SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
- --------------------------------------------------------------------------------
Date of Report (Date of Earliest Event Reported) March 25, 1999
- --------------------------------------------------------------------------------
Asset Backed Securities Corporation
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
- --------------------------------------------------------------------------------
(State of Other Jurisdiction Of Incorporation)
333-64351 13-3354848
- --------------------------------------------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
11 Madison Avenue, New York, New York 10010
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (zip code)
(212) 325-1811
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if changed Since Last Report)
<PAGE>
Item 5. Other Events
The Registrant is filing final forms of the Exhibits
listed in Item 7(c) below.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Document Description
- ----------- --------------------
1.4 Underwriting Agreement, dated as of March 16, 1999, between Credit
Suisse First Boston Corporation and Asset Backed Securities
Corporation.
4.1.10 Indenture, dated as of March 1, 1999 between Triad Auto
Receivables Owner Trust 1999-1, as Issuer, and The Chase Manhattan
Bank, as Indenture Trustee.
4.4.11 Amended and Restated Trust Agreement, dated as of March 1, 1999,
among Asset Backed Securities Corporation, Triad Financial Special
Purpose Corporation II, a Delaware corporation, as initial
Certificateholder, Triad Financial Corporation and Wilmington
Trust Company, as Owner Trustee.
4.4.12 Note Guaranty Surety Bond, dated March 25, 1999 and delivered by
Financial Security Assurance Inc.
10.1.5 Receivables Purchase Agreement, dated as of March 1, 1999 between
Triad Financial Corporation, a California corporation, as Seller,
and Asset Backed Securities Corporation, as Purchaser.
10.2.4 Sale and Servicing Agreement, dated as of March 1, 1999, among
Triad Auto Receivables Owner Trust 1999-1, as Issuer, Asset Backed
Securities Corporation, Triad Financial Corporation, a California
corporation, as Servicer, and The Chase Manhattan Bank, as
Indenture Trustee as Backup Servicer.
10.3.3 Indemnification Agreement, dated as of March 1, 1999, among
Financial Security Assurance Inc., Triad Financial Corporation and
Credit Suisse First Boston Corporation.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASSET BACKED SECURITIES CORPORATION
(Registrant)
By: /s/ Philip Weingord
--------------------------------------
Name: Philip Weingord
Title: Vice President
Dated: April 9, 1999
<PAGE>
Exhibit Index
Exhibit No. Document Description
- ----------- --------------------
1.4 Underwriting Agreement, dated as of March 16, 1999, between Credit
Suisse First Boston Corporation and Asset Backed Securities
Corporation.
4.1.10 Indenture, dated as of March 1, 1999 between Triad Auto
Receivables Owner Trust 1999-1, as Issuer, and The Chase Manhattan
Bank, as Indenture Trustee.
4.4.11 Amended and Restated Trust Agreement, dated as of March 1, 1999,
among Asset Backed Securities Corporation, Triad Financial Special
Purpose Corporation II, a Delaware corporation, as initial
Certificateholder, Triad Financial Corporation and Wilmington
Trust Company, as Owner Trustee.
4.4.12 Note Guaranty Surety Bond, dated March 25, 1999 and delivered by
Financial Security Assurance Inc.
10.1.5 Receivables Purchase Agreement, dated as of March 1, 1999 between
Triad Financial Corporation, a California corporation, as Seller,
and Asset Backed Securities Corporation, as Purchaser.
10.2.4 Sale and Servicing Agreement, dated as of March 1, 1999, among
Triad Auto Receivables Owner Trust 1999-1, as Issuer, Asset Backed
Securities Corporation, Triad Financial Corporation, a California
corporation, as Servicer, and The Chase Manhattan Bank, as
Indenture Trustee as Backup Servicer.
10.3.3 Indemnification Agreement, dated as of March 1, 1999, among
Financial Security Assurance Inc., Triad Financial Corporation and
Credit Suisse First Boston Corporation.
TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1
$71,100,000 5.626% CLASS A-1 ASSET BACKED NOTES
$56,300,000 6.09% CLASS A-2 ASSET BACKED NOTES
ASSET BACKED SECURITIES CORPORATION
Company
UNDERWRITING AGREEMENT
March 16, 1999
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
1. Introduction. Asset Backed Securities Corporation, a Delaware
corporation (the "Company") has previously filed a registration statement with
the Securities and Exchange Commission relating to the issuance and sale from
time to time of asset backed notes and/or asset backed certificates. The Company
proposes to cause Triad Auto Receivables Owner Trust 1999-1 (the "Trust") to
issue and sell $71,100,000 principal amount of its 5.626% Asset Backed Notes
(the "Class A-1 Notes") and $56,300,000 principal amount of its 6.09% Class A-2
Asset Backed Notes (the "Class A-2 Notes" and together with the Class A-1 Notes,
the "Class A Notes"), to Credit Suisse First Boston Corporation (the
"Underwriter"). The Trust will also issue Class B Asset Backed Notes (the "Class
B Notes" and together with the Class A Notes, the "Notes") and Asset Backed
Certificates (the "Certificates" and together with the Notes, the "Securities")
which will be retained by Triad Financial Corporation ("Triad"). The assets of
the Trust will include, among other things, a pool of motor vehicle retail
installment sale contracts (the "Receivables") secured by new and used
automobiles and light trucks financed thereby (the "Financed Vehicles"), and
certain monies received thereunder on or after February 28, 1999 (the "Cutoff
Date"), and the other property and the proceeds thereof to be conveyed to the
Trust pursuant to the Sale and Servicing Agreement to be dated as of the Closing
Date (the "Sale and Servicing Agreement") among the Trust, the Company, Triad,
as servicer (the "Servicer") and the Indenture Trustee. Pursuant to the Sale and
Servicing Agreement, the Company will sell the Receivables to the Trust and the
Servicer will service the Receivables on behalf of the Trust. In addition,
pursuant to the Sale and Servicing Agreement, the Servicer will agree to perform
certain administrative tasks on behalf of the Trust imposed on the Trust under
the Indenture. The Notes will be issued pursuant to the Indenture to be dated as
of the Closing Date (as amended and supplemented from time to
<PAGE>
time, the "Indenture"), between the Trust and The Chase Manhattan Bank (the
"Trustee"). The Certificates, each representing a fractional undivided interest
in the Trust, will be issued pursuant to an Amended and Restated Declaration of
Trust (the "Trust Agreement") to be dated as the Closing Date, among the
Company, Triad and Wilmington Trust Company, as owner trustee (the "Owner
Trustee").
The Receivables were originated by dealers and then acquired by Triad
pursuant to its contract acquisition program. Triad will sell the Receivables to
the Company pursuant to the terms of a Receivables Purchase Agreement (the
"Receivables Purchase Agreement") dated as of February 28, 1999 between the
Company and Triad.
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in the preliminary prospectus or, if not defined therein, as
defined in the Sale and Servicing Agreement. As used herein, the term "Basic
Documents" refers to the Sale and Servicing Agreement, Indenture, Trust
Agreement, Receivables Purchase Agreement and Note Depository Agreement.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter as of the date hereof as follows:
(a) A registration statement on Form S-3 (No. 333-64351), including
a prospectus and such amendments thereto as may have been required to the
date hereof, relating to the Notes and the offering of asset backed notes
and asset backed certificates from time to time in accordance with Rule
415 under the Securities Act of 1933, as amended (the "Act"), has been
filed with the Securities and Exchange Commission (the "Commission") and
such registration statement, as amended, has become effective. For
purposes of this Agreement, "Effective Time" means the date and time as of
which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission and "Effective
Date" means the date of the Effective Time. Such registration statement,
as amended, and the prospectus and related prospectus supplement that the
Company has filed with the Commission pursuant to Rule 424(b) relating to
the sale of the Notes, as from time to time amended or supplemented
(including any prospectus relating to the Notes filed with the Commission
pursuant to Rule 424(b) of the rules and regulations of the Commission
promulgated under the Act (the "Rules and Regulations")), including all
documents incorporated therein by reference relating to the Notes, are
respectively referred to as the "Registration Statement" and the "Base
Prospectus"; provided, however, that a supplement to such Base Prospectus
prepared pursuant to Section 5(a) shall be deemed to have supplemented the
Base Prospectus only with respect to the offering of the Notes (any such
supplement for the Notes, together with the Base Prospectus, the
"Prospectus"). The conditions to the use of a registration statement on
Form S-3 under the Act, as set forth in the General Instructions to Form
S-3, and the conditions of Rule 415 under the Act, have been satisfied
with respect to the Registration Statement.
2
<PAGE>
(b) The Registration Statement, on the Effective Date, and the Base
Prospectus, as of the date of the related Prospectus conformed in all
material respects to the requirements of the Act and the Rules and
Regulations, and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and on the date
of this Agreement, at the time of the filing of the Prospectus pursuant to
Rule 424(b) and at the Closing Date such Base Prospectus conforms and will
conform in all material respects to the requirements of the Act and the
Rules and Regulations, and does not include and will not include, any
untrue statement of a material fact and does not omit and will not omit to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The Prospectus delivered to the Underwriter was identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system,
except to the extent permitted by Regulation S-T. The two immediately
preceding sentences do not apply to statements or omissions from either of
such documents based upon written information (including Computational
Materials (as such term is defined in Section 8(a)) furnished to the
Company by any Underwriter specifically for use therein.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own its assets and conduct its
business as described in the Prospectus, is duly qualified as a foreign
corporation in good standing in all jurisdictions in which the ownership
or lease of its property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the Company, and is conducting its business
so as to comply in all material respects with the applicable statutes,
ordinances, rules and regulations of the jurisdictions in which it is
conducting business.
(d) The Basic Documents conform, or will conform as of the Closing
Date, to the description thereof contained in the Registration Statement
and the Prospectus. The Notes, when duly and validly executed by the
Trustee, authenticated and delivered in accordance with the Indenture, and
delivered and paid for pursuant hereto will be validly issued and
outstanding and entitled to the benefits of the Indenture. The
Certificates, when duly and validly executed by the Owner Trustee,
authenticated and delivered in accordance with the Trust Agreement will be
validly issued and outstanding and entitled to the benefits of the Trust
Agreement.
(e) The execution and delivery by the Company of this Agreement and
the Basic Documents to which it is a party are within the corporate power
of the Company and have been, or will have been on the Closing Date, duly
authorized by all necessary corporate action on the part of the Company;
and neither the execution and delivery by the Company of such instruments,
nor the consummation by the Company of the transactions herein or therein
contemplated, nor the compliance by the Company with the provisions hereof
or thereof, will (i) conflict with or result in a breach of, or constitute
a default under, any of the provisions of the certificate of incorporation
or by-laws of the Company, (ii) conflict with any of the provisions of any
law, governmental rule, regulation, judgment,
3
<PAGE>
decree or order binding on the Company or its properties, (iii) conflict
with any of the provisions of any indenture, mortgage, contract or other
instrument to which the Company is a party or by which it is bound, or
(iv) result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument.
(f) At the date thereof, the Basic Documents to which the Company is
a party will constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with their terms,
subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other similar laws affecting
creditors' rights generally from time to time in effect, and to general
principles of equity.
(g) All approvals, authorizations, consents, orders or other actions
of any person, corporation or other organization, or of any court,
governmental agency or body or official (except with respect to the state
securities or Blue Sky laws of various jurisdictions), required in
connection with the valid and proper authorization, issuance and sale of
the Class A Notes pursuant to this Agreement and the Basic Documents has
been or will be taken or obtained on or prior to the Closing Date.
(h) The Company's assignment and delivery of the Receivables to the
Trust on the Closing Date will vest in the Trust all the Triad's right,
title and interest therein, or will result in a first priority perfected
security interest therein, in either case subject to no prior lien. The
Trust's assignment of the Collateral to the Trustee pursuant to the
Indenture will vest in the Trustee, for the benefit of the Noteholders, a
first priority perfected security interest therein, subject to no prior
lien.
(i) At the Closing Date, the Receivables included in the Trust will
meet the criteria for selection described in the Prospectus, and will
conform in all material respects to the representations and warranties
with respect thereto set forth in the Receivables Purchase Agreement and
assigned to the Trust pursuant to the Sale and Servicing Agreement.
(j) The Trust is not an "investment company" and is not required to
be registered as an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").
3. Purchase, Sale and Delivery of Class A Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to cause the Trust to
sell to the Underwriter, and the Underwriter agrees, to purchase from the Trust,
the principal amount of each class of Class A Notes set forth opposite the name
of the Underwriter on Schedule I hereto at a purchase price equal to "Price %"
as specified on Schedule II hereto.
The Company agrees to cause the Trust to deliver the Class A Notes
to the Underwriter, against payment of the purchase price to or upon the order
of the Company by wire
4
<PAGE>
transfer or check in Federal (same day) Funds, at the office of Dechert Price &
Rhoads, at 10:00 a.m., New York time on March 25, 1999, or at such other time
not later than seven full business days thereafter as the Underwriter and the
Company, on behalf of the Trust, determine, such time being herein referred to
as the "Closing Date." The Class A Notes to be so delivered will be initially
represented by one or more Class A Notes registered in the name of Cede & Co.,
the nominee of The Depository Trust Company ("DTC"). The interests of beneficial
owners of the Class A Notes will be represented by book entries on the records
of DTC and participating members thereof. Definitive Notes will be available
only under the limited circumstances specified in the Basic Documents.
4. Offering by Underwriter. It is understood that the Underwriter proposes
to offer the Class A Notes for sale to the public (which may include selected
dealers), on the terms set forth in the Prospectus.
5. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) Immediately following the execution of this Agreement, the
Company will prepare a supplement to the Base Prospectus setting forth the
amount of Class A Notes and the terms thereof not otherwise specified in
the Base Prospectus, the price at which such Class A Notes are to be
purchased by the Underwriter, from the Company, either the initial public
offering price or the method by which the price at which such Class A
Notes are to be sold will be determined, the selling concessions and
reallowances, if any, and such other information as the Underwriter and
the Company deem appropriate in connection with the offering of such Class
A Notes, but the Company will not file, for so long as the delivery of a
Prospectus is required in connection with the offering or sale of such
Class A Notes, any amendments to the Registration Statement as in effect
with respect to such Class A Notes, or any amendments or supplements to
the related Prospectus, unless it shall first have delivered copies of
such amendments or supplements to the Underwriter, or if the Underwriter
shall have reasonably objected thereto promptly after receipt thereof, the
Company will, during such period, immediately advise the Underwriter or
its counsel (i) when notice is received from the Commission that any
post-effective amendment to the Registration Statement has become or will
become effective and (ii) of any order or communications suspending or
preventing, or threatening to suspend or prevent, the offer and sale of
the Class A Notes or of any proceedings or examinations that may lead to
such an order or communication, whether by or of the Commission or any
authority administering any state securities or Blue Sky law, as soon as
the Company is advised thereof, and will use its best efforts to prevent
the issuance of any such order or communication and to obtain as soon as
possible its lifting, if issued.
(b) If, at any time when a Prospectus relating to the Class A Notes
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with
the Act or the Rules and
5
<PAGE>
Regulations, the Company will promptly prepare and file with the
Commission, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance; provided,
however, that the Company will not be required to file any such amendment
or supplement with respect to any Computational Materials, Structural Term
Sheets (each as defined in Section 8 below) or Collateral Term Sheets (as
defined in Section 9 below) incorporated by reference in the Prospectus
other than any amendments or supplements of such Computational Materials
or Structural Term Sheets that are furnished to the Company by the
Underwriter pursuant to Section 8(a) hereof or any amendments or
supplements of such Collateral Term Sheets that are furnished to the
Company by the Underwriter pursuant to Section 9(a) hereof which are
required to be filed in accordance therewith.
(c) The Company will cause any Computational Materials and any
Structural Term Sheets with respect to the Class A Notes that are
delivered by the Underwriter to the Company pursuant to Section 8 to be
filed with the Commission on a Current Report on Form 8-K (a "Current
Report") pursuant to Rule 13a-11 under the Exchange Act in accordance with
Section 10 on the business day immediately following the date on which
this Agreement is executed and delivered. The Company will cause any
Collateral Term Sheet with respect to the Class A Notes that is delivered
by the Underwriter to the Company in accordance with the provisions of
Section 9 to be filed with the Commission on a Current Report pursuant to
Rule 13a-11 under the Exchange Act in accordance with Section 10 on the
business day immediately following the day on which such Collateral Term
Sheet is delivered to counsel for the Company by an Underwriter prior to
10:30 a.m. New York time. In addition, if at any time prior to the
availability of the related Prospectus, the Underwriter has delivered to
any prospective investor a subsequent Collateral Term Sheet that reflects,
in the reasonable judgment of the Underwriter and the Company, a material
change in the characteristics of the Receivables from those on which a
Collateral Term Sheet with respect to the Class A Notes previously filed
with the Commission was based, the Company will cause any such Collateral
Term Sheet that is delivered by the Underwriter to the Company in
accordance with the provisions of Section 9 hereof to be filed with the
Commission on a Current Report in accordance with Section 10. Each such
Current Report shall be incorporated by reference in the related
Prospectus and the related Registration Statement.
(d) The Company will cause the Trust to furnish or make available,
within a reasonable time after the end of each calendar year, to each
holder of a Class A Note (each, a "Noteholder") at any time during such
year, such information as the Company deems necessary or desirable to
assist Noteholders in preparing their federal income tax returns.
(e) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
documents and exhibits thereto or incorporated by reference therein), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents relating to the Class A Notes, in each case
as soon as available, and in such quantities as the Underwriter reasonably
requests.
6
<PAGE>
(f) The Company will arrange for the qualification of the Class A
Notes for sale and the determination of their eligibility for investment
under the laws of such jurisdictions as the Underwriter designates and
will continue such qualifications in effect so long as required for the
distribution of the Class A Notes; provided, however, that neither the
Company, Triad, nor the Trust shall be required to do business in any
jurisdiction where it is now not qualified or to take any action which
would subject it to general or unlimited service of process in any
jurisdiction in which it is now not subject to service of process.
(g) The Company will, while the Class A Notes are outstanding,
furnish to the Underwriter, and upon request of the Underwriter,
information with respect to the Trust or the Receivables, as the
Underwriter may reasonably request, including but not limited to
information necessary or appropriate to the maintenance of a secondary
market in the Class A Notes.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement and will reimburse the Underwriter
for any expenses (including fees and disbursements of its counsel)
incurred by them in connection with the offering and the qualification of
the Class A Notes and determination of their eligibility for investment
under the laws of such jurisdictions as the Representative may designate
and the reproduction of memoranda relating thereto, for any fees charged
by investment rating agencies for the rating of the Class A Notes and, to
the extent previously agreed upon with the Representative, the expenses
incurred in distributing any preliminary prospectuses, the Prospectus or
any amendments or supplements thereto to the Underwriter.
(i) The Company will file, or cause the Trustee to file on behalf of
the Trust, on a timely and complete basis, all documents that are required
by the Trust with the Commission pursuant to Sections 13, 14 or 15(d) of
the Exchange Act.
6. Conditions to the Obligations of the Underwriter. The obligations of
the Underwriter to purchase and pay for the Class A Notes subject to this
Agreement will be subject to the accuracy of the representations and warranties
on the part of the Company as of the date hereof and the Closing Date, to the
accuracy of the statements of the Company made pursuant to the provisions
thereof, to the performance by the Company in all material respects of its
obligations hereunder and to the following additional conditions precedent:
(a) The Underwriter shall have received letters dated the date of
this Agreement, in form and substance acceptable to the Underwriter and
its counsel, prepared by independent certified public accountants
acceptable to the Underwriter and its counsel, (i) regarding the numerical
information contained in the Prospectus and (ii) relating to certain
agreed upon procedures as specified by the Underwriter.
