then on deposit thereon and distribute such amount to the Seller and
(iii) if the amount then on deposit in the Yield Maintenance Account (after
giving effect to all withdrawals therefrom to be made on such Distribution Date)
is greater than the Yield Maintenance Amount, the Trustee shall distribute the
amount of such excess to the Seller on such Distribution Date.
(d) Amounts properly received by the Seller pursuant to this Agreement
shall not be available to the Trustee or the Trust for the purpose of making
deposits to the Reserve Account, or making payments to the Certificateholders,
nor shall the Seller be required to refund any amount properly received by it.
(e) In the event of any prepayment received on a Receivable during the
related Collection Period the Trustee shall, on or prior to each Distribution
Date, withdraw from the Reserve Account and deposit in the Collection Account an
amount equal to the difference between (x) 30 days' interest at an interest rate
at the related APR on the Principal Balance of such Receivable as of the first
day of the related
47
Collection Period and (y) the interest actually paid by the Obligor with respect
to the Receivable during such Collection Period (such amount, "Compensating
Interest"). In the event the funds in the Reserve Account are insufficient to
fund Compensating Interest, Certificateholders will not be entitled to
Compensating Interest on such Distribution Date; provided, that the foregoing
shall not affect the provisions relating to drawings under the Certificate
Insurance Policy.
SECTION 5.7 STATEMENTS TO CERTIFICATEHOLDERS.
On each Distribution Date, the Trustee shall mail or send by facsimile
to the Certificateholders, the Rating Agencies and the Certificate Insurer a
statement, based on information in the Servicer's Certificate furnished to the
Trustee by the Servicer pursuant to Section 4.9, setting forth for the
Collection Period relating to such Distribution Date the following information
(which in the case of items (i), (ii) and (iii) shall be based on a Certificate
in a principal amount of $1,000):
(i) the amount of the distribution allocable to principal,
including any overdue principal;
(ii) the amount of the distribution allocable to interest,
including any overdue interest;
(iii) the Monthly Servicing Fee, including any overdue Monthly
Servicing Fee, and the Monthly Trustee's Fee;
(iv) the amount of any Insured Payments;
(v) the remaining balance in the Reserve Account and in the
Yield Maintenance Account, together with the Reserve Account Withdrawal
Amount and the Yield Maintenance Withdrawal Amount;
(vi) the aggregate Net Losses on the Receivables for the
related Collection Period;
(vii) the Pool Balance and Certificate Factor as of the end of
the related Collection Period;
(viii) the aggregate Principal Balance of all Receivables which
were delinquent 30 days or more as of the last day of the related
Collection Period;
(ix) the Certificate Principal Balance (after giving effect to
any distribution of Monthly Principal made on such Distribution Date) on
which Monthly Interest will be calculated with respect to the next
succeeding Distribution Date;
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(x) the Delinquency Percentage relating to such Distribution
Date;
(xi) the aggregate of all Purchase Amounts received on the
related Determination Date;
(xii) the aggregate amount received with respect to Defaulted
Receivables, including Liquidation Proceeds, during the related Collection
Period; and
(xiii) the Reimbursement Amount for such Distribution Date.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of this Agreement, the Trustee
shall mail, to each Person who at any time during such calendar year shall have
been a Certificateholder, a statement containing the sum of the amounts
determined in clauses (i), (ii) and (iii) for such calendar year or, in the
event such Person shall have been a Certificateholder during a portion of such
calendar year, for the applicable portion of such year, unless substantially
comparable information has been provided to such Certificateholder, for the
purposes of such Certificateholder's preparation of federal income tax returns.
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 THE CERTIFICATES.
(a) The Certificates shall be issued in denominations of $1,000 and
integral multiples thereof; PROVIDED, HOWEVER, that one Certificate may be
issued in a denomination that includes any residual amount. The Certificates
shall be executed on behalf of the Trust by manual signature of a Responsible
Officer of the Trustee. Certificates bearing the signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust, shall be valid and binding obligations of the
Trust, notwithstanding that such individuals or any of them shall have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificates.
(b) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein with
respect to the Certificates as to "principal" and "interest" no debt of any
Person is represented thereby, nor are the Certificates or
49
the underlying Receivables guaranteed by any Person (except that the Receivables
may be recourse to the Obligors thereof to the extent permitted by law and
except for the rights of the Trustee with respect to the Certificate Insurance
Policy). Distributions on the Certificates are payable solely from payments
received on or with respect to the Receivables, moneys in the Collection Account
and the Certificate Account, except as otherwise provided herein, from earnings
on moneys and the proceeds of property held as a part of the Trust and, upon the
occurrence of certain events as herein provided, from draws on the Reserve
Account and the Yield Maintenance Account and claims under the Certificate
Insurance Policy. Each Certificate entitles the Certificate Owner thereof to
receive monthly on each Distribution Date a specified portion of such payments
with respect to the Receivables, earnings, proceeds and withdrawals from the
Reserve Account and the Yield Maintenance Account and claims under the
Certificate Insurance Policy PRO RATA in accordance with the ownership interest
of such Certificate Owner.
SECTION 6.2 AUTHENTICATION OF CERTIFICATES.
The Trustee shall cause the Certificates to be executed on behalf of
the Trust, authenticated, and delivered to or upon the written order of the
Seller, signed by its chairman of the board, any vice chairman of the board, its
president, any executive vice president, any senior vice president or any vice
president, without further corporate action by the Seller, in authorized
denominations, pursuant to this Agreement. No Certificate shall entitle its
holder to any benefit under this Agreement, or shall be valid for any purpose,
unless there shall appear on such Certificate a certificate of authentication,
substantially as set forth in the form of Certificate attached as Exhibit B
hereto, executed by the Trustee by manual signature; such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 6.7, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee shall be the initial
Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office, the Trustee shall execute, authenticate, and deliver, in
the name of the
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designated transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Trustee. At the option of a Holder, Certificates may be exchanged for other
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the Corporate Trust Office.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder or his or her attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer and exchange shall be canceled and
subsequently destroyed by the Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 6.4 MUTILATED, DESTROYED, LOST, OR STOLEN CERTIFICATES.
If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss, or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar or the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser other than the Person who requested a replacement
Certificate, the Trustee on behalf of the Trust shall execute and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost, or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 6.4, the Trustee and the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section 6.4 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen, or
destroyed Certificate shall be found at any time.
SECTION 6.5 PERSONS DEEMED OWNERS.
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Prior to registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.4 and for all other purposes whatsoever, and neither the
Trustee, the Certificate Insurer nor the Certificate Registrar shall be bound by
any notice to the contrary.
