<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1999.
REGISTRATION STATEMENT NO. 333-65107
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRIAD AUTO RECEIVABLES TRUSTS
(Issuer of the Securities)
------------------------
TRIAD FINANCIAL CORPORATION
(Sponsor of the trusts described herein)
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<S> <C> <C>
CALIFORNIA 7711 CENTER AVENUE, SUITE 100 33-0356705
(Jurisdiction) HUNTINGTON BEACH, CALIFORNIA 92647 (Identification no.)
(714) 373-8300
(Address, including zip code and
telephone number
including area code of principal
executive office)
</TABLE>
------------------------
HELEN R. KRAUS, ESQ.
TRIAD FINANCIAL CORPORATION
7711 CENTER AVENUE, SUITE 100
HUNTINGTON BEACH, CALIFORNIA 92647
(714) 373-8300
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------
COPY TO:
MALCOLM S. DORRIS, ESQ.
DECHERT PRICE & RHOADS
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 698-3519
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement, as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
Auto Receivables Asset Backed
Securities....................... $1,000,000 100% $1,000,000 $295
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains (i) two forms of Prospectus Supplement
relating to future offerings by a Triad Auto Receivables Trust of a Series of
Asset Backed Securities described therein and (ii) a form of Prospectus relating
to the offering of Series of Asset Backed Securities by various Triad Auto
Receivables Trusts created from time to time by Triad Financial Corporation. The
forms of Prospectus Supplement relates only to the securities described therein
and each is a form that may be used by Triad Financial Corporation to offer
Asset Backed Securities under this Registration Statement.
<PAGE>
SUBJECT TO COMPLETION, DATED [ ]
FORM OF PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED [ ], 199[ ]
$[ ]
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ]
$[ ] [ ]% ASSET BACKED NOTES, CLASS A-1
$[ ] [ ]% ASSET BACKED NOTES, CLASS A-2
$[ ] [ ]% ASSET BACKED NOTES, CLASS B
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION
(SELLER)
TRIAD FINANCIAL CORPORATION
(SERVICER)
The [ ]% Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), the [ ]%
Asset Backed Notes, Class A-2 (the "Class A-2 Notes; together with the Class A-1
Notes, the "Class A Notes") and the [ ]% Asset Backed Notes, Class B (the
"Class B Notes" and together with the Class A Notes, the "Notes") will be issued
pursuant to an Indenture (the "Indenture") between Triad Auto Receivables Owner
Trust 199[ ] - [ ], as Issuer (the "Issuer"), and [ ], as Indenture Trustee
(the "Indenture Trustee"). The Class A-2 Notes will be subordinated to the Class
A-1 Notes to the extent described herein; the Class B Notes will be subordinated
to the Class A Notes to the extent described herein. The Class A-1 Notes will
have an initial aggregate principal balance of $[ ], the Class A-2 Notes will
have an initial aggregate principal balance of $[ ] and the Class B Notes will
have an initial aggregate principal balance of $[ ]. The Reserve Account (as
defined herein) will serve as credit enhancement for the Notes.
The assets of the Issuer include a pool of non-prime motor vehicle retail
installment contracts, a security interest in the vehicles financed thereby, the
Reserve Account and certain other property, as more fully described herein. The
aggregate principal balance of such pool as of the Cutoff Date was $[ ].
Principal and interest will be distributed to the Class A-1 Noteholders, the
Class A-2 Noteholders and the Class B Noteholders on the [ ] day of each month
(or, if such day is not a Business Day, the next Business Day), commencing [ ].
Payments of interest on the Class A-2 Notes will be subordinated in priority of
payment to interest on the Class A-1 Notes, and payments of principal on the
Class A-2 Notes will be subordinated in priority of payment to principal due on
the Class A-1 Notes, to the extent described herein. Payments of interest on the
Class B Notes will be subordinated in priority of payment to interest on the
Class A Notes and payments of principal on the Class B Notes will be
subordinated in priority of payment to principal due on the Class A Notes, to
the extent described herein. The "Final Scheduled Payment Date" on the Notes is
[ ].
The Underwriter has agreed to purchase from the Seller the Notes at a
purchase price equal to [ ]% of the principal amount thereof, subject to the
terms and conditions set forth in the Underwriting Agreement referred to herein
under "Plan of Distribution". The aggregate proceeds to the Seller, after
deducting expenses payable by the Seller, estimated at $[ ] will be $[ ]. The
Underwriter proposes to offer the Notes from time to time in negotiated
transactions or otherwise, at varying prices to be determined at the time of
sale. For further information with respect to the plan of distribution and any
discounts, commissions or profits that may be deemed underwriting discounts or
commissions, see "Underwriting" herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE FACTORS SET
FORTH UNDER "RISK FACTORS" AT PAGE S-11 HEREIN AND PAGE 11 IN THE ACCOMPANYING
PROSPECTUS.
THE NOTES WILL REPRESENT OBLIGATIONS OF THE ISSUER AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF TRIAD FINANCIAL CORPORATION, THE SERVICER, THE
SELLER OR ANY AFFILIATE THEREOF. THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITER]
---------------------
The date of this Prospectus Supplement is [ ].
<PAGE>
AVAILABLE INFORMATION
Triad Financial Corporation (the "Sponsor") has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement (together
with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at 500 West Madison, 14th Floor,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a website
(http://www.sec.gov) at which the Registration Statement and other information
regarding the Seller may be accessed.
The Servicer, on behalf of the Trust, will also file or cause to be filed
with the Commission such periodic reports as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder. Upon the receipt of a request by
an investor who has received an electronic Prospectus Supplement and Prospectus
from the Underwriters (as defined herein) or a request by such investor's
representative within the period during which there is an obligation to deliver
a Prospectus Supplement and Prospectus, the Sponsor, the Seller or the
Underwriters will promptly deliver, or cause to be delivered, without charge, a
paper copy of the Prospectus Supplement and Prospectus.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus Supplement and any
Prospectus with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus Supplement and any
Prospectus with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Notes offered
hereby and thereby, nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus Supplement at any time does not imply that information herein is
correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Sponsor with respect to the Registration
Statement, either on its own behalf or on behalf of the Trust, relating to the
Notes, with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, after the date of this Prospectus Supplement and prior to the
termination of any offering of the Notes offered hereby, shall be deemed to be
incorporated by reference in this Prospectus Supplement and to be a part of this
Prospectus Supplement from the date of the filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus Supplement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or replaces such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
Supplement.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities are issued, periodic reports
containing information concerning the Receivables will be prepared by the
Servicer and sent on behalf of the Trust to the Indenture Trustee and Cede &
Co., as nominee of The Depository Trust Company ("DTC") and registered holder of
the Securities. Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. The Servicer will
file with the Commission such periodic reports as are required under the
Exchange Act, and the rules and regulations thereunder and as are otherwise
agreed to by the Commission. Copies of such periodic reports may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
ii
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS. CERTAIN CAPITALIZED TERMS USED AND NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED THERETO ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT OR THE PAGES INDICATED IN THE "INDEX OF TERMS" OR, TO THE
EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE
PROSPECTUS.
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<S> <C>
Issuer............................ Triad Auto Receivables Owner Trust 199[ ] - [ ], a
Delaware business trust (the "Issuer" or the "Trust"),
wholly-owned by Triad Financial Special Purpose
Corporation.
Seller............................ Triad Financial Special Purpose Corporation, a Delaware
corporation (the "Seller").
Servicer.......................... Triad Financial Corporation, a California corporation
("Triad" and, in its capacity as Servicer under the Sale
and Servicing Agreement, the "Servicer").
Owner Trustee..................... [Name and Address]
Indenture Trustee and
Backup Servicer................. [Name and Address]
Cutoff Date....................... [ ] (the "Cutoff Date").
Closing Date...................... [ ] (the "Closing Date").
Securities Offered................ The Notes will consist of three classes, entitled [ ]%
Asset Backed Notes, Class A-1 (the "Class A-1 Notes"),
the [ ]% Asset Backed Notes, Class A-2 (the "Class A-2
Notes"; together with the Class A-1 Notes, the "Class A
Notes") and [ ]% Asset Backed Notes, Class B (the
"Class B Notes"; together with the Class A Notes, the
"Notes"). The Notes will be offered for purchase in
minimum denominations of $[ ] and integral multiples of
$1,000 in excess thereof, except that one Note of each
Class may be issued in an additional amount equal to any
remaining portion of the original Note Balance of such
Class. The Notes will be offered in book entry form
only. See "Description of the Securities--Book Entry
Registration" in the Prospectus.
The "Class A-1 Percentage" of collections on the
Receivables will equal, as of any Payment Date, the
lesser of (a) a fraction (expressed as a percentage),
the numerator of which is the Class A-1 Note Balance,
before giving effect to any distributions of principal
on such Payment Date, and the denominator of which is
the Aggregate Principal Balance as of the opening of
business on the first day of the related Collection
Period and (b) [ ]%.
The "Class A-2 Percentage" of collections on the
Receivables will equal, as of any Payment Date, the
lesser of (a) a fraction (expressed as a percentage),
the numerator of which is the Class A-2 Note Balance,
before giving effect to any distributions of principal
on such Payment Date, and the denominator of which is
the Aggregate Principal Balance as of the opening of
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S-1
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<S> <C>
business on the first day of the related Collection
Period and (b) [ ]%. The "Class B Percentage" of
collections on the Receivables will equal, as of any
Payment Date, the lesser of (a) a fraction (expressed as
a percentage), the numerator of which is the Class B
Note Balance, before giving effect to any distributions
of principal on such Payment Date, and the denominator
of which is the Aggregate Principal Balance as of the
opening of business on the first day of the related
Collection Period and (b) [ ]%. The Class A-2 Notes are
subordinated to the Class A-1 Notes to the extent
described herein and the Class B Notes are subordinated
to the Class A Notes to the extent described herein. See
"Priority of Distribution Amounts" below and "The
Notes--Priority of Distribution Amounts." The Notes will
have a Final Scheduled Payment Date of [ ].
Trust Property.................... The property of the Trust (the "Trust Property") will
include: (i) a pool of certain motor vehicle retail
installment contracts sold and assigned by the Seller to
the Trust on the Closing Date (the "Receivables")
secured by new and used automobiles and light-duty
trucks (the "Financed Vehicles"); (ii) certain monies
payable thereunder after the Cutoff Date; (iii) security
interests in the Financed Vehicles; (iv) any proceeds
from claims on certain insurance policies; (v) certain
rights under the Receivables Purchase Agreement and the
Sale and Servicing Agreement; (vi) certain bank
accounts, including the Reserve Account, and the
proceeds thereof; and (vii) all proceeds of the
foregoing. See "Trust Property."
Initial Class A-1
Note Balance.................... The Class A-1 Notes will be issued in an initial
principal amount of $[ ] which is equal to the initial
Class A-1 Percentage of the Cutoff Date Principal
Balance. The "Class A-1 Note Balance" as of any date
will be equal to the initial Class A-1 Note Balance less
all principal distributed to holders of Class A-1 Notes
("Class A-1 Noteholders") prior to such date.
Class A-1 Interest Rate........... [ ]% per annum (the "Class A-1 Interest Rate"), payable
monthly in arrears at one-twelfth of the annual rate,
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Initial Class A-2
Note Balance.................... The Class A-2 Notes will be issued in an initial
principal amount of $[ ] which is equal to the initial
Class A-2 Percentage of the Cutoff Date Principal
Balance. The "Class A-2 Note Balance" as of any date
will be equal to the initial Class A-2 Note Balance less
all principal distributed to holders of Class A-2 Notes
("Class A-2 Noteholders") prior to such date.
Class A-2 Interest Rate........... [ ]% per annum (the "Class A-2 Interest Rate"), payable
monthly in arrears at one-twelfth of the annual rate,
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
</TABLE>
S-2
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<TABLE>
<S> <C>
Initial Class B
Note Balance.................... The Class B Notes will be issued in an initial principal
amount of $[ ] which is equal to the initial Class B
Percentage of the Cutoff Date Principal Balance. The
"Class B Note Balance" as of any date will be equal to
the initial Class B Note Balance less all principal
distributed to holders of Class B Notes ("Class B
Noteholders") prior to such date.
Class B Interest Rate............. [ ]% per annum (the "Class B Interest Rate"), payable
monthly in arrears at one-twelfth of the annual rate,
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Receivables....................... Pursuant to a Receivables Purchase Agreement (the
"Receivables Purchase Agreement") between Triad and the
Seller, Triad will sell and assign all of its right,
title and interest in and to the Receivables, Financed
Vehicles and other property as described below to the
Seller. Pursuant to the Sale and Servicing Agreement,
the Seller will sell and assign to the Trust all of its
right, title and interest in and to the Receivables and
such other property. On the Closing Date, the Trust will
pledge the Receivables to the Indenture Trustee for the
benefit of the Noteholders pursuant to the Indenture.
The Receivables arise from loans generally originated by
automobile dealers for sale and assignment to Triad
pursuant to Triad's auto loan programs. Triad's auto
loan programs target automobile purchasers with marginal
credit ratings who are generally unable to obtain credit
from banks or other low-risk lenders. See "Triad's
Automobile Financing Program."
As of the Cutoff Date, the aggregate outstanding
principal balance of the Receivables was $[ ].
Each Receivable is either a Precomputed Receivable or a
Simple Interest Receivable. As of the Cutoff Date, the
Receivables had a weighted average annual percentage
rate ("APR") of approximately [ ]%, a weighted average
original term to [ ] months and a weighted average
remaining term to [ ] months. As of the Cutoff Date, no
Receivable had a scheduled maturity date later than
[ ]. See "The Receivables."
Payment Date...................... The [ ]th day of each month (or if such day is not a
Business Day, then the next Business Day), commencing
[ ] (each, a "Payment Date"). "Business Day" means any
day other than a Saturday, Sunday or other day on which
commercial banking institutions or trust companies in
New York, New York, the State in which the Corporate
Trust Office is located or the State in which the
executive offices of the Servicer are located are
authorized or required to be closed.
Interest.......................... Interest on each class of Notes will accrue from the
Cutoff Date or the most recent Determination Date on
which interest has been paid on such Notes to but
excluding the next
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S-3
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<S> <C>
Determination Date. With respect to each class of Notes,
on each Payment Date, the Indenture Trustee will be
required to pay pro rata to the holders of record of the
applicable class of Notes as of the [ ]th day of the
month of such Payment Date (or if such [ ]th day is not
a Business Day, the immediately preceding Business Day)
(each such date, a "Record Date"), interest payable with
respect to the applicable class of Notes. The amount of
interest payable on the Class A-1 Notes on each Payment
Date is an amount equal to 30 days of interest at the
Class A-1 Interest Rate on the Class A-1 Note Balance as
of the close of business on the last day of the
preceding Collection Period (each such date, a
"Determination Date"). The amount of interest payable on
the Class A-2 Notes on each Payment Date is an amount
equal to 30 days of interest at the Class A-2 Interest
Rate on the Class A-2 Note Balance as of the close of
business on the related Determination Date. The payment
of interest on the Class A-2 Notes is subordinated to
the extent described in "Summary--Subordination" and
"The Notes-- Priority of Distribution Amounts."
The amount of interest payable on the Class B Notes on
each Payment Date is an amount equal to 30 days of
interest at the Class B Interest Rate on the Class B
Note Balance as of the close of business on the related
Determination Date. The payment of interest on the Class
B Notes is subordinated to the extent described in
"Summary--Subordination" and "The Notes--Priority of
Distribution Amounts."
Principal......................... On each Payment Date, principal will be payable to Class
A-1 Noteholders, Class A-2 Noteholders and Class B
Noteholders as of the related Record Date in an amount
equal to the sum of the following amounts with respect
to the related Collection Period, pro rata in accordance
with the Class A-1 Percentage, the Class A-2 Percentage
and the Class B Percentage, respectively:
(i) the principal portion of all Collected Funds
received by the Servicer during the related Collection
Period and deposited into the Collection Account on or
before the related Record Date (other than Collected
Funds received with respect to prepayments);
(ii) the principal portion of all prepayments received
during the related Collection Period (other than
Purchased Receivables);
(iii) the principal portion of the Purchase Amount of
all Receivables that became Purchased Receivables as of
the related Determination Date and the Principal Balance
of each Receivable that was required to be but was not
so purchased or repurchased;
(iv) the Principal Balance of each Receivable that first
became a Liquidated Receivable during the related
Collection Period; and
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S-4
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<S> <C>
(v) the aggregate amount of Cram Down Losses with
respect to the Receivables that have occurred during the
related Collection Period.
In addition, on the Final Scheduled Payment Date, to the
extent amounts are available therefor, the principal
required to be distributed to the Noteholders of each
Class will equal the then outstanding Class A-1 Note
Balance, the Class A-2 Note Balance and the Class B Note
Balance, respectively; PROVIDED, HOWEVER, payment of
principal to the Class A-2 Noteholders will be made only
after the full amount of principal and interest due on
the Class A-1 Notes is paid and payment of principal to
the Class B Noteholders will be made only after the full
amount of principal and interest due on the Class A
Notes is paid.
With respect to each Payment Date, the Class A-1
Noteholders' share of such principal payments (the
"Class A-1 Principal Payment Amount") is equal to the
Class A-1 Percentage of the amounts in clauses (i)
through (v) above, plus the Class A-1 Principal
Carryover Shortfall, if any, with respect to the
preceding Payment Date, except that on the Final
Scheduled Payment Date, the Class A-1 Principal Payment
Amount will equal the Class A-1 Note Balance as of the
Final Scheduled Payment Date.
With respect to each Payment Date, the Class A-2
Noteholders' share of such principal payments (the
"Class A-2 Principal Payment Amount") is equal to the
Class A-2 Percentage of the amounts in clauses (i)
through (v) above, plus the Class A-2 Principal
Carryover Shortfall, if any, with respect to the
preceding Payment Date, except that on the Final
Scheduled Payment Date, the Class A-2 Principal Payment
Amount will equal the Class A-2 Note Balance as of the
Final Scheduled Payment Date.
With respect to each Payment Date, the Class B
Noteholders' share of such principal payments (the
"Class B Principal Payment Amount") is equal to the
Class B Percentage of the amounts in clauses (i) through
(v) above, plus the Class B Principal Carryover
Shortfall, if any, with respect to the preceding Payment
Date, except that on the Final Scheduled Payment Date,
the Class B Principal Payment Amount will equal the
Class B Note Balance as of the Final Scheduled Payment
Date.
A "Collection Period" or a "related Collection Period"
with respect to a Payment Date or Record Date will be
the calendar month preceding the month in which such
Payment Date or Record Date occurs.
"Overcollateralization Amount" with respect to any
Payment Date will be an amount equal to the positive
difference, if any, between (a) the remaining Aggregate
Principal Balance as of the related Determination Date
and (b) the remaining Aggregate
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S-5
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<S> <C>
Note Balance, after giving effect to distributions of
principal to the Noteholders pursuant to items (vi),
(viii) and (ix) as described in "Priority of
Distribution Amounts" below.
"Target Overcollateralization Amount" with respect to
any Payment Date will be an amount equal to [ ]% of the
remaining Aggregate Principal Balance as of the related
Determination Date.
Priority of
Distribution Amounts............ On each Payment Date, to the extent of the Payment
Amount, the Indenture Trustee will distribute the
following amounts in the following order of priority:
(i) first, to the Servicer, the Servicer Fee (as defined
herein) for the related Collection Period, any
Supplemental Servicer Fee for the related Collection
Period and, so long as Triad is the Servicer, any
Servicer Expenses for the related or any prior
Collection Period and certain other amounts mistakenly
deposited in the Collection Account belonging to the
Servicer, if any, or otherwise required to be
distributed to the Servicer in accordance with the Sale
and Servicing Agreement;
(ii) second, to any Lockbox Bank (as defined herein),
the Indenture Trustee, the Owner Trustee and the Backup
Servicer, any accrued and unpaid fees and expenses
(including reasonable legal fees and expenses), in each
case, to the extent such Person (as defined herein) has
not previously received such amount from the Servicer;
(iii) third, to the Class A-1 Noteholders, the Class A-1
Interest Payment Amount for such Payment Date and the
Class A-1 Interest Carryover Shortfall, if any;
(iv) fourth, to the Class A-2 Noteholders, the Class A-2
Interest Payment Amount for such Payment Date and the
Class A-2 Interest Carryover Shortfall, if any;
(v) fifth, to the Class B Noteholders, the Class B
Interest Payment Amount for
such Payment Date and the Class B Interest Carryover
Shortfall, if any;
(vi) sixth, to the Class A-1 Noteholders, the Class A-1
Principal Payment Amount for such Payment Date, based on
the Class A-1 Percentage and the Class A-1 Principal
Carryover Shortfall, if any;
(vii) seventh, to the Class A-2 Noteholders, the Class
A-2 Principal Payment Amount for such Payment Date,
based on the Class A-2 Percentage and the Class A-2
Principal Carryover Shortfall, if any;
(viii) eighth, to the Class B Noteholders, the Class B
Principal Payment Amount for such Payment Date, based on
the Class B Percentage and the Class B Principal
Carryover Shortfall, if any;
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S-6
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<S> <C>
(ix) ninth, to the Reserve Account to the extent
necessary to make the amount on deposit in the Reserve
Account equal to the Reserve Account Required Amount
(after giving effect to all withdrawals from the Reserve
Account on such date);
(x) tenth, to the Class A-1 Noteholders, to the Class
A-2 Noteholders and to the Class B Noteholders, as
principal, pro rata, until the Target
Overcollateralization Amount is reached; and
(xi) eleventh, to the Seller, as holder of the
Certificate.
"Certificate" means a certificate evidencing the
beneficial ownership of a Certificateholder in the
Trust. See "The Notes-- Priority of Distribution
Amounts."
Subordination..................... Interest on the Class A-2 Notes will not be paid on any
Payment Date until interest on the Class A-1 Notes has
been paid in full. Interest on the Class B Notes will
not be paid on any Payment Date until interest on the
Class A Notes has been paid in full. Principal on the
Class A-2 Notes will not be paid on any Payment Date
until principal due on the Class A-1 Notes has been paid
in full. Principal on the Class B Notes will not be paid
on any Payment Date until principal due on the Class A
Notes has been paid in full. Accordingly, the Class A
Notes will receive the benefit of amounts otherwise due
on the Class B Notes as credit enhancement. See "The
Notes--Priority of Distribution Amounts."
Reserve Account................... On the Closing Date, the Seller will make an initial
deposit (the "Reserve Account Initial Deposit") of cash
into the Reserve Account in an amount of at least $[ ]
([ ]% of the Cutoff Date Principal Balance). As of any
Payment Date, the Reserve Account Required Amount will
be an amount equal to [ ]% of the remaining Aggregate
Principal Balance, subject to the Floor Amount, unless a
Reserve Account Trigger Event has occurred, in which
case the Reserve Account Required Amount shall generally
include all amounts required to be paid in items (x) and
(xi) as described in "Priority of Distribution Amounts"
above, until such Reserve Account Trigger Event has been
Deemed Cured (as defined herein). Funds will be
withdrawn from the Reserve Account on each Payment Date
to pay certain fees and to make required payments on the
Notes, to the extent funds are not otherwise available
therefor, as detailed under "The Notes--Priority of
Distribution Amounts" and "Reserve Account."
Purchase Obligations.............. Pursuant to the Receivables Purchase Agreement, Triad
and, pursuant to the Sale and Servicing Agreement, the
Seller will be obligated to repurchase or replace a
Receivable if the interests of the Noteholders or the
Trust in such Receivable are materially and adversely
affected by a breach of specified representations or
warranties made by Triad and the Seller with respect to
the Receivable, if the breach has not been cured by the
last day of
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the first full calendar month following the discovery by
or notice to Triad and the Seller of the breach.
Pursuant to the Sale and Servicing Agreement, the
Servicer will be obligated to purchase or replace a
Receivable if the interests of the Noteholders or the
Trust in such Receivable are materially and adversely
affected by a breach of certain of its servicing
obligations under the Sale and Servicing Agreement
(including its obligation to maintain perfection of the
first priority security interest created by each
Receivable in the related Financed Vehicle) if the
breach has not been cured by the last day of the first
full calendar month following discovery by or notice to
the Servicer of the breach. See "The Transaction
Documents--Sale and Assignment of Receivables."
Servicing......................... The Servicer will be obligated to purchase or replace a
Receivable if such Receivable or the interest of the
Trust or the Noteholders therein is materially adversely
affected by a breach of certain of its servicing
obligations under the Sale and Servicing Agreement
(including, but not limited to, its obligation to ensure
that the perfected security interest of the Indenture
Trustee in the related Financed Vehicle is maintained)
or certain other covenants with respect to the Servicer
if the breach has not been cured by the last day of the
first full calendar month following the discovery by or
notice to the Servicer of the breach. See "The
Receivables--Purchase or Replacement Obligations".
The Servicer will be responsible for servicing, managing
and administering the Receivables (as defined herein)
and enforcing and making collections on the Receivables.
The Servicer will be required to carry out its duties
using the degree of skill and care that the Servicer
exercises in performing similar obligations with respect
to all comparable automotive receivables that it
services for itself or others, consistent with its
customary standards, policies and procedures and, in all
cases, in a manner consistent with prudent industry
practice.
The Servicer will have the right under the Sale and
Servicing Agreement to subcontract with a third party
servicer to provide certain servicing functions with
respect to the Receivables.
Under certain limited circumstances, the Servicer may
resign or be removed, in which event the Backup Servicer
will be appointed as successor Servicer as described
below. See "The Notes--Servicer Termination Events;
Rights upon Servicer Termination Event."
Servicer Fee...................... On each Payment Date, the Servicer will receive a fee
for servicing the Receivables (the "Servicer Fee") equal
to the product of one twelfth of [ ]% (the "Servicing
Fee Rate") and the Aggregate Principal Balance
outstanding as of the opening of business on the first
day of the related Collection Period. As additional
servicing compensation, the Servicer will receive a
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supplemental servicing fee (the "Supplemental Servicer
Fee") equal to any late payment penalties, prepayment
penalties, extension and administration fees in
connection with modifications, extensions and
prepayments of the Receivables collected during such
month. The Servicer will also receive any liquidation
expenses not otherwise reimbursed to the Servicer,
reasonable out-of-pocket expenses incurred in connection
with collection efforts relating to skip trace services,
legal fees and field calls and 30% of any deficiencies
recovered from an Obligor ("Servicer Expenses"). See
"The Transaction Documents--Servicing Compensation."
Duties of Backup Servicer......... Pursuant to the Sale and Servicing Agreement, the Backup
Servicer will perform certain duties on a monthly basis.
In addition, following the resignation or removal of the
Servicer, the Backup Servicer has agreed to serve as the
successor Servicer under the Sale and Servicing
Agreement. See "The Transaction Documents--Backup
Servicing and Backup Servicing Compensation."
Optional Purchase
Receivables..................... The Servicer may purchase all the Receivables and the
other Trust Property on any Payment Date if, as of the
related Determination Date, the Aggregate Principal
Balance has declined to less than [ ]% of the Cutoff
Date Principal Balance, subject to specified limitations
in the Sale and Servicing Agreement (including those
described in "The Notes--Optional Purchase of
Receivables"). In such event, on the related Payment
Date, the Class A-1 Notes will be redeemed for an amount
equal to the Class A-1 Note Balance together with
accrued interest at the Class A-1 Interest Rate, the
Class A-2 Notes will be redeemed for an amount equal to
the Class A-2 Note Balance together with accrued
interest at the Class A-2 Interest Rate and the Class B
Notes will be redeemed for an amount equal to the Class
B Note Balance together with accrued interest at the
Class B Interest Rate. See "The Notes-- Optional
Purchase of Receivables."
Mandatory Redemption upon Event of
Default......................... The Notes may be accelerated and subject to immediate
payment at par upon the occurrence of an Event of
Default under the Indenture. See "The Notes--The
Indenture."
Book-Entry Registration........... The Notes initially will be represented by one or more
notes registered in the name of Cede & Co. ("Cede") as
the nominee of The Depository Trust Company ("DTC"), and
will only be available in the form of book-entries on
the records of DTC and participating members thereof.
Securities will be issued in definitive form only under
the limited circumstances described herein. All
references herein to "holders" of the Notes or
"Noteholders" shall reflect the rights of beneficial
owners of the Notes (the "Note Owners") as they may
indirectly exercise such rights through DTC and
participating members thereof, except
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as otherwise specified herein. See "Registration of
Notes" in this Prospectus Supplement and "Description of
the Securities-- Book Entry Registration" and
"--Definitive Securities" in the Prospectus.
Tax Status........................ On the Closing Date, Dechert Price & Rhoads ("Federal
Tax Counsel"), special tax counsel to Triad and the
Seller, will deliver an opinion to the effect that, for
Federal income tax purposes, the Class A Notes will be
classified as debt, the Class B Notes will either be
classified as debt or as partnership interests in the
Issuer, and the Issuer will not be classified as an
association (or a publicly traded partnership) taxable
as a corporation. Each Noteholder, by the acceptance of
a Note, will agree to treat the Notes as indebtedness
for federal, state and local income and franchise tax
purposes. See "Federal Income Tax Consequences."
ERISA Considerations.............. A fiduciary or other person investing "plan assets" of
any employee benefit or other plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code") (a "Plan")
should carefully review with its legal advisors whether
the purchase or holding of the Notes could give rise to
a transaction prohibited or not otherwise permissible
under ERISA or Section 4975 of the Code.
[The Class B Notes may not be purchased by, transferred
to or held by a Plan or any person using "plan assets"
of any Plan to effect such acquisition or holding.
Notwithstanding the foregoing restriction, the Class B
Notes may be purchased by, transferred to or held by the
general account of an insurance company, but any such
insurance company shall, in the case of any Class B
Notes, be deemed to have represented and warranted that
the acquisition and holding of the Class B Notes will
not result in a non-exempt prohibited transaction as
described herein. See "ERISA Considerations."]
Ratings........................... As a condition to the issuance of the Notes, the Class
A-1 Notes must be rated at least "[ ]" or the
equivalent by a nationally recognized statistical rating
agency (the "Rating Agency"), the Class A-2 Notes must
be rated at least "[ ]" or the equivalent by the Rating
Agency and the Class B Notes must be rated at least
"[ ]" or the equivalent by the Rating Agency. There is
no assurance that a rating will not be lowered or
withdrawn by the Rating Agency based on a change in
circumstances deemed by such Rating Agency to adversely
affect the Notes. A rating is not a recommendation to
purchase, hold or sell the Notes, inasmuch as such
ratings do not comment as to market price or suitability
for a particular investor. See "Ratings."
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RISK FACTORS
In addition to the other information in this Prospectus Supplement and the
Prospectus, prospective Noteholders should consider the following factors, as
well as those matters discussed in "Risk Factors" in the Prospectus, in
evaluating an investment in the Notes:
LIMITED OPERATING HISTORY OF TRIAD MAY NOT BE INDICATIVE OF FUTURE
PERFORMANCE. Generally, all of the Receivables were acquired by Triad in its
normal course of business in accordance with credit underwriting criteria
established by Triad. Triad commenced operations in 1989 as a prime automobile
lender, but changed its focus to the non-prime market in 1993. Triad began
servicing all new contract purchases in June 1996. Triad therefore has limited
historical performance data with respect to the motor vehicle retail installment
sale contracts it purchases and services. Although Triad has calculated and
presented herein its net loss experience with respect to its portfolio of
serviced contracts (the "Servicing Portfolio"), there can be no assurance that
the information presented will reflect actual experience with respect to the
Receivables.
RISK OF PAYMENT DEFAULTS BY NON-PRIME OBLIGORS HIGHER THAN PRIME
OBLIGORS. Triad purchases loans generally originated by automobile dealers for
sale and assignment to Triad. The underwriting standards applied by Triad are
not as stringent as those of the finance companies of motor vehicle
manufacturers or other financial institutions, given that Triad purchases retail
automobile installment sale contracts which may not meet the credit standards of
traditional primary lenders. The Triad finance program focuses on the non-prime
market, including borrowers with sub-standard credit profiles who may not be
able to receive financing from more traditional sources. Accordingly, the
borrowers may have had credit problems in the past, including prior
delinquencies, repossessions, bankruptcy filings or charge-offs by other credit
companies. As a result, borrowers may have greater difficulty or be less likely
to make their scheduled payments, and the number of delinquencies and losses on
the Receivables is expected to be higher than would be the case if stricter
credit guidelines had been applied. Due to the credit quality of these
borrowers, the Receivables have been originated with higher APRs than more
traditional lenders charge lower risk borrowers. To the extent that the forms of
credit enhancement described herein are insufficient to cover losses on the
Receivables, such losses will be borne by Noteholders. Investors are urged to
consider the credit quality of the Receivables when analyzing an investment in
the Notes. See "Triad's Automobile Financing Program--Underwriting."
A CHANGE IN SERVICER MAY CAUSE PAYMENT REDUCTIONS OR DELAYS. Triad believes
that its credit loss and delinquency experience reflect in part its trained
staff and collection procedures. If a Servicer Termination Event occurs under
the Sale and Servicing Agreement and Triad is removed as Servicer, or if Triad
resigns or is terminated as Servicer, the Backup Servicer has agreed to assume
the obligations of successor Servicer under the Sale and Servicing Agreement.
See "The Notes--Servicer Termination Events; Rights Upon Servicer Termination
Event." There can be no assurance, however, that collections with respect to the
Receivables will not be adversely affected by any change in Servicer.
A CLASS OF NOTES MAY BE SUBORDINATE TO ANOTHER CLASS; PAYMENTS WILL BE MADE
ONLY FROM THE LIMITED ASSETS OF THE TRUST. The Trust does not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the Receivables including certain insurance policies related thereto, and
amounts on deposit in certain accounts held by the Indenture Trustee on behalf
of the Noteholders. The Notes represent limited obligations of the Trust secured
by the property described under "Trust Property" herein, and the Notes will not
be insured or guaranteed by Triad, the Servicer, the Seller, the Indenture
Trustee or any other person or entity. The Noteholders must rely on any amounts
available under certain collateral accounts established in connection with the
transactions contemplated hereby, in the Reserve Account established in the name
of the Indenture Trustee for the benefit of the Noteholders, the proceeds from
the repossession and sale of Financed Vehicles that secure defaulted
Receivables, certain insurance policies related to the Financed Vehicles and the
other property described under "Trust Property" herein. Certain factors, such as
the Indenture Trustee not having perfected security interests in the Financed
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Vehicles, may affect the Indenture Trustee's ability to realize on the
collateral securing the Receivables and thus may reduce the proceeds to be
distributed to the Noteholders on a current basis.
The Class A-2 Noteholders will not receive any payment of interest with
respect to a Collection Period until the full amount of interest on the Class
A-1 Notes and any related Class A-1 Interest Carryover Shortfall for such
Collection Period have been paid in full. The Class B Noteholders will not
receive any payment of interest with respect to a Collection Period until the
full amount of interest on the Class A-1 Notes, the full amount of interest on
the Class A-2 Notes, any related Class A-1 Interest Carryover Shortfall and any
related Class A-2 Interest Carryover Shortfall for such Collection Period have
been paid in full. The Class A-2 Noteholders will not receive any payment of
principal with respect to a Collection Period until the full amount of principal
on the Class A-1 Notes and any related Class A-1 Principal Carryover Shortfall
for such Collection Period have been paid in full. The Class B Noteholders will
not receive any payment of principal with respect to a Collection Period until
the full amount of principal on the Class A-1 Notes, the full amount of
principal on the Class A-2 Notes, any related Class A-1 Principal Carryover
Shortfall and any related Class A-2 Principal Carryover Shortfall for such
Collection Period have been paid in full. See "The Notes--Priority of
Distribution Amounts."
GEOGRAPHIC CONCENTRATION OF RECEIVABLES MAY ADVERSELY AFFECT THE
DELINQUENCY, LOSS OR REPOSSESSION EXPERIENCE OF THE RECEIVABLES. As of the
Cutoff Date, Obligors with respect to approximately [ ]% of the Receivables
(based on Principal Balance and mailing addresses as of the Cutoff Date) were
located in California. See the tables set forth under "The Receivables."
Accordingly, adverse economic conditions or other factors particularly affecting
California could adversely affect the delinquency, loan loss or repossession
experience of the Receivables.
PREPAYMENT ON RECEIVABLES MAY ADVERSELY AFFECT INTEREST RATE YIELD AND
MATURITY OF NOTES. Interest on the Receivables will be payable to the Class A-1
Noteholders, the Class A-2 Noteholders and the Class B Noteholders on each
Payment Date in an amount equal to one-twelfth of the Class A-1 Interest Rate on
the Class A-1 Note Balance, the Class A-2 Interest Rate on the Class A-2 Note
Balance and the Class B Interest Rate on the Class B Note Balance, respectively,
in each case as of the close of business on the related Determination Date. The
Receivables have different APRs as set forth in "The Receivables." However, the
weighted average APR of the Receivables exceeds each of (i) the sum of the
Servicing Fee Rate and the Class A-1 Interest Rate, (ii) the sum of the
Servicing Fee Rate and the Class A-2 Interest Rate and (iii) the sum of the
Servicing Fee Rate and the Class B Interest Rate.
The weighted average life of the Notes will be reduced by full or partial
prepayments on the Receivables. Each of the Receivables are prepayable at any
time. The rate of prepayments on the Receivables may be influenced by a variety
of economic, social and other factors, including the fact that an Obligor
generally may not sell or transfer the Financed Vehicle securing a Receivable
without the consent of Triad unless the loan is repaid by the Obligor at the
time of such sale or transfer. (For this purpose, the term "prepayments"
includes prepayments in full or in part, including without limitation, certain
partial prepayments related to refunds of extended service contract costs and
unearned insurance premiums, liquidations due to default, as well as receipts of
proceeds from physical damage, credit life and credit accident and health
insurance policies and certain other repurchases of Receivables for other
reasons.) The rate of prepayment on the Receivables may also may be influenced
by the structure of the loan, the nature of the Obligors and the Financed
Vehicles and servicing decisions. In addition, under certain circumstances, the
Seller and Triad are obligated to repurchase Receivables as a result of breaches
of representations and warranties, pursuant to the Sale and Servicing Agreement
and the Receivables Purchase Agreement, respectively. Under certain
circumstances, the Servicer is obligated to purchase receivables pursuant to the
Sale and Servicing Agreement as a result of specified uncured breaches of
covenants by it. The Servicer may also purchase all the Receivables and the
other Trust Property, and the Notes will be redeemed upon such purchase, on any
Payment Date if, as of the related Determination Date, the Aggregate Principal
Balance has declined to less than [ ]% of the Cutoff Date Principal Balance,
subject to specified limitations in the Sale and Servicing Agreement. See "The
Notes--Optional Purchase of Receivables."
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Triad has limited historical experience with respect to prepayments. Neither
the Trust, the Seller nor Triad is aware of publicly available industry
statistics that set forth principal prepayment experience for motor vehicle
retail installment contracts similar to the Receivables. Neither the Trust, the
Seller nor Triad makes any representation as to the actual prepayment rates that
will be experienced on the Receivables. The Trust, the Seller and Triad,
however, believe that the actual rate of prepayments will result in a shorter
weighted average life than the scheduled weighted average life of the
Receivables. The amounts paid to Noteholders will include prepayments on the
Receivables. The Noteholders will bear all reinvestment risk resulting from the
timing of payments on the Notes.
ADVERSE JUDGMENT IN LITIGATION MAY CAUSE PAYMENT REDUCTIONS OR DELAYS. Due
to the consumer-oriented nature of Triad's industry and the application of
certain laws and regulations, industry participants are regularly named as
defendants in litigation alleging violations of federal and state laws and
regulations and consumer law torts, including fraud. Many of these actions
involve alleged violations of consumer protection laws. A significant judgment
against Triad or others within the industry in connection with any such
litigation could have a material adverse effect on Triad's financial condition,
results of operations and/ or its ability to perform its obligations under the
Receivables Purchase Agreement, the Sale and Servicing Agreement and the Trust
Agreement.
RATINGS OF THE NOTES DO NOT ADDRESS SUITABILITY OF INVESTMENT. As a
condition to the issuance of the Notes, the Class A-1 Notes will be rated at
least "[ ]" or the equivalent by the Rating Agency, the Class A-2 Notes will be
rated at least "[ ]" or the equivalent by the Rating Agency and the Class B
Notes will be rated at least "[ ]" or the equivalent by the Rating Agency.
There is no assurance that a rating will not be lowered or withdrawn by the
Rating Agency based on a change in circumstances deemed by such Rating Agency to
adversely affect the Notes. A rating is not a recommendation to purchase, hold
or sell the Notes, inasmuch as such ratings do not comment as to market price or
suitability for a particular investor. See "Ratings."
THE YEAR 2000 ISSUE. The Year 2000 issue is whether Triad's or its vendors'
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or fail.
Triad has developed a comprehensive project plan for achieving Year 2000
readiness. An inventory of critical hardware and software has been completed and
information technology components have been assessed. This assessment included
major suppliers and business partners and Triad is monitoring their continued
progress toward Year 2000 compliance. Triad is currently in the process of
renovating or replacing critical systems that are not currently Year 2000
compliant and plans of substantially complete this phase by December 31, 1998.
Integrated testing and installation of all renovated mission critical systems is
planned for early calendar 1999 with an estimated completion date of March 31,
1999. In addition, prior to December 31, 1998, Triad completed its contingency
plans for mission critical systems.
Triad presently believes that the modifications to existing systems and/or
conversion to new systems, the Year 2000 issue will not pose significant
operational problems for Triad. However, if such modifications and conversions
are not made, or not completed in a timely manner, or are not completed
successfully, the Year 2000 issue could have a material impact on the operations
of Triad. In addition, there can be no assurance that unforeseen problems in the
Triad systems, or the systems of third parties on which the Triad computers
rely, would not have an adverse effect on Triad systems or operations.
TRUST PROPERTY
Each Note represents a limited obligation of the Trust secured by a security
interest in all payments received on or after the Cutoff Date under certain
motor vehicle retail installment contracts between dealers (the "Dealers") and
the purchasers or co-purchasers of the Financed Vehicles or any other person who
owes payments under the Receivables (the "Obligors"). The Receivables were
generally originated by Dealers in accordance with Triad's requirements under
agreements with Dealers for assignment directly to Triad or to third party
originators of Receivables ("Correspondents") for assignment to Triad and were
so assigned. Pursuant to agreements between the Dealers and Triad ("Dealer
Agreements") and agreements
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between Correspondents and Triad ("Correspondent Agreements"), the Receivables
were purchased by Triad and, prior to the Closing Date, evidenced financing made
available by Triad through the Dealers to the Obligors. All the Receivables will
be sold and assigned by Triad to the Seller pursuant to the Receivables Purchase
Agreement and by the Seller to the Trust pursuant to the Sale and Servicing
Agreement. On the Closing Date, the Trust will pledge the Receivables to the
Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture.
The Trust Property also will include: (i) such amounts as from time to time
may be held in one or more separate trust accounts established and maintained by
the Indenture Trustee pursuant to the Sale and Servicing Agreement, including
the Collection Account and the Reserve Account, and the proceeds of such
accounts, as described below (see "The Transaction Documents--Trust Accounts");
(ii) security interests in the Financed Vehicles granted by the Obligors
pursuant to the Receivables and any accessions thereto; (iii) the interest of
the Seller in any proceeds from claims on any credit life, credit disability,
and physical damage insurance policies or other insurance policies covering the
Financed Vehicles or Obligors; (iv) certain rights under the Sale and Servicing
Agreement and the Receivables Purchase Agreement; (v) amounts payable to the
Seller under all Dealer Recourse (defined herein) obligations (including the
assignment of the rights, if any, of Correspondents, to Dealer Recourse) and
(vi) any and all payments on and proceeds of the foregoing. Pursuant to dealer
agreements, the Dealers generally are obligated to pay Triad or the
Correspondent, if applicable, for the unpaid balance, losses and expenses of
those Receivables which do not meet certain limited representations made by the
Dealers (such obligations referred to herein as "Dealer Recourse"). Such
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related Financed
Vehicles, and do not typically relate to the creditworthiness of the related
Obligors or the collectability of such contracts. Although neither the Dealer
Agreements nor the Correspondent Agreements with respect to the Receivables will
be assigned to the Indenture Trustee, the Sale and Servicing Agreement will
require the Seller to cause the amount of any recovery by Triad in respect to
any Receivable pursuant to any Dealer Recourse to be deposited in the Collection
Account in satisfaction of the Seller's obligations under the Sale and Servicing
Agreement. The sales by the Dealers of installment sale contracts to Triad or a
Correspondent do not generally provide for recourse against the Dealers for
unpaid amounts in the event of a default by an Obligor thereunder, other than in
connection with the breach of the foregoing representations and warranties.
There can be no assurance that Triad will pursue all claims under the Dealer
Agreements or Correspondent Agreements nor that Triad will prevail if any such
claim is made.
TRIAD AND THE SELLER
Triad Financial Special Purpose Corporation (the "Seller") was incorporated
in the State of Delaware on September 26, 1996 and is a wholly-owned subsidiary
of Triad. The Seller has been organized for limited purposes, which include
selling and assigning receivables sold to it by Triad to the Trust and similar
securitization entities and any activities incidental to and necessary or
convenient for the accomplishment of such purposes. The principal executive
office of the Seller is located at 7711 Center Avenue, Suite 390, Huntington
Beach, California 92647. The telephone number of such office is (714) 373-8300.
For further information regarding Triad and the Seller, see "Triad and the
Seller" in the Prospectus.
TRIAD'S AUTOMOBILE FINANCING PROGRAM
Triad was incorporated in the State of California in 1989. Triad engages
primarily in the business of purchasing, selling and servicing retail automobile
installment sales contracts ("Contracts") originated by Dealers. Triad currently
has relationships with approximately 2,000 Dealers operating in 30 states
(Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, Missouri,
Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia and Washington).
Each dealer has executed a Dealer Agreement which provides representations and
warranties with respect to each Contract sold to Triad. Dealer relationships are
developed and maintained by Triad-employed sales representatives. Triad
currently employs 41 market representatives, six of whom serve the California
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market. Triad specializes in Contracts with borrowers ("Non-prime Borrowers")
who generally would not be expected to qualify for traditional financing such as
that provided by commercial banks or automobile manufacturers' captive finance
companies. Non-prime Borrowers generally have limited credit history, lower than
average income or past credit problems. Triad offers five distinct automobile
financing programs to its Dealers. The offerings vary based upon the Obligor's
overall credit quality and the pricing established by Triad. These variations
affect the coupon charged on the contract. For all such programs, the maximum
loan to wholesale value ratio, including approved additional items such as
taxes, license fees and warranties, is equal to 150%.
UNDERWRITING
Loan underwriting is centralized at Triad's headquarters. Dealers typically
remit applications to the operations center via facsimile. Credit analysts
underwrite each application using Triad's written underwriting guidelines. After
completion of the credit analysis, the underwriter makes a final decision
regarding the application; such decision may include an approval, a conditional
approval or a turndown. A conditional approval is an agreement by Triad to fund
the application under certain specific conditions as determined by Triad. Once a
Dealer chooses Triad as its funding source, it assembles the financing package
in accordance with Triad's requirements. The primary elements of the standard
package include the contract, credit application, proof of residence, proof of
income, an agreement to provide insurance, and titling paperwork. Packages are
generally delivered via overnight mail. To minimize dealer misrepresentations,
Triad conducts five independent verifications for each package: (1) application
information, generally verified directly with the Obligor; (2) mortgage or
rental information, generally verified directly with the Obligor's mortgage
holder or landlord, as appropriate; (3) insurance, verified directly with the
insurance agent; (4) employment and income levels, verified directly with the
Obligor's employer; and (5) reference information. Triad also reviews each
contract for completeness and accuracy. Triad attempts to maintain a two-day
turn-around time from when it receives a complete funding package until it
purchases the contract from the Dealer. Funding packages with deficiencies are
not funded and are returned to the submitting Dealer. Triad's quality control
department performs an additional review of the financing package which Triad's
management believes enhances its origination procedures.
SERVICING AND COLLECTIONS
Triad's servicing responsibilities consist of collecting, accounting for and
posting of all payments received with respect to its Servicing Portfolio,
responding to borrower inquiries, taking steps to maintain the security interest
granted in Financed Vehicles or other collateral, investigating delinquencies,
communicating with the Obligors, repossessing and liquidating collateral when
necessary, and generally monitoring each loan and the related collateral. Triad
began servicing all new contract purchases in June 1996.
Triad currently performs all servicing and collection functions from its
centralized operations center in Huntington Beach, California. Triad sends
payment invoices to Obligors each month for amounts due under the Contracts,
including amounts past due and late charges thereon, if any. Each Obligor has
been instructed to make payments with respect to the Contracts to a Lockbox
maintained by the Lockbox Bank. See "Description of the Transaction
Documents--Payments on Accounts." Subject to applicable law, Triad's current
collection policies establish the following procedures. Triad initiates
collection activities once a payment is five days contractually past due. The
initial contacts are made through phone calls, with continued attempts to
contact the Obligor for payment at least every two days thereafter. In cases
where an Obligor has broken a promise to make a payment by a certain date, such
Obligor is called within a day. If Triad's collection department is unsuccessful
in contacting an Obligor by phone, alternative methods of contact, such as the
use of outside agent field calls or location gathering via references,
employers, landlords, or other credit references are pursued, generally within
15 to 20 days of the account becoming delinquent. Triad presently intends to
maintain a ratio of one collector for approximately every 600 contracts
serviced, with one supervisor for approximately every 10 collectors.
The decision to repossess a vehicle is influenced by many factors, such as
previous account history, reasons for delinquency and cooperation of the
Obligor. As part of the collection process, all practical
S-15
<PAGE>
means of contacting the Obligor are attempted. If, at any point, a collector
feels that there is little or no chance that Triad will be able to establish
contact with the Obligor or that the Obligor will not make the required
payments, the collector will submit such contract for repossession. All
contracts submitted are evaluated by collection supervisors to determine if more
follow-up work is needed prior to repossession. If so determined, the supervisor
provides suggestions to assist the collector in further efforts to locate the
Obligor. If the supervisor feels all leads have been exhausted, the contract
will be forwarded to the collection manager for review. If the collection
manager agrees with the supervisor, it will be returned to the collector
"approved" for repossession.
Once the decision to repossess a vehicle is made, the account is referred to
an outside agency which handles the actual repossession. Most state laws require
that the Obligor be sent a Notice of Intent to Sell, which informs the borrower
of the lender's intent to sell the vehicle. The various states provide for a
period of time, generally 15 to 20 days, during which the Obligor may have the
right, depending on the applicable statute, either to reinstate the contract by
making all past due payments and paying the repossession and storage expenses,
or to redeem the vehicle by paying the contract in full, plus expenses
associated with repossession and storage of the vehicle. If the Obligor does not
exercise his right to reinstate the contract or redeem the vehicle, as provided
by the applicable statute, Triad immediately begins the process to sell the
vehicle at public or private sale. The vehicle is usually sold within 31 to 45
days after being repossessed. After a repossessed vehicle is sold, Triad's
collection staff applies for rebates on any extended warranty or life, accident
and health insurance policies that may have been financed as part of the vehicle
purchase.
Triad's collection policies generally do not allow for loan extensions;
PROVIDED, HOWEVER, in those circumstances where extensions are granted, Triad
typically does not (a) grant more than three extensions with respect to a
Receivable, (b) grant more than one extension per calendar year with respect to
a Receivable or (c) grant an extension for more than one calendar month with
respect to a Receivable.
INFORMATION TECHNOLOGY AND SYSTEMS
Triad's information technology needs are met with a system consisting of
client servers, a personal computer local area network and a mainframe computer
provided by a vendor. Triad's loan accounting and collections systems, Shaw IL
2000 and CS 2000, are housed on a mainframe computer provided by Affiliated
Computer Services, Inc. ("ACS"). ACS's mainframe is located in Dallas, Texas and
communicates with Triad's operation center through a dedicated, leased telephone
line. Triad's credit application processing system, APPRO, is maintained on a
client server at Triad's operations center in Huntington Beach.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth information relating to the delinquency and
loss experience of Triad for the periods indicated. Scheduled Payments made by
the Obligor must be at least 90% of such Scheduled Payment for a contract to be
considered current with respect to such Scheduled Payment. The data presented in
the delinquency and loss tables below are for illustrative purposes only. There
is no assurance that the delinquency and credit loss experience with respect to
Triad's automobile, light-duty truck and sports utility vehicle installment
contracts in the future, or that the experience of the Trust Property with
respect to the Receivables pledged to the Indenture Trustee for the benefit of
the Noteholders, will be similar to that set forth below. Losses and
delinquencies are affected by, among other things, general and regional economic
conditions and the supply of and demand for automobiles, light-duty trucks and
sports utility vehicles.
S-16
<PAGE>
TRIAD FINANCIAL CORPORATION
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997 AS OF JUNE 30, 1997
----------------------------------------- ------------------------------------------
% OF % OF
NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE
------------- ------------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Principal Balance at Period
End(1), (2).............................. 5,423 $ 71,601,339 100.00% 8,195 $ 105,465,298 100.00%
----- ------------- ----------- ----- -------------- -----------
----- ------------- ----------- ----- -------------- -----------
Delinquencies(3)
31-60 Days............................... 81 $ 1,145,807 1.60% 106 $ 1,374,687 1.30%
61-90 Days............................... 6 64,946 0.09 23 287,357 0.27
91+ Days................................. 6 99,426 0.14 8 126,995 0.12
----- ------------- ----------- ----- -------------- -----------
Total Delinquencies........................ 93 $ 1,310,179 1.83% 137 $ 1,789,039 1.70%
Amount in Repossession(4).................. 45 $ 615,233 0.86% 96 $ 1,051,533 1.00%
----- ------------- ----------- ----- -------------- -----------
Total Delinquencies and Amount in
Repossession............................. 138 $ 1,925,412 2.69% 233 $ 2,840,572 2.69%
----- ------------- ----------- ----- -------------- -----------
----- ------------- ----------- ----- -------------- -----------
<CAPTION>
AS OF SEPTEMBER 30, 1997
----------------------------------------
% OF
NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE
----------- -------------- -----------
<S> <C> <C> <C>
Aggregate Principal Balance at Period
End(1), (2).............................. 10,714 $ 135,148,169 100.00%
----------- -------------- -----------
----------- -------------- -----------
Delinquencies(3)
31-60 Days............................... 169 $ 2,111,018 1.56%
61-90 Days............................... 62 793,279 0.59
91+ Days................................. 19 254,826 0.19
----------- -------------- -----------
Total Delinquencies........................ 250 $ 3,159,123 2.34%
Amount in Repossession(4).................. 130 $ 1,735,378 1.28%
----------- -------------- -----------
Total Delinquencies and Amount in
Repossession............................. 380 $ 4,894,501 3.62%
----------- -------------- -----------
----------- -------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 AS OF MARCH 31, 1998
---------------------------------------- ----------------------------------------
% OF % OF
NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE
----------- -------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Principal Balance at Period
End(1), (2)............................. 14,239 $ 178,820,032 100.00% 18,065 $ 222,579,214 100.00%
----------- -------------- ----------- ----------- -------------- -----------
----------- -------------- ----------- ----------- -------------- -----------
Delinquencies(3)
31-60 Days.............................. 283 $ 3,536,717 1.98% 243 $ 3,005,925 1.35%
61-90 Days.............................. 91 1,175,834 0.66 50 636,024 0.29
91+ Days................................ 49 612,742 0.34 25 313,044 0.14
----------- -------------- ----------- ----------- -------------- -----------
Total Delinquencies....................... 423 $ 5,325,293 2.98% 318 $ 3,954,993 1.78%
Amount in Repossession(4)................. 271 $ 3,325,167 1.86% 298 $ 3,692,886 1.66%
----------- -------------- ----------- ----------- -------------- -----------
Total Delinquencies and Amount in
Repossession............................ 694 $ 8,650,460 4.84% 616 $ 7,647,879 3.44%
----------- -------------- ----------- ----------- -------------- -----------
----------- -------------- ----------- ----------- -------------- -----------
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------------
% OF
NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE
----------- -------------- -----------
<S> <C> <C> <C>
Aggregate Principal Balance at Period
End(1), (2)............................. 23,278 $ 275,701,781 100.00%
----------- -------------- -----------
----------- -------------- -----------
Delinquencies(3)
31-60 Days.............................. 544 $ 6,504,170 2.36%
61-90 Days.............................. 125 1,471,899 0.53
91+ Days................................ 42 519,163 0.19
----------- -------------- -----------
Total Delinquencies....................... 711 $ 8,495,232 3.08%
Amount in Repossession(4)................. 273 $ 3,082,642 1.12%
----------- -------------- -----------
Total Delinquencies and Amount in
Repossession............................ 984 $ 11,577,874 4.20%
----------- -------------- -----------
----------- -------------- -----------
</TABLE>
- ------------------------
(1) The aggregate principal balance is equal to the gross receivable less
unearned finance charges on Precomputed Receivables plus the principal
balance on Simple Interest Receivables.
(2) Represents the aggregate principal balance of all contracts purchased and
serviced by Triad.
(3) Prior to May 30, 1998 Scheduled Payments not made by the Obligors must be
less than $40 for a contract to be considered current.
(4) Represents the aggregate principal balance as of the repossession date.
S-17
<PAGE>
TRIAD FINANCIAL CORPORATION
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
DURING THE THREE-MONTH PERIOD ENDED
----------------------------------------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Average Aggregate Principal Balance(1),
(2).................................. $ 58,244,815 $ 89,203,495 $ 119,831,579 $ 157,030,572 $ 200,583,686
Gross Charge-Offs(3)................... 276,769 1,050,485 1,251,613 2,318,711 4,102,536
Recoveries(4).......................... 24,453 216,364 228,287 339,306 632,487
------------- ------------- -------------- -------------- --------------
Net Losses............................. $ 252,316 $ 834,121 $ 1,023,326 $ 1,979,405 $ 3,470,049
------------- ------------- -------------- -------------- --------------
Net Losses as a Percentage of Average
Aggregate Principal Balance(5)....... 0.43% 0.94% 0.85% 1.26% 1.73%
------------- ------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- --------------
<CAPTION>
YEAR ENDED
6/30/98 6/30/98
-------------- --------------
<S> <C> <C>
Average Aggregate Principal Balance(1),
(2).................................. $ 245,536,237 $ 181,183,145
Gross Charge-Offs(3)................... 3,226,167 10,899,027
Recoveries(4).......................... 535,192 1,735,272
-------------- --------------
Net Losses............................. $ 2,690,975 $ 9,163,755
-------------- --------------
Net Losses as a Percentage of Average
Aggregate Principal Balance(5)....... 1.10% 5.06%
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(1) The aggregate principal balance is equal to the gross receivable less
unearned finance charges on Precomputed Receivables plus the principal
balance on Simple Interest Receivables.
(2) Other than for the Year Ended June 30, 1998, represents the three-month
average for the related period of the aggregate principal balance of all
contracts purchased and serviced by Triad.
(3) Gross Charge-Offs are defined as the remaining principal balance of the
charged-off contract less the net proceeds of the liquidation of the related
vehicle.
(4) Recoveries include post-liquidation amounts received on previously
charged-off contracts, including deficiency payments, rebates on related
extended service contracts and insurance policies.
(5) Other than for the Year Ended June 30, 1998, net loss percentages are not
annualized.
S-18
<PAGE>
CHARGE-OFF POLICIES AND NET LOSSES
Triad's charge-off policy relating to repossessed vehicles, bankruptcy,
"skip" accounts and thefts or collisions is as follows:
REPOSSESSIONS. When a vehicle has been repossessed and sold, the proceeds
from the sale of the vehicle, net of the costs incurred in its repossession,
storage and disposition, will be applied against the outstanding balance of the
Receivable. A charge-off will be made in an amount equal to the Principal
Balance of the Receivable less the net proceeds of the liquidation of the
related Financed Vehicle.
BANKRUPTCIES. If Triad receives a bankruptcy notice with respect to an
Obligor, the contract will be charged of in an amount equal to the current
outstanding principal balance of the contract at the time of charge-off. The
charge-off actually taken upon the earlier of (a) the month in which the Obligor
allows the contract to become 120 days or more delinquent in the case of an
Obligor that files for protection under Chapter 7 or Chapter 13 of the United
States Bankruptcy Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code") or (b)
Triad's receipt of notice of the results of the bankruptcy proceedings. The
initial charge-off is adjusted, if necessary, to reflect the results of the
bankruptcy proceedings.
"SKIP" ACCOUNTS. Triad defines "skip" accounts as contracts for which (a)
Triad is unable to contact or locate an Obligor for a period of 120 days and (b)
Triad is unable to locate the related Financed Vehicle. Triad charges off the
contract, with a charge-off equal to the current outstanding principal balance
of the contract, and continues collection efforts. If Triad subsequently makes
contact with the Obligor, and the vehicle is repossessed and sold, proceeds from
the disposition of the collateral, net of the costs incurred in repossessing,
storing and disposing of the vehicle, and/or rebates from the cancellation of
outstanding insurance policies and/or extended service contracts are recorded as
recoveries.
THEFTS OR COLLISIONS. Theft or collision contracts are charged-off upon the
earlier of (a) Triad's receipt of proceeds from the Obligor's insurance policy
if the account becomes more than 30 days past due and (b) the month in which the
contract becomes 120 days delinquent. The charge-off is equal to the amount of
the net deficiency resulting from the application of insurance proceeds to the
current outstanding principal balance of the contract. Insurance proceeds
received after a contract is charged-off are recorded as recoveries.
Where permitted by local statute, charged-off Receivables are pursued for
any deficiencies by Triad's loss prevention staff. A deficiency letter is sent
to the Obligor within five days of the deficiency being established. A follow-up
call to the Obligor is made within ten days after the deficiency letter has been
sent. During this call, an attempt is made to negotiate a settlement of the
deficiency balance. The first offer is generally made in an amount equal to 85%
of the deficiency balance, but a 65% settlement is acceptable. Triad generally
prefers to avoid establishing a monthly payment plan, as its experience has been
that the Obligor will typically only make payments until such time as he is able
to purchase a replacement vehicle. Triad will generally garnish the salary of a
defaulted Obligor in states in which salary garnishment for recovery of
deficiency balances is permitted.
INSURANCE
In addition to the physical damage insurance policies maintained by the
Obligors naming Triad as the loss payee, Triad may maintain collateral
protection for uninsured physical damage in a manner that is customary and
standard for servicers of receivables in the same general area as the Servicer
and for receivables comparable to the Receivables, which may include
self-insurance. Triad also maintains fidelity coverage insuring against losses
through wrongdoing of its officers and employees.
S-19
<PAGE>
THE BACKUP SERVICER
If a Servicer Termination Event occurs and remains unremedied and Triad is
terminated as Servicer or resigns as Servicer, [ ], will serve as successor
Servicer (in such capacity, the "Backup Servicer"). The Backup Servicer will
receive a fee on each Distribution Date equal to the product of one-twelfth
times $[ ] as compensation for, among other things, (i) standing by to act as
successor Servicer and (ii) confirming certain calculations made by the Servicer
on the monthly statement to Noteholders, including but not limited to (a)
interest and principal payments due to the Noteholders and (b) Receivables
performance ratios related to a Reserve Account Trigger Event and/or Servicer
Termination Trigger Event.
THE RECEIVABLES
Pursuant to the Receivables Purchase Agreement, Triad will sell and assign
to the Seller all of its right, title and interest in and to the Receivables and
the other Trust Property, and the Seller, pursuant to the Sale and Servicing
Agreement, will sell and assign to the Trust all of its right, title and
interest in and to the Receivables and such other Trust Property. The Trust will
then pledge all of its right, title and interest in and to the Receivables to
the Indenture Trustee for the benefit of the Noteholders pursuant to the
Indenture. The Receivables consist of motor vehicle retail installment
contracts. The Receivables were purchased by Triad in the ordinary course of its
business pursuant to its finance programs and underwriting standards. As
detailed herein, such credit guidelines may be less stringent than those applied
in the origination of other automobile loans by other lenders. See "Triad and
the Servicer--Underwriting." Not more than [ ]% of the Receivables were
acquired by Triad directly from any single Dealer. Approximately [ ]% of the
Receivables were originated by Correspondents, with The Bank of the West, a
Correspondent whose executive offices are located in Walnut Creek, California
generating [ ]% of the Receivables included in the Trust Property.
No selection procedures adverse to the Noteholders were utilized in
selecting the Receivables sold and assigned to the Seller and then sold and
assigned to the Trust. The Receivables existing as of the Cutoff Date were
selected from Triad's portfolio according to several criteria. Among such
criteria, each Receivable (1) arises from the delivery and acceptance of a
Financed Vehicle and which delivery and acceptance has been fully performed by
the Obligor and the Dealer party thereto, (2) arises from the normal course of
the Dealer's business, (3) is not in default, (4) the Obligor of which is a
natural person residing in any state or the District of Columbia, (5) the
Obligor of which is not a government or a governmental subdivision or agency,
(6) met Triad's underwriting criteria at the time of purchase, (7) is
denominated and payable in Dollars in the United States, (8) is in full force
and effect and constitutes the legal, valid and binding obligation of the
Obligor in accordance with its terms, (9) is not subject to any dispute,
litigation, counterclaim or defense, or any offset or right of offset at the
time of purchase by Triad, and to the best of Triad's knowledge, any exercisable
right of recission, (10) has an original term to maturity of not less than [ ]
or more than [ ] months, (11) provides for equal monthly payments which will
cause the Receivable to fully amortize during its term, (12) has an Amount
Financed of not less than [ ]or more than [ ] and (13) has an APR of not less
than the lesser of (A) [ ] and (B) the maximum interest rate permissible by law
with respect to such Receivable.
PAYMENTS ON THE RECEIVABLES
All of the Receivables provide for the payment by the related Obligor of a
specific total amount of payments, payable in substantially equal monthly
installments on each scheduled payment date, which total represents the amount
financed plus interest charges on the amount financed for the term of such
Receivable. Each Receivable provides for repayment of the Amount Financed by an
Obligor according to (i) the Rule of 78's (a "Rule of 78's Receivables"), (ii)
the actuarial method (an "Actuarial Receivable" and together with Rule of 78's
Receivables, the "Precomputed Receivables") or (iii) the simple interest method
(a "Simple Interest Receivable").
S-20
<PAGE>
Under a Rule of 78's Receivable, the rate at which the amount of finance
charges is earned and, correspondingly, the amount of each scheduled monthly
payment allocated to reduction of the outstanding principal balance of the
related Receivable are calculated in accordance with the "Rule of 78's". Under
the Rule of 78's, the portion of a payment allocable to interest earned during
that month is determined by multiplying the total amount of interest payable
over the term of the Receivable by a fraction, the denominator of which is equal
to the sum of a series of numbers beginning with one and ending with the number
of scheduled monthly payments due under the related Receivable, and the
numerator of which is the number of payments remaining under such Receivable
before giving effect to the payment to which the fraction is being applied. The
difference between the amount of the scheduled monthly payment made by the
Obligor and the amount of earned add-on interest calculated for the month is
applied to principal reduction.
An Actuarial Receivable provides for amortization of the loan over a series
of fixed level monthly installments. Each scheduled monthly payment is deemed to
consist of an amount of interest equal to 1/12 of the stated APR of the
Receivable multiplied by the outstanding principal balance of the Receivable and
an amount of principal equal to the remainder of such scheduled monthly payment.
All payments received by the Servicer on or in respect of Precomputed
Receivables, including the final scheduled payment, will be allocated pursuant
to the Sale and Servicing Agreement on an actuarial basis. No adjustment will be
made in the event of early or late payments, although in the latter case the
Obligor may be subject to a late charge.
"Simple Interest Receivables" provide for the amortization of the amount
financed under the receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78s Receivables, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date immediately preceding the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if an
Obligor pays a fixed monthly installment before its scheduled due date, the
portion of the payment allocable to interest for the period since the preceding
payment was made will be less than it would have been had the payment been made
as scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment was
made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly less. In either case, the Obligor pays a fixed
monthly installment until the final scheduled payment date, at which time the
amount of the final installment is increased or decreased as necessary to repay
the then outstanding principal balance.
In the event of a prepayment in full (voluntarily or by acceleration) of a
Precomputed Receivable, a "rebate" in the loan accounting records of the
Servicer may be made to the Obligor of that portion of the total amount of
payments under such Receivable allocable to "unearned" finance charges. In the
event of the prepayment in full (voluntarily or by acceleration) of a Simple
Interest Receivable, a "rebate" will not be made to the Obligor, but the Obligor
will be required to pay interest only to the date immediately preceding the date
of prepayment. The amount of such rebate under a Precomputed Receivable
generally will be less than or equal to the remaining scheduled payments of
interest that would have been due under a Simple Interest Receivable for which
all remaining payments were made on schedule.
The amount of a rebate under a Rule of 78's Receivable calculated in
accordance with the Rule of 78's generally will be less than the amount of a
rebate on an Actuarial Receivable calculated in accordance with the actuarial
method. Distributions to Noteholders will not be affected by Rule of 78's
rebates under the Rule of 78's Receivables because pursuant to the Sale and
Servicing Agreements such distributions will be
S-21
<PAGE>
determined using the actuarial method. Amounts received upon prepayment in full
of a Rule of 78's Receivable in excess of the then outstanding principal balance
of such Receivable and accrued interest thereon (calculated pursuant to the
actuarial method) will not be passed through to Noteholders.
PURCHASE OR REPLACEMENT OBLIGATIONS
Pursuant to the Receivables Purchase Agreement and the Sale and Servicing
Agreement, Triad and the Seller, respectively, will be obligated to repurchase
or replace any Receivable sold and assigned to the Trust as to which a breach
has occurred as to certain representations or warranties made by Triad and the
Seller with respect to the Receivable, if such breach has not been cured by the
last day of the first full calendar month following the discovery by or notice
to Triad and the Seller of the breach, if such breach will materially and
adversely affect the interests of the Noteholders or the Trust in such
Receivable. The Indenture Trustee will also have certain rights to enforce the
corresponding obligations of the Seller under the Sale and Servicing Agreement
and of Triad under the Receivables Purchase Agreement. See "The Transaction
Documents--Sale and Assignment of Receivables" and "Trust Property."
The Sale and Servicing Agreement also provides that if the Servicer breaches
certain of its servicing obligations thereunder (including but not limited to
its obligation to maintain perfection of the first priority security interest of
Triad created by each Receivable in the related Financed Vehicle) or certain
other covenants with regard to the Servicer, in each case only in a manner that
materially and adversely affects the interests of the Noteholders or the Trust
in any Receivable, the Servicer will purchase or replace such Receivable from
the Trust, unless such breach has been cured by the last day of the first full
calendar month following the discovery by or notice to the Servicer of the
breach.
COMPOSITION OF THE POOL OF RECEIVABLES
The tables below set forth information regarding the composition and
characteristics of the pool of Receivables as of the Cutoff Date.
COMPOSITION OF THE RECEIVABLES(1)
(AS OF THE CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance................................. $[ ]
Number of Receivables....................................... [ ]
Average Amount Financed..................................... $[ ]
Range of Amounts Financed................................... $[ ] to $[ ]
Average Current Principal Balance........................... $[ ]
Range of Current Principal Balances......................... $[ ] to $[ ]
Weighted Average APR........................................ [ ]%
Range of APRs............................................... [ ]% to [ ]%
Weighted Average Original Term to Scheduled Maturity(1)..... [ ] months
Range of Original Terms to Scheduled Maturity............... [ ] to [ ] months
Weighted Average Remaining Term to Scheduled Maturity(1).... [ ] months
Range of Remaining Terms to Scheduled Maturity.............. [ ] to [ ] months
</TABLE>
- ------------------------
(1) Rounded to the nearest month.
S-22
<PAGE>
DISTRIBUTION OF RECEIVABLES BY CURRENT PRINCIPAL BALANCE
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
CURRENT PRINCIPAL BALANCE RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
$[ ]......................................................
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY AMOUNT FINANCED
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
AMOUNT FINANCED RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
$[ ]...................................................... [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY APR
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
RANGE OF APRS RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
[Percent].................................................. [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY MODEL YEAR OF FINANCED VEHICLE
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
MODEL YEAR RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
[Year]..................................................... [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
- ------------------------
(1) Percentages may not add up to 100.00% due to rounding.
S-23
<PAGE>
DISTRIBUTION OF RECEIVABLES BY REMAINING TERM TO SCHEDULED MATURITY
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
RANGE OF REMAINING TERMS RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
[Range of months].......................................... [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY ORIGINAL TERM TO SCHEDULED MATURITY
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
RANGE OF ORIGINAL TERMS RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
[Range of months].......................................... [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY PRINCIPAL PLACE OF BUSINESS OF DEALER
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL NUMBER CURRENT OF AGGREGATE
NUMBER OF OF PRINCIPAL PRINCIPAL
STATE RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------------------------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
[State].................................................... [ ] [ ] [ ] [ ]
TOTAL...................................................... [ ] 100.00% $ [ ] 100.00%
--- ------ ----- ------
--- ------ ----- ------
</TABLE>
- ------------------------
(1) Percentages may not add up to 100.00% due to rounding.
S-24
<PAGE>
MATURITY AND PREPAYMENT ASSUMPTIONS
All the Receivables are prepayable at any time. The rate of prepayments on
the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of Triad unless
the loan is repaid by the Obligor at the time of such sale or transfer. (For
this purpose the term "prepayments" includes prepayments in full, or in part,
including, without limitation, certain partial prepayments related to refunds of
extended service contract costs and unearned insurance premiums, liquidations
due to default, as well as receipts of proceeds from physical damage, credit
life and credit accident and health insurance policies and certain other
Receivables repurchased for administrative reasons.) The rate of prepayment on
the Receivables may also be influenced by the structure of the loan, the nature
of the Obligors and the Financed Vehicles and servicing decisions as discussed
above. In addition, under certain circumstances, the Seller and Triad are
obligated to repurchase or replace Receivables as a result of breaches of
representations and warranties pursuant to the Sale and Servicing Agreement and
the Receivables Purchase Agreement, respectively, and under certain
circumstances, the Servicer is obligated to purchase Receivables pursuant to the
Sale and Servicing Agreement as a result of breaches of certain covenants.
Subject to certain conditions, the Servicer has the option, to purchase or
replace the Receivables when the aggregate principal balance thereof is [ ]% or
less of the Cutoff Date Principal Balance.
If prepayments are received on the Receivables, the actual weighted average
life of the Receivables may be shorter than the scheduled weighted average life
(i.e., the weighted average life assuming that payments will be made as
scheduled and that no prepayments will be made). "Weighted Average Life" means
the average amount of time during which each dollar of principal on a Receivable
is outstanding.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne by the Noteholders. See also "The
Notes--Optional Purchase of Receivables" regarding the Servicer's right to
purchase the Receivables and the other Trust Property on any Record Date as of
which the Aggregate Principal Balance has declined to less than [ ]% of the
Cutoff Date Principal Balance.
YIELD CONSIDERATIONS
On each Payment Date, interest on the Receivables will be passed through to
the Noteholders of each Class in an amount equal to one-twelfth of the related
Interest Rate multiplied by the Note Balance of the applicable Class on the
immediately preceding Determination Date. In the event of prepayments on
Receivables, Noteholders will nonetheless be entitled to receive interest for
the full month on the Notes. See also "The Receivables--Maturity and Prepayment
Assumptions".
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Receivables will be applied by the Seller to the purchase of the Receivables
from Triad, to the payment of the Reserve Account Initial Deposit and to the
payment of related expenses. Net amounts remaining after such payments, if any,
will be distributed by the Seller to its sole shareholder, Triad.
THE TRUST
The Issuer, Triad Auto Receivables Owner Trust 199[ ]-[ ], is a business
trust formed, prior to its purchase of the Receivables and the issuance of the
Notes, under the laws of the State of Delaware pursuant to the Trust Agreement,
between the Seller, as Holder of the Certificate (as defined in the Trust
Agreement), the Servicer and the Owner Trustee (the "Trust Agreement"), for the
purpose of carrying out the transactions described in this Prospectus
Supplement. After its formation, the Trust will not engage in any business
activity other than acquiring and holding the Trust Property, issuing the Notes
and Certificate and making payments thereon.
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<PAGE>
Each Note will represent a limited obligation of the Trust. The Trust
Property will include, among other things, the Receivables and the other Trust
Property described in "Trust Property" above.
THE OWNER TRUSTEE
[ ], the Owner Trustee under the Trust Agreement, is a [ ] and its
principal offices are located at [ ]. The Owner Trustee will perform limited
administrative functions under the Trust Agreement. The Owner Trustee's
liability in connection with the issuance and sale of the Notes is limited
solely to the express obligations of the Owner Trustee set forth in the Trust
Agreement and the Sale and Servicing Agreement.
THE INDENTURE TRUSTEE
[ ] will be the Indenture Trustee under the Indenture. [ ] is a [ ], the
corporate trust office of which is located at [ ].
THE NOTES
THE NOTES OFFERED HEREBY WILL BE ISSUED PURSUANT TO THE INDENTURE, A FORM OF
WHICH HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT. THE FOLLOWING
SUMMARY DESCRIBES MATERIAL TERMS OF THE NOTES AND THE INDENTURE. THE SUMMARY
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, ALL THE PROVISIONS OF THE NOTES AND THE INDENTURE. THE
FOLLOWING SUMMARY SUPPLEMENTS THE DESCRIPTION OF THE GENERAL TERMS AND
PROVISIONS OF THE NOTES OF ANY GIVEN SERIES AND THE RELATED INDENTURE SET FORTH
IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
GENERAL
The Notes initially will be represented by notes registered in the name of
Cede as the nominee of DTC, and will only be available in the form of
book-entries on the records of DTC and participating members thereof in
denominations of $1,000. All references to "holders" or "Noteholders" and to
authorized denominations, when used with respect to the Notes, shall reflect the
rights of Note Owners, and limitations thereof, as they may be indirectly
exercised through DTC and its participating members, except as otherwise
specified herein. See "Registration of Notes" in this Prospectus Supplement.
In general, the Class A-1 Noteholders will be entitled to receive, on each
Payment Date, the Class A-1 Principal Payment Amount, based on the Class A-1
Percentage and the Class A-1 Interest Payment Amount; subject to the priority of
payments to the Class A-1 Noteholders, as described in "Summary-- Priority of
Distribution Amounts", the Class A-2 Noteholders will be entitled to receive on
each Payment Date, the Class A-2 Principal Payment Amount, based on the Class
A-2 Percentage and the Class A-2 Interest Payment Amount; subject to the
priority of payments to the Class A Noteholders, as described in
"Summary--Priority of Distribution Amounts", the Class B Noteholders will be
entitled to receive, on each Payment Date, the Class B Principal Payment Amount,
based on the Class B Percentage and the Class B Interest Payment Amount.
OPTIONAL PURCHASE OF RECEIVABLES
As an administrative convenience, the Servicer may purchase all the
Receivables and other Trust Property on any Payment Date if, as of the related
Determination Date, the Aggregate Principal Balance has declined to less than
[ ]% of the Cutoff Date Principal Balance. To exercise such option, the
Servicer must pay the aggregate Purchase Amounts for the Receivables and will
succeed to all interests in and to the Trust Property. The purchase price paid
by the Servicer will be deposited into the Collection Account and distributed
pursuant to "Priority of Distribution Amounts" below.
Such purchase will cause a redemption of the Notes; PROVIDED, HOWEVER, that
the Servicer will provide the Indenture Trustee, the Backup Servicer and the
Rating Agency at least 10 days' prior written notice of
S-26
<PAGE>
any redemption. The Indenture Trustee will give notice to each Noteholder at
least five days prior to any such redemption. The redemption price for each Note
will be no less than the outstanding principal balance of such Note on the date
of redemption plus accrued and unpaid interest thereon (the "Redemption Price").
The Servicer will deposit the Redemption Price into the Collection Account, and
the Indenture Trustee will distribute the amounts so deposited in accordance
with the "Priority of Distribution Amounts" below.
DISTRIBUTIONS FROM THE TRUST
No later than 12:00 p.m. New York City time on each Record Date, the
Servicer will inform the Indenture Trustee of the amount of aggregate
collections on the Receivables, and the aggregate Purchase Amount of Receivables
to be purchased by the Servicer with respect to the related Collection Period.
The Servicer will determine prior to such Record Date, the Class A-1 Interest
Payment Amount, the Class A-2 Interest Payment Amount, the Class B Interest
Payment Amount, the Class A-1 Principal Payment Amount, the Class A-2 Principal
Payment Amount, the Class B Principal Payment Amount, the Class A-1 Payment
Amount, the Class A-2 Payment Amount, the Class B Payment Amount, the Reserve
Account Required Amount, the Overcollateralization Amount and the Target
Overcollateralization Amount.
For purposes hereof, the following terms shall have the following meanings:
"Defaulted Receivable" means any Receivable (a) for which the related
Financed Vehicle has been repossessed by the Servicer or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"Liquidated Receivable" means any Receivable (a) which has been liquidated
by the Servicer through the sale of the Financed Vehicle or the Receivable or
(b) for which the Obligor is more than 120 days past due, or (c) with respect to
which the Servicer has determined in good faith that no further proceeds are
expected to be received in respect of such Receivable.
"Principal Balance" of a Receivable (a) as of the Cutoff Date, means the
Amount Financed minus (i) in the case of a Precomputed Receivable, that portion
of all payments (including all Scheduled Payments and any prepayments in full or
partial prepayments) actually received on or prior to such date and allocable to
principal in accordance with the actuarial method and (ii) in the case of a
Simple Interest Receivable, that portion of all payments (including all
Scheduled Payments and any prepayments in full or partial prepayments) actually
received on or prior to such date and allocable to principal in accordance with
the simple interest method, and (b) as of any date after the Cutoff Date, means
the Principal Balance as of the Cutoff Date minus (1) in the case of a
Precomputed Receivable, that portion of all payments (including all Scheduled
Payments and any prepayments in full or partial prepayments) actually received
on or prior to such date (but after the Cutoff Date) and allocable to principal
in accordance with the actuarial method, (2) in the case of a Simple Interest
Receivable, that portion of all payments (including all Scheduled Payments and
any prepayments in full or partial prepayments) actually received on or prior to
such date (but after the Cutoff Date) and allocable to principal in accordance
with the simple interest method and (3) any Cram Down Loss in respect of such
Receivable. The Principal Balance of a Liquidated Receivable for purposes other
than the definition of Principal Payment Amount shall be equal to $0.
"Purchase Amount" means, with respect to a Receivable, the Principal Balance
plus interest thereon at the respective APR from the last day through which
interest has been paid to the last day of the immediately preceding Collection
Period if purchased prior to the Record Date immediately following the end of
such Collection Period, and otherwise through the last day of the month of
repurchase.
"Principal Payment Amount" means, with respect to any Payment Date other
than the Final Scheduled Payment Date, the sum of the following amounts, without
duplication: (a) the principal portion of all Scheduled Payments on Precomputed
Receivables (calculated in accordance with the actuarial method) and all
payments of principal received on Simple Interest Receivables (calculated in
accordance
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<PAGE>
with the simple interest method) during such Collection Period; (b) the
principal portion of all prepayments received during the preceding Collection
Period; (c) the portion of the Purchase Amount allocable to principal of each
Receivable that became a Purchased Receivable as of the last day of the
preceding Collection Period and the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased; (d) the Principal
Balance of each Receivable that first became a Liquidated Receivable during the
preceding Collection Period and (e) the aggregate amount of Cram Down Losses
with respect to the Receivables that have occurred during the preceding
Collection Period.
"Recoveries" means, with respect to a Liquidated Receivable, the monies
collected from whatever source, subsequent to the date on which such Receivable
became a Liquidated Receivable net of the reasonable costs of liquidation
including reasonable out-of-pocket expenses of the Servicer in connection with
such liquidation plus any amounts required by law to be remitted to the Obligor.
"Scheduled Payment" means, for any Collection Period for any Receivable, the
amount indicated in such Receivable as required to be paid by the Obligor in
such Collection Period (without giving effect to deferments of payments granted
to Obligors by the Servicer pursuant to the Sale and Servicing Agreement or any
rescheduling of payments in an insolvency or similar proceeding).
CALCULATION OF PAYMENT AMOUNTS. (a) The Class A-1 Noteholders will be
entitled to receive, to the extent funds are available therefor, the "Class A-1
Payment Amount" with respect to each Payment Date. The "Class A-1 Payment
Amount" with respect to a Payment Date will be an amount equal to the sum of (i)
the "Class A-1 Principal Payment Amount", consisting of the Class A-1 Percentage
of the Principal Payment Amount, PLUS (ii) the "Class A-1 Interest Payment
Amount", consisting of 30 days' interest (calculated on the basis of a 360-day
year consisting of twelve 30-day months) at the Class A-1 Interest Rate on the
Class A-1 Note Balance as of the close of business on the last day of the
related Collection Period.
(b) The Class A-2 Noteholders will be entitled to receive, to the extent
funds are available therefor, the "Class A-2 Payment Amount" with respect to
each Payment Date. The "Class A-2 Payment Amount" with respect to a Payment Date
will be an amount equal to the sum of (i) the "Class A-2 Principal Payment
Amount", consisting of the Class A-2 Percentage of the Principal Payment Amount,
PLUS (ii) the "Class A-2 Interest Payment Amount", consisting of 30 days'
interest (calculated on the basis of a 360-day year consisting of twelve 30-day
months) at the Class A-2 Interest Rate on the Class A-2 Note Balance as of the
close of business on the last day of the related Collection Period; PROVIDED,
HOWEVER, that payment of interest and principal to the Class A-2 Noteholders
will be subordinated to the extent described under "The Notes--Priority of
Distribution Amounts."
(c) The Class B Noteholders will be entitled to receive, to the extent funds
are available therefor, the "Class B Payment Amount" with respect to each
Payment Date. The "Class B Payment Amount" with respect to a Payment Date will
be an amount equal to the sum of (i) the "Class B Principal Payment Amount",
consisting of the Class B Percentage of the Principal Payment Amount, PLUS (ii)
the "Class B Interest Payment Amount", consisting of 30 days' interest
(calculated on the basis of a 360-day year consisting of twelve 30-day months)
at the Class B Interest Rate on the Class B Note Balance as of the close of
business on the last day of the related Collection Period; PROVIDED, HOWEVER,
that payment of interest and principal to the Class B Noteholders will be
subordinated to the extent described under "The Notes--Priority of Distribution
Amounts".
On and after the Final Scheduled Payment Date, the Class A-1 Principal
Payment Amount, the Class A-2 Principal Payment Amount and the Class B Principal
Payment Amount will equal the then outstanding Class A-1 Note Balance, Class A-2
Note Balance and the Class B Note Balance, respectively.
For purposes hereof, the following terms shall have the following meanings:
"Class A-1 Interest Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class A-1 Interest Payment Amount for
such Payment Date and any outstanding
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<PAGE>
Class A-1 Interest Carryover Shortfall from the immediately preceding Payment
Date plus interest on such outstanding Class A-1 Interest Carryover Shortfall,
to the extent permitted by law, at the Class A-1 Interest Rate from such
preceding Payment Date through the current Payment Date (calculated on the basis
of a 360-day year consisting of twelve 30-day months), over (b) the amount of
interest that the Holders of the Class A-1 Notes actually received on such
current Payment Date.
"Class A-1 Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class A-1 Principal Payment Amount
and any outstanding Class A-1 Principal Carryover Shortfall from the immediately
preceding Payment Date, over (b) the amount of principal that the Holders of the
Class A-1 Notes actually received on such current Payment Date.
"Class A-2 Interest Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class A-2 Interest Payment Amount for
such Payment Date and any outstanding Class A-2 Interest Carryover Shortfall
from the immediately preceding Payment Date plus interest on such outstanding
Class A-2 Interest Carryover Shortfall, to the extent permitted by law, at the
Class A-2 Interest Rate from such preceding Payment Date through the current
Payment Date (calculated on the basis of a 360-day year consisting of twelve
30-day months), over (b) the amount of interest that the Holders of the Class
A-2 Notes actually received on such current Payment Date.
"Class A-2 Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class A-2 Principal Payment Amount
and any outstanding Class A-2 Principal Carryover Shortfall from the immediately
preceding Payment Date, over (b) the amount of principal that the Holders of the
Class A-2 Notes actually received on such current Payment Date.
"Class B Interest Carryover Shortfall" means, as of the close of business on
any Payment Date, the excess (a) of the Class B Interest Payment Amount for such
Payment Date and any outstanding Class B Interest Carryover Shortfall from the
immediately preceding Payment Date plus interest on such outstanding Class B
Interest Carryover Shortfall, to the extent permitted by law, at the Class B
Interest Rate from such preceding Payment Date through the current Payment Date
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
over (b) the amount of interest that the Holders of the Class B Notes actually
received on such current Payment Date.
"Class B Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class B Principal Payment Amount and
any outstanding Class B Principal Carryover Shortfall from the immediately
preceding Payment Date, over (b) the amount of principal that the Holders of the
Class B Notes actually received on such current Payment Date.
PRIORITY OF DISTRIBUTION AMOUNTS
On each Payment Date to the extent of the Payment Amount, the Indenture
Trustee will (based on the information contained in the Servicer's Certificate
delivered on the related Record Date) distribute the following amounts in the
following order of priority:
(i) first, to the Servicer, the Servicer Fee (as defined herein) for the
related Collection Period, any Supplemental Servicer Fee for the related
Collection Period and so long as Triad is the Servicer, any Servicer
Expenses for the related or any prior Collection Period and certain other
amounts mistakenly deposited in the Collection Account belonging to the
Servicer, if any, or otherwise required to be distributed to the Servicer in
accordance with the Sale and Servicing Agreement;
(ii) second, to any Lockbox Bank (as defined herein), the Indenture
Trustee, the Owner Trustee and the Backup Servicer, any accrued and unpaid
fees and expenses (including reasonable legal fees and expenses), in each
case, to the extent such Person (as defined herein) has not previously
received such amount from the Servicer;
(iii) third, to the Class A-1 Noteholders, the Class A-1 Interest Payment
Amount for such Payment Date and the Class A-1 Interest Carryover Shortfall,
if any;
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<PAGE>
(iv) fourth, to the Class A-2 Noteholders, the Class A-2 Interest
Payment Amount for such Payment Date and the Class A-2 Interest Carryover
Shortfall, if any;
(v) fifth, to the Class B Noteholders, the Class B Interest Payment
Amount for such Payment Date and the Class B Interest Carryover Shortfall,
if any;
(vi) sixth, to the Class A-1 Noteholders, the Class A-1 Principal
Payment Amount for such Payment Date, based on the Class A-1 Percentage and
the Class A-1 Principal Carryover Shortfall, if any;
(vii) seventh, to the Class A-2 Noteholders, the Class A-2 Principal
Payment Amount for such Payment Date, based on the Class A-2 Percentage and
the Class A-2 Principal Carryover Shortfall, if any;
(viii) eighth, to the Class B Noteholders, the Class B Principal Payment
Amount for such Payment Date, based on the Class B Percentage and the Class
B Principal Carryover Shortfall, if any;
(ix) ninth, to the Reserve Account to the extent necessary to make the
amount on deposit in the Reserve Account equal to the Reserve Account
Required Amount (after giving effect to all withdrawals from the Reserve
Account on such date);
(x) tenth, to the Class A-1 Noteholders, to the Class A-2 Noteholders
and to the Class B Noteholders, as principal, pro rata, until the Target
Overcollateralization Amount is reached; and
(xi) eleventh, to the Seller, as holder of the Certificate.
STATEMENTS TO NOTEHOLDERS
On each Payment Date, the Indenture Trustee must provide to each Noteholder
and the Rating Agency a statement prepared by the Servicer based on the
information in the related Servicer's Certificate, which statement sets forth
certain information required under the Sale and Servicing Agreement. Each such
statement will include the following information with respect to such Payment
Date or the immediately preceding Collection Period, as applicable:
(i) the amount of such payment allocable to interest with respect to the
Class A-1, Class A-2 and Class B Notes, as applicable;
(ii) the Class A-1 Percentage, the Class A-2 Percentage and the Class B
Percentage;
(iii) the amount of such payment allocable to principal on or with
respect to the Class A-1 Notes, Class A-2 and Class B Notes, as applicable;
(iv) the amount of such payment payable out of amounts withdrawn from
the Reserve Account, the Reserve Account Required Amount and the amount
remaining in the Reserve Account;
(v) the amount of fees paid by the Trust with respect to such Collection
Period, including any Servicer Fee, Supplemental Servicer Fee, and Servicer
Expenses;
(vi) the Class A-1 Note Balance, the Class A-2 Note Balance and the
Class B Note Balance, as applicable;
(vii) the Class A-1 Interest Carryover Shortfall, the Class A-1 Principal
Carryover Shortfall, the Class A-2 Interest Carryover Shortfall, the Class
A-2 Principal Carryover Shortfall, the Class B Interest Carryover Shortfall
and the Class B Principal Carryover Shortfall, if any;
(viii) the Class A-1 Note Factor, the Class A-2 Note Factor and the Class
B Note Factor;
(ix) the Delinquency Ratio, Cumulative Default Ratio and Repossession
Inventory Ratio;
(x) whether any Reserve Account Trigger Event or Servicer Termination
Trigger Event has occurred;
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<PAGE>
(xi) whether any Reserve Account Trigger Event or Servicer Termination
Trigger Event that may have occurred as of a prior Record Date is Deemed
Cured;
(xii) the number of Receivables and the aggregate Principal Balance due
thereof, for which the related Obligors are delinquent in making Scheduled
Payments (A) between 31 and 60 days, (B) between 61 and 90 Days, (C) between
91 and 120 days and (D) more than 120 days;
(xiii) the number of Receivables which became Liquidated Receivables, and
the aggregate principal amount thereof net of Recoveries;
(xiv) the number of Receivables which became Defaulted Receivables, and
the aggregate principal amount thereof;
(xv) the number and the aggregate Purchase Amount of Receivables that
became Purchased Receivables during the related Collection Period and the
number and aggregate Purchase Amount of Receivables that were required to be
repurchased during the related Collection Period but were not so
repurchased;
(xvi) the Principal Balance, APR and model year of each Receivable that
was replaced and the Principal Balance, APR and model year of the
corresponding Replacement Receivable;
(xvii) the number and the aggregate Principal Balance of Receivables with
respect to which, to the knowledge of the Servicer, Obligors became the
subject of bankruptcy proceedings during such Collection Period (or during a
prior Collection Period, if the Servicer first became aware of such
proceeding during the current Collection Period);
(xviii) the amount of any Deficiency Claim Amounts deposited in the
Collection Account from the Reserve Account;
(xvix) the Collector to Current Receivable Ratio and the Collector to
Delinquent Receivable Ratio;
(xx) the Overcollateralization Amount and the Target
Overcollateralization Amount; and
(xxi) the beginning balance, amount of claims paid, amount of deposits
made, and ending balance of the applicable collateral self-insurance fund,
if any.
Each amount set forth pursuant to subclauses (i), (ii) and (iv) will be
expressed as a dollar amount per $1,000 of the initial principal amount of a
Note of the related class. Within the required period of time after the end of
each calendar year, the Indenture Trustee will furnish to each person who at any
time during such calendar year was a Noteholder, a statement as to the aggregate
amounts of interest and principal paid to such Noteholder and such other
information as the Servicer deems necessary to enable such Noteholder to prepare
its tax returns. See "Federal Income Tax Consequences."
RESERVE ACCOUNT
Pursuant to the Sale and Servicing Agreement, the Seller will cause the
Indenture Trustee to establish the Reserve Account in the name of the Indenture
Trustee for the benefit of the Noteholders. On the Closing Date, the Seller will
make an initial deposit of cash into the Reserve Account in the amount of at
least $[ ] ([ ]% of the Cutoff Date Principal Balance) (the "Reserve Account
Initial Deposit"). On each Payment Date, additional amounts will be deposited
into the Reserve Account from collections on the Receivables to the extent funds
are available therefor as described under "The Notes--Priority of Distribution
Amounts." Funds will be withdrawn from the Reserve Account on or before each
Payment Date to pay any Deficiency Claim Amount for such Payment Date. The
aggregate amount required to be on deposit in the Reserve Account at any time
(the "Reserve Account Required Amount") is described below.
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Amounts, if any, on deposit in the Reserve Account on any Payment Date in
excess of the Reserve Account Required Amount for each Payment Date will be
released as described in "Priority of Distribution Amounts" above, so long as
(a) no Reserve Account Trigger Event has occurred or (b) all Reserve Account
Trigger Events which have occurred have been Deemed Cured. Upon occurrence of a
Reserve Account Trigger Event and until such Reserve Account Trigger Event has
been Deemed Cured, such excess amounts on deposit in the Reserve Account will
not be released, but will be retained in the Reserve Account for the benefit of
the Noteholders and distributed as described in "--Priority of Distribution
Amounts" above.
For the purposes hereof, the following terms have the following meanings:
"Reserve Account Required Amount" means, with respect to any Record Date, an
amount equal to the greater of (a) [ ]% of the Aggregate Principal Balance and
(b) the Floor Amount, unless a Reserve Account Trigger Event has occurred, in
which case the Reserve Account Required Amount shall include all amounts
required to be paid in items (x) and (xi) as described in "Priority of
Distribution Amounts" until such Reserve Account Trigger Event has been Deemed
Cured; PROVIDED, HOWEVER, that the Reserve Account Required Amount shall be
[ ]% of the Aggregate Principal Balance for each Payment Date following the
point in time that the Cumulative Default Ratio as described in clause (c) of
the definition of a Reserve Account Trigger Event is greater than [ ]%, but
less than [ ]%, notwithstanding such Reserve Account Trigger Event being Deemed
Cured.
"Floor Amount" at any time will equal the lesser of (a) the Note Balance and
(b) $[ ].
"Reserve Account Trigger Event" means, with respect to any Record Date, that
any one of the following events shall have occurred: (a) the Delinquency Ratio
for each of the three preceding Collection Periods exceeds [ ]%; (b) the
Repossession Inventory Ratio is greater than [ ]%; or (c) the Cumulative
Default Ratio exceeds (i) [ ]% as of any Determination Date from the initial
Determination Date through and including the sixth Determination Date, (ii)
[ ]% as of any Determination Date from the seventh Determination Date through
and including the twelfth Determination Date, (iii) [ ]% as of any
Determination Date from the thirteenth Determination Date through and including
the eighteenth Determination Date, (iv) [ ]% as of any Determination Date from
the nineteenth Determination Date through and including the twenty-fourth
Determination Date or (v) [ ]% as of any Determination Date thereafter.
"Delinquency Ratio" means, with respect to any Determination Date, a
fraction (expressed as a percentage), (a) the numerator of which is equal to the
aggregate of the Principal Balances of all Receivables for which the related
Financed Vehicles have not been repossessed by the Servicer and with respect to
which more than 10% of a Scheduled Payment is 61 or more days past due as of
such Determination Date, and (b) the denominator of which is equal to the
Aggregate Principal Balance as of such Determination Date.
"Cumulative Default Ratio" means, with respect to any Determination Date, a
fraction (expressed as a percentage), (a) the numerator of which is equal to the
sum of (i) the aggregate of the Principal Balances of all Receivables which have
become Defaulted Receivables and (ii) the amount of any Cram Down Losses, and
(b) the denominator of which is equal to the Cutoff Date Principal Balance.
"Deemed Cured" means, as of a Determination Date, (a) with respect to a
Servicer Termination Trigger Event that has occurred, that no Servicer
Termination Trigger Event shall have occurred as of such Determination Date or
as of either of the two immediately preceding Determination Dates, and (b) with
respect to a Reserve Account Trigger Event that has occurred, that no Reserve
Account Trigger Event shall have occurred as of such Determination Date or as of
either of the two immediately preceding Determination Dates; PROVIDED, HOWEVER,
that a Reserve Account Trigger Event resulting from a Cumulative Default Ratio
exceeding [ ]% shall never be Deemed Cured until the Class A-1 Note Balance,
the Class A-2 Note Balance and the Class B Note Balance have been reduced to
zero.
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"Repossession Inventory Ratio" means, with respect to any Determination
Date, a fraction (expressed as a percentage), (a) the numerator of which is
equal to the aggregate of the Principal Balances of all Receivables for which
the related Financed Vehicles have been repossessed but not yet liquidated by
the Servicer and (b) the denominator of which is equal to the Aggregate
Principal Balance as of such Determination Date.
THE INDENTURE
THE INDENTURE TRUSTEE. [ ] is the Indenture Trustee under the
Indenture. For the purpose of meeting the legal requirements of certain
jurisdictions, the Indenture Trustee may appoint co-trustees or separate
trustees of all or any part of the trust estate and confer upon such party such
powers, duties, obligations, rights and trusts as the Indenture Trustee deems
necessary, or desirable. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon the Indenture Trustee by the
Indenture will be conferred or imposed upon the Indenture Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
Indenture Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who will exercise and perform
such rights, powers, duties, and obligations solely at the direction of the
Indenture Trustee.
The Indenture Trustee may resign at any time after 60 days' written notice
to the Issuer and Noteholders in which event the Trust will be obligated to
appoint a successor trustee. The Trust may remove the Indenture Trustee if,
among other reasons, the Indenture Trustee ceases to be eligible to continue as
such under the Indenture, becomes legally unable to act or becomes insolvent. In
such circumstances, the Trust will be obligated to appoint a successor trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
of a successor trustee.
The Sale and Servicing Agreement will provide that the Indenture Trustee
will be entitled to indemnification by the Servicer for and will be held
harmless against, any loss, liability, fee, disbursement or expense incurred by
the Indenture Trustee not resulting from the Indenture Trustee's own willful
misfeasance, bad faith or negligence and other than by reason of a breach of any
of the Indenture Trustee's representations or warranties set forth in the Sale
and Servicing Agreement. The Sale and Servicing Agreement will further provide
that the Servicer will indemnify the Indenture Trustee for certain taxes that
may be asserted in connection with the transaction.
The Indenture Trustee makes no representations as to the validity or
sufficiency of the Sale and Servicing Agreement, the Notes (other than the
authentication of the Notes) or any Receivables or the Related Documents and is
not accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Notes or the
Receivables, or the investment of any monies received by the Servicer before
such monies are deposited in the Collection Account. The Indenture Trustee has
not independently verified the Receivables. The Indenture Trustee is required to
perform only those duties specifically required of it under the Sale and
Servicing Agreement and the Indenture. The Indenture Trustee shall determine
whether the certificates, reports or other instruments required to be furnished
to the Indenture Trustee under the Sale and Servicing Agreement and the
Indenture conform to the requirements of the Sale and Servicing Agreement and
the Indenture, respectively.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. The Trust and
Indenture Trustee may, without consent of the Noteholders, enter into one or
more supplemental indentures for any of the following purposes: (i) to correct
or amplify the description of the property subject to the lien of the Indenture
or add additional property thereto; (ii) to evidence the succession of another
Person to the Trust and the assumption by such successor of the covenants of the
Trust; (iii) to add additional covenants for the benefit of the Noteholders or
to surrender any, right or power conferred on the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any additional property to or with the
Indenture Trustee; (v) to cure any ambiguity, or to correct or supplement any
provision in the Indenture or in any supplemental indenture
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that may be inconsistent with any other provision of the Indenture or any
supplemental indenture; (vi) to add to or change any of the provisions of the
Indenture as shall be necessary and permitted to facilitate the administration
by more than one trustee; and (vii) to add any provisions to, change in any
manner or eliminate any of the provisions of the Indenture or modify in any
manner the rights of Noteholders under such Indenture; provided that any such
action must not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT. With the consent of the
Note Majority, the Trust and the Indenture Trustee may execute one or more
supplemental indentures to add, change or eliminate any other provisions of the
Indenture, modify in any manner the rights of the Noteholders or provide for the
acceptance of the appointment of a successor Indenture Trustee. Without the
consent of the Holder of each outstanding related Note affected thereby,
however, no supplemental indenture will: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate thereon or the redemption price with respect
thereto, change the provisions of the Indenture relating to the application of
collections on, or the proceeds of the sale of, the collateral to the payment of
principal of or interest on the Notes, change any place of payment where or the
coin or currency in which any Note or any interest thereon is payable; (ii)
impair the right to institute suit for the enforcement of certain provisions of
the Indenture regarding payment; (iii) reduce the percentage of the aggregate
amount of the outstanding Notes the consent of the Holders of which is required
for any such supplemental indenture or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of the Indenture
or of certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding
certain aspects of what constitutes an "Outstanding" Note; (v) reduce the
percentage of the aggregate outstanding amount of the Notes the consent of the
Holders of which is required to direct the Indenture Trustee to sell or
liquidate the Receivables if the proceeds of such sale would be insufficient to
pay the principal amount and accrued but unpaid interest on the outstanding
Notes; (vi) modify the provision of the Indenture requiring consent of
Noteholders except to increase the percentage of the aggregate principal amount
of the Notes required to amend the sections of the Indenture or to provide
additional provisions requiring the consent of each Noteholder prior to
modification or waiver; (vii) modify any of the provisions of the Indenture
affecting the calculation of the amount of any payment of interest or principal
due on any Note on any Payment Date; (viii) permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to
any of the collateral for the Notes or, except as otherwise permitted or
contemplated in the Indenture, terminate the lien of the Indenture on any such
collateral or deprive the Holder of any Note of the security afforded by the
lien of the Indenture; or (ix) become effective if the Rating Agency Condition
in respect thereof has not been satisfied.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. "Events of Default" under
the Indenture will consist of: (i) any failure to pay interest on the Notes as
and when the same becomes due and payable, which failure continues unremedied
for two days; (ii) any failure to make any required payment of principal on the
Notes; (iii) a default in the observance or performance in any material respect
of any covenant or agreement of the Trust made in the Indenture, or any
representation or warranty made by the Trust in the Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect as of the time made, and the continuation of any such default or the
failure to cure such breach of a representation or warranty for a period of 30
days after there shall have been given to the Trust by the Indenture Trustee, or
to the Trust and the Indenture Trustee by the Holders of at least 25% of the
aggregate outstanding principal balance of the Notes, a written notice in
accordance with the Indenture; (iv) certain events of bankruptcy, insolvency,
receivership or liquidation with respect to the Seller or the Trust; and (v)
failure to pay the unpaid principal balance of any class of Notes on the
respective Final Scheduled Payment Date for such class. However, the amount of
principal required to be paid to Noteholders under the Indenture will generally
be limited to amounts available in the Collection Account. Therefore, the
failure to pay principal on a class of Notes generally will not result in the
occurrence of an Event of Default until the Final Scheduled Payment Date for
such class of Notes.
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If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee may, or if requested by the Note Majority must, declare
all the Notes to be immediately due and payable. Such declaration by the
Indenture Trustee may, under certain circumstances, be rescinded by the Note
Majority.
If an Event of Default occurs, the Indenture Trustee may institute
proceedings to collect amounts due or foreclose on property held by the
Indenture Trustee for the benefit of the Noteholders, exercise remedies as a
secured party, sell the Receivables, elect to have the Trust maintain possession
of such Receivables and continue to apply collections on such Receivables as if
there had been no declaration of acceleration or make demand on the Servicer to
deliver all Servicer Receivables Files to the Indenture Trustee. However, the
Indenture Trustee is prohibited from selling the related Receivables following
an Event of Default, unless (i) the holders of all the outstanding Notes consent
to such sale, (ii) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding Notes at the date of
such sale, or (iii) the Indenture Trustee determines that the proceeds of the
Receivables would not be sufficient on an ongoing basis to make all payments on
the Notes as such payments would have become due if such obligations had not
been declared due and payable. Following a declaration upon an Event of Default
that the Notes are immediately due and payable, Noteholders will be entitled to
repayment of interest and principal in accordance with the "Priority of
Distribution Amounts" above.
If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee will be under no obligation to exercise any of the rights
or powers under the Indenture at the request or direction of any of the Holders
of such Notes if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and the preceding paragraph, the Note Majority will have the
right to direct the time, method and place of conducting any proceeding or any
remedy available to the Indenture Trustee and the Note Majority may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the Indenture that cannot be modified without the waiver or consent of all of
the Holders of such outstanding Notes.
No Holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such Holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
Holders of not less than 25% of the Note Balance have made written request of
the Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such Holders have offered the Indenture Trustee indemnity
reasonably satisfactory to the Indenture Trustee, and (iv) the Indenture Trustee
has for 60 days failed to institute such proceeding.
NOTE FACTORS; STATEMENT TO NOTEHOLDERS; SERVICER REPORTS TO THE INDENTURE
TRUSTEE
The "Class A-1 Note Factor" will be a seven-digit decimal number that the
Servicer will compute each month indicating the Class A-1 Note Balance as of the
close of business on the Determination Date in that month as a fraction of the
respective original outstanding principal balance of the Class A-1 Notes. The
Class A-1 Note Factor will be 1.0000000 as of the Cutoff Date; thereafter, the
Class A-1 Note Factor will decline to reflect reductions in the Class A-1 Note
Balance as a result of scheduled payments collected, partial prepayments,
prepayments and liquidations of the Receivables. The amount of a Class A-1
Noteholder's pro rata share of the Class A-1 Note Balance can be determined on
any date by multiplying the original denomination of the Holder's Note by the
Class A-1 Note Factor as of the close of business on the most recent Payment
Date.
The "Class A-2 Note Factor" will be a seven-digit decimal number that the
Servicer will compute each month indicating the Class A-2 Note Balance as of the
close of business on the Determination Date in that month as a fraction of the
respective original outstanding principal balance of the Class A-2 Notes. The
Class A-2 Note Factor will be 1.0000000 as of the Cutoff Date; thereafter, the
Class A-2 Note Factor will decline to reflect reductions in the Class A-2 Note
Balance as a result of scheduled payments collected, partial prepayments,
prepayments and liquidations of the Receivables. The amount of a Class A-2
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Noteholder's pro rata share of the Class A-2 Note Balance can be determined on
any date by multiplying the original denomination of the Holder's Note by the
Class A-2 Note Factor as of the close of business on the most recent Payment
Date.
The "Class B Note Factor" will be a seven-digit decimal number that the
Servicer will compute each month indicating the Class B Note Balance as of the
close of business on the Determination Date in that month as a fraction of the
respective original outstanding principal balance of the Class B Notes. The
Class B Note Factor will be 1.0000000 as of the Cutoff Date; thereafter, the
Class B Note Factor will decline to reflect reductions in the Class B Note
Balance as a result of scheduled payments collected, partial prepayments,
prepayments and liquidations of the Receivables. The amount of a Class B
Noteholder's pro rata share of the Class B Note Balance can be determined on any
date by multiplying the original denomination of the Holder's Note by the Class
B Note Factor as of the close of business on the most recent Payment Date.
Under the Sale and Servicing Agreement, the Servicer will perform certain
monitoring and reporting functions for the Trust, including the preparation and
delivery of the Servicer's Certificate on each Record Date to the Indenture
Trustee, the Backup Servicer, and the Rating Agency setting forth specified
information with respect to the preceding Collection Period.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Sale and Servicing Agreement,
the Indenture Trustee will be required to mail to each person who at any time
during such calendar year will have been a Noteholder a statement containing
certain information related to such Noteholder's preparation of federal income
tax returns.
RATINGS
It is a condition to issuance of the Notes that the Class A-1 Notes be rated
at least "[ ]" or the equivalent by the Rating Agency, the Class A-2 Notes be
rated at least "[ ]" or the equivalent by the Rating Agency and the Class B
Notes be rated at least "[ ]" or the equivalent by the Rating Agency. A rating
is not a recommendation to purchase, hold or sell the Notes, inasmuch as such
ratings do not comment as to market price or suitability for a particular
investor. There is no assurance that the ratings will remain for any given
period of time or that the ratings will not be lowered or withdrawn entirely by
the Rating Agency if in its judgment circumstances in the future so warrant.
REGISTRATION OF NOTES
The Notes will initially be registered in the name of Cede, the nominee of
DTC. DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. See "Description of the
Securities--Book-Entry Registration" in the Prospectus.
THE TRANSACTION DOCUMENTS
THE FOLLOWING SUMMARY DESCRIBES MATERIAL TERMS OF THE TRANSACTION DOCUMENTS.
FORMS OF THE TRANSACTION DOCUMENTS HAVE BEEN FILED AS EXHIBITS TO THE
REGISTRATION STATEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, ALL THE PROVISIONS IN
THE TRANSACTION DOCUMENTS. THE FOLLOWING SUMMARY SUPPLEMENTS THE DESCRIPTION OF
THE GENERAL TERMS AND PROVISIONS OF THE
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TRUST DOCUMENTS (AS SUCH TERM IS USED IN THE PROSPECTUS) SET FORTH IN THE
PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
SALE AND ASSIGNMENT OF RECEIVABLES
At the time of issuance of the Notes, the Seller will sell and assign to the
Trust the Seller's entire interest in the Receivables, including its security
interests in the Financed Vehicles. On or before the Closing Date, the Trust
will pledge the Receivables to the Indenture Trustee for the benefit of the
Noteholders pursuant to the Indenture. Each Receivable will be identified in a
schedule to the Sale and Servicing Agreement. The Indenture Trustee will,
concurrently with such pledge, authenticate and deliver the Notes, which have
been executed on behalf of the Trust.
In the Receivables Purchase Agreement and the Sale and Servicing Agreement,
Triad and the Seller will represent and warrant to the Seller and the Trust,
respectively, that, among other things: (i) as of the Cutoff Date, the
information provided in the schedule to the Sale and Servicing Agreement with
respect to the Receivables is correct in all material respects; (ii) at the date
of issuance of the Notes, the Receivables are, to the best of its knowledge,
free and clear of all liens or claims existing or that have been filed for work,
labor, storage or materials that are liens prior to the security interest in the
Financed Vehicle granted by the Receivables and no right of setoff, counterclaim
or rescission has been asserted or, to the best of its knowledge, threatened
with respect to the Receivables; (iii) at the date of issuance of the Notes,
each of the Receivables is secured by (or will be when all necessary steps have
been taken to result in) a first priority perfected security interest in the
Financed Vehicle in favor of Triad; and (iv) each Receivable, at the time it was
originated, complied, and at the date of issuance of the Notes, complies in all
material respects with applicable federal, state and local laws, including
consumer credit, truth in lending, equal credit opportunity and disclosure laws.
Pursuant to the Receivables Purchase Agreement and the Sale and Servicing
Agreement, Triad and the Seller, respectively, will be obligated to repurchase
or replace a Receivable from the Seller and the Trust, respectively, if the
interests of the Noteholders or the Trust in such Receivable are materially
adversely affected by a breach of any representation or warranty made by Triad
or the Seller, respectively, with respect to the Receivable, if such breach has
not been cured following discovery by or notice to Triad or the Seller,
respectively, of the breach. Pursuant to the Sale and Servicing Agreement, the
Servicer will be obligated to purchase or replace a Receivable from the Trust if
the interests of the Noteholders or the Trust in such Receivable are materially
adversely affected by a breach of certain of its servicing obligations under the
Sale and Servicing Agreement (including its obligation to maintain perfection of
the first priority security interest created by each Receivable in the related
Financed Vehicle or certain other covenants with respect to the Servicer), if
the breach has not been cured following the discovery or notice to the Servicer
of the breach. Each Receivable will be purchased from the Trust or replaced by
Triad, the Seller or the Servicer, as the case may be, at a price equal to the
Purchase Amount. The purchase or replacement obligations will constitute the
sole remedy available to the Noteholders or the Indenture Trustee for any such
uncured breaches.
Pursuant to the Sale and Servicing Agreement, the Servicer will service and
administer the Receivables. The documents evidencing the Receivables will be
delivered to the Indenture Trustee on the Closing Date. In addition, Triad's
accounting records and computer systems will be marked to reflect such sale and
assignment, and UCC financing statements reflecting such sale and assignment
will be filed. See "Legal Aspects of the Receivables--Security Interests in
Vehicles" in the Prospectus.
ACCOUNTS
Each Obligor has been instructed to make payments with respect to the
Receivables to a Lockbox which has been established and will be maintained by
[ ] (the "Lockbox Bank"). Upon receipt of payments in the Lockbox, the Lockbox
Bank will deposit funds into an account maintained by the Lockbox Bank at a
depository institution (the "Lockbox Account"). The Indenture Trustee will
establish the
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Collection Account (the "Collection Account") and the Reserve Account (the
"Reserve Account") in the name of the Indenture Trustee for the benefit of the
Noteholders. All payments made on or with respect to the Receivables previously
deposited in the Lockbox Account will be transferred to the Collection Account
within two Business Days of the receipt of available funds therein. All payments
with respect to the Notes will be made by the Indenture Trustee from the
Collection Account. Upon receipt, but in no event later than two Business Days
after the receipt thereof, each of the Servicer, Triad and the Seller will remit
all amounts received by it in respect of the Receivables in the form of checks
with payment coupons directly to the Lockbox. Other payments received by each of
the Servicer, Triad and the Seller will be deposited into a local servicing
account for processing, and then transferred to the Collection Account. The
Collection Account will be maintained with the Indenture Trustee as long as the
Indenture Trustee's deposits have a rating acceptable to the Rating Agency. If
the deposits of the Indenture Trustee no longer have such acceptable rating, the
Indenture Trustee shall cause such accounts to be moved to a bank or trust
company having such acceptable ratings.
The Collection Account and the Reserve Account will be initially established
and maintained in the trust department of the Indenture Trustee. All the trust
accounts will be invested in eligible investments as specified in the Sale and
Servicing Agreement.
SERVICING PROCEDURES
The Servicer will make all reasonable efforts to collect all payments due
with respect to the Receivables and will continue such collection procedures as
it follows with respect to all comparable motor vehicle receivables that it
services for itself or others, in a manner consistent with the Sale and
Servicing Agreement. If the Servicer determines that eventual payment in full of
a Receivable is unlikely, the Servicer will follow its normal collection
practices and procedures, including the repossession and disposition of the
Financed Vehicle securing the Receivable at a public or private auction, or the
taking of any other action permitted by applicable law.
COLLECTIONS
The Servicer or the Seller, as the case may be, will remit or cause to be
remitted the aggregate Purchase Amount of any Receivables required to be
purchased by it from the Trust to the Collection Account. Under the Sale and
Servicing Agreement, the amounts of any recoveries in respect of any Receivables
repurchased by Dealers pursuant to any Dealer Recourse constitute collections on
the Receivables.
For purposes of the Sale and Servicing Agreement, collections on a
Receivable (other than a Receivable purchased by the Servicer or the Seller)
which are not late fees or other administrative fees and expenses collected
during a Collection Period are required to be applied first to the Scheduled
Payment. To the extent that such collections on a Receivable during a Collection
Period exceed the Scheduled Payment on such Receivable, the collections are
required to be applied to prepay the Receivable in full. If the collections are
insufficient to prepay the Receivable in full, any partial prepayment of
principal during a Collection Period will be immediately applied to reduce the
principal balance of the Receivable during such Collection Period.
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SERVICING COMPENSATION
The Servicer is entitled under the Sale and Servicing Agreement to receive
on each Payment Date the Servicer Fee equal to the product of one-twelfth of the
Servicing Fee Rate and the Principal Balance outstanding at the beginning of the
calendar month immediately preceding the month in which such Payment Date
occurs. If the Backup Servicer, or any other entity becomes the successor
Servicer, it will receive compensation at the Servicing Fee Rate. The Servicer
will also collect and retain the Supplemental Servicer Fee as additional
servicing compensation, which includes any late fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to the Receivables. Payments by or on behalf of Obligors will be
allocated to scheduled payments, late fees and other charges and principal and
interest in accordance with the Servicer's normal practices and procedures. The
Servicer Fee, the Supplemental Servicer Fee and Servicer Expenses will be paid
out of collections from the Receivables pursuant to the distribution described
under "The Notes--Priority of Distribution Amounts".
The Servicer Fee, the Supplemental Servicer Fee and Servicer Expenses will
compensate the Servicer for performing the functions of a third-party servicer
of the Receivables as an agent for the Trust, including collecting and posting
all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, reporting any required tax information to Obligors,
paying costs of collections and monitoring the collateral. In addition, the
Servicer Fee will (a) compensate the Servicer for administering the Receivables,
including accounting for collections, furnishing monthly and annual statements
with respect to payments and generating federal income tax information, if any,
and (b) reimburse the Servicer for certain taxes, independent accountants' fees
and other costs incurred in connection with administering the Receivables.
BACKUP SERVICING AND BACKUP SERVICING COMPENSATION
Pursuant to the Sale and Servicing Agreement, the Backup Servicer will
perform certain duties as the Backup Servicer. In addition, following the
resignation or removal of the Servicer, the Backup Servicer has agreed to serve
as the successor Servicer under the Sale and Servicing Agreement. The Backup
Servicer will be required to carry out its duties in accordance with the
customary and usual procedures of institutions which perform similar functions.
On each Payment Date, the Backup Servicer will be entitled to receive a fee for
acting as Backup Servicer (the "Backup Servicer Fee") equal to the product of
one-twelfth times [ ].
The Sale and Servicing Agreement will provide that the Backup Servicer may
not resign from its obligations and duties as Backup Servicer thereunder, except
as otherwise provided below or upon determination that, by reason of a change in
legal requirements, the Backup Servicer's performance of such duties would be in
violation of such legal requirements and a Note Majority does not elect to waive
the obligations of the Backup Servicer to perform the duties that render it
legally unable to act or to delegate those duties to another Person. No such
resignation will become effective until a successor backup servicer has assumed
the Backup Servicer's servicing obligations and duties under the Sale and
Servicing Agreement. Notwithstanding the foregoing, the Backup Servicer may
resign for any reason, provided an entity acceptable to the Controlling Party
has assumed the Backup Servicer's obligations and duties under the Sale and
Servicing Agreement prior to the effectiveness of any such resignation and the
Rating Agency Condition is satisfied with respect thereto.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement will provide that the Servicer will cause a
firm of nationally recognized independent certified public accountants to
deliver to the Servicer, on or before June 30 of each year, commencing June 30,
[ ], a statement to the effect that such firm has audited the books and records
of the Servicer and issued its report thereon from the fiscal year ended on the
immediately
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preceding March 31. The Servicer will deliver a copy of such report to the
Indenture Trustee, the Backup Servicer and the Rating Agency.
The Sale and Servicing Agreement will also provide for delivery to the
Indenture Trustee, the Backup Servicer and the Rating Agency, on or before March
31 of each year, commencing March 31, [ ], of a certificate signed by an
officer of the Servicer stating that, to such officer's knowledge, the Servicer
has fulfilled its obligations under the Sale and Servicing Agreement throughout
the preceding 12 months (or, for the initial report, for such longer period as
will have elapsed from the date of issuance of the Notes) or, if there has been
a default in the fulfillment of any such obligation, describing each such
default. A copy of such certificate may be obtained by any Noteholder by a
request in writing to the Indenture Trustee addressed to the Corporate Trust
Office.
MATTERS REGARDING THE SERVICER
The Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder, except upon
determination that, by reason of a change in legal requirements, the Servicer's
performance of such duties would be in violation of such legal requirements and
a Note Majority does not elect to waive the obligations of the Servicer to
perform the duties that render it legally unable to act or to delegate those
duties to another Person. No such resignation will become effective until the
Backup Servicer or a successor servicer has assumed the Servicer's servicing
obligations and duties under the Sale and Servicing Agreement.
The Sale and Servicing Agreement will further provide that neither the
Servicer nor any of its stockholders, directors, officers, employees or agents,
will be liable to the Trust or the Indenture Trustee for taking any action or
for refraining from taking any action pursuant to the Sale and Servicing
Agreement; provided, however, that neither the Servicer nor any such Person will
be protected against any liability that would otherwise be imposed by reason of
the Servicer's material breach of the Sale and Servicing Agreement, willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of its duties.
Subject to the provisions of the Sale and Servicing Agreement, any entity
into which the Servicer may be merged or consolidated, resulting from any
merger, conversion or consolidation to which the Servicer is a party, which
acquires all or substantially all of the assets of the Servicer, or succeeding
to the business of the Servicer, which in any case assumes the obligations of
the Servicer, will be the successor of the Servicer, under the Sale and
Servicing Agreement. The Servicer may at any time perform certain specific
duties as Servicer through other subcontractors.
SERVICER TERMINATION EVENTS; RIGHTS UPON SERVICER TERMINATION EVENT
A "Servicer Termination Event" under the Sale and Servicing Agreement will
include: (i) the Servicer's failure to make deposits into the Collection Account
or to deliver to the Indenture Trustee any proceeds or payments payable to the
Noteholders required to be so deposited or delivered in accordance with the Sale
and Servicing Agreement, which failure continues unremedied for a period of two
Business Days (one Business Day with respect to payment of Purchase Amounts)
after the earlier of (x) discovery of such failure by the Servicer and (y)
notice of such failure is given by the Indenture Trustee to the Servicer; (ii)
the Servicer's failure or failures to satisfy any other covenant or agreement
set forth in the Sale and Servicing Agreement, which failure or failures,
individually or in the aggregate, materially and adversely affect the rights of
Noteholders and remains uncured for a period of 30 days after the earlier of the
date on which (a) it obtains actual knowledge of such failure and (b) written
notice of such failure to the Servicer by the Indenture Trustee or the Note
Majority; (iii) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings with respect to the Servicer
indicating its insolvency; and (iv) a Servicer Termination Trigger Event has
occurred and has not been Deemed Cured.
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A "Servicer Termination Trigger Event" means that any one of the following
events shall have occurred and shall not have been cured: (a) the average of the
Delinquency Ratios for each of the three preceding Collection Periods exceeds
[ ]%; (b) the Repossession Inventory Ratio is greater than [ ]% or (c) the
Cumulative Default Ratio exceeds (i) [ ]% as of any Determination Date from the
initial Determination Date through and including the sixth Determination Date,
(ii) [ ]% as of any Determination Date from the seventh Determination Date
through and including the twelfth Determination Date, (iii) [ ]% as of any
Determination Date from the thirteenth Determination Date through and including
the eighteenth Determination Date or (iv) [ ]% as of any Determination Date
thereafter; PROVIDED, HOWEVER, that following the appointment of a successor
Servicer, no Servicer Termination Trigger Event shall have been deemed to occur
in accordance with this definition until the seventh Determination Date
succeeding the appointment of such successor Servicer.
As long as a Servicer Termination Event under the Sale and Servicing
Agreement remains unremedied, a Note Majority may terminate all of the rights
and obligations of the Servicer under the Sale and Servicing Agreement. Upon
such termination, all authority, power, obligations and responsibilities of the
Servicer under the Sale and Servicing Agreement (other than obligations and
responsibilities arising prior to such termination) will automatically pass to
the Backup Servicer (or such other successor servicer appointed by the Indenture
Trustee).
WAIVER OF PAST DEFAULTS
A Note Majority may waive any default by the Servicer in the performance of
its obligations under the Sale and Servicing Agreement and its consequences. No
such waiver will impair the Noteholders' rights with respect to subsequent
defaults.
AMENDMENT
The Sale and Servicing Agreement may be amended by the Issuer, the Seller,
Triad, the Servicer, the Indenture Trustee and the Backup Servicer, without the
consent of any of the Certificateholders or the Noteholders, to cure any
ambiguity, to correct or supplement any provision therein or for the purpose of
adding any provision to or changing in any manner or eliminating any provision
thereof or modifying in any manner the rights of the Noteholders; PROVIDED,
HOWEVER, that such action must not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the Noteholders. The
Seller, the Issuer, Triad, the Servicer, the Backup Servicer and the Indenture
Trustee may also amend the Sale and Servicing Agreement with the consent of a
Note Majority to add, change or eliminate any provisions of the Sale and
Servicing Agreement or to modify the rights of the Noteholders, PROVIDED,
HOWEVER, that such action will not: (i) 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 Note, the
Class A-1 Interest Rate, the Class A-2 Interest Rate or the Class B Interest
Rate; (ii) reduce the aforesaid percentage of the Class A-1 Note Balance, the
Class A-2 Note Balance or Class B Note Balance which is required to consent to
any such amendment, without the consent of the Holders of all Notes of such
Class then outstanding; (iii) result in a downgrade or withdrawal of the then
current rating of any Class of Note by the Rating Agency without the consent of
each Noteholder; or (iv) change the Reserve Account Required Amount or Target
Overcollateralization Amount without the consent of each Noteholder and the
Rating Agency.
LIST OF NOTEHOLDERS; VOTING OF NOTES
Upon written request by three or more Noteholders or any one or more
Noteholders with an aggregate principal balance evidencing not less than [ ]%
of the Note Balance and upon compliance by such Noteholders with certain other
provisions of the Sale and Servicing Agreement, the Indenture Trustee will
afford such Noteholders within five Business Days after receipt of such request
access during business
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hours to the current list of Noteholders for purposes of communicating with
other Noteholders with respect to their rights under the Sale and Servicing
Agreement and the Notes.
If Triad, the Seller or any of their affiliates owns any Notes, such Note
will not have voting rights under the Sale and Servicing Agreement or the other
Related Documents.
The Sale and Servicing Agreement will not provide for the holding of any
annual or other meetings of Noteholders.
TERMINATION
The respective obligations of the Issuer, the Seller, the Servicer, the
Backup Servicer and the Indenture Trustee pursuant to the Sale and Servicing
Agreement will terminate upon the latest of: (i) the maturity or other
liquidation of the last Receivable and the payment to Noteholders of amounts
required to be paid under the Notes and the Indenture; or (ii) the payment to
Noteholders of all amounts required to be paid to them pursuant to the Indenture
and the expiration of any preference period related thereto.
In order to avoid excessive administrative expense, the Servicer has the
option, to purchase from the Trust, as of the last day of any month as of which
the Aggregate Principal Balance with respect to the Receivables is less than or
equal to [ ]% of the Cutoff Date Principal Balance, all remaining Receivables
at a price equal to the aggregate of the Purchase Amounts thereof as of such
last day, plus the appraised value of any other property held by the Trust. The
Indenture Trustee will give written notice of termination to each Noteholder of
record. The final distribution to any Noteholder will be made only upon
surrender and cancellation of such Holder's Note at the office or agency of the
Trustee specified in the notice of termination; PROVIDED, HOWEVER, that if on
the Payment Date upon which final payment of the Notes is to be made, there are
five or fewer Noteholders of record, such final payment to such Noteholder will
be made by check or wire transfer as described above and each such Noteholder
shall present and surrender its Note at the office or agency designated in the
notice of final distribution referred to above within 30 days after such Payment
Date.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material Federal income tax
consequences of the purchase, ownership and disposition of the Notes. This
discussion does not address every aspect of the Federal income tax laws that may
be relevant to holders of Notes in light of their personal investment
circumstances or to certain types of Noteholders subject to special treatment
under the Federal income tax laws (including, without limitation, banks and
thrifts, insurance companies, dealers in securities, foreign investors,
regulated investment companies, individuals, trusts and estates and pass-through
entities, the equity holders of which are any of the foregoing). This discussion
is directed to prospective purchasers who purchase Notes in the initial
distribution thereof and who hold the Notes as "capital assets" within the
meaning of Section 1221 of the Code. Prospective purchasers are urged to consult
their own tax advisors in determining the Federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of the
Notes.
The following summary is based upon current provisions of the Code, the
Treasury regulations promulgated thereunder, judicial authority, and ruling
authority, all of which are subject to change, which change may be retroactive.
The Issuer will be provided with an opinion of Federal Tax Counsel regarding
certain Federal income tax matters discussed below. An opinion of Federal Tax
Counsel, however, is not binding on the Internal Revenue Service (the "IRS") or
the courts. Moreover, there are no cases or IRS rulings on similar transactions
with terms similar to those of the Notes. As a result, the IRS may disagree with
all or a part of the discussion below. No ruling on any of the issues discussed
below will be sought from the IRS.
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TAX CHARACTERIZATION OF THE ISSUER
Federal Tax Counsel is of the opinion that the Issuer will not be classified
as an association (or publicly traded partnership) taxable as a corporation for
Federal income tax purposes. This opinion will be based on the assumption of
compliance by all parties with the terms of the Trust Agreement and related
documents.
If the Issuer were taxable as a corporation for Federal income tax purposes,
the Issuer would be subject to corporate income tax on its taxable income. The
Issuer's taxable income would include all its income on the Receivables,
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Issuer will agree, and the
Class A Noteholders will agree by their purchase of Class A Notes, to treat the
Class A Notes as debt for Federal, state and local income and franchise tax
purposes. Federal Tax Counsel will advise the Issuer that in its opinion the
Class A Notes will be classified as debt for Federal income tax purposes.
The Issuer will agree, and the Class B Noteholders will agree by their
purchase of Class B Notes, to treat the Class B Notes as debt for Federal, state
and local income and franchise tax purposes. Federal Tax Counsel will opine
that, for Federal income tax purposes, the Class B Notes will be classified as
either debt or as partnership interests in the Issuer and not as equity
interests in an association taxable as a corporation. The discussion below,
unless otherwise noted, assumes the characterization of the Notes, as debt, is
correct.
OID, INDEXED SECURITIES, ETC. It is not anticipated that the Notes will be
issued with original issue discount ("OID") within the meaning of Section 1273
of the Code.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed below, the Notes will not be considered issued with OID. If the Notes
were treated as being issued with OID, the excess of the "stated redemption
price at maturity" of the Notes over their issue price would constitute OID. The
stated interest thereon will be taxable to a Noteholder as ordinary interest
income when received or accrued in accordance with such Noteholder's method of
tax accounting. Under the OID Regulations, a holder of a Note issued with a DE
MINIMIS amount of OID must include such OID in income, on a pro rata basis, as
principal payments are made on the Note. A purchaser who buys a Note for more or
less than its principal amount will generally be subject, respectively, to the
premium amortization or market discount rules of the Code.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used by a corporate taxpayer
only to offset capital gains, and by an individual taxpayer only to the extent
of capital gains plus $3,000 of other income.
POSSIBLE ALTERNATIVE TREATMENTS OF THE CLASS B NOTES. If the IRS
successfully asserted that the Class B Notes did not represent debt for Federal
income tax purposes, Federal Tax Counsel is of the opinion that the Class B
Notes would be treated as equity interests in the Issuer. If the Notes are
recharacterized as equity interests in the Issuer and the Issuer were respected
as a partnership, certain Noteholders could
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have adverse tax consequences. For example, income to foreign holders might be
subject to U.S. tax and U.S. tax return filing and withholding requirements,
income to certain tax exempt holders might constitute unrelated business taxable
income generally subject to tax at corporate income tax rates, and individual
holders might be subject to certain limitations on their ability to deduct their
share of the Issuer's expenses.
Alternatively, if, contrary to the opinion of Federal Tax Counsel, the
Issuer were treated as a publicly traded partnership taxable as a corporation,
it would be subject to Federal income tax (and any similar state or local taxes)
at corporate tax rates on its taxable income generated by ownership of the
Receivables. Such a tax could result in reduced distributions to Noteholders.
Distributions to Noteholders generally would not be deductible in computing the
taxable income of the publicly traded partnership. In addition, all or a portion
of any such distributions would, to the extent of the current and accumulated
earnings and profits of such corporation, be treated as dividend income to the
Noteholders, and in the case of Noteholders that are foreign persons would be
subject to withholding tax.
FOREIGN HOLDERS. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"Foreign Person") generally will be considered "portfolio interest," and
generally will not be subject to United States Federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
Foreign Person (i) does not own actually or constructively 10% or more of the
capital or profits of interests in the Issuer (including a holder of 10% of the
outstanding Class B Notes) and is not actually or constructively a "10 percent
shareholder" of Triad, the Seller or a 66 controlled foreign corporation" with
respect to which the Issuer or Triad is a "related person" within the meaning of
the Code and (ii) provides the Trustee or other person who is otherwise required
to withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a Foreign Person and providing the foreign
person's name and address. If the information provided in this statement
changes, the Foreign Person must inform the Issuer within 30 days of such
change. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the Foreign Person that owns the Note. If such interest is not portfolio
interest, then it will be subject to United States Federal income and
withholding tax at a rate of 30%, unless reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax, provided that (a) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Person and (b) in the case of an individual foreign
person, the Foreign Person is not present in the United States for 183 days or
more in the taxable year.
If the IRS were to contend successfully that the Notes are interests in a
partnership (not taxable as a corporation), a Noteholder that is a foreign
person might be required to file a U.S. Federal income tax return and pay tax on
its share of partnership income at regular U.S. rates, including the branch
profits tax, and would be subject to withholding tax on its share of partnership
income. If the Notes were recharacterized as interests in a "publicly traded
partnership" taxable as a corporation, distributions on the Notes treated as
dividends would generally be subject to withholding tax on the gross amount of
such dividends at the rate of 30% unless such rate were reduced by an applicable
treaty. If the Notes are recharacterized as equity interests in a partnership,
or, contrary to the opinion of Federal Tax Counsel, in a publicly traded
partnership taxable as a corporation, any taxes required to be so withheld will
be treated for all purposes of the Notes as having been paid to the related
Noteholder.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
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penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Issuer will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability.
STATE TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences" above, potential purchasers should consider the state
income tax consequences of the acquisition, ownership and disposition of the
Notes. State income tax law may vary substantially from state to state, and this
discussion does not purport to describe any aspect of the income tax laws of any
state. Therefore, potential purchasers should consult their own tax advisors
with respect to the various tax consequences of an investment in the Notes.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing, or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans subject to those provisions, and
entities deemed to hold plan assets of such plans (each, a "Benefit Plan"), from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code with
respect to the Benefit Plan. A violation of these "prohibited transaction" rules
may generate excise tax and other penalties and liabilities under ERISA and the
Code for such persons. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a Benefit Plan is considered to be a fiduciary of such Benefit
Plan (subject to certain exceptions not here relevant).
Certain transactions involving the Issuer might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes if assets of the Issuer were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "Plan Assets Regulation"), the assets of the Issuer would be treated as
plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an equity interest in the Issuer and none of the
exceptions contained in the Plan Assets Regulation was applicable. An "equity
interest" is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there is little guidance on
the subject, the Issuer believes that, at the time of their issuance the [Class
A] Notes should be treated as indebtedness without substantial equity features
for purposes of the Plan Assets Regulation. The debt status of the Notes could
be affected subsequent to their issuance by certain changes in the financial
condition of the Issuer.
[The debt status of the Class B Notes for these purposes is unclear and
therefore no Class B Note or interest therein may be sold or transferred to any
Benefit Plan subject to Title I of ERISA or Section 4975 of the Code unless such
sale or transfer is to an "insurance company general account" as defined in
Prohibited Transaction Class Exemption ("PTCE") 95-60 and the conditions set
forth in PTCE 95-60 have been satisfied. By its purchase of a Class B Note, each
purchaser shall be deemed to represent and warrant that it is purchasing the
Class B Note in compliance with the foregoing restrictions.]
Without regard to whether Notes are treated as an equity interest under the
Plan Assets Regulation, the acquisition or holding of Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
Issuer, Triad, the Servicer the Backup Servicer, the Indenture Trustee or the
Owner Trustee is or becomes a party in interest or a disqualified person with
respect to such Benefit Plan. Certain exemptions from the prohibited transaction
rules could be applicable to the purchase and holding
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of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions, each of which contains several conditions which must be satisfied
before the exemption applies, are: PTCE 90-1, regarding certain transactions
entered into by insurance company pooled separate accounts; PTCE 95-60,
regarding certain transactions entered into by insurance company general
accounts; PTCE 96-23, regarding certain transactions effected by "in-house asset
managers"; PTCE 91-38 regarding certain transactions entered into by bank
collective investment funds; and PTCE 84-14, regarding certain transactions
effected by "qualified professional asset managers." By acquiring a Note, each
purchaser and each transferee of a Note shall be deemed to represent and warrant
that either (i) it is not acquiring a Note with the assets of a Benefit Plan; or
(ii) its purchase and holding of the Notes will not result in a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
may not be subject to ERISA requirements. However, governmental plans can be
subject, under federal, fiduciary, state or local law, to restrictions which are
similar to ERISA and church plans may be subject to other types of prohibited
transaction restrictions under the Code.
A Benefit Plan fiduciary considering the purchase of Notes should consult
its tax and/or legal advisors regarding whether the assets of the Issuer would
be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated [ ], (the "Underwriting Agreement") among Triad, the Seller,
and [ ] (the "Underwriter"), the Seller has agreed to cause the Seller to sell
to the Underwriter, and the Underwriter has agreed to purchase, Notes in the
following respective amounts:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Total.......................................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will
purchase all the Notes offered hereby if any of such Notes are purchased. Triad
and the Seller have been advised by the Underwriter that the Underwriter
proposes to offer the Notes from time to time for sale in negotiated
transactions or otherwise, at varying prices to be determined at the time of
sale. The Underwriter may effect such transactions by selling the Notes to or
through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriter and any
purchasers of Notes for whom they may act as agents. The Underwriter and any
dealers that participate with the Underwriter in the distribution of the Notes
may be deemed to be underwriters, and any discounts or commissions received by
them and any profit on the resale of Notes by them may be deemed to be
underwriting discounts or commissions, under the Notes Act.
The Notes are a new issue of securities with no established trading market.
The Underwriter has advised Triad and the Seller that it intends to act as a
market maker for the Notes. However, the Underwriter is not obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of any trading market for the Notes.
Triad and the Seller have agreed to indemnify the Underwriter against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriter may be required to make in respect
thereof.
LEGAL MATTERS
Certain legal matters relating to the Notes and certain bankruptcy, federal
income tax and other matters will be passed upon for the Seller and Triad by
Dechert Price & Rhoads, New York, New York. Certain legal matters under
California law will be passed upon for the Seller and Triad by California
counsel, and Helen R. Kraus, General Counsel of Triad.
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GLOSSARY
AGGREGATE PRINCIPAL BALANCE: With respect to the Closing Date, the Cutoff
Date Principal Balance, and with respect to any Record Date, the sum of the
Principal Balances (computed as of the related Determination Date) for all
Receivables (other than Liquidated Receivables and Purchased Receivables).
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced extended under such Receivable toward the purchase price of the
Financed Vehicle and related costs, including amounts of credit extended in
respect of accessories, insurance premiums, service and warranty policies or
contracts and other items customarily financed as part of motor vehicle retail
installment contracts or promissory notes, and related costs.
AVAILABLE FUNDS: With respect to any Record Date, the sum of (i) the
Collected Funds received by the Servicer during the related Collection Period,
(ii) all Purchase Amounts deposited in the Collection Account for the related
Collection Period, (iii) all income received from investments of funds in the
Collection Account during the related Collection Period and (iv) any funds in
the Reserve Account in excess of the Reserve Account Required Amount to be
released from the Reserve Account.