(b) The Underwriter shall have received a copy of the Prospectus.
7
<PAGE>
(c) All actions required to be taken and all filings required to be
made by the Company under the Act prior to the sale of the Class A Notes
shall have been duly taken or made; and prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted, or to the knowledge of the Company or the Underwriter, shall
be contemplated by the Commission.
(d) The Class A Notes shall be rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Group, a
division of The McGraw Hill Companies, Inc. ("S&P" and, together with
Moody's, the "Rating Agencies").
(e) The Underwriter shall have received an opinion of counsel or
counsels for the Company, dated the Closing Date, substantially to the
effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business as a foreign
corporation in the State of New York.
(ii) The Company has requisite corporate power and corporate
authority to enter into this Agreement and the Basic Documents to
which it is a party.
(iii) The execution, delivery and performance of this
Agreement and the Basic Documents to which the Company is a party do
not conflict with the Certificate of Incorporation or the By-laws of
the Company and, to the knowledge of such counsel, (A) do not
conflict with or violate or constitute a material breach of, or
constitute a default under, any material written contract,
indenture, undertaking, or other agreement or instrument by which
the Company is now bound or to which it is now a party, and (B) do
not conflict with or violate any order, writ, injunction or decree
of any court or governmental authority against the Company.
(iv) This Agreement and the Basic Documents to which the
Company is a party have been authorized by all necessary corporate
action on the part of the Company and have been fully executed and
delivered by the Company.
(v) To the knowledge of such counsel, no authorization,
consent, approval of or other filing with any New York State or
federal governmental authority, that has not been obtained or made,
is required for the execution of, delivery of or performance by the
Company of any material obligation under the Basic Documents to
which it is a party or the Securities; provided however that, such
counsel need not express an opinion with respect to (i) any
authorization, consent, approval or any filing which may be required
under the Securities Act of 1933, as amended, or any state
securities laws, or (ii) the creation or perfection of any security
interest in the Receivables or the Financed Vehicles.
8
<PAGE>
(vi) The Registration Statement (except information of an
accounting, financial or statistical nature included therein, as to
which we do not express any opinion) and the Prospectus comply as to
form in all material respects with the requirements of the Act and
the rules and regulations promulgated thereunder. In passing upon
the form of the Registration Statement, such counsel may assume the
correctness and completeness of the statements made therein and take
no responsibility therefor, except insofar as such statements relate
to them.
(vii) The conditions to the use of a registration statement on
Form S-3 under the Act, as set forth in the General Instructions to
Form S-3, and the conditions of Rule 415 under the Act, have been
satisfied with respect to the Registration Statement.
(viii) The Registration Statement, on the day it became
effective, and the Base Prospectus, as of the date of the Prospectus
Supplement conformed in all material respects to the requirements of
the Act and the Rules and Regulations.
(f) The Underwriter shall have received an opinion of counsel to
Triad, addressed to the Underwriter and the Company, dated the Closing
Date, substantially to the effect that the statements in the Prospectus
Supplement do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need not render any opinion with respect to any financial or
statistical information contained therein).
(g) The Underwriter shall have received from Stroock & Stroock &
Lavan LLP, counsel for the Underwriter, such opinion or opinions, dated
the Closing Date, with respect to the existence of the Company, the
Registration Statement, the Prospectus and other related matters as the
Underwriter may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(h) The Underwriter shall have received a certificate or
certificates signed by such of the principal executive, financial and
accounting officers of the Company as the Underwriter may request, dated
the Closing Date, in which such officers, to the best of their knowledge
after reasonable investigation, shall state that (i) the representations
and warranties of the Company in this Agreement are true and correct; (ii)
the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to the Closing Date;
(iii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated; (iv) subsequent to the respective dates as
of which information is given in the Prospectus, and except as otherwise
set forth in or contemplated by the Prospectus, there has not been any
material adverse change in the general affairs, capitalization, financial
condition or results of operations of the Company; and (v) except as
otherwise stated in the Prospectus, there are no material actions, suits
or
9
<PAGE>
proceedings pleading before any court or governmental agency, authority or
body or, to their knowledge, threatened, affecting the Company or the
transactions contemplated by this Agreement.
(i) The Underwriter shall have received letters dated the Closing
Date from counsel rendering opinions to either Rating Agency, to the
effect that the Underwriter may rely upon their opinion to such rating
organization, as if such opinion were rendered to the Underwriter.
(j) The Underwriter shall have received copies of all documents,
certificates, legal opinions and accountant's letters delivered to the
Company pursuant to the Receivables Purchase Agreement in form and
substance satisfactory to the Underwriter and with the legal opinions and
accountant's letters addressed to the Underwriter or accompanied by a
letter entitling the Underwriter to rely thereon.
(k) The Company will furnish the Underwriter with such copies of
such other opinions, certificates, letters and documents as the
Underwriter reasonably requests.
7. Indemnification.
(a) The Company will indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of
the Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which the Underwriter or such
controlling person may become subject, under the Act or the Exchange Act
or other Federal or State statutory law or otherwise, 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 Registration Statement or
the Prospectus or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Underwriter and
each such controlling person for any legal or other expenses reasonably
incurred by the Underwriter and each such controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue
statement in or omission or alleged omission made in any of such documents
(A) in reliance upon and in conformity with written information furnished
to the Company by the Underwriter specifically for use therein, or (B) in
any Computational Materials or ABS Term Sheets furnished to prospective
investors by the Underwriter or any Current Report or any amendment or
supplement thereof, except to the extent that any untrue statement or
alleged untrue statement therein or omission therefrom results directly
from an error (a "Receivable Pool Error") in the information concerning
the characteristics of the Receivables furnished by Triad or the Company
to the Underwriter in writing or by electronic transmission that was used
in the preparation of either (x) any Computational Materials or ABS Term
Sheets (or amendments or supplements thereof) included in such Current
Report (or amendment or supplement
10
<PAGE>
thereof) or (y) any written or electronic materials furnished to
prospective investors on which the Computational Materials (or amendments
or supplements) were based. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act to the same extent as
the foregoing indemnities from the Company to the Underwriter, but only
with reference to (A) written information furnished to the Company by or
on behalf of the Underwriter specifically for use in the preparation of
the documents referred to in the foregoing indemnity (the "Underwriter
Information"), or (B) any Computational Materials or ABS Term Sheets (or
amendments or supplements thereof) delivered to prospective investors by
the Underwriter, including any Computational Materials or ABS Term Sheets
that are furnished to the Company by such Underwriter pursuant to Section
8 and incorporated by reference in such Registration Statement, or the
related Prospectus or any amendment or supplement thereof (except that no
such indemnity shall be available for any losses, claims, damages or
liabilities, or actions in respect thereof, resulting from any Receivable
Pool Error, other than a Receivable Pool Error that had been corrected and
such corrected information had been provided to the Underwriter);
provided, however, that in no event shall the Underwriter be liable to the
Company under this paragraph (b) with respect to the material described in
clause (B) in an amount in excess of the underwriting discounts and
commissions received by such Underwriter in connection with the offering
of the Class A Notes. This indemnity agreement will be in addition to any
liability that the Underwriter may otherwise have. The Company
acknowledges that, for purposes of this Section, the statements set forth
in the Prospectus regarding stabilization allocation of Class A Notes
between Underwriters and concessions, under the heading "Underwriting"
with respect to the Class A Notes to be purchased by the Underwriter,
constitute the only information furnished to the Company by the
Underwriter for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will 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. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will 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
11
<PAGE>
to assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 7 for any legal or other
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 on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) 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 (a) or
(b) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriter on
the other from the offering of the Class A Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
on the one hand and the Underwriter 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 the Company on the one hand and the
Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses)
received by the Company 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 or the Underwriter 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 (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified in connection with
investigating or defending any action or claim which is the subject to
this subsection (d). Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Class A Notes
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter 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 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Computational Materials and Structural Term Sheets.
12
<PAGE>
(a) The Underwriter agrees to provide to the Company no less than
two business days prior to the date on which the Prospectus is proposed to
be filed pursuant to Rule 424(b) under the Act, for the purpose of
permitting the Company to comply with the filing requirement set forth in
Section 5(a), all information (in such written or electronic format as
required by the Company) with respect to the Class A Notes which
constitutes "Computational Materials", as defined in the Commission's
No-Action Letter, dated May 20, 1994, addressed to Kidder, Peabody
Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and Kidder
Structured Asset Corporation, and the no-action letter dated May 27, 1994
issued by the Division of Corporation Finance of the Commission to the
Public Securities Association (together, the "Kidder Letters"), the filing
of which material is a condition of the relief granted in such letters
(such materials being the "Computational Materials"), and (ii) "Structural
Term Sheets" within the meaning of the no-action letter dated February 17,
1995 issued by the Division of Corporation Finance of the Commission to
the Public Securities Association (the "PSA Letter") and the filing of
such material is a condition of the relief granted in such letter (such
materials being the "Structural Term Sheets"), such delivery to be made
not later than 10:30 a.m. New York on the business day immediately
following the date on which such Computational Materials or Structural
Term Sheets was first delivered to a prospective investors in the Class A
Notes. Each delivery of Computational Materials and Structural Term Sheets
to the Company pursuant to this paragraph (a) shall be effected in
accordance with Section 10.
(b) The Underwriter represents and warrants to and agrees with the
Company, as of the date hereof and as of the Closing Date, that:
(i) the Computational Materials furnished to the Company by such
Underwriter pursuant to Section 8(a) constitute (either in original,
aggregated or consolidated form) all of the materials furnished to
prospective investors by such Underwriter prior to the time of
delivery thereof to the Company that are required to be filed with
the Commission with respect to the Class A Notes in accordance with
the Kidder Letters, and such Computational Materials comply with the
requirements of the Kidder Letters;
(ii) the Structural Term Sheets furnished to the Company by such
Underwriter pursuant to Section 8(a) constitute all of the materials
furnished to prospective investors by such Underwriter prior to the
time of delivery thereof to the Company that are required to be
filed with the Commission as "Structural Term Sheets" with respect
to the related Class A Notes in accordance with the PSA Letter, and
such Structural Term Sheets comply with the requirements of the PSA
Letter; and
(iii) on the date any such Computational Materials or Structural
Term Sheets with respect to the Class A Notes (or any written or
electronic materials furnished to prospective investors on which the
Computational Materials are based) were last furnished to each
prospective investor by such Underwriter and on the date of delivery
thereof to the Company pursuant to Section 8(a) and on the Closing
Date, such Computational Materials (or such other materials) or
Structural Term Sheets
13
<PAGE>
did not and will not include any untrue statement of a material fact
or, when read in conjunction with the Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Notwithstanding the foregoing, the Underwriter makes no representation or
warranty as to whether any Computational Materials or Structural Term Sheets (or
any written or electronic materials on which the Computational Materials are
based) included or will include any untrue statement resulting directly from any
Receivable Pool Error.
9. Collateral Term Sheets.
(a) Prior to the delivery of any "Collateral Term Sheet" within the
meaning of the PSA Letter, the filing of which material is a condition of
the relief granted in such letter (such material being the "Collateral
Term Sheets"), to a prospective investor in the Class A Notes, the
Underwriter shall notify the Company and its counsel by telephone of their
intention to deliver such materials and the approximate date on which the
first such delivery of such materials is expected to occur. Not later than
10:30 a.m., New York time, on the business day immediately following the
date on which any Collateral Term Sheet was first delivered to a
prospective investor in the Class A Notes, the Underwriter shall deliver
to the Company one complete copy of all materials provided by the
Underwriter to prospective investors in such Class A Notes which
constitute "Collateral Term Sheets." Each delivery of a Collateral Term
Sheet to the Company pursuant to this paragraph (a) shall be effected in
accordance with Section 10. (Collateral Term Sheets and Structural Term
Sheets are, together, referred to herein as "ABS Term Sheets.") At the
time of each such delivery, the Underwriter making such delivery shall
indicate in writing that the materials being delivered constitute
Collateral Term Sheets, and, if there has been any prior such delivery
with respect to the Class A Notes, shall indicate whether such materials
differ in any material respect from any Collateral Term Sheets previously
delivered to the Company with respect to the Class A Notes pursuant to
this Section 9(a) as a result of the occurrence of a material change in
the characteristics of the related Receivables.
(b) The Underwriter represents and warrants to and agrees with the
Company as of the date of this Agreement and as of the Closing Date, that:
(i) The Collateral Term Sheets furnished to the Company by
such Underwriter pursuant to Section 9(a) constitute all of the
materials furnished to prospective investors by such Underwriter
prior to time of delivery thereof to the Company that are required
to be filed with the Commission as "Collateral Term Sheets" with
respect to the Class A Notes in accordance with the PSA Letter, and
such Collateral Term Sheets comply with the requirements of the PSA
Letter; and
(ii) On the date any such Collateral Term Sheets with respect
to the Class A Notes were last furnished to each prospective
investor by such
14
<PAGE>
Underwriter and on the date of delivery thereof to the Company
pursuant to Section 9(a) and on the Closing Date, such Collateral
Term Sheets did not and will not include any untrue statement of a
material fact or, when read in conjunction with the Prospectus, omit
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
Notwithstanding the foregoing, the Underwriter makes no
representation or warranty as to whether any Collateral Term Sheet
included or will include any untrue statement or material omission
resulting directly from any Receivable Pool Error.
(c) If, at any time when a Prospectus relating to the Class A Notes
is required to be delivered under the Act, it shall be necessary to amend
or supplement the related Prospectus as a result of an untrue statement of
a material fact contained in any Collateral Term Sheets provided by the
Underwriter pursuant to this Section 9 or the omission to state therein a
material fact required, when considered in conjunction with the related
Prospectus, to be stated therein or necessary to make the statements
therein, when read in conjunction with the related Prospectus, not
misleading, or if it shall be necessary to amend or supplement any Current
Report relating to any Collateral Term Sheets to comply with the Act or
the rules thereunder, such Underwriter promptly will prepare and furnish
to the Company for filing with the Commission an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance. The Underwriter represents and warrants to the
Company, as of the date of delivery of such amendment or supplement to the
Company, that such amendment or supplement will not include any untrue
statement of a material fact or, when read in conjunction with the related
Prospectus, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, such Underwriter makes no representation or warranty as to
whether any such amendment or supplement will include any untrue statement
resulting directly from any Receivable Pool Error.
10. Delivery and Filing of Current Reports, Collateral Term Sheets,
Structural Term Sheets.
(a) Any Current Report, Collateral Term Sheet or Structural Term
Sheet that is required to be delivered by the Underwriter to the Company
hereunder shall be effected by the delivery of one copy to counsel for the
Company and, if requested, one copy in computer readable format to the
Financial Printer on or prior to 10:30 a.m. on the date so specified
herein.
(b) The Company shall cause its counsel or the Financial Printer to
file with the Commission any such Current Report, Collateral Term Sheet or
Structural Term Sheet within one business day immediately following the
delivery thereof pursuant to the preceding subsection. The Company shall
use its best efforts to cause any such Current Report, Collateral Term
Sheet or Structural Term Sheet to be so filed prior to 4:00 p.m.,
15
<PAGE>
New York time, on such business day and will promptly advise the
Representative of such filing.
11. Default of Underwriter. If the Underwriter defaults in its obligations
to purchase the Class A Notes hereunder and the aggregate principal amount of
such Class A Notes which such defaulting Underwriter agreed, but failed, to
purchase does not exceed 10% of the total principal amount of the Class A Notes,
the Company may make arrangements for the purchase of such Notes by other
persons, including any other underwriters. If the Underwriter so defaults and
the aggregate principal amount of Class A Notes with respect to which such
default or defaults occur is more than 10% of the total principal amount of the
Class A Notes and arrangements satisfactory to the Company for the purchase of
such Class A Notes by other persons are not made pursuant to this Agreement,
this Agreement will terminate without liability on the part of any other
underwriter, except as provided in Section 10. As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
12. Termination of the Obligations of the Underwriter. The obligations of
the Underwriter to purchase the Class A Notes on the Closing Date shall be
terminable by the Underwriter if at any time on or prior to the Closing Date (a)
any of the conditions set forth in Section 6 are not satisfied when and as
provided therein; (b) there shall have been the entry of a decree or order by a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to Triad or the Company, or for the winding up or
liquidation of the affairs of Triad or the Company; (c) there shall have been
the consent by Triad or the Company to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to Triad or the
Company or of or relating to substantially all of the property of Triad or the
Company; (d) any purchase and assumption agreement with respect to Triad or the
Company of substantially all of the assets and properties of Triad or the
Company shall have been entered into; or (e) a Termination Event (as defined
below) shall have occurred. The termination of the Company's obligations
hereunder shall not terminate the Company's rights hereunder or its right to
exercise any remedy available to it at law or inequity.
A "Termination Event" means the existence of any one or more of the
following conditions:
(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) subsequent to the execution and delivery of this Agreement,
there shall have occurred an adverse change in the condition, financial or
otherwise, in the earnings, regulatory situation or business prospects of Triad
or the Company reasonably determined by the Underwriter to be material; or
(c) subsequent to the date of this Agreement there shall have
occurred any of
16
<PAGE>
the following: (i) any suspension or limitation of trading in securities
generally on the New York Stock Exchange or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities of
Triad or its parent, if so listed 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 escalation of such
hostilities, or any calamity or crisis, if the effect of any such event
specified in this clause (iii) in the reasonable judgment of the Underwriter
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Class A Notes on the terms and in the manner contemplated in the
Prospectus.
13. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements by the
Company or its officers and of the Underwriter set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriter, the Company or any of its officers or directors or any
controlling person, and will survive delivery of and payment for Class A Notes.
If this Agreement is terminated pursuant to Section 9 or if for any reason
the purchase of the Class A Notes by the Underwriter is not consummated, the
Company shall remain responsible for the expenses to be paid or reimbursed by
them pursuant to Section 5(g), and the obligations of the Company and the
Underwriter pursuant to Sections 7 and 8 shall remain in effect.
14. Notices. All communications hereunder will be in writing and, if sent
to the Underwriter will be mailed, delivered or telegraphed and confirmed to the
Underwriter at 11 Madison Avenue, New York, New York 10010 or if sent the
Company, will be mailed, delivered or telegraphed and confirmed to it at 11
Madison Avenue, New York, New York 10010 Attention: President; provided,
however, that any notice to the Underwriter pursuant to Section 7 will be
mailed, delivered or telegraphed to such Underwriter at the address furnished by
it.
15. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Sections 7 and 8, and their
successors and assigns, and no other person will have any right or obligations
hereunder.
16. Applicable Law. THIS AGREEMENT WILL 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.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
17
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon, it will
become a binding agreement between the Company and the Underwriter, in
accordance with its terms.