SECTION 6.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Trustee shall furnish or cause to be furnished to the Servicer and
the Certificate Insurer, within 15 days after receipt by the Trustee of a
request therefor from such party in writing, a list, in such form as such party
may reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If three or more Certificateholders, or one or
more Holders of Certificates aggregating not less than 25% of the Certificate
Principal Balance, apply in writing to the Trustee, and such application states
that the applicants desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates and such
application shall be accompanied by a copy of the communication that such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, afford such applicants access during
normal business hours to the current list of Certificateholders. Each Holder,
by receiving and holding a Certificate, shall be deemed to have agreed to hold
neither the Servicer nor the Trustee accountable by reason of the disclosure of
its name and address, regardless of the source from which such information was
derived.
SECTION 6.7 MAINTENANCE OF OFFICE OR AGENCY.
The Trustee shall maintain an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served. The Trustee initially designates
the Corporate Trust Office as specified in this Agreement as its office for such
purposes. The Trustee shall give prompt written notice to the Servicer, the
Certificate Insurer and Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 6.8 BOOK-ENTRY CERTIFICATES.
The Certificates (other than a Certificate representing any residual
portion of the Pool Balance as of the Cut-Off Date), upon original issuance,
shall be issued in
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the form of typewritten Certificates representing the Book-Entry Certificates,
to be delivered to The Depository Trust Company, the initial Clearing Agency, by
the Seller or on its behalf. The Certificates shall initially be registered on
the Certificate Register in the name of CEDE & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Certificates, except as
provided in Section 6.10. Unless and until definitive, fully registered
Certificates ("Definitive Certificates") have been issued to Certificateholders
pursuant to Section 6.10:
(i) the provisions of this Section 6.8 shall be in full force
and effect;
(ii) the Seller, the Servicer and the Trustee may deal with the
Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions on the Certificates and the taking
of actions by the Certificateholders) as the authorized representatives of
the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.8
conflict with any other provisions of this Agreement, the provisions of
this Section 6.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency (or to the extent Certificate Owners are not
Clearing Agency Participants through the Clearing Agency Participants
through which such Certificate Owners own Book-Entry Certificates) and
shall be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants, and all references in this Agreement to actions by
Certificateholders shall refer to actions taken by the Clearing Agency upon
instructions from the Clearing Agency Participants, and all references in
this Agreement to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and
statements to the Clearing Agency or its nominee, as registered Holder of
the Certificates, as the case may be, for distribution to Certificate
Owners in accordance with the procedures of the Clearing Agency; and
(v) pursuant to an agreement between the Clearing Agency and
the Seller, the initial Clearing Agency will make Book-Entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Certificates to the Clearing
Agency Participants, for
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distribution by such Clearing Agency Participants to the Certificate Owners
or their nominees.
SECTION 6.9 NOTICES TO CLEARING AGENCY.
Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 6.10, the Trustee
shall give to the Clearing Agency all such notices and communications specified
herein to be given to Certificateholders.
SECTION 6.10 DEFINITIVE CERTIFICATES.
If (i)(A) the Servicer advises the Trustee in writing that the
Clearing Agency is no longer willing or able properly to discharge its
responsibilities as Clearing Agency with respect to the Certificates, and (B)
the Trustee or the Servicer is unable to locate a qualified successor, (ii) the
Servicer, at its option, elects to terminate the Book-Entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default,
Certificateholders representing in the aggregate not less than a majority of the
Certificate Principal Balance advise the Clearing Agency through the Clearing
Agency Participants in writing that the continuation of a Book-Entry system
through the Clearing Agency is no longer in the best interests of the
Certificate Owners, the Trustee shall notify the Clearing Agency of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee by the
Clearing Agency, accompanied by re-registration instructions from the Clearing
Agency for registration and instructions and directions from the Servicer to
execute and authenticate new Certificates, the Trustee shall issue authenticated
Definitive Certificates. The Servicer shall arrange for, and will bear all
costs of, the printing and issuance of such Definitive Certificates. None of
the Seller, the Servicer, the Trustee or the Certificate Insurer shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, all references herein to obligations imposed upon or to
be performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
ARTICLE VII
THE SELLER
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SECTION 7.1 REPRESENTATIONS OF SELLER.
The Seller makes the following representations on which the Trustee
relies in accepting the Receivables in trust and executing and authenticating
the Certificates and upon which the Certificate Insurer relies in executing and
delivering the Certificate Insurance Policy. The representations speak as of
the Closing Date and shall survive the sale of the Receivables to the Trustee.
(i) DUE ORGANIZATION AND GOOD STANDING. The Seller shall have
been duly organized and shall be validly existing as a federal savings bank
in good standing under the laws of the United States of America, with the
corporate power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have, the
corporate power and authority and legal right to acquire and own the
Receivables.
(ii) DUE QUALIFICATION. The Seller shall be duly qualified to
do business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business shall
require such qualifications, except where the failure to be so qualified or
to have obtained such licenses or approvals would not have a material
adverse effect on the transactions contemplated by this Agreement.
(iii) POWER AND AUTHORITY. The Seller shall have the corporate
power and authority to execute and deliver this Agreement and to carry out
its terms, the Seller shall have full power and authority to sell and
assign the property to be sold and assigned to and deposited with the
Trustee as part of the Trust and shall have duly authorized such sale and
assignment to the Trustee by all necessary corporate action; and the duly
authorized by the Seller by all necessary corporate action.
(iv) VALID SALE; BINDING OBLIGATIONS. This Agreement shall
evidence a valid sale, transfer, and assignment of the Receivables,
enforceable against creditors of and purchasers from the Seller; and shall
be a legal, valid, and binding obligation of the Seller enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights or other obligees' rights in general or
the rights of creditors or obligees
55
of federally chartered stock savings banks, the deposits of which are
insured by the FDIC, and by general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding in equity
or at law.
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time) a
default under, the charter or by-laws of the Seller, or any indenture,
agreement, or other instrument to which the Seller is a party or by which
it shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument (other than this Agreement); nor violate any
law or, to the best of the Seller's knowledge, any 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 its properties.
(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Seller's best knowledge, threatened
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement or the
Certificates, (B) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement,
(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 the Certificates, or (D)
which might adversely affect the federal income tax attributes of the
Certificates.
(vii) NO CONSENT REQUIRED. The Seller is not required to obtain
the consent of any other Person or any consent, license, approval or
authorization of, or make any registration or declaration with, any
governmental authority or agency in connection with the execution, delivery
and performance of this Agreement (except as have been obtained), other
than as may be required under the Blue Sky laws of any state or the
Securities Act.
(viii) NO INSOLVENCY. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby were
not made in
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contemplation of the insolvency of the Seller or after the commission of
any act of insolvency by the Seller.
(ix) NOT AN INVESTMENT COMPANY. The Trust is not required to be
registered as an "investment company" under the Investment Company Act of
1940, as amended.