CERTIFICATEHOLDER: A holder of a certificate evidencing a beneficial
interest in the Trust.
CLASS: A class of Notes.
CLASS A-1 NOTE BALANCE: Initially, [ ] and, thereafter, an amount equal to
the initial Class A-1 Note Balance reduced by all amounts distributed to the
Class A-1 Noteholders that are allocable to principal.
CLASS A-2 NOTE BALANCE: Initially, [ ] and, thereafter, an amount equal to
the initial Class A-2 Note Balance reduced by all amounts distributed to the
Class A-2 Noteholders that are allocable to principal.
CLASS B NOTE BALANCE: Initially, [ ] and, thereafter, an amount equal to
the initial Class B Note Balance reduced by all principal paid to the Class B
Notes.
COLLECTED FUNDS: With respect to any Record Date, the amount of funds in
the Collection Account representing collections on the Receivables received by
the Servicer during the related Collection Period, including all Liquidation
Proceeds collected during the related Collection Period (but excluding any
Purchase Amounts) and all amounts paid by Dealers under Dealer Agreements or
Dealer Assignments with respect to the Receivables during the related Collection
Period.
COLLECTOR TO CURRENT RECEIVABLE RATIO: The ratio of collectors employed by
the Servicer to the aggregate number of Managed Receivables with respect to
which 10% or less of Scheduled Payments is 61 or more days past due.
COLLECTOR TO DELINQUENT RECEIVABLE RATIO: The ratio of collectors employed
by the Servicer to the aggregate number of Managed Receivables with respect to
which more than 10% of all Scheduled Payments is 61 or more days past due.
CONTROLLING PARTY: The Indenture Trustee for the benefit of the
Noteholders; PROVIDED, HOWEVER, that the Owner Trustee for the benefit of the
Certificateholder will be the Controlling Party after all unpaid principal and
interest on the Notes shall have been paid in full.
CORPORATE TRUST OFFICE: The office of the Indenture Trustee at which its
corporate trust business shall be principally administered, which office as of
the date hereof is located at [ ].
CRAM DOWN LOSS: With respect to a Receivable, if a court of appropriate
jurisdiction in an insolvency proceeding shall have issued an order reducing the
amount owed on a Receivable or otherwise modifying or restructuring the
Scheduled Payments to be made on a Receivable, an amount equal to such reduction
in Principal Balance of such Receivable or the reduction in the net present
value (using as the discount rate
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the lower of the APR on such Receivable or the rate of interest, if any,
specified by the court in such order) of the Scheduled Payments as so modified
or restructured. A Cram Down Loss shall be deemed to have occurred on the date
of issuance of such order.
DEALER AGREEMENT: An agreement generally between Triad and a Dealer
relating to the sale of retail installment contracts to Triad and all documents
and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed assignment
conveying such Receivable to Triad.
DEFICIENCY CLAIM AMOUNT: With respect to any Record Date, the positive
difference, if any, of (i) the sum of the amounts payable on the related Payment
Date pursuant to clauses (i) through (vi) under the heading "The Notes--Priority
of Distribution Amounts" minus (ii) the amount of Available Funds with respect
to such Record Date, which amount will be withdrawn from the Reserve Account to
the extent funds are on deposit therein and deposited into the Collection
Account on the related Payment Date.
HOLDER OR NOTEHOLDER: The Person in whose name a Note is registered in the
Note Register.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all amounts
realized with respect to such Receivable (other than amounts withdrawn from the
Reserve Account) net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of such Receivable and the repossession and
disposition of the related Financed Vehicle and (ii) amounts that are required
to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the
Liquidation Proceeds with respect to any Receivable will in no event be less
than zero.
MANAGED RECEIVABLE: Any retail installment contract (including any related
promissory note) for a Financed Vehicle, and all rights and obligations
thereunder, generally originated by and currently serviced by Triad for
Obligors.
NOTE BALANCE: As of any date of determination, the sum of the Class A-1
Note Balance, the Class A-2 Note Balance and the Class B Note Balance.
NOTE MAJORITY: As of any date of determination, Holders of Class A Notes
and Class B Notes representing more than 50% of the Note Balance.
PAYMENT AMOUNT: With respect to a Payment Date, the sum of (i) the
Available Funds as of the related Record Date, plus (ii) the Deficiency Claim
Amount, if any, with respect to such Payment Date.
PERSON: Any legal person, including any individual, corporation, limited
liability company, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof or any other entity.
PURCHASED RECEIVABLE: A Receivable that was purchased as of the close of
business on the last day of a Collection Period by the Seller or the Servicer as
the result of the violation of certain representations or warranties of the
Seller under the Sale and Servicing Agreement or a breach by the Servicer of
certain of the Servicer's obligations.
RATING AGENCY CONDITION: With respect to any action, that the Rating Agency
has been given prior notice thereof and that the Rating Agency has notified
Triad, the Seller, the Servicer and the Indenture Trustee in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Class A-1 Notes, Class A-2 Notes or the Class B Notes.
RELATED DOCUMENTS: The Sale and Servicing Agreement, the Indenture, the
Trust Agreement, the Notes, the Receivables Purchase Agreement, the Note
Purchase Agreement, and the other agreements executed in connection with the
closing of the transactions described herein.
S-49
<PAGE>
SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement between
Triad, in its individual capacity and as Servicer, Triad Financial Special
Purpose Corporation, as Seller, Triad Auto Receivables Owner Trust 199[ ]-[ ] as
purchaser, and [ ], as Indenture Trustee and Back-up Servicer.
SERVICER'S CERTIFICATE: With respect to each Record Date, a certificate,
completed by and executed on behalf of the Servicer, in accordance with the
applicable Sale and Servicing Agreement provisions.
SERVICER RECEIVABLES FILES: The following documents or instruments in the
Servicer's possession with respect to each Receivable: (i) documents evidencing
or relating to any Insurance Policy; and (ii) any and all other documents (in
original or electronic form) that the Servicer keeps on file in accordance with
its customary procedures relating to the individual Receivable, Obligor or
Financed Vehicle.
STATE: Any state of the United States or the District of Columbia.
TRANSACTION DOCUMENTS: The Receivables Purchase Agreement, the Indenture,
the Sale and Servicing Agreement, the Note Purchase Agreement and the Trust
Agreement.
TRUST AGREEMENT: The Trust Agreement between Triad Financial Special
Purpose Corporation, as Holder of the Certificate, Triad, as Servicer, and [ ],
as Owner Trustee.
S-50
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found.
<TABLE>
<S> <C>
ACS.............................................................................. S-16
Actuarial Receivable............................................................. S-20
Aggregate Principal Balance...................................................... S-48
Amount Financed.................................................................. S-48
APR.............................................................................. S-3
Available Funds.................................................................. S-48
Backup Servicer.................................................................. S-20
Backup Servicer Fee.............................................................. S-39
Bankruptcy Code.................................................................. S-19
Benefit Plan..................................................................... S-45
Business Day..................................................................... S-3
Cede............................................................................. S-9
Certificate...................................................................... S-7
Certificateholder................................................................ S-48
Class............................................................................ S-48
Class A Notes.................................................................... i, S-1
Class A-1 Interest Carryover Shortfall........................................... S-29
Class A-1 Interest Payment Amount................................................ S-28
Class A-1 Interest Rate.......................................................... S-2
Class A-1 Note Balance........................................................... S-2, S-48
Class A-1 Note Factor............................................................ S-35
Class A-1 Noteholders............................................................ S-2
Class A-1 Notes.................................................................. i, S-1
Class A-1 Payment Amount......................................................... S-28
Class A-1 Percentage............................................................. S-1
Class A-1 Principal Carryover Shortfall.......................................... S-29
Class A-1 Principal Payment Amount............................................... S-5
Class A-2 Interest Carryover Shortfall........................................... S-29
Class A-2 Interest Payment Amount................................................ S-28
Class A-2 Interest Rate.......................................................... S-2
Class A-2 Note Balance........................................................... S-2, S-48
Class A-2 Note Factor............................................................ S-35
Class A-2 Noteholders............................................................ S-2
Class A-2 Notes.................................................................. i, S-1
Class A-2 Payment Amount......................................................... S-28
Class A-2 Percentage............................................................. S-1
Class A-2 Principal Carryover Shortfall.......................................... S-29
Class A-2 Principal Payment Amount............................................... S-5
Class B Interest Carryover Shortfall............................................. S-29
Class B Interest Payment Amount.................................................. S-28
Class B Interest Rate............................................................ S-3
Class B Note Balance............................................................. S-3, S-48
Class B Note Factor.............................................................. S-36
Class B Noteholders.............................................................. S-3
Class B Notes.................................................................... i, S-1
Class B Payment Amount........................................................... S-28
</TABLE>
S-51
<PAGE>
<TABLE>
<S> <C>
Class B Percentage............................................................... S-2
Class B Principal Carryover Shortfall............................................ S-29
Class B Principal Payment Amount................................................. S-5
Closing Date..................................................................... S-1
Code............................................................................. S-10
Collected Funds.................................................................. S-48
Collection Account............................................................... S-38
Collection Period................................................................ S-5
Collector to Current Receivable Ratio............................................ S-48
Collector to Delinquent Receivable Ratio......................................... S-48
Commission....................................................................... ii
Contracts........................................................................ S-14
Controlling Party................................................................ S-48
Corporate Trust Office........................................................... S-48
Correspondents................................................................... S-13
Correspondent Agreements......................................................... S-14
Cram Down Loss................................................................... S-48
Cumulative Default Ratio......................................................... S-32
Cutoff Date...................................................................... S-1
S-14,
Dealer Agreements................................................................ S-49
Dealer Assignment................................................................ S-49
Dealer Recourse.................................................................. S-14
Dealers.......................................................................... S-13
Deemed Cured..................................................................... S-32
Defaulted Receivable............................................................. S-27
Deficiency Claim Amount.......................................................... S-49
Delinquency Ratio................................................................ S-32
Determination Date............................................................... S-4
DTC.............................................................................. ii, S-9
ERISA............................................................................ S-10
Events of Default................................................................ S-34
Exchange Act..................................................................... ii
Federal Tax Counsel.............................................................. S-10
Final Scheduled Payment Date..................................................... i
Financed Vehicles................................................................ S-2
Floor Amount..................................................................... S-32
Foreign Person................................................................... S-44
Holder........................................................................... S-49
Indenture........................................................................ i
Indenture Trustee................................................................ i
IRS.............................................................................. S-42
Issuer........................................................................... i, S-1
Liquidated Receivable............................................................ S-27
Liquidation Proceeds............................................................. S-49
Lockbox Account.................................................................. S-38
Lockbox Bank..................................................................... S-38
Managed Receivable............................................................... S-49
Non-prime Borrowers.............................................................. S-15
Note Balance..................................................................... S-49
Note Majority.................................................................... S-49
Noteholder....................................................................... S-9, S-49
</TABLE>
S-52
<PAGE>
<TABLE>
<S> <C>
Note Owners...................................................................... S-9
Notes............................................................................ i
Obligors......................................................................... S-13
OID.............................................................................. S-43
Overcollateralization Amount..................................................... S-5
Participants..................................................................... S-36
Payment Amount................................................................... S-49
Payment Date..................................................................... S-3
Person........................................................................... S-49
Plan............................................................................. S-10
Plan Assets Regulation........................................................... S-45
Precomputed Receivables.......................................................... S-20
Principal Balance................................................................ S-27
Principal Payment Amount......................................................... S-27
PTCE............................................................................. S-45
Purchase Amount.................................................................. S-27
Purchased Receivable............................................................. S-49
Rating Agency.................................................................... S-10
Rating Agency Condition.......................................................... S-49
Receivables...................................................................... S-2
Receivables Purchase Agreement................................................... S-3
Record Date...................................................................... S-4
Recoveries....................................................................... S-28
Redemption Price................................................................. S-27
Registration Statement........................................................... ii
Related Documents................................................................ S-49
Repossession Inventory Ratio..................................................... S-33
Reserve Account.................................................................. S-7, S-38
Reserve Account Initial Deposit.................................................. S-7, S-31
Reserve Account Required Amount.................................................. S-32
Reserve Account Trigger Event.................................................... S-32
Rule of 78's Receivables......................................................... S-20
Sale and Servicing Agreement..................................................... S-50
Scheduled Payment................................................................ S-28
Securities Act................................................................... ii
Seller........................................................................... S-1, S-14
Servicer......................................................................... S-1
Servicer Expenses................................................................ S-9
Servicer Fee..................................................................... S-8
Servicer Receivables Files....................................................... S-50
Servicer Termination Event....................................................... S-40
Servicer Termination Trigger Event............................................... S-41
Servicer's Certificate........................................................... S-50
Servicing Fee Rate............................................................... S-8
Servicing Portfolio.............................................................. S-11
Simple Interest Receivable....................................................... S-20
Sponsor.......................................................................... ii
State............................................................................ S-50
Supplemental Servicer Fee........................................................ S-9
Target Overcollateralization Amount.............................................. S-6
S-25,
Transaction Documents............................................................ S-50
</TABLE>
S-53
<PAGE>
<TABLE>
<S> <C>
Triad............................................................................ S-1
Trust............................................................................ S-1
Trust Agreement.................................................................. S-50
Trust Property................................................................... S-2
UCC.............................................................................. S-37
Underwriter...................................................................... S-47
Underwriting Agreement........................................................... S-47
Weighted Average Life............................................................ S-25
</TABLE>
S-54
<PAGE>
FORM OF PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 199[ ]
$[ ]
TRIAD AUTO RECEIVABLES TRUST 199[ ]--[ ]
$[ ] [ ]% ASSET BACKED CERTIFICATES, CLASS A
$[ ] [ ]% ASSET BACKED CERTIFICATES, CLASS B
TRIAD FINANCIAL CORPORATION
(SERVICER)
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION
(SELLER)
The Asset Backed Certificates (the "Certificates") will consist of three
classes of certificates, each of which will evidence a beneficial ownership
interest in the Triad Auto Receivables Trust 199[ ]--[ ] (the "Trust") to be
formed pursuant to a Pooling and Servicing Agreement dated as of [ ] (the
"Pooling and Servicing Agreement") among Triad Financial Special Purpose
Corporation., as seller (the "Seller"), Triad Financial Corporation, as servicer
(individually, "Triad", and in its capacity as servicer, the "Servicer"), and
[ ], as trustee (the "Trustee"), as Backup Servicer (the "Backup Servicer")
and as Collateral Agent (the "Collateral Agent").
The Certificates will consist of the following: (i) [ ]% Asset Backed
Certificates, Class A (the "Class A Certificates"); (ii) [ ]% Asset Backed
Certificates, Class B (the "Class B Certificates"); and (iii) [ ]% Asset Backed
Certificates, Class C (the "Class C Certificates"). Only the Class A
Certificates and the Class B Certificates (the "Offered Certificates") are being
offered hereby. The Class A Certificates will have an initial aggregate
principal balance of approximately $[ ], and will evidence a [ ]%
beneficial ownership interest in the Trust (the "Class A Percentage"). The Class
B Certificates will have an initial aggregate principal balance of approximately
$[ ] evidence an [ ]% beneficial ownership interest in the Trust (the
"Class B Percentage"). The Class C Certificates will have an initial aggregate
principal balance of $[ ] and will evidence a [ ]% beneficial ownership
interest in the Trust (the "Class C Percentage"). The Reserve Account (as
defined herein) will serve as credit enhancement for the Certificates.
The assets of the Trust will include a pool of non-prime retail installment
sale contracts acquired by Triad in the ordinary course of its business, sold by
Triad to the Seller pursuant to the Purchase Agreement (as defined herein), a
security interest in the vehicles financed thereby and certain other property,
as more fully described herein. The aggregate Principal Balance (as defined
below) of such pool as of the Cutoff Date (as defined below) was approximately
$[ ].
Principal and interest will be distributed to the Holders of the
Certificates on the [ ]th day of each month (or, if such day is not a Business
Day (as defined below), on the next succeeding Business Day), beginning
[ ]. Distributions of interest on the Class B Certificates and the Class C
Certificates will be subordinated in priority of payment to interest due on the
Class A Certificates and the Class B Certificates, respectively, to the extent
described herein. Distributions of principal on the Class B Certificates and the
Class C Certificates will be subordinated in priority of payment to principal
and interest due on the Class A and the Class B Certificates, respectively, to
the extent described herein. The "Final Scheduled Payment Date" is [ ].
The Underwriter has agreed to purchase from the Seller the Offered
Certificates at a purchase price equal to [ ]% of the principal amount thereof,
subject to the terms and conditions set forth in the Underwriting Agreement
referred to herein under "Underwriting". The aggregate proceeds to the Seller,
after deducting expenses payable by the Seller, estimated at $[ ], will be
$[ ]. The Underwriter proposes to offer the Offered Certificates from time to
time in negotiated transactions or otherwise, at varying prices to be determined
at the time of sale. For further information with respect to the plan of
distribution and any discounts, commissions or profits that may be deemed
underwriting discounts or commissions, see "Underwriting" herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE FACTORS SET
FORTH UNDER "RISK FACTORS" AT PAGE [ ] HEREIN AND PAGE [ ] IN THE ACCOMPANYING
PROSPECTUS WHEN CONTEMPLATING AN INVESTMENT IN ANY OF THE OFFERED CERTIFICATES.
THE CERTIFICATES WILL REPRESENT OBLIGATIONS OF THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF TRIAD, THE SELLER, THE BACKUP SERVICER
OR ANY AFFILIATE THEREOF. THE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITER]
------------------
The date of this Prospectus Supplement is [ ].
<PAGE>
AVAILABLE INFORMATION
Triad Financial Corporation (the "Sponsor") has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement (together
with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at 500 West Madison, 14th Floor,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a website
(http://www.sec.gov) at which the Registration Statement and other information
regarding the Seller may be accessed.
The Servicer, on behalf of the Trust, will also file or cause to be filed
with the Commission such periodic reports as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder. Upon the receipt of a request by
an investor who has received an electronic Prospectus Supplement and Prospectus
from the Underwriters (as defined herein) or a request by such investor's
representative within the period during which there is an obligation to deliver
a Prospectus Supplement and Prospectus, the Sponsor, the Seller, or the
Underwriters will promptly deliver, or cause to be delivered, without charge, a
paper copy of the Prospectus Supplement and Prospectus.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus Supplement and any
Prospectus with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus Supplement and any
Prospectus with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Certificates
offered hereby and thereby, nor an offer of the Securities to any person in any
state or other jurisdiction in which such offer would be unlawful. The delivery
of this Prospectus Supplement at any time does not imply that information herein
is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Sponsor with respect to the Registration
Statement, either on its own behalf or on behalf of the Trust, relating to the
Certificates, with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act, after the date of this Prospectus Supplement and prior to
the termination of any offering of the Certificates offered hereby, shall be
deemed to be incorporated by reference in this Prospectus Supplement and to be a
part of this Prospectus Supplement from the date of the filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein, modifies or
replaces such statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus Supplement.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities are issued, periodic reports
containing information concerning the Receivables will be prepared by the
Servicer and sent on behalf of the Trust to the Trustee and Cede & Co., as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Securities. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Servicer will file
with the Commission such periodic reports as are required under the Exchange
Act, and the rules and regulations thereunder and as are otherwise agreed to by
the Commission. Copies of such periodic reports may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
S-2
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS. CERTAIN CAPITALIZED TERMS USED AND NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED THERETO ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT OR TO THE EXTENT NOT DEFINED HEREIN, IN THE PROSPECTUS. A
LISTING OF THE PAGES ON WHICH SUCH TERMS ARE DEFINED IS FOUND IN THE "INDEX OF
TERMS" APPEARING AT THE END OF THIS PROSPECTUS SUPPLEMENT.
<TABLE>
<S> <C>
ISSUER....................... Triad Auto Receivables Trust 199[ ]--[ ] (the "Trust"), to
be formed by the Seller pursuant to the Pooling and
Servicing Agreement, dated as of [ ] (the "Pooling and
Servicing Agreement"), among the Seller, the Servicer, the
Backup Servicer, the Trustee and the Collateral Agent.
SELLER....................... Triad Financial Special Purpose Corporation, a Delaware
corporation (the "Seller"), and a wholly owned special
purpose subsidiary of Triad. See "Triad and The Seller".
TRIAD AND SERVICER........... Triad Financial Corporation, a California corporation
(individually, "Triad", and, in its capacity as servicer
under the Pooling and Servicing Agreement, the "Servicer").
The chief executive office of Triad is in Huntington Beach,
California. See "Triad's Automobile Financing Program".
TRUSTEE, BACKUP SERVICER AND
COLLATERAL AGENT........... [ ], a [ ] banking corporation (in its capacity as
trustee under the Pooling and Servicing Agreement, the
"Trustee", in its capacity as backup servicer under the
Pooling and Servicing Agreement, the "Backup Servicer", and
in its capacity as collateral agent under the Pooling and
Servicing Agreement and the Reserve Account Agreement (as
defined herein), the "Collateral Agent").
CUTOFF DATE.................. The close of business on [ ].
CLOSING DATE................. On or about [ ].
SECURITIES OFFERED........... The Certificates consist of three classes of fixed rate
pass-through certificates entitled [ ]% Asset Backed
Certificates, Class A (the "Class A Certificates"), [ ]%
Asset Backed Certificates, Class B (the "Class B
Certificates") and [ ]% Asset Backed Certificates, Class C
(the "Class C Certificates"). Only the Class A Certificates
and the Class B Certificates (the "Offered Certificates")
are being offered hereby. The Offered Certificates will be
offered for purchase in minimum denominations of $[ ] and
integral multiples of $1,000 in excess thereof; provided,
however, that one Class A Certificate and one Class B
Certificate may be issued in denominations that include any
residual portion of the Class A Certificate Balance and the
Class B Certificate Balance, respectively. The Offered
Certificates will be offered in book entry form only. See
"Registration of Certificates."
The Class A Certificates will evidence in the aggregate a
beneficial ownership interest of [ ]% of the Trust (the
"Class A Percentage"); the Class B Certificates will
evidence in the aggregate a beneficial ownership interest of
[ ]% of the Trust (the "Class B
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Percentage"); the Class C Certificates will evidence a
beneficial ownership interest of [ ]% of the Trust (the
"Class C Percentage").
The initial Class A Certificate Balance will equal the
product of the Class A Percentage and the Cutoff Date Pool
Balance; the initial Class B Certificate Balance will equal
the product of the Class B Percentage and the Cutoff Date
Pool Balance; the initial Class C Certificate Balance will
equal the product of the Class C Percentage and the Cutoff
Date Pool Balance.
The Class B Certificates will be subordinated to the Class A
Certificates to the extent described herein. The Class C
Certificates will be subordinated to the Class B
Certificates to the extent described herein. See
"Summary--Subordination" and "Summary-- Priority of
Distribution Amounts".
TRUST PROPERTY............... The property of the Trust (the "Trust Property") will
include a pool of non-prime retail installment sale
contracts (collectively, the "Receivables") secured by new
and used automobiles and light-duty trucks, financed thereby
(the "Financed Vehicles"), the Principal Balance (as defined
herein) of the Receivables including all payments due
thereunder on or after the Cutoff Date, security interests
in the Financed Vehicles, certain bank accounts and the
proceeds thereof, the right of the Seller to receive any
proceeds from claims on certain insurance policies, certain
rights under the Pooling and Servicing Agreement and all
proceeds of the foregoing. The Receivables were purchased
from Triad by the Seller pursuant to the Purchase Agreement,
and from the Seller by the Trust pursuant to the Pooling and
Servicing Agreement. See "Property of the Trust".
RECEIVABLES.................. The Receivables arise from loans generally originated by
automobile dealers for sale and assignment to Triad pursuant
to Triad's auto loan programs. Triad's auto loan programs
target automobile purchasers with marginal credit ratings
who are generally unable to obtain credit from banks or
other low-risk lenders. See "Triad's Automobile Financing
Program".
As of the Cutoff Date, the aggregate outstanding principal
balance of the Receivables was $[ ]. As of the Cutoff
Date, the Receivables primarily represented the financing of
used vehicles.
Each Receivable is either a Precomputed Receivable or a
Simple Interest Receivable. As of the Cutoff Date, the
weighted average annual percentage rate (the "APR") of the
Receivables was approximately [ ], the weighted average
remaining term to scheduled maturity of the Receivables was
approximately [ ] months and the weighted average original
term to maturity of the Receivables was approximately
[ ]months. As of the Cutoff Date, no Receivable had a
scheduled maturity later than [ ].
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
CLASS A PASS-THROUGH RATE.... [ ]% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months (the "Class A
Pass-Through Rate").
CLASS B PASS-THROUGH RATE.... [ ]% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months (the "Class B
Pass-Through Rate").
CLASS C PASS-THROUGH RATE.... [ ]% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months (the "Class C
Pass-Through Rate").
PAYMENT DATE................. The [ ]th day of each month (or if such [ ]th day is not a
Business Day, the next succeeding Business Day), commencing
[ ] (each, a "Payment Date"). The record date related
to each Payment Date shall be the [ ](th) day of each month
(or if such [ ](th) day is not a Business Day, the next
Business Day) (each, a "Record Date"). The determination
date related to each Payment Date shall be the last day of
the immediately preceding Collection Period (the
"Determination Date"). The "Collection Period" with respect
to a Payment Date or Record Date is the calendar month
immediately preceding the month in which such Payment Date
or Record Date occurs, or, in the case of the initial
Payment Date, the period from the Cutoff Date to and
including the last day of the month following the month in
which the Cutoff Date occurred.
INTEREST..................... On each Payment Date, the Trustee will, to the extent of
funds available from the sources described herein, (i)
distribute pro rata to the Holders of record of the Class A
Certificates (the "Class A Certificateholders") as of the
Record Date, thirty days of interest at the Class A
Pass-Through Rate on the Class A Certificate Balance as of
the close of business on the Determination Date, (ii)
distribute pro rata to the Holders of record of the Class B
Certificates (the "Class B Certificateholders") as of the
Record Date, thirty days of interest at the Class B
Pass-Through Rate on the Class B Certificate Balance as of
the close of business on the Determination Date and (iii)
distribute pro rata to the Holder of record of the Class C
Certificates (the "Class C Certificateholder") as of the
Record Date, thirty days of interest at the Class C
Pass-Through Rate on the Class C Certificate Balance as of
the close of business on the Determination Date. (The Class
C Certificateholder together with the Class A
Certificateholders and the Class B Certificateholders, the
"Certificateholders".) See "The Certificates--Priority of
Distribution Amounts".
PRINCIPAL.................... On each Payment Date, the Trustee will, to the extent that
there are funds available from the sources described herein,
distribute to (a) the Class A Certificateholders as of the
related Record Date an amount equal to the Class A
Percentage of the Principal Distributable Amount, (b) the
Class B Certificateholders as of the related Record Date an
amount equal to the Class B Percentage of the Principal
Distributable Amount and (c) the Class C
</TABLE>
S-5
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<TABLE>
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Certificateholder as of the related Record Date an amount
equal to the Class C Percentage of the Principal
Distributable Amount.
The "Principal Distributable Amount" for a Payment Date
shall equal the sum of, without duplication: (i) the
principal portion of all Scheduled Payments received during
the preceding Collection Period on Precomputed Receivables
and all payments of principal received on Simple Interest
Receivables during such Collection Period; (ii) the
principal portion of all prepayments received during the
preceding Collection Period; (iii) the portion of the
Purchase Amount allocable to principal of each Receivable
that became a Purchased Receivable as of the last day of the
preceding Collection Period and the Principal Balance of
each Receivable that was required to be but was not so
purchased or repurchased; (iv) the Principal Balance of each
Receivable that first became a Liquidated Receivable during
the preceding Collection Period; and (v) the aggregate
amount of Cram Down Losses with respect to the Receivables
that have occurred during the preceding Collection Period.
In addition, on the Final Scheduled Payment Date, to the
extent amounts are available therefor, the principal
required to be distributed to the Certificateholders of each
Class will equal the then outstanding Class A Certificate
Balance, Class B Certificate Balance and Class C Certificate
Balance, respectively; PROVIDED, HOWEVER, payment of
principal to the Class B Certificateholders and the Class C
Certificateholder will be made only after the full amount of
principal and interest due on the Class A Certificates and
the Class B Certificateholders, respectively, are paid.
PRIORITY OF DISTRIBUTION
AMOUNTS.................... Pursuant to the Pooling and Servicing Agreement, the Trustee
will, on each Payment Date, be required to distribute the
following amounts (to the extent of available funds) in the
following order of priority:
(i) first, to the Servicer, the Servicing Fee (as defined
herein) for the related Collection Period, any Additional
Servicing Fee for the related Collection Period and, so
long as Triad is the Servicer, any Servicer Expenses for
the related or any prior Collection Period and any
amounts mistakenly deposited in the Collection Account
belonging to the Servicer, if any, or otherwise required
to be distributed to the Servicer in accordance with the
Pooling and Servicing Agreement;
(ii) second, to any Lockbox Bank (as defined herein), the
Trustee, Backup Servicer and the Collateral Agent
(including the Trustee if acting in such additional
capacity), any accrued and unpaid fees and expenses
(including reasonable legal fees and expenses) in each
case, to the
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extent such Person (as defined herein) has not
previously received such amount from the Servicer or
Seller;
(iii) third, to the Class A Certificateholders, the Class A
Interest Distributable Amount for such Payment Date
and the Class A Interest Carryover Shortfall, if any;
(iv) fourth, to the Class B Certificateholders, the Class B
Interest Distributable Amount for such Payment Date and
the Class B Interest Carryover Shortfall, if any;
(v) fifth, to the Class A Certificateholders, the Class A
Principal Distributable Amount for such Payment Date and
the Class A Principal Carryover Shortfall, if any;
(vi) sixth, to the Class B Certificateholders, the Class B
Principal Distributable Amount for such Payment Date
and the Class B Principal Carryover Shortfall, if any;
(vii) seventh, to the Class C Certificateholder, the Class C
Interest Distributable Amount for such Payment Date
and the Class C Interest Carryover Shortfall, if any;
(viii) eighth, to the Class C Certificateholder, the Class C
Principal Distributable Amount for such Payment Date
and the Class C Principal Carryover Shortfall, if
any;
(ix) ninth, to the Seller, the Seller's Retained Yield;
PROVIDED, HOWEVER, that (a) any amounts distributable to the
Seller in respect of item (ix) above shall be paid by the
Trustee to the Collateral Agent for deposit into the Reserve
Account to the extent necessary to satisfy the Reserve
Account Requirement (as defined herein) and (b) to the
extent not satisfied with amounts under clause (a) of this
proviso, any amounts distributable to the Class C
Certificateholder in respect of items (viii) and (vii) above
shall be paid, respectively, by the Trustee to the
Collateral Agent for deposit into the Reserve Account to the
extent necessary to satisfy the Reserve Account Requirement.
SUBORDINATION................ Distributions of interest on the Class B Certificates will
be subordinated in priority of payment to interest due on
the Class A Certificates and distributions of interest on
the Class C Certificates will be subordinated in priority of
payment to interest and principal on the Class A
Certificates and the Class B Certificates and the
satisfaction of the Reserve Account Requirement.
Distributions of principal on the Class B Certificates will
be subordinated in priority of payment to interest and
principal due on the Class A Certificates. Distributions of
principal on the Class C Certificates will be subordinated
in priority of payment to interest and principal due on the
Class B Certificates and the satisfaction of the Reserve
Account Requirement. Accordingly, (a) the Class A
Certificates will
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receive the benefit of amounts otherwise due on the Class B
Certificates and the Class C Certificates as credit
enhancement and (b) the Class B Certificates will receive
the benefit of amounts otherwise due on the Class C
Certificates as credit enhancement. Funds representing the
payment of interest to the Class B Certificateholders will
be applied first to the payment of any amounts due to the
Class A Certificateholders on account of the Class A
Interest Distributable Amount and any Class A Interest
Carryover Shortfall before any portion thereof is paid to
the Class B Certificateholders and funds otherwise due to
pay principal of the Class B Certificates will be applied
first to the payment of the Class A Principal Distributable
Amount and any Class A Principal Carryover Shortfall before
any portion thereof is paid to the Class B
Certificateholders. Funds representing the payment of
interest and principal due to the Class C Certificateholder
will be applied first to the payment of any amounts due to
the Class B Certificateholders on account of the Class B
Interest Distributable Amount, any Class B Interest
Carryover Shortfall, the Class B Principal Distributable
Amount and any Class B Principal Carryover Shortfall and the
Reserve Account Requirement before any portion thereof is
paid to the Class C Certificateholder.
RESERVE ACCOUNT.............. On the Closing Date, the Seller shall create the Reserve
Account by depositing in cash the amount of approximately
$[ ]. Such amount will be augmented each Payment Date
by the deposit in the Reserve Account of amounts necessary
to maintain the Reserve Account Requirement. All amounts
otherwise distributable to the Seller in connection with the
Seller's Retained Yield shall be deposited in the Reserve
Account and retained therein to the extent necessary to
satisfy the Reserve Account Requirement. If such amounts
otherwise distributable to the Seller are not sufficient to
satisfy the Reserve Account Requirement, then all amounts
otherwise distributable to the Class C Certificateholder
with respect to principal and then with respect to interest
shall be deposited in the Reserve Account to the extent
necessary to satisfy the Reserve Account Requirement.
"Reserve Account Requirement" means an amount equal to (a)
with respect to the Closing Date, [ ]% of the initial
Certificate Balance and (b) with respect to each Payment
Date thereafter, [ ]% of the Certificate Balance as of the
immediately preceding Determination Date unless a Reserve
Account Trigger Event has occurred, in which case the
Reserve Account Requirement shall include all amounts
required to be paid in items (vii), (viii) and (ix) as
described in "Priority of Distribution Amounts" above, until
such Reserve Account Trigger Event has been Deemed Cured (as
defined herein); PROVIDED, HOWEVER, that the Reserve Account
Requirement shall be [ ]% of the Certificate Balance for
each Payment Date following the point in time that a Reserve
Account Trigger Event as described in clause (c) of the
definition thereof is greater than [ ]%, but less than
[ ]%, notwithstanding such Reserve Account Trigger Event
being Deemed Cured. If a Reserve Account Trigger Event shall
have occurred and
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be continuing then all amounts otherwise distributable to
the Class C Certificateholder and the Seller, on the related
Payment Date shall be deposited in the Reserve Account.
"Reserve Account Trigger Event" means that any one of the
following events shall have occurred: (a) the Delinquency
Ratio for each of the three preceding Collection Periods
exceeds [ ]%; (b) the Repossession Inventory Ratio is
greater than [ ]%; or (c) the Cumulative Default Ratio
exceeds (i) [ ]% as of any Determination Date from the
initial Determination Date through and including the sixth
Determination Date, (ii) [ ]% as of any Determination Date
from the seventh Determination Date through and including
the twelfth Determination Date, (iii) [ ]% as of any
Determination Date from the thirteenth Determination Date
through and including the eighteenth Determination Date,
(iv) [ ]% as of any Determination Date from the nineteenth
Determination Date through and including the twenty-fourth
Determination Date or (v) [ ]% as of any Determination Date
thereafter. If following the occurrence of a Reserve Account
Trigger Event, such Reserve Account Trigger Event shall have
been cured and no Reserve Account Trigger Event shall be
occurring for a period of three consecutive Record Dates,
then any amounts on deposit in the Reserve Account in excess
of the Reserve Account Requirement shall be distributed to
the Class C Certificateholder and the Seller, as applicable,
on the next succeeding Payment Date. Funds will be withdrawn
from the Reserve Account for distribution to
Certificateholders to the extent of shortfalls in the
amounts available to make distributions as detailed under
"Summary--Priority of Distribution Amounts". The Reserve
Account will be maintained with the Collateral Agent, as
agent for the Certificateholders, as a segregated trust
account, pursuant to the Reserve Account Agreement, dated as
of [ ] (the "Reserve Account Agreement"), between the
Seller and the Collateral Agent, and will not be part of the
Trust.
REPURCHASE AND PURCHASE
OBLIGATIONS................ Each of the Seller and Triad will make certain
representations and warranties regarding the Receivables in
the Pooling and Servicing Agreement and the Purchase
Agreement, respectively. The Seller will be obligated to
repurchase a Receivable if the Receivable or the interest of
the Trust or the Certificateholders therein is materially
adversely affected by a breach of any representation or
warranty made by the Seller with respect to the Receivable
if the breach has not been cured by the last day of the
first full calendar month following the discovery by or
notice to the Seller of the breach. Triad will be obligated
to repurchase the Receivable from the Seller pursuant to the
Purchase Agreement contemporaneously with the Seller's
repurchase from the Trust. The Seller's obligation to
repurchase a Receivable from the Trust is not conditioned
upon the Seller's or Triad's repurchase obligation of that
Receivable.
SERVICING.................... The Servicer will be obligated to repurchase a Receivable if
such Receivable or the interest of the Trust or the
Certificateholders therein is materially adversely affected
by a breach of certain of its
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servicing obligations under the Pooling and Servicing
Agreement (including, but not limited to, its obligation to
ensure that the perfected security interest of the Trustee
in the related Financed Vehicle is maintained) or certain
other covenants with respect to the Servicer if the breach
has not been cured by the last day of the first full
calendar month following the discovery by or notice to the
Servicer of the breach. See "The Receivables--Repurchase
Obligations".
The Servicer will be responsible for servicing, managing and
administering the Receivables (as defined herein) and
enforcing and making collections on the Receivables. The
Servicer will be required to carry out its duties using the
degree of skill and care that the Servicer exercises in
performing similar obligations with respect to all
comparable automotive receivables that it services for
itself or others, consistent with its customary standards,
policies and procedures and, in all cases, in a manner
consistent with prudent industry practice.
The Servicer will have the right under the Pooling and
Servicing Agreement to subcontract with a third party
servicer to provide certain servicing functions with respect
to the Receivables.
Under certain limited circumstances, the Servicer may resign
or be removed, in which event the Backup Servicer will be
appointed as successor Servicer as described below. See "The
Certificates-- Servicer Termination Events; Rights Upon
Servicer Termination Event".
SERVICER FEE................. On each Payment Date, the Servicer will be entitled to
receive a fee for servicing the Receivables (the "Servicing
Fee"). The Servicing Fee will be equal to the product of
one-twelfth times [ ]% (the "Servicing Fee Rate") of the
Pool Balance outstanding at the beginning of the calendar
month immediately preceding the month in which such Payment
Date occurs. As additional servicing compensation (the
"Additional Servicing Fee"), the Servicer will also be
entitled to certain late payment penalties, prepayment
penalties, extension and administration fees in connection
with modifications, extensions and prepayments of the
Receivables. The Servicer will also be entitled to any
liquidation expenses not otherwise reimbursed to the
Servicer, reasonable out-of-pocket expenses incurred in
connection with collection efforts relating to skip trace
services, legal fees and field calls and [ ]% of any
deficiencies recovered from an Obligor ("Servicer
Expenses"). See "The Transaction Documents--Servicing
Compensation".
DUTIES OF BACKUP SERVICER.... Pursuant to the Pooling and Servicing Agreement, the Backup
Servicer will perform certain duties on a monthly basis. In
addition, following the resignation or removal of the
Servicer, the Backup Servicer has agreed to serve as the
successor Servicer under the Pooling and Servicing
Agreement. The Backup Servicer will be required to carry out
its duties in accordance with the customary and usual
procedures of institutions which perform similar
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functions. On each Payment Date, the Backup Servicer will be
entitled to receive a fee for acting as Backup Servicer (the
"Backup Servicing Fee") equal to the product of one-twelfth
times $[ ]. See "The Transaction Documents--Backup
Servicing and Backup Servicing Compensation".
OPTIONAL PURCHASE............ The Servicer may at its option, purchase all of the
Receivables as of the last day of any month in which the
Pool Balance is equal to [ ]% or less of the Cutoff Date
Pool Balance (such purchase being the "Optional Purchase").
The purchase price will be equal to the aggregate principal
balance of the Receivables, plus accrued interest at the
respective APRs. See "The Transaction Documents--
Termination".
BOOK-ENTRY REGISTRATION...... The Certificates initially will be represented by one or
more certificates registered in the name of Cede & Co.
("Cede") as the nominee of The Depository Trust Company
("DTC"), and will only be available in the form of
book-entries on the records of DTC and participating members
thereof. Securities will be issued in definitive form only
under the limited circumstances described herein. All
references herein to "holders" of the Certificates or
"Certificateholders" shall reflect the rights of beneficial
owners of the Certificates (the "Certificate Owners") as
they may indirectly exercise such rights through DTC and
participating members thereof, except as otherwise specified
herein. See "Registration of Certificates" in this
Prospectus Supplement and "Description of the
Securities--Book Entry Registration" and "Definitive
Certificates" in the Prospectus.
TAX STATUS................... In the opinion of special counsel to Triad and the Seller,
(a) the Trust will be classified as a grantor trust for
federal income tax purposes and will not be subject to
federal income tax, and (b) the Certificateholders will be
treated as the owners of the Trust. The Certificateholders
must report their respective allocable shares of all income
earned on the Trust Property (other than amounts treated as
"stripped coupons") and may deduct their respective
allocable shares of reasonable servicing fees. See "Federal
Income Tax Consequences".
ERISA CONSIDERATIONS......... A fiduciary or other person investing "plan assets" of any
employee benefit or other plan subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") (a "Plan") should carefully
review with its legal advisors whether the purchase or
holding of the Certificates could give rise to a transaction
prohibited or not otherwise permissible under ERISA or
Section 4975 of the Code.
[With respect to the Class A Certificates, the U.S.
Department of Labor has granted to [ ] an individual
prohibited transaction exemption PTE [ ], [ ] Fed. Reg.
[ ] (the "Exemption") from certain of the prohibited
transaction rules of ERISA and the related excise tax
provisions of Section 4975 of the
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Code with respect to the initial purchase, the holding and
subsequent resale by Plans of non-subordinated certificates
evidencing an interest in pass-through trusts that consist
of certain receivables, loans and other obligations that
meet the conditions and requirements of the Exemption. If
the conditions of the Exemption are met, then whether or not
a Plan's assets would be deemed to include an ownership
interest in the assets in the Trust, the acquisition,
holding and resale of the Class A Certificates by, on behalf
of or with "plan assets" of Plans would be exempt from
certain of the prohibited transaction provisions of ERISA
and Section 4975 of the Code.]
[Because the Class B Certificates and C Certificates are
subordinated to the Class A Certificates, the Exemption will
not apply to such Certificates. Accordingly, the Class B
Certificates and the Class C Certificates may not be
purchased by, transferred to or held by a Plan or any person
using "plan assets" of any Plan to effect such acquisition
or holding. Notwithstanding the foregoing restriction, the
Class B Certificates may be purchased by, transferred to or
held by the general account of an insurance company, but any
such insurance company shall, in the case of any Class B
Certificates, be deemed to have represented and warranted
that the acquisition and holding of the Class B Certificates
will not result in a non-exempt prohibited transaction as
described herein. See "ERISA Considerations."]
RATINGS OF THE
CERTIFICATES............... It is a condition to the issuance of the Offered
Certificates that a nationally recognized rating agency (the
"Rating Agency") rate the Class A Certificates at least
"[ ]" and rate the Class B Certificates at least "[ ]".
There is no assurance that a rating will not be lowered or
withdrawn by a rating agency based on a change in
circumstances deemed by such rating agency to adversely
affect the Certificates. A rating is not a recommendation to
purchase, hold or sell any of the Offered Certificates, in
as much as such rating does not comment as to market price
or suitability for a particular investor. See "Ratings of
the Offered Certificates".
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RISK FACTORS
In addition to the other information in this Prospectus Supplement and the
Prospectus, prospective Certificateholders should consider the following
factors, as well as these matters discussed in "Risk Factors" in the Prospectus,
in evaluating an investment in the Certificates,
LIMITED OPERATING HISTORY OF TRIAD MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
Generally, all of the Receivables were acquired by Triad in its normal
course of business in accordance with credit underwriting criteria established
by Triad. Triad commenced operations in 1989 as a prime automobile lender, but
changed its focus to the non-prime market in 1993. Triad began servicing all new
contract purchases in June 1996. Triad therefore has limited historical
performance data with respect to the motor vehicle retail installment sale
contracts it purchases and services. Although Triad has calculated and presented
herein its net loss experience with respect to its portfolio of serviced
contracts (the "Servicing Portfolio"), there can be no assurance that the
information presented will reflect actual experience with respect to the
Receivables.
RISK OF PAYMENT DEFAULTS BY NON-PRIME OBLIGORS HIGHER THAN PRIME OBLIGORS
Triad purchases loans originated by automobile dealers generally for sale
and assignment to Triad. The underwriting standards applied by Triad are not as
stringent as those of the finance companies of motor vehicle manufacturers or
other financial institutions, given that Triad purchases retail automobile
installment sale contracts which may not meet the credit standards of
traditional primary lenders. The Triad finance program focuses on the non-prime
market, including borrowers with sub-standard credit profiles who may not be
able to receive financing from more traditional sources. Accordingly, the
borrowers may have had credit problems in the past, including prior
delinquencies, repossessions, bankruptcy filings or charge-offs by other credit
companies. As a result, borrowers may have greater difficulty or be less likely
to make their scheduled payments, and the number of delinquencies and losses on
the Receivables is expected to be higher than would be the case if stricter
credit guidelines had been applied. Due to the credit quality of these
borrowers, the Receivables have been originated with higher APRs than more
traditional lenders charge lower risk borrowers. To the extent that the forms of
credit enhancement described herein are insufficient to cover losses on the
Receivables, such losses will be borne by Certificateholders. Investors are
urged to consider the credit quality of the Receivables when analyzing an
investment in the Offered Certificates. See "Triad's Automobile Financing
Program--Underwriting".
A CHANGE IN SERVICER MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Triad believes that its credit loss and delinquency experience reflect in
part its trained staff and collection procedures. If a Servicer Termination
Event occurs under the Pooling and Servicing Agreement and Triad is removed as
Servicer, or if Triad resigns or is terminated as Servicer, the Backup Servicer
has agreed to assume the obligations of successor Servicer under the Pooling and
Servicing Agreement. See "The Certificates--Servicer Termination Events; Rights
Upon Servicer Termination Event." There can be no assurance, however, that
collections with respect to the Receivables will not be adversely affected by
any change in Servicer.
A CLASS OF CERTIFICATES MAY BE SUBORDINATE TO ANOTHER CLASS; PAYMENTS WILL BE
MADE ONLY FROM THE LIMITED ASSETS OF THE TRUST
The Trust does not have, nor is it expected or permitted to have, any
significant assets or sources of funds other than the Receivables, including
certain insurance policies related thereto, and amounts on deposit in certain
accounts held by the Trustee on behalf of the Certificateholders. The
Certificates represent interests solely in the Trust, and such Certificates will
not be insured or guaranteed by the
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Seller, the Servicer, the Trustee or any other person. The Certificateholders
must rely on any amounts available under certain collateral accounts established
in connection with the transactions contemplated hereby, the proceeds from the
repossession and sale of Financed Vehicles which secure defaulted Receivables
and certain insurance policies related to the Financed Vehicles. In such event,
certain factors, such as the Trustee not having perfected security interests in
the Financed Vehicles, may affect the Trust's ability to realize on the
collateral securing the Receivables and thus may reduce the proceeds to be
distributed to the Certificateholders.
Distributions of interest on the Class B Certificates will be subordinated
in priority of payment to interest due on the Class A Certificates.
Distributions of interest on the Class C Certificates will be subordinated in
priority of payment to interest and principal on the Class A Certificates and
the Class B Certificates and the satisfaction of the Reserve Account
Requirement. Distributions of principal on the Class B Certificates will be
subordinated in priority of payment to interest and principal due on the Class A
Certificates. Distributions of principal on the Class C Certificates will be
subordinated in priority of payment to interest and principal due on the Class B
Certificates and the satisfaction of the Reserve Account Requirement. Funds
representing the payment of interest to the Class B Certificateholders will be
applied first to the payment of any amounts due to the Class A
Certificateholders on account of the Class A Interest Distributable Amount and
any Class A Interest Carryover Shortfall before any portion thereof is paid to
the Class B Certificateholders, and funds otherwise due to pay principal of the
Class B Certificates will be applied first to the payment of the Class A
Principal Distributable Amount and any Class A Principal Carryover Shortfall
before any portion thereof is paid to the Class B Certificateholders. Funds
representing the payment of interest and principal due to the Class C
Certificateholder will be applied first to the payment of any amounts due to the
Class B Certificateholders on account of the Class B Interest Distributable
Amount, any Class B Interest Carryover Shortfall, the Class B Principal
Distributable Amount, any Class B Principal Carryover Shortfall and the
satisfaction of the Reserve Account Requirement before any portion thereof is
paid to the Class C Certificateholder. See "The Certificates--Distributions from
the Trust".
GEOGRAPHIC CONCENTRATION OF RECEIVABLES MAY ADVERSELY AFFECT THE DELINQUENCY,
LOSS OR REPOSSESSION EXPERIENCE OF THE RECEIVABLES
As of the Cutoff Date, Obligors with respect to [ ]% of the Receivables
(based on outstanding principal balance and mailing address as of the Cutoff
Date) were located in California. See the tables set forth under "The
Receivables." Accordingly, adverse economic conditions or other factors
particularly affecting California could adversely affect the delinquency, loss
or repossession experience of the Receivables.
PREPAYMENTS ON RECEIVABLES MAY ADVERSELY AFFECT INTEREST RATE YIELD AND MATURITY
OF CERTIFICATES
Each of the Receivables is prepayable at any time. The rate of prepayments
on the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of Triad unless
the loan is repaid by the Obligor at the time of such sale or transfer. (For
this purpose the term "prepayments" includes prepayments in full or in part,
including, without limitation, certain partial prepayments related to refunds of
extended service contract costs and unearned insurance premiums, liquidations
due to default, as well as receipts of proceeds from physical damage, credit
life and credit accident and health insurance policies and certain other
repurchases of Receivables for other reasons.) The rate of prepayment on the
Receivables may also be influenced by the structure of the loan, the nature of
the Obligors and the Financed Vehicles and servicing decisions as discussed
above. In addition, under certain circumstances, the Seller and Triad are
obligated to repurchase Receivables as a result of breaches of representations
and warranties, pursuant to the Pooling and Servicing Agreement and the Purchase
Agreement, respectively, and under certain circumstances, the Servicer is
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obligated to purchase Receivables pursuant to the Pooling and Servicing
Agreement as a result of breaches of certain covenants. Subject to certain
conditions, the Servicer has the option, to purchase the Receivables when the
aggregate principal balance thereof is [ ]% or less of the Cutoff Date
Principal Balance.
Triad has limited historical experience with respect to prepayments. Neither
Triad, the Seller nor the Trust makes any representation as to the actual
prepayment rates that will be experienced on the Receivables. However, Triad
believes that the actual rate of prepayments will result in a shorter weighted
average life than the scheduled weighted average life of the Receivables. The
amounts paid to Certificateholders will include all prepayments on the
Receivables. Any reinvestment risks resulting from a faster or slower incidence
of prepayment of Receivables will be borne entirely by the Certificateholders.
ADVERSE JUDGMENT IN LITIGATION MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Due to the consumer-oriented nature of Triad's industry and the application
of certain laws and regulations, industry participants are regularly named as
defendants in litigation alleging violations of federal and state laws and
regulations and consumer law torts, including fraud. Many of these actions
involve alleged violations of consumer protection laws. A significant judgment
against Triad or others within the industry in connection with any such
litigation could have a material adverse effect on Triad's financial condition,
results of operations and/or its ability to perform its obligations under the
Purchase Agreement and the Pooling and Servicing Agreement.
RATINGS OF THE OFFERED CERTIFICATES DO NOT ADDRESS SUITABILITY OF INVESTMENT
It is a condition to the issuance of the Offered Certificates that the
Rating Agency rate the Class A Certificates at least "[ ]" and rate the Class B
Certificates at least "[ ]". There is no assurance that a rating will not be
lowered or withdrawn by the Rating Agency based on a change in circumstances
deemed by such rating agency to adversely affect the Offered Certificates. A
rating is not a recommendation to purchase, hold or sell the Offered
Certificates, in as much as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the Offered Certificates
do not address the possibility that Certificateholders may receive a lower than
anticipated yield. There is no assurance that a rating will remain for any given
period of time or that a rating will not be lowered or withdrawn entirely by the
Rating Agency if in its judgment circumstances in the future so warrant. See
"Ratings of the Offered Certificates".
THE YEAR 2000 ISSUE
The Year 2000 issue is whether Triad's or its vendors' systems will properly
recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
fail.
Triad has developed a comprehensive project plan for achieving Year 2000
readiness. An inventory of critical hardware and software has been completed and
information technology components have been assessed. This assessment included
major suppliers and business partners and Triad is monitoring their continued
progress toward Year 2000 compliance. Triad is currently in the process of
renovating or replacing critical systems that are not currently Year 2000
compliant and plans of substantially complete this phase by December 31, 1998.
Integrated testing and installation of all renovated mission critical systems is
planned for early calendar 1999 with an estimated completion date of March 31,
1999. In addition prior to December 31, 1998, Triad completed its contingency
plans for mission critical systems.
Triad presently believes that the modifications to existing systems and/or
conversion to new systems, the Year 2000 issue will not pose significant
operational problems for Triad. However, if such
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modifications and conversions are not made, or not completed in a timely manner,
or are not completed successfully, the Year 2000 issue could have a material
impact on the operations of Triad. In addition, there can be no assurance that
unforeseen problems in the Triad systems, or the systems of third parties on
which the Triad computers rely, would not have an adverse effect on Triad
systems or operations.
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the Trust
Property to the Trustee in exchange for the Certificates. Prior to such sale and
assignment, the Trust will have no assets or obligations or any operating
history. The Trust will not engage in any business. The Trust will hold the
Receivables, issue the Certificates and distribute payments on the Certificates.
Triad will act as Servicer of the Receivables pursuant to the Pooling and
Servicing Agreement and will receive compensation and fees for such services.
See "Further Provisions of the Principal Transaction Documents--Servicing
Compensation". The Trustee will hold the certificates of title relating to the
Financed Vehicles and shall retain physical possession of the original executed
Receivables and certain other documents or instruments relating to the
Receivables (the "Custodian Receivables Files"), as custodian for the Trust
pursuant to the Pooling and Servicing Agreement. Other documents relating to the
Receivables will be held by the Servicer (the "Servicer Receivables Files", and
collectively with the Custodian Receivables Files, the "Receivables Files"). In
order to protect the Trust's ownership interest in the Receivables, the Seller
will file UCC-1 financing statements to give notice of the Trust's ownership of
the Receivables. Under the Pooling and Servicing Agreement, the Servicer will be
obligated to take all necessary steps to preserve and protect the interest of
the Trustee in the Receivables. The Trustee will not be responsible for the
legality, validity or enforceability of any security interest in respect of any
Receivable. The Servicer will mark its computer records but may not stamp or
mark each individual Receivable to reflect the sale and assignment of such
Receivable to the Trust. Furthermore, the Servicer will not seek to have amended
or re-issued the certificates of title to the Financed Vehicles. In the absence
of amendments to the certificates of title, the Trustee may not have perfected
security interests in the Financed Vehicles securing the Receivables originated
in some states.
The Trust will not acquire any assets other than the Trust Property, and it
is not anticipated that the Trust will have any need for additional capital
resources. Because the Trust will have no operating history upon its
establishment and will not engage in any business other than acquiring and
holding the Trust Property, issuing the Certificates and distributing payments
on the Certificates, no historical or PRO FORMA financial statements or ratios
of earnings to fixed charges with respect to the Trust have been included
herein.
PROPERTY OF THE TRUST
Each Certificate represents a beneficial ownership interest in the Trust.
The Trust Property will include the Principal Balance of the Receivables
including all payments due on or after the Cutoff Date with respect to the
Receivables under certain retail installment sale contracts between automobile
dealers (the "Dealers") and the purchasers or co-purchasers of the Financed
Vehicles or any other person who owes payments under the Receivables (the
"Obligors"). The Receivables were originated by the Dealers and assigned
directly to Triad or to third party originator of Receivables ("Correspondents")
who assigned the Receivables to Triad. Pursuant to agreements between the
Dealers and Triad ("Dealer Agreements") and agreements between Correspondents
and Triad ("Correspondent Agreements"), the Receivables were purchased by Triad
and, prior to the Closing Date, evidenced financing made available by Triad
through the Dealers to the Obligors. On or before the Closing Date, Triad will
sell the Receivables to the Seller which will in turn sell such Receivables to
the Trust.
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<PAGE>
The Trust Property also will include: (i) such amounts as from time to time
may be held in one or more separate trust accounts established and maintained by
the Trustee pursuant to the Pooling and Servicing Agreement, and the proceeds of
such accounts, as described below (see "Further Provisions of the Principal
Transaction Documents--Accounts"); (ii) the rights of the Seller under the
Purchase Agreement; (iii) security interests in the Financed Vehicles granted by
the Obligors pursuant to the Receivables and any accessions thereto; (iv) the
interest of the Seller in any proceeds from claims on any credit life, credit
disability, and physical damage insurance policies or other insurance policies
covering the Financed Vehicles or Obligors; (v) certain rights under the Pooling
and Servicing Agreement and the Purchase Agreement; (vi) amounts payable to the
Seller under all Dealer Recourse (defined herein) obligations (including the
assignment of the rights of Correspondents, if any, to Dealer Recourse) and
(vii) any and all payments on and proceeds of the foregoing. The Trust Property
does not include the Reserve Account. Pursuant to dealer agreements, the Dealers
generally are obligated to pay Triad or the Correspondent, if applicable, for
the unpaid balance, losses and expenses of those Receivables which do not meet
certain limited representations made by the Dealers (such obligations referred
to herein as "Dealer Recourse"). Such representations and warranties relate
primarily to the origination of the contracts and the perfection of the security
interests in the related Financed Vehicles, and do not typically relate to the
creditworthiness of the related Obligors or the collectability of such
contracts. Although neither the Dealer Agreements nor the Correspondent
Agreements with respect to the Receivables will not be assigned to the Trustee,
the Pooling and Servicing Agreement will require the Seller to cause the amount
of any recovery by Triad in respect to any Receivable pursuant to any Dealer
Recourse to be deposited in the Collection Account in satisfaction of the
Seller's obligations under the Pooling and Servicing Agreement. The sales by the
Dealers of installment sale contracts to Triad or a Correspondent do not
generally provide for recourse against the Dealers for unpaid amounts in the
event of a default by an Obligor thereunder, other than in connection with the
breach of the foregoing representations and warranties. There can be no
assurance that Triad will pursue all claims under the Dealer Agreements or
Correspondent Agreements nor that Triad will prevail if any such claim is made.
TRIAD AND THE SELLER
Triad Financial Special Purpose Corporation (the "Seller"), a special
purpose corporation, is a wholly-owned subsidiary of Triad, which was
incorporated in the State of Delaware on September 26, 1996. The Seller was
organized for limited purposes, which include purchasing receivables from Triad,
transferring such receivables to third parties and any activities incidental to
and necessary or convenient for the accomplishment of such purposes. The chief
executive office of the Seller is located at 7711 Center Avenue, Suite 390,
Huntington Beach, California 92647. The telephone number of such office is (714)
373-8300. For further information regarding Triad and the Seller, see "Triad and
the Seller" in the Prospectus.
The Seller has taken steps in structuring the transaction contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by Triad under Insolvency Laws will not result in consolidation of
the assets and liabilities of the Seller with those of Triad. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to articles of incorporation containing certain limitations (including
restrictions on the nature of the Seller's business, the requirement of at least
one independent director being on the Board of Directors of the Seller and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the prior unanimous affirmative vote of all of
its directors). However, there can be no assurance that the activities of the
Seller would not result in a court concluding that the assets and liabilities of
the Seller should be consolidated with those of Triad in a proceeding under any
Insolvency Law.
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<PAGE>
The Seller has received the advice of counsel to the effect that subject to
certain facts, assumptions and qualifications, in a properly presented case
under current law, it would not be a proper exercise by a court of its equitable
discretion to disregard the separate corporate existence of the Seller and to
require the substantive consolidation of the assets and liabilities of the
Seller with those of Triad in the event of the application of the Insolvency
Laws to Triad. Among other things, it is assumed by counsel that the Seller will
follow certain procedures in the conduct of its affairs, including maintaining
records and books of account separate from those of Triad, refraining from
commingling its assets with those of Triad and refraining from agreeing to pay,
or being liable for, the debts of Triad. The Seller intends to follow and has
represented to such counsel that it will follow these and other procedures
related to maintaining its separate corporate identity. However, in the event
that the Seller does not follow these procedures, there can be no assurance that
a court would not conclude that the assets and liabilities of the Seller should
be consolidated with those of Triad. If a court were to reach such a conclusion,
or a filing were made under any Insolvency Law by or against the Seller, or if
an attempt were made to litigate any of the foregoing issues, delays in
distributions on the Certificates (and possible reductions in the amount of such
distributions) could occur.
TRIAD'S AUTOMOBILE FINANCING PROGRAM
Triad was incorporated in the State of California in 1989. Triad engages
primarily in the business of purchasing, selling and servicing retail automobile
installment sales contracts ("Contracts") originated by Dealers. Triad currently
has relationships with approximately 2,000 Dealers operating in 30 states
(Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, Missouri,
Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia and Washington).
Each dealer has executed a Dealer Agreement which provides representations and
warranties with respect to each Contract sold to Triad. Dealer relationships are
developed and maintained by Triad-employed sales representatives. Triad
currently employs 41 market representatives, six of whom serve the California
market. Triad specializes in Contracts with borrowers ("Non-prime Borrowers")
who generally would not be expected to qualify for traditional financing such as
that provided by commercial banks or automobile manufacturers' captive finance
companies. Non-prime Borrowers generally have limited credit history, lower than
average income or past credit problems. Triad offers five distinct automobile
financing programs to its Dealers. The offerings vary based upon the Obligor's
overall credit quality and the pricing established by Triad. These variations
affect the coupon charged on the contract. For all such programs, the maximum
loan to wholesale value ratio, including approved additional items such as
taxes, license fees and warranties, is equal to 150%.
UNDERWRITING
Loan underwriting is centralized at Triad's headquarters. Dealers typically
remit applications to the operations center via facsimile. Credit analysts
underwrite each application using Triad's written underwriting guidelines. After
completion of the credit analysis, the underwriter makes a final decision
regarding the application; such decision may include an approval, a conditional
approval or a turndown. A conditional approval is an agreement by Triad to fund
the application under certain specific conditions as determined by Triad. Once a
Dealer chooses Triad as its funding source, it assembles the financing package
in accordance with Triad's requirements. The primary elements of the standard
package include the contract, credit application, proof of residence, proof of
income, an agreement to provide insurance, and titling paperwork. Packages are
generally delivered via overnight mail. To minimize dealer misrepresentations,
Triad conducts five independent verifications for each package: (1) application
information, generally verified directly with the Obligor; (2) mortgage or
rental information, generally verified directly with the Obligor's mortgage
holder or landlord, as appropriate; (3) insurance, verified directly with the
insurance agent; (4) employment and income levels, verified directly with the
Obligor's employer; and (5) reference information. Triad also reviews each
contract for
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<PAGE>
completeness and accuracy. Triad attempts to maintain a two-day turn-around time
from when it receives a complete funding package until it purchases the contract
from the Dealer. Funding packages with deficiencies are not funded and are
returned to the submitting Dealer. Triad's quality control department performs
an additional review of the financing package which Triad's management believes
enhances its origination procedures.
SERVICING AND COLLECTIONS
Triad's servicing responsibilities consist of collecting, accounting for and
posting of all payments received with respect to its Servicing Portfolio,
responding to borrower inquiries, taking steps to maintain the security interest
granted in Financed Vehicles or other collateral, investigating delinquencies,
communicating with the Obligors, repossessing and liquidating collateral when
necessary, and generally monitoring each loan and the related collateral. Triad
began servicing all new contract purchases in June 1996.
Triad currently performs all servicing and collection functions from its
centralized operations center in Huntington Beach, California. Triad sends
payment invoices to Obligors each month for amounts due under the Contracts,
including amounts past due and late charges thereon, if any. Each Obligor has
been instructed to make payments with respect to the Contracts to a Lockbox
maintained by the Lockbox Bank. See "Further Provisions of the Principal
Transaction Documents--Accounts". Subject to applicable law, Triad's current
collection policies establish the following procedures. Triad initiates
collection activities once a payment is five days contractually past due. The
initial contacts are made through phone calls, with continued attempts to
contact the Obligor for payment at least every two days thereafter. In cases
where an Obligor has broken a promise to make a payment by a certain date, such
Obligor is called within a day. If Triad's collection department is unsuccessful
in contacting an Obligor by phone, alternative methods of contact, such as the
use of outside agent field calls or location gathering via references,
employers, landlords, or other credit references are pursued, generally within
15 to 20 days of the account becoming delinquent. Triad presently intends to
maintain a ratio of one collector for approximately every 600 contracts
serviced, with one supervisor for approximately every 10 collectors.
The decision to repossess a vehicle is influenced by many factors, such as
previous account history, reasons for delinquency and cooperation of the
Obligor. As part of the collection process, all practical means of contacting
the Obligor are attempted. If, at any point, a collector feels that there is
little or no chance that Triad will be able to establish contact with the
Obligor or that the Obligor will not make the required payments, the collector
will submit such contract for repossession. All contracts submitted are
evaluated by collection supervisors to determine if more follow-up work is
needed prior to repossession. If so determined, the supervisor provides
suggestions to assist the collector in further efforts to locate the Obligor. If
the supervisor feels all leads have been exhausted, the contract will be
forwarded to the collection manager for review. If the collection manager agrees
with the supervisor, it will be returned to the collector "approved" for
repossession.
Once the decision to repossess a vehicle is made, the account is referred to
an outside agency which handles the actual repossession. Most state laws require
that the Obligor be sent a Notice of Intent to Sell, which informs the borrower
of the lender's intent to sell the vehicle. The various states provide for a
period of time, generally 15 to 20 days, during which the Obligor may have the
right, depending on the applicable statute, either to reinstate the contract by
making all past due payments and paying the repossession and storage expenses,
or to redeem the vehicle by paying the contract in full, plus expenses
associated with repossession and storage of the vehicle. If the Obligor does not
exercise his right to reinstate the contract or redeem the vehicle, as provided
by the applicable statute, Triad immediately begins the process to sell the
vehicle at public or private sale. The vehicle is usually sold within 31 to 45
days after being repossessed. After a repossessed vehicle is sold, Triad's
collection
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<PAGE>
staff applies for rebates on any extended warranty or life, accident and health
insurance policies that may have been financed as part of the vehicle purchase.
Triad's collection policies generally do not allow for loan extensions;
PROVIDED, HOWEVER, in those circumstances where extensions are granted, Triad
typically does not (a) grant more than three extensions with respect to a
Receivable, (b) grant more than one extension per calendar year with respect to
a Receivable or (c) grant an extension for more than one calendar month with
respect to a Receivable.
INFORMATION TECHNOLOGY AND SYSTEMS
Triad's information technology needs are met with a system consisting of
client servers, a personal computer local area network and a mainframe computer
provided by a vendor. Triad's loan accounting and collections systems, Shaw IL
2000 and CS 2000, are housed on a mainframe computer provided by Affiliated
Computer Services, Inc. ("ACS"). ACS's mainframe is located in Dallas, Texas and
communicates with Triad's operation center through a dedicated, leased telephone
line. Triad's credit application processing system, APPRO, is maintained on a
client server at Triad's operations center in Huntington Beach.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth information relating to the delinquency and
loss experience of Triad for the periods indicated. Scheduled Payments made by
the Obligor must be at least 90% of such Scheduled Payment for a contract to be
considered current with respect to such Scheduled Payment. The data presented in
the delinquency and loss tables below are for illustrative purposes only. There
is no assurance that the delinquency and credit loss experience with respect to
Triad's automobile, light-duty truck and sports utility vehicle installment
contracts in the future, or that the experience of the Trust Property with
respect to the Receivables pledged to the Trustee for the benefit of the
Certificateholders, will be similar to that set forth below. Losses and
delinquencies are affected by, among other things, general and regional economic
conditions and the supply of and demand for automobiles, light-duty trucks and
sports utility vehicles.
S-20
<PAGE>
TRIAD FINANCIAL CORPORATION
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
DURING THE THREE-MONTH PERIOD ENDED
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
------------- ------------- -------------- -------------- --------------
Average Aggregate Principal Balance(1),
(2)........................................ $ 58,244,815 $ 89,203,495 $ 119,831,579 $ 157,030,572 $ 200,583,686
Gross Charge-Offs(3)......................... 276,769 1,050,485 1,251,613 2,318,711 4,102,536
Recoveries(4)................................ 24,453 216,364 228,287 339,306 632,487
------------- ------------- -------------- -------------- --------------
Net Losses................................... $ 252,316 $ 834,121 $ 1,023,326 $ 1,979,405 $ 3,470,049
------------- ------------- -------------- -------------- --------------
Net Losses as a Percentage of Average
Aggregate Principal Balance(5)............. 0.43% 0.94% 0.85% 1.26% 1.73%
------------- ------------- -------------- -------------- --------------
------------- ------------- -------------- -------------- --------------
<CAPTION>
<S> <C> <C>
YEAR ENDED
6/30/98 6/30/98
-------------- --------------
Average Aggregate Principal Balance(1),
(2)........................................ $ 245,536,237 $ 181,183,145
Gross Charge-Offs(3)......................... 3,226,167 10,899,027
Recoveries(4)................................ 535,192 1,735,272
-------------- --------------
Net Losses................................... $ 2,690,975 $ 9,163,755
-------------- --------------
Net Losses as a Percentage of Average
Aggregate Principal Balance(5)............. 1.10% 5.06%
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(1) The aggregate principal balance is equal to the gross receivable less
unearned finance charges on Precomputed Receivables plus the principal
balance on Simple Interest Receivables.
(2) Other than for the Year Ended September 30, 1997, represents the three-month
average for the related period of the aggregate principal balance of all
contracts purchased and serviced by Triad.
(3) Gross charge-off equals the remaining principal balance of the charged-off
contract less the net proceeds of the liquidation of the related vehicle.
(4) Recoveries include post liquidation amounts received on previously
charged-off contracts, including deficiency payments, rebates on related
extended service contracts and insurance policies.
(5) Other than for the Year Ended September 30, 1997, net loss percentages are
not annualized.
S-21
<PAGE>
TRIAD FINANCIAL CORPORATION
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997 AS OF JUNE 30, 1997
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
% OF % OF
NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE
----------- ------------- ----------- ----------- ------------- -----------
Aggregate Principal Balance at Period End(1),
(2)............................................. 5,423 $ 71,601,339 100.00% 8,195 $ 105,465,298 100.00%
----------- ------------- ----------- ----------- ------------- -----------
----------- ------------- ----------- ----------- ------------- -----------
Delinquencies(3)
31-60 Days...................................... 81 $ 1,145,807 1.60% 106 $ 1,374,687 1.30%
61-90 Days...................................... 6 64,946 0.09 23 287,357 0.27
91+ Days........................................ 6 99,426 0.14 8 126,995 0.12
----------- ------------- ----------- ----------- ------------- -----------
Total Delinquencies............................... 93 $ 1,310,179 1.83% 137 $ 1,789,039 1.70%
Amount in Repossession(4)......................... 45 $ 615,233 0.86% 96 $ 1,051,533 1.00%
----------- ------------- ----------- ----------- ------------- -----------
Total Delinquencies and Amount in Repossession.... 138 $ 1,925,412 2.69% 233 $ 2,840,572 2.69%
----------- ------------- ----------- ----------- ------------- -----------
----------- ------------- ----------- ----------- ------------- -----------
<CAPTION>
AS OF MARCH 31, 1997 AS OF JUNE 30, 1997
--------------------------------------- ---------------------------------------
% OF % OF
NO. OF PRINCIPAL PRINCIPAL NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE RECEIVABLES BALANCE BALANCE
----------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Principal Balance at Period End(1),
(2)............................................. 14,239 $ 178,820,032 100.00% 18,065 $ 222,579,214 100.00%
----------- ------------- ----------- ----------- ------------- -----------
----------- ------------- ----------- ----------- ------------- -----------
Delinquencies
31-60 Days...................................... 283 $ 3,536,717 1.98% 243 $ 3,005,925 1.35%
61-90 Days...................................... 91 1,175,834 0.66 50 636,024 0.29
91+ Days........................................ 49 612,742 0.34 25 313,044 0.14
----------- ------------- ----------- ----------- ------------- -----------
Total Delinquencies............................... 423 $ 5,325,293 2.98% 318 $ 3,954,993 1.78%
Amount in Repossession(4)......................... 271 $ 3,325,167 1.86% 298 $ 3,692,886 1.66%
----------- ------------- ----------- ----------- ------------- -----------
Total Delinquencies and Amount in Repossession.... 694 $ 8,650,460 4.84% 616 $ 7,647,879 3.44%
----------- ------------- ----------- ----------- ------------- -----------
----------- ------------- ----------- ----------- ------------- -----------
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------------------
<S> <C> <C> <C>
% OF
NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE
----------- ------------- -----------
Aggregate Principal Balance at Period End(1),
(2)............................................. 10,714 $ 135,148,169 100.00%
----------- ------------- -----------
----------- ------------- -----------
Delinquencies(3)
31-60 Days...................................... 169 $ 2,111,018 100.00%
61-90 Days...................................... 62 793,279 0.59
91+ Days........................................ 19 254,826 0.19
----------- ------------- -----------
Total Delinquencies............................... 250 $ 3,159,123 2.34%
Amount in Repossession(4)......................... 130 $ 1,735,378 1.28%
----------- ------------- -----------
Total Delinquencies and Amount in Repossession.... 380 $ 4,894,501 3.62%
----------- ------------- -----------
----------- ------------- -----------
AS OF SEPTEMBER 30, 1997
---------------------------------------
% OF
NO. OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE
----------- ------------- -----------
<S> <C> <C> <C>
Aggregate Principal Balance at Period End(1),
(2)............................................. 23,278 $ 275,701,781 100.00%
----------- ------------- -----------
----------- ------------- -----------
Delinquencies
31-60 Days...................................... 544 $ 6,504,170 2.36%
61-90 Days...................................... 125 1,471,899 0.53
91+ Days........................................ 42 519,163 0.19
----------- ------------- -----------
Total Delinquencies............................... 711 $ 8,495,232 3.08%
Amount in Repossession(4)......................... 273 $ 3,082,642 1.12%
----------- ------------- -----------
Total Delinquencies and Amount in Repossession.... 984 11,577,874 4.20%
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
- --------------------------
(1) The aggregate principal balance is equal to the gross receivable less
unearned finance charges on Precomputed Receivables plus the principal
balance on Simple Interest Receivables.
(2) Represents the aggregate principal balance of all contracts purchased and
serviced by Triad.
(3) Prior to May 30, 1998 Scheduled Payments not made by the Obligors must be
less than $40 for a contract to be considered current.
(4) Represents the aggregate principal balance as of the repossession date.
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<PAGE>
CHARGE-OFF POLICIES AND NET LOSSES
Triad's charge-off policy relating to repossessed vehicles, bankruptcy,
"skip" accounts and thefts or collisions is as follows:
REPOSSESSIONS. When a vehicle has been repossessed and sold, the proceeds
from the sale of the vehicle, net of the costs incurred in its repossession,
storage and disposition, will be applied against the outstanding balance of the
Receivable. A charge-off will be made in an amount equal to the Principal
Balance of the Receivable less the net proceeds of the liquidation of the
related Financed Vehicle.
BANKRUPTCIES. If Triad receives a bankruptcy notice with respect to an
Obligor, the contract will be charged off in an amount equal to the current
outstanding principal balance of the contract at the time of charge-off. The
charge-off is actually taken upon the earlier of (a) the month in which the
Obligor allows the contract to become 120 days or more delinquent in the case of
an Obligor that files for protection under either Chapter 7 or Chapter 13 of the
United States Bankruptcy Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code") or
(b) Triad's receipt of notice of the results of the bankruptcy proceedings. The
initial charge-off is adjusted, if necessary, to reflect the results of the
bankruptcy proceedings.
"SKIP" ACCOUNTS. Triad defines "skip" accounts as contracts for which (a)
Triad is unable to contact or locate an Obligor for a period of 120 days and (b)
Triad is unable to locate the related Financed Vehicle. Triad charges off the
contract, with a charge-off equal to the current outstanding principal balance
of the contract, and continues collection efforts. If Triad subsequently makes
contact with the Obligor, and the vehicle is repossessed and sold, proceeds from
the disposition of the collateral, net of the costs incurred in repossessing,
storing and disposing of the vehicle, and/or rebates from the cancellation of
outstanding insurance policies and/or extended service contracts are recorded as
recoveries.
THEFTS OR COLLISIONS. Theft or collision contracts are charged-off upon the
earlier of (a) Triad's receipt of proceeds from the Obligor's insurance policy
and (b) the month in which the contract becomes 120 days delinquent. The
charge-off is equal to the amount of the net deficiency resulting from the
application of insurance proceeds to the current outstanding principal balance
of the contract. Insurance proceeds received after a contract is charged-off are
recorded as recoveries.
Where permitted by local statute, charged-off Receivables are pursued for
any deficiencies by Triad's loss prevention staff. A follow-up call to the
Obligor is made within ten days of the deficiency being established. During this
call, an attempt is made to negotiate a settlement of the deficiency balance.
The first offer is generally made in an amount equal to 85% of the deficiency
balance, but a 65% settlement is acceptable. Triad generally prefers to avoid
establishing a monthly payment plan, as its experience has been that the Obligor
will typically only make payments until such time as he is able to purchase a
replacement vehicle. Triad will generally garnish the salary of a defaulted
Obligor in states in which salary garnishment for recovery of deficiency
balances is permitted.
INSURANCE
In addition to the physical damage insurance policies maintained by the
Obligors naming Triad as the loss payee, Triad may maintain collateral
protection for uninsured physical damage in a manner that is customary and
standard for servicers of receivables in the same general area as the Servicer
and for receivables comparable to the Receivables, which may include
self-insurance. Triad also maintains fidelity coverage insuring against losses
through wrongdoing of its officers and employees.
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<PAGE>
THE BACKUP SERVICER
If a Servicer Termination Event occurs and remains unremedied and Triad is
terminated as Servicer or resigns as Servicer, [ ], a [ ], will serve
as successor Servicer (in such capacity, the "Backup Servicer"). The Backup
Servicer will receive a fee on each Payment Date equal to the product of
one-twelfth times $[ ] as compensation for, among other things, (i)
standing by to act as successor Servicer and (ii) confirming certain
calculations made by the Servicer on the monthly statement to
Certificateholders, including but not limited to (a) interest and principal
payments due to the Certificateholders and (b) Receivables performance ratios
related to a Reserve Account Trigger Event and/or Servicer Termination Trigger
Event.
THE RECEIVABLES
The Receivables were purchased by Triad generally from Dealers in the
ordinary course of Triad's business pursuant to Triad's finance programs and
underwriting standards. As detailed herein, such credit guidelines may be less
stringent than those applied in the origination of other automobile loans by
other lenders. See "Triad's Automobile Financing Program--Underwriting". Not
more than [ ]% of the Receivables were acquired by Triad directly from any
single Dealer. Approximately [ ]% of the Receivables were originated by
Correspondents, with The Bank of the West, a Correspondent whose executive
offices are located in Walnut Creek, California generating [ ]% of the
Receivables included in the Trust Property. All of the Receivables will be sold
by Triad to the Seller, and by the Seller to the Trust.
The Receivables existing as of the Cutoff Date were selected from Triad's
portfolio according to several criteria. Among such criteria, each Receivable
(1) arises from the delivery and acceptance of a Financed Vehicle and which
delivery and acceptance has been fully performed by the Obligor and the Dealer
party thereto, (2) arises from the normal course of the Dealer's business, (3)
is not in default, (4) the Obligor of which is a natural person residing in any
state or the District of Columbia, (5) the Obligor of which is not a government
or a governmental subdivision or agency, (6) met Triad's underwriting criteria
at the time of purchase, (7) is denominated and payable in Dollars in the United
States, (8) is in full force and effect and constitutes the legal, valid and
binding obligation of the Obligor in accordance with its terms, (9) is not
subject to any dispute, litigation, counterclaim or defense, or any offset or
right of offset at the time of purchase by Triad, and to the best of Triad's
knowledge, any exercisable right of recission, (10) has an original term to
maturity of not less than [ ]or more than [ ] months, (11) provides for equal
monthly payments which will cause the Receivable to fully amortize during its
term, (12) has an Amount Financed of not less than [ ]or more than [ ] and
(13) has an APR of not less than the lesser of (A) [ ] and (B) the maximum
interest rate permissible by law with respect to such Receivable.
PAYMENTS ON THE RECEIVABLES
All of the Receivables provide for the payment by the related Obligor of a
specific total amount of payments, payable in substantially equal monthly
installments on each scheduled payment date, which total represents the amount
financed plus interest charges on the amount financed for the term of such
Receivable. Each Receivable provides for repayment of the Amount Financed by an
Obligor according to (i) the Rule of 78's (a "Rule of 78's Receivables"), (ii)
the actuarial method (an "Actuarial Receivable" and together with Rule of 78's
Receivables, the "Precomputed Receivables") or (iii) the simple interest method
(a "Simple Interest Receivable").
Under a Rule of 78's Receivable, the rate at which the amount of finance
charges is earned and, correspondingly, the amount of each scheduled monthly
payment allocated to reduction of the outstanding principal balance of the
related Receivable are calculated in accordance with the "Rule of 78's". Under
the Rule of 78's, the portion of a payment allocable to interest earned during
that month is determined by multiplying the total amount of interest payable
over the term of the Receivable by a fraction, the denominator of which is equal
to the sum of a series of numbers beginning with one and
S-24
<PAGE>
ending with the number of scheduled monthly payments due under the related
Receivable, and the numerator of which is the number of payments remaining under
such Receivable before giving effect to the payment to which the fraction is
being applied. The difference between the amount of the scheduled monthly
payment made by the Obligor and the amount of earned interest calculated for the
month is applied to principal reduction.
An Actuarial Receivable provides for amortization of the loan over a series
of fixed level monthly installments. Each scheduled monthly payment is deemed to
consist of an amount of interest equal to 1/12 of the stated APR of the
Receivable multiplied by the outstanding principal balance of the Receivable and
an amount of principal equal to the remainder of such scheduled monthly payment.
All payments received by the Servicer on or in respect of Precomputed
Receivables, including the final scheduled payment, will be allocated pursuant
to the Pooling and Servicing Agreement on an actuarial basis. No adjustment will
be made in the event of early or late payments, although in the latter case the
Obligor may be subject to a late charge.
"Simple Interest Receivables" provide for the amortization of the amount
financed under the receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78s Receivables, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date immediately preceding the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if an
Obligor pays a fixed monthly installment before its scheduled due date, the
portion of the payment allocable to interest for the period since the preceding
payment was made will be less than it would have been had the payment been made
as scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment was
made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly less. In either case, the Obligor pays a fixed
monthly installment until the final scheduled payment date, at which time the
amount of the final installment is increased or decreased as necessary to repay
the then outstanding principal balance.
In the event of a prepayment in full (voluntarily or by acceleration) of a
Precomputed Receivable, a "rebate" in the loan accounting records of the
Servicer may be made to the Obligor of that portion of the total amount of
payments under such Receivable allocable to "unearned" finance charges. In the
event of the prepayment in full (voluntarily or by acceleration) of a Simple
Interest Receivable, a "rebate" will not be made to the Obligor, but the Obligor
will be required to pay interest only to the date immediately preceding the date
of prepayment. The amount of such rebate under a Precomputed Receivable
generally will be less than or equal to the remaining scheduled payments of
interest that would have been due under a Simple Interest Receivable for which
all remaining payments were made on schedule.
The amount of a rebate under a Rule of 78's Receivable calculated in
accordance with the Rule of 78's generally will be less than the amount of a
rebate on an Actuarial Receivable calculated in accordance with the actuarial
method. Distributions to Certificateholders will not be affected by Rule of 78's
rebates under the Rule of 78's Receivables because pursuant to the Pooling and
Servicing Agreement such distributions will be determined using the actuarial
method. Amounts received upon prepayment in full of a Rule of 78's Receivable in
excess of the then outstanding principal balance of such Receivable and accrued
interest thereon (calculated pursuant to the actuarial method) will not be
passed through to Certificateholders.
S-25
<PAGE>
REPURCHASE OBLIGATIONS
The Pooling and Servicing Agreement provides that if the Seller breaches
certain representations and warranties relating to the Receivables and the
Financed Vehicles in a manner that materially and adversely affects any
Receivable or the interest therein of the Trust or the Certificateholders, the
Seller shall be obligated to repurchase such Receivable if such breach under the
Pooling and Servicing Agreement is not cured by the last day of the first full
calendar month following the discovery by or notice to the Seller of the breach.
The Trustee will also have certain rights to enforce the corresponding
repurchase obligations of the Seller under the Purchase Agreement and of Triad
under the Purchase Agreement. See "The Transaction Documents--Sale and
Assignment of Receivables."
The Pooling and Servicing Agreement also provides that if the Servicer
breaches certain of its servicing obligations thereunder (including but not
limited to its obligation to maintain perfection of the first priority security
interest of Triad created by each Receivable in the related Financed Vehicle) or
certain other covenants with regard to the Servicer, in each case only in a
manner that materially and adversely affects the interests of the
Certificateholders or the Trust in any Receivable, the Servicer shall be
obligated to purchase such Receivable unless such breach has been cured by the
last day of the first full calendar month following the discovery by or notice
to the Servicer of the breach.
COMPOSITION OF THE POOL OF RECEIVABLES
The tables below set forth information regarding the composition and
characteristics of the pool of Receivables as of the Cutoff Date.
COMPOSITION OF THE RECEIVABLES(1) (AS OF THE CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance..................................... $[ ]
Number of Receivables........................................... [ ]
Average Amount Financed......................................... $[ ]
Range of Amounts Financed....................................... $[ ] to $[ ]
Average Current Principal Balance............................... $[ ]
Range of Current Principal Balances............................. $[ ] to $[ ]
Weighted Average APR............................................ [ ]%
Range of APRs................................................... [ ]% to $[ ]
Weighted Average Original Term to Scheduled Maturity(1)......... [ ] months
Range of Original Terms to Scheduled Maturity................... [ ] to [ ] months
Weighted Average Remaining Term to Scheduled Maturity(1)........ [ ] months
Range of Remaining Terms to Scheduled Maturity.................. [ ] to [ ] months
</TABLE>
- ------------------------
(1) Rounded to the nearest month.
S-26
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY APR
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
ANNUAL PERCENTAGE RATE RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
[Percent]......................................................... [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
GEOGRAPHIC CONCENTRATION OF THE RECEIVABLES
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
STATE RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
[State]........................................................... [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY MODEL YEAR OF FINANCED VEHICLE
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENTS
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
MODEL YEAR RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
[Year]............................................................ [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
DISTRIBUTION OF RECEIVABLES BY AMOUNT FINANCED
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
AMOUNT FINANCED RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$[ ]........................................................... [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-27
<PAGE>
DISTRIBUTION OF RECEIVABLES BY CURRENT PRINCIPAL BALANCE
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
CURRENT BALANCE RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$[ ]........................................................... [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
DISTRIBUTION OF THE RECEIVABLES BY REMAINING TERM TO SCHEDULED MATURITY
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF REMAINING TERMS RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
[Range of months]................................................. [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
DISTRIBUTION OF THE RECEIVABLES BY ORIGINAL TERM TO SCHEDULED MATURITY
(AS OF THE CUTOFF DATE)
<TABLE>
<CAPTION>
% OF
% OF AGGREGATE
TOTAL CURRENT CURRENT
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF ORIGINAL TERMS RECEIVABLES RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
[Range of months]................................................. [] [] [] []
Total (1):........................................................ [] 100.00% [] 100.00%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-28
<PAGE>
MATURITY AND PREPAYMENT ASSUMPTIONS
All the Receivables are prepayable at any time. The rate of prepayments on
the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of Triad unless
the loan is repaid by the Obligor at the time of such sale or transfer. (For
this purpose the term "prepayments" includes prepayments in full, or in part,
including, without limitation, certain partial prepayments related to refunds of
extended service contract costs and unearned insurance premiums, liquidations
due to default, as well as receipts of proceeds from physical damage, credit
life and credit accident and health insurance policies and certain other
Receivables repurchased for administrative reasons.) The rate of prepayment on
the Receivables may also be influenced by the structure of the loan, the nature
of the Obligors and the Financed Vehicles and servicing decisions as discussed
above. In addition, under certain circumstances, the Seller and Triad are
obligated to repurchase Receivables as a result of breaches of representations
and warranties pursuant to the Pooling and Servicing Agreement and the Purchase
Agreement, respectively, and under certain circumstances, the Servicer is
obligated to purchase Receivables pursuant to the Pooling and Servicing
Agreement as a result of breaches of certain covenants. Subject to certain
conditions, the Servicer has the option, to purchase the Receivables when the
aggregate principal balance thereof is [ ]% or less of the Cutoff Date Pool
Balance.
If prepayments are received on the Receivables, the actual weighted average
life of the Receivables may be shorter than the scheduled weighted average life
(i.e., the weighted average life assuming that payments will be made as
scheduled and that no prepayments will be made). "Weighted Average Life" means
the average amount of time during which each dollar of principal on a Receivable
is outstanding.
S-29
<PAGE>
YIELD CONSIDERATIONS
On each Payment Date, interest on the Receivables will be passed through to
the Certificateholders of each Class in an amount equal to one-twelfth of the
related Pass-Through Rate multiplied by the Certificate Balance of the
applicable Class on the immediately preceding Determination Date. In the event
of prepayments on Receivables, Certificateholders will nonetheless be entitled
to receive interest for the full month on the Certificates. See also "The
Receivables--Maturity and Prepayment Assumptions".
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the Offered
Certificates will be applied by the Seller to the purchase of the Receivables
from Triad.
POOL FACTORS AND OTHER INFORMATION
The "Pool Balance" at any time represents the aggregate principal balance of
the Receivables at the end of the preceding Collection Period, after giving
effect to all payments received from Obligors, all payments and Purchase Amounts
remitted by Triad or the Servicer, as the case may be, all for such Collection
Period, all losses realized on Receivables liquidated during such Collection
Period and any Cram Down Losses with respect to such Receivables. The Pool
Balance is computed by allocating payments to principal and to interest with
respect to Precomputed Receivables, using the constant yield or actuarial
method, and with respect to Simple Interest Receivables, using the simple
interest method. The "Class A Pool Factor" is a seven-digit decimal which the
Servicer will compute each month indicating the Class A Certificate Balance as a
fraction of the initial Class A Certificate Balance. The "Class B Pool Factor"
is a seven-digit decimal which the Servicer will compute each month indicating
the Class B Certificate Balance as a fraction of the initial Class B Certificate
Balance. The "Class C Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the Class C Certificate Balance as a fraction
of the initial Class C Certificate Balance. The Class A Pool Factor, the Class B
Pool Factor and the Class C Pool Factor will be 1.0000000 as of the Closing
Date; thereafter such pool factors will decline to reflect reductions in the
Class A Certificate Balance, Class B Certificate Balance or the Class C
Certificate Balance, as applicable. An individual Certificateholder's share of
the Class A Certificate Balance, Class B Certificate Balance or Class C
Certificate Balance, as applicable, is the product of (i) the original
denomination of the Certificateholder's Certificate and (ii) the Class A Pool
Factor, the Class B Pool Factor or the Class C Pool Factor, as applicable. The
Class A Pool Factor, the Class B Pool Factor and the Class C Pool Factor will be
made available on or about the Payment Date each month.
Pursuant to the Pooling and Servicing Agreement, the Certificateholders will
receive monthly reports concerning the payments received on the Receivables, the
Pool Balance, the Class A Pool Factor, the Class B Pool Factor, the Class C Pool
Factor and various other items of information. Certificateholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "The
Certificates--Statements to Certificateholders".
THE CERTIFICATES
THE CERTIFICATES OFFERED HEREBY WILL BE ISSUED PURSUANT TO THE POOLING AND
SERVICING AGREEMENT, A FORM OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT. THE FOLLOWING SUMMARY DESCRIBES MATERIAL TERMS OF THE
CERTIFICATES AND THE POOLING AND SERVICING AGREEMENT. THE SUMMARY DOES NOT
PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO ALL THE PROVISIONS OF THE CERTIFICATES AND THE POOLING AND
SERVICING AGREEMENT. THE FOLLOWING SUMMARY SUPPLEMENTS THE DESCRIPTION OF THE
GENERAL TERMS AND PROVISIONS OF THE CERTIFICATES OF ANY GIVEN SERIES AND THE
RELATED POOLING AND SERVICING AGREEMENT, SET FORTH IN THE ACCOMPANYING
PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
S-30
<PAGE>
GENERAL
The Certificates consist of three classes of Certificates, entitled [ ]%
Asset Backed Certificates, Class A, [ ]% Asset Backed Certificates, Class B,
and [ ]% Asset Backed Certificates, Class C. Only the Class A Certificates and
the Class B Certificates are being offered hereby. The Class A Certificates, the
Class B Certificates and the Class C Certificates will evidence a beneficial
ownership interest of [ ]%, [ ]% and [ ]%, respectively, of the Trust. The
Seller's Retained Yield will serve as credit enhancement for the Offered
Certificates and the Class C Certificates.
The Certificates initially will be represented by certificates registered in
the name of Cede as the nominee of DTC, and will only be available in the form
of book-entries on the records of DTC and participating members thereof in
denominations of $1,000; provided, however, one Class A Certificate and one
Class B Certificate may be issued in denominations that include any residual
portion of the original Class A Certificate Balance and Class B Certificate
Balance, respectively. All references to "holders" or "Certificateholders" and
to authorized denominations, when used with respect to the Certificates, shall
reflect the rights of Certificate Owners, and limitations thereof, as they may
be indirectly exercised through DTC and its participating members, except as
otherwise specified herein. See "Registration of Certificates" in this
Prospectus Supplement.
In general it is intended that the Certificateholders receive, on each
Payment Date, a distribution equal to the Class A Distributable Amount, the
Class B Distributable Amount and the Class C Distributable Amount, respectively.
Distributions of interest on the Class B Certificates will be subordinated
in priority of payment to interest due on the Class A Certificates.
Distributions of interest on the Class C Certificates will be subordinated in
priority of payment to interest and principal due on the Class A Certificates
and the Class B Certificates and the satisfaction of the Reserve Account
Requirement. Distributions of principal on the Class B Certificates will be
subordinated in priority of payment to interest and principal due on the Class A
Certificates. Distributions of interest and principal on the Class C
Certificates will be subordinated in priority of payment to interest and
principal due on the Class B Certificates and the satisfaction of the Reserve
Account Requirement. Accordingly, (a) the Class A Certificates will receive the
benefit of amounts otherwise due on the Class B Certificates, the Class C
Certificates and to the Seller in connection with the Seller's Retained Yield as
credit enhancement and (b) the Class B Certificates will receive the benefit of
amounts otherwise due on the Class C Certificates and to the Seller in
connection with the Seller's Retained Yield as credit enhancement. Funds
representing the payment of interest to the Class B Certificateholders will be
applied first to the payment of any amounts due to the Class A
Certificateholders on account of the Class A Interest Distributable Amount and
the Class A Interest Carryover Shortfall, if any, before any portion thereof is
paid to the Class B Certificateholders, and funds otherwise due to pay principal
of the Class B Certificates will be applied first to the payment of the Class A
Principal Distributable Amount and the Class A Principal Carryover Shortfall, if
any, before any portion thereof is paid to the Class B Certificateholders. Funds
representing the payment of interest to Class C Certificateholder will be
applied first to the payment of any amounts due to the Class B
Certificateholders on account of the Class B Interest Distributable Amount, any
Class B Interest Carryover Shortfall, the Class B Principal Distributable Amount
and any Class B Principal Carryover Shortfall and the Reserve Account
Requirement before any portion thereof is paid to the Class C Certificateholder.
DISTRIBUTIONS FROM THE TRUST
No later than 12:00 p.m. New York City time on each Record Date, the
Servicer will inform the Trustee of the amount of aggregate collections on the
Receivables, and the aggregate Purchase Amount of Receivables to be repurchased
by the Seller or to be purchased by the Servicer, in each case, with respect to
the related Collection Period. The Servicer will determine prior to such Record
Date, the Total Distribution Amount, the Class A Interest Distributable Amount,
the Class B Interest
S-31
<PAGE>
Distributable Amount, the Class C Interest Distributable Amount, the Class A
Principal Distributable Amount, the Class B Principal Distributable Amount, the
Class C Principal Distributable Amount, the Class A Distributable Amount, the
Class B Distributable Amount, the Class C Distributable Amount, the Reserve
Account Requirement and the Seller's Retained Yield.
DETERMINATION OF TOTAL DISTRIBUTION AMOUNT. The "Total Distribution Amount"
for a Payment Date (being the funds available for distribution to the
Certificateholders with respect to such Payment Date in accordance with the
priorities described below) will be the sum of the following amounts with
respect to the preceding Collection Period, without duplication, (a) all
collections on Receivables, (b) proceeds from Recoveries, (c) the Purchase
Amount of each Receivable that was repurchased by the Seller or purchased by the
Servicer as of the immediately preceding Determination Date and (d) all
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Collection Account.
For purposes hereof, the following terms shall have the following meanings:
"Defaulted Receivable" means any Receivable (a) for which the related
Financed Vehicle has been repossessed by the Servicer or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"Liquidated Receivable" means any Receivable (a) which has been liquidated
by the Servicer through the sale of the Financed Vehicle or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"Principal Balance" of a Receivable (a) as of the Cutoff Date, means the
amount financed minus (i) in the case of a Precomputed Receivable, that portion
of all payments (including all Scheduled Payments and any prepayments in full or
partial prepayments) actually received on or prior to such date and allocable to
principal in accordance with the actuarial method and (ii) in the case of a
Simple Interest Receivable, that portion of all payments (including all
Scheduled Payments and any prepayments in full or partial prepayments) actually
received on or prior to such date and allocable to principal in accordance with
the simple interest method, and (b) as of any date after the Cutoff Date, means
the Principal Balance as of the Cutoff Date minus (1) in the case of a
Precomputed Receivable, that portion of all payments (including all Scheduled
Payments and any prepayments in full or partial prepayments) actually received
on or prior to such date (but after the Cutoff Date) and allocable to principal
in accordance with the actuarial method, (2) in the case of a Simple Interest
Receivable, that portion of all payments (including all Scheduled Payments and
any prepayments in full or partial prepayments) actually received on or prior to
such date (but after the Cutoff Date) and allocable to principal in accordance
with the simple interest method and (3) any Cram Down Loss in respect of such
Receivable. The Principal Balance of a Liquidated Receivable for purposes other
than the definition of Principal Distributable Amount shall be equal to $0.
"Purchase Amount" means, with respect to a Receivable, the Principal Balance
plus interest thereon at the respective APR from the last day through which
interest has been paid to the last day of the immediately preceding Collection
Period if purchased prior to the Record Date immediately following the end of
such Collection Period, and otherwise through the last day of the month of
repurchase.
"Principal Distributable Amount" means, with respect to any Payment Date
other than the Final Scheduled Payment Date, the sum of the following amounts,
without duplication: (a) the principal portion of all Scheduled Payments on
Precomputed Receivables (calculated in accordance with the actuarial method) and
all payments of principal received on Simple Interest Receivables (calculated in
accordance with the simple interest method) during such Collection Period; (b)
the principal portion of all prepayments received during the preceding
Collection Period; (c) the portion of the Purchase
S-32
<PAGE>
Amount allocable to principal of each Receivable that became a Purchased
Receivable as of the last day of the preceding Collection Period and the
Principal Balance of each Receivable that was required to be but was not so
purchased or repurchased; (d) the Principal Balance of each Receivable that
first became a Liquidated Receivable during the preceding Collection Period and
(e) the aggregate amount of Cram Down Losses with respect to the Receivables
that have occurred during the preceding Collection Period.
"Recoveries" means, with respect to a Liquidated Receivable, the monies
collected from whatever source, subsequent to the date on which such Receivable
became a Liquidated Receivable net of the reasonable costs of liquidation
including reasonable out-of-pocket expenses of the Servicer in connection with
such liquidation plus any amounts required by law to be remitted to the Obligor.
"Scheduled Payment" means, for any Collection Period for any Receivable, the
amount indicated in such Receivable as required to be paid by the Obligor in
such Collection Period (without giving effect to deferments of payments granted
to Obligors by the Servicer pursuant to the Pooling and Servicing Agreement or
any rescheduling of payments in an insolvency or similar proceeding).
CALCULATION OF DISTRIBUTION AMOUNTS. (a) The Class A Certificateholders
will be entitled to receive, to the extent funds are available therefor, the
"Class A Distributable Amount" with respect to each Payment Date. The "Class A
Distributable Amount" with respect to a Payment Date will be an amount equal to
the sum of (i) the "Class A Principal Distributable Amount", consisting of the
Class A Percentage of the Principal Distributable Amount, plus (ii) the "Class A
Interest Distributable Amount", consisting of 30 days' interest (calculated on
the basis of a 360-day year consisting of twelve 30-day months) at the Class A
Pass-Through Rate on the Class A Certificate Balance as of the close of business
on the last day of the related Collection Period.
(b) The Class B Certificateholders will be entitled to receive, to the
extent funds are available therefor, the "Class B Distributable Amount" with
respect to each Payment Date. The "Class B Distributable Amount" with respect to
a Payment Date will be an amount equal to the sum of (i) the "Class B Principal
Distributable Amount", consisting of the Class B Percentage of the Principal
Distributable Amount, plus (ii) the "Class B Interest Distributable Amount",
consisting of 30 days' interest (calculated on the basis of a 360-day year
consisting of twelve 30-day months) at the Class B Pass-Through Rate on the
Class B Certificate Balance as of the close of business on the last day of the
related Collection Period; provided, however, that payment of interest and
principal to the Class B Certificateholders will be subordinated to the extent
described under "The Certificates--Distributions from the Trust; Priority of
Distribution Amounts".
(c) The Class C Certificateholder will be entitled to receive, to the extent
funds are available therefor, the "Class C Distributable Amount" with respect to
each Payment Date. The "Class C Distributable Amount" with respect to a Payment
Date will be an amount equal to the sum of (i) the "Class C Principal
Distributable Amount", consisting of the Class C Percentage of the Principal
Distributable Amount, PLUS (ii) the "Class C Interest Distributable Amount",
consisting of 30 days' interest (calculated on the basis of a 360-day year
consisting of twelve 30-day months), at the Class C Pass-Through Rate on the
Class C Certificate Balance as of the close of business on the last day of the
related Collection Period; PROVIDED, HOWEVER, payment of interest and principal
to the Class C Certificateholder will be subordinated to the extent described
under "The Certificates--Distributions from the Trust; Priority of Distribution
Amounts".
On and after the Final Scheduled Payment Date, the Class A Principal
Distributable Amount, the Class B Principal Distributable Amount and the Class C
Principal Distributable Amount will equal the then outstanding Class A
Certificate Balance, the Class B Certificate Balance and the Class C Certificate
Balance, respectively.
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For purposes hereof, the following terms shall have the following meanings:
"Class A Interest Carryover Shortfall" means, as of the close of business on
any Payment Date, the excess of the Class A Interest Distributable Amount for
such Payment Date and any outstanding Class A Interest Carryover Shortfall from
the immediately preceding Payment Date plus interest on such outstanding Class A
Interest Carryover Shortfall, to the extent permitted by law, at the Class A
Pass-Through Rate from such preceding Payment Date through the current Payment
Date (calculated on the basis of a 360-day year consisting of twelve 30-day
months), over the amount of interest that the Holders of the Class A
Certificates actually received on such current Payment Date.
"Class A Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class A Principal Distributable
Amount and any outstanding Class A Principal Carryover Shortfall from the
immediately preceding Payment Date, over (b) the amount of principal that the
Holders of the Class A Certificates actually received on such current Payment
Date.
"Class B Interest Carryover Shortfall" means, as of the close of business on
any Payment Date, the excess of the Class B Interest Distributable Amount for
such Payment Date and any outstanding Class B Interest Carryover Shortfall from
the immediately preceding Payment Date plus interest on such outstanding Class B
Interest Carryover Shortfall, to the extent permitted by law, at the Class B
Pass-Through Rate from such preceding Payment Date through the current Payment
Date (calculated on the basis of a 360-day year consisting of twelve 30-day
months), over the amount of interest that the Holders of the Class B
Certificates actually received on such current Payment Date.
"Class B Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class B Principal Distributable
Amount and any outstanding Class B Principal Carryover Shortfall from the
immediately preceding Payment Date, over (b) the amount of principal that the
Holders of the Class B Certificates actually received on such current Payment
Date.
"Class C Interest Carryover Shortfall" means, as of the close of business on
any Payment Date, the excess of the Class C Interest Distributable Amount for
such Payment Date and any outstanding Class C Interest Carryover Shortfall from
the immediately preceding Payment Date, plus interest on such outstanding Class
C Interest Carryover Shortfall, to the extent permitted by law, at the Class C
Pass-Through Rate from such preceding Payment Date through the current Payment
Date (calculated on the basis of a 360-day year consisting of twelve 30-day
months), over the amount of interest that the Holders of the Class C
Certificates actually received on such current Payment Date.
"Class C Principal Carryover Shortfall" means, as of the close of business
on any Payment Date, the excess of (a) the Class C Principal Distributable
Amount and any outstanding Class C Principal Carryover Shortfall from the
immediately preceding Payment Date, over (b) the amount of principal that the
Holders of the Class C Certificates actually received on such current Payment
Date.
"Seller's Retained Yield" means that portion of the interest earned on the
Receivable which is retained by the Seller for any Payment Date, in an amount
equal to the excess of such interest over the sum of (i) the weighted average of
the Class A Pass-Through Rate, the Class B Pass-Through Rate and the Class C
Pass-Through Rate divided by 12 multiplied by the sum of the Class A Certificate
Balance, Class B Certificate Balance and Class C Certificate Balance, each as of
the related Determination Date, (ii) the Servicing Fee, Additional Servicing Fee
and Servicer Expenses payable on such Payment Date, (iii) the Trustee Fee
payable on such Payment Date and (iv) the Backup Servicing Fee payable on such
Payment Date.
PRIORITY OF DISTRIBUTION AMOUNTS
On or before each Record Date, the Servicer will calculate the amount to be
distributed to the Certificateholders. On each Payment Date, the Trustee (based
on the information contained in the
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Servicing Certificate delivered, on or before the related Record Date) shall be
required to distribute the following amounts and in the following order of
priority:
(i) first, to the Servicer, the Servicing Fee for the related Collection
Period, any Additional Servicing Fees for the related Collection Period
and, so long as Triad is the Servicer, any Servicer Expenses for the
related or any prior Collection Period and any other amounts specified
in the Pooling and Servicing Agreement, to the extent the Servicer has
not reimbursed itself in respect of such amounts pursuant to the Pooling
and Servicing Agreement;
(ii) second, to any Lockbox Bank, the Trustee, the Backup Servicer and the
Collateral Agent (including the Trustee if acting in any such
additional capacity), any accrued and unpaid fees and expenses
(including reasonable legal fees and expenses) (in each case, to the
extent such Person has not previously received such amount from the
Servicer);
(iii) third, to the Class A Certificateholders, the Class A Interest
Distributable Amount for such Payment Date, and the Class A Interest
Carryover Shortfall, if any;
(iv) fourth, to the Class B Certificateholders, an amount equal to the sum
of the Class B Interest Distributable Amount for such Payment Date, and
the Class B Interest Carryover Shortfall, if any;
(v) fifth, to the Class A Certificateholders, an amount equal to the sum of
the Class A Principal Distributable Amount for such Payment Date, and
the Class A Principal Carryover Shortfall, if any;
(vi) sixth, to the Class B Certificateholders, an amount equal to the sum of
the Class B Principal Distributable Amount for such Payment Date, and
the Class B Principal Carryover Shortfall, if any;
(vii) seventh, to the Class C Certificateholder, an amount equal to the sum
of the Class C Interest Distributable Amount for such Payment Date, and
the Class C Interest Carryover Shortfall, if any;
(viii) eighth, to the Class C Certificateholder, an amount equal to the sum of
the Class C Principal Distributable Amount for such Payment Date, and
the Class C Principal Carryover Shortfall, if any;
(ix) ninth, to the Seller, the Seller's Retained Yield;
PROVIDED, HOWEVER, that (a) any amounts distributable to the Seller in respect
of item (ix) above shall be paid by the Trustee to the Collateral Agent for
deposit into the Reserve Account to the extent necessary to satisfy the Reserve
Account Requirement and (b) to the extent not satisfied with amounts under
clause (a) of this proviso, any amounts distributable to the Class C
Certificateholder in respect of items (viii) and (vii) above shall be paid,
respectively, by the Trustee to the Collateral Agent for deposit into the
Reserve Account to the extent necessary to satisfy the Reserve Account
Requirement.
The terms used above in the description of the distributions from the Trust
not otherwise defined herein are defined in the "Glossary" herein.
THE RESERVE ACCOUNT
The Seller has agreed to cause to be established with The Chase Manhattan
Bank (in such capacity, the "Collateral Agent") an account for the benefit of
the Trustee on behalf of the Certificateholders (the "Reserve Account"). On the
Closing Date, the Seller shall deposit into the Reserve Account approximately
$[ ]. Such amount will be augmented each Payment Date by the deposit in the
Reserve Account of amounts remaining after payment of all distributions required
to be made on such day pursuant to priorities (i) through and including (vi)
listed above until the Reserve Account Requirement is reached as set forth in
"The Certificates--Priority of Distribution Amounts".
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If on any Payment Date, there are insufficient funds to pay all distributions
required to be made on such day pursuant to priorities (i) through and including
(vi) listed under "The Certificates--Priority of Distribution Amounts", then
funds will be withdrawn from the Reserve Account and applied to pay the amounts
due on such Payment Date pursuant to such priorities (i) through and including
(vi). If a Reserve Account Trigger Event shall have occurred and be continuing
then all amounts otherwise distributable to the Class C Certificateholder and
the Seller shall be deposited in the Reserve Account. If following the
occurrence of a Reserve Account Trigger Event, such Reserve Account Trigger
Event shall have been Deemed Cured, then any amounts on deposit in the Reserve
Account in excess of the Reserve Account Requirement shall be distributed to the
Class C Certificateholder and the Seller, as applicable, on the next succeeding
Payment Date.
For the purposes hereof, the following terms shall have the following
meanings:
"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to such
reduction in Principal Balance of such Receivable or the reduction in the net
present value (using as the discount rate the lower of the APR on such
Receivable or the rate of interest, if any, specified by the court in such
order) of the Scheduled Payments as so modified or restructured. A "Cram Down
Loss" shall be deemed to have occurred on the date of issuance of such order.
"COLLECTOR TO CURRENT RECEIVABLE RATIO" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which 10% or less of all Scheduled Payments is 61 or more days past
due.
"COLLECTOR TO DELINQUENT RECEIVABLE RATIO" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which more than 10% of all Scheduled Payments is 61 or more days past
due.
"CUMULATIVE DEFAULT RATIO" means, with respect to any Determination Date, a
fraction, (a) the numerator of which is equal to the sum of (i) the aggregate of
the Principal Balances as of the related Determination Date of all Receivables
which have become Defaulted Receivables and (ii) the amount of any Cram Down
Losses, and (b) the denominator of which is equal to the Cutoff Date Pool
Balance.
"DEEMED CURED" means, as of a Determination Date, (a) with respect to a
Servicer Termination Trigger Event that has occurred, that no Servicer
Termination Trigger Event shall have occurred as of such Determination Date or
as of either of the two immediately preceding Determination Dates, and (b) with
respect to a Reserve Account Trigger Event that has occurred, that no Reserve
Account Trigger Event shall have occurred as of such Determination Date or as of
either of the two immediately preceding Determination Dates; PROVIDED, HOWEVER,
that a Reserve Account Trigger Event resulting from a Cumulative Default Ratio
exceeding [ ]% shall never be Deemed Cured until both the Class A Certificate
Balance and the Class B Certificate Balance have been reduced to zero.
"DELINQUENCY RATIO" means, with respect to any Determination Date, a
fraction, (a) the numerator of which is equal to the aggregate Principal
Balances of all Receivables which have not been repossessed by the Servicer and
with respect to which more than 10% of a Scheduled Payment is 61 or more days
past due as of such Determination Date, and (b) the denominator of which is
equal to the aggregate Principal Balances of the Receivables as of such
Determination Date.
"MANAGED RECEIVABLE" means any retail installment contract (including any
related promissory note) for a financed vehicle, and all rights and obligations
thereunder, originated by and currently serviced by Triad for non-prime
Obligors.
"REPOSSESSION INVENTORY RATIO" means, with respect to any Determination
Date, a fraction, (a) the numerator of which is equal to the aggregate Principal
Balances of all Receivables which have been repossessed by the Servicer and for
which the related Financed Vehicle has not been liquidated and
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(b) the denominator of which is equal to the aggregate Principal Balances of the
Receivables as of such Determination Date.
"RESERVE ACCOUNT REQUIREMENT" means an amount equal to (a) with respect to
the Closing Date, [ ]% of the initial Certificate Balance and (b) with respect
to each Payment Date thereafter, [ ]% of the Certificate Balance, after giving
effect to distribution of principal to Certificateholders on such Payment Date,
as of the immediately preceding Determination Date unless a Reserve Account
Trigger Event has occurred, in which case the Reserve Account Requirement shall
include all amounts required to be deposited in the Reserve Account until such
Reserve Account Trigger Event has been Deemed Cured; PROVIDED, HOWEVER, that the
Reserve Account Requirement shall be [ ]% of the Certificate Balance for each
Payment Date following the point in time that the Cumulative Default Ratio as
described in clause (c)(v) of the definition of a Reserve Account Trigger Event
is greater than [ ]%, but less than [ ]%, notwithstanding such Reserve Account
Trigger Event being Deemed Cured.
"RESERVE ACCOUNT TRIGGER EVENT" means that any one of the following events
shall have occurred: (a) the Delinquency Ratio for each of the three preceding
Collection Periods exceeds [ ]%; (b) the Repossession Inventory Ratio is
greater than [ ]% or (c) the Cumulative Default Ratio exceeds (i) [ ]% as of
any Determination Date from the initial Determination Date through and including
the sixth Determination Date, (ii) [ ]% as of any Determination Date from the
seventh Determination Date through and including the twelfth Determination Date,
(iii) [ ]% as of any Determination Date from the thirteenth Determination Date
through and including the eighteenth Determination Date, (iv) [ ]% as of any
Determination Date from the nineteenth Determination Date through and including
the twenty-fourth Determination Date or (v) [ ]% as of any Determination Date
thereafter.
"SCHEDULED PAYMENT" means, for any Collection Period for any Receivable, the
amount indicated in such Receivable as required to be paid by the Obligor in
such Collection Period (without giving effect to deferments of payments or any
rescheduling of payments in any insolvency or similar proceeding).
STATEMENTS TO CERTIFICATEHOLDERS
On each Payment Date, the Trustee will include with each distribution to
each Certificateholder of record as of the close of business on the applicable
Record Date and to each rating agency that is currently rating the Certificates
a statement prepared by the Servicer, setting forth the following information,
among other things, with respect to the preceding Collection Period, to the
extent applicable:
(i) the amount of the distribution allocable to principal of the Class A
Certificates, the Class B Certificates and the Class C Certificates,
respectively;
(ii) the amount of the distribution allocable to interest on the Class A
Certificates, the Class B Certificates and the Class C Certificates,
respectively;
(iii) the Pool Balance, the Class A Pool Factor, the Class B Pool Factor and
the Class C Pool Factor as of the close of business on the
Determination Date;
(iv) the Class A Certificate Balance, Class B Certificate Balance and the
Class C Certificate Balance as of the close of business on the
Determination Date, after giving effect to payments allocated to
principal reported under (i) above;
(v) the amount of the Servicing Fee, any Additional Servicing Fee and the
Servicer Expenses paid to the Servicer with respect to the related
Collection Period and the Class A Percentage, the Class B Percentage and
the Class C Percentage of the Servicing Fee, the amount of any unpaid
Servicing Fees and the change in such amount from that of the prior
Payment Date and the amount of any other fees paid by the Trust;
(vi) the amount of the Class A Interest Carryover Shortfall, if applicable,
and Class A Principal Carryover Shortfall, if applicable, on such
Payment Date and the change in such amounts from those on the prior
Payment Date;
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(vii) the amount of the Class B Interest Carryover Shortfall, if applicable,
and Class B Principal Carryover Shortfall, if applicable, on such
Payment Date and the change in such amounts from those on the prior
Payment Date;
(viii) the amount of the Class C Interest Carryover Shortfall, if applicable,
and the amount of the Class C Principal Carryover Shortfall, if
applicable, on such Payment Date, and the change in such amounts from
the prior Payment Date;
(ix) the aggregate amount in the Reserve Account and the change in such
amount from the preceding Payment Date;
(x) the number of Receivables and the aggregate Principal Balance due
thereof, for which the related Obligors are delinquent in making
Scheduled Payments (A) between 31 and 60 days, (B) between 61 and 90
days, (C) between 91 and 120 days and (D) more than 120 days;
(xi) the number of Receivables which became Liquidated Receivables, and the
aggregate principal amount thereof net of Recoveries;
(xii) the number of Receivables which became Defaulted Receivables, and the
aggregate principal amount thereof;
(xiii) the number and the aggregate Purchase Amount of Receivables that became
Purchased Receivables during the related Collection Period and the
number and aggregate Purchase Amount of Receivables that were required
to be repurchased during the related Collection Period but were not so
repurchased;
(xiv) the number and aggregate Principal Balance of Receivables with respect
to which, to the knowledge of the Servicer, Obligors became the subject
of bankruptcy proceedings during such Collection Period (or during a
prior Collection Period, if the Servicer first became aware of such
proceeding during the current Collection Period);
(xv) the Seller's Retained Yield for such Payment Date and the portion
thereof (A) distributed to the Seller and (B) deposited in the Reserve
Account;
(xvi) the Cumulative Default Ratio;
(xvii) the Delinquency Ratio;
(xviii) the Repossession Inventory Ratio;
(xix) the amount of any Deficiency Claim Amounts deposited in the Collection
Account from the Reserve Account;
(xx) whether a Reserve Fund Trigger Event, Servicer Termination Trigger Event
or Servicer Termination Event has occurred; and
(xxi) the Collector to Current Receivable Ratio and the Collector to
Delinquent Receivable Ratio;
PROVIDED, HOWEVER, the Trustee may deliver a copy of the Servicing
Certificate to each Certificateholder and the Rating Agency in satisfaction of
the requirements set forth in this Section if such Servicing Certificate
otherwise contains the information required to be distributed to each
Certificateholder in accordance herewith. Each amount set forth pursuant to
subclauses (i), (ii), (v), (vi), (vii), and (viii) above shall be expressed in
the aggregate and as a dollar amount per $1,000 of original principal balance of
a Certificate of the related Class.
"Certificateholder" or "Holder" means the person in whose name a Certificate
is registered in the certificate register.
The Trustee will include copies of the Servicer's annual audited financial
statements with the statement distributed by the Trustee on the next Payment
Date following receipt by the Trustee of such financial statements.
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The Servicer will be required to provide to the Trustee, no later than two
Business Days prior to such Payment Date, the information necessary to enable
the Trustee to prepare the statement described above.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Pooling and Servicing
Agreement, the Trustee will be required to mail to each person who at any time
during such calendar year shall have been a Certificateholder and received any
payment on such holder's Certificates a statement containing the sum of the
amounts described in (i), (ii) and (v) above for the purposes of such
Certificateholder's preparation of federal income tax returns.
SERVICER TERMINATION EVENTS; RIGHTS UPON SERVICER TERMINATION EVENT
A "Servicer Termination Event" under the Pooling and Servicing Agreement
will include: (i) any failure by the Servicer to deliver to the Trustee for
distribution to the Certificateholders any proceeds or payments, which failure
continues unremedied for a period of two Business Days after the earlier of (x)
discovery of such failure by the Servicer and (y) notice of such failure is
given by the Trustee to the Servicer; (ii) any failure by the Servicer or the
Seller, as the case may be, duly to observe or perform in any material respect
any other covenant or agreement in the Pooling and Servicing Agreement which
adversely affects the rights of the Certificateholders and continues unremedied
for 30 days after the earlier of the date on which (a) it discovers such failure
and (b) notice of such failure to the Servicer by the Trustee or the Holders of
Certificates evidencing not less than 25% of the Certificate Balance; (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings with respect to the Servicer or, so long as
Triad is Servicer, of any of its affiliates, indicating its insolvency; and (iv)
a Servicer Termination Trigger Event shall have occurred and shall not have been
deemed cured.
A "Servicer Termination Trigger Event" means that any one of the following
events shall have occurred and shall not have been cured: (a) the average of the
Delinquency Ratios for each of the three preceding Collection Periods exceeds
[ ]%; (b) the Repossession Inventory Ratio is greater than [ ]% or (c) the
Cumulative Default Ratio exceeds (i) [ ]% as of any Determination Date from the
initial Determination Date through and including the sixth Determination Date,
(ii) [ ]% as of any Determination Date from the seventh Determination Date
through and including the Determination Date, (iii) [ ]% as of any
Determination Date from the thirteenth Determination Date through and including
the eighteenth Determination Date or (iv) [ ]% as of any Determination Date
thereafter; provided, however, that following the appointment of a successor
Servicer, no Servicer Termination Trigger Event shall have been deemed to occur
in accordance with this definition until the seventh Determination Date
succeeding the appointment of such successor Servicer.
As long as a Servicer Termination Event under the Pooling and Servicing
Agreement remains unremedied, either the Trustee or the Certificateholders
evidencing not less than a Certificate Majority (as defined herein) may
terminate all of the rights and obligations of the Servicer under the Pooling
and Servicing Agreement. Upon such termination, all authority, power,
obligations and responsibilities of the Servicer under the Pooling and Servicing
Agreement will automatically pass to the Backup Servicer, or such other
successor Servicer as shall be appointed pursuant to the Pooling and Servicing
Agreement.
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RATINGS OF THE OFFERED CERTIFICATES
It is a condition to issuance of the Certificates that the Rating Agency
rate the Class A Certificates at least "[ ]" and rate the Class B Certificates
at least "[ ]". The ratings are not recommendations to purchase, hold or sell
the Offered Certificates, in as much as such ratings do not comment as to market
price or suitability for a particular investor. There is no assurance that the
ratings will remain for any given period of time or that the ratings will not be
lowered or withdrawn entirely by the Rating Agency if in its judgment
circumstances in the future so warrant. In any event that any rating initially
assigned to any Class of Offered Certificates were subsequently lowered or
withdrawn for any reason, no Person or entity will be obligated to provide any
additional credit enhancement with respect to any Class of Offered Certificates.
Any reductions or withdrawal of a rating may have an adverse effect on the
liquidity and market price of the Offered Certificates.
REGISTRATION OF CERTIFICATES
The Certificates will initially be registered in the name of Cede, the
nominee of DTC. DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. See "Description of the
Securities--Book-Entry Registration" in the Prospectus.
THE TRANSACTION DOCUMENTS
THE FOLLOWING SUMMARY DESCRIBES MATERIAL TERMS OF THE TRANSACTION DOCUMENTS.
FORMS OF THE TRANSACTION DOCUMENTS HAVE BEEN FILED AS EXHIBITS TO THE
REGISTRATION STATEMENT. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, ALL THE PROVISIONS IN
THE TRANSACTION DOCUMENTS. THE FOLLOWING SUMMARY SUPPLEMENTS THE DESCRIPTION OF
THE GENERAL TERMS AND PROVISIONS OF THE TRUST DOCUMENTS (AS SUCH TERM IS USED IN
THE PROSPECTUS) SET FORTH IN THE PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS
HEREBY MADE.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date, Triad will sell and assign to the Seller,
without recourse, except as provided in the Purchase Agreement, its entire
interest in the Receivables, together with its security interests in the
Financed Vehicles, pursuant to the Purchase Agreement dated as of [ ] (the
"Purchase Agreement") between Triad and the Seller. At the time of issuance of
the Certificates, the Seller will sell and assign to the Trust, without
recourse, except as provided in the Pooling and Servicing Agreement, the
Seller's entire interest in the Receivables, together with its security
interests in the Financed Vehicles, pursuant to the Pooling and Servicing
Agreement. Each Receivable will be identified in a schedule to the Pooling and
Servicing Agreement. The Trustee will, concurrently with such sale and
assignment, execute, authenticate and deliver the Certificates to the Seller in
exchange for the Receivables. The Seller will sell the Offered Certificates to
the Underwriter. See "Plan of Distribution". The net proceeds received from the
sale of the Offered Certificates will be applied to the purchase of the
Receivables.
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In the Purchase Agreement and in the Pooling and Servicing Agreement, Triad
and the Seller, respectively, will represent and warrant for the benefit of the
Trustee, among other things, that (i) the information provided with respect to
the Receivables is correct in all material respects as of the Cutoff Date; (ii)
at the date of issuance of the Certificates, the Receivables are, to its best
knowledge, free and clear of all security interests, liens, charges and
encumbrances other than the security interest of any warehouse lender to be
released concurrently with the issuance of the Certificates and no set-offs,
counterclaims or rescission by any Obligor have been asserted or threatened;
(iii) at the date of issuance of the Certificates, each of the Receivables is
secured by (or all necessary steps have been taken to result in) a first
priority perfected security interest in the Financed Vehicle in favor of Triad,
which security interest has been validly assigned to the Trustee; and (iv) each
Receivable, at the time it was originated, complied, and at the date of issuance
of the Certificates, complies in all material respects with applicable federal
and state laws, including consumer credit, truth in lending, equal credit
opportunity and disclosure laws. As of the last day of the first month following
the discovery by or notice to the Seller or Triad of a breach of any
representation or warranty that materially and adversely affects a Receivable,
unless the breach is cured, the Seller or Triad will purchase such Receivable
from the Trust for the Purchase Amount. The "Purchase Amount" equals the unpaid
principal balance owed by the Obligor plus interest thereon at the respective
APR from the last day through which interest has been paid to the last day of
the immediately preceding Collection Period if purchased prior to the Record
Date immediately following the end of Collection Period, and otherwise through
the last day of the month of repurchase. The repurchase obligation will
constitute the sole remedy available to the Certificateholders or the Trustee
for any such uncured breach.
Pursuant to the Pooling and Servicing Agreement, the Servicer will service
and administer the Receivables. The Trustee will act as custodian for the
Receivables and the certificates of title relating to the Financed Vehicles, and
the Receivables and such certificates of title will be delivered to and held in
the physical custody of the Trustee. In addition, Triad's accounting records and
computer systems will be marked to reflect the sale and assignment to the Trust,
and UCC financing statements reflecting such sales and assignments will be
filed. See "Formation of the Trust."
ACCOUNTS
Each Obligor has been instructed to make payments with respect to the
Receivables to a Lockbox which has been established and will be maintained by
[ ] (the "Lockbox Bank"). Upon receipt of payments in the Lockbox, the Lockbox
Bank will deposit funds into an account maintained by the Lockbox Bank at a
depository institution (the "Lockbox Account"). The Trustee will establish the
Collection Account (the "Collection Account") in the name of the Trustee for the
benefit of the Certificateholders. All payments made on or with respect to the
Receivables previously deposited in the Lockbox Account will be transferred to
the Collection Account within two Business Days of the receipt of available
funds therein. All payments with respect to the Certificates will be made by the
Trustee from the Collection Account. Upon receipt, but in no event later than
two Business Days after the receipt thereof, each of the Servicer, Triad and the
Seller will remit all amounts received by it in respect of the Receivables in
the form of checks with payment coupons directly to the Lockbox. Other payments
received by each of the Servicer, Triad and the Seller will be deposited into a
local servicing account for processing, and then transferred to the Collection
Account. The Collection Account will be maintained with the Trustee as long as
the Trustee's deposits have a rating acceptable to the Rating Agency. If the
deposits of the Trustee no longer have such acceptable rating, the Trustee shall
cause such accounts to be moved to a bank or trust company having such
acceptable ratings.
The Collateral Agent will establish the Reserve Account as a segregated
trust account at its office or at another depository institution or trust
company. See "The Certificates--Reserve Account".
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SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee on each Payment
Date equal to the product of one-twelfth of the Servicing Fee Rate and the Pool
Balance outstanding at the beginning of the calendar month immediately preceding
the month in which such Payment Date occurs. If the Backup Servicer, or any
other entity becomes the successor Servicer, it will receive compensation at the
Servicing Fee Rate. The Servicer will also collect and retain, as additional
servicing compensation, any late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the Receivables. Payments by or on behalf of Obligors will be allocated to
scheduled payments, late fees and other charges and principal and interest in
accordance with the Servicer's normal practices and procedures. The Servicing
Fee will be paid out of collections from the Receivables pursuant to the
distribution described under "The Certificates--Priority of Distribution
Amounts".
The Servicing Fee and additional servicing compensation will compensate the
Servicer for performing the functions of a third party servicer of automotive
receivables as an agent for their beneficial owner, including collecting and
posting all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors, paying costs of disposition of defaults and monitoring
the collateral. The Servicing Fee also will compensate the Servicer for
administering the Receivables, including accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will reimburse the Servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection with
administering the Receivables.
BACKUP SERVICING AND BACKUP SERVICING COMPENSATION
Pursuant to the Pooling and Servicing Agreement, the Backup Servicer, on
behalf of the Servicer, will perform certain duties as the Backup Servicer. In
addition, following the resignation or removal of the Servicer, the Backup
Servicer has agreed to serve as the successor Servicer under the Pooling and
Servicing Agreement. The Backup Servicer will be required to carry out its
duties in accordance with the customary and usual procedures of institutions
which perform similar functions. On each Payment Date, the Backup Servicer will
be entitled to receive a fee for acting as Backup Servicer (the "Backup
Servicing Fee") equal to the product of one-twelfth times $[ ].
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that a firm of independent
public accountants will furnish to the Servicer (who will provide a copy to the
Trustee and the Rating Agency) on or before June 30 of each year, commencing
June 30, [ ], a report of its audit of the Servicer's financial statements
for the fiscal year ended on the preceding March 31.
The Pooling and Servicing Agreement will also provide for delivery to the
Trustee and the Rating Agency on or before March 31 of each year, commencing
March 31, [ ], of a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the Pooling and Servicing
Agreement throughout the preceding twelve months ended December 31 (or, for the
initial report, for such shorter period as will have elapsed from the Cutoff
Date) or, if there has been a default in the fulfillment of any such obligation,
describing each such default.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee.
MATTERS REGARDING THE SERVICER
The Pooling and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder except upon
determination that, due to a change in legal
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requirements, the Servicer's performance of such duties would be in violation of
such legal requirements in a manner which would result in a material adverse
effect on the Servicer. No such resignation will become effective until the
Backup Servicer or a successor Servicer has assumed the Servicer's servicing
obligations and duties.
The Pooling and Servicing Agreement will further provide that neither the
Servicer, nor any of its directors, officers, employees, or agents will be
liable to the Trust, the Trustee or the Certificateholders for taking any action
or for refraining from taking any action pursuant to the Pooling and Servicing
Agreement, or for errors in judgment; PROVIDED, HOWEVER, that neither the
Servicer nor any such person will be protected against any liability that would
otherwise be imposed by reason of the Servicer's breach of the Pooling and
Servicing Agreement, willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of obligations and
duties thereunder.
Subject to the provisions of the Pooling and Servicing Agreement, any entity
into which the Servicer may be merged or consolidated, or any entity resulting
from any merger, conversion or consolidation to which the Servicer is a party,
or any entity succeeding to the business of the Servicer, which in any case
assumes the obligations of the Servicer, will be the successor of the Servicer
under the Pooling and Servicing Agreement.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the Seller, the
Servicer, Trustee and the Collateral Agent, with the consent of the Holders of a
Certificate Majority for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement; PROVIDED, HOWEVER, that no such amendment may (i) increase or reduce
in any manner the amount of, or accelerate or delay the timing of, collection of
payments on Receivables or distributions that are required to be made on any
Certificate or change the Pass-Through Rate, (ii) reduce the aforesaid
percentage of the Class A Certificate Balance, Class B Certificate Balance or
Class C Certificate Balance which is required to consent to any such amendment,
without the consent of the Holders of all Certificates of such Class, (iii)
result in a downgrade or withdrawal of the then current rating of any Class of
Certificate by the Rating Agency without the consent of each Certificateholder
or (iv) change the Reserve Account Requirement without the consent of each
Certificateholder and the Rating Agency. Notwithstanding anything herein to the
contrary, the Pooling and Servicing Agreement may be amended by the Seller, the
Servicer, Trustee and the Collateral Agent, without the consent of the
Certificateholders, to cure any ambiguity, correct or supplement any provision
therein which may be inconsistent with any other provision therein, or make any
other provisions with respect to matters or questions arising under such Pooling
and Servicing Agreement which are not inconsistent with the provisions of the
Pooling and Servicing Agreement; provided that such action will not, in the
opinion of counsel satisfactory to the Trustee, materially and adversely affect
the interest of any Certificateholder.
LIST OF CERTIFICATEHOLDERS
Upon written request of the Servicer, the Trustee will provide to the
Servicer within 10 days after receipt of such request a list of the names and
addresses of all Certificateholders of record as of the most recent Record Date.
Upon written request by three or more Certificateholders or by Holders of
Certificates evidencing not less than 25% of the Certificate Balance, and upon
compliance by such Certificateholders with certain other provisions of the
Pooling and Servicing Agreement, the Trustee will afford such Certificateholders
within five Business Days after receipt of such request access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement will not provide for the holding of any
annual or other meetings of Certificateholders.
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TERMINATION
The respective obligations of the Seller, the Servicer and the Trustee
pursuant to the Pooling and Servicing Agreement will terminate upon the latest
of (i) the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any remaining
Receivables and (ii) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Pooling and Servicing Agreement and the
expiration of any preference period related thereto.
In order to avoid excessive administrative expense, the Servicer has the
option, to purchase from the Trust, as of the last day of any month as of which
the aggregate Principal Balance with respect to the Receivables is equal to 10%
or less of the Cutoff Date Pool Balance, all remaining Receivables at a price
equal to the aggregate of the Purchase Amounts thereof as of such last day, plus
the appraised value of any other property held by the Trust. The Trustee will
give written notice of termination to each Certificateholder of record. The
final distribution to any Certificateholder will be made only upon surrender and
cancellation of such holder's Certificate at the office or agency of the Trustee
specified in the notice of termination; PROVIDED, HOWEVER, that if on the
Payment Date upon which final payment of the Certificates is to be made, there
are five or fewer Certificateholders of record, such final payment to such
Certificateholders will be made by check or wire transfer as described above and
each such Certificateholder shall present and surrender its Certificate at the
office or agency designated in the notice of final distribution referred to
above within 30 days after such Payment Date.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general discussion of the material federal income tax
consequences relating to the purchase, ownership and disposition of the
Certificates by investors. This summary is based upon laws, regulations, rulings
and decisions currently in effect, all of which are subject to change, which
change may be retroactive. The discussion does not deal with all federal income
tax consequences applicable to all categories of investors (some categories of
which, such as banks, insurance companies and foreign investors, among others,
may be subject to special rules). In addition, this summary is generally limited
to institutional investors who will hold the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"), and not as a dealer
or for resale. Investors should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership and
disposition of the Certificates. Prospective investors should note that no
rulings have been or will be sought from the Internal Revenue Service ("IRS")
with respect to any of the federal income tax consequences discussed below, and
no assurance can be given that the IRS will not take contrary positions.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF
INTERESTS IN THE CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION.
For purposes of this tax discussion, references to a "Certificateholder" or
a "holder" are to the beneficial owner of a Certificate.
TAX STATUS OF THE TRUST
In the opinion of Dechert Price & Rhoads, special tax counsel to Triad and
the Seller, the Trust will be classified as a grantor trust under subpart E,
part I of subchapter J of Chapter 1 of Subtitle A of the Code and not as an
association taxable as a corporation for federal income tax purposes and each
Certificateholder will be treated for federal income tax purposes as the owner
of a pro rata undivided interest in each of the assets of the Trust other than
the interest in such assets and income represented by the Seller's Retained
Yield.
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GENERAL
For purposes of federal income tax, the Seller will retain the right to
receive the Seller's Retained Yield. The issuance of a Certificate will result
in the separation of ownership ("stripping") of a portion of the rights to
interest payments on the Receivables. Consequently, under Section 1286 of the
Code the stripping of the Receivables will result in original issue discount
("OID"), and each Certificateholder will be treated as owning its pro rata
percentage interest in the principal of, and interest payable on, each
Receivable (minus the portion of the interest payable on such Receivable that
constitutes the Seller's Retained Yield). Each such interest of the
Certificateholders in each Receivable will be treated as a "stripped bond"
within the meaning of Section 1286 of the Code.
INCOME ON THE RECEIVABLES
Each Certificateholder will be required to report on its federal income tax
return, in a manner consistent with its method of accounting, its pro rata
allocable share of the entire gross income of the Trust, including interest or
finance charges earned on the Receivables, any OID under the stripped bond rules
and any gain or loss upon collection or disposition of the Receivables. Each
Certificateholder's right to interest should be limited to its pro rata share of
the interest that accrues at the Pass-Through Rate on its Certificate plus its
pro rata share of the Servicing and Trustee fees allocable to it (which fees
will be deemed to be paid over, on behalf of the Certificateholder, to the
Servicer and the Trustee).
In computing its federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its pro rata
allocable share of reasonable fees payable to the Servicer that are paid or
incurred by the Trust as provided in Sections 162 or 212 of the Code. Because of
the nature of the Receivables, it is anticipated that the Servicer's fees will
be treated as reasonable for this purpose. Although it is not entirely clear, it
appears that in transactions in which multiple classes of grantor trust
certificates (including grantor trust certificates treated as "stripped bonds")
are issued, such fees and expenses should be allocated among the classes of
grantor trust certificates using a method that recognizes that each such class
benefits from the related services. In the absence of statutory or
administrative clarification as to the method to be used, it currently is
intended to base information returns or reports to the IRS and
Certificateholders on a method that allocates such expenses among classes of
Certificates with respect to each period based on the distributions made to each
such class during that period. A Certificateholder using the cash method of
accounting must take into account its pro rata share of income and deductions as
and when collected by or paid by the Trust. A Certificateholder using the
accrual method of accounting must take into account its pro rata share of income
and deductions as and when such amounts become due to or payable by the Trust.
Because the Receivables are characterized as "stripped bonds," as described
above, the income of the Trust allocable to Certificateholders will not include
the portion of the interest on the Receivables constituting the Seller's
Retained Yield and treated as "stripped coupons" and the deductions allocable to
Certificateholders will be limited to their respective shares of reasonable
servicing and other fees. In addition, an initial Certificateholder will
generally not be subject to the market discount and premium rules discussed
below with respect to the stripped Receivables, but instead will be subject to
the original issue discount rules contained in the Code. A Certificateholder
will be required to include any original issue discount in income as it accrues,
regardless of whether cash payments are received, using a method reflecting a
constant rate of interest on the Receivables.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, each
purchaser of a Certificate will be treated as the purchaser of Receivables
treated as stripped bonds which generally should be treated as individual debt
instruments issued on the day they are purchased for purposes of calculating any
original issue discount within the meaning of Section 1273(a) of the Code.
Generally, under
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Treasury regulations issued under Section 1286 of the Code (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond certificate is larger
than a DE MINIMIS amount (as calculated for purposes of the OID rules of the
Code) such stripped bond certificate will be considered to have been issued with
original issue discount. See "Accrual of Original Issue Discount" below. Based
on the preamble to the Section 1286 Treasury Regulations, Dechert Price & Rhoads
is of the opinion that, although the matter is not entirely clear, the interest
income on the Class A Certificates, the Class B Certificates and the Class C
Certificates at the sum of the related Pass-Through Rate and the Servicing Fee
Rate allocable to such Certificates will be treated as "qualified stated
interest" within the meaning of the Section 1286 Treasury Regulations and such
income will be so treated in the Trustee's tax information reporting, provided
all classes of Certificates have an issue price equal to or greater than their
stated principal amounts.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
The Receivables bear interest at varying rates. Because a Certificateholder
will be viewed as owning an interest in each of the Trust's assets, a portion of
the Certificateholders' purchase price of a Certificate (whether on initial sale
or in a subsequent transaction) may be required to be allocated among each of
the Trust's assets based on their respective fair market values. For
administrative convenience, however, the Trustee will report information with
respect to a Certificateholder's investment in a Certificate on an aggregate
basis as though such Certificateholder's investment in the Receivables and other
assets were equal to such Certificateholder's share of their respective
Certificate Balances and on which interest is payable at a combined rate equal
to the sum of the Pass-Through Rate and the Servicing Fee Rate. See "Information
Reporting and Backup Withholding" below. If the IRS were to require reporting on
an asset-by-asset basis, the amount of income reportable for a period could
differ from the amount reportable on an aggregate basis. In particular, as
described above, because the Receivables bear an interest rate which is greater
than the sum of the related Pass-Through Rate and the Servicing Fee Rate, such
Receivables are subject to the "stripped bond" rules of the Code which result in
such Receivables having OID.
In determining whether a Certificateholder has purchased its interest in the
Receivables (or any Receivable) at a discount, a portion of the purchase price
for a Certificate may be allocated to the accrued interest on the Receivables at
the time of purchase as though such accrued interest were a separate asset,
thus, in each case, reducing the portion of the purchase price allocable to the
Certificateholder's undivided interest in the Receivables (the "Purchase
Price"). Under the stripped bond rules, each Certificate will be treated as
having been issued with OID within the meaning of Section 1273(a) of the Code,
subject, however, to the discussion below regarding the treatment of certain
stripped bonds as market discount bonds and the discussion regarding de minimis
market discount. Under the stripped bond rules, the holder of a Certificate
(whether a cash or accrual method taxpayer) will be required to report interest
income from its Certificate for each month in an amount equal to the income that
accrues on such Certificate in that month calculated under a constant yield
method, in accordance with the rules of the Code relating to OID.