Very truly yours,
ASSET BACKED SECURITIES CORPORATION,
as Company
By: ____________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION,
as Underwriter
By: ___________________________________
Name:
Title:
18
<PAGE>
SCHEDULE I
Initial Principal Balance of
----------------------------------
Underwriter Class A-1 Notes Class A-2 Notes
- ----------- --------------- ---------------
Credit Suisse First Boston Corporation.. $71,000,000 $56,300,000
Total................................... $71,000,000 $56,300,000
19
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Original
Principal Investor Investor Underwriting
Security Balance $ Price % Price $ Discount % Price to Seller Rate %
-------- --------- ------- ------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $71,100,000 100.000% $71,100,000 0.450% $70,780,050 5.626
Class A-2 Notes $56,300,000 99.986% $56,292,118 0.845% $55,816,383 6.090
</TABLE>
Total Price to Public: $127,392,118
Total Price to Seller: $126,596,433
Underwriting Discounts
and Commissions: $ 795,685
20
================================================================================
INDENTURE
between
TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1
and
THE CHASE MANHATTAN BANK
as Indenture Trustee
Dated as of March 1, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..........................3
Section 1.1. Definitions..............................................3
Section 1.2. Incorporation by Reference of Trust Indenture Act........9
Section 1.3. Rules of Construction....................................9
Section 1.4. Material Adverse Effect.................................10
ARTICLE II THE NOTES.........................................................10
Section 2.1. Form....................................................10
Section 2.2. Execution, Authentication and Delivery..................10
Section 2.3. Temporary Notes.........................................11
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............................................16
Section 2.9. Release of Collateral...................................16
Section 2.10. Book-Entry Notes........................................16
Section 2.11. Notices to Clearing Agency..............................17
Section 2.12. Definitive Notes........................................17
Section 2.13. Authenticating Agents...................................17
ARTICLE III COVENANTS........................................................21
Section 3.1. Payment of Principal and Interest.......................21
Section 3.2. Maintenance of Office or Agency.........................21
Section 3.3. Money for Payments To Be Held in Trust..................21
Section 3.4. Existence...............................................23
Section 3.5. Protection of the Trust Estate..........................23
Section 3.6. Opinion as to the Trust Estate..........................24
Section 3.7. Performance of Obligations, Servicing; of Receivables...24
Section 3.8. Negative Covenants......................................25
i
<PAGE>
Section 3.9. Annual Statement as to Compliance.......................26
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms.....26
Section 3.11. Successor or Transferee.................................29
Section 3.12. No Other Business.......................................29
Section 3.13. No Borrowing............................................29
Section 3.14. Servicer's Obligations..................................29
Section 3.15. Guarantees, Loans, Advances and Other Liabilities.......29
Section 3.16. Capital Expenditures....................................29
Section 3.17. Notice of Events of Default.............................29
Section 3.18 Restricted Payments.....................................30
Section 3.18. Further Instruments and Acts............................30
Section 3.19. Compliance with Laws....................................30
Section 3.20. Tax Treatment...........................................30
Section 3.21. Investment Company Act..................................30
Section 3.22. Liens...................................................30
Section 3.23. Conduct of Business.....................................30
ARTICLE IV SATISFACTION AND DISCHARGE........................................31
Section 4.1. Satisfaction and Discharge of Indenture.................31
Section 4.2 Application of Trust Money..............................33
Section 4.3. Payment of Moneys Held by Paying Agent..................33
ARTICLE V REMEDIES...........................................................33
Section 5.1. Events of Default.......................................33
Section 5.2. Acceleration of Maturity; Rescission and Annulment......35
Section 5.3. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee....................................36
Section 5.4. Remedies; Priorities....................................38
Section 5.5. Reserved................................................41
Section 5.6. Limitation of Suits.....................................41
Section 5.7. Unconditional Rights of Noteholders To Receive
Principal and Interest..................................42
Section 5.8. Restoration of Rights and Remedies......................42
Section 5.9. Rights and Remedies Cumulative..........................43
Section 5.10. Delay or Omission Not a Waiver..........................43
Section 5.11. Control by Noteholders..................................43
ii
<PAGE>
Section 5.12. Waiver of Past Default..................................43
Section 5.13. Undertaking for Costs...................................44
Section 5.14. Waiver of Stay or Extension Laws........................44
Section 5.15. Action on Notes.........................................44
Section 5.16. Performance and Enforcement of Certain Obligations......45
Section 5.17 Subrogation.............................................45
Section 5.18 Preference Claims.......................................45
ARTICLE VI THE INDENTURE TRUSTEE.............................................46
Section 6.1 Duties of the Indenture Trustee.........................46
Section 6.2. Rights of Indenture Trustee.............................49
Section 6.3. Individual Rights of the Indenture Trustee..............50
Section 6.4. Indenture Trustee's Disclaimer..........................50
Section 6.5. Notice of Defaults......................................50
Section 6.6. Reports by Indenture Trustee to the Holders.............50
Section 6.7. Compensation, Reimbursement and Indemnity...............50
Section 6.8. Replacement of the Indenture Trustee....................51
Section 6.9. Successor Indenture Trustee by Merger...................53
Section 6.10. Appointment of Co-Trustee or Separate Trustee...........53
Section 6.11. Eligibility; Disqualification...........................55
Section 6.12. Preferential Collection of Claims Against Issuer........55
Section 6.13. Appointment and Powers..................................55
Section 6.14. Performance of Duties...................................55
Section 6.15. Limitation on Liability.................................56
Section 6.16. Reliance Upon Documents.................................56
Section 6.17. Successor Indenture Trustee.............................56
Section 6.19. Representations and Warranties of the Indenture
Trustee ................................................57
Section 6.20. Waiver of Setoffs.......................................58
Section 6.21. Control by the Controlling Party........................58
Section 6.22. Indenture Trustee Not Liable for Notes or Receivables...58
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS...................................59
Section 7.1. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders................................59
Section 7.2. Preservation of Information, Communications to
Noteholders ............................................59
iii
<PAGE>
Section 7.3 Reports by Issuer.......................................59
Section 7.4. Reports by Indenture Trustee............................60
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES............................60
Section 8.1. Collection of Money.....................................60
Section 8.2. Trust Accounts..........................................61
Section 8.3. General Provisions Regarding Accounts...................61
Section 8.4. Release of Trust Estate.................................61
Section 8.5. Opinion of Counsel......................................62
ARTICLE IX SUPPLEMENTAL INDENTURES...........................................62
Section 9.1. Supplemental Indentures Without Consent of Noteholders..62
Section 9.2. Supplemental Indentures With Consent of Noteholders.....63
Section 9.3. Execution of Supplemental Indentures....................64
Section 9.4. Effect of Supplemental Indenture........................65
Section 9.5. Conformity With Trust Indenture Act.....................65
Section 9.6. Reference in Notes to Supplemental Indentures...........65
ARTICLE X REDEMPTION OF NOTES................................................65
Section 10.1. Redemption..............................................65
Section 10.2. Form of Redemption Notice...............................65
Section 10.3. Notes Payable on Redemption Date........................66
ARTICLE XI MISCELLANEOUS.....................................................66
Section 11.1. Compliance Certificates and Opinions, etc...............66
Section 11.2. Form of Documents Delivered to Indenture Trustee........68
Section 11.3. Acts of Noteholders.....................................69
Section 11.4. Notices, etc., to the Indenture Trustee, Issuer and
Rating Agency...........................................69
Section 11.5. Notices to Noteholders, Waiver..........................70
Section 11.6. Alternate Payment and Notice Provisions.................71
Section 11.7. Effect of Headings and Table of Contents................71
Section 11.8. Conflict with Trust Indenture Act.......................71
Section 11.9. Successors and Assigns..................................71
Section 11.10. Severability...........................................71
Section 11.11. Benefits of Indenture..................................71
iv
<PAGE>
Section 11.12. Legal Holidays.........................................72
Section 11.13. Governing Law..........................................72
Section 11.14. Counterparts...........................................72
Section 11.15. Recording of Indenture.................................72
Section 11.16. Trust Obligation.......................................72
Section 11.17. No Petition............................................72
Section 11.18. Inspection.............................................73
Exhibit A-1 Form of Class A-1 Notes
Exhibit A-2 Form of Class A-2 Notes
Exhibit B Form of Class B Notes
Exhibit C-1 Non-QIB Transferee Certificate
Exhibit C-2 QIB Transfer Certificate
v
<PAGE>
INDENTURE, dated as of March 1, 1999, between TRIAD AUTO RECEIVABLES OWNER
TRUST 1999-1, a Delaware business trust (the "Issuer"), and THE CHASE MANHATTAN
BANK, a New York 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 5.626% Asset Backed
Notes, Class A-1 (each, a "Class A-1 Note"), 6.090% Asset Backed Notes, Class
A-2 (each, a "Class A-2 Note", and together with the Class A-1 Notes, the "Class
A Notes") and 11.000% Asset Backed Notes, Class B (each, a "Class B Note" and,
together with the Class A Notes, the "Notes".)
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.
Financial Security Assurance Inc. (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 March 1, 1999 (as amended from time to time, the
"Insurance Agreement"), among the Insurer, the Issuer, Triad Financial
Corporation, and Triad Financial Special Purpose Corporation II ("TFSPC II").
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, TFSPC
II or the Issuer after the related Cutoff Date), as applicable, and all
Liquidation Proceeds and recoveries received with respect to such Receivables;
<PAGE>
(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 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:
"Accredited Investor" means an entity meeting the requirements of an
institutional "accredited investor" under Rule 5.1(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act.
"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 Class A 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.
"Class A-1 Interest Rate" means 5.626% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
"Class A-1 Note" is defined in the recitals. Each Class A-1 Note shall be
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 6.090% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
"Class A-2 Note" is defined in the recitals. Each Class A-2 Note shall be
substantially in the form of Exhibit A-2.
"Class B Interest Rate" means 11.000% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
"Class B Note" is defined in the recitals. Each Class B Note shall be
substantially in the form of Exhibit B.
3
<PAGE>
"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 March 25, 1999.
"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.
"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 450 West 33rd Street, New York, New York 10001; 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 and Class B Noteholders. 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.
4
<PAGE>
"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.
"Indenture Trustee" means The Chase Manhattan Bank, 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 one twelfth of 0.0025% 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 $1,875.00 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
5
<PAGE>
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.
"Issuer" means Triad Auto Receivables Owner Trust 1999-1, 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.
"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.
"Non-QIB Transferee Certificate" means a certificate substantially in the
form of Exhibit C-1 hereto.
"Noteholder" means a Holder.
"Note Majority" means Holders of Outstanding Class A Notes and Outstanding
Class B 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.
6
<PAGE>
"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 ss.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 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 Wilmington Trust Company, not in its individual
capacity but solely as trustee of the Issuer.
7
<PAGE>
"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.
"QIB Transfer Certificate" means a certificate substantially in the form
of Exhibit C-2 hereto.
"Qualified Institutional Buyer" means an entity meeting the requirements
of a "qualified institutional buyer" under Rule 144A
"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 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 March 1, 1999, among the Issuer, the Company, Triad, in its
individual capacity and as Servicer, and The Chase Manhattan Bank, 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.
8
<PAGE>
"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.
"Strike Bid" has the meaning specified in Section 5.5.
"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.
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:
9
<PAGE>
(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 Class A-1 Notes, the Class A-2 Notes and the Class
B Notes, together with the Indenture Trustee's certificate of authentication,
shall be in substantially the forms set forth in Exhibits A-1, and A-2 and B,
respectively, with such appropriate 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-1, A-2 and B 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.
10
<PAGE>
The Indenture Trustee shall upon receipt of the Note Policy and an Issuer
Order authenticate and deliver Class A-1 Notes, Class A-2 Notes and Class B
Notes for original issue in an aggregate principal amount of $71,100,000,
$56,300,000 and $12,600,000, respectively. The Class A-1 Note Balance, the Class
A-2 Note Balance and the Class B 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
of each Class may be issued in an additional amount equal to any remaining
portion of the original Note Balance for such Class.
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.
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 Sections 2.10, 2.12,
and 2.14, as applicable.
11
<PAGE>
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, 2.12, and 2.14 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 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, 2.12, and 2.14, as
applicable.
(c) At the option of the Holder, Notes may be exchanged for other new
Notes of the same Class 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, 2.12, and 2.14 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
12
<PAGE>
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 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 (if
such Note is a Class A Note and an Insurer Default has not occurred and is
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 of the
same Class; 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
13
<PAGE>
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.
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-1 Notes, the Class A-2 Notes and the Class B Notes
shall accrue interest at the Class A-1 Interest Rate, the Class A-2 Interest
Rate and the Class B Interest Rate, respectively, 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 Class A-1 Note Balance, Class A-2 Note Balance or Class B
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
14
<PAGE>
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 Class A-1 Final Scheduled Payment Date, Class A-2
Final Scheduled Payment Date and the Class B Final Scheduled Payment Date, as
applicable) 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 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 Class A-1 Final Scheduled Payment
Date, the Class A-2 Final Scheduled Payment Date and the Class B Final Scheduled
Payment Date, as applicable. 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.
15
<PAGE>
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 accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
Section 2.10. Book-Entry Notes. The Class A 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 Class A 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 Class A Note Owner's interest in such Class A 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 Class A Notes
and the giving of instructions or directions hereunder) as the sole Holder
of the Class A 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
16
<PAGE>
transmit payments of principal of and interest on the Class A Notes to
such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Class A Noteholders evidencing a
specified percentage of the Class A Note Balance or 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 Class A Notes
and has delivered such instructions to the Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to Class A
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 Class A 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 shall give all such notices and
communications specified herein to be given to the Class A 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 Class A 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
Class A 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 Class A Note or Class A 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 Class A 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
17
<PAGE>
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 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.
Section 2.14. Transfer Restrictions relating to Class B Notes. (a) The
transfer and registration of Notes shall be subject to the restrictions set
forth as follows (in addition to the provisions of Section 2.4):
(i) The Note Registrar shall register the transfer of a Class
B Note if the requested transfer is being made by a transferor who
has provided the Note Registrar with a QIB Transfer Certificate,
substantially in the form of Exhibit C-2 hereto, to the effect that
the transfer is being made to a Qualified Institutional Buyer in
accordance with Rule 144A;
(ii) The Note Registrar shall register the transfer of a Note
if prior to the transfer such transferee furnishes to the Note
Registrar (A) a Non-QIB Transferee Certificate, substantially in the
form of Exhibit C-1 hereto, to the effect that the transfer is being
made to an Accredited Investor or to an Affiliated Person in
accordance with an applicable exemption under the Securities Act,
and (B) an opinion of counsel acceptable to the Note Registrar that
such transfer is in compliance with the Securities Act;
18
<PAGE>
(iii) The Note Register shall not register the transfer of a
Class B Note (a) to an individual who is not a citizen or resident
of the United States, (b) to an entity organized under the laws of
any foreign country, (c) to any other individual or entity
classified as a "foreign person" under the Code or (d) to any other
person who is not a "United States person" within the meaning of
Section 7701 (a)(3) of the Code and any such purported transfer
shall be void ab initio;
and, in each case the Note Registrar shall register the transfer of a Class B
Note only if prior to the transfer, the transferor in the case of clause (i) or
the transferee in the case of clause (ii), furnishes to the Note Registrar a
written undertaking by the transferor to reimburse the Trust for any costs
incurred by it in connection with the proposed transfer. In addition, the Note
Registrar may, as a condition of the registration of any such transfer, require
the transferor to furnish such other certificates, legal opinions or other
information (at the transferor's expense) as the Note Registrar may reasonably
require to confirm that the proposed transfer is being made pursuant to an
exemption or in a transaction not subject to, the registration requirements of
the Securities Act and other applicable laws.
(b) If Class B Notes are issued upon the transfer, exchange or replacement
of Class B Notes not bearing the securities legend set forth in Section 2.15,
the Notes so issued shall not bear such securities legend. If Class B Notes are
issued upon the transfer, exchange or replacement of Class B Notes bearing the
securities legend set forth in Section 2.15, or if a request is made to remove
such securities legend on a Class B Note, the Class B Notes so issued shall bear
such securities legend, or such securities legend shall not be removed, as the
case may be, unless there is delivered to the Note Registrar such satisfactory
evidence, which may include an opinion of counsel (at the expense of the party
requesting the removal of such legend) familiar with United States securities
laws, as may be reasonably required by the Note Registrar, that neither such
securities legend nor the restrictions on transfers set forth therein are
required to ensure that transfers of any Note comply with the provisions of Rule
144A or Rule 144 under the Securities Act or that such Note is not a "restricted
security" within the meaning of Rule 144 under the Securities Act. Upon
provision of such satisfactory evidence, the Note Registrar shall execute and
deliver a Note that does not bear such securities legend.
Section 2.15. Legending of the Class B Notes. (a) (i) The Class B Notes
have not been registered under the Securities Act or any state securities law.
The Class B Notes shall bear a legend as follows:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS.
NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO REGISTRATION.
19
<PAGE>
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE THAT IS TWO
YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER
RULE 144(K) UNDER THE SECURITIES ACT AS PERMITTING RESALES BY
NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE SELLER OR ANY AFFILIATE OF THE SELLER WAS THE OWNER OF
THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE) ONLY (A) TO THE SELLER,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501 (A) (1), (2), (3) OR (7) OF REGULATION D
PROMULGATED UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE SELLER'S AND THE INDENTURE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS NOTE MAY NOT BE TRANSFERRED (A) TO AN INDIVIDUAL WHO IS NOT A
CITIZEN OR RESIDENT OF THE UNITED STATES, (B) TO ANY ENTITY
ORGANIZED UNDER THE LAWS OF ANY FOREIGN COUNTRY, (C) TO ANY OTHER
INDIVIDUAL OR ENTITY CLASSIFIED AS A FOREIGN PERSON UNDER THE
INTERNAL REVENUE CODE OF 1986 AS AMENDED OR (D) TO ANY OTHER PERSON
WHO IS NOT A "UNITED STATES PERSON" WITHIN THE MEANING OF SECTION
7701 (A)(3) OF THE CODE. ANY SUCH PURPORTED TRANSFER SHALL BE VOID
AB INITIO.
20
<PAGE>
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, as and to the extent
provided in Sections 4.6 and 4.7 of the Sale and Servicing Agreement (i) for the
benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders, and (ii) for the
benefit of the Class B Notes, to the Class B Noteholders. 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 Class A-1 Final Scheduled
Payment Date, the Class A-2 Final Scheduled Payment Date and the Class B Final
Scheduled Payment Date, as applicable) 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.
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:
21
<PAGE>
(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 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,
22
<PAGE>
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
(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
23
<PAGE>
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 March 2000, 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.
(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
24
<PAGE>
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:
(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;
25
<PAGE>
(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, 2000), 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
(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.
26
<PAGE>
(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 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:
27
<PAGE>
(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;
(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); 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) acquiring or surviving such
conveyance or transfer has a net worth, immediately after such conveyance
or transfer, that is (a) greater
28
<PAGE>
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 (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
29
<PAGE>
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.
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
30
<PAGE>
conducting business on behalf of Triad, TFSPC II, any Affiliate thereof or any
Certificateholder or that the assets of the Issuer are available to pay the
creditors of Triad, TFSPC II, any Affiliate thereof or any Certificateholder;
(b) maintain records and books of account separate from those of Triad, TFSPC
II, any Affiliate thereof or any Certificateholder; (c) maintain an arm's-length
relationship with Triad, TFSPC II, any Affiliate thereof or any
Certificateholder and shall not hold itself out as being liable for the debts of
Triad, TFSPC II, any Affiliate thereof or any Certificateholder; (d) keep its
assets and its liabilities wholly separate from those of all other entities,
including Triad, TFSPC II, 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 TFSPC II in its capacity as sole Certificateholder
of the Issuer) is an account party, into which any Affiliate or
Certificateholder (other than TFSPC II in its capacity as sole Certificateholder
of the Issuer) makes deposits or from which any Affiliate or Certificateholder
(other than TFSPC II 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 TFSPC II and its other
Certificateholders, if any, for all action requiring approval of TFSPC II 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, TFSPC II, 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, TFSPC II, 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 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
31
<PAGE>
(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 the Class A-1
Final Scheduled Payment Date, the Class A-2 Final
Scheduled Payment Date or the Class B Final Scheduled
Payment Date, as applicable 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 Class A-1 Final Scheduled Payment Date,
the Class A-2 Final Scheduled Payment Date or the Class B Final
Scheduled Payment Date, as applicable 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 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
32
<PAGE>
(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);
(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
33
<PAGE>
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, 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.