(x) OFFICIAL RECORD. This Agreement and all other documents
related hereto to which the Seller is a party have been approved by the
Seller's board of directors, which approval is reflected in the minutes of
such board, and shall continuously from the time of each such document's
execution, be maintained as an official record of the Seller.
SECTION 7.2 LIABILITY OF SELLER.
The Seller shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken and the representations made by the
Seller under this Agreement.
SECTION 7.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF THE
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 shall
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 Seller under this
Agreement, shall 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 (x) the Seller shall have delivered to the
Trustee and the Certificate Insurer an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger, or succession and such
agreement of assumption comply with this Section 7.3, and (y) all conditions
precedent, if any, provided for in this Agreement relating to such merger,
consolidation or succession have been complied with. Notwithstanding the above,
no such transaction shall result in the Seller becoming subject to the
provisions of the United States Bankruptcy Code or similar laws of any State.
The Seller or its successor hereunder shall provide the Trustee, the Servicer,
the Certificate Insurer and the Rating Agencies with prompt notice of any such
transaction.
SECTION 7.4 LIMITATION ON LIABILITY OF CERTAIN PERSONS OF SELLER.
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No recourse under or upon any obligation or covenant of this
Agreement, or of any Certificate or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, shareholder, officer or
director as such, of the Seller or of any successor corporation, either directly
or through the Seller, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise. This
Agreement and the obligations created hereunder are solely corporate
obligations, and no personal liability whatever shall attach to, or is or shall
be incurred by the incorporators, shareholders, officers or directors, as such,
of the Seller, or any of them, because of the issuance of the Certificates, or
under or by reason of the obligations, covenants or agreements contained in this
Agreement or in any of the Certificates or implied therefrom. Any and all such
personal liability, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, shareholder, officer or director, as such, because of the issuance
of the Certificates, or under or by reason of the obligations, covenants or
agreements contained in this Agreement or in any of the Certificates or implied
therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement and the issuance of the
Certificates. The Seller and any director, officer, employee or agent of the
Seller may rely in good faith on any document of any kind PRIMA FACIE properly
executed and submitted by any Person respecting any matters arising hereunder.
ARTICLE VIII
THE SERVICER
SECTION 8.1 REPRESENTATIONS OF SERVICER.
The Servicer makes the following representations on which the Trustee
relies in accepting the Receivables in trust and executing and authenticating
the Certificates and upon which the Certificate Insurer relies in executing and
delivering the Certificate Insurance Policy. The representations speak as of
the Closing Date and shall survive the sale of the Receivables to the Trustee.
(a) DUE ORGANIZATION AND GOOD STANDING. The Servicer shall have been
duly organized and shall be validly existing as a federal savings bank in good
standing under the laws of the United States of America, with the corporate
power and authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently conducted,
and had at all relevant times, and shall have, the corporate power and authority
and legal right to acquire, own, sell, and service the Receivables
58
and to hold the Receivable Files as custodian on behalf of the Trustee.
(b) DUE QUALIFICATION. The Servicer shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such qualifications,
except where the failure to be so qualified or to have obtained such licenses or
approvals would not have a material adverse effect on the transactions
contemplated by this Agreement and would not render any Receivable unenforceable
by the Trustee on behalf of the Certificateholders and the Certificate Insurer.
(c) POWER AND AUTHORITY. The Servicer shall have the corporate power
and authority to execute and deliver this Agreement and to carry out its terms,
and the execution, delivery, and performance of this Agreement shall have been
duly authorized by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATIONS. This Agreement shall constitute a legal,
valid, and binding obligation of the Servicer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors' or
other obligees' rights in general or the rights of creditors or obligees of
federally chartered stock savings banks, the deposits of which are insured by
the Federal Deposit Insurance Corporation, and by general principles of equity,
regardless of whether such enforceability shall be considered in a proceeding in
equity or at law.
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the charter or by-
laws of the Servicer, or any indenture, agreement, or other instrument to which
the Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instrument (other than this
Agreement); nor violate any law or, to the best of the Servicer's knowledge any
order, rule, or regulation applicable to the Servicer of any court or of any
federal or State regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
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(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties (A) asserting the
invalidity of this Agreement or the Certificates, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement, (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 the
Certificates, or (D) which might adversely affect the federal income tax
attributes of the Certificates.
SECTION 8.2 LIABILITIES OF SERVICER, INDEMNITIES.
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken and the representations made
by the Servicer under this Agreement, including its duties as custodian of the
Receivable Files.
(i) The Servicer, except as set forth in this Section 8.2, shall
not be under any liability to the Trust or the Certificateholders for
taking any action or for refraining from taking any action pursuant to this
Agreement, or for errors in judgment; PROVIDED, HOWEVER, that this
provision shall not protect the Servicer against any liability which would
otherwise be imposed upon the Servicer by reason of its willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties as Servicer
hereunder.
(ii) The Servicer shall indemnify, defend, and hold harmless the
Trustee, its officers, directors, agents and employees, the Trust, the
Certificateholders and the Certificate Insurer from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out of
or resulting from the use, ownership or operation by the Servicer or any
affiliate thereof of a Financed Vehicle; PROVIDED, that the Servicer shall
have no obligation to indemnify any Person against any credit losses on any
Receivable serviced by the Servicer in accordance with the requirements of
this Agreement.
(iii) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee and its officers, directors, employees and agents and
the Certificate Insurer from and against any loss, liability, expense,
damage or injury, including any judgment, award,
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settlement and other costs or expenses incurred in connection with the
defense of any action, proceeding or claim, to the extent such loss,
liability, expense, damage or injury arose out of, or was imposed upon such
persons through, the willful misfeasance, bad faith or negligence of the
Servicer in the performance of its duties or by reason of its reckless
disregard of its obligations and duties as Servicer hereunder.
(iv) The initial Servicer shall indemnify, defend and hold
harmless the Trustee, its officers, directors, employees and agents from
and against any loss, liability or expense incurred without negligence or
bad faith on the part of the Trustee or its officers, directors, employees
or agents and arising out of or in connection with the acceptance or
administration by the Trustee of this Trust, as applicable, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of the Trustee's powers
or duties hereunder.
(v) The Servicer shall defend, indemnify and hold harmless the
Trust and the Trustee, its respective officers, directors, agents and
employees, the Certificate Insurer and the Certificateholders from and
against any taxes that may at any time be asserted against the Trust, the
Trustee, the Certificate Insurer or the Certificateholders with respect to
the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but not including any
personal property taxes asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions
on the Certificates) and costs and expenses in defending against the same.
Indemnification under this Section 8.2 shall include reasonable fees
and expenses of counsel and expenses of litigation.