Generally the owner of a stripped bond or stripped coupon issued or acquired
with OID must include in gross income the sum of the "daily portions," as
defined below, of the OID on such Certificate for each day on which it owns a
Certificate, including the date of purchase but excluding the date of
disposition. In the case of an original Certificateholder, the daily portions of
OID with respect to a Certificate generally would be determined as follows. A
calculation will be made of the portion of OID that accrues on the Certificate
during each successive monthly accrual period (or shorter period in respect of
the date of original issue or the final Payment Date). This will be done, in the
case of each full monthly accrual period, by adding (i) the present value of all
remaining payments to be received on the Certificate under the prepayment
assumption used in respect of the Certificates and (ii) any payments received
during such accrual period, and subtracting from that total the "adjusted issue
price" of the Certificate at the beginning of such accrual period. No
representation is made that the
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Receivables will prepay at any prepayment rate. The "adjusted issue price" of a
Certificate at the beginning of the first accrual period is its issue price (as
determined for purposes of the OID rules of the Code) and the "adjusted issue
price" of a Certificate at the beginning of a subsequent accrual period is the
"adjusted issued price" at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced by
the amount of any payment made at the end of or during that accrual period. The
OID accruing during such accrual period will then be divided by he number of
days in the period to determine the daily portion of OID for each day in the
period. With respect to an initial accrual period shorter than a full monthly
accrual period, the daily portions of OID must be determined according to any
reasonable method as set forth in the Treasury Regulations with respect to OID.
With respect to the Certificates, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the Certificates.
With respect to certain categories of debt instruments, Section 1272(a)(6)
of the Code requires (i) the use of a reasonable prepayment assumption in
accruing OID and (ii) adjustments in the accrual of OID when prepayments do not
conform to the prepayment assumption and regulations could be adopted applying
those provisions to grantor trust certificates subject to the "stripped bond"
rules of Section 1286 of the Code. It is unclear whether those provisions would
be applicable to the Certificates or whether use of a reasonable prepayment
assumption may be required or permitted without reliance on these rules. It is
also uncertain, if a prepayment assumption is used, whether the assumed
prepayment rate would be determined based on conditions at the time of the first
sale of Certificates or, with respect to any holder, at the time of purchase of
the Certificate by that holder. Certificateholders are advised to consult their
own tax advisors concerning reporting OID in general and, in particular, whether
a prepayment assumption should be used in reporting OID with respect to
Certificates.
In the case of a Certificate acquired at a price equal to the principal
amount of the Receivables allocable to such certificate, the use of a prepayment
assumption generally would not have any significant effect on the yield used in
calculating accruals of interest income. In the case, however, of a Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption, would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a Receivable prepays in
full, the holder of a certificate acquired at a discount or a premium generally
will recognize ordinary income or loss equal to the difference between the
portion of the prepaid principal amount of the Receivable that is allocable to
such certificate and the portion of the adjusted basis of such certificate that
is allocable to such Certificateholder's interest in the Receivable. If a
prepayment assumption is used, it appears that no separate item of income or
loss should be recognized upon a prepayment. Instead, a prepayment should be
treated as a partial payment of the principal amount of the certificate and
accounted for under a method similar to that described for taking account of
OID. It is unclear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
In the absence of statutory or administrative clarification, it is currently
intended to base information reports or returns to the IRS and
Certificateholders without using a prepayment assumption. However, neither the
Seller, the Servicer nor the Trustee will make any representation that the
Receivables will not in fact prepay.
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MARKET DISCOUNT
Under Treasury regulation Section 1.1286-1, certain stripped bonds are to be
treated as market discount bonds and, accordingly, any purchaser of such a bond
is to account for any discount on the bond as market discount rather than OID.
This treatment applies to the Certificate because immediately after the most
recent disposition of the bond by a person stripping one or more coupons from
the bond and disposing of the bond or coupon (in this case, the Closing Date)
there is no OID (or only a DE MINIMIS amount of original issue discount). If the
OID or market discount on a certificate determined under the stripped bond rules
is less than 0.25% of the principal amount multiplied by the weighted average
maturity of the Receivables, then such OID or market discount will be considered
to be DE MINIMIS. OID of only a DE MINIMIS amount will be included in income as
each payment of stated principal is made, based on the product or the total
amount of such DE MINIMIS OID and a fraction, the numerator of which is the
amount of each such payment and the denominator of which is the outstanding
stated principal amount of the Receivable. Certificateholders may also elect to
accrue DE MINIMIS OID into income currently based on a constant yield method.
Subsequent purchasers that purchase Certificates at more than a DE MINIMIS
discount should consult their tax advisors with respect to the proper method to
accrue such OID.
PREMIUM
The initial purchase of a Certificate at more than its adjusted principal
amount will result in the creation of a premium with respect to the interest in
the underlying Receivables represented by such Certificates. In determining
whether a Certificateholder has purchased its interest in the Receivables (or
any Receivable) at a premium, a portion of the purchase price for a Certificate
may be allocated to the accrued interest on the Receivables at the time of
purchase as though such accrued interest were a separate asset, thus, in each
case, reducing the portion of the purchase price allocable to the
Certificateholder's undivided interest in the Receivables. A purchaser may elect
under Section 171 of the Code to amortize such premium using a constant yield
method. Under the Code, premium is allocated among the interest payments on the
Receivables to which it relates and is considered as an offset against (and thus
a reduction of) such interest payments. With certain exceptions, such an
election would apply to all taxable debt instruments held or subsequently
acquired by the electing holder. Absent such an election, the premium will be
deductible as an ordinary loss only upon disposition of the Certificate or pro
rata as principal is paid on the Receivables.
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Receivable
prepays in full, the holder of a Certificate acquired at a premium should
recognize a loss, equal to the difference between the portion of the prepaid
principal amount of the Receivable that is allocable to the Certificate and the
portion of the adjusted basis of the Certificate that is allocable to the
Receivable. If a prepayment assumption is used to amortize such premium, it
appears that such a loss would be unavailable. Instead, if a prepayment
assumption is used, a prepayment should be treated as a partial payment of the
stated redemption price of the Certificate and accounted for under a method
similar to that described for taking account of OID. It is unclear whether any
other adjustments would be required to reflect differences between the
prepayment assumption used, and the actual rate of prepayments.
Holders of Certificates acquired at a premium are urged to consult with
their own tax advisors regarding the proper treatment of the Certificates for
federal income tax purposes.
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale (exclusive of amounts
attributed to accrued and unpaid interest, which will be
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treated as ordinary income) allocable to the Receivables and the
Certificateholder's adjusted basis in the foregoing. A Certificateholder's
adjusted basis will equal the Certificateholder's cost for the Certificate,
increased by any market or OID previously included in income, and decreased (but
not below zero) by any previously reported losses, any previously amortized
premium and by the amount of payments previously received on the Receivables.
Any gain or loss will be capital gain or loss if the Certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the seller's interest in accrued OID not
previously taken into income and unrecognized market discount, which will be
treated as ordinary income, and (in the case of banks and other financial
institutions) except as provided under Section 582(c) of the Code. A capital
gain or loss will be long-term or short-term depending on whether or not the
Certificates have been owned for more than one year. Although, as of the date of
this Prospectus Supplement, there is no rate differential between ordinary
income and capital gains applicable to corporations, the distinction between a
capital gain or loss and ordinary income or loss remains relevant for other
purposes.
Gain or loss from the sale of a Certificate may be partially or wholly
ordinary and not capital in certain circumstances. A portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the grantor trust certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction. Finally, a
taxpayer may elect to have net capital gain taxed at ordinary income rates
rather than capital gains rates in order to include such net capital gain in
total net investment income for that taxable year, for purposes of the rule that
limits the deduction of interest on indebtedness incurred to purchase or carry
property held for investment to a taxpayer's net investment income.
Principal payments on the Certificates will be treated as amounts received
upon a sale or exchange of the Certificates subject to the foregoing rules
relating to OID. In the event there is a prepayment of the total outstanding
balance of a Receivable, gain or loss will be recognized by each
Certificateholder in an amount equal to the difference between the amount
received by each such Certificateholder on the prepayment and such
Certificateholder's adjusted basis in that Receivable. Because the applicable
Certificate Pass-Through Rate is identical with respect to each Receivable and
the Receivables have other similar characteristics, it appears reasonable for a
Certificateholder to allocate its adjusted basis among the Receivables in
proportion to their respective principal amounts. Any resulting gain or loss
will be capital gain or loss to a Certificateholder (other than a financial
institution referred to above) that holds a Certificate as a capital asset.
To the extent that a subsequent purchaser's Purchase Price is exceeded by
the remaining principal payments on the Certificates, such subsequent purchaser
will be required for Federal income tax purposes to accrue and report such
excess as described in "Accrual of Original Issue Discount" above. Whether or
not the Certificates may be deemed to have "qualified stated interest" at the
time of such subsequent purchase will depend upon the facts and circumstances as
they exist at such time.
FOREIGN CERTIFICATEHOLDERS
Interest attributable to Receivables which is received by a foreign
Certificateholder will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that (i) the foreign
Certificateholder does not own, directly or indirectly, 10% or more of, and is
not a
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controlled foreign corporation related to, any Obligor under a Receivable, (ii)
such holder fulfills certain certification requirements, (iii) is not a bank
that is treated as receiving such interest "on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its trade or
business" and (iv) is not a person within a foreign country which the IRS has
included in a list of countries that do not provide adequate exchange of
information with the United States to prevent tax evasion by United States
persons. In addition, the foregoing rules will not apply to exempt a United
States shareholder of a controlled foreign corporation from taxation on such
United States shareholder's allocable portion of the interest income received by
such controlled foreign corporation.
Under such requirements, the holder must certify, under penalty of perjury,
that it is not a "United States person" and provide its name and address. For
this purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. If the holder does not qualify for exemption, distributions of
interest, including distributions in respect of accrued OID, to such holder may
be subject to tax at a rate of 30%, subject to reduction under any applicable
tax treaty. Gain realized upon the sale of a Certificate by a foreign
Certificateholder generally will not be subject to United States withholding
tax. If, however, such interest or gain is effectively connected to the conduct
of a trade or business within the United States by such foreign
Certificateholder, such holder will be subject to United States federal income
tax thereon at regular rates. Potential investors who are not United States
persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a Certificate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish to each holder of a Certificate with each
distribution a statement setting forth the amount of such distribution allocable
to principal on the underlying Receivables and to interest thereon at the
related Pass-Through Rate. In addition, the Trustee will furnish or make
available, within the prescribed period of time for tax reporting purposes after
the end of each calendar year, to each Certificateholder or each person holding
a Certificate at any time during such year, such other customary factual
information as the Trustee deems necessary or desirable to assist
Certificateholders in preparing their federal income tax returns including
information regarding the amount of servicing compensation received by the
Servicer and sub-servicer (if any) and will furnish comparable information to
the IRS as and when required by law to do so. Because the rules for accruing
discount and amortizing premium with respect to the Certificates are uncertain
in various respects, there is no assurance the IRS will agree with the Trustee's
information reports of such items of income and expense. Moreover, such
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial Certificateholders that bought
their Certificates at the representative initial offering price used in
preparing such reports. Payments made on the Certificates and proceeds from the
sale of the Certificates will not be subject to a "backup" withholding tax of
31% unless, in general, a Certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner.
S-50
<PAGE>
FOREIGN, STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences", potential investors should consider the foreign, state
and local tax consequences of the acquisition, ownership, and disposition of the
Certificates offered hereunder. Such laws may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any foreign country, any state or other
jurisdiction. Therefore, prospective investors should consult their own tax
advisors with respect to the various tax consequences of investments in the
certificates offered hereunder.
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans subject to Title I of ERISA should
consider ERISA's fiduciary investment standards before making an investment for
the plan in the Certificates.
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit a
pension, profit sharing or other employee benefit plan, as well as individual
retirement accounts and Keogh Plans (each a "Benefit Plan"), from engaging in
certain transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. ERISA
also imposes certain duties on persons who are fiduciaries of Benefit Plans
subject to ERISA. Under ERISA, any person who exercises any authority or control
with respect to the management or disposition of the assets of a Benefit Plan,
which includes under certain circumstances the rendering of investment advice
with respect to such assets, is considered to be a fiduciary of such Benefit
Plan (subject to certain exceptions not here relevant). A violation of these
"prohibited transaction" rules may result in liability under ERISA and the Code
for such persons.
Neither ERISA nor the Code defines the terms "plan assets". Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Benefit Plan's assets may include an interest in the underlying
assets of an entity (such as a trust) for certain purposes, including the
prohibited transaction provisions of ERISA and the Code, if the Benefit Plan
acquires an "equity interest" in such entity. The Seller believes that the
Certificates will give Certificateholders an equity interest in the Trust for
purposes of the Regulation. Under the Regulation, when a Benefit Plan acquires
an equity interest that is neither a "publicly-offered security" nor a security
issued by an investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), the underlying assets of the
entity will be considered "plan assets" unless the entity is an "operating
company" or equity participation in the entity by benefit plan investors is not
"significant". For this purpose, such participation is significant if
immediately after the most recent acquisition of any equity interest in the
entity, whether or not from an issuer or an underwriter, 25% or more of the
value of any class of equity interest is held by "benefit plan investors," which
are defined as Benefit Plans, employee benefit plans not subject to ERISA (E.G.,
governmental plans) and any entity whose underlying assets include plan assets
by reason of a plan's investment in the entity.
The Trust will not be an "operating company" as defined in the Regulation,
and it will not be an investment company registered under the Investment Company
Act, and even though the Certificates will be offered pursuant to a registration
statement under the Securities Act, there can be no assurance that the
Certificates will be considered publicly-offered securities within the meaning
of the Regulation. Accordingly, if at any time immediately after the most recent
acquisition of any class of Certificates, 25% or more of the value of such Class
of Certificates is held by Benefit Plan investors, then all or some portion of
the Receivables and other assets of the Trust will constitute Plan assets. There
can be no assurance that less than 25% of the value of each Class of
Certificates will be held by Benefit Plan investors.
[The DOL has granted to [ ] an administrative exemption
(Prohibited Transaction Exemption [ ], [ ] Fed. Reg. [ ], as amended by
Prohibited Transaction Exemption [ ]) (the
S-51
<PAGE>
"Exemption") from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by
Benefit Plans of certificates representing interests in asset backed
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include motor vehicle installment
obligations such as the Receivables. The Seller believes that the Exemption will
apply to the acquisition, holding, and resale of the Class A Certificates by a
Benefit Plan, provided that specified conditions (certain of which are described
below) are met.
THE EXEMPTION DOES NOT APPLY TO THE HOLDING OR THE SUBSEQUENT RESALE OF THE
CLASS B CERTIFICATES. THE CLASS B CERTIFICATES, THEREFORE, MAY NOT BE ACQUIRED
BY A BENEFIT PLAN.
Each person that acquires or holds a Class B Certificate shall be deemed to
have represented and warranted to the Seller, the Trustee and the Servicer that
it satisfies the foregoing limitation, provided that an insurance company
investing solely assets of its general account may acquire and hold the Class B
Certificates subject to the limitations described in "Insurance Company General
Account" below.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition by a Benefit Plan of the Class A Certificates are the following
(each of which, other than those within the control of the investors, the Seller
believes has been or will be met in connection with the Class A Certificates).
(i) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for such Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an
arm's-length transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A Certificates acquired
by the Benefit Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust.
(iii) The Class A Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from either Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc. ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit
Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch").
(iv) The Trustee is not an affiliate of any member of the Restricted Group
(as defined below).
(v) The sum of all payments made to and retained by the Underwriter in
connection with the distribution or underwriting of the Class A
Certificates represents not more than reasonable compensation for its
underwriting services. The sum of all payments made to and retained by
the Seller pursuant to the sale of the Receivables to the Trust
represents not more than the fair market value of such Receivables. The
sum of all payments made to and retained by the Servicer, represents not
more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith.
(vi) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the SEC under the Securities Act.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets of the type that
have been included in other investment pools.
S-52
<PAGE>
(b) Certificates in such other investment pools must have been rated in one
of the three highest generic rating categories of S&P, Moody's, Duff &
Phelps or Fitch for at least one year prior to the Benefit Plan's
acquisition of certificates.
(c) Certificates evidencing interests in such other investment pools must
have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of certificates.
The Exemption does not apply in all respects to Benefit Plans ("Excluded
Plans") sponsored by the Seller, the Underwriter, the Trustee, the Servicer, the
Backup Servicer, any Obligor with respect to the Receivables included in the
Trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in the Trust or any affiliate of such parties (the "Restricted
Group"). As of the date hereof, no Obligor with respect to the Receivables
included in the Trust constitutes more than 5% of the aggregate unamortized
principal balance of the Trust (i.e., the initial principal amount of the
Certificates). Moreover, the Exemption provides relief from certain
self-dealing/conflict of interest prohibited transactions, only if, among other
requirements: (i) the Benefit Plan is not an Excluded Plan, (ii) a Benefit
Plan's investment in the Class A Certificates does not exceed 25% of all of the
Class A Certificates, as applicable, outstanding at the time of the acquisition
and (iii) immediately after the acquisition no more than 25% of the assets of a
Benefit Plan with respect to which a person has discretionary authority or
renders investment advice are invested in certificates representing interests in
trusts containing assets sold or serviced by the same entity.
Before purchasing a Class A Certificate based on the Exemption, however, a
fiduciary of a Benefit Plan should itself confirm (a) that such Certificate
constitutes a "certificate" for purposes of the Exemption and (b) that the
specific conditions and other requirements set forth in the Exemption would be
satisfied.]
Due to the complexities of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that the fiduciary
of a Benefit Plan considering the purchase of Class A Certificates consult with
its counsel regarding the applicability of ERISA and the Code to such
investment. Purchasers that are insurance companies should consult with their
counsel with respect to the potential application of Prohibited Transaction
Class Exemption 95-60 to any purchases involving their general accounts.
INSURANCE COMPANY GENERAL ACCOUNTS
Insurance companies contemplating the investment of general account assets
in the Class B Certificates should consult with their legal counsel with respect
to the applicability of ERISA Section 401(c), including the general account's
ability to continue to hold such Certificates after the date which is 18 months
after the date the 401(c) Regulations become final.
Any insurance company that acquires or holds any Class B Certificate shall
be deemed to have represented and warranted to the Seller, the Trustee and the
Servicer that the source of funds used to acquire and hold such Certificates is
an "insurance company general account" (as defined in DOL Prohibited Transaction
Class Exemption ("PTCE") 95-60) and the conditions set forth in Section III of
PTCE 95-60 have been satisfied.]
PLAN OF DISTRIBUTION
Under the terms and subject to the conditions contained in an underwriting
agreement dated [ ], (the "Underwriting Agreement") among the
Seller, Triad and [ ] (the
S-53
<PAGE>
"Underwriter"), Triad has agreed to cause the Seller to sell to the Underwriter,
and the Underwriter has agreed to purchase, Certificates in the following
respective amounts:
<TABLE>
<CAPTION>
<S> <C>
PRINCIPAL AMOUNT
UNDERWRITER -
- -----------------------------------------------------------------------------
Total........................................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will
purchase all the Certificates offered hereby if any of such Certificates are
purchased. Triad and the Seller have been advised by the Underwriter that the
Underwriter proposes to offer the Certificates from time to time for sale in
negotiated transactions or otherwise, at varying prices to be determined at the
time of sale. The Underwriter may effect such transactions by selling the
Certificates to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriter and any purchasers of Certificates for whom they may act as agents.
The Underwriter and any dealers that participate with the Underwriter in the
distribution of the Certificates may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of
Certificates by them may be deemed to be underwriting discounts or commissions,
under the Securities Act.
The Certificates are a new issue of securities with no established trading
market. The Underwriter has advised Triad and the Seller that it intends to act
as a market maker for the Certificates. However, the Underwriter is not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of any trading market for
the Certificates.
Triad and the Seller have agreed to indemnify the Underwriter against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriter may be required to make in respect
thereof.
LEGAL OPINIONS
Certain legal matters relating to bankruptcy and other matters will be
passed upon for Triad, the Seller and the Servicer by Dechert Price & Rhoads,
New York, New York. Certain federal income tax and other legal matters will be
passed upon for the Seller by Dechert Price & Rhoads, New York, New York.
GLOSSARY
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or other
day on which commercial banking institutions or trust companies in the City of
New York, the State in which the Corporate Trust Office is located or the State
in which the executive offices of the Servicer are located shall be authorized
or obligated by law, executive order or governmental decree to be closed.
S-54
<PAGE>
CERTIFICATE BALANCE: The sum of the Class A Certificate Balance, the Class
B Certificate Balance and the Class C Certificate Balance.
CERTIFICATE MAJORITY: Holders of Class A Certificates and Class B
Certificates representing a majority of the sum of the Class A Certificate
Balance and the Class B Certificate Balance; PROVIDED, HOWEVER, if there are no
Class A Certificates outstanding, Certificateholders representing a majority of
the Class B Certificate Balance shall constitute a Certificate Majority;
PROVIDED, FURTHER, if there are no Class A Certificates and no Class B
Certificates outstanding, Certificateholders representing a majority of the
Class C Certificate Balance shall constitute a Certificate Majority.
CLASS: A class of Certificates.
CLASS A CERTIFICATE BALANCE: Initially, the Class A Percentage of the, and
thereafter shall equal the initial Class A Certificate Balance reduced by all
amounts previously distributed to the Class A Certificateholders and allocable
to principal. If the date of determination is a Payment Date, then such Class A
Certificate Balance shall be reduced by all such amounts distributed on such
date.
CLASS B CERTIFICATE BALANCE: Initially, the Class B Percentage of the
Cutoff Date Pool Balance, and thereafter shall equal the initial Class B
Certificate Balance reduced by all amounts previously distributed to the Class B
Certificateholders and allocable to principal. If the date of determination is a
Payment Date, then such Class B Certificate Balance shall be reduced by all such
amounts distributed on such date.
CLASS C CERTIFICATE BALANCE: Initially, the Class C Percentage of the
Cutoff Date Pool Balance, and thereafter shall equal the initial Class C
Certificate Balance reduced by all amounts previously distributed to the Class C
Certificateholder and allocable to principal. If the date of determination is a
Payment Date, then such Class C Certificate Balance shall be reduced by all such
amounts distributed on such date.
CORPORATE TRUST OFFICE: The office of the Trustee at which its corporate
trust business shall be principally administered, which office as of the date
hereof is located at [ ].
HOLDER OR CERTIFICATEHOLDER: The Person in whose name a Certificate shall
be registered in the Certificate Register.
PERSON: Any individual, corporation, limited liability company, estate,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
SERVICING CERTIFICATE: With respect to each Record Date, a certificate
executed on behalf of the Servicer, in accordance with the applicable Pooling
and Servicing Agreement provisions.
STATE: Any State of the United States of America, or the District of
Columbia.
S-55
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found.
<TABLE>
<S> <C>
401(c) Regulations............................................................. S-53
ACS............................................................................ S-20
Actuarial Receivable........................................................... S-24
Additional Servicing Fee....................................................... S-10
Amount Financed................................................................ S-55
APR............................................................................ S-4
S-1, S-3,
Backup Servicer................................................................ S-24
Backup Servicing Fee........................................................... ii, S-42
Bankruptcy Code................................................................ S-23
Benefit Plan................................................................... S-51
Business Day................................................................... S-55
Cede........................................................................... S-11
Certificate Balance............................................................ S-55
Certificate Majority........................................................... S-55
Certificate Owners............................................................. S-11
Certificateholder.............................................................. S-38, S-56
Certificateholders............................................................. S-5
Certificates................................................................... S-1
Class.......................................................................... S-55
Class A Certificate Balance.................................................... S-55
Class A Certificateholders..................................................... S-5
Class A Certificates........................................................... S-1, S-3
Class A Distributable Amount................................................... S-33
Class A Interest Carryover Shortfall........................................... S-34
Class A Interest Distributable Amount.......................................... S-33
Class A Pass-Through Rate...................................................... S-5
Class A Percentage............................................................. S-1, S-3
Class A Pool Factor............................................................ S-30
Class A Principal Carryover Shortfall.......................................... S-34
Class A Principal Distributable Amount......................................... S-33
Class B Certificate Balance.................................................... S-55
Class B Certificateholders..................................................... S-5
Class B Certificates........................................................... S-1, S-3
Class B Distributable Amount................................................... S-33
Class B Interest Carryover Shortfall........................................... S-34
Class B Interest Distributable Amount.......................................... S-33
Class B Pass-Through Rate...................................................... S-5
Class B Percentage............................................................. S-1, S-3
Class B Pool Factor............................................................ S-30
Class B Principal Carryover Shortfall.......................................... S-34
Class B Principal Distributable Amount......................................... S-33
Class C Certificate Balance.................................................... S-55
Class C Certificateholder...................................................... s-5
Class C Certificates........................................................... S-1, S-3
Class C Distributable Amount................................................... S-33
Class C Interest Carryover Shortfall........................................... S-34
Class C Interest Distributable Amount.......................................... S-33
Class C Pass-Through Rate...................................................... S-5
Class C Percentage............................................................. S-1, S-4
Class C Pool Factor............................................................ S-30
Class C Principal Carryover Shortfall.......................................... S-34
</TABLE>
S-56
<PAGE>
<TABLE>
<S> <C>
Class C Principal Distributable Amount......................................... S-33
Closing Date................................................................... S-3
Code........................................................................... S-11, S-44
Collateral Agent............................................................... S-1, S-35
Collection Account............................................................. S-41
Collection Period.............................................................. S-5
Collector to Current Receivable Ratio.......................................... S-36
Collector to Delinquent Receivable Ratio....................................... S-36
Commission..................................................................... S-2
Contracts...................................................................... S-18
Corporate Trust Office......................................................... S-55
Correspondent Agreements....................................................... S-16
Correspondents................................................................. S-16
Cram Down Loss................................................................. S-36
Cumulative Default Ratio....................................................... S-36
Custodian Receivables File..................................................... S-16
Cut-off Date................................................................... S-3
Dealer Agreements.............................................................. S-16
Dealer Recourse................................................................ S-17
Dealers........................................................................ S-16
Deemed Cured................................................................... S-36
Defaulted Receivable........................................................... S-32
Delinquency Ratio.............................................................. S-36
Determination Date............................................................. S-5
DTC............................................................................ S-2, S-11
DOL............................................................................ S-51
Duff & Phelps.................................................................. S-51
ERISA.......................................................................... S-11
Exchange Act................................................................... S-2
Excluded Plans................................................................. S-52
Exemption...................................................................... S-51
Final Scheduled Payment Date................................................... S-1
Financed Vehicles.............................................................. S-4
Fitch.......................................................................... S-51
Holder......................................................................... S-38, S-56
Investment Company Act......................................................... S-51
IRS............................................................................ S-44
Liquidated Receivable.......................................................... S-32
Lockbox Account................................................................ S-41
Lockbox Bank................................................................... S-41
Managed Receivable............................................................. S-36
Moody's........................................................................ S-51
Non-prime Borrowers............................................................ S-18
Obligors....................................................................... S-16
Offered Certificates........................................................... S-1, S-3
OID............................................................................ S-44
Optional Purchase.............................................................. S-11
Participants................................................................... S-40
Payment Date................................................................... S-5
Person......................................................................... S-56
Plan........................................................................... S-11
Pool Balance................................................................... S-30
Pooling and Servicing Agreement................................................ S-1, S-3
Precomputed Receivables........................................................ S-24
Principal Balance.............................................................. S-32
</TABLE>
S-57
<PAGE>
<TABLE>
<S> <C>
Principal Distributable Amount................................................. S-6, S-32
PTCE........................................................................... S-54
Purchase Agreement............................................................. S-40
Purchase Amount................................................................ S-32, S-41
Purchase Price................................................................. S-46
Rating Agency.................................................................. S-12
Receivables.................................................................... S-4
Receivables Files.............................................................. S-16
Record Date.................................................................... S-5
Recoveries..................................................................... S-33
Registration Statement......................................................... S-2
Regulation..................................................................... S-51
Repossession Inventory Ratio................................................... S-36
Reserve Account................................................................ S-35
Reserve Account Agreement...................................................... S-1
Reserve Account Requirement.................................................... S-8, S-37
Reserve Account Trigger Event.................................................. S-9, S-37
Restricted Group............................................................... S-52
Rule of 78's Receivables....................................................... S-24
S&P............................................................................ S-51
Scheduled Payment.............................................................. S-33, S-37
Section 1286 Treasury Regulations.............................................. S-46
Section 401(c)................................................................. S-52
Securities Act................................................................. S-2
S-1, S-3,
Seller......................................................................... S-17
Seller's Retained Yield........................................................ S-34
Servicer....................................................................... S-1, S-3
Servicer Expenses.............................................................. S-10
Servicer Receivables Files..................................................... S-16
Servicer Termination Event..................................................... S-39
Servicer Termination Trigger Event............................................. S-39
Servicing Certificate.......................................................... S-56
Servicing Fee.................................................................. S-10
Servicing Fee Rate............................................................. S-10
Servicing Portfolio............................................................ S-13
Simple Interest Receivable..................................................... S-24
Sponsor........................................................................ S-2
State.......................................................................... S-56
Total Distribution Amount...................................................... S-36
Triad.......................................................................... S-1, S-3
Trust.......................................................................... S-1, S-3
Trust Property................................................................. S-4
Trustee........................................................................ S-1, S-3
Underwriter.................................................................... S-53
Underwriting Agreement......................................................... S-53
United States person........................................................... S-50
Weighted Average Life.......................................................... S-29
</TABLE>
S-58
<PAGE>
SUBJECT TO COMPLETION, DATED XXXXXX
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SHALL THERE BE ANY SALE OF THOSE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
TRIAD AUTO RECEIVABLES TRUSTS
AUTO RECEIVABLES BACKED NOTES AND CERTIFICATES ISSUABLE IN SERIES
TRIAD FINANCIAL CORPORATION
SPONSOR AND SERVICER
This Prospectus describes certain Auto Receivables Backed Notes (the
"Notes") and Auto Receivables Backed Certificates (the "Certificates" and,
together with the Notes, the "Securities") that may be sold from time to time in
one or more Series (each, a "Series"), in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement"). Each Series of Securities may
include one or more classes of Notes and one or more classes of Certificates,
which will be issued by a trust to be formed by a special purpose subsidiary of
the Sponsor for the purpose of issuing one or more Series of such Securities
(each, a "Trust"). A Trust issuing Securities as described in this Prospectus
and the related Prospectus Supplement shall be referred to herein as the
"Issuer."
Each class of Securities of any Series will evidence beneficial ownership in
a segregated pool of assets (the "Trust Property") (such Securities,
Certificates) or will represent indebtedness of the Issuer secured by the Trust
Property (such Securities, Notes), as described herein and in the related
Prospectus Supplement. The Trust Property may consist of any combination of
prime and non-prime retail installment sales contracts between manufacturers,
dealers or certain other originators and retail purchasers secured by new and
used automobiles and light-duty trucks financed thereby, or participation
interests therein, together with all monies received relating thereto (the
"Contracts"). The Trust Property will also include a security interest in the
underlying new and used automobiles and light-duty trucks (the "Financed
Vehicles") and property relating thereto, together with the proceeds thereof
(together with the Contracts, the "Receivables"). If and to the extent specified
in the related Prospectus Supplement, credit enhancement with respect to the
Trust Property or any class of Securities may include any one or more of the
following: a financial guaranty insurance policy (a "Policy") issued by an
insurer specified in the related Prospectus Supplement, a reserve account,
letters of credit, credit or liquidity facilities, third party payments or other
support, cash deposits or other arrangements. In addition to or in lieu of the
foregoing, credit enhancement may be provided by means of subordination,
cross-support among the Receivables or overcollateralization. See "Description
of the Trust Documents--Credit and Cash Flow Enhancements." Except to the extent
that a Prospectus Supplement for a Series provides for a pre-funding period, the
Receivables included in the Trust Property for a Series will have been
originated or acquired by Triad Financial Corporation ("Triad") on or prior to
the date of issuance of the related Securities, as described herein and in the
related Prospectus Supplement. The Receivables included in a Trust will be
serviced by a servicer (the "Servicer") as described in the related Prospectus
Supplement.
Each Series of Securities may include one or more classes (each, a "Class").
A Series may include one or more Classes of Securities entitled to principal
distributions, with disproportionate, nominal or no interest distributions, or
to interest distributions, with disproportionate, nominal or no principal
distributions. The rights of one or more Classes of Securities of any Series may
be senior or subordinate to the rights of one or more of the other Classes of
Securities. A Series may include two or more Classes of Securities which differ
as to the timing, order or priority of payment, interest rate or amount of
distributions of principal or interest or both. Information regarding each Class
of Securities of a Series, together with certain characteristics of the related
Receivables, will be set forth in the related Prospectus Supplement. The rate of
payment in respect of principal of the Securities of any Class will depend on
the priority of payment of such a Class and the rate and timing of payments
(including prepayments, defaults, liquidations or repurchases of Receivables) on
the related Receivables. A rate of payment lower or higher than that anticipated
may affect the weighted average life of each Class of Securities in the manner
described herein and in the related Prospectus Supplement. See "Description of
the Securities."
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" PAGE 11 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO
NOT REPRESENT OBLIGATIONS OF TRIAD, ANY SELLER, ANY SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE CERTIFICATES OF A GIVEN SERIES REPRESENT BENEFICIAL
INTERESTS IN THE RELATED TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF TRIAD, ANY SELLER, ANY SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE SECURITIES NOR THE UNDERLYING RECEIVABLES WILL BE
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY TRIAD,
ANY SELLER, ANY SERVICER, ANY TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES,
EXCEPT AS SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT. SEE ALSO "RISK
FACTORS" PAGE 11.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Offers of the Securities may be made through one or more different methods,
including offerings through underwriters as more fully described under "Plan of
Distribution" herein and in the related Prospectus Supplement. Prior to
issuance, there will have been no market for the Securities of any Series, and
there can be no assurance that a secondary market for the Securities will
develop, or if it does develop, it will continue.
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED
TO CONSUMMATE SALES OF SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS , 1999.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
hereunder, among other things, will set forth with respect to such Series of
Securities: (i) a description of the Class or Classes of each Securities, (ii)
the rate of interest, the "Pass-Through Rate" or "Interest Rate" or other
applicable rate (or the manner of determining such rate) and authorized
denominations of such Class of such Securities; (iii) certain information
concerning the Receivables and insurance polices, cash accounts, letters of
credit, financial guaranty insurance policies, third party guarantees or other
forms of credit enhancement, if any, relating to one or more pools of
Receivables or all or part of the related Securities; (iv) the specified
interest, if any, of each Class of Securities in, and manner and priority of,
the distributions from the Trust Property; (v) information as to the nature and
extent of subordination with respect to such Series of Securities, if any; (vi)
the payment date to Securityholders; (vii) information regarding the Servicer(s)
for the related Receivables; (viii) the circumstances, if any, under which the
Trust Property may be subject to early termination; (ix) information regarding
tax considerations; and (x) additional information with respect to the method of
distribution of such Securities.
AVAILABLE INFORMATION
The Sponsor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a website (http://www.sec.gov) containing reports,
proxy and information statements and other information regarding registrants,
including the Seller, that file electronically with the Commission.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby, nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Sponsor with respect to the Registration
Statement, either on its own behalf or on behalf of a Trust, relating to any
Series of Securities referred to in the accompanying Prospectus Supplement, with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date of this
Prospectus and prior to the termination of any offering of the Securities issued
by the Issuer, shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (other than the
documents expressly incorporated therein by reference). Requests should be
directed to Triad Financial Corporation, 7711 Center Avenue, Suite 100,
Huntington Beach, California 92647 (telephone number (714) 373-8300).
REPORTS TO SECURITYHOLDERS
So long as the Securities of a Series are in book-entry form, monthly and
annual reports concerning the Securities and the Trust will be sent by the
Trustee to Cede & Co., as the nominee of DTC and as registered holder of the
Securities pursuant to the related Trust Documents. DTC will supply such reports
to Securityholders in accordance with its procedures. To the extent required by
the Exchange Act, each Trust will provide financial information to the
Securityholders which has been examined and reported upon, with an opinion
expressed by, an independent public accountant; to the extent not so required,
such financial information will be unaudited. Each Trust will be formed to own
the Receivables, hold and administer the Pre-Funding Account, if any, to issue
the Securities and to acquire the Subsequent Receivables, if available. No Trust
will have any assets or obligations prior to issuance of the Securities and will
engage in no activities other than those described herein. Accordingly, no
financial statements with respect to the Trust are included in the related
Prospectus Supplement.
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SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO
THE INFORMATION WITH RESPECT TO THE SECURITIES OF ANY SERIES CONTAINED IN THE
RELATED PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH
THE OFFERING OF SUCH SECURITIES. CERTAIN CAPITALIZED TERMS USED IN THE SUMMARY
ARE DEFINED ELSEWHERE IN THE PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF
DEFINED TERMS."
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Issuer........................ With respect to each Series of Securities, a
trust (each, a "Trust") will be formed by the
Seller; pursuant to either a Pooling and
Servicing Agreement among the Seller, Triad,
in its individual capacity, and the Servicer
(as defined below), and the trustee for such
trust specified in the related Prospectus
Supplement, or a Trust Agreement between the
Seller, the trustee for such trust specified
in the related Prospectus Supplement and
certain other parties as specified in the
related Prospectus Supplement (each such
agreement, a "Trust Agreement"). A Trust
issuing Securities pursuant to this
Prospectus and the related Prospectus
Supplement shall be referred to herein as the
"Issuer" with respect to the related
securities.
Sponsor....................... Triad Financial Corporation ("Triad" or the
"Sponsor"). See "Triad's Automobile Financing
Program" and "Triad and the Seller."
Seller........................ Triad Financial Special Purpose Corporation,
or another special purpose subsidiary of
Triad (each, a "Seller"). See "Triad and the
Seller."
Servicer...................... Triad or such other entity named as Servicer
in the related Prospectus Supplement (in such
capacity, the "Servicer"). See "Triad's
Automobile Financing Program." Each
Prospectus Supplement will specify whether
the Servicer will service the Receivables in
the related Trust Property directly or
indirectly through one or more subservicers
(each, a "Subservicer").
Trustee....................... The Trustee for each Series of Securities
will be specified in the related Prospectus
Supplement. In addition, a Trust may
separately enter into an Indenture and may
issue Notes pursuant to such Indenture; in
any such case, the Trust and the Indenture
will be administered by separate, independent
trustees as required by the rules and
regulations under the Trust Indenture Act of
1939 and the Investment Company Act of 1940.
The Securities................ Each Class of Securities of any Series will
either evidence beneficial interests in a
segregated pool of assets (the "Trust
Property") (such Securities, "Certificates")
or will represent indebtedness of the Trust
secured by the Trust Property (such
Securities, "Notes"), as described herein and
in the related Prospectus Supplement.
With respect to Securities that represent
debt issued by the Trust, the Trust will
enter into an indenture (each, an
"Indenture") by and between the Trust and the
trustee named in such Indenture (the
"Indenture Trustee" or "Trustee"). Each
Indenture will describe the related pool of
Receivables comprising the Trust
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Property and securing the debt issued by the
related Issuer. The Receivables comprising
the Trust Property will be serviced by the
Servicer pursuant to a servicing agreement
(each, a "Servicing Agreement") by and
between the Servicer, the related Issuer and
the other parties named thereto. The
contractual arrangements relating to the
establishment of a Trust, if any, the
servicing of the related Receivables and the
issuance of the related Securities may be
contained in a single agreement, or in
several agreements which combine certain
aspects of the Trust Agreement, the Servicing
Agreement and the Indenture described above
(for example, a servicing and collateral
management agreement). For purposes of this
Prospectus, the term "Trust Documents" as
used with respect to a Trust means,
collectively, and except as otherwise
specified, any and all agreements relating to
the establishment of the related Trust, the
transfer of Receivables to the Trust, the
servicing of the related Receivables and the
issuance of the related Securities including,
without limitation, the Indenture. The term
"Trustee" means any and all persons acting as
a trustee pursuant to the Trust Documents.
SECURITIES WILL BE NON-RECOURSE. The
Securities will not be obligations, either
recourse or non-recourse, of Triad, any
Seller, the related Servicer or any person
other than the related Issuer. The Notes of a
given Series represent obligations of the
Issuer, and the Certificates of a given
Series represent beneficial interests in the
related Issuer only and do not represent
interests in or obligations of Triad, any
Seller, the related Servicer or any of their
respective affiliates other than the related
Issuer. In the case of Securities that
represent beneficial ownership interests in
the related Issuer, such Securities will
represent the beneficial ownership interests
in such Issuer and the sole source of payment
will be the assets of such Issuer. In the
case of Securities that represent debt issued
by the related Issuer, such Securities will
be secured by assets in the related Trust
Property. Notwithstanding the foregoing, and
as to be described in the related Prospectus
Supplement, certain types of credit
enhancement, such as a letter of credit,
financial guaranty insurance policy or
reserve fund may constitute a full recourse
obligation of the issuer of such credit
enhancement.
GENERAL PAYMENT TERMS OF SECURITIES. As
provided in the related Trust Documents and
as described in the related Prospectus
Supplement, the holders of the Securities
("Securityholders") will be entitled to
receive payments on their Securities on
specified dates (each, a "Payment Date").
Payment Dates with respect to Securities will
occur monthly, quarterly or semiannually, as
described in the related Prospectus
Supplement. The related Prospectus Supplement
will describe a date (the "Record Date")
preceding such Payment Date, as of which the
Trustee or its paying agent will fix the
identity of the Securityholders for the
purpose of receiving payments on the next
succeeding Payment Date. As described in the
related
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Prospectus Supplement, the Payment Date will
be a specified day of each month, (or, in the
case of quarterly-pay Securities, a specified
day of every third month; and in the case of
semiannual-pay Securities, a specified day of
every sixth month) and the Record Date will
be the close of business as of a specified
day preceding such Payment Date. Each
Indenture and Trust Agreement will describe a
period (each, a "Collection Period")
preceding each Payment Date (for example, in
the case of monthly-pay Securities, the
calendar month preceding the month in which a
Payment Date occurs). As more fully described
in the related Prospectus Supplement,
collections received on or with respect to
the related Receivables constituting Trust
Property during a Collection Period will be
required to be remitted by the Servicer to
the related Trustee prior to the related
Payment Date and will be used to fund
payments to Securityholders on such Payment
Date. As more fully specified in the related
Prospectus Supplement, neither the Securities
nor the underlying Receivables will be
guaranteed or insured by any governmental
agency or instrumentality or Triad, any
Seller, the related Servicer, any Trustee, or
any of their respective affiliates.
Each Series of Securities will be issued
pursuant to the related Indenture, in the
case of the Notes, and pursuant to the
related Trust Agreement, in the case of the
Certificates. The related Prospectus
Supplement will specify which Class or
Classes of Securities of the related Series
are being offered thereby.
Each Class of Securities will have a stated
security balance (the "Security Balance") and
will accrue interest on such Security Balance
at a specified rate (with respect to each
Class of Securities the "Interest Rate") as
set forth in the related Prospectus
Supplement. Each Class of Securities may have
a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate,
or any combination of the foregoing. The
related Prospectus Supplement will specify
the Interest Rate, or the method for
determining the applicable Interest Rate, for
each Class of Securities.
A Series of Securities may include two or
more Classes of Securities that differ as to
timing and priority of distributions,
seniority, allocations of losses, Interest
Rate or amount of distributions in respect of
principal or interest. Additionally,
distributions in respect of principal or
interest in respect of any such Class or
Classes may or may not be made upon the
occurrence of specified events or on the
basis of collections from designated portions
of the related Receivables Pool. If specified
in the related Prospectus Supplement, one or
more Classes of Securities ("Strip
Securities") may be entitled to (i) principal
distributions with disproportionate, nominal
or no interest distributions or (ii) interest
distributions with disproportionate, nominal
or no principal distributions. If specified
in the related Prospectus Supplement, a
Series may include one or more Classes of
Securities ("Accrual Securities"), as to
which certain
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accrued interest will not be distributed but
rather will be added to the principal balance
(or nominal balance, in the case of Accrual
Securities which are also Strip Securities)
thereof on each Payment Date or in the manner
described in the related Prospectus
Supplement. If so provided in the related
Prospectus Supplement, a Series may include
one or more other Classes of Securities
(collectively, the "Senior Securities") that
are senior to one or more other Classes of
Securities (collectively, the "Subordinate
Securities") in respect of certain
distributions of principal and interest and
allocations of losses on Receivables. In
addition, certain Classes of Senior (or
Subordinate) Securities may be senior to
other Classes of Senior (or Subordinate)
Securities in respect of such distributions
or losses. See "Description of the
Securities--General Payment Terms of the
Securities".
Securities will be available for purchase in
the minimum denomination specified in the
related Prospectus Supplement and will be
available in book-entry form unless the
related Prospectus Supplement provides only
for Definitive Securities. Securityholders
will only be able to receive Definitive
Securities in the limited circumstances
described herein or in the related Prospectus
Supplement. See "Description of the
Securities-- Definitive Securities".
If the Servicer or any Subservicer exercises
its option to purchase the Receivables of a
Trust in the manner and on the respective
terms and conditions described under
"Description of the Trust
Documents--Termination", the Securities will
be prepaid as set forth in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a
Pre-Funding Account that will be used to
purchase additional Receivables after the
applicable Closing Date, one or more Classes
of Securities may be subject to a partial
prepayment of principal at or immediately
following the end of the period specified in
such Prospectus Supplement for the purchase
of such additional Receivables, in the manner
and to the extent specified in the related
Prospectus Supplement.
The Residual Interest......... With respect to each Trust, the Residual
Interest at any time represents the rights to
the related Trust Property in excess of the
Securityholders' interest of all Series then
outstanding that were issued by such Trust.
The Residual Interest in any Trust Property
will fluctuate as the Aggregate Principal
Balance (as hereinafter defined) of such
Trust changes from time to time. A portion of
the Residual Interest in any Trust may be
sold separately in one or more public or
private transactions.
Cross-Collateralization....... As described in the related Trust Documents
and the related Prospectus Supplement, the
source of payment for Securities of each
Series will be the assets of the related
Trust Property only.
However, as may be described in the related
Prospectus Supplement, a Series or class of
Securities may include the right
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to receive moneys from a common pool of
credit enhancement which may be available for
more than one Series of Securities, such as a
master reserve account, master insurance
policy or a master collateral pool consisting
of similar Receivables. Notwithstanding the
foregoing, and as described in the related
Prospectus Supplement, no payment received on
any Receivable held by any Trust may be
applied to the payment of Securities issued
by any other Trust (except to the limited
extent that certain collections in excess of
the amounts needed to pay the related
Securities may be deposited in a common
master reserve account or an
overcollateralization account that provides
credit enhancement for more than one Series
of Securities issued pursuant to the related
Trust Documents).
Trust Property................ As specified in the related Prospectus
Supplement, the Trust Property will include:
(i) a pool of certain prime and/or non-prime
motor vehicle retail installment contracts
(the "Receivables") secured by new and used
automobiles and light-duty trucks (the
"Financed Vehicles"), (ii) certain monies
payable thereunder after the Cutoff Date (as
specified in the related Prospectus
Supplement), (iii) security interests in the
Financed Vehicles, (iv) any proceeds from
claims under certain related insurance
policies, (v) certain rights under the
Receivables Purchase Agreement, (vi) certain
bank accounts, including the proceeds
thereof, and (vii) all proceeds thereof and
certain other rights under the Trust
Documents. The Trust may not have a perfected
security interest in the Financed Vehicles in
some states. See "Risk Factors--The Trusts'
Security Interests in Financed Vehicles May
be Unenforceable in Some States."
If and to the extent specified in the related
Prospectus Supplement, credit enhancement
with respect to Trust Property or any class
of Securities may include any one or more of
the following: a Policy issued by an insurer
specified in the related Prospectus
Supplement, a reserve account, letters of
credit, credit or liquidity facilities,
repurchase obligations, third party payments
or other support, cash deposits or other
arrangements. In addition to or in lieu of
the foregoing, credit enhancement may be
provided by means of subordination,
cross-support among the Receivables or
overcollateralization. See "Description of
the Trust Documents--Credit and Cash Flow
Enhancements." The Receivables are
obligations for the purchase of the Financed
Vehicles or evidence borrowings used to
acquire the Financed Vehicles. As specified
in the related Prospectus Supplement, the
Receivables may consist of any combination of
"Rule of 78s Receivables," "Actuarial
Receivables" or "Simple Interest
Receivables". Under a Rule of 78's
Receivable, the rate at which the amount of
finance charges is earned and,
correspondingly, the amount of each scheduled
monthly payment allocated to reduction of the
outstanding principal balance of the related
Receivables are calculated in accordance with
the "Rule of 78's". Under the Rule of 78's,
the
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portion of a payment allocable to interest
earned during that month is determined by
multiplying the total amount of interest
payable over the term of the Receivable by a
fraction, the denominator of which is equal
to the sum of a series of numbers beginning
with one and ending with the number of
scheduled monthly payments due under the
related Receivable, and the numerator of
which is the number of payments remaining
under such Receivable before giving effect to
the payment to which the fraction is being
applied. The difference between the amount of
the scheduled monthly payment made by the
Obligor and the amount of earned interest
calculated for the month is applied to
principal reduction. Under the Rule of 78s
the portion of each payment allocable to
interest is higher during the early months of
the term of a Receivable and lower during
later months than that under a constant yield
method for allocating payments between
interest and principal.
An Actuarial Receivable provides for
amortization of the loan over a series of
fixed level monthly installments. Each
scheduled monthly payment is deemed to
consist of an amount of interest equal to
1/12 of the stated APR of the Receivable
multiplied by the outstanding principal
balance of the Receivable and an amount of
principal equal to the remainder of such
scheduled monthly payment.
All payments received by the Servicer on or
in respect of Rule of 78s Receivables and
Actuarial Receivables ("Precomputed
Receivables"), including the final scheduled
payment, will be allocated pursuant to the
Servicing Agreement on an actuarial basis. No
adjustment will be made in the event of early
or late payments, although in the latter case
the Obligor may be subject to a late charge.
"Simple Interest Receivables" provide for the
amortization of the amount financed under the
Receivable over a series of fixed level
monthly payments. However, unlike the monthly
payment under Rule 78s Receivables, each
monthly payment consists of an installment of
interest which is calculated on the basis of
the outstanding principal balance of the
Receivable multiplied by the stated APR and
further multiplied by the period elapsed (as
a fraction of a calendar year) since the
preceding payment of interest was made. As
payments are received under a Simple Interest
Receivable, the amount received is applied
first to interest accrued to the date
immediately preceding the date of payment and
the balance is applied to reduce the unpaid
principal balance. Accordingly if an Obligor
pays a fixed monthly installment before its
scheduled due date, the portion of the
payment allocable to interest for the period
since the preceding payment was made will be
less than it would have been had the payment
been made as scheduled, and the portion of
the payment applied to reduce the unpaid
principal balance will be correspondingly
greater. Conversely, if an Obligor pays a
fixed monthly installment after its scheduled
due date, the portion of
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the payment allocable to interest for the
period since the preceding payment was made
will be greater than it would have been had
the payment been made as scheduled, and the
portion of the payment applied to reduce the
unpaid principal balance will be
correspondingly less. In either case, the
Obligor pays a fixed monthly installment
until the final scheduled payment date, at
which time the amount of the final
installment is increased or decreased as
necessary to repay the then outstanding
principal balance.
If an Obligor prepays a Precomputed
Receivable in full (voluntarily or by
acceleration), it is entitled to a rebate of
the portion of the outstanding balance then
due and payable attributable to unearned
finance charges. If a Simple Interest
Receivable is prepaid, rather than receive a
rebate, the Obligor is required to pay
interest only to the date immediately
preceding the date of prepayment. The amount
of a rebate under a Precomputed Receivable
generally will be less than the remaining
scheduled payments of interest that would be
due under a Simple Interest Receivable for
which all payments were made on schedule.
Distributions to Securityholders may not be
affected by rebates related to the Rule of
78s Receivables because pursuant to the
related Prospectus Supplement such
distributions will be determined using the
actuarial method.
The related Prospectus Supplement will
further describe the type and characteristics
of the Receivables included in the Trust
Property relating to the Securities offered
pursuant to this Prospectus and the related
Prospectus Supplement.
On the date of issuance of a Series of
Securities specified in the related
Prospectus Supplement (the "Closing Date" for
such Series), the applicable Seller will
either convey Receivables to the related
Trust pursuant to a pooling and servicing
agreement or a sale and servicing agreement.
The obligations of Triad, the Servicer, the
related Trustee and the related Indenture
Trustee, if any, under the related Trust
Documents include those specified below and
in the related Prospectus Supplement.
In addition, if so specified in the related
Prospectus Supplement, the Trust Property
will include monies on deposit in a
segregated account (the "Pre-Funding
Account") to be established with the Trustee,
which will be used to acquire additional
Receivables (the "Subsequent Receivables")
from time to time during the Pre-Funding
Period (as defined below). See "--Pre-funding
Account" below.
Pre-Funding Account........... If and to the extend provided in the related
Prospectus Supplement, the Seller will be
obligated (subject only to the availability
thereof) to sell Subsequent Receivables
having an aggregate principal balance
approximately equal to the amount deposited
to the Pre-Funding Account on the Closing
Date (the "Pre-Funded Amount"), which in any
case will not exceed 30% of the Trust
Property, and the Trust will be obligated to
purchase
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such Subsequent Receivables (subject to the
satisfaction of certain conditions set forth
in the related Trust Documents) from time to
time during the period (the "Pre-Funding
Period"), not to exceed a specified number of
months, set forth in such Prospectus
Supplement, which will not exceed three
months if the Trust is formed pursuant to a
Pooling and Servicing Agreement or nine
months if the Trust is formed pursuant to a
Trust Agreement. Any Subsequent Receivables
conveyed to a Trust will have been acquired
by the Seller, directly or indirectly, from
Triad and will meet all of the credit
underwriting and other criteria set forth
herein and in the related Prospectus
Supplement. See "The Receivables", and
"Description of the Trust Documents--Sale and
Assignment of Receivables" herein and "The
Receivables Pool" in the related Prospectus
Supplement.
The Pre-Funding Account, if any, will be
reduced during the related Pre-Funding Period
by the amount thereof used to purchase
Subsequent Receivables. Amounts on deposit in
any Pre-Funding Account during the related
Pre-Funding Period will either (i) be held
uninvested or (ii) will be invested in cash-
equivalent investments rated in one of the
four highest rating categories by at least
one Rating Agency and which will either
mature prior to the end of the Pre-Funding
Period, or will be drawable on demand. Any
resultant investment income, less any related
investment expenses ("Investment Income"),
will be added on the Payment Date immediately
following the date on which such Investment
Income is paid to the Trust, to interest
collections on the Receivables for the
related Collection Period and distributed in
the manner specified in the related
Prospectus Supplement. Any funds remaining in
a Pre-Funding Account at the end of the
related Pre-Funding Period will be
distributed as a prepayment or early
distribution of principal to holders of one
or more classes of the Securities of the
related Series of Securities, in the amounts
and in accordance with the payment priorities
specified in the related Prospectus
Supplement. Such distribution may affect the
yield realized by Securityholders and
Securityholders may not be able to reinvest
those funds in investments realizing
comparable returns.
As used in this Prospectus, the term
Receivables will include the Receivables
transferred to a Trust on the related Closing
Date (such Receivables, the "Initial
Receivables") as well as any Subsequent
Receivables transferred to such Trust during
the related Pre-Funding Period, if any.
Registration of Securities.... Securities may be represented by global
securities registered in the name of Cede &
Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC"), or another nominee. In
such case, Securityholders will not be
entitled to receive definitive securities
representing such Securityholders' interests,
except in certain limited circumstances
described in the related
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<S> <C>
Prospectus Supplement. See "Description of
the Securities-- Book Entry Registration"
herein.
Credit and Cash Flow
Enhancement................. If and to the extent specified in the related
Prospectus Supplement, credit enhancement
with respect to Trust Property or any Class
of Securities may include any one or more of
the following: subordination of one or more
other classes of Securities of the same
Series, a reserve account, a Policy issued by
an insurer specified in the related
Prospectus Supplement (a "Credit Enhancer"),
letters of credit, credit or liquidity
facilities, third party payments or other
support, cash deposits or other arrangements.
Any form of credit enhancement will have
certain limitations and exclusions from
coverage thereunder, which will be described
in the related Prospectus Supplement. See
"Description of the Trust Documents--Credit
and Cash Flow Enhancements."
Repurchase Obligations and the
Receivables Purchase
Agreement................... As more fully described in the related
Prospectus Supplement, Triad will be
obligated to repurchase from the Seller or
replace any Receivable which was transferred
pursuant to a Receivables Purchase Agreement
and the Seller will be obligated to
repurchase or replace from the Trust any
Receivable which was transferred pursuant to
a Pooling and Servicing Agreement or a Sale
and Servicing Agreement, if the interest of
the Securityholders therein is materially
adversely affected by a breach of any
representation or warranty made by Triad or
the Seller with respect to such Receivable,
which breach has not been cured. In addition,
if so specified in the related Prospectus
Supplement, Triad may from time to time
repurchase certain Receivables of the Trust
Property, subject to specified conditions set
forth in the related Trust Documents.
Servicer's Compensation....... The Servicer shall be entitled to receive a
fee for servicing the Trust Property equal to
a specified percentage of the value of such
Trust Property and reimbursement for certain
other expenses as set forth in the related
Prospectus Supplement. See "Description of
the Trust Documents--Servicing Compensation"
herein and in the related Prospectus
Supplement.
Optional Termination.......... The Servicer, Triad, or, if specified in the
related Prospectus Supplement, certain other
entities may, at their respective options,
effect early retirement of a Series of
Securities under the circumstances and in the
manner set forth herein under "Description of
the Trust Documents--Termination" and in the
related Prospectus Supplement.
Mandatory Termination......... The Trustee, the Servicer or certain other
entities specified in the related Prospectus
Supplement may be required to effect early
retirement of all or any portion of a Series
of Securities by soliciting competitive bids
for the purchase of the Trust Property or
otherwise, under other circumstances and in
the manner specified in "Description of the
Trust Documents--Termination" and in the
related Prospectus Supplement.
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Tax Considerations............ Unless the Prospectus Supplement specifies
that the related Trust will be treated as a
grantor trust, upon the issuance of the
related Series, Dechert Price & Rhoads,
Federal Tax Counsel to such Trust ("Federal
Tax Counsel"), will deliver an opinion to the
effect that, for federal income tax purposes:
(i) any Notes of such Series will be
characterized as debt, and (ii) such trust
will not be classified as an association (or
a publicly traded partnership) taxable as a
corporation. In respect of any such Series,
each owner of a Note, by the acceptance of a
beneficial interest in a Note of such Series,
will agree to treat such Trust as a
partnership in which such owner of a
Certificate is a partner for federal, state
and local tax purposes.
If the Prospectus Supplement specifies that
the related Trust will be treated as a
grantor trust, upon the issuance of the
related Series of Certificates, Federal Tax
Counsel to such Trust will deliver an opinion
to the effect that such Trust will be treated
as a grantor trust for federal income tax
purposes and will not be subject to federal
income tax. Accordingly, the owners of
Certificates would be treated as owners of
the Receivables for federal income tax
purposes.
Investors are urged to consult their tax
advisors and to review "Federal Income Tax
Consequences" herein and in the related
Prospectus Supplement for additional
information concerning the application of
federal tax laws.
ERISA Considerations.......... The Prospectus Supplement for each Series of
Securities will summarize, subject to the
limitations discussed therein, considerations
under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), relevant
to the purchase of such Securities by
employee benefit plans and individual
retirement accounts. See "ERISA
Considerations" in the related Prospectus
Supplement.
Ratings....................... Each Class of Securities offered pursuant to
this Prospectus and the related Prospectus
and the related Prospectus Supplement will be
rated on the related Closing Date in one of
the four highest rating categories by one or
more "nationally recognized statistical
rating organizations", as defined in the
Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and commonly referred
to as "Rating Agencies". Such ratings will
address, in the opinion of such Rating
Agencies, the likelihood that the Issuer will
be able to make timely payment of all amounts
due on the related Securities in accordance
with the terms thereof. Such ratings will
neither address any prepayment or yield
considerations applicable to any Securities
nor constitute a recommendation to buy, sell
or hold any Securities. There is no assurance
that the rating initially assigned to such
Securities will not be subsequently lowered
or withdrawn by the Rating Agencies.
The rating expected to be received with
respect to any Securities will be set forth
in the related Prospectus Supplement.
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RISK FACTORS
Prospective Securityholders should consider, among other things, the
following factors in connection with the purchase of the Securities:
LIMITED OPERATING HISTORY OF TRIAD MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
Generally, all of the Receivables will be acquired or originated by Triad in
its normal course of business in accordance with credit underwriting criteria
established by Triad. See "Triad's Automobile Financing Program." Triad
commenced operations in 1989 as a prime automobile lender, but changed its focus
to the non-prime market in 1993. Triad began servicing all new contract
purchases in June 1996. Triad therefore has limited historical performance data
with respect to the motor vehicle retail installment sale contracts it purchases
and services. Although Triad has calculated and presented herein its net loss
and delinquency experience with respect to its portfolio of serviced contracts
(the "Servicing Portfolio"), there can be no assurance that the information
presented will reflect actual experience with respect to the Receivables.
RISK OF PAYMENT DEFAULTS BY NON-PRIME OBLIGORS HIGHER THAN PRIME OBLIGORS
The Obligors on the Receivables to be conveyed to a Trust will include
"non-prime" borrowers who have limited or adverse credit histories, low income
or past credit problems and, therefore, are unable to obtain financing from
traditional sources of consumer credit. The average interest rate charged by
Triad to such "non-prime" borrowers is generally higher than that charged to
more creditworthy customers. The payment experience on receivables of Obligors
with this credit profile is likely to be different from that on receivables of
traditional auto financing sources in that default rates are likely to be
higher. In addition, the payment experience on such receivables is likely to be
more sensitive to changes in the economic climate in the areas in which such
Obligors reside. As a result of the credit profile of the Obligors and the APRs
of such receivables, the historical credit loss and delinquency rates on such
receivables are generally higher than those experienced by banks and the captive
finance companies of the automobile manufacturers.
A CHANGE IN SERVICER MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Triad believes that its credit loss and delinquency experience reflect in
part its trained staff and collection procedures. If Triad were to cease acting
as Servicer, delays in processing payments and collections on the Receivables
and information in respect thereof could occur and result in delays in payments
to the Securityholders.
PREPAYMENTS ON RECEIVABLES MAY ADVERSELY AFFECT INTEREST RATE YIELD AND MATURITY
OF SECURITIES
All of the Receivables are prepayable at any time. The rate of prepayments
on the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of Triad, unless
the Receivable is repaid by the Obligor at the time of such sale or transfer.
(For this purpose the term "prepayments" includes prepayments in full, certain
partial prepayments related to refunds of extended service contract costs and
unearned insurance premiums, liquidations due to default, as well as receipts of
proceeds from physical damage, credit life and credit accident and health
insurance policies and certain other Receivables repurchased for administrative
reasons.) The rate of prepayment on the Receivables may also be influenced by
the structure of the loan, the nature of the Obligors and the Financed Vehicles
and servicing decisions as discussed above. In addition, under certain
circumstances, Triad and the Seller are obligated to repurchase or replace
Receivables as a result of breaches of representations and warranties, and under
certain circumstances the Servicer is obligated to purchase or replace
Receivables pursuant to the Servicing Agreement as a result of breaches of
certain covenants. Subject to certain conditions, the Servicer also has the
right to purchase the Receivables when the aggregate principal
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balance thereof is less than a specified percentage (set forth in the related
Prospectus Supplement) of the Aggregate Principal Balance thereof on the Cutoff
Date. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the Securityholders.
The rate of prepayments of Receivables cannot be predicted and is influenced
by a wide variety of economic, social, and other factors, including prevailing
interest rates, the availability of alternate financing and local and regional
economic conditions. Therefore, no assurance can be given as to the level of
prepayments that a Trust will experience.
Securityholders should consider, in the case of Securities purchased at a
discount, the risk that a slower than anticipated rate of prepayment on the
Receivables could result in an actual yield that is less than the anticipated
yield and, in the case of any Securities purchased at a premium, the risk that a
faster than anticipated rate of prepayment on the Receivables could result in an
actual yield that is less than the anticipated yield.
INCLUSION OF SUBSEQUENT RECEIVABLES IN A TRUST MAY RESULT IN ADDITIONAL RISK OF
PAYMENT REDUCTIONS OR DELAYS OR REDUCTIONS IN INTEREST RATE YIELD; PREPAYMENT
AND REINVESTMENT RISK IF SUBSEQUENT RECEIVABLES ARE NOT PURCHASED BY THE TRUST
If so provided in the related Prospectus Supplement, on the Closing Date the
Seller will deposit the Pre-Funded Amount specified in such Prospectus
Supplement into the Pre-Funding Account. The Pre-Funded Amount will be used to
purchase Subsequent Receivables from the Seller (which, in turn, will acquire
such Subsequent Receivables from Triad) from time to time during the related
Pre-Funding Period. During the related Pre-Funding Period and until such amounts
are applied by the Trustee to purchase Subsequent Receivables, amounts on
deposit in the Pre-Funding Account will be either (i) held uninvested or (ii)
invested in cash-equivalent investments rated in one of the four highest rating
categories by at least one Rating Agency and which will either mature prior to
the end of the Pre-Funding Period, or will be drawable on demand. Any resultant
investment income, less any related investment expenses ("Investment Income"),
will be added, on the Payment Date immediately following the date on which such
Investment Income is paid to the Trust, to interest collections on the
Receivables for the related Collection Period and distributed in the manner
specified in the related Prospectus Supplement.
To the extent that the entire Pre-Funded Amount has not been applied to the
purchase of Subsequent Receivables by the end of the related Pre-Funding Period,
any amounts remaining in the Pre-Funding Account will be distributed as a
prepayment of principal to Securityholders on the Payment Date at or immediately
following the end of the Pre-Funding Period, in the amounts and pursuant to the
priorities set forth in the related Prospectus Supplement. Any such prepayment
of principal could have the effect of shortening the weighted average life of
the Securities of the related Series. In addition, holders of the related
Securities will bear the risk that they may be unable to reinvest any such
principal prepayment at yields at least equal to the yield on such Securities.
POSSIBLE DEVIATIONS IN CHARACTERISTICS OF THE RECEIVABLE POOL WHEN SUBSEQUENT
RECEIVABLES ARE PURCHASED BY THE TRUST
If so provided in the related Prospectus Supplement, the Seller will be
obligated pursuant to the Trust Documents to sell Subsequent Receivables to the
Trust, and the Trust will be obligated to purchase such Subsequent Receivables,
subject only to the satisfaction of certain conditions set forth in the Trust
Documents and described in the related Prospectus Supplement. If the principal
amount of the eligible Subsequent Receivables acquired by the Seller from Triad
during a Pre-Funding Period is less than the Pre-Funded Amount, the Seller may
have insufficient Subsequent Receivables to transfer to a Trust and holders of
one or more Classes of the related Series of Securities may receive a prepayment
or early distribution of principal at the end of the Pre-Funding Period.
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Any conveyance of Subsequent Receivables to a Trust is subject to the
satisfaction, on or before the related transfer date (each, a "Subsequent
Transfer Date"), of the following conditions precedent, among others: (i) each
such Subsequent Receivable must satisfy the eligibility criteria specified in
the related Receivables Purchase Agreement; (ii) the Seller shall not have
selected such Subsequent Receivables in a manner that is adverse to the
interests of holders of the related Securities; (iii) as of the respective
Cutoff Dates for such Subsequent Receivables, all of the Receivables in the
Trust, including the Subsequent Receivables to be conveyed to the Trust as of
such date, must satisfy the parameters described under "The Receivables" herein
and "The Receivables" in the related Prospectus Supplement; and (iv) the Seller
must execute and deliver to such Trust a written assignment conveying such
Subsequent Receivables to such Trust. In addition, as and to the extent
specified in the related Prospectus Supplement, the conveyance of Subsequent
Receivables to a Trust is subject to the satisfaction of the condition
precedent, among others, that the Seller deliver certain legal opinions to the
related Trustee with respect to the validity of the conveyance of the Subsequent
Receivables to the Trust. If any such conditions precedent are not met with
respect to any Subsequent Receivables, Triad or the Seller, as specified in the
related Prospectus Supplement, will be required to repurchase such Subsequent
Receivables from the related Trust, at a purchase price equal to the related
Purchase Amounts therefor.
Except as described herein and in the related Prospectus Supplement, there
will be no other required characteristics of Subsequent Receivables. Therefore,
the characteristics of the Subsequent Receivables conveyed to a Trust from time
to time during the related Pre-Funding Period may deviate significantly from the
characteristics of the entire Receivables Pool as of the related Closing Date.
See "The Receivables" herein.
THE TRUST'S SECURITY INTERESTS IN FINANCED VEHICLES MAY BE UNENFORCEABLE IN SOME
STATES AS CERTIFICATES OF TITLE WILL NOT BE AMENDED
In connection with each sale of Receivables to the Trust, security interests
in the Financed Vehicles securing the Receivables will be assigned by Triad to
the Seller and by the Seller to the Trust. In most states, the notation of an
assigned party's security interest on the vehicle's certificate of title will be
sufficient to protect the rights of the assigned party against the rights of
subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. Due to the administrative burden and
expense of retitling each of the Financed Vehicles in the appropriate state, the
certificates of title to the Financed Vehicles will not be amended or reissued
to reflect the assignment to the Trust. In the absence of such an amendment or
reissuance, the Trust may not have a perfected security interest in the Financed
Vehicles securing the Receivables in some states. By virtue of the assignment of
the applicable Receivables Purchase Agreement to the related Trust, Triad will
be obligated to repurchase or replace any Receivable sold to the Trust as to
which there did not exist on the Closing Date a perfected security interest in
favor of Triad in the Financed Vehicle or for which an application for
certificate of title noting the lien of Triad has not been filed on or before
the Closing Date, and the Servicer will be obligated to purchase any Receivable
sold to the Trust as to which it failed to use best efforts to take such steps
as are necessary to maintain a perfected security interest in favor of Triad in
the Financed Vehicle securing such Receivable if, in either case, such breach
materially and adversely affects such Receivable and if such failure or breach
is not cured by the last day of the first full month following the discovery by
or notice to Triad or the Servicer, as the case may be, of such breach. To the
extent the security interest of Triad is perfected, the Trust will have a prior
claim over subsequent purchasers of such Financed Vehicle and holders of
subsequently perfected security interests.
THE NON-PRIORITY OF THE TRUST'S SECURITY INTEREST IN CHATTEL PAPER OR A FINANCED
VEHICLE MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
In connection with the issuance of any Series of Securities, Triad will
originate or acquire Receivables as further described herein. See "The Trust
Property". The Seller will warrant in a Sale and Servicing
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Agreement or Pooling and Servicing Agreement, as applicable, that the transfer
of the Contracts to such Trust is either a valid assignment, transfer and
conveyance of the Receivables to the Trust or that the Trustee on behalf of the
Securityholders has a valid security interest in such Receivables. As will be
described in the related Prospectus Supplement, the related Trust Documents will
provide that the Trustee or Servicer will be required to maintain possession of
such original copies of all Receivables that constitute chattel paper; provided
that if the Trustee has custody, the Servicer may take possession of such
original copies as necessary for the enforcement of any Receivable. If the
Servicer, the Trustee or other third party, while in possession of any
Receivable, sells or pledges and delivers such Receivable to another party in
violation of the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, there is a risk that such other party could acquire an
interest in such Receivable having a priority over the Trust's interest.
Furthermore, if the Servicer or a third party, while in possession of any
Receivable, is rendered insolvent, such an event of insolvency may result in
competing claims to ownership or security interests in such Receivable. Such an
attempt, even if unsuccessful, could result in delays in payments on the
Securities. If successful, such attempt could result in losses to the
Securityholders or an acceleration of the repayment of the Securities. The
Servicer will be obligated to repurchase any Receivable if there is a breach of
the Servicer's representations and warranties that materially and adversely
affects the interests of the Trust in any Receivable and such breach has not
been cured.
Additionally, against liens for repairs of a Financed Vehicle or for taxes
unpaid by an Obligor under a Receivable, or through fraud, forgery, negligence
or error, Triad, and therefore the Trust, could lose the priority of its
security interest or its security interest in a Financed Vehicle. Neither Triad
nor the Servicer will have any obligation to purchase a Receivable as to which a
lien for repairs of a Financed Vehicle or for taxes unpaid by an Obligor under a
Receivable result in losing the priority of the security interest in such
Financed Vehicle after the Closing Date of the related Trust. See "Legal Aspects
of the Receivables-- Security Interests in the Financed Vehicles".
LIMITATION ON ENFORCEABILITY OF THE RECEIVABLES BECAUSE OF CONSUMER PROTECTION
LAWS MAY CAUSE PAYMENT REDUCTION OR DELAYS
Federal and state consumer protection laws impose requirements on creditors
in connection with extensions of credit and collections of retail installment
contracts, and certain of these laws make an assignee of such a contract liable
to the Obligor thereon for any violation by the lender. To the extent specified
herein and in the related Prospectus Supplement, Triad will be obligated to
repurchase or replace any Receivable that fails to comply with such legal
requirements from the Seller and the Seller shall be obligated to repurchase or
replace such Receivable from the Trust which was materially and adversely
affected by the failure as of the Closing Date to comply with such requirements.
See "Legal Aspects of the Receivables--Consumer Protection Laws".
INSOLVENCY OF TRIAD OR THE SELLER MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Each Seller has taken or will take steps in structuring the transactions
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by Triad under the United States Bankruptcy
Code or similar state laws ("Insolvency Laws") will not result in consolidation
of the assets and liabilities of the Seller with those of Triad. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to articles of incorporation containing certain limitations (including
restrictions on the nature of the Seller's business, a restriction on the
Seller's ability to commence a voluntary case or proceeding under any Insolvency
Law without the prior unanimous affirmative vote of all of its directors and a
requirement that at least one director qualifies under the articles of
incorporation as an "independent director"). However, there can be no assurance
that the activities of the Seller would not result in a court concluding that
the assets and liabilities of such Seller should be consolidated with those of
Triad in a proceeding under any Insolvency Law. If a court were to reach such a
conclusion, then delays
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in distributions on the related Securities could occur or reductions in the
amounts of such distributions could result. See "Triad and the Seller".
Triad will warrant to the Seller in each Receivables Purchase Agreement that
the sale of the Receivables by it to the Seller is a valid sale of such
Receivables to such Seller. In addition, Triad and each Seller will treat the
transactions described herein as a sale of the Receivables to the Seller, and
each Seller has taken and will take all actions that are required to perfect the
Seller's ownership interest in the Receivables. Notwithstanding the foregoing,
if Triad were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor itself were to take the position that the
sale of Receivables to the Seller should be recharacterized as a pledge of such
Receivables to secure a borrowing of such debtor, then delays in payments of
collections of Receivables to the Seller could occur or, should the court rule
in favor of any such trustee, debtor or creditor, reductions in the amount of
such payments could result. If the transfer of Receivables to the Seller is
recharacterized as a pledge, then a tax or government lien on the property of
Triad arising before the transfer of a Receivable to the Seller may have
priority over the Seller's interest in such Receivable. If the transactions
contemplated herein are treated as a sale, the Receivables would not be part of
the bankruptcy estate of Triad, and would not be available to creditors of
Triad.
The U.S. Court of Appeals for the Tenth Circuit issued its opinion in
OCTAGON GAS SYSTEMS, INC. V. RIMMER (IN RE MERIDIAN RESERVE, INC.) (decided May
27, 1993) in which it concluded (noting that its position is in contrast to that
taken by another court) that accounts receivable sold by the debtor prior to the
filing for bankruptcy remain property of the debtor's bankruptcy estate.
Although the Receivables are likely to be viewed as "chattel paper", as defined
under the Uniform Commercial Code, rather than as accounts, the rationale behind
the Octagon holding is equally applicable to chattel paper. The circumstances
under which the OCTAGON ruling would apply are not fully known, and the extent
to which the OCTAGON decision will be followed in other courts or outside of the
Tenth Circuit is not certain. If the holding in the OCTAGON case were applied in
a bankruptcy of Triad, however, even if the transfers of Receivables to the
Seller and to the Trust were treated as sales, the Receivables would be part of
the bankruptcy estate and would be subject to claims of certain creditors and
delays and reductions in payments to the Securityholders could result. Triad
will warrant in the related Receivables Purchase Agreement that the sale of the
Receivables to the Seller is a valid sale of the Receivables to the Seller, and
the Seller will warrant in the Sale and Servicing Agreement or Pooling and
Servicing Agreement that the sale of the Receivables to the Trust is a valid
sale of the Receivables to the Trust.
ADVERSE JUDGMENTS IN LITIGATION MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Due to the consumer-oriented nature of Triad's industry and the application
of certain laws and regulations, industry participants are regularly named as
defendants in litigation alleging violations of federal and state laws and
regulations and consumer law torts, including fraud. Many of these actions
involve alleged violations of consumer protection laws. A significant judgment
against Triad or others within the industry in connection with any such
litigation could have a material adverse effect on Triad's financial condition,
results of operations and/or its ability to perform its obligations under the
Receivables Purchase Agreement, the Servicing Agreement and the Trust Agreement.
INADEQUATE INSURANCE ON FINANCED VEHICLES MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Each Receivable generally requires the Obligor to maintain insurance
covering physical damage to the Financed Vehicle in an amount not less than the
unpaid principal balance of such Receivable pursuant to which Triad is named as
a loss payee. Since the Obligors select their own insurers to provide the
requisite coverage, the specific terms and conditions of their policies vary.
In addition, although each Receivable generally gives Triad the right to
force place insurance coverage in the event the required physical damage
insurance on a Financed Vehicle is not maintained by an
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Obligor, neither Triad nor the Servicer is obligated to place such coverage. In
the event insurance coverage is not maintained by Obligors and coverage is not
force placed, then insurance recoveries may be limited in the event of losses or
casualties to Financed Vehicles included in the Trust Property, as a result of
which Securityholders could suffer a loss on their investment.
HISTORICAL DELINQUENCIES AND NET LOSSES MAY NOT BE INDICATIVE OF FUTURE
PERFORMANCE
There can be no assurance that the historical levels of delinquencies and
net losses experienced by Triad on its respective loan and vehicle portfolio
will be indicative of the performance of the Contracts included in the Trust or
that such levels will continue in the future. Delinquencies and losses could
increase significantly for various reasons, including changes in the federal
income tax laws, changes in the local, regional or national economies or due to
other events.
A CLASS OF SECURITIES MAY BE SUBORDINATE TO ANOTHER CLASS; PAYMENTS WILL BE MADE
ONLY FROM THE LIMITED ASSETS OF THE TRUST
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one Class of Securities of a Series may be
subordinated in priority of payment to interest and principal due on other
Classes of Securities of a related Series. Moreover, each Trust will not have,
nor is it permitted or expected to have, any significant assets or sources of
funds other than the related Receivables and, to the extent provided in the
related Prospectus Supplement, the related reserve account and any other Credit
Enhancement (as defined herein). The Securities represent beneficial interests
in or obligations of the related Trust only and will not represent a recourse
obligation to other assets of Triad or the Seller. No Securities of any Series
will be insured or guaranteed by Triad, any Seller, the Servicer, or the
applicable Trustee. Consequently, holders of the Securities of any Series must
rely for repayment primarily upon payments on the Receivables and, if and to the
extent available, the reserve account, if any, and any other credit enhancement,
all as specified in the related Prospectus Supplement.
LIMITATIONS ON THE AMOUNT OF RECOVERIES MAY CAUSE PAYMENT REDUCTIONS OR DELAYS
Triad will warrant that no claims or defenses have been asserted or
threatened with respect to the Receivables as of the applicable Closing Date and
that all requirements of applicable law with respect to the Receivables have
been satisfied as of the applicable Closing Date.
In the event that Triad or the Trustee must rely on repossession and
disposition of Financed Vehicles to recover scheduled payments due on Defaulted
Receivables (as defined in the related Sale and Servicing Agreement or Pooling
and Servicing Agreement), the Issuer may not realize the full amount due on a
Receivable (or may not realize the full amount on a timely basis). Other factors
that may affect the ability of the Issuer to realize the full amount due on a
Receivable include whether amendments to certificates of title relating to the
Financed Vehicles had been filed, depreciation, obsolescence, damage or loss of
any Financed Vehicle, and the application of Federal and state bankruptcy and
insolvency laws. As a result, the Securityholders may be subject to delays in
receiving payments and suffer loss of their investment in the Securities.
SECURITY OWNERS WILL ONLY BE ABLE TO EXERCISE THEIR RIGHTS INDIRECTLY
Issuance of the Securities in book-entry form may reduce the liquidity of
such Securities in the secondary trading market since investors may be unwilling
to purchase Securities for which they cannot obtain definitive physical
securities representing such Securityholders' interests, except in certain
circumstances described in the related Prospectus Supplement.
Since transactions in Securities will, in most cases, be able to be effected
only through DTC, direct or indirect participants in DTC's book-entry system
("Direct Participants" or "Indirect Participants") or certain banks, the ability
of a Securityholder to pledge a Security to persons or entities that do not
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participate in the DTC system, or otherwise to take actions in respect to such
Securities, may be limited due to lack of a physical security representing the
Securities.
Securityholders may experience some delay in their receipt of distributions
of interest on and principal of the Securities since distributions may be
required to be forwarded by the Trustee to DTC and, in such case, DTC will be
required to credit such distributions to the accounts of its Participants which
thereafter will be required to credit them to the accounts of the applicable
class of Securityholders either directly or indirectly through Indirect
Participants. See "Description of the Securities--Book Entry Registration."
THE LIMITED LIQUIDITY OF THE SECURITIES MAY MAKE IT DIFFICULT TO RESELL THEM
There can be no assurance that a secondary market for the Securities of any
Series or Class will develop or, if it does develop, that it will provide
Securityholders with liquidity of investment or that it will continue for the
life of such Securities. The Prospectus Supplement for any Series of Securities
may indicate that an underwriter specified therein intends to establish and
maintain a secondary market in such Securities; however, no underwriter will be
obligated to do so. The Securities will not be listed on any securities
exchange.
RATINGS OF THE SECURITIES DO NOT ADDRESS SUITABILITY OF INVESTMENT
The rating of Securities credit enhanced by a Policy, reserve fund, credit
or liquidity facilities, cash deposits or other forms of credit enhancement
(collectively, "Credit Enhancement") will depend primarily on the
creditworthiness of the Credit Enhancer. Any reduction in the rating assigned to
the claims-paying ability of the related Credit Enhancer to honor its
obligations pursuant to any such Credit Enhancement below the rating initially
given to the Securities would likely result in a reduction in the rating of the
Securities.
LIMITATIONS ON INTEREST PAYMENTS AND FORECLOSURES MAY CAUSE PAYMENT REDUCTIONS
AND DELAYS
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended (the "Relief Act"), or similar state legislation, an Obligor
who enters military service after the origination of the related Receivable
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the Receivable and is later called to
active duty) may not be charged interest (including fees and charges) above an
annual rate of 6% during the period of such Obligor's active duty status, unless
a court orders otherwise upon application of the lender. It is possible that
such action could have an effect, for an indeterminate period of time, on the
ability of the Servicer to collect full amounts of interest on certain of the
Receivables. In addition, the Relief Act imposes limitations that would impair
the ability of the Servicer to foreclose on an affected Receivable during the
Obligor's period of active duty status. Thus, in the event that such a
Receivable goes into default, there may be delays and losses occasioned by the
inability of the Servicer to realize upon the Financed Vehicle in a timely
fashion.
THE TRUST PROPERTY
The Trust Property will include, as specified in the related Prospectus
Supplement, (i) a pool of Receivables, (ii) certain monies (including accrued
interest) payable thereunder on or after the applicable Cutoff Date (as
specified in the related Prospectus Supplement), (iii) such amounts as from time
to time may be held in one or more separate Trust Accounts established and
maintained by the Trustee pursuant to the Trust Documents, and the proceeds of
such accounts, (iv) security interests in the Financed Vehicles granted by the
Obligors pursuant to the Receivables and any accessions thereto; (v) the
interest of the Seller in any proceeds from claims on any credit life, credit
disability, and physical damage insurance policies or other insurance policies
covering the Financed Vehicles or Obligors; (vi) certain rights under the
Pooling and Servicing Agreement or Sale and Servicing Agreement and the
Receivables Purchase Agreement; (vii) amounts payable to the Seller under all
Dealer and Correspondent (as defined herein)
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recourse obligations and (viii) any and all payments on and proceeds of the
foregoing. The Trust Property will also include, if so specified in the related
Prospectus Supplement, monies on deposit in a Pre-Funding Account, which will be
used by the Trustee to acquire or receive a security interest in Subsequent
Receivables from time to time during the Pre-Funding Period specified in the
related Prospectus Supplement. See "Description of the Securities--Forward
Commitments; Pre-Funding." In addition, to the extent specified in the related
Prospectus Supplement, some combination of Credit Enhancements may be issued to
or held by the Trustee on behalf of the related Trust for the benefit of the
holders of one or more Classes of Securities.
If the protection provided to Securityholders, if any, by any such Credit
Enhancement is insufficient, such Securityholders will have to look to payments
by or on behalf of Obligors on the related Receivables and the proceeds from the
repossession and sale of Financed Vehicles that secure defaulted Receivables for
distributions of principal and interest on the Securities. In such event,
certain factors, such as the applicable Trust's not having perfected security
interests in all of the Financed Vehicles, may limit the ability of a Trust to
realize on the collateral securing the related Receivables, or may limit the
amount realized to less than the amount due under the related Receivables.
Securityholders may thus be subject to delays in payment on, or may incur losses
on their investment in, such Securities as a result of defaults or delinquencies
by Obligors and depreciation in the value of the related Financed Vehicles. See
"Description of the Trust Documents--Credit and Cash Flow Enhancements" and
"Legal Aspects of the Receivables".
The Receivables comprising the Trust Assets will, as specifically described
in the related Prospectus Supplement, be either (i) originated by Triad, (ii)
originated by various manufacturers (or their captive finance companies) and
acquired by Triad, (iii) originated by various Dealers and acquired by Triad or
(iv) acquired by Triad from other originators ("Correspondents") or owners of
Receivables. Such Receivables will have been originated or acquired by Triad in
accordance with Triad's specified underwriting criteria. Receivables acquired by
Triad from other originators will be re-underwritten by Triad using its
specified underwriting criteria. See "Triad's Automobile Financing Program" for
a more detailed description of Triad's underwriting criteria.
The Receivables included in the Trust Property will be selected from those
Receivables held by Triad based on the criteria specified in the applicable
Receivables Purchase Agreement and described herein or in the related Prospectus
Supplement.
ACQUISITION OF RECEIVABLES BY THE SELLER
On or prior to each Closing Date, Triad will sell and assign to the Seller,
without recourse, except for certain limited repurchase obligations described
herein under "Description of the Trust Documents--Sale and Assignment of
Receivables", its entire interest in the applicable Receivables, together with
its security interests in the Financed Vehicles, pursuant to a Receivables
Purchase Agreement between Triad and the Seller (a "Receivables Purchase
Agreement").
Pursuant to each Receivables Purchase Agreement, Triad will make certain
representations and warranties to the Seller with respect to the Receivables. As
of the last day of the first full month following the discovery by or notice to
the Seller and Triad of a breach of any representation or warranty that
materially and adversely affects the interests of the Securityholders or the
Trust in such Receivable, unless the breach is cured, Triad will be obligated to
repurchase or replace such Receivables from the Seller and the Seller will be
obligated to repurchase or replace such Receivable from the Trust. The
repurchase obligation will constitute the sole remedy available to the
Securityholders, the Credit Enhancer (if any) or the Trustee for any such
uncured breach.
THE ISSUERS
With respect to each Series of Securities, the Seller will establish a
separate Trust that will issue such Securities, pursuant to the related Trust
Documents. For purposes of this Prospectus and the related
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Prospectus Supplement, the related Trust shall be referred to as the "Issuer"
with respect to such Securities.
Upon the issuance of the Securities of a given Series, the proceeds from
such issuance will be used by the Seller to purchase the Receivables from Triad
and by Triad to originate or acquire Receivables. The Servicer will service the
related Receivables pursuant to the applicable Servicing Agreement, and will be
compensated for acting as the Servicer. To facilitate servicing and to minimize
administrative burden and expense, the Servicer may be appointed custodian for
the related Receivables by each Trustee and Triad, as may be set forth in the
related Prospectus Supplement.
If the protection provided to the Securityholders of a given class by the
subordination of another Class of Securities of such Series and by the
availability of the funds in the reserve account, if any, or any other Credit
Enhancement for such Series is insufficient, the Issuer must rely solely on the
payments from the Obligors on the related Contracts, and the proceeds from the
sale of Financed Vehicles which secure the Defaulted Contracts. In such event,
certain factors may affect such Issuer's ability to realize on the collateral
securing such Contracts, and thus may reduce the proceeds to be distributed to
the Securityholders of such Series.
THE RECEIVABLES
RECEIVABLES POOLS
Information with respect to the Receivables in the related Trust Property
will be set forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition of such Receivables and the distribution of such
Receivables by geographic concentration, payment frequency, term and current
principal balance as of the applicable Cutoff Date. Additionally, information
will be set forth in the related Prospectus Supplement regarding an originator,
if any, which accounts for a material portion of the Receivables in the related
Trust Property.
THE RECEIVABLES
As specified in the related Prospectus Supplement, the Contracts may consist
of any combination of Rule of 78s Receivables, Actuarial Receivables or Simple
Interest Receivables. Under a Rule of 78's Receivable, the rate at which the
amount of finance charges is earned and, correspondingly, the amount of each
scheduled monthly payment allocated to reduction of the outstanding principal
balance of the related Receivables are calculated in accordance with the "Rule
of 78's". Under the Rule of 78's, the portion of a payment allocable to interest
earned during that month is determined by multiplying the total amount of
interest payable over the term of the Receivable by a fraction, the denominator
of which is equal to the sum of a series of numbers beginning with one and
ending with the number of scheduled monthly payments due under the related
Receivable, and the numerator of which is the number of payments remaining under
such Receivable before giving effect to the payment to which the fraction is
being applied. The difference between the amount of the scheduled monthly
payment made by the Obligor and the amount of earned interest calculated for the
month is applied to principal reduction. Under the Rule of 78s, the portion of
each payment allocable to interest is higher during the early months of the term
of a Receivable and lower during later months than that under a constant yield
method for allocating payments between interest and principal. Notwithstanding
the foregoing, as specified in the related Prospectus Supplement, all payments
received by the Servicer on or in respect of the Rule of 78s Receivables will be
allocated on an actuarial basis.
An Actuarial Receivable provides for amortization of the loan over a series
of fixed level monthly installments. Each scheduled monthly payment is deemed to
consist of an amount of interest equal to 1/12 of the stated APR of the
Receivable multiplied by the outstanding principal balance of the Receivable and
an amount of principal equal to the remainder of such scheduled monthly payment.
All payments received by the Servicer on or in respect of Precomputed
Receivables, including the final scheduled payment, will be allocated pursuant
to the Servicing Agreement on an actuarial basis. No
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adjustment will be made in the event of early or late payments, although in the
latter case the Obligor may be subject to a late charge.
"Simple Interest Receivables" provide for the amortization of the amount
financed under the receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78s Receivables, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date immediately preceding the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if an
Obligor pays a fixed monthly installment before its scheduled due date, the
portion of the payment allocable to interest for the period since the preceding
payment was made will be less than it would have been had the payment been made
as scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment was
made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly less. In either case, the Obligor pays a fixed
monthly installment until the final scheduled payment date, at which time the
amount of the final installment is increased or decreased as necessary to repay
the then outstanding principal balance.
If an Obligor prepays a Precomputed Receivable in full (voluntarily or by
acceleration), it is entitled to a rebate of the portion of the outstanding
balance then due and payable attributable to unearned finance charges. If a
Simple Interest Receivable is prepaid, rather than receive a rebate, the Obligor
is required to pay interest only to the date immediately preceding the date of
prepayment. The amount of a rebate under a Precomputed Receivable generally will
be less than the remaining scheduled payments of interest that would be due
under a Simple Interest Receivable for which all payments were made on schedule.
Distributions to Securityholders may not be affected by Rule of 78s rebates
under the Rule of 78s Receivable because pursuant to the related Prospectus
Supplement such distributions may be determined using the actuarial or simple
interest method.
DELINQUENCIES AND NET LOSSES
Information relating to Triad's delinquency and net loss experience with
respect to Receivables it has originated or acquired will be set forth in each
Prospectus Supplement. This information may include, among other things, the
experience with respect to all Triad's Receivables portfolio during certain
specified periods. There can be no assurance that the delinquency and net loss
experience on any Trust Property will be comparable to the Receivables prior
experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
As more fully described in the related Prospectus Supplement, if a
Receivable permits prepayment, such payment, together with accelerated payments
resulting from defaults, will shorten the weighted average life of the related
pool of Receivables and the weighted average life of the related Securities. The
rate of Prepayments on the Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain circumstances,
Triad and the Seller will be obligated to repurchase Receivables from the
related Trust Property pursuant to the applicable Pooling and Servicing
Agreement or Sale and Servicing Agreement or Receivables Purchase Agreement as a
result of breaches of representations and warranties. Any reinvestment risks
resulting from a faster or slower amortization of the related Securities which
results from Prepayments will be borne entirely by the related Securityholders.
The related Prospectus Supplement will set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related Series of
Securities, together with a description of any applicable prepayment penalties.
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TRIAD'S AUTOMOBILE FINANCING PROGRAM
GENERAL
Triad was incorporated in the State of California in 1989. Triad engages
primarily in the business of purchasing, selling and servicing retail automobile
installment sales contracts ("Contracts") originated by Dealers. Triad
specializes in Contracts with borrowers ("Non-prime Borrowers") who generally
would not be expected to qualify for traditional financing such as that provided
by commercial banks or automobile manufacturers' captive finance companies.
Non-prime Borrowers generally have limited credit history, lower than average
income or past credit problems. Triad offers five distinct automobile financing
programs to its Dealers. The offerings vary based upon the Obligor's overall
credit quality and the pricing established by Triad. These variations affect the
coupon charged on the contract. For all such programs, the maximum loan to
wholesale value ratio, including approved additional items such as taxes,
license fees and warranties, is equal to 150%.
UNDERWRITING
Loan underwriting is centralized at Triad's headquarters. Dealers typically
remit applications to the operations center via facsimile. Credit analysts
underwrite each application using Triad's written underwriting guidelines. After
completion of the credit analysis, the underwriter makes a final decision
regarding the application; such decision may include an approval, a conditional
approval or a turndown. A conditional approval is an agreement by Triad to fund
the application under certain specific conditions as determined by Triad. Once a
Dealer chooses Triad as its funding source, it assembles the financing package
in accordance with Triad's requirements. The primary elements of the standard
package include the contract, credit application, proof of residence, proof of
income, an agreement to provide insurance, and titling paperwork. Packages are
generally delivered via overnight mail. To minimize dealer misrepresentations,
Triad conducts five independent verifications for each package: (1) application
information, generally verified directly with the Obligor; (2) mortgage or
rental information, generally verified directly with the Obligor's mortgage
holder or landlord, as appropriate; (3) insurance, verified directly with the
insurance agent; (4) employment and income levels, verified directly with the
Obligor's employer; and (5) reference information. Triad also reviews each
contract for completeness and accuracy. Triad attempts to maintain a two-day
turn-around time from when it receives a complete funding package until it
purchases the contract from the Dealer. Funding packages with deficiencies are
not funded and are returned to the submitting Dealer. Triad's quality control
department performs an additional review of the financing package which Triad's
management believes enhances its origination procedures.
SERVICING AND COLLECTIONS
Triad's servicing responsibilities consist of collecting, accounting for and
posting of all payments received with respect to its Servicing Portfolio,
responding to borrower inquiries, taking steps to maintain the security interest
granted in Financed Vehicles or other collateral, investigating delinquencies,
communicating with the Obligors, repossessing and liquidating collateral when
necessary, and generally monitoring each loan and the related collateral. Triad
began servicing all new contract purchases in June 1996.
Triad currently performs all servicing and collection functions from its
centralized operations center in Huntington Beach, California. Triad sends
payment invoices to Obligors each month for amounts due under the Contracts,
including any amounts past due and late charges thereon, if any. Each Obligor
has been instructed to make payments with respect to the Contracts to a Lockbox
maintained by the Lockbox Bank. See "Description of the Trust
Documents--Payments on Receivables." Subject to applicable law, Triad's current
collection policies establish the following procedures. Triad initiates
collection activities once a payment is five days contractually past due. The
initial contacts are made through phone calls, with continued attempts to
contact the Obligor for payment at least every two days thereafter. In cases
where an Obligor has broken a promise to make a payment by a certain date, such
Obligor is called within a day. If
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Triad's collection department is unsuccessful in contacting an Obligor by phone,
alternative methods of contact, such as the use of outside agent field calls or
location gathering via references, employers, landlords, or other credit
references are pursued, generally within 15 to 20 days of the account becoming
delinquent.
The decision to repossess a vehicle is influenced by many factors, such as
previous account history, reasons for delinquency and cooperation of the
Obligor. As part of the collection process, all practical means of contacting
the Obligor are attempted. If, at any point, a collector feels that there is
little or no chance that Triad will be able to establish contact with the
Obligor or that the Obligor will not make the required payments, the collector
will submit such contract for repossession. All contracts submitted are
evaluated by collection supervisors to determine if more follow-up work is
needed prior to repossession. If so determined, the supervisor provides
suggestions to assist the collector in further efforts to locate the Obligor. If
the supervisor feels all leads have been exhausted, the contract will be
forwarded to the collection manager for review. If the collection manager agrees
with the supervisor, it will be returned to the collector "approved" for
repossession.
Once the decision to repossess a vehicle is made, the account is referred to
an outside agency which handles the actual repossession. Most state laws require
that the Obligor be sent a Notice of Intent to Sell, which informs the borrower
of the lender's intent to sell the vehicle. The various states provide for a
period of time, generally 15 to 20 days, during which the Obligor may have the
right, depending on the applicable statute, either to reinstate the contract by
making all past due payments and paying the repossession and storage expenses,
or to redeem the vehicle by paying the contract in full, plus expenses
associated with repossession and storage of the vehicle. If the Obligor does not
exercise his right to reinstate the contract or redeem the vehicle, as provided
by the applicable statute, Triad immediately begins the process to sell the
vehicle at public or private sale. The vehicle is usually sold within 31 to 45
days after being repossessed. After a repossessed vehicle is sold, Triad's
collection staff applies for rebates on any extended warranty or life, accident
and health insurance policies that may have been financed as part of the vehicle
purchase.
Triad's collection policies generally do not allow for loan extensions;
provided, however, in those circumstances where extensions are granted, Triad
typically does not (a) grant more than three extensions with respect to a
Receivable, (b) grant more than one extension per calendar year with respect to
a Receivable or (c) grant an extension for more than one calendar month with
respect to a Receivable.
INFORMATION TECHNOLOGY AND SYSTEMS
Triad's information technology needs are met with a system consisting of
client servers, a personal computer local area network and a mainframe computer
provided by a vendor. Triad's loan accounting and collections systems, Shaw IL
2000 and CS 2000, are housed on a mainframe computer provided by Affiliated
Computer Services, Inc. ("ACS"). ACS's mainframe is located in Dallas, Texas and
communicates with Triad's operation center through a dedicated, leased telephone
line. Triad's credit application processing system, APPRO, is maintained on a
client server at Triad's operations center in Huntington Beach.
POOL FACTORS
The "Pool Factor" for each Class of Securities will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such Class of Securities, indicating the remaining outstanding principal
balance of such Class of Securities as of the applicable Record Date, as a
fraction of the initial outstanding principal balance of such Class of
Securities. Each Pool Factor will be initially 1.0000000, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable Class of Securities. A Securityholder's portion of the aggregate
outstanding principal balance of the related Class of Securities is the product
of (i) the original aggregate purchase price of such Securityholder's Securities
and (ii) the applicable Pool Factor.
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As more specifically described in the related Prospectus Supplement with
respect to each Series of Securities, the related Securityholders of record will
receive reports on or about each Record Date concerning the payments received on
the Receivables, the Aggregate Principal Balance (as such term is defined in the
related Prospectus Supplement, the "Aggregate Principal Balance"), each Pool
Factor and various other items of information. In addition, Securityholders of
record during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law.
USE OF PROCEEDS
Except as provided in the related Prospectus Supplement, the proceeds from
the sale of the Securities of a given Series will be applied by the applicable
Trust to the purchase of Receivables from the applicable Seller, to make the
deposit of the Pre-Funded Amount, if any, to the Pre-Funding Account, to make
the required deposit, if any, into a reserve account, and to pay certain
expenses. Net amounts remaining after such payments, if any, may be distributed
by the Seller to its sole shareholder, Triad.
TRIAD AND THE SELLER
Each Seller will be a wholly-owned subsidiary of Triad. Each Seller has been
or will be organized for the limited purpose of purchasing automobile
installment sale contracts from Triad and transferring such receivables to third
parties and any activities incidental to and necessary or convenient for the
accomplishment of such purposes. The principal executive offices of each Seller
is or will be located at 7711 Center Avenue, Huntington Beach, California 92647.
The telephone number of such office is (714) 373-8300.
Each Seller has taken or will take steps in structuring the transaction
contemplated hereby that are intended to make it unlikely that the voluntary or
involuntary petition for relief by Triad under any Insolvency Law will result in
consolidation of the assets and liabilities of the Seller or the Trust with
those of Triad. These steps include the creation of the Seller as a separate,
limited-purpose subsidiary pursuant to articles of incorporation containing
certain limitations (including restrictions on the nature of the Seller's
business and a restriction on the Seller's ability to commence a voluntary case
or proceeding under any Insolvency Law without the prior unanimous affirmative
vote of all of its directors and a requirement that at least one director
qualifies under the articles of incorporation as an "independent director").
However, there can be no assurance that the activities of the Seller would not
result in a court concluding that the assets and liabilities of the Seller
should be consolidated with those of Triad in a proceeding under any Insolvency
Law.
It is expected that each Seller will receive the advice of Dechert Price &
Rhoads to the effect that, subject to certain facts, assumptions and
qualifications, in a properly presented case under current law, in the event
that Triad becomes a debtor in a case under the Bankruptcy Code, a United States
Bankruptcy Court would not order the substantive consolidation of the assets and
liabilities of the Seller with those of Triad. Among other things, it will be
assumed by Dechert Price & Rhoads that the Seller will follow certain procedures
in the conduct of its affairs, including maintaining records and books of
account separate from those of Triad, refraining from commingling its assets
with those of Triad and refraining from holding itself out as having agreed to
pay, or being liable for, the debts of Triad. Each Seller will represent to such
counsel that it will follow these and other procedures related to maintaining
its separate corporate identity. However, in the event that the Seller does not
follow these procedures, and in certain other circumstances, there can be no
assurance that a court would not conclude that the assets and liabilities of the
Seller should be consolidated with those of Triad. If a court were to reach such
a conclusion, or a filing were made to litigate any of the foregoing issues,
delays in distributions on the Securities (and possible reductions in the amount
of such distributions) could occur. See "Risk Factors--Insolvency of Triad or
the Seller May Cause Payment Reductions or Delays".
Triad was founded in 1989 by James M. Landy and Helen R. Kraus, who now
serve Triad as Chief Executive Officer and Executive Vice President,
respectively. ContiFinancial Corporation ("CFN"),
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acquired 53.5% of the common stock of Triad in November 1996, acquired an
additional 2.5% in January 1997 and acquired the remaining common stock in March
1998. The chief executive office of Triad is located at 7711 Center Avenue,
Suite 100, Huntington Beach, California 92647. The telephone number of such
office is (714) 373-8300. Funding sources available to Triad include warehouse
and working capital lending facilities provided by ContiTrade Services L.L.C.,
an affiliate of CFN.
THE TRUSTEE
The Trustee or Trustees, as applicable, for each Series of Securities will
be specified in the related Prospectus Supplement. The liability of each Trustee
in connection with the issuance and sale of the related Securities is limited
solely to the express obligations of such Trustee set forth in the related
Pooling and Servicing Agreement, Trust Agreement or Indenture, as applicable.
With respect to each Series of Securities, the procedures for the
resignation or removal of the Trustee and the appointment of a successor Trustee
shall be specified in the related Prospectus Supplement.
DESCRIPTION OF THE SECURITIES
GENERAL
The Securities will be issued in Series. Each Series of Securities (or, in
certain instances, two or more Series of Securities) will be issued pursuant to
a Pooling and Servicing Agreement, Indenture or Trust Agreement, as applicable.
The following summaries (together with additional summaries under "Description
of the Trust Documents" below) describe all material terms and provisions
relating to the Securities common to each Indenture and Trust Agreement or
Pooling and Servicing Agreement. The summaries do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of the
provisions of the Trust Documents for the related Securities and the related
Prospectus Supplement.
All of the Securities offered pursuant to this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies.
The Securities will generally be styled as debt instruments, having a
principal balance and a specified Interest Rate. The Securities may either
represent beneficial ownership interests in the related Receivables held by the
related Trust or debt secured by certain assets of the related Trust.
Each Series or Class of Securities offered pursuant to this Prospectus may
have a different Interest Rate, which may be a fixed or adjustable interest
rate. The related Prospectus Supplement will specify the Interest Rate for each
Series or Class of Securities described therein, or the initial interest rate
and the method for determining subsequent changes to the Interest Rate.
A Series may include one or more Classes of Strip Securities entitled (i) to
principal distributions, with disproportionate, nominal or no interest
distributions, or (ii) to interest distributions, with disproportionate, nominal
or no principal distributions. In addition, a Series of Securities may include
two or more Classes of Securities that differ as to timing, sequential order,
priority of payment, Interest Rate or amount of distribution of principal or
interest or both, or as to which distributions of principal or interest or both
on any Class may be made upon the occurrence of specified events, in accordance
with a schedule or formula, or on the basis of collections from designated
portions of the related pool of Receivables. Any such Series may include one or
more Classes of Accrual Securities, as to which certain accrued interest will
not be distributed but rather will be added to the principal balance (or nominal
balance, in the case of Accrual Securities which are also Strip Securities)
thereof on each Payment Date, as hereinafter defined, or in the manner described
in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, a Series may include
one or more other Classes of Senior Securities that are senior to one or more
other Classes of Subordinate Securities in respect of certain distributions of
principal and interest and allocations of losses on Receivables.
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In addition, certain Classes of Senior (or Subordinate) Securities may be
senior to other Classes of Senior (or Subordinate) Securities in respect of such
distributions or losses.
GENERAL PAYMENT TERMS OF SECURITIES
As provided in the related Trust Documents and as described in the related
Prospectus Supplement, Securityholders will be entitled to receive payments on
their Securities on the specified Payment Dates. Payment Dates with respect to
the Securities will occur monthly, quarterly or semiannually, as described in
the related Prospectus Supplement.
The related Prospectus Supplement will describe the Record Date preceding
such Payment Date, as of which the Trustee or its paying agent will fix the
identity of the Securityholders for the purpose of receiving payments on the
next succeeding Payment Date. As more fully described in the related Prospectus
Supplement, the Payment Date will be a specified day of each month (or, in the
case of quarterly-pay Securities, a specified day of every third month; and in
the case of semiannual-pay Securities, a specified day of every sixth month) and
the Record Date will be the close of business as of a specified day proceeding
such Payment Date.
Each Trust Agreement and Indenture will describe a Collection Period
preceding each Payment Date (for example, in the case of monthly-pay Securities,
the calendar month preceding the month in which a Payment Date occurs). As more
fully provided in the related Prospectus Supplement, collections received on or
with respect to the related Receivables held by a Trust during a Collection
Period will be required to be remitted by the Servicer to the related Trustee
prior to the related Payment Date and will be used to fund payments to
Securityholders on such Payment Date.
In addition, and as may be described in the related Prospectus Supplement,
the related Trust Documents may provide that all or a portion of such collected
payments may be retained by the Trustee (and held in certain temporary
investments, including Receivables) for a specified period prior to being used
to fund payments of principal to Securityholders.
Such retention and temporary investment by the Trustee of such collected
payments may be required by the related Trust Documents for the purposes of (a)
slowing the amortization rate of the related Securities relative to the
installment payment schedule of the related Receivables, or (b) attempting to
match the amortization rate of the related Securities to an amortization
schedule established at the time such Securities are issued. Any such feature
applicable to any Securities may terminate upon the occurrence of events to be
described in the related Prospectus Supplement, resulting in distributions to
the specified Securityholders and an acceleration of the amortization of such
Securities.
Neither the Securities nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality or Triad, any Seller, the
Servicer, any Trustee or any of their respective affiliates unless specifically
set forth in the related Prospectus Supplement.
As may be described in the related Prospectus Supplement, Securities of each
Series covered by a particular Trust Agreement will either evidence specified
beneficial ownership interests in the Trust Property or represent debt secured
by the related Trust Property. To the extent that any Trust Property includes
certificates of interest or participations in Receivables, the related
Prospectus Supplement will describe the material terms and conditions of such
certificates or participations.
BOOK-ENTRY REGISTRATION
As may be described in the related Prospectus Supplement, Securityholders of
a given Series may hold their Securities through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
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Cede, as nominee for DTC, will hold the global Securities in respect of a
given Series. CEDEL and Euroclear will hold omnibus positions on behalf of the
CEDEL Participants (as defined below) and the Euroclear Participants (as defined
below) (collectively, the "Participants"), respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries (collectively, the "Depositaries") which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
Indirect Participants such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
The Securityholders of a given Series that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Securities of such Series may do so only through
Participants and Indirect Participants. In addition, Securityholders of a given
Series will receive all distributions of principal and interest through the
Participants who in turn will receive them from DTC. Under a book-entry format,
Securityholders of a given Series may experience some delay in their receipt of
payments, since such payments will be forwarded by the applicable Trustee to
Cede, as nominee for DTC. DTC will forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or such
Securityholders. It is anticipated that the only "Securityholder" in respect of
any Series will be Cede, as nominee of DTC. Securityholders of a given Series
will not be recognized as Securityholders of such Series, and such
Securityholders will be permitted to exercise the rights of Securityholders of
such Series only indirectly through DTC and its Participants.
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Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities of a given Series among Participants on whose behalf it acts with
respect to such Securities and to receive and transmit distributions of
principal of, and interest on, such Securities. Participants and Indirect
Participants with which the Securityholders of a given Series have accounts with
respect to such Securities similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective
Securityholders of such Series. Accordingly, although such Securityholders will
not possess Securities, the Rules provide a mechanism by which Participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder of a given Series to pledge Securities of such Series to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC will advise the Trustee in respect of each Series that it will take any
action permitted to be taken by a Securityholder of the related Series only at
the direction of one or more Participants to whose accounts with DTC the
Securities of such Series are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 28 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. Euroclear is operated by Morgan Guaranty Trust Company of
New York, Brussels, Belgium office, under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the "Euroclear Operator" (as defined below), and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of
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Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of relationship with persons holding through Euroclear Participants.
Except as required by law, the Trustee in respect of a Series will not have
any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related Securities held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
As may be described in the related Prospectus Supplement, the Securities
will be issued in fully registered, certificated form ("Definitive Securities")
to the Securityholders of a given Series or their nominees, rather than to DTC
or its nominee, only if (i) the Trustee in respect of the related Series advises
in writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Securities and such Trustee
is unable to locate a qualified successor, (ii) such Trustee, at its option,
elects to terminate the book-entry-system through DTC or (iii) after the
occurrence of an "Event of Default" under the related Indenture or a default by
the Servicer under the related Trust Documents, Securityholders representing at
least a majority of the outstanding principal amount of such Securities advise
the applicable Trustee through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in such
Securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all such
Securityholders through Participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
such Securities and receipt of instructions for re-registration, the applicable
Trustee will reissue such Securities as Definitive Securities to such
Securityholders.
Distributions of principal of, and interest on, such Securities will
thereafter be made by the applicable Trustee in accordance with the procedures
set forth in the related Indenture or Trust Agreement, as applicable, directly
to holders of Definitive Securities in whose names the Definitive Securities
were registered at the close of business on the applicable Record Date specified
for such Securities in the related Prospectus Supplement. Such distributions
will be made by check mailed to the address of such holder as it appears on the
register maintained by the applicable Trustee. The final payment on any such
Security, however, will be made only upon presentation and surrender of such
Security at the office or agency specified in the notice of final distribution
to the applicable Securityholders.
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Definitive Securities in respect of a given Series of Securities will be
transferable and exchangeable at the offices of the applicable Trustee or of a
certificate registrar named in a notice delivered to holders of such Definitive
Securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each Series of Securities, on or prior to each Payment Date
for such Series, the Servicer or the related Trustee will forward or cause to be
forwarded to each securityholder and the Rating Agency a statement or statements
with respect to the related Trust Property setting forth the information
specifically described in the related Trust Document which generally will
include the following information and may include such other information as
specified in the related Prospectus Supplement:
(i) the amount of the distribution with respect to each class of
Securities;
(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Aggregate Principal Balance, if applicable, as of the close of
business on the last day of the related Collection Period;
(v) the aggregate outstanding principal balance and the Pool Factor for
each Class of Securities after giving effect to all payments reported under
(ii) above on such Record Date;
(vi) the amount paid to the Servicer, if any, with respect to the
related Collection Period;
(vii) the amount of the aggregate purchase amounts (the "Purchase
Amounts") for Receivables that have been reacquired, if any, for such
Collection Period; and
(viii)the amount of coverage under a Policy, reserve account or other
form of Credit Enhancement covering default risk as of the close of business
on the applicable Payment Date and a description of any Credit Enhancement
substituted therefor.
Each amount set forth pursuant to subclauses (i), (ii), (iii) and (v) with
respect to the Securities of any Series will be expressed as a dollar amount per
$1,000 of the initial principal balance of such Securities, as applicable. The
actual information to be set forth in statements to Securityholders of a Series
will be described in the related Prospectus Supplement.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the applicable Trustee will provide to the
Securityholders a statement containing the amounts described in (ii) and (iii)
above for that calendar year and any other information required by applicable
tax laws, for the purpose of the Securityholders' preparation of federal income
tax returns.
FORWARD COMMITMENTS; PRE-FUNDING
A Trust may enter into an agreement (each, a "Forward Purchase Agreement")
with the Seller whereby the Seller will agree to transfer additional Receivables
to such Trust following the date on which such Trust is established and the
related Securities are issued. The Trust may enter into Forward Purchase
Agreements to permit the acquisition of additional Receivables that could not be
delivered by the Seller or have not formally completed the origination process,
in each case prior to the related Closing Date. Any Forward Purchase Agreement
will require that any Receivables so transferred to the Trust conform to the
requirements specified in such Forward Purchase Agreement.
If a Forward Purchase Agreement is to be utilized, and unless otherwise
specified in the related Prospectus Supplement, the related Trustee will be
required to deposit in the Pre-Funding Account up to
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100% of the net proceeds received by the Trustee in connection with the sale of
one or more classes of Securities of the related Series and the additional
Receivables will be transferred to the related Trust in exchange for money
released to the Seller from the related Pre-Funding Account. Each Forward
Purchase Agreement will set a Pre-Funding Period during which any such transfers
must occur; for a Trust which elects federal income treatment as a grantor
trust, the related Pre-Funding Period will be limited to three months from the
date such Trust is established; for a Trust which is treated as a mere security
device for federal income tax purposes, the related Pre-Funding Period will be
limited to nine months from the date such Trust is established. The Forward
Purchase Agreement or the related Pooling and Servicing Agreement or Sale and
Servicing Agreement will require that, if all moneys originally deposited to
such Pre-Funding Account are not so used by the end of the related Pre-Funding
Period, then any remaining moneys will be applied as a mandatory prepayment of
the related class or classes of Securities as specified in the related
Prospectus Supplement.
During the Pre-Funding Period the monies deposited to the Pre-Funding
Account will either (i) be held uninvested or (ii) will be invested in
cash-equivalent investments rated in one of the four highest rating categories
by at least one Rating Agency and which will either mature prior to the end of
the Pre-Funding Period, or will be drawable on demand. Any resultant investment
income, less any related investment expenses ("Investment Income"), will be
added, on the Payment Date immediately following the date on which such
Investment Income is paid to the Trust, to interest collections on the
Receivables for the related Collection Period and distributed in the manner
specified in the related Prospectus Supplement. In no event will such
investments constitute the type of investment which would require registration
of the related Trust as an "investment company" under the Investment Company Act
of 1940, as amended.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes the material terms of each Trust Documents
pursuant to which a Trust will be created and the related Securities in respect
of such Trust will be issued. For purposes of this Prospectus, the term "Trust
Documents" as used with respect to a Trust means, collectively, and except as
otherwise specified, any and all agreements relating to the establishment of the
related Trust, the transfer of Receivables to the Trust, the servicing of the
related Receivables and the issuance of the related Securities, including
without limitation the Indenture (i.e. pursuant to which any Notes shall be
issued). Forms of the material Trust Documents have been filed as exhibits to
the Registration Statement of which the Prospectus forms a part. The summary
does not purport to be complete. It is qualified in its entirety by reference to
the provisions of the Trust Documents.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date specified with respect to any given Series,
Triad will sell and assign to a Seller, without recourse, except as otherwise
provided in the applicable Receivables Purchase Agreement, its entire interest
in the Receivables to be included in such Trust, together with its security
interests in the Financed Vehicles. At the time of issuance of the Securities,
such Seller will transfer and assign to a Trust the Seller's entire interest in
such Receivables, including its security interests in the Financed Vehicles,
pursuant to a Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Receivable transferred by the Seller will be identified in a schedule
appearing as an exhibit to the related Trust Documents. The obligations of the
Seller and the Servicer under the related Pooling and Servicing Agreement or
Sale and Servicing Agreement include those specified below and in the related
Prospectus Supplement.
As more fully described in the related Prospectus Supplement, Triad will be
obligated to acquire from the related Trust its interest in any Receivable
transferred to a Trust or pledged to a Trustee on behalf of Securityholders if
the interest of the Securityholders therein is materially adversely affected by
a breach of any representation or warranty made by Triad with respect to such
Receivable, which breach has not been
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cured within a specified period following the discovery by or notice to Triad of
the breach. In addition, if so specified in the related Prospectus Supplement,
Triad may from time to time reacquire certain Receivables or substitute other
Receivables for such Receivable subject to specified conditions set forth in the
related Receivables Purchase Agreement.
PAYMENTS ON RECEIVABLES
With respect to each Series of Securities, unless the related Prospectus
Supplement does not so provide, the Servicer will notify each Obligor that
payments made by such Obligor after the Cutoff Date with respect to a Receivable
must be mailed directly to a Lockbox established and maintained with a bank (the
"Lockbox Bank"), as set forth in the Servicing Agreement relating to such
Receivable. Upon receipt of payments in the Lockbox, the Lockbox Bank will
deposit funds into an account maintained by the Lockbox Bank at a depository
institution (the "Lockbox Account"). All payments made on or with respect to the
Receivables previously deposited in the Lockbox Account will be transferred to
the Collection Account (as defined below) within two Business Days of the
receipt of available funds therein. All payments with respect to the Securities
will be made by the Trustee from the Collection Account. Upon receipt, but in no
event later than two Business Days after the receipt thereof, each of the
Servicer, Triad and the Seller will remit all amounts received by it in respect
of the Receivables in the form of checks with payment coupons directly to the
Lockbox. Other payments received by each of the Servicer, Triad and the Seller
will be deposited into a local servicing account for processing, and then
transferred to the Collection Account. The Collection Account will be maintained
with the Trustee as long as the Trustee's deposits have a rating acceptable to
the Rating Agency. If the deposits of the Trustee no longer have such acceptable
rating, the Trustee shall cause such accounts to be moved to a bank or trust
company having such acceptable ratings.
The Servicer or the Seller, as the case may be, will remit or cause to be
remitted the aggregate Purchase Amounts of any Receivables required to be
purchased by it from the Trust to the Collection Account. Under the Servicing
Agreement, the amounts of any recoveries in respect of any Receivables
repurchased by Dealers pursuant to any Dealer recourse constitute collections on
the Receivables.
For purposes of the Servicing Agreement, collections on a Receivable (other
than a Receivable purchased by the Servicer or the Seller) which are not late
fees or other administrative fees and expenses collected during a Collection
Period are required to be applied first to the scheduled payment on such
Receivable. To the extent that such collections on a Receivable during a
Collection Period exceed the scheduled payment on such Receivable, the
collections are required to be applied to prepay the Receivable in full. If the
collections are insufficient to prepay the Receivable in full, any partial
prepayment of principal during a Collection Period will be immediately applied
to reduce the principal balance of the Receivable during such Collection Period.
ACCOUNTS
With respect to each Series of Securities issued by a Trust unless otherwise
specified in the related Prospectus Supplement, the Trustee will establish and
maintain one or more accounts (the "Collection Account"), in the name of such
Trustee on behalf of the related Securityholders, into which all payments made
on or with respect to the related Receivables and deposited in the Lockbox
Account will be transferred.
If the related Prospectus Supplement so provides, the Pre-Funding Account
will be maintained with the Trustee and is intended solely to hold funds to be
applied by the Trustee during the Pre-Funding Period (i) to pay to the Seller
the purchase price for Subsequent Receivables and (ii) to make any eligible
investments with funds not yet invested in Subsequent Receivables. Monies on
deposit in the Pre-Funding Account will not be available to cover losses on or
in respect of the Receivables and any eligible investments purchased with funds
not yet invested in Subsequent Receivables. On the Closing Date, the
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Pre-Funding Account will be funded with the initial Pre-Funded Amount from the
sale proceeds of the Securities.
Any other accounts to be established with respect to a Trust, including any
reserve account, will be described in the related Prospectus Supplement.
For any Series of Securities, funds in the Collection Account, any reserve
account and other accounts identified as such in the related Prospectus
Supplement (collectively, the "Trust Accounts") shall be maintained as "eligible
accounts" and invested in "eligible investments" as specified in the related
Trust Documents.
THE SERVICER
The Servicer under each Servicing Agreement will be named in the related
Prospectus Supplement. The entity serving as Servicer may be Triad or an
affiliate of Triad and may have other business relationships with Triad or
Triad's affiliates. The Servicer with respect to each Series will service the
Receivables contained in the Trust for such Series. Any Servicer may delegate
its servicing responsibilities to one or more subservicers, but will not be
relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related Servicing Agreement. An uncured breach of such a representation or
warranty that in any respect materially and adversely affects the interests of
the Securityholders will constitute a Servicer Termination Event (as hereinafter
defined) by the Servicer under the related Servicing Agreement.
A Servicing Agreement may contain provisions providing for a backup servicer
(a "Backup Servicer") to serve as successor servicer in the event the Servicer
is terminated or resigns as Servicer pursuant to the terms of such Servicing
Agreement. A Backup Servicer will receive a fee on each Payment Date for
agreeing to stand by as successor Servicer and for performing certain other
functions. If the Backup Servicer becomes the Servicer under a Servicing
Agreement, it will receive compensation as a Servicer in an amount set forth in
such Servicing Agreement.
SERVICING PROCEDURES
Each Servicing Agreement will provide that the Servicer will make reasonable
efforts to collect all payments due with respect to the Receivables which are
part of the Trust and will continue such collection procedures as it follows
with respect to all comparable motor vehicle receivables that it services for
itself and others, in a manner consistent with the related Servicing Agreement.
If the Servicer determines that eventual payment in full of a Receivable is
unlikely, the Servicer will follow its normal collection practices and
procedures, including the repossession and disposition of the Financed Vehicle
securing the Receivable at a public or private auction, or the taking of any
other action permitted by applicable law.
The material aspects of any particular Servicer's collections and other
relevant procedures will be set forth in the related Prospectus Supplement.
SERVICING COMPENSATION
As described in the related Prospectus Supplement with respect to any Series
of securities issued by a Trust, the Servicer will be entitled to receive a
servicing fee for each Collection Period (the "Servicing Fee") in an amount
equal to a specified percentage per annum (as set forth in the related
Prospectus Supplement, the "Servicing Fee Rate") of the value of the assets of
the Trust Property, generally as of the first day of such Collection Period.
Each Prospectus Supplement and Servicing Agreement will specify the priority of
distributions with respect to the Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Payment Dates). Generally, the
Servicing Fee will be paid prior to any distribution to the related
Securityholders.
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The Servicer will also collect and retain any late fees, prepayment charges,
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables. Payments by or on behalf of Obligors will be
allocated to scheduled payments, late fees and other charges and principal and
interest in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third-party servicer of similar types of receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the related Receivables, investigating delinquencies,
sending billing statements to Obligors, reporting tax information to Obligors,
paying costs of collection and disposition of defaults, and policing the
collateral. In addition, the Servicing Fee also will compensate the Servicer for
administering the related Receivables, including accounting for collections,
furnishing statements to the applicable Trustee and the applicable Indenture
Trustee, if any, with respect to distributions. The Servicer will also be
reimbursed for certain taxes, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
Receivables.
DISTRIBUTIONS
With respect to each Series of Securities, beginning on the Payment Date
specified in the related Prospectus Supplement, distributions of principal and
interest (or, where applicable, of principal or interest only) on each Class of
such Securities entitled thereto will be made by the applicable Trustee to the
holders of Notes (the "Noteholders") and by the applicable Trustee to the
holders of Certificates (the "Certificateholders") of such Series. The timing,
calculation, allocation, order, source, priorities of and requirements for all
distributions to each class of Securityholders of such Series will be set forth
in the related Prospectus Supplement.
With respect to each Series of Securities, Credit Enhancement, such as a
reserve account, may be available to cover any shortfalls in the amount
available for distribution on a Payment Date, to the extent specified in the
related Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and unless otherwise specified therein, distributions in respect of
principal of a Class of Securities of a given Series will be subordinate to
distributions in respect of interest on such Class, and distributions in respect
of the Certificates of such Series may be subordinate to payments in respect of
the Notes of such Series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of Credit Enhancement arrangements, if any, and the
provider thereof, if applicable, with respect to each Class of Securities of a
given Series will be set forth in the related Prospectus Supplement. If and to
the extent provided in the related Prospectus Supplement, Credit Enhancement may
be in the form of a Policy, subordination of one or more Classes of Securities,
reserve accounts, overcollateralization, letters of credit, credit or liquidity
facilities, third party payments or other support, surety bonds, guaranteed cash
deposits or such other arrangements as may be described in the related
Prospectus Supplement or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, Credit Enhancement for a
Class of Securities may cover one or more other Classes of Securities of the
same Series, and Credit Enhancement for a Series of Securities may cover one or
more other Series of Securities.
The presence of Credit Enhancement for the benefit of any Class or Series of
Securities is intended to enhance the likelihood of receipt by the
Securityholders or such Class or Series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. As more specifically provided in the related Prospectus
Supplement, the Credit Enhancement for a Class or Series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any Credit Enhancement or which are not covered by any
Credit Enhancement, Securityholders
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of any Class or Series will bear their allocable share of deficiencies, as
described in the related Prospectus Supplement. In addition, if a form of Credit
Enhancement covers more than one Series of Securities, Securityholders of any
such Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of Securityholders of other Series.
STATEMENTS TO TRUSTEES
Prior to each Payment Date with respect to each Series of Securities, the
Servicer will provide to the applicable Trustee and Credit Enhancer as of the
close of business on the last day of the preceding related Collection Period a
statement setting forth substantially the same information as is required to be
provided in the periodic reports provided to Securityholders of such Series
described under "Description of the Securities--Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Servicing Agreement will provide that a firm of nationally recognized
independent certified public accountants will furnish to the related Trust
and/or the applicable Trustee and Credit Enhancer (if any), annually, a
statement to the effect that such firm has audited the books and records of the
Servicer and issued its report thereon for the fiscal year.
Each Servicing Agreement will also provide for the annual delivery to the
related Trust and/or the applicable Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under such, to such officer's knowledge, Servicing Agreement in all
material respects throughout the preceding 12 months (or, in the case of the
first such certificate, the period from the applicable Closing Date) or, if
there has been a default in the fulfillment of any such obligation in any
material respect, describing each such default. The Servicer also will agree to
give each Trustee notice of certain Servicer Termination Events under the
related Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Trustee.
MATTERS REGARDING THE SERVICERS
The Servicing Agreement will provide that the Servicer may not resign from
its obligations and duties as Servicer thereunder, except upon determination
that, by reason of a change in legal requirements, the Servicer's performance of
such duties would be in violation of such legal requirements and the requisite
majority of Securityholders do not elect to waive the obligations of the
Servicer to perform the duties that render it legally unable to act or to
delegate those duties to another Person. No such resignation will become
effective until the Backup Servicer or a successor servicer has assumed the
Servicer's servicing obligations and duties under the Servicing Agreement. In
the event Triad resigns as Servicer or is terminated as Servicer, the Backup
Servicer, if any, will agree to assume the servicing obligations and duties
under the Servicing Agreement.
Except as otherwise provided in the related Prospectus Supplement, each
Servicing Agreement will further provide that neither the Servicer nor any of
its respective directors, officers, employees, or agents shall be under any
liability to the related Issuer, Trustee or the related Securityholders for
taking any action or for refraining from taking any action pursuant to such
Servicing Agreement; provided, however, that neither the Servicer nor any such
person will be protected against any liability that would otherwise be imposed
by reason of the Servicer's material breach of the Servicing Agreement, willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of duties.
Under the circumstances specified in any such Servicing Agreement any entity
into which the Servicer may be merged or consolidated, resulting from any
merger, conversion or consolidation to which the Servicer is a party, which
acquires all or substantially all of the assets of the Servicer, or succeeding
to the
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business of the Servicer, which in any case assumes the obligations of the
Servicer, will be the successor of the Servicer, under the Servicing Agreement.
The Servicer may at any time perform certain specific duties as Servicer through
other subcontractors.
SERVICER TERMINATION EVENT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Termination Event" under the related Trust Documents will include: (i) any
failure by the Servicer to deliver to the applicable Trustee for deposit in any
of the related Trust Accounts any required payment or to direct such Trustee to
make any required distributions therefrom, which failure continues unremedied
for more than two (2) Business Days (one Business Day with respect to payment of
Purchase Amounts) after the earlier of (x) notice of such failure is given by
such Trustee to the Servicer or (y) after discovery by the Servicer; (ii) the
Servicer's failure or failures to satisfy any other covenant or agreement set
forth in the Servicing Agreement, which failure or failures, individually or in
the aggregate, materially and adversely affect the rights of the related
Securityholders and remains uncured for a period of 30 days after the earlier of
the date on which (a) it obtains actual knowledge of such failure and (b)
written notice of such failure to the Servicer by the applicable Trustee or a
specified percentage of Securityholders; (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings with respect to the Servicer indicating its insolvency; and (iv) the
failure by the Receivables pool to meet certain tests, including those relating
to delinquencies, defaults and repossession and such results have not been
deemed cured, as further specified in the related Prospectus Supplement.
RIGHTS UPON SERVICER TERMINATION EVENT
As more fully described in the related Prospectus Supplement, as long as a
Servicer Termination Event under the related Trust Documents remains unremedied,
the applicable Trustee, Credit Enhancer or holders of Securities of the related
Series evidencing not less than 50% of the voting rights of such then
outstanding Securities may terminate all the rights and obligations of the
Servicer, if any, under such Servicing Agreement, whereupon the Backup Servicer,
if any, or another successor servicer appointed by such Trustee or such Trustee
will succeed to all the responsibilities, duties and liabilities of the Servicer
under such Trust Agreement and will be entitled to similar compensation
arrangements.
WAIVER OF PAST DEFAULTS
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement and subject to the approval of any Credit Enhancer, the
holders of Securities evidencing at least a majority of the voting rights of
such then outstanding Securities may, on behalf of all Securityholders of the
related Securities, waive any default by the Servicer in the performance of its
obligations under the related Trust Documents and its consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts in accordance with the applicable Trust Documents. No such waiver shall
impair the Securityholders' rights with respect to subsequent defaults.
AMENDMENT
As more fully described in the related Prospectus Supplement, each of the
Trust Documents may be amended by the parties thereto, without the consent of
the related Securityholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Trust
Documents or of modifying in any manner the rights of such Securityholders;
provided that such action will not, in the opinion of counsel satisfactory to
the applicable Trustee, materially and adversely affect the interests of any
such Securityholder and subject to the approval of any Credit Enhancer. As may
be described in the related Prospectus Supplement, the Trust Documents may also
be amended by the Seller, the Servicer, and the applicable Trustee with the
consent of the holders of Securities evidencing at least a majority of the
voting rights of such then outstanding Securities for the purpose of adding any
provisions to
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or changing in any manner or eliminating any of the provisions of such Trust
Documents or of modifying in any manner the rights of such Securityholders;
provided, however, that no such amendment may (i) increase or reduce in any
manner the amount or priority of, or accelerate or delay the timing of,
collections of payments on the related Receivables or distributions that are
required to be made for the benefit of such Securityholders or (ii) reduce the
aforesaid percentage of the Securities of such Series which are required to
consent to any such amendment, without the consent of the Securityholders of
such Series.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller and
the applicable Trustee pursuant to the related Trust Document will terminate
upon the earlier to occur of (i) the maturity or other liquidation of the last
related Receivable and the payment to Securityholders of amounts required to be
paid under the Securities or Trust Documents and (ii) the payment to
Securityholders of the related Series of all amounts required to be paid to them
pursuant to such Trust Document and the expiration of any preference period
related thereto. As more fully described in the related Prospectus Supplement,
in order to avoid excessive administrative expense, the Servicer will be
permitted in respect of the applicable Trust Property, unless otherwise
specified in the related Prospectus Supplement, at its option to purchase from
such Trust Property, as of the end of any Collection Period immediately
preceding a Payment Date, if the Aggregate Principal Balance of the related
Receivables is less than a specified percentage (set forth in the related
Prospectus Supplement) of the initial Aggregate Principal Balance in respect of
such Trust Property, all such remaining Receivables at a price equal to the
aggregate of the Purchase Amounts thereof as of the end of such Collection
Period. The related Securities will be redeemed following such purchase.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related Series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement may effect the prepayment of the
Certificates of such Series.
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LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of Receivables by the Seller to the Trust pursuant to the
related Pooling and Servicing Agreement or Sale and Servicing Agreement, the
perfection of the security interests in the Receivables and the enforcement of
rights to realize on the Financed Vehicles as collateral for the Receivables are
subject to a number of federal and state laws, including the Uniform Commercial
Code (the "UCC") as in effect in various states. As specified in each Prospectus
Supplement, the Servicer will take such action as is required to perfect the
rights of the Trustee in the Receivables. If, through inadvertence or otherwise,
a third party were to purchase (including the taking of a security interest in)
a Receivable for new value in the ordinary course of its business, without
actual knowledge of the Trust's interest, and take possession of a Receivable,
the purchaser would acquire an interest in such Receivable superior to the
interest of the Trust. As further specified in each Prospectus Supplement, no
action will be taken to perfect the rights of the Trustee in proceeds of any
insurance policies covering individual Financed Vehicles or Obligors. Therefore,
the rights of a third party with an interest in such proceeds could prevail
against the rights of the Trust prior to the time such proceeds are deposited by
the Servicer into a Trust Account.
SECURITY INTERESTS IN VEHICLES
Generally, retail installment sale contracts such as the Receivables
evidence the credit sale of automobiles and light-duty trucks by dealers to
Obligors. The contracts also constitute personal property security agreements
and include grants of security interests in the financed vehicles under the
applicable UCC.
In most states, perfection of a security interest in a motor vehicle is
generally governed by the motor vehicle titling or registration laws of the
state in which the vehicle is located. In most states in which the Receivables
have been originated, a security interest in motor vehicles is perfected by
notation of the secured party's lien on the vehicle's certificate of title and
the filing of the certificate with the state motor vehicle department.
Pursuant to each Receivables Purchase Agreement and Pooling and Servicing
Agreement or Sale and Servicing Agreement, each of Triad and the Seller will
sell and assign to the Seller and the Trust, respectively, its security
interests in the Financed Vehicles securing the Receivables. Pursuant to an
Indenture, the Issuer will assign those security interests to the Trustee, for
the benefit of the Securityholders. However because of the administrative burden
and expense, no steps will be taken to cause certificates of title for the
Financed Vehicles to be issued or amended to show the Trustee as the new secured
party on the certificates of title for the Financed Vehicles. See "Description
of the Trust Documents--Sale and Assignment of Receivables."
In most states, assignments such as those under the Receivables Purchase
Agreement, the Pooling and Servicing Agreement and the Sale and Servicing
Agreement are effective assignments of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. By not identifying the
Trustee as the secured party on the certificate of title, the security interest
of the Issuer in the Financed Vehicles that is assigned to the Trustee could be
defeated through fraud or negligence. If there are any Financed Vehicles as to
which a perfected security interest was not obtained or is not maintained, the
security interest of the Issuer that is assigned to the Trustee would be
subordinate to, among others, the interests of subsequent purchasers of the
Financed Vehicles, subsequent lenders who take security interests in such
Financed Vehicles and creditors who attach or obtain judgment liens against the
Financed Vehicles, and could be avoided by bankruptcy trustees and debtors in
possession. In the absence of fraud or forgery by the vehicle owner or the
Servicer or administrative error by governmental authorities charged with
responsibility for issuing vehicle titles, the notation of Triad's security
interest on the certificates of title and, if applicable, the Trustee's or
Servicer's possession of the certificates of title will be sufficient to protect
the Seller, the Issuer and the Trustee
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against the rights of subsequent purchasers of a Financed Vehicle or subsequent
lenders who take a security interest in a Financed Vehicle. But the security
interest of the Issuer, as assigned to the Trustee, would be subordinate to the
lien of a judgment creditor and would be subject to avoidance by a bankruptcy
trustee or debtor in possession. However, Triad's failure to obtain or the
Servicer's failure to maintain a perfected security interest in a Financed
Vehicle would constitute a breach of the warranties of Triad or the Servicer (as
applicable) under the Receivables Purchase Agreement or the Pooling and
Servicing Agreement or Sale and Servicing Agreement (as applicable), and would
create an obligation of Triad or the Servicer under the Receivables Purchase
Agreement or the Pooling and Servicing Agreement or Sale and Servicing Agreement
to purchase or replace the related Receivable unless the breach is cured. See
"Description of the Trust Documents--Sale and Assignment of Receivables."
Under the laws of most states, a security interest in a vehicle that is
perfected by notation on the certificate of title remains perfected for four
months after a vehicle is moved from the state that issued the certificate of
title to a new state, and thereafter until the vehicle is re-registered in the
new state, but not beyond surrender of the certificate of title. A majority of
states generally require, as part of the registration process, that an existing
certificate of title for a vehicle be deposited with the application for
registration. Accordingly, a secured party that is in possession of a
certificate of title must surrender possession in order for the vehicle to be
re-registered. In cases where the secured party is not in possession of the
certificate of title, a secured party whose security interest is noted on the
certificate of title may receive notice when the certificate of title is
surrendered for purposes of re-registration of the vehicle. In either case, the
secured party would have the opportunity to re-perfect its security interest in
the vehicle in the new state. If a vehicle is relocated to and re-registered in
a state that does not require surrender of a certificate of title for
registration of the motor vehicle or that does not notify secured parties of
surrender of certificates of title, or in case of fraud on the part of the
Obligor, re-registration could result in a loss of perfection of a security
interest in the vehicle. In the ordinary course of servicing receivables, the
Servicer takes steps to effect re-perfection upon receipt of notice of
re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a vehicle, the Servicer must surrender possession of the
certificate of title or may receive notice as a result of its security interest
being noted thereon and accordingly will have an opportunity to require
satisfaction of the related Receivable before release of the security interest.
Under either of the Pooling and Servicing Agreement or Sale and Servicing
Agreement, the Servicer is obligated to take appropriate steps, at the
Servicer's expense, to maintain perfection of security interests in the Financed
Vehicles.
Under the laws of most states, liens for repairs performed on, and for
storage of, a motor vehicle and liens for certain unpaid taxes take priority
over even a perfected security interest in a Financed Vehicle. The Code also
grants priority to certain federal tax liens over the lien of a secured party.
The laws of certain states and federal law permit the confiscation of motor
vehicles under certain circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle. Triad will represent in the Receivables Purchase
Agreement and the Seller will represent in the Pooling and Servicing or Sale and
Servicing Agreement, as applicable, that each security interest in a Financed
Vehicle is or will be prior to all other present liens (other than liens for
repairs, storage or taxes) upon and security interests in such Financed Vehicle.
However, liens for repairs, storage or taxes, or the confiscation of a Financed
Vehicle, could arise or occur at any time during the term of a Receivable. No
notice will be given to the Indenture Trustee or Securityholders if such a lien
arises or confiscation occurs.
REPOSSESSION
In the event of a default by Obligors, the holder of the retail installment
sale contract has all the remedies of a secured party under the UCC of the state
in which enforcement is to take place, except where specifically limited by
other laws. In almost all states: (i) the UCC remedies of a secured party
include the right to repossession by self-help means, unless such means would
constitute a breach of the
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peace; (ii) unless a vehicle is voluntary surrendered, self-help repossession is
the method employed by the Servicer in the majority of instances in which a
default occurs and is accomplished by retaking possession of the Financed
Vehicle; and (iii) in cases where the Obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court order
must be obtained from the appropriate state court, and the Financed Vehicle must
then be repossessed in accordance with that order. In certain states under
certain circumstances after the Financed Vehicle has been repossessed, the
Obligor may reinstate the contract by paying the delinquent installments on the
Receivable and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
some states, the Obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for sale, plus, in some jurisdictions, reasonable
attorneys' fees, (such expenses, the "Repossession Costs") or, in some other
states, by payment of the unpaid balance. In other states, the Obligor has the
right to reinstate the obligation by payment of delinquent installments and
Repossession Costs. Repossessed Financed Vehicles are generally resold by the
Servicer through automobile auctions which are attended principally by
automotive dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed Financed Vehicles will be applied
first to the expenses of resale and repossession, then to the satisfaction of
the indebtedness of the Obligor evidenced by the Receivable, and then as may be
required by law. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. Additionally, under the laws of
most states, in order for a creditor in a secured transaction to sue for a
deficiency, he or she must first comply with those provisions of the UCC which
govern disposition of collateral and then dispose of the collateral in a
commercially reasonable manner. Any deficiency judgment would be a personal
judgment against the Obligor for the shortfall, and a defaulting Obligor can be
expected to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any other holder of any subordinate lien with
respect to the vehicle who has notified the lender within the specified time
period or, if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon credit sellers, lenders and servicers
involved in consumer finance. These laws include the Truth in Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and
Sailors' Civil Relief Act of 1940, state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code, and state motor vehicle retail
installment sales acts, retail installment sales acts and other similar laws.
Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These laws impose specific statutory liabilities
upon creditors who fail to comply with their provisions. In some cases, this
liability could affect an
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assignee's (such as the Seller's, the Trust's or the Trustee's) ability to
enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, state statute or the common law in certain states,
has the effect of subjecting a seller (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller (such
as Triad, the Seller, the Trust or the Trustee) to all claims and defenses which
the Obligor in the transaction could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the Obligor under
the contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the Obligor. The Receivables will be
subject to the requirements of the FTC Rule. Accordingly, the Seller, the Trust
and the Trustee will be subject to any claims or defenses that the purchaser of
the Financed Vehicle may assert against the seller of the Financed Vehicle.
Under most state motor vehicle dealer licensing laws, sellers of motor vehicles
are required to be licensed to sell motor vehicles at retail sale. Furthermore,
Federal odometer regulations promulgated under the Motor Vehicle Information and
Cost Savings Act require that all sellers of new and used vehicles furnish a
written statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed or if an odometer disclosure
statement was not provided to the purchaser of the related Financed Vehicle, the
Obligor may be able to assert a claim or defense against the seller of the
vehicle, and against Triad, the Seller, the Trust or the Trustee pursuant to the
FTC Rule.
Courts have imposed general equitable principles on secured parties pursuing
repossession of collateral or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an Obligor from some or
all of the legal consequences of a default. In most states, failure to comply
with the UCC's provisions regarding repossession, notice and sale of collateral,
such as the Financed Vehicles, may result in the secured party being liable in
damages to the debtor. The Servicer's failure to comply with these UCC
provisions also could affect the enforceability of the Receivables or of the
security interests in the Financed Vehicles that secure the Receivables.
In several cases, Obligors have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the Fourteenth Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
Triad will represent and warrant under the Receivables Purchase Agreement
and the Seller will represent and warrant under either the Pooling and Servicing
Agreement or the Sale and Servicing Agreement, as applicable, that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against the Trust for violation of any
law and such claim materially and adversely affects the Trust's interest in a
Receivable, such violation would constitute a breach of the warranties of Triad
under the Receivables Purchase Agreement and/or of the warranties of the Seller
under the Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable, and would create an obligation of Triad to repurchase or replace the
Receivable unless the breach is cured. See "Description of the Trust
Documents--Sale and Assignment of the Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, some courts have held
that a court may prevent a lender from repossessing a motor vehicle, and, as a
part of the rehabilitation plan, reduce the amount of the secured indebtedness
to the market value of the motor vehicle at the time of bankruptcy (as
determined by
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the court), leaving the party providing financing as a general unsecured
creditor for the remainder of the indebtedness. A bankruptcy court may also
reduce the monthly payments due under a contract or change the rate of interest
and time of repayment of the indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the purchase, ownership and disposition of the Notes and the Certificates.
Dechert Price & Rhoads, special federal tax counsel for Triad ("Federal Tax
Counsel"), is of the opinion that the discussion hereunder fully and fairly
discloses all material federal tax risks associated with the purchase, ownership
and disposition of the Notes and Certificates. The summary does not purport to
deal with federal income tax consequences or special rules that are applicable
to certain categories of holders. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on all of the issues discussed below. As a
result, the IRS may disagree with all or a part of the discussion below.
Prospective investors are urged to consult their own tax advisors in determining
the federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Notes and the Certificates.
Federal Tax Counsel will deliver separate opinions in connection with each
issuance of Securities. Such opinions will be delivered at pricing.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The opinion of Federal Tax
Counsel, however, is not binding on the IRS or the courts. No ruling on any of
the issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the Notes, the Certificates and
related terms, parties and documents shall be deemed to refer, unless otherwise
specified herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust will be treated as a partnership under the Code,
whether the Trust will be treated as a grantor trust, or whether it is intended
that the Trust serve as a security device for the issuance of Certificates that
are to be treated as indebtedness for federal income tax purposes. The
Prospectus Supplement for each series of Certificates will specify whether the
Trust will be treated as a partnership, a grantor trust, or is intended to serve
as a security device as just described.
TRUSTS TREATED AS PARTNERSHIPS
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust which is intended
to be a partnership, as specified in the related Prospectus Supplement, will not
be an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with,
and on counsel's conclusions that (1) the Trust will not have certain
characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
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TAX CONSEQUENCES TO HOLDERS OF THE NOTES ISSUED BY A PARTNERSHIP
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that in its
opinion the Notes will be classified as debt for federal income tax purposes.
The discussion below assumes this characterization of the Notes is correct.
TREATMENT OF ORIGINAL ISSUE DISCOUNT. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not "indexed securities" or "strip notes." Moreover, the discussion assumes that
the interest formula for the Notes meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the Notes (I.E., any excess
of the principal amount of the Notes over their issue price) does not exceed a
DE MINIMIS amount (I.E., generally 1/4% of their principal amount multiplied by
the number of full years included in their term), all within the meaning of the
OID regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
OID AS INTEREST INCOME. Based on the above assumptions the Notes generally
will not be considered issued with OID. The stated interest thereon will be
taxable to a Noteholder as ordinary interest income when received or accrued in
accordance with such Noteholder's method of tax accounting. Under the OID
regulations, a holder of a Note issued with a DE MINIMIS amount of OID generally
must include such OID in income, on a pro rata basis, as principal payments are
made on the Note. However, a holder may elect to accrue DE MINIMIS OID under a
constant yield method in connection with an election to accrue all interest,
discount, and premium on the Note using the constant yield method. See "Trusts
Treated as Grantor Trusts--Taxation of Holders if Stripped Bond Rules Do Not
Apply--Election to Treat All Interest as OID" for a discussion of such election.
A purchaser who buys a Note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
OID TREATMENT UPON SALE OR OTHER DISPOSITION. If a Noteholder sells a Note,
the holder will recognize gain or loss in an amount equal to the difference
between the amount realized on the sale and the holder's adjusted tax basis in
the Note. The adjusted tax basis of a Note to a particular Noteholder will equal
the holder's cost for the Note, increased by any market discount, acquisition
discount, OID, if any, and gain previously included by such Noteholder in income
with respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Noteholder with respect to such Note. Any such gain or loss generally
will be capital gain or loss if the Note was held as a capital asset, except for
gain representing accrued interest and accrued
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market discount not previously included in income. Capital losses generally may
be used only to offset capital gains.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a Foreign Investor, as defined below, generally will be considered "portfolio
interest," and generally will not be subject to United States federal income tax
and withholding tax, if the interest is not effectively connected with the
conduct of a trade or business within the United States by the Foreign Investor
and the Foreign Investor (i) is not actually or constructively a "10 percent
shareholder" of the Trust or the Seller (including a holder of 10% of the
outstanding Certificates) or a "controlled foreign corporation" with respect to
which the Trust or the Seller is a "related person" within the meaning of the
Code and (ii) provides the Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a Foreign Investor and providing the Foreign
Investor's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the Foreign Investor that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any gain realized on the sale, redemption, retirement or other taxable
disposition of a Note by a foreign person will be exempt from United States
federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Investor, (ii) in the case of an individual Foreign
Person, the Foreign Person is not present in the United States for 183 days or
more in the taxable year, and (iii) in the case of gain representing accrued
interest or OID, the conditions described in the immediately preceding paragraph
are satisfied.
If the interest, gain or income on a Note held by a Foreign Investor is
effectively connected with the conduct of a trade or business in the United
States by the Foreign Investor (although exempt from the withholding tax
previously discussed if the holder provides an appropriate and timely statement
on Form 4224), the holder generally will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
In addition, if the Foreign Investor is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its "effectively connected earnings and
profits" within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable tax
treaty (as modified by the branch profits tax rules).
Proposed Treasury regulations which would be effective for payments made
after December 31, 1998 if adopted in their current form would provide
alternative certification requirements and means by which a Foreign Investor
could claim the exemptions from federal income and withholding taxes.
For purposes of this tax discussion, a "Foreign Person" or "Foreign
Investor" is any person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate whose income is includible in gross income for United States
federal income taxation regardless of source, or (iv) a trust other than a
"Foreign Trust," as such term is defined in Section 7701(a)(31) of the Code.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing, among other things, the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a nonexempt
Noteholder fail to provide the required certification, the Trust will be
required to withhold 31 percent of the amount otherwise payable to the holder,
and remit the withheld amount to the IRS as a credit against the holder's
federal income tax liability.
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POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, the
Trust might be treated as a publicly traded partnership that would not be
taxable as a corporation if it met certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a publicly traded partnership
could have adverse tax consequences to certain holders. For example, income to
Foreign Investors generally would be subject to U.S. tax and U.S. tax return
filing and withholding requirements, and individual holders might be subject to
certain limitations on their ability to deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES ISSUED BY A PARTNERSHIP
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller and Triad will agree,
and the Certificateholders will agree by their purchase of Certificates, to
treat the Trust as a partnership for purposes of federal and state income tax,
franchise tax and any other tax measured in whole or in part by income, with the
assets of the partnership being the assets held by the Trust, the partners of
the partnership being the Certificateholders, and the Notes being debt of the
partnership. However, the proper characterization of the arrangement involving
the Trust, the Certificates, the Notes, the Seller and Triad is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.
For example, because the Certificates may have certain features
characteristic of debt, the Certificates might be considered debt of the Seller
or the Trust. Generally, provided such Certificates are issued at or close to
face value, any characterization would not result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of the Certificates as equity in a partnership, described below. If
Certificates are issued at a substantial discount, a discussion of the relevant
tax consequences will be set forth in the related Prospectus Supplement. The
following discussion assumes that the Certificates represent equity interests in
a partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are "indexed securities" or "strip notes," and that a series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. In certain instances, however, the
Trust could have an obligation to make payments of withholding tax on behalf of
a Certificateholder. See "Backup Withholding" and "Tax Consequences to Foreign
Certificateholders" below. The Trust's income will consist primarily of interest
and finance charges earned on the Receivables (including appropriate adjustments
for market discount, OID and bond premium) and any gain upon collection or
disposition of Receivables. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, servicing and other fees, and
losses or deductions upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over
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their initial issue price; (iii) prepayment premium payable to the
Certificateholders for such month; and (iv) any other amounts of income payable
to the Certificateholders for such month. Such allocation will be reduced by any
amortization by the Trust of premium on Receivables that corresponds to any
excess of the issue price of Certificates over their principal amount. Based on
the economic arrangement of the parties, this approach for allocating Trust
income should be permissible under applicable Treasury regulations, although
Federal Tax Counsel is unable to opine that the IRS would not require a greater
amount of income to be allocated to Certificateholders. Moreover, even under the
foregoing method of allocation, Certificateholders may be allocated income equal
to the entire Pass-Through Rate plus the other items described above even though
the Trust might not have sufficient cash to make current cash distributions of
such amount. Thus, cash basis holders will in effect be required to report
income from the Certificates on the accrual basis and Certificateholders may
become liable for taxes on Trust income even if they have not received cash from
the Trust to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
All of some of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt
entity(including an individual retirement account) may constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. Such deductions may also be subject to reduction under Section 68 of
the Code if the individual's adjusted gross income exceeds certain limits.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Receivables will not be
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction will be allocated to Certificateholders if the
related Trust Agreement so provides. Any such allocation will be disclosed in
the related Prospectus Supplement.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. Proposed
regulations would provide that if a termination occurs the partnership will be
considered to transfer its assets and liabilities to a new partnership in
exchange for interests in that new partnership which it would then be treated as
transferring to its partners. The Trust will not comply with certain technical
requirements that might apply when such a constructive termination occurs. As a
result,
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the Trust may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, the
Trust might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN SELLERS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The [Affiliated]
[Initial] Purchaser is authorized to revise the Trust's method of allocation
between Sellers and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-l. The Trust will
provide the Schedule K-l information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the
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information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS with respect to partnership
items. The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificateholders, and a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. As discussed below, an
investment in a Certificate is not suitable for any Foreign Person, as defined
above, which is not eligible for a complete exemption from U.S. withholding tax
on interest under a tax treaty with the United States. Accordingly, no interest
in a Certificate should be acquired by or on behalf of any such Foreign Person.
No regulations, published rulings or judicial decisions exist that would
discuss the characterization for Federal withholding tax purposes with respect
to a Foreign Person of a partnership with activities substantially the same as
the Trust. Depending upon the particular terms of the related Trust Agreement
and Sale and Servicing Agreement, a trust may be considered to be engaged in a
trade or business in the United States for purposes of Federal withholding taxes
with respect to non-U.S. persons. If the Trust is considered to be engaged in a
trade or business in the United States for such purposes, the income of the
Trust distributable to a non-U.S. person would be subject to Federal withholding
tax at a rate of 35% for persons taxable as a corporation and 39.6% for all
other Foreign Persons. Also, in such cases, a Foreign Person that is a
corporation may be subject to the branch profits tax. If the Trust is notified
that a Certificateholder is a Foreign Person, the Trust may withhold as if it
were engaged in a trade or business in the United States in order to protect the
Trust from possible adverse consequences of a failure to withhold. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures.
If a Trust is engaged in a trade or business, each foreign Certificateholder
will be required to file a United States federal individual or corporate income
tax return (including in the case of a corporation, the branch profits tax) on
its share of the Trust's income. A foreign holder generally would be entitled to
file with the IRS a claim for refund with respect to withheld taxes, taking the
position that no taxes were due because the Trust was not engaged in a United
States trade or business. However, interest payments made
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to (or accrued by) a Certificateholder who is a Foreign Person may be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust and for that reason or because of the nature of the
Receivables, the interest will likely not be considered "portfolio interest."
See "--Tax Consequences to Holders of the Notes Issued by a Partnership--Foreign
Holders" for a discussion of portfolio interests. As a result, even if the Trust
is not considered to be engaged in a U.S. trade or business, Certificateholders
would be subject to United States Federal income tax which must be withheld at a
rate of 30% on their share of the Trust's income(without reduction for interest
expense), unless reduced or eliminated pursuant to an applicable income tax
treaty. If the Trust is notified that a Certificateholder is a Foreign Person,
the Trust may be required to withhold and pay over such tax, which can exceed
the amounts otherwise available for distribution to such a Certificateholder. A
Foreign Person would generally be entitled to file with the IRS a refund claim
for such withheld taxes, taking the position that the interest was portfolio
interest and therefore not subject to U.S. tax. However, the IRS may disagree
and no assurance can be given as to the appropriate amount of tax liability. As
a result, each potential foreign Certificateholder should consult its tax
advisor as to whether the tax consequences of holding an interest in a
Certificate make it an unsuitable investment.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
As specified in the related Prospectus Supplement, if a partnership election
is not made and the Certificates are not treated as debt for federal income tax
purposes as discussed below, Federal Tax Counsel will deliver its opinion that
the Trust will not be classified as an association taxable as a corporation and
that such Trust will be classified as a grantor trust under subpart E, Part I of
subchapter J of the Code. In this case, Grantor Trust Certificateholders will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein as "Grantor Trust Certificates."
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus such holder's other miscellaneous
itemized deductions exceed two percent of such holder's adjusted gross income.
Such deductions may also be limited by Code Section 68 for an individual whose
adjusted gross income exceeds certain limits. A Grantor Trust Certificateholder
using the cash method of accounting must take into account its pro rata share of
income and deductions as and when
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collected by or paid to the Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Servicer, whichever is
earlier. If the servicing fees or other amounts paid to the Servicer exceed
reasonable servicing compensation, the amount of such excess would be considered
as an ownership interest retained by the Servicer (or any person to whom the
Servicer assigned all or a portion of the servicing fees) in a portion of the
interest payments on the Receivables. The Receivables would then be subject to
the stripped bond rules of the Code discussed below.
TAXATION OF HOLDERS IF STRIPPED BOND RULES APPLY
In the absence of comprehensive regulations, the tax treatment of stripped
bonds is not entirely clear. The preamble to certain stripped bond regulations
suggests that each purchaser of a Grantor Trust Certificate will be treated with
respect to each Receivable as the purchaser of a single stripped bond consisting
of all of the stripped portions of the applicable Receivable (such portions with
respect to a Receivable are referred to herein as a "Stripped Bond") which
generally should be treated as a single debt instrument issued on the day it is
purchased for purposes of calculating any original issue discount. Generally,
under Treasury regulations relating to Stripped Bonds (the "Section 1286
Treasury Regulations"), if the discount on a Stripped Bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code) such
Stripped Bond will be considered to have been issued with OID. See "--Original
Issue Discount" herein. Based on the preamble to the Section 1286 Treasury
regulations, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Pass-Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing should be treated
as "qualified stated interest" within the meaning of the Section 1286 Treasury
regulations, assuming all other requirements for treatment as qualified stated
interest are satisfied, and such income will be so treated in the Trustee's tax
information reporting.
ORIGINAL ISSUE DISCOUNT. When Stripped Bonds have more than a DE MINIMIS
amount of OID, the special rules of the Code relating to "original issue
discount" (currently Sections 1271 through 1275) will be applicable to a Grantor
Trust Certificateholder's interest in those Stripped Bonds. Generally, a Grantor
Trust Certificateholder that acquires an interest in a Stripped Bond issued or
acquired with OID must include in gross income the sum of the "daily portions",
as defined below, of the OID on such Stripped Bond for each day on which it owns
a Certificate, including the date of purchase but excluding the date of
disposition. Although the proper method is not entirely clear, the Trust intends
to calculate the daily portions of OID with respect to a Stripped Bond generally
as follows. A calculation will be made of the portion of OID that accrues on the
Stripped Bond during each successive monthly accrual period (or shorter period
in respect of the date of original issue or the final Distribution Date). This
will be done, in the case of each full monthly accrual period, by adding (i) the
present value of all remaining payments to be received on the Stripped Bond
under the prepayment assumption, if any, used in respect of the Stripped Bonds
and (ii) any payments received during such accrual period, and subtracting from
that total the "adjusted issue price" of the Stripped Bond at the beginning of
such accrual period. No representation is made that the Stripped Bonds will
prepay at any prepayment assumption. The "adjusted issue price" of a Stripped
Bond at the beginning of the first accrual period is its issue price (as
determined for purposes of the OID rules of the Code) and the "adjusted issue
price" of a Stripped Bond at the beginning of a subsequent accrual period is the
"adjusted issue price" at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced by
the amount of any payment (other than "qualified stated interest") made at the
end of or during that accrual period. The OID accruing during such accrual
period will then be divided by the number of days in the period to determine the
daily portion of OID for each day in the period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions of
OID must be determined according to an appropriate allocation under either an
exact or approximate method set forth in the OID Regulations, or some other
reasonable method, provided that such method is consistent with the method used
to determine the yield to maturity of the Receivables.
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With respect to the Stripped Bonds, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Stripped Bonds.
TAXATION OF HOLDERS IF STRIPPED BOND RULES DO NOT APPLY
PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
It is unclear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for Receivables that are construed to
be acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption or it prepays faster than the prepayment assumption, the holder of a
Grantor Trust Certificate acquired at a premium should recognize a loss if a
Receivable prepays in full, equal to the difference between the portion of the
prepaid principal amount of such Receivable that is allocable to the Grantor
Trust Certificate and the portion of the adjusted basis of the Grantor Trust
Certificate that is allocable to such Receivable.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
Receivable will be considered to be zero if the amount allocable to the
Receivable is less than 0.25% of the Receivable's stated redemption price at
maturity multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. Because the
regulations described above have not been issued, Federal Tax Counsel is unable
to opine as to what effect those regulations might have on the tax treatment of
a Grantor Trust Certificate purchased at a discount.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not
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exceed the market discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in which such market
discount is includible in income. If such holder elects to include market
discount in income currently as it accrues on all market discount instruments
acquired by such holder in that taxable year or thereafter, the interest
deferral rule described above will not apply.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including DE
MINIMIS market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
TAXATION OF HOLDERS REGARDLESS OF WHETHER STRIPPED BOND RULES APPLY
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Subject to the discussion
of market discount above, such gain or loss generally will be capital gain or
loss to an owner for which a Grantor Trust Certificate is a "capital asset"
within the meaning of Section 1221, and will be long-term or short-term
depending on whether the Grantor Trust Certificate has been owned for the
long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
NON-U.S. PERSONS. To the extent that a Grantor Trust Certificate evidences
ownership in underlying Receivables that were issued on or before July 18, 1984,
interest or OID paid by the person required to withhold tax under Section 1441
or 1442 to (i) an owner that is a Foreign Person or (ii) a Grantor Trust
Certificateholder holding on behalf of an owner that is a Foreign Person will be
subject to federal income tax, collected by withholding, at a rate of 30% or
such lower rate as may be provided for interest by an applicable tax treaty.
Accrued OID recognized by the owner on the sale or exchange of such a Grantor
Trust Certificate also will be subject to federal income tax at the same rate.
Generally, such payments would be considered portfolio interest and would not be
subject to withholding to the extent that a Grantor Trust Certificate evidences
ownership in Receivables issued after July 18, 1984, if such Grantor Trust
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Grantor Trust Certificateholder under
penalties of perjury, certifying that such Grantor Trust Certificateholder is
the beneficial owner, is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder). Additional restrictions apply to
Receivables where the Obligor is not a natural person in order to qualify for
the exemption from withholding. See "--Tax Consequences to Holders of the Notes
Issued by a Partnership--Foreign Holders" for a discussion of when interest will
constitute portfolio interest.
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INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
CERTAIN CERTIFICATES TREATED AS INDEBTEDNESS
Upon the issuance of Certificates that are intended to be treated as
indebtedness for federal income tax purposes, Federal Tax Counsel will opine
that based upon its analysis of the factors discussed below and certain
assumptions and qualifications the Certificates will be treated as indebtedness
for federal income tax purposes. However, opinions of counsel are not binding on
the IRS and there can be no assurance that the IRS could not successfully
challenge this conclusion. Such Certificates that are intended to be treated as
indebtedness are herein referred to as "Debt Certificates" and holders of such
Certificates are herein referred to as "Debt Certificateholders."
The Seller will express in the Trust Documents its intent that for federal,
state and local income and franchise tax purposes, the Debt Certificates will be
indebtedness secured by the Receivables. The Seller agrees and each Debt
Certificateholder, by acquiring an interest in a Debt Certificate, agrees or
will be deemed to agree to treat the Debt Certificates as indebtedness for
federal state and local income or franchise tax purposes. However, because
different criteria are used to determine the non-tax accounting characterization
of the transactions contemplated by the Trust Documents, the Seller expects to
treat such transactions, for regulatory and financial accounting purposes, as a
sale of ownership interests in the Receivables and not as debt obligations.
In general, whether for federal income tax purposes a transaction
constitutes a sale of property or a loan the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction. The form of a transaction, while a
relevant factor, is not conclusive evidence of its economic substance.
Inappropriate circumstances, the courts have allowed taxpayers, as well as the
IRS to treat a transaction in accordance with its economic substance, as
determined under federal income tax laws, notwithstanding that the participants
characterize the transaction differently for non-tax purposes. In some
instances, however, courts have held that a taxpayer is bound by a particular
form it has chosen for a transaction, even if the substance of the transaction
does not accord with its form. It is expected that Federal Tax Counsel will
advise that the rationale of those cases will not apply to the transactions
evidenced by a series of Debt Certificates.
While the IRS and the courts have set forth several factors to be taken into
account in determining whether the substance of a transaction is a sale of
property or a secured indebtedness for federal income tax purposes, the primary
factor in making this determination is whether the transferee has assumed the
risk of loss or other economic burdens relating to the property and has obtained
the economic benefits of ownership thereof. Federal Tax Counsel will analyze and
rely on several factors in reaching its opinion that the weight of the benefits
and burdens of ownership of the Receivables has not been transferred to the Debt
Certificateholders and that the Debt Certificates are properly characterized as
indebtedness for federal income tax purposes. Contrary characterizations that
could be asserted by the IRS are described below under "--Possible
Classification of the Transaction as a Partnership or as an Association Taxable
as a Corporation."
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TAXATION OF INCOME OF DEBT CERTIFICATEHOLDER
As set forth above, it is expected that Federal Tax Counsel will advise the
Seller that the Debt Certificates will constitute indebtedness for Federal
income tax purposes, and accordingly, holders of Debt Certificates generally
will be taxed in the manner described above in "Trusts Treated as
Partnerships--Tax Consequences to Holders of Notes Issued by a Partnership."
If the Debt Certificates are issued with OID that is more than a de minimis
amount as defined in the Code and Treasury regulations (see "Trusts Treated as
Partnerships--Tax Consequences to Holders of Notes Issued by a Partnership") a
United States holder of a Debt Certificate (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income in advance of the receipt of cash attributable
to that income. Under section 1272(a)(6) of the Code, special provisions apply
to debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those
provisions would apply to the Debt Certificates is unclear. Additionally, the
IRS could take the position based on Treasury regulations that none of the
interest payable on a Debt Certificate is "unconditionally payable" and hence
that all of such interest should be included in the Debt Certificate's stated
redemption price at maturity. Accordingly, Federal Tax Counsel is unable to
opine as to whether interest payable on a Debt Certificate constitutes
"qualified stated interest" that is not included in a Certificate's stated
redemption price at maturity. Consequently, prospective investors in Debt
Certificates should consult their own tax advisors concerning the impact to them
in their particular circumstances. The Prospectus Supplement will indicate
whether the Trust intends to treat the interest on the Certificates as
"qualified stated interest".
TAX CHARACTERIZATION OF TRUST
Consistent with the treatment of the Debt Certificates as indebtedness, the
Trust will be treated as a security device to hold Receivables securing the
repayment of the Debt Certificates. In connection with the issuance of Debt
Certificates of any series, Federal Tax Counsel will render an opinion that,
based on the assumptions and qualifications set forth therein, under then
current law, the issuance of the Debt Certificates of such series will not cause
the applicable Trust to be characterized for Federal income tax purposes as an
association (or publicly traded partnership) taxable as a corporation.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN ASSOCIATION
TAXABLE AS A CORPORATION
The opinion of Federal Tax Counsel with respect to Debt Certificates will
not be binding on the courts or the IRS. It is possible that the IRS could
assert that, for federal income tax purposes, the transactions contemplated
constitute a sale of the Receivables (or an interest therein) to the Debt
Certificateholders and that the proper classification of the legal relationship
between the Seller and some or all of the Debt Certificateholders resulting from
the transactions is that of a partnership (including a publicly traded
partnership), a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation. The Seller currently does not intend to
comply with the federal income tax reporting requirements that would apply if
any Classes of Debt Certificates were treated as interests in a partnership or
corporation.
If a transaction were treated as creating a partnership between the Seller
and the Debt Certificateholders, the partnership itself would not be subject to
federal income tax (unless it were characterized as a publicly traded
partnership taxable as a corporation); rather, the partners of such partnership,
including the Debt Certificateholders, would be taxed individually on their
respective distributive shares of the partnership's income, gain, loss,
deductions and credits. The amount and timing of items of income and deductions
of a Debt Certificate could differ if the Debt Certificates were held to
constitute partnership
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interests, rather than indebtedness. Moreover, unless the partnership were
treated as engaged in a trade or business, an individual's share of expenses of
the partnership would be miscellaneous itemized deductions that, in the
aggregate, are allowed as deductions only to the extent they exceed two percent
of the individual's adjusted gross income, and would be subject to reduction
under Section 68 of the Code if the individual's adjusted gross income exceeded
certain limits. As a result, the individual might be taxed on a greater amount
of income than the stated rate on the Debt Certificates. Finally, all or a
portion of any taxable income allocated to a Debt Certificateholder that is a
pension, profit-sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be taxable
to the holder under the Code.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, the
Trust would be subject to federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Debt Certificateholders. Such classification
may also have adverse state and local tax consequences that would reduce amounts
available for distribution to Debt Certificateholders. Moreover, distributions
on Debt Certificates that are recharacterized as equity in an entity taxable as
a corporation would not be deductible in computing the entity's taxable income,
and cash distributions on such Debt Certificates generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
FOREIGN INVESTORS
If the IRS were to contend successfully that the Debt Certificates are
interests in a partnership and if such partnership were considered to be engaged
in a trade or business in the United States, the partnership would be subject to
a withholding tax on income of the Trust that is allocable to a Foreign Investor
and such Foreign Investor would be credited for his or her share of the
withholding tax paid by the partnership. In such case, the holder generally
would be subject to United States federal income tax at regular income tax
rates, and possibly a branch profits tax in the case of a corporate holder.
Alternatively, although there may be arguments to the contrary, if such
partnership is not considered to be engaged in a trade or business within the
United States and if income with respect to the Debt Certificates is not
otherwise effectively connected with the conduct of a trade or business in the
United States by the Foreign Investor, the Foreign Investor would be subject to
United States income tax and withholding at a rate of 30% (unless reduced by an
applicable tax treaty) on the holder's distributive share of the partnership's
interest income. See "Trusts Treated as Partnerships--Tax Consequences to
Holders of the Certificates Issued by the Partnership--Tax Consequences to
Foreign Certificateholders" for a more detailed discussion of the consequences
of an equity investment by a Foreign Investor in an entity characterized as a
partnership.
If the Trust were taxable as a corporation, distribution to foreign
investors, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30% unless such rate were reduced or eliminated by an
applicable income tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of a Trust, the
Certificates, the Notes or the holders of Certificates or Notes of any series
under state and local tax laws. Prospective investors are urged to consult their
own tax advisors regarding state and local tax treatment of the Trust, the
Certificates, the Notes and the consequences of purchase, ownership or
disposition of the Certificates and Notes under any state or local tax law.
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ERISA CONSIDERATIONS
The Prospectus Supplement for each Series of Securities will summarize,
subject to the limitations discussed therein, considerations under ERISA
relevant to the purchase of such Securities by employee benefit plans and
individual retirement accounts.
PLAN OF DISTRIBUTION
The Securities offered hereby and by the related Prospectus Supplement will
be offered in Series through one or more of the methods described below. The
Prospectus Supplement prepared for each Series will describe the method of
offering being utilized for that Series and will state the public offering or
purchase price of such Series and the net proceeds to the Seller from such sale.
Triad intends that Securities will be offered through the following methods
from time to time and that offerings may be made concurrently through more than
one of these methods or that an offering of a particular Series of Securities
may be made through a combination of two or more of these methods. Such methods
are as follows:
1. By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters;
2. By placements by Triad with institutional investors through dealers;
3. By direct placements by Triad with institutional investors; and
4. By competitive bid.
In addition, if specified in the related Prospectus Supplement, a Series of
Securities may be offered in whole or in part in exchange for the Receivables
(and other assets, if applicable) that would comprise the Trust Property in
respect of such Securities.
If one or more underwriters or groups of underwriters (the "Underwriters")
are used in a sale of any Securities (other than in connection with an
underwriting on a best efforts basis), such Securities will be acquired by the
Underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices to be determined at the time of sale or at the time
of commitment therefor. The Securities will be set forth on the cover of the
Prospectus Supplement relating to such Series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with the sale of the Securities, Underwriters may receive
compensation from Triad or from purchasers of the Securities in the form of
discounts, concessions or commissions. Underwriters and dealers participating in
the distribution of the Securities may be deemed to be underwriters in
connection with such Securities, and any discounts or commissions received by
them from Triad and any profit on the resale of Securities by them may be deemed
to be underwriting discounts and commissions under the Securities Act. The
Prospectus Supplement will describe any such compensation paid by Triad.
It is anticipated that the underwriting agreement pertaining to the sale of
any Series of Securities will provide that the obligations of the Underwriters
will be subject to certain conditions precedent, that the Underwriters will be
obligated to purchase all such Securities if any are purchased (other than in
connection with an underwriting on a best efforts basis) and that, in limited
circumstances, Triad will indemnify the several Underwriters and the
Underwriters will indemnify Triad against certain civil liabilities, including
liabilities under the Securities Act or will contribute to payments required to
be made in respect thereof.
The Prospectus Supplement with respect to any Series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between Triad and purchasers of Securities
of such Series.
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Purchasers of Securities, including dealers, may, depending on the facts and
circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Securities. Holders of Securities should consult with their legal advisors in
this regard prior to any such reoffer or sale.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Securities of any
Series, including certain federal and state income tax consequences with respect
thereto, will be passed upon by Dechert Price & Rhoads, New York, New York, or
other counsel specified in the related Prospectus Supplement.
FINANCIAL INFORMATION
Certain specified Trust Property will secure each Series of Securities. No
Trust will engage in any business activities or have any assets or obligations
prior to the issuance of the related Series of Securities. Accordingly, no
financial statements with respect to any Trust Property will be included in this
Prospectus or in the related Prospectus Supplement.
A Prospectus Supplement may contain the financial statements of the related
Credit Enhancer, if any.
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INDEX OF DEFINED TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein.
<TABLE>
<S> <C>
Accrual Securities.............................................................. 3
ACS............................................................................. 22
Aggregate Principal Balance..................................................... 23
Backup Servicer................................................................. 32
Cede............................................................................ 8
CEDEL Participants.............................................................. 27
Certificateholders.............................................................. 33
Certificates.................................................................... i, 1
CFN............................................................................. 23
Class........................................................................... i
Closing Date.................................................................... 7
Code............................................................................ 41
Collection Account.............................................................. 31
Collection Period............................................................... 3
Commission...................................................................... ii
Contracts....................................................................... i, 21
Cooperative..................................................................... 27
Correspondents.................................................................. 18
Credit Enhancement.............................................................. 17
Credit Enhancer................................................................. 9
Debt Certificateholders......................................................... 52
Debt Certificates............................................................... 52
Definitive Securities........................................................... 28
Depositaries.................................................................... 26
Direct Participants............................................................. 16
DTC............................................................................. 8
ERISA........................................................................... 10
Euroclear Participants.......................................................... 27
Euroclear Operator.............................................................. 27
Exchange Act.................................................................... ii, 10
Federal Tax Counsel............................................................. 10, 41
Financed Vehicles............................................................... i, 5
Foreign Investor................................................................ 43
Foreign Person.................................................................. 43
Forward Purchase Agreement...................................................... 29
FTC Rule........................................................................ 40
Grantor Trust Certificates...................................................... 48
Indenture....................................................................... 1
Indenture Trustee............................................................... 1
Indirect Participants........................................................... 16
Initial Receivables............................................................. 8
Insolvency Laws................................................................. 14
Interest Rate................................................................... ii, 3
Investment Income............................................................... 8, 12, 30
IRS............................................................................. 41
Issuer.......................................................................... i, 1, 19
Lockbox Account................................................................. 31
Lockbox Bank.................................................................... 31
Non-prime Borrowers............................................................. 21
Noteholders..................................................................... 33
Notes........................................................................... i, 1
OID............................................................................. 42
OID Regulations................................................................. 42
</TABLE>
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<TABLE>
<S> <C>
Pass-Through Rate............................................................... ii
Participants.................................................................... 26
Payment Date.................................................................... 2
Policy.......................................................................... i
Pool Factor..................................................................... 22
Precomputed Receivables......................................................... 6
Pre-Funded Amount............................................................... 7
Pre-Funding Account............................................................. 7
Pre-Funding Period.............................................................. 8
Prospectus Supplement........................................................... i
Purchase Amounts................................................................ 29
Rating Agencies................................................................. 10
Receivables..................................................................... i, 5
Receivables Purchase Agreement.................................................. 18
Record Date..................................................................... 2
Registration Statement.......................................................... ii
Relief Act...................................................................... 17
Repossession Costs.............................................................. 39
Residual Interest............................................................... 4
Rule of 78s..................................................................... 5, 19
Rules........................................................................... 27
Section 1286 Treasury Regulations............................................... 49
Securities...................................................................... i
Securities Act.................................................................. ii
Security Balance................................................................ 3
Securityholders................................................................. 2
Seller.......................................................................... 1
Senior Securities............................................................... 4
Series.......................................................................... i
Servicer........................................................................ i, 1
Servicer Termination Event...................................................... 35
Servicing Agreement............................................................. 2
Servicing Fee................................................................... 32
Servicing Fee Rate.............................................................. 32
Servicing Portfolio............................................................. 11
Short-Term Note................................................................. 42
Simple Interest Receivables..................................................... 6, 20
Sponsor......................................................................... 1
Stripped Bond................................................................... 49
Strip Securities................................................................ 3
Subordinate Securities.......................................................... 4
Subsequent Receivables.......................................................... 7
Subsequent Transfer Date........................................................ 13
Subservicer..................................................................... 1
Terms and Conditions............................................................ 28
Triad........................................................................... i, 1
Trust........................................................................... i, 1
Trust Accounts.................................................................. 32
Trust Agreement................................................................. 1
Trust Documents................................................................. 2
Trustee......................................................................... 1, 2
Trust Property.................................................................. i, 1
UCC............................................................................. 37
Underwriters.................................................................... 5
</TABLE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER
OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE TRUST OR THE RECEIVABLES SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
----
<S> <C>
Available Information..................................................... ii
Incorporation Of Certain Documents By Reference........................... ii
Reports To Securityholders................................................ ii
Summary................................................................... S-1
Risk Factors.............................................................. S-11
Trust Property............................................................ S-13
Triad and the Seller...................................................... S-14
Triad's Automobile Financing Program...................................... S-14
The Backup Servicer....................................................... S-20
The Receivables........................................................... S-20
Yield Considerations...................................................... S-25
Use Of Proceeds........................................................... S-25
The Trust................................................................. S-25
The Notes................................................................. S-26
Ratings................................................................... S-36
Registration of Notes..................................................... S-36
The Transaction Documents................................................. S-37
Federal Income Tax Consequences........................................... S-42
State Tax Consequences.................................................... S-45
ERISA Considerations...................................................... S-45
Underwriting.............................................................. S-47
Legal Matters............................................................. S-47
Glossary.................................................................. S-48
Index Of Terms............................................................ S-51
</TABLE>
<TABLE>
<CAPTION>
PROSPECTUS
<S> <C>
Prospectus Supplement..................................................... ii
Available Information..................................................... ii
Incorporation Of Certain Documents By Reference........................... ii
Reports To Securityholders................................................ iii
Summary Of Terms.......................................................... 1
Risk Factors.............................................................. 11
The Trust Property........................................................ 17
Acquisition Of Receivables By The Seller.................................. 18
The Issuers............................................................... 18
The Receivables........................................................... 19
Triad's Automobile Financing Program...................................... 21
Pool Factors.............................................................. 22
Use Of Proceeds........................................................... 23
Triad And The Seller...................................................... 23
The Trustee............................................................... 24
Description Of The Securities............................................. 24
Forward Commitments; Pre-Funding.......................................... 29
Description Of The Trust Documents........................................ 30
Legal Aspects Of The Receivables.......................................... 37
Federal Income Tax Consequences........................................... 41
State and Local Taxation.................................................. 54
ERISA Considerations...................................................... 55
Plan Of Distribution...................................................... 55
Legal Matters............................................................. 56
Financial Information..................................................... 56
Index Of Defined Terms.................................................... 57
Information Not Required In Prospectus.................................... II-1
Signatures................................................................ II-4
Exhibit Index............................................................. II-5
</TABLE>
$[ ]
TRIAD AUTO
RECEIVABLES TRUST
199[ ]-[ ]
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION
SELLER
TRIAD FINANCIAL CORPORATION
SERVICER
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
[UNDERWRITER]
[DATE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the offering of the Securities being registered under this Registration
Statement.
<TABLE>
<S> <C>
SEC Filing Fee........................................................ $
Trustee's Fees and Expenses*..........................................
Legal Fees and Expenses*..............................................
Accounting Fees and Expenses*.........................................
Printing and Engraving Expenses*......................................
Blue Sky Qualification and Legal
Investment Fees and Expenses*.......................................
Rating Agency Fees*...................................................
Certificate Insurer's Fee*............................................
Miscellaneous*........................................................
---
TOTAL........................................................... $
---
---
</TABLE>
- ------------------------
* Estimated in accordance with Item 511 of Regulation S-K.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances.
Article IV of the Second Amended and Restated Articles of Incorporation and
Section 7 of Article V of the Amended and Restated By-Laws of Triad Financial
Corporation (the "Company") provide that all officers and directors of the
Company shall be indemnified by the Company to the fullest extent permissible
under the California Corporations Code from and against all expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such person's status as an agent of the Company.
The form of the Underwriting Agreement, filed as Exhibits 1.1 to this
Registration Statement, provide that Triad will indemnify and reimburse the
underwriter(s) and each controlling person of the underwriter(s) with respect to
certain expenses and liabilities, including liabilities under the 1933 Act or
other federal or state regulations or under the common law, which arise out of
or are based on certain material misstatements or omissions in the Registration
Statement. In addition, the Underwriting Agreement provides that the
underwriter(s) will similarly indemnify and reimburse Triad with respect to
certain material misstatements or omissions in the Registration Statement which
are based on certain written information furnished by the underwriter(s) for use
in connection with the preparation of the Registration Statement.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
**3.1 Second Amended and Restated Articles of Incorporation of the Sponsor.
**3.2 Amended and Restated By-Laws of the Sponsor.
**4.1 Form of Indenture between the Trust and the Indenture Trustee.
**4.2 Form of Pooling and Servicing Agreement.
**4.3 Form of Sale and Servicing Agreement.
**4.4 Form of Trust Agreement.
**5.1 Opinion of Dechert Price & Rhoads with respect to legality.
**8.1 Opinion of Dechert Price & Rhoads with respect to tax matters.
**10.1 Form of Receivables Purchase Agreement.
**23.1 Consents of Dechert Price & Rhoads are included in its opinions filed as Exhibits
5.1 and 8.1 hereto.
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed herewith.
ITEM 17. UNDERTAKINGS.
A. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described above in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by them is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
B. Undertaking pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
II-2
<PAGE>
information required to be included in the post-effective amendment is
contained in periodic reports filed by the Issuer pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
C. Undertaking in respect of incorporation by reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in Reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 (and that the security rating
requirement will be met by the time of sale) and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Huntington Beach, state
of California, on the 11th day of February, 1999.
<TABLE>
<S> <C> <C>
TRIAD FINANCIAL CORPORATION
By: /s/ JAMES M. LANDY
-----------------------------------------
James M. Landy
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JAMES E. MOORE
- ------------------------------ Director February 11, 1999
James E. Moore
/s/ JEROME PERELSON
- ------------------------------ Director February 11, 1999
Jerome Perelson
Executive Vice President,
/s/ HELEN R. KRAUS Principal Accounting
- ------------------------------ Officer, Secretary and February 11, 1999
Helen R. Kraus Director
Chief Executive Officer,
/s/ JAMES M. LANDY Principal Financial
- ------------------------------ Officer February 11, 1999
James M. Landy and Director
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- ---------
<C> <S>
*1.1 Form of Underwriting Agreement.
**3.1 Second Amended and Restated Articles of Incorporation of the Sponsor.
**3.2 Amended and Restated Bylaws of the Sponsor.
**4.1 Form of Indenture between the Trust and the Indenture Trustee.
**4.2 Form of Pooling and Servicing Agreement.
**4.3 Form of Sale and Servicing Agreement.
**4.4 Form of Trust Agreement.
**5.1 Opinion of Dechert Price & Rhoads with respect to legality.
**8.1 Opinion of Dechert Price & Rhoads with respect to tax matters.
**10.1 Form of Receivables Purchase Agreement.
**23.1 Consent of Dechert Price & Rhoads (included in Exhibits 5.1 and 8.1).
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed herewith.
II-5
<PAGE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TRIAD FINANCIAL CORPORATION
JAMES M. LANDY and HELEN R. KRAUS certify that:
1. They are the President and Secretary, respectively, of Triad
Fiancial Corporation, a California corporation.
2. The Articles of Incorporation of Triad Financial Corporation,
as amended to the filing date of this certificate, and setting forth an
amendment to Article III and Article IV, are amended and restated to read as
follows (with the omissions mandated by Corporations Code Section 910(a)):
I
The name of this corporation is TRIAD FINANCIAL CORPORATION
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorported
by the California Corporations Code.
III
This corporation is authorized to issue one class of shares
designated "Common Stock." The number of shares of Common Stock authorized to
be issued is nine thousand sixty-nine (9,069), no par value.
IV
(a) The liability of directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
(b) This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code)
through bylaw provisions, agreements with the agents, vote of shareholders
or disinterested directors or otherwise, in excess of the indemnification
otherwise permitted by section 317 of the California Corporations Code,
subject only to applicable limits set forth in Section 204 of the California
Corporations Code with respect to actions for breach of duty to the
corporation and its shareholders.
<PAGE>
(c) Any amendment, repeal or modification of any provision of this
Article IV shall not adversely affect any right to protection of an agent of
this corporation existing at the time of such amendment, repeal or
modification.
3. The Second Amended and Restated Articles of Incorporation set
forth above were approved by a resolution of the Board of Directors dated
November 20, 1996.
4. The Second Amended and Restate Articles of Incorporation set
forth above were approved by the required shareholder vote in accordance with
Corporations Code Section 902 on November 20, 1996. The corproation has two
classes of shares, designated "Common Stock" and "Class B Common Stock"
entitled to vote with respect to the Second Amended and Restated Articles of
Incorporation. The total number of outstanding shares of Common Stock
entitled to vote with respect to the Second Amended and Restated Articles of
Incorporation was four thousand (4,000). The number of shares of Common Stock
voting in favor of the Second Amended and Restated Articles of Incorporation
was four thousand (4,000), which exceeded the vote required by the Common
Stock. The total number of outstanding shares of Class B Common Stock
entitled to vote with respect to the Second Amended and Restated Articles of
Incorporation was one thousand (1,000). The number of shares of Class B
Common Stock voting in favor of the Second Amended and Restated Articles of
Incorporation was one thousand (1,000), which exceeded the vote required by
the Class B Common Stock. The percentage vote required of the Common Stock
entitled to vote was 50.1%.
/s/ James M. Landy
------------------------------
James M. Landy, President
/s/ Helen R. Kraus
------------------------------
Helen R. Kraus, Secretary
Each of the undersigned declares under penalty of perjury that the
matters set forth in this certificate are true and correct of his or her own
knowledge, and that this declaration was executed on November 20, 1996, at
Los Angeles, California.
/s/ James M. Landy
------------------------------
James M. Landy
/s/ Helen R. Kraus
------------------------------
Helen R. Kraus
2
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
TRIAD FINANCIAL CORPORATION
(a California corporation)
<PAGE>
Section 7. Vice President ......................................... 9
Section 8. Secretary .............................................. 10
Section 9. Chief Financial Officer ................................ 10
Section 10. Salaries ............................................... 10
Section 11. Officers Holding More Than One Office .................. 10
ARTICLE V - MISCELLANEOUS ................................................. 11
Section 1. Record Date and Closing of Stock Books ................. 11
Section 2. Certificates ........................................... 11
Section 3. Representation of Shares in Other ...................... 11
Section 4. Fiscal Year ............................................ 11
Section 5. Annual Reports ......................................... 11
Section 6. Amendments ............................................. 11
Section 7. Indemnification of Corporate Agents .................... 12
SECRETARY'S CERTIFICATE ................................................... 13
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
TRIAD FINANCIAL CORPORATION
(a California corporation)
ARTICLE I - OFFICES
Section 1. The principal executive office of Triad Financial Corporation
(the "Corporation") shall be at such place inside or outside the State of
California as the Board of Directors may determine from time to time.
Section 2. The Corporation may also have offices at such other places as
the Board of Directors may from time to time designate, or as the business of
the Corporation may require.
ARTICLE II - SHAREHOLDERS' MEETINGS
Section 1. Annual Meetings. The annual meeting of the shareholders of the
Corporation for the election of directors to succeed those whose terms expire
and for the transaction of such other business as may properly come before the
meeting shall be held at such place and at such time as may be fixed from time
to time by the Board of Directors and stated in the notice of the meeting. If
the annual meeting of the shareholders be not held as herein prescribed, the
election of directors may be held at any meeting thereafter called pursuant to
these Bylaws.
Section 2. Special Meetings. Special meetings of the shareholders, for any
purpose whatsoever, unless otherwise prescribed by statute, may be called at any
time by the Chairman of the Board, the President, or by the Board of Directors,
or by one or more shareholders holding not less than ten percent (10%) of the
voting power of the Corporation.
Section 3. Place. All meetings of the shareholders shall be at any place
within or without the State of California designated by the Board of Directors
or by written consent of all the persons entitled to vote thereat, given either
before or after the meeting. In the absence of any such designation,
shareholders' meetings shall be held at the principal executive office of the
Corporation.
Section 4. Notice. Notice of meetings of the shareholders of the
Corporation shall be given in writing to each shareholder entitled to vote,
either personally or by first-class mail or other means of written
communication, charges prepaid, addressed to the shareholder at his address
appearing on the books of the Corporation or given by the shareholder to the
Corporation for the purpose of notice. Notice of any such meeting of
shareholders shall be sent
1
<PAGE>
to each shareholder entitled thereto not less than ten (10) nor more than sixty
(60) days before the meeting. Said notice shall state the place, date and hour
of the meeting and, (1) in the case of special meetings, the general nature of
the business to be transacted, and no other business may be transacted, or (2)
in the case of annual meetings, those matters which the Board of Directors, at
the time of the mailing of the notice, intends to present for action by the
shareholders, but subject to Section 601(f) of the California Corporations Code
any proper matter may be presented at the meeting for shareholder action, and
(3) in the case of any meeting at which directors are to be elected, the names
of the nominees intended at the time of the mailing of the notice to be
presented by management for election.
Section 5. Adjourned Meetings. Any shareholders' meeting may be adjourned
from time to time by the vote of the holders of a majority of the voting shares
present at the meeting either in person or by proxy. Notice of any adjourned
meeting need not be given unless a meeting is adjourned for forty-five (45) days
or more from the date set for the original meeting.
Section 6. Quorum. The presence in person or by proxy of the persons
entitled to vote a majority of the shares entitled to vote at any meeting
constitutes a quorum for the transaction of business. The shareholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
In the absence of a quorum, any meeting of shareholders may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but no other
business may be transacted, except as provided above.
Section 7. Shareholder Action by Written Consent. Any action which may be
taken at any meeting of shareholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted;
provided, however, that (1) unless the consents of all shareholders entitled to
vote have been solicited in writing, notice of any shareholder approval without
a meeting by less tan unanimous written consent shall be given as required by
the California Corporations Code, and (2) directors may not be elected by
written consent except by unanimous written consent of all shares entitled to
vote for the election of directors.
Any written consent may be revoked by a writing received by the Secretary
of the Corporation prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary.
2
<PAGE>
Section 8. Waiver of Notice. The transactions of any meeting of
shareholders, however called and noticed, and whenever held, shall be as valid
as though had at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting, or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 9. Voting. The voting at all meetings of shareholders need not be
by ballot, but any qualified shareholder before the voting begins may demand a
stock vote whereupon such stock vote shall be taken by ballot, each of which
shall state the name of the shareholder voting and the number of shares voted by
such shareholder, and if such ballot be cast by a proxy, it shall also state the
name of such proxy.
At any meeting of the shareholders, every shareholder having the right to
vote shall be entitled to vote in person, or by proxy appointed in a writing
subscribed by such shareholder and bearing a date not more than eleven (11)
months prior to said meeting, unless the writing states that it is irrevocable
and is held by a person specified in Section 705(e) of the California
Corporations Code, in which event it is irrevocable for the period specified in
said writing and said Section 705(e).
Section 10. Record Dates. In the event the Board of Directors fixes a day
for the determination of shareholders of record entitled to vote as provided in
Section 1 of Article V of these Bylaws, then, subject to the provisions of the
General Corporation Law of the State of California, only persons in whose name
shares entitled to vote stand on the stock records of the Corporation at the
close of business on such day shall be entitled to vote.
If no record date is fixed:
The record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day notice is given or, if notice is waived, at
the close of business on the business day next preceding the day on which the
meeting is held;
The record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is necessary, shall be the day on which the first written consent
is given; and
The record date for determining shareholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of
3
<PAGE>
Directors fixes a new record date for the adjourned meeting, but the Board of
Directors shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days.
Section 11. Cumulative Voting for Election of Directors. Provided the
candidate's name has been placed in nomination prior to the voting and one or
more shareholders has given notice at the meeting prior to the voting of the
shareholder's intent to cumulate the shareholder's votes, every shareholder
entitled to vote at any election for directors shall have the right to cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
shareholder's shares are normally entitled, or distribute the shareholder's
votes on the same principle among as many candidates as the shareholder shall
think fit. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares are elected.
ARTICLE III - BOARD OF DIRECTORS
Section 1. Powers. Subject to any limitations in the Articles of
Incorporation or these Bylaws and to any provision of the California
Corporations Code requiring shareholder authorization or approval for a
particular action, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by, or under the direction of, the
Board of Directors. The Board of Directors may delegate the management of the
day-to-day operation of the business of the Corporation to a management company
or other person provided that the business and affairs of the Corporation shall
be managed and all corporate powers shall be exercised, under the ultimate
direction of the Board of Directors.
Section 2. Number, Tenure, Qualifications and Election. The number of
directors that shall constitute the whole board shall be six (6). Any director
who is not an employee of a shareholder shall be either (i) a person with at
least five (5) years of full-time experience in either a financial business or a
law or accounting firm, or (ii) a person with significant business experience
whose election is consented to by the remaining directors such consent not to be
unreasonably withheld. The number of directors may be changed from time to time
by a duly adopted resolution of the Board of Directors or shareholders.
Directors need not be shareholders.
So long as ContiFinancial Corporation or its designee ("CFN") owns at
least 50.1% of the issued and outstanding shares of common stock of the
Corporation, then CFN shall be entitled to nominate four (4) directors. So long
as either Helen Kraus or James Landy (collectively the "Management
Shareholders") own any shares of common stock of the Corporation or are entitled
to any contingent payment owing under the Share Governance Agreement dated as of
November 20, 1996 by and among the Corporation, Helen Kraus, James Landy,
Friendly Capital Partners, L.P. and CFN, then such Management Shareholder who is
owed such contingent obligation shall be entitled to nominate one (1) director
(each, a "Management Director").
4
<PAGE>
Directors shall hold office until the next annual meeting of shareholders
and until their respective successors are elected, If any such annual meeting is
not held, or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Directors need not
be shareholders.
Section 3. Regular Meetings. A regular annual meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide for other regular meetings from time to time by
resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board, or the President or any
Vice President, or the Secretary or any two (2) directors. Written notice of the
time and place of all special meetings of the Board of Directors shall be
delivered personally or by telephone or telegraph to each director at least five
(5) business days before the meeting, or sent to each director by first-class
mail, postage prepaid, at least five (5) business days before the meeting. Such
notice need not specify the purpose of the meeting. Notice of any meeting of the
Board of Directors need not be given to any director who signs a waiver of
notice, whether before or after the meeting, or who attends the meeting without
protesting prior thereto or at its commencement, the lack of notice to such
director.
Section 5. Place of Meetings. Meetings of the Board of Directors may be
held at any place within or without the State of California, which has been
designated in the notice, or if not stated in the notice or there is no notice,
the principal executive office of the Corporation or as designated by the
resolution duly adopted by the Board of Directors.
Section 6. Participation by Telephone. Members of the Board of Directors
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another.
Section 7. Quorum. Four (4) members of the Board of Directors shall
constitute a quorum at all meetings. In the absence of a quorum a majority of
the directors present may adjourn any meeting to another time and place. If a
meeting is adjourned for more than twenty-four (24) hours, notice of any
adjournment to another time or place shall be given prior to the time of the
reconvened meeting to the directors who were not present at the time of
adjournment.
Section 8. Action at Meeting. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present is the act of the Board of Directors. Notwithstanding the foregoing, so
long as any Management Directors are directors, any vote with respect to the
change in the basic business of the Corporation or any change in the principal
place of business of the Corporation (other than a change within Orange County,
California) must include the affirmative vote of at least one (1) Management
Director. A meeting at which a quorum is initially present may continue to
transact business notwithstand-
5
<PAGE>
ing the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 9. Waiver of Notice. The transactions of any meeting of the Board
of Directors, however called and noticed or wherever held, are as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 10. Action Without Meeting. Any action required or permitted to be
taken by the Board of Directors may be taken without a meeting, if all members
of the Board individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors.
Section 11. Removal. The Board of Directors may declare vacant the office
of a director who has been declared of unsound mind by an order of court or who
has been convicted of a felony.
The entire Board of Directors or any individual director may be removed
from office without cause by a vote of shareholders holding a majority of the
outstanding shares entitled to vote at an election of directors; provided,
however, that unless the entire Board is removed, no individual director may be
removed when the votes cast against removal, or not consenting in writing to
such removal, would be sufficient to elect such director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled to vote were voted)
and the entire number of directors authorized at the time of the director's most
recent election were then being elected.
In the event an office of a director is so declared vacant or in case the
Board or any one or more directors be so removed, new directors may be elected
at the same meeting.
Any director nominated by CFN may be removed and replaced at any time and
for any reason by CFN. Any Management Director may be removed and replaced at
any time and for any reason by the nominating Management Shareholder.
Section 12. Resignations. Any director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
fixture time, a successor may be elected to take office when the resignation
becomes effective.
Section 13. Vacancies. Subject to the provisions of Section 2 above and
except for a vacancy created by the removal of a director, all vacancies in the
Board of Directors,
6
<PAGE>
whether caused by resignation, death or otherwise, may be filled by a majority
of the remaining directors, though less than a quorum, or by a sole remaining
director, and each director so elected shall hold office until his successor is
elected at an annual, regular or special meeting of the shareholders. Vacancies
created by the removal of a director may be filled only by approval of the
shareholders that removed such director. Subject to the provisions of Section 2
above the shareholders may elect a director at any time to fill any vacancy not
filled by the directors. Any such election by written consent requires the
consent of a majority of the outstanding shares entitled to vote.
Section 14. Compensation. No stated salary shall be paid directors, as
such, for their services or for reimbursement of their expenses; provided that
nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Notwithstanding the foregoing, the Board of Directors, by resolution
adopted by a majority of the authorized number of directors, such majority
including at least one (1) Management Director, may authorize the reimbursement
of expenses of directors incurred in the performance of their duties.
Section 15. Committees. The Board of Directors may, by resolution adopted
by a majority of the authorized number of directors, designate one or more
committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any such committee, to the extent provided in the resolution of
the Board of Directors, shall have all the authority of the Board of Directors
in the management of the business and affairs of the Corporation, except with
respect to (a) the approval of any action requiring shareholders' approval or
approval of the outstanding shares, (b) the filling of vacancies on the Board or
any committee, (c) the fixing of compensation of directors for serving on the
Board or a committee, (d) the adoption, amendment or repeal of Bylaws, (e) the
amendment or repeal of any resolution of the Board which by its express terms is
not so amendable or repealable, (f) a distribution to shareholders, except at a
rate or in a periodic amount or within a price range determined by the Board,
and (g) the appointment of other committees of the Board or the members thereof.
The Compensation Committee shall consist of three (3) members, one (1) of which
shall be a Management Director.
ARTICLE IV - OFFICERS
Section 1. Number and Term. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice-Presidents, a Secretary and
a Chief Financial Officer, all of which shall be chosen by the Board of
Directors. In addition, the Board of Directors may appoint such other officers
as may be deemed expedient for the proper conduct of the business of the
Corporation, each of whom shall have such authority and perform such duties as
the Board of Directors may from time to time determine. The officers to be
appointed
7
<PAGE>
by the Board of Directors shall be chosen annually at the regular meeting of the
Board of Directors held after the annual meeting of shareholders and shall serve
at the pleasure of the Board of Directors. If officers are not chosen at such
meeting of the Board of Directors, they shall be chosen as soon thereafter as
shall be convenient. Each officer shall hold office until his successor shall
have been duly chosen or until his removal or resignation.
Section 2. Inability to Act. In the case of absence or inability to act of
any officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer, or any director or other person
whom it may select.
Section 3. Removal and Resignation. Any officer chosen by the Board of
Directors may be removed at any time, with or without cause, by the affirmative
vote of a majority of all the members of the Board of Directors, subject to the
rights of any officer under any employment agreement.
Any officer chosen by the Board of Directors may resign at any time by
giving written notice of said resignation to the Corporation. Unless a different
time is specified therein, such resignation shall be effective upon its receipt
by the Chairman of the Board, the President, the Secretary or the Board of
Directors.
Section 4. Vacancies. A vacancy in any office because of any cause may be
filled by the Board of Directors for the unexpired portion of the term.
Section 5. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the Board.
Section 6. President. The President shall be the Chief Executive Officer
of the corporation unless such title is assigned to another officer of the
corporation; in the absence of a Chairman and Vice Chairman of the Board, the
President shall preside as the chairman of meetings of the shareholders and the
Board of Directors; and the President shall have general and active management
of the business of the corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President or any
Vice-President shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 7. Vice President. In the absence of the President, or in the
event of such officer's death, disability or refusal to act, the Vice President,
or in the event there be more than one Vice President, the Vice Presidents in
the order designated at the time of their selection, or in the absence of such
designation, then in the order of their selection, shall perform the duties of
President, and when so acting, shall have all the powers and be subject
8
<PAGE>
to all restrictions upon the President. The Vice President shall have such
powers and discharge such duties as may be assigned from time to time by the
President or by the Board of Directors.
Section 8. Secretary. The Secretary shall see that notices for all
meetings are given in accordance with the provisions of these Bylaws and as
required by law, shall keep minutes of all meetings, shall have charge of the
seal and the corporate books, and shall make such reports and perform such other
duties as are incident to such office, or as are properly required by the
President or by the Board of Directors.
The Assistant Secretary or the Assistant Secretaries, in the order of
their seniority, shall, in the absence or disability of the Secretary, or in the
event of such officer's refusal to act, perform the duties and exercise the
powers and discharge such duties as may be assigned from time to time by the
President or by the Board of Directors.
Section 9. Chief Financial Officer. The Chief Financial Officer may also
be designated by the alternate title of "Treasurer." The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Chief Financial Officer shall disburse the funds
of the corporation as may be ordered by the Board of Directors, President or
Chief Executive Officer, taking proper vouchers for such disbursements, and
shall render to the President, Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Chief Financial Officer and of the
financial condition of the corporation. If required by the Board of Directors,
the Chief Financial Officer shall give the corporation a bond (which shall be
renewed every six (6) years) in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
The Assistant Treasurer or the Assistant Treasurers, in the order of their
seniority, shall, in the absence or Chief Financial Officer, or in the event of
such officer's refusal to act, perform the duties and exercise the powers of the
Chief Financial Officer, and shall have such powers and discharge such duties as
may be assigned from time to time by the President or by the Board of Directors.
Section 10. Salaries. Subject to any employment agreements with the
Corporation, the salaries of the officers shall be fixed from time to time by
the Board of Directors and no officer shall be prevented from receiving such
salary by reason of the fact that such officer is also a director of the
Corporation.
9
<PAGE>
Section 11. Officers Holding More Than One Office. Any two or more offices
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity.
ARTICLE V - MISCELLANEOUS
Section 1. Record Date and Closing of Stock Books. The Board of Directors
may fix a time in the future as a record date for the determination of the
shareholders entitled to notice of and to vote at any meeting of shareholders or
entitled to receive payment of any dividend or distribution, or any allotment of
rights, or to exercise rights in respect to any other lawful action. The record
date so fixed shall not be more than sixty (60) nor less than ten (10) days
prior to the date of the meeting or event for the purposes of which it is fixed.
When a record date is so fixed, only shareholders of record at the close of
business on that date are entitled to notice of and to vote at the meeting or to
receive the dividend, distribution, or allotment of rights, or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation after the record date.
The Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of a period of not more than
sixty (60) days prior to the date of a shareholders' meeting, the date when the
right to any dividend, distribution, or allotment of rights vests, or the
effective date of any change, conversion or exchange of shares.
Section 2. Certificates. Certificates of stock shall be issued in
numerical order and each shareholder shall be entitled to a certificate signed
in the name of the Corporation by the Chairman of the Board or the President or
a Vice President, and the Chief Financial Officer or the Secretary or an
Assistant Secretary, certifying to the number of shares owned by such
shareholder. Any or all of the signatures on the certificate may be facsimile.
Prior to the due presentment for registration of transfer in the stock transfer
book of the Corporation, the registered owner shall be treated as the person
exclusively entitled to vote, to receive notifications and otherwise to exercise
all the rights and powers of an owner, except as expressly provided otherwise by
the laws of the State of California.
Section 3. Representation of Shares in Other Corporations. Shares of other
corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
Corporation by the Chairman of the Board President or the Vice President and the
Chief Financial Officer or the Secretary or an Assistant Secretary.
Section 4. Fiscal Year. The fiscal year of the Corporation shall end on
the 31st day of March.
Section 5. Annual Reports. The Annual Report to shareholders, described in
the California Corporations Code, is expressly waived and dispensed with.
10
<PAGE>
Section 6. Amendments. Bylaws may be adopted, amended, or repealed by the
vote or the written consent of shareholders entitled to exercise a majority of
the voting power of the Corporation. Subject to the right of shareholders to
adopt, amend, or repeal Bylaws, Bylaws may be adopted, amended, or repealed by
the Board of Directors, except that a Bylaw amendment thereof changing the
authorized number of directors may be adopted by the Board of Directors only if
these Bylaws permit an indefinite number of directors and the Bylaw or amendment
thereof adopted by the Board of Directors changes the authorized number of
directors within the limits specified in these Bylaws. Notwithstanding the
foregoing, no amendment to Article III, Sections 2, 4, 7, 8, 11, 13, or 14,
shall be effective unless at least one (1) Management Director shall have
approved such amendment.
Section 7. Indemnification of Coroorate Agents. The Corporation shall
indemnify each of its agents against expenses, judgments, fines, settlements and
other amounts, actually and reasonably incurred by such person by reason of such
person's having been made or having been threatened to be made a parry to a
proceeding to the fullest extent permissible under the California Corporations
Code and the Corporation shall advance the expenses reasonably expected to be
incurred by such agent in defending any such proceeding upon receipt of the
undertaking required by subdivision (f) of Section 317 of the California
Corporations Code. The terms "agent," "proceeding" and "expenses" made in this
Section 7 shall have the same meaning as such terms in said Section 317.
11
<PAGE>
Exhibit 4.1
FORM OF INDENTURE
between
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ]-[ ]
and
[ ]
as Indenture Trustee
Dated as of [ ]
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..............................................................3
Section 1.1. Definitions.....................................................................................3
ARTICLE II THE NOTES..............................................................................................9
Section 2.1. Form........................................................................................... 9
Section 2.2. Execution, Authentication and Delivery.........................................................10
Section 2.3. Temporary Notes................................................................................10
Section 2.4. Registration, Registration of Transfer and Exchange............................................11
Section 2.5. Mutilated, Destroyed, Lost or Stolen Notes.....................................................13
Section 2.6. Persons Deemed Owners..........................................................................14
Section 2.7. Payment of Principal and Interest, Defaulted Interest..........................................14
Section 2.8. Cancellation...................................................................................15
Section 2.9. Release of Collateral..........................................................................16
Section 2.10. Book-Entry Notes...............................................................................16
Section 2.11. Notices to Clearing Agency.....................................................................16
Section 2.12. Definitive Notes...............................................................................17
Section 2.13. Authenticating Agents..........................................................................17
ARTICLE III COVENANTS............................................................................................18
Section 3.1. Payment of Principal and Interest..............................................................18
Section 3.2. Maintenance of Office or Agency................................................................18
Section 3.3. Money for Payments To Be Held in Trust.........................................................18
Section 3.4. Existence......................................................................................20
Section 3.5. Protection of the Trust Estate.................................................................20
Section 3.6. Opinion as to the Trust Estate.................................................................21
Section 3.7. Performance of Obligations, Servicing; of Receivables..........................................21
Section 3.8. Negative Covenants.............................................................................22
Section 3.9. Annual Statement as to Compliance..............................................................23
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms............................................24
Section 3.11. Successor or Transferee........................................................................26
i
<PAGE>
Section 3.12. No Other Business..............................................................................26
Section 3.13. No Borrowing...................................................................................26
Section 3.14. Servicer's Obligations.........................................................................26
Section 3.15. Guarantees, Loans, Advances and Other Liabilities..............................................26
Section 3.16. Capital Expenditures...........................................................................27
Section 3.17. Notice of Events of Default....................................................................27
Section 3.18 Restricted Payments............................................................................27
Section 3.18. Further Instruments and Acts...................................................................27
Section 3.19. Compliance with Laws...........................................................................27
Section 3.20. Tax Treatment..................................................................................27
Section 3.21. Investment Company Act.........................................................................27
Section 3.22. Liens..........................................................................................28
Section 3.23. Conduct of Business............................................................................28
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................28
Section 4.1. Satisfaction and Discharge of Indenture........................................................28
Section 4.2. Application of Trust Money.....................................................................30
Section 4.3. Payment of Moneys Held by Paying Agent.........................................................30
ARTICLE V REMEDIES...............................................................................................30
Section 5.1. Events of Default..............................................................................30
Section 5.2. Acceleration of Maturity; Rescission and Annulment.............................................32
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee......................33
Section 5.4. Remedies; Priorities...........................................................................36
Section 5.5. Reserved.......................................................................................38
Section 5.6. Limitation of Suits............................................................................38
Section 5.7. Unconditional Rights of Noteholders To Receive Principal and Interest..........................38
Section 5.8. Restoration of Rights and Remedies.............................................................39
Section 5.9. Rights and Remedies Cumulative.................................................................39
Section 5.10. Delay or Omission Not a Waiver.................................................................39
Section 5.11. Control by Noteholders.........................................................................39
Section 5.12. Waiver of Past Default.........................................................................40
Section 5.13. Undertaking for Costs..........................................................................40
Section 5.14. Waiver of Stay or Extension Laws...............................................................40
ii
<PAGE>
Section 5.15. Action on Notes................................................................................41
Section 5.16. Performance and Enforcement of Certain Obligations.............................................41
Section 5.17. Subrogation....................................................................................41
Section 5.18. Preference Claims..............................................................................42
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................43
Section 6.1. Duties of the Indenture Trustee................................................................43
Section 6.2. Rights of Indenture Trustee....................................................................45
Section 6.3. Individual Rights of the Indenture Trustee.....................................................46
Section 6.4. Indenture Trustee's Disclaimer.................................................................46
Section 6.5. Notice of Defaults.............................................................................46
Section 6.6. Reports by Indenture Trustee to the Holders....................................................47
Section 6.7. Compensation, Reimbursement and Indemnity......................................................47
Section 6.8. Replacement of the Indenture Trustee...........................................................48
Section 6.9. Successor Indenture Trustee by Merger..........................................................49
Section 6.10. Appointment of Co-Trustee or Separate Trustee..................................................50
Section 6.11. Eligibility; Disqualification..................................................................51
Section 6.12. Preferential Collection of Claims Against Issuer...............................................51
Section 6.13. Appointment and Powers.........................................................................51
Section 6.14. Performance of Duties..........................................................................52
Section 6.15. Limitation on Liability........................................................................52
Section 6.16. Reliance Upon Documents........................................................................53
Section 6.17. Successor Indenture Trustee....................................................................53
Section 6.19. Representations and Warranties of the Indenture Trustee........................................53
Section 6.20. Waiver of Setoffs..............................................................................54
Section 6.21. Control by the Controlling Party...............................................................54
Section 6.22. Indenture Trustee Not Liable for Notes or Receivables..........................................54
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................55
Section 7.1. Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders.........................55
Section 7.2. Preservation of Information, Communications to Noteholders.....................................56
Section 7.3. Reports by Issuer..............................................................................56
Section 7.4. Reports by Indenture Trustee...................................................................57
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES................................................................57
iii
<PAGE>
Section 8.1. Collection of Money............................................................................57
Section 8.2. Trust Accounts.................................................................................57
Section 8.3. General Provisions Regarding Accounts..........................................................57
Section 8.4. Release of Trust Estate........................................................................58
Section 8.5. Opinion of Counsel.............................................................................58
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................59
Section 9.1. Supplemental Indentures Without Consent of Noteholders..........................................59
Section 9.2. Supplemental Indentures With Consent of Noteholders.............................................60
Section 9.3. Execution of Supplemental Indentures............................................................61
Section 9.4. Effect of Supplemental Indenture................................................................61
Section 9.5. Conformity With Trust Indenture Act.............................................................61
Section 9.6. Reference in Notes to Supplemental Indentures...................................................62
ARTICLE X REDEMPTION OF NOTES....................................................................................62
Section 10.1. Redemption.....................................................................................62
Section 10.2. Form of Redemption Notice......................................................................62
Section 10.3. Notes Payable on Redemption Date...............................................................63
ARTICLE XI MISCELLANEOUS.........................................................................................63
Section 11.1. Compliance Certificates and Opinions, etc......................................................63
Section 11.2. Form of Documents Delivered to Indenture Trustee...............................................65
Section 11.3. Acts of Noteholders............................................................................65
Section 11.4. Notices, etc., to the Indenture Trustee, Issuer and Rating Agency..............................66
Section 11.5. Notices to Noteholders, Waiver.................................................................67
Section 11.6. Alternate Payment and Notice Provisions........................................................67
Section 11.7. Effect of Headings and Table of Contents.......................................................68
Section 11.8. Conflict with Trust Indenture Act..............................................................68
Section 11.9. Successors and Assigns.........................................................................68
Section 11.10. Severability..................................................................................68
Section 11.11. Benefits of Indenture.........................................................................68
Section 11.12. Legal Holidays................................................................................68
Section 11.13. Governing Law.................................................................................69
Section 11.14. Counterparts..................................................................................69
Section 11.15. Recording of Indenture........................................................................69
iv
<PAGE>
Section 11.16. Trust Obligation..............................................................................69
Section 11.17. No Petition...................................................................................69
Section 11.18. Inspection....................................................................................69
</TABLE>
EXHIBITS
EXHIBIT A FORM OF CLASS A NOTE
v
<PAGE>
INDENTURE, dated as of [______________], between TRIAD AUTO RECEIVABLES
OWNER TRUST 199[ ]-[ ], a Delaware business trust (the "ISSUER"), and
[___________], a [_____________] banking corporation, as trustee (the "INDENTURE
TRUSTEE") and not in its individual capacity.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's [___]% Asset Backed
Notes, Class A (each, a "CLASS A NOTE" or, a "NOTE").
As security for the payment and performance by the Issuer of the Issuer
Secured Obligations (as defined below), the Issuer has agreed to assign the
Indenture Collateral (as defined below) as collateral to the Indenture Trustee
on behalf of the Insurer and the Noteholders.
[__________________________] (the "Insurer") has issued and delivered a
financial guaranty insurance policy, dated the Closing Date (with endorsements,
the "Note Policy"), pursuant to which the Insurer guarantees Scheduled Payments,
as defined in the Note Policy.
As an inducement to the Insurer to issue and deliver the Note Policy,
the Issuer and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of [_________] (as amended from time to time, the
"Insurance Agreement"), among the Insurer, the Issuer, Triad Financial
Corporation, and [__________________________].
As an additional inducement to the Insurer to issue the Note Policy,
and as security for the performance by the Issuer of the Insurer Issuer Secured
Obligations and as security for the performance by the Issuer of the Indenture
Trustee Issuer Secured Obligations, the Issuer has agreed to assign the
Indenture Collateral (as defined below) as collateral to the Indenture Trustee
for the benefit of the Issuer Secured Parties, as their respective interests may
appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee on behalf of and for
the benefit of the Issuer Secured Parties to secure the performance of the
Issuer Secured Obligations and its compliance with the covenants hereof, all of
the Issuer's right, title and interest in (but none of the Issuer's
obligations), to and under the following, whether now existing or hereafter
arising or acquired (collectively, the "INDENTURE COLLATERAL"):
(a) the Initial Receivables and any Subsequent Receivables,
all monies due or received thereunder or in respect thereof after the Initial
Cutoff Date or the related Subsequent Cutoff Date (in each case, including
amounts due on or before the related Cutoff Date but received by Triad, the
Company, [_________] or the Issuer after the related Cutoff Date), as
applicable, and all Liquidation Proceeds and recoveries received with respect to
such Receivables;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial Receivables and any Subsequent Receivables, and
any other interest of the
<PAGE>
Issuer in the Financed Vehicles, including the certificates of title with
respect to the Financed Vehicles;
(c) the Insurance Policies and any proceeds from any Insurance
Policies relating to the Initial Receivables and any Subsequent Receivables, the
Obligors or the related Financed Vehicles, including rebates or refunds of
premiums;
(d) rights against Dealers with respect to the Initial
Receivables and any Subsequent Receivables under the Dealer Agreements, Dealer
Assignments and rights against Correspondents under the Correspondent Agreements
and the Correspondent Assignments;
(e) property (including the right to receive future
Liquidation Proceeds) that secures the Initial Receivables, any Subsequent
Receivables and any property that has been acquired by or on behalf of the
Company or the Issuer pursuant to liquidation of any such Receivables;
(f) all funds on deposit from time to time in the Trust
Accounts, including all income thereon and proceeds thereof; and
(g) all right, title and interest (but none of the Issuer's
obligations) of the Trust and Company, respectively, in and to the Sale and
Servicing Agreement, any Subsequent Transfer Agreement, the Receivables Purchase
Agreement and any Subsequent Purchase Agreement, including a direct right to
cause the Company and Triad, respectively, to purchase Receivables from the
Trust under certain circumstances;
(h) all right, title and interest in and to refunds for the
costs of extended service contracts financed under each Receivable with respect
to the Financed Vehicles;
(i) all items contained in the Receivable File related to each
Receivable, and all other documents or electronic records that Triad keeps on
file in accordance with its customary procedures relating to the Receivables;
and
(j) all proceeds and investments of any of the foregoing, all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any of the foregoing.
The foregoing Grant is made in trust to secure the payment of the
Issuer Secured Obligations.
The Indenture Trustee, on behalf of the Noteholders and the Insurer,
hereby acknowledges such Grant, accepts the trusts under this Indenture in
accordance with this Indenture and agrees to perform its duties required in this
Indenture to the end that the interests of the Issuer Secured Parties may be
adequately and effectively protected.
2
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture:
"ACT" has the meaning specified in SECTION 11.3(A).
"AUTHORIZED OFFICER" means, with respect to the Issuer or the Servicer,
as the case may be, any officer of the Owner Trustee or the Servicer or other
person who is authorized to act for the Owner Trustee or the Servicer, as
applicable, in matters relating to the Issuer and who is identified on the list
of Authorized Officers delivered by each of the Owner Trustee and the Servicer
to the Indenture Trustee and the Insurer on the Closing Date (as such list may
be modified or supplemented from time to time thereafter).
"BOOK-ENTRY NOTES" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10.
"CLASS" means any class of Notes.
"CLASS A NOTE" is defined in the recitals. Each Class A Note shall be
substantially in the form of EXHIBIT A.
"CLASS A PREPAYMENT AMOUNT" means, as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Pre-Funded Amount as of such Payment Date.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"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 and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means [______________].
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"COMMISSION" shall mean the Securities and Exchange Commission.
"CONTROLLING PARTY" means the Insurer, so long as an Insurer Default
shall not have occurred and be continuing, and otherwise, the Indenture Trustee
for the benefit of the Noteholders.
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"CORPORATE TRUST OFFICE" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Indenture is
located at [__________________________________]; or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders,
the Insurer and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee (the address of which the successor Indenture
Trustee shall notify the Noteholders, the Insurer and the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFINITIVE NOTES" shall mean definitive, fully registered Notes issued
to Note Owners. The Definitive Notes shall be typewritten, printed, lithographed
or engraved or produced by any combination of these methods (with or without
steel engraved borders), all as determined by the officers executing such Notes,
as evidenced by their execution of such Notes.
"EVENT OF DEFAULT" has the meaning specified in SECTION 5.1.
"ELIGIBLE ACCOUNT" means (i) a segregated trust account that is
maintained with the corporate trust department of the Indenture Trustee, or (ii)
a segregated direct deposit account maintained with a depository institution or
trust company organized under the laws of the United States of America, or any
of the States thereof or the District of Columbia, having a certificate of
deposit, short-term deposit or commercial paper rating of at least "A-1" by
Standard & Poor's or "P-1" by Moody's.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture, and other forms of the verb "to Grant" shall have
correlative meanings. A Grant of the Indenture Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations of the granting party) of the granting party thereunder,
including the immediate and continuing right to claim for, collect, receive and
give receipt for principal and interest payments in respect of the Indenture
Collateral and all other moneys payable thereunder, to give and receive notices
and other communications, to make waivers or other agreements, to exercise all
rights and options, to bring Proceedings in the name of the granting party or
otherwise and generally to do and receive anything that the granting party is or
may be entitled to do or receive thereunder or with respect thereto.
"HOLDER" means the Person in whose name a Note is registered on the
Note Register.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INDENTURE COLLATERAL" has the meaning specified in the Granting Clause
of this Indenture.
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"INDENTURE TRUSTEE" means [____________________], not in its individual
capacity but solely as Indenture Trustee under this Indenture, or any successor
Indenture Trustee under this Indenture.
"INDENTURE TRUSTEE FEE" with respect to any Payment Date, the fee
payable to the Indenture Trustee for services rendered during the related
Collection Period, which shall be equal to [___]% multiplied by the Note Balance
as of the open of business on the first day of the related Collection Period,
provided, however, in no event shall the Indenture Trustee Fee be less than
$[___] in aggregate in any calendar year.
"INDENTURE TRUSTEE ISSUER SECURED OBLIGATIONS" means all amounts and
obligations that the Issuer may at any time owe to or on behalf of the Indenture
Trustee for the benefit of the Noteholders under this Indenture or the Notes
(including all payments under the Notes).
"INDEPENDENT" means, when used with respect to any specified Person,
that the Person: (a) is in fact independent of the Issuer, any other obligor
upon the Notes, Triad, the Company other than the Underwriter and any Affiliate
of any of the foregoing Persons, (b) does not have any direct financial interest
or any material indirect financial interest in the Issuer, any such other
obligor, Triad, the Company other than the Underwriter or any Affiliate of any
of the foregoing Persons and (c) is not connected with the Issuer, the Company
other than the Underwriter any such other obligor, Triad or any Affiliate of any
of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of SECTION 11.1, made by
an Independent appraiser or other expert duly licensed and of recognized
standing appointed by an Issuer Order, and such opinion or certificate shall
state that the signer has read the definition of "Independent" in this Indenture
and that the signer is Independent within the meaning thereof.
"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning specified
therefor in the Insurance Agreement.
"INSURER ISSUER SECURED OBLIGATIONS" means all amounts and obligations
that the Issuer may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Related Document.
"INTEREST RATE" means [___]% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months.
"ISSUER" means Triad Auto Receivables Owner Trust 199[ ]-[ ], until a
permitted successor replaces it and, thereafter, means such successor and for
purposes of any provision contained herein and required by the TIA, each other
obligor on the Notes.
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"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request,
respectively, signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Indenture Trustee.
"ISSUER SECURED OBLIGATIONS" means the Insurer Issuer Secured
Obligations and the Indenture Trustee Issuer Secured Obligations.
"ISSUER SECURED PARTIES" means each of the Indenture Trustee in respect
of the Indenture Trustee Issuer Secured Obligations and the Insurer in respect
of the Insurer Secured Obligations.
"NOTEHOLDER" means a Holder.
"NOTE MAJORITY" means Holders of Outstanding Notes representing more
than 50% of the Note Balance of Outstanding Notes.
"NOTE OWNER" means, with respect to a Book-Entry Note, the person who
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agent Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"NOTE POLICY" means the financial guaranty insurance policy issued by
the Insurer with respect to the Notes, including any endorsements thereto.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in SECTION 2.4.
"NOTES" is defined in the introduction hereto.
"OFFICERS' CERTIFICATE" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of SECTION 11.1 and TIA Section 314,
and delivered to the Indenture Trustee.
"OPINION OF COUNSEL" means one or more written opinions of counsel,
reasonably acceptable in form and substance and from counsel acceptable to (i)
if addressed to the Insurer, the Insurer, and (ii) a Note Majority and the
Indenture Trustee or the Owner Trustee and not at the expense of the Indenture
Trustee or Owner Trustee and which shall comply with any applicable requirements
of SECTION 11.1.
"OUTSTANDING" means, as of any date, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in
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trust for the Holders of such Notes (PROVIDED, HOWEVER, that if such
Notes are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture); and
(iii) Notes in exchange for or in lieu of other Notes that
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
PROVIDED, HOWEVER, that Notes that have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee, and the Insurer shall be deemed to be the holder
thereof to the extent of any payments thereon made by the Insurer, PROVIDED,
FURTHER, that in determining whether the Holders of the requisite Note Balance
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder or under any Related Document, Notes owned by the Issuer, any
other obligor upon the Notes, Triad, the Company or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Indenture Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes that a Responsible Officer of the Indenture Trustee actually
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other obligor
upon the Notes, Triad, the Company or any Affiliate of any of the foregoing
Persons.
"OWNER TRUSTEE" means [__________________], not in its individual
capacity but solely as trustee of the Issuer.
"PAYING AGENT" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in SECTION
6.11 and is authorized by the Issuer to make the payments to and distributions
from the Collection Account and the Note Distribution Account, including payment
of principal or of interest on the Notes on behalf of the Issuer.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under SECTION 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"REDEMPTION DATE" means the Payment Date specified by the Servicer or
the Issuer pursuant to SECTION 10.1.
"REDEMPTION PRICE" means (a) in the case of a redemption of Notes
pursuant to Section 10.1 (a), the aggregate unpaid principal amount of the Notes
to be redeemed, plus accrued and
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unpaid interest thereon at the applicable interest rate to but excluding the
related Redemption Date, and (b) in the case of a payment to Noteholders
pursuant to Section 10.1(b), the amount on deposit in the Note Distribution
Account, but not in excess of the amount specified in clause (a) above.
"REGISTERED HOLDER" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary or Assistant Secretary,
or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, in each case having responsibility with respect to this
Indenture.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of [_________], among the Issuer, the Company, Triad, in its individual
capacity and as Servicer, and [_______________], as Indenture Trustee and as
Backup Servicer, as the same may be amended or supplemented from time to time.
"SCHEDULED PAYMENTS" has the meaning specified in the Note Policy.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STATE" means any one of the fifty states of the United States of
America or the District of Columbia.
"TERMINATION DATE" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Insurer for cancellation, (ii)
the date on which the Insurer shall have received payment and performance of all
Insurer Issuer Secured Obligations and (iii) the date on which the Indenture
Trustee shall have received full and indefeasible payment and performance of all
Indenture Trustee Issuer Secured Obligations.
"TRUST ESTATE" means all the money, instruments, rights and other
property that are subject or intended to be subject to the Lien and security
interest of this Indenture for the benefit of the Noteholders (including,
without limitation, all property and interests Granted to the Indenture Trustee)
and the Insurer, including all proceeds thereof.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939,
as amended and as in force on the date hereof, unless otherwise specifically
provided.
(b) Except as otherwise specified herein or as the context may
otherwise require, the capitalized terms used herein but not defined have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
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SECTION 1.2. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule have the meaning assigned to them by such definitions.
SECTION 1.3. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect on the date hereof,
(iii) "or" is not exclusive;
(iv) "including" means "including, without limitation,";
and
(v) words in the singular include the plural and words
in the plural include the singular.
SECTION 1.4. MATERIAL ADVERSE EFFECT. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts could or would have a material adverse effect on the Noteholders
(or any similar or analogous determination), such determination shall be made
without taking into account the funds available from claims under the Note
Policy.
ARTICLE II
THE NOTES
SECTION 2.1. FORM. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
EXHIBIT A, with such appropriate
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insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in EXHIBITS A are part of the terms of this Indenture.
SECTION 2.2. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon receipt of the Note Policy and an
Issuer Order authenticate and deliver Class A Notes for original issue in an
aggregate principal amount of $[_________]. The Note Balance at any time may not
exceed such amount except as provided in SECTION 2.5.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $250,000
and in integral multiples of $1,000 in excess thereof; PROVIDED, HOWEVER, that
one Note may be issued in an additional amount equal to any remaining portion of
the original Note Balance.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate of authentication shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 2.3. TEMPORARY NOTES. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order, the
Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the Definitive Notes in lieu of which they are issued and with such
variations not inconsistent with this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
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If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in SECTION 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
SECTION 2.4. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) The Indenture Trustee shall keep or cause to be kept a
register (the "Note Register") for the registration, transfer and exchange of
Notes. The Indenture Trustee shall be the "Note Registrar" for the purpose of
registering Notes and transfers and exchanges of Notes as herein provided. The
names and addresses of all Noteholders and the names and addresses of the
transferees of any Notes shall be registered in the Note Register. The Person in
whose name any Note is so registered shall be deemed and treated as the sole
owner and Holder thereof for all purposes of this Indenture and the Note
Registrar and the Indenture Trustee and any agent of any of them shall not be
affected by any notice or knowledge to the contrary. A Note is transferable or
exchangeable only upon the surrender of such Note to the Note Registrar at the
Corporate Trust Office together with an assignment and transfer (executed by the
Holder or his duly authorized attorney), subject to the requirements of SECTION
2.10 and 2.12. Upon request of the Indenture Trustee, the Note Registrar shall
provide the Indenture Trustee with the names, addresses and percentage interests
of the Holders.
Upon any resignation of any Note Registrar, the Issuer shall promptly
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer shall give the Indenture Trustee and the Insurer
prompt written notice of the appointment of such Note Registrar and of the
location, and any change in the location, of the Note Register, and the
Indenture Trustee shall have the right to inspect the Note Register at all
reasonable times and to obtain copies thereof, and the Indenture Trustee shall
have the right to conclusively rely upon a certificate executed on behalf of the
Note Registrar by a Responsible Officer thereof as to the names and addresses of
the Holders of the Notes and the principal amounts and number of such Notes.
(b) Subject to SECTIONS 2.10 and 2.12 hereof, upon surrender for
registration of transfer of any Note together with an instrument of assignment
or transfer (executed by the Holder or its duty authorized attorney) at the
office or agency of the Issuer to be maintained as provided in SECTION 3.2, if
the requirements of Section 8-401(1) of the UCC are met, the Issuer shall
execute, the Indenture Trustee shall authenticate and the Noteholder shall
obtain from the Indenture Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations of a like
aggregate principal amount. Each new Note issued
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pursuant to this SECTION 2.4 shall be registered in the name of any Person as
the transferring Holder may request, subject to the provisions of SECTIONS 2.10
and 2.12.
(c) At the option of the Holder, Notes may be exchanged for other new
Notes in any authorized denominations of a like aggregate principal amount, upon
surrender of the Notes to be exchanged, together with a written request at the
office or agency designated pursuant to SECTION 3.2. Whenever any Notes are so
surrendered for exchange, subject to the requirements of SECTIONS 2.10 and 2.12
and if the requirements of Section 8-401(1)(a) of the UCC are met, the Issuer
shall execute, the Indenture Trustee shall authenticate and the Noteholder shall
obtain from the Indenture Trustee, the Notes that the Noteholder making the
exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar.
(f) Notwithstanding the foregoing, in the case of any sale or other
transfer of a Definitive Note or a temporary Note, the transferor of such
Definitive Note or such temporary Note shall be required to represent and
warrant in writing that the prospective transferee either (a) is not (i) an
employee benefit plan (as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which is subject to the
provisions of Title I of ERISA, (ii) a plan (as defined in section 4975(e)(1) of
the Code), which is subject to Section 4975 of the Code, or (iii) an entity
whose underlying assets are deemed to be assets of a plan described in (i) or
(ii) above by reason of such plan's investment in the entity (any such entity
described in clauses (i) through (iii), a "Benefit Plan Entity") or (b) is a
Benefit Plan Entity and the acquisition and holding of the Definitive Note or
the temporary Note by such prospective transferee is covered by a Department of
Labor Prohibited Transaction Class Exemption. Each transferee of a Book Entry
Note that is a Benefit Plan Entity shall be deemed to represent that its
acquisition and holding of the Book Entry Note is covered by a Department of
Labor Prohibited Transaction Class Exemption.
(g) No fee or service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Issuer or the Indenture
Trustee may require payment of a sum sufficient to cover any tax, expense or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than exchanges pursuant to
SECTION 2.3 or 9.6 not involving any transfer. In connection with any transfer
to Noteholders requesting Notes, the transferor shall reimburse the Trust for
any costs (including the cost of the Note Registrar's counsel's review of the
documents and any legal opinions, submitted by the
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transferor or transferee to the Note Registrar as provided herein) incurred by
the Note Registrar in connection with such transfer.
(h) The preceding provisions of this section notwithstanding, the
Issuer shall not be required to make and the Note Registrar shall not register
transfers or exchanges of any Note for a period of fifteen (15) days preceding
the due date for any payment with respect to the Note.
SECTION 2.5. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i)
any mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, and (ii) there is delivered to the Indenture Trustee and the
Insurer (unless an Insurer Default shall have occurred and be continuing) such
security or indemnity as may be required by the Indenture Trustee, the Insurer
and the Issuer to hold the Issuer, the Insurer and the Indenture Trustee,
respectively, harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a
protected purchaser, and provided that the requirements of Section 8-405 of the
UCC are met, the Issuer shall execute, and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note; PROVIDED,
HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become, or within seven (7) days shall be, due and payable, or
shall have been called for redemption, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note (or payment of a destroyed, lost or stolen Note pursuant
to the proviso to the preceding sentence), a protected purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, the Indenture Trustee and the Insurer shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered (or payment made) or any
assignee of such Person, except a protected purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith. Upon the issuance of any replacement Note under this
SECTION 2.5, the Issuer or the Indenture Trustee may require the payment by the
Holder of such Note of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this SECTION 2.5 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture, equally and
proportionately with any and all other Notes duly issued hereunder.
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The provisions of this SECTION 2.5 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6. PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer, the Indenture Trustee and the Insurer may treat the Person
in whose name any Note is registered as of the preceding Record Date as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether or
not such Note be overdue, and none of the Issuer, the Insurer or the Indenture
Trustee nor any agent thereof shall be affected by notice to the contrary.
SECTION 2.7. PAYMENT OF PRINCIPAL AND INTEREST, DEFAULTED INTEREST.
(a) The Class A Notes shall accrue interest at the Class A
Interest Rate, and such interest shall be payable on each Payment Date, as and
to the extent provided in SECTIONS 4.6 and 4.7 of the Sale and Servicing
Agreement and SECTION 3.1 of this Indenture. Any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
related Record Date, by wire transfer of immediately available funds if such
Noteholder holds the Notes representing at least $1,000,000 in Note Balance as
of the Closing Date and if such Person has delivered to the Indenture Trustee in
writing instructions with respect to effecting a wire transfer to such Person no
later than the applicable Determination Date by check mailed first-class,
postage prepaid, to such Person's address as it appears on the Note Register on
such Record Date, except that, unless Definitive Notes have been issued pursuant
to SECTION 2.12, with respect to Notes registered on the Record Date in the name
of the nominee of the Clearing Agency (initially, such nominee to be Cede &
Co.), payment will be made by wire transfer in immediately available funds to
the account designated by such nominee and except for the final installment of
principal payable with respect to such Note on a Payment Date (and except for
the Redemption Price for any Note called for redemption pursuant to SECTION
10.1) which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with SECTION 3.3.
(b) The principal of each Note shall be payable in installments on each
Payment Date (including the Final Scheduled Payment Date) as and to the extent
provided in this Indenture and in SECTIONS 4.6 and 4.7 of the Sale and Servicing
Agreement. Notwithstanding the foregoing (and subject to the provisions of
SECTIONS 5.1 and 5.2), the entire Note Balance shall be due and payable on the
date on which an Event of Default shall have occurred and be continuing if the
Insurer (if an Insurer Default shall not have occurred and be continuing) or the
Indenture Trustee or a Note Majority (if an Insurer Default has occurred and is
continuing) has declared the Notes to be immediately due and payable in the
manner provided in SECTION 5.2.
The Indenture Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the Payment
Date on which the Issuer expects
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that the final installment of principal of and interest on such Note will be
paid. Such notice shall be mailed no later than the fifth (5th) day of the month
in which such final Payment Date occurs and shall specify that such final
installment will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for
payment of such installment unless there are five or fewer Noteholders of record
in which case such presentation and surrender shall occur within thirty (30)
days after the Final Scheduled Payment Date. Notices in connection with
redemptions of Notes shall be mailed to Noteholders as provided in SECTION 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, and
such default is waived by the Controlling Party, the Issuer shall pay, in any
lawful manner, as and to the extent provided in SECTION 4.7 of the Sale and
Servicing Agreement, defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable interest rate in any lawful
manner. The Issuer may pay such defaulted interest to the Persons who are
Noteholders on the immediately following Payment Date, and, if such amount is
not paid on such following Payment Date, then on a subsequent special record
date, which date shall be at least five (5) Business Days prior to the payment
date. The Issuer shall fix or cause to be fixed any such special record date and
payment date, and, at least fifteen (15) days before any such special record
date, the Issuer shall mail to each Noteholder and the Indenture Trustee a
notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Indenture Trustee, the Indenture Trustee shall, if the Insurer has paid any
amount in respect of the Notes under the Note Policy or otherwise which has not
been reimbursed to it, deliver such surrendered Notes to the Insurer to the
extent not previously cancelled or destroyed.
SECTION 2.8. CANCELLATION. Subject to SECTION 2.7(D), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly canceled by the Indenture Trustee.
Subject to SECTION 2.7(D), the Issuer may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder that the Issuer may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section except as expressly permitted by this Indenture.
Subject to SECTION 2.7(D), all canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time.
SECTION 2.9. RELEASE OF COLLATERAL. The Indenture Trustee shall, on or
after the Termination Date, release any remaining portion of the Trust Property
from the lien created by this Indenture and deposit in the Collection Account
any funds then on deposit in any other Trust Account. The Indenture Trustee
shall release property from the lien created by this Indenture pursuant to this
SECTION 2.9 only upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in
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accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements OF SECTION 11.1.
SECTION 2.10. BOOK-ENTRY NOTES. The Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner shall receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
SECTION 2.12. Unless and until the Definitive Notes have been issued to Note
Owners pursuant to SECTION 2.12:
(i) the provisions of this SECTION 2.10 shall be in full
force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this SECTION 2.10
conflict with any other provisions of this Indenture, the provisions of
this SECTION 2.10 shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes are
issued pursuant to SECTION 2.10, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Noteholders evidencing a
specified percentage of the Note Balance, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes and has delivered
such instructions to the Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust Office.
SECTION 2.11. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to SECTION
2.12, the Indenture Trustee
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shall give all such notices and communications specified herein to be given to
the Noteholders to the Clearing Agency, and shall have no obligation to the Note
Owners.
SECTION 2.12. DEFINITIVE NOTES. If (i) the Servicer advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option (with prior written notice to the Insurer) advises the Indenture Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default, the
Insurer (if no Insurer Default shall have occurred and is continuing) or Note
Owners representing beneficial interests aggregating at least a majority of the
Note Balance (if an Insurer Default shall have occurred and is continuing)
advise the Indenture Trustee through the Clearing Agency in writing that the
continuation of a book entry system through the Clearing Agency is no longer in
the best interests of the Insurer or the Note Owners, as the case may be, then
the Clearing Agency shall notify all Note Owners and the Indenture Trustee of
the occurrence of any such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Note or Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute and
the Indenture Trustee shall authenticate the Definitive Notes in accordance with
the instructions of the Clearing Agency. None of the Issuer, the Note Registrar
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
SECTION 2.13. AUTHENTICATING AGENTS. (a) The Indenture Trustee may
appoint one or more Persons (each, an "Authenticating Agent") (with the written
consent of the Servicer if such Person is other than the Indenture Trustee),
with power to act on its behalf and subject to its direction in the
authentication of Notes in connection with issuance, transfers and exchanges
under SECTIONS 2.2, 2.3, 2.4, 2.5 and 2.12, as fully to all intents and purposes
as though each such Authenticating Agent had been expressly authorized by those
Sections to authenticate such Notes. For all purposes of this Indenture, the
authentication of Notes by an Authenticating Agent pursuant to this Section
shall be deemed to be the authentication of Notes "by the Indenture Trustee."
(b) Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of any Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, without the
execution or filing of any further act on the part of the parties hereto or such
Authenticating Agent or such successor corporation.
(c) Any Authenticating Agent may at any time resign by giving
written notice of resignation to Indenture Trustee and Owner Trustee. Indenture
Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such
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Authenticating Agent and Owner Trustee. Upon receiving such notice of
resignation or upon such a termination, Indenture Trustee may appoint a
successor Authenticating Agent and shall give written notice of any such
appointment to Owner Trustee.
(d) Servicer agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services. The provisions of SECTION
6.4 shall be applicable to any Authenticating Agent.
ARTICLE III
COVENANTS
SECTION 3.1. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer shall duly and
punctually pay the principal and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
the Issuer shall distribute (or cause to be distributed) the amounts on deposit
in the Note Distribution Account on each Payment Date for the benefit of the
Notes, as and to the extent provided in SECTIONS 4.6 and 4.7 of the Sale and
Servicing Agreement to Holders of the Notes. Amounts properly withheld under the
Code or any applicable State law by any Person from a payment to any Noteholder
of interest and/or principal shall be considered as having been paid by the
Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.2. MAINTENANCE OF OFFICE OR AGENCY. The Indenture Trustee
shall maintain in the city of New York, New York an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Indenture Trustee to serve
as its agent for the foregoing purposes. The Indenture Trustee shall give prompt
written notice to the Issuer of the location, and of any change in the location,
of any such office or agency. If at any time the Indenture Trustee shall fail to
maintain any such office or agency or shall fail to furnish the Issuer with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
SECTION 3.3. MONEY FOR PAYMENTS TO BE HELD IN TRUST. All payments of
amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Note Distribution Account pursuant to SECTION 8.2(B)
hereof shall be made on behalf of the Issuer by the Indenture Trustee or by
another Paying Agent, and no amounts so withdrawn from the Note Distribution
Account for payments of Notes shall be paid over to the Issuer, except as
provided in this SECTION 3.3 and SECTIONS 4.6 and 4.7 of the Sale and Servicing
Agreement.
On or before each Payment Date (including the Final Scheduled Payment
Date) and Redemption Date, the Issuer shall deposit or cause to be deposited in
the Note Distribution Account an aggregate sum sufficient to pay the amounts
then becoming due under the Notes as and to the extent provided in SECTIONS
3.2(C), 3.3 and 4.4 of the Sale and Servicing Agreement, such sum to be held in
trust for the benefit of the Persons entitled thereto.
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The Issuer shall cause each Paying Agent (other than the Indenture
Trustee) to execute and deliver to the Indenture Trustee and the Insurer an
instrument in which such Paying Agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this SECTION 3.3, that such Paying Agent shall:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee written notice of any Default
by the Issuer (or any other obligor upon the Notes) of which it has
actual knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such Default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent; and
(v) comply with all requirements of the Code and any
applicable State law with respect to the withholding from any payments
made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order, direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and upon Issuer Request with the prior written consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) shall be deposited with
the Issuer; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment thereof (but only to the
extent of the amounts so paid to the Issuer), and all liability of the Indenture
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; PROVIDED, HOWEVER, that if such money or any portion thereof had
been previously deposited by the Insurer or the Indenture Trustee with the
Indenture Trustee for the payment of principal or interest on the Notes, to the
extent any amounts are owing to the Insurer, such amounts shall be paid promptly
to the Insurer upon the Indenture Trustee's
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receipt of a written request by the Insurer to such effect, and PROVIDED,
FURTHER, that the Indenture Trustee or such Paying Agent, before being required
to make any such repayment, shall at the expense and direction of the Issuer
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than thirty (30) days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ,
at the expense of the Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose Notes
have been called but have not been surrendered for redemption or whose right to
or interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
SECTION 3.4. EXISTENCE. Except as otherwise permitted by the provisions
of SECTION 3.10, the Issuer shall keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware and shall
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Indenture Collateral and each
other instrument or agreement included in the Trust Estate or to enforce its
rights under the Receivables and with respect to the Financed Vehicles.
SECTION 3.5. PROTECTION OF THE TRUST ESTATE. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Indenture Trustee for the benefit of the Issuer Secured Parties, a first
lien on and a first priority, perfected security interest in the Trust Estate.
The Issuer shall from time to time execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust
Estate;
(ii) maintain the Trust Estate free and clear of all prior liens;
(iii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Indenture Trustee for the benefit
of the Issuer Secured Parties created by this Indenture or carry out
more effectively the purposes hereof;
(iv) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(v) enforce any of the Indenture Collateral;
(vi) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Issuer Secured Parties in such Trust
Estate against the claims of all Persons; and
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(vii) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Indenture Trustee as its agent and
attorney-in-fact to execute any financing statement, continuation statement,
instrument of further assurance or other instrument required to be executed to
accomplish the foregoing; PROVIDED, HOWEVER, that, except with respect to
continuation statements, the Indenture Trustee shall not be obligated to execute
such instruments except upon written instruction from the Servicer or the
Issuer, except, that such instruction need not be in writing if delivered with
respect to instruments to be executed by the Indenture Trustee on the Closing
Date.
SECTION 3.6. OPINION AS TO THE TRUST ESTATE.
(a) On the Closing Date the Issuer shall furnish to the
Indenture Trustee and the Insurer an Opinion of Counsel either stating that, in
the opinion of such counsel, such action has been taken, or will be taken within
two (2) Business Days of the Closing Date, with respect to the execution and
filing of any financing statements and continuation statements as are necessary
to perfect and make effective the first priority lien and security interest in
the Indenture Collateral and the proceeds thereof in favor of the Indenture
Trustee for the benefit of the Issuer Secured Parties created by this Indenture
and reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and security interest
effective.
(b) Within 90 days after the beginning of each calendar year,
beginning in [_____________], the Issuer shall furnish to the Indenture Trustee
and the Insurer, an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording, filing,
rerecording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security agreement. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture.
SECTION 3.7. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES.
(a) The Issuer shall not take, or fail to take, any action and
shall use its best efforts not to permit any action to be taken by others that
would release any Person from any material covenants or obligations under any
instrument or agreement included in the Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
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(b) The Issuer may contract with other Persons acceptable to
the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Indenture Trustee and
the Insurer in an Officers' Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Pursuant to the Sale and Servicing Agreement, the
Issuer has contracted with the Servicer to assist the Issuer in performing its
duties under the Notes and this Indenture.
(c) The Issuer shall perform and observe all of its
obligations and agreements contained in this Indenture, the other Related
Documents and in the instruments and agreements included in the Trust Estate,
including filing or causing to be filed any UCC financing statements and
continuation statements required to be filed by this Indenture and the Sale and
Servicing Agreement in accordance with and within the time periods provided for
herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Termination Event under the Sale and Servicing Agreement, the Issuer
shall promptly notify the Indenture Trustee, the Insurer and the Rating Agencies
thereof in accordance with Section 11.4 hereof, and shall specify in such notice
the action, if any, the Issuer is taking with respect thereto. If a Servicer
Termination Event shall arise from the failure of the Servicer to perform any of
its duties or obligations under the Sale and Servicing Agreement with respect to
the Receivables, the Issuer shall take all reasonable steps available to it to
remedy such failure.
(e) If notice of termination has been given to the Servicer of
the Servicer's rights and powers pursuant to SECTION 9.2 of the Sale and
Servicing Agreement, the Backup Servicer or another successor Servicer shall be
appointed as successor Servicer in accordance with SECTION 9.3 of the Sale and
Servicing Agreement. Except as otherwise expressly provided therein, the Issuer
shall not waive, amend, modify, supplement or terminate any Related Document or
any provision thereof without the consent of the Indenture Trustee and the
Insurer (if an Insurer Default shall not have occurred and be continuing) or the
Note Majority (if an Insurer Default shall have occurred and is continuing).
(f) Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee, the Insurer and the Rating Agencies. As soon as a
successor Servicer is appointed, the Issuer shall notify the Indenture Trustee
of such appointment, specifying in such notice the name and address of such
successor Servicer.
(g) The Issuer agrees that it shall not waive timely
performance or observance by the Servicer, the Backup Servicer or Triad of their
respective duties under Related Documents (x) without the prior consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) or (y)
if the effect thereof would adversely affect the Holders.
SECTION 3.8. NEGATIVE COVENANTS. So long as any Notes are
Outstanding, the Issuer shall not:
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(i) except as expressly permitted by this Indenture, the Sale
and Servicing Agreement or the Related Documents, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of the
Issuer, including those included in the Trust Estate, unless directed
to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or
applicable State law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed
upon any part of the Trust Estate; or
(iii) dissolve or liquidate in whole or in part; or
(iv) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof, other than (i) any liens on the Financed Vehicles
which (w) are junior to or are otherwise subordinated to the lien in
favor of the Indenture Trustee, (x) have arisen notwithstanding the
Servicer's best efforts to avoid the imposition of such liens, (y) to
which neither the Indenture Trustee nor the Issuer has consented, and
(z) have arisen despite the Servicer not having surrendered title to
the Financed Vehicle (unless the Servicer was legally obligated to do
so), and (ii) tax liens, mechanics' liens and other liens that arise
subsequent to the Closing Date or Subsequent Transfer Date, as
applicable by operation of law, in each case on a Financed Vehicle and
arising solely as a result of an action or omission of the related
Obligor), or (C) permit the lien of this Indenture not to constitute a
valid first priority (other than with respect to any such tax lien,
mechanics lien or other lien that arises by operation of law) security
interest in the Trust Estate.
Section 3.9. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer shall
deliver to the Indenture Trustee and the Insurer, within ninety (90) days after
the end of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, [______]), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision;
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof; and
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(iii) such certificate is in compliance with the requirements
of TIA Section 314(a)(4).
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
(a) The Issuer shall not consolidate or merge with or
into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory
to the Indenture Trustee and the Insurer (so long as an Insurer Default
shall not have occurred and be continuing), the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Issuer, the Insurer, any
Noteholder or the Certificateholders;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee
and the Insurer an Officers' Certificate and an Opinion of Counsel each
stating that such merger or consolidation and such supplemental
indenture comply with this SECTION 3.10 and that all conditions
precedent provided for in this SECTION 3.10 relating to such
transaction have been complied with (including any filing required by
the Exchange Act); and
(vii) so long as an Insurer Default shall not have occurred
and be continuing, the Issuer shall have given the Insurer written
notice of such conveyance or transfer at least twenty (20) Business
Days prior to the consummation of such action and shall have received
the prior written approval of the Insurer of such conveyance or
transfer and the Issuer or the Person (if other than the Issuer) formed
by or surviving such conveyance or transfer has a net worth,
immediately after such conveyance or transfer, that is (a) greater
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than zero and (b) not less than the net worth of the Issuer immediately
prior to giving effect to such conveyance or transfer.
(b) Except as otherwise provided herein and in the Related
Documents, the Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Estate, to any
Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall: (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any State, (B) expressly assumes, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee and the Insurer (so long as an
Insurer Default shall not have occurred and be continuing), the due and
punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture and each of the Related Documents on the part of the Issuer
to be performed or observed, all as provided herein, (C) expressly
agrees by means of such supplemental indenture that all right, title
and interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes, (D) unless otherwise
provided in such supplemental indenture, expressly agrees to indemnify,
defend and hold harmless the Issuer against and from any loss,
liability or expense arising under or related to this Indenture and the
Notes, and (E) expressly agrees by means of such supplemental indenture
that such Person (or if a group of Persons, then one specified Person)
shall make any filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Insurer, any
Noteholder or the Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee
and the Insurer an Officers' Certificate and an Opinion of Counsel each
stating that such conveyance or transfer and such supplemental
indenture comply with this SECTION 3.10 and that all conditions
precedent provided for in this SECTION 3.10 relating to such
transaction have been complied with (including any filing required by
the Exchange Act).
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(vii) so long as an Insurer Default shall not have occurred
and be continuing, the Issuer shall have given the Insurer written
notice of such conveyance or transfer at least twenty (20) Business
Days prior to the consummation of such action and shall have received
the prior written approval of the Insurer of such conveyance or
transfer and the Issuer or the Person (if other than the Issuer)
acquiring or surviving such conveyance or transfer has a net worth,
immediately after such conveyance or transfer, that is (a) greater than
zero and (b) not less than the net worth of the Issuer immediately
prior to giving effect to such conveyance or transfer.
SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Issuer in
accordance with SECTION 3.10(A), the Person formed by or surviving such
consolidation or merger (if other than the Issuer) shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all
the assets and properties of the Issuer pursuant to SECTION 3.10(B), the Issuer
shall be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee stating
that the Issuer is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing of the
Receivables in the manner contemplated by this Indenture and the other Related
Documents and activities incidental thereto.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for (i) the Notes, (ii) obligations arising from time to
time to the Insurer under the Insurance Agreement and (iii) any other
indebtedness permitted by the Related Documents. The proceeds of the Notes shall
be used to purchase the Receivables, to fund the Pre-Funding Account and the
Capitalized Interest Account and to pay the Issuer's organizational,
transactional and start up expenses. Net amounts remaining after such payments
shall be distributed by the Issuer to the Certificateholder(s). The Issuer shall
incur no additional borrowed money indebtedness secured by the Trust Estate
other than the Notes.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the
Servicer to comply with ARTICLE III and SECTION 4.10 of the Sale and Servicing
Agreement.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire
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(or agree contingently to do so) any stock, obligations, assets or securities
of, or any other interest in, or make any capital contribution to, any other
Person.
SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee, the Insurer and the Rating Agencies prompt written notice of
each Event of Default hereunder and each default on the part of the Servicer or
Triad of its obligations under the Sale and Servicing Agreement, in each case of
which it becomes aware.
SECTION 3.18. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amount for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Indenture Trustee and the
Certificateholders as permitted by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement or Trust Agreement. The
Issuer will not, directly or indirectly, make payments to or distributions from
the Collection Account except in accordance with this Indenture and the Related
Documents.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee or the Insurer, the Issuer shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Related Document.
SECTION 3.21. TAX TREATMENT. The Issuer has structured this Indenture
and the Notes with the intention that the Notes will qualify under applicable
federal, state and local tax law as indebtedness. The Issuer and each Holder
agree to treat, and take no action inconsistent with the treatment of, the Notes
(or any beneficial interest therein) as indebtedness for purposes of federal,
state and local income or franchise taxes and any other tax imposed on or
measured by income. Each Holder, by acquisition of a beneficial interest in a
Note, agrees to be bound by the provisions of this SECTION 3.21.
SECTION 3.22. INVESTMENT COMPANY ACT. The Issuer shall conduct its
operations in a manner that will not subject it to registration as an
"investment company" under the Investment Company Act of 1940, as amended.
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SECTION 3.23. LIENS. The Issuer shall not contract for, create,
incur or suffer to exist any Lien upon any of its property or assets, whether
now owned or hereafter acquired, except for Permitted Liens.
SECTION 3.24. CONDUCT OF BUSINESS. Except as provided herein and in the
Related Documents, the Issuer shall (a) conduct its business solely in its own
name through its duly authorized officers or agents so as not to mislead others
as to the identity of the Issuer with which those others are concerned, and
particularly shall use its best efforts to avoid the appearance of conducting
business on behalf of Triad, [_______], any Affiliate thereof or any
Certificateholder or that the assets of the Issuer are available to pay the
creditors of Triad, [_______], any Affiliate thereof or any Certificateholder;
(b) maintain records and books of account separate from those of Triad,
[_______], any Affiliate thereof or any Certificateholder; (c) maintain an
arm's-length relationship with Triad, [_______], any Affiliate thereof or any
Certificateholder and shall not hold itself out as being liable for the debts of
Triad, [_______], any Affiliate thereof or any Certificateholder; (d) keep its
assets and its liabilities wholly separate from those of all other entities,
including Triad, [_______], any Affiliate thereof or any Certificateholder,
except as expressly permitted by the Related Documents; (e) not maintain bank
accounts or other depository accounts to which any Affiliate or
Certificateholder (other than [_______] in its capacity as sole
Certificateholder of the Issuer) is an account party, into which any Affiliate
or Certificateholder (other than [_______] in its capacity as sole
Certificateholder of the Issuer) makes deposits or from which any Affiliate or
Certificateholder (other than [_______] in its capacity as sole
Certificateholder of the Issuer) has the power to make withdrawals, except as
otherwise permitted by Sections 3.2 and 4.2 of the Sale and Servicing Agreement;
(f) shall obtain proper authorization for all the Issuer's actions requiring
such authorization; (g) shall obtain proper authorization from [_______] and its
other Certificateholders, if any, for all action requiring approval of [_______]
and its other Certificateholders, if any; (h) shall pay operating expenses and
liabilities from the Issuer's own funds; (i) shall disclose in its annual
financial statements the effects of the Issuer's transactions under the Related
Documents in accordance with generally accepted accounting principles and shall
disclose that the assets of the Issuer are not available to pay creditors of
Triad, [_______], any Affiliate thereof or any Certificateholder; (j) shall
continuously maintain the resolutions, agreements and other instruments
underlying the transactions described in the Related Documents as official
records; and (k) shall insure that any consolidated financial statements of
Triad, [_______], any Affiliate thereof or any Certificateholder have notes to
the effect that the Issuer is a separate entity whose creditors have a claim on
its assets prior to those assets becoming available to its equity holders.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except, to the
extent applicable, as to (i) rights of registration of transfer and exchange,
(ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of
Noteholders to receive payments of principal thereof and interest thereon, (iv)
SECTIONS 3.2 and 3.20, (v) the rights, obligations and immunities of the
Indenture Trustee hereunder (including the rights of the Indenture Trustee under
SECTION 6.7 and the obligations of
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the Indenture Trustee under SECTION 4.2) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when:
(A) either
(1) all Notes theretofore authenticated and
delivered (other than (i) Notes that have been destroyed, lost
or stolen and that have been replaced or paid as provided in
SECTION 2.5 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in SECTION 3.3) have
been delivered to the Indenture Trustee for cancellation and
the Note Policy has expired and been returned to the Insurer
for cancellation; or
(2) all Notes not theretofore delivered to
the Indenture Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at
their respective Final Scheduled Payment
Dates within one year, or
(iii) are to be called for
redemption within one year under
arrangements satisfactory to the Indenture
Trustee for the giving of notice of
redemption by the Indenture Trustee in the
name, and at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due to the Final Scheduled Payment Date or
Redemption Date (if Notes shall have been called for
redemption pursuant to SECTION 10.1), as the case may be;
(B) the Issuer has paid or caused to be paid all
Insurer Issuer Secured Obligations and all Indenture Trustee Issuer
Secured Obligations and the Note Policy has expired in accordance with
its terms and has been returned to the Insurer for cancellation;
(C) the Issuer has delivered to the Indenture Trustee
an Officers' Certificate, an Opinion of Counsel and (if required by the
TIA, the Indenture Trustee or the Insurer (so long as an Insurer
Default shall not have occurred and be continuing)) an Independent
Certificate from a firm of certified public accountants, each meeting
the
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applicable requirements of SECTION 11.1 and, subject to SECTION
11.2, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with; and
(D) the Issuer has delivered to the Indenture Trustee
an Opinion of Counsel to the effect that the satisfaction and discharge
of the Notes pursuant to this Section shall not cause any Noteholder to
be treated as having sold or exchanged any of its Notes for purposes of
Section 1001 of the Code.
SECTION 4.2. APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from the other funds except to
the extent required herein or in the Sale and Servicing Agreement or required
by law.
SECTION 4.3. PAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under this
Indenture with respect to such Notes shall, upon demand of the Issuer, be paid
to the Indenture Trustee to be held and applied according to SECTION 3.3 hereof
and SECTIONS 4.6 and 4.7 of the Sale and Servicing Agreement, and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.
ARTICLE V
REMEDIES
SECTION 5.1. EVENTS OF DEFAULT. "EVENT OF DEFAULT," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any Governmental Authority):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for a
period of five (5) days (solely for purposes of this clause, a payment
on the Notes funded by the Insurer or the Collateral Agent pursuant to
the Reserve Account Agreement shall be deemed to be a payment made by
the Issuer);
(ii) default in the payment of the principal of or any
installment of the Principal of any Note when the same becomes due and
payable (solely for purposes of this clause, a payment on the Notes
funded by the Insurer or the Collateral Agent pursuant to the Reserve
Account Agreement shall be deemed to be a payment made by the Issuer);
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(iii) so long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; PROVIDED, HOWEVER, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event of
Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered in accordance with SECTION 11.4 to the
Issuer and the Indenture Trustee and not rescinded a written notice
specifying that such Insurance Agreement Indenture Cross Default
constitutes an Event of Default under the Indenture;
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant
or agreement a default in the observance or performance of which is
elsewhere in this SECTION 5.1 specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of thirty (30) days (or for such longer period, not in excess of
ninety (90) days, as may be reasonably necessary to remedy such
default; PROVIDED, HOWEVER, that such default is capable of remedy
within ninety (90) days or less and the Servicer on behalf of the Owner
Trustee delivers an Officer's Certificate to the Indenture Trustee to
the effect that such Owner Trustee has commenced, or will promptly
commence and diligently pursue, all reasonable efforts to remedy such
default) after there shall have been given, by registered or certified
mail, to the Issuer by the Indenture Trustee or to the Issuer and the
Indenture Trustee by the Holders of at least 25% of the Note Balance, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder;
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a petition for relief by a court having
jurisdiction in the premises in respect of the Issuer, the Company or
any substantial part of their property in an involuntary case under any
applicable Federal or State bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer, the Company or for any substantial part of their property, or
ordering the winding-up or liquidation of the affairs of the Issuer or
the Company, and such petition shall remain unstayed and in effect for
a period of sixty (60) consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer or the Company of a
voluntary case under any applicable Federal or State bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer or the Company to the entry of an order for
relief in an involuntary case under any such law, or the consent by the
Issuer or the Company to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee,
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sequestrator or similar official of the Issuer or the Company or for
any substantial part of its property, or the making by the Issuer or
the Company of any general assignment for the benefit of creditors, or
the failure by the Issuer or the Company generally to pay its debts as
such debts become due, or the taking of action by the Issuer or the
Company in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, the Insurer, the
Noteholders and the Rating Agencies, within five (5) days after the occurrence
thereof, written notice in the form of an Officers' Certificate of any event
that, with the giving of notice or the lapse of time or both, would become an
Event of Default, its status and what action the Issuer is taking or proposes to
take with respect thereto.
SECTION 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
(a) If an Insurer Default shall not have occurred and be
continuing and an Event of Default shall have occurred and be continuing, the
Notes shall become immediately due and payable at par, together with accrued
interest thereon. If an Event of Default shall have occurred and be continuing,
the Controlling Party may exercise any of the remedies specified in SECTION
5.4(A). In the event of any acceleration of any Notes by operation of this
SECTION 5.2, the Indenture Trustee shall continue to be entitled to make claims
under the Note Policy pursuant to the Sale and Servicing Agreement for Scheduled
Payments on the Notes. Payments under the Note Policy following acceleration of
any Notes shall be applied by the Indenture Trustee:
(i) to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest; and
(ii) to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal.
(b) In the event any Notes are accelerated due to an Event of
Default, the Insurer shall have the right (in addition to its obligation to pay
Scheduled Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be
continuing and an Event of Default shall have occurred and be continuing, the
Indenture Trustee in its discretion may, or if so requested in writing by the
Note Majority shall declare by written notice to the Issuer that the Notes
become, whereupon they shall become, immediately due and payable at par,
together with accrued interest thereon.
(d) If an Insurer Default shall have occurred and be
continuing, then at any time after such declaration of acceleration of maturity
has been made by the Indenture Trustee and before a judgment or decree for
payment of the money due has been obtained by the
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Indenture Trustee as
hereinafter in this ARTICLE V provided, the Note Majority, by written notice to
the Issuer and the Indenture Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and
counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in SECTION 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.
(a) The Issuer covenants that if the Notes are accelerated
following the occurrence of an Event of Default, the Issuer will, upon demand of
the Indenture Trustee, pay to it as and to the extent provided in SECTIONS 4.6
and 4.7 of the Sale and Servicing Agreement, for the benefit of the Holders of
Notes, the whole amount then due and payable on such Notes for principal and
interest, and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest, at the applicable interest
rate, and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Issuer Secured Party for so long as such Issuer Secured
Party is not the Controlling Party, with full power of substitution, to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of such Issuer Secured Party such acts, things and deeds
for or on behalf of and in the name of such Issuer Secured Party under this
Indenture (including specifically under SECTION 5.4) and under the Related
Documents which such Issuer Secured Party could or might do or which may be
necessary, desirable or convenient in such Controlling Party's sole discretion
to effect the purposes contemplated hereunder and under the Related Documents
and, without limitation, following the occurrence of an Event of Default,
exercise full right, power and
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authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.
(c) In the event that an Event of Default occurs and is
continuing, the Indenture Trustee may, in its discretion but with the prior
written consent of the Controlling Party and shall, at the direction of the
Controlling Party (except as provided in Section 5.3(d) below), proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee or the Controlling Party shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Indenture Trustee by this Indenture or
by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including, without limitation, Sections 5.4(a), 5.11, 5.12 and 5.16)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section 10.1(b)
hereof when and as due, the Indenture Trustee may in its discretion (and without
the consent of the Controlling Party) proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law; provided that the Indenture Trustee shall
only be entitled to take any such actions without the consent of the Controlling
Party to the extent such actions (x) are taken only to enforce the Issuer's
obligations to redeem the principal amount of Notes and (y) are taken only
against the portion of the Indenture Collateral, if any, consisting of the
Pre-Funding Account, the Capitalized Interest Account, any investments therein
and any proceeds thereof.
(e) In the event that there shall be pending, relative to the
Issuer or any other obligor upon the Notes or any Person having or claiming an
ownership interest in the Trust Estate, Proceedings under Title 11 of the United
States Code or any other applicable Federal or State bankruptcy, insolvency or
other similar law, or in case a receiver, assignee, trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor upon the Notes, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor upon the Notes, the Indenture
Trustee, irrespective of whether the principal of any Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to this
SECTION 5.3, shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Indenture
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Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in
such Proceedings;
(ii) unless prohibited by applicable law or regulations, to
vote on behalf of the Holders of the Notes in any election of a
trustee, a standby trustee or any Person performing similar functions
in any such Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of Notes allowed in any
Proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, assignee, custodian, sequestrator or
other similar official in any such Proceeding is hereby authorized by each of
such Noteholders to make payments to the Indenture Trustee, and, if the
Indenture Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient
to cover reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of negligence
or bad faith.
(f) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(g) All rights of action and of asserting claims under this
Indenture, the Reserve Account or under any of the Notes may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any trial or other Proceedings relative thereto, and any such action
or Proceedings instituted by the Indenture Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment, subject
to the payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Indenture Trustee or to
which the Indenture Trustee shall be a party (and also any Proceedings involving
the interpretation of any provision of this Indenture or the Reserve Account
Agreement), the Indenture Trustee shall be
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held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.4. REMEDIES; PRIORITIES.
(a) If an Event of Default shall have occurred and be
continuing, the Controlling Party may do one or more of the following (subject
to SECTIONS 5.5 and 5.11):
(i) institute Proceedings in its own name and as or on behalf
of a trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Issuer and any other obligor upon such Notes moneys
adjudged due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Issuer Secured Parties;
(iv) elect to have the Issuer maintain possession of the
Receivables and continue to apply collections on such Receivables as if
there had been no declaration of acceleration; and
(v) direct the Indenture Trustee in writing to sell the Trust
Estate, or any portion thereof or rights or interest therein, at one or
more public or private sales called and conducted in any manner
permitted by law; PROVIDED, HOWEVER, that:
(A) if the Insurer is the Controlling Party,
the Insurer may not sell or otherwise liquidate the Trust
Estate following an Insurance Agreement Indenture Cross
Default unless: (x) such Insurance Agreement Indenture Cross
Default arises from a claim being made on the Note Policy or
from the insolvency of the Trust, Triad or [________] or the
Trust becomes taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state
income tax purposes, or the Notes are not being treated as
indebtedness for federal or applicable state income tax
purposes and such characterization having a material adverse
effect on the Trust, the Noteholders or the Insurer or (y) the
proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts
then due and unpaid upon such Notes for principal and
interest; or
(B) if the Indenture Trustee is the
Controlling Party, the Indenture Trustee may not sell or
otherwise liquidate the Trust Estate following an Event of
Default, other than an Event of Default described in SECTION
5.1(I) or (II), unless: (x) all the Noteholders consent
thereto, (y) the proceeds of such sale
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or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (z) the Indenture Trustee determines that the
Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable, and the
Indenture Trustee provides prior written notice to the Rating Agency
and obtains the consent of Holders of the Note Majority. In determining
such sufficiency or insufficiency with respect to CLAUSES (Y) and (Z)
above, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and
as to the sufficiency of the Trust Estate for such purpose.
(b) Following (i) an acceleration of the Notes pursuant to
SECTION 5.2 or, (ii) in the event that an Insurer Default shall have occurred
and be continuing, the occurrence of an Event of Default pursuant to SECTION
5.1(I), 5.1(II), 5.1(IV), 5.1(V) or 5.1(VI) of the Indenture or (iii) the
receipt of Insolvency Proceeds pursuant to Section 10.1(b) of the Sale and
Servicing Agreement, the Payment Amount, including any money or property
collected pursuant to this Section and any such Insolvency Proceeds, shall be
applied by the Indenture Trustee on the related Payment Date in the following
order of priority:
(i) FIRST, amounts due and owing and required to be
distributed to the Servicer (provided there is no Servicer Termination
Event), the Owner Trustee, the Collateral Agent, Back Up Servicer and
the Indenture Trustee, respectively, pursuant to priorities (i) and
(ii) of SECTION 4.6(B) of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
(ii) SECOND, to Noteholders for amounts due and unpaid on the
Notes for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
interest;
(iii) THIRD, to Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal;
(iv) FOURTH, amounts due and owing and required to be
distributed to the Insurer pursuant to priority (v) of SECTION 4.6(B)
of the Sale and Servicing Agreement and not previously distributed);
and
(v) FIFTH, to the Collateral Agent to be applied as provided
in the Reserve Account Agreement;
PROVIDED that any amounts collected from the Pre-Funding Account or the
Capitalized Interest Account shall be paid, first, for amounts due and unpaid on
the Notes for principal for
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distribution to Noteholders in accordance with SECTION 10.1(B) hereof and,
second, in accordance with priorities (i) through (v) above.
(c) The Indenture Trustee may fix a special record date and
special payment date for any payment to Noteholders pursuant to this Section. At
least fifteen (15) days before such special record date, the Indenture Trustee
shall mail to each Noteholder and the Issuer a notice that states the special
record date, the special payment date and the amount to be paid.
SECTION 5.5. [RESERVED].
SECTION 5.6. LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Note Balance have
made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to the Indenture Trustee against the
costs, expenses and liabilities to be incurred in complying with such
request;
(iv) the Indenture Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity has failed to
institute such Proceeding; and
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such sixty (60) day period
by the Note Majority; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Note Balance, the Indenture
Trustee in its sole discretion or with advice of counsel (which shall be at
Issuer's expense) may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
SECTION 5.7. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the
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right, which is absolute and unconditional, to receive payment of the principal
of and interest, if any, on such Note on or after the respective due dates
thereof expressed in such Note or in this Indenture (or, in the case of
redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
SECTION 5.8. RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Controlling
Party or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee, the Insurer and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Indenture Trustee, the Insurer and the Noteholders shall continue as though no
such Proceeding had been instituted.
SECTION 5.9. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Indenture Trustee, the Controlling Party or any Holder of Notes to exercise
any right or remedy accruing upon any Default or Event of Default shall impair
any such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this ARTICLE
V or by law to the Indenture Trustee, the Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Insurer or by the Noteholders, as the case may be.
SECTION 5.11. CONTROL BY NOTEHOLDERS. If the Indenture Trustee is the
Controlling Party, the Holders of the Note Majority shall have the right to
direct the time, method and place of conducting any Proceeding for any remedy
available to the Indenture Trustee with respect to the Notes or exercising any
trust or power conferred on the Indenture Trustee; PROVIDED, HOWEVER, that:
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of SECTION 5.4, any
direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by Holders of Notes representing not less than 100% of
the Note Balance;
(iii) if the conditions set forth in SECTION 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any
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direction to the Indenture Trustee by Holders of Notes representing
less than 100% of the Note Balance to sell or liquidate the Trust
Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction; and
PROVIDED, HOWEVER, that, subject to SECTION 6.1, the Indenture Trustee need not
take any action that it reasonably determines might involve it in liability or
would reasonably be expected to materially adversely affect the rights of any
Noteholder(s) not consenting to such action.
SECTION 5.12. WAIVER OF PAST DEFAULT. If an Insurer Default shall have
occurred and be continuing prior to the declaration of the acceleration of the
maturity of Notes as provided in SECTION 5.4, the Holders of the Note Majority
may waive any past Default or Event of Default and its consequences except a
Default (a) in payment of principal of or interest on any of the Notes or (b) in
respect of a covenant or provision hereof that cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
The Indenture Trustee shall promptly provide written notice to each
Rating Agency of any such waiver.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this SECTION 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder(s) holding in
the aggregate more than 10% of the Note Balance or (c) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance
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of this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Indenture Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to the Notes or this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate or upon any of the assets of the Issuer.
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Indenture Trustee to
do so (upon the direction of the Servicer) and at the Issuer's expense, the
Issuer shall take all such lawful action as the Indenture Trustee may request to
compel or secure the performance and observance by Triad and the Servicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Sale and Servicing Agreement in accordance, with the terms thereof, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of Triad or the
Servicer thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by Triad or the Servicer of each of
their obligations under the Sale and Servicing Agreement.
(b) If the Indenture Trustee is the Controlling Party and if
an Event of Default has occurred and is continuing, the Indenture Trustee may,
and subject to SECTION 5.11 hereof at the direction (which direction shall be in
writing) of the Holders of the Note Majority shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against Triad or the
Servicer under or in connection with the Sale and Servicing Agreement, including
the right or power to take any action to compel or secure performance or
observance by Triad or the Servicer of each of their obligations to the Company
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement, and any right of the
Issuer to take such action shall be suspended.
SECTION 5.17. SUBROGATION. The Indenture Trustee shall receive as
attorney-in-fact of each Noteholder any Note Policy Claim Amount from the
Insurer. Any and all Note Policy Claim Amounts disbursed by the Indenture
Trustee from claims made under the Note Policy shall not be considered payment
by the Trust or from the Reserve Account with respect to such Notes and shall
not discharge the obligations of the Trust with respect thereto. The Insurer
shall, to the extent it makes any payment with respect to the Notes, become
subrogated to the rights of the recipient of such payments to the extent of such
payments. Subject to and conditioned upon any payment with respect to the Notes
by or on behalf of the Insurer, the Indenture Trustee shall
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assign to the Insurer all rights to the payment of interest of interest or
principal with respect to the Notes which are then due for payment to the extent
of all payments made by the Insurer, and the Insurer may exercise any option,
vote, right, power or the like with respect to the Notes to the extent that it
has made payment pursuant to the Note Policy. To evidence such subrogation, the
Note Registrar shall note the Insurer's rights as subrogee upon the register of
Noteholders upon receipt from the Insurer of proof of payment by the Insurer of
any Interest Payment Amount or Principal Payment Amount. The foregoing
subrogation shall in all cases be subject to the rights of the Noteholders to
receive the Scheduled Payments in respect of the Notes.
SECTION 5.18. PREFERENCE CLAIMS. (a) In the event that the Indenture
Trustee has received a certified copy of an order of the appropriate court that
any Interest Payment Amount or Principal Payment Amount paid on a Note has been
avoided in whole or in part as a preference payment under applicable bankruptcy
law, the Indenture Trustee shall so notify the Insurer, shall comply with the
provisions of the Note Policy to obtain payment by the Insurer of such avoided
payment, and shall, at the time it provides notice to the Insurer, notify
Holders of the Notes by mail that, in the event that any Noteholder's payment is
so recoverable, such Noteholder will be entitled to payment pursuant to the
terms of the Note Policy. The Indenture Trustee shall furnish to the Insurer at
its written request, the requested records it holds in its possession evidencing
the payments of principal of and interest on Notes, if any, which have been made
by the Indenture Trustee and subsequently recovered from Noteholders, and the
dates on which such payments were made. Pursuant to the terms of the Note
Policy, the Insurer will make such payment on behalf of the Noteholder to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order (as defined in the Note Policy) and not to the Indenture Trustee or
any Noteholder directly (unless a Noteholder has previously paid such payment to
the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in
which case the Insurer will make such payment to the Indenture Trustee for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of
any proceeding or the institution of any action (of which a Responsible Officer
of the Indenture Trustee has actual knowledge), seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "Preference Claim") of any distribution made
with respect to the Notes. Each Holder, by its purchase of Notes, and the
Indenture Trustee hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Insurer may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim including, without limitation, (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedes or performance bond pending any such appeal at the expense of
the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 5.17, the Insurer shall be subrogated to, and each Noteholder and the
Indenture Trustee hereby delegate an assign, to the fullest extent permitted by
law, the rights of the Indenture Trustee and each Noteholder in the conduct of
any proceeding with respect to a Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim.
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ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1. DUTIES OF THE INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and the Related Documents and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default
actually known to a Responsible Officer:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and its other Related Documents and no implied covenants or obligations
shall be read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; PROVIDED, HOWEVER, in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Indenture Trustee, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture and the Indenture Trustee's other Related Documents.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this CLAUSE (C) does not limit the effect of CLAUSE (B) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction by the Insurer (so long as an Insurer Default shall
have not occurred and be continuing) or a Note Majority (if an Insurer
Default has occurred and is continuing) or otherwise received by it
pursuant to this Indenture;
(iv) the Indenture Trustee shall not be charged with knowledge
of an Event of Default or Servicer Termination Event unless a
Responsible Officer obtains actual knowledge of such event or the
Indenture Trustee receives written notice of such event
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from Triad, the Insurer, the Servicer or Holders owning Notes
aggregating not less than 10% of the Note Balance; and
(v) the Indenture Trustee shall have no duty to monitor the
performance of the Issuer, the Company, Triad or the Servicer, nor
shall it have any liability in connection
with malfeasance or nonfeasance by the Issuer, the Company, Triad or
the Servicer. The Indenture Trustee shall have no liability in
connection with compliance of the Issuer, the Company, Triad or the
Servicer with statutory or regulatory requirements related to the
Receivables. The Indenture Trustee shall not make or be deemed to have
made any representations or warranties with respect to the Receivables
or the validity or sufficiency of any pledge or assignment of the
Receivables to the Indenture Trustee.
(d) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to CLAUSES (A), (B), (C) and (G) and to the
provisions of the TIA.
(e) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law, this Indenture
or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur or be subjected to
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayments of such funds or adequate indemnity reasonably
satisfactory to it against any loss, liability or expense is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Indenture Trustee
shall be subject to this SECTION 6.1 and to the provisions of the TIA.
(i) The Indenture Trustee shall, upon one (1) Business Day's
prior notice to the Indenture Trustee, permit any representative of the Insurer,
during the Indenture Trustee's normal business hours, to examine all books of
account, records, reports and other papers of the Indenture Trustee relating to
the Notes, to make copies and extracts therefrom and to discuss the Indenture
Trustee's affairs and actions, as such affairs and actions relate to the
Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes. All expenses incurred by the
Indenture Trustee in connection with such examination shall be borne by the
Issuer.
(j) The Indenture Trustee shall, and hereby agrees that it
shall, perform all of the obligations and duties required of it under the Sale
and Servicing Agreement.
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(k) In no event shall the Indenture Trustee be required to
perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer, or any other party, under the Sale and Servicing
Agreement except that [_____________________] solely in its capacity as Backup
Servicer, shall perform and be responsible for such obligations during such
time, if any, as the Backup Servicer shall be the successor to, and be vested
with the rights, powers, duties and privileges of the Servicer in accordance
with the terms of the Sale and Servicing Agreement.
(l) The Indenture Trustee shall, and hereby agrees that it
will, hold the Note Policy in trust, and will hold any proceeds of any claim on
the Note Policy in trust solely for the use and benefit of the Noteholders.
(m) Without limiting the generality of this SECTION 6.1, the
Indenture Trustee, in its capacity as Indenture Trustee, shall have no duty,
unless specifically set forth in this Indenture or the Related Documents, (i) to
see to any recording, filing or depositing of this Indenture or any agreement
referred to herein or any financing statement evidencing a security interest in
the Financed Vehicles, or to see to the maintenance of any such recording or
filing or depositing or to any recording, refiling or redepositing of any
thereof, (ii) 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, assessed or levied against any part of the Trust Estate, (iii) to confirm or
verify the contents of any reports or certificates delivered to the Indenture
Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed
by the Indenture Trustee to be genuine and to have been signed or presented by
the proper party or parties, or (iv) to inspect the Financed Vehicles at any
time or ascertain or inquire as to the performance or observance of any of the
Issuer's, the Company's or the Servicer's representations, warranties or
covenants or the Servicer's duties and obligations as Servicer.
(n) The Indenture Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture and left to
the Indenture Trustee's discretion, or to institute, conduct or defend any
litigation under this Agreement or in relation to this Indenture, at the
request, order or direction of any of the Noteholders, pursuant to the
provisions of this Indenture, unless such Noteholders shall have offered to the
Indenture Trustee reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby.
SECTION 6.2. RIGHTS OF INDENTURE TRUSTEE.
(a) The Indenture Trustee may conclusively rely and shall be
fully protected in acting on any document reasonably believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officers' Certificate or Opinion of Counsel.
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(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, attorneys or a custodian or nominee, and (with respect to
actions or omissions by an attorney that is not an employee of the Indenture
Trustee) the Indenture Trustee shall not be responsible for any misconduct or
negligence on the part of, or for the supervision of, any such attorney.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith that it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence (other than errors in
judgment) or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture, the Related Documents and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Indenture Trustee, other than in its capacity as
Custodian under the Sale and Servicing Agreement, shall not be required to make
any initial or periodic examination of any files or records related to the
Receivables for the purpose of establishing the presence or absence of defects,
the compliance by the Issuer with its representations and warranties or for any
other purpose.