34
<PAGE>
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 Class A 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 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:
35
<PAGE>
(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
authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.
36
<PAGE>
(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 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;
37
<PAGE>
(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 Class A 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 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.
38
<PAGE>
(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 TFSPC II 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 Class A 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 and such sale is in
accordance with Section 5.5 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 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
39
<PAGE>
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 Class A-1 Noteholders and Class A-2 Noteholders for
amounts due and unpaid on the Class A-1 Notes and the Class A-2 Notes for
interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Class A-1 Notes and Class A-2 Notes,
respectively, for interest;
(iii) third, to Class A-1 Noteholders and Class A-2 Noteholders for
amounts due and unpaid on the Class A-1 Notes and Class A-2 Notes for
principal, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Class A-1 Notes and Class A-2 Notes,
respectively, for principal;
(iv) fourth, amounts due and owing and required to be distributed to
the Insurer pursuant to priority (vi) of Section 4.6(b) of the Sale and
Servicing Agreement and not previously distributed); and
(v) fifth, to Class B Noteholders for amounts due and unpaid on the
Class B Notes for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class B Notes for
interest;
(vi) sixth, to Class B Noteholders for amounts due and unpaid on the
Class B Notes for principal, ratably, without preference of any kind,
according to the amounts due and payable on the Class B Notes for
principal; and
40
<PAGE>
(vii) seventh, to the Collateral Agent to be applied as provided in
the Class A 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 Class A Notes for principal for distribution to Class A Noteholders in
accordance with Section 10.1(b) hereof and, second, in accordance with
priorities (i) through (vii) 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. Rights of Insurer to Direct Indenture Trustee; Class B
Noteholder's Right of First Refusal.
(a) The Insurer, after giving written notice to the Indenture
Trustee, shall have the right to direct the time, method and place at or by
which the Indenture Trustee conducts any proceeding for any remedy available to
the Indenture Trustee, or exercise any such trust or power conferred upon the
Indenture Trustee.
(b) If in the exercise of its rights, powers and remedies solely
pursuant to Section 5.4(a)(v)(A), the Insurer directs the Indenture Trustee to
liquidate Receivables with an aggregate Principal Balance exceeding 25% of the
Aggregate Principal Balance of all Receivables by selling such Receivables to
one or more third parties in one or more substantially contemporaneous sales,
the Insurer shall direct the Indenture Trustee, prior to contracting to sell any
such Receivables to a third party, to (i) solicit and receive no fewer than
three bids and (ii) notify any Holder of Outstanding Class B Notes evidencing in
the aggregate more than 50% of the Class B Note Balance of its intent to sell
such Receivables and the amount of the highest bid the Indenture Trustee has
received to purchase such Receivables (the "Strike Bid"). Such Class B
Noteholders or their designee shall have ten (10) Business Days from the date of
notification to submit a bid equal to or greater than the Strike Bid. If the
Indenture Trustee has not received a bid from such Class B Noteholders or their
designee within such ten (10) Business Day period, the Insurer shall be entitled
to direct the Indenture Trustee to consummate the purchase at the Strike Bid. If
the Indenture Trustee receives a bid equal to or greater than the Strike Bid
from the Class B Noteholders or their designee with such ten (10) Business Day
period, the Insurer shall direct the Indenture Trustee to accept such bid of the
Class B Noteholders or their designee and the Class B Noteholders shall make
payment for the Receivables within 10 days in immediately available funds.
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;
41
<PAGE>
(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 shall maintain the funds on deposit in the Trust Accounts and take such
other action, if any, that it shall determine in its sole discretion or with the
advice of counsel (which shall be at Issuer's expense), notwithstanding any
other provisions of this Indenture. In no event shall the Indenture Trustee be
liable for taking any action or refraining from taking any action should it
receive such conflicting or inconsistent instructions from such Holders.
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 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
42
<PAGE>
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 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
43
<PAGE>
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 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.
44
<PAGE>
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 Class A 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 Class A 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 Class A
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 Class A Notes by or on behalf of the Insurer, the Indenture
Trustee shall assign to the Insurer all rights to the payment of interest of
interest or principal with respect to the Class A 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 Class A
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 Class A Interest Payment Amount or Class A
Principal Payment Amount. The foregoing subrogation shall in all cases be
subject to the rights of the Class A 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 Class A Interest Payment Amount or Class A Principal Payment Amount paid on
a Class A Note has been avoided in whole or in part as a preference payment
under applicable bankruptcy law, the Indenture Trustee shall so
45
<PAGE>
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 Class A Notes by mail
that, in the event that any Class A Noteholder's payment is so recoverable, such
Class A 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 the Class A Notes, if any, which have
been made by the Indenture Trustee and subsequently recovered from the Class A
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
Class A 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 Class A Noteholder directly (unless a Class 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 Class A
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 of Class A Notes, by its purchase of the
Class A 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 Class A Noteholder and the Indenture Trustee hereby delegate an assign, to
the fullest extent permitted by law, the rights of the Indenture Trustee and
each Class A 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.
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:
46
<PAGE>
(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 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.
47
<PAGE>
(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.
(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 The Chase Manhattan Bank 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 Class A 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
48
<PAGE>
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.
(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.
49
<PAGE>
(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. 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
50
<PAGE>
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 8.1 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 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 TFSPC II 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
51
<PAGE>
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,
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
52
<PAGE>
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 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
53
<PAGE>
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
(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.
54
<PAGE>
(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 ss.26(a)(1) of the Investment Company
Act of 1940, as amended and the requirements of TIA ss.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 ss.310(b), including the optional
provision permitted by the second sentence of TIA ss.310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss.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 ss.
310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss.311(a), excluding any creditor
relationship listed in TIA ss.311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss.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 The Chase Manhattan
Bank as Indenture Trustee with respect to the Indenture Collateral, and The
Chase Manhattan Bank hereby accepts such appointment and agrees to act as the
Indenture Trustee with respect to the Indenture 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.
55
<PAGE>
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 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 Trustee 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
56
<PAGE>
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 New York banking
corporation and is duly organized, validly existing and in good standing under
the laws of the State of New York, 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.
(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
57
<PAGE>
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. 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
58
<PAGE>
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.
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 ss.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 ss. 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)
59
<PAGE>
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 ss. 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.
Section 7.4. Reports by Indenture Trustee. If required by TIA ss.313(a),
within 60 days after each June 30, beginning with June 30, 1999, the Indenture
Trustee shall mail to each Noteholder as required by TIA ss.313(c) a brief
report dated as of such date that complies with TIA ss.313(a). The Indenture
Trustee also shall comply with TIA ss.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.
60
<PAGE>
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 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
ss.ss.314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1.
61
<PAGE>
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.
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
62
<PAGE>
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.
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";
63
<PAGE>
(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 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 Class A 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.
64
<PAGE>
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.
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
65
<PAGE>
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).
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.
66
<PAGE>
(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 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.
67
<PAGE>
(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.
(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
68
<PAGE>
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 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
1999-1, 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: Wilmington Trust Company, 1100 North Market Street,
Wilmington,
69
<PAGE>
Delaware 19890. 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: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Triad Auto Receivables Owner Trust 1999-1
Class A Asset Backed Notes
Telex No.: (212) 688-3101
Confirmation: (212)826-0100
Telecopy Nos.: (212) 339-3518 or
(212) 339-3529
(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
70
<PAGE>
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 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 ss.ss. 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
71
<PAGE>
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.
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
72
<PAGE>
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 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.
73
<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 1999-1
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By: ________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Indenture
Trustee
By: ________________________________________
Name:
Title:
74
<PAGE>
B-1
================================================================================
AMENDED AND RESTATED TRUST AGREEMENT
among
TRIAD FINANCIAL SPECIAL PURPOSE CORPORATION II
TRIAD FINANCIAL CORPORATION
WILMINGTON TRUST COMPANY
OWNER TRUSTEE
and
ASSET BACKED SECURITIES CORPORATION
Dated as of March 1, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
RECITALS......................................................................1
ARTICLE I. DEFINITIONS.......................................................1
Section 1.1. Capitalized Terms........................................1
Section 1.2. Usage of Terms...........................................3
Section 1.2. 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........................6
Section 2.8. Title to Trust Property..................................6
Section 2.9. Situs of Trust...........................................6
Section 2.10. Representations and Warranties of ABSC...................6
Section 2.11. Representations and Warranties of TFSPC II...............8
Section 2.12. Federal Income Tax Allocations...........................9
Section 2.13. Covenants of ABSC.......................................10
Section 2.14. Covenants of the Holders................................10
ARTICLE III. CERTIFICATES AND TRANSFER OF INTERESTS.........................11
Section 3.1. Initial Ownership.......................................11
i
<PAGE>
Section 3.2. The Certificates........................................12
Section 3.3. Authentication of Certificates..........................12
Section 3.4. Registration of Transfer and Exchange of Certificates...12
Section 3.5. Legending of Certificates...............................14
Section 3.6. Mutilated, Destroyed, Lost or Stolen Certificates.......14
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.........................15
Section 3.10. Disposition Only With Consent of Insurer................15
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.................................................16
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........................................17
ARTICLE V. CERTAIN DUTIES...................................................17
Section 5.1. Accounting and Records to the Noteholders,
Certificateholder(s), the Internal Revenue Service
and Others..............................................18
Section 5.2. Signature on Returns; Tax Matters Partner...............18
Section 5.3. Payments to Certificateholders..........................18
ARTICLE VI. AUTHORITY AND DUTIES OF OWNER TRUSTEE...........................18
Section 6.1. General Authority.......................................19
Section 6.2. General Duties..........................................19
Section 6.3. Action upon Instruction.................................19
Section 6.4. No Duties Except as Specified in this Agreement or in
Instructions............................................20
ii
<PAGE>
Section 6.5. No Action Except under Specified Documents or
Instructions ...........................................20
Section 6.6. Restrictions............................................21
ARTICLE VII. CONCERNING THE OWNER TRUSTEE...................................21
Section 7.1. Acceptance of Trusts and Duties.........................21
Section 7.2 Furnishing of Documents.................................22
Section 7.3. Representations and Warranties..........................22
Section 7.4. Reliance; Advice of Counsel.............................23
Section 7.5 Not Acting in Individual Capacity.......................23
Section 7.6. Owner Trustee Not Liable for Certificates or
Receivables ............................................24
Section 7.7. Payments from Trust Property............................24
Section 7.8. Doing Business in Other Jurisdictions...................24
ARTICLE VIII. COMPENSATION AND INDEMNIFICATION OF OWNER TRUSTEE.............25
Section 8.1. Owner Trustee's Fees and Expenses.......................25
Section 8.2. Indemnification.........................................25
Section 8.3. Payments to the Owner Trustee...........................25
Section 8.4. Non-recourse Obligations................................25
ARTICLE IX. TERMINATION OF TRUST AGREEMENT..................................25
Section 9.1. Termination of Trust Agreement..........................25
ARTICLE X. SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES...........27
Section 10.1 Eligibility Requirements for Owner Trustee..............27
Section 10.2 Resignation or Removal of Owner Trustee.................27
Section 10.3 Successor Owner Trustee.................................28
Section 10.4 Merger or Consolidation of Owner Trustee................28
Section 10.5. Appointment of Co-Trustee or Separate Trustee...........29
iii
<PAGE>
ARTICLE XI. MISCELLANEOUS...................................................30
Section 11.1 Supplements and Amendments..............................30
Section 11.2. No Legal Title to Trust Property in
Certificateholder(s) ...................................31
Section 11.3. Limitations on Rights of Others.........................32
Section 11.4. Notices.................................................32
Section 11.5. Severability............................................32
Section 11.6. Separate Counterparts...................................32
Section 11.7. Assignments.............................................33
Section 11.8. No Petition.............................................33
Section 11.9. Bankruptcy Matters......................................33
Section 11.10. No Recourse.............................................33
Section 11.11. Headings................................................33
Section 11.12. Governing Law...........................................34
Section 11.13. Servicer................................................34
Exhibit A Form of Certificate...........................................1
Exhibit B Form of Certificate of Trust..................................1
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 1, 1999,
among TRIAD FINANCIAL CORPORATION, a California corporation ("Triad"), TRIAD
FINANCIAL SPECIAL PURPOSE CORPORATION II, a Delaware corporation, as Holder of
the Certificate ("TFSPC II"), ASSET BACKED SECURITIES CORPORATION, a Delaware
corporation, as depositor, ("ABSC"), and WILMINGTON TRUST COMPANY, a Delaware
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, TFSPC II, ABSC and Wilmington Trust Company, dated as of March
1, 1999.
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
1999-1 (the "Trust");
WHEREAS, Triad, TFSPC II, ABSC and Wilmington Trust Company 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:
"ABSC" shall mean Asset Backed Securities Corporation, a Delaware
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 3.11.
"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
1100 North Market Street, Wilmington, Delaware 19890, 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 2.12.
"ERISA" shall have the meaning assigned to such term in Section
3.11.
"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 Financial Security Assurance Inc., or its
successor in interest.
"Issuer" shall mean the Trust established by this Agreement.
"Original Trust Agreement" shall mean the Trust Agreement among
Triad, ABSC, TFSPC II and the Owner Trustee, dated as of March 1, 1999.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor Owner Trustee hereunder.
2
<PAGE>
"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 Class A 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 March 1, 1999, among the Issuer, ABSC, Triad, in its
individual capacity and as Servicer, and The Chase Manhattan Bank, 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.
"TFSPC II" shall mean Triad Financial Special Purpose Corporation
II, 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 1999-1, 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.
ARTICLE II.
ORGANIZATION
Section 2.1. Name. There is hereby formed a trust to be known as
"Triad Auto Receivables Owner Trust 1999-1", 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.
3
<PAGE>
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 ABSC 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.
(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. ABSC 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.
4
<PAGE>
Section 2.5. Initial Capital Contribution of Trust Property. ABSC
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 ABSC, 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.
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
5
<PAGE>
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 ABSC. ABSC 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.
(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.
6
<PAGE>
(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 TFSPC II.
(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 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.
7
<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 2.12. 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
8
<PAGE>
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 Class A 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 TFSPC II (or other holders of
interests in the Class A Reserve Account) to the extent TFSPC II (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. TFSPC II is authorized to
modify the allocations in this paragraph if necessary or appropriate, in its
sole discretion, for the allocations to fairly reflect the economic income, gain
or loss to TFSPC II or to the Certificateholders or Equity Interest holders, or
as otherwise required by the Code. Notwithstanding anything provided in this
Section 2.12, 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
2.12 shall be disregarded.
Section 2.13. Covenants of ABSC. ABSC 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
9
<PAGE>
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 TFSPC II 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 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 TFSPC II to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Issuer or TFSPC II 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 TFSPC II or a substantial part of its property, or
cause or permit the Issuer or TFSPC II 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
10
<PAGE>
(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 ABSC pursuant to Section 2.5 and prior to the issuance of
the Certificates pursuant to Section 3.2, ABSC shall be the sole initial
beneficiary of the Issuer.
Section 3.2. The Certificates. In consideration of payment of the
sum of $8,400,000 to the Trust and upon the written order of ABSC, the
Certificates shall be initially issued to TFSPC II 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 ABSC, signed
by its chairman of the board, its president or any vice president, its treasurer
or any assistant treasurer without further corporate action by ABSC, 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 3.9, 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
11
<PAGE>
exchanges of Certificates as herein provided. Wilmington Trust Company 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 3.9, 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 3.9.
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.
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 Class A 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 Class A Reserve Account constitute a pledge of collateral,
then the provisions of the Sale and Servicing Agreement
12
<PAGE>
and the Class A Reserve Account Agreement shall be considered to constitute a
security agreement and TFSPC II and the Certificateholders hereby grant to the
Collateral Agent for the benefit of the Class A 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 Class A Reserve Account Agreement. In addition,
each Certificateholder, by acceptance of its Certificate, hereby appoints TFSPC
II as its agent to pledge a first priority perfected security interest in the
Class A 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 Class A 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 Class A 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 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
13
<PAGE>
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, ABSC, TFSPC II 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, TFSPC II, 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 Wilmington, Delaware, 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 stating "THIS 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.
14
<PAGE>
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 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.
15
<PAGE>
(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 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), or
(iv) amend the Certificate of Trust.
16
<PAGE>
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 2.12); (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 TFSPC II.
(b) Subject to Section 2.6, TFSPC II 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)(xiii) of the Sale and Servicing Agreement by wire transfer or
check mailed to such Certificateholder.
17
<PAGE>
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 ABSC 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 Class A-1 Notes in the aggregate principal amount of $71,100,000, Class
A-2 Notes in the aggregate principal amount of $56,300,000 and Class B Notes in
the aggregate principal amount of $12,600,000. 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 TFSPC II 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, TFSPC II 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 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
18
<PAGE>
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 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.
19
<PAGE>
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;
(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 TFSPC II, Triad or ABSC 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
20
<PAGE>
obligation to Triad or ABSC, 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, TFSPC II, ABSC, 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, TFSPC II, or ABSC 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.
(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.
21
<PAGE>
(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.
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 TFSPC II 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
22
<PAGE>
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 ABSC, TFSPC II,
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. Wilmington Trust Company
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 Wilmington Trust Company 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 Wilmington Trust Company (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
Wilmington Trust Company (or any successor thereto) or the Owner Trustee, as the
case may be, contemplated hereby.
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
23
<PAGE>
between the Servicer and the Owner Trustee, and the Owner Trustee shall be
entitled to be reimbursed by the Issuer or TFSPC II 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 TFSPC II 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 wind up 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 8.2 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 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.
24
<PAGE>
(b) Except as provided in Section 9.1(a), neither Triad, ABSC 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)(xiii) 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 TFSPC II and Holders shall look solely to TFSPC II 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 TFSPC II.
(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.
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
25
<PAGE>
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 TFSPC II, the Insurer and the Servicer. Upon
receiving such notice of resignation, TFSPC II 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 TFSPC II 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 TFSPC II 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 TFSPC II shall remove the Owner Trustee under the
authority of the immediately preceding sentence, TFSPC II, 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 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
TFSPC II, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such
26
<PAGE>
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. TFSPC II
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
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
27
<PAGE>
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.
ARTICLE XI.
MISCELLANEOUS
Section 11.1. Supplements and Amendments. (a) This Agreement may be
amended by Triad, TFSPC II, ABSC 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
28
<PAGE>
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, TFSPC II, ABSC 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-1 Interest Rate, the Class A-2 Interest Rate or the Class B 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. 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
29
<PAGE>
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, TFSPC II, ABSC, 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 ABSC, addressed to Asset Backed Securities
Corporation, 11 Madison Avenue, New York, NY 10010, Attention: Secretary; (iii)
if to Triad, addressed to Triad Financial Corporation, 7711 Center Avenue, Suite
100, Huntington Beach, California 92647; (iv) if to TFSPC II, addressed to Triad
Financial Special Purpose Corporation II, 7711 Center Avenue, Suite 395,
Huntington Beach, California 92647, and (v) if to the Insurer, addressed to
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New York
10022, Attention: Surveillance Department, Telex No.: (212) 688-3101,
Confirmation: (212) 826-0100, Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in
each case in which notice or other communication to Financial Security refers to
an Event of Default, a claim on the Note Policy or with respect to which failure
on the part of Financial Security 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 conclusively
presumed to have been duly given, whether or not the Certificate holder receives
such notice.