Within a reasonable period after receipt by the Trustee, the Trust,
the Certificate Insurer or the Certificateholders of notice of the commencement
of any action with respect to which indemnification is sought under this Section
8.2, such party shall notify the Servicer in writing of the commencement
thereof. In case any such action shall be brought, the Servicer shall be
entitled to participate in and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the Servicer to the indemnified party of its election so to assume
the defense thereof, the Servicer shall not be liable to such indemnified party
for any legal or
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other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
The Servicer shall not be liable for any settlement of any litigation
or proceeding effected without the written consent of the Servicer (which shall
not be unreasonably withheld). The indemnified party shall not, without the
Servicer's written consent (which shall not be unreasonably withheld), settle or
compromise any claim or consent to entry of any judgment which would impose an
injunction or other equitable relief on the Servicer or which does not include
as an unconditional term thereof the release by the claimant or the plaintiff of
the Servicer from all liability in respect of such claim.
The rights to indemnification under this Section 8.2 shall survive the
termination, resignation or removal of the Servicer with respect to acts and
omissions to act of the Servicer giving rise to such rights and occurring prior
to such termination, resignation or removal. In addition, the rights to
indemnification under this Section 8.2 shall survive the termination of the
Trust.
SECTION 8.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF THE
SERVICER.
Any Person (a) into which the Servicer may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Servicer
shall be a party, or (c) which may succeed to the properties and assets of the
Servicer substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act on the part of any of
the parties to this Agreement; PROVIDED, HOWEVER, that (x) the Servicer shall
have delivered to the Trustee and the Certificate Insurer an Officers'
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 (y) all conditions precedent, if any, provided for in this Agreement
relating to such merger, consolidation or succession have been complied with.
The Servicer or its successor hereunder shall provide the Trustee, the Seller,
the Certificate Insurer and the Rating Agencies with prompt notice of any such
transaction.
SECTION 8.4 LIMITATION ON LIABILITY OF CERTAIN PERSONS OF SERVICER.
No recourse under or upon any obligation or covenant of this
Agreement, or of any Certificate or for any claim
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based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer or director as such, of the Servicer or of
any successor corporation, either directly or through the Servicer, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise. This Agreement and the obligations created
hereunder are solely corporate obligations, and no personal liability whatever
shall attach to, or is or shall be incurred by the incorporators, shareholders,
officers or directors, as such, of the Servicer, or any of them, because of the
issuance of the Certificates, or under or by reason of the obligations,
covenants or agreements contained in this Agreement or in any of the
Certificates or implied therefrom. Any and all such personal liability, either
at common law or in equity or by constitution or statute, of, and any and all
such rights and claims against, every such incorporator, shareholder, officer or
director, as such, because of the issuance of the Certificates, or under or by
reason of the obligations, covenants or agreements contained in this Agreement
or in any of the Certificates or implied therefrom, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Agreement and the issuance of the Certificates. The Servicer and any
director, officer, employee or agent of the Servicer may rely in good faith on
any document of any kind PRIMA FACIE properly executed and submitted by any
Person respecting any matters arising hereunder.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Receivables in accordance with
this Agreement (collection actions with respect to Defaulted Receivables are
understood to be incidental to the Servicer's duties to service the
Receivables), and that in its opinion may involve it in any expense or
liability.
SECTION 8.5 SERVICER NOT TO RESIGN.
The Servicer shall not resign from its obligations and duties under
this Agreement except upon determination that the performance of its duties
shall no longer be permissible under applicable law (any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee and the Certificate Insurer).
Notice of any such determination permitting the resignation of the Servicer,
shall be communicated to the Trustee, the Certificate Insurer and the Rating
Agencies at the earliest practicable time and any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered to the Trustee concurrently with such notice. No such
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resignation shall become effective until the Trustee or other successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 9.2.
SECTION 8.6 DELEGATION OF DUTIES.
The Servicer may at any time delegate any duties hereunder to any
Person, including, without limitation, the Sub-Servicer, who agrees to conduct
such duties in accordance with this Agreement; PROVIDED, HOWEVER, that the
Servicer may not delegate its duties as custodian except (i) with the consent of
the Certificate Insurer, or (ii) as provided in Sections 3.3 and 3.4 of this
Agreement. Such delegation shall not relieve the Servicer of its
responsibilities and liabilities with respect to such duties, and shall not
constitute a resignation within the meaning of Section 8.5.
ARTICLE IX
DEFAULT
SECTION 9.1 EVENTS OF DEFAULT.
If any one of the following events ("Events of Default") shall occur
and be continuing:
(i) any failure by the Servicer to deliver to the Trustee the
Servicer's Certificate for a Collection Period or to deliver to the Trustee
for distribution to Certificateholders any proceeds or payment required to
be so delivered under the terms of the Certificates and this Agreement that
shall continue unremedied for a period of more than three Business Days
after written notice from (x) the Trustee or the Holders of Certificates
evidencing not less than 25% of the Certificate Principal Balance, which
notice, in either case, shall be consented to by the Certificate Insurer,
or (y) the Certificate Insurer is received by the Servicer as specified in
this Agreement; or
(ii) failure on the part of the Servicer or the Seller duly to
observe or to perform in any material respect any other covenants or
agreements of the Servicer or the Seller, as the case may be, set forth in
the Certificates or in this Agreement, which failure shall (a) materially
and adversely affect the rights of Certificateholders (determined without
regard to the availability of the Certificate Insurance Policy) and (b)
continue unremedied for a period of more than 30 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given (x) (1) to the Servicer or the Seller, as the case
may be, by the Trustee, or (2) to the Servicer or the Seller,
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as the case may be, and to the Trustee by the Holders of Certificates
evidencing not less than 25% of the Certificate Principal Balance, which
notice, in either case, shall be consented to by the Certificate Insurer,
or (y) to the Servicer or the Seller, as the case may be, by the
Certificate Insurer; or
(iii) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the Servicer in
any insolvency, readjustment of debt, marshaling of assets and liabilities,
or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(iv) the consent by the Servicer to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities, or similar proceedings of or
relating to the Servicer or of or relating to substantially all of its
property; or the admission by the Servicer in writing of its inability to
pay its debts generally as they become due, the filing by the Servicer of a
petition to take advantage of any applicable insolvency or reorganization
statute, the making by the servicer of an assignment for the benefit of its
creditors, or the voluntary suspension by the Servicer of payment of its
obligations;
then, and in each and every case, so long as an Event of Default shall not have
been remedied, (x) the Trustee or the Holders of Certificates evidencing more
than 50% of the Certificate Principal Balance, in either case with the consent
of the Certificate Insurer or (y) the Certificate Insurer, by notice then given
in writing to the Servicer (and to the Trustee if given by the Certificate
Insurer or the Certificateholders), may terminate all of the rights and
obligations of the Servicer under this Agreement.