(g) If the Indenture Trustee is also acting as Paying Agent or
Note Registrar hereunder, the rights and protections afforded to the Indenture
Trustee pursuant to this ARTICLE VI shall also be afforded to such Paying Agent
or Note Registrar.
SECTION 6.3. INDIVIDUAL RIGHTS OF THE INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not the Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with SECTIONS 6.11 and 6.12.
SECTION 6.4. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for, and makes no representation as to the validity or
adequacy of, this Indenture, the Trust Estate or the Notes; (except the
enforceability of this Indenture and the Indenture Trustee's Related Documents
against the Indenture Trustee) shall not be accountable for the Issuer's use of
the proceeds from the Notes; and shall not be responsible for any statement of
the Issuer in this Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
SECTION 6.5. NOTICE OF DEFAULTS. If an Event of Default or Servicer
Termination Event occurs and is continuing and is known to, or written notice
thereof has been delivered to, a Responsible Officer, the Indenture Trustee
shall promptly mail to the Rating Agencies and each Noteholder notice of the
Event of Default or Servicer Termination Event after such Responsible Officer
has knowledge or written notice of such Event of Default or Servicer Termination
Event.
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Except in the case of an Event of Default in payment of principal of or interest
on any Note (including payments pursuant to the mandatory redemption provisions
of such Note), the Indenture Trustee may withhold the notice of such Event of
Default if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6. REPORTS BY INDENTURE TRUSTEE TO THE HOLDERS. The Indenture
Trustee shall deliver to each Noteholder such information as set forth in
SECTION 4.10 of the Sale and Servicing Agreement.
SECTION 6.7. COMPENSATION, REIMBURSEMENT AND INDEMNITY.
(a) The Issuer shall, or shall cause the Servicer to, pay to
the Indenture Trustee the Indenture Trustee Fee, including compensation for
extraordinary services such as default administration in accordance with SECTION
4.6 of the Sale and Servicing Agreement. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall, or shall cause the Servicer to, reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services,
to the extent such expenses do not result from the bad faith or negligence of
the Indenture Trustee. Such expenses shall include securities transaction
charges and the reasonable compensation and expenses, disbursements and advances
of the Indenture Trustee's agents, counsel, accountants and experts but, with
respect to securities transaction charges, only to the extent such charges have
not been waived due to the Indenture Trustee's receipt of payment from any
financial institution with respect to certain eligible investments specified by
the Servicer pursuant to SECTION 4.1(C) of the Sale and Servicing Agreement.
(b) The Issuer shall or shall cause the Servicer in accordance
with SECTION 7.1 of the Sale and Servicing Agreement to indemnify the Indenture
Trustee and its officers, directors, employees and agents against any and all
loss, liability or expense (including attorneys' fees) incurred by them in
connection with the administration of this trust and the performance of its
duties hereunder. The Indenture Trustee shall notify the Issuer and the Servicer
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Servicer shall not relieve the Issuer or
the Servicer of its obligations hereunder. The Issuer shall, or shall cause the
Servicer to, defend the claim and the Indenture Trustee may have separate
counsel and the Issuer shall, or shall cause the Servicer to, pay the fees and
expenses of such counsel. Neither the Issuer nor the Servicer need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence (other than errors in judgment) or bad faith.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Indenture Trustee be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Indenture Trustee has been advised of the
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likelihood of such loss or damage and regardless of the form of action. This
indemnity shall survive the termination of the Agreement.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
SECTION 6.7 shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default specified in
SECTION 5.1(IV) or (V), the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
Federal or State bankruptcy, insolvency or similar law. Notwithstanding anything
else set forth in this Indenture or the Related Documents, the Indenture Trustee
agrees that the obligations of the Issuer to the Indenture Trustee hereunder and
under the Related Documents shall be recourse to the Trust Estate only and
specifically shall not be recourse to the assets of the Issuer, the Company or
Triad, except that Triad, as Servicer, has undertaken the payment and indemnity
obligations as described in this SECTION 6.7. In addition, the Indenture Trustee
agrees that its recourse to the amounts held pursuant to the Reserve Account
Agreement shall be limited to the right to receive the distributions referenced
to in SECTION 4.6(B) of the Sale and Servicing Agreement and that its recourse
to [_______] shall be solely as explicitly set forth in the Related Documents.
SECTION 6.8. REPLACEMENT OF THE INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this SECTION 6.8. Subject to the
preceding sentence, the Indenture Trustee may resign at any time by providing
sixty (60) days prior written notice to the Issuer, the Insurer and the
Noteholders or sooner if so required by law. The Issuer may and, at the request
of the Insurer (unless an Insurer Default shall have occurred and be continuing)
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with SECTION 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official) for
the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Indenture Trustee and such case is not dismissed
within 60 days;
(iv) the Indenture Trustee commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee,
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conservator, sequestrator (or other similar official) for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due
or take any corporate action in furtherance of any of the foregoing;
or
(v) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly provide written notice of such event to the Rating Agencies, the
Insurer and the Noteholders and shall appoint a successor Indenture Trustee
acceptable to the Insurer (so long as an Insurer Default shall not have occurred
and be continuing) or a Note Majority (if an Insurer Default has occurred and is
continuing). If the Issuer shall fail to appoint such a successor Indenture
Trustee, the Insurer (so long as an Insurer Default shall not have occurred and
be continuing) or a Note Majority (if an Insurer Default has occurred and is
continuing) may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Insurer (provided that an
Insurer Default shall not have occurred and be continuing) and to the Issuer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the retiring Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee and shall be
paid all fees and expenses owed through the date of termination.
If a successor Indenture Trustee does not take office within sixty (60)
days after the retiring Indenture Trustee provides notice of intended
resignation or is removed, the retiring Indenture Trustee, the Issuer or the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or a Note Majority (if an Insurer Default has occurred and is
continuing) may petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
If the Indenture Trustee shall fail to comply with SECTION 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's obligations under SECTION 6.7 shall continue for the
benefit of the retiring Indenture Trustee. The retiring Indenture Trustee shall
have no liability for any act or omission by any successor Indenture Trustee.
SECTION 6.9. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee. The Indenture
Trustee shall provide the Rating Agencies, the Insurer and the Issuer written
notice of
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any such transaction as soon as practicable thereafter; PROVIDED, HOWEVER, that
such corporation or banking association shall be otherwise qualified and
eligible under SECTION 6.11.
If at the time of any such succession by merger, conversion or
consolidation to the Indenture Trustee any of the Notes shall have been
authenticated but not delivered, any such successor to the Indenture Trustee may
adopt the certificate of authentication of any predecessor trustee, and deliver
such Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may authenticate
such Notes either in the name of any predecessor Indenture Trustee hereunder or
in the name of the successor to the Indenture Trustee; and in all such cases
such certificates of authentication shall have the full force and effect to the
same extent given to the certificate of authentication of the Indenture Trustee
anywhere in the Notes or in this Indenture.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust Estate may at the time be located, the Indenture
Trustee with the consent of the Insurer (so long as an Insurer Default shall not
have occurred and be continuing) or a Note Majority (if an Insurer Default has
occurred and is continuing) shall have the power and may execute and deliver all
instruments to appoint one or more Person(s) to act as co-trustee(s), or
separate trustee(s), of all or any part of the Trust Estate, and to vest in such
Person(s), in such capacity and for the benefit of the Noteholders, such title
to the Trust Estate, or any part thereof, and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Indenture Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under SECTION 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
SECTION 6.8.
(c) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture 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
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act(s) are to be
performed, the Indenture Trustee shall be incompetent or unqualified to
perform such act(s), in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
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(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(d) Any notice, request or other writing given to the
Indenture 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 Indenture and the conditions of this ARTICLE VI. 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 Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(e) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee as its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Indenture 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 Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
(f) The Indenture Trustee shall have no obligation to
determine whether a co-trustee or separate trustee is legally required in any
jurisdiction in which any part of the Trust Estate may be located.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of Section 26(a)(1) of the
Investment Company Act of 1940, as amended and the requirements of TIA
Section 301(a). The Indenture Trustee shall have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published
annual report of condition and it shall have a long-term debt rating of BBB-
or better by the Rating Agencies. The Indenture Trustee shall provide copies
of such reports to the Insurer upon request. The Indenture Trustee shall
comply with TIA Section 310(b), including the optional provision permitted by
the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture
or indentures under which other securities of the Issuer are outstanding if
the requirements for such exclusion set forth in TIA Section 310(b)(1) are
met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints
[________________________] as Indenture Trustee with respect to the Indenture
Collateral, and [________________________] hereby accepts such appointment and
agrees to act as the Indenture Trustee with respect to the Indenture
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Collateral for the Issuer Secured Parties, to maintain custody and possession of
such Indenture Collateral (except as otherwise provided hereunder and under the
Sale and Servicing Agreement) and to perform the other duties of the Indenture
Trustee in accordance with the provisions of this Indenture and the Related
Documents. Each Issuer Secured Party hereby authorizes the Indenture Trustee to
take such action on its behalf, and to exercise such rights, remedies, powers
and privileges hereunder, as the Controlling Party may direct and as are
specifically authorized to be exercised by the Indenture Trustee by the terms
hereof, together with such actions, rights,
remedies, powers and privileges as are reasonably incidental thereto. The
Indenture Trustee shall act upon and in compliance with the written instructions
of the Controlling Party delivered pursuant to this Indenture promptly following
receipt of such written instructions; provided that the Indenture Trustee shall
not act in accordance with any instructions (i) which are not authorized by, or
in violation of the provisions of, this Indenture, (ii) which are in violation
of any applicable law, rule or regulation or (iii) for which the Indenture
Trustee has not received reasonable indemnity. Receipt of such instructions
shall not be a condition to the exercise by the Indenture Trustee of its express
duties hereunder, except where this Indenture provides that the Indenture
Trustee is permitted to act only following and in accordance with such
instructions.
SECTION 6.14. PERFORMANCE OF DUTIES. The Indenture Trustee shall have
no duties or responsibilities except those expressly set forth in this Indenture
and the other Related Documents to which the Indenture Trustee is a party or as
directed by the Controlling Party in accordance with this Indenture. The
Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction and with the indemnification of the
Controlling Party. The Indenture Trustee shall, and hereby agrees that it will,
subject to this Article VI, perform all of the duties and obligations required
of it under the Sale and Servicing Agreement.
SECTION 6.15. LIMITATION ON LIABILITY. Neither the Indenture Trustee
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith, except that the Indenture Trustee shall be liable for its negligence
(other than errors in judgment), bad faith or willful misconduct; nor shall the
Indenture Trustee be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Issuer of this Indenture or any of the
Indenture Collateral (or any part thereof). Notwithstanding any term or
provision of this Indenture, the Indenture Trustee shall incur no liability to
the Issuer or the Issuer Secured Parties for any action taken or omitted by the
Indenture Trustee in connection with the Indenture Collateral, except for the
negligence (other than errors in judgment) or willful misconduct on the part of
the Indenture Trustee and, further, shall incur no liability to the Issuer
Secured Parties except for negligence (other than errors in judgment), bad faith
or willful misconduct in carrying out its duties to the Issuer Secured Parties.
The Indenture Trustee shall be protected and shall incur no liability to any
such party in relying upon the accuracy, acting in reliance upon the contents,
and assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Indenture Trustee to be
genuine and to have been duly executed by the appropriate signatory, and (absent
actual knowledge to the contrary by a Responsible Officer of the Indenture
Trustee) the Indenture Trustee shall not be required to make any independent
investigation with respect thereto. The Indenture Trustee shall at all times be
free independently to establish to its
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reasonable satisfaction, but shall have no duty to independently verify, the
existence or nonexistence of facts that are a condition to the exercise or
enforcement of any right or remedy hereunder or under any of the Related
Documents. The Indenture Trutee may consult with counsel, and shall not be
liable for any action taken or omitted to be taken by it hereunder in good faith
and in accordance with the advice of such counsel. The Indenture Trustee shall
not be under any obligation to exercise any of the remedial rights or powers
vested in it by this Indenture or to follow any direction from the Controlling
Party or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder unless it shall have received
reasonable security or indemnity satisfactory to the Indenture Trustee against
the costs, expenses and liabilities which might be incurred by it.
SECTION 6.16. RELIANCE UPON DOCUMENTS. In the absence of negligence,
bad faith or willful misconduct on its part, the Indenture Trustee shall be
entitled to conclusively rely on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such document
or instrument.
SECTION 6.17. SUCCESSOR INDENTURE TRUSTEE. Any Person into which the
Indenture Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any Person resulting from any such
conversion, merger, consolidation, sale or transfer to which the Indenture
Trustee is a party, shall (provided it is otherwise qualified to serve as the
Indenture Trustee hereunder) be and become a successor Indenture Trustee
hereunder and be vested with all of the title to and interest in the Indenture
Collateral and all of the trusts, powers, discretions, immunities, privileges
and other matters as was its predecessor without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, except to the
extent, if any, that any such action is necessary to perfect, or continue the
perfection of, the security interest of the Issuer Secured Parties in the
Indenture Collateral; provided that any such successor shall also be the
successor Indenture Trustee under SECTION 6.9.
SECTION 6.18. REPRESENTATIONS AND WARRANTIES OF THE INDENTURE TRUSTEE.
The Indenture Trustee represents and warrants to the Issuer and to each Issuer
Secured Party as follows:
(a) DUE ORGANIZATION. The Indenture Trustee is a [_________]
banking corporation and is duly organized, validly existing and in good standing
under the laws of the State of [_________], and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Indenture Trustee has all requisite
right, power and authority to execute and deliver this Indenture and its related
documents and to perform all of its duties as Indenture Trustee hereunder and
thereunder.
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(c) DUE AUTHORIZATION. The execution and delivery by the
Indenture Trustee of this Indenture and the other Related Documents to which it
is a party, and the performance by the Indenture Trustee of its duties hereunder
and thereunder, have been duly authorized by all necessary corporate proceedings
and no further approvals or filings, including any governmental approvals, are
required for the valid execution and delivery by the Indenture Trustee, or the
performance by the Indenture Trustee, of this Indenture and such other Related
Documents.
(d) NO VIOLATION. The execution, delivery and performance by
the Indenture Trustee of this Agreement and its Related Documents (i) do not
violate any provision of any law or regulation governing it or any order, writ,
judgment, or decree of any court, arbitrator, or governmental authority
applicable to it or any of its assets, (ii) do not violate any provision of its
corporate charter or by-laws, and (iii) do not violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any lien on any of the Trust property pursuant
to the provisions of any mortgage, indenture, contract, agreement or other
undertaking other than this Agreement to which it is a party.
(e) NO CONSENT REQUIRED. The execution, delivery and
performance by the Indenture Trustee of this Agreement and its Related Documents
do not require the authorization, consent or approval of, the giving of notice
to, the filing or registration with, or the taking of any action in respect of,
any governmental authority or agency.
(f) VALID AND BINDING INDENTURE. The Indenture Trustee has
duly executed and delivered this Indenture and each other Related Document to
which it is a party, and each of this Indenture and each such other Related
Document constitutes the legal, valid and binding obligation of the Indenture
Trustee, enforceable against the Indenture Trustee in accordance with its terms,
except as (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
SECTION 6.19. WAIVER OF SETOFFS. The Indenture Trustee hereby expressly
waives any and all rights of setoff that the Indenture Trustee may otherwise at
any time have under applicable law with respect to any Trust Account and agrees
that amounts in the Trust Accounts shall at all times be held and applied solely
in accordance with the provisions hereof and of the Sale and Servicing
Agreement.
SECTION 6.20. CONTROL BY THE CONTROLLING PARTY. The Indenture Trustee
shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Event of Default shall have occurred and be continuing, the Indenture Trustee
shall act upon and comply with notices and instructions given by the Controlling
Party alone in the place and stead of the Issuer.
SECTION 6.21. INDENTURE TRUSTEE NOT LIABLE FOR NOTES OR RECEIVABLES.
The Indenture Trustee makes no representations as to the validity or sufficiency
of the Sale and Servicing Agreement or of the Notes (other than authentication
of the Notes) or of any Receivable or Related Document, except as expressly
provided herein or in the Sale and Servicing Agreement.
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Except as expressly set forth in the Related Documents, the Indenture Trustee
shall at no time (except with respect to its duties as Backup Servicer,
Collateral Agent and Custodian under the Related Documents and except during
such time, if any, as it is acting as successor Servicer) 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
sufficiency of the Trust or its ability to generate the payments to be
distributed to Noteholders under this Indenture, including the existence,
condition, location and ownership of any Financed Vehicle; subject to SECTION
2.3 of the Sale and Servicing Agreement, the existence and enforceability of any
insurance thereon; the existence of any Receivable or any computer or other
record thereof; subject to SECTION 2.3 of the Sale and Servicing Agreement, the
completeness of any Receivable; subject to SECTION 2.3 of the Sale and Servicing
Agreement, the receipt by the Servicer of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Company and the Servicer
with any covenant or the breach by the Company and the Servicer of any warranty
or representation made under any Related Document and the accuracy of any such
warranty or representation prior to the Indenture Trustee's receipt of notice or
other discovery of any noncompliance therewith or any breach thereof; any
investment of monies by or at the direction of the Servicer or any loss
resulting therefrom (it being understood, however, that the Indenture Trustee
shall remain responsible for any Trust Property that it may hold directly); the
acts or omissions of the Company, the Servicer or any Obligor; any action of the
Servicer taken in the name of the Indenture Trustee; the accuracy, content or
completeness of any offering documents used in connection with the sale of the
Notes or any action by the Indenture Trustee taken at the instruction of the
Servicer, the Company or the Noteholders holding the requisite percentage of
Notes not inconsistent with the provisions hereof or of any Related Document;
PROVIDED, HOWEVER, that the foregoing shall not relieve the Indenture Trustee of
its respective obligation to perform its duties under this Agreement and the
other Related Documents, whether as Indenture Trustee, as Collateral Agent, as
Custodian or as Backup Servicer. The Indenture Trustee shall not be accountable
for the use or application by the Company of any of the Notes or of the proceeds
of such Notes, or for the use or application of any funds paid to the Servicer
in respect of the Receivables prior to the time such funds are deposited in the
Collection Account.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee within thirty (30) days after receipt by the Issuer of a written request
by the Indenture Trustee, a list of the names and addresses of the Holders of
Notes as of a date not more than ten (10) days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished. The Indenture Trustee
shall or, if the Indenture Trustee is not the Note Registrar, the Issuer shall,
furnish to the Insurer in writing upon their written request and at such other
times as the Insurer may request a copy of the list.
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SECTION 7.2. PRESERVATION OF INFORMATION, COMMUNICATIONS TO
NOTEHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in SECTION 7.1 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in SECTION 7.1 upon receipt of a
new list so furnished.
(b) Three or more Noteholders, or one or more Holder(s) of
Notes evidencing at least 25% of the Note Balance, may obtain a list of the
names and addresses of Holders of Notes of record as of the most recent Record
Date in order to communicate with other Noteholders with respect to their rights
under this Indenture or under the Notes.
(c) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(d) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.3. REPORTS BY ISSUER.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within fifteen (15) days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission
pursuant to SECTION 13 or 15(D) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this SECTION 7.3(A) as may be required by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of each year.
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SECTION 7.4. REPORTS BY INDENTURE TRUSTEE. If required by TIA Section
313(a), within 60 days after each June 30 [___], beginning with June 30, [___],
the Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b). A copy
of each report at the time of its mailing to Noteholders shall be given by the
Indenture Trustee to the Servicer to file with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture and the Sale
and Servicing Agreement. The Indenture Trustee shall apply all such money
received by it, as provided in this Indenture and the Sale and Servicing
Agreement. Except as otherwise expressly provided in this Indenture or in the
Sale and Servicing Agreement, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in ARTICLE V.
SECTION 8.2. TRUST ACCOUNTS.
(a) On or prior to the Closing Date, the Issuer shall cause
the Indenture Trustee to establish and maintain, in the name of the Indenture
Trustee, for the benefit of the Noteholders and the Insurer, the Trust Accounts
as provided in SECTION 4.1 of the Sale and Servicing Agreement.
(b) On each Payment Date, the Indenture Trustee shall
distribute all amounts on deposit in the Note Distribution Account to
Noteholders to the extent of amounts due and unpaid on the Notes for principal
and interest in the amounts and in the order of priority set forth in SECTIONS
4.6 and 4.7 of the Sale and Servicing Agreement.
SECTION 8.3. GENERAL PROVISIONS REGARDING ACCOUNTS.
(a) The funds in the Trust Accounts shall be invested and
reinvested by the Indenture Trustee in Eligible Investments in accordance with
SECTION 4.1(C) of the Sale and Servicing Agreement.
(b) Subject to SECTION 6.1(C), the Indenture Trustee shall not
in any way be held liable for the selection of Eligible Investments or by reason
of any insufficiency in the Trust Accounts resulting from any loss on any
Eligible Investment included therein, except for losses
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attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
SECTION 8.4. RELEASE OF TRUST ESTATE.
(a) The Indenture Trustee may, and when required by this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with this Indenture and the
Sale and Servicing Agreement. No party relying upon an instrument executed by
the Indenture Trustee as provided in this Article shall be bound to ascertain
the Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due to the Indenture Trustee pursuant to SECTION
6.7 have been paid, all other Issuer Secured Obligations have been paid in full
and the Note Policy has expired in accordance with its terms and has been
returned to the Insurer for cancellation, release any remaining portion of the
Trust Estate that secured the Notes from the lien of this Indenture and release
to the Issuer or any other Person entitled thereto any funds then on deposit in
the Collection Account. The Indenture Trustee shall release property from the
lien of this Indenture pursuant to this SECTION 8.2(B) only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
Sections 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.1.
SECTION 8.5. OPINION OF COUNSEL. The Indenture Trustee shall receive at
least seven (7) days' notice when requested by the Issuer to take any action
pursuant to SECTION 8.4(A), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of this Indenture; PROVIDED, HOWEVER,
that no such notice or Opinion of Counsel shall be required after the Notes and
all other Issuer Secured Obligations have been paid in full and the Note Policy
has expired in accordance with its terms and has been returned to the Insurer
for cancellation, or for the release of liens in connection with a Purchased
Receivable or a replaced Receivable; and PROVIDED, FURTHER, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of the
Trust Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
Without the consent of the Holders of Notes but with the prior written consent
of the Insurer (unless an Insurer Default shall have occurred and be continuing)
and with prior written notice to the Rating Agencies, the Issuer and the
Indenture Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) (A) to cure any ambiguity or to correct any provision
herein or in any supplemental indenture that may be inconsistent with
any other provision herein or in any supplemental indenture or (B) to
make any other provisions with respect to matters or questions arising
under this Indenture which are not inconsistent with the provisions of
this Indenture or in any supplemental indenture so long as, in the
Opinion of Counsel, such action in this CLAUSE (B) shall not materially
adversely affect the interests of the Holders of Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
ARTICLE VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
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SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee may, with prior written notice to the Rating
Agencies, with the prior written consent of the Insurer (unless Insurer Default
shall have occurred and be continuing) and with the prior written consent of the
Note Majority enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Notes under this Indenture; PROVIDED, HOWEVER, that, no such
supplemental indenture shall, without the consent of the Insurer and the Holder
of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to the
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in ARTICLE V, to
the payment of any such amount due on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(ii) reduce the percentage of the Note Balance, the consent of
the Holders of which is required for any such supplemental indenture,
or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this
Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of "Outstanding";
(iv) reduce the percentage of the Note Balance required to
direct the Indenture Trustee to sell or liquidate the Trust Estate
pursuant to SECTION 5.4 or 5.11;
(v) modify any provision of this SECTION 9.2 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the other Related Documents
cannot be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation);
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at
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any time subject hereto or deprive any Holder of Notes of the security
provided by the lien of this Indenture; or
(viii) become effective if the Rating Agency Condition in
respect thereof shall have not been satisfied.
The provisions of this Section shall in no event be construed to
require the consent of the Noteholders or the Certificateholders to a reduction
in the Target Overcollateralization Amount or the required level of the Reserve
Account.
The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Indenture or in any other Related Document) and
of evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Indenture Trustee may provide.
Prior to the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this SECTION 9.2, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a true copy of such supplemental indenture. Any failure of the
Indenture Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this ARTICLE IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to SECTIONS 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
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SECTION 9.6. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Notes so modified as to conform, in the opinion
of the Issuer, to any such supplemental indenture may be prepared and executed
by the Issuer and authenticated and delivered by the Indenture Trustee in
exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1. REDEMPTION.
(a) On any Payment Date on which the Servicer exercises its
option to purchase the Receivables and other Trust Property pursuant to SECTION
10.1 of the Sale and Servicing Agreement, the Notes shall be redeemed in whole,
but not in part, for a purchase price equal to the Redemption Price. Pursuant to
said SECTION 10.1, the Servicer shall furnish notice of such redemption to the
Indenture Trustee, the Insurer, the Backup Servicer and the Rating Agencies not
later than the Record Date prior to the Redemption Date and the Servicer shall
deposit with the Indenture Trustee in the Collection Account the Redemption
Price of the Notes to be redeemed on or before the Redemption Date.
(b) In the event that the assets of the Trust are sold
pursuant to SECTION 9.1 of the Trust Agreement, all amounts on deposit in the
Collection Account shall be paid to the Noteholders up to the Note Balance and
all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this SECTION 10.1(C), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than forty-five (45) days prior to the Redemption Date whereupon all
such amounts shall be payable on the Redemption Date.
SECTION 10.2. FORM OF REDEMPTION NOTICE. Notice of redemption under
SECTION 10.1 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, mailed no later than the fifth (5th) day of the month in which
the applicable Redemption Date occurs to each Holder of Notes, as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered in
accordance with SECTION 2.7(B)(II) hereof for payment of the Redemption
Price (which shall be the office or agency of the Issuer to be
maintained as provided in SECTION 3.2).
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Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
SECTION 10.3. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions
thereof to be redeemed shall, following notice of redemption pursuant to this
ARTICLE X, become due and payable on the Redemption Date at the Redemption Price
and (unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on the Redemption Price for any period after the date to
which accrued interest is calculated for purposes of calculating the Redemption
Price.
If there are not sufficient funds in the Collection Account on the
Payment Date on which the Notes are to be redeemed available to pay the
Redemption Price, the notice of redemption shall be deemed to have been revoked
and the Notes shall not be redeemed on the Redemption Date. Payments will be
made on such Payment Date in accordance with SECTION 4.7 of the Sale and
Servicing Agreement as though no notice of redemption had been given and the
Notes shall continue to bear interest at the Class A Interest Rate.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under this Indenture, the Indenture Trustee shall be entitled to request that
the Issuer furnish to the Indenture Trustee and to the Insurer (i) an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and (ii) an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case of
any such application or request as to which the furnishing of such documents is
specifically required by this Indenture, no additional certificate or opinion
need be furnished.
(a) Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such
certificate or opinion has read or has caused to be read such covenant
or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made (or has caused to be made) such
examination or investigation as is
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necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of
each such signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the Lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in SECTION 11.1 or elsewhere
in this Indenture, furnish to the Indenture Trustee and the Insurer an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Indenture Collateral or other property or securities to be so deposited.
Such certificate or opinion of fair value shall satisfy the requirements of
Section 314 of the TIA, as amended.
(c) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Insurer an Officer's Certificate certifying or stating
the opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Indenture Trustee and the Insurer an
Independent Certificate as to the same matters, if the fair value to the issuer
of the securities to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to clause (i) above and this clause (ii), is 10% or more of
the Outstanding Notes; provided, that such a certificate need not be furnished
with respect to any securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officer's Certificate is less than $25,000 or
less than 1% percent of the Outstanding Notes.
(d) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables whenever any property or securities are to
be released from the lien of this Indenture, the Issuer shall also furnish to
the Indenture Trustee and the Insurer an Officer's Certificate certifying or
stating the opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed to be
released and stating that in the opinion of such person the proposed release
will not impair the security under this Indenture in contravention of the
provisions hereof.
(e) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Insurer an Officer's Certificate certifying or stating
the opinion of any signer thereof as to the matters described in clause (iii)
above, the Issuer shall also furnish to the Indenture Trustee and the Insurer an
Independent Certificate as to the same matters if the fair value of the property
or securities and of all other property other than Purchased Receivables and
Defaulted Receivables, or securities released from the lien of this Indenture
since the commencement of the then current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or
more of the Outstanding Notes; provided, that such certificate need not be
furnished in the case of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is less than $25,000
or less than 1 percent of the then Outstanding Notes.
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(f) Notwithstanding SECTION 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise dispose of
Receivables as and to the extent permitted or required by the Related Documents
and (B) make cash payments out of the Trust Accounts as and to the extent
permitted or required by the Related Documents.
SECTION 11.2. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate, opinion or
representations with respect to the matters upon which his certificate or
opinion is based is/are erroneous. Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, Triad or the Issuer, stating that the information with respect
to such factual matters is in the possession of the Servicer, Triad or the
Issuer, as applicable, unless such Authorized Officer or counsel knows, or in
the exercise of reasonable care should know, that the certificate, opinion or
representations with respect to such matters are erroneous.
Where any Person is required or permitted to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Whenever in this Indenture, in connection with any application,
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in ARTICLE VI.
SECTION 11.3. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders may be embodied in and evidenced by one or more instrument(s) of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument(s) are delivered to
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the Indenture Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument(s) (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "ACT" of the Noteholders
signing such instrument(s). Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to SECTION 6.1) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any manner that the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or Act by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof, in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4. NOTICES, ETC., TO THE INDENTURE TRUSTEE, ISSUER AND
RATING AGENCY. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders, or other documents provided or permitted by this
Indenture, shall be in writing and, if such request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders is to be made upon,
given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer,
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Indenture Trustee at its Corporate Trust Office,
or
(b) the Issuer by the Indenture Trustee or by any Noteholder,
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Triad Auto Receivables
Owner Trust 199[ ]-[ ], 7711 Center Avenue, Suite 100, Huntington Beach,
California 92647, Telecopy No.: (714) 894-8617 or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer, with a
copy to the Owner Trustee, addressed to:
[_____________________________________________________]. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee shall
be sufficient for any purpose hereunder if in writing and mailed by registered
mail or personally delivered or telexed or telecopied to the recipient as
follows:
To the Insurer: [___________________]
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Telex No.:
Confirmation:
Telecopy Nos.:
(In each case in which notice or other communication to the Insurer refers to an
Event of Default, a claim on the Note Policy or with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head--Financial Guaranty
Group "URGENT MATERIAL ENCLOSED.")
Notices required to be given to the Rating Agency by the Issuer or the
Indenture Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to the address set forth in SECTION
10.12(E) of the Sale and Servicing Agreement.
SECTION 11.5. NOTICES TO NOTEHOLDERS, WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service, it shall
be impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.6. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture or the Notes
for such payments or notices. The Issuer will furnish to the Indenture Trustee a
copy of each such agreement and the Indenture Trustee will cause
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payments to be made and notices to be given in accordance with such agreements
to the extent such alternative arrangements are reasonable. Any additional costs
or expenses associated therewith shall be payable by the Issuer or the
applicable Noteholder.
SECTION 11.7. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.8. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not expressly contained herein.
SECTION 11.9. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents of the
Indenture Trustee.
SECTION 11.10. SEVERABILITY. Any provision of this Indenture or the
Notes that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or of the
Notes, as applicable, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.11. BENEFITS OF INDENTURE. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and to directly enforce such
provisions of this Indenture so long as an Insurer Default shall not have
occurred and be continuing. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and the Insurer, and any other party
secured hereunder, and any other person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Trustee may exercise such right
or power hereunder), but not its duties and obligations under the Note Policy,
upon delivery of a written notice to the Indenture Trustee.
SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next Business Day with the same force and effect as if
made on the date on which nominally due, and no interest shall accrue for the
period from and after any such nominal date.
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SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any public recording offices, such recording is to be effected by
the Issuer and, at its expense, accompanied by an Opinion of Counsel (which may
be counsel to the Indenture Trustee or any other counsel reasonably acceptable
to the Indenture Trustee and the Insurer) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Indenture
Trustee on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of (a) the Owner Trustee in its individual capacity, (b) any holder of a
beneficial interest in the Issuer or the Indenture Trustee or (c) of any
successor or assign of the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed (it being understood that the Owner
Trustee and the Indenture Trustee have no such obligations in their respective
individual capacities) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
SECTION 11.17. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they shall not at any time institute against the Company or the
Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or State bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
other Related Document. The foregoing shall not limit the rights of the
Indenture Trustee to file any claim in or otherwise take any action with respect
to any insolvency proceeding that was instituted against the Issuer by any
Person other than the Indenture Trustee.
SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or of the
Insurer, during the Issuer's normal business hours, to examine all the books of
account, records, reports and other papers of the
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Issuer, to make copies and extracts therefrom, to cause such books to be audited
by Independent certified public accountants, and to discuss the Issuer's
affairs, finances and accounts with the Issuer's officers, employees and
Independent certified public accountants, all at such reasonable times and as
often as may be reasonably requested. The Indenture Trustee shall cause its
representatives to hold in confidence all such information; PROVIDED, HOWEVER,
that the foregoing shall not be construed to prohibit (i) disclosure of any and
all information that is or becomes publicly known, or information obtained by
the Indenture Trustee from sources other than the Issuer or the Servicer, (ii)
disclosure of any and all information (A) if required to do so by any applicable
statute, law, rule or regulation, (B) to any government agency or regulatory or
self-regulatory body having or claiming authority to regulate or oversee any
aspects of the Indenture Trustee's business or that of its Affiliates, (C)
pursuant to any subpoena, civil investigative demand or similar demand or
request of any court, regulatory authority, arbitrator or arbitration to which
the Indenture Trustee or an Affiliate thereof or any officer, director, employee
or shareholder thereof is subject, (D) in any preliminary or final placement
memorandum, registration statement or contract or other document pertaining to
the transactions contemplated by the Indenture and approved in advance by the
Issuer or (E) to any Affiliate, independent or internal auditor, agent, employee
or attorney of the Indenture Trustee having a need to know the same; PROVIDED,
that the Indenture Trustee advises such recipient of the confidential nature of
the information being disclosed and such recipient agrees to keep such
information confidential, (iii) any other disclosure authorized in writing by
the Issuer or the Servicer or (iv) disclosure to the other parties to the
transactions contemplated by the Related Documents and the Noteholders.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers duly authorized as of the day and
year first above written.
TRIAD AUTO RECEIVABLES OWNER
TRUST 199[ ]-[ ]
By: [________________________]
not in its individual capacity but
solely as Owner Trustee
By:
-------------------------------------
Name:
Title:
[________________________], as Indenture
Trustee
By:
-------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
to Indenture
FORM OF CLASS A NOTES
REGISTERED $[_______________]
No. R- CUSIP NO. [____________]
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE, IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ]-[ ]
[_____]% ASSET BACKED NOTES, CLASS A
Triad Auto Receivables Owner Trust 199[ ]-[ ], a Delaware business
trust (including any successor, the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, the principal sum of
[______________________________] ($_________) partially payable on each Payment
Date in an amount equal to the aggregate amount, if any, payable from the
Collection Account and the Note Distribution Account in respect of principal on
the Class A Notes pursuant to SECTION 3.1 of the Indenture and SECTIONS 4.6 and
4.7 of the Sale and Servicing Agreement; PROVIDED, HOWEVER, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
the Final Scheduled Payment Date and the Redemption Date, if any, pursuant to
SECTION 10.1 of the Indenture. The Issuer will pay interest on this Note at the
rate per annum shown above, on each Payment Date until the principal of this
Note is paid or made available for payment, on the principal amount of this Note
outstanding on the close of business on the last day of the calendar month
preceding such Payment Date (the "COLLECTION PERIOD END DATE"), subject to
certain limitations contained in SECTION 3.1 of the Indenture and SECTIONS 4.6
and 4.7 of the Sale and Servicing Agreement to the holders of record as of the
Record Date in the month in which the Payment Date occurs. Interest on this Note
will accrue for each Payment Date from the last day of the most recent
Collection Period on which interest has been paid to but excluding the last day
of the next Collection Period or, if no interest has yet been paid, from
[________________]. Interest will be computed on the basis of
A-1
<PAGE>
a 360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified in the Indenture.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture referred to on the reverse hereof, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Dated: [_____________]
TRIAD AUTO RECEIVABLES OWNER
TRUST 199[ ]-[ ]
By: [_________________________],
not in its individual capacity but
solely as Owner Trustee
By:
-------------------------------------
Name:
Title:
A-2
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Dated: December 15, 1998
[------------------------]
not in its individual capacity but solely as
Indenture Trustee
By:
------------------------------------------
Authorized Signatory
A-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its [____]% Asset Backed Notes, Class A (herein called the "CLASS
A NOTES" or the "Notes"), all issued under an Indenture, dated as of
[_______________] (such Indenture, as supplemented or amended, is herein called
the "INDENTURE"), between the Issuer and [______________________], not in its
individual capacity but solely as indenture trustee (the "INDENTURE TRUSTEE",
which term includes any successor Indenture Trustee under the Indenture), for
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are
subject to all terms of the Indenture. All terms used in this Note that are not
otherwise defined herein and that are defined in the Indenture shall have the
meanings assigned to them in or pursuant to the Indenture.
The Class A Notes will each be secured by the collateral pledged as
security therefor as provided in the Indenture.
The Issuer shall pay interest on overdue installments of interest at
the Class A Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
SECTION 10.1 of the Sale and Servicing Agreement, in whole, but not in part, if
the Servicer exercises its option to purchase the Receivables and the other
Trust Property on any Payment Date if, as of the last day of the related
Collection Period,, the Aggregate Principal Balance of Receivables has declined
to less than or equal to 10% of the Original Pool Balance.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer on the Notes or under the Indenture or any certificate or other
writing delivered in connection therewith, against (i) the Owner Trustee in its
individual capacity, the Indenture Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of (a) the Owner Trustee in
its individual capacity, the Indenture Trustee in its individual capacity, (b)
any holder of a beneficial interest in the Issuer or the Owner Trustee or the
Indenture Trustee or of (c) any successor or assign of the Owner Trustee in its
individual capacity, the Indenture Trustee in its individual capacity, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
It is the intent of the Issuer, the Servicer and the Noteholders that,
for purposes of Federal and State income tax and any other tax measured in whole
or in part by income, the Notes will qualify as indebtedness of the Issuer. The
Noteholders, by acceptance of a Note, agree to treat,
A-4
<PAGE>
and to take no action inconsistent with the treatment of, the Notes for such tax
purposes as indebtedness of the Issuer.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Issuer, or join in any institution against the Issuer
of, any bankruptcy, reorganization or arrangement, insolvency or liquidation
proceedings under any United States Federal or State bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Related Documents, neither [___________________________], in its
individual capacity, [______________________], in its individual capacity, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees, successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnification's contained in
this Note or the Indenture, it being expressly understood that said covenants,
obligations and indemnification's have been made by (i) the Owner Trustee for
the sole purpose of binding the assets of the Issuer, and (ii) the Indenture
Trustee for the sole purpose of binding the interests of the Indenture Trustee
in the assets of the Issuer. The Holder of this Note by the acceptance hereof
agrees that, except as expressly provided in the Related Documents, in the case
of an Event of Default under the Indenture, the Holder shall have no claim
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
A-5
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- -------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(name and address of assignee) ________________________________________________
- -------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
_________________ attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated: _______________ ____________________________________
Signature Guaranteed:
__________________________________*/
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the Note
Registrar.
- --------------------------
*/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular without alteration, enlargement or any change
whatsoever.
A-6
<PAGE>
Exhibit 4.2
FORM OF POOLING AND SERVICING AGREEMENT
RELATING TO
TRIAD AUTO RECEIVABLES TRUST 199[ ]-[ ]
among
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION,
as Seller
and
TRIAD FINANCIAL CORPORATION,
as Servicer
and
[ ],
as Trustee, Backup Servicer and Collateral Agent
--------------------------------
Dated as of [ ]
--------------------------------
<PAGE>
THIS POOLING AND SERVICING AGREEMENT (this "AGREEMENT") dated as of [ ] is
made with respect to the formation of the Triad Auto Receivables Trust 199[ ]-
[ ], among (1) Triad Financial Special Purpose Corporation, a Delaware
corporation, as seller (the "SELLER"), (2) Triad Financial Corporation, a
California corporation ("TRIAD"), as servicer (the "SERVICER") and (3) [ ], a
[ ] banking corporation, as trustee (the "TRUSTEE"), backup servicer (the
"BACKUP SERVICER") and collateral agent (the "COLLATERAL AGENT").
In consideration of the premises and of the mutual agreements herein
contained, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Whenever capitalized and used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"ACCOUNTANT'S REPORT" shall have the meaning set forth in SECTION 3.11.
"ACCREDITED INVESTOR" means an entity meeting the requirements of an
institutional "accredited investor" under Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Act.
"ACT" means the Securities Act of 1933, as it may be amended from time to
time.
"ACTUARIAL METHOD" means the method of allocating a fixed level payment
between principal and interest, pursuant to which each scheduled monthly payment
is deemed to consist of an amount of interest equal to 1/12 of the stated APR of
the Receivable multiplied by the outstanding Principal Balance of the Receivable
and an amount of principal equal to the remainder of such scheduled monthly
payment.
"ACTUARIAL RECEIVABLE" means any Receivable under which the portion of a
payment allocable to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
"ADDITIONAL SERVICING FEE" means the additional compensation payable to the
Servicer for services rendered during the respective Collection Period, which
shall be equal to all late payment penalties, prepayment penalties, extension
and administration fees payable by the Obligors in connection with
modifications, extensions and prepayments; PROVIDED, HOWEVER, that amounts paid
in connection with the prepayment in full of a Precomputed Receivable shall not
be considered part of the Additional Servicing Fee in accordance with Section
4.3(a) hereof.
"AFFILIATE" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition of "Affiliate", the term "control"
(including the terms "controlling", "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to
<PAGE>
direct or cause a direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall have the meaning set forth in the first paragraph of this
Agreement.
"AMOUNT FINANCED" means, with respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual rate of
finance charges stated in the Receivable.
"BACKUP SERVICING FEE" means the fee payable to the Backup Servicer on each
Distribution Date for services rendered during the respective Collection Period,
which shall be equal to the product of one-twelfth and $[ ].
"BACKUP SERVICER" shall have the meaning set forth in the first paragraph
of this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday, legal holiday
or other day on which commercial banking institutions or trust companies in the
City of New York, the state in which the Corporate Trust Office is located or
the state in which the executive offices of the Servicer are located shall be
authorized or obligated by law, executive order or governmental decree to be
closed.
"CASUALTY" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"CERTIFICATE" or "CERTIFICATES" means anyone of the Class A Certificates,
Class B Certificates or Class C Certificates executed by the Trustee on behalf
of the Trust and authenticated by the Trustee in substantially the form set
forth in EXHIBIT A, EXHIBIT B, or EXHIBIT C hereto, respectively.
"CERTIFICATE BALANCE" as of any day, means the sum of the Class A
Certificate Balance, the Class B Certificate Balance and the Class C Certificate
Balance.
"CERTIFICATE CUSTODIAN" means initially, the Trustee; thereafter, any other
certificate custodian acceptable to the Trustee.
"CERTIFICATE MAJORITY" means the Holders of Class A Certificates and the
Class B Certificates representing a majority of the sum of the Class A
Certificate Balance and the Class B Certificate Balance; PROVIDED, HOWEVER, if
there are no Class A Certificates outstanding, Certificateholders representing a
majority of the Class B Certificate Balance shall constitute a Certificate
Majority; and, PROVIDED, FURTHER, if there are no Class A Certificates
outstanding and
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no Class B Certificates outstanding, Certificateholders representing a majority
of the Class C Certificate Balance shall constitute a Certificate Majority.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean, respectively, the
register maintained and the Certificate Registrar appointed pursuant to SECTION
5.3.
"CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name a
Certificate shall be registered in the Certificate Register, except that so long
as any Certificates are outstanding, 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 Affiliate of either of them, 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.
"CLASS" means a class of Certificates.
"CLASS A CERTIFICATE" means any one of the Class A Certificates, executed
by the Trustee on behalf of the Trust and authenticated by the Trustee in
substantially the form set forth in EXHIBIT A hereto.
"CLASS A CERTIFICATEHOLDER" means the Person in whose name a Class A
Certificate shall be registered in the Certificate Register.
"CLASS A CERTIFICATE BALANCE" means initially, the Class A Percentage of
the Cutoff Date Pool Balance, and thereafter shall equal the initial Class A
Certificate Balance reduced by all amounts previously distributed to the Class A
Certificateholders and allocable to principal. If the date of determination is a
Distribution Date, then such Class A Certificate Balance shall be reduced by all
such amounts distributed on such date.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, as of the close of business
on any Distribution Date, the excess of (a) the Class A Interest Distributable
Amount for such Distribution Date and any outstanding Class A Interest Carryover
Shortfall from the preceding Distribution Date plus interest on such outstanding
Class A Interest Carryover Shortfall, to the extent permitted by law, at the
Class A Pass-Through Rate from such preceding Distribution Date through the
current Distribution Date (calculated on the basis of a 360-day year consisting
of twelve 30-day months), over (b) the amount of interest that the Holders of
the Class A Certificates actually received on such current Distribution Date.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, for any Distribution Date,
an amount equal to thirty (30) days of interest at the Class A Pass-Through Rate
on the Class A Certificate Balance as of the close of business on the last day
of the related Collection Period (calculated on the basis of a 360-day year
consisting of twelve 30-day months).
"CLASS A PASS-THROUGH RATE" means [ ]% per annum.
"CLASS A PERCENTAGE" shall be [ ] percent ([ ]%).
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"CLASS A POOL FACTOR" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class A Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class A Certificate
Balance. The Class A Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class A Pool Factor will decline to reflect reductions in the
Class A Certificate Balance.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of business
on any Distribution Date, the excess of (a) the Class A Principal Distributable
Amount and any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date, over (b) the amount of principal that the Holders
of the Class A Certificates actually received on such current Distribution Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class A Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class A Principal Distributable
Amount will equal the remaining Class A Certificate Balance.
"CLASS B CERTIFICATE" means any one of the Class B Certificates, executed
by the Trustee on behalf of the Trust and authenticated by the Trustee in
substantially the form set forth in EXHIBIT B hereto.
"CLASS B CERTIFICATE BALANCE" means, initially, the Class B Percentage of
the Cutoff Date Pool Balance, and thereafter shall equal the initial Class B
Certificate Balance reduced by all amounts previously distributed to the Class B
Certificateholders and allocable to principal. If the date of determination is a
Distribution Date, then such Class B Certificate Balance shall be reduced by all
such amounts distributed on such date.
"CLASS B CERTIFICATEHOLDER" means the Person in whose name a Class B
Certificate shall be registered in the Certificate Register.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, as of the close of business
on any Distribution Date, the excess of (a) the Class B Interest Distributable
Amount for such Distribution Date and any outstanding Class B Interest Carryover
Shortfall from the preceding Distribution Date, plus interest on such
outstanding Class B Interest Carryover Shortfall, to the extent permitted by
law, at the Class B Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date (calculated on the basis of a 360-day year
consisting of twelve 30-day months), over (b) the amount of interest that the
Holders of the Class B Certificates actually received on such current
Distribution Date.
"CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, for any Distribution Date,
an amount equal to thirty (30) days of interest at the Class B Pass-Through Rate
on the Class B Certificate Balance as of the close of business on the last day
of the related Collection Period (calculated on the basis of a 360-day year
consisting of twelve 30-day months).
"CLASS B PASS-THROUGH RATE" means [ ]% per annum.
"CLASS B PERCENTAGE" shall be [ ] percent ([ ]%).
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"CLASS B POOL FACTOR" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class B Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class B Certificate
Balance. The Class B Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class B Pool Factor will decline to reflect reductions in the
Class B Certificate Balance.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of (a) the Class B Principal Distributable Amount
and any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date, over (b) the amount of principal that the Holders of the
Class B Certificates actually received on such current Distribution Date.
"CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class B Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class B Principal Distributable
Amount will equal the remaining Class B Certificate Balance.
"CLASS C CERTIFICATE" means any one of the Class C Certificates, executed
by the Trustee on behalf of the Trust and authenticated by the Trustee in
substantially the form set forth in Exhibit C hereto.
"CLASS C CERTIFICATE BALANCE" means, initially, the Class C Percentage of
the Cutoff Date Pool Balance, and thereafter shall equal the initial Class C
Certificate Balance reduced by all amounts previously distributed to the Class C
Certificateholder and allocable to principal. If the date of determination is a
Distribution Date, then such Class C Certificate Balance shall be reduced by all
such amounts distributed on such date.
"CLASS C CERTIFICATEHOLDER" means the Person in whose name a Class C
Certificate shall be registered in the Certificate Register.
"CLASS C INTEREST CARRYOVER SHORTFALL" means, as of the close of business
on any Distribution Date, the excess of (a) the Class C Interest Distributable
Amount for such Distribution Date and any outstanding Class C Interest Carryover
Shortfall from the immediately preceding Distribution Date, plus interest on
such outstanding Class C Interest Carryover Shortfall, to the extent permitted
by law, at the Class C Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date (calculated on the basis of a 360-day year
consisting of twelve 30-day months), over (b) the amount of interest that the
Holders of the Class C Certificates actually received on such current
Distribution Date.
"CLASS C INTEREST DISTRIBUTABLE AMOUNT" means, for any Distribution Date,
an amount equal to thirty (30) days of interest at the Class C Pass-Through Rate
on the Class C Certificate Balance as of the close of business on the last day
of the related Collection Period (calculated on the basis of a 360-day year
consisting of twelve 30-day months).
"CLASS C PASS-THROUGH RATE" means [ ]% per annum.
"CLASS C PERCENTAGE" shall be [ ] percent ([ ]%).
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"CLASS C POOL FACTOR" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class C Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class C Certificate
Balance. The Class C Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class C Pool Factor will decline to reflect reductions in the
Class C Certificate Balance.
"CLASS C PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of (a) the Class C Principal Distributable Amount
and any outstanding Class C Principal Carryover Shortfall from the preceding
Distribution Date, over (b) the amount of principal that the Holders of the
Class C Certificates actually received on such current Distribution Date.
"CLASS C PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the product
of the Class C Percentage and the Principal Distributable Amount. On and after
the Final Scheduled Distribution Date, the Class C Principal Distributable
Amount will equal the remaining Class C Certificate Balance.
"CLOSING DATE" means [ ].
"CLOSING DATE CERTIFICATE BALANCE" means $[ ].
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" means [ ], acting as the Collateral Agent pursuant to
the Reserve Account Agreement, and any successor thereto pursuant to the terms
of the Reserve Account Agreement.
"COLLATERAL INSURANCE" shall have the meaning specified in SECTION 3.4(a).
"COLLECTION ACCOUNT" means the account designated in, and which is
established and maintained pursuant to, SECTION 4.1.
"COLLECTION GUIDELINES AND PROCEDURES" means the guidelines and procedures
of the Servicer with respect to servicing contracts attached to the Purchase
Agreement as EXHIBIT C.
"COLLECTION PERIOD" means, with respect to a Determination Date or a
Distribution Date, the calendar month immediately preceding the month in which
such Determination Date or Distribution Date occurs, or, in the case of the
initial Determination Date or Distribution Date, the period from and excluding
the Cutoff Date to and including the last day of the month following the month
in which the Cutoff Date occurred.
"COLLECTOR TO CURRENT RECEIVABLE RATIO" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which less than $40 of Scheduled Payments is 31 or more days past
due.
"COLLECTOR TO DELINQUENT RECEIVABLE RATIO" means the ratio of collectors
employed by the Servicer to the aggregate number of Managed Receivables with
respect to which $40 or more of all Scheduled Payments is 31 or more days past
due.
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"CORPORATE TRUST OFFICE" means the office of the Trustee at which its
corporate trust business shall be principally administered, which office as of
the date hereof is located at [ ].
"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to such
reduction in Principal Balance of such Receivable or the reduction in the net
present value (using as the discount rate the lower of the APR on such
Receivable or the rate of interest, if any, specified by the court in such
order) of the Scheduled Payments as so modified or restructured. A "Cram Down
Loss" shall be deemed to have occurred on the date of issuance of such order.
"CUMULATIVE DEFAULT RATIO" means, with respect to any Record Date, a
fraction, (a) the numerator of which is equal to the sum of (i) the aggregate of
the Principal Balances as of the related Record Date of all Receivables which
have become Defaulted Receivables, and (ii) the aggregate amount of any Cram
Down Losses, and (b) the denominator of which is equal to the Cutoff Date Pool
Balance.
"CUSTODIAN AGREEMENT" means that certain Custodian Agreement, dated as of
[ ], among ContiTrade Services L.L.C., as lender, the Servicer, as Borrower,
and the Trustee, as custodian.
"CUTOFF DATE" means the close of business on [ ].
"CUTOFF DATE POOL BALANCE" means $[ ] as set forth in SCHEDULE A.
"DEALER" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to Triad.
"DEALER AGREEMENT" means an agreement between Triad and a Dealer relating
to the sale of retail installment sale contracts to Triad and all documents and
instruments relating thereto.
"DEALER ASSIGNMENT" means, with respect to a Receivable, the assignment
executed by a Dealer conveying such Receivable to Triad.
"DEEMED CURED" means, as of a Record Date, (a) with respect to a Servicer
Termination Trigger Event that has occurred, that no Servicer Termination
Trigger Event shall have occurred as of such Record Date or as of either of the
two immediately preceding Record Dates, and (b) with respect to a Reserve
Account Trigger Event that has occurred, that no Reserve Account Trigger Event
shall have occurred as of such Record Date or as of either of the two
immediately preceding Record Dates; PROVIDED, HOWEVER, that a Reserve Account
Trigger Event resulting from a Cumulative Default Ratio exceeding [ ]% shall
never be Deemed Cured until both the Class A Certificate Balance and the Class B
Certificate Balance have been reduced to zero.
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"DEFAULTED RECEIVABLE" means any Receivable (a) for which the related
Financed Vehicle has been repossessed by the Servicer or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"DEFICIENCY CLAIM AMOUNT" shall have the meaning specified in SECTION 4.7.
"DEFICIENCY CLAIM DATE" means, with respect to any Distribution Date, the
second Business Day preceding such Distribution Date.
"DEFICIENCY NOTICE" shall have the meaning specified in SECTION 4.7.
"DELINQUENCY RATIO" means, with respect to any Record Date, a fraction,
(a) the numerator of which is equal to the aggregate Principal Balances of
all Receivables which are not Defaulted Receivables and with respect to which
$40 or more of all Scheduled Payments is 61 or more days past due as of such
Record Date, and (b) the denominator of which is equal to the aggregate
Principal Balances of the Receivables as of such Record Date.
"DETERMINATION DATE" means, with respect to any Collection Period, the
[ ]th day of the following month, or if such day is not a Business Day, the next
Business Day.
"DISTRIBUTION DATE" means, for each Collection Period, the [ ]th day of the
following month, or if the [ ]th day is not a Business Day, the next succeeding
Business Day, commencing [ ].
"ELIGIBLE ACCOUNT" means a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of the
United States of America, or any of the States thereof, or the District of
Columbia, having a certificate of deposit, short-term deposit or commercial
paper rating of at least "D-1" by the Rating Agency, or if not rated by the
Rating Agency, then at least "A-1" by Standard & Poor's and "P-1" by Moody's.
"ELIGIBLE INVESTMENTS" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the full
and timely payment of principal and interest by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by federal or state
banking or depository institution authorities; PROVIDED, HOWEVER, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall be rated "D-1" by
the Rating Agency, or if not rated by the Rating Agency, then at least "A-1+" by
Standard & Poor's and "P-1" by Moody's;
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(c) commercial paper that, at the time of the investment or contractual
commitment to invest therein, is rated "D-1" by the Rating Agency, or if not
rated by the Rating Agency, then at least "A-1+" by Standard & Poor's and "P-1"
by Moody's;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to the full and timely payment of
principal and interest by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full faith
and credit of the United States of America, in either case entered into with (i)
a depository institution or trust company (acting as principal) described in
clause (b) or (ii) a depository institution or trust company whose commercial
paper or other short term unsecured debt obligations are rated "A-1+" by
Standard & Poor's and "P-1" by Moody's and if rated by the Rating Agency, "D-1",
and whose long term unsecured debt obligations are rated "AAA" by Standard &
Poor's and "Aaa" by Moody's and if rated by the Rating Agency, "AAA";
(f) money market mutual funds registered under the Investment Company Act
of 1940, as amended, having a rating, at the time of such investment, in the
highest investment category of Standard & Poor's and Moody's; and
(g) any other investment as may be acceptable to the Certificate Majority
and the Rating Agency, as may from time to time be confirmed in writing to the
Trustee by the Certificate Majority and the Rating Agency;
PROVIDED, HOWEVER, that no such instrument shall be an Eligible Investment if
(w) such instrument evidences a right to receive either (A) only interest
payments with respect to the obligations underlying such instrument or (B) both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations; (x) its terms do not have a
predetermined fixed dollar amount of principal due at maturity that cannot vary
or change; (y) to the extent rated, an "r" highlighter is affixed to its rating;
or (z) to the extent the related interest rate is variable, interest thereon is
not tied to a single interest rate index plus a single fixed spread (if any), or
does not move proportionately with that index.
Any Eligible Investments may be purchased by or through the Trustee or any
of its Affiliates.
"ELIGIBLE SERVICER" means Triad, the Backup Servicer (so long as the Backup
Servicer is not in default of any of its obligations under this Agreement or any
other agreement relating hereto) or another Person which at the time of its
appointment as the successor Servicer, (a) is servicing a portfolio of motor
vehicle retail installment sale contracts and/or motor vehicle installment loans
of not less than $100 million, (b) is legally qualified and has the capacity and
all necessary licenses, permits and approvals to service the Receivables, (c)
has demonstrated the ability to service a portfolio of motor vehicle retail
installment sales contracts and/or motor vehicle installment loans similar to
the Receivables with reasonable skill and care, (d) is approved
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by the Rating Agency, (e) is approved by a Certificate Majority, (f) is
qualified and entitled to use, pursuant to a license or other written agreement,
and agrees to maintain the confidentiality of, the software which the Servicer
uses in connection with performing its duties and responsibilities under this
Agreement or otherwise has available software which is adequate to perform its
duties and responsibilities under this Agreement and (g) has a tangible net
worth as determined in accordance with generally accepted accounting principles
consistently applied of at least $15 million.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as it may be
amended from time to time.
"FINAL SCHEDULED DISTRIBUTION DATE" shall be the Distribution Date
occurring in [ ].
"FINANCED VEHICLE" means a new or used automobile or light duty truck,
together with all accessions thereto, securing an Obligor's indebtedness under a
Receivable.
"INDEPENDENT ACCOUNTANTS" shall have the meaning specified in SECTION 3.11.
"INFORMATION REQUEST" means a request for information delivered pursuant to
SECTION 3.11(d) or 4.8(a), substantially in the form of SCHEDULE 4.8 hereto.
"INSURANCE POLICY" means any insurance policy (a) covering physical damage,
theft, mechanical breakdown or similar event with respect to a Financed Vehicle
or loss of such Financed Vehicle or (b) such as credit life or credit disability
insurance with respect to payments due on a Receivable or (c) otherwise
benefiting the holder of the Receivable.
"LIEN" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, including tax liens, mechanics' liens, and any liens
that may attach by operation of law.
"LIEN CERTIFICATE" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
registrar of titles or comparable official or agency of the applicable state to
a secured party which indicates that the lien of the secured party on the
Financed Vehicle is recorded on the original certificate of title. In any
jurisdiction in which the original certificate of title is required to be given
to the Obligor, the term "LIEN CERTIFICATE" shall mean only a certificate or
notification issued to a secured party.
"LIQUIDATED RECEIVABLE" means any Receivable (a) which has been liquidated
by the Servicer through the sale of the Financed Vehicle or (b) for which the
Obligor is more than 120 days past due or (c) with respect to which the Servicer
has determined in good faith that no further proceeds are expected to be
received in respect of such Receivable.
"LOCKBOX ACCOUNT" means an account maintained with a Lockbox Bank, into
which payments from Obligors under Triad's portfolio of serviced contracts are
deposited.
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"LOCKBOX AGREEMENT" means an agreement with a Lockbox Bank between the
Servicer and such Lockbox Bank pursuant to which a Lockbox Account is
maintained.
"LOCKBOX BANK" means, as of any date, a depository institution which
provides a Lockbox as part of its normal and customary services named by the
Servicer at which the Lockbox Account is established and maintained as of such
date.
"MANAGED RECEIVABLE" means any retail installment sale contract (including
any related promissory note) for a financed vehicle, and all rights and
obligations thereunder, originated by and currently serviced by Triad for
non-prime Obligors.
["MOODY'S" means Moody's Investors Service, Inc., and any successors
thereof.]
"OBLIGOR" on a Receivable means the purchaser or co-purchasers of the
related Financed Vehicle or any other Person who owes or may be liable for
payments under such Receivable.
"OFFICER'S CERTIFICATE" means a certificate signed by the chairman of the
board, the president, any vice chairman of the board, any vice president or the
treasurer of Triad, the Seller, or the Servicer, as appropriate.
"OPINION OF COUNSEL" means a written opinion of counsel, which counsel
shall be acceptable to the Trustee and a Certificate Majority, which opinion
shall be in form and substance acceptable to the Trustee and a Certificate
Majority and which opinion shall not, except for the Opinion of Counsel referred
to in SECTION 9.3 hereof, be the expense of the Trustee.
"PERSON" means, any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof, or any other entity.
"PLAN" means an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA or Code Section 4975, or a governmental plan
as defined in Section 3(32) of ERISA, or subject to any federal, state or local
law which is to a material extent similar to the foregoing provisions of ERISA
or the Code.
"POOL BALANCE" means the aggregate Principal Balance of the Receivables
(excluding Liquidated and Purchased Receivables) as of the close of business on
the last day of the immediately preceding Collection Period.
"PRECOMPUTED RECEIVABLE" means an Actuarial Receivable or a Rule of 78's
Receivable.
"PRINCIPAL BALANCE" of a Receivable (a) as of the Cutoff Date, means the
Amount Financed minus (i) in the case of a Precomputed Receivable, that
portion of all payments (including all Scheduled Payments and any prepayments
in full or partial prepayments) actually received on or prior to such date
and allocable to principal in accordance with the Actuarial Method and (ii)
in the case of a Simple Interest Receivable, that portion of all payments
(including all Scheduled Payments and any prepayments in full or partial
prepayments) actually received on
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or prior to such date and allocable to principal in accordance with the
Simple Interest Method, and (b) as of any date after the Cutoff Date, means
the Principal Balance as of the Cutoff Date minus (1) in the case of a
Precomputed Receivable, that portion of all payments (including all Scheduled
Payments and any prepayments in full or partial prepayments) actually
received on or prior to such date (but after the Cutoff Date) and allocable
to principal in accordance with the Actuarial Method, (2) in the case of a
Simple Interest Receivable, that portion of all payments (including all
Scheduled Payments and any prepayments in full or partial prepayments)
actually received on or prior to such date (but after the Cutoff Date) and
allocable to principal in accordance with the Simple Interest Method, and (3)
any Cram Down Loss in respect of such Receivable. The Principal Balance of a
Liquidated Receivable for purposes other than the definition of Principal
Distributable Amount shall be equal to $0.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date other than the Final Scheduled Distribution Date, the sum of the following
amounts, without duplication: (a) the principal portion of all Scheduled
Payments received during the preceding Collection Period on Precomputed
Receivables (calculated in accordance with the Actuarial Method) and all
payments of principal received on Simple Interest Receivables (calculated in
accordance with the Simple Interest Method) during such Collection Period; (b)
the principal portion of all prepayments received during the preceding
Collection Period; (c) the portion of the Purchase Amount allocable to principal
of each Receivable that became a Purchased Receivable as of the last day of the
preceding Collection Period and the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased; (d) the Principal
Balance of each Receivable that first became a Liquidated Receivable during the
preceding Collection Period; and (e) the aggregate amount of Cram Down Losses
with respect to the Receivables that have occurred during the preceding
Collection Period.
"PURCHASE AGREEMENT" means, the Purchase Agreement, dated as of [ ], by and
between Triad and the Seller, as amended, modified or supplemented from time to
time, relating to the purchase of Receivables from time to time by the Seller
from Triad.
"PURCHASE AMOUNT" means, with respect to a Purchased Receivable, the
Principal Balance plus interest thereon at the respective APR from the last date
through which interest has been paid to the last day of the immediately
preceding Collection Period if purchased prior to the Determination Date
immediately following the end of such Collection Period, and otherwise through
the last day of the month of repurchase.
"PURCHASED RECEIVABLE" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
SECTION 3.7 or by the Seller pursuant to SECTION 2.6 or SECTION 2.9.
"RATING AGENCY" means [ ] and any successors thereof. If such organization
or successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization or other comparable Person designated
by the Seller, notice of which designation shall be given to the Trustee and the
Servicer.
"RECEIVABLE" means each retail installment sale contract (including any
related promissory note) for a Financed Vehicle which is listed on the Schedule
of Receivables and all
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rights and obligations thereunder except for Receivables that shall have become
Purchased Receivables.
"RECEIVABLE FILES" means the documents, electronic entries, instruments and
writings specified in SECTION 2.8.
"RECORD DATE" means, with respect to any Distribution Date or Determination
Date, the last day of the immediately preceding calendar month.
"RECOVERIES" means, with respect to a Liquidated Receivable, the monies
collected from whatever source subsequent to the date on which such Receivable
became a Liquidated Receivable, net of the reasonable costs of liquidation
including reasonable out-of-pocket expenses of the Servicer including Servicer
Expenses in connection with such liquidation plus any amounts required by law to
be remitted to the Obligor.
"REGULATION D" means Regulation D under the Act.
"RELATED DOCUMENTS" means the Certificates, the Pooling and Servicing
Agreement, the Purchase Agreement, the Reserve Account Agreement, the Lockbox
Agreement, the Underwriting Agreement and any other documents to be executed in
connection with the transactions contemplated hereby and thereby. The Related
Documents to be executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
"REPOSSESSION INVENTORY RATIO" means, with respect to any Record Date, a
fraction, (a) the numerator of which is equal to the aggregate Principal
Balances of all Receivables which have been repossessed by the Servicer and for
which the related Financed Vehicle has not been liquidated and (b) the
denominator of which is equal to the aggregate Principal Balances of the
Receivables as of such Record Date.
"RESERVE ACCOUNT" means, with respect to the Trust, the Reserve Account
established and maintained pursuant to the Reserve Account Agreement. The
Reserve Account shall be held by the Collateral Agent and shall in no event be
deemed part of the Trust.
"RESERVE ACCOUNT AGREEMENT" means the Reserve Account Agreement among the
Seller, the Collateral Agent and the Trustee, dated as of [ ], as the same may
be amended, supplemented or otherwise modified in accordance with the terms
thereof.
"RESERVE ACCOUNT REQUIREMENT" means an amount equal to (a) with respect to
the Closing Date, [ ]% of the initial Certificate Balance and (b) with respect
to each Distribution Date thereafter, [ ]% of the Certificate Balance, after
giving effect to distributions of principal to Certificateholders pursuant to
SECTION 4.5 hereof on such Distribution Date, as of the immediately preceding
Record Date unless a Reserve Account Trigger Event has occurred, in which case
the Reserve Account Requirement shall include all amounts required to be
deposited in the Reserve Account pursuant to SECTION 4.5(b) hereof, until such
Reserve Account Trigger Event has been Deemed Cured; PROVIDED, HOWEVER, that the
Reserve Account Requirement shall be [ ]% of the Certificate Balance for each
Distribution Date following the point in time that the Cumulative
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Default Ratio as described in clause (c)(v) of the definition of a Reserve
Account Trigger Event is greater than [ ]%, but less than [ ]%, notwithstanding
such Reserve Account Trigger Event being Deemed Cured.
"RESERVE ACCOUNT TRIGGER EVENT" means that any one of the following events
shall have occurred: (a) the Delinquency Ratio for each of the three preceding
Collection Periods exceeds [ ]%; (b) the Repossession Inventory Ratio is greater
than [ ]%; or (c) the Cumulative Default Ratio exceeds (i) [ ]% as of any Record
Date from the initial Record Date through and including the sixth Record Date,
(ii) [ ]% as of any Record Date from the seventh Record Date through and
including the twelfth Record Date, (iii) [ ]% as of any Record Date from the
thirteenth Record Date through and including the eighteenth Record Date, (iv)
[ ]% as of any Record Date from the nineteenth Record Date through and including
the twenty-fourth Record Date or (v) [ ]% as of any Record Date thereafter.
"RESPONSIBLE OFFICER" of a Person means the president, vice president,
controller, treasurer or chief financial officer of such Person.
"RULE OF 78'S RECEIVABLE" means any Receivable under which the portion of a
payment allocable to interest earned during that month is determined by
multiplying the total amount of add-on interest payable over the term of the
Receivable by a fraction, the denominator of which is equal to the sum of a
series of numbers beginning with one and ending with the number of scheduled
monthly payments due under the related Receivable, and the numerator of which is
the number of payments remaining under such Receivable before giving effect to
the payment to which the fraction is being applied. The difference between the
amount of the scheduled monthly payment made by the Obligor and the amount of
earned add-on interest calculated for the month is applied to principal
reduction.
"SCHEDULE OF RECEIVABLES" means the schedule of all retail installment sale
contracts and promissory notes originally held as part of the Trust which is
attached as SCHEDULE A hereto.
"SCHEDULED PAYMENT" means, for any Collection Period for any Receivable,
the amount indicated in such Receivable as required to be paid by the Obligor in
such Collection Period (without giving effect to deferments of payments to the
extent permitted pursuant to SECTION 3.2 or any rescheduling of payments in any
insolvency or similar proceeding).
"SELLER" means, Triad Financial Special Purpose Corporation, a Delaware
corporation.
"SELLER'S RETAINED YIELD" means that portion of the interest earned on the
Receivable which is retained by the Seller for any Distribution Date, in an
amount equal to the excess of such interest over the sum of (i) the weighted
average of the Class A Pass-Through Rate, the Class B Pass-Through Rate and the
Class C Pass-Through Rate divided by 12 multiplied by the sum of the Class A
Certificate Balance, Class B Certificate Balance and Class C Certificate
Balance, each as of the related Record Date, (ii) the Servicing Fee, Additional
Servicing Fee and Servicer Expenses payable on such Distribution Date, (iii) the
Trustee Fee payable on such Distribution Date and (iv) the Backup Servicing Fee
payable on such Distribution Date.
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"SERVICER" shall have the meaning set forth in the first paragraph of this
Agreement.
"SERVICER EXPENSES" means for any Collection Period (i) any reasonable
liquidation expenses not otherwise reimbursed to the Servicer, (ii) reasonable
out-of-pocket expenses incurred in connection with collection efforts relating
to skip trace services, legal fees and field calls and (iii) [ ]% of any
deficiencies recovered from an Obligor.
"SERVICER RECEIVABLE FILES" shall have the meaning set forth in SECTION
2.8(b).
"SERVICER TERMINATION EVENT" means an event specified in SECTION 8.1.
"SERVICER TERMINATION TRIGGER EVENT" means that any one of the following
events shall have occurred: (a) the average of the Delinquency Ratios for each
of the three preceding Collection Periods exceeds [ ]%; (b) the Repossession
Inventory Ratio is greater than [ ]%; or (c) the Cumulative Default Ratio
exceeds (i) [ ]% as of any Record Date from the initial Record Date through and
including the sixth Record Date, (ii) [ ]% as of any Record Date from the
seventh Record Date through and including the twelfth Record Date, (iii) [ ]% as
of any Record Date from the thirteenth Record Date through and including the
eighteenth Record Date or (iv) [ ]% as of any Record Date thereafter; PROVIDED,
HOWEVER, that following the appointment of a successor Servicer pursuant to
SECTION 8.3 hereof, no Servicer Termination Trigger Event shall have been deemed
to occur in accordance with this definition until the seventh Record Date
succeeding the appointment of such successor Servicer.
"SERVICING CERTIFICATE" means a certificate completed and executed by a
Servicing Officer pursuant to SECTION 3.9, substantially in the form of EXHIBIT
D.
"SERVICING FEE" means the fee payable to the Servicer for services rendered
during the respective Collection Period, which shall be equal to the product of
(i) one-twelfth, (ii) the Servicing Fee Rate and (iii) the Pool Balance as of
the close of business on the first day of the related Collection Period.
"SERVICING FEE RATE" shall be [ ]% per annum.
"SERVICING OFFICER" means any person whose name appears on a list of
Servicing Officers delivered to the Trustee, as the same may be amended from
time to time.
"SIMILAR LAW", as used in SECTION 5.3, means any federal, state or local
law which is to a material extent similar to the fiduciary responsibility
provisions of ERISA, Code Section 4975, or Section 3(32) of ERISA.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (based on the
number of days) elapsed since the preceding payment of interest was made and the
remainder of such payment is allocable to principal.
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"SIMPLE INTEREST RECEIVABLE" means any Receivable under which the portion
of a payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
["STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc. and any successors thereof.]
"STATE" means any state of the United States of America, or the District
of Columbia.
"TOTAL DISTRIBUTION AMOUNT" means, for each Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period,
without duplication: (a) all collections on Receivables; (b) proceeds from
Recoveries and liquidation proceeds; (c) the Purchase Amount of each
Receivable repurchased by the Seller or purchased by the Servicer as of the
immediately preceding Record Date; and (d) all interest, dividends, gains
upon sale and other income from, or earnings on, investments of funds in the
Collection Account.
"TRIAD" shall have the meaning set forth in the first paragraph of this
Agreement.
"TRUST" has the meaning set forth in SECTION 2.1.
"TRUST PROPERTY" means that property set forth in items (a) through (j) in
SECTION 2.2. Although the Certificateholders have directed that the Seller, as
their agent, place the Reserve Account in trust with and pledge the Reserve
Account to, the Trustee for the benefit of the Certificateholders pursuant to
the Reserve Account Agreement, the Reserve Account shall not under any
circumstances be deemed to be a part of or otherwise includable in the Trust or
the Trust Property.
"TRUSTEE" shall have the meaning set forth in the first paragraph of this
Agreement.
"TRUSTEE FEE" means the fee payable to the Trustee on each Distribution
Date for services rendered during the preceding Collection Period in an amount
equal to the product of one-twelfth and $[ ].
"TRUSTEE OFFICER" means any vice president, any assistant vice president,
any assistant secretary, any assistant treasurer, any trust officer, or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"TRUSTEE'S CERTIFICATE" means a certificate completed and executed for the
Trustee by a Trustee Officer pursuant to SECTION 9.2, substantially in the form
of, in the case of an assignment to the Seller, EXHIBIT E-1 and in the case of
an assignment to the Servicer, EXHIBIT E-2.
"UNDERWRITER" means [ ].
"UNDERWRITING AGREEMENT" means [ ].
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"UNDERWRITING CRITERIA" means the criteria used by Triad for purchasing
Contracts attached to the Purchase Agreement as Exhibit B.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code as in
effect in the respective jurisdiction.
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. SECTION REFERENCES. All references to Articles, Sections,
paragraphs, subsections, Exhibits and Schedules herein shall be to such portions
of this Agreement unless otherwise specified.
SECTION 1.4. LIMITATION ON TRUST FUND ACTIVITIES. Notwithstanding any other
provision in this Agreement to the contrary, the Trustee shall have no power to
vary the investment of the Certificateholders within the meaning of Treasury
Department Regulation 301.7701-4(c) or to engage in business on behalf of the
Trust unless the Trustee shall have received an Opinion of Counsel that such
activity shall not cause the Trust to be an association or a publicly traded
partnership taxable as a corporation for federal income tax purposes.
SECTION 1.5. CALCULATIONS. All calculations of the amount of interest
accrued on the Certificates and all calculations of the amount of fees to be
paid pursuant hereto, including without limitation, the fees to be paid to the
Servicer shall be made on the basis of a 360-day year consisting of twelve
30-day months.
SECTION 1.6. ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. The Trustee or Certificate Registrar may require such
additional proof of any matter referred to in this SECTION 1.6 as it shall
deem necessary.
ARTICLE II
THE TRUST AND TRUST PROPERTY
SECTION 2.1. CREATION OF TRUST. The Seller does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement, a
trust (the "TRUST"), which for convenience shall be known as "Triad Auto
Receivables Trust 199[ ]-[ ]."
SECTION 2.2. CONVEYANCE OF RECEIVABLES. In consideration of the Trustee's
delivery of Certificates in an aggregate principal amount equal to the Closing
Date Certificate
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Balance to or upon the written order of the Seller, and subject
to the terms and conditions of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Trustee, on behalf of the
Trust, in trust for the benefit of the Certificateholders, without recourse,
except as provided in SECTIONS 2.6, 2.8(b) and 2.9 (subject to the obligations
herein):
(a) all right, title and interest of the Seller in and to the Receivables
listed on the Schedule of Receivables and all monies paid or payable thereon or
in respect thereof after the Cutoff Date (including amounts due on or before the
Cutoff Date but received by Triad, the Seller or the Servicer after the Cutoff
Date) and all liquidation proceeds and Recoveries received with respect to such
Receivables;
(b) all right, title and interest of the Seller in and to the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title and all other evidence
of ownership with respect to such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any Insurance
Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Financed Vehicles or the Obligors thereunder, including rebates
of unearned premiums;
(d) all right, title and interest (but none of the obligations) of the
Seller in and to the Purchase Agreement, including a direct right to cause Triad
to purchase Receivables from the Trust under certain circumstances;
(e) all right, title and interest of the Seller in and to refunds for the
costs of extended service contracts with respect to the Financed Vehicles;
(f) all right, title and interest of Triad and the Seller against Dealers
with respect to the Receivables, including any reserves or collateral
established or posted by Dealers with respect to the Receivables;
(g) all items contained in the Receivable File related to each Receivable,
and all other documents or electronic records that Triad keeps on file in
accordance with its customary procedures relating to the Receivables, the
Obligors or the Financed Vehicles;
(h) all amounts and property from time to time held in or credited to the
Collection Account or to the extent such amounts and property relate to the
Receivables;
(i) all property (including the right to receive Recoveries) that secures a
Receivable and that has been acquired by or on behalf of the Trust pursuant to
liquidation of such Receivable; and
(j) the payments on and proceeds of any and all of the foregoing.
SECTION 2.3. TRANSFER INTENDED AS SALE; PRECAUTIONARY SECURITY INTEREST;
TAX TREATMENT. (a) The conveyance of the Receivables and the other Trust
Property pursuant to this Agreement is intended by each of the parties hereto as
a sale free and clear of all Liens, and it is intended that the beneficial
interest in and title to the Receivables and the other Trust Property
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shall not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. In the
event, however, that notwithstanding the intent of the parties hereto, the
transfer under this Agreement is held not to be a sale, this Agreement shall
constitute a grant of, and the Seller hereby grants, a security interest in the
Receivables and the other Trust Property to the Trustee for the benefit of the
Certificateholders. The execution and delivery of this Agreement shall
constitute an acknowledgment by the Seller that it intends to establish (for
federal tax purposes) a trust, rather than an association taxable as a
corporation.
(b) In connection with the grant of the security interest in paragraph (a)
above, the following financing statements will be filed by the Seller:
(i) Form UCC-1 filed with the Secretary of State of California,
naming Triad as the debtor, the Trust as the secured party and the
Receivables as collateral;
(ii) Form UCC-1 filed with the Secretary of State of Delaware and
the Secretary of State of New York and New York County, naming the
Seller as the debtor, the Trust as the secured party and the
Receivables as collateral; and
(iii) Form UCC-1 filed with the Secretary of State of Delaware,
naming the Trust as the debtor, the Trustee as the secured party and
the Receivables as collateral.
(c) The Seller has entered into this Agreement, and the Certificates will
be issued, with the intention that (i) the Trust will be classified as a grantor
trust under subpart E, part I of subchapter J of the Code and not as an
association taxable as a corporation or a publicly traded partnership taxable as
a corporation for purposes of federal income tax law, and (ii) the
Certificateholders will be treated as the owners of a pro rata undivided
interest in each Receivable and any other assets of the Trust (other than the
interest in the Trust represented by the Seller's Retained Yield). The Seller,
the Trustee, the Servicer, the Backup Servicer, the Collateral Agent, and each
Certificateholder agree to treat and to take no action inconsistent with the
treatment of the Certificates (or beneficial interest therein) as interests in a
grantor trust for purposes of federal, state and local income and franchise
taxes, and agree to take no action with respect to the Trust or any interest
therein which would cause the Trust to be treated as an association or publicly
traded partnership taxable as a corporation for purposes of federal income tax
law. Each Certificateholder, by acceptance of its Certificate, and each owner of
a Certificate, by acquisition of a beneficial interest in a Certificate, agree
to be bound by the provisions of this SECTION 2.3. Each Certificateholder agrees
that it will cause any owner of a Certificate acquiring an interest in a
Certificate through it to comply with this Agreement as to the tax treatment
described in this SECTION 2.3. The provisions of this Agreement shall be
construed in light of the foregoing intended tax treatment.
SECTION 2.4. ACCEPTANCE BY TRUSTEE. The Seller hereby directs the Trustee
to, and the Trustee, on behalf of the Trust, does hereby, accept the Trust
Property conveyed by the Seller pursuant to SECTION 2.2. The Trustee declares
that it shall hold such consideration upon
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the trusts herein set forth for the benefit of all present and future
Certificateholders, subject to the terms and provisions of this Agreement.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller hereby
makes the following representations and warranties as to the Receivables to the
other parties hereto, on which the Trustee on behalf of itself and the
Certificateholders relies in accepting the Receivables and the other Trust
Property in trust and issuing the Certificates. Unless otherwise specified, such
representations and warranties are made as of the Closing Date. Such
representations and warranties shall survive the sale, transfer, and assignment
of the Receivables to the Trustee.
(a) Each Receivable (1) arises from the delivery and acceptance of a
Financed Vehicle and which delivery and acceptance has been fully performed by
the Obligor and the Dealer party thereto, (2) arises from the normal course of
the Dealer's business, (3) as of the Cutoff Date, is not a Receivable for which
$40 or more of all Scheduled Payments is 31 or more days past due, (4) the
Obligor of which is a natural person residing in any State, (5) the Obligor of
which is not a government or a governmental subdivision or agency, (6) the
Obligor of which has full power and capacity to enter into such Receivable, (7)
is denominated and payable in dollars in the United States, (8) is in full force
and effect and constitutes the legal, valid and binding obligation of the
Obligor in accordance with its terms, (9) is not subject to any dispute,
litigation, counterclaim or defense, or any offset or right of offset, and to
the best of the Seller's knowledge, any exercisable right of rescission, (10)
has an original term to maturity of not less than [ ] nor more than [ ] months,
(11) provides for equal monthly payments which will cause the Receivable to
fully amortize during its term, (12) has an Amount Financed that has been fully
disbursed of not less than $[ ] or more than $[ ], (13) has an Annual Percentage
Rate of not less than the lesser of (A) [ ]% and (B) the maximum interest rate
permissible by law with respect to such Receivable, (14) together with the note
or contract applicable thereto, does not contravene any requirements of law
applicable thereto, (15) is a Receivable with respect to which all required
consents, approvals and authorizations have been obtained, (16) is a Receivable
secured by a security interest in the Financed Vehicle that has been recorded or
applied for in the name of Triad and assigned to the Seller, which security
interest is or is reasonably expected to be in full force and effect, in each
case, subject to no prior or equal liens, claims or encumbrances, (17) was
purchased by Triad using and materially conforming to the Underwriting Criteria,
(18) requires Triad to be named as loss payee or beneficiary (as applicable)
under an Insurance Policy (described in clause (a) of the definition of such
term), with respect to the Financed Vehicle related to such Receivable and
entitles Triad to the benefits of such Insurance Policy, (19) requires no
additional action by Triad or the Seller before becoming a valid and binding
obligation of the Obligor thereunder, enforceable against such Obligor in
accordance with its terms and (20) relates to a Financed Vehicle with respect to
which the Obligor made at least the minimum down payment as specified in the
Underwriting Criteria.
(b) As of the Cutoff Date at least [ ]% of the Receivables, based on the
outstanding Principal Balance of the Receivables as of the Cutoff Date, have had
the first Scheduled Payment, which payment was not delinquent, made by the
related Obligor.
(c) Each Receivable was originated by a Dealer that had all necessary
licenses and permits to originate Receivables in the State where such Dealer was
located, was fully and
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properly executed by the parties thereto, was purchased by Triad from such
Dealer under an existing Dealer Agreement with Triad and was validly assigned by
the Dealer to Triad.
(d) At least [ ]% of the Dealers originating Receivables are franchise
dealers.
(e) Each Receivable contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for realization
against the collateral security.
(f) To the best of the Seller's knowledge, each Receivable was originated
by a Dealer to an Obligor and was sold by the Dealer to Triad without any fraud
or material misrepresentation on the part of such Dealer or on the part of the
Obligor.
(g) No Receivable represents a loan exceeding [ ]% of the wholesale book
value of the related Financed Vehicle.
(h) The information set forth in the Schedule of Receivables attached
hereto as it relates to such Receivable is true and correct in all material
respects as of the close of business on the Cutoff Date.
(i) Such Receivable complied at the time it was purchased by Triad and each
Receivable, each and every sale of a Financed Vehicle and, to the best of the
Seller's knowledge, the sale of any physical damage, credit life and credit
accident and death insurance and any extended service contracts at the time it
was originated or made, as of the date hereof complies in all material respects
with all requirements of applicable federal, state and local laws and
regulations thereunder, including usury laws, the federal Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Rees-Levering Act, the Consumer Legal Remedies Act of California and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, other consumer credit laws and equal credit opportunity and disclosure
laws and other applicable legal requirements.
(j) Such Receivables have not been satisfied, subordinated or rescinded,
nor has the related Financed Vehicle been released from the Lien granted by such
Receivable, in whole or in part.
(k) Since the Cutoff Date, no provision of any Receivable has been waived,
except in accordance with the Collection Guidelines and Procedures.
(l) Since the Cutoff Date, no Receivable has been amended, except in
accordance with the Collection Guidelines and Procedures and the terms of this
Agreement.
(m) Subject to SECTION 3.2(b) of this Agreement, no provision of any
Receivable has been waived, altered or modified in any respect since its
origination, except by instruments or documents identified in the Receivable
File held by the Trustee. No Receivable has been modified as a result of the
Soldier's and Sailor's Civil Relief Act of 1940, as amended.
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(n) No right of rescission, setoff, counterclaim or defense has been
asserted or, to the best of the Seller's knowledge, threatened against Triad or
the Seller with respect to such Receivable.
(o) The Lien Certificate for each Financed Vehicle either (i) shows Triad
named as of the original secured party under each Receivable or (ii) has been
applied for in the name of Triad. If the Receivable was originated in a State in
which a filing or recording is required of the secured party to perfect a
security interest in motor vehicles, such filing or recording has been duly made
to show Triad named as the original secured party under the Related Receivable.
Such security interest in the Financed Vehicle has been validly assigned by
Triad to the Seller pursuant to the Purchase Agreement and by the Seller to the
Trustee pursuant to this Agreement. Immediately after the sale, transfer and
assignment thereof to the Trust, each Receivable will be secured by an
enforceable and perfected security interest in the Financed Vehicle in favor of
the Trust as secured party, which security interest is prior to all other liens
and security interests in such Financed Vehicle (except, as to priority, for any
lien for taxes, labor or materials affecting a Financed Vehicle).
(p) To the best of Seller's knowledge, no Liens or claims have been
asserted or filed for taxes, work, labor or materials relating to the Financed
Vehicle that are Liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by any Receivable, and the Obligor has
good and marketable title to the Financed Vehicles subject to no Liens other
than the security interest under the Receivable.
(q) Other than Scheduled Payment defaults not more than thirty (30) days
past due as of the Cutoff Date, defaults arising out of the failure of the
Obligor to obtain and maintain insurance as required by the Receivable or by
applicable law and other defaults which will not have a material adverse affect
on the ability of the Obligor to make Scheduled Payments under the Receivable:
(1) no default, breach, violation or event permitting acceleration under the
terms of such Receivable has occurred; (2) no continuing condition that with
notice or the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any Receivable has
arisen; and (3) the Seller has not waived any of the foregoing.
(r) Such Receivable has not been sold, transferred, assigned or pledged by
the Seller to any Person other than the Trustee; the Seller has good and
marketable title to such Receivable free and clear of all Liens and rights of
others claiming by or through the Seller (other than the rights of the Obligor
to the Financed Vehicle thereunder) and, following the Closing Date, the Trustee
shall have good and marketable title to such Receivable, free and clear of all
Liens and rights of others claiming by or through the Seller (other than the
rights of the Obligor to the Financed Vehicle thereunder); and the transfer has
been perfected under the UCC for the applicable jurisdiction.
(s) Such Receivable has not been purchased by Triad from a Dealer in, nor
is subject to the laws of, any jurisdiction under which the sale, transfer and
assignment of such Receivable pursuant to this Agreement is unlawful, void or
voidable. No agreement has been entered into with any Obligor that prohibits,
restricts or conditions the assignment of any portion of the Receivables.
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(t) There is only one original executed contract for each Receivable.
(u) The related Financed Vehicle securing such Receivable is not in
repossession status.
(v) Such Receivable constitutes "chattel paper" as defined in the UCC.
(w) Such Receivable has not been included in a "fleet sale" (i.e., a sale
to a single Obligor of more than five vehicles).
(x) All amounts due and payable by Triad to the Dealer under the Dealer
Agreement with respect to such Receivable have been paid and no dealer has any
rights in, or claims against, the Receivables.
(y) The Seller has indicated in its computer files that such Receivable
has been sold to the Trustee and constitutes Trust Property.
(z) The Seller has taken such action as is necessary to obtain a first
perfected security interest in favor of the Trustee in such Receivable, the
proceeds thereof, other Trust Property and the Reserve Account.
(aa) The Seller has done nothing to convey any right to any Person that
would result in such Person having a right to payments due under such Receivable
or otherwise to impair the rights of the Trust and the Certificateholders in any
Receivable or the proceeds thereof.
(bb) No Receivable is assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations to the Seller with
respect to such Receivable.
(cc) No selection procedures adverse to the Certificateholders have been
utilized in selecting such Receivable from all other Receivables owned by Triad.
(dd) As of the Cutoff Date, no Obligor had been identified on the
records of Triad as being the subject of a current bankruptcy proceeding.
(ee) Each Receivable is a fully amortizing Simple Interest Receivable, Rule
of 78's Receivable or Actuarial Receivable which provides for level monthly
payments which, if made when due, shall fully amortize the Amount Financed over
the original term.
SECTION 2.6. REPURCHASE UPON BREACH. The Seller, the Servicer, the Trustee,
the Backup Servicer and the Collateral Agent, as the case may be, shall inform
the other parties to this Agreement promptly, in writing, upon the discovery of
any breach of the Seller's representations and warranties made pursuant to
SECTION 2.5 (without regard to any limitation therein as to the Seller's
knowledge) that has a material adverse effect on a Receivable or the interest
herein of the Trust or the Certificateholders; PROVIDED, HOWEVER, that the
failure to give any such notice shall not derogate from any obligation of the
Seller. Unless such breach shall have been cured by the last day of the first
full calendar month following the discovery by or notice to the Seller of such
breach, the Seller shall have an obligation on or prior to such date to
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repurchase any Receivable with respect to which such breach has a material
adverse effect on such Receivable or the interest therein of the Trust or the
Certificateholders. If necessary, to the extent that the Seller fails to effect
its repurchase obligation the Trustee shall notify Triad and Triad shall
(pursuant to the Purchase Agreement) repurchase any Receivable with respect to
which such breach has a material adverse effect on such Receivable or the
interest therein of the Trust or the Certificateholders. In consideration of the
purchase of the Receivables, the Seller shall remit, or the Seller, or upon a
failure by the Seller to act, the Trustee, shall notify Triad to remit, the
Purchase Amount, in the manner specified in SECTION 4.4. The sole remedy
hereunder (absent fraud, reckless disregard, willful misconduct or gross
negligence of the Seller) of the Trustee, the Trust and the Certificateholders
with respect to a breach of the Seller's representations and warranties pursuant
to SECTION 2.5 shall be to require the Seller to repurchase Receivables pursuant
to this Section or to enforce the obligation of Triad to repurchase such
Receivables pursuant to the Purchase Agreement; PROVIDED, HOWEVER,
notwithstanding whether the related Receivable shall have been purchased by the
Seller, or Triad, the Seller shall indemnify the Trustee, the Backup Servicer
and the Collateral Agent, and each of their respective officers, directors,
employees and agents, as well as the Trust and the Certificateholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount
and written instructions from the Servicer, the Trustee shall release to the
Seller, or Triad, as applicable, or any of their designees, the related
Receivable File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in the Seller, or Triad, as
applicable, or such designee, title to the Receivable. The Trustee shall be
under no duty or obligation (i) to inspect, review or examine any documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face or (ii) to determine whether there is
a breach of any of the Seller's representations and warranties.
SECTION 2.7. CONDITIONS TO ACCEPTANCE BY TRUSTEE. As conditions to the
execution and delivery of the Certificates by the Trustee on the Closing Date,
the Trustee shall have received the following on or before the Closing Date:
(a) The Schedule of Receivables certified by a Responsible Officer of the
Seller;
(b) Copies of resolutions of the Board of Directors of the Seller approving
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, certified by the Secretary of the Seller;
(c) Copies of resolutions of the Board of Directors of the Servicer
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, certified by the Secretary of the Servicer;
(d) A certification from a Responsible Officer of the Seller stating that
all filings (including, without limitation, UCC filings) required to be made by
any Person and actions required to be taken or performed by any Person in any
jurisdiction to give the Trustee a first
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priority perfected lien on, or ownership interest in, the Receivables and the
other Trust Property have been made, taken or performed; and
(e) An executed copy of the Reserve Account Agreement and each other
Related Document.
SECTION 2.8. CUSTODY OF RECEIVABLE FILES. (a) On or prior to the Closing
Date, the Servicer shall cause to be transferred and delivered to the Trustee,
at the offices specified in SCHEDULE B to this Agreement with respect to each
Receivable the following (the "RECEIVABLE FILES"):
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including without limitation, any
extension agreements); and
(ii) The Lien Certificate, or, if not yet received, a copy of the
application therefor or a representation from the Dealer certifying as to
the application thereof, showing Triad as secured party and such documents,
if any, that Triad keeps on file in accordance with its customary
procedures indicating that the Financed Vehicle is owned by the Obligor and
subject to the interest of Triad as first lienholder or secured party.
(b) In connection with the sale, transfer and assignment of the Receivables
and other Trust Property to the Trust pursuant to this Agreement, the Servicer
shall retain, on behalf of the Trustee, the following documents or instruments
in its possession with respect to each Receivable (the "SERVICER RECEIVABLE
FILES"):
(i) documents evidencing or relating to any Insurance Policy; and
(ii) any and all other documents (other than the documents referred
to in SECTION 2.8(a) hereof) (in original or electronic form) that the
Servicer keeps on file in accordance with its customary procedures relating
to the individual Receivable, Obligor or Financed Vehicle.
(c) The Servicer agrees that it shall duly discharge its duties of
receiving and holding the Servicer Receivable Files in accordance with this
Agreement. As to any matters not expressly provided for by this Agreement with
respect to the Servicer Receivable Files, the Servicer shall be required to act
or to refrain from acting (and shall be fully protected in so acting) upon the
written instructions of the Trustee.
(d) The Servicer acknowledges that with respect to each Receivable
identified in the Schedule of Receivables (a) it has possession of the
applicable Servicer Receivable File and (b) such Servicer Receivable File
contains the documents referred to in SECTION 2.8(b). The Servicer declares that
it holds and will continue to hold such files and any amendments, replacements
or supplements thereto as Servicer on behalf of the Trustee in trust for the use
and benefit of all present and future Certificateholders. If at a later date the
Servicer is unable to locate a file for a Receivable, or finds that a file is
unrelated to the Receivables identified in the
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Schedule of Receivables or that any of the documents referred to in SECTION
2.8(b) are not contained in a Servicer Receivable File, the Servicer shall
inform the Seller and the Trustee promptly, in writing, of the failure to locate
a file with respect to such Receivable (or of the failure of any of the
aforementioned documents to be included in the Servicer Receivable File) or
shall return to the Seller any file unrelated to a Receivable identified in the
Schedule of Receivables (it being understood that the Servicer's obligation to
review the contents of any Servicer Receivable File shall be limited as set
forth in the preceding sentence).
(e) In connection with the repurchase of a Receivable pursuant to SECTION
2.6 or 10.2 hereof, upon receipt of the Purchase Amount and written instructions
from the Trustee, the Servicer shall release to the Seller or its designee the
related Servicer Receivables File. The Trustee shall be under no duty or
obligation to inspect, review or examine any documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other what they purport
to be on their face and shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form, whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, or whether a
blanket assignment is permitted in any applicable jurisdiction.
(f) Without in any way limiting the respective rights of the Trustee, the
Backup Servicer or the Certificateholders under SECTION 3.12 or otherwise set
forth in this Agreement, at any time from time to time upon the giving of
reasonable prior notice, during normal business hours, the Trustee, the Backup
Servicer, the Holder of a Certificate Majority and any of their respective
agents, employees or representatives (including, without limitation, an
independent accounting firm performing an audit of the Servicer), shall have the
right but not the obligation (which right the Trustee shall exercise upon the
written request of a Certificate Majority) (i) to visit the office of the
Servicer where the Servicer Receivable Files are kept, (ii) to examine the
facilities for the storage and safekeeping thereof, (iii) to review the
procedures with which such documents are stored and catalogued, (iv) to examine
and make copies of and abstracts from such documents, and (v) to discuss matters
relating to the Servicer Receivable Files and the Servicer's performance
hereunder with any of the officers or employees of the Servicer having knowledge
of such matters. Any expenses reasonably incurred by the Trustee or the Backup
Servicer in connection with such activities shall be paid by the Servicer to the
extent such visits and examinations are not more frequent than once in every 12
month period, unless a Servicer Termination Event has occurred and not been
deemed cured.
(g) From time to time, with not less than one Business Day's prior written
notice delivered to the Trustee, the Servicer may request the Trustee to release
certain Receivable Files held by the Trustee to the Servicer; PROVIDED, that the
Trustee shall release such Receivable Files only upon receipt of a certificate
of the Servicer (substantially in the form of EXHIBIT F-1 hereto) signed by a
Servicing Officer to the effect that (i) the applicable Receivables with respect
to such Receivable Files have been paid in full and the related Receivables have
been terminated in accordance with their terms, (ii) the Seller or Triad has
repurchased such Receivables in accordance with the terms of this Agreement or
the Purchase Agreement, as applicable or (iii) the Servicer requires such
Receivable Files in connection with the compromise, extension, release,
adjustment, foreclosure or repossession of the related Receivables or Financed
Vehicles, as
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applicable, in accordance with the terms of this Agreement and the Purchase
Agreement. Such certificate shall obligate the Servicer to return such
document(s) to the Trustee when the need therefor no longer exists unless the
Receivable shall be liquidated or repurchased, in each case, the Servicer shall
provide a certificate (substantially in the form of EXHIBIT F-2 hereto) of a
Servicing Officer to the effect that all amounts required to be deposited in the
Collection Account with respect to such Receivable have been so deposited.
(h) On or prior to the Closing Date, the Servicer shall cause to be
delivered to the Certificateholders and the Rating Agency certification of the
Trustee that it has received the Receivables Files, in its capacity as custodian
under the Custodian Agreement, and that such Receivables Files contain all
documents required to be contained therein, except for any Lien Certificates not
available on the Closing Date.
SECTION 2.9. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING
DATE. In the case of any Receivable in respect of which written evidence from
the Dealer selling the related Financed Vehicle that the Lien Certificate for
such Financed Vehicle showing Triad as first lienholder has been applied for
from the registrar of titles was delivered to the Trustee on the Closing Date in
lieu of a Lien Certificate, or in respect of which a Lien Certificate was
otherwise not delivered to the Trustee on the Closing Date, the Servicer shall
use its best efforts to collect such Lien Certificate from the registrar of
titles as promptly as practicable. If such Lien Certificate showing Triad as
first lienholder is not received by the Trustee within 120 days after the
Closing Date, the Servicer shall inform the Seller and the other parties to this
Agreement, and the Servicer shall repurchase any such Receivable as of the last
day of the then current Collection Period in accordance with the provisions of
SECTION 3.7 of this Agreement.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1. DUTIES OF SERVICER. (a) The Servicer is hereby authorized to
act as agent for the Trust and the Certificateholders, and in such capacity
shall manage, service, administer and make collections on the Receivables, and
perform the other actions required by the Servicer under this Agreement. The
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sale contracts similar to the Receivables and
with the same degree of skill and care exercised by such institutions and, to
the extent more exacting, with the degree of skill and care that the Servicer
exercises with respect to all comparable motor vehicle receivables which it
services for itself or others and, in all cases, in accordance with the
Collection Guidelines and Procedures and all applicable laws. The Servicer's
duties shall include, without limitation, notifying each Obligor to make its
Scheduled Payments and all other payments on the Receivables directly to the
Lockbox Bank, collecting and posting of all payments, responding to inquiries of
Obligors on such Receivables, investigating delinquencies, sending payment
statements to Obligors, reporting tax information to Obligors, accounting for
collections, furnishing monthly and annual statements to the Trustee with
respect to distributions, monitoring the status of the Insurance Policies and
maintaining the Collateral Insurance and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain
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possession of the Dealer Agreements, to the extent it is necessary to do so),
the Dealer Assignments and the Insurance Policies, to the extent that such
Dealer Agreements, Dealer Assignments and Insurance Policies relate to the
Receivables, the Financed Vehicles or the Obligors.
(b) Subject to SECTION 3.2(b), to the extent consistent with the standards,
policies and procedures otherwise required by this Agreement, the Servicer shall
follow its customary standards, policies and procedures and shall have full
power and authority, acting alone, to do any and all things in connection with
such managing, servicing, administration and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer is hereby authorized and empowered by the Trustee to execute and
deliver, on behalf of the Certificateholders and the Trustee or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Servicer shall not, except pursuant to an
order from a court of competent jurisdiction, release an Obligor from payment of
any unpaid amount under any Receivable or waive the right to collect the unpaid
balance of any Receivable from the Obligor, except that the Servicer may forego
collection efforts if the amount subject to collection is DE MINIMIS and if it
would forego collection of such amount in accordance with its customary
procedures.
(c) The Servicer is hereby authorized to commence, in its own name or in
the name of the Trustee (provided the Servicer has obtained the Trustee's
written consent, which consent shall not be unreasonably withheld), a legal
proceeding to enforce a Receivable pursuant to SECTION 3.3 or to commence or
participate in any other legal proceeding (including, without limitation, a
bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trustee shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Trustee to execute and deliver
in the Servicer's name any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding. The Trustee shall furnish the Servicer with any powers of attorney
and other documents which the Servicer may reasonably request in writing and
which the Servicer reasonably deems necessary or appropriate and take any other
steps which the Servicer may reasonably deem necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement.
SECTION 3.2. COLLECTIONS; MODIFICATION AND AMENDMENT OF RECEIVABLES;
LOCKBOX ACCOUNT. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable motor vehicle
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Trust Property in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Trust with
respect thereto. The Servicer is authorized in its discretion to waive any
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prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.
(b) Notwithstanding anything to the contrary provided in this Agreement,
the Servicer will not (i) forgive any periodic or other scheduled payment due on
such Receivable, (ii) unless the Obligor is in default under a Receivable or is
likely to default on such Receivable in the foreseeable future, permit any
modification with respect to any Receivable that would increase or decrease the
Annual Percentage Rate on such Receivable, or defer the payment of any principal
or interest or any periodic or other scheduled payment due on such Receivable
unless any such modification is required by court order, (iii) reduce or
increase the Principal Balance on such Receivable (except in connection with
actual payments of periodic or other scheduled payments or principal
prepayments) unless any such modification is required by court order or (iv)
extend the final maturity date of any Receivable; PROVIDED, HOWEVER, that the
Servicer may grant an extension of the final maturity date of a Receivable, if
the Servicer, in its sole discretion, determines that (A) the Receivable is in
default or default on such Receivable is likely to occur in the foreseeable
future, and (B) that the value of the Receivable will be enhanced by such
extension; and, PROVIDED, FURTHER, that the Servicer shall not (1) grant more
than three extensions with respect to a Receivable, (2) grant more than one
extension per calendar year with respect to a Receivable or (3) grant an
extension for more than one calendar month with respect to a Receivable.
(c) The Servicer shall, prior to the Closing Date, notify each Obligor to
make its payments with respect to the Receivables directly to the Lockbox Bank.
The Servicer shall use its best efforts to cause Obligors to make all payments
on the Receivables whether by check or by direct debit of the Obligor's bank
account, to be made to the Lockbox Bank. The Servicer shall use its best efforts
to cause the Lockbox Bank to deposit all Scheduled Payments with respect to the
Receivables in the Lockbox Accounts no later than the first Business Day after
receipt, and to cause all amounts on deposit in the Lockbox Accounts with
respect to such payments to be transferred to the Collection Account not later
than the second Business Day after receipt of such payments in the Lockbox
Account. All amounts received by the Servicer, Triad or the Seller in respect of
the Receivables in the form of checks with payments coupon shall be deposited
directly to the Lockbox Bank immediately upon receipt, but in no event later
than the second Business Day after receipt of such payment. Other payments
received by each of the Servicer, Triad and the Seller shall be deposited into a
local servicing account for processing immediately upon receipt, and then
transferred to the Collection Account no later than the second Business Day
after receipt of available amounts.
(d) On the Closing Date the Servicer shall deposit or cause to be deposited
into the Collection Account all amounts collected with respect to the
Receivables from the Cutoff Date to the fourth Business Day preceding the
Closing Date. As soon as possible thereafter and in accordance with the
provisions of this Agreement, amounts collected with respect to the Receivables
from such date to the Closing Date shall be deposited into the Collection
Account.
(e) In the event the Servicer shall for any reason no longer be acting as
such, the Backup Servicer or successor Servicer shall thereupon (i) assume the
rights and obligations of the Servicer relating to the Receivables and (ii)
(1) assume all of the rights and, from the date of assumption, all of the
obligations of the outgoing Servicer relating to the Receivables under any
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Lockbox Agreement to which the Servicer is a party or (2) establish a different
Lockbox Account for the benefit of the Trust and notify each Obligor of the new
Lockbox Bank to which its payments should be sent. If the Backup Servicer or
successor Servicer assumes an existing Lockbox Agreement to which the Servicer
is a party, the Backup Servicer or any other successor Servicer shall not be
liable for any acts, omissions or obligations of the Servicer prior to such
succession. In such event, the successor Servicer shall be deemed to have
assumed all of the outgoing Servicer's interest therein relating to the
Receivables and to have replaced the outgoing Servicer as a party to each such
Lockbox Agreement to the same extent as if such Lockbox Agreement had been
assigned to the successor Servicer, except that the outgoing Servicer shall not
thereby be relieved of any liability, or obligations on the part of the outgoing
Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer
shall, upon request of the Trustee, but at the expense of the outgoing Servicer,
deliver to the successor Servicer all documents and records relating to the
Lockbox Agreement and an accounting of amounts collected and held by the Lockbox
Bank and otherwise use its best efforts to effect the orderly and efficient
transfer of any Lockbox Agreement to the successor Servicer.
(f) Notwithstanding any third-party processing arrangement, or any of the
provisions of this agreement relating to any third-party processing arrangement,
the Servicer shall remain obligated and liable to the Trust and the Noteholders
for servicing and administering the Receivables and the other Trust Property
serviced by it in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue thereof.
SECTION 3.3. REALIZATION UPON DEFAULTED RECEIVABLES. (a) Consistent with
the standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, promptly after default on such Receivable. The Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by SECTION
3.1, which practices and procedures may include reasonable efforts to realize
upon any recourse to Dealers, selling the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions by the Servicer in order to realize upon such a Receivable. The
foregoing is subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
shall increase the proceeds of liquidation of the related Receivable by an
amount greater than the amount of such expenses. All Recoveries and liquidation
proceeds received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer, to a servicing account of the Servicer for transfer to
the Collection Account. The Servicer shall pay on behalf of the Trust any
personal property taxes assessed on repossessed Financed Vehicles; the Servicer
shall be entitled to reimbursement of any such tax from Recoveries with respect
to such Receivable. The Servicer shall not lease any repossessed Financed
Vehicle to any party. In selling or otherwise disposing of any repossessed
Financed Vehicle, the Servicer shall do so as expeditiously as possible and in a
manner such that such activities shall not rise to the level of a trade or
business of selling or otherwise transferring such repossessed Financed
Vehicles.
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(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trustee to the Servicer of the rights
under such Dealer Agreement and Dealer Assignment but only to the extent needed
for purposes of collection thereunder. If, however, in any enforcement suit or
legal proceeding, it is held that the Servicer may not enforce a Dealer
Agreement or Dealer Assignment on the grounds that it is not a real party in
interest or a Person entitled to enforce the Dealer Agreement or Dealer
Assignment, the Trustee, at the Seller's expense, shall take such steps as the
Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment,
including bringing suit in its name or the name of the Seller or of the Trustee
for the benefit of the Certificateholders. All amounts recovered shall be
remitted directly by the Servicer into the Collection Account, as applicable.
SECTION 3.4. INSURANCE. (a) The Servicer shall maintain a lenders
comprehensive single interest or other collateral protection insurance policy
with respect to all Financed Vehicles ("COLLATERAL INSURANCE"), a copy of which
is attached hereto as EXHIBIT I, which policy by its terms insures against
physical damage in the event any Obligor fails to maintain physical damage
insurance with respect to the related Financed Vehicle without reduction on
account of any co-insurance or deductible. The Servicer will be the named
insured and, the Trustee shall be named additional insured. Each Financed
Vehicle is covered by Collateral Insurance providing coverage upon repossession
of such Financed Vehicle without reduction on account of any co-insurance or
deductible. Costs incurred by the Servicer in maintaining such Collateral
Insurance shall be paid by the Servicer from its own funds.
(b) The Servicer or its agents shall monitor the status of the Insurance
Policies in accordance with its customary servicing procedures. If the Servicer
shall determine that an Obligor has failed to obtain or maintain an Insurance
Policy covering the related Financed Vehicle (including during the repossession
of such Financed Vehicle against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision insurance), the Servicer shall be diligent in carrying on its
customary servicing procedures to enforce the rights of the holder of the
Receivable thereunder to ensure that the Obligor obtains such Insurance Policy.
(c) The Servicer may sue 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 Seller's expense, shall take such steps
as the Servicer deems reasonably necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Trustee for the benefit
of the Certificateholders.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN FINANCED
VEHICLES. Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the first priority perfected security interest created by each
Receivable in the related Financed Vehicle, including but not limited to
obtaining
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the execution by the Obligors and the recording, registering, filing,
re-recording, re-registering and re-filing of all security agreements, financing
statements and continuation statements or instruments as are necessary to
maintain the first priority security interest granted by the Obligors to Triad
under the respective Receivables. The Trustee hereby authorizes the Servicer to
take such steps as are necessary to re-perfect or continue the perfection of
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 Trustee on behalf of the Trust is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a first priority
security interest in the related Financed Vehicle in favor of the Trust, the
parties hereto agree that Triad's designation as the secured party on the
certificate of title is in its capacity as agent of the Trust.
SECTION 3.6. ADDITIONAL COVENANTS OF SERVICER. The Servicer hereby
covenants to the Trustee and the Certificateholders that it (a) shall not
release the Financed Vehicle securing any Receivable from the security interest
granted by such Receivable in whole or in part except upon payment in full by
the Obligor thereunder, (b) shall not impair the rights of the
Certificateholders in such Receivables, the Dealer Agreements, the Dealer
Assignments, the Insurance Policies, or the other Trust Property, (c) shall not
amend a Receivable, other than in accordance with SECTION 3.2, and (d) shall not
amend, modify, supplement or waive any provision of any Related Document to
which it is a party, as it relates to the transactions contemplated in this
Agreement, in a manner that shall adversely affect any Certificateholder without
the consent of a Certificate Majority. The covenants contained in this SECTION
3.6 shall survive and be binding on the Servicer notwithstanding the resignation
of the Servicer pursuant to SECTION 7.5 or the termination of the Servicer
pursuant to SECTION 8.2.
SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH. The Seller, the Servicer,
the Backup Servicer, the Collateral Agent or the Trustee, as the case may be,
shall, and a Certificate Majority may, inform the other parties to this
Agreement promptly, in writing, upon the discovery of any breach of SECTIONS
3.2, 3.4, 3.5 or 3.6; PROVIDED, HOWEVER, that the failure to give such notice
shall not affect any obligation of the Servicer hereunder. Unless the breach
shall have been cured by the last day of the first full calendar month following
such discovery by or notice to the Servicer of the breach, the Servicer shall
have an obligation, and the Trustee shall (provided that a Trustee Officer
either has made such discovery or has received notice thereof) enforce such
obligation of the Servicer, to repurchase any Receivable with respect to which
such breach has a material adverse effect on such Receivable or the interest
therein of the Trust or the Certificateholders. In consideration of the purchase
of such Receivable, the Servicer shall remit the Purchase Amount in the manner
specified in SECTION 4.4. The Servicer shall indemnify the Seller, the Trustee,
the Backup Servicer, the Collateral Agent and their respective officers,
directors, employees and agents, the Trust and the Certificateholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.
SECTION 3.8. SERVICING FEE, ADDITIONAL SERVICING FEE AND SERVICER EXPENSES.
On each Distribution Date, the Servicer shall be entitled to receive the
Servicing Fee,
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and so long as Triad is the Servicer, any Additional Servicing Fee and Servicer
Expenses for the related Collection Period pursuant to SECTION 4.5; PROVIDED,
HOWEVER, that the Servicer shall certify such Servicer Expenses to the Trustee
with a copy of such certification to the Rating Agency on or prior to each
Determination Date. The Servicer shall be required to pay all expenses incurred
by it in connection with its activities under this Agreement (including taxes
imposed on the Servicer and expenses incurred in connection with distributions
and reports to Certificateholders and all other fees and expenses of the Trust
including taxes levied or assessed against the Trust, and claims against the
Trust in respect of indemnification not expressly stated under this Agreement to
be for the account of the Trust). The Servicer shall be liable for the fees and
expenses of the Independent Accountants, the Lockbox Bank.
SECTION 3.9. SERVICING CERTIFICATE. No later than 12:00 noon, New York City
time, on each Determination Date, the Servicer shall deliver to the Trustee, the
Collateral Agent, the Rating Agency and the Seller, a Servicing Certificate
containing (a) all information necessary to enable the Trustee to make the
distributions pursuant to SECTION 4.5 (including, if required, withdrawals from
the Reserve Account) for the Collection Period preceding the date of such
Servicing Certificate, (b) all information necessary to enable the Trustee to
reconcile all deposits to, and withdrawals from, the Collection Account for the
related Collection Period and Distribution Date, and (c) all information
necessary for the Trustee to send statements to Certificateholders pursuant to
SECTION 4.8. A copy of such Servicing Certificate may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office. Receivables to be purchased by the Servicer, the Seller,
or by Triad and each Receivable which, during the preceding Collection Period
became a Liquidated Receivable or was paid in full, shall be identified by the
Servicer by account number with respect to such Receivable (as specified in the
Schedule of Receivables).
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) The
Servicer shall deliver to the Trustee, the Backup Servicer, and the Rating
Agency, on or before [ ] of each year, commencing [ ], an Officer's Certificate,
dated as of December 31 of the prior year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period ended [ ] (or,
in the case of the first such certificate, the period from the Cutoff Date to
December 31, 1997) and of its performance under this Agreement has been made
under such officer's supervision and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period; or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof. A copy of such certificate may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee, the Backup Servicer and the
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under SECTION 8.1.
SECTION 3.11. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT;
AUDITED FINANCIALS. (a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who
may also render other services
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to the Servicer, to deliver to the Trustee, the Backup Servicer and the Rating
Agency on or before June 30 of each year, commencing June 30, [ ], with respect
to the fiscal year ended on the immediately preceding March 31, a report (the
"ACCOUNTANT'S REPORT") addressed to the Board of Directors of the Servicer, to
the Trustee for the benefit of the Certificateholders, the Backup Servicer and
the Rating Agency, to the effect that such firm has examined the financial
statements of the Servicer and issued its report therefor and that such
examination (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances; (2) included tests relating to auto loans serviced for others in
accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers (the "PROGRAM"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; (3)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile and light duty truck installment sales
contracts (setting forth the statistics so reviewed); and (4) except as
described in the report, disclosed no exceptions or errors in the records
relating to automobile and light duty truck loans serviced for others that, in
the firm's opinion, the Program requires such firm to report. The accountant's
report shall further state that (1) a review in accordance with agreed upon
procedures was made of three randomly selected Servicer Certificates; (2) except
as disclosed in the report, no exceptions or errors in the Servicer Certificates
were found; and (3) the delinquency and loss information, relating to the
Receivables contained in the Servicer Certificates were found to be accurate.
(b) The Accountant's Report shall 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.
(c) On or before June 30 of each year, commencing June 30, [ ], the
Servicer shall deliver to the Trustee, Backup Servicer and the Rating Agency,
the audited annual financial statements of the Servicer.
(d) Copies of the Accountant's Report and such audited annual financial
statements shall also be available to any Certificateholder from the Trustee
upon reasonable request. Any Certificateholder desiring such documents shall
have delivered to the Trustee an executed Information Request.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Servicer shall provide to any Certificateholder, the Trustee,
the Backup Servicer and their respective representatives reasonable access to
documentation, computer systems and information regarding the Receivables. The
Servicer will permit any authorized representative or agent designated by the
Trustee, the Rating Agency, the Backup Servicer or any Certificateholder to
visit and inspect any of the properties of the Servicer, to examine the
corporate books and financial records of the Servicer, its records relating to
the Receivables, and make copies thereof or extracts therefrom and to discuss
the affairs, finances, and accounts of the Servicer with its principal officers,
as applicable, and its independent accountants. Any expense incident to the
exercise by the Trustee, the Rating Agency or the Backup Servicer of any right
under this Section shall be borne by the Servicer subject to the limitations set
forth in SECTION 2.8(f). Any expense incident to the exercise by any
Certificateholder of any right under this Section shall be borne by such
Certificateholder, and shall not be an expense of the Servicer, the
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Trust or the Trustee; PROVIDED, HOWEVER, that unless a Servicer Termination
Event shall have occurred, any such expense shall be borne by the Servicer. In
each case, such access to documentation, computer systems and information shall
be afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this SECTION 3.12 shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to provide
access as provided in this SECTION 3.12 as a result of such obligation shall not
constitute a breach of this SECTION 3.12.
SECTION 3.13. MONTHLY TAPE; VERIFICATION OF SERVICING CERTIFICATE; BACKUP
SERVICER. (a) On or before the 16th calendar day of each month, the Servicer
shall prepare and deliver to the Trustee and the Backup Servicer a computer tape
or diskette (or any other electronic transmission acceptable to the Trustee and
the Backup Servicer) in a format acceptable to the Trustee and the Backup
Servicer, containing the information with respect to the Receivables as of the
close of business on the last day of the preceding Collection Period which is
necessary for preparation of the Servicing Certificate relating to the
immediately succeeding Determination Date. In the event that the Backup Servicer
reports any discrepancies, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies prior to the second Business Day prior to the
related Distribution Date, but in the absence of a reconciliation, the Servicing
Certificate shall control for the purpose of calculations and distributions with
respect to the related Distribution Date. In the event that the Backup Servicer
and the Servicer are unable to reconcile discrepancies with respect to a
Servicing Certificate delivered by the Servicer during any calendar quarter, the
Servicer shall cause a firm of independent certified public accountants, at the
Servicer's expense, to audit the unreconciled Servicing Certificate or Servicing
Certificates delivered during such calendar quarter and, prior to the fifth
calendar day of the month of January, April, July or October, as applicable,
reconcile the discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicing Certificate to be delivered on the next succeeding
Determination Date. Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder, including,
without limitation, to supervise, verify, monitor or administer the performance
of the Servicer. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer. The duties and obligations of the Backup
Servicer shall be determined solely by the express provisions of this Agreement
and no implied covenants or obligations shall be read into this Agreement.
(b) The Backup Servicer shall review each Servicing Certificate delivered
pursuant to SECTION 3.13(a) and shall:
(i) confirm that such Servicing Certificate is complete on its face;
(ii) load the computer diskette (which shall be in a format acceptable
to the Backup Servicer) received from the Servicer pursuant to SECTION
3.13(a) hereof and confirm that such computer diskette is in a readable
form;
(iii) confirm that the Total Distribution Amount, the Class A
Interest Distributable Amount, the Class A Principal Distributable Amount,
the Class B Interest Distributable Amount, the Class B Principal
Distributable Amount, the Class C Interest Distributable Amount, the
Class C Principal Distributable Amount, the Backup Servicing Fee, the
Servicing Fee, the Trustee Fee and the
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amount on deposit in the Reserve Account are accurate based solely on the
recalculations of the Servicing Certificate; and
(iv) confirm the calculation of the Delinquency Ratio, Cumulative
Default Ratio, Repossession Inventory Ratio, Reserve Account Trigger
Events and Servicer Termination Trigger Events.
SECTION 3.14. FIDELITY COVERAGE; ERRORS AND OMISSIONS INSURANCE. The
Servicer shall maintain fidelity coverage in such form and amount as is
customary for entities acting as custodian of funds and documents in respect of
consumer contracts on behalf of institutional investors, but in no event less
than $1 million per occurrence. In addition, the Servicer shall use its best
efforts to obtain, and the Servicer shall thereafter maintain, an errors and
omissions insurance policy with such provisions as are customary for originators
and servicers of assets similar to the Receivables; and the Servicer shall
provide evidence of such insurance to the Trustee and the Initial
Certificateholder within 180 days following the Closing Date.
SECTION 3.15. DELEGATION OF DUTIES. So long as Triad is the Servicer, the
Servicer may delegate duties under this Agreement to sub-contractors who are in
the business of servicing motor vehicle receivables which are similar to the
Receivables and who are willing to accept such delegations and to perform such
duties in accordance with the customary procedures of Triad and this Agreement,
with the prior written consent of the Trustee, which consent shall not be
unreasonably withheld. The Servicer also may at any time, without the consent of
the Trustee, or any other Person, perform the specific duty of repossession of
Financed Vehicles through sub-contractors who are in the business of
repossessing motor vehicles. No such delegation or subcontracting duties by the
Servicer as described in this SECTION 3.15 shall relieve the Servicer of its
responsibility with respect to such duties. The Servicer shall pay the fees and
expenses of all such sub-contractors from its own funds.
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
SECTION 4.1. COLLECTION ACCOUNT. (a) The Servicer shall establish the
Collection Account in the name of the Trustee for the benefit of the
Certificateholders. The Collection Account shall be an Eligible Account and
initially shall be a segregated trust account established and maintained with
the Trustee.
(b) The Servicer shall cause the following amounts to be deposited into the
Collection Account no later than four Business Days following receipt of
available amounts thereof by the Lockbox Bank or the Servicer, but in any event
no later than the time specified in SECTION 3.2: (i) all Scheduled Payments,
(ii) all Recoveries, (iii) all Purchase Amounts, (iv) all amounts on deposit in
any Lockbox Account with respect to the Receivables, except as provided in
SECTION 4.3(a) hereof in connection with the prepayment of any Rule of 78's
Receivable, (v) the proceeds of any Insurance Policy, Collateral Insurance,
fidelity policy or other insurance policy relating to the Receivables or the
Servicer's activities with respect thereto, and (vi) all other amounts of any
nature whatsoever in respect of the Receivables.
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(c) All amounts held in the Collection Account shall, to the extent
permitted by applicable laws, rules and regulations, be invested, as directed in
writing by the Seller, in Eligible Investments that mature not later than one
Business Day prior to the Distribution Date for the Collection Period to which
such amounts relate. Any such written direction shall certify that any such
investment is authorized by this SECTION 4.1. Investments in Eligible
Investments shall be made in the name of the Trustee on behalf of the Trust, and
such investments shall not be sold or disposed of prior to their maturity. The
Trustee may trade with itself or an Affiliate in the purchase or sale of
Eligible Investments. Any investment of funds in the Collection Account shall be
made in Eligible Investments held by a financial institution with respect to
which (a) such institution has noted the Trustee's interest therein by book
entry or otherwise and (b) a confirmation of the Trustee's interest has been
sent to the Trustee by such institution, provided that such Eligible Investments
are (i) specific certificated securities (as such term is used in the UCC), and
(ii) either (A) in the possession of such institution or (B) in the possession
of a clearing corporation as such term is used in the UCC, registered in the
name of such clearing corporation, not endorsed for collection or surrender or
any other purpose not involving transfer, not containing any evidence of a right
or interest inconsistent with the Trustee's security interest therein, and held
by such clearing corporation in an account of such institution. Subject to the
other provisions hereof, the Trustee shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Trustee or its agent, together with each document of transfer, if any, necessary
to transfer title to such investment to the Trustee in a manner which complies
with this SECTION 4.1. All interest, dividends, gains upon sale and other income
from, or earnings on, investments of funds in the Collection Account shall be
deposited in the Collection Account and distributed on the next Distribution
Date pursuant to SECTION 4.5. The Trustee shall not be liable for any investment
loss or other charge resulting therefrom unless the Trustee's failure to perform
in accordance with this Agreement is the cause of such loss or charge.
SECTION 4.2. REIMBURSEMENT FROM THE COLLECTION ACCOUNT. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer or the Lockbox Bank to
have resulted from mistaken deposits or postings or checks returned for
insufficient funds or amounts required to be paid as prepayment rebates. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Distribution Date pursuant to SECTION 4.5(a) upon certification by the Servicer
of such amounts and the provision of such information to the Trustee as may be
necessary in the opinion of the Trustee to verify the accuracy of such written
certification. In the event that the Trustee has not received evidence of the
Servicer's entitlement to reimbursement pursuant to this SECTION 4.2, the
Trustee shall not make a distribution to the Servicer in respect of such amount
pursuant to SECTION 4.5, or if the Servicer prior thereto has been reimbursed
pursuant to SECTION 4.5 or SECTION 4.6, the Trustee shall withhold such amounts
from amounts otherwise distributable to the Servicer on the next succeeding
Distribution Date and, to the extent necessary, subsequent Distribution Dates.
SECTION 4.3. APPLICATION OF COLLECTIONS. All collections for each
Collection Period shall be applied by the Servicer as follows:
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(a) With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor (other than of Additional Servicing Fees
with respect to such Receivable, to the extent collected) shall be applied, in
the case of a Simple Interest Receivable, to interest and principal in
accordance with the Simple Interest Method, and in the case of a Precomputed
Receivable, to interest and principal in accordance with the Actuarial Method.
With respect to Simple Interest Receivables, any prepayment of principal during
each Collection Period shall be applied to reduce the principal balance of the
Receivable during such Collection Period. Amounts received upon prepayment in
full of a Rule of 78's Receivable in excess of the then outstanding principal
balance of such Receivable and accrued interest thereon (calculated pursuant to
the Actuarial Method) will not be passed through to Certificateholders, but
shall be paid by the Servicer to the related Obligor to the extent required by
the terms of such Receivable and by law and otherwise paid to the Seller.
(b) With respect to each Receivable that has become a Purchased Receivable,
the Purchase Amount shall be applied, for purposes of this Agreement only, to
interest and principal on the Receivable in accordance with the terms of the
Receivable as if the Purchase Amount has been paid by the Obligor on the Record
Date. Nothing contained herein shall relieve any Obligor of any obligation
relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as Additional
Servicing Fees hereunder shall be deposited in the Collection Account and paid
to the Servicer in accordance with SECTION 4.5(a).
SECTION 4.4. ADDITIONAL DEPOSITS. The Seller, Triad or the Servicer, as the
case may be, shall deposit or cause to be deposited in the Collection Account
the aggregate Purchase Amount with respect to Purchased Receivables and the
Servicer or the Seller, as the case may be, shall deposit therein all amounts to
be paid under SECTION 10.2. All such deposits shall be made, in immediately
available funds, on the Business Day preceding the Determination Date. On or
before the first Business Day preceding each Distribution Date, the Trustee
shall remit to the Collection Account any amounts delivered to the Trustee by
the Collateral Agent pursuant to SECTION 4.7.
SECTION 4.5. DISTRIBUTIONS. (a) On each Distribution Date, the Trustee
(based solely on the information contained in the Servicing Certificate
delivered on the related Determination Date pursuant to SECTION 3.9) shall,
subject to subsection (b) hereof, make the following distributions from the
amounts on deposit in the Collection Account, in the following order of
priority:
(i) first, to the Servicer, the Servicing Fee for the related
Collection Period, any Additional Servicing Fee for the related Collection
Period and, so long as Triad is the Servicer, any Servicer Expenses for the
related or any prior Collection Period and any amounts specified in SECTION
4.2, to the extent the Servicer has not reimbursed itself in respect of
such amounts pursuant to SECTION 4.6;
(ii) second, to any Lockbox Bank, the Trustee, the Backup Servicer and
the Collateral Agent (including the Trustee if acting in any such
additional
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capacity), any accrued and unpaid fees and expenses (including reasonable
legal fees and expenses) (in each case, to the extent such Person has not
previously received such amount from the Servicer or the Seller);
(iii) third, to the Class A Certificateholders, an amount equal to the
sum of the Class A Interest Distributable Amount for such Distribution
Date, and the Class A Interest Carryover Shortfall, if any;
(iv) fourth, to the Class B Certificateholders, an amount equal to the
sum of the Class B Interest Distributable Amount for such Distribution
Date, and the Class B Interest Carryover Shortfall, if any;
(v) fifth, to the Class A Certificateholders, an amount equal to the
sum of the Class A Principal Distributable Amount for such Distribution
Date, and the Class A Principal Carryover Shortfall, if any;
(vi) sixth, to the Class B Certificateholders, an amount equal to the
sum of the Class B Principal Distributable Amount for such Distribution
Date, and, the Class B Principal Carryover Shortfall, if any;
(vii) seventh, to the Class C Certificateholder, an amount equal to
the sum of the Class C Interest Distributable Amount for such Distribution
Date, and the Class C Interest Carryover Shortfall, if any;
(viii) eighth, to the Class C Certificateholder, an amount equal to
the sum of the Class C Principal Distributable Amount for such Distribution
Date, and the Class C Principal Carryover Shortfall, if any; and
(ix) ninth, to the Seller, the Seller's Retained Yield;
PROVIDED, HOWEVER, that (a) any amounts distributable to the Seller in respect
of item (ix) above shall instead be paid by the Trustee to the Collateral Agent
for deposit into the Reserve Account to the extent necessary to satisfy the
Reserve Account Requirement and (b) to the extent not satisfied with amounts
under clause (a) of this proviso, any amounts distributable to the Class C
Certificateholder in respect of items (viii) and (vii) above shall be paid,
respectively, by the Trustee to the Collateral Agent for deposit into the
Reserve Account to the extent necessary to satisfy the Reserve Account
Requirement.
(b) If a Reserve Account Trigger Event has occurred, all amounts otherwise
distributable to the Class C Certificateholder and the Seller shall be deposited
in the Reserve Account without regard to the Reserve Account Requirement; if a
Reserve Account Trigger Event shall have been Deemed Cured, the amounts on
deposit in the Reserve Account in excess of the Reserve Account Requirement
shall be distributed in accordance with the terms of the Reserve Account
Agreement.
(c) The rights of the Class B Certificateholders to receive distributions
in respect of the Class B Certificates pursuant to SECTION 4.5(a)(iv) on a
Distribution Date shall be
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and hereby are subordinated to the payment of the amounts distributable pursuant
to SECTIONS 4.5(a)(i) through and including (iii). The rights of the Class B
Certificateholders to receive distributions in respect of the Class B
Certificates pursuant to SECTION 4.5(a)(vi) on a Distribution Date shall be and
hereby are subordinated to the payment of the amounts distributable pursuant to
SECTIONS 4.5(a)(i) through and including (v). At such time as the Class A
Certificates are paid in full, the Class B Certificateholders shall be entitled
to exercise all rights granted to the Class A Certificateholders under this
Agreement to the extent that the exercise of such rights does not conflict with
the provisions of the Reserve Account Agreement. The rights of the Class C
Certificateholder to receive distributions in respect of the Class C
Certificates pursuant to SECTION 4.5(a)(vii) and (viii) on a Distribution Date
shall be and hereby are subordinated to the payment of the amounts distributable
pursuant to SECTIONS 4.5(a)(i) through and including (vi) and the satisfaction
of the Reserve Account Requirement. At such time as the Class A Certificates and
the Class B Certificates are paid in full, the Class C Certificateholder shall
be entitled to exercise all rights granted to the Class A Certificateholders
under this Agreement to the extent that the exercise of such rights does not
conflict with the provisions of the Reserve Account Agreement. The rights of the
holder of the Seller's Retained Yield to receive distributions pursuant to
SECTION 4.5(a)(ix) on a Distribution Date shall be and hereby are subordinated
to the payment of the amounts distributable pursuant to SECTION 4.5(a)(i)
through and including (viii) and the satisfaction of the Reserve Account
Requirement. At such time as the Certificates are paid in full, the holder of
the Seller's Retained Yield shall be entitled to exercise all rights granted to
the Certificateholders under this Agreement to the extent that the exercise of
such rights does not conflict with the provisions of the Reserve Account
Agreement.
(d) Subject to SECTION 10.1 respecting the final payment upon retirement of
each Certificate, and provided that the Trustee has received the applicable
Servicing Certificate, on each Distribution Date the Trustee shall distribute to
each Certificateholder of record on the preceding Record Date either (i) by wire
transfer, in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Trustee appropriate instructions
not later than fifteen days prior to the Record Date for such Distribution Date
and such Holder's Certificates in the aggregate evidence an original principal
balance of at least $1,000,000, or (ii) by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate
Register, the amounts to be distributed to such Certificateholder pursuant to
such Holder's Certificates, to the extent funds therefor are distributed under
SECTION 4.5(a).
(e) Each Certificateholder, by its acceptance of its Certificate, will be
deemed to have consented to the provisions of paragraph (b) above relating to
the priority of distributions. Each Certificateholder, by its acceptance of its
Certificate, further specifically acknowledges that it has no right to or
interest in any moneys at any time held pursuant to the Reserve Account
Agreement prior to the release of such moneys as aforesaid, such moneys being
held in trust for the benefit of the Certificateholders, as their interests may
appear prior to such release. Notwithstanding the foregoing, the provisions of
this Agreement and the Reserve Account Agreement shall be considered to
constitute a security agreement and the Seller hereby grants to the Collateral
Agent a first priority perfected security interest in such amounts, to be
applied as set forth in SECTION 3.03 of the Reserve Account Agreement in the
case of Reserve Account moneys.
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SECTION 4.6. NET DEPOSITS. The Servicer may make the remittances to be made
by it pursuant to SECTIONS 3.2, 4.1 and 4.4 without including amounts (which
amounts may be excluded prior to any such remittance for a Collection Period) to
be distributed to it pursuant to SECTION 4.2 and 4.5(a)(i), for so long as no
Servicer Termination Event has occurred and is continuing; PROVIDED, HOWEVER,
that the Servicer shall account for all of such amounts in the related Servicing
Certificate as if such amounts were deposited and distributed separately; and,
PROVIDED, FURTHER, that if an error is made by the Servicer in calculating the
amount to be deposited or retained by it, with the result that an amount less
than required is deposited in the Collection Account, the Servicer shall make a
payment of the deficiency to the Collection Account, immediately upon becoming
aware, or receiving notice from the Trustee, the Backup Servicer or any
Certificateholder of such error.
SECTION 4.7. THE RESERVE ACCOUNT. In order to effectuate and to secure the
subordination provided for herein, there shall be established and maintained
with the Collateral Agent, the Reserve Account to include the money and other
property deposited and held therein pursuant to this SECTION 4.7, and the Seller
agrees, simultaneously with the execution and delivery of this Agreement, to
execute and deliver the Reserve Account Agreement and, pursuant to the terms
thereof, to deposit $[ ] in the Reserve Account. Although the Seller has pledged
the Reserve Account to the Collateral Agent pursuant to the Reserve Account
Agreement, the Reserve Account shall not under any circumstances be deemed to be
a part of or otherwise includable in the Trust or the Trust Property, but
instead represents property beneficially owned by the Seller and the Class C
Certificateholder, which has been pledged and deposited with the Collateral
Agent (as secured party on behalf of the Class A Certificateholders, Class B
Certificateholders, Class C Certificateholder and the Servicer) in accordance
with the terms hereof and of the Reserve Account Agreement. The Seller and the
Class C Certificateholder, by the acceptance of its Certificate, hereby
acknowledge and accept that the assets in the Reserve Account (and all earnings
thereon) are owned beneficially by them, and the Seller and the Class C
Certificateholder agree to treat such assets (and all earnings thereon) as their
assets (and earnings) for federal, state, and local tax and all other purposes,
as their interest shall appear, and not to sell, transfer, or otherwise dispose
of their interests therein. In the event that the Servicing Certificate with
respect to any Determination Date shall state that the Total Distribution Amount
with respect to such Determination Date is insufficient to make the payments
required to be made on the related Distribution Date pursuant to SECTION
4.5(a)(i) through (vi), (the amount of such deficiency being a "DEFICIENCY CLAIM
AMOUNT"), then on the second Business Day immediately following the related
Determination Date, the Trustee shall deliver to the Collateral Agent, and the
Servicer, by hand delivery, telex or facsimile transmission, a written notice (a
"DEFICIENCY NOTICE") specifying the Deficiency Claim Amount for such
Distribution Date. Such Deficiency Notice shall direct the Collateral Agent to
remit such Deficiency Claim Amount (to the extent of the funds available to be
distributed pursuant to the Reserve Account Agreement) to the Trustee for
deposit in the Collection Account and distribution pursuant to SECTIONS
4.5(a)(i) through (vi), as applicable.
Any Deficiency Notice shall be delivered by 10:00 a.m., New York City time,
on the second Business Day following such Determination Date. The amounts
distributed by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice shall be deposited by the Trustee into the Collection Account pursuant to
SECTION 4.4.
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SECTION 4.8. STATEMENTS TO CERTIFICATEHOLDERS; TAX RETURNS. (a) On each
Distribution Date, the Trustee shall include with each distribution to each
Certificateholder and shall forward by mail to the Rating Agency, a statement
based solely on the information in the Servicing Certificate delivered on the
related Determination Date pursuant to SECTION 3.9, setting forth the following
information, among other things, with respect to the Collection Period relating
to such Distribution Date:
(i) the amount of such distribution allocable to principal of the
Class A Certificates, the Class B Certificates and the Class C
Certificates, respectively;
(ii) the amount of such distribution allocable to interest on the
Class A Certificates, the Class B Certificates and the Class C
Certificates, respectively;
(iii) the Pool Balance, the Class A Pool Factor, the Class B Pool
Factor, and the Class C Pool Factor (A) as of the close of business on the
last day of the preceding Collection Period and (B) after giving effect to
distributions made on such Distribution Date;
(iv) the Class A Certificate Balance, the Class B Certificate Balance,
and the Class C Certificate Balance as of the close of business on the last
day of the preceding Collection Period, after giving effect to
distributions allocated to principal reported under (i) above;
(v) the amount of the Servicing Fee, the Additional Servicing Fee and
the Servicer Expenses paid to the Servicer with respect to the related
Collection Period and the Class A Percentage, the Class B Percentage, and
the Class C Percentage of the Servicing Fee, the amount of any unpaid
Servicing Fees and the change in such amount from that of the prior
Distribution Date, and the amount of any other fees paid by the Trust with
respect to such Collection Period;
(vi) the amount of the Class A Interest Carryover Shortfall, if
applicable, on such Distribution Date and the Class A Principal Carryover
Shortfall, if applicable, on such Distribution Date, and the change in such
amounts from the prior Distribution Date;
(vii) the amount of the Class B Interest Carryover Shortfall, if
applicable, on such Distribution Date and the amount of the Class B
Principal Carryover Shortfall, if applicable, on such Distribution Date,
and the change in such amounts from the prior Distribution Date;
(viii) the amount of the Class C Interest Carryover Shortfall, if
applicable, on such Distribution Date and the amount of the Class C
Principal Carryover Shortfall, if applicable, on such Distribution Date,
and the change in such amounts from the prior Distribution Date;
(ix) the aggregate amount in the Reserve Account and the change in
such amount from the preceding Distribution Date;
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(x) the number of Receivables and the aggregate Principal Balance due
thereof, for which the related Obligors are delinquent in making scheduled
payments (A) between 31 and 60 days, (B) between 61 and 90 days, (C)
between 91 and 120 days and (D) more than 120 days;
(xi) the number of Receivables which became Liquidated Receivables,
and the aggregate principal amount thereof net of Recoveries;
(xii) the number of Receivables which became Defaulted Receivables,
and the aggregate principal amount thereof;
(xiii) the number and the aggregate Purchase Amount of Receivables
that became Purchased Receivables during the related Collection Period and
the number and aggregate Purchase Amount of Receivables that were required
to be repurchased during the related Collection Period but were not so
repurchased;
(xiv) the number and aggregate Principal Balance of Receivables with
respect to which, to the knowledge of the Servicer, Obligors became the
subject of bankruptcy proceedings during such Collection Period (or during
a prior Collection Period, if the Servicer first became aware of such
proceedings during the current Collection Period);
(xv) the Seller's Retained Yield for such Distribution Date and the
portion thereof (A) distributed to the Seller and (B) deposited in the
Reserve Account;
(xvi) the Cumulative Default Ratio;
(xvii) the Delinquency Ratio;
(xviii) the Repossession Inventory Ratio;
(xix) the amount of any Deficiency Claim Amounts deposited in the
Collection Account from the Reserve Account;
(xx) whether a Reserve Fund Trigger Event, Servicer Termination
Trigger Event or Servicer Termination Event has occurred; and
(xxi) the Collector to Current Receivable Ratio and the Collector to
Delinquent Receivable Ratio;
PROVIDED, HOWEVER, the Trustee may deliver a copy of the Servicing Certificate
to each Certificateholder and the Rating Agency in satisfaction of the
requirements set forth in this Section if such Servicing Certificate otherwise
contains the information required to be distributed to each Certificateholder in
accordance herewith. Each amount set forth pursuant to SUBCLAUSES (i), (ii),
(iv), (v), (vi), (vii) and (viii) above shall be expressed in the aggregate and
as a dollar amount per $1,000 of original principal balance of a Certificate of
the related Class.