30
<PAGE>
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 ABSC or TFSPC II, or
join in any institution against ABSC or TFSPC II 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.
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, TFSPC II, ABSC, the Owner Trustee, the
Insurer, the Indenture Trustee or any Affiliate thereof and no
31
<PAGE>
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.
32
<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.
WILMINGTON TRUST COMPANY, as Owner
Trustee
By:______________________________
Name: ________________________
Title:________________________
TRIAD FINANCIAL SPECIAL PURPOSE
CORPORATION II, as Holder of the
Certificate
By:______________________________
Name: ________________________
Title:________________________
TRIAD FINANCIAL CORPORATION, as
Servicer
By:______________________________
Name: ________________________
Title:________________________
ASSET BACKED SECURITIES
CORPORATION, as Company
By:______________________________
Name: ________________________
Title:________________________
<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 Asset Backed Securities Corporation, a
Delaware corporation ("ABSC"), and by ABSC 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, ABSC or any Affiliate thereof, except to the limited extent described
below.)
- ----------
* [To be inserted on the Certificate to be held by TFSPC II.
<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 1999-1 (the "Issuer") formed by ABSC.
The Issuer was created pursuant to a Trust Agreement, dated as of
March 1, 1999 (the "Trust Agreement"), between Triad, TFSPC II, ABSC and
Wilmington Trust Company, 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 March 1, 1999, between the Issuer
and The Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"),
are three classes of Notes designated as "Class A-1 5.626% Asset Backed Notes"
(the "Class A-1 Notes"), the "Class A-2 6.090% Asset Backed Notes" (the "Class
A-2 Notes", together with the Class A-1 Notes, the "Class A Notes") and the
"Class B 11.000% Asset Backed Notes" (the "Class B Notes, together with the
Class A Notes, 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 March 1, 1999 (the "Sale and Servicing Agreement"), among
Triad, ABSC, the Issuer and the Indenture Trustee, all right to and interest of
ABSC in and to the Receivables Purchase Agreement, dated as of March 1, 1999,
between Triad and ABSC, and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the 17th day
of each month (or, if such 17th day is not a Business Day, the next Business
Day) (the "Payment Date"), commencing on April 19, 1999, 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 Class A Reserve Account Agreement or prior to the
release of such monies pursuant to Section 4.6(b)(xiii) of the Sale and
Servicing Agreement, such monies being held in trust for the benefit of
A-2
<PAGE>
the Noteholders and the Insurer. Notwithstanding the foregoing, in the event
that it is ever determined that the monies held in the Class A Reserve Account
constitute a pledge of collateral, then the provisions of the Sale and Servicing
Agreement and the Class A 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 Class A Reserve Account Agreement. In addition, each
Certificateholder, by acceptance of its Certificate, hereby appoints TFSPC II as
its agent to pledge a first priority perfected security interest in the Class A
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 Class A 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 Class A Reserve
Account Agreement).
It is the intent of Triad, the Servicer, ABSC 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 TFSPC II,
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 TFSPC II) will be treated as partners in that
partnership. TFSPC II 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 TFSPC II, or join in any institution against the Issuer or
TFSPC II 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 City of Wilmington, State of Delaware.
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.
A-3
<PAGE>
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 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
1999-1
By: Wilmington Trust Company, not in
its individual capacity, but
solely as Owner Trustee
Dated: March 25, 1999 By:___________________________________
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
Wilmington Trust Company, not Wilmington Trust Company, not in
in its individual capacity but its individual capacity but solely
solely 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, TFSPC II, 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, ABSC 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 City of Wilmington, State of Delaware, 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 Wilmington Trust
Company.
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, TFSPC II 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 1999-1
This Certificate of Trust of Triad Auto Receivables Owner Trust
1999-1 (the "Trust"), dated as of March 1, 1999, is being duly executed and
filed by Wilmington Trust Company, 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 1999-1."
2. Trustee. The name and principal place of business of the trustee
of the Trust in the State of Delaware is 1100 Market Street, Wilmington,
Delaware 19890.
3. Effective Date. This Certificate of Trust will be effective March
__, 1999.
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.
WILMINGTON TRUST COMPANY,
as Owner Trustee
By:___________________________________
Name: _____________________________
Title: ____________________________
FINANCIAL GUARANTY
INSURANCE POLICY
OBLIGOR: Triad Auto Receivables Owner Trust Policy No.: 1999-1 50795-N
OBLIGATIONS: $127,400,000 Asset Backed Notes, Date of Issuance:
Classes A-1 and A-2, as described in
Endorsement No. 1 March 25, 1999
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term Of This Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder
to receive payments under the Obligations to the extent of any payment by
Financial Security hereunder.
Except to the extent expressly modified by an endorsement hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term Of This Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term Of This Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial
Security, and shall not be modified, altered or affected by any other agreement
or instrument, including any modification or amendment thereto, or by the
merger, consolidation or dissolution of the Obligor. Except to the extent
expressly modified by an endorsement hereto, the premiums paid in respect of
this Policy are nonrefundable for any reason whatsoever, including payment, or
provision being made for payment, of the Obligations prior to maturity. This
Policy may not be canceled or revoked during the Term Of This Policy. THIS
POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED
IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused
this Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By
--------------------------------------
Authorized Officer
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1
OBLIGATIONS: $71,100,000.00 5.626% Asset Backed Notes, Class A-1
$56,300,000.00 6.090% Asset Backed Notes, Class A-2
Policy No.: 50795-N
Date of Issuance: March 25, 1999
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in the City of New York or Wilmington,
Delaware or any other location of the Servicer, any successor Servicer,
successor Owner Trustee or successor Indenture Trustee are authorized or
obligated by law, executive order or government decree to be closed.
"Class A Interest Payment Amount" shall have the meaning set forth in the
Sale and Servicing Agreement.
"Class A-1 Interest Carryover Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.
"Class A-2 Interest Carryover Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.
"Class A Noteholder" shall mean the Holder of a Class A Note; provided,
however Class A Noteholder shall not include the Obligor or any affiliates or
successors thereof in the event the Obligor, or any such affiliate or successor,
is a registered or beneficial owner of the Obligation.
"Class A Principal Payment Amount" shall have the meaning set forth in the
Sale and
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Servicing Agreement.
"Financial Security" means Financial Security Assurance Inc., a New York
stock insurance company.
"Holder" shall have the meaning set forth in the Indenture.
"Indenture" means the Indenture, dated as of March 1, 1999, between Triad
Auto Receivables Owner Trust 1999-1, a Delaware business trust, and The Chase
Manhattan Bank as Indenture Trustee, as amended from time to time in accordance
with its terms.
"Indenture Trustee" means The Chase Manhattan Bank, a New York banking
corporation, in its capacity as Indenture Trustee under the Indenture and any
successor in such capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and to
its Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon, New York City time, shall be deemed to be "Receipt" on the
next succeeding Business Day. If any notice or certificate given hereunder by
the Indenture Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Indenture
Trustee and the Indenture Trustee may submit an amended notice.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of March 1, 1999, among the Obligor, as Purchaser, Asset Backed
Securities Corporation, as Company, Triad Financial Corporation, in its
individual capacity and as Servicer, and The Chase Manhattan Bank as Indenture
Trustee and Backup Servicer, as amended from time to time in accordance with its
terms.
"Scheduled Payments" means, with respect to each Payment Date, the
distribution to be made to the Class A Noteholders in an aggregate amount equal
to the Class A Interest Payment
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Amount and the Class A Principal Payment Amount due and payable on such Payment
Date, in each case in accordance with the original terms of the Class A Notes
when issued and without regard to any amendment or modification of the Class A
Notes, the Indenture, or the Sale and Servicing Agreement, except amendments or
modifications to which Financial Security has given its prior written consent;
provided, however, that Scheduled Payments shall not include (w) any amounts due
to Class A Noteholders pursuant to clause eighth of Section 4.6(b) of the Sale
and Servicing Agreement, (x) any portion of the Class A Interest Payment Amount
due to Class A Noteholders because the appropriate notice and certificate for
payment in proper form was not timely Received by Financial Security, (y) any
portion of the Class A Interest Payment Amount due to Class A Noteholders
representing interest on any Class A-1 Interest Carryover Shortfall or Class A-2
Interest Carryover Shortfall or (z) the Class A Mandatory Redemption Amount,
unless, in each case, Financial Security elects, in its sole discretion, to pay
such amount in whole or in part. Scheduled Payments do not include payments
(including, without limitation, the amounts set forth in clauses (w) and (z)
above) that become due on an accelerated basis as a result of (a) a default by
the Obligor, (b) an election by the Obligor to pay principal on an accelerated
basis, (c) the occurrence of an Event of Default under the Indenture or (d) any
other cause, unless, in each case, Financial Security elects, in its sole
discretion, to pay in whole or in part such principal due upon acceleration,
together with any accrued interest to the date of acceleration. Scheduled
Payments shall not include any amounts due in respect of the Class A Notes
attributable to any increase in interest rate, penalty or other sum payable by
the Obligor by reason of any default or event of default in respect of the
Obligations, or by reason of any deterioration of the creditworthiness of the
Obligor nor shall Scheduled Payments include, nor shall coverage be provided
under the Policy in respect of, any taxes, withholding or other charge imposed
by any governmental authority due in connection with the payment of any
Scheduled Payment to a Class A Noteholder.
"Term Of This Policy" means the period from and including the Date of
Issuance to and including the latest of the date on which (i) the outstanding
principal amount of Class A Notes has been reduced to zero and all distributions
of the Class A Interest Payment Amount have been paid on the Class A Notes, (ii)
any period during which any payment on the Class A Notes could have been avoided
in whole or in part as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law has expired, and (iii) if any
proceedings requisite to avoidance as a preference payment have been commenced
prior to the occurrence of (i) and (ii), a final and nonappealable order in
resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the third Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the Payment
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Date to which such claim relates. Payments due hereunder in respect of Scheduled
Payments will be disbursed by wire transfer of immediately available funds to
the Policy Payments Account established pursuant to the Sale and Servicing
Agreement or, if no such Policy Payments Account has been established, to the
Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by Financial Security as provided above;
provided, however, that by acceptance of this Policy the Indenture Trustee
agrees to provide upon request to Financial Security a notice and certificate in
respect of any such payments made by Financial Security. Financial Security
shall be entitled to pay hereunder any amount due on the Obligations on an
accelerated basis at any time or from time to time, in whole or in part, prior
to the scheduled date of payment thereof; Scheduled Payments insured hereunder
shall not include interest, in respect of principal paid hereunder on an
accelerated basis, accruing from and after the date of such payment of
principal. Financial Security's obligations hereunder in respect of Scheduled
Payments shall be discharged to the extent funds are disbursed by Financial
Security as provided herein whether or not such funds are properly applied by
the Indenture Trustee.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order (as defined below) or (b) the first to occur of (i) the fourth
Business Day following Receipt by Financial Security from the Indenture Trustee
of (A) a certified copy of the order (the "Order") of the court or other
governmental body that exercised jurisdiction to the effect that the Class A
Noteholder is required to return the amount of any Scheduled Payment distributed
with respect to the Class A Notes during the Term Of This Policy because such
distributions were avoidable as preference payments under applicable bankruptcy
law, (B) a certificate of the Class A Noteholder that the Order has been entered
and is not subject to any stay and (C) an assignment duly executed and delivered
by the Class A Noteholder, in such form as is reasonably required by Financial
Security and provided to the Class A Noteholder by Financial Security,
irrevocably assigning to Financial Security all rights and claims of the Class A
Noteholder relating to or arising under the Class A Notes against the debtor
that made such preference payment or otherwise with respect to such preference
payment, or (ii) the date of Receipt by Financial Security from the Indenture
Trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Indenture Trustee that such items were to be
delivered on such date and such date was specified in such notice. Such payment
shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Order and not to the Indenture Trustee or any Class A
Noteholder directly (unless a Class A
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Noteholder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Indenture Trustee for distribution to
such Class A Noteholder upon proof of such payment reasonably satisfactory to
Financial Security). In connection with the foregoing, Financial Security shall
have the rights provided pursuant to Section 6.2 of the Sale and Servicing
Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term Of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Sale and Servicing Agreement specifying the name and notice
address of the Fiscal Agent. From and after the date of receipt of such notice
by the Indenture Trustee, (i) copies of all notices and documents required to be
delivered to Financial Security pursuant to this Policy shall be simultaneously
delivered to the Fiscal Agent and to Financial Security and shall not be deemed
Received until Received by both and (ii) all payments required to be made by
Financial Security under this Policy may be made directly by Financial Security
or by the Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the
agent of Financial Security only and the Fiscal Agent shall in no event be
liable to any Class A Noteholder for any acts of the Fiscal Agent or any failure
of Financial Security to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Class A Noteholder, all rights (whether by counterclaim, setoff or
otherwise) and defenses (including, without limitation, the defense of fraud),
whether acquired by subrogation, assignment or otherwise, to the extent that
such rights and defenses may be available to Financial Security to avoid payment
of its obligations under this Policy in accordance with the express provisions
of this Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President-Transaction Oversight
Re: Triad Auto Receivables Owner Trust 1999-1
$71,100,000.00, 5.626% Asset Backed Notes, Class A-1
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
$56,300,000.00, 6.090% Asset Backed Notes, Class A-2
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this Policy
to Financial Security for cancellation upon expiration of the Term Of This
Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
Authorized Officer
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Exhibit A To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
(Letterhead of Indenture Trustee)
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: Triad Auto Receivables Owner Trust 1999-1
$71,100,000.00, 5.626% Asset Backed Notes, Class A-1
$56,300,000.00, 6.090% Asset Backed Notes, Class A-2
The undersigned, a duly authorized officer of The Chase Manhattan Bank
(the "Indenture Trustee") hereby certifies to Financial Security Assurance Inc.
("Financial Security"), with reference to Financial Guaranty Insurance Policy
No. 50795-N dated March 25, 1999 (the "Policy") issued by Financial Security in
respect of the $71,100,000.00, 5.626% Asset Backed Notes, Class A-1 and the
$56,300,000 6.090% Asset Backed Notes, Class A-2 (the "Class A-2 Notes" and,
together with the Class A-1 Notes, the "Class A Notes") of the above referenced
Trust, that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Class A Noteholders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Distribution Account and available for distribution
to the Class A Noteholders pursuant to the Sale and Servicing Agreement
will be $___________ (the "Shortfall") less than the Scheduled Payments
with respect to the Payment Date occurring _______ __, 19__.
(iii) The Indenture Trustee is making a claim under the Policy for
the Shortfall to be applied to distributions of Scheduled Payments with
respect to the Class A Notes.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Obligations
when due; (b) not apply such funds for any other purpose; (c) not
commingle such funds with other funds held by the Indenture Trustee and
(d) maintain an accurate record of such payments with respect to each
Class A Note and the corresponding claim on the Policy and proceeds
thereof and, if
A-1
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
the Class A Note is required to be surrendered or presented for such
payment, shall stamp on each such Class A Note the legend "$[insert
applicable amount] paid by Financial Security and the balance hereof has
been canceled and reissued" and than shall deliver such Class A Note to
Financial Security.
(v) The Indenture Trustee, on behalf of the Class A Noteholders,
hereby assigns to Financial Security the rights of the Class A Noteholders
with respect to the Class A Notes to the extent of any payments under the
Policy, including, without limitation, any amounts due to the Class A
Noteholders in respect of securities law violations arising from the offer
and sale of the Class A Notes. The foregoing assignment is in addition to,
and not in limitation of, rights of subrogation otherwise available to
Financial Security in respect of such payments. The Indenture Trustee
shall take such action and deliver such instruments as may be reasonably
requested or required by Financial Security to effectuate the purpose or
provisions of this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the Class
A Noteholders, hereby appoints Financial Security as agent and
attorney-in-fact for the Indenture Trustee and each such Class A
Noteholder in any legal proceeding with respect to the Class A Notes. The
Indenture Trustee hereby agrees that Financial Security may at any time
during the continuation of any proceeding by or against any debtor with
respect to which a Preference Claim (as defined below) or other claim with
respect to the Class A Notes is asserted under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding, including
without limitation, (A) all matters relating to any claim in connection
with an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment made with respect to the Class A Notes (a
"Preference Claim"), (B) the direction of any appeal of any order relating
to any Preference Claim at the expense of Financial Security but subject
to reimbursement as provided in the Insurance Agreement and (C) the
posting of any surety, supersedeas or performance bond pending any such
appeal. In addition, the Indenture Trustee hereby agrees that Financial
Security shall be subrogated to, and the Indenture Trustee on its behalf
and on behalf of each Class A Noteholder, hereby delegates and assigns, to
the fullest extent permitted by law, the rights of the Indenture Trustee
and each Class A Noteholder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued in connection
with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to [Specify
Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and
A-2
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
Certificate and not defined herein shall have the meanings provided in the
Policy.
A-3
<PAGE>
Policy No.: 50795-N Date of Issuance: March 25, 1999
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice of Claim and Certificate as of the ____ day of _______________, ____.
CHASE MANHATTAN BANK,
not in its individual capacity but solely as
Indenture Trustee
By:___________________________________________
Title:________________________________________
- ----------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on _______________________ by _______________________________
Confirmation Number ____________________________
A-4
RECEIVABLES PURCHASE AGREEMENT
between
TRIAD FINANCIAL CORPORATION
as Seller
and
ASSET BACKED SECURITIES CORPORATION
as Purchaser
---------------------------
Dated as of March 1, 1999
---------------------------
<PAGE>
TABLE OF CONTENTS
Page
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..............................................5
SECTION 1.6. Material Adverse Effect..................................5
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.......................6
SECTION 2.3. Conditions of the Company's Obligations..................6
SECTION 2.4. True Sales...............................................9
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................................19
SECTION 4.3. Costs and Expenses......................................19
ARTICLE V REPURCHASES OR REPLACEMENTS........................................20
SECTION 5.1. Repurchase or Replacement of Receivables Upon Breach
of Warranty.............................................20
SECTION 5.2. Reassignment of Purchased Receivables...................21
SECTION 5.3. Waivers.................................................21
ARTICLE VI MISCELLANEOUS.....................................................21
SECTION 6.1. Liability of Triad......................................21
SECTION 6.2. Merger or Consolidation of Triad........................21
SECTION 6.3. Limitation on Liability of Triad and Others.............22
SECTION 6.4. Conveyance of the Receivables and the Other Conveyed
Property to the Trust...................................22
SECTION 6.5. Amendment...............................................23
SECTION 6.6. Notices.................................................24
SECTION 6.7. Merger and Integration..................................24
SECTION 6.8. Severability of Provisions..............................25
SECTION 6.9. GOVERNING LAW...........................................25
SECTION 6.10. Counterparts............................................25
<PAGE>
SECTION 6.11. Nonpetition Covenant....................................25
SECTION 6.12. Assignment..............................................25
SECTION 6.13. Third-Party Beneficiaries...............................25
SECTION 6.14. Successors and Assigns..................................26
SCHEDULE A - SCHEDULE OF RECEIVABLES
SCHEDULE B - REPRESENTATIONS AND WARRANTIES OF THE SELLER
SCHEDULE C - LEGAL PROCEEDINGS
<PAGE>
RECEIVABLES PURCHASE AGREEMENT, dated as of March 1, 1999 (this
"Agreement"), between Triad Financial Corporation, a California corporation, as
seller ("Triad"), and Asset Backed Securities Corporation, a Delaware
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 1999-1, 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 November 19, 1998 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 March 16,
1999, relating to the Class A-1 Notes and the Class A-2 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 Asset Backed Securities Corporation.