On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Certificates or the Receivables or otherwise, shall, without further
action, pass to and be vested in the Trustee or such successor Servicer as may
be appointed under Section 9.2 pursuant to and under this Section 9.1; and,
without limitation, the Servicer, the Trustee or such other successor Servicer,
as the case may be, is hereby authorized and empowered to execute and deliver,
on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or
65
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and related documents,
or otherwise; PROVIDED, HOWEVER, that the Trustee or any successor Servicer
shall not be liable for any acts, omissions or obligations of the Servicer prior
to such succession. The predecessor Servicer shall cooperate with the successor
Servicer and the Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer of electronic records related to the
Receivables or such form as the successor Servicer may reasonably request and
the transfer to the successor Servicer for administration by it of all cash
amounts that shall at the time be held by the predecessor Servicer for deposit,
or shall thereafter be received with respect to a Receivable. The Trustee shall
give the Rating Agencies and the Certificate Insurer notice of any termination
of the Servicer pursuant to the terms of this Section 9.1.
SECTION 9.2 APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of notice of termination pursuant to
Section 9.1 or the Servicer's resignation in accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the later of (x) the date 45 days from the delivery to the
Trustee and the Certificate Insurer of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's resignation or
termination hereunder, the Trustee shall, with the consent of the Certificate
Insurer, appoint a successor Servicer, and the successor Servicer shall accept
its appointment by a written assumption in form acceptable to the Trustee. In
the event that a successor Servicer has not been appointed at the time when the
predecessor Servicer has ceased to act as Servicer in accordance with this
Section 9.2, the Trustee without further action shall automatically be appointed
the successor Servicer; PROVIDED, HOWEVER, that the Trustee shall not be liable
for any acts, omissions or obligations of the Servicer prior to such succession.
Notwithstanding the above, the Trustee shall, if it shall be legally unable so
to act, appoint, or petition a court of competent jurisdiction to appoint, any
established financial institution, having a net worth of not less than
$50,000,000 and whose regular business
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shall include the servicing of automotive receivables, as the successor to the
Servicer under this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties, and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, and shall be entitled to all of the rights
granted to the predecessor Servicer, by the terms and provisions of this
Agreement.
(c) In connection with such appointment, the Trustee may make such
arrangements for the compensation of a successor Servicer out of payments on
Receivables as it and such successor Servicer shall agree; PROVIDED, HOWEVER,
that no such compensation shall be in excess of that permitted the original
Servicer under this Agreement. The Trustee and such successor Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
The Servicer shall cooperate with the successor Servicer in effecting
the transfer of the rights and responsibilities of the Servicer under this
Agreement.
SECTION 9.3 NOTIFICATION TO CERTIFICATEHOLDERS.
Upon any notice of an Event of Default or upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article IX, the
Trustee shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register, to the Rating
Agencies and to the Certificate Insurer.
SECTION 9.4 WAIVER OF PAST DEFAULTS.
The Certificate Insurer or, provided they have obtained the prior
consent of the Certificate Insurer, the Holders of Certificates evidencing more
than 50% of the Certificate Principal Balance may, on behalf of all Holders of
Certificates, waive any default by the Servicer or the Seller in the performance
of its obligations hereunder and its consequences, except a default in making
any required deposits to or payments from the Certificate Account in accordance
with this Agreement. Upon any such waiver of a past default, such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
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SECTION 9.5 EFFECT OF EVENT OF DEFAULT ON SUB-SERVICER.
Any removal of the Servicer pursuant to this Article IX shall IPSO
FACTO constitute a removal of the Sub-Servicer.
ARTICLE X
THE TRUSTEE
SECTION 10.1 DUTIES OF TRUSTEE.
The Trustee both prior to and after the occurrence of an Event of
Default, shall undertake to perform such duties as are specifically set forth in
this Agreement. If an Event of Default shall have occurred and shall not have
been cured, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and shall use the same degree of care and skill in their
exercise, as a prudent man or woman would exercise or use under the
circumstances in the conduct of his or her own affairs; PROVIDED, HOWEVER, that
if the Trustee shall assume the duties of the Servicer pursuant to Section 9.2,
the Trustee in performing such duties shall use the degree of skill and
attention customarily exercised by a servicer with respect to automobile
receivables that it services for itself or others.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith; PROVIDED, HOWEVER, that:
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as shall be specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, or manifest error, the Trustee may conclusively
rely on the truth of the statements and the correctness of the opinions
expressed in any certificates or opinions
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furnished to the Trustee and conforming to the requirements of this
Agreement;
(ii) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that
the Trustee shall have been negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken, suffered, or omitted to be taken in good faith in accordance with
this Agreement or at the direction of the Certificate Insurer or the
Holders of Certificates evidencing not less than 25% of the Certificate
Principal Balance with the consent of the Certificate Insurer relating to
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Agreement;
(iv) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clause (i) or (ii) of Section 9.1, or of any failure by the
Seller to comply with the obligations of the Seller referred to in clause
(ii) of Section 9.1, unless a Responsible Officer of the Trustee receives
written notice of such failure (it being understood that knowledge of the
Servicer or the Servicer as custodian, in its capacity as agent for the
Trustee, is not attributable to the Trustee) from the Servicer, the Seller
or the Certificate Insurer, as the case may be, or the Holders of
Certificates evidencing not less than 25% of the Certificate Principal
Balance; and
(v) without limiting the generality of this Section or Section
10.4, the Trustee shall have no duty (i) to see to any recording, filing,
or depositing of this Agreement or any agreement referred to therein or any
financing statement evidencing a security interest in the Receivables or
the Financed Vehicles, or to see to the maintenance of any such recording
or filing or depositing or to any rerecording, refiling or redepositing of
any thereof, (ii) to see to any insurance of the Financed Vehicles or
Obligors or to effect or maintain any such insurance, (iii) to see to the
payment or discharge of any tax, assessment, or other governmental charge
or any Lien or encumbrance of any kind owing with respect to, or assessed
or levied against, any part of the Trust, (iv) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to the
Trustee pursuant to this Agreement believed by the Trustee to be genuine
and to have been signed or presented by the proper party or
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parties, or (v) to inspect the Financed Vehicles at any time or ascertain
or inquire as to the performance or observance of any of the Seller's or
the Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Receivable Files
under this Agreement.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers, and privileges of, the Servicer in accordance with
the terms of this Agreement.
SECTION 10.2 TRUSTEE'S CERTIFICATE.
