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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) November 24, 1999
Prudential Securities Secured Financing Corporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
333-52021 13-3526694
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(Commission File Number) (I.R.S. Employer Identification No.)
One New York Plaza, New York, New York 10292
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(Address of Principal Executive Offices) (Zip Code)
(212) 778-1000
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(Registrant's Telephone Number, Including Area Code)
No Change
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 24, 1999, Registrant caused the issuance and sale of
$250,000,000 aggregate principal amount of its Class A-1 asset-backed Notes,
Class A-2 asset-backed notes, Class A-3 asset-backed notes and Class A-4
asset-backed notes (the "Notes") and approximately $20,000,000 of asset-backed
certificates (the "Certificates").
The Registrant is filing final forms of the exhibits listed in Item 7(c)
below relating to the Notes and the Certificates.
ITEM 5. OTHER EVENTS.
In connection with the offering of Flagship Auto Receivables Owner Trust
1999_2, Auto Receivables Backed Notes, Series 1999_2 described in a Prospectus
Supplement dated November 17, 1999 (the "Prospectus Supplement"), attached
hereto as Exhibit 23.2 is a copy of the consent of Pricewaterhouse Coopers,
L.L.P. as to (i) the incorporation by reference in the Prospectus Supplement of
its report on its audits of the consolidated financial statements of MBIA
Insurance Corporation and (ii) the use of the name of Pricewaterhouse Coopers,
L.L.P. in the Prospectus Supplement.
Set forth in Exhibit 99.5 are certain data concerning the Auto Loans as of
the Cut-Off Date.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
EXHIBIT
NO. DOCUMENT DESCRIPTION
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(a) Not applicable
(b) Not applicable
(c) Exhibit 1.1 Underwriting Agreement, dated November 17, 1999, among the
Registrant, Flagship Credit Corporation ("Flagship") and
Prudential Securities Incorporated ("Prudential")
Exhibit 4.1 Indenture, dated as of November 1, 1999, among Flagship Auto
Receivables Owner Trust 1999-2 (the "Trust"), Harris Trust
and Savings Bank (the "Indenture Trustee") and Flagship
Exhibit 4.2 Amended and Restated Trust Agreement, dated as of November
8, 1999, among the Registrant, Flagship and First Union
National Bank (the "Owner Trustee")
Exhibit 4.3 Sales and Servicing Agreement, dated as of November 1, 1999,
among Flagship, Flagship Auto Loan Funding LLC 1999-II (the
"LLC"), the Indenture Trustee and Copelco Financial Services
Group, Inc. ("Copelco")
Exhibit 4.4 Depositor Purchase Agreement, dated as of November 1, 1999,
between the LLC and the Registrant
Exhibit 4.5 Owner Trust Purchase Agreement, dated as of November 1,
1999, between the Registrant and the Trust
Exhibit 4.6 Spread Account Agreement, dated as of November 1, 1999,
among the Trust, MBIA Insurance Corporation ("MBIA") and the
Indenture Trustee
Exhibit 4.7 Note Guaranty Insurance Policy No. 30856, dated November 24,
1999, issued by MBIA
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Exhibit 4.8 Insurance Agreement, dated as of November 1, 1999, among
MBIA, Flagship, the LLC, the Trust, the Registrant, Flagship
Special Member, Inc., the Owner Trustee, Copelco and the
Indenture Trustee
Exhibit 4.9 Indemnification Agreement, dated as of November 17, 1999,
among MBIA, Flagship and Prudential
Exhibit 23.2 Consent of PricewaterhouseCoopers, L.L.P. regarding
financial statements of MBIA Insurance Corporation, their
report and the use of their name in the Prospectus
Supplement
Exhibit 99.5 Statistical information for the Auto Loans as of the Cutoff
Date
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SIGNATURES
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.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
(Registrant)
Dated: December 9, 1999 By: Joseph M. Donovan
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Name: Joseph M. Donovan
Title: Vice President
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
ASSET BACKED NOTES
SERIES 1999-2
UNDERWRITING AGREEMENT
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
November 17, 1999
Ladies and Gentlemen:
Prudential Securities Secured Financing Corporation (the "Depositor")
proposes, subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated November 17, 1999 (the
"Standard Provisions"), between the Depositor, Flagship Credit Corporation (the
"Originator") and Prudential Securities Incorporated, to issue and sell to you
(the "Underwriter") the Securities specified in Schedule I hereto (the "Offered
Securities"). The Depositor and the Originator agree that each of the provisions
of the Standard Provisions is incorporated herein by reference in its entirety,
and shall be deemed to be a part of this Underwriting Agreement to the same
extent as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Underwriting Agreement. Each reference to the
"Representative" herein and in the provisions of the Standard Provisions so
incorporated by reference shall be deemed to refer to you. Unless otherwise
defined herein, terms defined in the Standard Provisions are used herein as
therein defined. The Prospectus Supplement and the accompanying Prospectus
relating to the Offered Securities (together, the "Prospectus") are incorporated
by reference herein.
Subject to the terms and conditions set forth herein and in the Standard
Provisions incorporated herein by reference, the Depositor agrees to issue and
sell to the Underwriter, and the Underwriter agrees to purchase from the
Depositor, at the time and place and at the purchase price to the Underwriter
and in the manner set forth in Schedule I hereto, the entire original principal
balance of the Offered Securities.
[Remainder of Page Intentionally Left Blank]
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If the foregoing is in accordance with your understanding, please sign and
return to us two counterparts hereof, and upon acceptance hereof by you, this
letter and such acceptance hereof, including the provisions of the Standard
Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter, the Originator and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
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Name:
Title:
FLAGSHIP CREDIT CORPORATION
By:
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Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:
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Name:
Title:
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Title of Offered Securities: Flagship Auto Receivables Owner Trust
1999-2, Asset Backed Notes, Series
1999-2, Class A-1, Class A-2, Class A-3
and Class A-4.
Terms of Offered Securities: The Offered Securities shall have the
terms set forth in the Prospectus and
shall conform in all material respects
to the descriptions thereof contained
therein, and shall be issued pursuant
to an Indenture, to be dated as of
November 1, 1999, between the Flagship
Auto Receivables Owner Trust 1999-2, as
issuer, Flagship Credit Corporation, as
servicer and Harris Trust and Savings
Bank, as indenture trustee.
Purchase Price: The purchase price for the Offered
Securities shall be 99.625%, 99.625%,
99.625% and 99.625% of the aggregate
note principal balance of the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes, respectively, as
of the Closing Date.
Specified funds for payment [Federal Funds (immediately available
of Purchase Price: funds).]
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Duff & Phelps Credit Rating Co.
and AAA by Standard & Poor's Ratings
Services, a division of the McGraw-Hill
Companies.
Closing Date: On or about November 24, 1999 at 10:00
A.M. eastern standard time or at such
other time as the Depositor and the
Underwriter shall agree.
Closing Location: Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603-3441.
Name and address of Designated Representative: Prudential
Representative: Securities Incorporated.
Address for Notices, etc.: One New York Plaza, 14th Floor New
York, New York 10292 Attn: Group
Head-Asset Backed Finance Group Re:
Flagship Auto Receivables Owner Trust
1999-2
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
November 17, 1999
From time to time, Prudential Securities Secured Financing Corporation, a
Delaware corporation (the "Depositor") and Flagship Credit Corporation, a
Delaware corporation (the "Originator") may enter into one or more underwriting
agreements (each, an "Underwriting Agreement") that provide for the sale of
designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. These Standard Provisions shall not be construed as an
obligation of the Depositor to sell any securities or as an obligation of any of
the Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under these Standard Provisions
and each Underwriting Agreement shall be several and not joint. Unless otherwise
defined herein, the terms defined in the Underwriting Agreement are used herein
as defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell pursuant to the
applicable Underwriting Agreement to the several Underwriters named therein auto
loan backed notes (the "Securities") representing indebtedness secured primarily
by the property of a trust which consists of a pool of retail installment sales
contracts for new or used automobiles, light trucks, vans or mini vans (the
"Auto Loans") and certain related property. The Securities will be issued
pursuant to an Indenture (the "Indenture") by and between Flagship Auto
Receivables Owner Trust 1999-2, as issuer (the "Issuer"), Flagship Credit
Corporation, as servicer (the "Servicer") and Harris Trust and Savings Bank, as
indenture trustee (the "Indenture Trustee"). The Issuer will be formed at the
direction of the Depositor, pursuant to the terms of an Amended and Restated
Trust Agreement (the "Trust Agreement") among the Originator, the Depositor, and
First Union National Bank, as owner trustee (the "Owner Trustee"). The Auto
Loans will be sold by the Originator to Flagship Auto Loan Funding LLC 1999-II
("Flagship LLC") pursuant to the Sales and Servicing Agreement (the "Sales and
Servicing Agreement") by and among the Originator, Flagship LLC, the Issuer, the
Indenture Trustee and Copelco Financial Services Group, Inc., as back-up
servicer (the "Back-Up Servicer"). Copelco Financial Services Group, Inc. will
execute a Guarantee guaranteeing the servicing obligations of the Servicer under
the Sales and Servicing Agreement (the "Guaranty"). The Auto Loans will be sold
by Flagship LLC to the Depositor pursuant to the Depositor Purchase Agreement
(the "Depositor Purchase Agreement") between Flagship LLC and the Depositor. The
Auto Loans
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will be sold by the Depositor to the Issuer pursuant to the Owner Trust Purchase
Agreement (the "Owner Trust Purchase Agreement") between the Depositor and the
Issuer. The Issuer will pledge the Auto Loans to the Indenture Trustee pursuant
to the terms of the Indenture. The Offered Securities will have the benefit of a
note guaranty insurance policy (the "Policy") issued by MBIA Insurance
Corporation (the "Insurer") pursuant to the terms of an Insurance and Indemnity
Agreement (the "Insurance Agreement") among the Insurer, the Originator,
Flagship LLC, the Depositor and the Issuer. The Issuer, the Insurer and the
Indenture Trustee will enter into an agreement governing the spread account (the
"Spread Account Agreement"). The Indenture, the Trust Agreement, the Sales and
Servicing Agreement, the Depositor Purchase Agreement, the Owner Trust Purchase
Agreement, the Guaranty, the Policy, the Insurance Agreement and the Spread
Account Agreement are collectively referred to therein as the "Transaction
Documents."
The terms and rights of any particular issuance of Securities shall be as
specified in the Underwriting Agreement relating thereto and in or pursuant to
the Indenture identified in such Underwriting Agreement. The Securities which
are the subject of any particular Underwriting Agreement into which these
Standard Provisions are incorporated are herein referred to as the "Offered
Securities."
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-52021),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
Depositor proposes to file with the Commission pursuant to Rule 424(b) ("Rule
424(b)") under the 1933 Act a supplement (the "Prospectus Supplement") to the
prospectus included in the Registration Statement (such prospectus, in the form
it appears in the Registration Statement or in the form most recently revised
and filed with the Commission pursuant to Rule 424(b) is hereunder referred to
as the "Base Prospectus") specifically relating to the Offered Securities. The
Base Prospectus and the Prospectus Supplement, together with any amendment
thereof or supplement thereto, is hereunder referred to as the "Prospectus". The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Offered Securities together with the Base
Prospectus.
2. Offering by the Underwriters. Upon the execution of the Underwriting
Agreement applicable to any Offered Securities and the authorization by the
Representative of the release of such Offered Securities, the several
Underwriters propose to offer for sale to the public the Offered Securities at
the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities. Unless otherwise
specified in the Underwriting Agreement, payment for the Offered Securities
shall be made by certified or official bank check or checks payable to the order
of the Depositor in immediately available or next day funds, at the time and
place set forth in the Underwriting Agreement, upon delivery to the
Representative of the Offered Securities in definitive form (which delivery
shall be made through the facilities of The Depository Trust Company ("DTC")).
The time and date of such
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payment and delivery with respect to the Offered Securities are herein referred
to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective obligations
of the several Underwriters pursuant to the Underwriting Agreement shall be
subject, in the reasonable discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor and
the Originator contained herein as of the date of the Underwriting Agreement and
as of the Closing Date as if made on and as of the Closing Date, to the accuracy
in all material respects of the statements of the officers of the Depositor, the
Originator and the Servicer made in any certificates pursuant to the provisions
hereof and of the Underwriting Agreement, to the performance by the Depositor of
its covenants and agreements contained herein and to the following additional
conditions precedent:
(a) All actions required to be taken and all filings required to be
made by or on behalf of the Depositor under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act") prior to the sale of the
Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall be in effect; (ii) no proceedings for such purpose shall be
pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests
for additional information on the part of the Commission shall have been
complied with to the Representative's reasonable satisfaction; (iv) since
the respective dates as of which information is given in the Registration
Statement and the Prospectus except as otherwise stated therein, there
shall have been no material adverse change in the condition, financial or
otherwise, earnings, affairs, regulatory situation or business prospects of
the Depositor; (v) there are no material actions, suits or proceedings
pending before any court or governmental agency, authority or body or
threatened, affecting the Depositor or the transactions contemplated by the
Underwriting Agreement; (vi) the Depositor is not in violation of its
charter or its by-laws or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or its properties may be bound, which
violations or defaults separately or in the aggregate would have a material
adverse effect on the Depositor; and (vii) the Representative shall have
received, on the Closing Date a certificate, dated the Closing Date and
signed by an executive officer of the Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement, there
shall not have occurred any of the following: (i) if at or prior to the
Closing Date, trading in securities on the New York Stock Exchange shall
have been suspended or any material limitation in trading in securities
generally shall have been established on such exchange, or a banking
moratorium shall have been declared by New York State or federal
authorities; (ii) if at or prior to the Closing Date, there shall have been
an outbreak or escalation of hostilities
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between the United States and any foreign power, or of any other
insurrection or armed conflict involving the United States which results in
the declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Offered Securities; or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking activities in the
State of New York shall have been declared by either federal or New York
State authorities.
(d) The Representative shall have received, on the Closing Date, true
and correct copies of the letter from each nationally recognized
statistical rating organization (as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the 1933 Act) that rated the Offered
Securities and confirming that, unless otherwise specified in the
Underwriting Agreement, the Offered Securities have been rated in the
highest rating categories by each such organization and that each such
rating has not been rescinded since the date of the applicable letter.
(e) The Representative shall have received, on the Closing Date, from
Spencer N. Lempert, Esq., General Counsel of Copelco, a favorable opinion,
dated the Closing Date and reasonably satisfactory in form and substance to
the Representative.
(f) The Representative shall have received, on the Closing Date, from
Brian Meyers, Esq., General Counsel of Flagship Credit Corporation, a
favorable opinion, dated the Closing Date and reasonably satisfactory in
form and substance to the Representative.
(g) The Representative shall have received, on the Closing Date, from
Mayer, Brown & Platt, its special counsel, a favorable opinion, dated the
Closing Date and reasonably satisfactory in form and substance to the
Representative.
(h) The Representative shall have received, on the Closing Date, an
opinion of counsel for the Indenture Trustee, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for the
Underwriters.
(i) The Representative shall have received, on the Closing Date, an
opinion of counsel for the Issuer and First Union National Bank, as owner
trustee (the "Owner Trustee"), dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters.
(j) The Representative shall have received, on the Closing Date, an
opinion of Fred Robustelli, Esq., Associate General Counsel for the
Depositor, dated the Closing Date, in form and substance satisfactory to
the Representative and counsel for the Underwriters.
(k) The Representative shall have received, on or prior to the date of
first use of the prospectus supplement relating to the Offered Securities,
and on the Closing Date if requested by the Representative, letters of
independent accountants of the Originator in the
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form and reflecting the performance of the procedures previously requested
by the Representative.
(l) The Depositor shall have furnished or caused to be furnished to
the Representative on the Closing Date a certificate of an executive
officer of the Depositor satisfactory to the Representative as to the
accuracy of the representations and warranties of the Depositor herein at
and as of such Closing Date as if made as of such date, as to the
performance by the Depositor of all of its obligations hereunder to be
performed at or prior to such Closing Date, and as to such other matters as
the Representative may reasonably request;
(m) Each of the Originator, the Servicer, Flagship LLC and the Issuer
shall have each furnished or caused to be furnished to the Representative
on the Closing Date a certificate of officers of such entity in form and
substance reasonably satisfactory to the Representative;
(n) The Insurance Policy shall have been duly executed and issued at
or prior to the Closing Date and shall conform in all material respects to
the description thereof in the Prospectus Supplement.
(o) The Representative shall have received, on the Closing Date, an
opinion of counsel to the Insurer, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters and containing opinions as to such matters as the
Representative may reasonably request.
(p) On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the
Insurer's claims paying ability by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the 1933 Act.
(q) There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since June 30, 1999, of the Insurer, that
is in the Representative's judgment material and adverse and that makes it
in the Representative's judgment impracticable to market the Offered
Securities on the terms and in the manner contemplated in the Prospectus.
(r) The Originator shall have executed and delivered the Sales and
Servicing Agreement which shall include an indemnification provision by the
Originator in favor of the Depositor in form and substance acceptable to
the Representative and the Depositor.
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(s) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative and
its counsel may reasonably request.
5. Covenants of the Depositor and the Originator.
(a) In further consideration of the agreements of the Underwriters
contained in the Underwriting Agreement, the Depositor and the Originator,
as applicable, covenant as follows:
i. To furnish the Representative, without charge, copies of the
Registration Statement and any amendments thereto including exhibits
as the Representative may from time to time reasonably request.
ii. Immediately following the execution of the Underwriting
Agreement, the Originator will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from
the Depositor, either the initial public offering price or prices or
the method by which the price or prices at which the Offered
Securities are to be sold will be determined, the selling concessions
and reallowances, if any, any delayed delivery arrangements, and such
other information as the Representative, the Originator and the
Depositor deem appropriate in connection with the offering of the
Offered Securities, but the Depositor will not file any amendment to
the Registration Statement or any supplement to the Prospectus of
which the Representative shall not previously have been advised and
furnished with a copy a reasonable time prior to the proposed filing
or to which the Representative shall have reasonably objected. The
Depositor will use its best efforts to cause any amendment to the
Registration Statement to become effective as promptly as possible.
During the time when a Prospectus is required to be delivered under
the 1933 Act, the Depositor will comply so far as it is able with all
requirements imposed upon it by the 1933 Act and the rules and
regulations thereunder to the extent necessary to permit the
continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof and of the Prospectus, and the
Depositor will file with the Commission, promptly upon request by the
Representative, any amendments to the Registration Statement or
supplements to the Prospectus which may be necessary or advisable in
connection with the distribution of the Offered Securities by the
Underwriters, and will use its best efforts to cause the same to
become effective as promptly as possible. The Depositor will advise
the Representative, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed. The Depositor
will advise the Representative, promptly after it receives notice or
obtains knowledge thereof, of the
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issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, or
the suspension of the qualification of the Offered Securities for
offering or sale in any jurisdiction, or of the initiation or
threatening of any proceeding for any such purpose, or of any request
made by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to prevent
the issuance of any such stop order or any order suspending any such
qualification, and if any such order is issued, to obtain the lifting
thereof as promptly as possible.
iii. During the period when a prospectus is required by law to be
delivered in connection with the sale of the Offered Securities
pursuant to the Underwriting Agreement, the Depositor will file, on a
timely and complete basis, all documents that are required to be filed
by the Depositor with the Commission pursuant to Sections 13, 14, or
15(d) of the 1934 Act.
iv. To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request (at the expense of the
Originator, including fees and disbursements of counsel) in connection
with such qualification of the eligibility of the Offered Securities
for investment under the laws of such jurisdictions as the
Representative may designate provided that in connection therewith the
Depositor shall not be required to qualify to do business or to file a
general consent to service of process in any jurisdiction.
v. To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Depositor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including, at the option of the Depositor, Rule 158).
vi. For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing
copies of such financial statements and other periodic and special
reports as the Depositor and the Originator may from time to time
distribute generally to its creditors or the holders of the Offered
Securities and to furnish to the Representative copies of each annual
or other report the Depositor shall be required to file with the
Commission.
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vii. The Depositor will cause any Computational Materials and any
Structural Term Sheets with respect to the Offered Securities that are
delivered by an Underwriter to the Depositor 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
Depositor will cause any Collateral Term Sheet with respect to the
Offered Securities that is delivered by the Underwriters to the
Depositor in accordance with the provisions of Section 9 to be filed
with the commission on a Current Report pursuant to Rule 13-a-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 the Depositor 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, an Underwriter has delivered to any
prospective investor a subsequent Collateral Term Sheet that reflects,
in the reasonable judgment of the Representative and the Depositor, a
material change in the characteristics of the Auto Loans from those on
which a Collateral Terms Sheet with respect to the Offered Securities
previously filed with the Commission was based, the Depositor will
cause any such Collateral Term Sheet that is delivered by an
Underwriter to the Depositor 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.
(b) In further consideration of the agreements of the Underwriters
contained in the Underwriting Agreement, the Originator covenants as
follows:
i. To furnish the Representative, without charge, as many copies
of the Prospectus and any supplements and amendments thereto as the
Representative may from time to time reasonably request.
ii. Immediately following the execution of the Underwriting
Agreement, the Originator will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from
the Depositor, either the initial public offering price or prices or
the method by which the price or prices at which the Offered
Securities are to be sold will be determined, the selling concessions
and reallowances, if any, any delayed delivery arrangements, and such
other information as the Representative, the Originator and the
Depositor deem appropriate in connection with the offering of the
Offered Securities. During the time when a Prospectus is required to
be delivered under the 1933 Act, the Originator will prepare, so that
the Depositor may file with the Commission, promptly upon request by
the Representative, any supplements to
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the Prospectus which may be necessary or advisable in connection with
the distribution of the Offered Securities by the Underwriters
iii. If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 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 any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus
to comply with the 1933 Act, to promptly notify the Representative
thereof and upon their request to prepare and file with the
Commission, at the Originator's own expense, an amendment or
supplement which will correct such statement or omission or any
amendment which will effect such compliance.
iv. For so long as any of the Offered Securities remain
outstanding, the Originator will, or will cause the Servicer to,
furnish to the Representative, as soon as available, a copy of (i) the
annual statement of compliance delivered by the Servicer to the
Indenture Trustee under the applicable Sales and Servicing Agreement,
(ii) the annual independent public accountants' servicing report
furnished to the Indenture Trustee pursuant to the applicable Sales
and Servicing Agreement, (iii) each report regarding the Offered
Securities mailed to the holders of such Securities, and (iv) from
time to time, such other information concerning such Securities as the
Representative may reasonably request.
6. Representations and Warranties of the Depositor, the Originator and
Copelco.
(a) The Depositor represents and warrants to, and agrees with, each
Underwriter, as of the date of the Underwriting Agreement, as follows:
i. The Registration Statement including a prospectus relating to
the Securities and the offering thereof from time to time in
accordance with Rule 415 under the 1933 Act has been filed with the
Commission and such Registration Statement, as amended to the date of
the Underwriting Agreement, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. A prospectus supplement prepared by the
Originator specifically relating to the Offered Securities will be
filed with the Commission pursuant to Rule 424 under the 1933 Act;
provided, however, that a supplement to the Prospectus prepared
pursuant to Section 5(b) hereof shall be deemed to have supplemented
the Base Prospectus only with respect to the Offered Securities to
which it relates. The conditions to the use of a registration
statement on Form S-3 under the 1933 Act, as
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set forth in the General Instructions on Form S-3, and the conditions
of Rule 415 under the 1933 Act, have been satisfied with respect to
the Depositor and the Registration Statement. There are no contracts
or documents of the Depositor that are required to be filed as
exhibits to the Registration Statement pursuant to the 1933 Act or the
rules and regulations thereunder that have not been so filed.
ii. On the effective date of the Registration Statement, the
Registration Statement conformed in all material respects to the
requirements of the 1933 Act and the rules and regulations thereunder,
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; on the date of the
Underwriting Agreement and as of the Closing Date, the Registration
Statement conforms, and as amended or supplemented, if applicable,
will conform in all material respects to the requirements of the 1933
Act and the rules and regulations thereunder, and on the date of the
Underwriting Agreement and as of the Closing Date, the Registration
Statement does 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 the
Registration Statement as amended or supplemented, if applicable, will
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.
iii. The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
iv. The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
orders, licenses, certificates and permits of and from all government
or regulatory officials and bodies to own its properties, to conduct
its business as described in the Registration Statement and the
Prospectus and to execute, deliver and perform these Standard
Provisions, the Underwriting Agreement, and each Transaction Document
to which it is a party, except such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending
or, to the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation thereof.
v. The execution and delivery by the Depositor of these Standard
Provisions, the Underwriting Agreement, and each Transaction Document
to which it is a party are within the corporate power of the Depositor
and none of the execution
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and delivery by the Depositor of these Standard Provisions, the
Underwriting Agreement, and each Transaction Document to which it is a
party, the consummation by the Depositor of the transactions therein
contemplated, or the compliance by the Depositor with the provisions
thereof, will conflict with or result in a breach of, or constitute a
default under, the charter or the by-laws of the Depositor or any of
the provisions of any law, governmental rule, regulation, judgment,
decree or order binding on the Depositor or its properties, or any of
the provisions of any indenture, mortgage, contract or other
instrument to which the Depositor is a party or by which it is bound,
or will result in the creation or imposition of a lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument, except such as have
been obtained under the 1933 Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Offered Securities by the
Underwriters.
vi. The Underwriting Agreement has been, and at the Closing Date
each Transaction Document to which it is a party will have been, duly
authorized, executed and delivered by the Depositor.
vii. At the Closing Date, each of the Underwriting Agreement, and
each Transaction Document to which it is a party will constitute a
legal, valid and binding obligation of the Depositor, enforceable
against the Depositor, in accordance with its terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
viii. No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Depositor of the transactions contemplated by the
Underwriting Agreement, or the Transaction Documents, except such as
have been obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities or
"Blue Sky" laws, in connection with the purchase and distribution of
the Offered Securities by the Underwriters.
ix. The Depositor owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may be,
and to operate, its properties and to carry on its business as
presently conducted and has received no notice of proceedings relating
to the revocation of any such license, permit, consent, order or
approval, which singly or in the aggregate, if the subject of an
unfavorable decision,
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ruling or finding, would materially adversely affect the conduct of
the business, results of operations, net worth or condition (financial
or otherwise) of the Depositor.
x. There are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Depositor and, to
the best of the Depositor's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
xi. At the time of execution and delivery of the Owner Trust
Purchase Agreement, the Depositor will have good and marketable title
to the Auto Loans being transferred to the Issuer pursuant thereto,
free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest (collectively, "Liens"), and
will not have assigned to any person (other than the Issuer and the
Indenture Trustee) any of its right, title or interest in such Auto
Loans or in such Owner Trust Purchase Agreement or the Offered
Securities being issued pursuant thereto, the Depositor will have the
power and authority to transfer such Auto Loans to the Issuer and to
transfer the Offered Securities to each of the Underwriters, and upon
execution and delivery to the Issuer of the Owner Trust Purchase
Agreement and delivery to each of the Underwriters of the Offered
Securities, the Issuer will have good and marketable title to the Auto
Loans and each of the Underwriters will have good and marketable title
to the Offered Securities, in each case free and clear of any Liens.
xii. Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of the Underwriting
Agreement, these Standard Provisions, the Transaction Documents and
the Offered Securities have been or will be paid at or prior to the
Closing Date.
(b) The Originator represents and warrants to, and agrees with, each
Underwriter and the Depositor, as of the date of the Underwriting
Agreement, as follows:
i. The Originator is a Delaware corporation with full power and
authority to own its properties and conduct its business, as presently
conducted, and to enter into and perform its obligations under the
Transaction Documents to which it is a party.
ii. The Prospectus Supplement does not contain any untrue
statement of a material fact or 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.
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iii. The Underwriting Agreement has been and as of the Closing
Date, each of the Other Transaction Documents to which the Originator
is a party will have been duly authorized, executed and delivered by
the Originator and as of the Closing Date, each Transaction Document
will constitute a valid and binding agreement of Originator.
iv. The Originator is not subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it
or any of its properties, which materially and adversely affects (A)
the ability of the Originator to perform any of its obligations under
the Transaction Documents, or (B) the business, operations, financial
condition, properties or assets of the Originator, and the Originator
is not a party to, bound by or in breach or violation of any
indenture, mortgage, deed of trust or other agreement or instrument,
which materially and adversely affects the ability of the Originator
to perform any of its obligations under the Transaction Documents to
which it is a party, or the ability of the Originator to perform any
of its obligations hereunder.
v. There are no actions, proceedings or investigations to which
the Originator, or any of its affiliates, is a party pending, or, to
the knowledge of the Originator, threatened, before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality (A) asserting the invalidity of the
Transaction Documents to which it is a party or the Offered
Securities, (B) seeking to prevent the issuance of the Offered
Securities or the consummation of any of the transactions contemplated
by the Transaction Documents, (C) which might materially and adversely
affect the performance by the Originator of its obligations under the
Transaction Documents to which it is a party, (D) which might
materially and adversely affect the validity or enforceability of the
Transaction Documents to which it is a party or the Offered Securities
or (E) which might adversely affect the federal income tax attributes
of the Offered Securities described in the Prospectus.
vi. Any taxes, fees and other governmental charges arising from
the execution and delivery of Transaction Documents with the
execution, delivery and issuance of the Offered Securities and with
the execution and delivery of the Auto Loans sold by Originator to
Flagship LLC, then sold by Flagship LLC to the Depositor and then sold
by the Depositor to the Issuer, including any amendments thereto and
assignments and/or endorsements thereof have been paid or will be paid
by the Originator except for any re-liening expenses incurred in
connection with any obligation of the Servicer to re-title any
Financed Vehicle.
vii. The Originator is unaware of any facts or circumstances that
would materially adversely affect its ability to perform its
obligations under the Transaction Documents to which it is a party or
its obligations with respect to the Auto Loans.