"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. 333-64351) 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 March 1, 1999, among Triad Financial Corporation, in its individual
capacity and as Servicer, Asset Backed Securities Corporation, as the Company,
the Trust and The Chase Manhattan Bank, 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 May 17, 1999.
"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 Class A Reserve Account or funds available from claims
under the Note Policy.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.2. 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. The Subsequent Receivables shall not include
Obligors whose addresses are in the State of Pennsylvania unless each of Triad,
the Company and the Trust are duly licensed with the Pennsylvania Department of
Banking as a "sales finance company". 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
5
<PAGE>
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.
(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 KPMG Peat Marwick LLP, 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 March 16, 1999, 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;
6
<PAGE>
(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 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
Class A-1 Notes and the Class A-2 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 Class A-1 Notes and the
Class A-2 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, TFSPC II 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 72 months nor less than 12 months; (c) not more than
85% of the aggregate Principal Balance of such Receivables will represent
financing of used Financed Vehicles; (d) the APR is not less than 9% nor
more than 25%; (e) not more than 23% of the aggregate Principal Balance of
such Receivables will represent Receivables designated in Credit Tier 3,
not more than 51% of the aggregate Principal Balance of the Receivables
7
<PAGE>
will represent Receivables designated in Credit Tier 4, not more than 19%
of the Aggregate Principal Balance of the Receivables will represent
Receivables designated in Credit Tier 5 and not more than 1% 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 1990 model year; (g)
not more than 15% of the aggregate Principal Balance of such Receivables
will be conveyed to Triad pursuant to Correspondent Assignments, and not
more than 11% 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
8
<PAGE>
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 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
9
<PAGE>
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 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. 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.
10
<PAGE>
(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 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
Delaware, 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.
11
<PAGE>
(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 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 11 Madison Avenue, New York, New York 10010.
(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
12
<PAGE>
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.
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
13
<PAGE>
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.
(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
14
<PAGE>
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 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
15
<PAGE>
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 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
Class A-1 Notes and Class A-2 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 Class A-1 Notes and Class A-2 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
16
<PAGE>
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
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.
17
<PAGE>
(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 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
18
<PAGE>
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 March 25, 1999); (d)
expenses incurred in connection with printing (or otherwise reproducing) and
delivering this Agreement, 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, (h)
fees and expenses relating to the licensing of the Company as a "sales finance
company" with the Pennsylvania Department of Banking, and (i) 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
19
<PAGE>
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 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.
20
<PAGE>
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 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.
21
<PAGE>
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 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, the Class A-1 Interest Rate, the Class A-2 Interest Rate or
the Class B Interest Rate or (ii) reduce the aforesaid percentage required to
consent to any
22
<PAGE>
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.
(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: Asset Backed Securities
Corporation, 11 Madison Avenue, New York, New York 10010, Telecopy No.: (212)
325-8261, (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: The Chase Manhattan Bank, 450 West
33rd Street, New York, New York 10001-2697, Telecopy No.: (212) 946-8191, (d) in
the case of the Trust or the Owner Trustee, at the following address: Wilmington
Trust Company, 1100 North Market Street, Wilmington, Delaware 19890, Telecopy
No.: (302) 651-1576, with a copy to the Servicer and (e) in the case of the
Insurer, to Financial Security Assurance Inc., 350 Park Avenue, New York, New
York 10022; Attention: Senior Vice President, Transaction Oversight (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.
23
<PAGE>
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.
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.
24
<PAGE>
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 and assigns, if any. Any request, notice, direction, consent, waiver
or other instrument or action by any Noteholder shall bind its successors and
assigns.
25
<PAGE>
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:
ASSET BACKED SECURITIES CORPORATION, as
Purchaser
By:_________________________________________
Name:
Title:
26
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
On file with the Indenture Trustee.
A-1
<PAGE>
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.
C-1
<PAGE>
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,
2
<PAGE>
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.
3
<PAGE>
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.
4
<PAGE>
27. Certain Characteristics of Initial Receivables. (A) Each Initial
Receivable had a remaining maturity, as of the Initial Cutoff Date, of not more
than 72 months; (B) each Receivable had an original maturity of not more than 72
months; (C) each Initial Receivable had a remaining Principal Balance as of the
Initial Cutoff Date of at least $250 and not more than $35,000; (D) each Initial
Receivable has an Annual Percentage Rate of at least 9.00% and not more than
25.00%; (E) no Initial Receivable was one for which more than 10% of a Scheduled
Payment was 31 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; (G) not more than 15% of the aggregate Principal Balance of
such Receivables will be conveyed to Triad pursuant to Correspondent
Assignments, and not more than 11% of the aggregate Principal Balance of such
Receivables will be conveyed to Triad by any one Correspondent; and (H) no
Initial Receivable shall include Obligors whose addresses are in the State of
Pennsylvania.
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.
5
SALE AND SERVICING AGREEMENT
RELATING TO
TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1
among
TRIAD FINANCIAL CORPORATION
in its individual capacity
and as Servicer
ASSET BACKED SECURITIES CORPORATION
as Company
TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1
as Purchaser
and
THE CHASE MANHATTAN BANK
as Indenture Trustee and Backup Servicer
----------------------------------
Dated as of March 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................1
Section 1.1 Definitions ..............................................1
Section 1.2 Usage of Terms ..........................................28
Section 1.3 Calculations ............................................28
Section 1.4 Section References ......................................28
Section 1.5 Action by or Consent of Noteholders .....................28
Section 1.6 No Recourse .............................................28
Section 1.7 Nonpetition Covenant ....................................29
Section 1.8 Limitation on Trust Fund Activities .....................29
Section 1.9 Material Adverse Effect .................................29
ARTICLE II CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY INDENTURE
TRUSTEE......................................................29
Section 2.1 Conveyance of Initial Receivables .......................29
Section 2.2 Conveyance of Subsequent Receivables ....................31
Section 2.2 Custody of Receivable Files .............................34
Section 2.4 Conditions Precedent to Issuance by Trust ...............35
Section 2.5 Representations and Warranties of Companny ..............36
Section 2.6 Repurchase or Replacement of Receivables Upon
Breach of Warranty ....................................38
Section 2.7 Indenture Trustee's Assignment of Receivables ...........38
Section 2.8 Collection of Lien Certificates .........................38
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES....................39
Section 3.1 Duties of the Servicer ..................................39
Section 3.2 Collection of Receivable Payments, Modifications
of Receivables; Sub-servicing Account; Lockbox
Account................................................41
Section 3.3 Realization Upon Receivables ............................43
Section 3.4 Insurance ...............................................44
Section 3.5 Maintenance of Security Interests in Vehicles ...........45
i
<PAGE>
Section 3.6 Covenants, Representations and Warranties of
Servicer ..............................................46
Section 3.7 Purchase or Replacement of Receivables Upon Breach
of Covenant ...........................................49
Section 3.8 Servicer Fee, Payment of Certain Expenses by
Servicer; Backup Servicer Fee..........................50
Section 3.9 Servicer's Certificate ..................................50
Section 3.10 Annual Statement as to Compliance, Notice of Servicer
Termination Event .....................................51
Section 3.11 Annual Independent Accountants' Report ..................51
Section 3.12 Access to Certain Documentation and Information
Regarding Receivables .................................52
Section 3.13 Monthly Tape, Certain Duties of Backup Servicer .........52
Section 3.14 Reports to the Commission ...............................54
Section 3.15 [Reserved] ..............................................54
Section 3.16 Insurance ...............................................54
Section 3.17 Compliance with Laws ....................................54
Section 3.18 Delegation of Duties ....................................54
Section 3.19 Retention and Termination of Servicer ...................55
ARTICLE IV PAYMENTS; STATEMENTS TO NOTEHOLDERS............................55
Section 4.1 Trust Accounts ..........................................55
Section 4.2 Servicer Reimbursements..................................59
Section 4.3 Capitalized Interest Account.............................59
Section 4.4 Application of Collections ..............................60
Section 4.5 Additional Deposits .....................................60
Section 4.6 Payments ................................................61
Section 4.7 Note Distribution Account ...............................63
Section 4.8 Pre-Funding Account .....................................65
Section 4.9 Net Deposits ............................................65
Section 4.10 Statements to Noteholders; Tax Returns ..................65
ARTICLE V THE CLASS A RESERVE ACCOUNT....................................68
Section 5.1 Withdrawals from Reserve Account ........................68
ii
<PAGE>
ARTICLE VI THE NOTE POLICY................................................68
Section 6.1 Claims Under Note Policy ................................68
Section 6.2 Preference Claims .......................................70
Section 6.3 Surrender of Policy .....................................71
ARTICLE VII THE COMPANY....................................................71
Section 7.1 Liability of Company; Indemnities .......................71
Section 7.2 Merger or Consolidation of the Company ..................71
Section 7.3 Limitation on Liability of Company and Others ...........72
Section 7.4 Special Purpose Entity ..................................72
Section 7.5 Restrictions on Liens ...................................73
Section 7.6 Creation of Indebtedness, Guarantees ....................73
Section 7.7 Compliance with Laws ....................................73
Section 7.8 Further Instruments and Acts ............................74
Section 7.9 Investment Company Act ..................................74
ARTICLE VIII THE SERVICER...................................................74
Section 8.1. Liability of Servicer; Indemnities.......................74
Section 8.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer .......75
Section 8.3. Limitation on Liability of Servicer, Backup Servicer
and Others.............................................77
Section 8.4. Servicer and Backup Servicer Not to Resign...............78
Section 8.5. Administrative Duties....................................79
Section 8.6. Representations and Warranties of Backup Servicer........80
Section 8.7. Duties of Backup Servicer................................82
ARTICLE IX SERVICER TERMINATION EVENTS....................................83
Section 9.1. Servicer Termination Event...............................83
Section 9.2. Consequences of a Servicer Termination Event.............84
Section 9.3. Appointment of Successor.................................85
Section 9.4. Notification to Noteholders..............................86
Section 9.5. Action Upon Certain Failures of the Servicer.............86
Section 9.6. Waiver of Past Defaults..................................87
iii
<PAGE>
ARTICLE X TERMINATION....................................................87
Section 10.1. Optional Purchase of All Receivables....................87
ARTICLE XI MISCELLANEOUS PROVISIONS.......................................88
Section 11.1. Amendment...............................................88
Section 11.2. Protection of Title to Trust............................89
Section 11.3. Limitation on Rights of Noteholders.....................91
Section 11.4. GOVERNING LAW...........................................92
Section 11.5. SUBMISSION TO JURISDICTION; WAIVERS.....................92
Section 11.6. WAIVER OF JURY TRIAL....................................93
Section 11.7. Severability of Provisions..............................93
Section 11.8. Assignment..............................................93
Section 11.9. Notes Nonassessable and Fully Paid......................94
Section 11.10. Limitations on Rights of Others.........................94
Section 11.11. Counterparts............................................94
Section 11.12. Notices.................................................94
Section 11.13. Successors and Assigns..................................95
Section 11.14. Assignment to Trustee...................................95
Section 11.15. Nonpetition Covenants...................................95
SCHEDULE A SCHEDULE OF RECEIVABLES ON FILE WITH THE SERVICER AND THE
INDENTURE TRUSTEE
SCHEDULE B REPRESENTATIONS AND WARRANTIES OF COMPANY WITH RESPECT TO
RECEIVABLES
SCHEDULE C FORM OF INFORMATION REQUEST
EXHIBIT A FORM OF SERVICER'S CERTIFICATE
EXHIBIT B REQUEST FOR RELEASE AND RECEIPT OF DOCUMENT
EXHIBIT C FORM OF CUSTODIAN CERTIFICATE
iv
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of March 1, 1999 (this
"Agreement"), among TRIAD FINANCIAL CORPORATION, a California corporation, in
its individual capacity ("Triad") and as Servicer (the "Servicer"), ASSET BACKED
SECURITIES CORPORATION, a Delaware corporation, as Company (the "Company"),
TRIAD AUTO RECEIVABLES OWNER TRUST 1999-1, a Delaware business trust, as
purchaser (the "Trust" or the "Purchaser"), and THE CHASE MANHATTAN BANK, a New
York 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, The Chase Manhattan Bank 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.
<PAGE>
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 or promissory notes, and related costs.
2
<PAGE>
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.
Backup Servicer: The Chase Manhattan Bank, 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 .0175% 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
$13,125 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: $127,590.49 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 Carryover Shortfall: As of the close of business on any
Payment Date, the sum of (i) the Class A-1 Interest Carryover Shortfall and (ii)
the Class A-2 Interest Carryover Shortfall.
3
<PAGE>
Class A Interest Payment Amount: With respect to any Payment Date, the sum
of (i) the Class A-1 Interest Payment Amount and (ii) the Class A-2 Interest
Payment Amount.
Class A Mandatory Redemption Amount: The amount, if any, remaining of the
Pre-Funded Amount on the Mandatory Redemption Date.
Class A Note Balance: As of any date of determination, the sum of the
Class A-1 Note Balance and the Class A-2 Note Balance.
Class A Note Preference Claim: As defined in Section 6.2(b).
Class A Notes: The Class A-1 Notes and the Class A-2 Notes.
Class A 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 and (b) all amounts, if any, in the Pre-Funding
Account, each determined as of the related Accounting Date, over (ii) the
remaining Class A Note Balance, after giving effect to the amounts payable on
such Payment Date pursuant to Section 4.6(b)(i) through (v) on such Payment
Date.
Class A Principal Payment Amount: With respect to any Payment Date, the
sum of the Class A-1 Principal Payment Amount and the Class A-2 Principal
Payment Amount.
Class A Reserve Account: The account designated as the "Series 1999-1
Spread Account," established and maintained pursuant to the Class A Reserve
Account Agreement.
Class A Reserve Account Agreement: The Master Spread Account Agreement,
dated as of March 1, 1999, among the Insurer, the Indenture Trustee, and TFSPC
II as the same may be modified, supplemented or otherwise amended in accordance
with the terms thereof.
Class A Reserve Account Initial Deposit: Means the "Initial Spread Account
Deposit" as defined in the Class A Reserve Account Agreement.
Class A Target Overcollateralization Amount: With respect to any Payment
Date, an amount equal to the product of (i) 13.5% (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.
Class A-1 Final Scheduled Payment Date: June 17, 2002, or, if such day is
not a Business Day, the next succeeding Business Day.
Class A-1 Interest Carryover Shortfall: As of the close of business on any
Payment Date, an amount equal to the excess of (a) the Class A-1 Interest
Payment Amount for such Payment Date and any outstanding 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
4
<PAGE>
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 Class A-1 Noteholders actually received on such current
Payment Date.
Class A-1 Interest Payment Amount: With respect to any Payment Date, an
amount equal to 30 days of interest (or in the case of the first Payment Date,
the number of days (on a "30/360" basis) from and including March 1, 1999, to
but excluding April 19, 1999), 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 related Accounting Date.
Class A-1 Interest Rate: 5.626% per annum, calculated on a basis of a
360-day year consisting of twelve 30-day months.
Class A-1 Mandatory Redemption Amount: (a) with respect to the Mandatory
Redemption Date on which the Class A Mandatory Redemption Amount is less than
$100,000, the Class A Mandatory Redemption Amount, and (b) with respect to any
Payment Date on which the Class A Mandatory Redemption Amount is greater than
$100,000, the product of (i) the Class A Mandatory Redemption Amount, and (ii) a
fraction, the numerator of which is the Class A-1 Note Balance as of the close
of business on the date prior to the related Payment Date and the denominator of
which is the Class A Note Balance as of the close of business on the date prior
to the related Payment Date.
Class A-1 Note: Any Note executed on behalf of the Trust and issued
pursuant to the Indenture in substantially the form set forth in Exhibit A-1 to
the Indenture.
Class A-1 Note Balance: Initially, $71,100,000 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. If the date of
determination is a Payment Date, then, unless otherwise specified herein, such
Class A-1 Note Balance shall be reduced by all such amounts distributed on such
date.
Class A-1 Note Factor: As of any Payment Date, a seven-digit figure equal
to the Class A-1 Note Balance as of the close of business on such Payment Date
divided by the initial Class A-1 Note Balance. The Class A-1 Note Factor will be
1.0000000 as of the Closing Date; thereafter, the Class A-1 Note Factor will
decline to reflect reductions in the Class A-1 Note Balance.
Class A-1 Noteholder: Means a Holder of Class A-1 Notes.
Class A-1 Principal Carryover Shortfall: As of the close of business on
any Payment Date, the excess of (i) the Class A-1 Principal Payment Amount and
any outstanding Class A-1 Principal
5
<PAGE>
Carryover Shortfall from the immediately preceding Payment Date, over (ii) the
amount of principal that the Class A-1 Noteholders actually received on such
current Payment Date.
Class A-1 Principal Payment Amount: (a) With respect to any Payment Date
other than the Class A-1 Final Scheduled Payment Date: the lesser of (i) the
Class A-1 Note Balance immediately prior to such Payment Date and (ii) the sum
of (A) the Principal Payment Amount and (B) the Class A-1 Mandatory Redemption
Amount; and (b) with respect to the Class A-1 Final Scheduled Payment Date, the
then outstanding Class A-1 Note Balance.
Class A-2 Final Scheduled Payment Date: September 17, 2005, or if such day
is not a Business Day, the next succeeding Business Day.
Class A-2 Interest Carryover Shortfall: As of the close of business on any
Payment Date, an amount equal to 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 Interest Payment Amount: With respect to any Payment Date, an
amount equal to 30 days of interest (or in the case of the first Payment Date,
the number of days (on a "30/360" basis) from and including March 1, 1999, to
but excluding April 19, 1999), 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 related Accounting Date.
Class A-2 Interest Rate: 6.090% per annum, calculated on a basis of a
360-day year consisting of twelve 30-day months.
Class A-2 Mandatory Redemption Amount: With respect to the Mandatory
Redemption Payment Date, the positive difference, if any, between the Class A
Mandatory Redemption Amount and the Class A-1 Mandatory Redemption Amount.
Class A-2 Note: Any Note executed on behalf of the Trust and issued
pursuant to the Indenture in substantially the form set forth in Exhibit A-2 to
the Indenture.
Class A-2 Note Balance: Initially, $56,300,000 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. If the date of
determination is a Payment Date, then, unless otherwise specified herein, such
Class A-2 Note Balance shall be reduced by all such amounts distributed on such
date.
6
<PAGE>
Class A-2 Note Factor: As of any Payment Date, a seven-digit figure equal
to the Class A-2 Note Balance as of the close of business on such Payment Date
divided by the initial Class A-2 Note Balance. The Class A-2 Note Factor will be
1.0000000 as of the Closing Date; thereafter, the Class A-2 Note Factor will
decline to reflect reductions in the Class A-2 Note Balance.
Class A-2 Noteholder: Means a Holder of Class A-2 Notes.
Class A-2 Principal Carryover Shortfall: As of the close of business on
any Payment Date, the excess of (i) the Class A-2 Principal Payment Amount and
any outstanding Class A-2 Principal Carryover Shortfall from the immediately
preceding Payment Date, over (ii) the amount of principal that the Class A-2
Noteholders actually received on such current Payment Date.