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(b) Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of this Agreement, the Trustee
shall mail, provided it has received the necessary information from the
Servicer, to each Person who at any time during such calendar year shall have
been a Holder of a Certificate and received any payment thereon, a report as to
the aggregate of amounts reported pursuant to clauses (i), (ii) and (v) of
SECTION 4.8(a) (separately indicating amounts in respect of each Class of
Certificates) and such other information reasonably requested in writing by the
Certificateholder necessary to permit the Certificateholder to ascertain its
share of the gross income and deductions of the Trust (exclusive of the
Additional Servicing Fee), for such calendar year or, in the event such Person
shall be a Holder of a Certificate during a portion of such calendar year for
the applicable portion of such year, for the purposes of such
Certificateholder's preparation of federal and state income tax returns. The
Trustee shall furnish such statements to the Internal Revenue Service annexed to
Form 1041 in the manner and at the time provided by the Code and applicable
Regulations thereunder. The obligation of the Trustee set forth in this
paragraph shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer pursuant
to any requirements of the Code.
(c) The Trustee shall prepare and file any tax returns required to be filed
by the Trust. The Servicer will furnish the Trustee with all such information
known to it as may be reasonably required in connection with the preparation of
all tax returns of the Trust. The fees and expenses incurred in connection with
the preparation and filing of all tax returns of the Trust shall be paid for by
the Trustee out of the Trustee Fee.
(d) The Trustee shall provide any Holder of Certificates representing at
least 25% of the Certificate Balance, with such additional information available
to the Trustee relating to the Certificates, the Trust Property or the Reserve
Account as such Holder may reasonably request from time to time. Such additional
information (to the extent provided to the Trustee by the Servicer) shall also
be available to any Certificateholder from the Trustee upon reasonable request
and upon payment of the Trustee's and the Servicer's reasonable fees and
expenses in connection with providing and preparing such information. Any
Certificateholder desiring such additional information shall have delivered to
the Trustee an executed Information Request.
ARTICLE V
THE CERTIFICATES
SECTION 5.1. THE CERTIFICATES. The Certificates shall be issued only in
fully registered form in minimum denominations of $250,000 and integral
multiples of $1,000 in excess thereof; provided, however, that one Certificate
of each Class may be issued in a different amount if the aggregate initial
Certificate Principal Balance of the Certificates is not an integral multiple of
$1,000. The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of a Trustee Officer of the Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures were affixed, authorized to sign on behalf of the Trustee, 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.
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SECTION 5.2. AUTHENTICATION OF CERTIFICATES. The Trustee shall cause the
Certificates to be executed on behalf of the Trust, authenticated, and delivered
to the or upon the written order of the Seller, such order signed by the
Seller's chairman of the board, 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 in the form set
forth in EXHIBIT A, EXHIBIT B, or EXHIBIT C hereto, executed by the Trustee by
manual signature of an authorized signatory; such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates issued on the Closing
Date shall be dated the Closing Date. All Certificates issued upon transfer or
exchange thereafter shall be dated the date of their authentication.
REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES; RESTRICTIONS ON
TRANSFER OF CLASS C CERTIFICATES.
(i) The Trustee shall keep or cause to be kept at the Corporate Trust
Office books (the "CERTIFICATE REGISTER") for the registration, transfer
and exchange of Certificates (the Trustee, in such capacity, being the
"CERTIFICATE REGISTRAR"). The names and addresses of all Certificateholders
and the names and addresses of the transferees of any Certificates shall be
registered in the Certificate Register. The Person in whose name any
Certificate is so registered shall be deemed and treated as the sole owner
and Holder thereof for all purposes of this Agreement and the Certificate
Registrar and the Trustee and any agent of any of them shall not be
affected by any notice or knowledge to the contrary. A Certificate is
transferable or exchangeable only upon the surrender of such Certificate to
the Certificate Registrar at the Corporate Trust Office together with an
assignment and transfer (executed by the Holder or his duly authorized
attorney), subject to the requirements of SECTIONS 5.3(c), (d), (e), (f)
and (g). Upon request of the Trustee, the Certificate Registrar shall
provide the Trustee with the names, addresses and percentage interests of
the Holders.
(ii) Upon surrender for registration of transfer of any Certificate,
subject to the requirements of SECTIONS 5.3(c), (d), (e), (f) and (g), the
Trustee shall execute and the Trustee shall duly authenticate in the name
of the designated transferee or transferees, one or more new Certificates
in authorized denominations of a like aggregate initial Certificate
Balance. Such Certificates shall be delivered by the Certificate Registrar
in accordance with Section 5.3(e). Each Certificate surrendered for
registration of transfer shall be canceled and subsequently destroyed by
the Certificate Registrar. Each new Certificate issued pursuant to this
Section 5.3 shall be registered in the name of any Person as the
transferring Holder may request, subject to the provisions of SECTIONS
5.3(c), (d), (e), (f) and (g).
(iii) Notwithstanding anything to the contrary provided in this
Agreement, no sale, transfer, or other disposition of the Class C
Certificate shall be made unless: (i) the Trustee is provided with an
opinion of independent counsel or
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a ruling of the Internal Revenue Service that establishes to the reasonable
satisfaction of the majority of the Holders of each of the Class A
Certificates, and the Class B Certificates, that such disposition will not
have any material adverse consequences under federal or state tax laws
resulting from the classification or status of this Agreement, or the Trust
created hereunder, or otherwise, and (ii) the Rating Agency shall have
indicated in writing that such sale, transfer, or other disposition will
not result in a reduction or withdrawal of the then current rating of the
Class A Certificates and the Class B Certificates.
SECTION 5.3. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss, or theft of any Certificate and (b) there is delivered to the Certificate
Registrar and the Trustee such security or indemnity as may be required by them
to save each of them harmless which in the case of (i) the Underwriter or (ii)
any other investor with a credit rating of at least "BBB" by Standard & Poor's,
"Baa" by Moody's or "BBB" by the Rating Agency shall be deemed satisfied by the
delivery of an unsecured agreement of indemnity), then in the absence of notice
that such Certificate shall have been acquired by a bona fide purchaser, the
Trustee on behalf of the Trust shall execute, 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 5.4, 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 relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this SECTION 5.4 shall constitute conclusive evidence of a
beneficial interest in the Trust Property, as if originally issued, whether or
not the lost, stolen, or destroyed Certificate shall be found at any time.
SECTION 5.4. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate Registrar
and any agent of 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 4.5
and for all other purposes whatsoever, and neither the Trustee, nor the
Certificate Registrar nor any agents of the Trustee or the Certificate Registrar
shall be bound by any notice to the contrary.
SECTION 5.5. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The
Trustee shall furnish or cause to be furnished to the Servicer, at the expense
of the Trust, within 10 days after receipt by the Trustee of a request therefor
from the Servicer, a written list of the names and addresses of the
Certificateholders as of the most recent Record Date for payment of
distributions to Certificateholders. If three or more Certificateholders, or one
Certificateholder evidencing not less than [ ]% of any Class of Certificates, so
request in writing to the Trustee, then the Trustee shall, within five Business
Days after the receipt of such request furnish to the requesting
Certificateholder or Certificateholders a copy of the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate, shall
be deemed to have agreed with the Servicer and the Trustee that neither the
Servicer nor the Trustee shall be held accountable by
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reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 5.6. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall maintain in
New York, New York, 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 [ ] as its
office for such purposes. The Trustee shall give prompt written notice to the
Servicer and to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
ARTICLE VI
THE SELLER
SECTION 6.1. REPRESENTATIONS OF SELLER. The Seller hereby makes the
following representations and warranties to the other parties hereto, on which
the Trustee on behalf of itself and the Certificateholders relies in accepting
the Receivables and the other Trust Property in trust and executing and
authenticating the Certificates. Unless otherwise specified, the representations
are made as of the execution and delivery of this Agreement, but shall survive
the sale, transfer and assignment of the Receivables to the Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to execute, deliver and perform its
obligations under this Agreement and its Related Documents and to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and now
has, power, authority, and legal right to acquire, own and sell the Receivables.
(b) DUE QUALIFICATION. The Seller is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualifications, licenses
or approvals.
(c) POWER AND AUTHORITY. The Seller has the power and authority to execute
and deliver this Agreement and each of its Related Documents and to carry out
their respective terms and the transactions contemplated thereby; the Seller has
full power and authority to sell and assign the Trust Property to be sold and
assigned to and deposited with the Trustee and has duly authorized such sale and
assignment to the Trustee by all necessary corporate action; and the execution,
delivery and performance of this Agreement and each of its Related Documents has
been duly authorized by the Seller by all necessary corporate action.
(d) VALID SALE; BINDING OBLIGATION. This Agreement and each of its Related
Documents has been duly executed and delivered by the Seller and shall effect a
valid sale, transfer and assignment of the Receivables and the other Trust
Property, and the grant of a valid security interest in the Reserve Account, in
each case enforceable against the Seller and creditors of and purchasers from
the Seller, and this Agreement and each of its Related Documents, when
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duly executed and delivered, shall constitute the legal, valid and binding
obligations of the Seller enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the Seller of
this Agreement and its Related Documents and the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof do not and shall not conflict with, result in any breach of
any of the terms and provisions of or constitute (with or without notice, lapse
of time or both) a default under, the articles of incorporation or by-laws of
the Seller, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Seller is a party or by which it is bound or to which
any of its properties is subject, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument (other than this
Agreement), or violate any law, order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties, or in any way materially adversely affect the interest of the
Certificateholders or the Trust in any Receivable, or affect the Seller's
ability to perform its obligations under this Agreement.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending, or
to the Seller's knowledge, threatened, before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties: (1) asserting the invalidity of this
Agreement, any of its Related Documents or the Certificates, (2) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of its Related Documents, (3)
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, any of its Related Documents or the
Certificates, (4) relating to the Seller and which might adversely affect the
federal or state income, excise, franchise or similar tax attributes of the
Certificates, or (5) that could have a material adverse effect on the
Receivables or the interest of the Trustee therein.
(g) NO CONSENTS. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Certificates or the consummation of the transactions
contemplated by this Agreement or any of the Seller's Related Documents, except
such as have been duly made or obtained on or prior to the Closing Date.
(h) TAX RETURNS. The Seller has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) CHIEF EXECUTIVE OFFICE. The principal place of business and chief
executive office of the Seller is, and for the four months preceding the date of
this Agreement has been, located at: 7711 Center Avenue, Suite 390, Huntington
Beach, California 92647.
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(j) NO INJUNCTIONS. There are no existing injunctions, writs, restraining
orders or other similar orders which might adversely affect the performance by
the Seller of its obligations under, or the validity and enforceability of, this
Agreement or any of the Related Documents.
(k) COMPLIANCE WITH LAW. The Seller is in compliance with all requirements
of federal and state laws, rules, regulations and orders, except where the
failure so to comply would not have a material adverse effect on the Seller, its
business or its properties, or the ability of the Seller to perform its
obligations under this Agreement, or any of the Related Documents.
(l) SOLVENCY; NO FRAUDULENT TRANSFER. (A) The Seller is assigning the
Receivables to the Trust without any intent to hinder, delay, or defraud any
current or future creditor of the Seller; (B) the Seller is not insolvent and
will not become insolvent as a result of the assignment; (C) the Seller is not
engaged and is not about to engage in any business or transaction for which any
property remaining with the Seller is an unreasonably small capital or for which
the remaining assets of the Seller are unreasonably small in relation to the
business of the Seller or the transaction; (D) the Seller does not intend to
incur, and does not believe or reasonably should not believe that it would
incur, debts beyond its ability to pay as they become due; and (E) the
consideration paid by the Certificateholders to the Seller for the Receivables
absolutely assigned by the Seller hereunder is equivalent to a fair market value
of such Receivables under the circumstances of the transaction, including but
not limited to, timing of such assignment.
(m) LEGAL NAME. "Triad Financial Special Purpose Corporation" is the only
legal name under which the Seller has ever operated its business, and the Seller
does not have any tradenames, fictitious names, assumed names or "doing business
as" names.
(n) SUBSIDIARIES. The Seller does not own, directly or indirectly, any
equity securities of any entity or enterprise and does not conduct any of its
business through any subsidiary, entity or enterprise.
(o) OTHER ACTIVITIES. The Seller has not in the past, and does not
currently, engage in any business activity other than transactions of the type
contemplated pursuant to this Agreement and the Related Documents.
SECTION 6.2. LIABILITY OF SELLER; INDEMNITIES. (a) The Seller shall be
liable hereunder only to the extent of the obligations specifically undertaken
by the Seller under this Agreement and the representations made by the Seller in
this Agreement. The Seller shall indemnify, defend and hold harmless the
Trustee, the Certificateholders, the Backup Servicer, the Servicer, the
Collateral Agent and their respective officers, directors, employees and agents
from and against any loss, liability or expense incurred by reason of (a) the
Seller's willful misfeasance, bad faith, or gross negligence in the performance
of its duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement or (b) the inaccuracy of any
representation made in SECTION 6.1, or (c) the Seller's violation of federal or
state securities laws in connection with the sale of the Certificates. The
indemnification provided for in this SECTION 6.2 shall survive the termination
of this Agreement and the resignation or removal of the Trustee, the Backup
Servicer and the Collateral Agent.
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(b) Indemnification under this SECTION 6.2 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made full indemnity payments to the Trustee, the
Certificateholders, the Servicer or the Backup Servicer pursuant to this Section
and the Trustee, the Certificateholders, the Servicer or the Backup Servicer
thereafter shall collect any of such amounts from others, the Trustee, the
Certificateholders, the Servicer or the Backup Servicer shall repay such amounts
to the Seller, without interest.
(c) The Seller shall be liable for the fees and expenses of the Trustee and
the Backup Servicer only to the extent such parties are not compensated in full
in accordance with the provisions of SECTION 4.5.
SECTION 6.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF SELLER, AMENDMENT OF CERTIFICATE OF INCORPORATION AND CERTAIN COVENANTS OF
THE SELLER. (a) The Seller shall not (i) consolidate or merge with or into any
other entity or Person, or dissolve, liquidate or transfer, in whole or in part,
its properties and assets substantially as an entirety to any entity (other than
to a trust established by the Seller), or lend or advance any moneys to, or make
an investment in, any Person or amend or repeal its Certificate of Incorporation
or (ii) engage in any other activity that bears on whether the separate legal
identity of the Seller will be respected including, without limitation, (A)
forming, or causing to be formed, any subsidiaries or (B) acting other than in
its corporate name and through its officers or directors;
(b) The Seller shall not engage in any joint activity or transaction of any
kind with or for the benefit of any related company, including loans to or from
any related company and any guarantee of the indebtedness of any related
company, except for (i) purchasing management services and leasing office space
or equipment, in each case only to the extent necessary for the conduct of the
corporation's business, (ii) purchasing assets or subordinate interests in any
pool of assets created or serviced by one or more related companies for fair and
reasonable consideration, (iii) payment of capital dividends to the
shareholders, (iv) arranging for letters of credit to be provided without
recourse to the Seller beyond the extent contemplated in its Certificate of
Incorporation by banks with which such related company maintains banking
relationships and (v) obtaining any financial guaranty insurance policy without
recourse to the Seller beyond the extent contemplated in its Certificate of
Incorporation;
(c) The Seller shall not create, incur, assume or in any manner become
liable in respect of any indebtedness or assume or guaranty any indebtedness of
any other entity, other than (i) indebtedness pursuant to which the Seller is
liable solely to the extent contemplated by its Certificate of Incorporation,
(ii) accounts payable and expense accruals incurred in the ordinary course of
business of the Seller and which are incidental to the business purpose of the
Seller as stated in its Certificate of Incorporation, but excluding any
liability in respect of the unpaid purchase price of any subordinate interest,
(iii) indebtedness without recourse to the Seller other than to the extent of
any security interest in one or more residual or subordinate interests and (iv)
indebtedness relating to the letters of credit or obligations arising out of a
financial guaranty insurance policy described in (c) above;
(d) The Seller shall not (i) institute proceedings to be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or
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consent to, or file a petition seeking, reorganization or relief under
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Seller or a substantial part of its property, or make
any assignment for the benefit of creditors, (ii) admit in writing its inability
to pay its debts generally as they become due, or (iii) take corporate action in
furtherance of any such action; and
(e) The Seller shall: (i) maintain books and records separate from any
other person or entity; (ii) maintain its accounts separate from any other
person or entity; (iii) not commingle assets with those of any other entity;
(iv) conduct its own business in its own name; (v) maintain separate financial
statements; (vi) pay its own liabilities out of its own funds; (vii) observe all
corporate formalities; (viii) maintain an arm's-length relationship with each
related company; (ix) pay the salaries of its own employees and maintain a
sufficient number of employees in light of its contemplated business operations;
(x) not guarantee or become obligated for the debts of any other entity or hold
out its credit as being available to satisfy the obligations of others; (xi) not
acquire obligations or securities of its shareholders; (xii) allocate fairly and
reasonably any overhead for shared office space; (xiii) use separate stationery,
invoices and checks; (xiv) not pledge its assets for the benefit of any other
entity or make any loans or advances to any entity; (xv) hold itself out as a
separate entity; (xvi) correct any known misunderstanding regarding its separate
identity; and (xvii) maintain adequate capital in light of its contemplated
business operations.
SECTION 6.4. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
SECTION 6.5. SELLER MAY OWN CERTIFICATES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof. Certificates so owned by or pledged
to the Seller or such Affiliate shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Certificates except as otherwise provided herein
or by the definition of Certificateholder. The Seller shall notify the Trustee
promptly after it or any of its Affiliates become the owner or pledgee of a
Certificate.
ARTICLE VII
THE SERVICER AND BACKUP SERVICER
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
hereby makes the following representations and warranties to the other parties
hereto, on which the Trustee on behalf of itself and the Certificateholders
relies in accepting the Receivables in trust and executing and authenticating
the Certificates. Unless otherwise specified, the representations and warranties
are made as of the Closing Date and shall survive the sale, transfer and
assignment of the Receivables to the Trustee.
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(a) ORGANIZATION AND GOOD STANDING. The Servicer has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of California, with power, authority and legal right to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and now has,
power, authority and legal right to acquire, own and service the Receivables and
to enter into and perform its obligations under this Agreement and each of its
Related Documents.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) requires or shall require such qualifications,
licenses or approvals.
(c) POWER AND AUTHORITY. The Servicer has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery, and performance of this Agreement have been duly authorized
by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement has been duly executed and delivered
by the Servicer and constitutes a legal, valid and binding obligation of the
Servicer enforceable in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the Servicer
of this Agreement and the consummation of the transactions contemplated hereby
and the fulfillment of the terms hereof as each of the foregoing relate to the
Servicer shall not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or both) a
default under, the articles of incorporation or by-laws of the Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it is bound or to which any of its properties is
subject, or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any indenture, agreement, mortgage, deed of
trust or other instrument (other than this Agreement), nor violate any law,
order, rule, or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any its properties, or
in any way materially adversely affect the interest of the Certificateholders or
the Trust in any Receivable, or affect the Servicer's ability to perform its
obligations under this Agreement.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending, or
to the Servicer's knowledge, threatened against the Servicer, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or its properties: (1) asserting the
invalidity of this Agreement, (2) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement as the same relate to the
Servicer, (3) seeking any determination or ruling that might materially and
adversely affect the
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performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, (4) relating to the Servicer and which might
adversely affect the federal or state income, excise, franchise or similar tax
attributes of the Certificates, or (5) that could have a material adverse effect
on the Receivables or the Trust Property.
(g) NO CONSENTS. No consent, approval, license, authorization or order of
or declaration or filing with any governmental authority, bureau or agency is
required for the consummation of the other transactions contemplated by this
Agreement as the same relate to the Servicer, except such as have been duly made
or obtained.
(h) TAXES. The Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) CHIEF EXECUTIVE OFFICE. The principal place of business and chief
executive office of the Servicer is, and for the four months preceding the date
of this Agreement has been, located at 7711 Center Avenue, Suite 100, Huntington
Beach, California.
(j) NO INJUNCTIONS. There are no existing injunctions, writs, restraining
orders or other similar orders which might adversely affect the performance by
the Servicer or its obligations under, or the validity and enforceability of,
this Agreement.
(k) COMPLIANCE WITH LAW. The Servicer is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Servicer, its business or its properties, or the ability of the Servicer to
perform its obligations under this Agreement.
SECTION 7.2. INDEMNITIES OF SERVICER. (a) The Servicer shall be liable
hereunder only to the extent of the obligations specifically undertaken by the
Servicer under this Agreement and the representations made by the Servicer
herein.
(b) The Servicer shall defend, indemnify, and hold harmless the Trustee,
the Backup Servicer, the Collateral Agent, the Seller, their respective
officers, directors, agents and employees, the Trust and the Certificateholders
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 or agent thereof of a Financed Vehicle.
(c) The Servicer shall defend, indemnify and hold harmless the Trustee, the
Backup Servicer, the Collateral Agent, the Seller, their respective officers,
directors, agents and employees, the Trust and the Certificateholders from and
against any taxes (other than franchise and income taxes other than income taxes
imposed on the Trust) that may at any time be asserted against the Trustee, the
Backup Servicer, the Collateral Agent, the Trust, the Seller or the
Certificateholders, with respect to the transactions contemplated herein,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes and costs and expenses in
defending against the same.
(d) The Servicer shall defend, indemnify, and hold harmless the Trustee,
the Backup Servicer, the Collateral Agent, the Seller, their respective
officers, directors, agents and
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employees, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages, fines, forfeitures, legal fees and
related costs, judgments and liabilities to the extent that such cost, expense,
loss, claim, damage, fine, forfeiture, legal fee, related cost, judgment or
liability arose out of, or was imposed upon the Trustee, the Backup Servicer,
the Collateral Agent, the Seller, the Trust or the Certificateholders through
the negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement or because of a
breach of any representation in SECTION 7.1 hereof.
(e) For purposes of this Section, in the event of the termination of the
rights and obligations of a Servicer (or any successor thereto pursuant to
SECTION 7.3) as Servicer pursuant to SECTION 8.2, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to SECTION 8.3.
The provisions of this SECTION 7.2(d) shall in no way affect the survival
pursuant to SECTION 7.2(e) of the indemnification by the Servicer provided by
SECTION 7.2(a), (b), (c) or (d).
(f) Indemnification under this SECTION 7.2 shall survive the termination of
this Agreement and any resignation or removal of Triad as Servicer or any
successor Servicer and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer shall have made full indemnity payments
pursuant to this Section and the recipient thereafter collects any of such
amounts from others, the recipient shall promptly repay such amounts to the
Servicer, without interest.
SECTION 7.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SERVICER OR BACKUP SERVICER. (a) The Servicer shall not merge or consolidate
with any other Person or, other than sales of assets in its ordinary course of
business, convey, transfer or lease substantially all its assets as an entirety
to another Person, or permit any other Person to become the successor to the
Servicer's business or its duties hereunder unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity shall be an Eligible Servicer, as determined by the Trustee,
and shall be capable of fulfilling the duties of the Servicer contained in this
Agreement. Any Person (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) which acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer, or (iv) succeeding to the business of the
Servicer, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of the Servicer under this Agreement and making
representations substantially equivalent to those made by the Servicer hereunder
and, whether or not such assumption agreement is executed, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Servicer
from any obligation. The Servicer shall provide notice of any proposed merger,
consolidation or succession pursuant to this SECTION 7.3(a) to the Seller, the
Backup Servicer, the Trustee, the Rating Agency and the Certificateholders.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii), (iii) and (iv) above, (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to SECTION 7.1 shall have been breached (for purposes
hereof, such representations and
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warranties shall speak as of the date of the consummation of such transaction),
(y) the Servicer shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this SECTION 7.3(a) and
that all conditions precedent, if any, provided for in this Agreement relating
to such transaction have been complied with, and (z) the Servicer shall have
delivered to the Trustee an Opinion of Counsel stating, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interest of the Trustee in the Trust Property and reciting the
details of the filings or (B) no such action shall be necessary to preserve and
protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation under this
Agreement.
SECTION 7.4. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Seller, the Trust or the Certificateholders, except
as provided under this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER, that
this provision shall not protect the Servicer, the Backup Servicer or any such
Person against any liability that would otherwise be imposed by reason of a
breach of this Agreement or willful misfeasance, bad faith, or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement or any violation of law, or the inaccuracy of any
representation made, by the Servicer, Backup Servicer or such Person, as the
case may be; and, PROVIDED, FURTHER, that this provision shall not affect any
liability to indemnify the Trustee for costs, expenses, claims, liabilities,
losses or damages paid by the Trustee in its individual capacity. The Servicer,
the Backup Servicer and any director or officer or employee or agent of the
Servicer or the Backup Servicer may reasonably rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
Except as provided in this Agreement, neither the Servicer nor the Backup
Servicer shall 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, and that in its opinion may
involve it in any expense or liability.
Other than the duties specifically set forth in this Agreement, the Backup
Servicer shall have no obligation hereunder, including, without limitation, to
supervise, verify, monitor or administer the performance of the Servicer
(however, in the event the Backup Servicer shall have
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knowledge of the Servicer's failure to perform its duties as required in this
Agreement, the Backup Servicer shall promptly notify the Trustee and the Initial
Certificateholder of such failure). The Backup Servicer shall have no liability
for any action taken or omitted by the Servicer. The duties and obligations of
the Backup Servicer shall be determined solely by the express provisions of this
Agreement and no implied covenants or obligations shall be read into this
Agreement against the Backup Servicer.
The Backup Servicer shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder (unless as a result of the Backup Servicer's failure to perform its
duties as required therein), or in the exercise of any of its rights or powers,
if the repayment of such funds or adequate written indemnity against such risk
or liability is not reasonably assured to it in writing prior to the expenditure
or risk of such funds or incurrence of financial liability.
The Backup Servicer will not be responsible for delays attributable to the
Servicer's failure to deliver information, defects in the information supplied
by the Servicer or other circumstances beyond the control of the Backup
Servicer.
The Backup Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Backup Servicer acting in accordance with the
terms of this Agreement and in accordance with information prepared or supplied
by a Person other than the Backup Servicer or the agent of the Backup Servicer
or the failure of any such Person to prepare or provide such information. The
Backup Servicer shall have no responsibility, shall not be in default and shall
incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Seller, or the Trustee (if the Person acting in such
capacity is other than the Person acting as Backup Servicer) or for any
inaccuracy or omission in a notice or communication received by the Backup
Servicer from any third party (other than the Trustee if the Person acting as
Trustee and Backup Servicer is one and the same) or (ii) which is due to or
results from the invalidity, unenforceability of any Receivable with applicable
law or the breach or the inaccuracy of any representation or warranty made with
respect to any Receivable.
SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the
provisions of SECTION 7.3, neither the Servicer nor the Backup Servicer may
resign from the obligations and duties hereby imposed on it as Servicer or
Backup Servicer, as the case may be, under this Agreement except upon
determination that by reason of a change in legal requirements the performance
of its duties under this Agreement would cause it to be in violation of such
legal requirements in a manner which would result in a material adverse effect
on the Servicer or the Backup Servicer, as the case may be. Notice of any such
determination permitting the resignation of the Servicer or the Backup Servicer,
as the case may be, shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee. No such resignation of the Servicer shall become
effective until the Backup Servicer or other successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
SECTION 8.3. No such resignation of the Backup Servicer shall become effective
until the Trustee or an entity appointed by the Trustee acceptable to a
Certificate Majority shall have assumed the responsibilities of the Backup
Servicer; PROVIDED, HOWEVER, that if no such entity shall have assumed such
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responsibilities and obligations of the Backup Servicer within 60 days of the
resignation of the Backup Servicer, the Backup Servicer may petition a court of
competent jurisdiction for the appointment of a successor to the Backup
Servicer. No resignation of the Servicer or the Backup Servicer shall relieve
the Servicer or the Backup Servicer, as the case may be, of any liability to
which it has previously become subject under this Agreement or any Related
Document.
SECTION 7.6. REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER. The Backup
Servicer hereby makes the following representations and warranties to the other
parties hereto, on which the Trustee on behalf of itself and the
Certificateholders relies in accepting the Receivables in trust and executing
and authenticating the Certificates. Unless otherwise specified, the
representations and warranties are made as of the Closing Date and shall survive
the sale, transfer and assignment of the Receivables to the Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Backup Servicer has been duly
organized and is validly existing as a New York banking corporation in good
standing under the laws of the State of New York, with power, authority and
legal right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and now has, power, authority and legal right to service the
Receivables and to enter into and perform its obligations under this Agreement
and each of its Related Documents.
(b) DUE QUALIFICATION. The Backup Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Receivables) requires or shall require such qualifications, licenses or
approvals.
(c) POWER AND AUTHORITY. The Backup Servicer has the power and authority to
execute and deliver this Agreement and each of its Related Documents has been
duly executed and delivered by the Backup Servicer, and to carry out its terms;
and the execution, delivery, and performance of this Agreement and each of its
Related Documents have been duly authorized by the Backup Servicer by all
necessary corporate action.
(d) BINDING OBLIGATION. This Agreement and each of its Related Documents
constitutes a legal, valid and binding obligation of the Backup 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' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the Backup
Servicer of this Agreement and each of its Related Documents, and the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof shall not conflict with, result in any breach of any of the terms
and provisions of or constitute (with or without notice, lapse of time or both)
a default under, the articles of incorporation or by-laws of the Backup
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Backup Servicer is a party or by which it is bound or to
which any of its properties is subject, or
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result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement, mortgage, deed of trust or
other instrument (other than this Agreement), nor violate any law, order, rule,
or regulation applicable to the Backup Servicer of any court or of any federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Backup Servicer or any its
properties, or in any way materially adversely affect the interest of the
Certificateholders or the Trust in any Receivable, or affect the Backup
Servicer's ability to perform its obligations under this Agreement.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending, or
to the Backup Servicer's knowledge, threatened against the Backup Servicer,
before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Backup Servicer or its properties:
(A) asserting the invalidity of this Agreement or any of its Related Documents,
(B) seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by this Agreement or any of its Related
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Backup Servicer of its obligations
under, or the validity or enforceability of, this Agreement or any of its
Related Documents, (D) relating to the Backup Servicer and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Certificates, or (E) that could have a material adverse effect on the
Receivables or the Trust Property.
(g) NO CONSENTS. No consent, approval, license, authorization or order of
or declaration or filing with any governmental authority, bureau or agency is
required for the consummation of the other transactions contemplated by this
Agreement or any of the Backup Servicer's Related Documents, except such as have
been duly made or obtained.
(h) TAXES. The Backup Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) NO INJUNCTIONS. There are no existing injunctions, writs, restraining
orders or other similar orders which might adversely affect the performance by
the Backup Servicer or its obligations under, or the validity and enforceability
of, this Agreement.
(j) COMPLIANCE WITH LAW. The Backup Servicer is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Backup Servicer, its business or its properties, or the ability of the Backup
Servicer to perform its obligations under this Agreement.
SECTION 7.7. DUTIES OF BACKUP SERVICER. (a) The Backup Servicer hereby
agrees, on the date (the "ASSUMPTION DATE") specified in the written notice to
the Backup Servicer from the Trustee of the termination of the rights and
obligations of the Servicer pursuant to SECTION 8.2 hereof or the resignation of
the Servicer pursuant to SECTION 7.5 hereof, and without any further notice, to
assume the obligations of the Servicer hereunder, to be the successor in all
respects to the Servicer and to be subject to all the responsibilities, duties
and liabilities arising thereafter relating thereto placed on the Servicer. From
and after the Assumption Date, the Backup Servicer shall be entitled to all of
the rights granted to the Servicer by the terms and provisions of this
Agreement.
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(b) Notwithstanding the Backup Servicer's assumption of, and its agreement
to perform and observe, all duties, responsibilities and obligations of the
Servicer under this Agreement arising on and after the Assumption Date, the
Backup Servicer shall not be deemed to have assumed or to become liable for, or
otherwise have any liability for, any duties, responsibilities, obligations or
liabilities of the Servicer arising on or before the Assumption Date, whether
provided for by the terms of this Agreement, arising by operation of law or
otherwise, including, without limitation, any liability for any duties,
responsibilities, obligations or liabilities of the Servicer arising on or
before the Assumption Date regardless of when the liability, duty,
responsibility or obligation of the Servicer arose, whether provided by the
terms of this Agreement, arising by operation of law or otherwise.
(c) Up to but not including the Assumption Date, the Backup Servicer shall
be paid the Backup Servicing Fee, as provided in SECTION 4.5 of this Agreement,
for services rendered hereunder on each Distribution Date.
(d) On each Distribution Date following the Assumption Date, the Backup
Servicer shall be entitled to the Servicing Fee.
(e) The Backup Servicer agrees to execute, acknowledge and deliver from
time to time all such further instruments and documents and to take all
reasonable actions as the Trustee may from time to time request to better assure
the Trustee and to preserve the rights and obligations created hereunder.
ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. SERVICER TERMINATION EVENTS. For purposes of this Agreement,
each of the following shall constitute a "SERVICER TERMINATION EVENT":
(a) Any failure by the Servicer to deliver to the Trustee for distribution
to Certificateholders or deposit in the Reserve Account any proceeds or payment
required to be so delivered under the terms of the Certificates or this
Agreement (including deposits of the Purchase Amount pursuant to SECTION 2.6 and
SECTION 3.7) that continues unremedied for a period of two Business Days (or one
Business Day with respect to payment of Purchase Amounts) after the date such
payment is due;
(b) Failure by the Servicer to deliver to the Trustee (i) any Servicing
Certificate required by SECTION 3.9, (ii) any annual statement as to compliance
pursuant to SECTION 3.10, in each case within five (5) Business Days after the
date such certificate is required to be delivered and (iii) any Accountant's
Report pursuant to SECTION 3.11;
(c) Failure on the part of the Servicer to observe its covenants and
agreements set forth in SECTION 7.3(a) or repudiation by the Servicer of any of
its covenants and agreements in this Agreement;
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(d) Failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement, which failure continues unremedied for a period of 30 days after
the earlier of the date on which (i) it obtains actual knowledge of such failure
and (ii) written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee or Certificateholders
evidencing not less than [ ]% of the Certificate Balance;
(e) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or another
present or future, federal or state, bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Servicer or of any substantial part of its
property or ordering the winding up or liquidation of the affairs of the
Servicer and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days or the commencement of an involuntary case
under the federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar law and
such case is not dismissed within 60 days;
(f) The commencement by the Servicer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or the consent by the
Servicer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Servicer or of any substantial part of its property or the making by the
Servicer of an assignment for the benefit of creditors or the failure by the
Servicer generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing;
(g) Any representation, warranty or statement of the Servicer made in
this Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time
when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Trust and, within 30 days after the earlier of the date on which (i) it
obtains actual knowledge of such inaccuracy and (ii) written notice thereof
shall have been given to the Servicer by the Trustee the circumstances or
condition in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured; and
(h) The occurrence of a Servicer Termination Trigger Event that has not
been Deemed Cured.
SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a Servicer
Termination Event shall occur and be continuing, any of the Trustee or the
Holders of Certificates evidencing not less than a Certificate Majority, by
notice given in writing to the Servicer (and to the Trustee if given by the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement; PROVIDED, HOWEVER, that no termination shall
relieve the Servicer of any liability to which it has previously become subject
under this Agreement. Upon receipt by the Servicer of such written notice, all
authority, power, obligations and responsibilities of the Servicer under this
Agreement, whether with respect to the Certificates or the Trust Property or
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otherwise, automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer; and, PROVIDED, FURTHER, that the Backup
Servicer shall have no liability with respect to any obligation which was
required to be performed by the prior Servicer prior to the date that the Backup
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer. Each successor Servicer is authorized
and empowered by this Agreement to execute and deliver, on behalf of the prior
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and the other Trust
Property and the applicable Related Documents to show the Trustee as lienholder
or secured party on the related Lien Certificates, or otherwise. The prior
Servicer agrees to cooperate with the Backup Servicer in effecting the
termination of the responsibilities and rights of the prior Servicer under this
Agreement, including, without limitation, the transfer to the Backup Servicer
for administration by it of all cash amounts that shall at the time be held by
the prior Servicer for deposit, or have been deposited by the prior Servicer, in
the Collection Account or thereafter received with respect to the Receivables
and the delivery to the Backup Servicer of all Receivable Files and a computer
tape in readable form containing all information necessary to enable the Backup
Servicer or a successor Servicer to service the Receivables and the other Trust
Property. The Servicer shall, if requested, cooperate with the successor
Servicer in the establishment of a new Lockbox Account pursuant to SECTION
3.2(e) hereof. The Trustee and the Backup Servicer may set off and deduct any
amounts owed by the terminated Servicer from any amounts payable to the
terminated Servicer pursuant to this Agreement. The terminated Servicer shall
grant the Trustee and the Backup Servicer reasonable access to the terminated
Servicer's premises at the terminated Servicer's expense.
SECTION 8.3. APPOINTMENT OF SUCCESSOR. (a) On and after (i) the time the
Servicer receives a notice of termination pursuant to SECTION 8.2 or (ii) upon
the resignation of the Servicer pursuant to SECTION 7.5, the Backup Servicer
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for in
this Agreement, and shall be subject to all the responsibilities, restrictions,
duties, liabilities and termination provisions relating thereto placed on the
Servicer by the terms and provisions of this Agreement; PROVIDED, HOWEVER, that
the Backup Servicer shall not be liable for any acts, omissions or obligations
of the Servicer prior to such succession or for any breach by the Servicer of
any of its representations and warranties contained in this Agreement or in any
of its Related Documents. The Trustee and such successor Servicer shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to termination under SECTION 8.2 upon the occurrence of any
Servicer Termination Event applicable to it as Servicer.
(b) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under the Agreement if the Servicer had not resigned or been
terminated hereunder. If any successor Servicer is appointed for any reason, a
Certificate Majority and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer. In addition, any successor
Servicer shall be entitled to reasonable transition expenses incurred in acting
as successor Servicer, such expenses to be paid by the outgoing Servicer.
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SECTION 8.4. NOTIFICATION TO CERTIFICATEHOLDERS. Upon any termination of,
or appointment of a successor to, the Servicer pursuant to this Article VIII,
the Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to the
Rating Agency.
SECTION 8.5. ACTION UPON CERTAIN FAILURES OF THE SERVICER. If either the
Seller or the Backup Servicer shall obtain actual knowledge of any Servicer
Termination Event or event but for the lapse of time or the giving of notice, or
both, would constitute a Servicer Termination Event, it shall be obligated to
notify promptly the Trustee and the Rating Agency of such occurrence or
circumstance. In the event a Trustee Officer of the Trustee shall have received
such notice (or any comparable notice from the Servicer or by a
Certificateholder) or otherwise obtained actual knowledge of any failure of the
Servicer specified in SECTION 8.1 which would give rise to a right of
termination under such Section upon the Servicer's failure to remedy the same
after notice, the Trustee shall give prompt notice thereof to the Servicer, the
Rating Agency and the Certificateholders. The Trustee shall be under no duty or
obligation to investigate or inquire as to any potential failure of the Servicer
specified in SECTION 8.1.
SECTION 8.6. WAIVER OF PAST DEFAULTS. A Certificate Majority may, on behalf
of all Holders of all Certificates, waive in writing any default by the Servicer
in the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
ARTICLE IX
THE TRUSTEE
SECTION 9.1. DUTIES OF TRUSTEE. (a) Subject to paragraph (c) of this
SECTION 9.1, the Trustee, in its capacity as trustee, shall undertake to perform
such duties and only such duties as are specifically set forth in this Agreement
with the same degree of skill and care as a prudent person would exercise under
the circumstance in the conduct of such Person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement, shall examine them to determine whether they conform to the
requirements of this Agreement; PROVIDED, HOWEVER, that the Trustee shall not be
responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order or other instrument furnished by the
Servicer or the Seller hereunder.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith or willful misfeasance; PROVIDED, HOWEVER, that:
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(i) 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, the Trustee may
conclusively rely on the truth of the statements and the correctness of the
opinions expressed in any certificates or opinions 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 Trustee Officer, unless it shall be proven that the Trustee
shall have been negligent in performing its duties in accordance with the
terms of this Agreement; and
(iii) The Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement.
(d) Notwithstanding any other provision of 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 (unless as
a result of the Trustee's failure to perform its duties as required herein), or
in the exercise of any of its rights or powers, if there shall be reasonable
grounds for believing that the repayment of such funds or indemnity satisfactory
to it 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.
(e) 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 this
Agreement, or of any failure by the Seller to comply with the obligations of the
Seller in this Agreement, unless a Trustee Officer obtains actual knowledge of
such failure or the Trustee receives written notice of such failure from the
Servicer or the Seller, as the case may be, or the Holders of Certificates
evidencing not less than [ ]% of the Certificate Balance.
(f) Except for actions expressly authorized by this Agreement, the Trustee
shall take no action reasonably likely to impair the security interests created
or existing under any Receivable or Financed Vehicle or to impair the value of
any Receivable or Financed Vehicle. All information obtained by the Trustee
regarding the Obligors and the Receivables, whether upon the exercise of its
rights under this Agreement or otherwise, shall be maintained by the Trustee in
confidence and shall not be disclosed to any other Person, unless such
disclosure is required by this Agreement or any applicable law or regulation.
(g) Except as expressly provided in this Agreement and without limiting the
generality of this Section 9.1, the Trustee shall have no duty (A) to see to any
recording, filing, or
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depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance, (C) 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, assessed or levied against, any part of the Trust Fund from funds
available in the Collection Account, or (D) 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 parties.
SECTION 9.2. TRUSTEE'S CERTIFICATE. On or as soon as practicable after each
Distribution Date on which Receivables shall be assigned to the Seller or the
Servicer, as applicable, pursuant to this Agreement, based on amounts deposited
to the Collection Account, notices received pursuant to this Agreement and the
information contained in the Servicing Certificate for the related Collection
Period, identifying the Receivables purchased by the Seller pursuant to SECTION
2.6 or 10.2 or purchased by the Servicer pursuant to SECTION 2.9, 3.7 or 10.2,
the Trustee shall execute a Trustee's Certificate (in the form of EXHIBIT E-1 or
E-2, as applicable), and shall deliver such Trustee's Certificate, accompanied
by a copy of the Servicing Certificate for such Collection Period to the Seller
or the Servicer, as the case may be. The Trustee's Certificate submitted with
respect to such Distribution Date shall operate, as of such Distribution Date,
as an assignment, without recourse, representation, or warranty, to the Seller
or the Servicer, as the case may be, of all the Trustee's right, title, and
interest in and to such repurchased Receivable, and all security and documents
relating thereto, such assignment being an assignment outright and not for
security. In addition, the Trustee shall execute and deliver additional
documents and releases as necessary for the release of the Trustee's right,
title and interest in and to such Repurchased Receivable.
SECTION 9.3. CERTAIN MATTERS AFFECTING TRUSTEE. Except as otherwise
provided in SECTION 9.1:
(a) The Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
Servicing Certificate, certificate of auditors, or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) The Trustee may consult with counsel, and any written advice of counsel
or Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it under this Agreement in
good faith and in accordance with such written advice of counsel or Opinion of
Counsel;
(c) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or 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; PROVIDED, HOWEVER, that the
Trustee shall, upon
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the occurrence of a Servicer Termination Event (that shall not have been cured
or waived), exercise the rights and powers vested in it by this Agreement with
reasonable care and skill;
(d) The Trustee shall not be bound to make any investigation into the facts
of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by Holders of Certificates
evidencing not less than [ ]% of the Certificate Balance; 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 indemnity satisfactory to it against such cost, expense, or
liability as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Person making such request or, if paid by the
Trustee, shall be reimbursed by the Person making such request upon demand,
unless a Servicer Termination Event shall have occurred and is continuing, in
which case such reasonable expenses shall be paid by the Servicer; PROVIDED,
HOWEVER, if Triad shall no longer be the Servicer, such expenses shall be paid
by the requesting party. Nothing in this clause (d) shall affect the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors;
(e) 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. The Trustee shall not be responsible for any
misconduct or negligence of any such agent or attorney appointed with due care
by it hereunder. The Trustee shall not be responsible for any misconduct or
negligence attributable to the acts or omissions of the Servicer;
(f) The Trustee may conclusively rely, as to factual matters relating to
the Seller or the Servicer, on an Officer's Certificate of the Seller or
Servicer, respectively;
(g) The Trustee shall not be required to take any action or refrain from
taking any action under this Agreement, or any Related Documents referred to
herein, nor shall any provision of this Agreement, or any such related document
be deemed to impose a duty on the Trustee to take action, if the Trustee shall
have been advised by counsel that such action is contrary to (i) the terms of
this Agreement, (ii) any such related document or (iii) law; and
(h) The Trustee shall not be personally liable for any 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.
SECTION 9.4. TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the execution and authentication of
the Certificates) or of any Receivable or related document, except to the extent
otherwise expressly provided herein. The Trustee shall at no time (except during
such time, if any, as it is acting as successor Servicer) 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
efficiency of the Trust or its ability to generate the payments to be
distributed to
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Certificateholders under this Agreement, including, without limitation, the
existence, condition, location and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence of any
Receivable or any computer or other record thereof (it being understood that the
Trustee has not reviewed and does not intend to review such matters, the sole
responsibility for such review being vested in the Seller and the Servicer as
applicable); the completeness of any Receivable; the receipt by the Servicer of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller and the Servicer with any covenant or the breach by the Seller and
the Servicer of any warranty or representation made under this Agreement or in
any related document and the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof, any investment of monies by or at the direction
of the Servicer or any loss resulting therefrom (it being understood, however,
that the Trustee shall remain responsible for any Trust Property that it may
hold directly); the acts or omissions of the Seller, the Servicer, or any
Obligor; any action of the Servicer taken in the name of the Trustee; the
accuracy, content or completeness of any offering documents used in connection
with the sale of the Certificates or any action by the Trustee taken at the
instruction of the Servicer, the Seller or the Certificateholders holding the
requisite percentage of Certificates; PROVIDED, HOWEVER, that the foregoing
shall not relieve the Trustee of its obligation to perform its duties under this
Agreement in accordance with the standard of care set forth in SECTION 9.1
hereof, whether as Trustee or as successor Servicer. It is expressly understood
and agreed by the parties hereto that (a) this Agreement and the Certificates
are executed and delivered by [ ], not individually or personally but solely as
Trustee of the Trust, in the exercise of the powers and authority conferred and
vested in it, and (b) under no circumstances shall [ ] be personally liable for
the payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Trust under this Agreement and the Certificates. 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 Servicer in respect of the Receivables
prior to the time such funds are deposited in the Collection Account.
SECTION 9.5. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual or
any other capacity may become the owner or pledgee of Certificates and may deal
with the Seller and the Servicer in banking transactions with the same rights as
it would have if it were not Trustee.
SECTION 9.6. INDEMNITY OF TRUSTEE. The Seller and the Trustee hereby agree
that the Trustee shall be entitled to the Trustee Fee (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
created by this Agreement and in the exercise and performance of any of the
powers and duties under this Agreement of the Trustee. To the extent not covered
by Article VII, the Seller shall indemnify, defend, and hold harmless the
Trustee and the Backup Servicer, and their respective officers, directors,
employees and agents, from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance of the performance of the trusts and duties contained in this
Agreement, except to the extent that such cost, expense, loss, claim, damage or
liability is due to the bad faith or negligence (except for errors in judgment)
of the Trustee or the Backup Servicer, respectively. Such
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indemnity shall be made from the Seller's own funds and not from any Trust
Property or the Reserve Account. In addition, the Seller in SECTION 6.2 has
agreed to indemnify the Trustee with respect to certain matters, the Servicer in
SECTION 7.2 has agreed to indemnify the Trustee with respect to certain matters,
and the Certificateholders in their individual capacity under SECTION 9.3(c) or
(d) may agree to indemnify the Trustee under certain circumstances.
SECTION 9.7. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee under this
Agreement shall at all times be organized and doing business under the laws of
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; and
having a rating, both with respect to long-term and short-term unsecured
obligations, of not less than investment grade by the Rating Agency. 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 9.7, 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 9.7, the Trustee shall resign immediately in the manner and with the
effect specified in SECTION 9.8.
SECTION 9.8. RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to the
provisions of subsection (c) of this SECTION 9.8, the Trustee and the Collateral
Agent may at any time resign and be discharged from the trusts hereby created by
giving 30 days' prior written notice thereof to the Servicer and the Seller, and
resignation of discharge of the Trustee shall result in resignation or discharge
of the Collateral Agent. Upon receiving such notice of resignation, the Seller,
with the prior written consent of a Certificate Majority, shall promptly appoint
a successor Trustee and Collateral Agent by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and
Collateral Agent, one copy to the successor Trustee and Collateral Agent and one
copy to the Rating Agency. If no successor Trustee or Collateral Agent shall
have been so appointed and have accepted appointment within 60 days after the
giving of such notice of resignation, the resigning Trustee or Collateral Agent
may petition any court of competent jurisdiction for the appointment of a
successor Trustee or Collateral Agent.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of SECTION 9.7 and shall fail to resign after written
request therefor by the Seller, or if at any time the Trustee shall be unable to
act, or shall be adjudged bankrupt or insolvent, or a receiver, conservator or
liquidator 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
Seller or a Certificate Majority may remove the Trustee. A Certificate Majority
may also remove the Trustee at any time with cause by written request to the
Trustee by the Certificate Majority with a copy to the Seller. If the Trustee
shall be removed under the authority of the immediately preceding two sentences,
the Seller, with the prior written consent of a Certificate Majority, shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee or so removed and one
copy to the successor Trustee, and pay all fees and expenses
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owed to the outgoing Trustee. A copy of such notice shall be furnished promptly
to the Rating Agency.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this SECTION 9.8 shall
not become effective until acceptance of appointment by the successor Trustee
pursuant to SECTION 9.9 and payment of all fees and expenses owed to the
outgoing Trustee. The Seller shall provide prompt notice of such resignation or
removal of the Trustee to the Rating Agency.
(d) The retiring Trustee shall not be liable for the acts or omissions of
any successor Trustee.
(e) All reasonable fees, charges and expenses shall be paid to the retiring
Trustee upon the appointment of a successor Trustee pursuant to SECTION 9.9.
SECTION 9.9. SUCCESSOR TRUSTEE. (b) Any successor Trustee appointed as
provided in SECTION 9.8 shall execute, acknowledge and deliver to the Servicer,
the Seller 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 (except as provided below), 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; but, on request of the Seller or the successor Trustee, such
predecessor Trustee shall, upon payment of its charges then unpaid, execute and
deliver an instrument transferring to such successor Trustee all of the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such Trustee so ceasing to act hereunder. Upon request of any such successor
Trustee, the Seller, on behalf of the Trust, shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts. The predecessor Trustee
shall deliver to the successor Trustee all documents and statements held by it
under this Agreement or any Related Document; and the predecessor Trustee and
the other parties to such Related Documents shall amend any related document to
make the successor Trustee the successor to the predecessor Trustee thereunder;
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 9.9 unless at the time of such acceptance such
successor Trustee shall be eligible under the provisions of SECTION 9.7. Upon
acceptance of appointment by a successor Trustee as provided in this SECTION
9.9, the Seller shall mail notice by first-class mail of the successor of such
Trustee and the address of the successor Trustee's Corporate Trust Office under
this Agreement, to the Rating Agency, and all Holders of Certificates at their
addresses as shown in the Certificate Register. If the Seller fails 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
Seller.
SECTION 9.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which the
Trustee may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or
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any Person succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible pursuant to SECTION 9.7, 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; PROVIDED,
HOWEVER, that the Trustee shall mail notice of such merger or consolidation to
the Rating Agency and the Certificateholders.
SECTION 9.11. CO-TRUSTEE; 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 Seller and the Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more persons approved by the Trustee to act as co-trustee, jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this SECTION 9.11, such powers, duties, obligations,
rights, and trusts as the Seller and the Trustee may consider necessary or
desirable. If the Seller shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, 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 9.7, except that the co-trustee or its parent shall
comply with the rating requirements set forth therein, and no notice of a
successor Trustee pursuant to SECTION 9.9 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required pursuant
to SECTION 9.9.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties, and obligations conferred or imposed
upon the Trustee shall be conferred upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under this Agreement or, as
successor to the Servicer under this Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties, and obligations (including the holding of title to
the Trust 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;
(ii) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) The Servicer and the Trustee acting jointly may, at any time
accept the resignation of or remove any separate trustee or co-trustee.
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Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the other 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 IX. 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.
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 9.12. REPRESENTATIONS AND WARRANTIES OF TRUSTEE, AND COLLATERAL
AGENT. Each of the Trustee, and the Collateral Agent hereby makes the following
representations and warranties with respect to itself as of the date of this
Agreement on which the Seller and the Certificateholders shall rely:
(a) it is a New York banking corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation;
(b) it has full power, authority and legal right to execute, deliver and
perform this Agreement and its Related Documents, and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement and its Related Documents;
(c) the execution, delivery and performance by it of this Agreement and its
Related Documents (i) do not violate any provision of any law or regulation
governing the banking and trust powers of it or any order, writ, judgment, or
decree of any court, arbitrator, or governmental authority applicable to it or
any of its assets, (ii) do not violate any provision of its corporate charter or
by-laws, or (iii) to the best of its knowledge do not violate any provision of,
or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any lien on any of the Trust Property
pursuant to the provisions of any mortgage, indenture, contract, agreement or
other undertaking other than this Agreement to which it is a party;
(d) the execution, delivery and performance by it of this Agreement and its
Related Documents do 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 its
banking and corporate trust activities; and
(e) this Agreement and its Related Documents has been duly executed and
delivered by it and constitutes the legal, valid and binding agreement of it,
enforceable in
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accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
SECTION 9.13. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as Trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
SECTION 9.14. SUIT FOR ENFORCEMENT. If a Servicer Termination Event shall
occur and be continuing, the Trustee, in its discretion may (but shall have no
duty or obligation so to proceed), subject to the provisions of SECTION 9.1,
proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in the execution of any
power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
SECTION 9.15. APPOINTMENT OF CUSTODIANS. The Trustee may, with the consent
of the Servicer, appoint one or more Custodians to hold all or a portion of the
Trust Property as agent for the Trustee, by entering into a Custodial Agreement.
Subject to this Article IX, the Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders. The Trustee shall be liable
for the fees of any Custodian appointed hereunder. Each Custodian shall be a
depository institution subject to supervision by federal or state authority and
shall be qualified to do business in the jurisdiction in which it holds any
Trust Property. Each Custodial Agreement may be amended only as provided in
Section 11.1.
ARTICLE X
TERMINATION
SECTION 10.1. TERMINATION OF THE TRUST. (c) The respective obligations and
responsibilities of the Seller, the Servicer, the Backup Servicer and the
Trustee created by this Agreement and the Trust created by this Agreement shall
terminate upon the earlier of (i) the latest of (A) the payment in full at
maturity or other liquidation of the last Receivable (including the purchase by
the Seller or the Servicer at its option of the corpus of the Trust as described
in SECTION 10.2) and the subsequent distribution to Certificateholders pursuant
to SECTION 4.5 of the amount required to be deposited pursuant to SECTION 10.2
or (B) the payment to Certificateholders of all amounts required to be paid to
them pursuant to this Agreement and the expiration of any preference period
related thereto and the disposition of all property held as part
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of the Trust; and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States of America to the Court of St. James, living on the date of this
Agreement. The Servicer or Seller, as applicable, shall promptly notify the
Trustee and the Rating Agency of any prospective termination pursuant to this
SECTION 10.1.
(b) 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 earlier than the 15th day
and not later than the 25th day of the month next preceding the specified
Distribution Date 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) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments shall be 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 be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to SECTION 4.5. Notwithstanding
the foregoing, if on the Distribution Date upon which final payment of the
Certificates is to be made, there are only five or less initial
Certificateholders of record, the amounts distributable to such initial
Certificateholders pursuant to SECTION 4.5 will be paid on the final
Distribution Date by wire transfer or check as set forth in SECTION 4.5(d), and
each such initial Certificateholder shall present and surrender its Certificates
at the office of the Trustee designated in the notice referred to above as
promptly as practicable after such Distribution Date.
(c) 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 shall 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 or, if none, from such Certificateholders.
SECTION 10.2. OPTIONAL PURCHASE OF ALL RECEIVABLES. On the last day of any
Collection Period as of which the Pool Balance shall be less than or equal to
ten percent (10%) multiplied by the Cutoff Date Pool Balance, the Seller may at
its option, and if such option is not exercised, the Servicer may at its option,
purchase the corpus of the Trust; PROVIDED, HOWEVER, that the Seller or the
Servicer, as applicable, may not effect any such purchase unless the Trustee
shall have received an Opinion of Counsel to the effect that such purchase would
not constitute a fraudulent conveyance. To exercise such option the Seller or
the Servicer, as applicable, shall deposit pursuant to SECTION 4.4 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including any Liquidated Receivables not previously deposited),
plus the appraised value of any other property held by the Trust, such value to
be
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determined by an appraiser mutually agreed upon by the Seller or the Servicer,
as applicable, the Trustee, and the Initial Certificateholder, and shall succeed
to all interests in and to the Trust. Such deposit shall be allocated and paid
as set forth in SECTION 4.5 hereof. The fees and expenses related to such
appraisal shall be paid by the party exercising the option to purchase.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. AMENDMENT.
(a) This Agreement may be amended from time to time by the Seller, the
Servicer, the Trustee, the Backup Servicer and the Collateral Agent with the
consent (which consent of any Certificateholder given pursuant to this Section
or pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Certificate and of any
Certificate issued upon the transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon the Certificate) of
the Holders of a Certificate Majority 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 the
Certificates; PROVIDED, HOWEVER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of, or
change the allocation or priority of, collections of payments on Receivables or
distributions that shall be required to be made on any Certificate or change the
Class A Pass-Through Rate, the Pass-Through Rate or the Class C Pass-Through
Rate without the consent of each Certificateholder affected thereby, (ii) reduce
the aforesaid percentage of the Class A Certificate Balance, the Certificate
Balance or the Class C Certificate Balance required to consent to any such
amendment, without the consent of the Holders of all Certificates of the
applicable Class then outstanding, (iii) result in a downgrade or withdrawal of
the then current rating of any Class of Certificates by the Rating Agency
without the consent of each Certificateholder, or (iv) change the Reserve
Account Requirement without the consent of each Certificateholder and the Rating
Agency. This Agreement may be amended from time to time by the Seller, the
Servicer, the Trustee and the Collateral Agent, without the consent of the
Certificateholders, to cure any ambiguity, correct or supplement any provision
therein which may be inconsistent with any other provision therein, or make any
other provisions with respect to matters or questions arising under this
Agreement which are not inconsistent with the provisions of this Agreement;
provided that such action will not, in the opinion of counsel satisfactory to
the Trustee, which opinion shall not be delivered at the expense of the Trustee,
materially and adversely affect the interest of any Certificateholder.
(b) Prior to the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to the Rating Agency. Prior to the execution of any such amendment or consent,
the Trustee shall furnish a true copy of such amendment or consent to each
Certificateholder.
(c) The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement) and of evidencing the
authorization of the
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execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
(d) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. PROTECTION OF TITLE TO TRUST. (a) The Seller or the Servicer
or both shall take or cause to be taken such actions and execute and file such
documents and instruments including without limitation, financing statements and
cause to be executed and filed such continuation and other statements, all in
such manner and in such places as may be required by law (or deemed reasonably
necessary by a Certificate Majority) fully to preserve, maintain and protect the
interest of the Certificateholders, the Trust and the Trustee under this
Agreement in the Trust Property and in the proceeds thereof against all other
Persons. The Seller shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) The Seller shall not 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 it shall have given the Trustee at least 60 days' prior written notice
thereof, shall have promptly filed appropriate amendments to all previously
filed financing statements and continuation statements and shall have delivered
an Opinion of Counsel (i) stating that, in the opinion of such counsel, all
amendments to all previously filed financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trustee in the Receivables and the other Trust
Property, and reciting the details of such filings, or (ii) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
(c) The Seller shall give the Trustee at least 30 days' prior written
notice of any relocation of its chief executive office or principal place of
business if, as a result of such relocation, the applicable provisions of the
UCC would require the filing of any amendment of any previously filed financing
or continuation statement or of any new financing statement, shall promptly file
any such amendment and shall deliver an Opinion of Counsel (i) stating that, in
the opinion of such counsel, all amendments to all previously filed financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in the
Receivables and the other Trust Property, and reciting the details of such
filings, or (ii) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest. The Servicer shall at
all times maintain each office from which it services Receivables and its chief
executive office and principal place of business within the United States of
America.
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(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 Collection Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any backup archives) that
refer to any Receivable indicate clearly the interest of Triad Auto Receivables
Trust 199[ ]-[ ] in such Receivable and that the Receivable is owned by the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, the
Receivable has been paid in full or repurchased by Triad, the Seller or the
Servicer.
(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 printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
(unless such Receivable has been paid in full or repurchased by Triad, the
Seller, the Seller or the Servicer).
(g) The Servicer shall permit the Trustee, the Rating Agency, the Backup
Servicer, the Seller 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 or any other portion of the Trust
Property in its possession; any Certificateholder shall be afforded the same
rights as described in this clause (g), provided that such Certificateholder
agrees to pay for its own fees and expenses incurred in such inspection, audit
and making copies and abstracts.
(h) The Servicer shall promptly furnish to the Trustee, the Backup Servicer
and the Seller at any time upon reasonable prior request a list of all
Receivables then held as part of the Trust, together with a reconciliation of
such list to the Schedule of Receivables and to each of the Servicing
Certificates furnished before such request indicating removal of Receivables
from the Trust. A copy of such list and reconciliation may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(i) In the event any of the events described in SECTION 8.1(e) or (f) shall
have occurred, or in the event Triad shall have been removed or replaced as
Servicer for any reason, then Triad and/or the Servicer shall immediately cause,
at the expense of Triad, each Certificate of Title for a Financed Vehicle to be
marked to reflect the security interest of the Trustee in the Financed Vehicle,
and Triad hereby appoints the Trustee its attorney-in-fact to effect such
marking, and the Trustee hereby accepts such appointment. The appointment of the
Trustee hereunder shall not operate to relieve Triad and/or the Servicer of its
obligations to mark each certificate of title under this provision. Triad shall
be liable for all costs, fees and expenses incurred under this SECTION 11.2(i).
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SECTION 11.3. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) 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.
(b) No Certificateholder shall have any right to vote (except as
specifically provided herein including in SECTION 11.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything set forth in this
Agreement, or contained in the terms of the 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 by the parties to this Agreement pursuant
to any provision of this Agreement.
(c) 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 (i) such Holder previously shall have given to the Trustee a written
notice of default and of the continuance thereof, (ii) the Holders of
Certificates evidencing not less than [ ]% of the Certificate 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 indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, (iii) 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 (iv) during such 30-day period, no request or waiver inconsistent with such
written request has been given to the Trustee pursuant to this Section or
SECTION 8.6; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
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 11.3, each Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 11.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.5. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
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(1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS FROM ANY THEREOF;
(2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS
AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN ANY INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH
IN SECTION 11.12 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE OTHER PARTIES
HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(4) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION; AND
(5) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS
SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
SECTION 11.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 11.7. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
SECTION 11.8. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in SECTIONS 6.3 and 7.3 and as
provided in the provisions of the Agreement concerning the resignation of the
Servicer and the Backup Servicer, this Agreement may not be assigned by the
Seller or the Servicer without the prior written consent of a Certificate
Majority. The Assignor shall furnish prompt written notice of any proposed
assignment to the Rating Agency.
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SECTION 11.9. 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 Certificates upon
authentication thereof by the Trustee pursuant to SECTION 5.2 are and shall be
deemed fully paid.
SECTION 11.10. THIRD PARTY BENEFICIARIES. Except as otherwise specifically
provided herein with respect to Certificateholders, the parties to this
Agreement hereby manifest their intent that no third party shall be deemed a
third party beneficiary of this Agreement, and specifically that the Obligors
are not third party beneficiaries of this Agreement.
SECTION 11.11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which counterpart shall be deemed to be an original,
and all of which counterparts taken together shall constitute but one and the
same instrument.
SECTION 11.12. NOTICES. All demands, notices and communications under this
Agreement shall be in writing, and delivered (a) personally, (b) by certified
mail, return receipt requested, (c) by Federal Express or similar overnight
courier service or (d) by telecopy (with telephonic confirmation of receipt),
and shall be deemed to have been duly given upon receipt (i) in the case of
Triad or the Servicer, at the following address: One Pacific Plaza, 7711 Center
Avenue, Suite 100, Huntington Beach, California 92647 (Telecopy: (714)
894-8617), (ii) in the case of the Seller, at the following address: 7711 Center
Avenue, Suite 390, Huntington Beach, California 92647 (Telecopy: (714)
894-8617), (iii) in the case of the Trustee or the Collateral Agent, at the
following address: [ ], (iv) in the case of the Backup Servicer, at the
following address: [ ], and (v) in the case of the Rating Agency, at the
following address: [ ], or at such other address as shall be designated by any
such party in a written notice to each of the other parties. Any notice required
or permitted to be mailed to a Certificateholder shall be given by Federal
Express or similar overnight courier service, 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 upon receipt by such Certificateholder.
SECTION 11.13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the parties hereto and their respective successors and assigns, and shall inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns permitted hereunder. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Trustee, the Backup Servicer, the Collateral Agent and the Certificateholders
and their respective permitted successors and assigns, if any. Any request,
notice, direction, consent, waiver or other instrument or action by any
Certificateholder shall bind its successors and assigns.
SECTION 11.14. NONPETITION COVENANT. Until the date that is one year plus
one day shall have elapsed since the termination of the Trust, none of the
Seller, the Servicer, the Trustee, the Backup Servicer, the Collateral Agent or
any Holder of a Certificate shall petition or otherwise invoke the process of
any court or government authority for the purpose of commencing or sustaining a
case against the Trust or the Seller under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee,
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custodian, sequestrator or other similar official of the Trust or the Seller or
any substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Trust or the Seller.
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IN WITNESS WHEREOF, the Seller, the Servicer, the Trustee, the Backup
Servicer and the Collateral Agent have caused this Pooling and Servicing
Agreement to be duly executed by their respective officers, effective as of the
day and year first above written.
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION,
as Seller
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
TRIAD FINANCIAL CORPORATION,
as Servicer
By:___________________________
Name:
Title:
[ ], as Trustee, Backup
Servicer and Collateral Agent
By:___________________________
Name:
Title:
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Schedule A
Schedule of Receivables
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Schedule B
[ ]
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.................................................................................................. 1
SECTION 1.1. Definitions.......................................................................... 1
SECTION 1.2. Usage of Terms....................................................................... 17
SECTION 1.3. Section References................................................................... 17
SECTION 1.4. Limitation on Trust Fund Activities.................................................. 17
SECTION 1.5. Calculations......................................................................... 17
SECTION 1.6. Action by or Consent of Certificateholders........................................... 17
ARTICLE II THE TRUST AND TRUST PROPERTY..................................................................... 17
SECTION 2.1. Creation of Trust.................................................................... 17
SECTION 2.2. Conveyance of Receivables............................................................ 17
SECTION 2.3. Transfer Intended as Sale; Precautionary Security Interest; Tax Treatment............ 18
SECTION 2.4. Acceptance by Trustee................................................................ 19
SECTION 2.5. Representations and Warranties of Seller............................................. 20
SECTION 2.6. Repurchase Upon Breach............................................................... 23
SECTION 2.7. Conditions to Acceptance by Trustee.................................................. 24
SECTION 2.8. Custody of Receivable Files.......................................................... 25
SECTION 2.9. Collecting Lien Certificates Not Delivered on the Closing Date....................... 27
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES..................................................... 27
SECTION 3.1. Duties of Servicer................................................................... 27
SECTION 3.2. Collections; Modification and Amendment of Receivables; Lockbox Account.............. 28
SECTION 3.3. Realization Upon Defaulted Receivables............................................... 30
SECTION 3.4. Insurance............................................................................ 31
SECTION 3.5. Maintenance of Security Interests in Financed Vehicles............................... 31
</TABLE>
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SECTION 3.6. Additional Covenants of Servicer..................................................... 32
SECTION 3.7. Purchase of Receivables Upon Breach.................................................. 32
SECTION 3.8. Servicing Fee, Additional Servicing Fee and Servicer Expenses........................ 32
SECTION 3.9. Servicing Certificate................................................................ 33
SECTION 3.10. Annual Statement as to Compliance; Notice of Default................................ 33
SECTION 3.11. Annual Independent Certified Public Accountant's Report; Audited Financials......... 33
SECTION 3.12. Access to Certain Documentation and Information Regarding Receivables............... 34
SECTION 3.13. Monthly Tape; Verification of Servicing Certificate; Backup Servicer................ 35
SECTION 3.14. Fidelity Coverage; Errors and Omissions Insurance................................... 36
SECTION 3.15. Delegation of Duties................................................................
ARTICLE IV DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO CERTIFICATEHOLDERS................................. 36
SECTION 4.1. Collection Account................................................................... 36
SECTION 4.2. Reimbursement from the Collection Account............................................ 37
SECTION 4.3. Application of Collections........................................................... 37
SECTION 4.4. Additional Deposits.................................................................. 38
SECTION 4.5. Distributions........................................................................ 38
SECTION 4.6. Net Deposits......................................................................... 41
SECTION 4.7. The Reserve Account.................................................................. 41
SECTION 4.8. Statements to Certificateholders; Tax Returns........................................ 42
ARTICLE V THE CERTIFICATES.................................................................................. 44
SECTION 5.1. The Certificates...................................................................... 44
SECTION 5.2 Authentication of Certificates........................................................ 45
SECTION 5.3. Mutilated, Destroyed, Lost or Stolen Certificates..................................... 46
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SECTION 5.4. Persons Deemed Owners................................................................. 46
SECTION 5.5. Access to List of Certificateholders' Names and Addresses............................. 46
SECTION 5.6. Maintenance of Office or Agency.......................................................
ARTICLE VI THE SELLER....................................................................................... 47
SECTION 6.1. Representations of Seller............................................................. 47
SECTION 6.2. Liability of Seller; Indemnities...................................................... 49
SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations of Seller,
Amendment of Certificate of Incorporation and Certain Covenants of the Seller....................... 50
SECTION 6.4. Limitation on Liability of Seller and Others.......................................... 51
SECTION 6.5. Seller May Own Certificates...........................................................
ARTICLE VII THE SERVICER AND BACKUP SERVICER................................................................. 51
SECTION 7.1. Representations and Warranties of Servicer............................................ 51
SECTION 7.2. Indemnities of Servicer............................................................... 53
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations.......................... 54
SECTION 7.4. Limitation on Liability of Servicer, Backup Servicer and Others....................... 55
SECTION 7.5. Servicer and Backup Servicer Not to Resign............................................ 56
SECTION 7.6. Representations and Warranties of Backup Servicer..................................... 57
SECTION 7.7. Duties of Backup Servicer............................................................. 58
ARTICLE VIII SERVICER TERMINATION EVENTS..................................................................... 59
SECTION 8.1. Servicer Termination Events........................................................... 59
SECTION 8.2. Consequences of a Servicer Termination Event.......................................... 60
SECTION 8.3. Appointment of Successor.............................................................. 61
SECTION 8.4. Notification to Certificateholders.................................................... 62
SECTION 8.5. Action Upon Certain Failures of the Servicer.......................................... 62
SECTION 8.6. Waiver of Past Defaults............................................................... 62
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ARTICLE IX THE TRUSTEE....................................................................................... 62
SECTION 9.1. Duties of Trustee..................................................................... 62
SECTION 9.2. Trustee's Certificate................................................................. 64
SECTION 9.3. Certain Matters Affecting Trustee..................................................... 64
SECTION 9.4. Trustee Not Liable for Certificates or Receivables.................................... 65
SECTION 9.5. Trustee May Own Certificates.......................................................... 66
SECTION 9.6. Indemnity of Trustee.................................................................. 66
SECTION 9.7. Eligibility Requirements for Trustee.................................................. 67
SECTION 9.8. Resignation or Removal of Trustee..................................................... 67
SECTION 9.9. Successor Trustee..................................................................... 68
SECTION 9.10. Merger or Consolidation of Trustee................................................... 68
SECTION 9.11. Co-Trustee; Separate Trustee......................................................... 69
SECTION 9.12. Representations and Warranties of Trustee, and Collateral Agent...................... 70
SECTION 9.13. Trustee May Enforce Claims Without Possession of Certificates........................ 71
SECTION 9.14. Suit for Enforcement................................................................. 71
SECTION 9.15. Appointment of Custodians............................................................ 71
ARTICLE X TERMINATION....................................................................................... 71
SECTION 10.1. Termination of the Trust............................................................. 71
SECTION 10.2. Optional Purchase of All Receivables................................................. 72
ARTICLE XI................................................................................................... 73
MISCELLANEOUS PROVISIONS..................................................................................... 73
SECTION 11.1. Amendment............................................................................ 73
SECTION 11.2. Protection of Title to Trust......................................................... 74
SECTION 11.3. Limitation on Rights of Certificateholders........................................... 76
SECTION 11.4. GOVERNING LAW........................................................................ 76
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SECTION 11.5. SUBMISSION TO JURISDICTION; WAIVERS.................................................. 76
SECTION 11.6. WAIVER OF JURY TRIAL................................................................. 77
SECTION 11.7. Severability of Provisions........................................................... 77
SECTION 11.8. Assignment........................................................................... 77
SECTION 11.9. Certificates Nonassessable and Fully Paid............................................ 78
SECTION 11.10. Third Party Beneficiaries........................................................... 78
SECTION 11.11. Counterparts........................................................................ 78
SECTION 11.12. Notices............................................................................. 78
SECTION 11.13. Successors and Assigns.............................................................. 78
SECTION 11.14. Nonpetition Covenant................................................................ 78
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SCHEDULE A - SCHEDULE OF RECEIVABLES..............................
SCHEDULE B - LOCATION OF RECEIVABLE FILES.........................
SCHEDULE 4.8- FORM OF INFORMATION REQUEST..........................
EXHIBITS
EXHIBIT A - FORM OF CLASS A CERTIFICATE..........................
EXHIBIT B - FORM OF CLASS B CERTIFICATE..........................
EXHIBIT C - FORM OF CLASS C CERTIFICATE..........................
EXHIBIT D - FORM OF SERVICING CERTIFICATE........................
EXHIBIT E-1 - FORM OF TRUSTEE'S CERTIFICATE (SELLER ASSIGNMENT)....
EXHIBIT E-2 - FORM OF TRUSTEE'S CERTIFICATE (SERVICER ASSIGNMENT)..
EXHIBIT F-1 - FORM OF TRUST RECEIPT................................
EXHIBIT F-2 - FORM OF SERVICING OFFICER'S CERTIFICATE..............
EXHIBIT G - FORM OF COLLATERAL INSURANCE.........................
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Exhibit 4.3
FORM OF SALE AND SERVICING AGREEMENT
RELATING TO
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ]
among
TRIAD FINANCIAL CORPORATION
in its individual capacity
and as Servicer
[ ]
as Company
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ]
as Purchaser
and
[ ]
as Indenture Trustee and Backup Servicer
----------------------------------
Dated as of [ ]
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS...................................................................................1
Section 1.1. Definitions.................................................................................1
Section 1.2. Usage of Terms.............................................................................25
Section 1.3. Calculations...............................................................................25
Section 1.4 Section References.........................................................................25
Section 1.5. Action by or Consent of Noteholders........................................................25
Section 1.6. No Recourse................................................................................25
Section 1.7. Nonpetition Covenant.......................................................................25
Section 1.8. Limitation on Trust Fund Activities........................................................26
Section 1.9. Material Adverse Effect....................................................................26
ARTICLE II CONVEYANCE OF RECEIVABLES; ACCEPTANCE
BY INDENTURE TRUSTEE..........................................................................26
Section 2.1. Conveyance of Initial Receivables..........................................................26
Section 2.2. Conveyance of Subsequent Receivables.......................................................28
Section 2.3. Custody of Receivable Files................................................................31
Section 2.4. Conditions Precedent to Issuance by Trust..................................................32
Section 2.5. Representations and Warranties of Company..................................................33
Section 2.6. Repurchase or Replacement of Receivables Upon Breach of Warranty...........................34
Section 2.7. Indenture Trustee's Assignment of Receivables..............................................35
Section 2.8. Collection of Lien Certificates............................................................35
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES..................................................35
Section 3.1. Duties of the Servicer.....................................................................35
Section 3.2. Collection of Receivable Payments, Modifications of Receivables; Lockbox Account...........37
Section 3.3. Realization Upon Receivables...............................................................40
Section 3.4. Insurance..................................................................................41
Section 3.5. Maintenance of Security Interests in Vehicles..............................................41
Section 3.6. Covenants, Representations and Warranties of Servicer......................................42
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Section 3.7. Purchase or Replacement of Receivables Upon Breach of Covenant.............................46
Section 3.8. Servicer Fee, Payment of Certain Expenses by Servicer; Backup Servicer Fee.................46
Section 3.9. Servicer's Certificate.....................................................................47
Section 3.10. Annual Statement as to Compliance, Notice of Servicer Termination Event....................47
Section 3.11. Annual Independent Accountants'Report......................................................48
Section 3.12. Access to Certain Documentation and Information Regarding Receivables......................49
Section 3.13. Monthly Tape, Certain Duties of Backup Servicer............................................49
Section 3.14. Reports to the Commission..................................................................51
Section 3.15. Indenture Trustee Notification to Company..................................................51
Section 3.16. Insurance..................................................................................51
Section 3.17. Compliance with Laws.......................................................................51
Section 3.18. Delegation of Duties.......................................................................51
Section 3.19. Retention and Termination of Servicer......................................................51
ARTICLE IV PAYMENTS; STATEMENTS TO NOTEHOLDERS..........................................................52
Section 4.1. Trust Accounts.............................................................................52
Section 4.2. Servicer Reimbursements....................................................................55
Section 4.3. Capitalized Interest Account...............................................................56
Section 4.4. Application of Collections.................................................................56
Section 4.5. Additional Deposits........................................................................57
Section 4.6. Payments...................................................................................57
Section 4.7. Note Distribution Account..................................................................59
Section 4.8. Pre-Funding Account........................................................................60
Section 4.9. Net Deposits...............................................................................61
Section 4.10. Statements to Noteholders; Tax Returns.....................................................61
ARTICLE V THE RESERVE ACCOUNT..........................................................................63
Section 5.1. Withdrawals from Reserve Account...........................................................63
ARTICLE VI THE NOTE POLICY..............................................................................64
Section 6.1. Claims Under Note Policy...................................................................64
Section 6.2. Preference Claims..........................................................................65
Section 6.3. Surrender of Policy........................................................................66
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ARTICLE VII THE COMPANY..................................................................................66
Section 7.1. Liability of Company; Indemnities..........................................................66
Section 7.2. Merger or Consolidation of the Company.....................................................67
Section 7.3. Limitation on Liability of Company and Others..............................................67
Section 7.4. Special Purpose Entity.....................................................................67
Section 7.5. Restrictions on Liens......................................................................68
Section 7.6. Creation of Indebtedness, Guarantees.......................................................69
Section 7.7. Compliance with Laws.......................................................................69
Section 7.8. Further Instruments and Acts...............................................................69
Section 7.9. Investment Company Act.....................................................................69
ARTICLE VIII THE SERVICER.................................................................................69
Section 8.1. Liability of Servicer; Indemnities.........................................................69
Section 8.2. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or Backup
Servicer...................................................................................71
Section 8.3. Limitation on Liability of Servicer, Backup Servicer and Others............................72
Section 8.4. Servicer and Backup Servicer Not to Resign.................................................74
Section 8.5. Administrative Duties......................................................................75
Section 8.6. Representations and Warranties of Backup Servicer..........................................76
Section 8.7. Duties of Backup Servicer..................................................................77
ARTICLE IX SERVICER TERMINATION EVENTS..................................................................78
Section 9.1. Servicer Termination Event.................................................................78
Section 9.2. Consequences of a Servicer Termination Event...............................................80
Section 9.3. Appointment of Successor...................................................................80
Section 9.4. Notification to Noteholders................................................................82
Section 9.5. Action Upon Certain Failures of the Servicer...............................................82
Section 9.6. Waiver of Past Defaults....................................................................82
ARTICLE X TERMINATION..................................................................................82
Section 10.1. Optional Purchase of All Receivables.......................................................82
ARTICLE XI MISCELLANEOUS PROVISIONS.....................................................................83
Section 11.1. Amendment..................................................................................83
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Section 11.2. Protection of Title to Trust...............................................................84
Section 11.3. Limitation on Rights of Noteholders........................................................87
Section 11.4. GOVERNING LAW..............................................................................88
Section 11.5. SUBMISSION TO JURISDICTION; WAIVERS........................................................88
Section 11.6. WAIVER OF JURY TRIAL.......................................................................88
Section 11.7. Severability of Provisions.................................................................89
Section 11.8. Assignment.................................................................................89
Section 11.9. Notes Nonassessable and Fully Paid.........................................................89
Section 11.11. Counterparts...............................................................................89
Section 11.12. Notices....................................................................................89
Section 11.13. Successors and Assigns.....................................................................90
Section 11.14. Assignment to Trustee......................................................................90
Section 11.15. Nonpetition Covenants......................................................................90
SCHEDULE A SCHEDULE OF RECEIVABLES ON FILE WITH THE SERVICER AND THE INDENTURE TRUSTEE........................A-1
SCHEDULE B REPRESENTATIONS AND WARRANTIES OF COMPANY WITH RESPECT TO RECEIVABLES..............................B-1
SCHEDULE C FORM OF INFORMATION REQUEST........................................................................C-1
SCHEDULE D THREATENED LITIGATION..............................................................................D-1
EXHIBIT A FORM OF SERVICER'S CERTIFICATE.............................................................EXHIBIT A-1
EXHIBIT B REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS...............................................EXHIBIT B-1
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SALE AND SERVICING AGREEMENT, dated as of [ ] (this
"AGREEMENT"), among TRIAD FINANCIAL CORPORATION, a California corporation, in
its individual capacity ("TRIAD") and as Servicer (the "SERVICER"),
[ ], a [ ] corporation, as Company (the "COMPANY"), TRIAD
AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ], a Delaware business trust, as
purchaser (the "TRUST" or the "PURCHASER"), and [ ], a [ ]
banking corporation, as Indenture Trustee (in such capacity, the "INDENTURE
TRUSTEE") and as Backup Servicer (in such capacity, the "BACKUP SERVICER").
WHEREAS, pursuant to the Receivables Purchase Agreement (as defined
below), the Company has purchased from Triad certain receivables arising in
connection with motor vehicle retail installment contracts acquired by Triad
through motor vehicle dealers;
WHEREAS, the Company wishes to sell and the Trust wishes to purchase
certain of such receivables;
WHEREAS, pursuant to the Subsequent Purchase Agreement (as defined
below), the Company will purchase from Triad certain additional receivables
arising in connection with motor vehicle retail installment contracts acquired
by Triad through motor vehicle dealers;
WHEREAS, the Company wishes to sell and the Trust wishes to purchase
such additional receivables;
WHEREAS, the Servicer has agreed to service all such receivables, which
constitute the principal assets of the trust estate; and
WHEREAS, [ ] is willing to serve in the capacities of
Indenture Trustee and Backup Servicer hereunder.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, Triad, the Servicer, the Company, the Trust, the Indenture Trustee and
the Backup Servicer hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings set forth in the Trust Agreement or the Indenture (each
as defined below). Whenever capitalized and used in this Agreement, the
following words shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in SECTION 3.11.
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ACCOUNTING DATE: With respect to a Payment Date or a Determination
Date, the last day of the related Collection Period.
ACTUARIAL METHOD: The method of allocating a fixed level payment
between principal and interest, pursuant to which each scheduled monthly payment
is deemed to consist of an amount of interest equal to 1/12 of the stated APR of
the Receivable multiplied by the outstanding Principal Balance of the Receivable
and an amount of principal equal to the remainder of such scheduled monthly
payment.
ACTUARIAL RECEIVABLE: Any Receivable under which the portion of a
payment allocable to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
ADDITION NOTICE: With respect to any transfer of Subsequent Receivables
to the Trust pursuant to SECTION 2.2 of this Agreement, notice of the Company's
election to transfer Subsequent Receivables to the Trust, such notice to
designate the related, Subsequent Cutoff Date, Subsequent Transfer Date and the
approximate principal amount of Subsequent Receivables to be transferred on such
Subsequent Transfer Date.
ADDITIONAL FUNDS AVAILABLE: With respect to any Payment Date the sum of
(i) the Deficiency Claim Amount, if any, received by the Indenture Trustee with
respect to such Payment Date plus (ii) the Insurer Optional Deposit, if any,
received by the Indenture Trustee with respect to such Payment Date.
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For the purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
AGGREGATE PRINCIPAL BALANCE: With respect to the Closing Date, the
Initial Cutoff Date Principal Balance, and with respect to any Determination
Date, the sum of the Principal Balances (computed as of the related Accounting
Date) for all Receivables (other than Liquidated Receivables and Purchased
Receivables).
AGREEMENT: This Agreement and all exhibits and schedules hereto.
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
extended under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts of credit extended in respect of
accessories, insurance premiums, service and warranty policies or contracts and
other items customarily financed as part of motor vehicle retail installment
contracts.
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ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the annual
rate of finance charges stated in the Receivable.
AVAILABLE FUNDS: With respect to any Determination Date, the sum of (i)
the Collected Funds received by the Servicer during the related Collection
Period, (ii) all Purchase Amounts deposited in the Collection Account for the
related Collection Period, (iii) all income received from investments of funds
in the Collection Account during the related Collection Period, (iv) the Monthly
Capitalized Interest Amount with respect to such Payment Date, (v) the Insurer
Optional Deposit, if any, and (vi) any remaining Pre-Funded Amount applied to
the mandatory redemption of Notes, as applicable.
BACKUP SERVICER: [ ], its successor in interest pursuant to
SECTION 8.2 or such Person as shall have been appointed as Backup Servicer
pursuant to SECTION 8.4.
BACKUP SERVICER FEE: With respect to any Payment Date, the fee payable
to the Backup Servicer for services rendered during the related Collection
Period which shall be equal to one-twelfth of [ ]% multiplied by the Note
Balance as of the open of business on the first day of the related Collateral
Period, provided, however, in no event shall the Backup Servicer Fee be less
than $[ ] in aggregate in any calendar year.
BUSINESS DAY: Any day other than a Saturday, Sunday or other day on
which commercial banking institutions or trust companies in (i) New York, New
York, (ii) the state in which the Corporate Trust Office is located or (iii) the
state in which the executive offices of the Servicer, any successor Servicer or
successor Indenture Trustee are located, are authorized or obligated by law,
executive order or governmental decree to be closed.
CAPITALIZED INTEREST ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.3.
CAPITALIZED INTEREST ACCOUNT INITIAL DEPOSIT: $ [ ]
deposited on the Closing Date.
CERTIFICATE: As defined in the Trust Agreement.
CERTIFICATED SECURITY: As defined in Section 8-102(a)(4) of Revised
Article 8.
CERTIFICATEHOLDER: As defined in the Trust Agreement.
CLASS: A class of Notes.
CLASS A INTEREST RATE: [ ]% per annum, calculated on a basis of a
360-day year consisting of twelve 30-day months.
CLASS A NOTE: Any Note executed on behalf of the Trust and issued
pursuant to the Indenture in substantially the form set forth in EXHIBIT A to
the Indenture.
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CLASS A NOTE FACTOR: As of any Payment Date, a seven-digit figure equal
to the Note Balance as of the close of business on such Payment Date divided by
the initial Note Balance. The Class A Note Factor will be 1.0000000 as of the
Closing Date; thereafter, the Class A Note Factor will decline to reflect
reductions in the Note Balance.
CLEARING CORPORATION: As defined in Section 8-102(3) of Old Article 8.
CLOSING: As defined in SECTION 2.1(e).
CLOSING DATE: [ ].
COLLATERAL AGENT: [ ], in its capacity as Collateral Agent
under the Reserve Account Agreement and any successors thereto under such
Agreement.
COLLECTED FUNDS: With respect to any Determination Date, the amount of
funds in the Collection Account representing collections on the Receivables
received by the Servicer during the related Collection Period, including all
Liquidation Proceeds collected during the related Collection Period (but
excluding any Purchase Amounts) and all amounts paid by the Dealers under Dealer
Agreements or Dealer Assignments with respect to the Receivables during the
related Collection Period.
COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, SECTION 4.1.
COLLECTION PERIOD: With respect to any Payment Date or Determination
Date, the calendar month preceding the month in which such Payment Date or
Determination Date occurs.
COMMISSION: The Securities and Exchange Act Commission.
COMPANY: [ ], a [ ] corporation.
COMPUTER TAPE: The computer tape or diskette generated on behalf of the
Servicer that provides information relating to the Receivables.
CONTRACT SCHEDULED PAYMENT: With respect to any Collection Period for
any Receivable, the amount indicated in such Receivable as required to be paid
by the Obligor thereon in such Collection Period (without giving effect to
deferments of payments granted to Obligors by the Servicer pursuant to the Sale
and Servicing Agreement or any rescheduling of payments in an insolvency or
similar proceeding).
CONTROL: With respect to any Federal Book Entry Security, the Indenture
Trustee shall have obtained control if:
4
<PAGE>
(i) the Indenture Trustee is a participant in the book entry
system maintained by the Federal Reserve Bank that is acting as fiscal
agent for the issuer of such Federal Book Entry Security, and such
Federal Reserve Bank has indicated by book entry that such Federal Book
Entry Security has been credited to the Indenture Trustee's securities
account in such book entry system; or
(ii) (a) the Indenture Trustee (1) is registered on the
records of a Securities Intermediary as the person having a Securities
Entitlement in respect of such Federal Book Entry Security against such
Securities Intermediary; or (2) has obtained the agreement, in writing,
of the Securities Intermediary for such Securities Entitlement that
such Securities Intermediary will comply with Entitlement Orders of the
Indenture Trustee without further consent of any other Person; and (b)
the Securities Intermediary is a participant in the book entry system
maintained by the Federal Reserve Bank that is acting as fiscal agent
for the issuer of such Federal Book Entry Security; and (c) such
Federal Reserve Bank has indicated by book entry that such Federal Book
Entry Security has been credited to the Securities Intermediary's
securities account in such book entry system.
CONTROLLING PARTY: The Insurer, so long as no Insurer Default shall
have occurred and be continuing and the Indenture Trustee for the benefit of the
Noteholders, in the event the Insurer Default shall have occurred and be
continuing; PROVIDED, HOWEVER, that the Owner Trustee for the benefit of the
Certificateholder shall be the Controlling Party after all unpaid principal and
interest on the Notes shall have been paid in full and all amounts due to the
Insurer have been paid and the Note Policy has expired in accordance with its
terms.
CORPORATE TRUST OFFICE: The principal office of the Indenture Trustee
at which its corporate trust business shall be administered, which office at the
Closing Date is located at [ ] or such other address as the Indenture Trustee
may designate from time to time by notice to the Noteholders, the Insurer, the
Servicer and the Company.
CORRESPONDENT: With respect to a Receivable, the person (i) purchasing
such Receivable from a Dealer, if such Receivable is not purchased directly by
Triad and (ii) assigning such Receivable to Triad.
CORRESPONDENT AGREEMENT: An agreement between a Correspondent and Triad
relating to the sale of retail installment contracts to Triad and all documents
and instruments relating thereto.
CORRESPONDENT ASSIGNMENT: With respect to a Receivable, the executed
assignment conveying such Receivable to Triad.
CRAM DOWN LOSS: With respect to a Receivable, if a court of appropriate
jurisdiction in an insolvency proceeding shall have issued an order reducing the
amount owed on a Receivable or otherwise modifying or restructuring the Contract
Scheduled Payments to be made on a Receivable, an amount equal to (i) the excess
of the Principal Balance of such Receivable
5
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immediately prior to such order over the Principal Balance of such Receivable as
so reduced and/or (ii) if such court shall have issued an order reducing the
effective rate of interest on such Receivable, the net present value (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the Contract
Scheduled Payments as so modified or restructured. A Cram Down Loss shall be
deemed to have occurred on the date of issuance of such order.
CREDIT TIER: Any one of the six Credit Tiers designated in the Triad
Financial Corporation policies and procedures manual.
CUSTODIAN: [ ] and any other Person named from time to time
as custodian under this Agreement, which Person must be acceptable to the
Controlling Party (the Custodian as of the Closing Date being acceptable to
the Insurer as of the Closing Date).
CUTOFF DATE: With respect to the Initial Receivables, the Initial
Cutoff Date, and with respect to the Subsequent Receivables, the Subsequent
Cutoff Date.
DEALER: With respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to Triad or a
Correspondent.
DEALER AGREEMENT: An agreement between (i) Triad and a Dealer or (ii) a
Correspondent and a Dealer relating to the sale of retail installment contracts
to Triad or such Correspondent, as the case may be, and all documents and
instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment conveying such Receivable to Triad or a Correspondent, as the case
may be.
DEFAULTED RECEIVABLE: Any Receivable with respect to which any of the
following shall have occurred: (a) for which the related Financed Vehicle has
been repossessed by the Servicer or (b) for which all or more than [ ]% of any
payment is [ ] days or more past due or (c) a Receivable with respect to which
the Servicer has determined in good faith that all amounts expected to be
recovered have been received.
DEFICIENCY CLAIM AMOUNT: As defined in SECTION 5.1(a).
DEFICIENCY CLAIM DATE: As defined in SECTION 5.1(a).
DEFICIENCY NOTICE: As defined in SECTION 5.1(a).
DELIVERY: When used with respect to Trust Account Property, "Delivery"
means:
(i) with respect to Physical Property other than a
"certificated security" as defined under Old Article 8, transfer
thereof to the Indenture Trustee or its nominee or custodian by
physical delivery to the Indenture Trustee or its nominee or custodian
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endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank;
(ii) with respect to a "certificated security" as defined
under Old Article 8 that will, upon compliance with the following
procedures, be held by a Person located in an Old Article 8
Jurisdiction, transfer thereof:
(A) by delivery of such certificated security
endorsed to, or registered in the name of, the Indenture
Trustee or its nominee or custodian or endorsed in blank to a
Financial Intermediary, and the making by such Financial
Intermediary of entries on its books and records identifying
such certificated security as belonging to the Indenture
Trustee or its nominee or custodian and the sending by such
Financial Intermediary of a confirmation of the transfer to
the Indenture Trustee or its nominee or custodian of such
certificated security; or
(B)(1) by delivery thereof to a Clearing Corporation
and the registering by such Clearing Corporation of
appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the
appropriate securities account of a Financial Intermediary by
the amount of such certificated security, (2) the
identification by the Clearing Corporation of the certificated
securities for the sole and exclusive account of the Financial
Intermediary, (3) the maintenance of such certificated
securities by such Clearing Corporation or a "custodian bank"
(as defined in Section 8-102(4) of Old Article 8) or the
nominee of either subject to the Clearing Corporation's
exclusive control, (4) the sending of a confirmation by the
Financial Intermediary of the transfer to the Indenture
Trustee or its nominee or custodian of such securities and the
registering by such Financial Intermediary of entries on its
books and records identifying such certificated security as
belonging to the Indenture Trustee or its nominee or
custodian, and, in any event, any such Physical Property in
registered form shall be in the name of the Indenture Trustee
or its nominee or custodian, and (5) such additional or
alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Trust
Account Property to the Indenture Trustee or its nominee or
custodian, consistent with applicable law or regulations or
the interpretation thereof,
(iii) with respect to a Certificated Security that will, upon
compliance with the following procedures, be held by a person located
in a Revised Article 8 Jurisdiction, transfer of such Certificated
Security to the Indenture Trustee or its nominee or custodian by
physical delivery to the Indenture Trustee or its nominee or custodian,
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank;
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(iv) with respect to any such Trust Account Property that
constitutes an "uncertificated security" under Old Article 8 (and that
is not a Federal Book Entry Security) and where the issuer thereof is
organized in an Old Article 8 Jurisdiction, registration of the
transfer to, and ownership of such Trust Account Property by the
Indenture Trustee or any Financial Intermediary acting on behalf of the
Indenture Trustee by the issuer of such Trust Account Property, and (B)
in the case of registration in the name of any Financial Intermediary,
(1) the making by any such Financial Intermediary of entries in its
books and records identifying such uncertificated security as belonging
to the Indenture Trustee, and (2) delivery by any such Financial
Intermediary to the Indenture Trustee of a written confirmation of the
transfer of the uncertificated securities to the Indenture Trustee; and
(v) with respect to any such Trust Account Property that
constitutes an Uncertificated Security (including any investments in
money market mutual funds, but excluding any Federal Book Entry
Security) and where the issuer thereof is organized in a Revised
Article 8 Jurisdiction, (A) registration of the Indenture Trustee as
the registered owner by the issuer, or (B) satisfaction of the
requirements for the Indenture Trustee's obtaining "control" pursuant
to Section 8-106(c)(2) of Revised Article 8.
DETERMINATION DATE: With respect to any Collection Period, the [ ]
Business Day preceding the related Payment Date in the calendar month following
such Collection Period.
DRAW DATE: With respect to any Payment Date, the [ ] Business Day (as
defined in the Note Policy) immediately preceding such Payment Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment contracts of the Servicer.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with the corporate trust department of the Indenture Trustee or (ii) a
segregated direct deposit account maintained with a depository institution or
trust company organized under the laws of the United States of America, any of
the States or the District of Columbia, having a certificate of deposit,
short-term deposit or commercial paper rating of at least "A-l" by S&P or "P-1"
by Moody's).
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(a) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or
instrumentality of the United States the obligations of which are
backed by the full faith and credit of the United States;
(b) demand or time deposits in, certificates of deposit of,
demand notes of, or bankers' acceptances issued by any depository
institution or trust company organized
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under the laws of the United States or any State (or any domestic
branch of a foreign bank) and subject to supervision and examination by
federal and/or state banking or depository institution authorities
(including, if applicable, the Indenture Trustee or any agent of the
Indenture Trustee acting in their respective commercial capacities);
PROVIDED, HOWEVER, that at the time of the investment or contractual
commitment to invest therein, the commercial paper or other short-term
unsecured debt obligations (other than such obligations the rating of
which is based on the credit of a Person other than such depository
institution or trust company) thereof shall be rated at least "A-1" by
S&P or "P-1" by Moody's;
(c) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such
obligation in accordance with SECTION 4.1, and (ii) entered into with a
depository institution or trust company organized under the laws of the
United States or any State, the deposits of which are insured by the
Federal Deposit Insurance Corporation and the commercial paper or other
short-term unsecured debt obligations of which are rated at least
"A-1+" by S&P or "P-1" by Moody's and whose long term unsecured debt
obligations are rated "A+" by S&P or "P-1" by Moody's (including, if
applicable, the Indenture Trustee, or any agent of the Indenture
Trustee acting in its commercial capacity);
(d) commercial paper that, at the time of the investment or
the contractual commitment to invest therein, (i) is payable in United
States dollars and (ii) is at least "A-1" by S&P or "P-1" by Moody's;
(e) money market mutual funds registered under the Investment
Company Act of 1940, as amended, that are rated in the highest credit
rating category by Moody's or S&P; or
(f) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Controlling Party and the Rating
Agencies, as may from time to time be confirmed in writing to the
Indenture Trustee by the Controlling Party and the Rating Agencies.
PROVIDED, HOWEVER, that no such instrument shall be an Eligible Investment if
(w) such instrument evidences a right to receive either (A) only interest
payments with respect to the obligations underlying such instrument or (B) both
principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations; (x) its terms do not have a
predetermined fixed dollar amount of principal due at maturity that cannot vary
or change; (y) to the extent rated, an "r" highlighter is affixed to its rating;
or (z) to the extent the related interest rate is variable, interest thereon is
not tied to a
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single interest rate index plus a single fixed spread (if any), or does not move
proportionately with that index.
Any Eligible Investments may be purchased by or through the
Indenture Trustee or any of its Affiliates.
ELIGIBLE SERVICER: Triad, the Backup Servicer (so long as the Backup
Servicer is not in default of any of its obligations under this Agreement or any
other agreement relating hereto) or another Person that, at the time of its
appointment as Servicer, (i) is servicing a portfolio of motor vehicle retail
installment contracts and/or motor vehicle installment loans of not less than
$100 million, (ii) is legally qualified and has the capacity and all necessary
licenses, permits and approvals to service the Receivables, (iii) has
demonstrated the ability to service with reasonable skill and care a portfolio
of motor vehicle retail installment contracts and/or motor vehicle installment
loans similar to the Receivables, (iv) is approved by the Rating Agencies, (v)
is approved by the Insurer (if no Insurer Default has occurred and is
continuing) or the Note Majority (if an Insurer Default has occurred and is
continuing), (vi) is qualified and entitled to use, pursuant to a license or
other written agreement, and agrees to maintain the confidentiality of, the
software that the Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software that
is adequate to perform its duties and responsibilities under this Agreement and
(vii) has a tangible net worth as determined in accordance with generally
accepted accounting principles consistently applied of at least $15 million.
ENTITLEMENT ORDER: As defined in Section 8-102(a)(8) of Revised Article
8.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: Any one of the following events: (i) default in the
payment of any interest on any Note when the same becomes due and payable, and
such default shall continue for a period of two days; (ii) default in the
payment of the principal of any Note when the same becomes due and payable;
(iii) default in the observance or performance of any covenant or agreement of
the Issuer made in the Indenture (other than a covenant or agreement a default
in the observance or performance of which is elsewhere in SECTION 5.1 of the
Indenture specifically dealt with), or any representation or warranty of the
Issuer made in the Indenture or in any certificate or other writing delivered
pursuant thereto or in connection therewith proving to have been incorrect in
any material respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition in
respect of which such misrepresentation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the Indenture
Trustee or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Note Balance, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Indenture; (iv) the filing of a
petition for relief by a court having jurisdiction in the
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premises in respect of the Issuer, the Seller or any substantial part of their
property in an involuntary case under any applicable Federal or State
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer, the Seller or for any substantial part of their
property, or ordering the winding-up or liquidation of the affairs of the Issuer
or the Seller, and such petition shall remain unstayed and in effect for a
period of 60 consecutive days; (v) the commencement by the Issuer or the Seller
of a voluntary case under any applicable Federal or State bankruptcy, insolvency
or other similar law now or hereafter in effect, or the consent by the Issuer or
the Seller to the entry of an order for relief in an involuntary case under any
such law, or the consent by the Issuer or the Seller to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or the Seller or for any
substantial part of their property, or the making by the Issuer or the Seller of
any general assignment for the benefit of creditors, or the failure by the
Issuer or the Seller generally to pay its debts as such debts become due, or the
taking of action by the Issuer or the Seller in furtherance of any of the
foregoing; or (vi) the failure to pay the Note Balance on the Final Scheduled
Payment Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as it may be amended
from time to time.
EXECUTIVE OFFICER: With respect to any corporation, the President,
Chief Financial Officer, Controller or any Vice President.
FEDERAL BOOK ENTRY SECURITY: An obligation (i) issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association, or any other direct obligation of, or obligation fully
guaranteed as to timely payment or principal and interest by, the United States,
that is a book-entry security held through the Federal Reserve System pursuant
to Federal book entry regulations, and (ii) the perfection of a security
interest in which is governed pursuant to federal regulations by Revised Article
8.
FINAL SCHEDULED PAYMENT DATE: [ ] or, if such day is not a
Business Day, the next Business Day).
FINANCED VEHICLE: A new or used automobile or light-duty truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.
FINANCIAL ASSET: As defined in Section 8-102(a)(9) of Revised Article
8.
FINANCIAL INTERMEDIARY: As defined in Section 8-313(4) of Old Article
8.
FUNDING PERIOD: The period beginning on and including the Closing Date
and ending on the first to occur of (a) the first date on which the amount on
deposit in the Pre-Funding Account
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(after giving effect to any transfers therefrom in connection with the transfer
of Subsequent Receivables to the Purchaser on such date) is less than $100,000,
(b) the date on which an Insurance Agreement Event of Default or a Servicer
Termination Event occurs and (c) the Payment Date in [ ].
GOVERNMENTAL AUTHORITY: Any court or federal or state regulatory body,
administrative agency or other tribunal or other governmental instrumentality.
INDENTURE: The Indenture, dated as of [ ], between the
Trust and the Indenture Trustee, as the same may be amended or supplemented
from time to time, in accordance with the terms thereof.
INDENTURE COLLATERAL: As defined in the Indenture.
INDENTURE TRUSTEE: The Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor Indenture Trustee under
the Indenture.
INDENTURE TRUSTEE FEE: With respect to any Payment Date, the fee
payable to the Indenture Trustee for services rendered during the related
Collection Period, which shall be equal to one twelfth of [ ]% multiplied by the
Note Balance as of the open of business on the first day of the related
Collection Period, provided, however, in no event shall the Indenture Trustee
Fee be less than $[ ] in aggregate in any calendar year.
INDENTURE TRUSTEE OFFICER: Any vice president, any assistant vice
president, any assistant secretary, any assistant treasurer, any trust officer
or other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Agreement.
INDEPENDENT ACCOUNTANTS: As defined in SECTION 3.11.
INFORMATION REQUEST: A request for information delivered pursuant to
SECTIONS 3.11(d) or 4.10(c), substantially in the form of SCHEDULE C hereto.
INITIAL CUTOFF DATE: The close of business on [ ].
INITIAL CUTOFF DATE PRINCIPAL BALANCE: $[ ].
INITIAL RECEIVABLES: The Receivables listed on the Schedule of
Receivables attached hereto as Schedule A and transferred by the Company to the
Trust on the Closing Date.
INSOLVENCY EVENT: With respect to a specified Person, (a) the entry of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
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assignee, custodian, trustee, sequestrator or similar official for such Person
or for any substantial part of its property, or ordering the winding-up or
liquidation of such Person's affairs; (b) the commencement of an involuntary
case under the federal bankruptcy laws, as now or hereinafter in effect, or
another present or future federal or state bankruptcy, insolvency or similar law
and such case is not dismissed within 60 days; or (c) the commencement by such
Person of a voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
INSOLVENCY PROCEEDS: As defined in SECTION 10.1(b).
INSTRUMENTS: As defined in Section 9-105(l)(i) of Revised Article 8.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
of [ ], among the Insurer, the Trust, [ ], and Triad.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as defined
in the Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
providing loss or physical damage, credit life, credit disability, accident and
health, theft, mechanical breakdown or similar coverage with respect to the
Financed Vehicle or otherwise benefiting the holder of the Receivable.
INSURER: [ ], a monoline insurance company incorporated
under the laws of the State of [ ], or any successor thereto, as
issuer of the Note Policy.
INSURER DEFAULT: The occurrence and continuance of any of the following
events:
(i) the Insurer shall have failed to make a payment required
under the Note Policy in accordance with its terms;
(ii) The Insurer shall have (a) filed a petition or commenced
any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (b) made a general assignment for the benefit of its
creditors, or (c) had an order for relief entered against it under the
United States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
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(iii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority shall
have entered a final and nonappealable order, judgment or decree (a)
appointing a custodian, trustee, agent or receiver for the Insurer or
for all or any material portion of its property or (b) authorizing the
taking of possession by a custodian, trustee, agent or receiver of the
Insurer (or the taking of possession of all or any material portion of
the property of the Insurer).
INSURER OPTIONAL DEPOSIT: With respect to any Payment Date, an amount
delivered by the Insurer, at its sole option, other than amounts in respect of a
Note Policy Claim Amount, for deposit into the Collection Account for any of the
following purposes: (i) to provide funds in respect of the payment of fees or
expenses of any provider of services to the Trust with respect to such Payment
Date; or (ii) to include such amounts as part of the Additional Funds Available
for such Payment Date to the extent that without such amount a draw would be
required to be made on the Note Policy.
INTEREST CARRYOVER SHORTFALL: As of the close of business on any
Payment Date, an amount equal to the excess of (a) the Interest Payment Amount
for such Payment Date and any outstanding Interest Carryover Shortfall from the
immediately preceding Payment Date, plus interest on such outstanding Interest
Carryover Shortfall, to the extent permitted by law, at the Class A Interest
Rate from such preceding Payment Date through the current Payment Date
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
over (b) the amount of interest that the holders of the Class A Notes actually
received on such current Payment Date.
INTEREST PAYMENT AMOUNT: With respect to any Payment Date, an amount
equal to 30 days of interest, calculated on the basis of a 360-day year
consisting of twelve 30-day months, (or in the case of the first Payment
Date, the number of days from and including [ ], to but excluding
[ ]), at the Class A Interest Rate on the Note Balance as of the
close of business on the related Accounting Date or in the case of the first
Payment Date, the Note Balance on the Closing Date.
INVESTMENT PROPERTY: As defined in Section 9-115(l)(f) of Revised
Article 8.
LIEN: Any security interest, lien, charge, pledge, preference, equity
or encumbrance of any kind, including tax liens, mechanics' liens and any liens
that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party that indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
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LIQUIDATED RECEIVABLE: Any Receivable with respect to which any of the
following shall have occurred with respect to any Collection Period: (i) the
sale of the Financed Vehicle; (ii) all or more than 10% of any Contract
Scheduled Payment is 120 days or more past due, except Receivables with respect
to which the related Financed Vehicles have been repossessed within such 120
days, (iii) the Servicer has determined in good faith that all amounts it
expects to be recovered have been received, or (iv) 90 days have elapsed since
the Servicer repossessed the Financed Vehicle.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, (i)
proceeds from the disposition of Financed Vehicles securing the Liquidated
Receivables, (ii) any insurance proceeds or rebates, or (iii) other monies,
received from the Obligor or otherwise, less amounts required to be refunded to
the Obligor.
LOCKBOX ACCOUNT: An account maintained with a Lockbox Bank, into which
payments from Obligors under Triad's portfolio of serviced contracts are
deposited; provided, however that upon the occurrence of a Servicer Termination
Event, the Controlling Party may, in its sole discretion, cause there to be
established as the Lockbox Account a segregated account in the name of the
Indenture Trustee.
LOCKBOX AGREEMENT: The agreement with the Lockbox Bank between the
Servicer and such Lockbox Bank pursuant to which the Lockbox Account is
maintained; provided, however, that the Controlling Party shall approve, in its
sole discretion, any new Lockbox Agreement in the event the Servicer and the
Lockbox Bank enter into such an Agreement.
LOCKBOX BANK: Initially, [ ] and its successors in
interest, and thereafter a depository institution approved by the Insurer (so
long as no Insurer Default has occurred and is continuing) which provides a
lockbox as part of its normal and customary services named by the Servicer at
which the Lockbox Account is established and maintained as of such date;
provided, however, that upon the occurrence of a Servicer Termination Event,
the Controlling Party may, in its sole discretion, cause the Lockbox Account
to be established at another bank.
MANDATORY REDEMPTION DATE: The earlier of (i) the Payment Date in
[ ]and (ii) if the last day of the Funding Period occurs on or prior
to the Determination Date in [ ], then the [ ] Payment Date.
MASTER ACCOUNT AGREEMENT: The Master Account Agreement, dated as of
[ ], among Triad, ContiTrade Services L.L.C. and [ ], as
the same may be amended or supplemented from time to time.
MONTHLY CAPITALIZED INTEREST AMOUNT: An amount equal to the
difference between (i) the product of (x) (I) 2, in the case of the
[ ] Payment Date, or (II) 30, in the case of the [ ]
Payment Date; or (III) 18, in the case of the [ ] Payment Date, (y)
the sum of (I) the Class A Interest Rate and (II) the per annum rate used to
calculate the Premium payable
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on such Payment Date and (z) the difference between (A) the average daily
aggregate principal amount of the Notes during the period since the prior
Payment Date and (B) the Aggregate Principal Balance as of the last day of
the preceding Collection Period (or in the case of the [ ] Payment
Date, as of the Closing Date) and (ii) the Pre-Funding Earnings for the
related Collection Period.
MONTHLY RECORDS: All records and data maintained by the Servicer with
respect to the Receivables and the Obligors, including the following with
respect to each Receivable: the account number; the identity of the originating
Dealer; Obligor name; Obligor address; Obligor home phone number; Obligor
business phone number (if any); original Amount Financed or Principal Balance;
original total of payments; original term; Annual Percentage Rate; current
balance; pay off balance; current remaining term; contract origination date;
first payment date; final scheduled payment date; next payment due date;
collateral description; days currently delinquent; new/used classification;
amount of the Contract Scheduled Payment; and past due late charges, if any.
MOODY'S: Moody's Investors Service, Inc., or any successor thereto.
NOTE: Any one of the Class A Notes executed on behalf of the Trust and
issued pursuant to the Indenture in substantially the form set forth in EXHIBIT
A to the Indenture.
NOTE BALANCE: Initially, $[ ] and thereafter, an amount
equal to the initial Note Balance reduced by all amounts distributed to the
Class A Noteholders that are allocable to principal. If the date of
determination is a Payment Date, then such Note Balance shall be reduced by
all such amounts distributed on such date.
NOTE DISTRIBUTION ACCOUNT: The account designated as such, established
and maintained pursuant to Section 4.7.
NOTE MAJORITY: Holders of Class A Notes representing more than 50% of
the Note Balance.
NOTE POLICY: The financial guaranty insurance policy issued by the
Insurer to the Indenture Trustee, for the benefit of the Noteholders.
NOTE POLICY CLAIM AMOUNT: For any Payment Date, the excess, if any, of
(i) the sum of the Interest Payment Amount and the Principal Payment Amount for
such Payment Date over (ii) the sum of the amounts actually deposited into the
Note Distribution Account on such related Payment Date.
NOTE PREFERENCE CLAIM: As defined in Section 6.2(b).
NOTE REGISTER: As defined in the Indenture.
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NOTE SHORTFALL AMOUNT: For any Payment Date, the excess, if any, of (i)
the sum of the Interest Payment Amount and the Payment Principal Amount for the
related Payment Date, over (ii) the amount actually deposited into the Note
Distribution Account on such related Payment Date from the Available Funds and
any amounts deposited in the Collection Account from the Reserve Account
pursuant to Section 5.1.
NOTEHOLDER OR HOLDER: Holders of Notes registered in the Note Register,
except that so long as any Notes are outstanding, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, the
interest evidenced by any Note registered in the name of or beneficially owned
by the Servicer, or any Affiliate of the Servicer other than the Underwriter,
shall not be taken into account in determining whether the requisite percentage
necessary to effect any such consent, waiver, request or demand shall have been
obtained.
OBLIGOR: With respect to a Receivable, the purchaser or the
co-purchasers of the related Financed Vehicle and any other Person or Persons
who are primarily or secondarily obligated to make payments under such
Receivable.
OC STABILIZATION DATE: The first Payment Date on which the
Overcollateralization Amount equals the Target Overcollateralization Amount.
OFFICER'S CERTIFICATE: A certificate signed by an Executive Officer.
OLD ARTICLE 8: Article 8 of the UCC as in effect in the applicable Old
Article 8 Jurisdiction as of the date hereof.
OLD ARTICLE 8 JURISDICTION: A jurisdiction which has not adopted
Revised Article 8.
OPINION OF COUNSEL: A written opinion of counsel reasonably acceptable
in form and substance and from counsel acceptable to the Controlling Party and
the Indenture Trustee or the Owner Trustee and not at the expense of the
Controlling Party, Indenture Trustee or Owner Trustee.
ORIGINAL POOL BALANCE: The sum of (i) the Aggregate Principal Balance
as of the Initial Cutoff Date plus (ii) the aggregate principal balances of the
Subsequent Receivables added to the Trust as of their respective Subsequent
Cutoff Dates.
OWNER TRUSTEE: As defined in the Trust Agreement.
OVERCOLLATERALIZATION AMOUNT: With respect to any Payment Date, an
amount equal to the excess, if any, of (i) the sum of (a) the remaining
Aggregate Principal Balance as of the related Accounting Date and (b) all
amounts, if any, in the Pre-Funding Account, over (ii) the remaining Note
Balance, after giving effect to the amounts payable on such Payment Date
pursuant to SECTION 4.6(b)(i) through (iv) on such Payment Date.
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OVERFUNDED CAPITALIZED INTEREST AMOUNT:
(i) with respect to the [ ] Payment Date, the
excess of (a) the amount on deposit in the Capitalized Interest
Account on such Payment Date (after giving effect to the transfer of
the Monthly Capitalized Interest Amount to the Collection Account on
such date) over (b) the product of (i) [ ], (ii) [ ]%, (iii) [ ] and
(iv) the amount on deposit in the Pre-Funding Account (excluding
Pre-Funding Earnings) at the close of business on [ ].
(ii) with respect to the [ ] Payment Date, the
excess of (a) the amount on deposit in the Capitalized Interest
Account on such Payment Date (after giving effect to the transfer of
the Monthly Capitalized Interest Amount to the Collection Account on
such date) over (b) the product of (i) [ ], (ii) [ ]% (iii) [ ] and
(iv) the amount on deposit in the Pre-Funding Account (excluding
Pre-Funding Earnings) at the close of business on [ ].
(iii) with respect to the [ ] Payment Date, the
amount on deposit in the Capitalized Interest Account on such
Payment Date (after giving effect to the transfer of the Monthly
Capitalized Interest Amount to the Collection Account on such date).
PAYMENT AMOUNT: With respect to a Payment Date, the sum of (i) the
Available Funds as of the related Determination Date, plus (ii) the Deficiency
Claim Amount, if any, with respect to such Payment Date.
PAYMENT DATE: The [ ] day of each calendar month, or if such [ ] day
is not a Business Day, the next Business Day, commencing [ ] and
including the Final Scheduled Payment Date.
PERMITTED LIEN: (i) the Lien in favor of the Trust, (ii) the Lien in
favor of the Indenture Trustee for the benefit of the Insurer and the
Noteholders, (iii) the restrictions on transferability imposed by the Related
Documents and (iv) with respect to a Financed Vehicle, but not the Trust's
interest in the Receivable secured by such Financed Vehicle, inchoate Liens for
taxes not yet payable and mechanics' or suppliers' liens for services or
materials supplied the payment of which is not yet overdue in each case arising
subsequent to the Initial Cutoff Date with respect to the Initial Receivables or
arising subsequent to the related Subsequent Cutoff Date with respect to the
Subsequent Receivables, as applicable.
PERSON: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof or any other entity.
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PHYSICAL PROPERTY: Personal property constituting Instruments or
constituting "certificated securities" under Old Article 8, including bankers'
acceptances, commercial paper, negotiable certificates of deposit and other
obligations that are susceptible of physical delivery.
PRE-COMPUTED RECEIVABLE: Any Actuarial Receivable or Rule of 78's
Receivable.
PRE-FUNDED AMOUNT: With respect to any Payment Date, the amount on
deposit in the Pre-Funding Account, (exclusive of Pre-Funding Earnings) which
initially shall be the amount set forth in SECTION 4.8.
PRE-FUNDING ACCOUNT: The account established pursuant to Section
4.1(a)(iii).
PRE-FUNDING EARNINGS: Any investment earnings on amounts on deposit in
the Pre-Funding Account.
PREMIUM: As defined in the Insurance Agreement.
PRINCIPAL BALANCE: With respect to any Receivable, (a) as of the
applicable Cutoff Date, the Amount Financed minus (i) in the case of a
Precomputed Receivable, that portion of all payments (including all Contract
Scheduled Payments and any prepayments in full or partial prepayment) actually
received on or prior to such date and allocable to principal in accordance with
the Actuarial Method and (ii) in the case of a Simple Interest Receivable, that
portion of all payments (including all Contract Scheduled Payments and any
prepayments in full or partial prepayment) received on or prior to such date and
allocable to principal in accordance with the Simple Interest Method, and (b) as
of any date after the applicable Cutoff Date, the Principal Balance as of the
Cutoff Date minus (i) in the case of a Precomputed Receivable, that portion of
all payments (including all Contract Scheduled Payments and any prepayments in
full or partial prepayments) actually received on or prior to such date (but
after the applicable Cutoff Date) and allocable to principal in accordance with
the Actuarial Method, (ii) in the case of a Simple Interest Receivable, that
portion of all payments (including all Contract Scheduled Payments and any
prepayments in full or partial prepayments) received on or prior to such date
(but after the applicable Cutoff Date) and allocable to principal in accordance
with the Simple Interest Method and (iii) any Cram Down Loss in respect of such
Receivable. The principal balance of a Liquidated Receivable for purposes other
than the definition of Principal Payment Amount shall be equal to $0.
PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on any
Payment Date, an amount equal to (i) the Principal Payment Amount and any
outstanding Principal Carryover Shortfall from the immediately preceding Payment
Date, over (ii) the amount of principal that the Noteholders actually received
on such current Payment Date.
PRINCIPAL PAYMENT AMOUNT: (i) With respect to any Payment Date other
than the Final Scheduled Payment Date, the amount equal to the excess, if any,
of (x) the sum of the following
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amounts, without duplication: (a) the principal portion of all Contract
Scheduled Payments received during the related Collection Period on Precomputed
Receivables (calculated in accordance with the Actuarial Method) and all
payments of principal received on Simple Interest Receivables (calculated in
accordance with the Simple Interest Method) during such Collection Period; (b)
the principal portion of all prepayments received during the related Collection
Period; (c) the portion of the Purchase Amount allocable to principal of each
Receivable that became a Purchased Receivable as of the related Accounting Date
and, at the option of the Insurer, the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased; (d) the Principal
Balance of each Receivable that first became a Liquidated Receivable during the
related Collection Period; and (e) the aggregate amount of Cram Down Losses with
respect to the Receivables that have occurred during the related Collection
Period, over (y) the Step-Down Amount, if any, for such Payment Date and (ii)
with respect to the Final Payment Date, the then outstanding Note Balance.
PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
plus interest thereon at the respective APR from the last day through which
interest has been paid to the immediately preceding Accounting Date if purchased
prior to the Determination Date immediately following the end of such Collection
Period, and otherwise through the last day of the month of repurchase.
PURCHASED RECEIVABLE: A Receivable that was purchased as of the close
of business on the Accounting Date by the Seller or the Servicer as a result of
the violation of certain representations or warranties of the Seller under this
Agreement or a breach by the Servicer of certain of the Servicer's obligations.
RATING AGENCIES: Moody's and S&P. If no such organization or successor
maintains a rating on the Notes, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Company and acceptable to the Insurer (so long as an Insurer Default
shall not have occurred and be continuing), notice of which designation shall be
given to the Indenture Trustee, the Owner Trustee and the Servicer.
RATING AGENCY CONDITION: With respect to any action, each Rating Agency
shall have been given prior notice thereof and each Rating Agency shall have
notified Triad, the Insurer, the Company, the Servicer and the Indenture Trustee
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Class A Notes.
RECEIVABLE: A retail installment contract (including any related
promissory note and the related security agreement), and all rights and
obligations under such contract, for a Financed Vehicle that is included in the
Schedule of Receivables (except for Receivables that shall have become Purchased
Receivables or Receivables that are replaced in accordance with the terms
hereof).
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RECEIVABLE FILE: The documents listed in SECTION 2.3(a) pertaining to a
particular Receivable.
RECEIVABLES PURCHASE AGREEMENT: The Receivables Purchase Agreement,
dated as of [ ], between the Company and Triad.
RECORD DATE: With respect to each Payment Date, the Business Day
immediately preceding such Payment Date, unless otherwise specified in the
Agreement.
RECOVERIES: With respect to a Liquidated Receivable, the positive
excess, if any of (i) the monies collected from whatever source subsequent to
the date on which such Receivable became a Liquidated Receivable over (ii) the
reasonable costs of liquidation, including reasonable out-of-pocket expenses of
the Servicer in connection with such liquidation plus any amounts required by
law to be remitted to the Obligor.
REGISTRAR OF TITLES: With respect to any state, the Governmental
Authority responsible for the registration of, and the issuance of certificates
of title relating to, motor vehicles and liens thereon.
RELATED DOCUMENTS: This Agreement, the Indenture, the Trust Agreement,
the Notes, the Receivables Purchase Agreement, the Underwriting Agreement, the
Reserve Account Agreement, the Insurance Agreement, the Indemnification
Agreement, the Premium Letter and the other agreements executed in connection
with the Closing. The Related Documents executed by any party are referred to
herein as "SUCH PARTY'S RELATED DOCUMENTS," "ITS RELATED DOCUMENTS" or by a
similar expression.
REPLACEMENT RECEIVABLE: With respect to any Collection Period, any
Receivable (a) having a Principal Balance and APR at least equal to the
Receivable it is replacing, (b) meeting the requirements of Section 2.2(b)(vi),
and (c) is of the same Credit Tier as the Receivable it is replacing.
RESERVE ACCOUNT: The account designated as the "Series 199[ ]-[ ]
Spread Account," established and maintained pursuant to the Reserve Account
Agreement.
RESERVE ACCOUNT AGREEMENT: The Master Spread Account Agreement,
dated as of [ ], among the Insurer, the Indenture Trustee, and
[ ] as the same may be modified, supplemented or otherwise amended
in accordance with the terms thereof.
RESPONSIBLE OFFICER: When used with respect to the Indenture Trustee or
Owner Trustee, any officer of the Indenture Trustee or Owner Trustee assigned by
the Indenture Trustee or Owner Trustee to administer its corporate trust affairs
relating to the Trust. When used with respect to any other Person that is not an
individual, the President, any Vice-President or Assistant Vice-President or the
Controller of such Person, or any other officer or employee having similar
functions.
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REVISED ARTICLE 8: UCC, Revised Article 8, Investment Securities (with
conforming and miscellaneous amendments to Articles 1, 3, 4, 5, 9 and 10), 1994
Official Text, as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws. Unless the context requires
otherwise, "Revised Article 8" means such version in the form in which it is
adopted in the applicable jurisdiction.
REVISED ARTICLE 8 JURISDICTION: A jurisdiction which has adopted
Revised Article 8.
RULE OF 78'S RECEIVABLE: Any Receivable under which the portion of a
payment allocable to interest earned during that month is determined by
multiplying the total amount of add-on interest payable over the term of the
Receivable by a fraction, the denominator of which is equal to the sum of a
series of numbers beginning with one and ending with the number of scheduled
monthly payments due under the related Receivable, and the numerator of which is
the number of payments remaining under such Receivable before giving effect to
the payment to which the fraction is being applied. The difference between the
amount of the scheduled monthly payment made by the Obligor and the amount of
earned add-on interest calculated for the month is applied to principal
reduction.
S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc.,
or any successor thereto.
SCHEDULE OF RECEIVABLES: The schedule of all retail installment
contracts sold and transferred to the Trust on the Closing Date attached hereto
as SCHEDULE A, as it may be amended from time to time, including to remove
Purchased Receivables pursuant to SECTION 2.6 or replaced Receivables pursuant
to SECTION 3.7, and to add Replacement Receivables and Subsequent Receivables.
SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and
Warranties of the Company attached as SCHEDULE B.
SECURITIES ACCOUNT: As defined in Section 8-501(a) of Revised Article
8.
SECURITIES ACT: The Securities Act of 1933, as amended.
SECURITIES ENTITLEMENT: As defined in Section 8-102(a)(17) of Revised
Article 8.
SECURITIES INTERMEDIARY: As defined in Section 8-102(a)(14) of Revised
Article 8.
SELLER: Triad Financial Corporation, a California corporation, in its
capacity as Seller under the Receivables Purchase Agreement.
SERVICER: Triad Financial Corporation, a California corporation, its
successor in interest pursuant to SECTION 8.2 or, after any termination of the
Servicer upon a Servicer Termination Event, the Backup Servicer or any other
successor Servicer.
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SERVICER EXPENSES: For any Collection Period, expenses associated with
the repossession of Financed Vehicles.
SERVICER FEE: With respect to any Payment Date, the fee payable to the
Servicer for services rendered during the related Collection Period, which shall
be equal to the sum of (i) one-twelfth of [ ]% multiplied by the Aggregate
Principal Balance as of the open of business on the first day of the related
Collection Period and (ii) any late fees received with respect to the
Receivables during such related Collection Period.
SERVICER TERMINATION EVENT: An event described in SECTION 9.1.
SERVICER TRANSITION EXPENSES: As defined in SECTION 9.3(c).
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with SECTION 3.9, substantially in the form attached as EXHIBIT A.
SIMPLE INTEREST METHOD: The method of allocating a fixed level payment
on an obligation between principal and interest, pursuant to which the portion
of such payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (based on the
actual number of days in the calendar month and 365 days in the calendar year)
elapsed since the preceding payment of interest was made and the remainder of
such payment is allocable to principal.
SIMPLE INTEREST RECEIVABLE: Any Receivable under which principal and
interest is allocated according to the Simple Interest Method.
STATE: Any state of the United States of America, or the District of
Columbia.
STEP-DOWN AMOUNT: With respect to any Payment Date, the excess, if any
of (a) the Overcollateralization Amount calculated for this purpose only without
deduction for any Step-Down Amount (i.e., assuming that the entire amount
described in clause (x) of the definition of Principal Payment Amount is
distributed as principal on the Notes) over (b) the Target Overcollateralization
Amount on such Payment Date.
SUBSEQUENT CUTOFF DATE: The date specified in the related Subsequent
Transfer Agreement, provided, however that such date shall be on or before the
Subsequent Transfer Date.
SUBSEQUENT PURCHASE AGREEMENT: An agreement by and between the Company
and Triad pursuant to which the Company will acquire Subsequent Receivables.
SUBSEQUENT RECEIVABLES: The Receivables transferred to the Purchaser
pursuant to Section 2.2, which shall be listed on Schedule A to the related
Subsequent Transfer Agreement.
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SUBSEQUENT TRANSFER AGREEMENT: The agreement among the Trust, the
Company and the Servicer, substantially in the form of Exhibit A.
SUBSEQUENT TRANSFER DATE: With respect to Subsequent Receivables, any
date, occurring not more frequently than once a month, during the Funding Period
on which Subsequent Receivables are to be transferred to the Trust pursuant to
this Agreement, and a Subsequent Transfer Agreement is executed and delivered to
the Trust.
TARGET OVERCOLLATERALIZATION AMOUNT: With respect to any Payment Date,
an amount equal to the product of (i) [ ]% (or such lesser percentage as the
Insurer may decide in its sole discretion), and (ii) the sum of (a) the
remaining Aggregate Principal Balance and (b) amounts, if any, in the
Pre-Funding Account, each determined as of the related Accounting Date.
TRIAD: Triad Financial Corporation, a California corporation.
TRUST: Triad Auto Receivables Owner Trust 199[ ] - [ ], a Delaware
business trust.
TRUST ACCOUNT: As defined in SECTION 4.1(c).
TRUST ACCOUNT PROPERTY: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account (whether in the form of deposit
accounts, physical property, book-entry securities, uncertificated securities or
otherwise) and all proceeds of the foregoing.
TRUST AGREEMENT: The Amended and Restated Trust Agreement, dated as
of [ ], among [ ], as certificateholder, [ ], as
depositor, Triad Financial Corporation and [ ] as Owner Trustee.
TRUST PROPERTY: The property and proceeds conveyed pursuant to
SECTION 2.1 and SECTION 2.2, together with certain monies paid after the
applicable Cutoff Date with respect to the Receivables, the Trust Accounts
(including all Eligible Investments therein and all proceeds therefrom), the
rights of the Trust under this Agreement and the rights of the Company under
the Receivables Purchase Agreement or each Subsequent Purchase Agreement, as
the case may be. Although [ ] has pledged the Reserve Account to the
Collateral Agent pursuant to the Reserve Account Agreement, the Reserve
Account shall not under any circumstances be deemed to be part of or
otherwise includable in the Trust or in the Trust Property.
UNCERTIFICATED SECURITY: As defined in Section 8-102(a)(18) of Revised
Article 8.
UNDERWRITER: [ ].
UNDERWRITING CRITERIA: The criteria used by Triad for purchasing
contracts.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
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SECTION 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular, words importing one gender include the other gender, references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form, references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement, references to Persons include their permitted successors and assigns,
and the terms "include" or "including" mean "include without limitation" or
"including without limitation."
SECTION 1.3. CALCULATIONS. All calculations of the amount of interest
accrued on the Notes and all calculations of the amount of fees to be paid
pursuant hereto, including without limitation, the fees to be paid to the
Servicer shall be made on the basis of a 360-day year consisting of twelve
30-day months. All references to the Principal Balance of a Receivable as of an
Accounting Date shall refer to the close of business on such day.
SECTION 1.4. SECTION REFERENCES. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.
SECTION 1.5. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken or consented to by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken or consent given by Noteholders. Solely for purposes of any action to be
taken or consented to by Noteholders, any Note registered in the name of, or
beneficially owned by, Triad, the Company or any Affiliate thereof other than
the Underwriter shall be deemed not to be outstanding; PROVIDED, HOWEVER, that,
solely for the purpose of determining whether the Indenture Trustee is entitled
to rely upon any such action or consent, only Notes that the Indenture Trustee
knows to be so owned shall be so disregarded. The Indenture Trustee or Note
Registrar may require such additional proof of any matter referred to in this
SECTION 1.5 as it shall deem necessary.
SECTION 1.6. NO RECOURSE. Without limiting the obligations of Triad
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of Triad,
the Company, the Servicer, the Underwriter, the Backup Servicer, the Owner
Trustee (in its individual or trust capacities) or the Indenture Trustee or of
any predecessor or successor of Triad, the Company, the Servicer, the
Underwriter, the Backup Servicer, the Owner Trustee (in its individual or trust
capacities) or the Indenture Trustee.
SECTION 1.7. NONPETITION COVENANT. Until one year and one day following
the payment in full of all amounts due in respect of the Notes, none of the
Company, the Servicer, the Indenture Trustee, Triad nor the Backup Servicer
shall petition or otherwise invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the
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Company or the Trust under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or the Trust or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Company or the Trust.
SECTION 1.8. LIMITATION ON TRUST FUND ACTIVITIES. Notwithstanding any
other provision in this Agreement to the contrary, the Indenture Trustee and the
Insurer shall have no power to vary the investment of the Noteholders within the
meaning of Treasury Department Regulation ss. 301.7701-4(c) or to engage in
business on behalf of the Trust unless the Indenture Trustee shall have received
an Opinion of Counsel that such activity shall not cause the Trust to be an
association or a publicly traded partnership taxable as a corporation for
federal income tax purposes.
SECTION 1.9. MATERIAL ADVERSE EFFECT. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Noteholders or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Note Policy.
ARTICLE II
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY INDENTURE TRUSTEE
SECTION 2.1 CONVEYANCE OF INITIAL RECEIVABLES.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby sells, transfers, assigns and otherwise conveys to the Trust, without
recourse (but without limitation of its obligations under this Agreement): (1)
all of the right, title and interest of the Company in and to the Initial
Receivables and all monies due or received thereunder or in respect thereof on
or after the Initial Cutoff Date including amounts due on or before the Initial
Cutoff Date but received by Triad, the Company or the Trust after the Initial
Cutoff Date (including all Liquidation Proceeds and recoveries received with
respect to such Receivables); and (2) all of the right, title and interest of
Triad and the Company in and to (i) the security interests of Triad and the
Company in the related Financed Vehicles and any other interest of Triad and the
Company in the related Financed Vehicles, including the certificates of title
with respect to such Financed Vehicles, (ii) the Insurance Policies and any
proceeds from any Insurance Policies relating to the Initial Receivables, the
Obligors or the related Financed Vehicles, including rebates or refunds of
premiums relating to the Initial Receivables, (iii) the rights of Triad and the
Company against Dealers with respect to the Initial Receivables under the Dealer
Agreements and the Dealer Assignments, (iv) the rights of Triad and the Company
against Correspondents with respect to the Initial Receivables under the
Correspondent Agreements and the Correspondent Assignments, (v) all items
contained in the related Receivable Files and any and all other documents that
Triad keeps on file in accordance with its customary procedures relating to the
Initial Receivables, the
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Obligors or the related Financed Vehicles, (vi) property (including the right to
receive future Liquidation Proceeds) that secures any of the Initial Receivables
and that has been acquired by or on behalf of the Company or the Trust pursuant
to the liquidation of any such Initial Receivable, (vii) the rights of the
Company under the Receivables Purchase Agreement, (viii) all funds on deposit
from time to time in the Collection Account, the Note Distribution Account,
Pre-Funding Account and the Capitalized Interest Account, including all income
thereon and proceeds thereof, (ix) all of the right, title and interest of the
Company in and to refunds for the costs of extended service contracts with
respect to the Financed Vehicles and (x) all proceeds and investments of any of
the foregoing, all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any of the
foregoing. It is the intention of the Company and the Trust that the transfer
and assignment contemplated by this Agreement shall constitute a sale of the
Receivables and the other Trust Property from the Company to the Trust and the
beneficial interest in and title to the Receivables and the other Trust Property
shall not be part of the Company's estate in the event of the filing of a
bankruptcy petition by or against the Company under any bankruptcy law.
(b) If, notwithstanding the intent of the Company and the Trust, the
transfer and assignment contemplated hereby is held not to be a sale, the
Company hereby grants a first priority security interest to the Trust in the
property referred to in this SECTION 2.1, for the benefit of the Noteholders and
the Insurer and this Agreement shall constitute a security agreement. The
execution and delivery of this Agreement shall constitute an acknowledgment by
the Company and the Indenture Trustee on behalf of the Noteholders that, solely
for income and franchise tax purposes, until the Certificates are held by more
than one Person or the Trust is recharacterized as a separate entity, the Trust
will be disregarded as an entity separate from its owner and the Notes will be
treated as debt. The powers granted and obligations undertaken in this Agreement
shall be construed so as to further such intent.
(c) In connection with the grant of the security interest in paragraph
(b) above, the Company shall cause the Servicer to file the following financing
statements:
(i) Form UCC-1 filed with the Secretary of State of
California, naming Triad as the debtor, the Company as the secured
party, and Receivables and the Trust Property as collateral;
(ii) Form UCC-2 filed with the Secretary of State of
California, naming Triad as the debtor, the Company as the secured
party, the Indenture Trustee as assignee and the Receivables and the
Trust Property as collateral;
(iii) Form UCC-1 filed with the Secretary of State of New York
and Delaware, naming the Company as the debtor, the Trust as secured
party the Indenture Trustee as assignee and the Receivables and the
Trust Property as collateral;
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(iv) Form UCC-1 filed with the Secretary of State of Delaware,
naming the Trust as the debtor, the Indenture Trustee as the secured
party and the Indenture Collateral as collateral.
(d) The Company hereby directs the Trust to, and the Trust does hereby,
accept the Trust Property conveyed by the Company to the Trust pursuant to this
SECTION 2.1.
(e) The conveyance of the Receivables and the other Trust Property with
respect thereto shall take place at a closing (the "CLOSING") at the offices of
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York 10112, on the
Closing Date.
SECTION 2.2. CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to paragraph (b) below and the terms and conditions of this
Agreement, the Company hereby sells, transfers, assigns and otherwise conveys to
the Trust, without recourse (but without limitation of its obligations under
this Agreement): (1) all of the right, title and interest of the Company in and
to the Subsequent Receivables and all monies due or received thereunder or in
respect thereof after the Subsequent Cutoff Date including amounts due on or
before the Subsequent Cutoff Date but received by Triad, the Company or the
Trust after the Subsequent Cutoff Date (including all Liquidation Proceeds and
recoveries received with respect to such Subsequent Receivables); and (2) all of
the right, title and interest of Triad and the Company in and to (i) the
security interests of Triad and the Company in the related Financed Vehicles and
any other interest of Triad and the Company in the related Financed Vehicles,
including the certificates of title with respect to such Financed Vehicles, (ii)
the Insurance Policies and any proceeds from any Insurance Policies relating to
the Subsequent Receivables, the Obligors or the related Financed Vehicles,
including rebates or refunds of premiums relating to the Subsequent Receivables,
(iii) the rights of Triad and the Company against Dealers with respect to the
Subsequent Receivables under the Dealer Agreements and the Dealer Assignments,
(iv) the rights of Triad and the Company against Correspondents with respect to
the Subsequent Receivables under the Correspondent Agreements and the
Correspondent Assignments, (v) all items contained in the related Receivable
Files and any and all other documents that Triad keeps on file in accordance
with its customary procedures relating to the Subsequent Receivables, the
Obligors or the related Financed Vehicles, (vi) property (including the right to
receive future Liquidation Proceeds) that secures any of the Subsequent
Receivables and that has been acquired by or on behalf of the Company or the
Trust pursuant to the liquidation of any such Receivable, (vii) the rights of
the Company under the Subsequent Receivables Purchase Agreement, (viii) all
funds on deposit from time to time in the Collection Account, the Note
Distribution Account, the Pre-Funding Account and the Capitalized Interest
Account, including all income thereon and proceeds thereof, (ix) all of the
right, title and interest of the Company in and to refunds for the costs of
extended service contracts with respect to the Financed Vehicles and (x) all
proceeds and investments of any of the foregoing, all present and future claims,
demands, causes and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any of the foregoing.