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viii. As of the Closing Date, each of the representations and
warranties of the Originator set forth in the Transaction Documents
will be true and correct. Such representations and warranties are
incorporated by reference in this Section 6(b) and the Representative
and the several Underwriters may rely thereon as if such
representation and warranties were fully set forth herein.
ix. There has not been any material adverse change in the
business, operations, financial condition, properties or assets of the
Originator since the financial statements for the quarter ended June
30, 1999 were delivered to you. Such financial statements (together
with notes and schedules, if any, thereto) fairly present the
financial condition of Originator, as of the dates indicated, for the
periods specified, in conformity with generally accepted accounting
principles applied on a consistent basis during such periods, except
as indicated therein. Since the date of the latest audited financial
statements (together with the Offered Securities and schedules, if
any, thereto) previously delivered to you, the Originator has not
sustained any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute, court or governmental action,
order or decree, or otherwise, or a material adverse change in the
financial condition of the Originator or any material adverse change,
or any development involving a prospective material adverse change in
or affecting the general affairs, management, financial position or
results of operations of the Originator, which would adversely affect
the ability of the Originator to perform its obligations hereunder or
under any of the Transaction Documents to which it is a party.
x. The Offered Securities will conform in all material respects
to the description thereof contained in the Registration Statement and
the Prospectus and will be duly authorized and, when duly and validly
executed in accordance with the Indenture and when delivered and paid
for as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Indenture and will conform in
substance to the description thereof contained in the Registration
Statement.
xi. The execution and delivery by the Originator of these
Standard Provisions, the Underwriting Agreement and as of the Closing
Date, the execution and delivery by the Originator of the Transaction
documents to which it is a party are within the corporate power of the
Originator and the consummation by the Originator of the transactions
herein contemplated, nor the fulfillment of the terms of the Offered
Securities, the Transaction Documents or this Underwriting Agreement,
will result in the breach of any term or provision of the
organizational documents of the Originator or conflict with, result in
a breach, violation or acceleration of or constitute a default under,
the terms of any indenture, mortgage, deed of trust or other agreement
or instrument to which the Originator is a party or by which it is
bound, or result in the creation or imposition of any lien upon any of
its material properties pursuant to the terms of such indenture,
mortgage, deed of trust or other such
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<PAGE>
instrument, other than the lien created pursuant to the Indenture, or
violate any law, statute, order or regulation applicable to the
Originator of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Originator or any of
its properties, except such as have been obtained under the 1933 Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Offered
Securities by the Underwriters.
xii. The Issuer is not, and will not as of the Closing Date, be
an "investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act").
xiv. As of the Closing Date, neither the Originator nor any
Person acting on the Originator's behalf will have offered,
transferred, pledged, sold or otherwise disposed of any of its right,
title and interest in the Auto Loans (except for any pledge or grant
of security interest under the Originator's financing facilities
(each, a "Facility Lien") which will be release on the Closing Date)
or the Sales and Servicing Agreement other than as contemplated by
these Standard Provisions and the Indenture and upon the execution and
delivery of the Indenture and the execution and delivery of the
Offered Securities, the Issuer will have taken all necessary steps to
convey good and marketable title to the Offered Securities to the
Underwriters, in each case free and clear of any Liens.
xvi. At the Closing Date each of the Auto Loans which is a
subject of the Transaction Documents, and all such Auto Loans in the
aggregate will meet the criteria for selection described in the
Prospectus, and at the Closing Date the representations and warranties
made by the Originator in the Transaction Documents will be true and
correct as of such date.
xvii. At the time of execution and delivery of the Transaction
Documents to which it is a party, the Originator will have good and
marketable title to the Auto Loans being transferred to the Flagship
LLC and then from Flagship LLC to the Depositor and then from the
Depositor to the Issuer pursuant to the Transaction Documents, free
and clear of any lien, mortgage, pledge, charge, encumbrance, adverse
claim or other security interest (collectively, "Liens") (other than
any Facility Liens which will be released on the Closing Date), and
will not have assigned to any person (other than the Issuer and the
Indenture Trustee) any of its right, title or interest in such Auto
Loans or in such Transaction Documents, the Originator will have the
power and authority to transfer such Auto Loans, and upon execution
and delivery of the Transaction Documents and delivery of the Auto
Loans to, or on behalf of, the Issuer, the Issuer will have good and
marketable title to the Auto Loans free and clear of any Liens.
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xvii. On the date of the Underwriting Agreement and as of the
Closing Date, the Prospectus conforms, and as amended or supplemented,
if applicable, will conform in all material respects to the
requirements of the 1933 Act and the rules and regulations thereunder,
and on the date of the Underwriting Agreement and as of the Closing
Date, neither the Prospectus nor any Structural Term Sheets or any
Computational Materials includes any untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and each
such document, as amended or supplemented, if applicable, will 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; provided, however, that the
foregoing does not apply to statements or omissions in any of such
documents based upon the Underwriter Information (as defined herein)
or the Depositor Information (as defined herein)
7. Indemnification and Contribution.
(a) the Depositor and the Underwriters:
i. The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated acting in
its capacity as Representative and as one of the Underwriters), and
each of its directors and each person or entity who controls any
Underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which such
Underwriter or such director, officer or controlling person may become
subject under the 1933 Act 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 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 each Underwriter
and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action.
ii. Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the Depositor's
officers who signed the Registration Statement and each person, if
any, who controls the Depositor, within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities to which the
Depositor, or any such director, officer or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue
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statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or any other
prospectus relating to the Offered Securities, 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, in each case to the extent, but
only to the extent, that such untrue statements or alleged untrue
statements or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Depositor
or the Originator by any Underwriter through the Representative
specifically for use therein; and each Underwriter will reimburse any
legal or other expenses reasonably incurred by the Depositor or any
such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability
which such Underwriter may otherwise have. The Depositor acknowledges
that the statements set forth under the caption "UNDERWRITING" in the
Prospectus Supplement (the "Underwriter Information") constitute the
only information furnished to the Depositor by or on behalf of any
Underwriter for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus, and each of the several Underwriters
represents and warrants that such statements are correct as to it.
iii. Promptly after receipt by an indemnified party under this
Section 7(a) 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(a), 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. After notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 7(a) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise
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participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be
liable for the expenses of more than one separate counsel.
iv. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7(a) is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount
of contribution to which the respective parties are entitled, there
shall be considered the relative benefits received by the Depositor on
the one hand, and the Underwriters on the other, from the offering of
the Offered Securities (taking into account the portion of the
proceeds of the offering realized by each), the Depositor's and the
Underwriters' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate in the circumstances. The
Depositor and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity
for such purpose). No Underwriter or person controlling such
Underwriter shall be obligated to make contribution hereunder which in
the aggregate exceeds the total underwriting fee of the Offered
Securities purchased by such Underwriter under the Underwriting
Agreement, less the aggregate amount of any damages which such
Underwriter and its controlling persons have otherwise been required
to pay in respect of the same or any substantially similar claim. The
Underwriters' obligation to contribute hereunder are several in
proportion to their respective underwriting obligations and not joint.
For purposes of this Section 7(a), each officer or director and each
person who controls an Underwriter within the meaning of the 1933 Act
shall have the same rights to contribution as such Underwriter, and
each director of the Depositor, each officer of the Depositor who
signed the Registration Statement, and each person, if any, who
controls the Depositor within the meaning of Section 15 of the 1933
Act, shall have the same rights to contribution as the Depositor.
(b) The Originator and the Underwriters.
i. The Originator agrees (A) to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated acting in
its capacity as
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Representative and as one of the Underwriters), and each of its
directors and each person or entity who controls any Underwriter or
any such person, within the meaning of the 1933 Act, against any and
all losses, claims, damages or liabilities, joint and several, to
which the such Underwriter or such person or entity may become
subject, under the 1933 Act 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 any Structural Term Sheet,
Computational Materials, the Prospectus or 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, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission relates to the information contained in the Prospectus other
than (x) the Underwriter Information and (y) the information under the
headings "Summary of Terms -- Depositor"; this indemnity agreement
will be in addition to any liability which the Originator may
otherwise have; and (B) to indemnify and to hold each Underwriter
harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that such Underwriter may sustain in any way
related to the failure of any of the Originator or its affiliates to
perform its duties in compliance with the terms of the Transaction
Documents.
ii. Each Underwriter will indemnify and hold harmless the
Originator, its directors and each person or entity who controls the
Originator or any such person, within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint and several,
to which the Originator or any such director or controlling person may
become subject, under the 1933 Act 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, any Preliminary Prospectus, the Prospectus, any amendment
or supplement thereto, or any other prospectus relating to the Offered
Securities, or arise out of or are based upon 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, and
in each case to the extent, but only to the extent, that such untrue
statements or alleged untrue statements or omission or alleged
omission was made in reliance upon and in conformity with the
Underwriter Information; and each Underwriter will reimburse any legal
or other expenses reasonably incurred by the Depositor or any such
director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability
which such Underwriter may otherwise have. The Originator acknowledges
that the Underwriter Information constitutes the only information
furnished by or on behalf of any Underwriter for use in the
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Registration Statement, any Preliminary Prospectus or the Prospectus,
and each of the several Underwriters represents and warrants that such
statements are correct as to it.
iii. Promptly after receipt by an indemnified party under this
Section 7(b) 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(b), 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. After notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 7(b) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party
shall not be liable for the expenses of more than one separate
counsel.
iv. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7(b) is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount
of contribution to which the respective parties are entitled, there
shall be considered the relative benefits received by the Originator
on the one hand, and the Underwriters on the other, from the offering
of the Offered Securities
20
<PAGE>
(taking into account the portion of the proceeds of the offering
realized by each), the Originator's and the Underwriters's relative
knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable
considerations appropriate in the circumstances. The Originator and
the Underwriters agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation
(even if the Underwriters were treated as one entity for such
purpose). No Underwriter or person controlling such Underwriter shall
be obligated to make contribution hereunder which in the aggregate
exceeds the total underwriting fee of the Offered Securities purchased
by such Underwriter under the Underwriting Agreement, less the
aggregate amount of any damages which such Underwriter and its
controlling persons have otherwise been required to pay in respect of
the same or any substantially similar claim. The Underwriters'
obligation to contribute hereunder are several in proportion to their
respective underwriting obligations and not joint. For purposes of
this Section 7(b), each officer, each director and each person, if any
who controls the an Underwriter within the meaning of the 1933 Act
shall have the same rights to contribution as such Underwriter, and
each officer, each director, and each person who controls the
Originator within the meaning of the 1933 Act, shall have the same
rights to contribution as the Originator.
8. Computational Materials and Structural Term Sheets.
(a) Each Underwriter agrees to provide to the Depositor 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 Depositor to comply with the filing
requirement set forth herein, all information (in such written or
electronic format as required by the Depositor) with respect to the
Offered Securities 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 Terms Sheets was first delivered to a
prospective investors in the Offered Securities. Each delivery of
Computational
21
<PAGE>
Materials and Structural Terms Sheets to the Depositor pursuant to
this paragraph (a) shall be effected in accordance with Section 10.
(b) Each Underwriter represents and warrants to and agrees with the
Depositor, as of the date hereof and as of the Closing Date, that:
i. the Computational Materials furnished to the Depositor 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 Depositor that are required to be filed with
the Commission with respect to the Offered Securities in accordance
with the Kidder Letters, and such Computational Materials comply with
the requirements of the Kidder Letters; and
ii. the Structural Term Sheets furnished to the Depositor 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 Depositor that are required to be
filed with the Commission as "Structural Term Sheets" with respect to
the related Offered Securities in accordance with the PSA Letter, and
such Structural Term Sheets comply with the requirements of the PSA
Letter.
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 Offered Securities, the
Underwriters shall notify the Depositor 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 Offered Securities, the Underwriters shall
deliver to the Depositor one complete copy of all materials provided by the
Underwriters to prospective investors in such Offered Securities which
constitute "Collateral Term Sheets." Each delivery of a Collateral Term
Sheet to the Depositor 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
Offered Securities, shall indicate whether such materials differ in any
material respect from any Collateral Term Sheets previously delivered to
the Depositor with respect to the Offered Securities pursuant to this
Section 9(a) as a result of the occurrence of the material change in the
characteristics of the related Auto Loans.
22
<PAGE>
(b) Each Underwriter represents and warrants to and agrees with the
Depositor as of the date of this Agreement and as of the Closing Date,
that:
i. The Collateral Term Sheets furnished to the Depositor 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 Depositor that are required to be filed
with the Commission as "Collateral Term Sheets" with respect to the
Offered Securities in accordance with the PSA Letter, and such
Collateral Term Sheets comply with the requirements of the PSA Letter.
(c) If, at any time when a Prospectus relating to the Offered
Securities 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 any 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 Depositor for filing with the Commission an amendment or
supplement which will correct such statement or omission or an amendment
which will effect such compliance.
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 Depositor
hereunder shall be effected by the delivery of one copy to counsel for the
Depositor 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 Depositor 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 Depositor 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., New York
time, on such business day and will promptly advise the Representative of
such filing.
11. Survival of Certain Representations and Obligations. The respective
representations, warranties, agreements, covenants, indemnities and other
statements of the Depositor and the Originator, its officers and the several
Underwriters set forth in, or made pursuant to, the Underwriting Agreement shall
remain in full force and effect, regardless of any investigation, or statement
as to the result thereof, made by or on behalf of any Underwriter, the
Depositor, the
23
<PAGE>
Originator or any of the officers or directors or any controlling person of any
of the foregoing, and shall survive the delivery of and payment for the Offered
Securities.
12. Termination.
(a) The Underwriting Agreement may be terminated by the Depositor by
notice to the Representative in the event that a stop order suspending the
effectiveness of the Registration Statement shall have been issued or
proceedings for that purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the Representative
by notice to the Depositor in the event that the Depositor or the
Originator shall have failed, refused or been unable to perform all
obligations and satisfy all conditions to be performed or satisfied
hereunder by the Depositor and the Originator at or prior to the Closing
Date.
(c) Termination of the Underwriting Agreement pursuant to this Section
12 shall be without liability of any party to any other party other than as
provided in Sections 7 and 14 hereof.
13. Default of Underwriters. If any Underwriter or Underwriters defaults or
default in their obligation to purchase Offered Securities which it or they have
agreed to purchase under the Underwriting Agreement and the aggregate principal
amount of the Offered Securities which such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent (10%) or less of the
aggregate principal amount, notional amount or stated amount, as applicable, of
the Offered Securities to be sold under the Underwriting Agreement, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments under the Underwriting Agreement to purchase the
Offered Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters so defaults or default
and the aggregate principal amount of the Offered Securities with respect to
which such default or defaults occurs or occur is more than ten percent (10%) of
the aggregate principal amount, notional amount or stated amount, as applicable,
of Offered Securities to be sold under the Underwriting Agreement, as the case
may be, and arrangements satisfactory to the Representative and the Depositor
for the purchase of such Offered Securities by other persons (who may include
one or more of the non-defaulting Underwriters including the Representative) are
not made within 36 hours after any such default, the Underwriting Agreement will
terminate without liability on the part of any non-defaulting Underwriters or
the Depositor except for the expenses to be paid or reimbursed by the Originator
pursuant to Section 14 hereof. As used in the Underwriting Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 13. Nothing herein shall relieve a defaulting Underwriter from liability
for its default.
14. Expenses.
(a) The Originator agrees with the several Underwriters that:
24
<PAGE>
i. whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement
is terminated, the Originator will pay all fees and expenses incident
to the performance of its obligations under the Underwriting
Agreement, including, but not limited to, (i) the expenses of printing
and distributing the Underwriting Agreement and any related
underwriting documents, the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendments or supplements to the
Registration Statement or the Prospectus, the Structural Term Sheets
and Computational Materials (including in each case all exhibits,
amendments and supplements thereto), and any Blue Sky memorandum or
legal investment survey and any supplements thereto, (ii) fees and
expenses of rating agencies, the Insurer, accountants and counsel for
the Depositor and the Underwriter and (iii) the expenses referred to
in Section 4.7 of the Sales and Servicing Agreement;
ii. all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the
Offered Securities under the Underwriting Agreement will be borne and
paid by the Originator if the Underwriting Agreement is terminated by
the Depositor pursuant to Section 12(a) hereof or by the
Representative on account of the failure, refusal or inability on the
part of the Depositor or the Originator to perform all obligations and
satisfy all conditions on the part of the Depositor or the Originator
to be performed or satisfied hereunder; and
iii. the Originator will pay the cost of preparing the
certificates for the Offered Securities.
(b) In connection with the transactions contemplated under this
Underwriting Agreement and the Transaction Documents, the Originator shall
promptly pay (or shall promptly reimburse the Depositor to the extent that
the Depositor shall have paid or otherwise incurred): (i) the fees and
disbursements of the Depositor's and the Originators' counsel; (ii) the
fees of DCR, S&P and Moody's; (iii) any of the fees of the Indenture
Trustee and the fees and disbursements of the Indenture Trustee's counsel;
(iv) any of the fees of the Owner Trustee and the fees and disbursements of
the Owner Trustee's counsel; (v) expenses incurred in connection with
printing the Prospectus, the Prospectus Supplement, the Structural Terms
Sheets and Computational Materials any amendment or supplement thereto, any
Preliminary Prospectus and the Offered Securities; (vi) fees and expenses
relating to the filing of documents with the Commission (including without
limitation periodic reports under the Exchange Act); (vii) the shelf
registration amortization fee of 0.04% of the principal balance of the
Offered Securities on the Closing Date, paid in connection with the
issuance of Offered Securities; (viii) the fees and disbursements for KPMG,
accountants for the Originator; and (ix) all of the initial expenses of the
Insurer including, without limitation,
25
<PAGE>
legal fees and expenses, accountant fees and expenses and expenses in
connection with due diligence conducted on the Auto Loan Files. For the
avoidance of doubt, the parties hereto acknowledge that it is the intention
of the parties that the Depositor shall not pay any of the Indenture
Trustee's or Owner Trustee's fees and expenses in connection with the
transactions contemplated by this Underwriting Agreement and the
Transaction Documents. All other costs and expenses in connection with the
transactions contemplated hereunder shall be borne by the party incurring
such expenses.
(c) Except as otherwise provided in this Section 14, the Underwriters
agree to pay all of their expenses in connection with investigating,
preparing to market and marketing the Offered Securities and proposing to
purchase and purchasing the Offered Securities under the Underwriting
Agreement, including any advertising expenses incurred by them in making
offers and sales of the Offered Securities.
15. Notices. All communications under the Underwriting Agreement shall be
in writing and, (i) if sent to the Underwriters, shall be mailed, delivered or
telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, (ii) if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Prudential Securities Secured Financing Corporation, One New York Plaza, New
York, New York 10292, Attention: Managing Director-Asset Backed Finance Group;
and (iii) if sent to the Originator, shall be mailed, delivered or telegraphed
and confirmed to Flagship Credit Corporation, One International Plaza,
Philadelphia, Pennsylvania 08054, Attention: General Counsel; provided, however,
that any notice to any Underwriter pursuant to the Underwriting Agreement shall
be mailed, delivered or telegraphed and confirmed to such Underwriter at the
address furnished by it.
16. Representative of Underwriters. Any Representative identified in the
Underwriting Agreement will act for the Underwriters of the Offered Securities
and any action taken by the Representative under the Underwriting Agreement will
be binding upon all of such Underwriters.
17. Successors. The Underwriting Agreement shall inure to the benefit of
and shall be binding upon the several Underwriters, the Depositor and the
Originator and their respective successors and legal representatives, and
nothing expressed or mentioned herein or in the Underwriting Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of the Underwriting Agreement, or any
provisions herein contained, the Underwriting Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the representations and warranties of the Depositor and the Originator contained
herein or in the Underwriting Agreement shall also be for the benefit of any
person or persons who controls or control any Underwriter within the meaning of
Section 15 of the 1933 Act, and (ii) the indemnities by the several Underwriters
shall also be for the benefit of the directors of the Depositor, the officers of
the Depositor who have signed the Registration Statement and any person or
persons who control the Depositor within the meaning of Section 15 of the 1933
Act. No purchaser of the Offered Securities from any Underwriter shall be deemed
a successor
26
<PAGE>
because of such purchase. These Standard Provisions and each Underwriting
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
18. Time of the Essence. Time shall be of the essence of each Underwriting
Agreement.
19. Governing Law. These Standard Provisions and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
[Signature Page Follows]
27
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
------------------------------------
Name:
Title:
FLAGSHIP CREDIT CORPORATION
By:
------------------------------------
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:
----------------------------------
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
28
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
Issuer
HARRIS TRUST AND SAVINGS BANK,
Indenture Trustee
and
FLAGSHIP CREDIT CORPORATION,
Servicer
--------------------------------------------
INDENTURE
Dated as of November 1, 1999
--------------------------------------------
$250,000,000 in aggregate principal amount of Asset-Backed Notes, Series 1999-2,
consisting of:
$117,000,000 of 6.420% Class A-1 Asset-Backed Notes
$60,000,000 of 6.705% Class A-2 Asset-Backed Notes
$43,000,000 of 6.835% Class A-3 Asset-Backed Notes
$30,000,000 of 6.900% Class A-4 Asset-Backed Notes
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE ............................ 3
SECTION 1.01 Definitions ............................................... 3
SECTION 1.02 Other Definitional Provisions ............................. 19
ARTICLE II THE NOTES ............................................................ 20
SECTION 2.01 Form ...................................................... 20
SECTION 2.02 Execution, Authentication and Deliver ..................... 20
SECTION 2.03 Transfer and Registry; Exchange; Negotiability; Appointment
of Certificate Registrar ................................. 21
SECTION 2.04 Regulations With Respect to Exchanges and Transfers ....... 22
SECTION 2.05 Mutilated, Destroyed, Lost or Stolen Notes ................ 23
SECTION 2.06 Persons Deemed Owner ...................................... 24
SECTION 2.07 Payment of Principal and Interest; Defaulted Interest ..... 24
SECTION 2.08 Cancellation .............................................. 25
SECTION 2.09 Release of Collateral ..................................... 25
SECTION 2.10 Book-Entry Notes .......................................... 25
SECTION 2.11 Notices to Clearing Agency ................................ 26
SECTION 2.12 Definitive Notes .......................................... 26
ARTICLE III COVENANTS ........................................................... 27
SECTION 3.01 Payment of Principal and Interest ......................... 27
SECTION 3.02 Maintenance of Office or Agency ........................... 27
SECTION 3.03 Money for Payments to be Held in Trust .................... 27
SECTION 3.04 Existence ................................................. 29
SECTION 3.05 Protection of Series Pool ................................. 29
SECTION 3.06 [Reserved] ................................................ 30
SECTION 3.07 Performance of Obligations; Servicing of Auto Loans ....... 30
SECTION 3.08 Issuer May Only Consolidate on Certain Terms .............. 31
SECTION 3.09 Successor or Transferee ................................... 32
SECTION 3.10 No Other Business ......................................... 32
SECTION 3.11 No Borrowing .............................................. 32
SECTION 3.12 Servicer's Obligations .................................... 32
SECTION 3.13 Guarantees, Loans, Advances and Other Liabilities ......... 33
SECTION 3.14 Capital Expenditures ...................................... 33
SECTION 3.15 Compliance with Laws ...................................... 33
SECTION 3.16 Restricted Payments ....................................... 33
SECTION 3.17 Notices of Events of Default .............................. 33
SECTION 3.18 Further Instruments and Acts .............................. 33
SECTION 3.19 Amendments of Sales and Servicing Agreement ............... 34
</TABLE>
i
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<TABLE>
<S> <C>
SECTION 3.20 Tax Characterization ...................................... 34
ARTICLE IV ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS ........................ 34
SECTION 4.01 Establishment of Accounts ................................. 34
SECTION 4.02 Spread Account Initial Deposit ............................ 36
SECTION 4.03 Certain Reimbursements to the Servicer .................... 36
SECTION 4.04 Application of Collections ................................ 36
SECTION 4.05 Withdrawals from Spread Account ........................... 36
SECTION 4.06 Additional Deposits ....................................... 37
SECTION 4.07 Payments .................................................. 37
SECTION 4.08 Payments to Noteholders ................................... 39
SECTION 4.09 [Reserved ................................................. 39
SECTION 4.10 Statements to Noteholders ................................. 40
SECTION 4.11 Optional Deposits by the Insurer; Notice of Waivers ....... 41
ARTICLE V THE POLICY ............................................................ 41
SECTION 5.01 Claims Under Policy ....................................... 41
SECTION 5.02 Preference Claims ......................................... 43
SECTION 5.03 Surrender of Policy ....................................... 43
ARTICLE VI SATISFACTION AND DISCHARGE ........................................... 44
SECTION 6.01 Satisfaction and Discharge of Indenture ................... 44
SECTION 6.02 Application of Trust Money ................................ 44
SECTION 6.03 Repayment of Moneys Held by Note .......................... 45
ARTICLE VII REMEDIES ............................................................ 45
SECTION 7.01 Events of Default ......................................... 45
SECTION 7.02 Rights Upon Event of Default .............................. 47
SECTION 7.03 Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee .................................... 48
SECTION 7.04 Remedies .................................................. 51
SECTION 7.05 [Reserved] ................................................ 52
SECTION 7.06 Priorities ................................................ 52
SECTION 7.07 Limitation of Suits ....................................... 53
SECTION 7.08 Unconditional Rights of Noteholders To Receive Principal
and Interest ........................................... 54
SECTION 7.09 Restoration of Rights and Remedies ........................ 54
SECTION 7.10 Rights and Remedies Cumulative ............................ 54
SECTION 7.11 Delay or Omission Not a Waiver ............................ 54
SECTION 7.12 Control by Noteholders .................................... 55
SECTION 7.13 Waiver of Defaults ........................................ 55
SECTION 7.14 Undertaking for Costs ..................................... 56
</TABLE>
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<TABLE>
<S> <C>
SECTION 7.15 Waiver of Stay or Extension Laws ................................ 56
ARTICLE VIII THE INDENTURE TRUSTEE .................................................... 56
SECTION 8.01 Duties Of Indenture Trustee ..................................... 56
SECTION 8.02 Rights of Indenture Trustee ..................................... 58
SECTION 8.03 Individual Rights of Indenture Trustee .......................... 59
SECTION 8.04 Indenture Trustee's Disclaimer .................................. 60
SECTION 8.05 Notice of Defaults .............................................. 60
SECTION 8.06 Reports by Indenture Trustee to Holders ......................... 60
SECTION 8.07 Compensation and Indemnity ...................................... 60
SECTION 8.08 Replacement of Indenture Trustee ................................ 61
SECTION 8.09 Successor Indenture Trustee by a Merger ......................... 63
SECTION 8.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee 63
SECTION 8.11 Appointment and Powers .......................................... 64
SECTION 8.12 Performance of Duties ........................................... 65
SECTION 8.13 Limitation on Liability ......................................... 65
SECTION 8.14 Successor Indenture Trustee ..................................... 66
SECTION 8.15 Representations and Warranties of the Indenture Trustee ......... 67
SECTION 8.16 Waiver of Setoffs ............................................... 67
SECTION 8.17 Control by the Controlling Party ................................ 68
SECTION 8.18 Insurer as Controlling Party .................................... 68
SECTION 8.19 Eligibility and Disqualification of Indenture Trustee ........... 68
SECTION 8.20 Resignation or Removal of Indenture Trustee ..................... 69
SECTION 8.21 Preferential Collection of Claims Against Issuer ................ 69
ARTICLE X NOTEHOLDERS' LISTS AND REPORTS .............................................. 70
SECTION 9.01 Issuer To Furnish To Indenture Trustee Names and
Addresses of Noteholders .................................................. 70
SECTION 9.02 Preservation of Information; Communications to Noteholders ...... 70
ARTICLE X COLLECTION OF MONEY AND RELEASES OF SERIES POOL ............................. 70
SECTION 10.01 Collection of Money ............................................ 70
SECTION 10.02 Release of Series Pool ......................................... 71
ARTICLE XI SUPPLEMENTAL INDENTURES .................................................... 71
SECTION 11.01 Supplemental Indentures Without Consent of Noteholders ......... 71
SECTION 11.02 Supplemental Indentures with Consent of Noteholders ............ 72
SECTION 11.03 Execution of Supplemental Indentures ........................... 74
SECTION 11.04 Effect of Supplemental Indenture ............................... 74
SECTION 11.05 Reference in Notes to Supplemental Indentures .................. 74
ARTICLE XII REDEMPTION OF NOTES ....................................................... 75
</TABLE>
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<TABLE>
<S> <C>
SECTION 12.01 Redemption ..................................................... 75
SECTION 12.02 Form of Redemption Notice ...................................... 75
SECTION 12.03 Notes Payable on Redemption Date ............................... 76
ARTICLE XIII MISCELLANEOUS ............................................................ 76
SECTION 13.01 Compliance Certificates and Opinions, etc ...................... 76
SECTION 13.02 Form of Documents Delivered to Indenture Trustee ............... 77
SECTION 13.03 Acts of Noteholders ............................................ 78
SECTION 13.04 Notices, etc., to Indenture Trustee, Issuer and Rating Agencies 79
SECTION 13.05 Notices to Noteholders Waiver .................................. 80
SECTION 13.06 Alternate Payment and Notice Provisions ........................ 81
SECTION 13.07 Effect of Headings and Table of Contents ....................... 81
SECTION 13.08 Successors and Assigns ......................................... 81
SECTION 13.09 Severability ................................................... 81
SECTION 13.10 Benefits of Indenture .......................................... 81
SECTION 13.11 Counterparts ................................................... 82
SECTION 13.12 Recording of Indenture ......................................... 82
SECTION 13.13 Issuer Obligation .............................................. 82
SECTION 13.14 No Petition .................................................... 82
SECTION 13.15 Inspection ..................................................... 83
SECTION 13.16 Legal Holidays ................................................. 83
SECTION 13.17 Governing Law .................................................. 83
SECTION 13.18 Conflict with Trust Indenture Act .............................. 83
SECTION 13.19 Limitation of Liability ........................................ 83
</TABLE>
Exhibits
EXHIBIT A-1 Form of Class A-1 Note
EXHIBIT A-2 Form of Class A-2 Note
EXHIBIT A-3 Form of Class A-3 Note
EXHIBIT A-4 Form of Class A-4 Note
EXHIBIT B Form of Certificate of Authentication
iv
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INDENTURE
This INDENTURE dated as of November 1, 1999, is among FLAGSHIP AUTO
RECEIVABLES OWNER TRUST 1999-2, as issuer (herein called the "Issuer"), HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, as indenture trustee
(herein called the "Indenture Trustee"), and FLAGSHIP CREDIT CORPORATION, as
servicer (herein called the "Servicer").