Class A-2 Principal Payment Amount: (a) With respect to any Payment Date
other than the Class A-2 Final Scheduled Payment Date: the lesser of (i) the
Class A-2 Note Balance immediately prior to such Payment Date and (ii) the
difference between (A) the sum of the Principal Payment Amount and the Class A-2
Mandatory Redemption Amount and (B) the Class A-1 Principal Payment Amount; and
(b) with respect to the Class A-2 Final Scheduled Payment Date, the then
outstanding Class A-2 Note Balance.
Class B Final Scheduled Payment Date: September 17, 2002.
Class B Interest Carryover Shortfall: As of the close of business on any
Payment Date, an amount equal to the excess of (a) 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 Class B
Noteholders actually received on such current Payment Date.
Class B Interest Payment Amount: With respect to any Payment Date, an
amount equal to 30 days of interest (or in the case of the first Payment Date,
the number of days (on a "30/360" basis) from and including March 1, 1999, to
but excluding April 19, 1999), 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 related Accounting Date.
Class B Interest Rate: 11.000% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months.
Class B Note: Any Note executed on behalf of the Trust and issued pursuant
to the Indenture in substantially the form set forth in Exhibit B to the
Indenture.
7
<PAGE>
Class B Note Balance: Initially, $12,600,000 and thereafter, an amount
equal to the initial Class B Note Balance reduced by all amounts distributed to
the Class B Noteholders that are allocable to principal. If the date of
determination is a Payment Date, then such Class B Note Balance shall be reduced
by all such amounts distributed on such date.
Class B Note Factor: As of any Payment Date, a seven-digit figure equal to
the Class B Note Balance as of the close of business on such Payment Date
divided by the initial Class B Note Balance. The Class B Note Factor will be
1.0000000 as of the Closing Date; thereafter, the Class B Note Factor will
decline to reflect reductions in the Class B Note Balance.
Class B Noteholder: Means a Holder of Class B Notes.
Class B Principal Carryover Shortfall: As of the close of business on any
Payment Date, the excess of (i) the Class B Principal Payment Amount and any
outstanding Class B Principal Carryover Shortfall from the immediately preceding
Payment Date, over (ii) the amount of principal that the Class B Noteholders
actually received on such current Payment Date.
Class B Principal Payment Amount: (a) With respect to any Payment Date
other than the Class B Final Scheduled Payment Date: the amount available to be
distributed on such Payment Date pursuant to Section 4.6(b)(x) and (b) with
respect to the Class B Final Scheduled Payment Date, the then outstanding Class
B 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: March 25, 1999.
Collateral Agent: The Chase Manhattan Bank, in its capacity as Collateral
Agent under the Class A 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.
8
<PAGE>
Commission: The Securities and Exchange Act Commission.
Company: Asset Backed Securities Corporation, a Delaware 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:
(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 450 West 33rd Street, New York, New York 10001,
Attention: Capital Markets Fiduciary Services or
9
<PAGE>
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 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: The Chase Manhattan Bank 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.
10
<PAGE>
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 10% of any
payment is 120 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 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
11
<PAGE>
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;
(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 fifth (5th)
Business Day preceding the related Payment Date in the calendar month following
such Collection Period.
Draw Date: With respect to any Payment Date, the third (3rd) 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.
12
<PAGE>
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 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
13
<PAGE>
(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 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
14
<PAGE>
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 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 of any
Class of Notes on the Final Scheduled Payment Date for such Class of Notes.
Excess Overcollateralization Amount: With respect to any Payment Date, the
excess, if any of (a) the Class A Overcollateralization Amount calculated for
this purpose only without deduction for any Excess Overcollateralization Amount
(i.e., assuming that the entire amount described in clause (x) of the definition
of Principal Payment Amount is distributed as principal to the Class A Notes)
over (b) the Class A Target Overcollateralization Amount on such 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.
15
<PAGE>
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.
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 (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 May, 1999.
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 March 1, 1999, 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 .0025% 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 $1,875.00 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.
16
<PAGE>
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 February 28, 1999.
Initial Cutoff Date Principal Balance: $103,718,530.71.
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,
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
March 1, 1999, among the Insurer, the Trust, TFSPC II, 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.
17
<PAGE>
Insurer: Financial Security Assurance Inc., a monoline insurance company
incorporated under the laws of the State of New York, 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
(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.
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.
18
<PAGE>
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 hereunder a segregated account in the name of
the Indenture Trustee.
Lockbox Agreement: The agreement with the 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, Mellon Bank N.A. 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 May,
1999 and (ii) if the last day of the Funding Period occurs on or prior to the
Determination Date in April, 1999, then the April, 1999 Payment Date.
Master Account Agreement: The Master Account Agreement, dated as of May
31, 1996, among Triad, ContiTrade Services L.L.C. and Mellon Bank, N.A., 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) 5, in the case of the April Payment Date, or
(II) 30, in the case of the May Payment Date; or (III) 17, in the case of the
June Payment Date, (y) the sum of (I) the weighted average of the Class A-1
Interest Rate and the Class A-2 Interest Rate and (II) the per annum rate
19
<PAGE>
used to calculate the Premium payable 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 April, 1999 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-1 Notes, Class A-2 Notes or Class B Notes
executed on behalf of the Trust and issued pursuant to the Indenture in
substantially the form set forth in Exhibit A-1, A-2 or B to the Indenture,
respectively.
Note Balance: As of any day, the sum of the Class A Note Balance and the
Class B Note Balance.
Note Distribution Account: The account designated as such, established and
maintained pursuant to Section 4.7.
Note Majority: Holders of Class A Notes and Class B 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 Class A Noteholders.
Note Policy Claim Amount: For any Payment Date, the excess, if any, of (i)
the sum of the Class A Interest Payment Amount and the Class A Principal Payment
Amount for such Payment Date over (ii) the sum of (a) the amounts actually
deposited into the Note Distribution Account on such related Payment Date (other
than any Additional Funds Available) and (b) the Additional Funds Available to
pay the Class A Interest Payment Amount or the Class A Principal Payment Amount,
if any, for such Payment Date.
Note Register: As defined in the Indenture.
20
<PAGE>
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 Class A
Overcollateralization Amount equals the Class A 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.
Overfunded Capitalized Interest Amount:
(i) with respect to the April, 1999 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) 1/360, (ii) 2.5%, (iii) 47 and (iv) the amount on deposit
in the Pre-Funding Account (excluding Pre-Funding Earnings) at the close
of business on March 1, 1999.
(ii) with respect to the May, 1999 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
21
<PAGE>
such date) over (b) the product of (i) 1/360, (ii) 2.5% (iii) 17 and (iv)
the amount on deposit in the Pre-Funding Account (excluding Pre-Funding
Earnings) at the close of business on March 31, 1999.
(iii) with respect to the June, 1999 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 17th day of each calendar month, or if such 17th day is
not a Business Day, the next Business Day, commencing April, 1999 and including
the Final Scheduled Payment Date. The first scheduled Payment Date shall be
April 19, 1999.
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.
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.
22
<PAGE>
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 Payment Amount: The amount equal to the excess, if any, of (x)
the sum of the following 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 Excess
Overcollateralization Amount, if any, for such Payment Date.
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
23
<PAGE>
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 Class A-1 Notes and the Class A-2 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-1 Notes or the Class A-2 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).
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 March 1, 1999, 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 Class
A 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
24
<PAGE>
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.
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.
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 Rating Services, 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.
25
<PAGE>
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.
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 2.25% 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.
26
<PAGE>
State: Any state of the United States of America, or the District of
Columbia.
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.
Subsequent Transfer Agreement: The agreement among the Trust, the Company
and the Servicer, pursuant to which the Trust will acquire the Subsequent
Receivables.
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.
TFSPC II: Triad Financial Special Purpose Corporation II, a Delaware
corporation.
Triad: Triad Financial Corporation, a California corporation.
Trust: Triad Auto Receivables Owner Trust 1999-1, 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
March 1, 1999, among TFSPC II, as certificateholder, Asset Backed Securities
Corporation, as depositor, Triad Financial Corporation and Wilmington Trust
Company 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
TFSPC II has pledged the Class A Reserve Account to the Collateral Agent
pursuant to the Class A Reserve Account Agreement, the Class A Reserve Account
shall not under any circumstances be deemed to be part of or otherwise
includable in the Trust or in the Trust Property.
27
<PAGE>
Uncertificated Security: As defined in Section 8-102(a)(18) of Revised
Article 8.
Underwriter: Credit Suisse First Boston.
Underwriting Criteria: The criteria used by Triad for purchasing
contracts.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
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
28
<PAGE>
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 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
29
<PAGE>
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 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. The Initial Receivables shall not include Obligors whose
addresses are in the State of Pennsylvania.
(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;
30
<PAGE>
(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;
(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,
31
<PAGE>
(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. The Subsequent Receivables
shall not include Obligors whose addresses are in the State of Pennsylvania
unless each of Triad, the Company and the Trust are duly licensed with the
Pennsylvania Department of Banking as a "Sales Finance Company."
(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
32
<PAGE>
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 Class A Reserve Account Initial Deposit
with respect to such Subsequent Receivables by the amount required by the
Insurer; (b) the remaining term of the Receivables transferred to the
Trust shall not be greater than 72 months nor less than 12 months; (c) not
more than 87% of the aggregate Principal Balance of such Receivables will
represent financing of used Financed Vehicles; (d) the APR is not less
than 9% nor more than 25%; (e) not more than 23% of the aggregate
Principal Balance of such Receivables will represent Receivables
designated in Credit Tier 3, not more than 51% of the aggregate Principal
Balance of the Receivables will represent Receivables designated in Credit
Tier 4, not more than 19% of the aggregate Principal Balance of the
Receivables will represent Receivables designated in Credit Tier 5 and not
more than 1% 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 1990
model year; (g) not more than 15% of the aggregate Principal Balance of
such Receivables have been conveyed to Triad pursuant to Correspondent
Assignments, and not more than 11% 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 2.5 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 Class A Reserve Account of the amounts
required by Section 3.01(c) of the Class A 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;
33
<PAGE>
(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, provided however, that the counsel to the
Company shall not be required to deliver any additional Opinions of
Counsel after the Closing Date;
(xiv) each Rating Agency shall have confirmed in writing to the
Indenture Trustee and the Insurer that the rating on the Class A 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
34
<PAGE>
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.
(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 office located in Houston, Texas 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;
35
<PAGE>
(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;
(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 Class A 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
Delaware, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted.
36
<PAGE>
(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 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
37
<PAGE>
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 11 Madison Avenue, New York, New York 10010.
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 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
38
<PAGE>
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 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
39
<PAGE>
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 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 (including any instruments in connection with the assignment
referred to in (b) below) 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 (a) 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 or (b) the Servicer may sell and assign any Receivable that is a
Liquidated Receivable if the Servicer has made a good faith determination that
amounts expected to be recovered from the Obligor have been received. All
proceeds received in respect of a Liquidated Receivable pursuant to the
foregoing clause shall be deposited within two (2) Business Days after receipt
of available amounts thereof into the Collection Account. 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,
40
<PAGE>
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.
(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
41
<PAGE>
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 in immediately available
funds 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 in immediately
available funds 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 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 in immediately available funds 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 in immediately available funds 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 in immediately
available funds 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
42
<PAGE>
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 Backup
Servicer, the Indenture Trustee, the Insurer 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 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
43
<PAGE>
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 reasonably necessary to enforce such agreement, including
bringing suit in its name or the name of the Trust or the 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 Receivables 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
44
<PAGE>
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 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
45
<PAGE>
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 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
46
<PAGE>
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;
(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; and
(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):
(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;
47
<PAGE>
(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. 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 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
48
<PAGE>
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 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 20 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 0.30 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
49
<PAGE>
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 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 Class A 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.
50
<PAGE>
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, 2000, 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.
(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, 1999, 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
51
<PAGE>
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, 1999, 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.
(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
52
<PAGE>
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, 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;
(iii) calculate and confirm the Payment Amount, the Class A
Principal Payment Amount, the Class A-1 Principal Payment Amount, the
Class A-1 Interest Payment Amount, the Class A-2 Principal Payment Amount,
the Class A-2 Interest Payment Amount, the Class B Principal Payment
Amount, the Class B Interest Payment Amount, the Backup Servicer Fee, the
Servicer Fee, the Indenture Trustee Fee and the amount on deposit in the
Class A 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 Class A Reserve Account Agreement) 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
53
<PAGE>
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.
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 [Reserved].
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
54
<PAGE>
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 June 30, 1999, 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
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
55
<PAGE>
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.
(b) The Servicer shall cause the following amounts to be deposited into
the Collection Account in immediately available funds 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. In no event shall the Indenture Trustee be liable for any investment
losses other than those resulting from its negligence or willful misconduct.
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:
56
<PAGE>
(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 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;
57
<PAGE>
(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;
(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.
58
<PAGE>
(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 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 April, 1999, May, 1999 and
June, 1999 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 April, 1999, May, 1999 and
June, 1999 the Servicer shall instruct the Indenture Trustee in writing to
withdraw from the
59
<PAGE>
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 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 Class A 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.
60
<PAGE>
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 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 $75,000 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 Class A-1 Interest Payment Amount for such
Payment Date and the Class A-1 Interest Carryover Shortfall, if any, the
Class A-2 Interest Payment Date and the Class A-2 Interest Carryover
Shortfall, if any;
61
<PAGE>
(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 Class A-1 Principal Payment Amount for such
Payment Date and the Class A-1 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
Note Distribution Account, the Class A-2 Principal Payment Amount for such
Payment Date and the Class A-2 Principal Carryover Shortfall, if any;
(vi) sixth, 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;
(vii) seventh, from the remaining Available Funds, to the Class A
Reserve Account to the extent necessary to increase the amount on deposit
therein to the required amount in accordance with the Class A Reserve
Account Agreement;
(viii) eighth, 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 Class A Reserve Account Agreement, to the
Note Distribution Account until the Class A Target Overcollateralization
Amount is achieved;
(ix) ninth, from the remaining Available Funds, to the Note
Distribution Account, the Class B Interest Payment Amount for such Payment
Date and the Class B Interest Carryover Shortfall, if any;
(x) tenth, from the remaining Available Funds, and together with
amounts, if any, released from the Class A Reserve Account pursuant to
clause seventh of Section 3.03(b) of the Class A Reserve Account
Agreement, to the Note Distribution Account, the Class B Principal Payment
Amount until the Class B Note Balance is reduced to zero;
(xi) eleventh, from the remaining Available Funds to the Class A
Reserve Account, any remaining funds;
(xii) twelfth, from the amounts released pursuant to and in
accordance with the Class A 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; and
(xiii) thirteenth, from the amounts (after giving effect to the
distributions in clause (xii) above) released pursuant to and in
accordance with the Class A Reserve Account Agreement to the holder of the
Certificate;
62
<PAGE>
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.
In furtherance of and not in limitation of the foregoing, each Class B
Noteholder, by acceptance of its Class B Note, specifically acknowledges that it
has no right to or interest in any monies at any time held pursuant to the Class
A Reserve Account Agreement or prior to the release of such monies pursuant to
this Section 4.6(b), such monies being held in trust for the benefit of the
Class A Noteholders and the Insurer.
(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, pro rata in respect of the amounts due thereto, (A) 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, and
(B) 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;
(ii) second, to the Class A-1 Noteholders, the Class A-1 Principal
Payment Amount, for such Payment Date and the Class A-1 Principal
Carryover Shortfall, if any;
63
<PAGE>
(iii) third, to the Class A-2 Noteholders, the Class A-2 Principal
Payment Amount for such Payment Date and the Class A-2 Principal Carryover
Shortfall, if any;
(iv) fourth, on or prior to the OC Stabilization Date, to the Class
A-1 Noteholders and Class A-2 Noteholders, sequentially, as principal,
until the Class A Target Overcollateralization Amount is reached;
(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; and
(vi) sixth, to the Class B Noteholders, the Class B Principal
Payment Amount for such Payment Date.
(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-1 Note Balance, Class A-2 Note Balance or Class B
Note Balance as of the Closing Date, and if such Noteholder shall have provided
to the Indenture Trustee appropriate instructions not later than the
64
<PAGE>
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
$36,281,469.29 from the proceeds of the sale of the Class A 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, 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 for the Class A Notes.
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 Class A-1 Noteholders, Class A-2 Noteholders
and Class B Noteholders, the amount of such payment allocable to interest;
65
<PAGE>
(ii) in the case of the Class A-1 Noteholders, Class A-2 Noteholders
and Class B 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 Class A-1 Note Balance, the Class A-2 Note Balance and the
Class B Note Balance (after giving effect to all payments made on such
Payment Date);
(vi) the amount of the Class A-1 Interest Carryover Shortfall, the
Class A-2 Interest Carryover Shortfall, the Class A-1 Principal Carryover
Shortfall, the Class A-2 Principal Carryover Shortfall, the Class B
Interest Carryover Shortfall and the Class B Principal Carryover
Shortfall, if any, on such Payment Date and the change in such amounts
from those of the prior Payment Date;
(vii) the Class A-1 Note Factor, the Class A-2 Note Factor and the
Class B 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;
66
<PAGE>
(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 Class A Reserve Account;
(xvii) the Class A Overcollateralization Amount and the Class A
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.
Each amount set forth pursuant to clauses (i) (such amounts broken down by Class
of Note), (ii) (such amounts broken down by Class of Note) and (v) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Note of the related Class.
(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 sum of the amounts set forth in clauses (i), (ii), and (iv) (separately
indicating amounts in respect of the Class A-1 Notes, the Class A-2 Notes and
the Class B Notes in the case of (i) and (ii)) 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
67
<PAGE>
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 CLASS A RESERVE ACCOUNT
SECTION 5.1. Withdrawals from Class A 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 (vi) of Section 4.6(b), (such deficiency being a
"Deficiency Claim Amount") then on the Deficiency Claim Date (as defined below)
immediately 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 Class A 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.
68
<PAGE>
(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 Class A 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 (3rd) 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 Class A Notes, and for
no other purpose.
(c) The Indenture Trustee shall (i) receive as attorney-in-fact of each
Class A Noteholder any Note Policy Claim Amount from the Insurer and (ii)
deposit the same in the Note Distribution Account for distribution to Class A
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 Class A 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 Class A 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 Class A 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 Class A
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 Class A 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 Class A Noteholders to
receive all Scheduled Payments (as defined in the Note Policy) in respect of the
Class A 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 Class A
69
<PAGE>
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
Class A Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Class A 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 Class A Interest Payment Amount or
Class A Principal Payment Amount paid on a Class 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
Class A Notes by mail that, in the event that any Class A Noteholder's payment
is so recoverable, such Class A 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
Class A Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Class A 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 Class A 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 Class A
Noteholder directly (unless a Class 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 Class A 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 "Class A Note Preference Claim") of any
distribution made with respect to the Class A Notes. Each Holder, by its
purchase of Class A 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 Class A Note Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to any Class A Note Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 6.1(c), the Insurer shall be subrogated to, and each Class A Noteholder
and the Indenture Trustee hereby delegate and assign, to the fullest extent
permitted
70
<PAGE>
by law, the rights of the Indenture Trustee and each Class A Noteholder in the
conduct of any proceeding with respect to a Class 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 Class A 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 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
71
<PAGE>
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.
(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.
72
<PAGE>
(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 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.
73
<PAGE>
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 Custodian, 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 Custodian, the Owner Trustee, the Backup Servicer, the Insurer,
their respective officers, directors, agents and 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 Custodian, 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 Custodian, 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
Custodian, the Indenture Trustee, the Custodian, 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
74
<PAGE>
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, or in the case of the Custodian, gross 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 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
75
<PAGE>
(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 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
76
<PAGE>
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 of the Servicer 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 actual knowledge
of the Servicer's failure to perform its duties as required in this Agreement,
the 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.