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(b) The Company shall transfer to the Issuer the Subsequent Receivables
and the other property and rights related thereto described in paragraph (a)
above only upon the satisfaction of each of the following conditions on or prior
to the related Subsequent Transfer Date:
(i) the Company shall have provided the Indenture Trustee, the
Owner Trustee, the Insurer and the Rating Agencies with (i) an Addition
Notice not later than seven (7) Business Days prior to such Subsequent
Transfer Date, (ii) an electronic transmission of the information on
the related Subsequent Receivables set forth in such Addition Notice
and (iii) any other information reasonably requested by any of the
foregoing with respect to the Subsequent Receivables;
(ii) the Company shall have delivered to the Owner Trustee,
the Insurer and the Indenture Trustee a duly executed Subsequent
Transfer Agreement which shall include supplements to Schedule A,
listing the Subsequent Receivables;
(iii) the Company shall, to the extent required by SECTION
3.2, have deposited in the Collection Account all collections in
respect of the Subsequent Receivables;
(iv) as of each Subsequent Transfer Date, (A) the Company
shall not be insolvent and shall not become insolvent as a result of
the transfer of Subsequent Receivables on such Subsequent Transfer
Date, (B) the Company shall not intend to incur or believe that it
shall incur debts that would be beyond its ability to pay as such debts
mature, (C) such transfer shall not have been made with actual intent
to hinder, delay or defraud any Person and (D) the assets of the
Company shall not constitute unreasonably small capital to carry out
its business as conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of Subsequent
Receivables on a Subsequent Transfer Date, the Receivables transferred
to the Trust pursuant hereto shall meet the following criteria (based
on the characteristics of the Initial Receivables on the Initial Cutoff
Date and the Subsequent Receivables on the related Subsequent Cutoff
Dates) as such information is provided to the Indenture Trustee by the
Servicer: (a) the weighted average APR of such Receivables transferred
to the Trust shall not be less than one percent less than the weighted
average APR of the Initial Receivables on the Initial Cutoff Date,
unless, with the prior consent of the Rating Agencies and the Insurer,
the Company increases the Reserve Account Initial Deposit with respect
to such Subsequent Receivables by the amount required by the Insurer;
(b) the weighted average remaining term of the Receivables transferred
to the Trust shall not be greater than [ ] months nor less than [ ]
months; (c) not more than [ ]% of the aggregate Principal Balance of
such Receivables will represent financing of used Financed Vehicles;
(d) the APR is not less than [ ]% nor more than [ ]%; (e) not more than
[ ]% of the aggregate Principal Balance of such Receivables will
represent Receivables designated in Credit Tier 3, not
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more than [ ]% of the aggregate Principal Balance of the Receivables
will represent Receivables designated in Credit Tier 4, not more than [
]% of the aggregate Principal Balance of the Receivables will represent
Receivables designated in Credit Tier 5 and not more than [ ]% of the
aggregate Principal Balance of the Receivables will represent
Receivables designated in Credit Tier 6; (f) no such Receivable will
represent financing of a Financed Vehicle which is older than a [ ]
model year; (g) not more than [ ]% of the aggregate Principal Balance
of such Receivables have been conveyed to Triad pursuant to
Correspondent Assignments, and not more than [ ]% of the aggregate
Principal Balance of such Receivables have been conveyed to Triad by
any one Correspondent; additionally, the Trust, the Indenture Trustee,
the Owner Trustee and the Insurer shall have received a written
confirmation from a firm of certified independent public accountants as
to the satisfaction of the criteria in clauses (a) through (f);
(vii) each of the representations and warranties made by the
Company pursuant to SECTION 3.1 with respect to the Subsequent
Receivables to be transferred on such Subsequent Transfer Date shall be
true and correct as of the related Subsequent Transfer Date, and the
Company shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Transfer Date;
(viii) the deposit into the Reserve Account of the amounts
required by Section 3.01(c) of the Reserve Account Agreement;
(ix) the Company shall deliver or have previously delivered
the related Receivables Files to the Custodian, and the Custodian shall
acknowledge the receipt of such files by delivery of a certificate in
form of Exhibit C hereto.
(x) the Company shall have taken any action required to
maintain the first priority perfected ownership interest of the Trust
in the Trust Property and the first perfected security interest of the
Indenture Trustee in the Indenture Collateral pledged under the
Indenture;
(xi) no selection procedures adverse to the interests of the
Noteholders or the Insurer shall have been utilized in selecting the
Subsequent Receivables;
(xii) the addition of any such Subsequent Receivables shall
not result in a material adverse tax consequence to the Trust or the
Noteholders;
(xiii) the Company shall cause to be delivered (A) to the
Rating Agencies, the Insurer and the Owner Trustee Opinions of Counsel
with respect to the transfer of such Subsequent Receivables
substantially in the form of the Opinions of Counsel delivered to the
Rating Agencies and the Insurer on the Closing Date and (B) to the
Indenture Trustee the Opinion of Counsel required by Section 11.2(j)
regarding true sale, non-consolidation, perfection and other matters
satisfactory in form and in substance to the Insurer;
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(xiv) each Rating Agency shall have confirmed in writing to
the Indenture Trustee and the Insurer that the rating on the Notes
shall not be withdrawn or reduced as a result of the transfer of such
Subsequent Receivables to the Trust;
(xv) the Insurer (so long as an Insurer Default shall not have
occurred and be continuing), in its absolute and sole discretion, shall
have approved in writing to the Indenture Trustee the transfer of such
Subsequent Receivables to the Trust;
(xvi) the Company shall have received a reasonably equivalent
value in exchange for the sale of the Subsequent Receivables;
(xvii) the Company shall have delivered to the Insurer and the
Indenture Trustee an Officers' Certificate confirming the satisfaction
of each condition precedent specified in this paragraph (b).
SECTION 2.3. CUSTODY OF RECEIVABLE FILES.
(a) The Company shall cause to be delivered the following documents
and/or instruments (with respect to each Receivable) to the Custodian on or
prior to the Closing Date with respect to the Initial Receivables, and the
applicable Subsequent Transfer Date with respect to the Subsequent Receivables:
(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, as applicable, including
any extension agreements, provided that the Custodian shall not have to
certify the receipt of any such agreements modifying or extending the
Receivable); and
(ii) The original Lien Certificate (when received) indicating
that the Financed Vehicle is owned by the Obligor and subject to the
interest of Triad as first lienholder or secured party (including any
Lien Certificate received by Triad), or, if such original Lien
Certificate has not yet been received, a copy of the application
therefor or a representation from the Dealer certifying as to the
application thereof, if any, showing Triad as secured party. Prior to
the Closing Date, the Custodian shall (A) conduct a physical inventory
of the Receivables Files relating to the Receivables in order to
confirm that the Custodian is in possession of a Receivable File for
each Receivable listed in the relevant Schedule of Receivables
delivered to the Custodian and (b) perform a review of the Receivables
Files relating to such Receivables that would enable the Custodian to
determine that each Receivable File includes (i) a fully executed
original retail installment sales contract or promissory note and (ii)
the original or copy of a Lien Certificate or application therefor or
such other documents received from the relevant authority showing Triad
as the secured party. As evidence of the performance of such inventory
and review, on or prior to the Closing Date, the Custodian shall
deliver to the Insurer, the Owner Trustee, the Company and the
Servicer, and Acknowledgment in the form of Exhibit C hereto.
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(b) Upon payment in full of any Receivable (including upon payment by
Triad or the Servicer of the Purchase Amount) or replacement of a Receivable,
the Servicer shall notify the Custodian pursuant to a certificate of an
authorized representative of the Servicer in the form of EXHIBIT B and shall
request delivery of the Receivable and Receivable File to the Servicer. From
time to time as appropriate for servicing and enforcing any Receivable, the
Custodian shall, upon written request of an authorized representative of the
Servicer in the form of EXHIBIT B and delivery to the Custodian of a receipt
signed by such officer, cause the original Receivable and the related Receivable
File to be released to the Servicer, as agent and bailee of the Custodian. The
Servicer's receipt of a Receivable and/or Receivable File pursuant to the prior
sentence shall obligate the Servicer to return the original Receivable and the
related Receivable File to the Custodian when its need by the Servicer has
ceased unless the Receivable is paid in full, liquidated, purchased, repurchased
or replaced.
(c) The Custodian shall maintain the Receivable Files it has received
at its principal office or at such other office as shall from time to time be
identified to the Servicer, the Insurer and the Owner Trustee, and the Custodian
will hold such Receivable Files in such office on behalf of the Noteholders and
the Insurer, clearly identified as being separate from any other instruments and
files on its records, including other instruments and files held by the
Indenture Trustee. Each Receivable shall be identified on the books and records
of the Custodian in a manner that (i) is consistent with practices of a
commercial bank acting in the capacity of custodian with respect to similar
receivables and (ii) is otherwise necessary, as reasonably determined by the
Custodian, to comply with the terms of this Agreement.
SECTION 2.4. CONDITIONS PRECEDENT TO ISSUANCE BY TRUST. As conditions
to the Indenture Trustee's authentication and delivery of the Notes on the
Closing Date, the Indenture Trustee and the Insurer shall have received the
following on or before the Closing Date:
(a) The Schedule of Initial Receivables certified by an Executive
Officer of the Seller;
(b) The acknowledgment (including an exceptions listing, if any) of the
Indenture Trustee stating that it holds the Receivable Files relating to the
Initial Receivables and has reviewed such Receivable Files and such Receivable
Files contain the items set forth in SECTION 2.3(a)(i) and (ii);
(c) Copies of resolutions of the Board of Directors of the Company
approving the execution, delivery and performance of the Company's Related
Documents and the transactions contemplated hereby and thereby, certified by a
Secretary or an Assistant Secretary of the Company;
(d) Copies of resolutions of the Board of Directors of Triad approving
the execution, delivery and performance of its Related Documents and the
transactions contemplated hereby and thereby, certified by a Secretary or an
Assistant Secretary of Triad;
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(e) Opinions from Dechert Price & Rhoads and Helen R. Kraus, General
Counsel of Triad, and local counsel for California with respect to the Trust's
first priority perfected security interest or ownership interest in the
Receivables and the Financed Vehicles and copies of any financing statements
which have been or will be attached to such opinions;
(f) An executed copy of each Related Document; and
(g) The executed Note Policy, issued to the Indenture Trustee for the
benefit of the Noteholders.
SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF COMPANY. By its
execution of this Agreement, the Company makes the following representations and
warranties on which the Trust relies in accepting the Receivables and the other
Trust Property and in issuing the Notes and on which the Indenture Trustee
relies in authenticating the Notes and upon which the Insurer shall be deemed to
rely in issuing the Note Policy. Unless otherwise specified, such
representations and warranties speak as of the Closing Date in the case of the
Initial Receivables and as of the related Subsequent Transfer Date in the case
of Subsequent Receivables, but shall survive the sale, transfer and assignment
of the Receivables to the Trust.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set
forth on the Schedule of Representations set forth in Schedule B attached hereto
are true and correct in all material respects.
(b) ORGANIZATION AND GOOD STANDING. The Company has been duly
organized and is validly existing as a corporation under the laws of the
State of [ ], with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business
is currently conducted.
(c) DUE QUALIFICATION. The Company is duly qualified to do business and
has obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business shall require
such qualification.
(d) POWER AND AUTHORITY. The Company has the power and authority to
execute and deliver its Related Documents and to carry out their terms; the
Company has power and authority to sell and assign the Receivables and the other
Trust Property to be sold and assigned to and deposited with the Trust by it and
has duly authorized such sale and assignment to and deposit with the Trust by
all necessary corporate action; and the execution, delivery and performance of
the Company's Related Documents have been duly authorized by the Company by all
necessary corporate action.
(e) BINDING OBLIGATIONS. The Company's Related Documents, when duly
executed and delivered by the other parties thereto, shall constitute valid and
binding obligations of the Company enforceable in accordance with their
respective terms, except as enforceability may be
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limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(f) NO VIOLATION. The execution, delivery and performance by the
Company of its Related Documents, the consummation of the transactions
contemplated thereby and the fulfillment of the terms thereof do not (i)
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Company, or any indenture, agreement,
mortgage, deed of trust, commitment letter or other instrument to which the
Company is a party or by which it or its properties are bound, (ii) result in
the creation or imposition of any Lien (other than Permitted Liens) upon any of
its properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust, commitment letter or other instrument or (iii) to the Company's
knowledge, violate any law, order, rule or regulation applicable to the Company
of any Governmental Authority having jurisdiction over the Company or its
properties.
(g) NO PROCEEDINGS. There are no proceedings or investigations pending
or, to the Company's knowledge, threatened against the Company, before any
Governmental Authority having jurisdiction over the Company or its properties
(i) asserting the invalidity of any of the Related Documents, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the transactions
contemplated by any of the Related Documents, (iii) seeking any determination or
ruling that would have a material adverse effect on the performance by the
Company of its obligations under, or the validity or enforceability of, any of
the Related Documents.
(h) NO CONSENTS. No consent approval, license, authorization or order
of, or declaration, registration or filing with, any Governmental Authority or
other Person is required to be made by the Company in connection with the
execution, delivery or performance of its Related Documents or the consummation
of the transactions contemplated thereby, except such as have been duly made,
effected or obtained.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the Company
is located at [ ].
SECTION 2.6. REPURCHASE OR REPLACEMENT OF RECEIVABLES UPON BREACH OF
WARRANTY. Upon discovery by any of the Company, the Servicer or the Indenture
Trustee of a breach of any of the representations and warranties of Triad
contained in SECTION 3.1(a) of the Receivables Purchase Agreement that has a
material adverse effect on the interests of the Noteholders or the Insurer in
any Receivable, the party discovering such breach shall give prompt written
notice to the others; PROVIDED, HOWEVER, that the failure to give any such
notice shall not affect the obligation of Triad under SECTION 5.1 of the
Receivables Purchase Agreement. Triad hereby acknowledges its obligations to
repurchase or replace such Receivable in accordance with the terms set forth in
the Receivables Purchase Agreement and further acknowledges that the
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provisions of SECTION 5.1 of the Receivables Purchase Agreement are intended to
grant the Trust and the Indenture Trustee a direct right against Triad to demand
performance thereunder.
SECTION 2.7. INDENTURE TRUSTEE'S ASSIGNMENT OF RECEIVABLES. With
respect to all Purchased Receivables and replaced Receivables, the Trust and the
Indenture Trustee shall take any and all actions reasonably requested by the
Servicer, at the Servicer's expense, to assign, without recourse, representation
or warranty, to the Servicer, all the Trust's and the Indenture Trustee's right,
title and interest in and to such Purchased Receivables or replaced Receivables
and the other Trust Property with respect thereto, such assignment being an
assignment outright and not for security; and the Servicer, shall thereupon own
such Purchased Receivables or replaced Receivables and the other Trust Property
related thereto, free of any further obligation to the Trust, the Indenture
Trustee or the Noteholders with respect thereto. The Trust and the Indenture
Trustee shall take any and all actions reasonably requested by the Servicer, at
the expense of the requesting party, to release its security interest in each
Purchased Receivable or replaced Receivable and in the other Trust Property with
respect thereto. The Servicer shall remove each Purchased Receivable or replaced
Receivable from the Schedule of Receivables and mark the Electronic Ledger
accordingly. The Servicer shall deliver any supplements to the Schedule of
Receivables to the Company, the Insurer and the Indenture Trustee and the Owner
Trustee. Notwithstanding the foregoing, although the Trust and the Indenture
Trustee, as applicable, shall be required to execute documentation related to
the foregoing, neither the Trust nor the Indenture Trustee shall be required to
prepare any such documentation.
SECTION 2.8. COLLECTION OF LIEN CERTIFICATES. The Servicer shall use
its best efforts to collect each Lien Certificate from the applicable Registrar
of Titles as promptly as practicable and, pending receipt of each Lien
Certificate from such Registrar of Titles, shall supply written evidence
reasonably acceptable to the Indenture Trustee that each such Lien Certificate
has been applied for. If a Lien Certificate with respect to a Receivable showing
Triad as first lienholder is not received by the Indenture Trustee within one
hundred eighty (180) days after the Closing Date with respect to an Initial
Receivable or one hundred eighty (180) days after the related Subsequent
Transfer Date with respect to a Subsequent Receivable, the Servicer shall be
obligated to purchase or replace such Receivable under SECTION 3.7.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.1 DUTIES OF THE SERVICER. The Servicer is hereby authorized
to act as agent for the Trust and in such capacity shall manage, service,
administer and make collections on the Receivables and perform the other actions
required by the Servicer under this Agreement. The Servicer agrees that its
servicing of the Receivables shall be carried out in accordance with customary
and usual procedures of institutions that service motor vehicle retail
installment contracts and, to the extent more exacting, with the degree of skill
and attention that the Servicer exercises from time to time with respect to
comparable motor vehicle receivables that it services
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for itself or others provided, however, that the Servicer shall not materially
change its servicing standards and procedures without the prior written consent
of the Insurer, which consent shall not be unreasonably withheld; provided
further, however, such consent shall not be required if the Servicer has given
the Insurer notice in writing of such request and the Insurer has not responded
to any request for consent within five (5) Business Days of receipt of such
request. In performing such duties, it shall comply with its current servicing
policies and procedures, as such servicing policies and procedures may be
amended from time to time, so long as such amendments shall not materially and
adversely affect the interests of the Noteholders, the Insurer or the Trust. The
Servicer's duties shall include, without limitation, notifying each Obligor to
make its Contract Scheduled Payments and all other payments on the Receivables
directly to the Lockbox Bank, collection and posting of all payments, responding
to inquiries of Obligors on the Receivables, investigating delinquencies,
sending statements or payment coupons to Obligors, reporting tax information to
Obligors, monitoring the collateral, accounting for collections and furnishing
monthly and annual statements to the Indenture Trustee and the Insurer with
respect to distributions, monitoring the status of the Insurance Policies,
maintaining the collateral insurance, if any, and performing the other duties
specified herein.
The Servicer shall: (a) maintain a lenders comprehensive single
interest or other collateral protection insurance policy with respect to all
Financed Vehicles, which policy by its terms insures against physical damage in
the event (i) any Obligor fails to maintain physical damage insurance with
respect to the related Financed Vehicle, and under which lenders comprehensive
single interest policy the Servicer will be the named insured and the Indenture
Trustee shall be named additional insured, (ii) or the Financed Vehicle is
repossessed; (b) implement such other collateral protection in a manner that is
customary and standard for servicers of receivables in the same general area as
the Servicer and for receivables comparable to the Receivables, which may
include self-insurance or (c) implement other insurance coverage acceptable to
the Controlling Party. The Servicer or its agents shall monitor the status of
the Insurance Policies in accordance with its customary servicing procedures. If
the Servicer shall determine that an Obligor has failed to obtain or maintain an
Insurance Policy covering the related Financed Vehicle (including during the
repossession of such Financed Vehicle against loss and damage due to fire,
theft, transportation, collision and other risks generally covered by
comprehensive and collision insurance), the Servicer shall be diligent in
carrying on its customary servicing procedures to enforce the rights of the
holder of the Receivable thereunder to ensure that the Obligor obtains such
Insurance Policy. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain possession of the Dealer Agreements, as
appropriate, to the extent it is necessary to do so), the Dealer Assignments and
the Insurance Policies, as appropriate, to the extent such Dealer Agreements,
Dealer Assignments and Insurance Policies relate to the Receivables, the
Financed Vehicles or the Obligors.
To the extent consistent with the standards, policies and procedures
otherwise required hereby, the Servicer shall follow its customary standards,
policies and procedures and shall have full power and authority, acting alone,
to do any and all things in connection with management, servicing,
administration and collection that it may deem necessary or desirable. Without
limiting
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the generality of the foregoing, the Servicer is hereby authorized and empowered
by the Trust to execute and deliver, on behalf of the Trust, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
and the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the Servicer shall not, except pursuant to an order from a court of
competent jurisdiction, release an Obligor from payment of any unpaid amount
under any Receivable or waive the right to collect the unpaid balance of any
Receivable from the Obligor, except that the Servicer may forego collection
efforts if the amount subject to collection is DE MINIMIS and if it would forego
collection of such amount in accordance with its customary procedures. The
Servicer is authorized to release Liens on Financed Vehicles granted by the
Receivables in order to collect insurance proceeds with respect thereto and to
liquidate such Financed Vehicles in accordance with its customary standards,
policies and procedures.
The Servicer is hereby authorized to commence, in its own name or in
the name of the Trust or the Indenture Trustee (provided that, if the Servicer
is acting in the name of the Indenture Trustee, it has obtained the Indenture
Trustee's written consent, which consent shall not be unreasonably withheld),
legal proceedings to enforce Receivables or to commence or participate in any
other legal proceedings (including bankruptcy proceedings) relating to or
involving Receivables, Obligors or Financed Vehicles. If the Servicer commences
or participates in such legal proceedings in its own name, the Trust shall
thereupon be deemed to have automatically assigned such Receivables to the
Servicer solely for purposes of commencing or participating in any such
proceedings as a party or claimant, and the Servicer is authorized and empowered
by the Trust to execute and deliver in the Servicer's name any notices, demands,
claims, complaints, responses, affidavits or other documents or instruments in
connection with any such proceedings. The Indenture Trustee and the Trust shall
furnish the Servicer with any powers of attorney and other documents that the
Servicer may reasonably request and that the Servicer deems necessary or
appropriate and take any other steps that the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.
SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS, MODIFICATIONS OF
RECEIVABLES; LOCKBOX ACCOUNT.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due, and shall follow such collection procedures as
it follows with respect to comparable motor vehicle receivables that it services
for itself or others and otherwise act with respect to the Receivables, the
Dealer Agreements, the Insurance Policies and the other Trust Property serviced
by it in such manner as will, in the reasonable judgment of the Servicer,
maximize the amount to be received by the Trust with respect thereto. The
Servicer is authorized in its discretion to waive any prepayment charge, late
payment charge or any other similar fees that may be collected in the ordinary
course of servicing any Receivable.
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(b) Notwithstanding anything to the contrary provided in this
Agreement, the Servicer will not (i) forgive any periodic or other Contract
Scheduled Payment due on such Receivable, (ii) permit any modification with
respect to any Receivable that would increase or decrease the Annual Percentage
Rate on such Receivable, or defer the payment of any principal or interest or
any periodic or other scheduled payment due on such Receivable, unless the
Obligor is in default under a Receivable or is likely to default on such
Receivable in the foreseeable future, provided, however, that notwithstanding
the foregoing, the Servicer may permit any such modifications or deferrals
described in this clause (ii) if such modification or deferral is required by
court order, (iii) reduce or increase the Principal Balance on such Receivable
(except in connection with actual payments of periodic or other scheduled
payments or principal prepayments) unless any such modification is required by
court order, (iv) other than in connection with a Liquidated Receivable, release
any Lien in favor of the Servicer or the Trust securing a Receivable or (v)
extend the final maturity date of any Receivable; PROVIDED, HOWEVER, that the
Servicer may grant an extension or deferral of the final maturity date of a
Receivable, if the Servicer, in its sole discretion, determines that (A) the
Receivable is in default or default on such Receivable is likely to occur in the
foreseeable future, and (B) that the value of the Receivable will be enhanced by
such extension; and, PROVIDED, FURTHER, that the Servicer shall not (1) grant
more than three extensions and/or deferrals in the aggregate with respect to a
Receivable, (2) grant more than one extension or deferral per calendar year with
respect to a Receivable, (3) grant an extension or deferral for more than one
calendar month with respect to a Receivable or (4) grant an extension or
deferral with respect to a Receivable, if immediately after giving effect
thereto, the sum of the Principal Balance of Receivables in respect of which
extensions and/or deferrals in the aggregate had been granted would exceed more
than one percent of the Aggregate Principal Balance.
(c) The Servicer shall, prior to the Closing Date with respect to
Initial Receivables and prior to the related Subsequent Transfer Date with
respect to Subsequent Receivables, notify each Obligor to make its payments with
respect to the Receivables directly to the Lockbox Bank. The Servicer shall use
its best efforts to cause Obligors to make all payments on the Receivables
whether by check or by direct debit of the Obligor's bank account, to be made to
the Lockbox Bank. The Servicer shall use its best efforts to cause the Lockbox
Bank to deposit all available Contract Scheduled Payments with respect to the
Receivables in the Lockbox Account no later than the first (1st) Business Day
after receipt, and to cause all available amounts on deposit in the Lockbox
Account with respect to such payments to be transferred to the Collection
Account no later than the second Business Day after receipt of such payments in
the Lockbox Account. All amounts received by the Servicer, Triad or the Company
in respect of the Receivables in the form of checks with payment coupons shall
be deposited directly to the Lockbox Bank immediately upon receipt, but in no
event later than the second (2nd) Business Day after receipt of such payment.
Other payments received by each of the Servicer, Triad and the Company will be
deposited into a local servicing account for processing immediately upon
receipt, and then transferred to the Collection Account no later than the second
(2nd) Business Day after receipt of available amounts. The Lockbox Account shall
be a demand deposit account, or at the request of the Controlling Party, an
Eligible Account. Upon the occurrence of a Servicer Termination
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Event, the Controlling Party may, in its sole discretion, elect to change the
identity of the Lockbox Bank and transfer the Lockbox Account to a segregated
account in the name of the Indenture Trustee.
(d) On the Closing Date, the Servicer shall deposit or cause to be
deposited into the Collection Account all amounts collected with respect to the
Initial Receivables from the Initial Cutoff Date to the fourth (4th) Business
Day preceding the Closing Date. As soon as possible thereafter and in accordance
with the provisions of this Agreement, all amounts collected with respect to the
Initial Receivables from such date to the Closing Date shall be deposited into
the Collection Account.
(e) On each Subsequent Transfer Date, the Servicer shall deposit or
cause to be deposited into the Collection Account all amounts collected with
respect to the Subsequent Receivables from the related Subsequent Cutoff Date to
the fourth (4th) Business Day preceding the Closing Date. As soon as possible
thereafter and in accordance with the provisions of this Agreement, amounts
collected with respect to the Subsequent Receivables from any such date to the
Closing Date shall be deposited into the Collection Account.
(f) In the event the Servicer shall for any reason no longer be acting
as such, the Backup Servicer or successor Servicer shall thereupon (i) assume
the rights and obligations of the Servicer relating to the Receivables and (ii)
(1) assume all of the rights and, from the date of assumption, all of the
obligations of the outgoing Servicer relating to the Receivables under any
Lockbox Agreement to which the Servicer is a party or (2) establish a different
Lockbox Account for the benefit of the Trust with the prior written consent of
the Insurer and notify each Obligor of the new Lockbox Bank to which its
payments should be sent. If the Backup Servicer or successor Servicer assumes an
existing Lockbox Agreement to which the Servicer is a party, the Backup Servicer
or any other successor Servicer shall not be liable for any acts, omissions or
obligations of the Servicer prior to such succession. In such event, the
successor Servicer shall be deemed to have assumed all of the outgoing
Servicer's interest therein relating to the Receivables and to have replaced the
outgoing Servicer as a party to each such Lockbox Agreement to the same extent
as if such Lockbox Agreement had been assigned to the successor Servicer, except
that the outgoing Servicer shall not thereby be relieved of any liability, or
obligations on the part of the outgoing Servicer to the Lockbox Bank under such
Lockbox Agreement. The outgoing Servicer shall, upon request of the Indenture
Trustee, but at the expense of the outgoing Servicer, deliver to the successor
Servicer all documents and records relating to the Lockbox Agreement and an
accounting of amounts collected and held by the Lockbox Bank and otherwise use
its best efforts to effect the orderly and efficient transfer of any Lockbox
Agreement to the successor Servicer.
(g) Notwithstanding any third-party processing arrangement, or any of
the provisions of this Agreement relating to any third-party processing
arrangement, the Servicer shall remain obligated and liable to the Trust, the
Indenture Trustee, the Insurer and the Noteholders for servicing and
administering the Receivables and the other Trust Property serviced by it in
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accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue thereof.
SECTION 3.3. REALIZATION UPON RECEIVABLES.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) any Financed Vehicle securing a
Receivable with respect to which the Servicer has determined that payments
thereunder are not likely to be resumed, as soon as practicable after default on
such Receivable, but in no event later than the date on which all or a portion
of a Contract Scheduled Payment has become 120 days delinquent, and shall use
its best efforts to liquidate such Financed Vehicle within 90 days of
repossession, PROVIDED, HOWEVER that the Servicer may elect not to repossess or
liquidate a Financed Vehicle within such time period if in its good faith
judgment it determines that the proceeds ultimately recoverable with respect to
such Receivable would be increased by forebearance. The Servicer is authorized
to follow such customary practices and procedures as it shall deem necessary or
advisable, consistent with the standard of care required by SECTION 3.1, which
practices and procedures may include reasonable efforts to realize upon any
recourse to Dealers, the sale of the related Financed Vehicle at public or
private sale, and shall include the submission of claims under an Insurance
Policy and other actions by the Servicer in order to realize upon a Receivable.
The foregoing is subject to the proviso that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair or repossession
shall increase the proceeds of liquidation of the related Receivable by an
amount greater than the amount of such expenses. All Recoveries and Liquidation
Proceeds received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer to a servicing account of the Servicer and the Servicer
shall cause all available amounts related thereto to be transferred to the
Collection Account no later than the second Business Day after receipt thereof.
The Servicer shall pay on behalf of the Trust any personal property taxes
assessed on repossessed Financed Vehicles; the Servicer shall be entitled to
reimbursement of any such tax from Recoveries and Liquidation Proceeds with
respect to such Receivable. The Servicer shall not lease any repossessed
Financed Vehicle to any party. In selling or otherwise disposing of any
repossessed Financed Vehicle, the Servicer shall do so as expeditiously as
possible and in a manner such that such activities shall not rise to the level
of a trade or business of selling or otherwise transferring such repossessed
Financed Vehicles.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trust and the Indenture Trustee, to the
Servicer of the rights under such agreements for purposes of collection only.
If, however, in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce any such agreement on the grounds that it is not a real
party in interest or a Person entitled to enforce such agreement, the Trust or
the Indenture Trustee, at the Servicer's expense, shall take such steps as the
Servicer deems necessary to enforce such agreement, including bringing suit in
its name or the name of the Trust or the
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Indenture Trustee for the benefit of the Noteholders. All amounts recovered
shall be remitted directly and promptly (but in no event later than one Business
Day) by the Servicer into a servicing account of the Servicer and the Servicer
shall cause all available amounts therein to be transferred to the Collection
Account no later than the second Business Day after receipt of available amounts
in respect thereof.
(c) The Servicer agrees that prior to delivering any repossessed
Financed Vehicle for sale to any Dealer, it shall make such filings and effect
such notices as are necessary under ss.9-114(1) of the UCC to preserve its
ownership interest (or security interest, as the case may be) in such
repossessed Financed Vehicle.
SECTION 3.4. INSURANCE. The Servicer shall require, in accordance with
its customary servicing policies and procedures, that each Financed Vehicle, at
the time of origination of the Receivable, be insured by the related Obligor
under the Insurance Policies referred to in Paragraph 24 of the schedule of
representations set forth in Schedule B to the Receivable Purchase Agreement and
that such Insurance Policy names Triad as an additional insured. Each Receivable
shall permit the holder thereof to obtain physical loss and damage insurance at
the expense of the Obligor if the Obligor fails to maintain such insurance. The
Servicer may sue to enforce or collect upon the Insurance Policies in its own
name or as agent of the Trust. If the Servicer elects to commence a legal
proceeding to enforce an Insurance Policy, the act of commencement shall be
deemed to be an automatic assignment of the rights of the Trust and the
Indenture Trustee under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Trust or the Indenture Trustee, at the Servicer's expense, 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 Trust and the
Indenture Trustee for the benefit of the Noteholders.
SECTION 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps on behalf of the Trust as are
necessary to maintain perfection of the first priority security interest created
by each Receivable in the related Financed Vehicle, including the recording,
registering, filing, re-recording, re-filing and re-registering of all security
agreements, financing statements and continuation statements or instruments as
are necessary to maintain the security interest under the respective
Receivables. The Trust and the Indenture Trustee each hereby authorize the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect or continue the perfection of such security interest in the name of
Triad or the Company on behalf of the Trust as necessary because of the
relocation of a Financed Vehicle or for any other reason. If the assignment of a
Receivable to the Trust and the pledge of such Receivables to the Indenture
Trustee are insufficient without a notation on the related Financed Vehicle's
certificate of title or without fulfilling any additional administrative
requirements under
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the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Indenture
Trustee, the Servicer hereby agrees that Triad's designation as the secured
party on the certificate of title is in its capacity as agent of the Indenture
Trustee, solely for purposes of providing perfection of the security interest
therein.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Insurer may (so long as an Insurer Default shall not have occurred and be
continuing) instruct the Indenture Trustee and the Servicer to take or cause to
be taken, or, if an Insurer Default shall have occurred, upon the occurrence of
a Servicer Termination Event, the Servicer shall take or cause to be taken such
action as may, in the opinion of counsel to the Insurer (so long as no Insurer
Default has occurred and is continuing) or the Servicer (so long as an Insurer
Default has occurred and is continuing), be necessary to perfect or re-perfect
the security interests in the Financed Vehicles securing the Receivables in the
name of the Trust by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the Insurer
(so long as no Insurer Default has occurred and is continuing) or the Servicer
(so long as an Insurer Default has occurred and is continuing), be necessary or
prudent.
(c) Triad hereby agrees to pay all expenses related to such perfection
or re-perfection and to take all action necessary therefor. In addition, prior
to the occurrence of an Insurance Agreement Event of Default, the Controlling
Party may instruct the Indenture Trustee and the Servicer to take or cause to be
taken such action as may, in the opinion of counsel to the Controlling Party, be
necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Receivables in the name of the Trust, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent; PROVIDED, HOWEVER, that if the Controlling Party requests
that the title documents be amended prior to the occurrence of an Insurance
Agreement Event of Default, the out-of-pocket expenses of the Servicer or the
Indenture Trustee in connection with such action shall be reimbursed to the
Servicer or the Indenture Trustee, as applicable, by the Controlling Party.
Triad hereby appoints the Indenture Trustee as its attorney-in-fact to take any
and all steps required to be performed by Triad pursuant to this Section 3.5(c)
(it being understood that and agreed that the Indenture Trustee shall have no
obligation to take such steps, except as pursuant to the Related Documents to
which it is a party), including execution of certificates of title or any other
documents in the name and stead of Triad, and the Indenture Trustee hereby
accepts such appointment.
SECTION 3.6. COVENANTS, REPRESENTATIONS AND WARRANTIES OF SERVICER. By
its execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Trust relies in accepting
the Receivables and issuing the Notes, the Insurer relies in issuing the Note
Policy, and on which the Indenture Trustee relies in authenticating the Notes.
Unless otherwise specified, such representations and warranties speak as of the
Closing Date with respect to Initial Receivables and as of the related
Subsequent Transfer Date with respect to Subsequent Receivables, but shall
survive the sale, transfer and
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assignment of the Receivables to the Trust and the pledge by the Trust of its
rights hereunder to the Indenture Trustee.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the security
interest granted by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair
the rights of the Trust, the Indenture Trustee, the Insurer or the
Noteholders in the Receivables or the other Trust Property. The
Servicer shall take such action as is necessary (including the filing
of appropriate UCC financing statements and continuation statements) to
preserve the rights of the Trust, the Indenture Trustee, the Insurer
and the Noteholders in the Receivables and the other Trust Property;
(iii) NO AMENDMENTS. The Servicer shall not extend or
otherwise amend the terms of any Receivable, except in accordance with
SECTION 3.2;
(iv) RESTRICTIONS ON LIENS. The Servicer shall not (A) create,
incur or suffer to exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien on, or restriction on transferability of, the Receivables, except
for Permitted Liens or (B) sign or file under the UCC of any
jurisdiction any financing statement that names Triad or the Servicer
as a debtor, or sign any security agreement authorizing any secured
party thereunder to file such financing statement, with respect to the
Receivables, except in each case any such instrument solely securing
the rights and preserving the Lien of the Indenture Trustee for the
benefit of the Noteholders and the Insurer or as otherwise permitted
under this Agreement or the Related Documents; and
(v) COMPLIANCE WITH LAWS. The Servicer shall comply with the
laws of each state in which a Receivable is located, including, without
limitation, all federal and state laws regarding the collection and
enforcement of consumer debt.
(vi) SERVICING OF RECEIVABLES. The Servicer shall service the
Receivables as required by the terms of this Agreement and in
substantial compliance with its standard and customary procedures for
servicing all of its other comparable motor vehicle receivables.
(b) The Servicer represents, warrants and covenants as of the Closing
Date with respect to the Initial Receivables (and as of the related Subsequent
Transfer Date with respect to Subsequent Receivables) as to itself (on which the
Insurer relies in issuing the Note Policy):
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(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of organization, with power,
authority and legal right to own its properties and to conduct its
business as such properties are currently owned and such business is
currently conducted;
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this
Agreement) requires or shall require such qualifications, licenses or
approvals;
(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, and the
execution, delivery and performance of the Servicer's Related Documents
have been duly authorized by the Servicer by all necessary corporate
action;
(iv) BINDING OBLIGATION. The Servicer's Related Documents,
when duly executed and delivered by the other parties thereto shall
constitute legal, valid and binding obligations of the Servicer
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(v) NO VIOLATION. The execution, delivery and performance by
the Servicer of its Related Documents, the consummation of the
transactions contemplated thereby and the fulfillment of the terms
thereof do not (A) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time) a default under, the articles of incorporation or bylaws of
the Servicer, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Servicer is a party or by which it or its
properties are bound, (B) result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or
(C) violate any law, order, rule or regulation applicable to the
Servicer of any Governmental Authority having jurisdiction over the
Servicer or any of its properties;
(vi) NO PROCEEDINGS. Other than as set forth in SCHEDULE D
hereto, there are no proceedings or investigations pending or, to the
best of the Servicer's knowledge, threatened against the Servicer,
before any Governmental Authority having jurisdiction over the Servicer
or its properties (A) asserting the invalidity of any of the Related
Documents, (B) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by the Related
Documents, (C) seeking any
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determination or ruling that could reasonably be expected to have a
material adverse effect on the performance by the Servicer of its
obligations under, or the validity or enforceability of, any of the
Related Documents or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Notes or
seeking to impose any excise, franchise, transfer or similar tax upon
the Notes or the sale and assignment of the Receivables hereunder;
(vii) NO CONSENTS. No consent, license, approval,
authorization or order of, or registration, declaration or filing with,
any Governmental Authority or other Person is required to be made in
connection with the execution, delivery or performance of the
Servicer's Related Documents or the consummation of the transactions
contemplated thereby, except such as have been duly made, effected or
obtained;
(viii) TAXES. The Servicer has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent
that such taxes have become due;
(ix) CHIEF EXECUTIVE OFFICE. The principal place of business
and chief executive office of the Servicer is, and for the four months
preceding the date of this Agreement has been, located at 7711 Center
Avenue, Suite 100, Huntington Beach, California;
(x) NO INJUNCTIONS. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect
the performance by the Servicer or its obligations under, or the
validity and enforceability of, the Agreement; and
(xi) COMPLIANCE WITH LAW. The Servicer is in compliance with
all requirements of federal and state laws, rules, regulations and
orders, except where the failure so to comply would not have a material
adverse effect on the Servicer, its business or its properties, or the
ability of the Servicer to perform its obligations under this
Agreement.
(c) The Servicer covenants and agrees:
(i) BACKUP SERVICER INDEMNIFICATION. The Servicer shall
defend, indemnify and hold the Backup Servicer and any officers,
directors, employees or agents of the Backup Servicer harmless against
any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments and any other costs, fees and expenses
that the Backup Servicer may sustain in connection with claims asserted
at any time by third parties against the Backup Servicer that result
from (A) any willful or negligent act taken or omission by the Servicer
(other than errors in judgment) or (B) a material breach of any
representations of the Servicer in this SECTION 3.6; and
(ii) TRANSFER OF DATA. The Servicer shall make arrangements
for the prompt and safe transfer of, and the Servicer shall provide to
the Backup Servicer, all necessary servicing files and records,
including (as deemed necessary by the Backup Servicer at such
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time): (A) account documentation, (B) servicing system tapes, (C)
account payment history, (D) collections history and (E) the trial
balances, as of the close of business on the day immediately preceding
conversion to the Backup Servicer, reflecting all applicable loan
information.
SECTION 3.7. PURCHASE OR REPLACEMENT OF RECEIVABLES UPON BREACH OF
COVENANT. The Servicer, the Trust, the Owner Trustee or the Indenture Trustee
shall, and a Note Majority may, upon discovery of a breach of any of the
covenants set forth in SECTIONS 3.5 or 3.6(a) that has a material adverse
effect on the interests of the Trust, the Insurer or the Noteholders in any
Receivable give prompt written notice to the others; PROVIDED, HOWEVER, that
the failure to give any such notice shall not affect any obligation of the
Servicer under this SECTION 3.7. Unless the breach shall have been cured by
the last day of the first full calendar month following its discovery or
receipt of notice of any such breach, the Servicer shall have an obligation,
and the Indenture Trustee shall enforce such obligation, to purchase from the
Trust or replace with Replacement Receivables the Receivables affected by
such breach PROVIDED, HOWEVER, that in no event shall the Servicer satisfy
such obligation with Replacement Receivables, if after giving effect to such
replacement, either (i) more than [ ] Receivables would be Replacement
Receivables transferred since the Closing Date, or (ii) the sum of the
Principal Balances of the Replacement Receivables transferred since the
Closing Date is greater than [ ] percent of the Original Pool Balance. In
consideration of the purchase of such Receivable, the Servicer shall remit
the Purchase Amount in the manner specified in SECTION 4.4. The Indenture
Trustee, provided a Responsible Officer of the Indenture Trustee has actual
knowledge, shall notify the Insurer and each Rating Agency promptly, in
writing, of any failure by the Servicer to so purchase or replace any
Receivable (including Liquidated Receivables). The Servicer shall indemnify
the Company, the Indenture Trustee, the Insurer, the Backup Servicer and
their respective officers, directors, employees and agents, the Trust and the
Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
SECTION 3.8. SERVICER FEE, PAYMENT OF CERTAIN EXPENSES BY SERVICER;
BACKUP SERVICER FEE. On each Payment Date, the Servicer shall be entitled to
receive out of the Collection Account the Servicer Fee and Servicer Expenses
for the related Collection Period pursuant to SECTION 4.6; PROVIDED, HOWEVER,
that the Servicer shall certify such Servicer Expenses to the Indenture
Trustee with a copy of such certification to each Rating Agency on or prior
to each Determination Date. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities under this
Agreement, including taxes imposed on the Servicer, expenses incurred in
connection with distributions, reports made by the Servicer to Noteholders or
the Insurer and all other fees and expenses of the Trust including taxes
levied or assessed against the Trust, and claims against the Trust in respect
of indemnification not expressly stated under this Agreement to be for the
account of the Trust. The Servicer shall be liable for the fees and expenses
of the Independent Accountants, the Custodian and the Lockbox Bank. On each
Payment Date, the Backup Servicer shall be entitled to receive out of the
Collection Account the
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Backup Servicer Fee for the related Collection Period and any Servicer
Transition Expense pursuant to SECTION 4.6.
SECTION 3.9. SERVICER'S CERTIFICATE. No later than 12:00 noon, New
York City time, on each Determination Date, the Servicer shall deliver to the
Indenture Trustee, the Backup Servicer, the Insurer and each Rating Agency a
Servicer's Certificate executed by a Responsible Officer of the Servicer
containing, among other things, (i) all information necessary to enable the
Indenture Trustee to make any withdrawal and deposit required by SECTION 5.1,
and to make the distributions required by SECTIONS 4.6, and 4.7 (ii) all
information necessary to enable the Indenture Trustee to send the statements
required by SECTION 4.10 to Noteholders and the Insurer, and (iii) all
information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Collection Period and Payment Date, including the accounting required by
SECTION 4.9. Receivables purchased, repurchased or replaced by the Servicer
or the Seller on or before the related Accounting Date and each Receivable
that became a Liquidated Receivable or that was paid in full during the
related Collection Period shall be identified by account number (as set forth
in the Schedule of Receivables). In addition to the information set forth in
the preceding sentence, the Servicer's Certificate shall also contain the
following information: (a) the Delinquency Ratio, the Cumulative Default Rate
and the Cumulative Net Loss Rate (as such terms are defined in the Reserve
Account Agreement) for such Determination Date; (b) whether to the knowledge
of the Servicer any Trigger Event (as such term is defined in the Insurance
Agreement) has occurred as of such Determination Date; (c) whether any
Trigger Event that may have occurred as of a prior Determination Date is
deemed cured as of such Determination Date; and (d) whether to the knowledge
of the Servicer an Insurance Agreement Event of Default has occurred. A copy
of such certificate may be obtained by any Noteholder by a request in writing
to the Indenture Trustee addressed to the Corporate Trust Office.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Indenture Trustee, the Backup
Servicer, the Insurer and each Rating Agency, on or before June 30 of each
year, beginning on June 30, [ ], an officer's certificate signed by any
Responsible Officer of the Servicer, dated as of the preceding December 31
(or other applicable date), stating that (i) a review of the activities of
the Servicer during the preceding 12-month period (or such other period as
shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof. A copy of such certificate
may be obtained by any Noteholder by a request in writing to the Indenture
Trustee addressed to the Corporate Trust Office.
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(b) The Servicer shall deliver to the Indenture Trustee, the Backup
Servicer, the Insurer and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than two (2) Business Days
thereafter, written notice in an Officer's Certificate of any event that,
with the giving of notice or lapse of time, would become a Servicer
Termination Event under SECTION 9.1.
SECTION 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who
may also render other services to the Servicer, to deliver to the Indenture
Trustee, the Backup Servicer, the Insurer and each Rating Agency, on or
before June 30 of each year, beginning on June 30, [ ], with respect to
the fiscal year ended the immediately preceding March 31 (or such other
period as shall have elapsed from the Closing Date to the date of such
certificate), a statement (the "ACCOUNTANTS' REPORT") addressed to the Board
of Directors of the Servicer, to the Indenture Trustee, to the Indenture
Trustee for the benefit of the Noteholders, to the Backup Servicer, to the
Insurer and to each Rating Agency, to the effect that such firm has audited
the books and records of the Servicer and issued its report thereon and that
such audit: (i) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances, (ii) included tests relating to auto loans serviced for others
in accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers (the "PROGRAM"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement,
(iii) included an examination of the delinquency and loss statistics relating
to the Servicer's portfolio of automobile and light-duty truck installment
sales contracts (setting forth the statistics so reviewed); and (iv) except
as described in the report, disclosed no exceptions or errors in the records
relating to automobile and light-duty truck loans serviced for others that,
in the firm's opinion, the Program requires such firm to report. The
Accountants' Report shall further state that (i) certain agreed upon
procedures were performed relating to three randomly selected Servicer's
Certificates, (ii) except as disclosed in such report, no errors or
exceptions were found in the Servicer's Certificates based on the performance
of such agreed upon procedures, and (iii) the delinquency and loss
information relating to the Receivables contained in the Servicer
Certificates were found to be accurate.
(b) The Accountants' Report shall 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.
(c) On or before June 30 of each year, commencing June 30, [ ],
the Servicer shall deliver to the Indenture Trustee, the Owner Trustee, the
Insurer, the Backup Servicer and each Rating Agency, the audited annual
financial statements of the Servicer.
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(d) Copies of the Accountants' Report and such audited annual financial
statements shall also be available to any Noteholder from the Indenture Trustee
upon reasonable request. Any Noteholder desiring such documents shall have
delivered to the Indenture Trustee an executed Information Request.
SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Servicer shall upon reasonable prior notice provide to
representatives of the Indenture Trustee, the Backup Servicer and the Insurer
reasonable access (without charge) to the documentation regarding the
Receivables. The Servicer will permit any authorized representative or agent
designated by the Indenture Trustee, each Rating Agency, the Insurer or the
Backup Servicer to visit and inspect any of the properties of the Servicer, to
examine the corporate books and financial records of the Servicer, its records
relating to the Receivables, and make copies thereof or extracts therefrom and
to discuss the affairs, finances, and accounts of the Servicer with its
principal officers, as applicable, and its independent accountants. Any expense
incident to the exercise by the Indenture Trustee, each Rating Agency, the
Insurer or the Backup Servicer of any right under this Section shall be borne by
the Servicer to the extent such visits and examinations are not more frequent
than once in every twelve month-period, or a Servicer Termination Event has
occurred and is continuing. In each case, such access shall be afforded only
upon reasonable request and during normal business hours. Nothing in this
SECTION 3.12 shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as a result of such obligation
shall not constitute a breach of this SECTION 3.12.
SECTION 3.13. MONTHLY TAPE, CERTAIN DUTIES OF BACKUP SERVICER.
(a) On each Determination Date, the Servicer shall deliver to the
Indenture Trustee, the Insurer and the Backup Servicer a computer tape or a
diskette (or any other electronic transmission acceptable to the Indenture
Trustee, the Insurer and the Backup Servicer) in a format acceptable to the
Indenture Trustee, the Insurer and the Backup Servicer containing the
information with respect to the Receivables as of the close of business on the
preceding Accounting Date which is necessary to calculate or confirm (i)
Aggregate Principal Balance, and (ii) the delinquency information, and which
includes the borrower demographic information.
(b) Prior to each such Payment Date (except in the case of the first
Payment Date, within ten (10) Business Days of the Closing Date), the Backup
Servicer shall use such tape or diskette (or other means of electronic
transmission acceptable to the Indenture Trustee and the Backup Servicer) and
review the related Servicer's Certificate in order to perform the following:
(i) confirm that the Servicer's Certificate is complete on its
face;
(ii) load the computer diskette received from the Servicer and
confirm that such computer diskette is in readable form;
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(iii) calculate and confirm the Payment Amount, the Principal
Payment Amount, the Interest Payment Amount, the Backup Servicer Fee,
the Servicer Fee, the Indenture Trustee Fee and the amount on deposit
in the Reserve Account for the next Payment Date, the Cumulative
Default Rate, the Cumulative Net Loss Rate, the Cumulative Default Test
Failure, the Cumulative Net Loss Test Failure, the Delinquency Ratio
(each as defined in the Reserve Account) and whether there has occurred
any Trigger Event or Curable Insurance Agreement Event of Default (each
as defined in the Insurance Agreement); and
(iv) verify the mathematical accuracy of any calculations on
the face of the Servicer's certificate.
(c) The Backup Servicer shall certify in writing to the Controlling
Party that it has verified the Servicer's Certificate in accordance with this
Section and in the event of any discrepancy, the Backup Servicer shall report
such discrepancy to the Servicer and the Controlling Party, in each case, on or
before the third (3) Business Day following the Determination Date in a form
similar to Exhibit D attached hereto. In the event of a discrepancy as described
in the preceding sentence, the Servicer and the Backup Servicer shall attempt to
reconcile such discrepancies prior to the related Payment Date, but in the
absence of a reconciliation, distributions on the related Payment Date shall be
made by the Indenture Trustee consistent with the information provided by the
Servicer in the Servicer's Certificate. In the event that the Servicer and the
Backup Servicer are unable to reconcile the discrepancies with respect to a
Servicer Certificate by the related Payment Date, the Servicer shall cause the
Independent Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and prior to the 5th Business Day, but no later than the 8th
calendar day, of the following month, reconcile the differences. The effect, if
any, of such reconciliation shall be reflected in the Servicer's Certificate for
such next succeeding Determination Date. In addition, upon the occurrence of an
Insurance Agreement Event of Default, the Servicer shall, if so requested by the
Controlling Party deliver to the Indenture Trustee Monthly Records within 15
days after demand therefor and a Computer Tape containing as of the close of
business on the date of demand all of the data maintained by the Servicer in
computer format in connection with servicing the Receivables.
(d) In addition, upon the occurrence of a Servicer Termination Event,
the Servicer shall, if so requested by the Controlling Party deliver to the
Backup Servicer its Monthly Records within fifteen (15) days after demand
therefor and a Computer Tape containing as of the close of business on the date
of demand all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables and in a form acceptable to the Backup
Servicer.
(e) Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including to supervise,
verify, monitor or administer the performance of the Servicer. The Backup
Servicer shall have no liability for any actions taken or omitted by the
Servicer, except for the express duties of the Backup Servicer set forth herein.
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SECTION 3.14. REPORTS TO THE COMMISSION. The Servicer shall, on behalf
of the Trust, cause to be filed with the Commission any and all periodic reports
required to be filed under the provisions of the Exchange Act, and the rules and
regulations of the Commission thereunder. The Company shall, at the Servicer's
expense, cooperate in any reasonable request made by the Servicer in connection
with such filings. The Servicer shall deliver to the Indenture Trustee, the
Insurer and the Company copies of all reports filed with the Commission.
SECTION 3.15. INDENTURE TRUSTEE NOTIFICATION TO COMPANY. The Indenture
Trustee shall, on [ ], deliver to Company a list of all filings made with the
Commission and delivered to Indenture Trustee pursuant to SECTION 3.14.
SECTION 3.16. INSURANCE. The Servicer shall maintain insurance
coverage, including a fidelity bond of a type and in an amount customary for
servicers engaged in the business of servicing automobile receivables. The
Servicer shall use its best efforts to obtain and thereafter maintain an errors
and omissions insurance policy in such form and with such limits as are
customary for originators and servicers of assets similar to the Receivables;
provided that such coverage may be obtained for a commercially reasonable
premium. The Servicer shall be entitled to self-insure with respect to such
insurance so long as the long-term unsecured debt obligations of the Servicer
are rated in the second highest long-term debt category by the Rating Agencies.
SECTION 3.17. COMPLIANCE WITH LAWS. The Servicer shall comply with the
requirements of all applicable laws (including any federal or state laws
regulating the collection or enforcement of consumer debts and/or the
foreclosure upon, and repossession of, vehicles) in the discharge of its duties
and obligations hereunder.
SECTION 3.18. DELEGATION OF DUTIES. So long as Triad is the Servicer,
the Servicer may delegate duties under this Agreement to sub-contractors who are
in the business of servicing motor vehicle receivables which are similar to the
Receivables and who are willing to accept such delegations and to perform such
duties in accordance with the customary procedures of Triad and this Agreement,
with the prior written consent of the Controlling Party, which consent shall not
be unreasonably withheld. The Servicer also may at any time, without the consent
of the Controlling Party, or any other Person, perform the specific duty of
repossession of Financed Vehicles through sub-contractors who are in the
business of repossessing motor vehicles. No such delegation or subcontracting
duties by the Servicer as described in this SECTION 3.16 shall relieve the
Servicer of its responsibility with respect to such duties. The Servicer shall
pay the fees and expenses of all such sub-contractors from its own funds.
SECTION 3.19. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on March 31, [ ], which term
shall be extendible by the Insurer (provided that no Insurer Default has
occurred and is continuing) for successive quarterly terms ending on each
successive June 30, September 30, December 31 and March 31 (or, pursuant to
revocable written standing instructions from time to time to the Servicer and
the Indenture
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Trustee for any specific number of terms greater than one), until the Notes are
paid in full. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive quarterly
terms for so long as such instructions are in effect) (a "Servicing Extension
Notice") shall be delivered by the Insurer to the Indenture Trustee and the
Servicer. The Servicer hereby agrees that, as of the date hereof and upon its
receipt of any such Servicer Extension Notice, the Servicer shall become bound,
for the initial term beginning on the Closing Date and for the duration of the
term covered by such Servicer Extension Notice, to continue as the Servicer
subject to and in accordance with the other provisions of this Agreement. Until
such time as an Insurer Default shall have occurred and be continuing, the
Indenture Trustee agrees that if as of the fifteenth day prior to the last day
of any term of the Servicer the Indenture Trustee shall not have received any
Servicer Extension Notice from the Insurer, the Indenture Trustee will, within
five days after, give written notice of such non-receipt to the Insurer and
Servicer and the Servicer's term shall not be extended unless a Servicer
Extension Notice is received on or before the last day of such term.
Notwithstanding the foregoing, in the event an Insurer Default has occurred and
is continuing, the Servicer Extension Notice shall be deemed to have been
delivered as of last day of the current term of the Servicer and extended until
the next quarterly period.
ARTICLE IV
PAYMENTS; STATEMENTS TO NOTEHOLDERS
SECTION 4.1 TRUST ACCOUNTS.
(a) (i) On or prior to the Closing Date, the Indenture Trustee on
behalf of the Noteholders and the Insurer shall establish the Collection Account
in the name of the Indenture Trustee bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Noteholders and
the Insurer. The Collection Account shall be an Eligible Account and shall be a
segregated trust account initially established with the Indenture Trustee.
(ii) On or prior to the Closing Date, the Indenture Trustee on
behalf of the Noteholders and the Insurer shall establish the Note
Distribution Account in the name of the Indenture Trustee bearing a
designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders and the Insurer. The Note
Distribution Account shall be an Eligible Account and shall be a
segregated trust account initially established with the Indenture
Trustee.
(iii) On or prior to the Closing Date, the Indenture Trustee
on behalf of the Noteholders and the Insurer shall establish the
Pre-Funding Account in the name of the Indenture Trustee bearing a
designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders and the Insurer. The
Pre-Funding Account shall be an Eligible Account and shall be a
segregated trust account initially established with the Indenture
Trustee.
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(b) The Servicer shall cause the following amounts to be deposited into
the Collection Account no later than two (2) Business Days following receipt of
available amounts thereof by the Lockbox Bank or the Servicer, but in any event
no later than the time specified in SECTION 3.2: (i) all Contract Scheduled
Payments, (ii) all Recoveries, (iii) all Purchase Amounts, (iv) all amounts on
deposit in any Lockbox Account with respect to the Receivables, (v) the proceeds
of any Insurance Policy, collateral insurance, fidelity policy or other
insurance policy relating to the Receivables or the Servicer's activities with
respect thereto, and (vi) all other amounts of any nature whatsoever in respect
of the Receivables.
(c) All amounts held in the Collection Account, the Pre-Funding
Account, the Note Distribution Account and the Capitalized Interest Account
(collectively, the "TRUST ACCOUNTS"), shall, to the extent permitted by
applicable laws, rules and regulations, be invested by the Indenture Trustee, as
directed by the Servicer in writing (or, if the Servicer fails to provide such
direction, amounts in the Collection Account shall be invested in investments
described in CLAUSE (E) of the definition of Eligible Investments), in Eligible
Investments that mature not later than one (1) Business Day prior to the Payment
Date for the Collection Period to which such amounts relate unless otherwise
permitted by the Rating Agencies and the Insurer, PROVIDED, HOWEVER, that any
amounts deposited in the Note Distribution Account by the Insurer shall remain
uninvested. Any such written direction shall certify that any such investment is
authorized by this SECTION 4.1 Investments in Eligible Investments shall be made
in the name of the Indenture Trustee on behalf of the Noteholders and the
Insurer, and such investments shall not be sold or disposed of prior to their
maturity. Each and every investment of funds in a Trust Account shall be made in
Eligible Investments held by a financial institution that is a Securities
Intermediary:
(i) in an account pursuant to an agreement with such financial
institution, governed by the law of the State of New York or any other
jurisdiction which has adopted Revised Article 8, that requires such
financial institution to (A) comply with Entitlement Orders pertaining
to such account originated by the Indenture Trustee, in its capacity as
trustee under the Indenture, without further consent of the Company,
(B) not enter into any agreement which grants "control" (as defined in
Section 8-106 of Revised Article 8) of such account (or any interest or
property therein) to any Person other than the Indenture Trustee, (C)
subordinate any security interest, banker's lien, right of setoff or
other similar right which such financial institution may have in such
account to the interest of the Indenture Trustee and (D) expressly
treat each item of property as a Financial Asset and such account as a
Securities Account; and
(ii) with respect to which such institution has noted the
Indenture Trustee's interest therein by book entry or otherwise, and
with respect to which a confirmation of the Indenture Trustee's
interest has been sent to the Indenture Trustee by such institution,
provided that such Eligible Investments are (A) specific "certificated
securities" (as defined under Old Article 8), and (B) either (1) in the
possession of such institution or (2) in the possession of a Clearing
Corporation, registered in the name of such Clearing Corporation, not
endorsed for collection or surrender or any other purpose not involving
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transfer, not containing any evidence of a right or interest
inconsistent with the Indenture Trustee's security interest therein,
and held by such Clearing Corporation in an account of such
institution.
Subject to the other provisions hereof, the Indenture Trustee shall have sole
control over each such investment and the income thereon, and any certificate or
other instrument evidencing any such investment, if any, shall be delivered
directly to the Indenture Trustee or its agent, together with each document of
transfer, if any, necessary to transfer title to such investment to the
Indenture Trustee in a manner that complies with this SECTION 4.1. All interest,
dividends, gains upon sale and other income from, or earnings on, investments of
funds in the Trust Accounts shall be deposited in the Collection Account and
distributed on the next Payment Date pursuant to SECTION 4.6. If the Indenture
Trustee is given instructions to invest funds in a Trust Account in investments
other than investments of the type described in CLAUSE (e) of the definition of
"Eligible Investments", the Person giving such instructions agrees to assist the
Indenture Trustee in complying with the requirements herein with respect to such
investments.
(d) With respect to the Trust Account Property, the Indenture Trustee
agrees that:
(i) any Trust Account Property that is held in deposit
accounts shall be held solely in the name of the Indenture Trustee in
accounts which satisfy the definition of Eligible Account; each such
deposit account shall be subject to the exclusive custody and control
of the Indenture Trustee, and the Indenture Trustee shall have sole
signature authority with respect thereto;
(ii) any Trust Account Property that constitutes Physical
Property (other than a "certificated security" as defined under Old
Article 8) shall be delivered to the Indenture Trustee in accordance
with paragraph (i) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee;
(iii) any Trust Account Property that constitutes a
"certificated security" as defined under Old Article 8 that will, upon
compliance with the procedures set forth in paragraph (ii) of the
definition of "Delivery," be held by a Person located in an Old Article
8 Jurisdiction, shall be delivered to the Indenture Trustee in
accordance with paragraph (ii) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by the Indenture
Trustee or a Financial Intermediary acting solely for the Indenture
Trustee;
(iv) any Trust Account Property that constitutes a
Certificated Security that will, upon compliance with the procedures
set forth in paragraph (iii) of the definition of "Delivery," be held
by a Person located in a Revised Article 8 Jurisdiction shall be
delivered to the Indenture Trustee in accordance with paragraph (iii)
of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee;
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(v) any Trust Account Property that constitutes an
"uncertificated security" under Old Article 8 (and that is not a
Federal Book Entry Security) and where the issuer thereof is organized
in an Old Article 8 Jurisdiction, shall be delivered to the Indenture
Trustee in accordance with paragraph (iv) of the definition of
"Delivery" and shall be maintained, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security;
(vi) any such Trust Account Property that constitutes an
Uncertificated Security (including any investments in money market
mutual funds, but excluding any Federal Book Entry Security) and where
the issuer thereof is organized in a Revised Article 8 Jurisdiction,
shall be delivered to the Indenture Trustee in accordance with
paragraph (v) of the definition of "Delivery" and shall be maintained,
pending maturity or disposition, through continued registration of the
Indenture Trustee's (or its nominee's) ownership of such security; and
(vii) with respect to any Trust Account Property that
constitutes a Federal Book Entry Security, the Indenture Trustee shall
maintain and obtain Control over such property.
Effective upon Delivery of any Trust Account Property in the form of
Physical Property, book-entry securities or uncertificated securities,
the Indenture Trustee shall be deemed to have represented that it has
purchased such Trust Account Property for value, in good faith and
without notice of any adverse claim thereto.
(e) If at any time any of the Trust Accounts ceases to be an Eligible
Account, the Indenture Trustee, with the prior written consent of the Insurer
(so long as no Insurer Default has occurred and is continuing), shall within
five Business Days establish a new Trust Account as an Eligible Account and
shall transfer any cash and/or any investments to such new Trust Account. The
Indenture Trustee shall promptly notify the Rating Agencies and the Owner
Trustee of any change in the location of any of the aforementioned accounts.
SECTION 4.2. SERVICER REIMBURSEMENTS. The Servicer shall be entitled to
be reimbursed from amounts on deposit in, or to be deposited in, the Collection
Account with respect to a Collection Period for amounts previously deposited in
the Collection Account but later determined by the Servicer to have resulted
from mistaken deposits or postings or checks returned for insufficient funds.
The amount to be reimbursed hereunder shall be paid to the Servicer on the
related Payment Date pursuant to SECTION 4.6(b)(i) upon certification by the
Servicer of such amounts and the provision of such information to the Indenture
Trustee and the Insurer as may be necessary in the opinion of the Insurer to
verify the accuracy of such certification. In the event that the Insurer has not
received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section, the Insurer shall (unless an Insurer
Default shall have occurred and be continuing) give the Indenture Trustee notice
to such effect, following receipt of which the Indenture Trustee shall not make
a distribution to the
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Servicer in respect of such amount pursuant to Section 4.6, or if the Servicer
prior thereto has been reimbursed pursuant to Section 4.6, the Indenture Trustee
shall withhold such amounts from amounts otherwise distributable to the Servicer
on the next succeeding Payment Date. The Indenture Trustee shall not be liable
for any action it is required to take pursuant to this Section 4.2, provided
that such action is in accordance with the provisions of this Section.
SECTION 4.3. CAPITALIZED INTEREST ACCOUNT.
(a) On or prior to the Closing Date, the Indenture Trustee shall
establish the Capitalized Interest Account in the name of the Indenture Trustee
for the benefit of the Noteholders and the Insurer. The Capitalized Interest
Account shall be an Eligible Account and shall be a segregated trust account
initially established with the Indenture Trustee.
(b) On or prior to the Closing Date, the Company shall deposit an
amount equal to the Capitalized Interest Account Initial Deposit into the
Capitalized Interest Account.
(i) On the Payment Dates occurring in [ ] and
[ ] and [ ] the Indenture Trustee shall withdraw
at the written direction of the Servicer from the Capitalized
Interest Account the Monthly Capitalized Interest Amount for such
Payment Date and deposit such amount in the Collection Account as
further provided in SECTION 4.6.
(ii) On the Payment Dates occurring in [ ] and
[ ] and [ ] the Servicer shall instruct the
Indenture Trustee in writing to withdraw from the Capitalized Interest
Account and deposit in the Collection Account on such Payment Date an
amount equal to the Overfunded Capitalized Interest Amount for such
Payment Date. Any amounts remaining in the Capitalized Interest
Account on the Payment Date which immediately follows the end of the
Funding Period after taking into account the transfer pursuant to
SECTION 4.6 shall be withdrawn from the Capitalized Interest Account
and deposited in the Collection Account.
SECTION 4.4. APPLICATION OF COLLECTIONS. For purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable, payments by or on behalf of the
Obligor shall be applied (i) in accordance with the Actuarial Method, with
respect to Pre-Computed Receivables, and (ii) in accordance with the Simple
Interest Method, with respect to Simple Interest Receivables.
(b) With respect to each Receivable that has become a Purchased
Receivable, the Purchase Amount shall be applied to interest and principal on
the Receivable in accordance with SECTION 4.4(a) as if the Purchase Amount had
been paid by the Obligor on the related Accounting
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Date. Nothing contained herein shall relieve any Obligor of any obligation
relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as Servicing
Expenses hereunder shall be deposited in the Collection Account and paid to the
Servicer in accordance with SECTION 4.6(b)(i).
(d) All payments by or on behalf of an Obligor received with respect to
any Purchased Receivable after the Accounting Date preceding the Accounting Date
on which the Purchase Amount was paid by the Seller or the Servicer shall be
paid to the Seller or the Servicer, respectively and shall not be included in
the Available Funds.
SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Accounting Date,
the Servicer or the Seller shall deposit into the Collection Account the
aggregate Purchase Amounts with respect to Purchased Receivables. All such
deposits of Purchase Amounts shall be made in immediately available funds. On or
before each Payment Date, the Indenture Trustee shall remit to the Collection
Account any amounts to be transferred into the Collection Account by the
Indenture Trustee from the Reserve Account pursuant to SECTION 5.1. Concurrent
with the exercise of the optional clean-up purchase pursuant to Section 10.1,
the Servicer shall deposit into the Collection Account the aggregate Purchase
Amount for such Receivables. Any such deposit shall be made in immediately
available funds.
SECTION 4.6. PAYMENTS.
(a) No later than 11:00 a.m. New York time on each Payment Date, the
Indenture Trustee shall (based solely on the information contained in the
Servicer's Certificate delivered on the related Determination Date) cause to be
made the following transfers and distributions in the amounts set forth in the
Servicer's Certificate for such Payment Date:
(i) During the Funding Period, from the Capitalized Interest
Account to the Collection Account, in immediately available funds, the
Monthly Capitalized Interest Amount for such Payment Date; and
(ii) If such Payment Date is the Mandatory Redemption Date,
from the Pre-Funding Account to the Collection Account, in immediately
available funds, the Pre-Funded Amount after giving effect to the
purchase of Subsequent Receivables, if any, on the Mandatory Redemption
Date.
(b) From the Collection Account, on each Payment Date, the Indenture
Trustee shall (x) distribute all amounts deposited by the Insurer pursuant to
SECTION 4.11 as directed by the Insurer in writing and (y) (based solely on the
information contained in the Servicer's Certificate delivered with respect to
the related Determination Date unless the Insurer shall have notified the
Indenture Trustee in writing by the close of business on the Business Day
immediately preceding
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such Payment Date of any errors or deficiencies with respect thereto) distribute
the following amounts to the extent of the Payment Amount in the following order
of priority:
(i) FIRST, from the Available Funds and other funds deposited
in the Collection Account pursuant to SECTION 5.1(B), to the Servicer,
any accrued and unpaid Servicer Fee, with respect to the related
Collection Period, and any Servicer Expenses to the extent the Servicer
has not reimbursed itself in respect of such amounts, and the amounts
specified in SECTION 4.2 to the extent the Servicer has not reimbursed
itself in respect of such amounts pursuant to SECTION 4.9;
(ii) SECOND, from the remaining Available Funds and other
funds deposited in the Collection Account pursuant to SECTION 5.1(b),
to the Indenture Trustee, the Owner Trustee and the Backup Servicer,
since the Closing Date, any accrued and unpaid fees and in the case of
the Backup Servicer, the Servicer Transition Expenses, if any, up to $[
] in the aggregate, in each case, to the extent such Person has not
previously received such amount from the Servicer;
(iii) THIRD, from the remaining Available Funds and other
funds deposited in the Collection Account pursuant to SECTION 5.1(b),
to the Note Distribution Account, the Interest Payment Amount for such
Payment Date and the Interest Carryover Shortfall, if any;
(iv) FOURTH, from the remaining Available Funds and other
funds deposited in the Collection Account pursuant to SECTION 5.1(b),
to the Note Distribution Account, the Principal Payment Amount for such
Payment Date and the Principal Carryover Shortfall, if any;
(v) FIFTH, from the remaining Available Funds and other funds
deposited in the Collection Account pursuant to SECTION 5.1(b), to the
Insurer to the extent of any amounts owing the Insurer under the
Insurance Agreement;
(vi) SIXTH, from the remaining Available Funds, to the Reserve
Account to the extent necessary to increase the amount on deposit
therein to the required amount in accordance with the Reserve Account
Agreement;
(vii) SEVENTH, on or prior to the OC Stabilization Date, from
the remaining Available Funds, and together with amounts available in
accordance with the terms of the Reserve Account Agreement, to the Note
Distribution Account until the Target Overcollateralization Amount is
achieved;
(viii) EIGHTH, from the remaining Available Funds to the
Reserve Account, any remaining funds;
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(ix) NINTH, from the amounts released pursuant to and in
accordance with the Reserve Account Agreement, to the Indenture Trustee
and the Owner Trustee and the Backup Servicer any expenses (including
reasonable legal fees and expenses), including Servicer Transition
Expenses, to the extent not previously paid on or prior to such date;
(x) TENTH, from the amounts (after giving effect to the
distributions in clause (ix) above) released pursuant to and in
accordance with the Reserve Account Agreement to the holder of the
Certificate;
PROVIDED, HOWEVER, that following (x) an acceleration of the Notes or, (y) in
the event that an Insurer Default shall have occurred and be continuing, the
occurrence of an Event of Default pursuant to SECTION 5.1(i), 5.1(ii), 5.1(iv),
5.1(v) or 5.1(vi) of the Indenture or (z) the receipt of Insolvency Proceeds
pursuant to SECTION 10.1(b) hereof, amounts deposited in the Note Distribution
Account (including any such Insolvency Proceeds) shall be paid to the
Noteholders pursuant to SECTION 5.4 of the Indenture.
(c) On each Payment Date, the Indenture Trustee shall (based solely on
the information contained in the Servicer's Certificate delivered with respect
to the related Determination Date, unless the Insurer shall have notified the
Indenture Trustee in writing of any errors or deficiencies with respect thereto)
distribute from the Collection Account, the Deficiency Claim Amount, if any,
then on deposit in the Collection Account, which amount shall be applied solely
to the payment of amounts then due and unpaid on the Notes in accordance with
the priorities set forth in SECTION 4.7(a).
(d) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Indenture Trustee shall
instruct and cause such institution to make all deposits and distributions
pursuant to SECTIONS 4.6(b) and 4.7(a) on the related Payment Date.
SECTION 4.7. NOTE DISTRIBUTION ACCOUNT
(a) On each Payment Date, as applicable, the Indenture Trustee shall
(based solely on the information contained in the Servicer's Certificate
delivered on the related Determination Date) cause to be made the following
distribution of all amounts on deposit in the Note Distribution Account to each
Noteholder of record on the preceding Record Date in the following order of
priority:
(i) FIRST, the Interest Payment Amount for such Payment Date
and the Interest Carryover Shortfall, if any;
(ii) SECOND, the Principal Payment Amount for such Payment
Date and the Principal Carryover Shortfall, if any; and
(iii) THIRD, on or prior to the OC Stabilization Date, as
principal, until the Target Overcollateralization Amount is reached.
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(b) On each Payment Date, the Indenture Trustee shall send to each
Noteholder the statement provided to the Indenture Trustee by the Servicer
pursuant to SECTION 4.10 hereof.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Noteholder, such tax shall reduce the
amount otherwise distributable to the Noteholder in accordance with this
Section. The Indenture Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Noteholders sufficient funds for the
payment of any tax attributable to the Trust (but such authorization shall not
prevent the Indenture Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Noteholder shall be treated as cash distributed to such Noteholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-US Noteholder), the
Indenture Trustee may in its sole discretion withhold such amounts in accordance
with this clause (c). In the event that a Noteholder wishes to apply for a
refund of any such withholding tax, the Indenture Trustee shall reasonably
cooperate with such Noteholder in making such claim so long as such Noteholder
agrees to reimburse the Indenture Trustee for any out-of-pocket expenses
(including legal fees and expenses) incurred.
(d) Subject to SECTION 10.1 respecting the final payment upon
retirement of each Note, and provided that the Indenture Trustee has received
the applicable Servicer's Certificate, on each Payment Date, the Indenture
Trustee shall distribute to each Noteholder of record on the preceding Record
Date the distributions required to be made to such Noteholders in accordance
with the terms of the Related Documents either (i) by wire transfer, in
immediately available funds to the account of such holder at a bank or other
entity having appropriate facilities therefor, if such Noteholder holds Notes
representing at least $1,000,000 in Class A Notes as of the Closing Date, and if
such Noteholder shall have provided to the Indenture Trustee appropriate
instructions not later than the Determination Date, or (ii) by check mailed to
such Noteholder at the address of such Holder appearing in the Note Register.
SECTION 4.8. PRE-FUNDING ACCOUNT
(a) On the Closing Date, the Indenture Trustee shall deposit, on
behalf of and at the written direction of the Company, in the Pre-Funding
Account $[ ]from the proceeds of the sale of the Notes. On each
Subsequent Transfer Date, the Servicer shall instruct the Indenture Trustee
in writing to withdraw from the Pre-Funding Account an amount equal to the
Principal Balance of the Subsequent Receivables transferred to the Issuer on
such Subsequent Transfer Date and to distribute such amount to or upon the
order of the Company upon satisfaction of the conditions set forth in this
Agreement with respect to such transfer.
(b) If the Pre-Funded Amount has not been reduced to zero on the date
on which the Funding Period ends after giving effect to any reductions in the
Pre-Funded Amount on such date,
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the Servicer shall instruct the Indenture Trustee in writing to withdraw from
the Pre-Funding Account on the Mandatory Redemption Date, the Pre-Funded Amount
(exclusive of any Pre-Funding Earnings, which shall be deposited in the
Collection Account) and deposit such an amount in the Note Distribution Account.
SECTION 4.9. NET DEPOSITS. So long as no Servicer Termination Event has
occurred and is continuing, the Servicer may make the remittances to be made by
it pursuant to SECTION 4.1 net of amounts (which amounts may be netted prior to
any such remittance for a Collection Period) to be distributed to it pursuant to
SECTION 4.2; PROVIDED, HOWEVER, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were deposited
and distributed separately; and PROVIDED, FURTHER, that if an error is made by
the Servicer in calculating the amount to be deposited or retained by it, with
the result that an amount less than required is deposited in the Collection
Account, the Servicer shall make a payment of the deficiency to the Collection
Account, immediately upon becoming aware, or receiving notice from the Indenture
Trustee, the Backup Servicer, the Insurer or any Noteholder, of such error.
SECTION 4.10. STATEMENTS TO NOTEHOLDERS; TAX RETURNS.
(a) On each Payment Date, the Indenture Trustee shall include with each
payment to each Noteholder, a statement prepared by the Servicer (which
statement shall also be provided to the Certificateholders, the Insurer and the
Rating Agencies), based on information in the Servicer's Certificate delivered
on the related Determination Date pursuant to SECTION 3.9, setting forth for
such Payment Date and the Collection Period relating to such Payment Date the
following information:
(i) in the case of the Noteholders, the amount of such payment
allocable to interest;
(ii) in the case of the Noteholders, the amount of such
payment allocable to principal;
(iii) the amount of such payment allocable to a claim on the
Note Policy;
(iv) the amount of fees paid by the Trust with respect to such
Collection Period, including any Servicer Fee and Servicer Expenses;
(v) the Note Balance (after giving effect to all payments made
on such Payment Date);
(vi) the amount of the Interest Carryover Shortfall and
Principal Carryover Shortfall, if any, on such Payment Date and the
change in such amount from that of the prior Payment Date;
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(vii) the Class A Note Factor as of such Payment Date (after
giving effect to payments made on such Payment Date);
(viii) for each date during the Funding Period, the remaining
Pre-Funded Amount and the amount remaining in the Capitalized Interest
Account;
(ix) for the final Subsequent Transfer Date, the amount of any
remaining Pre-Funded Amount that has not been used to fund the purchase
of Subsequent Receivables and is passed through as principal to
Noteholders;
(x) the number of Receivables and the aggregate Principal
Balance due thereof, for which the related Obligors are delinquent in
making Contract Scheduled Payments (A) between 31 and 60 days, (B)
between 61 and 90 Days and (C) between 91 and 120 days;
(xi) the number of Receivables which became Liquidated
Receivables, and the aggregate principal amount thereof net of
Recoveries;
(xii) the number of Receivables which became Defaulted
Receivables, and the aggregate principal amount thereof;
(xiii) the number and the aggregate Purchase Amount of
Receivables that became Purchased Receivables during the related
Collection Period and the number and aggregate Purchase Amount of
Receivables that were required to be repurchased during the related
Collection Period but were not so repurchased;
(xiv) the Principal Balance, APR and model year of each
Receivable that was replaced and the Principal Balance, APR and model
year of the corresponding Replacement Receivable;
(xv) the number and the aggregate Principal Balance of
Receivables with respect to which, to the knowledge of the Servicer,
Obligors became the subject of bankruptcy proceedings during such
Collection Period (or during a prior Collection Period, if the Servicer
first became aware of such proceeding during the current Collection
Period);
(xvi) the amount of any Deficiency Claim Amounts deposited in
the Collection Account from the Reserve Account;
(xvii) the Overcollateralization Amount and the Target
Overcollateralization Amount; and
(xviii) the beginning balance, amount of claims paid, amount
of deposits made, and ending balance of the applicable collateral
self-insurance fund, if any.
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Each amount set forth pursuant to CLAUSES (i), (ii) and (v) above shall be
expressed as a dollar amount per $1,000 of original principal balance of a Note.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of this Agreement, the
Indenture Trustee shall mail, provided it has received the necessary information
from the Servicer, to each Person who at any time during such calendar year
shall have been a Holder of a Note and received any payment thereon, a statement
containing the amounts set forth in CLAUSES (i), (ii), and (iv) and such other
information, requested in writing by the Noteholder necessary to permit such
Noteholder to ascertain its share of the gross income and deductions of the
Trust, for such calendar year or, in the event such Person shall have been a
Holder of a Note during a portion of such calendar year, for the applicable
portion of such year, for the purposes of such Noteholder's preparation of
federal income tax returns.
(c) The Indenture Trustee shall provide any Holder of Notes
representing at least 25% of the Note Balance, with such additional information
available to the Indenture Trustee relating to the Notes and the Trust Property
as such Holder may reasonably request from time to time. Such additional
information (to the extent provided to the Indenture Trustee by the Servicer)
shall also be available to any Noteholder from the Indenture Trustee upon
reasonable request and upon payment by the Noteholder of the Indenture Trustee's
and the Servicer's reasonable fees and expenses in connection with providing and
preparing such information. Any Noteholder desiring such additional information
shall have delivered to the Indenture Trustee an executed Information Request.
SECTION 4.11. OPTIONAL DEPOSITS BY THE INSURER. The Insurer shall at
any time, and from time to time, with respect to a Payment Date, have the option
(but shall not be required, except in accordance with the terms of the Note
Policy) to deliver amounts to the Indenture Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Payment Date, or (ii) to include such amount to the
extent that without such amount a draw would be required to be made on the Note
Policy.
ARTICLE V
THE RESERVE ACCOUNT
SECTION 5.1 WITHDRAWALS FROM RESERVE ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Available Funds for the related
Collection Period are less than the sum of the Scheduled Payments (as defined in
the Note Policy) plus the amounts payable on the related Payment Date pursuant
to clauses (i), (ii) and (v) of SECTION 4.6(b), (such deficiency being a
"Deficiency Claim Amount") then on the Deficiency Claim Date (as defined below)
immediately
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preceding the related Payment Date, the Indenture Trustee shall deliver to the
Collateral Agent, the Owner Trustee, the Insurer and the Servicer, by hand
delivery or facsimile transmission, a written notice (a "Deficiency Notice")
specifying the Deficiency Claim Amount for such Payment Date, if any. Such
Deficiency Notice shall direct the Collateral Agent to remit such Deficiency
Claim Amount (to the extent of the funds available to be distributed pursuant to
the Reserve Account Agreement) to the Indenture Trustee for deposit in the
Collection Account on the related Payment Date.
Any Deficiency Notice shall be delivered by 5:00 p.m., Eastern time, on
the fourth Business Day preceding such Payment Date (the "Deficiency Claim
Date").
(b) The amounts distributed by the Collateral Agent to the Indenture
Trustee pursuant to a Deficiency Notice shall be deposited by the Indenture
Trustee into the Collection Account pursuant to SECTION 4.5.
ARTICLE VI
THE NOTE POLICY
SECTION 6.1 CLAIMS UNDER NOTE POLICY.
(a) In the event that the Indenture Trustee has delivered a Deficiency
Notice with respect to any Determination Date pursuant to SECTION 5.1 hereof,
the Indenture Trustee shall on the related Draw Date determine the Note Policy
Claim Amount for the related Payment Date. If the Note Policy Claim Amount for
such Payment Date is greater than zero, the Indenture Trustee shall furnish to
the Insurer no later than 12:00 noon New York City time on the related Draw Date
a completed Notice of Claim (as defined in (b) below) in the amount of the Note
Policy Claim Amount. Amounts paid by the Insurer pursuant to a claim submitted
under this Section shall be deposited by the Indenture Trustee into the Note
Distribution Account for payment to Noteholders on the related Payment Date.
(b) Any notice delivered by the Indenture Trustee to the Insurer
pursuant to subsection 6.1(a) shall specify the Note Policy Claim Amount claimed
under the Note Policy and shall constitute a "Notice of Claim" (as defined in
the Note Policy) under the Note Policy. In accordance with the provisions of the
Note Policy, the Insurer is required to pay to the Indenture Trustee the Note
Policy Claim Amount properly claimed thereunder by 12:00 noon, New York City
time, on the later of (i) the third (3) Business Day (as defined in the Note
Policy) following Receipt (as defined in the Note Policy) on a Business Day (as
defined in the Note Policy) of the Notice of Claim, and (ii) the applicable
Payment Date. Any payment made by the Insurer under the Note Policy shall be
applied solely to the payment of principal of and interest on the Notes, and for
no other purpose.
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(c) The Indenture Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Insurer and (ii) deposit the
same in the Note Distribution Account for distribution to Noteholders. Any and
all Note Policy Claim Amounts disbursed by the Indenture Trustee from claims
made under the Note Policy shall not be considered payment by the Trust with
respect to such Notes, and shall not discharge the obligations of the Trust with
respect thereto. The Insurer shall, to the extent it makes any payment with
respect to the Notes, become subrogated to the rights of the recipients of such
payments to the extent of such payments. Subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Insurer, the Indenture
Trustee shall assign to the Insurer all rights to the payment of interest or
principal with respect to the Notes which are then due for payment to the extent
of all payments made by the Insurer, and the Insurer may exercise any option,
vote, right, power or the like with respect to the Notes to the extent that it
has made payment pursuant to the Note Policy. To evidence such subrogation, the
Note Registrar shall note the Insurer's rights as subrogee upon the register of
Noteholders upon receipt from the Insurer of proof of payment by the Insurer of
any Scheduled Payment (as defined in the Note Policy). The foregoing subrogation
shall in all cases be subject to the rights of the Noteholders to receive all
Scheduled Payments (as defined in the Note Policy) in respect of the Notes.
(d) The Indenture Trustee shall keep a complete and accurate record of
all funds deposited by the Insurer into the Collection Account and the Note
Distribution Account and the allocation of such funds to payment of interest on
and principal paid in respect of any Note. The Insurer shall have the right to
inspect such records at reasonable times upon one Business Day's prior notice to
the Indenture Trustee.
(e) The Indenture Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Insurer.
SECTION 6.2. PREFERENCE CLAIMS.
(a) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any Interest Payment Amount or
Principal Payment Amount paid on a Note has been avoided in whole or in part as
a preference payment under applicable bankruptcy law, the Indenture Trustee
shall so notify the Insurer, shall comply with the provisions of the Note Policy
to obtain payment by the Insurer of such avoided payment, and shall, at the time
it provides notice to the Insurer, notify Holders of the Notes by mail that, in
the event that any Noteholder's payment is so recoverable, such Noteholder will
be entitled to payment pursuant to the terms of the Note Policy. The Indenture
Trustee shall furnish to the Insurer its records evidencing the payments of
principal of and interest on Notes, if any, which have been made by the
Indenture Trustee and subsequently recovered from Noteholders, and the dates on
which such payments were made. Pursuant to the terms of the Note Policy, the
Insurer will make such payment on behalf of the Noteholder to the receiver,
conservator, debtor-in-possession or trustee in
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bankruptcy named in the Order (as defined in the Note Policy) and not to the
Indenture Trustee or any Noteholder directly (unless a Noteholder has previously
paid such payment to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy, in which case the Insurer will make such payment to the Indenture
Trustee for distribution to such Noteholder upon proof of such payment
reasonably satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which a Responsible Officer of
the Indenture Trustee has actual knowledge) seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "Note Preference Claim") of any distribution
made with respect to the Notes. Each Holder, by its purchase of Notes, and the
Indenture Trustee hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Insurer may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedesas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
SECTION 6.1(c), the Insurer shall be subrogated to, and each Noteholder and the
Indenture Trustee hereby delegate and assign, to the fullest extent permitted by
law, the rights of the Indenture Trustee and each Noteholder in the conduct of
any proceeding with respect to a Note Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Note Preference
Claim.
SECTION 6.3. SURRENDER OF POLICY. The Indenture Trustee shall surrender
the Note Policy to the Insurer for cancellation upon the expiration of such
policy in accordance with the terms thereof.
ARTICLE VII
THE COMPANY
SECTION 7.1 LIABILITY OF COMPANY; INDEMNITIES. (a) The Company shall be
liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Company and the representations made by the
Company.
(b) The Company shall indemnify, defend and hold harmless the Servicer,
the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Insurer, and
their respective officers, directors, agents and employees, the Trust and the
Noteholders from and against any and all costs, expenses, losses, claims,
penalties, fines, forfeitures, judgments, damages and liabilities to the extent
that such cost, expense, loss, claim, penalty, fine, forfeiture, judgment,
damage or liability arose out of, or was imposed upon the Servicer, the
Indenture Trustee, the Owner Trustee, the Trust, the Insurer or the Backup
Servicer by reason of, the gross negligence (other
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than errors in judgment), willful misfeasance or bad faith of the Company in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
SECTION 7.2. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall
not merge or consolidate with any other Person or permit any other Person to
become the successor to all or substantially all of the Company's business or
assets unless the conditions precedent set forth in this SECTION 7.2 have been
satisfied and the Rating Agency Condition shall have been satisfied. Any such
successor corporation shall execute an agreement of assumption of every
obligation of the Company under its Related Documents and, whether or not such
assumption agreement is executed, shall be the successor to the Company under
this Agreement without the execution or filing of any document (or any further
act on the part of any of the parties to this Agreement). The Company shall
provide prompt notice of any merger, consolidation or succession pursuant to
this SECTION 7.2 to the Indenture Trustee, the Seller, Owner Trustee, the
Noteholders, the Insurer and each Rating Agency. Notwithstanding the foregoing,
the Company shall not merge or consolidate with any other Person or permit any
other Person to become a successor to the Company's business, unless: (a)
immediately after giving effect to such transaction if such transaction occurs
during the Funding Period, no representation or warranty made pursuant to
SECTION 2.5 shall have been breached (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction) and no event that, after notice or lapse of time, would become an
Event of Default or an Insurance Agreement Event of Default shall have occurred
and be continuing; (b) the Company shall have delivered to the Owner Trustee,
the Seller, the Indenture Trustee, the Insurer and each Rating Agency an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this SECTION 7.2 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with; (c) the Company
shall have delivered to the Owner Trustee, the Seller, the Indenture Trustee,
the Insurer and each Rating Agency an Opinion of Counsel, stating, in the
opinion of such counsel, either (i) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interests of the Trust and the Indenture
Trustee in the Receivables and other Trust Property or (ii) no such action shall
be necessary to preserve and protect such interest and (d) such entity shall
since commencing its existence have been subject to the restrictions of SECTION
7.4.
SECTION 7.3. LIMITATION ON LIABILITY OF COMPANY AND OTHERS. The Company
and any director or officer or employee or agent of the Company may rely in good
faith on the advice of counsel or on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
under this Agreement. The Company shall not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
obligations as Company of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
SECTION 7.4. SPECIAL PURPOSE ENTITY.
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(a) The Company shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead others as to
the identity of the entity with which such persons are concerned, and shall use
its best efforts to avoid the appearance that it is conducting business on
behalf of any Affiliate thereof or that the assets of the Company are available
to pay the creditors of any Affiliate thereof (other than as expressly provided
herein).
(b) The Company shall maintain corporate records and books of account
separate from those of any Affiliate thereof.
(c) The Company shall obtain proper authorization for all corporate
action requiring such authorization.
(d) The Company shall pay its own operating expenses and liabilities
from its own funds.
(e) The resolutions, agreements and other instruments of the Company
underlying the transactions described in the Related Documents shall be
continuously maintained by the Company as official records of the Company.
(f) The Company shall maintain an arm's-length relationship with its
Affiliates, and shall not hold itself out as being liable for the debts of any
of its Affiliates.
(g) The Company shall keep its assets and liabilities separate from
those of all other entities other than as permitted by the Related Documents.
(h) The books and records of the Company shall be maintained at the
address designated herein for receipt of notices, unless the Company shall
otherwise advise the parties hereto in writing.
(i) The Company shall not maintain bank accounts or other depository
accounts to which any Affiliate is an account party, into which any Affiliate
makes deposits or from which any Affiliate has the power to make withdrawals,
except as otherwise permitted by the Related Documents.
(j) The Company shall not amend, supplement or otherwise modify its
certificate of incorporation or bylaws except in accordance therewith.
SECTION 7.5. RESTRICTIONS ON LIENS. The Company shall not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien on, or restriction
on transferability of, the Receivables except for Permitted Liens or (ii) sign
or file under the UCC of any jurisdiction any financing statement that names
Triad or the Company as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect to the
Receivables, except in each case any such
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instrument solely securing the rights and preserving the Lien of the Trust and
the Lien of the Indenture Trustee for the benefit of the Noteholders and the
Insurer.
SECTION 7.6. CREATION OF INDEBTEDNESS, GUARANTEES. The Company shall
not create, incur, assume or suffer to exist any indebtedness other than
indebtedness permitted under the Related Documents. The Company shall incur no
additional borrowed money indebtedness secured by the Trust Property other than
the Notes. The Company shall not assume, guarantee, endorse or otherwise be or
become directly or contingently liable for the obligations of any Person by,
among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
SECTION 7.7. COMPLIANCE WITH LAWS. The Company shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Company to perform its obligations under any Related Document.
SECTION 7.8. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trust or
the Indenture Trustee, the Company shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Agreement.
SECTION 7.9. INVESTMENT COMPANY ACT. The Company shall conduct its
operations in a manner that will not subject it to registration as an
"Investment Company" under the Investment Company Act of 1940, as amended.
ARTICLE VIII
THE SERVICER
SECTION 8.1 LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such) shall be liable hereunder
only to the extent of the obligations in this Agreement specifically undertaken
by the Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Company,
the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Insurer, and
their respective officers, directors, agents and employees, the Trust and the
Noteholders from and against any and all costs, expenses, losses, damages,
claims and liabilities, arising out of or resulting from the use, ownership or
operation, if any, by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(c) The Servicer shall defend, indemnify and hold harmless the
Indenture Trustee, the Owner Trustee, the Backup Servicer, the Insurer, their
respective officers, directors, agents and
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employees, the Trust and the Noteholders from and against any taxes (other than
franchise and income taxes other than income taxes imposed on the Trust) that
may at any time be asserted against the Indenture Trustee, the Owner Trustee,
the Backup Servicer, the Trust, the Insurer or the Noteholders, with respect to
the transactions contemplated herein, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes and costs and expenses in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless the Company,
the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Insurer, and
their respective officers, directors, agents and employees, the Trust and the
Noteholders from and against any and all costs, expenses, losses, claims,
penalties, fines, forfeitures, judgments, damages and liabilities to the extent
that such cost, expense, loss, claim, penalty, fine, forfeiture, judgment,
damage or liability arose out of, or was imposed upon the Company, the Indenture
Trustee, the Owner Trustee, the Trust, the Insurer or the Backup Servicer by
reason of, the breach of this Agreement by the Servicer, the negligence (other
than errors in judgment), willful misfeasance or bad faith of the Servicer in
the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(e) For purposes of this Section, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
SECTION 9.3) as Servicer pursuant to SECTION 9.2, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to SECTION 9.3.
The provisions of this SECTION 8.1(e) shall in no way affect the survival
pursuant to SECTION 8.1(f) of the indemnification by the Servicer provided by
SECTION 8.1(b), (c) or (d).
(f) Indemnification under this SECTION 8.1 shall survive the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer has made any indemnity
payments pursuant to this SECTION 8.1 and the recipient thereafter collects any
of such amounts from others, the recipient shall promptly repay such amounts
collected to the Servicer, without interest.
(g) Notwithstanding the indemnity provisions contained in SECTIONS
8.1(b) through (d), the Servicer shall not be required to indemnify any party
pursuant to this Agreement, or their respective officers, directors, agents or
employees against any costs, expenses, losses, damages, claims or liabilities to
the extent the same shall have been (i) caused by the misfeasance, bad faith or
negligence (other than errors in judgment) of such party, or (ii) suffered by
reason of uncollectible or uncollected Receivables not caused by the Servicer's
negligence (other than errors in judgment), willful misfeasance or bad faith.
(h) Notwithstanding the indemnity provisions contained in SECTIONS
8.1(b) through (d), the Servicer shall not be required to indemnify the Owner
Trustee in its individual capacity for any liability, obligation, loss, damage,
penalty, tax, claim, action, suit, cost, expense or disbursement which might
result from the gross negligence (or negligence in the case of handling
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of funds) or willful misconduct of Owner Trustee or the inaccuracy of any
representation or warranty of Owner Trustee in its individual capacity. The
payor of any indemnity under this SECTION 8.1(h) shall be subrogated to any
right of the person indemnified in respect of the matter as to which such
indemnity was paid.
SECTION 8.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other Person
or, other than sales of assets in its ordinary course of business, convey,
transfer or lease all or substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to all or
substantially all of its business or assets, unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity shall be capable of fulfilling the duties of the Servicer
contained in this Agreement and shall be an Eligible Servicer. Any Person (i)
into which the Servicer may be merged or consolidated, (ii) resulting from any
merger or consolidation to which the Servicer shall be a party, (iii) that
acquires by conveyance, transfer, or lease substantially all of the assets of
the Servicer, or (iv) succeeding to the business of the Servicer, in any of the
foregoing cases shall execute an agreement of assumption to perform every
obligation of the Servicer under this Agreement and making representations
substantially equivalent to those made by the Servicer hereunder and, whether or
not such assumption agreement is executed, shall be the successor to the
Servicer under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties to this Agreement, anything in
this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing
contained herein shall be deemed to release the Servicer from any obligation
hereunder. The Servicer shall provide notice of any merger, consolidation or
succession pursuant to this SECTION 8.2(a) to the Owner Trustee, the Indenture
Trustee, the Noteholders, the Insurer and each Rating Agency, and the Rating
Agency Condition in respect of such merger, consolidation or succession shall
have been satisfied. Notwithstanding the foregoing, the Servicer shall not merge
or consolidate with any other Person or permit any other Person to become a
successor to all or substantially all of its business or assets, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to SECTION 3.6 shall have been breached in any material
respect (for purposes hereof, such representations and warranties shall speak as
of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, would become an Event of Default, Insurance Agreement
Event of Default or Servicer Termination Event shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Owner Trustee, the
Indenture Trustee, the Insurer and each Rating Agency an Officer's Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
succession and such agreement of assumption comply with this SECTION 8.2(a) and
that all conditions precedent, if any, provided for in this Agreement relating
to such transaction have been complied with, and (z) the Servicer shall have
delivered to the Owner Trustee, the Indenture Trustee, the Insurer and each
Rating Agency an Opinion of Counsel, stating in the opinion of such counsel,
either (1) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trust and the
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Indenture Trustee in the Receivables and the proceeds thereof and reciting the
details of the filings or (2) no such action shall be necessary to preserve and
protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged,
consolidated or converted, (ii) resulting from any merger, consolidation or
conversion to which the Backup Servicer shall be a party, (iii) that acquires by
conveyance, transfer or lease substantially all of the assets of the Backup
Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of the Backup Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Backup Servicer
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing
contained herein shall be deemed to release the Backup Servicer from any
obligation under this Agreement.
SECTION 8.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS.
(a) Neither the Servicer, the Backup Servicer nor any of the directors,
officers, employees or agents of the Servicer or the Backup Servicer shall be
under any liability to the Trust, the Noteholders, the Indenture Trustee, the
Owner Trustee or the Company, except as provided in this Agreement, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement; PROVIDED, HOWEVER, that this provision shall not protect the
Servicer, the Backup Servicer or any such Person against any liability that
would otherwise be imposed by reason of a breach of this Agreement or willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of its duties or by reason of reckless disregard of obligations and
duties under this Agreement or any violation of law, or the inaccuracy of any
representation made by the Servicer, Backup Servicer or such Person, as the case
may be; and, PROVIDED, FURTHER, that this provision shall not affect any
liability to indemnify the Indenture Trustee for costs, expenses, claims,
liabilities, losses or damages paid by the Indenture Trustee in its individual
capacity. The Servicer, the Backup Servicer and any director, officer, employee
or agent of the Servicer or the Backup Servicer may rely in good faith on the
written advice of counsel or on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising under this
Agreement.
(b) Except as provided in this Agreement, neither the Servicer nor the
Backup Servicer shall 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, and that in its opinion may
involve it in any expense or liability.
(c) Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligation hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer (however, in the event the Backup Servicer shall have knowledge of the
Servicer's failure to perform its duties as required in this Agreement, the
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Backup Servicer shall promptly notify the Indenture Trustee and the Insurer of
such failure). The Backup Servicer shall have no liability for any action taken
or omitted by the Servicer. The duties and obligations of the Backup Servicer
shall be determined solely by the express provisions of this Agreement and no
implied covenants or obligations shall be read into this Agreement against the
Backup Servicer.
(d) The Backup Servicer in its capacity as such 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 (unless as a result of the Backup
Servicer's failure to perform its duties as required therein), or in the
exercise of any of its rights or powers, if the repayment of such funds or
adequate written indemnity against such risk or liability is not reasonably
assured to it in writing prior to the expenditure or risk of such funds or
incurrence of financial liability.
(e) The Backup Servicer will not be responsible for delays attributable
to the Servicer's failure to deliver information, defects in the information
supplied by the Servicer or other circumstances beyond the control of the Backup
Servicer.
(f) Unless acting as Servicer hereunder, the Backup Servicer shall not
be liable for any obligation of the Servicer contained in this Agreement, and
the Indenture Trustee, the Owner Trustee, the Company, the Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
(g) The parties expressly acknowledge and consent to [ ] acting
in the possible dual capacity of Backup Servicer or successor Servicer and in
the capacity as Indenture Trustee. [ ] may, in such dual capacity,
discharge its separate functions fully, without hindrance or regard to
conflict of interest principles, duty of loyalty principles or other breach
of fiduciary duties to the extent that any such conflict or breach arises
from the performance by [ ] of express duties set forth in this
Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto except in
the case of negligence (other than errors in judgment) and willful misconduct
by [ ]. Notwithstanding the foregoing, no provision of this Agreement
shall be deemed to relieve the Indenture Trustee of any of its duties
specified in the Indenture.
(h) The Backup Servicer shall have no responsibility and shall not be
in default hereunder nor incur any liability for any failure, error, malfunction
or any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such Person to prepare or provide such information. The
Backup Servicer shall have no responsibility, shall not be in default and shall
incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Company, the Controlling Party, the Insurer, the
Indenture Trustee or the Owner Trustee or for any inaccuracy or omission in a
notice or communication received by the Backup Servicer from any third party or
(ii) that is due
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to or results from the invalidity or unenforceability of any Receivable under
applicable law or the breach or the inaccuracy of any representation or warranty
made with respect to any Receivable.
SECTION 8.4. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the
provisions of SECTION 8.2, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would result in a material adverse effect on the Servicer or the Backup
Servicer, as the case may be, and the Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) does not elect to waive the
obligations of the Servicer or the Backup Servicer, as the case may be, to
perform the duties that render it legally unable to act or to delegate those
duties to another Person. Any such determination permitting the resignation of
the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee, the Indenture Trustee and the
Insurer (unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective, so long as no Insurer
Default shall have occurred and be continuing, until the Backup Servicer or an
entity acceptable to the Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if a Insurer Default shall have occurred and be
continuing, until the Backup Servicer or a successor Servicer that is an
Eligible Servicer shall have assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, an entity
acceptable to the Insurer shall have assumed the responsibilities and
obligations of the Backup Servicer or, if an Insurer Default shall have occurred
and be continuing, the Indenture Trustee or an entity appointed by the Indenture
Trustee acceptable to a Note Majority shall have assumed the responsibilities
and obligations of the Backup Servicer; PROVIDED, HOWEVER, that if a successor
Backup Servicer is not appointed within one hundred eighty (180) days after the
Backup Servicer has given notice of its resignation and has provided the Opinion
of Counsel required by this SECTION 8.4, the Backup Servicer may petition a
court for the appointment of a successor Backup Servicer. No resignation of the
Servicer or the Backup Servicer shall relieve the Servicer or the Backup
Servicer, as the case may be, of any liability to which it has previously become
subject under this Agreement or any Related Document. Notwithstanding the
foregoing, the Backup Servicer may resign for any reason, provided 180 days
notice of such resignation has been given by the Backup Servicer to the
Servicer, the Indenture Trustee, the Owner Trustee and the Insurer, (ii) an
entity acceptable to the Insurer (so long as no Insurer Default has occurred and
is continuing), in its sole and absolute discretion, shall have assumed the
responsibilities and obligations of the Backup Servicer prior to the
effectiveness of any such resignation and the Rating Agency Condition is
satisfied with respect thereto, (iii) the Backup Servicer agrees to pay all fees
of the successor backup servicer above the amounts which would be payable to the
Backup Servicer if it continued in such capacity, and (iv) the Backup Servicer
agrees to pay all backup servicer transition expenses upon the assumption of the
succcessor backup servicer of such duties and obligations.
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SECTION 8.5. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Servicer shall perform
all its duties and in accordance with this SECTION 8.5 the duties of the Issuer
under the Indenture. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of the Issuer
under the Indenture. The Servicer shall monitor the performance of the Issuer
and shall advise the Owner Trustee when action is necessary to comply with the
Issuer's duties under the Indenture. The Servicer shall prepare for execution by
the Owner Trustee or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Indenture. In furtherance of the foregoing, the Servicer shall take all
necessary action that is the duty of the Issuer to take pursuant to SECTIONS
2.9, 3.3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.19, 3.21, 3.23, 4.1, 5.1, 5.16, 8.4, 8.5,
9.5 and 11.1 of the Indenture. Notwithstanding any other provision of this
Agreement, no delegation of the Issuer's duties under any Related Document shall
relieve the Issuer of liability therefor.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Related Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Owner
Trustee or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to this Agreement or any of the
Related Documents or under state and federal tax and securities laws
and shall take all appropriate action that it is the duty of the Issuer
to take pursuant to this Agreement or any of the Related Documents. In
accordance with the directions of the Issuer or the Owner Trustee, the
Servicer shall administer, perform or supervise the performance of such
other activities in connection with the Related Documents as are not
covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably within
the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Related Documents to the contrary, the Servicer shall be responsible
for promptly notifying the Owner Trustee if any withholding tax is
imposed on the Issuer's payments (or allocations of income) to any
Certificateholder. Any such notice shall be in writing and specify the
amount of any withholding tax required to be withheld by the Owner
Trustee pursuant to such provision.
(c) RECORDS. The Servicer shall maintain appropriate books of account
and records relating to the services performed under this Agreement, which books
of account and records shall be accessible for inspection by the Owner Trustee
or the Insurer at any time upon reasonable prior notice during normal business
hours.
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SECTION 8.6. REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER.
The Backup Servicer hereby makes the following representations and
warranties to the other parties hereto, on which the Indenture Trustee on behalf
of itself and the Noteholders relies in accepting the Receivables in trust and
authenticating the Notes and on which the Insurer relies in issuing the Note
Policy. Unless otherwise specified, the representations and warranties are made
as of the Closing Date and shall survive the transfer of interest in the
Receivables hereunder to the Indenture Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Backup Servicer has been duly
organized and is validly existing as a New York banking corporation in good
standing under the laws of the State of New York, with power, authority and
legal right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and now has, power, authority and legal right to service the
Receivables and to enter into and perform its obligations under this Agreement
and each of its Related Documents.
(b) DUE QUALIFICATION. The Backup Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables) requires or shall require such qualifications, licenses or
approvals.
(c) POWER AND AUTHORITY. The Backup Servicer has the power and
authority to execute and deliver this Agreement and each of its Related
Documents has been duly executed and delivered by the Backup Servicer, and to
carry out its terms; and the execution, delivery, and performance of this
Agreement and each of its Related Documents have been duly authorized by the
Backup Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement and each of its Related
Documents constitutes a legal, valid and binding obligation of the Backup
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' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the Backup
Servicer of this Agreement and each of its Related Documents, and the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof shall not conflict with, result in any breach of any of the terms
and provisions of or constitute (with or without notice, lapse of time or both)
a default under, the articles of incorporation or by-laws of the Backup
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Backup Servicer is a party or by which it is bound or to
which any of its properties is subject, or result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any
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indenture, agreement, mortgage, deed of trust or other instrument (other than
this Agreement), nor violate any law, order, rule, or regulation applicable to
the Backup Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Backup Servicer or any its properties, or in any way materially
adversely affect the interest of the Noteholders, the Insurer or the Trust in
any Receivable, or affect the Backup Servicer's ability to perform its
obligations under this Agreement.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending,
or to the Backup Servicer's knowledge, threatened against the Backup Servicer,
before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Backup Servicer or its properties:
(i) asserting the invalidity of this Agreement or any of its Related Documents,
(ii) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of its Related Documents,
(iii) seeking any determination or ruling that might materially and adversely
affect the performance by the Backup Servicer of its obligations under, or the
validity or enforceability of, this Agreement or any of its Related Documents,
(iv) relating to the Backup Servicer and which might adversely affect the
federal or state income, excise, franchise or similar tax attributes of the
Notes, or (v) that could have a material adverse effect on the Receivables or
the Trust Property.
(g) NO CONSENTS. No consent, approval, license, authorization or order
of or declaration or filing with any governmental authority, bureau or agency is
required for the consummation of the other transactions contemplated by this
Agreement or any of the Backup Servicer's Related Documents, except such as have
been duly made or obtained.
(h) TAXES. The Backup Servicer has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) NO INJUNCTIONS. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect the
performance by the Backup Servicer or its obligations under, or the validity and
enforceability of, this Agreement.
(j) COMPLIANCE WITH LAW. The Backup Servicer is in compliance with all
requirements of federal and state laws, rules, regulations and orders, except
where the failure so to comply would not have a material adverse effect on the
Backup Servicer, its business or its properties, or the ability of the Backup
Servicer to perform its obligations under this Agreement.
SECTION 8.7. DUTIES OF BACKUP SERVICER.
(a) The Backup Servicer hereby agrees, on the date (the "ASSUMPTION
DATE") specified in the written notice to the Backup Servicer from the Insurer
or the Indenture Trustee, as the case may be, of the termination of the rights
and obligations of the Servicer pursuant to SECTION 9.2 hereof or the
resignation of the Servicer pursuant to SECTION 8.4 hereof, and without any
further notice, to assume the obligations of the Servicer hereunder, to be the
successor in all respects to
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the Servicer and to be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the Servicer. From and
after the Assumption Date and except as expressly set forth herein, the Backup
Servicer shall be entitled to all of the rights granted to the Servicer by the
terms and provisions of this Agreement.
(b) Notwithstanding the Backup Servicer's assumption of, and its
agreement to perform and observe, all duties, responsibilities and obligations
of the Servicer under this Agreement arising on and after the Assumption Date,
the Backup Servicer shall not be deemed to have assumed or to become liable for,
or otherwise have any liability for, any duties, responsibilities, obligations
or liabilities of the Servicer arising on or before the Assumption Date, whether
provided for by the terms of this Agreement, arising by operation of law or
otherwise, including, without limitation, any liability for any duties,
responsibilities, obligations or liabilities of the Servicer arising on or
before the Assumption Date regardless of when the liability, duty,
responsibility or obligation of the Servicer arose, whether provided by the
terms of this Agreement, arising by operation of law or otherwise.
(c) Up to but not including the Assumption Date, the Backup Servicer
shall be paid the Backup Servicing Fee, as provided in SECTION 4.6 of this
Agreement, for services rendered hereunder on each Payment Date.
(d) On each Payment Date following the Assumption Date, the Backup
Servicer shall be entitled to the Servicing Fee and the Servicer Transition
Expenses.
(e) The Backup Servicer agrees to execute, acknowledge and deliver from
time to time all such further instruments and documents and to take all
reasonable actions as the Indenture Trustee may from time to time request to
better assure the Indenture Trustee and to preserve the rights and obligations
created hereunder.
ARTICLE IX
SERVICER TERMINATION EVENTS
SECTION 9.1 SERVICER TERMINATION EVENT. For purposes of this Agreement,
each of the following shall constitute a "SERVICER TERMINATION EVENT":
(a) Any failure by the Servicer to deliver to the Indenture Trustee for
deposits into the Collection Account or to deliver to the Indenture Trustee for
distribution any proceeds or payment required to be so deposited or delivered
under the terms of this Agreement that continues unremedied for a period of two
(2) Business Days (one (1) Business Day with respect to payment of Purchase
Amounts) after written notice is received by the Servicer from the Indenture
Trustee or (unless an Insurer Default shall have occurred and be continuing) the
Insurer or after discovery of such failure by an Authorized Officer of the
Servicer.
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(b) Failure by the Servicer to deliver to the Indenture Trustee and (so
long as an Insurer Default shall not have occurred and be continuing), the
Insurer (i) the Servicer's Certificate required by SECTION 3.9 on any
Determination Date, (ii) any annual statement as to compliance pursuant to
SECTION 3.10, in each case within five (5) Business Days after the date such
annual statement is required to be delivered and (iii) any Accountant's Report
pursuant to SECTION 3.11; or
(c) Failure on the part of the Servicer to observe its covenants and
agreements set forth in SECTION 8.2(a) or repudiation by the Servicer of any of
its covenants and agreements in this Agreement; or
(d) Failure or failures on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in this
Agreement, which failure or failures, individually or in the aggregate, (i)
materially and adversely affect the rights of Noteholders (determined without
regard to the availability of funds under the Note Policy), or the Insurer
(unless an Insurer Default shall have occurred and be continuing) and (ii)
continue unremedied for a period of sixty (60) days after the earlier of actual
knowledge thereof by a Responsible Officer of the Servicer or the date on which
written notice of such failure or failures, requiring the same to be remedied,
shall have been given to the Servicer by the Owner Trustee, the Indenture
Trustee, the Insurer (or if an Insurer Default shall have occurred and be
continuing, by the Note Majority; or
(e) The occurrence of an Insolvency Event with respect to the Servicer;
or
(f) Any representation, warranty or statement of the Servicer made in
this Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect as of the time when the same shall have been
made, and the incorrectness of such representation or warranty has a material
adverse effect on the Noteholders or the Insurer and, within thirty (30) days
after the earlier of knowledge thereof by a Responsible Officer of the Servicer
or the date written notice thereof shall have been given to the Servicer by the
Owner Trustee, the Indenture Trustee, the Insurer (or, if an Insurer Default
shall have occurred and be continuing, the Note Majority), the circumstances or
condition in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and be
continuing, the Insurer shall not have delivered a Servicer Extension Notice
pursuant to SECTION 3.19; or
(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default or under any other Insurance
and Indemnity Agreement relating to any Series (as defined in the Insurance
Agreement) an event of default thereunder shall have occurred and be continuing;
or
(i) A claim is made under the Note Policy.
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SECTION 9.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Insurer (or, if an
Insurer Default shall have occurred and be continuing), either the Indenture
Trustee (to the extent it has actual knowledge thereof) or a Note Majority, by
notice given in writing to the Servicer and each Rating Agency (and to the
Indenture Trustee if given by the Insurer or the Noteholders), may terminate all
of the rights and obligations of the Servicer under this Agreement; PROVIDED,
HOWEVER, that no termination shall relieve the Servicer of any liability to
which it has previously become subject under this Agreement. On or after the
receipt by the Servicer of such written notice, the expiration without renewal
of the term of the Servicer pursuant to Section 3.19 all authority, power,
obligations and responsibilities of the Servicer under this Agreement, whether
with respect to the Notes, the Receivables, the other Trust Property or
otherwise, automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Controlling Party); PROVIDED, HOWEVER, that the successor
Servicer shall have no liability with respect to (i) any obligation that was
required to be performed by the terminated Servicer prior to the date that the
successor Servicer becomes the Servicer or (ii) any claim of a third party based
on any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables, the other Trust Property and related documents to show the Trust or
the Indenture Trustee as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with the
successor Servicer in effecting the termination of the responsibilities and
rights of the terminated Servicer under this Agreement, including the transfer
to the successor Servicer for administration by it of all cash amounts that
shall at the time be held by the terminated Servicer for deposit, or have been
deposited by the terminated Servicer, in the Collection Account or the Lockbox
Account or thereafter received with respect to the Receivables and the delivery
to the successor Servicer of all Receivable Files and Monthly Records and a
computer tape in readable form as of the most recent Business Day containing all
information necessary to enable the successor Servicer to service the Trust
Property. The Servicer shall, if requested by the Controlling Party, cooperate
with the successor Servicer in the establishment of a new Lockbox Account. The
Indenture Trustee and the Backup Servicer may set off and deduct any amounts
owed by the terminated Servicer from any amounts payable to the terminated
Servicer pursuant to this Agreement. For the purposes of succession hereunder,
the terminated Servicer shall, upon reasonable prior notice, grant the Indenture
Trustee, and the successor Servicer and the Controlling Party reasonable access
during normal business hours to the terminated Servicer's premises.
SECTION 9.3. APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of termination
pursuant to SECTION 9.2, upon non-extension of the servicing term as referred to
in Section 3.19 or upon the resignation of the Servicer pursuant to SECTION 8.4,
the Backup Servicer (unless the Insurer shall
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have exercised its option pursuant to SECTION 9.3(b) to appoint an alternate
successor Servicer) shall be the successor in all respects to the Servicer in
its capacity as Servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Servicer by the terms and provisions of this
Agreement, except as otherwise stated herein; PROVIDED; HOWEVER, that the Backup
Servicer shall not be liable for any acts, omissions or obligations of the
Servicer prior to such succession or for any breach by the Servicer of any of
its representations and warranties contained in this Agreement or in any of its
Related Documents. The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to term-to-term servicing as referred to in SECTION 3.19 and to
termination under SECTION 9.2 upon the occurrence of any Servicer Termination
Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint
as Backup Servicer or as successor to the Servicer a Person other than the
Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Note Policy) shall have no liability to the Indenture
Trustee, the Servicer, the Company, the Person then serving as Backup Servicer,
any Noteholders or any other Person if it does so. Notwithstanding the above, if
the Backup Servicer shall be legally unable or unwilling to act as Servicer, and
an Insurer Default shall have occurred and be continuing, the Backup Servicer,
the Indenture Trustee or a Note Majority may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment pursuant to the preceding sentence, the Backup Servicer
shall act as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. Subject to SECTION 8.4, no
provision of this Agreement shall be construed as relieving the Backup Servicer
of its obligation to succeed as successor Servicer upon the termination of the
Servicer pursuant to SECTION 9.2, the resignation of the Servicer pursuant to
SECTION 8.4 or the non-extension of the servicing term of the Servicer as
referred to in SECTION 3.19. If upon the termination of the Servicer pursuant to
SECTION 9.2 or the resignation of the Servicer pursuant to SECTION 8.4, the
Controlling Party appoints a successor Servicer other than the Backup Servicer,
the Backup Servicer shall not be relieved of its duties as Backup Servicer
hereunder.
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under this Agreement if the Servicer had not
resigned or been terminated hereunder. If any successor Servicer is appointed
for any reason, the Insurer and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer. Any successor Servicer shall
be entitled to reasonable transition expenses incurred in acting as successor
Servicer (the "Servicer Transition Expenses"), payable in accordance with
SECTION 4.6(b) hereof.
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SECTION 9.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this ARTICLE IX, the
Indenture Trustee shall give prompt written notice thereof to the each Rating
Agency and to the Noteholders at their respective addresses appearing in the
Note Register.
SECTION 9.5. ACTION UPON CERTAIN FAILURES OF THE SERVICER. If the
Backup Servicer shall obtain actual knowledge of any Servicer Termination Event
or event but for the lapse of time or the giving of notice, or both, would
constitute a Servicer Termination Event, it shall be obligated to notify
promptly the Indenture Trustee, the Insurer and each Rating Agency of such
occurrence or circumstance. In the event a Responsible Officer of the Indenture
Trustee shall have received such notice (or any comparable notice from the
Servicer, the Insurer or by a Noteholder) or otherwise obtained actual knowledge
of any failure of the Servicer specified in SECTION 9.1 which would give rise to
a right of termination under such SECTION 9.1 upon the Servicer's failure to
remedy the same after notice, the Indenture Trustee shall give prompt notice
thereof to the Servicer, each Rating Agency, the Insurer and the Noteholders.
The Indenture Trustee shall be under no duty or obligation to investigate or
inquire as to any potential failure of the Servicer specified in SECTION 9.1.
SECTION 9.6. WAIVER OF PAST DEFAULTS. So long as an Insurer Default
shall not have occurred and be continuing, the Insurer (or if an Insurer Default
shall have occurred and be continuing, a Note Majority) may, on behalf of the
Noteholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon. The Indenture Trustee shall provide the
Noteholders with notice of any waiver of any default by the Servicer hereunder.
ARTICLE X
TERMINATION
SECTION 10.1 OPTIONAL PURCHASE OF ALL RECEIVABLES.
(a) As an administrative convenience, the Servicer shall have the
option to purchase the Receivables and the other Trust Property on any Payment
Date if, as of the related Accounting Date, the Aggregate Principal Balance is
less than or equal to 10% of the Original Pool Balance (with the prior written
consent of the Insurer if such purchase would result in a claim on the Note
Policy or would result in any amount owing to the Insurer under the Insurance
Agreement remaining unpaid). To exercise such option, the Servicer shall pay the
aggregate Purchase Amounts for the Receivables and shall succeed to all
interests in and to the Trust Property. Not later than ten (10) days prior to
any proposed exercise of such option, the Servicer shall notify each Rating
Agency, the Indenture Trustee, the Insurer and the Owner Trustee of any
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proposed exercise of such option. To exercise such option, the Servicer shall
deposit pursuant to SECTION 4.5 in the Collection Account an amount equal to the
aggregate Purchase Amount for the Receivables (including Liquidated
Receivables), plus the appraised value of any other property held by the Trust,
such value to be determined by an appraiser mutually agreed upon by the
Servicer, the Insurer and the Indenture Trustee, and shall succeed to all
interests in and to the Trust.
(b) Upon any sale of the assets of the Trust pursuant to SECTION 9.1 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency Proceeds")
in the Collection Account.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Backup Servicer, the Indenture Trustee, the
Insurer and the Rating Agencies as soon as practicable after the Servicer has
received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the payment of
all amounts due to the Insurer under the Insurance Agreement, the end of the
Term of the Note Policy (as defined therein) and the surrender of the Note
Policy by the Indenture Trustee to the Insurer, the Certificateholders will
succeed to the rights of the Noteholders hereunder and the Owner Trustee will
succeed to the rights of, and assume the obligations of, the Indenture Trustee
pursuant to this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 AMENDMENT.
(a) This Agreement may be amended by the parties hereto with the prior
written consent of the Insurer (so long as no Insurer Default shall have
occurred and be continuing) but without the consent of any of the
Certificateholders or the Noteholders, (i) to cure any ambiguity, (ii) to
correct or supplement any provisions in this Agreement which may be inconsistent
with any other provision in this Agreement or (iii) for the purpose of making
any other provisions with respect to matters or questions arising under this
Agreement which are not inconsistent with the provisions of this Agreement;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Indenture Trustee and each Rating Agency, materially
and adversely affect the interests of the Certificateholders and the
Noteholders.
(b) This Agreement may also be amended from time to time by the parties
hereto with the prior written consent of the Insurer (so long as an Insurer
Default shall not have occurred and be continuing), the Indenture Trustee, and a
Note Majority (which consent of any Holder of a Note given pursuant to this
SECTION 11.1(b) or pursuant to any other provision of this Agreement
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shall be conclusive and binding on such Holder and on all future Holders of such
Note and of any Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the Note),
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Notes; PROVIDED, HOWEVER, that no such
amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables,
distributions that shall be required to be made for the benefit of Noteholders
or Certificateholders, (ii) reduce the aforesaid percentage required to consent
to any such amendment or any waiver hereunder, without the consent of the
Holders of all Notes then outstanding, PROVIDED FURTHER, that if an Insurer
Default has occurred and is continuing, such action shall not materially
adversely affect the interest of the Insurer, or (iii) result in a downgrade or
withdrawal of the then current rating of the Notes by either Rating Agency
without the consent of each Noteholder. The provisions of this SECTION 11.1(b)
shall in no event be construed to require the consent of the Noteholders or the
Certificateholders to a reduction in the Target Overcollateralization Amount or
the required level of the Reserve Account. (c) Prior to the execution of any
such amendment or consent under SECTION 11.1(a) or (b), the Servicer shall
furnish the Indenture Trustee with a written notice describing the substance of
such amendment and the Indenture Trustee shall forward such written notification
of the substance of such amendment or consent to the Insurer, Noteholders and
the Rating Agencies within the five (5) days of receipt thereof.
(d) Prior to the execution of any such amendment and receipt thereof by
the Indenture Trustee or consent under SECTION 11.1(a) or (b), the Indenture
Trustee shall furnish a true copy of such amendment or consent to each
Noteholder and to the Insurer.
(e) The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Agreement) and of evidencing the authorization
of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
(f) Prior to the execution of any amendment to this Agreement, the
Owner Trustee, the Backup Servicer, the Insurer and the Indenture Trustee, upon
request, shall be entitled to receive and rely upon an Opinion of Counsel
(delivered at the expense of the Servicer) stating that the execution of such
amendment is authorized or permitted by this Agreement. The Owner Trustee, the
Backup Servicer and the Indenture Trustee may, but shall not be obligated to,
enter into any such amendment that affects the Issuer's, the Owner Trustee's,
the Backup Servicer's or the Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
SECTION 11.2. PROTECTION OF TITLE TO TRUST.
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(a) The Company shall execute such financing statements prepared by the
Servicer and Servicer shall cause to be executed, filed, recorded and registered
such continuation and other statements or documents, all in such manner and in
such places as may be required by law or deemed reasonably necessary by the
Controlling Party fully to preserve, maintain and protect the interest of the
Trust, the Insurer and the Indenture Trustee under this Agreement in the Trust
Property and in the proceeds thereof against all other Persons. The Servicer
shall deliver (or cause to be delivered) to the Indenture Trustee and the
Insurer file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recordation, registration or filing. Triad and the Company shall cooperate fully
with the Servicer in connection with the obligations set forth above and shall
execute any and all documents reasonably required to fulfill the intent of this
SECTION 11.2(a).
(b) Neither the Company nor the Servicer shall change its name,
identity or corporate structure in any manner that would make any financing
statement or continuation statement filed in accordance with SECTION 11.2(a)
seriously misleading within the meaning of the applicable provisions of the UCC
or any title statute, unless it shall have given the Owner Trustee, the Insurer
and the Indenture Trustee at least sixty (60) days prior written notice thereof,
and promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Each of the Company and the Servicer shall give the Owner Trustee,
the Insurer and the Indenture Trustee at least sixty (60) days prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement. The Servicer shall at all times maintain each
office from which it services Receivables and its principal executive office
within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement, the Servicer's master computer
records (including any backup archives) that refer to any Receivable indicate
clearly that such Receivable is owned by the Trust. Indication of the Trust's
ownership of a Receivable shall be deleted from or modified on the Servicer's
computer systems when, and only when, the Receivable shall become a Purchased
Receivable, purchased in accordance with Section 10.1(a) hereof, a replaced
Receivable, or shall have been paid in full.
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(f) If at any time the Company or the Servicer proposes to sell, grant
a security interest in, or otherwise transfer any interest in automotive
receivables (other than the Receivables) to any prospective purchaser, lender or
other transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any restored
from backup archives) that, if they refer in any manner whatsoever to any
Receivable, indicate clearly that such Receivable has been sold and is owned by
the Trust (unless such Receivable shall become a Purchased Receivable, a
replaced Receivable, or shall have been paid in full).
(g) Upon reasonable notice, the Servicer shall permit the Insurer, the
Indenture Trustee, the Backup Servicer, the Company, each Rating Agency 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
Receivables or any other portion of the Trust Property in its possession; any
Noteholder shall be afforded the same rights as described in this CLAUSE (g),
provided that such Noteholder agrees to pay for its own fees and expenses
incurred in such inspection, audit and making copies and abstracts.
(h) The Servicer shall furnish to the Owner Trustee, the Insurer, the
Indenture Trustee, the Backup Servicer and the Company upon request within five
(5) Business Days of such request the Schedule of Receivables, setting forth the
Receivables then held as part of the Trust and reconciling the list of
Receivables then held as part of the Trust to each of the Servicing Certificates
furnished before such request indicating removal of Receivables from the Trust
and the addition of Replacement Receivables to the Trust. A copy of such
Schedule and reconciliation may be obtained by any Noteholder by a request in
writing to the Indenture Trustee addressed to the Corporate Trust Office.
(i) In the event any of the events described in SECTION 9.1(e) shall
have occurred, or in the event Triad shall have been removed or replaced as
Servicer for any reason, then Triad and/or the Servicer shall immediately cause,
at the expense of Triad, each Certificate of Title for a Financed Vehicle to be
marked to reflect the security interest of the Indenture Trustee in the Financed
Vehicle, and Triad hereby appoints the Indenture Trustee its attorney-in-fact to
effect such marking, and the Indenture Trustee hereby accepts such appointment.
The appointment of the Indenture Trustee hereunder shall not operate to relieve
Triad and/or the Servicer of its obligations to mark each Certificate of Title
under this provision. Triad shall be liable for all costs, fees and expenses
incurred under this SECTION 11.2(i).
(j) The Servicer (or the applicable party in the case of SECTION
11.2(b) or (c)) shall deliver to the Insurer, Owner Trustee and the Indenture
Trustee (i) simultaneously with the execution and delivery of this Agreement and
any Subsequent Transfer Agreement and of each amendment thereto, (ii) upon the
occurrence of the events giving rise to an obligation to give notice pursuant to
SECTION 11.2(b) or (c), and (iii) within 90 days after the beginning of each
calendar year beginning in [ ], and dated with such 90-day period, an Opinion of
Counsel in form and substance reasonably satisfactory to the Insurer (i) stating
that, in the opinion of such
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counsel, all financing statements and continuation statements have been executed
and filed that are necessary fully to preserve and protect the interests of the
Trust and the Indenture Trustee in the Receivables, and reciting the details of
such filing or referring to prior Opinions of Counsel in which such details are
given or (ii) stating that, in the opinion of such counsel, no such action is
necessary to preserve and protect such interest during the following 12-month
period.
SECTION 11.3. LIMITATION ON RIGHTS OF NOTEHOLDERS.
(a) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Noteholder shall have any right to vote (except as provided in
this SECTION 11.3 or SECTIONS 9.2 or 11.1) or in any manner otherwise control
the operation and management of the Trust, or the obligations of the parties to
this Agreement, nor shall anything set forth in this Agreement, or contained in
the terms of the Notes, be construed so as to constitute the Noteholders from
time to time as partners or members of an association; nor shall any Noteholder
be under any liability to any third person by reason of any action taken by the
parties to this Agreement pursuant to any provision of this Agreement or any
Related Document.
(c) No Noteholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Indenture Trustee a written notice of
default and of the continuance thereof, as provided in SECTION 5.6 of the
Indenture and unless also the Holders of Notes evidencing not less than 25% of
the Note Balance shall have made written request upon the Indenture Trustee to
institute such action, suit or proceeding in its own name as Indenture Trustee
under this Agreement and shall have offered to the Indenture Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Indenture Trustee, for
sixty (60) days after its receipt of such notice, request, and offer of
indemnity, shall have neglected or refused to institute any such action, suit,
or proceeding and no direction inconsistent with such written request has been
given to the Indenture Trustee during such sixty (60) day period by a Note
Majority; it being understood and intended, and being expressly covenanted by
each Noteholder with every other Noteholder and the Indenture Trustee, that no
one or more Holders of Notes shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb, or prejudice the rights of the Holders of any other of the
Notes, or to obtain or seek to obtain priority over or preference to any other
such Holder, or to enforce any right under this Agreement, except in the manner
provided in this Agreement and for the equal, ratable and common benefit of all
Noteholders. For the protection and enforcement of the provisions of this
SECTION 11.3, each and every Noteholder and the Indenture Trustee shall be
entitled to such relief as can be given either at law or in equity.
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SECTION 11.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 11.5. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS FROM ANY THEREOF;
(2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN ANY INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH
IN SECTION 11.12 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE OTHER PARTIES
HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(4) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE
IN ANY OTHER JURISDICTION; AND
(5) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN
THIS SUBSECTION ANY SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES.
SECTION 11.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
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LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
SECTION 11.7. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
rights of the Holders thereof.
SECTION 11.8. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in SECTION 7.2 or SECTION 8.2
and as provided in the provisions of the Agreement concerning the resignation of
the Servicer and the Backup Servicer, this Agreement may not be assigned by the
Company or the Servicer without the prior written consent of the Insurer (so
long as no Insurer Default shall have occurred and be continuing). Prior written
notice of any such assignment shall be provided to each Rating Agency by the
assignor.
SECTION 11.9. NOTES NONASSESSABLE AND FULLY PAID. Noteholders shall not
be personally liable for obligations of the Trust. The interests represented by
the Notes shall be nonassessable for any losses or expenses of the Trust or for
any reason whatsoever, and Notes upon authentication thereof by the Indenture
Trustee pursuant to the Indenture are and shall be deemed fully paid.
SECTION 11.10. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Certificateholders, the Owner Trustee and the Noteholders, as third-party
beneficiaries. The Insurer and its successors and assigns shall be a third-party
beneficiary with respect to the provisions, and shall be entitled to rely upon
and directly enforce such provisions so long as no Insurer Default shall have
occurred and be continuing. Except as expressly stated otherwise herein, any
right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Note
Policy) upon delivery of a written notice to the Indenture Trustee. Nothing in
this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 11.11. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
SECTION 11.12. NOTICES. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt
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requested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Company, at the following address: [ ], (b) in the case
of the Servicer, at the following address: Triad Financial Corporation, 7711
Center Avenue, Suite 100, Huntington Beach, California 92647, Telecopy No.:
(714) 894-8617, (c) in the case of the Indenture Trustee, and for so long as
the Indenture Trustee is the Backup Servicer, the Backup Servicer, at the
following address: [ ], (d) in the case of the Trust or the Owner
Trustee, at the following address: [ ], with a copy to the Servicer and
(e) in the case of the Insurer, to [ ] (in each case in which notice or
other communication to the Insurer refers to a Servicer Termination Event or
an Insurance Agreement Event of Default, a claim on the Note Policy, a
Deficiency Notice pursuant to SECTION 5.1 of this Agreement or with respect
to which failure on the part of the Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head-Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"); (f) in the case of Moody's, to Moody's Investors
Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New
York 10007; and (g) in the case of Standard & Poor's, to Standard & Poor's
Ratings Group, 25 Broadway - 15th Floor, New York, New York 10004, Attention:
Asset Backed Surveillance Department; or at such other address as shall be
designated by any such party in a written notice to the other parties. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in
the Note Register, and any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given,
whether or not the Noteholder receives such notice.
SECTION 11.13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereof and their respective successors and assigns, and shall
inure to the benefit of and be enforceable by the parties hereof and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Trust, the Indenture Trustee, the Insurer and the Noteholders and their
respective permitted successors and assigns, if any. Any request, notice,
direction, consent, waiver or other instrument or action by any Noteholder shall
bind its successors and assigns. Except as otherwise provided in this ARTICLE
XI, no other Person shall have any right or obligation hereunder.
SECTION 11.14. ASSIGNMENT TO INDENTURE TRUSTEE. The Company hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Trust to the Indenture Trustee pursuant to the
Indenture, for the benefit of the Noteholders and the Insurer, of all right,
title and interest of the Issuer in, to and under the Receivables and the
assignment of any or all of the Issuer's rights and obligations hereunder to the
Indenture Trustee.
SECTION 11.15. NONPETITION COVENANTS.
(a) Notwithstanding any prior termination of this Agreement, the
Servicer, the Company and the Seller shall not, prior to the date which is one
year and one day after the
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termination of this Agreement with respect to the Trust, acquiesce, petition or
otherwise invoke or cause the Trust to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Trust.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date that is one year and one day after the
termination of this Agreement with respect to the Company, acquiesce to,
petition or otherwise invoke or cause the Company to invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against the Company under any federal or state bankruptcy, insolvency or similar
law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Company or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Company.
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IN WITNESS WHEREOF, the Company, the Servicer, the Trust and
the Indenture Trustee have caused this Sale and Servicing Agreement to be duly
executed by their respective officers, effective as of the day and year first
above written.
TRIAD FINANCIAL CORPORATION, in its individual capacity and
as Servicer
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
[ ], as Indenture Trustee and as
Backup Servicer
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
[ ], as Company
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ], as
Purchaser
By: [ ],
not in its individual capacity but solely as Owner
Trustee
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
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SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Servicer and the Indenture Trustee.
SCHEDULE A
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF COMPANY
WITH RESPECT TO RECEIVABLES
The Company hereby makes the following representations and warranties
as to the Receivables. Unless otherwise specified, such representations and
warranties are made as of the Closing Date with respect to Initial Receivables
and as of the Subsequent Transfer Date, with respect to Subsequent Receivables,
as applicable. Such representations and warranties shall survive the sale,
transfer, and assignment of the Receivables by the Purchaser.
(a) LIEN IN FORCE. The Company has not taken any action which would
have the effect of releasing the related Financed Vehicle from the Lien granted
by such Receivable in whole or in part.
(b) NO LIENS. The Company has not received notice of any Liens or
claims, including Liens for work, labor, materials or unpaid state or federal
taxes, relating to the Financed Vehicle securing the Receivable, that are or may
be prior to or equal to the Lien granted by the Receivable.
(c) GOOD TITLE. It is the intention of the Company that the transfer
and assignment herein contemplated constitutes a sale of the Receivables from
the Company to the Purchaser and that the beneficial interest in and title to
the Receivables not be part of the Company's estate in the event of the filing
of a bankruptcy petition by or against the Company under any bankruptcy law. No
receivable has been sold, transferred, assigned, or pledged by the Company to
any Person other than the Purchaser. Immediately prior to the transfer and
assignment herein contemplated, the Company had good and marketable title to the
Receivable free and clear of any Lien and had full right and power to transfer
and assign the Receivable to the Purchaser and immediately upon the transfer and
assignment of the Receivable to the Purchaser, shall have good and marketable
title to the Receivable, free and clear of any Lien; and the Purchaser's
interest in the Receivable resulting from the transfer has been perfected under
the UCC.
(d) NO ASSIGNMENT. As of the Closing Date with respect to Initial
Receivables and as of the Subsequent Transfer Date with respect to Subsequent
Receivables, the Company shall not have taken any action to convey any right to
any Person that would result in such Person having a right to payments received
under the Insurance Policies or Dealer Agreements, or payments due under the
Receivable, that is senior to, or equal with, that of the Purchaser.
SCHEDULE B-1
<PAGE>
SCHEDULE C
[Form of Information Request]
____________, 199_
[ ]
Re: TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ] - [ ]
This information request is delivered to you pursuant to Sections
3.11(d) and 4.10(c) of the Sale and Servicing Agreement, dated as of [ ],
among Triad Financial Corporation individually and as servicer, [ ],
as company, Triad Auto Receivables Owner Trust 199[ ] - [ ], as purchaser,
and [ ], as indenture trustee and backup servicer (as amended,
supplemented or otherwise modified from time to time, the "Sale and Servicing
Agreement"). Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Sale and Servicing Agreement.
The undersigned hereby certifies that it is a Noteholder holding
$___________ aggregate principal amount of Class A Notes. Please provide
copies of the Accountant's Report and the audited annual financial statements
of the Servicer for the fiscal year ended _____] [additional information
delivered pursuant to Section 4.10(c) of the Sale and Servicing Agreement]
to the undersigned at the following address: _______________________.
Very truly yours,
By:
---------------------------------
Name:
Title:
SCHEDULE C
<PAGE>
SCHEDULE D
THREATENED LITIGATION
[ ]
SCHEDULE D
<PAGE>
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
EXHIBIT A-1
<PAGE>
EXHIBIT B
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: [ ]
Re: Sale and Servicing Agreement (the "SERVICING
AGREEMENT"), dated as of [ ], among [ ],
as Company ("Company") Triad Auto Receivables Owner
Trust 199[ ]-[ ], as purchaser (the "TRUST"), Triad
Financial Corporation, individually and in its
capacity as Servicer (the "SERVICER"), and [ ],
as Indenture Trustee and Backup Servicer (the
"Indenture Trustee" and the "Backup Servicer"
respectively)
In connection with the administration of the Receivables held by you
as the Indenture Trustee, we request the release, and acknowledge receipt, of
the Receivable and related Receivable File described below, for the reason
indicated.
OBLIGOR'S NAME, CUSTOMER ACCOUNT NUMBER AND VEHICLE IDENTIFICATION NUMBER
REASON FOR REQUESTING DOCUMENTS (check one)
_____ 1. Receivable Paid in Full. All amounts received in connection
with such payments have been deposited as required pursuant to
SECTION 3.2 of the Servicing Agreement
_____ 2. Receivable Purchased or replaced from Trust pursuant to
SECTION 2.6 or 3.7 of the Servicing Agreement
_____ 3. Receivable is being serviced or subject to enforcement of
rights and remedies pursuant to SECTION 2.3(b) of the
Servicing Agreement
_____ 4. Other (explain) ______________________________________
If item 1 or 2 above is checked, and if all or part of the Receivable or
Receivable File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified Receivable.