RECITALS
The Issuer has duly authorized the issuance of $250,000,000 in aggregate
principal amount of its Asset-Backed Notes, Series 1999-2, consisting of
$117,000,000 aggregate principal amount of 6.420% Class A-1 Asset-Backed Notes
(the "Class A-1 Notes"), $60,000,000 aggregate principal amount of 6.705% Class
A-2 Asset-Backed Notes (the "Class A-2 Notes"), $43,000,000 aggregate principal
amount of 6.835% Class A-3 Asset-Backed Notes (the "Class A-3 Notes"), and
$30,000,000 aggregate principal amount of 6.900% Class A-4 Asset-Backed Notes
(the "Class A-4 Notes", together with the Class A-1 Notes, Class A-2 Notes, and
Class A-3 Notes, the "Notes"), of substantially the tenor hereinafter set forth,
and to provide therefor the Issuer has duly authorized the execution and
delivery of this Indenture. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes shall be entitled to payments of interest and
principal as set forth herein.
MBIA Insurance Corporation (the "Insurer") has issued and delivered a
financial guaranty insurance policy, dated the Closing Date (with endorsements,
the "Policy"), pursuant to which the Insurer guarantees Insured Payments, as
defined in the Policy.
As an inducement to the Insurer to issue and deliver the Policy, the Issuer
and the Insurer have executed and delivered the Insurance Agreement, dated as of
November 1, 1999 (as amended from time to time, the "Insurance Agreement") among
the Issuer, the Seller, the Depositor, the Owner Trustee, the Special Member,
the Insurer, Flagship Credit Corporation, Harris Trust and Savings Bank, as
Indenture Trustee and Collateral Agent, and Copelco Financial Services Group,
Inc., as Back-up Servicer.
As an additional inducement to the Insurer to issue the Policy, and as
security for the performance by the Issuer of the Insurer Secured Obligations
(as defined below) and as security for the performance by the Issuer of the
Indenture Trustee Secured Obligations, the Issuer has agreed to assign the
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 at the Closing Date, for
the benefit of the Issuer Secured Parties,
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(i) all right, title and interest of the Issuer in and to the Auto
Loans listed in Schedule A to the Owner Trust Purchase Agreement and all
monies received thereunder after the Cutoff Date and all Actual Recovery
Amounts received with respect to such Auto Loans after the Cutoff Date;
(ii) all right, title and interest of the Issuer in and to the
security interests in the Financed Vehicles granted by Obligors pursuant to
the Auto Loans and any other interest of the Issuer in such Financed
Vehicles, including, without limitation, the certificates of title and all
other evidence of ownership with respect to such Financed Vehicles;
(iii) all right, title and interest of the Issuer in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles securing the Auto Loans or the Obligors thereunder;
(iv) all right, title and interest of the Issuer in and to certain
contracts, including certain third party contracts and dealer agreements;
(v) all right, title and interest of the Issuer in and to refunds for
the costs of extended service contracts with respect to Financed Vehicles
securing the Auto Loans, refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle or his or her
obligations with respect to a Financed Vehicle and any recourse to Dealers
for any of the foregoing;
(vi) the Loan File related to each Auto Loan;
(vii) all amounts and property from time to time held in or credited
to the Collection Account;
(viii) 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 or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing;
(ix) the Issuer's rights and benefits, but none of its obligations or
burdens, under the Owner Trust Purchase Agreement, including, without
limitation, the rights of the Depositor under the Depositor Purchase
Agreement and the rights of the Seller under the Sales and Servicing
Agreement; and
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(x) all proceeds of the foregoing
(collectively, the "Collateral").
In addition, the Issuer shall cause the Policy to be issued for the benefit
of the Noteholders.
The foregoing Grant is made in trust to the Indenture Trustee, for the
benefit of the Holders of the Notes and for the benefit of the Insurer. The
Indenture Trustee hereby acknowledges such Grant, accepts the trusts under this
Indenture in accordance with the provisions of this Indenture and agrees to
perform its duties as required in this Indenture to the best of its ability to
the end that the interests of such parties, recognizing the priorities of their
respective interests may be adequately and effectively protected.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture and the definitions of such terms are equally applicable to both
the singular and plural forms of such terms and to each gender.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Sales and Servicing Agreement.
"Account Property" means the Accounts, all amounts and investments held
from time to time in any Account (whether in the form of deposit accounts,
Physical Property, book-entry securities, uncertificated securities or
otherwise), and all proceeds of the foregoing.
"Accounts" has the meaning assigned thereto in Section 4.01.
"Act" has the meaning specified in Section 13.03(a).
"Actual Recovery Amounts" with respect to a Charged-off Auto Loan, proceeds
from the sale of the related Financed Vehicle, proceeds of the related insurance
policy, proceeds from any dealer agreements and any other recoveries with
respect to such Charged-off Auto Loan and the related Financed Vehicle, net of
reasonable and customary out-of-pocket expenses incurred by the Servicer in
connection with collection, enforcement, or liquidation relative to the Auto
Loans and amounts so received that are required to be refunded to the Obligor on
such Auto Loan.
"Additional Noteholders' Principal Payment Amount" means, on each Payment
Date on which the outstanding principal balance of the Notes (after giving
effect to the payment of the Noteholders' Principal Payment Amount for such
Payment Date) exceeds the Notes Target Amount, the lesser of (a) an amount
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necessary to reduce the aggregate principal amount of the Notes to the Notes
Target Amount and (b) the amount of Available Funds remaining on deposit in the
Collection Account for such Payment Date after making the payments set forth in
Section 4.07(a)(i)-(viii).
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition of "Affiliate", the term "control"
(including the terms "controlling", "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Auto Loans (other than
(i) any Auto Loan that became a Charged-off Auto Loan prior to the end of the
related Collection Period and (ii) any Auto Loan that became a Purchased Auto
Loan prior to or as of the end of the related Collection Period) as of the date
of determination.
"Annual Trustee Expense Cap" means an amount of $50,000 in any twelve month
period from the Closing Date; provided that, in the event unpaid reasonable and
customary out-of-pocket expenses of the Indenture Trustee and Collateral Agent
in any such twelve month period are less than $50,000, the amount of the
difference between $50,000 and the amount of such expenses will be added to
increase the Annual Trustee Expense Cap for the immediately successive twelve
month period on a cumulative basis; provided, further, that for each twelve
month period beginning after the occurrence and during the continuance of an
Event of Default or a Servicer Termination Event (in such event, the Indenture
Trustee will consult with the Insurer in connection with such expenditures), the
Annual Trustee Expense Cap shall be $150,000.
"Authorized Officer" means, with respect to the Issuer and the Servicer,
any officer or agent acting pursuant to a power of attorney of the Owner Trustee
or the Servicer, as applicable, who is authorized to act for the Owner Trustee
or the Servicer, as applicable, in matters relating to the Issuer or the
Servicer, as applicable, and who is identified on the list of Authorized
Officers delivered by 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).
"Auto Loans" has the meaning assigned to such term in the Sales and
Servicing Agreement.
"Available Funds" means, with respect to a Payment Date, will be the sum of
the following amounts with respect to the preceding Collection Period: (a) all
principal and interest payments on the Auto Loans; (b) all proceeds received
during the related Collection Period with respect to Auto Loans that became
Charged-off Auto Loans during such related Collection Period, net of the
reasonable and customary out-of-pocket expenses incurred by the Servicer in
connection with collection, enforcement or liquidation and any amounts required
by law to be remitted to the Obligor on such Charged-off Auto Loan; (c) proceeds
from Actual Recovery Amounts with respect to Charged-off Auto Loans; (d)
earnings on investments of funds in the Collection Account and the Spread
Account during the related Collection
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Period; and (e) the Purchase Amount deposited in the Collection Account for each
Auto Loan that was repurchased by the Originator, Flagship LLC or the Servicer,
as the case may be, as of the last day of the related Collection Period.
"Book-Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
"Business Day" means any day other than a Saturday, Sunday or other day on
which the Insurer or commercial banking institutions are authorized or obligated
to remain closed in Philadelphia, Pennsylvania, New York, New York or such other
city where the corporate trust office of the Owner Trustee, Indenture Trustee or
the Insurer is then located.
"Charged-off Auto Loan" has the meaning assigned to such term in the Spread
Account Agreement.
"Class A-1 Final Scheduled Maturity Date" means the November 2002 Payment
Date.
"Class A-1 Interest Rate" means 6.420% per annum.
"Class A-1 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-1 Noteholders' Interest Payment
Amount for the preceding Payment Date over the amount that was actually
deposited in the Collection Account on such preceding Payment Date on account of
the Class A-1 Noteholders' Interest Payment Amount.
"Class A-1 Noteholders' Interest Payment Amount" means, with respect to any
Payment Date, the sum of the Class A-1 Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Class A-1 Noteholders' Interest Carryover
Shortfall for such Payment Date, plus interest on such Class A-1 Noteholder's
Interest Carryover Shortfall, to the extent permitted by law, at the Class A-1
Interest Rate to, but excluding, the current Payment Date.
"Class A-1 Noteholders' Monthly Interest Payment Amount" means (a) for the
first Payment Date, an amount equal to the product of (i) the Class A-1 Interest
Rate, (ii) the initial outstanding principal amount of the Class A-1 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to but excluding the first Payment Date (assuming
that there are 30 days in each month of the year) and the denominator of which
is 360; and (b) for any Payment Date after the first Payment Date, an amount
equal to the product of (i) one-twelfth of the Class A-1 Interest Rate and (ii)
the outstanding principal amount of the Class A-1 Notes as of the close of the
preceding Payment Date (after giving effect to all payments on account of
principal on such preceding Payment Date).
"Class A-1 Notes" means the Class A-1 6.420% Asset-Backed Notes,
substantially in the form of Exhibit A-1.
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"Class A-2 Final Scheduled Maturity Date" means the January 2004 Payment
Date.
"Class A-2 Interest Rate" means 6.705% per annum.
"Class A-2 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-2 Noteholders' Interest Payment
Amount for the preceding Payment Date over the amount that was actually
deposited in the Collection Account on such preceding Payment Date on account of
the Class A-2 Noteholders' Interest Payment Amount.
"Class A-2 Noteholders' Interest Payment Amount" means, with respect to any
Payment Date, the sum of the Class A-2 Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Class A-2 Noteholders' Interest Carryover
Shortfall for such Payment Date, plus interest on such Class A-2 Noteholder's
Interest Carryover Shortfall, to the extent permitted by law, at the Class A-2
Interest Rate to, but excluding, the current Payment Date.
"Class A-2 Noteholders' Monthly Interest Payment Amount" means (a) for the
first Payment Date, an amount equal to the product of (i) the Class A-2 Interest
Rate, (ii) the initial outstanding principal amount of the Class A-2 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to but excluding the first Payment Date (assuming
that there are 30 days in each month of the year) and the denominator of which
is 360; and (b) for any Payment Date after the first Payment Date, an amount
equal to the product of (i) one-twelfth of the Class A-2 Interest Rate and (ii)
the outstanding principal amount of the Class A-2 Notes as of the close of the
preceding Payment Date (after giving effect to all payments on account of
principal on such preceding Payment Date).
"Class A-2 Notes" means the Class A-2 6.705% Asset-Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Final Scheduled Maturity Date" means the November 2004 Payment
Date.
"Class A-3 Interest Rate" means 6.835% per annum.
"Class A-3 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-3 Noteholders' Interest Payment
Amount for the preceding Payment Date over the amount that was actually
deposited in the Collection Account on such preceding Payment Date on account of
the Class A-3 Noteholders' Interest Payment Amount.
"Class A-3 Noteholders' Interest Payment Amount" means, with respect to any
Payment Date, the sum of the Class A-3 Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Class A-3 Noteholders' Interest Carryover
Shortfall for such Payment Date, plus interest on such Class A-3 Noteholder's
Interest Carryover Shortfall, to the extent permitted by law, at the Class A-3
Interest Rate to, but excluding, the current Payment Date.
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"Class A-3 Noteholders' Monthly Interest Payment Amount" means (a) for the
first Payment Date, an amount equal to the product of (i) the Class A-3 Interest
Rate, (ii) the initial outstanding principal amount of the Class A-3 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to but excluding the first Payment Date (assuming
that there are 30 days in each month of the year) and (ii) the denominator of
which is 360; and (b) for any Payment Date after the first Payment Date, an
amount equal to the product of (i) one-twelfth of the Class A-3 Interest Rate
and (ii) the outstanding principal amount of the Class A-3 Notes as of the close
of the preceding Payment Date (after giving effect to all payments on account of
principal on such preceding Payment Date).
"Class A-3 Notes" means the Class A-3 6.835% Asset-Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Final Scheduled Maturity Date" means the May 2006 Payment Date.
"Class A-4 Interest Rate" means 6.900% per annum.
"Class A-4 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-4 Noteholders' Interest Payment
Amount for the preceding Payment Date over the amount that was actually
deposited in the Collection Account on such preceding Payment Date on account of
the Class A-4 Noteholders' Interest Payment Amount.
"Class A-4 Noteholders' Interest Payment Amount" means, with respect to any
Payment Date, the sum of the Class A-4 Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Class A-4 Noteholders' Interest Carryover
Shortfall for such Payment Date, plus interest on such Class A-4 Noteholder's
Interest Carryover Shortfall, to the extent permitted by law, at the Class A-4
Interest Rate to, but excluding, the current Payment Date.
"Class A-4 Noteholders' Monthly Interest Payment Amount" means (a) for the
first Payment Date, an amount equal to the product of (i) the Class A-4 Interest
Rate, (ii) the initial outstanding principal amount of the Class A-4 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to but excluding the first Payment Date (assuming
that there are 30 days in each month of the year) and the denominator of which
is 360; and (b) for any Payment Date after the first Payment Date, an amount
equal to the product of (i) one-twelfth of the Class A-4 Interest Rate and (ii)
the outstanding principal amount of the Class A-4 Notes as of the close of the
preceding Payment Date (after giving effect to all payments on account of
principal on such preceding Payment Date).
"Class A-4 Notes" means the Class A-4 6.900% Asset-Backed Notes,
substantially in the form of Exhibit A-4.
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"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act, or any successor provision thereto.
The initial Clearing Agency shall be The Depository Trust Company.
"Closing Date" means November 24, 1999.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Collateral Agent" means Harris Trust and Savings Bank in its capacity as
Collateral Agent under the Spread Account Agreement.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 4.01.
"Collection Period" means, with respect to each Payment Date, the preceding
calendar month. Any amount stated "as of the close of business on the last day
of a Collection Period" shall give effect to the following calculations as
determined as of the end of the day on such last day: (i) all applications of
collections, and (ii) all payments.
"Commission" means the United State Securities and Exchange Commission.
"Controlling Party" has the meaning assigned to it in Section 8.18 hereof.
"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 date of the execution of this Indenture is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Administration, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders, the
Insurer, the Servicer and the Issuer, or the principal corporate trust office of
any successor Indenture Trustee (the address of which the successor Indenture
Trustee will notify the Noteholders, the Insurer and the Issuer).
"Cram Down Loss" means, with respect to an Auto Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on an Auto Loan or otherwise modifying or restructuring
scheduled payments to be made on an Auto Loan, an amount equal to such reduction
in Principal Balance of such Auto Loan or the reduction in the net present value
(using as the discount rate the lower of the contract rate or the rate of
interest specified by the court in such order) of the Scheduled Payments as so
modified or restructured. A "Cram Down Loss" shall be deemed to have occurred on
the date such order is entered.
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"Cutoff Date" has the meaning assigned to such term in the Sales and
Servicing Agreement.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Deficiency Amount" means (a) for any Payment Date, any shortfall in the
sum of Available Funds plus amounts on deposit in the Spread Account to pay the
related Noteholders' Interest Payment Amount, and (b) on the related Final
Scheduled Maturity Date, any shortfall in the sum of Available Funds plus
amounts on deposit in the Spread Account to pay the outstanding principal amount
of the related Class of Notes (after taking into account all payments to be made
on such Payment Date).
"Deficiency Claim Amount" shall have the meaning set forth in Section
4.05(a).
"Deficiency Notice" shall have the meaning set forth in Section 4.05(a).
"Definitive Notes" shall mean those Notes issued in fully-registered
certificated form.
"Determination Date" means, with respect to any Payment Date, the fifth
Business Day preceding such Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business Day
immediately preceding such Payment Date.
"Eligible Account" means (i) a segregated trust account that is maintained
with the corporate trust department of a depository institution acceptable to
the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) 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 and "P-1" by Moody's and "D-1+" by DCR,
if rated by DCR and a long term rating of at least AA- by Standard & Poor's.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the full
and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State thereof and subject to supervision and
examination by Federal or State banking or depository institution authorities;
provided, however, that at the time of the investment or contractual commitment
to invest
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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 "A-1+" by Standard & Poor's, "P-1" by Moody's and "D-1+" to the extent
rated by DCR;
(c) commercial paper (having original or remaining maturities of no more
than 270 days) that, at the time of the investment or contractual commitment to
invest therein, is rated "A-1+" by Standard & Poor's, "P-1" by Moody's and
"D-1+" to the extent rated by DCR;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to the full and timely payment by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with (i) a depository institution
or trust company (acting as principal) described in clause (b) or (ii) a
depository institution or trust company whose commercial paper or other
short-term unsecured debt obligations are rated "A-1 +" by Standard & Poor's,
"P-1 " by Moody's and "D-1+" by DCR, to the extent rated by DCR and long-term
unsecured debt obligations are rated "AAA" by Standard & Poor's and "Aaa" by
Moody's;
(f) money market mutual funds registered under the Investment Company Act
of 1940, as amended, having a rating, at the time of such investment, from each
of the Rating Agencies in the highest investment category granted thereby; and
(g) master notes payable on demand or on a specified date not more than one
year after the date of issuance thereof having the highest short term credit
ratings from S&P or Moody's at the time of such investments;
(h) funding agreements or guaranteed investment contracts payable on demand
or on a specified date not more than one year after the date of issuance thereof
having the highest short term credit ratings from S&P or Moody's at the time of
such investments; and
(i) any other investment as may be acceptable to the Insurer, as evidenced
by a writing to that effect, as may from time to time be confirmed in writing to
the Indenture Trustee by the Insurer.
Any of the foregoing Eligible Investments may be purchased by or through the
Indenture Trustee or any of its Affiliates.
"Event of Default" has the meaning specified in Section 7.01.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Scheduled Maturity Date" means with respect to the Class A-1 Notes,
the Class A-1 Final Scheduled Maturity Date, with respect to the Class A-2
Notes, the Class A-2 Final Scheduled Maturity Date, with respect to the Class
A-3 Notes, the Class A-3 Final Scheduled Maturity Date, and with respect to the
Class A-4 Notes, the Class A-4 Final Scheduled Maturity Date.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) 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 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.
"Guaranty Agreement" means the Guaranty Agreement from Copelco, dated as of
November 1, 1999, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should be, in accordance
with generally accepted accounting principles, recorded as capital leases; (c)
current liabilities of such Person in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; (d) obligations issued for or liabilities
incurred on the account of such Person; (e) obligations or liabilities of such
Person arising under acceptance facilities; (f) obligations of such Person under
any guarantees, endorsements (other than for collection or deposit in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person or otherwise
to assure a creditor against loss; (g) obligations of such Person secured by any
lien on property or assets of such Person, whether or not the obligations have
been assumed by such Person; or (h) obligations of such Person under any
interest rate or currency exchange agreement.
"Indenture" means this Indenture as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
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"Indenture Trustee" means Harris Trust and Savings Bank, an Illinois
banking corporation, not in its individual capacity but solely as indenture
trustee under this Indenture, or any successor indenture trustee under this
Indenture.
"Indenture Trustee and Collateral Agent Fee" means the fee payable to the
Indenture Trustee and Collateral Agent on each Payment Date in accordance with
the fee schedule agreed upon by the Servicer and the Indenture Trustee (a copy
of which has been delivered to the Insurer) which shall compensate the Indenture
Trustee and Collateral Agent in its dual capacity as Indenture Trustee and
Collateral Agent.
"Indenture Trustee Secured Obligations" means all amounts and obligations
which 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.
"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, the Sellers 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, the Sellers or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Sellers 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 and the Insurer under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 13.01, prepared
by an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Insurer and the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
"Initial Portfolio Balance" means the Aggregate Principal Balance included
in the Series Pool as of the Cut-off Date.
"Initial Spread Account Amount" shall have the meaning specified in the
Spread Account Agreement.
"Insurance Agreement Indenture Indicator" has the meaning set forth in the
Insurance Agreement.
"Insurance Agreement Indicator" has the meaning specified in the Insurance
Agreement.
"Insured Payments" has the meaning specified in the Policy.
"Insurer Default" has the meaning assigned to such term in the Insurance
Agreement.
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"Insurer Premium" means any monthly premium fees due and payable to the
Insurer pursuant to the Insurance Agreement.
"Insurer Secured Obligations" means all amounts and obligations which may
at any time be owed to or on behalf of the Insurer (or any agents, accountants
or attorneys for the Insurer) under this Indenture, the Insurance Agreement or
any other Transaction Document, regardless or whether such amounts are owed now
or in the future, whether liquidated or unliquidated, contingent or
noncontingent.
"Interest Rate" means, with respect to the (i) Class A-1 Notes, the Class
A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, (iii)
Class A-3 Notes, the Class A-3 Interest Rate, and (iv) Class A-4 Notes, the
Class A-4 Interest Rate.
"Investment Earnings" means, with respect to any Payment Date and any
Account and the Spread Account, the investment earnings on amounts on deposit in
such Account and in the Spread Account on such Payment Date.
"Issuer" means the party named as such in this Indenture until a successor
acceptable to the Insurer replaces it and, thereafter, means the successor and,
for purposes of any provision contained herein, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Issuer Property" or "Series Pool" means all 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 and the
Insurer (including the Collateral and all property and interests Granted to the
Indenture Trustee), including all proceeds thereof.
"Issuer Secured Parties" means each of the Indenture Trustee, in respect of
the Indenture Trustee Secured Obligations, and the Insurer, in respect of the
Insurer Secured Obligations.
"Level I Portfolio Performance Indicator" has the meaning assigned to that
term in the Spread Account Agreement.
"LLC Agreement" has the meaning assigned to that term in the Sales and
Servicing Agreement.
"Net Losses" means, for any Collection Period, the amount, if any, by which
(a) the sum of (i) the Aggregate Principal Balance of all Auto Loans which
became Charged-off Auto Loans during the related Collection Period, plus accrued
and unpaid interest thereon to the end of the related Collection Period, plus
(ii) the aggregate of all Cram Down Losses that occurred during the related
Collection Period, exceeds (b)
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the Actual Recovery Amounts received during the related Collection Period in
respect of all Charged-off Auto Loans.
"Note" means a Class A-1 Note, Class A-2 Note, a Class A-3 Note or a Class
A-4 Note.
"Note Factor" means as of the close of business on any Payment Date, a
seven-digit decimal figure equal to the outstanding principal amount of the
Notes divided by the original outstanding principal amount of the Notes.
"Note Majority" means the Holders of Notes evidencing more than 50% of the
outstanding principal amount of the Notes.
"Note Owner" means, with respect to any Book-Entry Note, the Person who is
the beneficial 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.
"Note Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
8.11 and is authorized by the Issuer to make the payments to and payments from
the Collection Account, including payment of principal of or interest on the
Notes on behalf of the Issuer.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.03.
"Noteholders' Interest Payment Amount" means, with respect to any Payment
Date, the sum of (i) the Class A-1 Noteholders' Interest Payment Amount for such
Payment Date, (ii) the Class A-2 Noteholders' Interest Payment Amount for such
Payment Date, (iii) the Class A-3 Noteholders' Interest Payment Amount for such
Payment Date and (iv) the Class A-4 Noteholders' Interest Payment Amount for
such Payment Date.
"Noteholders' Percentage" means, on any Payment Date, 89%; provided that
the "Noteholders' Percentage" will be 82% during the continuance of an uncured
Level I Portfolio Performance Indicator (provided that a Level I Portfolio
Performance Indicator shall be considered cured only if no Level I Portfolio
Performance Indicator had occurred or was continuing during any of the four
preceding Collection Periods) and will be zero percent upon the occurrence of an
Insurance Agreement Indicator.
"Noteholders' Principal Payment Amount" means, with respect to any Payment
Date, the lesser of (a) one hundred percent (100%) of the Principal Payment
Amount for such Payment Date or (b) an amount necessary to reduce the aggregate
principal amount of the Notes to the Notes Target Amount for such Payment Date.
Notwithstanding the foregoing, the "Noteholders' Principal Payment Amount" shall
be increased to the extent required such that all outstanding principal and
interest with respect to a class of Notes will be payable in full on the Final
Scheduled Maturity Date for such class of Notes.
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"Notes Target Amount" means, for any Payment Date, the product of the
Noteholders' Percentage for such Payment Date multiplied by the Outstanding
Portfolio Balance as of the end of the related Collection Period.
"Obligor" on an Auto Loan means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Auto Loan.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Servicer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 13.01, and delivered to
the Indenture Trustee and the Insurer. Unless otherwise specified, any reference
in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be addressed to and satisfactory to the
Indenture Trustee and to the Insurer, and which shall comply with any applicable
requirements of Section 13.01, and shall be in form and substance satisfactory
to the Indenture Trustee and to the Insurer.
"Other Conveyed Property" has the meaning assigned to such term in the
Sales and Servicing Agreement.
"Outstanding" means, as of the date of determination, 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 Note 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, satisfactory to the
Indenture Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which 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 which have been paid with proceeds of the 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
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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
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Transaction
Document, Notes owned by the Issuer, any other obligor upon the Notes, either
Seller 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 either actually knows to be so
owned or has received written notice thereof 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 pledgees
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"Outstanding Amount" means, with respect to any date of determination, the
aggregate principal amount of all Notes, or class of Notes, as applicable,
Outstanding at such date of determination.
"Outstanding Portfolio Balance" has the meaning assigned to such term in
the Sales and Servicing Agreement.
"Overcollateralization Amount" means, as of any Payment Date, the excess of
the Outstanding Portfolio Balance as of the end of the preceding Collection
Period over the outstanding principal balance of the notes (after giving effect
to all payments on the notes on such Payment Date).
"Owner Trust Purchase Agreement" means the Owner Trust Purchase Agreement
dated as of November 1, 1999, among the Issuer and the Depositor, as the same
may be modified supplemented or otherwise amended in accordance with the terms
thereof.
"Payment Date" has the meaning specified in the Notes.
"Policy" means the insurance policy issued by the Insurer with respect to
the Notes, including any endorsements thereto.
"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 2.05 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.
"Preference Claim" shall have the meaning specified in Section 5.02(b).
"Principal Payment Amount" means, with respect to any Payment Date, the sum
of the following amounts (without duplication) (i) collections on Auto Loans
(other than Charged-off Auto Loans) allocable
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to principal including full and partial prepayments; (ii) the portion of the
Purchase Amount deposited in the Collection Account allocable to principal of
each Auto Loan that was repurchased by the Originator or purchased by the
Servicer as of the last day of the preceding Collection Period (without
duplication of amounts referred to in clause (i) above); (iii) the Principal
Balance of each Auto Loan that first became a Charged-off Auto Loan during the
preceding Collection Period, other than Charged-off Auto Loans for which the
Originator has made substitutions of Substitute Auto Loans (without duplication
of the amounts included in clause (i) through (ii) above); (iv) the aggregate
amount of Cram Down Losses with respect to the Auto Loans that have occurred
during the preceding Collection Period (without duplication of amounts referred
to in clause (i) through (iii) above); and (v) following the acceleration of the
Notes pursuant to Section 7.02 hereof, the amount of money or property collected
pursuant to Section 7.04 hereof since the preceding Determination Date by the
Indenture Trustee or Controlling Party for payment pursuant to Section 4.07(a)
hereof.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means each of Moody's, Standard & Poor's and DCR, so long
as such Persons maintain a rating on the Notes; and if any of Moody's, Standard
& Poor's or DCR no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Servicer and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
the Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Servicer, the Sellers, the Insurer, the
Indenture Trustee and the Issuer in writing that such action will not result in
a reduction or withdrawal of the then current rating of the Notes without regard
to the Policy.
"Record Date" means, with respect to a Payment Date, (i) in the case of
Book-Entry Notes, the close of business on the Business Day prior to such
Payment Date and (ii) in the case of Definitive Notes, the close of business on
the last day of the calendar month preceding such Payment Date; provided that in
the case of the initial Payment Date, the Record Date shall be the close of
business on the Closing Date.
"Redemption Date" means, in the case of a redemption of the Notes pursuant
to Section 12.01, the Payment Date specified by the Servicer or the Issuer
pursuant to Section 12.01.
"Redemption Price" means, in the case of a redemption of the Notes pursuant
to Section 12.01, an amount equal to the remaining unpaid principal amount of
the Notes plus accrued interest thereon through the Payment Date on which the
redemption will occur.
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"Reimbursement Amounts" means any amounts due to the Insurer under the
terms of the Insurance Agreement payable pursuant to Section 4.07(a) hereof plus
the amounts paid by the Insurer under Section 4.11 hereof.
"Released Funds Principal Payment Amount" means for any Payment Date, the
lesser of (a) the amount by which the funds in the Spread Account (after giving
effect to all payments and withdrawals on that Payment Date) exceed the
Requisite Spread Account Amount and (b) the amount necessary (after giving
effect to the Noteholders' Principal Payment Amount and the Additional
Noteholders' Principal Payment Amount on that date) to reduce the Outstanding
Amount to the Notes Target Amount.
"Re-liening Expenses" means any reasonable and nonrecurring fees and
expenses relating to reissuing or amending the certificates of title relative to
the Financed Vehicles to reflect the assignment of the Auto Loans to the Issuer
and the Issuer's pledge of its interest in the Auto Loans to the Indenture
Trustee.
"Requisite Spread Account Amount" will equal the Initial Spread Account
Amount on the Closing Date, and thereafter, as of any Determination Date, after
giving effect to all payments to be made on the related Payment Date, will be an
amount equal to the greater of (a) the lesser of (i) 3% of the Initial Portfolio
Balance and (ii) 5% of the Outstanding Portfolio Balance as of the end of the
preceding Collection Period, and (b) the greater of (i) 1% of the Initial
Portfolio Balance and (ii) an amount such that the sum of (A) the funds on
deposit in the Spread Account (after all payments and withdrawals from the
Spread Account on such Payment Date) and (B) the Overcollateralization Amount is
greater than 2% of the Initial Portfolio Balance.
"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, Assistant Treasurer, 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.
"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of November 1, 1999, among the Issuer, the Seller, the Servicer, the
Indenture Trustee and the Back-Up Servicer, as the same may be amended or
supplemented from time to time.
"Scheduled Payment" has the meaning assigned to such term in the Sales and
Servicing Agreement.
"Seller" means Flagship Auto Loan Funding LLC 1999-II.