On or as soon as practicable after each Distribution Date on which
Receivables shall be (i) assigned to the Seller pursuant to Section 3.2 or (ii)
assigned to the Servicer pursuant to Section 4.2, 4.7 or 11.2, the Trustee shall
execute a Trustee's Certificate, substantially in the form of, in the case of an
assignment to the Seller, Exhibit C, or, in the case of an assignment to the
Servicer, Exhibit D, based on the information contained in the Servicer's
Certificate for the related Collection Period, amounts deposited to the
Certificate Account, and notices received pursuant to this Agreement,
identifying the Receivables repurchased by the Seller pursuant to Section 3.2 or
purchased by the Servicer pursuant to Section 4.2, 4.7 or 11.2 with respect to
such Collection Period, and shall deliver such Trustee's Certificate,
accompanied by a copy of the Servicer's Certificate for such Collection Period
to the Seller or the Servicer, as the case may be, with a copy to the
Certificate Insurer. The Trustee's Certificate shall be an assignment pursuant
to Section 10.3.
SECTION 10.3 TRUSTEE'S ASSIGNMENT OF PURCHASED RECEIVABLES.
With respect to each Receivable repurchased by the Seller pursuant to
Section 3.2 or purchased by the Servicer pursuant to Section 4.2, 4.7 or 11.2,
the Trustee shall assign, on the day on which the Trustee receives payment for
such Receivable, effective as of the last day of the Collection Period during
which such Receivable became subject to repurchase by the Seller or purchase by
the Servicer,
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without recourse, representation, or warranty, to the Seller or the Servicer (as
the case may be) all the Trustee's right, title, and interest in and to such
Receivables, and all security and documents relating thereto, and all proceeds
thereof, such assignment being an assignment outright and not for security. If
in any enforcement suit or legal proceeding it shall be held that the Servicer
may not enforce a Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce the Receivable, the Trustee shall, at
the Servicer's expense, take such steps as the Trustee deems necessary to
enforce the Receivable, including bringing suit in its name or the name of the
Certificateholders.
SECTION 10.4 CERTAIN MATTERS AFFECTING THE TRUSTEE.
Except as otherwise provided in Section 10.1:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
Servicer's Certificate, certificate of auditors, or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond, or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties.
(ii) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it under this Agreement in
good faith and in accordance with such Opinion of Counsel.
(iii) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute,
conduct, or defend any litigation under this Agreement or in relation to
this Agreement, at the request, order, or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless
such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses, and liabilities that may
be incurred therein or thereby; nothing contained in this Agreement,
however, shall relieve the Trustee of the obligations, upon the occurrence
of an Event of Default (that shall not have been cured), to exercise such
of the rights and powers vested in it by this Agreement, and to use the
same degree of care and skill in their exercise as a prudent man or woman
would exercise or use under the circumstances in the conduct of his or her
own affairs.
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(iv) The Trustee shall not be liable for any action taken,
suffered, or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement.
(v) Prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond, or other paper or
document, unless requested in writing to do so by the Holders of
Certificates evidencing not less than 25% of the Certificate Principal
Balance or the Certificate Insurer; PROVIDED, HOWEVER, that if the payment
within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in the making of such investigation
shall be, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense, or
liability as a condition to so proceeding. Nothing in this clause (v) shall
affect the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors.
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this Agreement either directly or by
or through agents or attorneys or a custodian and shall not be liable for
the negligence of any of such agents, attorneys or custodians appointed
with due care. The Trustee shall not be responsible for any misconduct or
negligence solely attributable to the acts or omissions of the Servicer in
its capacity as Servicer or custodian.
(vii) Subsequent to the sale of the Receivables by the Seller to
the Trustee, the Trustee shall have no duty of independent inquiry, except
as may be required by Section 10.1, and the Trustee may rely upon the
representations and warranties and covenants of the Seller and the
Servicer contained in this Agreement with respect to the Receivables and
the Receivable Files.
SECTION 10.5 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES.
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the
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Seller or the Servicer, as the case may be, and the Trustee assumes no
responsibility for the correctness thereof. The Trustee shall make no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates),
or of any Receivable or related document. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity, and
enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficacy of the Trust or its ability to generate the payments to be distributed
to Certificateholders under this Agreement, including, without limitation, the
existence, condition, location, and ownership of any Financed Vehicle; the
existence and enforceability of any physical damage insurance, theft insurance,
vendor's single interest insurance, or credit life or disability and
hospitalization insurance with respect to any Receivable; the existence and
contents of any Receivable or any computer or other record thereof; the validity
of the assignment of any Receivable to the Trust or of any intervening
assignment; the completeness of any Receivable; the performance or enforcement
of any Receivable; the compliance by the Seller or the Servicer with any
warranty or representation made under this Agreement or in any related document
and the accuracy of any such warranty or representation prior to the Trustee's
receipt of notice or other discovery of any noncompliance therewith or any
breach thereof; any investment of monies by the Servicer or any loss resulting
therefrom other than investments in obligations of or guaranteed by the Trustee
(it being understood that the Trustee shall remain responsible for any Trust
property that it may hold); the acts or omissions of the Seller, the Servicer,
or any Obligor; any action of the Servicer taken in the name of the Trustee; or
any action by the Trustee taken at the instruction of the Servicer; PROVIDED,
HOWEVER, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. Except with respect to a claim based
on the failure of the Trustee to perform its duties under this Agreement or
based on the Trustee's negligence or willful misconduct, no recourse shall be
had for any claim based on any provision of this Agreement, the Certificates, or
any Receivable or assignment thereof against the Trustee in its individual
capacity, the Trustee shall not have any personal obligation, liability, or duty
whatsoever to any Certificateholder or any other Person with respect to any such
claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in this Agreement. The
Trustee shall not be accountable for the use or application by the Seller of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Seller or the Servicer in respect of the
Receivables.
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The Trustee shall not be responsible for any statement in any document prepared,
executed or delivered in connection with the sale and issuance of the
Certificates other than any such document prepared, executed or delivered by the
Trustee in connection therewith on the Closing Date.
SECTION 10.6 TRUSTEE MAY OWN CERTIFICATES.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee.
SECTION 10.7 TRUSTEE'S FEES.
The Trustee's fee for a Collection Period shall equal the Monthly
Trustee's Fee. The Monthly Trustee's Fee will be paid from the funds of the
Trust in accordance with Section 5.4.
SECTION 10.8 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee under this Agreement shall at all times be a corporation
having an office in the same State as the location of the Corporate Trust Office
as specified in this Agreement, or another state of the United States of America
or the District of Columbia; and organized and doing business under the laws of
such State, district or the United States of America; authorized under such laws
to exercise corporate trust powers; having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or State
authorities; having a rating of its long-term debt obligations by Moody's of no
less than Baa3; and reasonably satisfactory to the Certificate Insurer. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 10.8, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 10.8, the Trustee shall resign immediately in the manner and with the
effect specified in Section 10.9.