77
<PAGE>
(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 The Chase Manhattan
Bank acting in the possible dual capacity of Backup Servicer or successor
Servicer and in the capacity as Indenture Trustee. The Chase Manhattan Bank 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 The Chase Manhattan Bank 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
The Chase Manhattan Bank. 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 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
78
<PAGE>
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, (i) 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, (ii) 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 (iii) the
Backup Servicer agrees to pay all backup servicer transition expenses upon the
assumption of the successor backup servicer of such duties and obligations.
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
79
<PAGE>
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.
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
80
<PAGE>
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 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
81
<PAGE>
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. 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.
(g) [Reserved].
(h) 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.
(i) 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 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,
82
<PAGE>
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.
(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
83
<PAGE>
(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 (other than any Insurance
Agreement Event of Default related solely to a breach of the covenants in
Section 2.5(r) of the Insurance Agreement) 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.
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
84
<PAGE>
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 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
85
<PAGE>
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.
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
86
<PAGE>
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 Backup Servicer, the Insurer and the Owner Trustee of any
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.
87
<PAGE>
(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 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 either of the Class A-1
88
<PAGE>
Notes or Class A-2 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 Class A Target Overcollateralization Amount or the required
level of the Class A 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 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.
(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).
89
<PAGE>
(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, the Backup Servicer 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.
(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
90
<PAGE>
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 March 2000, 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 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.
91
<PAGE>
(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.
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
92
<PAGE>
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 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
93
<PAGE>
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, directions, instructions, notices or
other similar 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: Asset Backed Securities Corporation, 11
Madison Avenue, New York, New York 10010, Telecopy No.: (212) 325-8261, (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: The Chase Manhattan Bank, 450 West 33rd Street, New York, New York
10001-2697, Attention: Corporate Trust Fiduciary Services, Telecopy No.: (212)
946-8191, (d) in the case of the Trust or the Owner Trustee, at the following
address: Wilmington Trust Company, 1100 North Market Street, Wilmington,
Delaware 19890, Telecopy No.: (302) 651-1576, with a copy to the Servicer and
(e) in the case of the Insurer, to Financial Security Assurance Inc., 350 Park
Avenue, New York, New York 10022; Attention: Senior Vice President, Transaction
Oversight (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
94
<PAGE>
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 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
95
<PAGE>
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.
96
<PAGE>
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: _________________________________________
THE CHASE MANHATTAN BANK, as Indenture
Trustee and as Backup Servicer
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
ASSET BACKED SECURITIES CORPORATION, as
Company
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
TRIAD AUTO RECEIVABLES OWNER TRUST
1999-1, as Purchaser
By: Wilmington Trust Company,
not in its individual capacity but solely as
Owner Trustee
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
97
<PAGE>
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_
The Chase Manhattan Bank, as Indenture Trustee
450 West 33rd Street
New York, NY 10001-2697
Re: Triad Auto Receivables Owner Trust 1999-1
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 March 1, 1999,
among Triad Financial Corporation individually and as servicer, Asset Backed
Securities Corporation, as company, Triad Auto Receivables Owner Trust 1999-1,
as purchaser, and The Chase Manhattan Bank, 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 __ 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
<PAGE>
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
EXHIBIT A
<PAGE>
EXHIBIT B
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: The Chase Manhattan Bank
Re: Sale and Servicing Agreement (the "Servicing Agreement"), dated as
of March 1, 1999, among Asset Backed Securities Corporation, as
Company ("Company") Triad Auto Receivables Owner Trust 1999-1, as
purchaser (the "Trust"), Triad Financial Corporation, individually
and in its capacity as Servicer (the "Servicer"), and The Chase
Manhattan Bank, 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 Custodian, 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 CUSTODIAN
THE CHASE MANHATTAN BANK
(Custodian)
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
Date: _______________________________________
EXHIBIT B-2
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
TRIAD FINANCIAL CORPORATION
and
CREDIT SUISSE FIRST BOSTON
Dated as of March 1, 1999
Triad Auto Receivables Owner Trust 1999-1
$71,100,000 5.626% Asset Backed Notes, Class A-1
$56,300,000 6.090% Asset Backed Notes, Class A-2
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions........................................................1
Section 2. Representations, Warranties and Agreements of Financial Security...3
Section 3. Representations, Warranties and Agreements of the Underwriter......5
Section 4. Indemnification....................................................6
Section 5. Indemnification Procedures.........................................7
Section 6. Contribution.......................................................8
Section 7. Miscellaneous......................................................9
EXHIBIT A - Opinion of Assistant General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of March 1, 1999, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), TRIAD FINANCIAL CORPORATION (the
"Company") and CREDIT SUISSE FIRST BOSTON (the "Underwriter").
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Commission" means the Securities and Exchange Commission.
"Company Party" means any of the Company, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Federal Securities Laws" means the Securities Act, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Public Utility Holding
Company Act of 1935, each as amended from time to time, and the rules and
regulations in effect from time to time under such Acts.
"Financial Security Agreements" means this Agreement, the Stock
Pledge Agreement, the Spread Account Agreement and the Insurance Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its
parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Indenture" means the Indenture dated as of March 1, 1999 between
the Trust and The Chase Manhattan Bank, as trustee, as the same may be amended
and supplemented from time to time in accordance with its terms.
-1-
<PAGE>
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of March 1, 1999, among Financial Security, the Trust, Triad Financial
Special Purpose Corporation II and the Company, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or expenses incurred by such party, including reasonable
fees or expenses of its counsel and other expenses incurred in connection with
investigating or defending any claim, action or other proceeding which entitle
such party to be indemnified hereunder (subject to the limitations set forth in
Section 5 hereof), to the extent not paid, satisfied or reimbursed from funds
provided by any other Person other than an affiliate of such party (provided
that the foregoing shall not create or imply any obligation to pursue recourse
against any such other Person), plus (c) interest on the amount paid by the
party entitled to indemnification or contribution from the date of such payment
to the date of payment by the party who is obligated to indemnify or contribute
hereunder at the statutory rate applicable to judgments for breach of contract.
"Note Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.
"Offering Document" means the Prospectus and any other material or
documents delivered by the Underwriter or any Underwriter Party to any Person in
connection with the offer or sale of the Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Prospectus" means, collectively, the Prospectus relating to the
Securities dated November 19, 1998, and the Prospectus Supplement.
"Prospectus Supplement" means the Prospectus Supplement dated March
16, 1999 relating to the Securities.
"Rating Agencies" has the meaning provided in the last paragraph of
Section 2 hereof.
"Securities" means the Trust's $71,100,000 5.626% Asset Backed
Notes, Class A-1 and $56,300,000 6.090% Asset Backed Notes, Class A-2, described
in the Offering Document and issued pursuant to the Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any rule or regulation in effect from time to time under such
Act.
-2-
<PAGE>
"Spread Account Agreement" means the Master Spread Account Agreement
dated as of March 1, 1999, among the Triad Financial Special Purpose Corporation
II, Financial Security, the Collateral Agent and the Trustee specified therein,
as the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"Stock Pledge Agreement" means the Stock Pledge and Collateral
Agency Agreement dated as of November 1, 1998 among the Company, Triad Financial
Special Purpose Corporation II, The Chase Manhattan Bank, as Collateral Agent,
and Financial Security.
"Trust" means Triad Auto Receivables Owner Trust 1999-1.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee, or
agent of the "controlling person" (as such item is used in the Securities Act)
of any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated as
of March 16, 1999 between the Company and the Underwriter with respect to the
offer and sale of the Securities, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees with the parties
hereto as follows:
(a) Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing and authorized to transact
financial guaranty insurance business under the laws of the State of New
York.
(b) Authorization, Etc. The Note Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by Financial
Security.
(c) Validity, Etc. The Note Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in
the event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of
this Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained herein.
-3-
<PAGE>
(d) Exemption From Registration. The Note Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial
Security of the Note Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder, will
conflict with any provision of the certificate of incorporation or the
bylaws of Financial Security nor result in a breach of, or constitute a
default under, any material agreement or other instrument to which
Financial Security is a party or by which any of its property is bound nor
violate any judgment, order or decree applicable to Financial Security of
any governmental or regulatory body, administrative agency, court or
arbitrator having jurisdiction over Financial Security (except that, in
the published opinion of the Securities and Exchange Commission, the
indemnification provisions of this Agreement, insofar as they relate to
indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 1997 and December 31, 1996 and the
related consolidated statements of income, changes in shareholder's equity
and cash flows for the fiscal years then ended and the interim
consolidated balance sheet of Financial Security as of September 30, 1998,
and the related statements of income, changes in shareholder's equity and
cash flows for the interim period then ended, furnished by Financial
Security to the Underwriter, fairly present in all material respects the
financial condition of Financial Security as of such dates and for such
periods in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal year-end
adjustments) and since the date of the most current interim consolidated
balance sheet referred to above there has been no change in the financial
condition of Financial Security which would materially and adversely
affect its ability to perform its obligations under the Note Policy.
(g) Financial Security Information. The information in the
Prospectus Supplement set forth under the caption "THE INSURER"(as revised
from time to time in accordance with the provisions hereof, the "Financial
Security Information") is limited and does not purport to provide the
scope of disclosure required to be included in a prospectus with respect
to a registrant in connection with the offer and sale of securities of
such registrant registered under the Securities Act. Within such limited
scope of disclosure, however, as of the date of the Prospectus Supplement
and as of the date hereof, the Financial Security Information does not
contain any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
-4-
<PAGE>
(h) Additional Information. Financial Security will furnish to the
Underwriter or the Company, upon request of the Underwriter or the
Company, as the case may be, copies of Financial Security's most recent
financial statements (annual or interim, as the case may be) which fairly
present in all material respects the financial condition of Financial
Security as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied except as
noted therein (subject, as to interim statements, to normal year-end
adjustments). In addition, if the delivery of a Prospectus relating to the
Securities is required at any time prior to the expiration of nine months
after the time of issuance of the Prospectus in connection with the
offering or sale of the Securities, the Company or the Underwriter will
notify Financial Security of such requirement to deliver a Prospectus and
Financial Security will promptly provide the Underwriter with any
revisions to the Financial Security Information that are in the judgment
of Financial Security necessary to prepare a supplement to the Prospectus.
(i) Opinion of Counsel. Financial Security will furnish to the
Underwriter and the Company, on the closing date for the sale of the
Securities an opinion of its Assistant General Counsel, to the effect set
forth in Exhibit A attached hereto, dated such closing date and addressed
to the Company and the Underwriter.
(j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriter and the Company, upon request, as
comfort from its independent accountants in respect of its financial
condition, (i) at the expense of the Person specified in the Insurance
Agreement, a copy of the Prospectus, including either a manually signed
consent or a manually signed report of Financial Security's independent
accountants and (ii) the quarterly review letter by Financial Security's
independent accountants in respect of the most recent interim financial
statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its insurance financial strength by
Moody's Investors Service, Inc. or its insurer financial strength by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, or any other
rating agency (collectively, the "Rating Agencies"). The Rating Agencies, in
assigning such ratings, take into account facts and assumptions not described in
the Prospectus and the facts and assumptions considered by the Rating Agencies,
and the ratings issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of the Underwriter.
The Underwriter represents, warrants and agrees with the parties hereto as
follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers
and sales of
-5-
<PAGE>
the Securities and make such offers and sales in the manner provided in
the Offering Document.
(b) Offering Document. The Underwriter will not use, or distribute
to other broker-dealers for use, any Offering Document in connection with
the offer and sale of the Securities unless such Offering Document
includes such information as has been furnished by Financial Security for
inclusion therein and the information therein concerning Financial
Security has been approved by Financial Security in writing. Financial
Security hereby consents to the information in respect of Financial
Security included in the Prospectus Supplement. Each Offering Document
will include the following statement:
"The Note Policy is not covered by the property/casualty insurance
security fund specified in Article 76 of the New York Insurance Law".
Each Offering Document including financial information (other than
financial information included in the Financial Security Information) with
respect to Financial Security prepared in accordance with generally
accepted accounting principles will include the following statement
immediately preceding such financial information:
"The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition
and results of operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to its
stockholders. No consideration is given by the New York State Insurance
Department to financial statements prepared in accordance with generally
accepted accounting principles in making such determinations."
(c) Underwriter Information. All material provided by the
Underwriter for inclusion in the Offering Document (as revised from time
to time, the "Underwriter Information"), insofar as such information
relates to the Underwriter is true and correct in all material respects.
In respect of the Prospectus Supplement, the Underwriter Information is
limited to the information set forth on the cover page in the third
paragraph (other than the last sentence of such third paragraph) and the
information set under the caption "UNDERWRITING".
Section 4. Indemnification.
(a) Financial Security agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Company Party and each Underwriter Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth
-6-
<PAGE>
in Section 2 hereof and (ii) any and all Losses to which any Company Party
or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or omission
was made in the Financial Security Information included therein in
accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them
with respect to the offer and sale of the Securities and resulting from
the Underwriter's breach of any of its representations, warranties or
agreements set forth in Section 3 hereof and (ii) any and all Losses to
which any Financial Security Party may become subject, under the
Securities Act or otherwise, insofar as such Losses arise out of or result
from an untrue statement of a material fact contained in any Offering
Document or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or omission was made in the Underwriter Information included
therein.
(c) Upon the incurrence of any Losses for which a party is entitled
to indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to
the Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in Section
6 with respect to contribution, the indemnification provided herein by an
Indemnifying Party shall be the exclusive remedy of any and all Indemnified
Parties for the breach of a representation, warranty or agreement hereunder by
an Indemnifying Party; provided, however, that each Indemnified Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle an Indemnified
Party to be indemnified under this Agreement, such party shall give the
Indemnifying Party written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Indemnifying
Party shall be entitled to participate in and, upon notice to the Indemnified
Party, assume the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed
-7-
<PAGE>
to pay such fees and expenses, (ii) the Indemnifying Party shall have failed to
assume the defense of such action or proceeding and employ counsel satisfactory
to the Indemnified Party in any such action or proceeding or (iii) the named
parties to any such action or proceeding (including any impleaded parties)
include both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have been advised by counsel that (A) there may be one
or more legal defenses available to it which are different from or additional to
those available to the Indemnifying Party and (B) the representation of the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate or contrary to prudent practice, in which case, if the Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for all the Company Parties, one such
firm for all Underwriter Parties and one such firm for all Financial Security
Parties, as the case may be, which firm shall be designated in writing by the
Company in respect of the Company Parties, by the Underwriter in respect of the
Underwriter Parties and by Financial Security in respect of the Financial
Security Parties. The Indemnifying Party shall not be liable for any settlement
of any such claim or action unless the Indemnifying Party shall have consented
thereto or be in default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Indemnifying Party of liability only if such failure is prejudicial to the
position of the Indemnifying Party and then only to the extent of such
prejudice.
Section 6. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of
this Section), each Indemnifying Party shall contribute to the Losses
arising from any breach of any of its representations, warranties or
agreements contained in this Agreement on the basis of the relative fault
of each of the parties as set forth in Section 6(b) below; provided,
however, that an Indemnifying Party shall in no event be required to
contribute to all Indemnified Parties an aggregate amount in excess of the
Losses incurred by such Indemnified Parties resulting from the breach of
representations, warranties or agreements contained in this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand,
and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach
of, any representations, warranties or agreements contained in this
Agreement relates to
-8-
<PAGE>
information supplied by, or action within the control of, the Indemnifying
Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information and the Underwriter
shall be solely responsible for the Underwriter Information and that the
balance of each Offering Document shall be the responsibility of the
Company.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount in excess of the
amount by which the total underwriting discounts and commissions received
by the Underwriter exceeds the amount of any damages that such Underwriter
has otherwise been required to pay in respect of any breach by the
Underwriter of its representations or warranties contained in Section 3
hereof.
(e) 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.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to
such other address as shall be designated by the recipient in a written
notice to the other party or parties hereto:
If to Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President -- Transaction
Oversight Department (with a copy to the
attention of the General Counsel)
Re: Triad Auto Receivables Owner Trust, 1999-1,
71,100,000 5.626% Asset Backed Notes, Class A-1
and $56,300,000 6.090% Asset Backed Notes,
Class A-2
Confirmation: (212) 826-0100
Facsimile Nos.: (212) 339-3518, (212) 339-3529
-9-
<PAGE>
(in each case in which notice or other
communication to Financial Security refers to
an Event of Default, a claim on the Note Policy
or with respect to which failure on the part of
Financial Security 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.")
If to the Company: Triad Financial Corporation
7711 Center Avenue, Suite 100
Huntington Beach, California 92647
Facsimile No: (714) 373-6428
Confirm No: (714) 373-8300
If to the Underwriter: Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Attention: Legal Department
Facsimile No: (212) 325-8261
Confirm No: (212) 325-2000
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing
signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of any
Indemnifying Party, (ii) the issuance of the Securities or (iii) any
termination of this Agreement or the Note Policy. The indemnification
provided in this Agreement will be in addition to any liability which the
parties may otherwise have and shall in no way limit any obligations of
the parties to the Underwriting Agreement or the Insurance Agreement.
-10-
<PAGE>
(f) Counterparts. This Agreement may be executed in counterparts by
the parties hereto, and all such counterparts shall constitute one and the
same instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be duly executed and delivered as of the date first
above written.
FINANCIAL SECURITY ASSURANCE INC.
By: _____________________________________
Name:
Title:
TRIAD FINANCIAL CORPORATION
By: _____________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By: _____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
OPINION OF ASSISTANT GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance business under
the laws of the State of New York.
2. The Note Policy and the Financial Security Agreements have been duly
authorized, executed and delivered by Financial Security.
3. The Note Policy and the Financial Security Agreements constitute valid
and binding obligations of Financial Security, enforceable against Financial
Security in accordance with their terms, subject, as to the enforcement of
remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium
and other similar laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy or insolvency of Financial
Security and to the application of general principles of equity and subject, in
the case of the Indemnification Agreement, to principles of public policy
limiting the right to enforce the indemnification provisions contained therein
insofar as they relate to indemnification for liabilities arising under
applicable securities laws.
4. The Note Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution nor delivery by Financial Security of the Note
Policy or the Financial Security Agreements, nor the performance by Financial
Security of its obligations thereunder, will conflict with any provision of the
certificate of incorporation or the bylaws of Financial Security or, to the best
of my knowledge, result in a breach of, or constitute a default under, any
agreement or other instrument to which Financial Security is a party or by which
it or any of its property is bound or, to the best of my knowledge, violate any
judgment, order or decree applicable to Financial Security of any governmental
or regulatory body, administrative agency, court or arbitrator having
jurisdiction over Financial Security (except that in the published opinion of
the Securities and Exchange Commission the indemnification provisions of the
Indemnification Agreement, insofar as they relate to indemnification for
liabilities arising under the Act, are against public policy as expressed in the
Act and are therefore unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "THE INSURER" in the Prospectus Supplement
dated March 16, 1999 (the "Offering Document") with respect to the Securities.
The information provided in the Offering Document with respect to Financial
Security is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant under the
Act in connection with the public offer and sale of
A-2
<PAGE>
securities of such registrant. Within such limited scope of disclosure, however,
there has not come to my attention any information which would cause me to
believe that the description of Financial Security referred to above, as of the
date of the Prospectus Supplement, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that no opinion is rendered with respect to any financial
statements or other financial information contained or referred to therein).
A-3