"Series Pool" or "Issuer Property" means all 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
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Noteholders and the Insurer (including the Collateral and all property and
interests Granted to the Indenture Trustee), including all proceeds thereof.
"Special Member" has the meaning assigned to such term in the LLC
Agreement.
"Spread Account" means the account designated as such, established and
maintained pursuant to Section 4.01.
"Spread Account Agreement" means the Spread Account Agreement dated as of
November 1, 1999 among the Insurer, the Issuer and the Indenture Trustee and
Collateral Agent, as the same may be modified, supplemented or otherwise amended
in accordance with the terms thereof.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Substitute Auto Loans" has the meaning assigned to such term in the Sales
and Servicing Agreement.
"Termination Date" means the latest of (i) the expiration of the Policy and
the return of the Policy to the Insurer for cancellation, (ii) the date on which
the Insurer shall have received payment and performance of all Insurer Secured
Obligations and (iii) the date on which the Indenture Trustee shall have
received payment and performance of all Indenture Trustee Secured Obligations.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Transaction Documents" means this Indenture, the Sales and Servicing
Agreement, the Owner Trust Purchase Agreement, the Depositor Purchase Agreement,
the Trust Agreement, the Spread Account Agreement, the Insurance Agreement, the
Indemnification Agreement, the LLC Agreement, the Guaranty Agreement, the
Underwriting Agreement and other documents and certificates delivered in
connection therewith.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
"Underwriting Agreement" means that agreement dated as of November 17, 1999
by and among Flagship, the Depositor and Prudential Securities Incorporated.
SECTION 1.02 Other Definitional Provisions. Unless the context otherwise
requires:
(i) All references in this instrument to designated "Articles,"
"Sections," "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this instrument
as originally executed;
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(ii) The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section, Subsection or other subdivision;
(iii) an accounting term not otherwise defined herein has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iv) "or" is not exclusive; and
(v) "including" means including without limitation.
ARTICLE II
THE NOTES
SECTION 2.01 Form.
(a) The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes, in each case together with the Indenture Trustee's certificate
of authentication, shall be in substantially the form set forth in Exhibits A-1,
A-2, A-3 and A-4, 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.
SECTION 2.02 Execution, Authentication and Deliver.
(a) 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.
(b) 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.
(c) The Indenture Trustee shall upon receipt of the Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $117,000,000, Class A-2 Notes for original issue in an
aggregate principal amount of $60,000,000, Class
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A-3 Notes for original issue in an aggregate principal amount of $43,000,000,
and Class A-4 Notes for original issue in an aggregate principal amount of
$30,000,000.
(d) At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed by the Issuer for
authentication. Upon a written order from the Issuer (which order may be in the
form of an Officer's Certificate) the Indenture Trustee shall authenticate and
deliver such Notes as provided in this Indenture and not otherwise. 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 set forth in EXHIBIT B hereto executed
by the Indenture Trustee by the manual signature of an Authorized Officer of the
Indenture Trustee, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
(e) Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples thereof (except for one Note of each class which may be
issued in a denomination other than an integral multiple of $1,000).
(f) 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 upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.03 Transfer and Registry; Exchange; Negotiability; Appointment of
Certificate Registrar.
(a) Notes of each Class will be represented initially by beneficial
interests in single global instruments in definitive, fully registered form
without coupons deposited with a custodian for, and registered in the name of,
the Depository Trust Company ("DTC"). Beneficial interests in such global
instruments will trade in DTC's same day funds settlement system. Beneficial
interests in such global instruments will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its Participants,
which may include Cedel Bank, societe anonyme and the Euroclear System.
(b) (i) Each Note in registered and certificated form shall be transferable
only upon the books of the Issuer (the "Note Register"), which shall be kept for
that purpose at the office of the Person acting as registrar of the Issuer (the
"Note Registrar"). The Indenture Trustee is hereby designated as the initial
Note Registrar. Subject to the provisions in paragraph (c) of this Section 2.03,
the transfer of any Note may be effected on the books of Issuer by the Holder
thereof in person or by his attorney duly authorized in writing, upon surrender
thereof together with a written instrument of transfer satisfactory to the Note
Registrar duly executed by the Holder or its duly authorized attorney. Upon the
transfer of any
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such Note, the Issuer shall issue in the name of the transferee a new Note or
Notes of the same aggregate principal or notional amount, class, interest rate
and maturity as the surrendered Note.
(ii) At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations, and of a like aggregate principal or notional
amount, class, interest rate and maturity, upon surrender of the Notes to be
exchanged at such office or agency. Whenever any Notes are so surrendered for
exchange, the Issuer shall execute, and the Indenture Trustee shall authenticate
and deliver, the Notes which the Noteholder making the exchange is entitled to
receive.
(iii) 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.
(iv) Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
(v) Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Issuer or the Indenture Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Indenture Trustee duly executed, by the
Holder thereof or his attorney duly authorized in writing.
(c) No Note (or any interest therein) may be Transferred (including,
without limitation, by pledge or hypothecation) except in accordance with the
following additional restrictions:
(i) No Transfer of a Note or any beneficial interest therein may be made to
any Person unless such Transfer is exempt from the registration requirements of
the 1933 Act and any applicable state securities and blue sky laws or is made in
accordance with said Act and state laws. The Holder of a Note desiring to effect
a Transfer of a Note shall indemnify the Owner Trustee in its individual
capacity, the Issuer, the Indenture Trustee, the Depositor, the Seller, the Note
Registrar, the Servicer, and the Originator against any liability that may
result if the Transfer is not so exempt or is not made in accordance with such
federal and state laws. Each Noteholder acquiring an interest in a Note shall
agree and shall be deemed to have agreed to treat the Notes as indebtedness for
federal, state and local income and franchise tax purposes.
(ii) No Note may be Transferred if, as a result of such Transfer, there
would be registered or record owners of Notes in denominations of less than the
minimum denominations set forth in Section 2.02 hereto.
SECTION 2.04 Regulations With Respect to Exchanges and Transfers.
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In all cases in which the privilege of exchanging or transferring Notes is
exercised, the Issuer and the Indenture Trustee shall authenticate and deliver
Notes in accordance with the provisions of this Indenture. For every such
exchange or registration of transfer of Notes, whether temporary or definitive,
the Issuer and the Indenture Trustee may require the payment of a sum sufficient
to cover any tax or other governmental charge required to be paid with respect
to such exchange or registration of transfer. Neither the Issuer nor the
Indenture Trustee shall be required to register the transfer of or exchange
Notes for a period beginning on the Record Date next preceding a Payment Date
and ending on such Payment Date.
SECTION 2.05 Mutilated, Destroyed, Lost or Stolen Notes.
(a) 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 Issuer, the Owner
Trustee in its individual capacity, the Indenture Trustee and the Insurer
(unless an Insurer Default shall have occurred and be continuing) such security
or indemnity as may be required by it to hold the Issuer, the Owner Trustee in
its individual capacity, the Indenture Trustee and the Insurer 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 bona fide purchaser, and, provided
that the requirements of Section 8-405 and 8-406 of the UCC are met, the Issuer
shall execute, and upon request by the Issuer, the Indenture Trustee shall
authenticate and deliver in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become, or within seven days shall be, due and payable or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may direct the
Indenture Trustee, in writing, to 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 bona fide
purchaser of the original Note in lieu of which such replacement Note was
issued, presents for payment such original Note, the Issuer, the Indenture
Trustee and the Insurer shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide 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.
(b) Upon the issuance of any replacement Note under this Section, the
Issuer 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.
(c) Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the
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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.
(d) The provisions of this Section 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 2.06 Persons Deemed Owner.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name any Note is
registered (as of the applicable Record Date) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such
Note, for all other purposes whatsoever and whether or not such Note be overdue,
and none of the Issuer, the Insurer, the Owner Trustee, the Indenture Trustee
nor any agent of the Issuer, the Insurer or the Indenture Trustee shall be
affected by notice to the contrary.
SECTION 2.07 Payment of Principal and Interest; Defaulted Interest.
(a) The Notes shall accrue interest as provided therein in the forms of the
Class A-1 Note, the Class A-2 Note, the Class A-3 Note and the Class A-4 Note
set forth in Exhibits A-1, A-2, A-3 and A-4, respectively, and such interest
shall be payable on each Payment Date as specified therein. Any installment of
interest or principal, if any, payable on any Note which 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 Record Date, by check mailed first-class, postage prepaid, to
such Person's address as it appears on the Note Register on such Record Date,
except that, unless Definitive Notes have been issued pursuant to Section 2.12,
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will
be made by wire transfer in immediately available funds to the account
designated by such nominee, except for the final installment of principal
payable with respect to such Note on a Payment Date or on the related Final
Scheduled Maturity Date (and except for the Redemption Price for any Note called
for redemption pursuant to Section 12.01, which shall be payable as provided
below). The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the forms of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes set forth in Exhibits A-1,
A-2, A-3 and A-4, respectively. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing
in the manner and under the circumstances provided in Section 7.02. All
principal payments on each class of Notes shall be made pro
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rata to the Noteholders of such class entitled thereto. Upon written notice from
the Issuer, 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 or transmitted
by facsimile prior to such final Payment Date 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. Notices in connection with redemptions of Notes
shall be mailed to Noteholders as provided in Section 12.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay 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 a
subsequent special record date, which date shall be at least five 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 15 days before any such
special record date, the Issuer shall mail to each Noteholder, the Insurer 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 Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Insurer.
SECTION 2.08 Cancellation.
Subject to Section 2.07(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 2.07(d), the
Issuer may at any time deliver to the Indenture Trustee for cancellation any
Notes previously authenticated and delivered hereunder which 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 2.07(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 unless the Issuer
shall direct by an Issuer Order that they be destroyed or returned to it;
provided that such Issuer Order is timely and the Notes have not been previously
disposed of by the Indenture Trustee.
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SECTION 2.09 Release of Collateral.
The Indenture Trustee shall, on or after the Termination Date, release any
remaining portion of the Issuer Property from the lien created by this Indenture
and deposit in the Collection Account any funds then on deposit in any other
Account.
SECTION 2.10 Book-Entry Notes. The Book-Entry Notes, upon original
issuance, will be issued in the form of typewritten Notes and will be delivered
to the Indenture Trustee, as custodian for The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of the Issuer. Such Notes shall
initially be registered on the Note Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Note Owner will receive a
Definitive Note representing such Note Owner's interest in such Note, except as
provided in Section 2.12. Unless and until Definitive Notes have been issued to
Note Owners pursuant to Section 2.12:
(a) the provisions of this Section shall be in full force and effect
as to the Notes represented by the Book-Entry Notes;
(b) the Note Registrar and 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 such Notes and the giving of
instructions or directions hereunder) as the sole Holder of such Notes, and
shall have no obligation to the Note Owners;
(c) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(d) 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
Participants or Persons acting through Participants;
(e) the initial Clearing Agency will make book-entry transfers among
the Participants and receive and transmit payments of principal of and
interest on the Notes to such Participants; and
(f) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Noteholders evidencing a specified
percentage interest of the Notes, 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 Participants or Persons
acting through Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Book-Entry Notes and
has delivered such instructions to Indenture Trustee.
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SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Clearing Agency, and
shall have no obligation to the Note Owners.
SECTION 2.12 Definitive Notes. If (a) the Servicer advises the Indenture
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibili ties with respect to the Notes, and the
Indenture Trustee and the Servicer are unable to locate a qualified successor or
(b) after the occurrence of a Servicer Termination Event, Note Owners holding
Notes representing more than 662/3% of the Outstanding Amount of all Notes
advise the Indenture Trustee and 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 Note Owners, 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 by the Clearing Agency to the Indenture Trustee of the typewritten
Book-Entry Notes and re- registration instructions, the Issuer shall execute and
the Indenture Trustee shall authenticate the Definitive Notes in exchange
therefor in accordance with the re-registration instructions of the Clearing
Agency. None of the Issuer, Note Registrar or Indenture Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Notes, the Indenture Trustee shall recognize the Holders of the
Definitive Notes as Noteholders.
ARTICLE III
COVENANTS
SECTION 3.01 Payment of Principal and Interest.
The Issuer will duly and punctually pay the principal of and interest on
the Notes in accordance with the terms of the Notes and this Indenture. Without
limiting the foregoing, the Issuer will cause to be paid on each Payment Date
all amounts deposited in the Collection Account pursuant to Section 4.07(a)
hereof. Amounts properly withheld under the Code 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 3.02 Maintenance of Office or Agency.
The Issuer will maintain in Chicago, Illinois, 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 Issuer will give
prompt written notice to the Indenture
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Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee 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 3.03 Money for Payments to be Held in Trust.
(a) On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Collection Account an aggregate sum
sufficient to pay the amounts then becoming due under the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto and (unless the
Note Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee, the Insurer and the Rating Agencies of its action or failure so to act.
(b) The Issuer shall cause each Note Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee and the Insurer an
instrument in which such Note Paying Agent shall agree with the Indenture
Trustee and the Insurer (provided that no Insurer Default shall have occurred
and is continuing) (and if the Indenture Trustee acts as Note Paying Agent, it
hereby so agrees), subject to the provisions of this Section, that such Note
Paying Agent shall:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee and the Insurer 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 with the consent of the Insurer
(provided that no Insurer Default shall have occurred and is continuing),
forthwith pay to the Indenture Trustee all sums so held in trust by such
Note Paying Agent;
(iv) immediately resign as a Note 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 Note
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code 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.
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(c) 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 Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note 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 Note
Paying Agent; and upon such a payment by any Note Paying Agent to the Indenture
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
(d) Subject to applicable laws with respect to the escheat of funds, any
money held by the Indenture Trustee or any Note 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 be paid to the Issuer on Issuer Request with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and
shall be deposited by the Indenture Trustee in the Collection Account; 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, the Insurer or
such Note 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 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 receipt of a written
request by the Insurer to such effect, and provided, further, that the Indenture
Trustee or such Note Paying Agent, before being required to make any such
repayment, shall at the expense of the Issuer cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 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, but not limited
to, 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 Note Paying Agent, at the last address of record for
each such Holder).
SECTION 3.04 Existence.
Except as otherwise permitted by the provisions of Section 3.09, the Issuer
will keep in full effect its existence, rights and franchises as a trust
organized under the laws of the State of Delaware and will 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 Collateral and each other
instrument or agreement included in the Series Pool.
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SECTION 3.05 Protection of Series Pool.
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 Series Pool, 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 Series Pool. The Issuer will from time to time prepare (or shall
cause to be prepared), execute and deliver all such supplements and amendments
hereto and all such financing statements, continuation statements, instruments
of further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) grant more effectively all or any portion of the Series Pool;
(ii) 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;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Series Pool and the rights of the
Indenture Trustee and the Insurer in such Series Pool against the claims of
all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the Series
Pool when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee or the Insurer pursuant to
this Section.
SECTION 3.06 [Reserved].
SECTION 3.07 Performance of Obligations; Servicing of Auto Loans.
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Series Pool 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 ordered by any
bankruptcy or other court or as expressly provided in this Indenture, the
Transaction Documents or such other instrument or agreement.
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(b) The Issuer may contract with other Persons reasonably acceptable to the
Insurer (so long as no Insurer Default shall 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 Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Servicer to assist the
Issuer in performing its duties under this Indenture, and performance of such
duties by the Servicer shall be deemed to be action taken by the Issuer.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Transaction Documents and in the
instruments and agreements included in the Series Pool, including but not
limited to preparing (or causing to be prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sales and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Transaction Document or any provision
thereof without the consent of the Indenture Trustee or the Insurer and upon
notice to the Rating Agencies.
SECTION 3.08 Issuer May Only Consolidate on Certain Terms. The Issuer shall
not convey or transfer all or substantially all of its properties or assets,
including those included in the Series Pool, to any Person, unless
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted shall (A) 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 no Insurer Default shall
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 Transaction
Documents on the part of the Issuer to be performed or observed, all as
provided herein, (B) expressly agree 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 and
the Insurer, (C) unless otherwise provided in such supplemental indenture,
expressly agree 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 (D) expressly agree by means of such
supplemental indenture that such Person (or if a group of persons, then one
specified Person) shall prepare (or cause to be prepared) and make all
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;
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(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 no Insurer Default shall have occurred and be continuing)) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, the Insurer or any Noteholder;
(v) any action as 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 Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of such
conveyance or transfer at least 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 consolidation or merger.
SECTION 3.09 Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer, 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 the assets and properties of the
Issuer pursuant to Section 3.08, the Issuer will 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 and the Insurer stating that the Issuer is to be so
released.
SECTION 3.10 No Other Business.
The Issuer shall not engage in any business other than financing,
purchasing, owning, selling and managing the Auto Loans in the manner
contemplated by this Indenture and the Transaction Documents and activities
incidental thereto.
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SECTION 3.11 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 owing from time to time to the Insurer under the Insurance
Agreement and (iii) any other Indebtedness permitted by or arising under the
Transaction Documents. The proceeds of the Notes shall be used exclusively to
fund the Issuer's purchase of the Auto Loans and the other assets specified in
the Sales and Servicing Agreement, to fund (on behalf of the Issuer) the Spread
Account and to pay the Issuer's organizational, transactional and start-up
expenses.
SECTION 3.12 Servicer's Obligations.
The Issuer shall cause the Servicer to comply with Sections 3.9, 3.10, 3.11
of the Sales and Servicing Agreement and Section 4.10 hereof.
SECTION 3.13 Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by the Transaction Documents, 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 3.14 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 3.15 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
Transaction Document.
SECTION 3.16 Restricted Payments.
The Issuer shall not, directly or indirectly, (i) pay any dividend or make
any payment (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to 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
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ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer
may make, or cause to be made, payments to the Servicer, the Seller and the
Indenture Trustee as permitted by, and to the extent funds are available for
such purpose under, the Transaction Documents. The Issuer will not, directly or
indirectly, make payments to or payments from the Collection Account except in
accordance with the Sales and Servicing Agreement, this Indenture and the
Transaction Documents.
SECTION 3.17 Notices of Events of Default.
The Issuer agrees to give the Indenture Trustee, the Insurer and the Rating
Agencies prompt written notice of each Event of Default hereunder and each
default on the part of the Servicer or the Originator of their respective
obligations under the Sales and Servicing Agreement.
SECTION 3.18 Further Instruments and Acts.
Upon request of the Indenture Trustee or the Insurer, the Issuer will
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 3.19 Amendments of Sales and Servicing Agreement.
The Issuer shall not agree to any amendment to Section 9.1 of the Sales and
Servicing Agreement to eliminate the requirements thereunder that the Indenture
Trustee or the Holders of the Notes consent to amendments thereto as provided
therein.
SECTION 3.20 Tax Characterization.
For purposes of federal income tax, state and local income tax franchise
tax and any other income taxes, the Issuer will treat the conveyance of the Auto
Loans and Other Conveyed Property as a contribution and the Notes as
indebtedness of the Issuer and hereby instructs the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal and state tax reporting
purposes.
ARTICLE IV
ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS
SECTION 4.01 Establishment of Accounts.
(a) (i) The Indenture Trustee, on behalf of the Noteholders and the
Insurer, shall establish and maintain in its own name an Eligible Account (the
"Collection Account"), bearing a designation
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clearly indicating that the funds deposited therein are held for the benefit of
the Indenture Trustee on behalf of the Noteholders and the Insurer.
(ii) The Issuer shall cause the Indenture Trustee and Collateral Agent to
establish and maintain an Eligible Account (the "Spread Account") with the
Indenture Trustee and Collateral Agent in the name of the Indenture Trustee and
Collateral Agent, bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Noteholders and the
Insurer.
(b) Funds on deposit in the Collection Account and the Spread Account
(collectively, the "Accounts") shall be invested by the Indenture Trustee (or
any custodian with respect to funds on deposit in any such account) in Eligible
Investments selected in writing by the Servicer (pursuant to standing
instructions or otherwise). All such Eligible Investments shall be held by or in
the name of the Indenture Trustee for the benefit of the Noteholders and the
Insurer, as applicable. Other than as permitted by the Rating Agencies and the
Insurer, funds on deposit in any Account shall be invested in Eligible
Investments that will mature (or be payable on demand) so that such funds will
be available at the close of business on the Business Day immediately preceding
the following Payment Date. Funds deposited in an Account on the day immediately
preceding a Payment Date upon the maturity of any Eligible Investments are not
required to be invested overnight. All Eligible Investments will be held to
maturity but prior to maturity if such liquidation would not result in a loss of
principal or interest.
(c) All investment earnings of moneys deposited in the Accounts shall be
deposited (or caused to be deposited) by the Indenture Trustee in the Collection
Account for payment pursuant to Section 4.07(a), and any loss resulting from
such investments shall be charged to such account. The Servicer will not direct
the Indenture Trustee to make any investment of any funds held in any of the
Accounts unless the security interest granted and perfected in such account to
the Indenture Trustee will continue to be perfected in such investment, in
either case without any further action by any Person.
(d) The Indenture Trustee shall not in any way be held liable by reason of
any insufficiency in any of the Accounts resulting from any loss on any Eligible
Investment included therein except for losses attributable to the Indenture
Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(e) If (i) the Servicer shall have failed to give investment directions for
any funds on deposit in the Accounts to the Indenture Trustee by 2:00 p.m.
Eastern Time (or such other time as may be agreed by the Issuer and Indenture
Trustee) on any Business Day; or (ii) an Event of Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable, or, if such Notes shall have been declared due and
payable following an Event of Default and amounts collected or receivable from
the Account Property are being applied as if there had not been such a
declaration; then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Accounts in one or more Eligible
Investments.
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(f) The Indenture Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Accounts and in all proceeds
thereof (including all Investment Earnings on the Accounts) and all such funds,
investments, proceeds and income shall be part of the Issuer Property. Except as
otherwise provided herein, the Accounts shall be under the sole dominion and
control of the Indenture Trustee for the benefit of the Noteholders and the
Insurer. If at any time any of the Accounts ceases to be an Eligible Account,
the Issuer with the consent of the Insurer shall within five Business Days cause
the Indenture Trustee to establish a new Account as an Eligible Account and to
transfer any cash and/or any investments to such new Account. The Servicer shall
promptly notify the Rating Agencies and the Insurer of any change in the
location of any of the aforementioned accounts. In connection with the
foregoing, the Servicer agrees that, in the event that any of the Accounts are
not accounts with the Indenture Trustee, the Servicer shall notify the Indenture
Trustee, the Insurer and the Rating Agencies in writing promptly upon any of
such Accounts ceasing to be an Eligible Account.
(g) With respect to the Account Property, the Indenture Trustee agrees
that: any Account Property that is held in deposit accounts shall be held solely
in Eligible Accounts; and, except as otherwise provided herein, each such
Eligible 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.
SECTION 4.02 Spread Account Initial Deposit.
On or prior to the Closing Date, the Issuer shall deposit an amount equal
to the Initial Spread Account Amount into the Spread Account which on the
Closing Date shall be $8,108,121.02.
SECTION 4.03 Certain Reimbursements to the Servicer.
The Servicer will be entitled to be reimbursed from amounts on deposit in
the Collection Account with respect to a Collection Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer to have resulted from mistaken deposits or postings or checks returned
for insufficient funds. The amount to be reimbursed hereunder shall be paid to
the Servicer on the related Payment Date pursuant to Section 4.07(a)(ii)<-1-
95>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 payment to the Servicer in respect of such
amount pursuant to Section 4.07(a), or if prior thereto the Servicer has been
reimbursed pursuant to Section 4.07(a), the Indenture Trustee shall withhold
such amounts from amounts otherwise distributable to the Servicer on the next
succeeding Payment Date.
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SECTION 4.04 Application of Collections.
All collections for each Collection Period with respect to each Auto Loan
(other than a Purchased Auto Loan) shall be applied as follows. The Servicer
shall apply payments by or on behalf of an Obligor to interest and principal in
accordance with the Simple Interest Method.
SECTION 4.05 Withdrawals from Spread Account.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Available Funds with respect to such
Determination Date is insufficient to make the payments required to be made on
the related Payment Date pursuant to Sections 4.07(a)(i) through (vi) (such
deficiency being a "Deficiency Claim Amount"), then on the third Business Day
immediately preceding the related Payment Date, the Indenture Trustee shall
deliver to the Collateral Agent, the Insurer, and the Servicer, by hand
delivery, telex or facsimile transmission, a written notice (a "Deficiency
Notice") specifying the Deficiency Claim Amount for such Payment Date. Such
Deficiency Notice shall direct the Collateral Agent to remit such Deficiency
Claim Amount (to the extent of the funds available to be paid pursuant to the
Spread Account Agreement) to the Indenture Trustee for deposit in the Collection
Account and payment pursuant to Sections 4.07(a)(i) through (vi), as applicable.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York City
time, on the third Business Day preceding such Payment Date. 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 4.06.
SECTION 4.06 Additional Deposits.
The Servicer shall deposit or cause to be deposited in the Collection
Account the aggregate Purchase Amount with respect to Purchased Auto Loans and
the Servicer shall deposit or cause to be deposited therein all amounts to be
paid under the Sales and Servicing Agreement. All such deposits shall be made,
in immediately available funds, on the Business Day preceding the Determination
Date. On or before the third Business Day preceding each Payment Date, the
Indenture Trustee shall remit to the Collection Account any amounts delivered to
the Indenture Trustee by the Collateral Agent pursuant to Section 4.05.
SECTION 4.07 Payments.
(a) On each Payment Date, the Indenture Trustee (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) shall apply Available Funds in the Collection Account plus any amounts
deposited into the Collection Account from the Spread Account pursuant to
Section 4.05 hereof to make the following payments in the following order of
priority:
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(i) to the Indenture Trustee and Collateral Agent, (A) all amounts due
to the Indenture Trustee and Collateral Agent (other than fees) in respect
of the immediately prior Collection Period, together with all
reimbursements for such recurring items from prior Collection Periods
subject to the Annual Trustee Expense Cap and (B) the Indenture Trustee and
Collateral Agent Fee in respect of the immediately prior Collection Period
and all unpaid Indenture Trustee and Collateral Agent Fees from prior
Collection Periods;
(ii) to the Servicer, the Servicing Fee and all unpaid Servicing Fees;
(iii) to the Noteholders, pro rata, the Noteholders' Interest Payment
Amount;
(iv) to the Insurer, any Insurer Premium due and payable to the
Insurer;
(v) to the Noteholders, sequentially first to holders of the Class A-1
Notes until the Class A-1 Notes are paid in full, then to the holders of
the Class A-2 Notes until the Class A-2 Notes are paid in full, then to the
holders of the Class A-3 Notes until the Class A-3 Notes are paid in full
and thereafter to the holders of the Class A-4 Notes until the Class A-4
Notes are paid in full, the Noteholders' Principal Payment Amount;
(vi) to any successor servicer, the Indenture Trustee and the Insurer,
any reasonable and nonrecurring fees and expenses related to the transfer
of servicing and the appointment of a successor servicer or temporary
successor servicer in the event Copelco is not the successor servicer to
the extent not paid by the Servicer or by Copelco pursuant to the Guaranty
Agreement; provided that amounts paid pursuant to this clause (vi) shall
not exceed $100,000;
(vii) to the Insurer, any Reimbursement Amounts due under the terms of
the Insurance Agreement;
(viii) to the Indenture Trustee and Collateral Agent for deposit into
the Spread Account, the amount, if any, required to be deposited therein
necessary to maintain the Requisite Spread Account Amount;
(ix) to the Noteholders, sequentially first to holders of the Class
A-1 Notes until the Class A-1 Notes are paid in full, then to the holders
of the Class A-2 Notes until the Class A-2 Notes are paid in full, then to
the holders of the Class A-3 Notes until the Class A-3 Notes are paid in
full and thereafter to the holders of the Class A-4 Notes until the Class
A-4 Notes are paid in full, the Additional Noteholders' Principal Payment
Amount;
(x) to the payment of any Re-liening Expenses, to the extent not paid
by the Servicer or by Copelco pursuant to the Guaranty Agreement;
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(xi) to any successor servicer, the Insurer, the Indenture Trustee and
Collateral Agent, any items payable to them that were not paid under
clauses (i) and (vi) above; and
(xii) to the holder(s) of the Certificates, the remaining balance, if
any, in the Collection Account;
provided, however, that, (A) following an acceleration of the Notes pursuant to
Section 7.02 of this Indenture, or (B) if an Insurer Default shall have occurred
and be continuing and an Event of Default pursuant to Sections 7.01(a)(i),
7.01(a)(ii), 7.01(a)(iv), 7.01(a)(v) or 7.01(a)(vi) of this Indenture shall have
occurred and be continuing, the Available Funds shall be paid pursuant to
Section 7.06(a) of this Indenture.
(b) On each Determination Date, to the extent that the Servicer's
Certificate indicates that the funds on deposit in the Spread Account are in
excess of the Requisite Spread Account Amount for such Payment Date, the
Indenture Trustee will withdraw such excess from the Spread Account and first
apply such amount to the payment of the Released Funds Principal Payment Amount
and thereafter will apply such amounts in accordance with the priorities set
forth under clauses (x) through (xii) of Section 4.07(a) above. The Released
Funds Principal Payment Amount will be paid to the Noteholders, sequentially
first to holders of the Class A-1 Notes until the Class A-1 Notes are paid in
full, then to the holders of the Class A-2 Notes until the Class A-2 Notes are
paid in full, then to the holders of the Class A-3 Notes until the Class A-3
Notes are paid in full and thereafter to the holders of the Class A-4 Notes
until the Class A-4 Notes are paid in full. Upon any such payment to the
Certificateholder(s) in accordance with this clause (b), the Noteholders and the
Insurer will have no further rights in, or claims to, such amounts.
(c) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Issuer shall instruct and
cause the Note Paying Agent to make all deposits and payments pursuant to
Section 4.07(a) on the related Payment Date.
SECTION 4.08 Payments to Noteholders.
(a) On each Payment Date, the Indenture Trustee shall send to each
Noteholder the statement or statements provided to the Indenture Trustee by the
Servicer pursuant to Section 4.10 hereof on such Payment Date.
(b) In the event that any withholding tax is imposed on the Issuer's
payment (or allocations of income) to a Noteholder, such tax shall reduce the
amount otherwise payable to the Noteholder in accordance with this Section 4.08.
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 that is legally owed by the Issuer (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
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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 Issuer and remitted to the
appropriate taxing authority. If, after consultations with experienced counsel,
the Indenture Trustee determines that there is a reasonable likelihood that
withholding tax is payable with respect to a payment (such as a payment to a
non-US Noteholder), the Indenture Trustee may in its sole discretion withhold
such amounts in accordance with this clause (b). 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 incurred.