SECTION 10.9 RESIGNATION OR REMOVAL OF TRUSTEE.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer. Upon receiving
such notice of resignation, the Servicer shall, with the consent of the
Certificate Insurer, promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to
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the successor Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.8 and shall fail to resign after written
request therefor by the Servicer or the Certificate Insurer, or if at any time
the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation, or
liquidation, then the Servicer or the Certificate Insurer may remove the
Trustee. If it shall remove the Trustee under the authority of the immediately
preceding sentence, the Servicer shall promptly appoint a successor Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 10.9 shall
not become effective without the consent of the Certificate Insurer and until
acceptance of appointment by the successor Trustee pursuant to Section 10.10.
SECTION 10.10 SUCCESSOR TRUSTEE.
Any successor Trustee appointed pursuant to Section 10.9 shall
execute, acknowledge, and deliver to the Servicer and to its predecessor Trustee
an instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed, or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement; and the Servicer and
the predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties, and
obligations.
No successor Trustee shall accept appointment as provided in this
Section 10.10 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 10.8.
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Upon acceptance of appointment by a successor Trustee pursuant to this
Section 10.10, the Servicer shall mail notice of the successor of such Trustee
under this Agreement to all Holders of Certificates at their addresses as shown
in the Certificate Register, to the Certificate Insurer and to the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Servicer.
SECTION 10.11 MERGER OR CONSOLIDATION OF TRUSTEE.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible pursuant to Section 10.8, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding. The
Trustee or its successor hereunder shall provide the Servicer, the Certificate
Insurer and the Rating Agencies with prompt notice of any such transaction.
SECTION 10.12 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Financed Vehicle may at the time be located, the
Servicer and the Trustee with the consent of the Certificate Insurer acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person, in such capacity and for the
benefit of the Certificateholders and the Certificate Insurer, such title to the
Trust, or any part thereof, and, subject to the other provisions of this Section
10.12, such powers, duties, obligations, rights, and trusts as the Servicer and
the Trustee may consider necessary or desirable. If the Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor Trustee pursuant to Section 10.8 and no
notice to Certificateholders of the
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appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.10.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(A) all rights, powers, duties, and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under this Agreement or as
successor to the Servicer under this Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties, and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(B) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(C) the Servicer, the Trustee and the Certificate Insurer acting
jointly may at any time accept the resignation of or remove any separate
trustee or co-trustee.
Any notice, request, or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article X. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Each
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer and the Certificate Insurer.
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Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign, or be removed, all of its
estates, properties, rights, remedies, and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
SECTION 10.13 REPRESENTATIONS AND WARRANTIES OF TRUSTEE.
The Trustee shall make the following representations and warranties on
which the Seller, the Certificate Insurer and Certificateholders may rely:
(A) DUE ORGANIZATION AND GOOD STANDING. The Trustee is a
national banking association duly organized, validly existing, and in good
standing under the laws of the United States of America.
(B) POWER AND AUTHORITY. The Trustee has full power, authority,
and legal right to execute, deliver, and perform this Agreement, and shall
have taken all necessary action to authorize the execution, delivery, and
performance by it of this Agreement.
(C) NO VIOLATION. The execution, delivery, and performance by
the Trustee of this Agreement shall not violate any provision of any law
governing the banking and trust powers of the Trustee or, to the best of
the Trustee's knowledge, any order, writ, judgment, or decree of any court,
arbitrator, or governmental authority applicable to the Trustee or any of
its assets.
(D) NO PROCEEDINGS. The execution, delivery, and performance by
the Trustee of this Agreement shall not require the authorization,
consent, or approval of, the giving of notice to, the filing or
registration with, or the taking of any other action in respect of any
governmental authority or agency regulating the banking and corporate trust
activities of the Trustee.
(E) DULY EXECUTED. This Agreement shall have been duly executed
and delivered by the Trustee and shall constitute the legal, valid, and
binding agreement of the Trustee, enforceable in accordance with its terms.
(F) SECURITIES INTERMEDIARY. The Trustee is a securities
intermediary as defined under Article 8 of the Minnesota Uniform Commercial
Code.
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SECTION 10.14 TAX RETURNS.
The Servicer shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust and the Trustee shall promptly sign
and file such returns. In no event shall the Trustee be liable for any
liabilities, costs or expenses of the Trust or the Certificateholders under any
tax law, including without limitation federal, state or local income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).
ARTICLE XI
TERMINATION
SECTION 11.1 TERMINATION OF THE TRUST.
The respective obligations and responsibilities of the Seller, the
Servicer, and the Trustee created hereby and the Trust created by this Agreement
shall terminate upon (i) the purchase as of the last day of any Collection
Period by the Servicer at its option, pursuant to Section 11.2, of the corpus of
the Trust or (ii) the payment to Certificateholders and the Certificate Insurer
of all amounts required to be paid to them pursuant to this Agreement and the
disposition of all property held as part of the Trust; PROVIDED, HOWEVER, that
in no event shall the trust created by this Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late ambassador of the Court of St. ▇▇▇▇▇, living on the
date of this Agreement. The Servicer shall promptly notify the Trustee and the
Certificate Insurer of any prospective termination pursuant to this Section
11.1.
Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not later than the first day
of the month in which the specified Distribution Date occurs, stating (A) the
Distribution Date upon which final payment of the Certificates shall be made
upon presentation and surrender of the Certificates at the office of the Trustee
therein designated, (B) the amount of any such final payment, and (C) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Trustee therein specified. The Trustee shall give such notice
to the Certificate Registrar (if other than the Trustee) at the time such notice
is given to Certificateholders. Upon presentation and surrender of the
Certificates, the Trustee shall cause to
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be distributed to Certificateholders and the Certificate Insurer amounts
distributable on such Distribution Date pursuant to Section 5.4.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall, upon notice to the Trustee, be paid by the Trustee to the
Servicer for deposit into an escrow account, and thereafter Certificateholders
shall look only to such escrow account with respect to any claims in respect of
such funds.
SECTION 11.2 OPTIONAL PURCHASE OF ALL RECEIVABLES.
The Seller shall have the option to purchase the corpus of the Trust
on any Distribution Date following a Record Date on which the Pool Balance is 5%
or less of the Original Pool Balance. To exercise such option, the Seller shall
deposit in the Certificate Account an amount equal to the aggregate Purchase
Amounts for the Receivables, together with any Reimbursement Amount then owed to
the Certificate Insurer (the "Optional Purchase Price"); PROVIDED, HOWEVER, that
the Seller may not effect any such purchase unless the Trustee and the
Certificate Insurer shall have received an Opinion of Counsel acceptable to them
that such purchase does not constitute a fraudulent conveyance under applicable
federal and state laws. Such price shall be deposited to the Certificate
Account in immediately available funds by 12:00 noon, New York City time, on
such Distribution Date and, upon notice to the Trustee of such deposit, the
Trustee shall release the Receivables and the Receivable Files and all other
property of the Trust to the Seller, whereupon the Certificates shall no longer
evidence any right or interest in the Receivables or other property of the Trust
or any proceeds thereof.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 AMENDMENT.