EXHIBIT B-1
<PAGE>
If item 3 or 4 above is checked, upon our return of all of the above documents
to you as the Indenture Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
TRIAD FINANCIAL CORPORATION
as Servicer
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Date:
--------------------------------------
DOCUMENTS RETURNED TO INDENTURE TRUSTEE
[ ]
(Indenture Trustee)
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Date:
--------------------------------------
EXHIBIT B-2
<PAGE>
Exhibit 4.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM OF AMENDED AND RESTATED TRUST AGREEMENT
among
[__________________________________]
TRIAD FINANCIAL CORPORATION
[__________________________________]
OWNER TRUSTEE
and
[__________________________________]
Dated as of [___________]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I. DEFINITIONS...........................................................................................1
Section 1.1. Capitalized Terms..........................................................................1
Section 1.2. Usage of Terms.............................................................................3
Section 1.3. Material Adverse Effect....................................................................3
ARTICLE II. ORGANIZATION.........................................................................................4
Section 2.1. Name.......................................................................................4
Section 2.2. Office.....................................................................................4
Section 2.3. Purposes and Powers........................................................................4
Section 2.4. Appointment of Owner Trustee...............................................................5
Section 2.5. Initial Capital Contribution of Trust Property.............................................5
Section 2.6. Declaration of Trust.......................................................................5
Section 2.7. No Liability of Certificateholder..........................................................5
Section 2.8. Title to Trust Property....................................................................6
Section 2.9. Situs of Trust.............................................................................6
Section 2.10. Representations and Warranties of [_____].................................................6
Section 2.11. Representations and Warranties of [_______]...............................................7
Section 2.12. Federal Income Tax Allocations............................................................9
Section 2.13. Covenants of [_____].....................................................................10
ARTICLE III. CERTIFICATES AND TRANSFER OF INTERESTS.............................................................11
Section 3.1. Initial Ownership.........................................................................11
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 3.2. The Certificates..........................................................................11
Section 3.3. Authentication of Certificates............................................................11
Section 3.4. Registration of Transfer and Exchange of Certificates.....................................12
Section 3.5. Legending of Certificates.................................................................13
Section 3.6. Mutilated, Destroyed, Lost or Stolen Certificates.........................................13
Section 3.7. Persons Deemed Certificateholder(s).......................................................14
Section 3.8. Access to List of Certificateholder(s)' Names and Addresses...............................14
Section 3.9. Maintenance of Office or Agency...........................................................14
Section 3.10. Disposition Only With Consent of Insurer..................................................14
Section 3.11. ERISA Restrictions........................................................................15
ARTICLE IV. VOTING RIGHTS AND OTHER ACTIONS.....................................................................15
Section 4.1. Prior Notice to Holders with Respect to Certain Matters...................................15
Section 4.2. Action by Certificateholder(s) with Respect to Certain Matters............................15
Section 4.3. Action by Certificateholder(s) with Respect to Bankruptcy.................................16
Section 4.4. Restrictions on Certificateholder(s)' Power...............................................16
Section 4.5. Majority Control..........................................................................16
Section 4.6. Rights of Insurer.........................................................................17
ARTICLE V. CERTAIN DUTIES.......................................................................................17
Section 5.1. Accounting and Records to the Noteholders, Certificateholder(s),
the Internal Revenue Service and Others...................................................17
Section 5.2. Signature on Returns; Tax Matters Partner.................................................17
Section 5.3. Payments to Certificateholders............................................................18
ARTICLE VI. AUTHORITY AND DUTIES OF OWNER TRUSTEE...............................................................18
Section 6.1. General Authority.........................................................................18
Section 6.2. General Duties............................................................................18
Section 6.3. Action upon Instruction...................................................................18
Section 6.4. No Duties Except as Specified in this Agreement or in Instructions........................19
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 6.5. No Action Except under Specified Documents or Instructions................................19
Section 6.6. Restrictions..............................................................................20
ARTICLE VII. CONCERNING THE OWNER TRUSTEE.......................................................................20
Section 7.1. Acceptance of Trusts and Duties...........................................................20
Section 7.2 Furnishing of Documents....................................................................21
Section 7.3. Representations and Warranties............................................................21
Section 7.4. Reliance; Advice of Counsel...............................................................22
Section 7.5 Not Acting in Individual Capacity.........................................................22
Section 7.6. Owner Trustee Not Liable for Certificates or Receivables..................................23
Section 7.7. Payments from Trust Property..............................................................23
Section 7.8. Doing Business in Other Jurisdictions.....................................................23
ARTICLE VIII. COMPENSATION AND INDEMNIFICATION OF OWNER TRUSTEE.................................................24
Section 8.1. Owner Trustee's Fees and Expenses.........................................................24
Section 8.2. Indemnification...........................................................................24
Section 8.3. Payments to the Owner Trustee.............................................................24
Section 8.4. Non-recourse Obligations..................................................................24
ARTICLE IX. TERMINATION OF TRUST AGREEMENT......................................................................24
Section 9.1. Termination of Trust Agreement............................................................24
ARTICLE X. SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES...............................................26
Section 10.1 Eligibility Requirements for Owner Trustee................................................26
Section 10.2 Resignation or Removal of Owner Trustee...................................................26
Section 10.3 Successor Owner Trustee...................................................................27
Section 10.4 Merger or Consolidation of Owner Trustee..................................................27
Section 10.5. Appointment of Co-Trustee or Separate Trustee.............................................27
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI. MISCELLANEOUS.......................................................................................29
Section 11.1 Supplements and Amendments................................................................29
Section 11.2. No Legal Title to Trust Property in Certificateholder(s).................................30
Section 11.3. Limitations on Rights of Others..........................................................30
Section 11.4. Notices..................................................................................30
Section 11.5. Severability.............................................................................31
Section 11.6. Separate Counterparts....................................................................31
Section 11.7. Assignments..............................................................................31
Section 11.8. No Petition..............................................................................31
Section 11.9. Bankruptcy Matters.......................................................................31
Section 11.10. No Recourse..............................................................................32
Section 11.11. Headings.................................................................................32
Section 11.12. Governing Law............................................................................32
Section 11.13. Servicer.................................................................................32
Exhibit A Form of Certificate..........................................................................A-1
Exhibit B Form of Certificate of Trust.................................................................B-1
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of [__________], among
TRIAD FINANCIAL CORPORATION, a California corporation ("Triad"),
[_____________________________], a Delaware corporation, as Holder of the
Certificate ("[_______]"), [__________________________________], a [________]
corporation, as depositor, ("[_____]"), and [___________________________], a
[________] banking corporation, as Owner Trustee. This Trust Agreement amends
and restates in its entirety the trust agreement (the "Original Trust
Agreement") entered into among Triad, [_______], [_____] and
[______________________], dated as of [____________].
RECITALS
WHEREAS, pursuant to the Original Trust Agreement, a business trust
was created under Chapter 38 of Title 12 of the Delaware Code, 12 Del.C ss.
3801, et seq. (the "Business Trust Statute") named Triad Auto Receivables Owner
Trust 199[ ]-[ ] (the "Trust");
WHEREAS, Triad, [_______], [_____] and [______________________] desire
to amend and restate the Original Agreement as provided in this Amended and
Restated Trust Agreement and to continue the Trust as a business trust under the
Business Trust Statute and that this Trust Agreement constitute the governing
instrument of such business trust; and
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.1. CAPITALIZED TERMS. Capitalized terms used but not defined
herein shall have the meanings set forth in the Sale and Servicing Agreement (as
defined below). For all purposes of this Agreement, the following terms shall
have the meanings set forth below:
"[_____]" shall mean [_____________________], a
[____________] corporation, as depositor.
"AGREEMENT" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time in accordance with the terms hereof.
"BENEFIT PLAN" shall have the meaning assigned to such term in Section
3.10.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et. seq., as the same may be amended from
time to time.
"CERTIFICATE" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Issuer, substantially in the form of
Exhibit A.
<PAGE>
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust in the form
of Exhibit B to be filed for the Issuer pursuant to Section 3810(a) of the
Business Trust Statute.
"CERTIFICATE PERCENTAGE INTEREST" shall mean with respect to any
Certificate, the percentage interest of ownership in the Issuer represented
thereby as set forth on the face thereof.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean the
register mentioned in and the registrar appointed pursuant to Section 3.4.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
[_________________________], or at such other address as the Owner Trustee may
designate by notice to the Certificateholder(s), the Insurer and Triad, or the
principal corporate trust office of any successor Owner Trustee (the address of
which the successor owner trustee will notify the Certificateholder(s), the
Insurer and Triad).
"EQUITY INTERESTS" shall have the meaning assigned to such term in
Section 2.11.
"ERISA" shall have the meaning assigned to such term in Section 3.10.
"EXPENSES" shall have the meaning assigned to such term in Section
8.1. "GOVERNMENTAL AUTHORITY" shall mean any court or federal or state
regulatory body, administrative agency or other tribunal or other governmental
instrumentality.
"HOLDER" or "CERTIFICATEHOLDER" shall mean the Person in whose name a
Certificate is registered on the Certificate Register.
"INITIAL CERTIFICATE BALANCE" shall have the meaning assigned to such
term in Section 2.5.
"INSTRUCTING PARTY" shall mean the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Holders of
Certificates evidencing not less than a majority of the Certificate Percentage
Interest (if an Insurer Default shall have occurred and be continuing).
"INSURER" shall mean [______________________________], or its
successor in interest.
"ISSUER" shall mean the Trust established by this Agreement.
"ORIGINAL TRUST AGREEMENT" shall mean the Trust Agreement among Triad,
[_____], [_______] and the Owner Trustee, dated as of [______________].
2
<PAGE>
"OWNER TRUSTEE" shall mean [______________________], a [__________]
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor Owner Trustee hereunder.
"RELATED DOCUMENTS" shall mean this Agreement, the Indenture, the Sale
and Servicing Agreement, the Certificate of Trust, the Notes, the Receivables
Purchase Agreement, the Insurance Agreement, the Reserve Account Agreement, the
Indemnification Agreement, the Premium Letter, the Underwriting Agreement, and
the other agreements executed in connection with the Closing. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"SALE AND SERVICING AGREEMENT" shall mean the Sale and Servicing
Agreement, dated as of [_____________], among the Issuer, [_____], Triad, in its
individual capacity and as Servicer, and [__________________], as Indenture
Trustee and Backup Servicer, as the same may be amended or supplemented from
time to time.
"SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.
"[_______]" shall mean [_____________________], a Delaware
corporation, as Certificateholder.
"TREASURY REGULATIONS" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST" shall mean Triad Auto Receivables Owner Trust 199[ ]-[ ], a
Delaware business trust.
Section 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular, words importing one gender include the other gender, references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form, references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement, references to Persons include their permitted successors and assigns,
and the terms "include" or "including" mean "include without limitation" or
"including without limitation."
Section 1.3. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Noteholders or Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Note Policy.
3
<PAGE>
ARTICLE II.
ORGANIZATION
Section 2.1. NAME. There is hereby formed a trust to be known as
"Triad Auto Receivables Owner Trust 199[ ]-[ ]", in which name the Owner Trustee
may conduct the business of the Issuer, make and execute contracts and other
instruments on behalf of the Issuer and sue and be sued on behalf of the Issuer.
Section 2.2. OFFICE. The office of the Issuer shall be (a) in care of
the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the
Certificateholder(s), the Insurer and Triad or (b) at the principal corporate
trust office of any successor Owner Trustee (the address of which the successor
Owner Trustee will notify the Certificateholder(s), the Insurer and Triad).
Section 2.3. PURPOSES AND POWERS. (a) The purpose of the Issuer is,
and the Issuer shall have the power and authority, to engage in the following
activities:
(i) to acquire from time to time the Trust Property;
(ii) to issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Agreement, and to sell, transfer and exchange the Notes
and the Certificates and to pay interest on and principal of the Notes and
distributions on the Certificates;
(iii) with the proceeds of the sale of the Notes, to fund the
Pre-Funding Account and the Capitalized Interest Account, to pay the
organizational, start-up and transactional expenses of the Issuer and to
pay the balance to [_____] pursuant to the Sale and Servicing Agreement;
(iv) to assign, grant, transfer, pledge, mortgage and convey the Trust
Property to the Indenture Trustee pursuant to the Indenture for the benefit
of the Insurer and the Noteholders and to hold, manage and distribute to
the Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Property released from the Lien of, and
remitted to the Issuer pursuant to, the Indenture and the Sale and
Servicing Agreement;
(v) to enter into and perform its obligations under the Related
Documents to which it is a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Related Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Property and the making of distributions to the
Certificateholder(s) and the Noteholders.
4
<PAGE>
(b) The Issuer is hereby authorized to engage in the foregoing
activities. The Issuer shall not engage in any activity other than in connection
with the foregoing or other than as required or authorized by the terms of this
Agreement or the Related Documents.
Section 2.4. APPOINTMENT OF OWNER TRUSTEE. [_____] hereby appoints the
Owner Trustee as trustee of the Issuer effective as of the date hereof, to have
all the rights, powers and duties set forth herein, and the Owner Trustee by
execution hereof accepts such appointment.
Section 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST PROPERTY. [_____]
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $10 (the "Initial Certificate Balance"). The
Owner Trustee hereby acknowledges receipt in trust from [_____], as of the date
hereof, of the foregoing contribution, which shall constitute the initial Trust
Property and shall be deposited into the Collection Account.
Section 2.6. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the use and benefit of the Holders, subject to the
obligations of the Issuer under the Related Documents. The Issuer shall
constitute a business trust under the Business Trust Statute, and this Agreement
shall constitute the governing instrument of such business trust. It is the
intention of the parties hereto that, solely for income and franchise tax
purposes, until the Certificates are held by more than one person or the Trust
is recharacterized as a separate entity, the Trust will be disregarded as an
entity separate from its beneficial owner and the Notes will be treated as debt
of the Certificateholder. If the Certificates are held by more than one person
or the Trust is recharacterized as a separate entity, it is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Issuer
shall be treated as a partnership with the assets of the partnership being the
Trust Property, the partners of the partnership being the Certificateholders and
the Notes being debt of the partnership. The parties agree that, unless
otherwise required by appropriate tax authorities, until the Certificates are
held by more than one person or the Trust is recharacterized as a separate
entity, the Trust will not file or cause to be filed annual or other necessary
returns, reports and other forms characterizing the Issuer as a partnership for
income and franchise tax purposes. Consistent with the foregoing, neither the
Trust, the Owner Trustee nor any officers, manager, agent , Certificateholder,
holder of other Equity Interests or members of the Trust shall have the power to
elect for purposes of federal, state or local laws to treat the Trust as an
association taxable as a corporation (including the election under Treasury
Regulations section 301.7701-3(c)). Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and, to the
extent not inconsistent herewith, in the Business Trust Statute with respect to
accomplishing the purposes of the Issuer. The Owner Trustee shall file the
Certificate of Trust with the Secretary of State.
Section 2.7. NO LIABILITY OF CERTIFICATEHOLDER. To the fullest extent
permitted by law, no Certificateholder shall have any personal liability for any
liability or obligation of the Issuer.
5
<PAGE>
Section 2.8. TITLE TO TRUST PROPERTY.
(a) Legal title to all the Trust Property shall be vested at all times
in the Issuer as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Trust Property to be vested in a
trustee or trustees, in which case title shall be deemed to be vested in the
Owner Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the Trust
Property. The Holders shall be entitled to receive distributions with respect to
their undivided ownership interest therein only in accordance with Articles V
and IX. No transfer, by operation of law or otherwise, of any right, title or
interest by any Certificateholder of its beneficial or other ownership interest
in the Trust Property shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Trust Property.
Section 2.9. SITUS OF TRUST. The Issuer shall be located and
administered in the State of Delaware. The Issuer's assets shall be segregated.
All bank accounts maintained by the Owner Trustee on behalf of the Issuer shall
be located in the State of Delaware. Payments shall be received by the Issuer
only in Delaware and payments will be made by the Issuer only from Delaware. The
Issuer shall not have any employees in any state other than Delaware; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee, the
Servicer or any agent of the Issuer from having employees within or without the
State of Delaware. The only office of the Issuer shall be at the Corporate Trust
Office in Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF [_____]. [_____] makes
the following representations and warranties upon which the Owner Trustee relies
in accepting the Trust Property in trust and issuing the Certificates and upon
which the Insurer relies in issuing the Note Policy:
(a) ORGANIZATION AND GOOD STANDING. It is duly organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power, authority and legal right to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times and now
has power, authority and legal right to acquire and own the Receivables and to
enter into and perform its obligations under this Agreement and its Related
Documents.
(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property or
the conduct of its business and the performance of its obligations under this
Agreement and the Related Documents requires or shall require such
qualifications, licenses or approvals, except where the failure to have such
qualifications, licenses or approvals will not have a material adverse effect on
the interest of the Trust or the Insurer in the Receivables or on it's ability
to perform its obligations under this Agreement and the Related Documents, or
its ability to enforce the Receivables and the other property in the Trust
Property.
6
<PAGE>
(c) POWER AND AUTHORITY. It has the power and authority to execute and
deliver this Agreement and its Related Documents and to carry out its and their
terms. It has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer and it has duly authorized
such sale and assignment and deposit to the Issuer by all necessary corporate
action and the execution, delivery and performance of this Agreement and its
Related Documents have been duly authorized by all necessary corporate action.
(d) NO CONSENT REQUIRED. No consent, license, approval, authorization
or order of, or registration, declaration or filing with, any Governmental
Authority or other Person is required to be made in connection with the
execution, delivery or performance of this Agreement or its Related Documents or
the consummation of the transactions contemplated hereby or thereby, except such
as have been duly made, effected or obtained.
(e) NO VIOLATION. The execution, delivery and performance by it of
this Agreement and its Related Documents, the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof, do not (i) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, its certificate of incorporation or bylaws, or any indenture, agreement,
mortgage, deed of trust, license or other instrument to which it is a party or
by which it or its properties are bound, (ii) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, or (iii)
violate any law, order, rule or regulation applicable to it of any Governmental
Authority having jurisdiction over it or any of its properties.
(f) BINDING OBLIGATIONS. Its Related Documents, when duly executed and
delivered by the other parties thereto, shall constitute legal, valid and
binding obligations of it enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(g) NO PROCEEDINGS. There are no proceedings or investigations pending
or, to the best of its knowledge, threatened against it before any Governmental
Authority having jurisdiction over it or its properties (i) asserting the
invalidity of any of the Related Documents, (ii) seeking to prevent the issuance
of the Certificates or the Notes or the consummation of any of the transactions
contemplated by the Related Documents, (iii) seeking any determination or ruling
that could reasonably be expected to have a material adverse effect on the
performance by it of its obligations under, or the validity or enforceability
of, any of the Related Documents or (iv) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of the Certificates
or the Notes or seeking to impose any excise, franchise, transfer or similar tax
upon the Certificates or the Notes or the sale and assignment of the Receivables
under the Related Documents.
Section 2.11. REPRESENTATIONS AND WARRANTIES OF [_______].
(a) ORGANIZATION AND GOOD STANDING. It is duly organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with
7
<PAGE>
power, authority and legal right to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted, and had at all relevant times and now has power, authority and legal
right to acquire and own the Certificates and to enter into and perform its
obligations under this Agreement and its Related Documents.
(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property or
the conduct of its business and the performance of its obligations under this
Agreement and the Related Documents requires or shall require such
qualifications, licenses or approvals, except where the failure to have such
qualifications, licenses or approvals will not have a material adverse effect on
the interest of the Trust or the Insurer in the Receivables or on the it's
ability to perform its obligations under this Agreement and the Related
Documents.
(c) POWER AND AUTHORITY. It has the power and authority to execute and
deliver this Agreement and its Related Documents and to carry out its and their
terms. It has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer and it has duly authorized
such sale and assignment and deposit to the Issuer by all necessary corporate
action and the execution, delivery and performance of this Agreement and its
Related Documents have been duly authorized by all necessary corporate action.
(d) NO CONSENT REQUIRED. No consent, license, approval, authorization
or order of, or registration, declaration or filing with, any Governmental
Authority or other Person is required to be made in connection with the
execution, delivery or performance of this Agreement or its Related Documents or
the consummation of the transactions contemplated hereby or thereby, except such
as have been duly made, effected or obtained.
(e) NO VIOLATION. The execution, delivery and performance by it of
this Agreement and its Related Documents, the consummation of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof, do not (i) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, its certificate of incorporation or bylaws, or any indenture, agreement,
mortgage, deed of trust, license or other instrument to which it is a party or
by which it or its properties are bound, (ii) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, or (iii)
violate any law, order, rule or regulation applicable to it of any Governmental
Authority having jurisdiction over it or any of its properties.
(f) BINDING OBLIGATIONS. Its Related Documents, when duly executed and
delivered by the other parties thereto, shall constitute legal, valid and
binding obligations of it enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(g) NO PROCEEDINGS. There are no proceedings or investigations pending
or, to the best of its knowledge, threatened against it before any Governmental
Authority having
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jurisdiction over it or its properties (i) asserting the invalidity of any of
the Related Documents, (ii) seeking to prevent the issuance of the Certificates
or the Notes or the consummation of any of the transactions contemplated by the
Related Documents, (iii) seeking any determination or ruling that could
reasonably be expected to have a material adverse effect on the performance by
it of its obligations under, or the validity or enforceability of, any of the
Related Documents or (iv) seeking to adversely affect the federal income tax or
other federal, state or local tax attributes of the Certificates or the Notes or
seeking to impose any excise, franchise, transfer or similar tax upon the
Certificates or the Notes or the sale and assignment of the Receivables under
the Related Documents.
Section 2.12. FEDERAL INCOME TAX ALLOCATIONS. If Certificates are held
by more than one person or the Trust is recharacterized as a separate entity,
interest payments on the Certificates (or other interests in the Trust treated
as equity in the Trust for applicable tax purposes ("Equity Interests"),
including interest on amounts previously due on the Certificates or Equity
Interests but not yet distributed) shall be treated as "guaranteed payments"
under Section 707(c) of the Code. Net income of the Issuer for any month as
determined for Federal income tax purposes (and each item of income, gain, loss
and deduction entering into the computation thereof) shall be allocated:
(a) among the Certificateholders and Equity Interest holders as of the
close of business on the last day of such month, in proportion to their
ownership of principal amount of Certificates and Equity Interests on such date,
an amount of net income up to the sum of: (i) the portion of the market discount
on the Receivables accrued during such month that is allocable to the excess, if
any, of the initial Certificate Balance over their initial aggregate issue
price, (ii) Certificateholders' and Equity Interest holders' prepayment premium,
if any, payable for such month, (iii) any other amounts of income payable to the
Certificateholders or Equity Interest holders for such month; and such sum of
amounts specified in clauses (i) through (iii) of this sentence shall be reduced
by any amortization by the Trust of premium on Receivables that corresponds to
any excess of the issue price of Certificates or Equity Interests over their
principal amount, and
(b) to the Certificateholders and Equity Interest holders as of the
close of business on the last day of such month, in proportion to their
ownership of principal amount of Certificates and Equity Interests on such date,
and other holders of interests in the Reserve Account, to the extent of any
remaining net income, in accordance with their respective interests therein.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a), subsequent net income shall first be allocated to make
up such shortfall before being allocated as provided in the preceding sentence.
Net losses of the Trust, if any, for any month as determined for Federal income
tax purposes (and each item of income, gain, loss and deduction entering into
the computation thereof) shall be allocated to [_______] (or other holders of
interests in the Reserve Account) to the extent [_______] (or such holders) are
reasonably expected to bear the economic burden of such net losses, and any
remaining net losses shall be allocated among the remaining Certificateholders
and Equity Interest holders as of the close of business on the last day of such
month in proportion to their ownership of principal amount of Certificates and
Equity Interests on such day. [_______] is authorized to modify the allocations
in this paragraph if
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necessary or appropriate, in its sole discretion, for the allocations to fairly
reflect the economic income, gain or loss to [_______] or to the
Certificateholders or Equity Interest holders, or as otherwise required by the
Code. Notwithstanding anything provided in this Section 2.11, if the
Certificates are held solely by one person or the Trust has not been
recharacterized as a separate entity, the application of this Section 2.11 shall
be disregarded.
Section 2.13. COVENANTS OF [_____]. [_____] agrees and covenants for
the benefit of each Holder, the Insurer and the Owner Trustee, during the term
of this Agreement, and to the fullest extent permitted by applicable law, that:
(a) it shall not, for any reason, institute proceedings for the Issuer
to be adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Issuer, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Issuer, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Issuer or a substantial part of the property of the
Issuer or cause or permit the Issuer to make any assignment for the benefit of
creditors, or admit in writing the inability of the Issuer to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Issuer or take any action in furtherance of any such action; and
(b) it shall not, for any reason, prior to the end of the Funding
Period withdraw or attempt to withdraw from this Agreement, dissolve, institute
proceedings for it to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of it or a substantial part of its property, or make any assignment
for the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.
(c) COVENANTS OF THE HOLDERS. This undertaking is made for the benefit
of the Issuer, the Owner Trustee, the Insurer and all other Holders present and
future. Each Holder agrees:
(d) to be bound by the terms and conditions of the Certificates of
which such Holder is the owner and of this Agreement, including any supplements
or amendments hereto, and to perform the obligations of a Holder as set forth
therein or herein, in all respects as if it were a signatory hereto;
(e) to hereby appoint [_______] as such Holder's agent and
attorney-in-fact to sign any federal income tax information return filed on
behalf of the Issuer and agree that, if requested by the Issuer, it will sign
such federal income tax information return in its capacity as holder of an
interest in the Issuer. Each Holder also hereby agrees that in its tax returns
it will not take any position inconsistent with those taken in any tax returns
filed by the Issuer;
(f) if such Holder is other than an individual or other entity holding
its Certificate through a broker who reports securities sales on Form 1099-B, to
notify the Owner
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Trustee of any transfer by it of a Certificate in a taxable sale or exchange,
within thirty (30) days of the date of the transfer;
(g) until the completion of the events specified in Section 9.1(e),
not to, for any reason, institute proceedings for the Issuer or [_______] to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Issuer or [_______] or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Issuer or [_______] or a substantial part of its property, or
cause or permit the Issuer or [_______] to make any assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or declare or effect a moratorium on its debt or take any
action in furtherance of any such action; and
(h) it shall obtain from each counterparty to each Related Document to
which it or the Issuer is a party and each other agreement entered into on or
after the date hereof to which it or the Issuer is a party, an agreement by each
such counterparty that prior to the occurrence of the event specified in Section
9.1(e) such counterparty shall not institute against , or join any other Person
in instituting against, it or the Issuer, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceedings under
the laws of the United States.
ARTICLE III.
CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.1. INITIAL OWNERSHIP. Upon the formation of the Issuer by
the contribution by [_____] pursuant to Section 2.5 and prior to the issuance of
the Certificates pursuant to Section 3.2, [_____] shall be the sole initial
beneficiary of the Issuer.
Section 3.2. THE CERTIFICATES. In consideration of payment of the sum
of $[_________] to the Trust and upon the written order of [_____], the
Certificates shall be initially issued to [_______] in a Certificate Percentage
Interest of 100%. The Certificates shall be executed on behalf of the Issuer by
manual or facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Issuer shall be validly issued and entitled to the benefit of this
Agreement, 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 authentication and
delivery of such Certificates. A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon due registration of such
Certificate in such transferee's name pursuant to Section 3.4.
Section 3.3. AUTHENTICATION OF CERTIFICATES. Concurrently with the
initial sale of the Receivables to the Issuer pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Certificates in an aggregate
Certificate Percentage Interest equal to 100% to be executed on behalf of the
Issuer, authenticated and delivered to or upon the written order of
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[_____], signed by its chairman of the board, its president or any vice
president, its treasurer or any assistant treasurer without further corporate
action by [_____], in authorized denominations. 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 in the form set forth in Exhibit A, executed by the Owner 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 3.4. 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 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. [______________________] shall be
the initial Certificate Registrar.
The Certificate Registrar shall provide the Indenture Trustee with a
list of the names and addresses of the Certificateholder(s) on the Closing Date.
Upon any transfers of Certificates, the Certificate Registrar shall notify the
Servicer, the Insurer and the Indenture Trustee of the name and address of the
transferee in writing, by facsimile, on the day of such transfer.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
class and aggregate Certificate Percentage Interest dated the date of
authentication by the Owner Trustee or any authenticating agent. At the option
of a Holder, Certificates may be exchanged for other Certificates of the same
class in authorized denominations of a like aggregate amount upon surrender of
the Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
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 Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Certificate Registrar, which requirements include
membership or participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Certificate Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act. Each Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
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Notwithstanding the preceding provisions of this Section 3.4, the
Owner Trustee shall not be required to make, and the Certificate Registrar shall
not be required to register, transfers or exchanges of Certificates for a period
of fifteen (15) days preceding the due date for any payment with respect to the
Certificates.
In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that it has no right to or interest in any monies at any time held pursuant to
the Reserve Account Agreement or prior to the release of such monies pursuant to
Section 4.6(b) of the Sale and Servicing Agreement, such monies being held in
trust for the benefit of the Noteholders and the Insurer. Notwithstanding the
foregoing, in the event that it is ever determined that the monies held in the
Reserve Account constitute a pledge of collateral, then the provisions of the
Sale and Servicing Agreement and the Reserve Account Agreement shall be
considered to constitute a security agreement and [_______] and the
Certificateholders hereby grant to the Collateral Agent for the benefit of the
Noteholders and the Insurer a first priority perfected security interest in such
amounts, to be applied as set forth in Section 3.03 of the Reserve Account
Agreement. In addition, each Certificateholder, by acceptance of its
Certificate, hereby appoints [_______] as its agent to pledge a first priority
perfected security interest in the Reserve Account, and any amounts held therein
from time to time to the Collateral Agent for the benefit of the Indenture
Trustee and the Insurer pursuant to the Reserve Account Agreement and agrees to
execute and deliver such instruments of conveyance, assignment, grant and
confirmation, as well as any financing statements, in each case the Insurer
shall consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the Collateral (as such terms are defined in the Reserve
Account Agreement).
Section 3.5. LEGENDING OF CERTIFICATES. Each Certificate shall bear a
legend in substantially the following form:
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. ANY
RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION.
Section 3.6. 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, the Owner Trustee and (unless an Insurer Default
shall have occurred and be continuing) the Insurer, such security or indemnity
as may be reasonably 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, the Owner Trustee on behalf of the Issuer shall execute and the Owner
Trustee, or the Owner Trustee's authenticating agent, shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like class, tenor and Certificate
Percentage Interest. In connection with the issuance of any new Certificate
under this Section 3.5, the Owner Trustee or 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
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therewith. Any replacement Certificate issued pursuant to this Section 3.6 shall
constitute conclusive evidence of an ownership interest in the Issuer, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 3.7. PERSONS DEEMED CERTIFICATEHOLDER(S). Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement shall
be deemed to be bound by the terms of this Agreement. Prior to due presentation
of a Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar, and the Insurer and any agent of the Owner Trustee, the
Certificate Registrar and the Insurer, may treat the Person in whose name any
Certificate shall be registered in the Certificate Register as the owner of such
Certificate for the purpose of receiving distributions pursuant to the Sale and
Servicing Agreement and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar, the Insurer or any agent of the Owner
Trustee, the Certificate Registrar or the Insurer shall be bound by any notice
to the contrary.
Section 3.8. ACCESS TO LIST OF CERTIFICATEHOLDER(S)' NAMES AND
ADDRESSES. The Owner Trustee shall furnish or cause to be furnished to the
Servicer, [_____], [_______] or (unless an Insurer Default shall have occurred
and be continuing), the Insurer, within fifteen (15) days after receipt by the
Owner Trustee of a request therefor from such Person in writing, a list of the
names and addresses of the Certificateholder(s) as of the most recent Record
Date. If three or more Holders of Certificates or one or more Holders of
Certificates evidencing not less than a Certificate Percentage Interest equal to
25% apply in writing to the Owner Trustee, and such application states that the
applicants desire to communicate with other Certificateholder(s) with respect to
their rights under this Agreement or under the Certificates and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five (5) Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholder(s). Each Holder or
Owner, by receiving and holding a Certificate, shall be deemed to have agreed
not to hold any of Triad, [_______], the Servicer, the Owner Trustee, the
Insurer or any agent thereof accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
Section 3.9. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee
shall maintain in [__________], 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 Owner Trustee in
respect of the Certificates and the Related Documents may be served. The
Owner Trustee initially designates its Corporate Trust Office for such
purposes. The Owner Trustee shall give prompt written notice to Triad, the
Certificateholder(s) and (unless an Insurer Default shall have occurred and
be continuing) the Insurer of any change in the location of the Certificate
Register or any such office or agency.
Section 3.10. DISPOSITION ONLY WITH CONSENT OF INSURER. The
Certificate is only transferable (i) to an Affiliate of Triad Financial
Corporation whose stock has been pledged to the Insurer or (ii) to another
entity with the prior written consent of the Insurer in its sole discretion and,
in each case in accordance with the restrictions set forth in Section 2.6(m) of
the Insurance Agreement. The Owner Trustee shall cause any Certificate issued to
contain a legend
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stating "THI CERTIFICATE IS NOT TRANSFERABLE, EXCEPT UNDER THE LIMITED
CONDITIONS SPECIFIED IN THE TRUST AGREEMENT".
Section 3.11. ERISA RESTRICTIONS. No Certificateholder may transfer
its interest in or to any Certificate to or for the account of (i) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended "ERISA")) that is subject to the provisions of
Title 1 of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or
(iii) any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding its beneficial ownership interest in its Certificate, the Holder thereof
shall be deemed to have represented and warranted that it is not a Benefit Plan.
ARTICLE IV.
VOTING RIGHTS AND OTHER ACTIONS
Section 4.1. PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS.
With respect to the following matters, the Owner Trustee shall not take any of
the actions set forth below unless at least thirty (30) days before the taking
of such action, the Owner Trustee shall have notified the Certificateholder(s)
and the Insurer in writing of the proposed action and the Instructing Party
(pursuant to Section 4.5, if applicable) shall have notified the Owner Trustee
in writing that such Certificateholder(s) have consented thereto:
(a) the election by the Issuer to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute or unless such amendment would not materially and adversely affect the
interests of the Certificateholders);
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment would not materially and adversely affect the interests of the
Certificateholder(s); or
(d) the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially and adversely affect the
interests of the Certificateholder(s).
The Owner Trustee shall notify the Certificateholder(s) in writing of any
appointment of a successor Note Registrar, Indenture Trustee or Certificate
Registrar within five Business Days thereof.
Section 4.2. ACTION BY CERTIFICATEHOLDER(S) WITH RESPECT TO CERTAIN
MATTERS. The Owner Trustee shall not have the power, except upon the direction
of the Insurer or, in the event that an Insurer Default shall have occurred and
be continuing, the Certificateholder(s) in accordance with the Related
Documents, to (a) remove the Servicer under the Sale and Servicing Agreement or
(b) except as expressly provided in the Related Documents, sell the Receivables
after the termination of the Indenture. The Owner Trustee shall take the actions
referred to in the
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preceding sentence only upon written instructions signed by the Insurer or the
Certificateholder(s) pursuant to Section 4.5, as the case may be, and the
furnishing of indemnification satisfactory to the Owner Trustee by the
Certificateholder(s).
Section 4.3. ACTION BY CERTIFICATEHOLDER(S) WITH RESPECT TO
BANKRUPTCY. To the fullest extent permitted by applicable law, the Owner Trustee
shall not have the power to, and shall not, commence any proceeding or other
actions contemplated by Section 2.13(a) relating to the Issuer.
Section 4.4. RESTRICTIONS ON CERTIFICATEHOLDER(S)' POWER.
(a) No Certificateholder(s) shall direct the Owner Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Issuer or the Owner Trustee under this Agreement or any of
the Related Documents or would be contrary to Section 2.3 or otherwise contrary
to law nor shall the Owner Trustee be obligated to follow any such direction, if
given.
(b) 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
or any Related Document, unless: (i) the Certificateholder(s) are the
Instructing Party pursuant to Section 6.3 and shall previously have given to the
Owner Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement; (ii) Certificateholder(s) evidencing not less than a
Certificate Percentage Interest equal to 25% shall have made written request to
the Owner Trustee to institute such action, suit or proceeding in its own name
as Owner Trustee under this Agreement and shall have offered to the Owner
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby; (iii) the Owner Trustee, for
thirty (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 (iv) during such thirty (30) day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section 4.4(b) or Section 6.3; provided,
however, that each Certificateholder hereby agrees with every other
Certificateholder and the Owner Trustee that no one or more Holders 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 any other Holders, 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 Certificateholder(s). For the protection and enforcement of the
provisions of this Section 4.4, each and every Certificateholder and the Owner
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 4.5. MAJORITY CONTROL. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Issuer except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholder(s) under
this Agreement may be taken by the Holders of Certificates evidencing not less
than a majority of the Certificate Percentage Interest. Except as expressly
provided herein, any written notice of the Certificateholder(s) delivered
pursuant to this
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Agreement shall be effective if signed by Certificateholder(s) evidencing not
less than a majority of the Certificate Percentage Interest at the time of the
delivery of such notice.
Section 4.6. RIGHTS OF INSURER. Notwithstanding anything to the
contrary in the Related Documents, without the prior written consent of the
Insurer (so long as no Insurer Default shall have occurred and be continuing),
the Owner Trustee shall not (i) remove the Servicer, (ii) initiate any claim,
suit or proceeding by the Issuer or compromise any claim, suit or proceeding
brought by or against the Issuer, other than with respect to the enforcement of
any Receivable or any rights of the Issuer thereunder, (iii) authorize the
merger or consolidation of the Issuer with or into any other business trust or
other entity (other than in accordance with Section 3.10 of the Indenture), (iv)
amend the Certificate of Trust.
ARTICLE V.
CERTAIN DUTIES
Section 5.1. ACCOUNTING AND RECORDS TO THE NOTEHOLDERS,
CERTIFICATEHOLDER(S), THE INTERNAL REVENUE SERVICE AND OTHERS. Subject to
Section 2.6 of this Agreement, Triad shall: (a) maintain (or cause to be
maintained) the books of the Issuer on a calendar year basis on the accrual
method of accounting (including the allocations, net income and net loss under
Section 2.11); (b) prepare and deliver (or cause to be delivered) to each
Certificateholder, as may be required by the Code and applicable Treasury
Regulations, such information as may be required (including Schedule K-1) to
enable each Certificateholder to prepare its federal and state income tax
returns; (c) prepare and file or cause to be filed such tax returns relating to
the Issuer (including a partnership information return, Form 1065), and direct
the Owner Trustee or the Servicer, as the case may be, to make such elections as
may from time to time be required or appropriate under any applicable state or
federal statute or rule or regulation thereunder so as to maintain the Issuer's
characterization as a partnership for federal income tax purposes; and (d)
collect or cause to be collected any withholding tax as required under the Code
with respect to income or distributions to Certificateholder(s) and the
appropriate forms relating thereto. Subject to Section 2.6, the Owner Trustee
shall make all elections pursuant to this Section 5.1 as directed by Triad. The
Owner Trustee shall sign all tax information returns filed pursuant to this
Section 5.1 and any other returns as may be required by law, and in doing so
shall rely entirely upon, and shall have no liability for information provided
by, or calculations provided by, Triad or the Servicer, as the case may be. The
Owner Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Receivables. The
Owner Trustee shall not make the election provided under Section 754 of the
Code.
Section 5.2. SIGNATURE ON RETURNS; TAX MATTERS PARTNER.
(a) Notwithstanding the provisions of Section 5.1 and subject to
Section 2.6, the Owner Trustee shall sign on behalf of the Issuer the tax
returns of the Issuer, if any, unless applicable law requires a
Certificateholder to sign such documents, in which case such documents shall be
signed by [_______].
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(b) Subject to Section 2.6, [_______] shall be the "tax matters
partner" of the Issuer pursuant to the Code.
Section 5.3. PAYMENTS TO CERTIFICATEHOLDERS. On each Payment Date, the
Indenture Trustee will distribute to the Certificateholder(s) as of the related
Determination Date each such Certificateholder's Certificate Percentage Interest
in the amount to be distributed on such Payment Date pursuant to Section
4.6(b)(x) of the Sale and Servicing Agreement by wire transfer or check mailed
to such Certificateholder.
ARTICLE VI.
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver the Related Documents to which the Issuer is
named as a party and each certificate or other document attached as an exhibit
to or contemplated by the Related Documents to which the Issuer is named as a
party and any amendment thereto, in each case in such form as [_____] shall
approve as evidenced conclusively by the Owner Trustee's execution thereof, and
on behalf of the Issuer, to direct the Indenture Trustee to authenticate and
deliver the Notes in the aggregate principal amount of $[________]. In addition
to the foregoing, the Owner Trustee is authorized, but shall not be obligated,
to take all actions required of the Issuer pursuant to the Related Documents.
The Owner Trustee is further authorized from time to time to take such action as
the Instructing Party recommends with respect to the Related Documents so long
as such activities are consistent with the terms of the Related Documents.
Section 6.2. GENERAL DUTIES. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the term of this Agreement and to administer the Issuer in the interest of the
Holders, subject to the Related Documents to which the Issuer is a party and in
accordance with the provisions of this Agreement. Notwithstanding the foregoing,
the Owner Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the Related Documents to the extent the
Servicer has agreed in the Sale and Servicing Agreement or [_______] has agreed
in this Agreement to perform any act or to discharge any duty of the Owner
Trustee hereunder or under any Related Document, and the Owner Trustee shall not
be liable for the default or failure of the Servicer, [_______] to carry out any
of their obligations under the Sale and Servicing Agreement or this Agreement,
respectively, except with respect to obligations redelegated back to the Owner
Trustee.
Section 6.3. ACTION UPON INSTRUCTION. (a) Subject to Article IV, the
Instructing Party shall have the exclusive right to direct the actions of the
Owner Trustee in the management of the Issuer, so long as such instructions are
not inconsistent with the express terms set forth herein or in any Related
Document. The Instructing Party shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Related Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Related Document, other than its express duties, if the
Owner Trustee shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in
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liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Related Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Related Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Instructing Party received, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten (10) days of delivery of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, as it shall deem to
be in the best interests of the Certificateholder(s), and shall have no
liability to any Person for such action or inaction.
(d) If the Owner Trustee is unsure as to the application of any
provision of this Agreement or any Related Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or if this Agreement permits any determination by
the Owner Trustee or is silent or is incomplete as to the course of action that
the Owner Trustee is required to take with respect to a particular set of facts,
the Owner Trustee may give notice (in such form as shall be appropriate under
the circumstances) to the Instructing Party requesting instruction and, to the
extent that the Owner Trustee acts or refrains from acting in good faith in
accordance with any such instruction received (so long as the same is not
manifestly inconsistent with this Agreement or a Related Document), the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within ten (10) days of delivery of such notice (or within such shorter period
of time as reasonably may be specified in such notice or may be necessary under
the circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, as it shall deem to be in the best interests of the
Certificateholder(s), and shall have no liability to any Person for such action
or inaction.
Section 6.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Property, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any Related Document, document or written instruction
received by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Related Document against
the Owner Trustee. The Owner Trustee nevertheless agrees that it will, at its
own cost and expense, promptly take all action as may be necessary to discharge
any Liens on any part of the Trust Property that result from actions by, or
claims against, the Owner Trustee (solely in its individual capacity) and that
are not related to the ownership or the administration of the Trust Property.
Section 6.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part
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of the Trust Property or take any action on the part of the Issuer except (a) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (b) in accordance with the Related Documents
and (c) in accordance with any document or instruction conforming with and
delivered to the Owner Trustee pursuant to Section 6.3.
Section 6.6. RESTRICTIONS. The Owner Trustee shall not take any action
that, to the actual knowledge of a Responsible Officer the Owner Trustee, would
result in the Issuer's becoming taxable as a corporation for federal income tax
purposes or for the purposes of any applicable state tax on corporations. The
Certificateholder(s) shall not direct the Owner Trustee to take action that
would violate the provisions of this Section 6.6.
ARTICLE VII.
CONCERNING THE OWNER TRUSTEE
Section 7.1. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Trust Property upon the terms of the Related Documents and this
Agreement. The Owner Trustee (in its individual or trust capacities) shall not
be answerable or accountable hereunder or under any Related Document under any
circumstances, except (i) for its own willful misconduct, bad faith or
negligence (other than errors in judgment), (ii) in the case of the inaccuracy
of any representation or warranty contained in Section 7.3 expressly made by the
Owner Trustee in its individual capacity, (iii) for liabilities arising from the
failure of the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.4, (iv) for taxes, fees or other charges on,
based on or measured by, any fees, commissions or compensation received by the
Owner Trustee or (v) for any investments issued by the Owner Trustee or any
branch or affiliate thereof in its commercial capacity. In particular, but not
by way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee (in its individual or trust capacities) shall
not be liable for any error of judgment made by a Responsible Officer of the
Owner Trustee;
(b) the Owner Trustee (in its individual or trust capacities) shall
not be liable with respect to any action taken or omitted to be taken by it in
accordance with the instructions (not inconsistent with this Agreement or any
Related Document) of the Instructing Party, the Servicer or any
Certificateholder;
(c) no provision of this Agreement or any Related Document shall
require the Owner Trustee (in its individual or trust capacities) to expend or
risk funds or otherwise incur any financial liability in the performance of any
of its rights or powers hereunder or under any Related Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
or provided to it;
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(d) the Owner Trustee (in its individual or trust capacities) shall
not be responsible for or in respect of the validity or sufficiency of this
Agreement or for the due execution hereof by [_______], Triad or [_____] or for
the form, character, genuineness, sufficiency, value or validity of any of the
Trust Property or for or in respect of the validity or sufficiency of the
Related Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty or obligation to Triad or [_____], the Insurer, the Indenture
Trustee, any Noteholder or to any Certificateholder, other than as expressly
provided for herein and in the Related Documents;
(e) the Owner Trustee (in its individual or trust capacities) shall
not be liable for the default or misconduct of Triad, [_______], [_____], the
Insurer, the Indenture Trustee, or the Servicer under any of the Related
Documents or otherwise, and the Owner Trustee shall have no obligation or
liability to perform the obligations under this Agreement or the Related
Documents that are required to be performed by Triad, [_______], or [_____]
under this Agreement, the Indenture Trustee under the Indenture or the Servicer
under the Sale and Servicing Agreement; and
(f) the Owner Trustee (in its individual or trust capacities) shall be
under no obligation to exercise any of the rights or powers vested in it by this
Agreement, other than its express duties, or to institute, conduct or defend any
litigation under this Agreement or otherwise or in relation to this Agreement or
any Related Document, at the request, order or direction of the Instructing
Party or any of the Certificateholder(s), unless such Instructing Party or
Certificateholder(s) have offered to the Owner Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities that
may reasonably be incurred by the Owner Trustee therein or thereby. The right of
the Owner Trustee to perform any discretionary act enumerated in this Agreement
or in any Related Document shall not be construed as a duty, and the Owner
Trustee (in its individual or trust capacities) shall not be answerable for
other than its negligence (other than errors in judgment), bad faith or willful
misconduct in the performance of any such act.
Section 7.2. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish
to the Certificateholder(s), promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Related Documents.
Section 7.3. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants in its individual capacity to Triad, the Holders and the
Insurer (which shall have relied on such representations and warranties in
issuing the Note Policy), that:
(a) It is a Delaware banking corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
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(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene any
federal or Delaware state law, governmental rule or regulation or any judgment
or order binding on it, or constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract, agreement or instrument to which
it is a party or by which any of its properties may be bound.
(d) This Agreement has been duly authorized, executed and delivered by
it and constitutes a legal, valid and binding obligation of it, enforceable
against it, in accordance with its terms.
(e) No consent, approval or other authorization of, or registration,
declaration or filing with, any court or governmental agency or commission of
the State of Delaware is required by or with respect to it for the valid
execution and delivery of this Agreement, or for the validity or enforceability
thereof, other than the filing of the Certificate of Trust.
Section 7.4. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Related Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee (with respect to acts or omissions of attorneys that are not employees
of the Owner Trustee) shall not be liable for the conduct or misconduct of such
attorneys if such attorneys shall have been selected by the Owner Trustee with
reasonable care, and (ii) may consult with counsel, accountants and other
skilled persons to be selected with reasonable care and employed by it. The
Owner Trustee shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and according to such opinion not
contrary to this Agreement or any Related Document.
Section 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
this Article VII, in accepting the trusts hereby created, the Owner Trustee acts
solely as Owner Trustee hereunder and not in its individual capacity and all
Persons having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any Related Document shall look only to the
Trust Property for payment or satisfaction thereof.
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Section 7.6. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Owner Trustee on the Certificates) shall be taken as
the statements of [_______] and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Related Document, the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates), the Notes (other than the signature of the Owner Trustee
on the Notes) or any Receivable or related documents (other than enforceability
against the Owner Trustee). The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any security
interest created by any Receivable in any Financed Vehicle or (except as
required by the Indenture) the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust Property or its ability
to generate the payments to be distributed to Certificateholder(s) under this
Agreement or the Noteholders under the Indenture, including: the existence,
condition and ownership of any Financed Vehicle; the existence and
enforceability of any insurance thereon; the existence and contents of any
Receivable on any computer or other record thereof; the validity of the
assignment of any Receivable to the Issuer or of any intervening assignment; the
completeness of any Receivable; the performance or enforcement of any
Receivable; the compliance by [_____], [_______], the Servicer or any other
Person with any warranty or representation made under any Related Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Indenture Trustee or the Servicer or any subservicer taken in
the name of the Owner Trustee.
Section 7.7. PAYMENTS FROM TRUST PROPERTY. All payments to be made by
the Owner Trustee under this Agreement or any of the Related Documents to which
the Issuer or the Owner Trustee is a party shall be made only from the income
and proceeds of the Trust Property, only to the extent not otherwise directed to
be made by the Indenture Trustee and only to the extent that the Owner Trustee
shall have received income or proceeds from the Trust Property to make such
payments in accordance with the terms hereof.
[______________________] or any successor thereto, in its individual capacity,
shall not be liable for any amounts payable under this Agreement or any of the
Related Documents to which the Issuer or the Owner Trustee is a party, except
any expenses arising from or resulting from any of the matters described in the
third sentence of Section 7.1.
Section 7.8. DOING BUSINESS IN OTHER JURISDICTIONS. Notwithstanding
anything contained herein to the contrary, neither [______________________] or
any successor thereto, nor the Owner Trustee shall be required to take any
action in any jurisdiction other than in the State of Delaware if the taking of
such action will, even after the appointment of a co-trustee or separate trustee
in accordance with Section 10.5, (a) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware; or (b)
subject [______________________] (or any successor thereto) to personal
jurisdiction in any jurisdiction other than the State of Delaware for causes of
action arising from acts unrelated to the consummation of the transactions by
[______________________] (or any successor thereto) or the Owner Trustee, as the
case may be, contemplated hereby.
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ARTICLE VIII.
COMPENSATION AND INDEMNIFICATION OF OWNER TRUSTEE
Section 8.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon between the Servicer and the Owner Trustee, and the Owner
Trustee shall be entitled to be reimbursed by the Issuer or [_______] for its
other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and its duties hereunder and under the Related Documents
("Expenses"). The Owner Trustee shall also be entitled to be reimbursed by
[_______] for any organizational expenses of the Issuer.
Section 8.2. INDEMNIFICATION. Triad shall defend, indemnify and hold
harmless the Owner Trustee to the extent provided in Section 8.1 of the Sale and
Servicing Agreement, as dated the date hereof and incorporated herein by
reference.
Section 8.3. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Trust Property immediately after such payment.
Section 8.4. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in
this Agreement or any Related Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Issuer that all
obligations of the Issuer to the Owner Trustee individually or as Owner Trustee
for the Issuer shall be recourse to the Trust Property only and specifically
shall not be recourse to the assets of any Holder.
ARTICLE IX.
TERMINATION OF TRUST AGREEMENT
Section 9.1. TERMINATION OF TRUST AGREEMENT. (a) The Issuer shall
dissolve and this Agreement shall terminate and be of no further force or effect
upon the latest of (i) the maturity or other liquidation of the last Receivable
(including the purchase by the Servicer at its option of the Receivables and
other Trust Property of the Issuer as described in Section 10.1 of the Sale and
Servicing Agreement) and the subsequent distribution of amounts in respect of
such Receivables as provided in the Related Documents, (ii) the payment to
Certificateholders and Noteholders of all amounts required to be paid to them
pursuant to this Agreement, the Indenture and the Sale and Servicing Agreement
and the payment to the Insurer of all amounts payable or reimburseable to it
pursuant to the Sale and Servicing Agreement, (iii) the expiration of the Note
Policy in accordance with its terms, or (iv) payment to the Insurer of all
amounts due to the Insurer under the Insurance Agreement; provided, however,
that the rights to indemnification under Section 8.1 and the rights under
Section 10.1 shall survive the dissolution of the Issuer. The Servicer shall
promptly notify the Owner Trustee and the Insurer of any prospective termination
or dissolution pursuant to this Section 9.1. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, shall not (x) operate
to terminate this Agreement or dissolve
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the Issuer, nor (y) entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of all or any part of the affairs of the Issuer or
Trust Property nor (z) otherwise affect the rights, obligations and liabilities
of the parties hereto.
(b) Except as provided in Section 9.1(a), neither Triad, [_____] nor
any Certificateholder shall be entitled to revoke the trust created hereby or
otherwise dissolve the Issuer.
(c) Notice of any dissolution of the Issuer, specifying the Payment
Date upon which the Certificateholder(s) shall surrender their Certificates to
the Indenture Trustee for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholder(s) mailed
within five (5) Business Days of receipt of notice of such termination from the
Servicer given pursuant to Section 10.1(c) of the Sale and Servicing Agreement,
stating (i) the Payment Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Indenture Trustee therein designated, (ii) the amount of
any such final payment, (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
specified and (iv) that no amount will thereafter be payable under the
Certificates. The Owner Trustee shall give such notice to the Certificate
Registrar (if other than the Owner Trustee) and the Indenture Trustee at the
time such notice is given to Certificateholder(s). Upon presentation and
surrender of the Certificates, the Indenture Trustee shall cause to be
distributed to Certificateholder(s) amounts distributable on such Payment Date
pursuant to Section 4.6(b)(x) of the Sale and Servicing Agreement.
In the event that all of the Certificateholder(s) shall not surrender
their Certificates for cancellation within two months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholder(s) 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 Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholder(s) 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 held by the Issuer after exhaustion
of such remedies shall be distributed, subject to applicable escheat laws, by
the Owner Trustee to [_______] and Holders shall look solely to [_______] for
payment.
(d) Any funds held by the Issuer after funds for final payment have
been distributed or set aside for payment shall be distributed by the Owner
Trustee to [_______].
(e) Upon the winding up of the Issuer and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
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ARTICLE X.
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation: (a) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (b) authorized to exercise
corporate trust powers; (c) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and (iv) acceptable to the Insurer in its reasonable discretion, so
long as an Insurer Default shall not have occurred be continuing. 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 10.1, 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. If at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section 10.1, the Owner Trustee shall resign immediately in the manner and
with the effect specified in Section 10.2.
Section 10.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to [_______], the Insurer and the Servicer.
Upon receiving such notice of resignation, [_______] shall, with the prior
written consent of the Insurer, promptly appoint a successor Owner Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee, provided that [_______] shall have received written confirmation from
each of the Rating Agencies that the proposed appointment will not result in an
increased capital charge to the Insurer by either of the Rating Agencies. If no
successor Owner Trustee shall have been so appointed and have accepted
appointment within thirty (30) days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by [_______] or any other entity authorized to make
such request, or if at any time the Owner Trustee shall be legally unable to
act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Owner Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then such requesting
party may remove the Owner Trustee. If [_______] shall remove the Owner Trustee
under the authority of the immediately preceding sentence, [_______], with the
prior written consent of the Insurer, shall promptly appoint a successor Owner
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Owner Trustee so removed, one copy to the Insurer
and one copy to the successor Owner Trustee and all fees owed to the outgoing
Owner Trustee shall be paid.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section 10.2
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3 and payment of all fees and expenses owed
to the outgoing Owner Trustee. The successor Owner
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Trustee shall provide notice of such resignation or removal of the Owner Trustee
each of the Rating Agencies.
Section 10.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to
[_______], the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner 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
Owner Trustee. The predecessor Owner Trustee shall deliver to the successor
Owner Trustee all documents and statements and monies held by it under this
Agreement. [_______] and the predecessor Owner 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 Owner Trustee all
such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the successor Owner Trustee shall mail notice of the successor
of such Owner Trustee to all Certificateholder(s), the Indenture Trustee, and
the Rating Agencies. If the Servicer shall fail to mail such notice within ten
(10) days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Servicer.
Section 10.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation into which the Owner 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 Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing (other than the filing of an amendment to the
Certificate of Trust with the Secretary of State) of any instrument or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
Section 10.5. 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 Property or any Financed Vehicle may at the time be located, the
Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee and the Instructing Party to act as co-trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Property, and to vest in such Person, in such capacity, such title
to the Issuer, or any part thereof, and, subject to the other provisions of this
Section 10.5, such powers, duties, obligations, rights and trusts as the
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Servicer and the Owner Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within fifteen (15) days
after the receipt by it of a request so to do, the Owner Trustee, subject,
unless an Insurer Default shall have occurred and be continuing, to the approval
of the Insurer (which approval shall not be unreasonably withheld), 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 10.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner 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 Owner 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, the Owner 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
Issuer 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 Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Servicer and the Owner Trustee 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 Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Section 10.5. 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
Owner 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 Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
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
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
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ARTICLE XI.
MISCELLANEOUS
Section 11.1. SUPPLEMENTS AND AMENDMENTS. (a) This Agreement may be
amended by Triad, [_______], [_____] and the Owner Trustee, with the prior
written consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and with prior written notice to the Rating
Agencies, without the consent of any of the Noteholders or any other
Certificateholder(s): (i) to cure any ambiguity or defect; or (ii) to correct or
supplement any provisions in this Agreement; provided, however, that such action
under this clause (ii) shall not, as evidenced by an Opinion of Counsel (which
may be based upon a certificate of the Servicer) delivered to the Owner Trustee
and the Rating Agency adversely affect in any material respect the interests of
any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time with the
prior written consent of the Insurer (so long as an Insurer Default shall not
have occurred and be continuing) by Triad, [_______], [_____] and the Owner
Trustee, with prior written notice to the Rating Agencies and with the consent
of the Holders of Notes evidencing not less than the Note Majority and the
consent of the Certificateholder(s) evidencing not less than a majority
Certificate Percentage Interest (which consent of any Holder of a Certificate or
Note given pursuant to this Section 11.1(b) or pursuant to any other provision
of this Agreement shall be conclusive and binding on such Holder and on all
future Holders of such Certificate or Note and of any Certificate or Note issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether or
not notation of such consent is made upon the Certificate or Note) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or the Certificateholder(s); provided, however, that, the Rating
Agency Condition shall have been satisfied with respect to any such amendment
prior to the execution thereof; and provided, further, that, subject to the
express rights of the Insurer under the Related Documents, no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables, payments that shall be
required to be made on any Certificate or Note, or yield on the Certificates or
the Class A Interest Rate, or (ii) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the consent of
the Holders of all Certificates and Notes then outstanding.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Noteholders, the Indenture
Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholder(s), the
Noteholders or the Indenture Trustee pursuant to this Section 11.1(b) to approve
the particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents (and any other consents of Certificateholder(s) or
Noteholders provided for in this Agreement or in any other Related Document) and
of evidencing the authorization of the execution thereof by Certificateholder(s)
or Noteholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
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Promptly after the execution of any amendment to the Certificate of Trust, the
Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Section 11.1 and that all conditions precedent
to the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
Section 11.2. NO LEGAL TITLE TO TRUST PROPERTY IN
CERTIFICATEHOLDER(S). The Certificateholder(s) shall not have legal title to any
part of the Trust Property. The Certificateholder(s) shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Certificateholder(s) to and in
their ownership interest in the Trust Property shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting or
to the transfer to it of legal title to any part of the Trust Property.
Section 11.3. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Owner Trustee (in its individual and
trust capacities), Triad, [_______], [_____], the Certificateholder(s), the
Servicer, the Indenture Trustee and, to the extent expressly provided herein,
the Insurer, the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Property or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 11.4. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt: (i) if to
the Trust or the Owner Trustee, addressed to the Corporate Trust Office with a
copy to Triad; (ii) if to [_____], addressed to
[___________________________________]; (iii) if to Triad, addressed to Triad
Financial Corporation, 7711 Center Avenue, Suite 100, Huntington Beach,
California 92647; (iv) if to [_______], addressed to
[________________________________________________________________________], and
(v) if to the Insurer, addressed to Insurer,
[_____________________________________], (in each case in which notice or other
communication to [______________] refers to an Event of Default, a claim on the
Note Policy or with respect to which failure on the part of [___________] to
respond shall be deemed to constitute consent or acceptance, then a copy of such
notice or other communication shall also be sent to the attention of the General
Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"); or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
(b) Any notice required or permitted to be given 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
30
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conclusively presumed to have been duly given, whether or not the Certificate
holder receives such notice.
Section 11.5. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.6. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.7. ASSIGNMENTS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. This Agreement shall also inure to the benefit of the Insurer
for so long as an Insurer Default shall not have occurred and be continuing.
Without limiting the generality of the foregoing, all covenants and agreements
in this Agreement which confer rights upon the Insurer shall be for the benefit
of and run directly to the Insurer, and the Insurer shall be entitled to rely on
and enforce such covenants and agreements, subject, however, to the limitations
on such rights provided in this Agreement and the Related Documents. The Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Note Policy) upon delivery of a written notice
to the Owner Trustee.
Section 11.8. NO PETITION. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee and
each Noteholder by accepting the benefits of this Agreement, hereby covenants
and agrees that they will not at any time institute against [_____] or
[_______], or join in any institution against [_____] or [_______] of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates, the
Notes, this Agreement or any of the Related Documents.
Section 11.9. BANKRUPTCY MATTERS. To the fullest extent permitted by
law, no Certificateholder or any party to this Agreement shall take any action
to cause the Issuer to dissolve in whole or in part or file a voluntary petition
or otherwise initiate proceedings to have the Issuer adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against the Issuer, or file a petition seeking or consenting to reorganization
or relief of the Issuer as debtor under any applicable federal or state law
relating to bankruptcy, insolvency or other relief for debtors with respect to
the Issuer; or seek or consent to the appointment of any trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other similar
official) of the Issuer or of all or any substantial part of the properties and
assets of the Issuer, or cause the Issuer to make any general assignment for the
benefit of creditors of the Issuer or take any action in furtherance of any of
the above actions unless each Certificateholder and the Indenture Trustee shall
have provided its written consent.
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Section 11.10. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Issuer only and do not represent interests in or
obligations of Triad, the Servicer, [_______], [_____], the Owner Trustee, the
Insurer, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Related Documents.
Section 11.11. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. SERVICER. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Issuer all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer or Owner Trustee to prepare, file or deliver pursuant
to the Related Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Issuer's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
[___________________________],
as Owner Trustee
By:___________________________
Name: ________________________
Title: _______________________
[______________________________],
as Holder of the Certificate
By: ___________________________
Name:
_________________________
Title:
_________________________
TRIAD FINANCIAL CORPORATION, as
Servicer
By:
____________________________
Name:
___________________________
Title:
__________________________
[________________________________],
as Company
By:
_____________________________
Name:
____________________________
Title:
___________________________
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<PAGE>
EXHIBIT A
___% Certificate Percentage Interest
NUMBER
R-
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT UNDER THE LIMITED CIRCUMSTANCES
SPECIFIED IN THE TRUST AGREEMENT.*
ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Issuer, as defined below, the property of which includes a pool of motor vehicle
retail installment contracts secured by new or used automobiles or light-duty
trucks and sold by Triad Financial Corporation, a California corporation
("Triad" or in its capacity as Servicer under the Sale and Servicing Agreement
(as defined below), the "Servicer") to [_________________________________], a
[__________] corporation ("[_____]"), and by [_____] to the Issuer.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. ANY RESALE, TRANSFER OR
OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION
MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION.
THIS CERTIFICATE MAY NOT BE PURCHASED BY EMPLOYEE BENEFIT PLANS THAT ARE SUBJECT
TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR
PERSONS USING ASSETS OF SUCH PLANS.
(THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF TRIAD, THE
SERVICER, [_____] OR ANY AFFILIATE THEREOF, EXCEPT TO THE LIMITED EXTENT
DESCRIBED BELOW.)
________________
* [To be inserted on the Certificate to be held by Triad SPE].
A-1
<PAGE>
THIS CERTIFIES THAT ____________________ is the registered owner of a
___% Certificate Percentage Interest that is a nonassessable, fully-paid,
beneficial ownership interest in certain distributions of Triad Auto Receivables
Owner Trust 199[___]-[_____] (the "Issuer") formed by [_____].
The Issuer was created pursuant to a Trust Agreement, dated as of
[__________] (the "Trust Agreement"), between Triad, [_______], [_____] and
[______________________], as owner trustee (the "Owner Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). Also issued
under the Indenture, dated as of [__________], between the Issuer,
[________________________], as Indenture Trustee (the "Indenture Trustee"), is
one class of Notes designated as "Class A Asset Backed Notes" (the "Class A
Notes" or the "Notes"). This Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property subject to the Trust
Agreement includes a pool of motor vehicle retail installment contracts secured
by new and used automobiles and light-duty trucks (the "Receivables"), all
monies received thereunder or in respect thereof on or after the Cutoff Date,
security interests in the vehicles financed thereby, certain bank accounts and
the proceeds thereof, proceeds from claims on certain insurance policies and
certain other rights under the Trust Agreement and the Sale and Servicing
Agreement, dated as of [__________] (the "Sale and Servicing Agreement"),
between Triad, [_____] and the Indenture Trustee, all right to and interest of
[_____] in and to the Receivables Purchase Agreement, dated as of [__________],
between Triad and [_____], and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the [_____]
day of each month (or, if such [_____] day is not a Business Day, the next
Business Day) (the "Payment Date"), commencing on [___________], to the Person
in whose name this Certificate is registered at the close of business on the
Business Day preceding such Payment Date (the "Record Date"), such
Certificateholder's Certificate Percentage Interest in the amount to be
distributed to Certificateholders on such Payment Date
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
The holder of this Certificate, by acceptance of this Certificate,
specifically acknowledges that it has no right to or interest in any monies at
any time held pursuant to the Reserve Account Agreement or prior to the release
of such monies pursuant to Section 4.6(b)(x) of the Sale and Servicing
Agreement, such monies being held in trust for the benefit of the Noteholders
and the Insurer. Notwithstanding the foregoing, in the event that it is ever
determined that the monies held in the Reserve Account constitute a pledge of
collateral, then the
A-2
<PAGE>
provisions of the Sale and Servicing Agreement and the Reserve Account Agreement
shall be considered to constitute a security agreement and the holder this
Certificate hereby grants to the Collateral Agent for the benefit of the
Noteholders and the Insurer a first priority perfected security interest in such
amounts, to be applied as set forth in Section 3.03 of the Reserve Account
Agreement. In addition, each Certificateholder, by acceptance of its
Certificate, hereby appoints [_______] as its agent to pledge a first priority
perfected security interest in the Reserve Account, and any amounts held therein
from time to time to the Collateral Agent for the benefit of the Indenture
Trustee and the Insurer pursuant to the Reserve Account Agreement and agrees to
execute and deliver such instruments of conveyance, assignment, grant, and
confirmation, as well as any financing statements, in each case as the Insurer
shall consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the Collateral (as such terms are defined in the Reserve
Account Agreement).
It is the intent of Triad, the Servicer, [_____] and the
Certificateholders that, for purposes of all applicable federal and state income
taxes, until the Certificates are held by more than one person or the Trust is
recharacterized as a separate entity, the Trust will be disregarded as an entity
separate from its owner. If the Certificates are held by more than one person or
the Trust is recharacterized as a separate entity, it is the intent of
[_______], the Servicer and the Certificateholder that, for purposes of all
applicable federal and state income taxes, the Issuer will be treated as a
partnership and the Certificateholders (including [_______]) will be treated as
partners in that partnership. [_______] and any other Certificateholders by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with such treatment of, the Certificates for such tax purposes.
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Issuer or [_______], or join in any institution against the Issuer or
[_______] of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, the Trust Agreement or any of the Related
Documents.
Distributions on this Certificate will be made on behalf of the Owner
Trustee by the Indenture Trustee as provided in the Sale and Servicing Agreement
by wire transfer or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the [______________________________________].
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the
A-3
<PAGE>
holder hereof to any benefit under the Trust Agreement or the Sale and Servicing
Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer and not
in its individual capacity, has caused this Certificate to be duly executed.
TRIAD AUTO RECEIVABLES OWNER
TRUST 199[____]-[_____]
By: [______________________], not in its
individual capacity, but solely
as Owner Trustee
Dated: [______________] By:
________________________________
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
[________________________], [_______________________],
as Owner Trustee or as Owner Trustee
By: By:
_______________________ _____________________
Authenticating Agent
By: ________________________
A-5
<PAGE>
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest in,
Triad, the Servicer, [_______], the Owner Trustee or any Affiliates of any of
them and no recourse may be had against such parties or their assets, except as
may be expressly set forth or contemplated herein or in the Trust Agreement, the
Sale and Servicing Agreement or the Related Documents. In addition, this
Certificate is not guaranteed by any governmental agency or instrumentality and
is limited in right of payment to certain collections with respect to the
Receivables, all as more specifically set forth herein and in the Trust
Agreement and the Sale and Servicing Agreement. A copy of each of the Sale and
Servicing Agreement and the Trust Agreement may be examined during normal
business hours at the principal office of the Seller, and at such other places,
if any, designated by the Seller, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of
Triad and the rights of the Certificateholder(s) under the Trust Agreement at
any time by Triad, [_____] and the Owner Trustee with the consent of Holders of
Certificates evidencing not less than a majority of the outstanding Certificate
Percentage Interest of the Certificates. Any such consent by the holder of this
Certificate shall be conclusive and binding on such holder and on all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Trust Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the [______________________], accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Issuer
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is [______________________].
As provided in the Trust Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates in
authorized denominations evidencing the same aggregate denomination, as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any
agent of the Owner Trust, the Certificate Registrar or the Insurer may treat the
person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Owner Trustee, the
A-6
<PAGE>
Certificate Registrar, the Insurer, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Sale and Servicing Agreement and the Trust created by the Trust
Agreement shall terminate upon the payment to Certificateholder(s) and
Noteholders of all amounts required to be paid to them pursuant to the Trust
Agreement and the Sale and Servicing Agreement. The Servicer of the Receivables
may at its option purchase Receivables and other property of the Issuer at a
price specified in the Sale and Servicing Agreement, and such purchase of the
Receivables and other property of the Issuer will effect early retirement of the
Certificates; provided, however, such right of purchase is exercisable, subject
to certain restrictions, only as of the last day of any Collection Period as of
which the Aggregate Principal Balance has declined to less than 10% of the
Original Pool Balance.
The Certificates may not be purchased by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of
Triad, [_______] or the Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Certificate or of
any Receivable or related document.
A-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
*
Signature Guaranteed:
- --------
* NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or
any change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-8
<PAGE>
EXHIBIT B
FORM OF
CERTIFICATE OF TRUST OF
TRIAD AUTO RECEIVABLES OWNER TRUST 199[ ]-[ ]
This Certificate of Trust of Triad Auto Receivables Owner Trust 199
[____]-[_____] (the "Trust"), dated as of [____________________], is being
duly executed and filed by [______________________], a Delaware banking
corp., to form a business trust under the Delaware Business Trust Act (12
Del, Code, ss. 3801 et seq.).
1. Owner Name. The name of the business trust formed hereby is "Triad
Auto Receivables Owner Trust 199[____]-[_____]."
2. Trustee. The name and principal place of business of the trustee of
the Trust in the State of Delaware is [_____________________________].
3. Effective Date. This Certificate of Trust will be effective
[____________].
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
[____________________________],
as Owner Trustee
By:
______________________________
Name:
________________________
Title:
_________________________
B-1
<PAGE>
Exhibit 5.1
[ ]
Triad Financial Corporation
7711 Center Avenue, Suite 100
Huntington Beach, California 92647
Re: Triad Financial Corporation
Registration Statement on Form S-3
(File No. 333-65107)
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Triad Financial Corporation, a
California corporation (the "Registrant") in connection with the Registration
Statement on Form S-3 (File No. 333-65107) (the "Registration Statement"),
filed with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), for the registration
under the Act of up to $[ ] aggregate principal amount of Asset Backed
Securities (the "Securities"). Each series of such Securities will be issued
pursuant to (i) a separate pooling and servicing agreement (the "Pooling and
Servicing Agreement"), among the Registrant, as servicer (the "Servicer"), an
entity named in the prospectus supplement for such series of Securities, as
Seller, and an entity named in the prospectus supplement for such series of
Securities, as trustee, as backup servicer and as collateral agent, (ii) a
separate sale and servicing agreement (the "Sale and Servicing Agreement"),
among the Registrant, in its individual capacity and as servicer, an entity
named in the prospectus supplement for such series of Securities, as Seller,
the trust formed pursuant to the Trust Agreement and an entity named in the
prospectus supplement for such series of Securities, as indenture trustee and
as backup servicer, (iii) a trust agreement (the "Trust Agreement") among an
owner trustee named in the related prospectus supplement, the Registrant and
another entity named in such prospectus supplement; and/or (iv) an indenture
(the "Indenture") between the trust formed pursuant to the Trust Agreement
and the indenture trustee named in the related prospectus supplement; all
such documents, the "Operative Documents."
We have made such investigation of law as we deemed appropriate and
have examined the proceedings heretofore taken and are familiar with the
procedures proposed to be taken by the Registrant in connection with the
authorization, issuance and sale of the Securities.
In rendering the opinions set forth below, we have assumed the
accuracy and truthfulness of all public records of the Registrant and of all
certifications, documents and other
<PAGE>
Triad Financial Corporation
______________, ____
Page 2
proceedings examined by us that have been executed or certified by officials
of the Registrant acting within the scope of their official capacities and
have not verified the accuracy or truthfulness thereof. We have also assumed
the genuineness of the signatures appearing upon such public records,
certifications, documents and proceedings. In addition, we have assumed that
each such Pooling and Servicing Agreement, Sale and Servicing Agreement,
Trust Agreement and Indenture and the related Certificates and Notes, as
applicable, will be executed and delivered in substantially the form filed as
exhibits to the Registration Statement with such changes acceptable to us,
and that such Securities will be sold as described in the Registration
Statement. We express no opinion as to the laws of any jurisdiction other
than the laws of the State of New York and the federal laws of the United
States of America.
On the basis of the above-mentioned examination and assumptions, and
upon consideration of applicable law, it is our opinion that, with respect to
the Certificates and/or Notes of any series, when: (a) the Registration
Statement becomes effective pursuant to the provisions of the Act, (b) the
amount, price, interest rate and other principal terms of such Notes and/or
Certificates have been fixed by or pursuant to authorization of the Board of
Directors of the Registrant, (c) the Operative Documents relating to such
series have each been duly completed, authorized, executed and delivered by
the parties thereto substantially in the form filed as an exhibit to the
Registration Statement reflecting the terms established as described above,
(d) such Notes and/or Certificates have been duly executed and issued by the
related trust and authenticated by the owner trustee or the indenture
trustee, as applicable, and sold by the Registrant or by the trust, at the
direction of the Registrant as applicable, and (e) payment of the agreed
consideration for such Notes and/or Certificates shall have been received by
the trust, all in accordance with the terms and conditions of the related
Operative Documents and a definitive purchase, underwriting or similar
agreement with respect to such Notes and/or Certificates and in the manner
described in the Registration Statement; then (i) such Certificates will have
been duly authorized by all necessary action of the trust and will be legally
issued, fully paid and nonassessable and (ii) such Notes will have been duly
authorized by all necessary action of the trust and will be legally issued,
fully paid and nonassessable and binding obligations of the trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration
Statement, without implying or admitting that we are "experts" within the
meaning of the Act or the rules and regulations of the Securities and
Registration Statement, including this exhibit.
Very truly yours,
Dechert Price & Rhoads
<PAGE>
Exhibit 8.1
_____________, ____
Triad Financial Corporation
7711 Center Avenue, Suite 100
Huntington Beach, California 92647
Re: Triad Financial Corporation
Registration Statement on Form S-3
(File No. 333-65107)
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Triad Financial Corporation, a California
corporation (the "Registrant") in connection with the issuance and sale of
its asset backed securities (the "Securities") that evidence interests in, or
securities backed by, certain pools of loans. Each series of Securities will
be issued pursuant to (i) a Pooling and Servicing Agreement among the
Registrant, as servicer, an entity named in the prospectus supplement for
such series of Securities, as Seller and an entity named in the prospectus
supplement for such series of Securities, as trustee, as backup servicer and
as collateral agent; (ii) a Sale and Servicing Agreement among the
Registrant, in its individual capacity and as servicer, an entity named in
the prospectus supplement for such series of Securities, as Seller, a trust
formed pursuant to the Trust Agreement and an indenture trustee named in the
related prospectus supplement; (iii) a trust agreement (the "Trust
Agreement") among an owner trustee named in the related prospectus
supplement, the Registrant and another entity named in such prospectus
supplement and/or (iv) an indenture (the "Indenture") among the trust formed
pursuant to the Trust Agreement and an indenture trustee named in the related
prospectus supplement. We have advised the Registrant with respect to
certain federal income tax consequences of the proposed issuance of the
Securities. This advice is summarized under the headings "Summary -- Tax
Status" and "Federal Income Tax Consequences" in the Prospectus, all as
parts of the Registration Statement on From S-3 (File No. 333-65107) (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act").
Such description does not purport to discuss all possible federal income tax
ramifications of the proposed issuance, but with respect to those tax
consequences which are discussed, in our opinion, the description is accurate
in all material respects.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the heading "Federal
<PAGE>
Triad Financial Corporation
______________, ____
Page 2
Income Tax Consequences" in the Prospectus forming a part of the Registration
Statement, without implying or admitting that we are "experts" within the
meaning of the Act or the rules and regulations of the Commission issued
thereunder, with respect to any part of the Registration Statement, including
this exhibit.
Very truly yours,
Dechert Price & Rhoads
<PAGE>
Exhibit 10.1
FORM OF RECEIVABLES PURCHASE AGREEMENT
between
TRIAD FINANCIAL CORPORATION
as Seller
and
[ ]
as Purchaser
---------------------------
Dated as of [ ]
---------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.1 Definitions................................................................................1
SECTION 1.2. Usage of Terms.............................................................................4
SECTION 1.3. Section References.........................................................................4
SECTION 1.4. Action by or Consent of Noteholders........................................................4
SECTION 1.5. No Recourse................................................................................4
SECTION 1.6. Material Adverse Effect....................................................................4
ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY..........................................5
SECTION 2.1. Conveyance of the Initial Receivables and the Initial Other Conveyed Property..............5
SECTION 2.2. Conveyance of the Subsequent Receivables and the Subsequent Other Conveyed Property........5
SECTION 2.3. Conditions of Company's Obligations........................................................6
SECTION 2.4. True Sales.................................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................9
SECTION 3.1. Representations and Warranties of Triad as Seller..........................................9
SECTION 3.2. Representations and Warranties of the Company as Purchaser................................11
SECTION 3.3. Indemnification...........................................................................13
ARTICLE IV COVENANTS OF TRIAD....................................................................................17
SECTION 4.1. Protection of Title of the Company and the Trust..........................................17
SECTION 4.2. Other Liens or Interests..................................................................18
SECTION 4.3. Costs and Expenses........................................................................18
ARTICLE V REPURCHASES OR REPLACEMENTS............................................................................19
SECTION 5.1. Repurchase or Replacement of Receivables Upon Breach of Warranty..........................19
SECTION 5.2. Reassignment of Purchased Receivables.....................................................20
SECTION 5.3. Waivers...................................................................................20
ARTICLE VI MISCELLANEOUS.........................................................................................20
SECTION 6.1. Liability of Triad........................................................................20
SECTION 6.2. Merger or Consolidation of Triad..........................................................20
SECTION 6.3. Limitation on Liability of Triad and Others...............................................21
SECTION 6.4. Conveyance of the Receivables and the Other Conveyed Property to the Trust................21
SECTION 6.5. Amendment.................................................................................22
SECTION 6.6. Notices...................................................................................23
SECTION 6.7. Merger and Integration....................................................................23
SECTION 6.8. Severability of Provisions................................................................23
SECTION 6.9. GOVERNING LAW.............................................................................24
SECTION 6.10. Counterparts..............................................................................24
SECTION 6.11. Nonpetition Covenant......................................................................24
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.12. Assignment...............................................................................24
SECTION 6.13. Third-Party Beneficiaries................................................................24
SECTION 6.14. Successors and Assigns...................................................................24
</TABLE>
SCHEDULE A - SCHEDULE OF RECEIVABLES
SCHEDULE B - REPRESENTATIONS AND WARRANTIES OF THE SELLER
SCHEDULE C - LEGAL PROCEEDINGS
<PAGE>
RECEIVABLES PURCHASE AGREEMENT, dated as of [ ] (this "AGREEMENT"),
between Triad Financial Corporation, a California corporation, as seller
("TRIAD"), and [ ], a [ ] corporation, as purchaser (the "COMPANY").
WHEREAS, the Company, as Purchaser, has agreed to purchase from Triad,
as Seller, and Triad has agreed to sell and transfer to the Company, the Initial
Receivables and the Initial Other Conveyed Property on the Closing Date, and
with respect to Subsequent Receivables, will transfer on the related Subsequent
Transfer Date the Subsequent Receivables and the Subsequent Other Conveyed
Property.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and Triad hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS
Capitalized terms used but not defined herein shall have the meanings
set forth in the Sale and Servicing Agreement (as defined below). Whenever
capitalized and used in this Agreement, the following words shall have the
following meanings:
"INITIAL OTHER CONVEYED PROPERTY" means the Other Conveyed Property
conveyed by Triad to the Company on the Closing Date pursuant to this Agreement
other than the Initial Receivables.
"INITIAL RECEIVABLES" means the Receivables listed on the Schedule of
Receivables attached hereto and transferred by the Seller to the Company on the
Closing Date.
"ISSUER" means Triad Auto Receivables Owner Trust 199[ ]-[ ], a
Delaware business trust.
"OTHER CONVEYED PROPERTY" means, with respect to the Receivables: (1)
all of the right, title and interest of Triad in and to all monies due or
received under the Receivables or in respect thereof after the applicable Cutoff
Date including amounts due on or before the applicable Cutoff Date but received
by the Seller after the applicable Cutoff Date (including without limitation all
Liquidation Proceeds and Recoveries received with respect to such Receivables);
and (2) all of the right, title and interest of Triad in and to (i) the security
interests of Triad in the related Financed Vehicles and any other interest of
Triad in the related Financed Vehicles, including the certificates of title with
respect to such Financed Vehicles, (ii) the Insurance Policies and any proceeds
from any Insurance Policies relating to the Receivables, the Obligors or the
related Financed Vehicles, including rebates or refunds of premiums relating to
the Receivables, (iii) the rights of Triad against Dealers with respect to the
Receivables under the Dealer Agreements and the Dealer Assignments, (iv) the
rights of Triad with respect to the Receivables under the Correspondent
Agreements and the Correspondent Assignments, (v) all items contained in the
related Receivable Files and any and all other documents that Triad keeps on
file in accordance with its customary
<PAGE>
procedures relating to the Receivables, the Obligors or the related Financed
Vehicles, (vi) property (including the right to receive future Liquidation
Proceeds) that secures any of the Receivables and that has been acquired by or
on behalf of Triad pursuant to liquidation of any such Receivable, (vii) all of
the right, title and interest of the Seller in and to refunds for the costs of
extended service contracts with respect to the Financed Vehicles, and (viii) all
proceeds and investments of any of the foregoing, all present and future claims,
demands, causes and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any of the foregoing.
"PROSPECTUS" means the Prospectus dated [ ] relating to the offering by
the Company from time to time of its asset backed notes and asset backed
certificates in the form in which it was or will be filed with the Commission
pursuant to Rule 424(b) under the Securities Act filed with the Commission
pursuant to Rule 424(b) under the Securities Act.
"PROSPECTUS SUPPLEMENT" means the Prospectus Supplement dated [ ],
relating to the Notes in the form in which it was or will be filed with the
Commission pursuant to rule 424(b) under the Securities Act.
"PURCHASE PRICE" means, with respect to Receivables to be sold by Triad
to the Purchaser on the Closing Date or any Subsequent Transfer Date, as the
case may be, the total principal amount of such Receivables (as reflected on the
books of Triad as of the Initial Cutoff Date or the related Subsequent Cutoff
Date, as applicable).
"PURCHASER" means [ ].
"RECEIVABLES" means a retail installment contract (including any
related promissory note and the related security agreement), and all rights and
obligations under such contract, for a Financed Vehicle that is included in the
Schedule of Receivables (except for Receivables that shall have become Purchased
Receivables or Receivables that are replaced in accordance with the terms
hereof.)
"REGISTRATION STATEMENT" means that certain registration statement on
Form S-3, as amended (Registration No. [ ]) relating to the offering by the
Company from time to time of its asset backed notes and asset backed
certificates as previously declared effective by the Commission.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of [ ], among Triad Financial Corporation, in its individual capacity
and as Servicer, [ ], as the Company, the Trust and [ ], as Indenture Trustee
and as Backup Servicer, as the same may be amended or supplemented from time to
time in accordance with the terms thereof.
"SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations and
Warranties attached hereto as SCHEDULE B.
"SCHEDULE OF RECEIVABLES" means the Schedule of Initial Receivables
sold and transferred pursuant to this Agreement on the Closing Date which is
attached hereto as Schedule A as it may
2
<PAGE>
be amended from time to time, including to remove Purchased Receivables or
replaced Receivables or add Replacement Receivables pursuant to Section 5.1 or
add Subsequent Receivables.
"SELLER" means Triad Financial Corporation.
"SUBSEQUENT CUTOFF DATE" means the date specified in the related
Subsequent Transfer Agreement, provided, however that such date shall be on or
before the Subsequent Transfer Date.
"SUBSEQUENT OTHER CONVEYED PROPERTY" means Other Conveyed Property
conveyed by Triad to the Company on the Subsequent Transfer other than the
Subsequent Receivables pursuant to the Subsequent Purchase Agreement on the
Subsequent Transfer Date.
"SUBSEQUENT PURCHASE AGREEMENT" means an agreement by and between Triad
and the Company pursuant to which the Company will acquire Subsequent
Receivables.
"SUBSEQUENT RECEIVABLES" means the Receivables transferred to the
Company pursuant to Section 2.2, which shall be listed on Schedule A to the
related Subsequent Purchase Agreement.
"SUBSEQUENT TRANSFER DATE" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once a month, during
the Funding Period on which Subsequent Receivables are to be transferred to the
Company pursuant to this Agreement, and a Subsequent Purchase Agreement is
executed and delivered on or before [ ].
"TERMINATION EVENT" means the existence of any one or more of the
following conditions on or prior to the Closing Date:
(a) a stop order suspending the effectiveness of the Registration
Statement shall have been issued or a proceeding for that purpose shall have
been initiated or threatened by the Commission; or
(b) after the execution and delivery of this Agreement but prior to the
Closing Date, a downgrading, or public notification of a possible change without
indication of direction, shall have occurred in the rating afforded any of the
debt securities or claims paying ability of Triad by any Rating Agency; or
(c) after the execution and delivery of this Agreement but prior to the
Closing Date, there shall have occurred an adverse change in the condition,
financial or otherwise, in the earnings, regulatory situation or business
prospects of Triad reasonably determined by the Company to be material; or
(d) after the date of this Agreement but prior to the Closing Date,
there shall have occurred any of the following: (i) any suspension or material
limitation in trading in securities generally on the New York Stock Exchange, or
any suspension of trading of any securities of Triad or its parent or affiliate
if so traded on any exchange or in the over-the-counter market; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the engagement by the United
States in hostilities, or the
3
<PAGE>
escalation of such hostilities, or any calamity or crisis, if the effect of any
such event specified in this clause (iv) in the reasonable judgment of the
Company makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Notes on the terms and in the manner
contemplated in the Prospectus Supplement.
"TRIAD REPURCHASE EVENT" means the occurrence of a breach of any of
Triad's representations and warranties under SECTION 3.1(a).
SECTION 1.2. USAGE OF TERMS.
With respect to all terms used in this Agreement, the singular includes
the plural and the plural the singular; words importing one gender include the
other gender; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not
prohibited by this Agreement or the Sale and Servicing Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
SECTION 1.3. SECTION REFERENCES.
All references to Articles, Sections, paragraphs, subsections, exhibits
and schedules shall be to such portions of this Agreement unless otherwise
specified.
SECTION 1.4. ACTION BY OR CONSENT OF NOTEHOLDERS.
Whenever any provision of this Agreement refers to action to be taken
or consented to by Noteholders, such provision shall be deemed to refer to
Noteholders of record as of the Record Date immediately preceding the date on
which such action is to be taken or consent given by Noteholders. Solely for the
purposes of any action to be taken, or consented to by Noteholders, any Note
registered in the name of, or beneficially owned by, the Company, Triad or any
Affiliate of either of such entity, shall be deemed not to be outstanding;
PROVIDED, HOWEVER, that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes which the Indenture Trustee knows to be so owned shall be so disregarded.
SECTION 1.5. NO RECOURSE.
Without limiting the obligations of the Seller hereunder, no recourse
may be taken, directly or indirectly, under this Agreement or any certificate or
other writing delivered in connection herewith or therewith, against any
stockholder, officer or director, as such, of Triad, the Company or of any
predecessor or successor of Triad or the Company.
SECTION 1.6. MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this Agreement as to
whether a given event, action, course of conduct or set of facts or
circumstances could or would have a material
4
<PAGE>
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account any
amounts on deposit in the Reserve Account or funds available from claims under
the Note Policy.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. CONVEYANCE OF THE INITIAL RECEIVABLES AND THE INITIAL
OTHER CONVEYED PROPERTY.
(a) CONVEYANCE. Subject to the terms and conditions of this Agreement,
Triad hereby sells, contributes, transfers, assigns and otherwise conveys to the
Company, without recourse (but without limitation of its obligations in this
Agreement), and the Company hereby purchases and accepts, all right, title and
interest of Triad in and to the Initial Receivables and the Initial Other
Conveyed Property with respect thereto. It is the intention of Triad and the
Company that the transfer and assignment contemplated by this Agreement shall
constitute a sale and/or contribution of the Initial Receivables and the Initial
Other Conveyed Property from Triad to the Company and the beneficial interest in
and title to the Initial Receivables and the Initial Other Conveyed Property
shall not be part of Triad's estate in the event of the filing of a bankruptcy
petition by or against Triad under any bankruptcy or similar law. If,
notwithstanding the intent of Triad and the Company, the transfer and assignment
contemplated hereby is held not to be a sale, Triad hereby grants a first
priority security interest to the Company in the property conveyed pursuant to
this SECTION 2.1(a), and this Agreement shall be construed so as to further such
intent.
(b) INITIAL RECEIVABLES PURCHASE PRICE. Simultaneously with the
conveyance of the Initial Receivables and the Initial Other Conveyed Property
with respect thereto by Triad to the Company, on the Closing Date, the Company
shall pay to Triad the Purchase Price of the Initial Receivables sold by Triad
to the Company.
SECTION 2.2. CONVEYANCE OF THE SUBSEQUENT RECEIVABLES AND THE
SUBSEQUENT OTHER CONVEYED PROPERTY.
(a) CONVEYANCE. On each Subsequent Transfer Date and simultaneously
with the execution and delivery of the related Subsequent Purchase Agreement,
Triad shall sell, contribute, transfer, assign and otherwise convey to the
Company, without recourse (but without limitation of its obligations in this
Agreement), and the Company shall purchase and accept, all right, title and
interest of Triad in and to the Subsequent Receivables and the Subsequent Other
Conveyed Property with respect thereto. It is the intention of Triad and the
Company that the transfer and assignment contemplated by each Subsequent
Transfer Agreement shall constitute a sale and/or contribution of the Subsequent
Receivables and the Subsequent Other Conveyed Property from Triad to the Company
and the beneficial interest in and title to the Subsequent Receivables and the
Subsequent Other Conveyed Property shall not be part of Triad's estate in the
event of the filing of a bankruptcy petition by or against Triad under any
bankruptcy or similar law.
5
<PAGE>
(b) SUBSEQUENT RECEIVABLES PURCHASE PRICE. Simultaneously with the
conveyance of the Subsequent Receivables and the Subsequent Other Conveyed
Property with respect thereto by Triad to the Company, on each Subsequent
Transfer Date the Company shall pay to Triad the Purchase Price of the
Subsequent Receivables sold by Triad to the Company.
SECTION 2.3. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligations
of the Company to purchase the Initial Receivables and the Initial Other
Conveyed Property from Triad, and with respect to Subsequent Receivables, the
obligations of the Company to purchase the Subsequent Receivables and the
Subsequent Other Conveyed Property from Triad, will be subject to the
satisfaction on the Closing Date and on each Subsequent Transfer Date, as the
case may be, of the following conditions. Upon payment of the purchase price for
the Initial Receivables and the Initial Other Conveyed Property or for the
Subsequent Receivables and the Subsequent Other Conveyed Property, as the case
may be, to Triad and the prior written consent of the Insurer, such other
conditions shall be deemed satisfied or waived.
(a) Each of the obligations of Triad required to be performed by it on
or prior to the Closing Date and on each Subsequent Transfer Date, as the case
may be, pursuant to the terms of this Agreement shall have been duly performed
and complied with, and all of the representation and warranties of Triad under
this Agreement shall be true and correct in all material respects as of the
Closing Date and on each Subsequent Transfer Date, as the case may be, and no
event shall have occurred which, with notice or the passage of time, would
constitute a default under this Agreement and the Company and the Insurer shall
have received certificates to the effect of the foregoing signed by an
authorized officer of Triad.
(b) The Company shall have received letters in form and substance
reasonably acceptable to the Company and its counsel, and the Insurer, prepared
by [ ], independent certified public accountants, dated as of the date of the
Prospectus Supplement, as of the Closing Date and on each Subsequent Transfer
Date, as the case may be, (i) regarding the numerical information contained in
the Prospectus Supplement and (ii) relating to certain agreed upon procedures as
specified by the Insurer.
(c) The Company shall have received duly executed and delivered copies
of the following additional closing documents, in form and substance reasonably
satisfactory to the Company and its counsel and the Insurer
(i) the Schedule of Receivables;
(ii) the Related Documents and the Underwriting Agreement,
dated as of [ ], between the Company and the Underwriter, and all
documents required thereunder, in each case duly executed and delivered
by each of the parties thereto other than the Company;
(iii) an officer's certificate of an officer of Triad, dated
as of the Closing Date and as of each Subsequent Transfer Date, as the
case may be, as to the incumbency of officers and the due authorization
of the transactions contemplated by the Related
6
<PAGE>
Documents, with resolutions of their boards of directors and a copy of
their charter and by-laws attached thereto;
(iv) opinions of counsel for Triad as to the matters, and in
form and substance, reasonably acceptable to the Company and the
Insurer (it being agreed that such opinions shall expressly provide
that the Owner Trustee, the Indenture Trustee, the Underwriter, the
Insurer and the Rating Agencies shall be entitled to rely on such
opinions), including as to such matters as shall be required for the
assignment of a rating to the Notes of "AAA" by S&P and "Aaa" by
Moody's;
(v) a letter from each of Moody's and S&P that it has assigned
a rating of "AAA" and "Aaa", respectively, to the Notes and
satisfactory written notification of such ratings has been received by
the Insurer;
(vi) opinions of counsel for the Owner Trustee and the
Indenture Trustee, in form and substance reasonably acceptable to the
Company and the Insurer (it being agreed that such opinions shall
expressly provide that Triad, the Underwriter, the Insurer and the
Rating Agencies shall be entitled to rely on such opinions);
(vii) opinions of counsel for the Trust, in form and in
substance reasonably acceptable to the Company and the Insurer (it
being agreed that such opinions shall expressly provide that the Owner
Trustee, the Indenture Trustee, the Underwriter, the Insurer and the
Rating Agencies shall be entitled to rely on such opinions);
(viii) the Insurer (so long as no Insurer Default has occurred
or is continuing) shall, in its sole and absolute discretion, have
approved the transfer of the Subsequent Receivables to the Company;
(ix) after giving effect to any transfer of Subsequent
Receivables on a Subsequent Transfer Date, the Receivables transferred
to the Company pursuant hereto shall meet the following criteria (based
on the characteristics of the Initial Receivables on the Initial Cutoff
Date and the Subsequent Receivables on the related Subsequent Cutoff
Dates): (a) the weighted average APR of such Receivables transferred to
the Company shall not be less than one percent less than the weighted
average APR of the Initial Receivables on the Initial Cutoff Date,
unless, with the prior consent of the Rating Agencies, [ ] and the
Insurer, the Spread Account Subsequent Deposit is increased with
respect to such Subsequent Receivables by the amount required by the
Insurer; (b) the weighted average remaining term of the Receivables
transferred to the Trust shall not be greater than [ ] months nor less
than [ ] months; (c) not more than [ ]% of the aggregate Principal
Balance of such Receivables will represent financing of used Financed
Vehicles; (d) the APR is not less than [ ]% nor more than [ ]%; (e) not
more than [ ]% of the aggregate Principal Balance of such Receivables
will represent Receivables designated in Credit Tier 3, not more than
[ ]% of the aggregate Principal Balance of the Receivables will
represent Receivables designated in Credit Tier 4, not more than
[ ]% of the Aggregate Principal Balance of the Receivables will
represent Receivables designated in Credit Tier 5 and not more
than [ ]% of the aggregate Principal Balance of
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the Receivables will represent Receivables designated in Credit Tier 6;
(f) no such Receivable will represent financing of a Financed Vehicle
which is older than a [ ]model year; (g) not more than [ ]% of the
aggregate Principal Balance of such Receivables will be conveyed to
Triad pursuant to Correspondent Assignments, and not more than [ ]% of
the aggregate Principal Balance of such Receivables will be conveyed to
Triad by any one Correspondent, additionally, the Trust, the Indenture
Trustee, the Owner Trustee and the Insurer shall have received a
written confirmation from a firm of certified independent public
accountants as to the satisfaction of the criteria in clauses (a)
through (f); and
(x) no selection procedures believed to be adverse to the
interests of the Noteholders or the Insurer shall have been utilized in
selecting the Receivables.
(d) With respect to the transfer of the Initial Receivables, no
Termination Event shall have occurred as of the Closing Date.
(e) All proceedings in connection with the transactions contemplated by
this Agreement and the other Related Documents and all documents incident hereto
and thereto shall be reasonably satisfactory in form and substance to the
Company and its counsel.
(f) Triad shall have furnished the Company and the Insurer with such
other certificates of its officers or others and such other documents or
opinions as the Company or its counsel or the Insurer may reasonably request.
(g) All other terms and conditions of this Agreement and the Sale and
Servicing Agreement shall have been complied with in all material respects or
waived.
SECTION 2.4. TRUE SALES. (a) Each of Triad and the Company intend the
transfer of the Initial Receivables and the Initial Other Conveyed Property or
the Subsequent Receivables and the Subsequent Other Conveyed Property, as the
case may be, to constitute a true sale by Triad to the Company providing the
Company with the full benefits of ownership thereof, and neither party hereto
intends the transactions contemplated hereunder to be, or for any purpose to be
characterized as, a loan from the Company to Triad.
(b) If (but only to the extent) that the transfer of the Initial
Receivables and the Initial Other Conveyed Property or the Subsequent
Receivables and the Subsequent Other Conveyed Property, as the case may be,
hereunder is characterized by a court or other Governmental Authority as a loan
rather than a sale, Triad shall be deemed hereunder to have granted to the
Company a security interest in all of Triad's right, title and interest in and
to the Initial Receivables and the Initial Other Conveyed Property or the
Subsequent Receivables and the Subsequent Other Conveyed Property, as the case
may be. Such security interest shall secure all of Triad's obligations (monetary
or otherwise) under this Agreement and the other Related Documents to which it
is a party, whether now or hereafter existing or arising, due or to become due,
direct or indirect, absolute or contingent. The Company shall have, with respect
to the property described in this SECTION 2.4, and in addition to all the other
rights and remedies available to the Company under this Agreement and applicable
law, all the rights and remedies of a secured
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party under any applicable UCC, and this Agreement shall constitute a security
agreement under applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF TRIAD AS SELLER.
Triad makes the following representations and warranties as of the date
hereof and as of each Subsequent Transfer Date, as the case may be, on which the
Company relies in purchasing the Receivables and the Other Conveyed Property
with respect thereto and in transferring the Receivables and the Other Conveyed
Property with respect thereto to the Trust under the Sale and Servicing
Agreement and on which the Insurer will rely in issuing the Policy. Unless
otherwise specified, such representations and warranties speak as of the Closing
Date and as of the execution and delivery of any Subsequent Purchase Agreement,
as the case may be, but shall survive the sale, contribution, transfer and
assignment of the Receivables and the Other Conveyed Property hereunder, and the
sale, transfer and assignment thereof by the Company to the Trust under the Sale
and Servicing Agreement. Triad and the Company agree that the Company will
assign to the Trust all of the Company's rights and interests under the
Agreement and the Trust will pledge all of such interests of the Company to the
Indenture Trustee, and that the Indenture Trustee will thereafter be entitled to
enforce this Agreement directly against Triad in the Indenture Trustee's own
name on behalf of the Noteholders and the Insurer.
(a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set
forth on the Schedule of Representations with respect to the Initial Receivables
as of the Closing Date, and with respect to the Subsequent Receivables as of the
related Subsequent Transfer Date are true and correct in all material respects.
(b) ORGANIZATION AND GOOD STANDING. Triad has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of California, with due power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and has, the power,
authority and legal right to acquire, sell and own the Receivables and the Other
Conveyed Property to be transferred to the Company.
(c) DUE QUALIFICATION. Triad is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property or
the conduct of its business shall require such qualification.
(d) POWER AND AUTHORITY. Triad has the power and authority to execute
and deliver this Agreement, the Sale and Servicing Agreement and its Related
Documents and to carry out its terms and their terms, respectively; Triad has
the power and authority to sell and assign the Receivables and Other Conveyed
Property to be sold and assigned to and deposited with the Company hereunder and
has duly authorized such sale and assignment to the Company by all necessary
corporate action; and the execution, delivery and performance of this Agreement,
the
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Sale and Servicing Agreement and its Related Documents have been duly authorized
by Triad by all necessary corporate action.
(e) BINDING, OBLIGATION. This Agreement, the Sale and Servicing
Agreement and Triad's Related Documents, when duly executed and delivered by the
other parties thereto, shall constitute a legal, valid and binding obligation of
Triad enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(f) NO VIOLATION. The execution, delivery and performance by Triad of
its Related Documents, the consummation of the transactions contemplated by this
Agreement, the Sale and Servicing Agreement and the Related Documents and the
fulfillment of the terms hereof and thereof do not (i) conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles of incorporation
or bylaws of Triad, or any indenture, agreement, mortgage, deed of trust,
commitment letter or other instrument to which Triad is a party or by which it
or its properties are bound, (ii) result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust, commitment letter or other instrument or
(iii) violate any law, order, rule or regulation applicable to Triad of any
Governmental Authority having jurisdiction over Triad or any of its properties.
(g) NO PROCEEDINGS. Other than as set forth on SCHEDULE C hereto, there
are no proceedings or investigations pending or, to the best of Triad's
knowledge, threatened against Triad before any Governmental Authority having
jurisdiction over Triad or its properties (i) asserting the invalidity of this
Agreement or any of the Related Documents, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions contemplated by this
Agreement or any of the Related Documents, (iii) seeking any determination or
ruling that could reasonably be expected to have a material adverse effect on
the performance by Triad of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, or (iv)
seeking to adversely affect the federal income tax or other federal, state or
local tax attributes of the Notes or seeking to impose any excise, franchise,
transfer or similar tax upon the Notes or the sale and assignment of the
Receivables and the Other Conveyed Property.
(h) NO CONSENTS. No consent, approval, license, authorization or order
of, or declaration, registration or filing with, any Governmental Authority or
other Person, is required to be made by Triad in connection with the execution,
delivery or performance of its Related Documents or the consummation of the
transactions contemplated thereby, except such as have been duly made, effected
or obtained.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of Triad is
located at 7711 Center Avenue, Suite 100, Huntington Beach, California 92647.
(j) NO UNTRUE STATEMENT. None of the statements of Triad in the
Prospectus Supplement (excluding any reference to or information contained in
the Prospectus or any
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information deemed incorporated by reference in the Prospectus Supplement
from the Prospectus) contains any untrue statement or alleged untrue
statement of any material fact or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AS
PURCHASER.
The Company makes the following representations and warranties as of
the date hereof and as of the Subsequent Transfer Date, as the case may be, on
which Triad relies in selling, assigning, transferring and conveying the
Receivables and the Other Conveyed Property to the Company hereunder and on
which the Insurer will rely in issuing the Policy. Unless otherwise specified,
such representations and warranties speak as of the Closing Date and as of each
Subsequent Transfer Date, as the case may be, but shall survive the sale,
contribution, transfer and assignment of the Receivables and the Other Conveyed
Property hereunder, and the sale, transfer and assignment thereof by the Company
to the Trust under the Sale and Servicing Agreement.
(a) ORGANIZATION AND GOOD STANDING. The Company has been duly organized
and is validly existing as a corporation under the laws of the State of [ ],
with due power and authority to own its properties and to conduct its business
as such properties are currently owned and such business is currently conducted,
and had at all relevant times, and has, the power, authority and legal right to
acquire, sell and own the Receivables and the Other Conveyed Property and to
transfer the Receivables and the Other Conveyed Property to the Trust pursuant
to the Sale and Servicing Agreement.
(b) DUE QUALIFICATION. The Company is duly qualified to do business as
a foreign corporation in good standing and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualification.
(c) POWER AND AUTHORITY. The Company has the power, authority and legal
right to execute and deliver this Agreement and to carry out its terms and their
terms, respectively; the Company has the power and authority to acquire the
Receivables and the Other Conveyed Property hereunder and to sell, transfer or
otherwise convey such Receivables and Other Conveyed Property to the Trust and
has duly authorized such acquisition and conveyance by all necessary corporate
action; and the execution, delivery and performance of this Agreement has been
duly authorized by the Company by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement, when duly executed and
delivered by the other parties thereto, shall constitute a legal, valid and
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the
Company of this Agreement, the consummation of the transactions contemplated by
this Agreement, the Sale and
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Servicing Agreement and the Company's Related Documents, and the fulfillment of
the terms of this Agreement, the Sale and Servicing Agreement and the Company's
Related Documents, do not and will not (i) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or bylaws of the
Company, or any indenture, agreement, mortgage, deed of trust, commitment letter
or other instrument to which the Company is a party or by which it or its
properties are bound, (ii) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust, commitment letter or other instrument or (iii) violate
any law, order, rule or regulation applicable to the Company of any Governmental
Authority having jurisdiction over the Company or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending
or, to the Company's knowledge, threatened against the Company before any
Governmental Authority having jurisdiction over the Company or its properties
(i) asserting the invalidity of this Agreement, the Sale and Servicing Agreement
or any of the Related Documents, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement, the Sale and Servicing
Agreement or any of the Company's Related Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material
adverse effect on the performance by the Company of its obligations under, or
the validity or enforceability of, this Agreement, the Sale and Servicing
Agreement or any of the Company's Related Documents, or (iv) seeking to
adversely affect the federal income tax or other federal, state or local tax
attributes of the Notes or seeking to impose any excise, franchise, transfer or
similar tax upon the Notes or the transfer and acquisition of the Receivables
and the Other Conveyed Property hereunder, or the transfer by the Company of the
Receivables and the Other Conveyed Property to the Trust pursuant to the Sale
and Servicing Agreement.
(g) NO CONSENTS. No consent, approval, license, authorization or order
of, or declaration, registration or filing with, any Governmental Authority or
other Person is required to be made by the Company in connection with the
execution, delivery or performance of its Related Documents or the consummation
of the transactions contemplated thereby, except such as have been duly made,
effected or obtained.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the Company
is located at [ ].
(i) INVESTMENT COMPANY ACT COMPLIANCE. The Company is not required to
be registered as an "investment company" under the Investment Company Act of
1940, as amended.
In the event of any breach of a representation and warranty made by the Company
hereunder, Triad covenants and agrees that Triad will not take any action to
pursue any remedy that either may have hereunder, in law, in equity or
otherwise, until a year and a day have passed since the date on which all Notes
or other similar securities issued by the Trust, or another trust or similar
vehicle formed by the Company, or any obligations, notes or other securities
issued by the Company have been paid in full. Triad and the Company agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by the Company, the Trust or by the Indenture
Trustee on behalf of the Noteholders and the Insurer.
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SECTION 3.3. INDEMNIFICATION.
(a) Triad shall defend, indemnify and hold harmless the Company, the
Issuer, the Indenture Trustee, the Owner Trustee and the Insurer, from and
against any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from any breach of any of Triad's representations
and warranties contained herein.
(b) Triad shall defend, indemnify and hold harmless the Company, the
Issuer, the Indenture Trustee, the Owner Trustee and the 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 Triad or any
affiliate thereof of a Financed Vehicle.
(c) Triad shall defend, indemnify and hold harmless the Company, the
Issuer, the Indenture Trustee, the Owner Trustee and the Insurer from and
against any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from any action taken, or failed to be taken, by it
in respect of any portion of the Receivables other than in accordance with this
Agreement or the Sale and Servicing Agreement.
(d) Triad agrees to pay, and shall defend, indemnify and hold harmless
the Company, the Issuer, the Indenture Trustee, the Owner Trustee and the
Insurer from and against any taxes that may at any time be asserted against the
Company, the Issuer, the Indenture Trustee, the Owner Trustee with respect to
the transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale, transfer and assignment of the
Receivables and the Other Conveyed Property to the Company and by the Company to
the Issuer or the issuance and original sale of the Notes or the Certificates,
or asserted with respect to ownership of the Receivables and Other Conveyed
Property which shall be indemnified by Triad pursuant to clause (e) below, or
federal, state or other income taxes, arising out of distributions on the Notes
or the Certificates or transfer taxes arising in connection with the transfer of
the Notes or the Certificates) and costs and expenses in defending against the
same, arising by reason of the acts to be performed by Triad under this
Agreement or imposed against such Persons.
(e) Triad agrees to pay, and to indemnify and hold harmless the
Company, the Issuer, the Indenture Trustee, the Owner Trustee and the Insurer
from, any taxes which may at any time be asserted against such Persons with
respect to, and as of the date of, the conveyance or ownership of the
Receivables or the Other Conveyed Property hereunder and the conveyance or
ownership of the Receivables under the Sale and Servicing Agreement or the
issuance and original sale of the Notes or the Certificates, including, without
limitation, any sales, gross receipts, personal property, tangible or intangible
personal property, privilege or license taxes (but not including any federal or
other income taxes, including franchise taxes, arising out of the transactions
contemplated hereby or transfer taxes arising in connection with the transfer of
the Notes or the Certificates) and costs and expenses in defending against the
same, arising by reason of the acts to be performed by Triad under this
Agreement or imposed against such Persons.
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(f) Triad shall defend, indemnify and hold harmless the Company, the
Issuer, the Indenture Trustee, the Owner Trustee and the Insurer from and
against any and all costs, expenses, losses, claims, damages, and liabilities to
the extent that such cost, expense, loss, claim, damage, or liability arose out
of, or was imposed upon any of such Persons through the negligence, misfeasance,
or bad faith of Triad in the performance of its duties under this agreement or
by reason of reckless disregard of Triad's obligations and duties under this
Agreement.
(g) Triad shall indemnify and hold harmless the Company, the Issuer,
the Indenture Trustee, the Owner Trustee, the Insurer, the Noteholders and the
Certificateholders from and against any loss, liability or expense incurred by
reason of the violation by Triad of federal or state securities laws in
connection with the registration or the sale of the Notes or the Certificates.
Indemnification under this SECTION 3.3 shall include reasonable fees
and expenses of counsel and expenses of litigation and shall survive termination
of the Notes and the Certificates. The indemnity obligations hereunder shall be
in addition to any obligation that Triad may otherwise have.
Notwithstanding the indemnity provisions contained in SECTIONS 3.3(a)
through (h), Triad shall not be required to indemnify any Indemnified Party
against any taxes, costs, expenses, losses, damages, claims or liabilities to
the extent the same shall arise out of or be based upon (i) the wilful
misfeasance, bad faith or gross negligence of such party, or (ii) losses
suffered by reason of uncollectible or uncollected Receivables.
(h) (i) Triad agrees to indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the Registration
Statement, each Person who controls the Company within the meaning of Section 15
of the Securities Act, the Underwriter and the Underwriter's respective officers
and directors and each Person, if any, who controls the Underwriter within the
meaning of the Securities Act and the Exchange Act (each, a "Company Indemnified
Party"), against any and all losses, claims, damages or liabilities to which any
Company Indemnified Party may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, and shall reimburse such Company Indemnified Party for any
legal or other expenses incurred by the Company Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability or
action, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the preliminary prospectus
supplement (except as subsequently updated in the Prospectus Supplement), the
Prospectus Supplement or any amendment or supplement to the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement approved
in writing by Triad, or the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
in the preliminary prospectus supplement (except as subsequently updated in the
Prospectus Supplement), Prospectus Supplement or any amendment or supplement to
the Prospectus Supplement approved in writing by Triad, in light of the
circumstances under which they were made, not misleading, other than any untrue
statement or alleged untrue statement or omission or alleged omission based on
any information (A) in the third and last paragraph on the first page of the
Prospectus
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Supplement; (B) under the heading "Company" in "Summary of Terms;" (C) in the
second sentence under the heading "Use of Proceeds" in the Prospectus Supplement
only to the extent relating to the Company's use of proceeds; (D) under the
heading "Underwriting" in the Prospectus Supplement (the "Company Information"),
or the Prospectus or the Registration Statement; and (E) under the heading "The
Insurer"; whether or not deemed a part of or included in, by cross-reference or
otherwise, the Prospectus Supplement. This indemnity agreement shall be in
addition to any liability which Triad may otherwise have.
(ii) Triad agrees to indemnify and hold the Company harmless
against any and all losses, claims, damages or liabilities that the
Company may sustain related to the failure of Triad to perform in all
material respects their duties under this Agreement. Triad shall
immediately notify the Company if a claim is made by a third party with
respect to this Agreement, and Triad shall assume the defense of any
such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Company in respect
of such claim.
(i) The Company agrees to indemnify and hold harmless Triad, each of
its directors and officers and each Person who controls Triad or any such
Person, within the meaning of the Securities Act and the Exchange Act, against
any and all losses, claims, damages or liabilities to which Triad or any such
Person may become subject under the Securities Act, the Exchange Act or
otherwise, and shall reimburse Triad and any such director, officer or
controlling Person for any legal or other expenses incurred by such party or any
such director, officer or controlling person in connection with investigating or
defending any such loss, claim, damages, liability or action, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Prospectus, the Registration Statement and the
Company Information in the Prospectus Supplement, and any amendment or
supplement to the Prospectus, or the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. This indemnity agreement shall be in addition to any liability
which the Company may otherwise have.
(j) Promptly after receipt by an indemnified party under this SECTION
3.3 of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
this SECTION 3.3, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party shall not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent such indemnifying party
has been prejudiced thereby. If any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party). After notice from the indemnifying
party to such indemnified party of its election to assume the
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defense thereof, the indemnifying party shall not be liable to such indemnified
party under this SECTION 3.3 for any legal or otherwise expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability of any claims that are the subject
matter of such action.
(k) If the indemnification provided for in this SECTION 3.3(h) and (i)
is unavailable or insufficient to hold harmless any Company Indemnified Party
under SUBSECTION (h) above or Triad, each of their directors and officers and
each Person who controls Triad or any such Person, within the meaning of the
Securities Act and the Exchange Act, under SUBSECTION (i) above, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in SUBSECTION (h) OR (i) above, as applicable, (a) in such
proportion as is appropriate to reflect the relative benefits received by
Company on the one hand and Triad on the other from the offering of the offered
Notes or (b) if the allocation provided by CLAUSE (a) above is not permitted by
applicable law in such proportion as is appropriate to reflect not only the
relative benefits referred to in CLAUSE (a) above but also the relative fault of
Company on the one hand and Triad on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by Company on the one hand and Triad on the other shall be deemed to be
in the same proportion as the total net proceeds from the sale of the Trust
Property (before deducting expenses) received by Triad bear to the total
underwriting discounts and commissions received by the Underwriter. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
Indemnified Parties or Triad and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
SUBSECTION (k) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject to this SUBSECTION (k). Notwithstanding
the provisions of this SUBSECTION (k), except with respect to liabilities of the
Company resulting directly from material misstatements or material omissions of
information contained in the Registration Statement or the Prospectus, the
Company shall not be required to pay any amount in excess of the amount by which
the total price at which the Notes underwritten by the Underwriter and
distributed to the public were offered to the public exceeds the amount of any
damages which the Company has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
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ARTICLE IV
COVENANTS OF TRIAD
SECTION 4.1. PROTECTION OF TITLE OF THE COMPANY AND THE TRUST.
(a) Triad shall execute, file, record and register such financing
statements and cause to be executed, filed, recorded and registered such
continuation and other statements or documents, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interests of the Company under this Agreement and any Subsequent Receivables
Purchase Agreement, and of the Trust and the Indenture Trustee under the
Indenture, the Sale and Servicing Agreement and any Subsequent Transfer
Agreement, in the Receivables and the Other Conveyed Property, and in the
proceeds thereof. Triad shall deliver (or cause to be delivered) to the Company,
the Owner Trustee. the Indenture Trustee and the Insurer file-stamped copies of,
or filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recordation, registration or filing.
If Triad fails to perform its obligations under this subsection, the Company,
the Owner Trustee, the Insurer or the Indenture Trustee may do so, at the
expense of Triad.
(b) Triad shall not change its name, identity or corporate structure in
any manner that would make any financing statement or continuation statement
filed by Triad (or by the Company, the Trust or the Indenture Trustee on behalf
of Triad) in accordance with SECTION 4.1(a) seriously misleading within the
meaning of the applicable provisions of the UCC or any title statute, unless
Triad shall have given the Company, the Owner Trustee, the Insurer and the
Indenture Trustee at least sixty (60) days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Triad shall give the Company, the Owner Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Indenture Trustee at least sixty (60) days prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement. Triad shall at all times maintain each office from which it
services Receivables and its principal executive office within the United States
of America.
(d) Triad, so long as Triad is 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
Collection Account in respect of such Receivable.
(e) Triad shall maintain its computer systems so that, from and after
the time of sale under this Agreement or any Subsequent Receivables Purchase
Agreement of the Receivables to the Company and the sale of the Receivables by
the Company to the Trust, Triad's master computer records (including any backup
archives) that refer to any Receivable indicate clearly that such Receivable is
owned by the Trust. Indication of the Trust's ownership of a Receivable shall
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be deleted from or modified on Triad's computer systems when, and only when, the
Receivable has been paid in full or purchased.
(f) If at any time Triad proposes to sell, grant a security interest
in, or otherwise transfer any interest in automotive receivables (other than the
Receivables) to any prospective purchaser, lender or other transferee, Triad
shall give to such prospective purchaser, lender or other transferee computer
tapes, records or print-outs (including any restored from backup archives) that,
if they shall refer in any manner whatsoever to any Receivable, indicate clearly
that such Receivable is owned by the Trust (unless such Receivable has been paid
in full or purchased).
(g) Promptly after taking the foregoing actions described in SECTIONS
4.1(b) or (c), Triad shall deliver to the Indenture Trustee, the Owner Trustee
and the Insurer an Opinion of Counsel either (i) stating that, in the opinion of
such counsel, all financing statements and continuation statements have been
executed and filed that are necessary to preserve and protect the interest of
the Indenture Trustee in the Trust Property, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) stating that, in the opinion of such counsel, no such action is
necessary to preserve and protect such interest.
SECTION 4.2. OTHER LIENS OR INTERESTS.
Triad shall not (i) create, incur or suffer to exist, or agree to
create, incur or suffer to exist, or consent to cause or permit in the future
(upon the happening of a contingency or otherwise) the creation, incurrence or
existence of any Lien on, or restriction on transferability of, the Receivables,
except for the Lien in favor of the Company, the Lien in favor of the Trust, the
Lien in favor of the Indenture Trustee for the benefit of the Noteholders and
the Insurer and the restrictions on transferability imposed by the Related
Documents or (ii) sign or file under the UCC of any jurisdiction any financing
statement that names Triad or the Company as a debtor, or sign any security
agreement authorizing any secured party thereunder to file any such financing
statement, with respect to the Receivables, except in each case any such
instrument solely securing the rights and preserving the Lien of the Company,
the Lien of the Trust and the Lien of the Indenture Trustee, for the benefit of
the Noteholders and the Insurer or as otherwise permitted under this Agreement
or the Related Documents. Triad shall defend the right, title and interest of
Purchaser and the Indenture Trustee on behalf of the Noteholders and the Insurer
in and to the Receivables and Other Conveyed Property against all claims of
third parties obtaining through or under the Seller.
SECTION 4.3. COSTS AND EXPENSES. In connection with the transactions
contemplated under this Agreement and the other Related Documents, Triad shall
promptly pay (or shall reimburse Company or any other Person to the extent that
Company or such other Person shall pay): (a) the cost of the qualification of
the Notes for offer and sale under the securities or Blue Sky laws (including
the reasonable fees and expenses of counsel for the Underwriter relating to the
preparation, reproduction and delivery of any Blue Sky Memorandum prepared in
connection with such qualification); (b) the fees of the Rating Agencies; (c)
any of the initial fees of Owner Trustee and Indenture Trustee and the
reasonable fees and disbursements of their counsel (which, in the case of
Indenture Trustee, are set forth a fee letter dated as of [ ]); (d) expenses
incurred in connection with printing (or otherwise reproducing) and delivering
this Agreement,
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the other Related Documents, the Prospectus, the Prospectus Supplement, any
amendment or supplement thereto, any preliminary prospectus and prospectus
supplement, the Notes and the Certificates; (e) fees and expenses relating to
the filing of documents with the commission (including all related filings under
Rule 424(b) of the Securities Act, all related filings on Form 8-K and periodic
reports under the Exchange Act) in connection with the transactions contemplated
hereby; (f) the shelf registration amortization fee (which fee shall equal
1/33rd of 1% times the aggregate principal amount of the offered Notes) paid in
connection with the issuance of offered Notes; (g) all accountant's fees
incurred in connection with the accountant's review of the Prospectus Supplement
and delivery of the letters described in SECTION 2.3, and (h) the reasonable
fees and disbursements of counsel to the Company.
ARTICLE V
REPURCHASES OR REPLACEMENTS
SECTION 5.1. REPURCHASE OR REPLACEMENT OF RECEIVABLES UPON BREACH OF
WARRANTY.
Upon the occurrence of a Triad Repurchase Event, Triad shall, unless
such breach shall have been cured in all material respects, repurchase or
replace the related Receivable in accordance with the Sale and Servicing
Agreement from the Company as of the Accounting Date in the first complete
Collection Period following its discovery or its receipt of notice of any such
Triad Repurchase Event and, on or before the Determination Date following such
Accounting Date, Triad shall deposit or cause to be deposited the Purchase
Amount into the Collection Account pursuant to SECTION 4.5 of the Sale and
Servicing Agreement. In no event shall Triad satisfy the obligations specified
in the foregoing sentence with Replacement Receivables, if after giving effect
to such replacement, either (i) as of the date of such replacement, more than 20
Receivables in the aggregate since the Closing Date are Replacement Receivables,
or (ii) the sum of the Principal Balances transferred since the Closing Date of
the Replacement Receivables is greater than 0.30 percent of the Original Pool
Balance. The obligation of Triad to repurchase or replace any Receivable as to
which a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against Triad for such breach available to
the Company, the Issuer, the Insurer, the Backup Servicer, the Indenture Trustee
on behalf of the Noteholders or the Noteholders; PROVIDED, HOWEVER, Triad shall
indemnify the Indenture Trustee and the Backup Servicer, and each of their
respective officers, directors, employees and agents, as well as the Trust, the
Insurer and the Noteholders against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. The provisions of
this Section 5.1 are intended to grant the Issuer and the Indenture Trustee a
direct right against Triad to demand performance hereunder. Upon receipt of the
Purchase Amount or a Replacement Receivable and written instructions from the
Servicer, the Indenture Trustee shall release to Triad or any of Triad's
designees, the related Receivable File and shall execute and deliver all
reasonable instruments of transfer or assignment, without recourse, as are
prepared by Triad and delivered to the Custodian and necessary to vest in Triad,
or such designee, title to the Receivable. The Custodian shall be under no duty
or obligation (a) to inspect, review or examine any documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose
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or that they are other than what they purport to be on their face or (b) to
determine whether there is a breach of any of the Seller's representations and
warranties. Notwithstanding any other provision of this Agreement or the Sale
and Servicing Agreement to the contrary, the obligation of Triad under this
SECTION 5.1 shall not terminate upon the termination of Triad as Servicer under
the Sale and Servicing Agreement and shall be performed in accordance with the
terms hereof notwithstanding the failure of the Servicer or the Company to
perform any of their respective obligations with respect to such Receivables
under the Sale and Servicing Agreement.
SECTION 5.2. REASSIGNMENT OF PURCHASED RECEIVABLES.
Upon deposit in the Collection Account of the Purchase Amount of any
Receivables repurchased by Triad or deposit with the Indenture Trustee of a
Replacement Receivable under SECTION 5.1, the Company, the Owner Trustee and the
Indenture Trustee shall take any and all actions reasonably requested by Triad,
at the expense of Triad, to assign, without recourse, representation or
warranty, to Triad all of the Company's, the Indenture Trustee's and the Trust's
right, title and interest in and to such Receivables, such assignment being an
assignment outright and not for security; and Triad shall thereupon own such
Receivables and all such Other Conveyed Property, free of any further obligation
to the Company, the Trust, the Indenture Trustee or the Noteholders with respect
thereto. The Company shall take any and all actions reasonably requested by
Triad, at the expense of Triad, to release its security interest in each such
Receivable and in the Other Conveyed Property with respect thereto. If,
following the reassignment of a Purchased Receivable, or a replaced Receivable
in any enforcement suit or legal proceeding, it is held that Triad may not
enforce any such Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce the Receivable, the Company shall, at
the expense of Triad, take such steps as Triad deems reasonably necessary to
enforce the Receivable, including bringing suit in the Company's name.
SECTION 5.3. WAIVERS.
No failure or delay on the part of the Company or the Trust, as
purchaser and assignee of the Company, in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other or future
exercise thereof or the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. LIABILITY OF TRIAD.
Triad shall be liable in accordance herewith only to the extent of the
obligations of this Agreement specifically undertaken by Triad and its
representations and warranties.
SECTION 6.2. MERGER OR CONSOLIDATION OF TRIAD.
Triad shall not merge or consolidate with any other Person or permit
any other Person to become the successor to all or substantially all of Triad's
business or assets unless, after such
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merger, consolidation or succession, the successor or surviving entity shall be
capable of fulfilling Triad's duties hereunder. Triad shall not merge or
consolidate with any other Person or permit any other Person to become its
successor without the prior written consent of the Insurer, which consent shall
not be unreasonably withheld. Any such successor corporation shall execute an
agreement of assumption of every obligation of Triad under its Related Documents
and, whether or not such assumption agreement is executed, shall be the
successor to Triad 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). Triad shall provide prompt notice of any merger, consolidation or
succession pursuant to this SECTION 6.2 to the Owner Trustee, the Indenture
Trustee, each Rating Agency and, so long as an Insurer Default shall not have
occurred and be continuing, the Insurer. Notwithstanding the foregoing, Triad
shall not merge or consolidate with any other Person or permit any other Person
to become a successor to Triad's business, unless: (i) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
SECTION 3.1 shall have been breached in any material respect (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction), and no event, that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default shall have
occurred and be continuing; (ii) Triad shall have delivered to the Owner
Trustee, the Indenture Trustee, each Rating Agency and, so long as an Insurer
Default shall not have occurred and be continuing, the Insurer, an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this SECTION
6.2 and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with; and (iii) Triad shall have
delivered to the Owner Trustee, the Indenture Trustee, the Insurer and each
Rating Agency an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interests of the Company, the Trust and the Indenture Trustee, in the
Receivables or (B) no such action shall be necessary to preserve and protect
such interest.
SECTION 6.3. LIMITATION ON LIABILITY OF TRIAD AND OTHERS.
Triad and any director or officer or employee or agent of Triad may
rely in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. Triad shall not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.4. CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED
PROPERTY TO THE TRUST.
Triad acknowledges that the Company intends, pursuant to the Sale and
Servicing Agreement and any Subsequent Transfer Agreement, to convey the
Receivables and the Other Conveyed Property, together with its respective rights
under this Agreement and any Subsequent Receivables Purchase Agreement, to the
Trust on the date hereof and any Subsequent Transfer Date, as the case may be.
Triad acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of
Triad
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contained in this Agreement, and the rights of the Company hereunder, are
intended to benefit the Indenture Trustee, the Trust, the Insurer and the
Noteholders. In furtherance of the foregoing, Triad covenants and agrees to
perform its duties and obligations hereunder in accordance with the terms hereof
for the benefit of the Indenture Trustee, the Trust, the Insurer and the
Noteholders and that, notwithstanding anything to the contrary in this
Agreement, Triad shall be directly liable to the Indenture Trustee ,the Insurer
and the Trust (notwithstanding any failure by the Servicer, the Backup Servicer
or the Company to perform its duties and obligations hereunder or under the Sale
and Servicing Agreement), and that the Owner Trustee and the Indenture Trustee,
may enforce the duties and obligations of Triad under this Agreement against
Triad for the benefit of the Trust, the Insurer or the Noteholders,
respectively.
SECTION 6.5. AMENDMENT.
(a) This Agreement may be amended by Triad and the Company with the
prior written consent of the Insurer (so long as an Insurer Default shall not
have occurred and be continuing) but without the consent of the Indenture
Trustee, the Owner Trustee any of the Certificateholder or the Noteholders, (i)
to cure any ambiguity, (ii) to correct or supplement any provisions in this
Agreement or (iii) for the purpose of adding any provision to or changing in any
manner or eliminating any provision of this Agreement or of modifying in any
manner the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall
not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee, the
Indenture Trustee and the Rating Agency, adversely affect in any material
respect the interests of the Noteholders.
(b) This Agreement may also be amended from time to time by Triad and
the Company with the prior written consent of the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) and with the consent of a
Note Majority (which consent of any Holder of a Note given pursuant to this
SECTION 6.5(b) or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such Note and
of any Note issued upon the transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon the Note), for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Noteholders; PROVIDED, HOWEVER, that the Rating Agency Condition shall have
been satisfied with respect to any such amendment prior to the execution
thereof; and PROVIDED, FURTHER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables, payments that shall be required to be
made on any Note or the Class A Interest Rate or (ii) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent under
SECTION 6.5(a) or (b), Triad shall furnish five (5) days prior written
notification of the substance of such amendment or consent to the Rating Agency.
(d) Promptly after the execution of any such amendment or consent under
SECTION 6.5(b), the Indenture Trustee shall furnish written notification of the
substance of such amendment or consent to each Noteholder.
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(e) It shall not be necessary for the consent of Noteholders pursuant
to SECTION 6.5(b) to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable requirements as the Indenture Trustee may prescribe.
SECTION 6.6. 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 Company, at the following address: [ ], (b) in the case of the
Seller, at the following address: Triad Financial Corporation, 7711 Center
Avenue, Suite 100, Huntington Beach, California 92647, Telecopy No.: (714)
894-8617, (c) in the case of the Indenture Trustee, and for so long as the
Indenture Trustee is the Backup Servicer, the Backup Servicer, at the following
address: [ ], (d) in the case of the Trust or the Owner Trustee, at the
following address: [ ], with a copy to the Servicer and (e) in the case of the
Insurer, to [ ], (in each case in which failure on the part of the Insurer to
respond shall be deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention of each of
the General Counsel and the Head-Financial Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED"); (f) in the case of Moody's, to Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York,
New York 10007; and (g) in the case of S&P, to Standard & Poor's Ratings Group,
25 Broadway - 15th Floor, New York, New York 10004, Attention: Asset Backed
Surveillance Department; or at such other address as shall be designated by any
such party in a written notice to the other parties. Any notice required or
permitted to be mailed to a Noteholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Note Register,
and any notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the Noteholder
receives such notice.
SECTION 6.7. MERGER AND INTEGRATION.
Except as specifically stated otherwise herein, this Agreement, the
Sale and Servicing Agreement and the Related Documents set forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement, the
Sale and Servicing Agreement and the Related Documents. This Agreement may not
be modified, amended, waived or supplemented except as provided herein.
SECTION 6.8. SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement.
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SECTION 6.9. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6.10. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts shall constitute but one and the same instrument.
SECTION 6.11. NONPETITION COVENANT.
Until one year and one day following the payment in full of all amounts
due in respect of the Notes, neither the Company nor Triad shall petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Company or the Trust
under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Company or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Company or the
Trust.
SECTION 6.12. ASSIGNMENT.
Notwithstanding anything to the contrary contained in this Agreement,
except as provided in SECTION 6.2, this Agreement may not be assigned by Triad
or the Company.
SECTION 6.13. THIRD-PARTY BENEFICIARIES. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Agreement, and shall be entitled to rely upon and directly enforce such
provisions of this Agreement so long as no Insurer Default shall have occurred
and be continuing. Except as expressly stated otherwise herein, any right of the
Insurer to direct, appoint, consent to, approve or, or take any action under
this Agreement, shall be a right exercised by the Insurer in its sole and
absolute discretion. The Insurer may disclaim any of its rights and powers under
this Agreement (but not its duties and obligations under the Note Policy) upon
delivery of a written notice to the Indenture Trustee. Nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Property or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereof and their respective successors and assigns, and shall
inure to the benefit of and be enforceable by the parties hereof and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of
the Trust, the Indenture Trustee and the Noteholders and their respective
permitted successors
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and assigns, if any. Any request, notice, direction, consent, waiver or other
instrument or action by any Noteholder shall bind its successors and assigns.
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IN WITNESS WHEREOF, the parties have caused this Receivables Purchase
Agreement to be duly executed by their respective officers, effective as of the
day and year first above written.
TRIAD FINANCIAL CORPORATION, as Seller
By:
------------------------------------------
Name:
Title:
[ ] as Purchaser
By:
------------------------------------------
Name:
Title:
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SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Indenture Trustee.
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Triad hereby makes the following representations and warranties as to
the Receivables. Unless otherwise specified, such representations and warranties
are made as of the Closing Date with respect to Initial Receivables and as of
the related Subsequent Transfer Date with respect to Subsequent Receivables.
Such representations and warranties shall survive the sale, transfer, and
assignment of the Receivables by the Purchaser.
1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business and such Dealer had all necessary licenses and
permits to originate Receivables in the state where such Dealer was located, was
fully and properly executed by the parties thereto, was purchased, directly or
indirectly, by Triad using and materially conforming to Triad's credit policies,
from such Dealer and a Correspondent under an existing Dealer Agreement or
Correspondent Agreement or pursuant to a Dealer Assignment between the Dealer
and Triad or a Correspondent Assignment between the Correspondent and Triad and
was validly assigned by such Dealer or Correspondent to Triad pursuant to such
Assignment, (B) contains customary and enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for realization against
the collateral security, (C) is a Receivable which provides for level monthly
payments (provided that the period in the first Collection Period and the
payment in the final Collection Period of the Receivable may be minimally
different from the normal period and level payment) which, if made when due,
shall fully amortize the Amount Financed over the original term and (D) has not
been amended or collections with respect to which waived, other than as
evidenced in the Receivable File relating thereto.
2. FRAUD OR MISREPRESENTATION. Each Receivable was originated
by a Dealer and was sold by the Dealer to (i) Triad or (ii) a Correspondent,
which sold such Receivable to Triad, and Triad sold such Receivable to the
Company in any such case, without any fraud or misrepresentation on the part of
such Dealer.
3. COMPLIANCE WITH LAW. 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
Moss-Magnuson Warranty Act, the Federal Reserve Board's Regulations "B" and "Z",
the Soldiers' and Sailors' Civil Relief Act of 1940, each applicable state Motor
Vehicle Retail Installment Sales Act, and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer credit
laws and equal credit opportunity and disclosure laws) in respect of the
Receivables and the Financed Vehicles, have been complied with in all material
respects, and each Receivable and the sale of the Financed Vehicle evidenced by
each Receivable complied at the time it was originated or made and now complies
in all material respects with all applicable legal requirements.
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4. ORIGINATION. Each Receivable was originated in the United
States.
5. BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon, enforceable
by the holder thereof in accordance with its terms, except (A) as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as such
Receivable may be modified by the application after the Cutoff Date of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to
each Receivable had full legal capacity to execute and deliver such Receivable
and all other documents related thereto and to grant the security interest
purported to be granted thereby.
6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of
America, any State or municipality, or any agency, department, subdivision or
instrumentality thereof.
7. OBLIGOR BANKRUPTCY. At the related Cutoff Date, no Obligor
had been identified on the records of Triad as being the subject of a current
bankruptcy proceeding.
8. SCHEDULE OF RECEIVABLES. The information set forth in the
Schedule of Receivables has been produced from the electronic ledger and was
true and correct in all material respects as of the close of business on the
related Cutoff Date.
9. MAKING RECORDS. By the Closing Date or Subsequent Transfer
Date, as applicable, the Seller will have caused the portions of the electronic
ledger relating to the Receivables to be clearly and unambiguously marked to
show that the Receivables have been sold to the Company by the Seller and resold
by the Company to the Trust in accordance with the terms of the Sale and
Servicing Agreement.
10. COMPUTER TAPE. The Computer Tape made available by the
Seller to the Trust on the Closing Date or Subsequent Transfer Date, as
applicable, was complete and accurate as of the related Cutoff Date and includes
a description of the same Receivables that are described in the Schedule of
Receivables.
11. ADVERSE SELECTION. No selection procedures believed to be
adverse to the Noteholders or the Insurer were utilized in selecting the
Receivables from those receivables owned by the Seller which met the selection
criteria contained in the Sale and Servicing Agreement.
12. CHATTEL PAPER. The Receivables constitute chattel paper
within the meaning of the UCC.
13. ONE ORIGINAL. There is only one original executed copy of
each Receivable.
14. RECEIVABLE FILES COMPLETE. There exists a Receivable File
pertaining to each Receivable and such Receivable File contains (a) a fully
executed original of the Receivable,
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and (b) the original Lien Certificate or application therefor. The complete
Receivable File for each Receivable is in the possession of the Custodian.
15. RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the Lien of the related Receivable in
whole or in part. No terms of any Receivable have been waived, altered or
modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified as
a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such Receivable under the
Sale and Servicing Agreement (or pursuant to transfers of the Notes, if
applicable).
17. GOOD TITLE. Immediately prior to the conveyance of the
Receivables to the Trust pursuant to the Sale and Servicing Agreement or
Subsequent Transfer Agreement, as applicable, the Seller was the sole owner
thereof and had good marketable title thereto, free of any Lien and, upon
execution and delivery of the Sale and Servicing Agreement by the Seller, the
Trust shall have good and marketable title to and will be the sole owner of such
Receivables, free of any Lien. No Dealer or Correspondent has a participation
in, or other right to receive, proceeds of any Receivable. The Seller has not
taken any action to convey any right to any Person that would result in such
Person having a right to payments received under the related Insurance Policies
or the related Dealer Agreements or Dealer Assignments or Correspondent
Agreements or Correspondent Assignment, if applicable, or to payments due under
such Receivables.
18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
created or shall create a valid, binding and enforceable first priority security
interest in favor of the Seller in the Financed Vehicle. The Lien Certificate
and original certificate of title for each Financed Vehicle identify Triad, or
if a Lien Certificate is being applied for with respect to such Financed Vehicle
the Lien Certificate will be received within 180 days of the Closing Date or
Subsequent Transfer Date, as applicable, and will identify Triad the Seller
named as the original secured party under each Receivable as the holder of a
first priority security interest in such Financed Vehicle. With respect to each
Receivable for which the Lien Certificate has not yet been returned from the
Registrar of Titles, Triad has received written evidence from the related Dealer
that such Lien Certificate showing the Seller as the first lienholder has been
applied for and the Seller's security interest has been validly assigned by the
Seller to the Trust pursuant to the Sale and Servicing Agreement. Immediately
after the sale, transfer and assignment thereof by the Seller to the Trust, each
Receivable will be secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of the Indenture Trustee as
secured party, which security interest is prior to all other Liens upon and
security interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for taxes, labor or
materials affecting a Financed Vehicle). As of the related Cutoff Date, there
were no Liens or claims for taxes, work, labor or materials affecting a Financed
Vehicle which are or may be Liens prior or equal to the Liens of the related
Receivable.
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19. ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions required
to be taken or performed by any Person in any jurisdiction to give the Trust a
first priority perfected lien on, or ownership interest in, the Receivables and
the proceeds thereof and the Other Conveyed Property have been made, taken or
performed.
20. NO IMPAIRMENT. The Seller has not done anything to convey
any right to any Person that would result in such Person having a right to
payments due under the Receivable or otherwise to impair the rights of the
Trust, the Insurer, the Indenture Trustee, the Owner Trustee and the Noteholders
in any Receivable or the proceeds thereof.
21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to Triad with respect to such Receivable.
22. NO DEFENSES. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been asserted
or, to the best of Seller's knowledge, threatened with respect to any
Receivable.
23. NO DEFAULT. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days and other defaults that will not
have a material adverse affect on the ability of the Obligor to make, nor the
enforceability of Obligor's obligation to make, Contract Scheduled Payments and
will not have a material adverse effect on the validity or priority of the Lien
on the Financed Vehicle), and no condition exists or event has occurred and is
continuing that with notice, the lapse of time or both would constitute a
default, breach, violation or event permitting acceleration under the terms of
any Receivable, and there has been no waiver of any of the foregoing. As of the
related Cutoff Date, no Financed Vehicle had been repossessed by or at the
direction of Triad.
24. INSURANCE. At the time of a purchase of a Receivable by
Triad from a Dealer or a third party, each Financed Vehicle is required to be
covered by a comprehensive and collision insurance policy (i) naming Triad as
loss payee, (ii) insuring against loss and damage due to fire, theft, collision
and other risks generally covered by comprehensive and collision coverage and
(iii) subject to maximum deductibles of $500 for collision coverage and $500 for
comprehensive coverage. Each Receivable requires the Obligor to maintain
physical loss and damage insurance and each Receivable permits the holder
thereof to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to do so. No Financed Vehicle is insured under a
policy of force-placed insurance on the related Cutoff Date.
25. PAST DUE. At the related Cutoff Date, no Receivable was a
Receivable for which more than 10% of a Contract Scheduled Payment is 31 or more
days past due.
26. REMAINING PRINCIPAL BALANCE. At the related Cutoff Date,
the Principal Balance of each Receivable set forth in Schedule of Receivables is
true and accurate in all material respects.
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27. CERTAIN CHARACTERISTICS OF INITIAL RECEIVABLES. (A) Each
Initial Receivable had a remaining maturity, as of the Initial Cutoff Date, of
not more than [ ] months; (B) each Receivable had an original maturity of not
more than [ ] months; (C) each Initial Receivable had a remaining Principal
Balance as of the Initial Cutoff Date of at least $[ ] and not more than $[ ];
(D) each Initial Receivable has an Annual Percentage Rate of at least [ ]% and
not more than [ ]%; (E) no Initial Receivable was one for which more than [ ]%
of a Scheduled Payment was [ ] or more days past due as of the Initial Cutoff
Date; (F) no funds have been advanced by Triad, any Dealer, or Correspondent or
anyone acting on behalf of any of them in order to cause any Initial Receivable
to qualify under clause (E) above; and (G) not more than [ ]% of the aggregate
Principal Balance of such Receivables will be conveyed to Triad pursuant to
Correspondent Assignments, and not more than [ ]% of the aggregate Principal
Balance of such Receivables will be conveyed to Triad by any one Correspondent.
28. FULL AMORTIZATION. Each Receivable is a fully amortizing
Simple Interest Receivable, Rule of 78's Receivable or Actuarial Receivable
which provides for level monthly payments which, if made when due, shall fully
amortize the Amount Financed over the original term.
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SCHEDULE C
LEGAL PROCEEDINGS
[ ]
C-1