(c) Payments required to be made to Noteholders on any Payment Date shall
be made to each Noteholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if (i) such
Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Payment Date and such
Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate thereof, or,
if not, by check mailed to such Noteholder at the address of such holder
appearing in the Note Register; provided, however, that, unless Definitive Notes
have been issued pursuant to Section 2.12 of this Indenture, with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Notwithstanding the foregoing, the final payment in respect of any Note
(whether on the related Final Scheduled Maturity Date or otherwise) will be
payable only upon presentation and surrender of such Note at the office or
agency maintained for that purpose by the Note Registrar pursuant to Section
2.04 of this Indenture.
SECTION 4.09 [Reserved].
SECTION 4.10 Statements to Noteholders.
(a) On or prior to each Payment Date, the Servicer shall provide to the
Indenture Trustee (with a copy to the Insurer and the Rating Agencies) for the
Indenture Trustee to forward to each Noteholder of record a statement setting
forth at least the following information as to the Notes to the extent
applicable:
(i) the amount of such payment allocable to principal of the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes,
respectively;
(ii) the amount of such payment allocable to interest on or with
respect to the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes,
the Class A-4 Notes, respectively;
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(iii) the Outstanding Portfolio Balance and the Note Factor for each
Class of Notes as of the close of business on the last day of the preceding
Collection Period;
(iv) the aggregate outstanding principal amount of each Class of Notes
after giving effect to payments allocated to principal reported under
clause (i) above;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period, the amount of any unpaid Servicing Fees
and the change in such amount from the prior Payment Date;
(vi) the amount paid to the Noteholders under the Policy or from the
Spread Account for such Payment Date;
(vii) the amount payable to the Insurer on such Payment Date;
(viii) the aggregate amount in the Spread Account and the change in
such amount from the previous Payment Date;
(ix) as of the end of the preceding Collection Period, the number of
Auto Loans and the aggregate principal amount scheduled to be paid thereon
for which the related Obligors are delinquent in making scheduled payments
thereon for [(a) at least one month, but not two months or more, (b) at
least two months, but not three months or more, (c) at least three months,
but not four months or more, and (d) four months or more];
(x) the number and the aggregate Purchase Amounts for Auto Loans, if
any, that were repurchased in such period;
(xi) the cumulative amount of Net Losses from the Initial Cutoff Date
to the last day of the related Collection Period;
(xii) the amount of any Indenture Trustee and Collateral Agent Fees
and all other amounts paid pursuant to Section 4.07(a)(i); and
(xiii) the calculation of the Level I Portfolio Performance Tests and
the Level II Portfolio Performance Tests.
(b) Within 60 days after the end of each calendar year, the Servicer shall
deliver to the Indenture Trustee a statement setting forth the amounts paid
during such preceding calendar year in respect of (i) principal of the Notes,
(ii) interest on the Notes and (iii) Servicing Fees. The Indenture Trustee shall
mail to each person who at any time during such preceding calendar year shall
have been a Noteholder of record and received any payment in respect of such
Notes.
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SECTION 4.11 Optional Deposits by the Insurer; Notice of Waivers.
(a) 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 as provided in
Section 5.01(a)) 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
Issuer with respect to such Payment Date, (ii) to pay as a component of the
Principal Payment Amount to the extent that the principal balance of the Notes
as of the Determination Date preceding such Payment Date exceeds the
Noteholders' Percentage as of such Determination Date, or (iii) to include such
amount as part of the Available Funds for such Payment Date to the extent that
without such amount a draw would be required to be made on the Policy. Any
amounts so delivered by the Insurer shall be included in Reimbursement Amounts.
(b) If the Insurer waives the satisfaction of any of the events that might
trigger an event of default under the Insurance Agreement and so notifies the
Indenture Trustee in writing pursuant to Section 6.02 of the Insurance
Agreement, the Indenture Trustee shall notify the Rating Agencies of such
waiver.
ARTICLE V
THE POLICY
SECTION 5.01 Claims Under Policy.
(a) In the event that the Indenture Trustee has delivered a Deficiency
Notice with respect to any Determination Date pursuant to Section 4.05 hereof,
the Indenture Trustee shall on the related Draw Date determine whether the
application of funds in accordance with Section 4.07(a), together with any
amounts deposited by the Insurer pursuant to Section 4.11 and the application of
any Deficiency Claim Amount pursuant to Section 4.05 would result in a
Deficiency Amount on any Payment Date or the related Final Scheduled Maturity
Date, as applicable. If the Deficiency Amount for such Payment Date or on the
related Final Scheduled Maturity Date, as applicable, 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
clause (b) below) in the amount of the Deficiency Amount. Amounts paid by the
Insurer pursuant to a claim submitted under this Section 5.01, shall be
deposited by the Indenture Trustee into the Collection Account for payment to
Noteholders on the related Payment Date and shall remain uninvested.
(b) Any notice delivered by the Indenture Trustee to the Insurer pursuant
to Section 5.01 (a) shall specify the Deficiency Amount claimed under the Policy
and shall constitute a "Notice of Claim" (as defined in the Policy) under the
Policy. In accordance with the provisions of the Policy, the
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Insurer is required to pay to the Indenture Trustee the Deficiency Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the second Business Day (as defined in the Policy) following receipt on a
Business Day of the Notice of Claim, and (ii) the applicable Payment Date. Any
payment made under the Policy by the Insurer shall be applied solely to the
payment of the Notes as set forth in the Policy, and for no other purpose.
(c) The Indenture Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Deficiency Amount from the Insurer and (ii) deposit the same in
the Collection Account for payment to Noteholders. For the purposes of clause
(d) below, any and all Deficiency Amounts disbursed by the Indenture Trustee
from claims made under the Policy shall not be considered payment by the Issuer
with respect to such Notes, and shall not discharge the obligations of the
Issuer with respect thereto.
(d) The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipients of such payments to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Indenture Trustee and
the Noteholders shall assign to the Insurer all rights to the payment of
interest or principal with respect to the Notes which are then due for payment
to the extent of all payments made by the Insurer, and the Insurer may exercise
any option, vote, right, power or the like with respect to the Notes to the
extent that it has made payment pursuant to the Policy. To evidence such
subrogation, the Note Registrar (as defined in this Indenture) 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 Insured Payment (as
defined in the Policy). The foregoing subrogation shall in all cases be subject
to the rights of the Noteholders to receive all Insured Payments (as defined in
the Policy) in respect of the Notes.
(e) The Indenture Trustee shall keep a complete and accurate record of all
funds deposited by the Insurer into the Collection Account and the allocation of
such funds to payment of interest on and principal paid in respect of any Note.
The Insurer shall have the right to inspect such records at reasonable times
upon one Business Day's prior notice to the Indenture Trustee.
(f) The Indenture Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Policy. Notwithstanding any
other provision of this Agreement or any Transaction Documents, the Noteholders
are not entitled to make any claims under the Policy or institute proceedings
directly against the Insurer.
SECTION 5.02 Preference Claims.
(a) In the event that the Indenture Trustee has received a certified copy
of an order of the appropriate court that any Insured Payment (as defined in the
Policy) paid on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Indenture Trustee shall so notify
the Insurer, shall comply with the provisions of the 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
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the Notes by mail that, in the event that any Noteholder's payment is so
recoverable, such Noteholder will be entitled to payment pursuant to the terms
of the Policy. The Indenture Trustee shall furnish to the Insurer its records
evidencing the payments of principal of and interest on the Notes, if any, which
have been made by the Indenture Trustee and subsequently recovered from
Noteholders, and the dates on which such payments were made. Pursuant to the
terms of the Policy, the Insurer will make such payment on behalf of the
Noteholder to the receiver or trustee in bankruptcy named in the final order of
the court exercising jurisdiction on behalf of the Noteholder and not to any
Noteholder directly (unless a Noteholder has returned principal or interest on
the Notes to such receiver or trustee in bankruptcy, in which case the Insurer
will make such payment to the Indenture Trustee for payment to such Noteholder
upon proof of such payment reasonably satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which 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 payment made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agrees 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, supersedeas
or performance bond pending any such appeal. In addition, and without limitation
of the foregoing, as set forth in Section 5.01(d), the Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
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.
SECTION 5.03 Surrender of Policy.
The Indenture Trustee shall surrender the Policy to the Insurer for
cancellation upon the expiration of the Policy in accordance with the terms
thereof.
ARTICLE VI
SATISFACTION AND DISCHARGE
SECTION 6.01 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to the
Notes except 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 3.03, 3.04, 3.05, 3.08, 3.10, 3.11, 3.13, 3.14, 3.15, 3.16, 3.18, 3.19
and 3.20, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section
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8.07 and the obligations of the Indenture Trustee under Section 6.02) and (vi)
the rights of Noteholders and the Insurer 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
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 2.05 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 3.03) have been
delivered to the Indenture Trustee for cancellation and the Policy has
expired and been returned to the Insurer for cancellation;
2) the Issuer has paid or caused to be paid all Insurer Secured
Obligations and all Indenture Trustee Secured Obligations; and
3) the Issuer has delivered to the Indenture Trustee and the Insurer an
Officer's Certificate and, an Opinion of Counsel stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
SECTION 6.02 Application of Trust Money.
All moneys deposited with the Indenture Trustee pursuant to Section 6.01
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 Note Paying Agent, as the Indenture Trustee may determine, to the
Holders of the particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all sums due and to
become due thereon for principal and interest and to the Insurer for the payment
of any amounts due to it under the Transaction Documents; but such moneys need
not be segregated from other funds except to the extent required herein or in
the Sales and Servicing Agreement or required by law.
SECTION 6.03 Repayment of Moneys Held by Note.
In connection with the satisfaction and discharge of this Indenture with
respect to the Notes, all moneys then held by any Note Paying Agent other than
the Indenture Trustee under the provisions of 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 3.03 and thereupon such Note Paying
Agent shall be released from all further liability with respect to such moneys.
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ARTICLE VII
REMEDIES
SECTION 7.01 Events of Default.
(a) "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 administrative or governmental body):
(i) so long as an Insurer Default shall have occurred and be
continuing, 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 days (solely for purposes of this clause, a payment on the Notes
funded by the Insurer or the Collateral Agent pursuant to the Spread
Account Agreement shall be deemed to be a payment made by the Issuer); or
(ii) so long as an Insurer Default shall have occurred and be
continuing, default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable and such
default shall continue for a period of five days (solely for purposes of
this clause, a payment on the Notes funded by the Insurer or the Collateral
Agent pursuant to the Spread Account Agreement, shall be deemed to be a
payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Indenture Indicator (other than clauses
(4) - (8) of the definition of Insurance Agreement Indicator or a Servicer
Termination Event arising from a breach of clauses (w) or (x)(2) (to the
extent relating to clauses (4)-(8) of the definition of Insurance Agreement
Indicator) of Section 5.4(a) or clause (y) of the proviso to Section 5.4(b)
of the Sales and Servicing Agreement) shall have occurred; provided,
however, that the occurrence of an Insurance Agreement Indenture Indicator
may not form the basis of an Event of Default unless the Insurer shall have
delivered to the Issuer and the Indenture Trustee and not rescinded a
written notice specifying that such Insurance Agreement Indenture Indicator
constitutes an Event of Default under the Indenture; or
(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 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
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been eliminated or otherwise cured, for a period of 30 days (or for such
longer period, not in excess of 90 days, as may be reasonably necessary to
remedy such default; provided that such default is capable of remedy within
90 days or less and the Servicer delivers an Officer's Certificate to the
Indenture Trustee to the effect that the Issuer 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 Outstanding Amount
of the Notes, 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; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Series Pool 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 or for any substantial part
of the Series Pool, or ordering the winding-up or liquidation of the
Issuer's affairs, which decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer 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 to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Series Pool, or the making
by the Issuer of any general assignment for the benefit of creditors, or
the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of action by the Issuer in furtherance of any of the
foregoing.
(b) The Issuer shall deliver to the Indenture Trustee and the Insurer and
the Rating Agencies, within three days after obtaining knowledge of the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 7.02 Rights Upon Event of Default.
(a) If an Insurer Default shall not have occurred and be continuing and an
Event of Default shall have occurred, upon the written direction of the Insurer,
the Notes shall become immediately due and payable at par, together with accrued
interest thereon. If an Event of Default shall have occurred, the Controlling
Party may exercise any of the remedies specified in Section 7.04. In the event
of any acceleration of any Notes by operation of this Section 7.02, the
Indenture Trustee shall continue to be
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entitled to make claims under the Policy pursuant to the Policy for Insured
Payments on the Notes. Payments under the Policy following acceleration of any
Notes shall be applied by the Indenture Trustee:
FIRST: 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
SECOND: for amounts due and unpaid on the Notes for principal, to the
Holders of the Notes, sequentially, first to pay principal of the Class A-1
Notes until the outstanding principal amount of the Class A-1 Notes has
been reduced to zero, then to pay principal of the Class A-2 Notes until
the outstanding principal amount of the Class A-2 Notes has been reduced to
zero, and then to pay principal of the Class A-3 Notes until the
outstanding principal amount of the Class A-3 Notes has been reduced to
zero, and then to pay principal of the Class A-4 Notes until the
outstanding principal amount of the Class A-4 Notes has been reduced to
zero.
(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 Insured
Payments on the Notes in accordance with the Policy), but not the obligation, to
make payments under the 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 an Event of Default shall
have occurred and be continuing, the Indenture Trustee in its discretion may, or
if so requested in writing by Holders holding Notes representing not less than a
majority of the Outstanding Amount of the Notes, 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 and
before a judgment or decree for payment of the money due has been obtained by
the Indenture Trustee as hereinafter in this Article VII provided, the Holders
of Notes representing a majority of the Outstanding Amount of the Notes, by
written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if
the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Indenture Trustee hereunder and
all sums due to the Insurer under the Transaction Documents and the
reasonable
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compensation, expenses, disbursements and advances of the Indenture
Trustee and the Insurer and their respective 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 7.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 7.03 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
(a) The Issuer covenants that if (i) default is made in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable and such default continues for a period of five days,
the Issuer will, upon demand of the Indenture Trustee, pay to it, for the
benefit of the Holders of the Notes, the whole amount then due and payable on
such Notes for principal and interest, with interest upon the overdue principal,
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 Indenture Trustee as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Indenture Trustee, with full power of substitution, with the prior consent of
the Insurer (provided that no Insurer Default has occurred and is continuing) to
execute, acknowledge and deliver any notice, document, certificate, paper,
pleading or instrument and to do in the name of the Indenture Trustee 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 7.04) and under the
Transaction Documents which such Issuer Secured Party could or might do or which
may be necessary, desirable or convenient in the Indenture Trustee's discretion
with the consent of the Insurer (so long as an Insurer Default has not occurred
and is continuing) to effect the purposes contemplated hereunder and under the
Transaction 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 Series Pool.
(c) If an Event of Default occurs, the Indenture Trustee may in its
discretion subject to the consent of the Controlling Party and shall, at the
direction of the Controlling Party (except as provided in Section 7.03(d)
below), proceed to protect and enforce its rights and the rights of the
Noteholders and the Insurer by such appropriate Proceedings as the Indenture
Trustee or the Controlling
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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 7.04, 7.12 and 7.13) and regardless of
whether an Insurer Default shall have occurred and be continuing, if the Issuer
fails to perform its obligations under Section 12.01(b) hereof when and as due,
the Indenture Trustee may in its discretion (and with the consent of the
Controlling Party) proceed to protect and enforce its rights and the rights of
the Noteholders and the Insurer (provided that an Insurer Default has not
occurred and is continuing) by such appropriate proceedings as the Indenture
Trustee and the Insurer (provided that an Insurer Default has not occurred and
is continuing) 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.
(e) In case 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
any of the property included in the Series Pool, 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 or 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 or Person, 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, 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 the
provisions of this Section, 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 and the Insurer (including any
claim for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee and the Insurer, 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 and the Insurer, except as a result of
negligence, bad faith or willful misconduct) and of the Noteholders allowed
in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or person performing similar functions in any such proceedings;
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(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 and
of the Insurer 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 or the Insurer allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders and the
Insurer to make payments to the Indenture Trustee, and, in the event that the
Indenture Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee and the Insurer such amounts as
shall be sufficient to cover reasonable compensation to the Indenture Trustee
and the Insurer, 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
and the Insurer 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
Spread Account Agreement 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 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 and the
Insurer.
(h) In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the Spread 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 7.04 Remedies.
If an Event of Default shall have occurred, the Controlling Party may do
one or more of the following:
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(i) institute or direct the Indenture Trustee to institute Proceedings
in its own name and as 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 or direct the Indenture Trustee to institute
Proceedings from time to time for the complete or partial foreclosure of
this Indenture with respect to the Auto Loans and Other Conveyed Property
included in the Series Pool;
(iii) exercise or direct the Indenture Trustee to exercise any
remedies of a secured party under the UCC and to take any other appropriate
action to protect and enforce the rights and remedies of the Indenture
Trustee and the Holders of the Notes and the Insurer; and
(iv) sell or direct the Indenture Trustee to sell the Series Pool 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; and:
(A) such Event of Default is of the type described in Section 7.01(i)
or (ii), or
(B) either
(x) the Holders of 100% of the Outstanding Amount of the Notes
consent thereto, 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 all
amounts due to the Insurer under the Transaction Documents, or
(z) the Indenture Trustee determines that the Trust estate will
not continue to provide sufficient funds for the payment of
principal and interest on the Notes as they would have become due
if the Notes had not been declared due and payable, and the
Indenture Trustee obtains the consent of the Holders of 662/3% of
the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to clauses
(y) and (z), the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation acceptable to the Insurer (provided that an Insurer Default has not
occurred and is continuing) as to the feasibility of such proposed action and as
to the sufficiency of the Series Pool for such purpose.
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SECTION 7.05 [Reserved]
SECTION 7.06 Priorities.
(a) Following (1) the acceleration of the Notes pursuant to Section 7.02 or
(2) if an Insurer Default shall have occurred and be continuing, the occurrence
of an Event of Default pursuant to Section 7.01(a)(i), 7.01(a)(ii), 7.01(a)(iv),
7.01(a)(v) or 7.01(a)(vi) of this Indenture, all Available Funds plus all
amounts in the Spread Account, including any money or property collected
pursuant to Section 7.04 of this Indenture shall be applied by the Indenture
Trustee on the related Payment Date in the following order of priority:
FIRST: amounts due and owing and required to be distributed to the
Servicer and Indenture Trustee and Collateral Agent, respectively, pursuant
to priorities (i) through (ii) of Section 4.07(a) hereof and not previously
distributed, in the order of such priorities and without preference or
priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest;
THIRD: for amounts due and unpaid on the Notes for principal, to the
Holders of the Notes, sequentially, first to pay principal of the Class A-1
Notes until the outstanding principal amount of the Class A-1 Notes has
been reduced to zero, then to pay principal of the Class A-2 Notes until
the outstanding principal amount of the Class A-2 Notes has been reduced to
zero, and then to pay principal of the Class A-3 Notes until the
outstanding principal amount of the Class A-3 Notes has been reduced to
zero, and then to pay the principal of the Class A-4 Notes until the
outstanding principal balance of the Class A-4 Notes has been reduced to
zero;
FOURTH: to any successor servicer, the Indenture Trustee and the
Insurer, any reasonable and nonrecurring fees and expenses related to the
transfer of servicing and the appointment of a successor servicer or
temporary successor servicer in the event Copelco is not the successor
servicer, to the extent not paid by the Servicer or by Copelco pursuant to
the Guaranty Agreement provided that amounts paid pursuant to this clause
FOURTH shall not exceed $100,000;
FIFTH: amounts due and owing and required to be paid to the Insurer
pursuant to Section 4.07(a) hereof and not previously paid;
SIXTH: to the Indenture Trustee and Collateral Agent to be applied as
provided in the Spread Account Agreement;
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SEVENTH: to the payment of any Re-liening Expenses, to the extent not
paid by Copelco pursuant to the Guaranty Agreement;
EIGHTH, to any successor servicer, the Insurer, the Indenture Trustee
and Collateral Agent, any items payable to them that were not paid under
clauses FIRST and FOURTH above; and
NINTH, to the holder(s) of the Certificates, the remaining balance, if
any.
(b) The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date the Issuer shall mail to each Noteholder, the Insurer and the
Indenture Trustee a notice that states such record date, the payment date and
the amount to be paid.
SECTION 7.07 Limitation of Suits.
No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes 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 Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Holders of Notes 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
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rights of any other Holders of Notes or to obtain or to seek to obtain priority
or preference over any other Holders 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 Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 7.08 Unconditional Rights of Noteholders To Receive Principal and
Interest.
Notwithstanding any other provisions of 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 7.09 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
Indenture Trustee, the Insurer or to such Noteholder, then and in every such
case the Issuer, the Indenture Trustee, the Insurer and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Indenture Trustee, the Insurer and the Noteholders shall
continue as though no such proceeding had been instituted.
SECTION 7.10 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 7.11 Delay or Omission Not a Waiver.
No delay or omission of the Controlling Party or any Holder of any Note 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
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by this Article VII 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 7.12 Control by Noteholders.
If the Indenture Trustee is the Controlling Party, 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 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 7.04, any direction to
the Indenture Trustee to sell or liquidate the Auto Loans and Other
Conveyed Property that comprise the Series Pool shall be by the Holders of
Notes representing not less than 100% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 7.04 have been satisfied
and the Indenture Trustee elects to retain the Auto Loans and Other
Conveyed Property that comprise the Series Pool pursuant to such Section,
then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell
or liquidate the Auto Loans and Other Conveyed Property that comprise the
Series Pool 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;
provided, however, that, subject to Section 8.01, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 7.13 Waiver of Defaults.
The Insurer or, if an Insurer Default shall have occurred and be
continuing, prior to the declaration of the acceleration of the maturity of the
Notes as provided in Section 7.04, the Note Majority may waive any past Default
or Event of Default and its consequences except a Default or Event of Default
(i) in payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision hereof which 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, the Insurer and the Holders of the Notes
shall be restored
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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 or Event of 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 Event of Default or impair any right
consequent thereto.
SECTION 7.14 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 attorneys' 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 shall not apply to (a) any suit
instituted by the Indenture Trustee or the Insurer, (b) any suit instituted by
any Noteholder, or group of Noteholders, in each case holding in the aggregate
more than 10% of the Outstanding Amount of the Notes 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 7.15 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
including, but not limited to, filing a voluntary petition under Chapter 11 of
the Bankruptcy Code, 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 and any right of the Issuer to take such action shall be
suspended.
ARTICLE VIII
THE INDENTURE TRUSTEE
SECTION 8.01 Duties Of 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 Transaction Documents and use the
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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:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture 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; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform on their face to the requirements of this Indenture.
(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 paragraph does not limit the effect of paragraph (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; and
(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 received by it pursuant to Section 7.12.
(d) 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.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sales and Servicing Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(g) The Indenture Trustee shall permit any representative of the Insurer,
during the Indenture Trustee's normal business hours, to examine all books of
account, records, reports and other
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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.
(h) The Indenture Trustee shall, and hereby agrees that it will, perform
all of the obligations and duties required of it under the Sales and Servicing
Agreement and the other Transaction Documents to which it is a party.
(i) The Indenture Trustee shall, and hereby agrees that it will, hold the
Policy in trust, and will hold any proceeds of any claim on the Policy in trust
solely for the use and benefit of the Noteholders.
(j) Except for actions expressly authorized by this Indenture, the
Indenture Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Auto Loan or Financed Vehicle or other
Collateral or to impair the value of any Auto Loan or Financed Vehicle or other
Collateral.
(k) All information obtained by the Indenture Trustee regarding the
Obligors and the Auto Loans, whether upon the exercise of its rights under this
Indenture or otherwise, shall be maintained by the Indenture Trustee in
confidence and shall not be disclosed to any other Person, other than the
Indenture Trustee's attorneys, accountants and agents unless such disclosure is
required by this Indenture or any applicable law or regulation.
(l) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to Indenture Trustee shall be subject
to the provisions of this Section and to the provisions of the TIA.
SECTION 8.02 Rights of Indenture Trustee.
(a) Subject to Sections 8.01, the Indenture Trustee shall be protected and
shall incur no liability to the Issuer or any Issuer Secured 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, except to the extent the
Indenture Trustee has actual knowledge to the contrary or as required pursuant
to Section 8.01 or Section 8.02(g) the Indenture Trustee shall not be required
to make any independent investigation with respect thereto.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate. Subject to Section 8.01(c), the Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officer's Certificate.
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(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of Flagship Credit Corporation, or any other such agent, attorney,
custodian or nominee appointed with the prior consent of the Insurer (provided
that an Insurer Default has not occurred and is continuing).
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which 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 or bad faith.
(e) The Indenture Trustee may consult with counsel selected by it with
care, and the written advice or Opinion of Counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes or
the Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however, that the
Indenture Trustee shall, upon the occurrence of an Event of Default (that has
not been cured), exercise the rights and powers vested in it by this Indenture
in accordance with Section 8.01.
(g) The Indenture Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by the Insurer (so
long as no Insurer Default shall have occurred and be continuing) or (if an
Insurer Default shall have occurred and be continuing) by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount thereof; provided,
however, that if the payment within a reasonable time to the Indenture Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Indenture Trustee, not
reasonably assured to the Indenture Trustee by the security afforded to it by
the terms of this Indenture or the Sales and Servicing Agreement, the Indenture
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Person making such request, or, if paid by the
Indenture Trustee, shall be reimbursed by the Person making such request upon
demand.
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SECTION 8.03 Individual Rights of Indenture Trustee.
The Indenture Trustee in its individual or any other capacity may become
the owner or pledgee 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 Note 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 8.11.
SECTION 8.04 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 Series
Pool, the Collateral or the Notes, it shall not be accountable for the Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuer in the 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 8.05 Notice of Defaults.
If an Event of Default occurs, and if it is either known by, or written
notice of the existence thereof has been delivered to, a Responsible Officer of
the Indenture Trustee, the Indenture Trustee shall mail to the Insurer, each
Noteholder and the Rating Agencies notice of the Default within 5 days after
such knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note, if any), the Indenture Trustee may
withhold the notice to each Noteholder 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 8.06 Reports by Indenture Trustee to Holders.
The Indenture Trustee shall on behalf of the Issuer deliver to each
Noteholder such information as may be reasonably required to enable such Holder
to prepare its Federal and state income tax returns. If required by TIA ss.
313(a), within 60 days after each March 31, beginning with March 31, 2001,
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). Indenture
Trustee also shall comply with TIA ss.ss. 313(b)(1) and 313(b)(2). A copy of
each report at the time of its mailing to Noteholders shall be filed by
Indenture Trustee with the Commission and each stock exchange, if any, on which
the Notes are listed. Issuer shall notify Indenture Trustee if and when the
Notes are listed on any stock exchange.
SECTION 8.07 Compensation and Indemnity.
(a) The Indenture Trustee shall receive from time to time compensation for
its services, including all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation
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and expenses, disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts.
(b) The Issuer shall pay such compensation and make such reimbursement on a
non-recourse basis by payment from Available Funds as provided in Section
4.07(a) of this Indenture. The Servicer shall also be obligated to pay such
amounts to the extent expressly provided for in this Indenture. The Indenture
Trustee shall seek payment for amounts set forth in Sections 4.07(a)(i),
4.07(a)(vi) and 4.07(a)(xi) of the Indenture from the Collection Account one
Payment Date before making demand therefor to the Servicer, and the Servicer
shall promptly but in any case no later than the first Determination Date that
follows more than five days after receipt of such demand, pay such amount,
unless it reasonably believes such amount will not be available from the
Collection Account on the next Payment Date, in which case it may make immediate
demand on the Issuer. The Indenture Trustee shall seek payment for amounts set
forth in this Section 8.07, first from the Servicer (subject to the same timing
requirements as are set forth in the previous sentence) and then from the
Issuer, as set forth herein. 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 Servicer of its obligations under Article V of the Sales and Servicing
Agreement or the Indenture Trustee of its entitlement to withdraw. The Indenture
Trustee may have separate counsel and the Issuer shall or shall cause the
Servicer to pay the reasonable 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 or bad faith.
(c) The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default specified in
Section 7.01(a)(v) or (vi) with respect to the Issuer, 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
Transaction Documents, the recourse of the Indenture Trustee hereunder and under
the Transaction Documents shall be to the Series Pool only in the priorities set
forth herein and specifically shall not be recourse to the assets of any
Noteholder. In addition, the Indenture Trustee agrees that its recourse to the
Issuer, the Series Pool, the Sellers and amounts held pursuant to the Spread
Account Agreement shall be limited to the right to receive the payments referred
to in Section 4.07(a) hereof.
SECTION 8.08 Replacement of Indenture Trustee.
(a) The Issuer may, with the consent of the Insurer, 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 8.11;
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(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 or 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 takes any corporate action in
furtherances of any of the foregoing;
(v) the Indenture Trustee otherwise becomes incapable of acting; or
(vi) the Indenture Trustee materially breaches any covenants under any
Transaction Document to which it is a party.
(b) If the Indenture Trustee resigns pursuant to Section 8.20 or is removed
pursuant to the terms hereof 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 appoint a
successor Indenture Trustee acceptable to the Insurer (so long as an Insurer
Default shall not have occurred and be continuing). If the Issuer fails to
promptly appoint such a successor Indenture Trustee, the Insurer may appoint a
successor Indenture Trustee.
(c) A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Insurer (provided that no
Insurer Default shall have occurred and be continuing) and the Issuer,
whereupon, the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the retiring Indenture Trustee under this Indenture,
subject to satisfaction of the Rating Agency Condition. The successor Indenture
Trustee shall mail a notice of its succession to each Noteholder. The retiring
Indenture Trustee shall promptly transfer all property held by it as Indenture
Trustee to the successor Indenture Trustee.
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(d) If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee acceptable to the Insurer (provided
that an Insurer Default shall not have occurred and be continuing).
(e) Any resignation or removal of the Indenture Trustee and appointment of
a successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 8.08.
SECTION 8.09 Successor Indenture Trustee by a Merger.
(a) 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; provided that, such successor is otherwise qualified to serve as
Indenture Trustee hereunder and is acceptable to the Insurer (provided that no
Insurer Default has occurred and is continuing). The Indenture Trustee shall
provide the Rating Agencies and the Insurer at least 30 days' prior written
notice of any such transaction.
(b) In case at the time such successor or successors to the Indenture
Trustee by merger, conversion or consolidation shall succeed to the trusts
created by this Indenture 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 hereunder or in the name of the
successor to the Indenture Trustee.