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This Agreement may be amended by the Seller, the Servicer and the
Trustee, without the consent of any of the Certificateholders but with the
consent of the Certificate Insurer, to cure any ambiguity or defect, to correct
or supplement any provisions in this Agreement, to correct any typographical
error or to add any other provisions with respect to matters or questions
arising under this Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Servicer and the Trustee with the consent of the Certificate Insurer and the
Holders of Certificates evidencing more than 50% of the Certificate Principal
Balance for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Certificates; PROVIDED, HOWEVER, that no
such amendment shall, without the consent of the Holders of all Certificates
then outstanding, reduce the aforesaid percentage required to consent to any
such amendment. In no case may any such amendment increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made on
any Certificate without the consent of the Holder of such Certificate.
The Trustee shall notify each Rating Agency prior to any amendment of
this Agreement; to the extent practicable, such notice shall be given not less
than 10 days prior to the date on which such amendment is executed.
Promptly after the execution of any amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to each Certificateholder, each Rating Agency and the Certificate Insurer; a
copy of any proposed amendment shall be furnished to the Certificate Insurer by
the Seller prior to its execution by the Seller.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section 12.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such
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amendment is authorized or permitted by this Agreement and the Opinion of
Counsel referred to in Section 12.2(i)(1). The Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Trustee's own
rights, duties, or immunities under this Agreement.
SECTION 12.2 PROTECTION OF TITLE TO TRUST.
(a) The Seller shall execute and file, or cause to be executed and
filed, such financing statements and cause to be executed and filed such
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
Certificateholders, the Certificate Insurer and the Trustee under this Agreement
in the Receivables and in the proceeds thereof. The Seller shall deliver (or
cause to be delivered) to the Trustee and the Certificate Insurer 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 shall change its name,
identity, or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless the Seller or Servicer shall have filed (or
cause to be filed) UCC financing statements upon any of the stated events.
(c) If, as a result of a relocation of the Seller's or Servicer's
principal executive office, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement, then the Seller or the Servicer
shall file or cause to be filed such amendment or continuation statement or new
financing statement within the period of time necessary fully to preserve and
protect the interest of the Trustee in the Receivables. The Servicer shall at
all times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and 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 Certificate
Account in respect of such Receivable.
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(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly with reference to the particular
grantor trust that such Receivable is owned by the Trustee. Indication of the
Trustee's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Receivable shall have been
paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender, or other transferee, the
Servicer shall give to such prospective purchaser, lender, or other transferee
computer tapes, records, or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trustee.
(g) The Servicer shall permit the Trustee and the Certificate Insurer
and their respective agents at any time during normal business hours to inspect,
audit, and make copies of and abstracts from the Servicer's records regarding
any Receivable to the extent permitted by applicable banking, privacy and other
laws limiting such access.
(h) Upon request, the Servicer shall furnish to the Trustee and to the
Certificate Insurer, 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.
(i) The Servicer shall deliver to the Trustee and the Certificate
Insurer:
(A) promptly after the execution and delivery of this Agreement
and of each amendment hereto and at the time of any merger,
consolidation or succession of the Seller or the Servicer, an Opinion
of Counsel either (a) stating that, in the opinion of such counsel,
all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect
the first priority perfected security interest of the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (b)
stating that, in the opinion of
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such counsel, no such action shall be necessary to preserve and
protect such interest; and (2) by December 31 of each calendar year
beginning December 31, 1997, an Opinion of Counsel, dated as of a date
during the 90-day period ending on such date, either (a) stating that,
in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are
necessary fully to preserve and protect the first priority perfected
security interest of the Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (b) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and
protect such interest.
SECTION 12.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties to
this Agreement or any of them.
No Certificateholder shall have any right to vote (except as provided
in Section 9.1, 9.4, 12.1, 12.3 or 12.7) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement, nor shall anything in this Agreement set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken pursuant to any provision of this Agreement.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have received the written consent of the
Certificate Insurer and shall have given to the Trustee a written notice of
default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 25% of the Certificate
Principal Balance shall have made written request upon the Trustee to institute
such action, suit, or proceeding in its own name as Trustee under this Agreement
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses, and liabilities to be
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incurred therein or thereby, and the Trustee, for 30 days after its receipt of
such notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding and during such 30-day period no
direction inconsistent with such written request has been given to the Trustee
pursuant to Section 9.4; no one or more Holders of Certificates shall have any
right in any manner whatever by virtue or by availing itself or themselves of
any provisions of this Agreement to affect, disturb, or prejudice the rights of
the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right,
under this Agreement except in the manner provided in this Agreement and for the
equal, ratable, and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 12.3, each
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
SECTION 12.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 12.5 NOTICES.
All demands, notices, and communications under this Agreement shall be
in writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller or the Servicer, to the agent for service as specified in
this Agreement, at the following address: Chevy Chase Bank, F.S.B., ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General
Counsel, or at such other address as shall be designated by the Seller or the
Servicer in a written notice to the Trustee and (b) in the case of the Trustee,
at the Corporate Trust Office, (c) in the case of the Certificate Insurer, at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed
Certificates Group. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice.
SECTION 12.6 SEVERABILITY OF PROVISIONS.
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If any one or more of the covenants, agreements, provisions, or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from the
remaining covenants, agreements, provisions, or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof or
the rights of the Certificate Insurer.
SECTION 12.7 ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 7.3 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 (x)
the Certificate Insurer or (y) the Trustee or the Holders of Certificates
evidencing more than 50% of the Certificate Principal Balance, in either case
acting with the consent of the Certificate Insurer.
SECTION 12.8 CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not be personally liable for obligations of
the Trust. The interests represented by the Certificates shall be nonassessable
for any losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 6.2, Certificates
shall be deemed fully paid.
SECTION 12.9 COUNTERPARTS.
For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.
SECTION 12.10 BENEFITS OF AGREEMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, the Certificateholders and their respective successors and
assigns, and to the extent provided herein, the Certificate Insurer. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement which expressly confer rights upon the Certificate Insurer shall be
for the benefit of and run directly to the Certificate Insurer, and the
Certificate Insurer shall be entitled to rely on and enforce such covenants to
the same extent as if it were a party hereto.
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Except as otherwise provided in this Agreement, no other person shall have any
rights or obligations hereunder.
SECTION 12.11 TAX TREATMENT.
The parties hereto agree that the Trust created hereby will at all
times be characterized as a grantor trust for federal, state and local income
tax purposes.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
CHEVY CHASE BANK, F.S.B.,
as Seller and Servicer
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
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