SECTION 8.10 Appointment of Co-Indenture Trustee or Separate Indenture
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 of the property included in the Series Pool 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) shall have the power and may execute
and deliver all instruments to appoint one or more Persons acceptable to the
Insurer (provided that no Insurer Default shall have occurred and be continuing)
to act as a co-indenture trustee or co-indenture trustees, or separate indenture
trustee or separate indenture trustees, of all or any part of the property
included in the Series Pool, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders and the Insurer, such title to
the Issuer, or any part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Indenture
Trustee and the Insurer may consider necessary or desirable. No co-indenture
trustee or separate indenture trustee hereunder shall be required
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to meet the terms of eligibility as a successor indenture trustee under Section
8.11 and no notice to Noteholders of the appointment of any co-indenture trustee
or separate indenture trustee shall be required under Section 8.08 hereof.
(b) Every separate indenture trustee and co-indenture 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 indenture trustee
or co-indenture trustee jointly (it being understood that such separate
indenture trustee or co-indenture 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 or acts are to be performed the Indenture Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed singly by
such separate indenture trustee or co-indenture trustee, but solely at the
direction of the Indenture Trustee;
(ii) no indenture trustee hereunder shall be personally liable by
reason of any act or omission of any other indenture trustee hereunder,
including acts or omissions of predecessor or successor indenture trustees;
and
(iii) the Indenture Trustee with the prior consent of the Insurer may
at any time accept the resignation of or remove any separate indenture
trustee or co-indenture trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate indenture
trustees and co-indenture trustees, as effectively as if given to each of them.
Every instrument appointing any separate indenture trustee or co-indenture
trustee shall be in form and substance acceptable to the Insurer and shall refer
to this Agreement and the conditions of this Article VIII. Each separate
indenture trustee and co-indenture 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 with a copy to the Insurer.
(d) Any separate indenture trustee or co-indenture trustee may at any time
constitute the Indenture 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 Indenture on its behalf and in its name. If any separate
indenture trustee or co-indenture trustee shall die, dissolve, become insolvent,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall invest in and
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be exercised by the Indenture Trustee, to the extent permitted by law, without
the appointment of a new or successor indenture trustee.
SECTION 8.11 Appointment and Powers.
Subject to the terms and conditions hereof, each of the Issuer Secured
Parties hereby appoints Harris Trust and Savings Bank as the Indenture Trustee
with respect to the Collateral and as paying agent with respect to the Notes
(the "Note Paying Agent"), and Harris Trust and Savings Bank hereby accepts such
appointment and agrees to act as Indenture Trustee with respect to the
Collateral for the Issuer Secured Parties, to maintain custody and possession of
such Collateral (except as otherwise provided hereunder) and to perform the
other duties of the Indenture Trustee in accordance with the provisions of this
Indenture and the other Transaction 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 8.12 Performance of Duties.
The Indenture Trustee shall have no duties or responsibilities except those
expressly set forth in this Indenture and the other Transaction 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 action hereunder except at the written direction and
with the indemnification of the Controlling Party and as provided in Section
7.12. The Indenture Trustee shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under the other Transaction
Documents to which it is a party.
SECTION 8.13 Limitation on Liability.
Neither the Indenture Trustee nor any of its directors, officers or
employees shall be liable for any action taken or omitted to be taken by it or
them in good faith hereunder, or in connection herewith, except that the
Indenture Trustee shall be liable for its negligence, bad faith or willful
misconduct. 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
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Collateral, except for the negligence, bad faith or willful misconduct on the
part of the Indenture Trustee, and, further, shall incur no liability to the
Issuer Secured Parties except for negligence, bad faith or willful misconduct in
carrying out its duties to the Issuer Secured Parties. 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 Transaction Documents. The
Indenture Trustee may consult with counsel selected by it with due care, 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 written 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 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 8.14 Successor Indenture Trustee.
(a) Merger. 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 and is
acceptable to the Insurer provided that no Insurer Default shall have occurred
and be continuing) be and become a successor Indenture Trustee hereunder and be
vested with all of the title to and interest in the Collateral and all of the
trusts, powers, descriptions, 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 Collateral; provided that any such
successor shall also be the successor Indenture Trustee under Section 8.09.
(b) Removal. The Indenture Trustee may be removed by the Controlling Party
at any time, with or without cause, by an instrument or concurrent instruments
in writing delivered to the Indenture Trustee, the other Issuer Secured Party
and the Issuer. A temporary successor may be removed at any time to allow a
successor Indenture Trustee to be appointed pursuant to subsection (c) below.
Any removal pursuant to the provisions of this subsection (b) shall take effect
only upon the effective date of the appointment of a successor Indenture Trustee
acceptable to the Insurer (provided that no Insurer Default shall have occurred
and be continuing) and the acceptance in writing by such successor Indenture
Trustee of such appointment and of its obligation to perform its duties
hereunder in accordance with the provisions hereof.
(c) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Indenture Trustee. Every temporary or permanent
successor Indenture Trustee appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to the Indenture
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Trustee, each Issuer Secured Party and the Issuer an instrument in writing
accepting such appointment hereunder and the relevant predecessor shall execute,
acknowledge and deliver such other documents and instruments as will effectuate
the delivery of all Collateral to the successor Indenture Trustee, whereupon
such successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written request
of either Issuer Secured Party or the Issuer, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. In the event that any instrument in writing from the
Issuer or an Issuer Secured Party is reasonably required by a successor
Indenture Trustee to more fully and certainly vest in such successor the
estates, properties, rights, powers, duties and obligations vested or intended
to be vested hereunder in the Indenture Trustee, any and all such written
instruments shall at the request of the temporary or permanent successor
Indenture Trustee, be forthwith executed, acknowledged and delivered by the
Indenture Trustee or the Issuer, as the case may be. The designation of any
successor Indenture Trustee and the instrument or instruments removing any
Indenture Trustee and appointing a successor hereunder, together with all other
instruments provided for herein, shall be maintained with the records relating
to the Collateral and, to the extent required by applicable law, filed or
recorded by the successor Indenture Trustee in each place where such filing or
recording is necessary to effect the transfer of the Collateral to the successor
Indenture Trustee or to protect or continue the perfection of the security
interests granted hereunder.
SECTION 8.15 Representations and Warranties of the Indenture Trustee.
The Indenture Trustee represents and warrants to the Issuer and to each
Issuer Secured Party as follows:
(a) Due Organization. The Indenture Trustee is a banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
Illinois and is duly authorized and licensed under applicable law to conduct its
business as presently conducted.
(b) Trust Power. The Indenture Trustee has all requisite right, power and
authority to execute and deliver this Indenture and to perform all of its duties
as Indenture Trustee hereunder.
(c) Due Authorization. The execution and delivery by the Indenture Trustee
of this Indenture and the other Transaction 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
Transaction Documents.
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(d) Valid and Binding Indenture.
The Indenture Trustee has duly executed and delivered this Indenture and
each other Transaction Document to which it is a party, and each of this
Indenture and each such other Transaction Document constitutes the legal, valid
and binding obligation of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with its terms, except as (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization and
similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
SECTION 8.16 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 Account and agrees that amounts in the Accounts shall at all
times be held and applied solely in accordance with the provisions hereof.
SECTION 8.17 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 8.18 Insurer as Controlling Party.
Each Noteholder by purchase of the Notes held by it acknowledges that the
Indenture Trustee, as partial consideration of the issuance of the Policy, has
agreed that the Insurer shall have certain rights hereunder and shall be the
Controlling Party for so long as no Insurer Default shall have occurred and be
continuing. Unless otherwise provided herein, so long as an Insurer Default has
occurred and is continuing, any provision giving the Insurer the right to
direct, appoint or consent to, approve of, or take any action under this
Indenture shall be inoperative during the period of such Insurer Default and
such right shall instead vest in the Indenture Trustee acting, unless otherwise
specified, at the written direction of a Note Majority until such time as such
Insurer Default is no longer continuing. The Insurer may disclaim any of its
rights and powers under this Indenture (but not its duties and obligations under
the Policy) upon delivery of a written notice to the Indenture Trustee. Except
as otherwise provided herein, the Insurer may give or withhold any consent
hereunder in its sole and absolute discretion.
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SECTION 8.19 Eligibility and Disqualification of Indenture Trustee.
Indenture Trustee shall at all times satisfy the requirements of TIA ss.
310(a). The Indenture Trustee under this Indenture shall at all times be a bank,
organized and doing business under the laws of the United States of America or
any State thereof; authorized under such laws to exercise corporate trust
powers, shall be acceptable to the Insurer; having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
Federal or State authorities; and having a rating, both with respect to
long-term and short-term unsecured obligations, of not less than A and A-1,
respectively, by the Rating Agencies. If such corporation, banking association
or trust company publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 8.19, the combined capital and surplus of
such corporation, banking association or trust company shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.19, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.20. 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 that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of Issuer are
outstanding if the requirements for such exclusion set forth in ss. 310(b)(1)
are met.
SECTION 8.20 Resignation or Removal of Indenture Trustee.
The Indenture Trustee may at any time resign and be discharged from the
trusts hereby created by giving 30 days' prior written notice thereof to the
Servicer and the Insurer. Upon receiving such notice of resignation, (a) the
Insurer (provided no Insurer Default has occurred and is continuing), or (b) if
an Insurer Default has occurred and is continuing, the Note Majority, the
Servicer shall promptly appoint a successor Indenture Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Indenture Trustee and one copy to the successor Indenture Trustee;
provided that the consent of the Insurer shall be required. If no successor
Indenture Trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Indenture Trustee may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee which satisfies the eligibility
requirements pursuant to Section 8.19. The Indenture Trustee may be removed at
any time by written demand of the Insurer delivered to the Indenture Trustee and
the Servicer, provided that, if an Insurer Default has occurred which is
continuing, such right of the Insurer shall be inoperative during the period of
such Insurer Default and shall instead vest in the Note Majority.
If at any time the Indenture Trustee shall cease to be eligible in
accordance with the provisions of Section 8.19 and shall fail to resign after
written request therefor by the Insurer or the Servicer, with the prior consent
of the Insurer, or if at any time the Indenture Trustee shall be legally unable
to act, or shall be adjudged bankrupt or insolvent, or a receiver, conservator
or liquidator of the Indenture Trustee or of its property shall be appointed, or
any public officer shall take charge or control of the Indenture Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, or at request of the
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Insurer then the Servicer with the prior written consent of the Insurer may (and
at the instruction of the Insurer shall) remove the Indenture Trustee. If the
Servicer shall remove the Indenture Trustee under the authority of the
immediately preceding sentence, the Servicer, with the prior written consent of
the Insurer, shall promptly appoint a successor Indenture Trustee that meets the
eligibility requirements of Section 8.19 by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Indenture Trustee so
removed and one copy to the successor Indenture Trustee, and pay all fees and
expenses owed to the outgoing Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
8.20 shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to Section 8.14 and payment of all fees and expenses
owed to the outgoing Indenture Trustee. The Servicer shall provide notice of
such resignation or removal of the Indenture Trustee to the Rating Agencies and
the Insurer.
SECTION 8.21 Preferential Collection of Claims Against Issuer. Indenture
Trustee shall comply with TIA ss. 311(a), while 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.
ARTICLE IX
NOTEHOLDERS' LISTS AND REPORTS
SECTION 9.01 Issuer To Furnish To Indenture Trustee Names and Addresses of
Noteholders.
The Issuer will furnish or cause to be furnished to the Indenture Trustee
(a) not more than five days after the earlier of (i) each Record Date and (ii)
three months after the last Record Date, a list, in such form as the Indenture
Trustee may reasonably require, of the names and addresses of the Holders as of
such Record Date, (b) at such other times as the Indenture Trustee may request
in writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 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 or, if the Indenture Trustee is not the Note Registrar,
the Issuer shall furnish to the Insurer in writing on an annual basis on each
March 31 and at such other times as the Insurer may request a copy of such list.
SECTION 9.02 Preservation of Information; Communications to Noteholders.
The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders contained in the most recent
list furnished to the Indenture Trustee as provided in Section 9.01 and the
names and addresses of Holders received by the Indenture Trustee in its
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capacity as Note Registrar. The Indenture Trustee may destroy any list furnished
to it as provided in such Section 9.01 upon receipt of a new list so furnished.
ARTICLE X
COLLECTION OF MONEY AND RELEASES OF SERIES POOL
SECTION 10.01 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 other Transaction Documents. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture
and the other Transaction Documents. Except as otherwise expressly provided in
this Indenture or in the other Transaction Documents, if any default occurs in
the making of any payment or performance under any agreement or instrument that
is part of the Series Pool, the Indenture Trustee with the consent of the
Insurer (provided that an Insurer Default has not occurred and is continuing)
may or shall at the direction of the Insurer (provided that an Insurer Default
has not occurred and is continuing) 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 VII.
SECTION 10.02 Release of Series Pool.
(a) Subject to the payment of its fees and expenses pursuant to Section
8.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture only, in a manner and under circumstances that are authorized by the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in this Article X 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 the Indenture Trustee pursuant to Section 8.07 have
been paid and all amount due to the Insurer have been paid and the Policy has
been cancelled and returned to the Insurer, release any remaining portion of the
Series Pool 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 Accounts. The Indenture Trustee shall release the Auto Loans and Other
Conveyed Property included in the Series Pool from the lien of this Indenture
pursuant to this Section 10.02(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel and compliance
with the provisions of this Indenture.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.01 Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with the consent of
the Insurer (unless an Insurer Default shall have occurred and be continuing)
and with prior notice to the Rating Agencies by the Issuer, the Issuer and the
Indenture Trustee, when authorized by an Issuer Order, at any time and from time
to time, may enter into one or more indentures supplemental hereto, in form and
substance satisfactory to the Indenture Trustee and the Insurer (provided that
an Insurer Default has not occurred and is continuing), 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
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the 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) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action shall
not adversely affect the interests of the Holders of the Notes; or
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor indenture 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 indenture trustee, pursuant to the requirements of Article VIII;
provided that, if an Insurer Default has occurred and is continuing, the
Insurer's prior written consent shall be required if such indenture
supplement would materially and adversely affect the interests of the
Insurer.
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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 not inconsistent with the foregoing.
SECTION 11.02 Supplemental Indentures with Consent of Noteholders.
(a) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior notice to the Rating Agencies, with the consent of
the Insurer (unless an Insurer Default shall have occurred and be continuing)
and with the consent of Note Majority, by Act of such Holders delivered to the
Issuer, the Insurer and the Indenture Trustee, enter into an indenture or
indentures supplemental hereto in form and substance satisfactory to the
Indenture Trustee and the Insurer (provided that an Insurer Default has not
occurred and is continuing) 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 the Notes under this
Indenture; provided, however, that, subject to the express rights of the Insurer
under the Transaction Documents, no such supplemental indenture shall, without
the consent of 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
provision of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Series Pool to 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;
(ii) 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 VII, to the payment of any such amount due
on the Notes on or after the respective due dates thereof (or, in the case
of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Series Pool pursuant to Section 7.04;
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(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Transaction Documents cannot be
modified or waived without the consent of the Holder of each Outstanding
Note affected thereby;
(vii) 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) or as to affect the
rights of the Holders of Notes to the benefit of any provisions for the
mandatory redemption of the Notes contained herein; or
(viii) 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 property
included in the Series Pool or, except as otherwise permitted or
contemplated herein or in any of the Transaction Documents, terminate the
lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture; provided that, if an Insurer Default has occurred and is
continuing, the Insurer's prior written consent shall be required if such
indenture supplement would materially and adversely affect the interests of
the Insurer.
(b) It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
(c) Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance 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 11.03 Execution of Supplemental Indentures.
In executing, or permitting the additional trusts created by, any
supplemental indenture permitted by this Article XI or the modifications thereby
of the trusts created by this Indenture, the Indenture Trustee shall and the
Insurer shall be entitled to receive, and subject to Sections 8.01 and 8.02,
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.
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SECTION 11.04 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 11.05 Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article XI may, and if required by the Issuer shall,
bear a notation in form approved by the Issuer 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 XII
REDEMPTION OF NOTES
SECTION 12.01 Redemption. The Notes are subject to redemption in whole, but
not in part, at the direction of Flagship LLC pursuant to the Depositor Purchase
Agreement, on any Payment Date on which Flagship LLC exercises its option to
purchase the Auto Loans included in the Series Pool pursuant to said Depositor
Purchase Agreement, for a Note redemption price equal to the Redemption Price
plus all amounts due to the Insurer under the Transaction Documents; provided,
however, that the Issuer has available funds sufficient to pay the Redemption
Price. Flagship LLC or the Issuer shall furnish the Insurer and the Rating
Agencies prior written notice of such redemption. If the Notes are to be
redeemed pursuant to this Section 12.01, Flagship LLC or the Issuer shall
furnish written notice of such election to the Indenture Trustee and the Insurer
not later than 35 days prior to the Redemption Date and the Issuer shall deposit
with the Indenture Trustee in the Collection Account the Redemption Price of the
Notes to be redeemed plus all amounts due to the Insurer under the Transaction
Documents, whereupon all such Notes shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 12.02 to each Holder
of Notes.
SECTION 12.02 Form of Redemption Notice. Notice of redemption under Section
12.01 shall be given by the Indenture Trustee by facsimile or by first-class
mail, postage prepaid, transmitted or mailed prior to the applicable Redemption
Date to each Holder of Notes, as of the close of business on
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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;
(iii) that the Record Date otherwise applicable to such Redemption
Date is not applicable and that payments shall be made only upon
presentation and surrender of such Notes and the place where such Notes are
to be surrendered for payment of the Redemption Price (which shall be the
office or agency of the Issuer to be maintained as provided in Section
3.02); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
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 12.03 Notes Payable on Redemption Date.
The Notes to be redeemed shall, following notice of redemption as required
by Section 12.02 (in the case of redemption pursuant to Section 12.01), on the
Redemption Date become due and payable 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.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee and to the Insurer (i) an Officer's 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.
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(b) 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 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.
(c) (i) 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 13.01(a) 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 (on the date of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(ii) 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 Amount of the Notes, but 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 Amount of the Notes.
(iii) Other than with respect to the release of any Purchased Auto
Loans or Charged-Off Auto Loans, 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.
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(iv) 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 Auto Loans and Defaulted Auto Loans, 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 Amount of
the Notes, but 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 Amount of the Notes.
(v) Notwithstanding Section 2.09 or any provision of this Section, the
Issuer may (A) collect, liquidate, sell or otherwise dispose of the Auto
Loans as and to the extent permitted or required by the Transaction
Documents and (B) make cash payments out of the Trust Accounts as and to
the extent permitted or required by the Transaction Documents.
SECTION 13.02 Form of Documents Delivered to Indenture Trustee.
(a) 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.
(b) 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 or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based 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, the Originator or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the
Originator or the Issuer, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
(c) Where any Person is required 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.
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(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VIII.
SECTION 13.03 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 instruments 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 or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. 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 8.01) 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 customary manner of the Indenture Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or 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 13.04 Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
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(i) the Indenture Trustee by any Noteholder, the Insurer or by the
Issuer shall be sufficient for every purpose hereunder if personally
delivered, delivered by overnight courier or mailed certified mail, return
receipt requested and shall be deemed to have been duly given upon receipt
to the Indenture Trustee at its Corporate Trust Office;
(ii) the Issuer by the Indenture Trustee, the Insurer or by any
Noteholder shall be sufficient for every purpose hereunder if personally
delivered, delivered by overnight courier or mailed certified mail, return
receipt requested and shall deemed to have been duly given upon receipt to
the Issuer addressed to: Flagship Auto Receivables Owner Trust 1999-2 in
care of First Union National Bank, One Rodney Square, 920 King Street,
Wilmington, Delaware 19801, with a copy to the General Counsel of Flagship
Credit Corporation, 1 International Plaza, Philadelphia, Pennsylvania
19113, or at such other address previously furnished in writing to the
Indenture Trustee and the Insurer by the Issuer. The Issuer shall promptly
transmit any notice received by it from the Noteholders to the Indenture
Trustee and the Insurer; or
(iii) 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 telecopied to the recipient as follows:
To the Insurer:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management - Structured Finance
(Flagship Auto Receivables Owner Trust 1999-2)
Confirmation: (914) 273-4545
Telecopy Nos.:(914) 765-3810
(b) Notices required to be given to the Rating Agencies by the Issuer or
the Indenture Trustee shall be in writing, personally delivered, delivered by
overnight courier or mailed certified mail, return receipt requested to (i) in
the case of Moody's, at the following address: Moody's Investors Service, Inc.,
99 Church Street, New York, New York 10004, Attention: ABS Monitoring Dept.;
(ii) in the case of S&P, at the following address: Standard & Poor's Ratings
Group, a Division of The McGraw Hill Companies, 55 Water Street, 40th Floor, New
York, New York 10041, Attention: Asset-Backed Surveillance Department; or in the
case of DCR, at the following address: Duff & Phelps Credit Rating Co., 17 State
Street, 12th Floor, New York, New York 10004, Attention: Asset-Backed Monitoring
Group; or as to each of the foregoing, at such address as shall be designated by
written notice to other parties.
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SECTION 13.05 Notices to Noteholders Waiver.
(a) Where this Indenture provides for notice to Noteholders of any event,
such notice shall be sufficiently given (unless otherwise expressly provided
herein) 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.
(b) 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.
(c) In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
(d) 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 13.06 Alternate Payment and Notice Provisions.
(a) 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
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). 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.
SECTION 13.07 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.
82
<PAGE>
SECTION 13.08 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.
SECTION 13.09 Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.10 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 directly to enforce such provisions of this Indenture so long as no
Insurer Default shall 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 any
other party secured hereunder, and any other person with an ownership interest
in any part of the Series Pool, 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 Indenture Trustee may
exercise such right or power hereunder), but not its duties and obligations
under the Policy, upon delivery of a written notice to the Indenture Trustee.
SECTION 13.11 Counterparts.
This Indenture may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 13.12 Recording of Indenture.
If this Indenture is subject to recording in any appropriate 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 or to the Collateral Agent under the Spread Account
Agreement.
83
<PAGE>
SECTION 13.13 Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Sellers, the Servicer 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 Originator, the Servicer or
the Indenture Trustee in its individual capacity, (ii) any owner of a legal or
beneficial interest in the Issuer or (iii) any affiliate, partner, owner,
beneficiary, agent, officer, director, employee or agent of the Originator, the
Servicer or the Indenture Trustee in its individual capacity, any holder of a
legal or beneficial interest in the Issuer, the Originator, the Servicer or the
Indenture Trustee or of any successor or assign of the Originator, the Servicer
or the Indenture Trustee in its individual capacity, except as any such Person
may have expressly agreed (it being understood that the Indenture Trustee has no
such obligations in its individual capacity) 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 13.14 No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder, by accepting a Note or a beneficial interest therein, hereby
covenant and agree that they will not at any time institute against Flagship
LLC, the Depositor, the Special Member or the Issuer, or join in any insolvency
proceeding against Flagship LLC, the Depositor, the Special Member or 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 of the Transaction Documents.
SECTION 13.15 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
and shall cause its representatives to hold in confidence all such information
except to the extent disclosure may be required by law (and all reasonable
applications for confidential treatment are unavailing) and except to the extent
that the Indenture Trustee may reasonably determine that such disclosure is
consistent with its obligations hereunder.
84
<PAGE>
SECTION 13.16 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
succeeding 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 13.17 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, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 13.18 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.
SECTION 13.19 Limitation of Liability. Notwithstanding any other provision
herein or elsewhere, this Indenture has been executed and delivered by First
Union National Bank, not in its individual capacity, but solely in its capacity
as Owner Trustee of the Issuer, and in no event shall First Union National Bank
have any liability (except with respect to its own grossly negligent action or
failure to act) in respect of the representations, warranties, or obligations of
the Issuer or the Owner Trustee hereunder or under any other document, as to all
of which recourse shall be had solely to the assets of the Issuer, and for all
purposes of this Indenture and each other document, First Union National Bank
shall be entitled to the benefits of the Amended and Restated Trust Agreement of
the Issuer.
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 physically contained herein.
85
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Servicer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers, hereunto
duly authorized, all as of the day and year first above written.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2, as Issuer
By: FIRST UNION NATIONAL BANK, not in
its individual capacity, but solely as Owner
Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
FLAGSHIP CREDIT CORPORATION,
as Servicer
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
S-1
<PAGE>
EXHIBIT A-1
[Form of Class A-1 Note]
REGISTERED $117,000,000
No. R-A-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 33841F AA 8
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
CLASS A-1 6.420% ASSET-BACKED NOTES
Flagship Auto Receivables Owner Trust 1999-2 (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of ONE HUNDRED SEVENTEEN MILLION DOLLARS
payable on each Payment Date in an amount equal to the aggregate amount, if any,
payable from the Note Distribution Account in respect of principal on the Class
A-1 Notes pursuant to Section 3.01 and Section 4.07 or 4.08 of the Indenture;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the November 2002 Payment Date (the "Class A-1 Final
Scheduled Maturity Date"). The Issuer will pay interest on this Note at the rate
per annum shown above on each Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date). Interest on this Note
A-1-1
<PAGE>
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such current Payment Date; provided that
for the December 1999 Payment Date interest will accrue for the number of days
from and including November 24, 1999 to but excluding December 20, 1999.
Interest will be calculated on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by MBIA Insurance Corporation (the "Insurer"),
pursuant to which the Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Payment Amount on each Payment Date and the Outstanding
Amount on the related Final Scheduled Maturity Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
By: FIRST UNION NATIONAL BANK, not in its
individual capacity, but solely as Owner Trustee
By:
--------------------------------------------
Name:
Title:
A-1-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 6.420% Asset-Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of November 1, 1999 (such
indenture, as supplemented or amended, is herein called the "Indenture"), among
the Issuer, Flagship Credit Corporation, as Servicer (the "Servicer") and Harris
Trust and Savings Bank, as indenture trustee (the "Indenture Trustee", which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, supplemented or amended, shall have the meanings assigned to them in
or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the eighteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing on December 20, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-1 Final Scheduled Maturity Date
and the Redemption Date, if any, pursuant to Section 12. 01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Indenture Trustee or the Holders of the Notes representing at
least a majority of the Outstanding Amount of the Notes have declared the Notes
to be immediately due and payable in the manner provided in Section 7.02 of the
Indenture. All principal payments on the Class A-1 Notes shall be made pro rata
to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one
A-1-4
<PAGE>
or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not rated hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice mailed
prior to such Payment Date and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
12.01 of the Indenture, in whole, but not in part, at the option of the Seller
(with the consent of the Insurer under certain circumstances), on any Payment
Date on or after the date on which the Outstanding Amount is less than or equal
to 10% of the initial aggregate principal amount of the Notes.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the Depositor, the Indenture
Trustee or 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 or employee of the Issuer, the Seller, the Servicer,
the Depositor, the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Seller, the
Servicer, the Depositor, the Special Member, the Owner Trustee or the Indenture
Trustee or of any successor or assign of the Issuer, the Seller,
A-1-5
<PAGE>
the Servicer, the Depositor, the Special Member, the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Issuer, the Seller, the Special Member or the Depositor or
join in any institution against the Issuer, the Seller, the Special Member or
the Depositor 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, the Indenture or the Transaction Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
A-1-6
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the indenture or the Transaction Documents, neither the Owner
Trustee in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Owner Trustee for the sole purposes of binding the
interests of the Owner Trustee in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-1-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (1)
------------------ ------------------------------
Signature Guaranteed:
- --------
(1) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-1-8
<PAGE>
EXHIBIT A-2
[Form of Class A-2 Note]
REGISTERED $60,000,000
No. R-A-2
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 33841F AB 6
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
CLASS A-2 6.705% ASSET-BACKED NOTES
Flagship Auto Receivables Owner Trust 1999-2 (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of SIXTY MILLION DOLLARS payable on each
Payment Date in an amount equal to the aggregate amount, if any, payable from
the Note Distribution Account in respect of principal on the Class A-2 Notes
pursuant to Section 3.01 and Section 4.07 or 4.08 of the Indenture provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the January 2004 Payment Date (the "Class A-2 Final Scheduled
Maturity Date"). The Issuer will pay interest on this Note at the rate per annum
shown above on each Payment Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such current Payment
A-2-1
<PAGE>
Date; provided that for the December 1999 Payment Date interest will accrue for
the number of days from and including November 24, 1999 to but excluding
December 20, 1999 (assuming that there are 30 days in each month of the year).
Interest will be calculated on the basis of a 360-day year of twelve 30- day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by MBIA Insurance Corporation (the "Insurer"),
pursuant to which the Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Payment Amount on each Payment Date and the Outstanding
Amount on the related Final Scheduled Maturity Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2
By: FIRST UNION NATIONAL BANK, not in its
individual capacity, but solely as Owner Trustee
By:
-----------------------------------------
Name:
Title:
A-2-3
<PAGE>
(REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 6.705% Asset-Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of November 1, 1999 (such
indenture, as supplemented or amended, is herein called the "Indenture"), among
the Issuer, Flagship Credit Corporation, as Servicer (the "Servicer") and Harris
Trust and Savings Bank, as indenture trustee (the "Indenture Trustee", which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the eighteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing on December 20, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-2 Final Scheduled Maturity Date
and the Redemption Date, if any, pursuant to Section 12.01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Indenture Trustee or the Holders of the Notes representing at
least a majority of the Outstanding Amount of the Notes have declared the Notes
to be immediately due and payable in the manner provided in Section 7.02 of the
Indenture. All principal payments on the Class A-2 Notes shall be made pro rata
to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one
A-2-4
<PAGE>
or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice mailed
prior to such Payment Date and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
12.01 of the Indenture, in whole, but not in part, at the option of the Seller
(with the consent of the Insurer under certain circumstances), on any Payment
Date on or after the date on which the Outstanding Amount is less than or equal
to 10% of the initial aggregate principal amount of the Notes.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the Depositor, the Indenture
Trustee or 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 or employee of the Issuer, the Seller, the Servicer,
the Depositor, the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Seller,
A-2-5
<PAGE>
the Servicer, the Depositor, the Special Member, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Issuer, the Seller, the
Servicer, the Depositor, the Special Member, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Issuer, the Seller, the Special Member or the Depositor or
join in any institution against the Issuer, the Seller, the Special Member or
the Depositor 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, the Indenture or the Transaction Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
A-2-6
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Transaction Documents, neither the Owner
Trustee in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Owner Trustee for the sole purposes of binding the
interests of the Owner Trustee in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-2-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (2)
------------------ -----------------------------
Signature Guaranteed:
- --------
(2) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-2-8
<PAGE>
EXHIBIT A-3
[Form of Class A-3 Note]
REGISTERED $43,000,000
No. R-A-3
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 33841F AC 4
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
CLASS A-3 6.835% ASSET-BACKED NOTES
Flagship Auto Receivables Owner Trust 1999-2 (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of FORTY THREE MILLION DOLLARS payable on
each Payment Date in an amount equal to the aggregate amount, if any, payable
from the Note Distribution Account in respect of principal on the Class A-3
Notes pursuant to Section 3.01 and Section 4.07 or 4.08 of the Indenture
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the November 2004 Payment Date (the "Class A-3 Final
Scheduled Maturity Date"). The Issuer will pay interest on this Note at the rate
per annum shown above on each Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date). Interest on this Note will
accrue
A-3-1
<PAGE>
for each Payment Date from the most recent Payment Date on which interest has
been paid to but excluding such current Payment; provided that for the December
1999 Payment Date interest will accrue for the number of days from and including
November 24, 1999 to but excluding December 20, 1999 (assuming that there are 30
days in each month of the year). Interest will be calculated on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by MBIA Insurance Corporation (the "Insurer"),
pursuant to which the Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Payment Amount on each Payment Date and the Outstanding
Amount on the related Final Scheduled Maturity Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-3-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2
By: FIRST UNION NATIONAL BANK, not in its
individual capacity, but solely as Owner Trustee
By:
--------------------------------------------
Name:
Title:
A-3-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 6.835% Asset-Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of March 1, 1999 (such
indenture, as supplemented or amended, is herein called the "Indenture"), among
the Issuer, Flagship Credit Corporation, as Servicer (the "Servicer") and Harris
Trust and Savings Bank, as indenture trustee (the "Indenture Trustee", which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the eighteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing on December 20, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-3 Final Scheduled Maturity Date
and the Redemption Date, if any, pursuant to Section 12.01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Indenture Trustee or the Holders of the Notes representing at
least a majority of the Outstanding Amount of the Notes have declared the Notes
to be immediately due and payable in the manner provided in Section 7.02 of the
Indenture. All principal payments on the Class A-3 Notes shall be made pro rata
to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one
A-3-4
<PAGE>
or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice mailed
prior to such Payment Date and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
12.01 of the Indenture, in whole, but not in part, at the option of the Seller
(with the consent of the Insurer under certain circumstances), on any Payment
Date on or after the date on which the Outstanding Amount is less than or equal
to 10% of the initial aggregate principal amount of the Notes.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the Depositor, the Indenture
Trustee or 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 or employee of the Issuer, the Seller, the Servicer,
the Depositor, the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Seller, the
Servicer, the Depositor, the Special Member, the Owner Trustee or the Indenture
Trustee or of any successor or assign of the Issuer, the Seller,
A-3-5
<PAGE>
the Servicer, the Depositor, the Special Member, the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Issuer, the Seller, the Special Member or the Depositor or
join in any institution against the Issuer, the Seller, the Special Member or
the Depositor 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, the Indenture or the Transaction Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
A-3-6
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Transaction Documents, neither the Owner
Trustee in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Owner Trustee for the sole purposes of binding the
interests of the Owner Trustee in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-3-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (3)
-------------------------- -------------------------------
Signature Guaranteed:
- --------
(3) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-3-8
<PAGE>
EXHIBIT A-4
[Form of Class A-4 Note]
REGISTERED $30,000,000
No. R-A-4
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 33841F AD 2
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
CLASS A-4 6.900% ASSET-BACKED NOTES
Flagship Auto Receivables Owner Trust 1999-2 (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [THIRTY MILLION DOLLARS] payable on
each Payment Date in an amount equal to the aggregate amount, if any, payable
from the Note Distribution Account in respect of principal on the Class A-4
Notes pursuant to Section 3.01 of the Indenture and Section 4.07 or 4.08 of the
Indenture, provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the May 2006 Payment Date (the "Class A-4 Final
Scheduled Maturity Date"). The Issuer will pay interest on this Note at the rate
per annum, shown above on each Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date). Interest on this Note will
accrue for each Payment Date from the most recent Payment Date on which interest
has been paid to but excluding such
A-4-1
<PAGE>
current Payment Date; provided that for the December 1999 Payment Date interest
will accrue for the number of days from and including November 24, 1999 to but
excluding December 20, 1999 (assuming that there are 30 days in each month of
the year). Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Such principal of and interest on this Note shall be paid in the
manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by MBIA Insurance Corporation (the "Insurer"),
pursuant to which the Insurer has unconditionally guaranteed payments of the
Noteholders' Interest Payment Amount on each Payment Date and the Outstanding
Amount on the related Final Scheduled Maturity Date, all as more fully set forth
in the Indenture.
Reference is made to the farther provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-4-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
By: FIRST UNION NATIONAL BANK, not in its individual
capacity, but solely as Owner Trustee
By:
--------------------------------------------
Name:
Title:
A-4-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 6.900% Asset-Backed Notes (herein called the "Class
A-4 Notes"), all issued under an Indenture dated as of March 1, 1999 (such
indenture, as supplemented or amended, is herein called the "Indenture"), among
the Issuer, Flagship Credit Corporation, as Servicer (the "Servicer") and Harris
Trust and Savings Bank, as indenture trustee (the "Indenture Trustee", which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the eighteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing on December 20, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-4 Final Scheduled Maturity Date
and the Redemption Date, if any, pursuant to Section 12.01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Indenture Trustee or the Holders of the Notes representing at
least a majority of the Outstanding Amount of the Notes have declared the Notes
to be immediately due and payable in the manner provided in Section 7.02 of the
Indenture. All principal payments on the Class A-4 Notes shall be made pro rata
to the Class A-4 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one
A-4-4
<PAGE>
or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice mailed
prior to such Payment Date and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-4 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
12.01 of the Indenture, in whole, but not in part, at the option of the Seller
(with the consent of the Insurer under certain circumstances), on any Payment
Date on or after the date on which the Outstanding Amount is less than or equal
to 10% of the initial aggregate amount of the Notes.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the Depositor, the Indenture
Trustee or 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 or employee of the Issuer, the Seller, the Servicer,
the Depositor, the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Seller, the
Servicer, the Depositor, the Special Member, the Owner Trustee or the Indenture
Trustee or of any successor or assign of the Issuer, the Seller,
A-4-5
<PAGE>
the Servicer, the Depositor, the Special Member, the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Issuer, the Seller, the Special Member or the Depositor or
join in any institution against the Issuer, the Seller, the Special Member or
the Depositor 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, the Indenture or the Transaction Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and the Insurer and any agent of the Issuer, the
Indenture Trustee or the Insurer may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
A-4-6
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall after or impair the obligation of the Issuer, which is
absolute and unconditional to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Transaction Documents, neither the Owner
Trustee in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Owner Trustee for the sole purposes of binding the
interests of the Owner Trustee in the assets of the Issuer. The Holder of this
Note by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-4-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (4)
-------------------------- -----------------------------
Signature Guaranteed:
- --------
(4) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-4-8
<PAGE>
EXHIBIT B
CERTIFICATE OF AUTHENTICATION
This is one of the Class Notes referred to in the within-mentioned
Indenture.
Date: November 24, 1999
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By:
------------------------------------
Name:
Title:
B-1
<PAGE>
EXHIBIT C
DOCUMENT RELEASE FORM
__________, 199__
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Re: Indenture dated as of November 1, 1999 by and among Flagship Auto
Receivables Owner Trust 1999-2, Harris Trust and Savings Bank and
Flagship Credit Corporation (the "Indenture")
---------------------------------------------
Ladies & Gentlemen:
In connection with the servicing and administration of the pool of Loans
held by you as Indenture Trustee for the Noteholders under the Indenture, we
request the release, and acknowledge receipt of the (Loan Files [specify
documents]) for the Loan described below, for the reason indicated.
Borrower's Name, Address & Zip Code
Borrower's Loan Number:
Reason for Requesting Documents (check one)
______ Loan Repurchased or Substituted
______ Loan Paid in Full
______ Loan Liquidated
______ Loan in Foreclosure
______ Other, including release of collateral contemplated by the Servicing
______ Agreement or in Loan Documents (explain):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
If the Loan is being paid in full or liquidated, and if all or part of the
Loan 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 Loan.
C-1
<PAGE>
If the Loan is in Foreclosure the box "Other (explain)" above is checked,
upon our return of all of the above documents to you as Indenture Trustee,
please acknowledge your receipt by signing in the space indicated below and
returning this form.
SERVICER:
FLAGSHIP CREDIT CORPORATION
By
------------------------------------
Name:
Title:
Documents Receipt Acknowledged:
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By
-------------------------------------
Name:
Title:
C-2
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
AMENDED AND RESTATED TRUST AGREEMENT
between
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
FLAGSHIP CREDIT CORPORATION
and
FIRST UNION NATIONAL BANK,
as Owner Trustee
Dated as of November 8, 1999
<PAGE>
TABLE OF CONTENTS
Page ||
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms...................................1
SECTION 1.02. Other Definitional Provisions.......................2
ARTICLE II
Organization
SECTION 2.01. Name................................................3
SECTION 2.02. Office..............................................3
SECTION 2.03. Purposes and Powers.................................3
SECTION 2.04. Appointment of Owner Trustee........................4
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate..4
SECTION 2.06. Declaration of Trust................................5
SECTION 2.07. Liability of Owners.................................5
SECTION 2.08. Title to Trust Property.............................5
SECTION 2.09. Situs of Trust......................................5
SECTION 2.10. Representations and Warranties of the Depositor.....5
SECTION 2.11. [Reserved...........................................6
SECTION 2.12. Federal Income Tax Allocations; Tax Treatment.......6
SECTION 2.13. Administrative Duties...............................7
SECTION 2.14. [Reserved]..........................................8
ARTICLE III
Certificates
SECTION 3.01. Initial Ownership...................................8
SECTION 3.02. The Certificates....................................9
SECTION 3.03. Authentication of Trust Certificates................9
SECTION 3.04. Registration of Transfer and Exchange of
Certificates; Limitations on Transfer...............9
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Certificates..10
SECTION 3.06. Persons Deemed Certificateholders..................10
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses..........................................10
<PAGE>
SECTION 3.08. Maintenance of Office or Agency....................11
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to the Certificateholders and the
Insurer with Respect to Certain Matters............11
SECTION 4.02. Action by the Certificateholders and the Insurer with
Respect to Certain Matters.........................12
SECTION 4.03. Action by the Certificateholders with Respect to
Bankruptcy.........................................12
SECTION 4.04. Restrictions on Power..............................13
SECTION 4.05. Majority Control...................................13
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account.....................13
SECTION 5.02. Application of Trust Funds.........................14
SECTION 5.03. Method of Payment..................................14
SECTION 5.04. No Segregation of Moneys; No Interest..............14
SECTION 5.05. Accounting and Reports to the Certificateholders,
Internal Revenue Service and Others................14
SECTION 5.06. Signature on Returns; Tax Matters Partner..........15
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority..................................15
SECTION 6.02. General Duties.....................................15
SECTION 6.03. Action upon Instruction............................16
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions.......................................17
SECTION 6.05. No Action Except Under Specified Documents or
Instructions.......................................17
SECTION 6.06. Restrictions.......................................17
ii
<PAGE>
ARTICLE VII
Concerning Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties....................18
SECTION 7.02. Furnishing of Documents............................19
SECTION 7.03. Representations and Warranties.....................19
SECTION 7.04. Reliance; Advice of Counsel........................20
SECTION 7.05. Not Acting in Individual Capacity..................20
SECTION 7.06. Owner Trustee Not Liable for Certificates or Auto
Loans..............................................20
SECTION 7.07. Owner Trustee May Own Notes........................21
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses..................21
SECTION 8.02. Indemnification....................................21
SECTION 8.03. Payments to Owner Trustee..........................22
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.....................22
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee.........22
SECTION 10.02. Resignation or Removal of Owner Trustee............23
SECTION 10.03. Successor Owner Trustee............................23
SECTION 10.04. Merger or Consolidation of Owner Trustee...........24
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee......24
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments.........................26
SECTION 11.02. No Legal Title to Owner Trust Estate in
Certificateholders.................................27
SECTION 11.03. Limitations on Rights of Others; Third Party
Beneficiary........................................27
SECTION 11.04. Notices............................................27
SECTION 11.05. Severability.......................................28
iii
<PAGE>
SECTION 11.06. Separate Counterparts..............................28
SECTION 11.07. Successors and Assigns.............................28
SECTION 11.08. Covenants of the Company...........................28
SECTION 11.09. No Petition........................................29
SECTION 11.10. No Recourse........................................29
SECTION 11.11. Headings...........................................29
SECTION 11.12. GOVERNING LAW......................................29
SECTION 11.13. Cecate Transfer Restrictions.......................29
SECTION 11.14. Submission to Jurisdiction.........................30
||
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT dated as of November 8, 1999 (this
"Agreement"), between PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a
Delaware corporation, as depositor (the "Depositor"), FLAGSHIP CREDIT
CORPORATION, a Delaware corporation (the "Company"), and FIRST UNION NATIONAL
BANK, a national banking association (the "Bank," and not in its individual
capacity, but solely as owner trustee, the "Owner Trustee"). This Agreement
amends and restates the Trust Agreement dated as of November 8, 1999 between the
Depositor and the Bank (the "Original Trust Agreement").
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
capitalized terms used but not defined herein and defined in the Sales and
Servicing Agreement or, if not defined therein, in the Indenture and shall have
the meanings set forth therein. The "Sales and Servicing Agreement" means the
Sales and Servicing Agreement, dated as of November 1, 1999, among Flagship Auto
Loan Funding LLC 1999-II, a Delaware limited liability company, as purchaser
("Flagship LLC"), Flagship Credit Corporation, as originator and servicer (the
"Company" or the "Servicer"), Flagship Auto Receivables Owner Trust 1999-2, as
Issuer (the "Issuer"), Harris Trust and Savings Bank, an Illinois banking
corporation, as indenture trustee (the "Indenture Trustee") and Copelco
Financial Services Group, Inc., a Delaware corporation, as Back-up Servicer (the
"Back-up Servicer"). For all purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Agreement" shall mean this Amended and Restated Trust Agreement, as the
same may be amended and supplemented from time to time.
"Bank" means First Union National Bank, its successors and assigns, and any
other Person that serves as Owner Trustee hereunder, each in its individual
capacity.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Certificate" means a certificate evidencing the beneficial interest of a
Certificateholder in the Issuer, substantially in the form of Exhibit A.
"Certificate Balance" shall have the meaning assigned to such term in
Section 2.05.
"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.
<PAGE>
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned in and the registrar appointed pursuant to Section 3.04.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
corporate trust office of the Owner Trustee located at One Rodney Square, 920
King Street, Wilmington, DE 19801, Attention: Corporate Trust Administration or
at such other address as the Owner Trustee may designate by notice to the
Certificateholder(s), and the Company, or the principal corporate trust office
of any successor Owner Trustee (the address of which the successor owner trustee
will notify the Certificateholder(s), and Flagship).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"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.
"Insurer" shall mean MBIA Insurance Corporation, its successors and
assigns.
"Issuer" shall mean the Trust established by this Agreement.
"Note Depository Agreement" means the agreement dated the Closing Date
among the Trust, the Indenture Trustee and The Depository Trust Company, as the
clearing agency, as the same may be amended, amended and restated or otherwise
modified from time to time.
"Owner Trust Estate" shall mean the property that is the subject of the
Flagship Auto Receivables Owner Trust 1999-2.
"Owner Trustee" shall mean First Union National Bank, a national banking
association, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
SECTION 1.02. Other Definitional Provisions.
2
<PAGE>
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto, accounting terms not defined in this Agreement or
in any such certificate or other document, and accounting terms partly defined
in this Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article and Section references
contained in this Agreement are references to Articles and Sections in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
(including the Sales and Servicing Agreement referred to above) or in any
instrument or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time amended, amended and restated or
otherwise modified and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created under the Original Trust Agreement
shall be known as "Flagship Auto Receivables Owner Trust 1999-2," in which name
the Owner Trustee shall have power and authority and is hereby authorized and
empowered, without the need for further action on the part of the Owner Trustee,
to conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address outside of
Delaware as the Owner Trustee
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may designate by written notice to the Certificateholders, the Company, the
Insurer and the Depositor.
SECTION 2.03. Purposes and Powers.
(a) The purpose of the Trust is , and the Owner Trustee shall have power
and authority, and is hereby authorized and empowered, without the need for
further action on the part of the Owner Trustee, in the name and on behalf of
the Trust or in the name of the Owner Trustee, to do or cause to be done all
acts and things necessary, appropriate, or convenient to engage in the following
activities:
(i) to acquire the Auto Loans and Other Conveyed Property pursuant to
the Owner Trust Purchase Agreement;
(ii) to execute, (in the case of the Certificates) authenticate,
deliver, and issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Agreement, and to sell the Notes and the Certificates and
to pay interest on and principal on the Notes and make distributions on the
Certificates;
(iii) with the proceeds of the sale of the Notes to pay the
organizational, start-up and transactional expenses of the Trust and to pay
the balance to the Depositor;
(iv) to Grant the Collateral pursuant to the Indenture and to hold,
manage and distribute to the Certificateholders pursuant to the terms of
the Sales and Servicing Agreement and Indenture any portion of the
Collateral released from the Lien of, and remitted to the Trust pursuant
to, the Indenture;
(v) to enter into, execute, deliver, and perform its obligations under
the Transaction Documents to which it is to be 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 Transaction Documents, to engage
in such other activities as may be required in connection with conservation
of the Owner Trust Estate (as defined herein).
Each of the Owner Trustee and the Trust is hereby authorized to engage in
the foregoing activities. The Trust 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 other Transaction Documents.
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SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby confirms
the appointment of the Owner Trustee as trustee of the Trust effective as of the
date hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. Pursuant
to the Original Trust Agreement, the Depositor assigned, transferred, conveyed
and set over to the Owner Trustee, of the date thereof, the sum of $1 (the
"Certificate Balance"). The Owner Trustee hereby acknowledges receipt in trust
from the Depositor, as of the date thereof, of the foregoing contribution, which
shall constitute the initial Owner Trust Estate. The Company shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee or the Bank, as the case may be.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares that
it shall hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Certificateholders, subject to
the obligations of the Trust under the Transaction Documents. It is the
intention of the parties hereto that the Trust constitute a trust under the
common law of the State of Delaware and that this Agreement constitute the
governing instrument of such trust.
SECTION 2.07. Liability of Owners. The Certificateholders shall not have
any personal liability for any liability or obligation of the Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a common law trust and
separate legal entity except where applicable law in any jurisdiction requires
title to any part of the Owner Trust Estate to be vested in the Owner Trustee
and/or another trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee and/or, a co-trustee(s) and/or a separate
trustee(s), as the case may be.
SECTION 2.09. Situs of Trust. The Trust shall be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware. Payments shall be
received by the Trust only in Delaware, and payments shall be made by the Trust
only from Delaware. The only office of the Trust shall be determined in
accordance with Section 2.02.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Bank and Owner Trustee and the
Insurer that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority to own
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its properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(iii) The Depositor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Depositor has full power and
authority to sell and assign the property to be sold and assigned to and
deposited with the Trust and the Depositor has duly authorized such sale
and assignment and deposit to the Trust by all necessary corporate action;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the certificate
of incorporation or bylaws of the Depositor, or any indenture, agreement or
other instrument to which the Depositor is a party or by which it is bound;
nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Transaction Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties.
(v) To the Depositor's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
SECTION 2.11. [Reserved]
SECTION 2.12. Federal Income Tax Allocations; Tax Treatment.
(a) If the Certificates are held by more than one Person or the Trust is
recharacterized as a separate entity the net income of the Trust for any month
as determined for federal income tax purposes (and each item of income, gain,
loss and deduction entering into the computation
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thereof) shall be allocated among the Certificateholders as of the first day
following the end of such month, in proportion to their ownership of principal
amount of Certificates on such date, to the extent of any net income of the
Trust (including any amounts to be distributed to the Certificateholders
pursuant to the Indenture).
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 the Company.
(b) All "excess nonrecourse liabilities" represented by all outstanding
Notes issued by the Trust, as well as the deductions attributable thereto, shall
be allocated one hundred percent to the Company in accordance with Treasury
Regulations section 1.752-3(a)(3). Notwithstanding any other provision of this
Agreement, if the Certificates are held solely by one Person or the Trust has
not been recharacterized as a separate entity, the application of clause (a) and
this clause (b) shall be disregarded.
(c) It is the intent of the parties hereto that, solely for purposes of
federal income, state and local income, franchise and single business tax and
any other taxes measured in whole or in part by income, 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. 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 purposes of federal income,
state and local income, franchise and single business tax and any other taxes
measured in whole or in part by income, the Trust shall be treated as a
partnership and the Certificateholder(s) and the Company shall be treated as
partners in that partnership with the assets of the partnership being the Auto
Loans and other assets held by the Trust, and the Notes being debt of that
partnership. The parties agree that, unless otherwise required by appropriate
tax authorities, the Trust shall execute annual or other necessary returns,
reports and other forms consistent with the characterization of the Trust as a
partnership for such tax purposes , as such returns, reports, and forms may be
represented to the Owner Trustee and upon the written direction of the Company.
The Owner Trustee (as such and in its individual capacity) shall have no
responsibility for the accuracy of the information contained in any such return,
report, or form and shall be fully protected in relying thereon.
SECTION 2.13. Administrative Duties.
(a) Duties with Respect to the Specified Agreements. The Company shall
perform the duties of the Trust and the Owner Trustee under the Indenture and
the Note Depository Agreement (collectively the "Specified Agreements"). In
addition, the Company shall consult with the Owner Trustee as the Company deems
appropriate regarding the duties of the Trust and the Owner Trustee under the
Specified Agreements. The Company shall monitor the performance of the Trust's
duties and shall advise the Owner Trustee and the Insurer when action
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is necessary to comply with the Trust's and the Owner Trustee's duties under the
Specified Agreements. The Company 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 Trust or the Owner Trustee to prepare, file or deliver
pursuant to the Specified Agreements. In furtherance and without limiting the
generality of the foregoing, the Company shall take all necessary action that is
the duty of the Trust or the Owner Trustee to take pursuant to Sections 3.05,
3.17 and 3.18 of the Indenture.
(b) Duties with Respect to the Trust.
(i) In addition to the duties of the Company set forth in the
Transaction Documents, but subject to the terms of the Transaction
Documents, the Company shall perform such calculations and shall prepare
for execution by the Trust or 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 Trust or the Owner Trustee to prepare, file or deliver pursuant to
state and federal tax and securities laws and shall take all other
appropriate action that it is the duty of the Trust or the Owner Trustee to
take pursuant to the Transaction Documents relating to the preparation and
filing of tax returns, the furnishing of documents and with respect to
supplements and amendments of the Specified Agreements. The Owner Trustee
(as such and in its individual capacity) shall have no responsibility for
the accuracy of the information contained in any such document, report,
filing, instrument, certificate, opinion, return, supplement, or amendment,
and shall be fully protected in relying thereon. In accordance with the
request of the Owner Trustee but subject to the terms of the Transaction
Documents, the Company shall administer, perform or supervise the
performance of such other activities in connection with the Transaction
Documents as are not covered by any of the foregoing provisions and as are
expressly requested by the Owner Trustee and are reasonably within the
capability of the Company.
(ii) Notwithstanding anything in this Agreement or any of the other
Transaction Documents to the contrary, the Company shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to a
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. The Owner Trustee (as such and in its
individual capacity) shall have no responsibility for the accuracy of the
information contained in any such notice and shall be fully protected in
relying thereon.
(c) Records. The Company shall maintain appropriate books of account,
including capital accounts, and records relating to the Trust, which books of
account and records shall be accessible for inspection by the Owner Trustee and
the Certificateholders at any time during normal business hours.
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(d) Additional Information to be Furnished to the Trust. The Depositor
shall furnish to the Owner Trustee from time to time such additional information
regarding the Trust or the Transaction Documents as the Owner Trustee shall
reasonably request.
SECTION 2.14. [Reserved].
ARTICLE III
Certificates
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.02. The Certificates. The Certificates shall be initially issued
to Flagship LLC in a Certificate Percentage Interest of 100% upon the written
direction of the Depositor to the Owner Trustee. The Certificates shall be
executed 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 Owner Trustee 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
3.04.
SECTION 3.03. Authentication of Trust Certificates. On the Closing Date,
the Owner Trustee shall cause the Certificates in aggregate Certificate
Percentage Interest of 100% to be executed on behalf of the Trust, authenticated
and delivered to or upon the written order of the Depositor, signed by its
chairman of the board, its president, any vice president, secretary or any
assistant treasurer as set forth in Exhibit B, without further corporate action
by the Depositor, in authorized denominations. No Certificate shall entitle its
Holder to any benefit under this Agreement or 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 has been validly issued, authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Certificates;
Limitations on Transfer. The Certificate Registrar shall keep or cause to be
kept, at the office or agency
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maintained pursuant to Section 3.08, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
Certificate Registrar.
No Certificate may be transferred without the consent of the Insurer. Upon
surrender for registration of transfer of any Certificate at the office or
agency maintained pursuant to Section 3.08, the Owner Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
aggregate amount dated the date of authentication by the Owner Trustee. At the
option of a Holder, Certificates may be exchanged for other Certificates of
authorized denominations of a like aggregate amount upon surrender of the
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.08.
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 Holder or such Holder's attorney duly authorized in writing. 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.
The preceding provisions of this Section notwithstanding, the Certificate
Registrar shall not be required to register transfers or exchanges of,
Certificates for a period of 15 days preceding the due date for any payment with
respect to the Certificates (the parties hereto hereby, and each
Certificateholder by its acceptance of a Certificate thereby, agreeing that such
period is reasonable).
SECTION 3.05. 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 Bank and the Owner Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate has been acquired by a purchaser, the
Owner Trustee on behalf of the Trust shall execute and the Owner Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
denomination. In connection with the issuance of any new Certificate under this
Section, 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
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duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Certificateholders. Prior to due presentation
of a Certificate for registration of transfer, the Owner Trustee and the
Certificate Registrar may treat the Person in whose name any Certificate is
registered in the Certificate Register as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 5.02 and for all other
purposes whatsoever, and none of the Owner Trustee, or the Certificate Registrar
shall be bound by any notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.
The Certificate Registrar shall furnish or cause to be furnished to the Servicer
and the Depositor, within 15 days after receipt by the Owner Trustee of a
written request therefor from the Servicer or the Depositor, a list, in such
form as the Servicer or the Depositor may reasonably require, of the names and
addresses (as reflected on the Certificate Register) of the Certificateholders
as of the most recent Record Date. If a Certificateholder applies in writing to
the Certificate Registrar, and such application states that the applicant
desires to communicate with other Certificateholders 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 applicant proposes to
transmit, then the Certificate Registrar shall, within five Business Days after
the receipt of such application, afford such applicant access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Depositor, the Company, the Certificate Registrar, the Bank, or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.08. 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 Transaction Documents may be served. The Owner Trustee
initially designates its Corporate Trust Office as its office for such purposes.
The Owner Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to the Certificateholders and the Insurer with
Respect to Certain Matters. With respect to the following matters, the Owner
Trustee shall not take action unless, at least 30 days before the taking of such
action, the Owner Trustee shall have notified
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the Certificateholders and the Insurer in writing of the proposed action and the
Certificateholders prior to the 30th day after such notice is given shall not
have notified the Owner Trustee in writing that the Certificateholders and the
Insurer have withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with the collection of the Auto Loans) and the
compromise of any action, claim or lawsuit brought by or against the Owner
Trustee (except with respect to the aforementioned claims or lawsuits brought in
connection with collection of the Auto Loans);
(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 materially adversely affects the interests of the Certificateholders;
or
(d) the appointment pursuant to the Indenture of a successor Note Registrar
or Indenture Trustee or pursuant to this Agreement of a successor Certificate
Registrar, or the consent to the assignment by the Note Registrar or Indenture
Trustee or Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable.
In addition, the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separately from those of any other entity. Except as expressly set forth
herein, the Trust shall not pay any indebtedness, operating expenses or
liabilities of any other entity. The Trust shall maintain appropriate minutes or
other records of all appropriate actions and shall maintain its offices separate
from the offices of the Company, Flagship LLC, the Depositor and the Servicer.
SECTION 4.02. Action by the Certificateholders and the Insurer with Respect
to Certain Matters. The Owner Trustee shall not have the power, except upon the
written direction of the Certificateholders and the Insurer and as expressly
provided for in the Transaction Documents to (a) to remove the Servicer under
the Sales and Servicing Agreement or (b) to sell the Auto Loans 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
Certificateholders and the Insurer.
SECTION 4.03. Action by the Certificateholders with Respect to Bankruptcy.
(a) The Trust shall not, without the prior written consent of the Owner
Trustee, (i) institute any proceedings to adjudicate the Trust as bankrupt or
insolvent, (ii) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (iii) file a petition seeking
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or consenting to reorganization or relief under any applicable federal or state
law relating to bankruptcy with respect to the Trust, (iv) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of its property, (v) make
any assignment for the benefit of the Trust's creditors; (vi) cause the Trust to
admit in writing its inability to pay its debts generally as they become due; or
(vii) take any action in furtherance of any of the foregoing (any of the above
foregoing actions, a "Bankruptcy Action"). In considering whether to give or
withhold written consent to the Bankruptcy Action by the Trust, the Owner
Trustee, with the consent of the Certificateholders (hereby given, which consent
the Certificateholders believe to be in the best interest of Certificateholders
and the Trust), shall consider the interests of the Noteholders and the Insurer
in addition to the interests of the Trust and whether the Trust is insolvent.
The Owner Trustee shall have no duty to give such written consent to Bankruptcy
Action by the Trust if the Owner Trustee shall not have been furnished (at the
expense of the Person that requested that such letter be furnished to the Owner
Trustee) a letter from an independent accounting firm of national reputation
stating that in the opinion of such firm the Trust is then insolvent. The Owner
Trustee shall not be personally liable to any Person on account of the Owner
Trustee's good faith reliance on the provisions of this Section or in connection
with the Owner Trustee's giving prior written consent to Bankruptcy Action by
the Trust in accordance herewith, or withholding such consent in good faith, and
neither the Trust nor any Certificateholder shall have any claim for breach of
fiduciary duty or otherwise against the Owner Trustee or the Bank for giving or
withholding its consent to any such Bankruptcy Action.
(b) The parties hereto stipulate and agree that no Certificateholder has
power to commence any Bankruptcy Action on the part of the Trust or to direct
the Owner Trustee to take any Bankruptcy Action on the part of the Trust. To the
extent permitted by applicable law, the consent of the Controlling Part and the
Indenture Trustee shall be obtained prior to taking any Bankruptcy Action by the
Trust.
(c) The provisions of this Section do not constitute an acknowledgment or
admission by the Trust, the Owner Trustee, any Certificateholder or any creditor
of the Trust that the Trust is eligible to be a debtor under the United States
Bankruptcy Code, 11 U.S.C.ss.ss.101 et seq., as amended.
SECTION 4.04. Restrictions on Power. The Owner Trustee shall not be
required to take or to refrain from taking any action if such action or inaction
would be contrary to any obligation of the Trust, or of the Owner Trustee under
this Agreement or any of the other Transaction Documents or would be contrary to
the purpose of this Trust as set forth in Section 2.03, nor shall the Owner
Trustee be obligated to follow any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Holders of Certificates aggregating more than 50% of the
Certificates by Certificate Percentage Interest. Except as expressly provided
herein, any written notice of the Certificateholders delivered pursuant to this
Agreement shall be effective if signed by Holders of Certificates aggregating
more than 50% by the Certificate Percentage Interest.
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ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Account (the "Certificate Distribution Account"), bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise provided herein the Certificate
Distribution Account shall be under the sole dominion and control of the Owner
Trustee for the benefit of the Certificateholders. If, at any time, the
Certificate Distribution Account ceases to be an Eligible Account, the Owner
Trustee (or the Depositor on behalf of the Owner Trustee, if the Certificate
Distribution Account is not then held by the Owner Trustee or an Affiliate
thereof) shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Certificate Distribution Account as an Eligible Account and shall transfer any
cash and/or any investments to such new Certificate Distribution Account.
SECTION 5.02. Application of Trust Funds.
(a) On each Payment Date, Certificateholders shall receive on a pro rata
basis, amounts, if any distributable by the Indenture Trustee pursuant to
Section 4.07 of the Indenture with respect to such Payment Date.
(b) On each Payment Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to the Sales and Servicing Agreement with respect to such
Payment Date.
(c) In the event that any withholding tax is imposed on distributions (or
allocations of income) to a Certificateholder, such tax shall reduce the amount
otherwise distributable to the Certificateholder in accordance with this
Section. The Owner Trustee is hereby authorized and directed to retain, in
accordance with the written directions of the Company, from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner 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
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tax imposed with respect to a Certificateholder shall be treated as cash
distributed to the Certificateholder 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-U.S. Certificateholder), the Owner Trustee may in its sole
discretion withhold such amounts in accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Distributions required to be made to
Certificateholders on any Payment Date shall be made to each Certificateholder
of record on the preceding Record Date pursuant to the Indenture either by wire
transfer, in immediately available funds, to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if the Certificateholder shall have provided to the Indenture Trustee
appropriate written instructions at least five Business Days prior to such
Payment Date or, if not, by check mailed to the Certificateholder at the address
of the Certificateholder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Moneys received by the
Owner Trustee hereunder need not be segregated in any manner except to the
extent required by law or the Transaction Documents and may be deposited under
such general conditions as may be prescribed by law, and the Owner Trustee shall
not be personally liable for any interest thereon.
SECTION 5.05. Accounting and Reports to the Certificateholders, Internal
Revenue Service and Others. Subject to Section 2.12, the Depositor shall (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis and the accrual method of accounting, (b) prepare and deliver to the
Certificateholders during such calendar year, as may be required by the Code and
applicable Treasury Regulations, and not later than the latest date permitted by
law, 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 such tax returns relating to the Trust (including a partnership
information return, IRS Form 1065) and make such elections as from time to time
may be required or appropriate under any applicable state or federal statute or
any rule or regulation thereunder so as to maintain the Trust's characterization
as a disregarded entity if there is only one Certificateholder, or, if there is
more than one Certificateholder, as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.02(c) with respect to income or distributions to
the Certificateholders. The Owner Trustee shall execute such documents, in the
forms furnished to the Owner Trustee by the Company, to elect under Section 1278
of the Code to include in income currently any market discount that accrues with
respect to the Auto Loans. The Owner Trustee shall not make the election
provided under Section 754 of the Code.
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SECTION 5.06. Signature on Returns; Tax Matters Partner.
(a) Subject to Section 2.12, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust in such form as the same may be presented to
the Owner Trustee for signature, unless applicable law requires a
Certificateholder to sign such documents, in which case such documents shall not
be presented to the Owner Trustee for signature but rather shall be presented to
and shall be signed by a Certificateholder.
(b) The Company shall be designated the "tax matters partner" of the Trust
pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee shall have power and
authority and hereby is authorized and empowered to execute and deliver the
Transaction Documents to which the Trust or the Owner Trustee is to be a party
and each certificate or other document attached as an exhibit to or contemplated
by the Transaction Documents to which the Trust or the Owner Trustee is to be a
party and, in each case, in such form as the Depositor shall approve, as
evidenced conclusively by the Owner Trustee's execution thereof. In addition to
the foregoing, the Owner Trustee shall have power and authority and hereby is
authorized and empowered, but shall not be obligated, to take all actions
required of the Trust or the Owner Trustee pursuant to the Transaction
Documents. The Owner Trustee shall have power and authority and hereby is
further authorized and empowered from time to time to take such action as the
Servicer recommends or directs in writing with respect to the Transaction
Documents, except to the extent this Agreement requires the consent of
Certificateholders for such action.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged) the duties expressly required to be
performed by the Owner Trustee under the terms of this Agreement and the other
Transaction Documents to which the Trust is a party in the interest of the
Certificateholders, subject to the Transaction Documents and in accordance with
the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties under the Transaction
Documents to the extent the Company has agreed to perform them pursuant to
Section 2.13 of this Agreement.
SECTION 6.03. Action upon Instruction.
(a) Subject to Article IV and to the other terms of the Transaction
Documents, the Certificateholders may by written instruction direct the Owner
Trustee in the management of the Trust. Such direction may be exercised at any
time by written instruction of the Certificateholders pursuant to Article IV.
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(b) The Owner Trustee shall not be required to take any action hereunder or
under any other Transaction Document 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 the Bank or is contrary
to the terms hereof or of any other Transaction 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 under
any other Transaction Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders and the Insurer requesting instruction as to the course of
action to be adopted, and to the extent the Owner Trustee acts or refrains from
acting in good faith in accordance with any written instruction of the
Certificateholders and the Insurer, the Owner Trustee shall not be personally
liable on account of such action or inaction to any Person. If the Owner Trustee
shall not have received appropriate instruction within 10 days 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 not inconsistent with this
Agreement or the other Transaction Documents, as it shall deem to be in the best
interests of the Certificateholders, and shall have no personal liability to any
Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Transaction 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 in the event that 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
Certificateholders and the Insurer 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, the Owner Trustee shall not be personally
liable, on account of such action or inaction, to any Person. If the Owner
Trustee shall not have received appropriate instruction within 10 days 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 not inconsistent with
this Agreement or the other Transaction Documents, as it shall deem to be in the
best interests of the Certificateholders, and shall have no personal liability
to any Person for such action or inaction.
SECTION 6.04. 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 Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, this Agreement or
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any document contemplated hereby to which the Trust or the Owner Trustee is a
party or otherwise, except for duties expressly required to be performed by the
Owner Trustee by the terms of this Agreement, any other Transaction Document to
which the Trust is a party or in any written instruction received by the Owner
Trustee as contemplated by Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any other Transaction Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or under any other document or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any other Transaction Document. The Bank nevertheless agrees that
it shall, at its own cost and expense, promptly take all action as may be
necessary to discharge any Liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate, this
Agreement, the Trust or the Bank's serving as Owner Trustee.
SECTION 6.05. 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 Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Transaction Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee as
contemplated by Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
that, to the actual knowledge of a Responsible Officer of the Owner Trustee,
would result in the Trust's becoming taxable as a corporation for federal income
tax purposes. The Certificateholders shall not direct the Owner Trustee to take
action that would be inconsistent with the purposes of the Trust set forth in
Section 2.03 or violate the provisions of this Section. A "Responsible Officer
of the Owner Trustee" is an officer in the Owner Trustee's Corporate Trust
Office having direct responsibility for the performance of the Owner Trustee's
duties hereunder.
ARTICLE VII
Concerning Owner Trustee
SECTION 7.01. 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 Owner Trust Estate upon the terms of the Transaction Documents and
this Agreement. The Owner Trustee shall not be personally answerable or
accountable hereunder or under any other Transaction Document under any
circumstances, except (i) for its own willful misconduct or gross negligence or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 7.03 expressly made by the
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Bank. In particular, but not by way of limitation (and subject to the exceptions
set forth in the preceding sentence):
(a) The Owner Trustee shall not be personally liable for any error of
judgment made by the Owner Trustee.
(b) The Owner Trustee shall not be personally liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
any Certificateholder.
(c) No provision of this Agreement or any other Transaction Document shall
require the Owner Trustee to expend or risk its own funds or otherwise incur any
personal financial liability in the performance of any of its rights or powers
hereunder or under any other Transaction Document if the Owner Trustee or the
Bank 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) Under no circumstances shall the Owner Trustee be personally liable for
indebtedness evidenced by or arising under any of the Transaction Documents,
including the principal of and interest on the Notes.
(e) The Owner Trustee shall not be personally responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution hereof
by the Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Transaction Documents, other than the validity of the
Owner Trustee's signature on the certificate of authentication on the
Certificates and the Owner Trustee shall in no event assume or incur any
personal liability, duty or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein or expressly
agreed to in the Transaction Documents.
(f) The Owner Trustee shall not be personally liable for the default or
misconduct of, and shall have no duty to monitor or supervise, the Depositor,
the Indenture Trustee or the Servicer or any other Person under any of the
Transaction Documents or otherwise, and the Owner Trustee shall have no
obligation or personal liability to perform the obligations of the Trust or the
Owner Trustee under this Agreement or the other Transaction Documents that are
required to be performed by the Indenture Trustee under the Indenture or the
Servicer under the Sales and Servicing Agreement.
(g) The Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any other Transaction Document, at the request, order or direction
of any of the Certificateholders, unless the Certificateholders have offered to
the Owner Trustee and the Bank security or indemnity satisfactory to it against
the
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costs, expenses and liabilities that may be incurred by the Owner Trustee or the
Bank therein or thereby. The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any other Transaction
Document shall not be construed as a duty, and the Owner Trustee shall not be
answerable or personally liable other than for its gross negligence or willful
misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish to
the Certificateholders and the Insurer, 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 Transaction Documents.
SECTION 7.03. Representations and Warranties. The Bank hereby represents
and warrants to the Depositor and the Insurer, for the benefit of the
Certificateholders, that:
(a) The Bank is a national banking association duly organized and validly
existing in good standing under the laws of the United States. The Bank has all
requisite power and authority to execute, deliver and perform its and the Owner
Trustee's obligations under this Agreement and each other Transaction Document
to which it or the Owner Trustee is a party.
(b) The Bank has taken all action necessary to authorize the execution and
delivery by it of this Agreement and by the Owner Trustee each of the other
Transaction Documents to which it is a party, and this Agreement and each of the
other Transaction Documents to which the Owner Trustee is a party has been
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement and each of the other Transaction Documents to which
it or the Owner Trustee is a party on its behalf.
(c) This Agreement and each of the other Transaction Documents to which it
is a party constitutes a legal, valid and binding obligation of the Bank or the
Owner Trustee, as the case may be, enforceable against the Bank or the Owner
Trustee in accordance with its respective terms, subject, as to enforceability,
to applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation and other similar laws affecting enforcement of the
rights of creditors of banks generally and to equitable limitations on the
availability of specific remedies.
(d) Neither the execution or the delivery by the Bank or by the Owner
Trustee of this Agreement and each of the other Transaction Documents to which
it is a party, nor the consummation by it or the Owner Trustee of the
transactions contemplated hereby and thereby, nor compliance by it or the Owner
Trustee with any of the terms or provisions hereof and thereof, shall contravene
any federal or state law, governmental rule or regulation governing the banking
and trust powers of the Bank or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
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SECTION 7.04. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no personal 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 an appropriate Person or Persons.
The Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any Person 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 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 or other authorized officer 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 other
Transaction 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 shall not be personally liable for the conduct or misconduct
of such agents or attorneys if such agents or 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 personally 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 not
contrary to this Agreement or any other Transaction Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created, First Union National Bank,
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 other Transaction Document
shall look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Certificates or Auto Loans. The
recitals contained herein, in the Certificates, and in the Notes shall be taken
as the statements of the Depositor, and the Owner Trustee assumes no personal
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
other Transaction Document or of the Certificates (other than as to the validity
of the signature and countersignature of the Owner Trustee on the Certificates)
or the Notes, or of any Auto Loan or related documents. The Owner Trustee shall
at no time have any responsibility or personal liability for or with respect to
the legality, validity and enforceability of any Auto Loan or the perfection and
priority of any security interest created by any Auto Loan in any Financed
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Vehicle or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to the Certificateholders under this Agreement or
the Noteholders under the Indenture, including, without limitation: the
existence, condition and ownership of any Financed Vehicle; the existence and
enforceability of any insurance thereon; the existence and contents of any Auto
Loan on any computer or other record thereof; the validity of the transfer of
any Auto Loan to the Trust or Owner Trustee or of any intervening transfer; the
completeness of any Auto Loan; the performance or enforcement of any Auto Loan;
the compliance by the Depositor or the Servicer with any warranty or
representation made under any other Transaction 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 or other Person
taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Notes. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may deal with the Depositor, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. The Bank shall receive as
compensation for its services hereunder reasonable expenses incurred before the
date hereof and such fees as have been separately agreed upon before the date
hereof between the Originator and the Bank, and shall be entitled to be
reimbursed by the Originator for its other reasonable expenses hereunder
incurred on and after the date hereof, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the negotiation and
preparation of this Agreement and the Transaction Documents or exercise and
performance of its rights and its duties hereunder.
SECTION 8.02. Indemnification. The Company shall be liable as primary
obligor for, and shall indemnify, defend, and hold harmless the Bank (which to
the fullest extent permitted by applicable law, shall not be limited by any
provision of law limiting the compensation of a trustee of a trust), the Owner
Trustee and its successors, assigns, agents and servants (collectively, the
"Indemnified Parties") from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions and suits, and any and all reasonable
costs, expenses and disbursements (including reasonable legal fees and expenses)
of any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
other Transaction Documents, the Owner Trust Estate, the administration of the
Owner Trust Estate or the action or inaction of the Owner Trustee hereunder,
except only that the
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Company shall not be liable for or required to indemnify an Indemnified Party
from and against Expenses arising or resulting from any of the matters described
in the third sentence of Section 7.01. The indemnities contained in this Section
shall survive the resignation or termination of the Owner Trustee and the
termination of this Agreement. In any event of any claim, action or proceeding
for which indemnity shall be sought pursuant to this Section, the Owner
Trustee's choice of legal counsel shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
SECTION 8.03. Payments to Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.
(a) This Agreement (other than Article VIII and the other rights, benefits,
privileges and immunities of the Bank) and the Trust shall terminate and be of
no further force or effect upon the final distribution by the Owner Trustee of
all moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Sales and Servicing Agreement, the
Insurance Agreement and Article V. The bankruptcy, liquidation, dissolution,
death or incapacity of any Certificateholder shall not, to the fullest extent
permitted by applicable law, (x) operate to terminate this Agreement or the
Trust or (y) entitle any 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 Trust or Owner Trust Estate or
(z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in Section 9.01(a), none of the Company, the
Depositor nor any Certificateholder shall be entitled to revoke or terminate the
Trust.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a bank, trust company, or other Person authorized
to exercise corporate trust powers; having (or have a parent that has) a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authorities; and having (or having a parent
that has) time deposits that are rated at least A-1 by Standard & Poor's and
D-1+ by DCR and P-1 by Moody's. If such bank, trust company, or other Person
shall publish reports of
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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, the combined capital and surplus of such bank, trust company, or other
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. In case at any time the Owner
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Owner Trustee shall resign immediately in the manner and with the
effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Depositor and the Insurer. Upon receiving
such notice of resignation, the Depositor, with the 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 resigning
Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Owner Trustee
at the expense of the Company 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 10.01 and shall fail to resign after written
request therefor by the Depositor and the Insurer, 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 the Depositor with the written consent of the
Insurer may remove the Owner Trustee. If the Depositor shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Depositor
with the 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 and one copy to the
successor Owner Trustee, and shall pay all fees owed to the outgoing Owner
Trustee in its individual capacity.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and (in the case of removal) payment of all
fees and expenses owed to the outgoing Owner Trustee in its individual capacity.
The Depositor shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Depositor and the Insurer and to its predecessor Owner Trustee an instrument
accepting such appointment under this Agreement, and thereupon the resignation
or removal of the predecessor Owner Trustee shall
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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
upon payment of its fees and expenses in its individual capacity deliver to the
successor Owner Trustee all documents and statements and monies held by it under
this Agreement; and the Depositor 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 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Depositor shall mail notice thereof to all Certificateholders,
the Indenture Trustee, the Noteholders, the Insurer and the Rating Agencies. If
the Depositor shall fail to mail such notice within 10 days after acceptance of
such appointment by the successor Owner Trustee, the successor Owner Trustee
shall cause such notice to be mailed at the expense of the Depositor.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any Person into
which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such Person shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies and the Insurer.
SECTION 10.05. 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 Owner Trust Estate or any Financed Vehicle may at the time be located,
the Depositor 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 Depositor and Owner Trustee to act as co-trustee, jointly with
the Owner Trustee, or as separate trustee or separate trustees, of all or any
part of the Owner Trust Estate, and to vest in such Person, in such capacity,
such title to the Owner Trust Estate or any part thereof and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Depositor and the Owner Trustee may consider necessary or
desirable. If the Depositor shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, the Owner Trustee alone
shall have the power to make such appointment. No co-trustee or
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separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor Owner Trustee pursuant to Section 10.01 and no notice
of the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the 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 Owner 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 Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason of
any act or omission of any other trustee under this Agreement; and
(c) The Depositor 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 Article. 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.
Any separate trustee or co-trustee may at any time appoint the Owner
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
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 co-trustee or separate trustee.
26
<PAGE>
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be amended
from time to time by the Depositor, the Company, the Bank and the Owner Trustee,
with prior written notice to the Rating Agencies, with the prior written consent
of the Insurer, and without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor, the
Company, the Bank and the Owner Trustee, with prior written notice to the Rating
Agencies, with the prior written consent of the Insurer, and with the consent of
the holders of Notes evidencing not less than a majority of the outstanding
principal amount of the Notes and the consent of the Certificateholders
evidencing not less than a majority of the Certificate Balance, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
shall: (a) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, collections of payments on Auto Loans or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders; or (b) reduce the percentage of the Outstanding Amount of
the Notes required to consent to any such amendment to less than the percentage
contemplated by the definition of Majority Noteholders, without the consent of
the Holders of all the outstanding Notes.
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 Indenture Trustee, the Insurer and each
of the Rating Agencies.
It shall not be necessary for the consent of the Certificateholders or the
Noteholders pursuant to this Section 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 Certificateholders provided for in this Agreement or in any
other Transaction Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Insurer shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution
27
<PAGE>
of such amendment is authorized or permitted by this Agreement. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment that
affects the Owner Trustee's own rights, benefits, duties or immunities under
this Agreement or otherwise. Notwithstanding any other provision herein or
elsewhere, no provision, amendment, supplement, waiver, or consent of or with
respect to any of the Transaction Documents that affects any right, power,
authority, duty, benefit, protection, privilege, immunity, or indemnity of the
Owner Trustee or the Bank shall be binding on the Owner Trustee or the Bank
unless the Owner Trustee and the Bank shall have expressly consented thereto in
writing.
In connection with the execution of any amendment to this Trust Agreement
or any amendment of any other agreement to which the Trust or the Owner Trustee
is a party, the Owner Trustee and the Insurer shall be entitled to receive and
conclusively rely upon an Opinion of Counsel to the effect that such amendment
is authorized or permitted by the Transaction Documents and that all conditions
precedent in the Transaction Documents for the execution and delivery thereof by
the Trust or the Owner Trustee, as the case may be, have been satisfied.
The Owner Trustee shall comply with Article XI of the Indenture with
respect to the amendments, modifications, supplements, terminations and
surrenders referred to therein.
SECTION 11.02. No Legal Title to Owner Trust Estate in Certificateholders.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. Each Certificateholder shall be entitled to receive distributions with
respect to its undivided ownership interest in the Trust only in accordance with
the terms of this Agreement and the other Transaction Documents. No transfer, by
operation of law or otherwise, of any right, title or interest of the
Certificateholders to and in its undivided ownership interest 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 Owner
Trust Estate.
SECTION 11.03. Limitations on Rights of Others; Third Party Beneficiary.
The provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Bank, the Indemnified Parties, the Depositor, the
Certificateholder, the Insurer and, to the extent expressly provided herein, the
Indenture Trustee and 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 Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein. The parties hereto agree that the Insurer is an express third party
beneficiary.
SECTION 11.04. 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 by the
intended recipient or three Business Days after mailing if mailed by certified
mail, postage prepaid (except that notice to the
28
<PAGE>
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to First Union National Bank, One
Rodney Square, Suite 102, Wilmington, Delaware 19801; if to the Insurer,
addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504
to the Depositor, addressed to Prudential Securities Secured Financing
Corporation, 1 New York Plaza, 14th Floor, New York, New York 10292, Attn: Group
Head, Asset Backed Finance Group, or, as to each party, at such other address as
shall be designated by such party in a written notice to the other party hereto.
(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,
SECTION 11.05. 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 11.06. 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 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assigns, the Owner Trustee and its successors and
each Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by such Certificateholder shall bind the successors and assigns of the
Certificateholder.
SECTION 11.08. Covenants of the Company. In the event that any litigation
with claims in excess of $1,000,000 to which the Company is a party which shall
be reasonably likely to result in a material judgment against the Company that
the Company shall not be able to satisfy shall be commenced by a
Certificateholder, during the period beginning nine months following the
commencement of such litigation and continuing until such litigation is
dismissed or otherwise terminated (and, if such litigation has resulted in a
final judgment against the Company, such judgment has been satisfied), the
Company shall not declare any dividend or make any other distribution on or in
respect of its shares to any of its equity holders, or repay the principal
amount of any indebtedness of the Company held by any Affiliate of the Company,
unless (i) after giving effect to such distribution or repayment, the Company's
liquid assets shall not be less than the amount of actual damages claimed in
such litigation and (ii) the Rating Agencies shall have been notified with
respect to any such distribution or repayment.
29
<PAGE>
The Company will not at any time institute against the Trust any bankruptcy
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 Transaction Documents.
SECTION 11.09. No Petition. The 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
covenant and agree that they shall not at any time, acquiesce, petition or
otherwise invoke or cause (or join with any other Person in acquiescing,
petitioning or otherwise invoking or causing) the Depositor or the Trust to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Depositor 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 Depositor or the Trust or any substantial part of the
property of the Depositor or the Trust, or ordering the winding up or
liquidation of the affairs of the Depositor or the Trust.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interest in the Trust only and does not represent interests in or
obligations of the Depositor, the Company, the Servicer, the Bank, the Indenture
Trustee or any Affiliate thereof and no recourse may be had against such Persons
or their assets, except as may be expressly set forth or contemplated in this
Agreement or the Transaction 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 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. SECTION 3540
OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
SECTION 11.13. Certificate Transfer Restrictions. The Certificates may not
be acquired by or for the account of (i) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I 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 a Certificate, the
Holder thereof shall be deemed to have represented and warranted that it is not
a Benefit Plan.
30
<PAGE>
Notwithstanding any other provision herein or elsewhere, the Owner Trustee shall
have no obligation to determine whether any transfer or exchange or proposed or
purported transfer or exchange of a Certificate is permitted under or in
accordance with this Agreement, and the Owner Trustee shall have no personal
liability to any Person in connection with any transfer or exchange or proposed
or purported transfer or exchange (and/or registration thereof).
SECTION 11.14. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Transaction Document or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general 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;
(b) 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 such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) 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 such
Person at its address set forth in Section 11.04 or at such other address
notified to the other party to this Agreement pursuant thereto; and
(d) 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.
[SIGNATURES FOLLOW]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor
By:
-------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Owner Trustee
By:
-------------------------------------------
Name:
Title:
FLAGSHIP CREDIT CORPORATION
By:
-------------------------------------------
Name:
Title:
S-1
<PAGE>
EXHIBIT A
____% Certificate Percentage Interest
NUMBER
R-
SEE REVERSE FOR CERTAIN DEFINITIONS
--------------------------
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, light trucks
and vans or mini vans and sold by Flagship Credit Corporation, a Delaware
corporation ("Flagship" or in its capacity as Servicer under the Sales and
Servicing Agreement (as defined below), the "Servicer") to Flagship Auto Loan
Funding LLC 1999-II ("Flagship LLC"), by Flagship LLC to Prudential Securities
Secured Financing Corporation ("Prudential"), and by Prudential 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 Flagship
Credit Corporation, the Servicer, Flagship LLC, Prudential or any Affiliate
thereof, except to the limited extent described below.)
A-1
<PAGE>
THIS CERTIFIES THAT _____________ is the registered owner of a __%
Certificate Percentage Interest that is a nonassessable, fully-paid, beneficial
ownership interest in certain distributions of Flagship Auto Receivables Owner
Trust 1999-2 (the "Issuer").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
First Union National Bank, First Union National Bank,
not in its individual not in its individual
capacity but solely as capacity but solely as
Owner Trustee or Owner Trustee
By: By:
----------------------- ----------------------
Authenticating Agent
By:
-----------------------
The Issuer was created pursuant to a Trust Agreement, dated as of _______
__, 1999 (the "Trust Agreement"), between Flagship, Prudential and First Union
National Bank, 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 November __, 1999, between the Issuer, Harris
Trust & Savings Bank, as Indenture Trustee (the "Indenture Trustee"), are four
classes of Notes designated as "Class A-1 ____% Asset Backed Notes" (the "Class
A-1 Notes"), "Class A-2 ____% Asset Backed Notes" (the "Class A-2 Notes"),
"Class A-3 ____% Asset Backed Notes" (the "Class A-3 Notes") and "Class A-4
____% Asset Backed Notes" (the "Class A-4 Notes"), (collectively, 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, light
trucks and vans or mini vans (the "Auto Loans"), 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 Sales and Servicing Agreement, dated as of
November __, 1999 (the "Sales and Servicing Agreement"),
A-2
<PAGE>
between Flagship, Flagship LLC, the Issuer, the Back-up Servicer and the
Indenture Trustee, all right to and interest of Prudential in and to the
Depositor Purchase Agreement, dated as of November 1, 1999, between Flagship LLC
and Prudential, all right to, and interest of the Issuer in and to the Owner
Trust Purchase Agreement, dated as of November 1, 1999, between Prudential and
the Issuer, and all proceeds of the foregoing.
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.
It is the intent of the Flagship, the Servicer, Flagship LLC, Prudential
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 Flagship, 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 will be treated as partners in that
partnership. Flagship LLC 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.
Distributions on this Certificate will be made on behalf of the Trust by
the Indenture Trustee as provided in the Indenture and Sales 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 Indenture 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 Indenture
Trustee.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or the Sales and Servicing Agreement or be valid for any purpose.
No Certificate may be transferred without the consent of the Insurer.
A-3
<PAGE>
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.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2
By: FIRST UNION NATIONAL BANK,
not in its individual capacity but solely
as Owner Trustee
Dated: By:
-------------------------------------------
<PAGE>
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest in,
Flagship, the Servicer, Flagship LLC, Prudential, the Owner Trustee in its
individual capacity 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 Sales and Servicing Agreement
or the Transaction 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 Auto Loans, all as more specifically set
forth herein and in the Trust Agreement and the Sales and Servicing Agreement. A
copy of each of the Sales and Servicing Agreement and the Trust Agreement may be
examined during normal business hours at the principal office of the Servicer,
and at such other places, if any, designated by the Servicer, 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 Flagship
and the rights of the Certificateholder(s) under the Trust Agreement at any time
by Flagship, 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 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 the Owner Trustee.
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.
A-6
<PAGE>
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trust or the Certificate Registrar 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 Certificate Registrar, nor any such agent shall be affected
by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Sales and Servicing Agreement and the Trust created by the Trust Agreement shall
terminate upon the final distribution of all moneys or other property or
proceeds of the Owner Trust Estate in accordance with the terms of the Indenture
and the Sales and Servicing Agreement.
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 Flagship
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
Auto Loan or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sales and Servicing Agreement or be valid for any
purpose.
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
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
Direction of the Depositor and the Company to the Owner Trustee
Pursuant to Amended and Restated Trust Agreement
November 24, 1999
First Union National Bank, as Owner Trustee of
Flagship Auto Receivables Owner Trust 1999-2
One Rodney Square
920 King Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Ladies and Gentlemen:
We refer to the Amended and Restated Trust Agreement of Flagship Auto
Receivables Owner Trust 1999-2 (the "Trust"), dated as of November 1, 1999 (the
"Trust Agreement"), by and among Prudential Securities Secured Financing
Corporation, Flagship Credit Corporation, and First Union National Bank (the
"Bank"). Capitalized terms used but not otherwise defined in this letter have
the meanings assigned thereto in the Trust Agreement.
The undersigned hereby authorize, empower, and direct the Owner Trustee to
execute, authenticate, and deliver to Flagship Auto Loan Funding LLC 1999-II
Certificate(s) No(s). _________________ in an aggregate Certificate Percentage
Interest of 100%, and to execute and deliver each of the Transaction Documents
to which the Owner Trustee is to be a party and any and all documents and
instruments as may be necessary, advisable, or convenient in connection
therewith or incidental thereto, each in the respective form furnished to the
Owner Trustee. The undersigned hereby certify and confirm that such execution
and delivery (a) are consistent with the purposes of the Trust, are permitted by
and consistent with the Trust Agreement and the Transaction Documents, and do
not violate and are not contrary to any of such documents, and (b) are covered
by the indemnification provided under the Trust Agreement, and the Owner Trustee
and the Bank shall be fully protected in following such direction.
[Signature page follows.]
B-1
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed and delivered
this letter as of the date first set forth above.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
----------------------------
Name:
Title:
FLAGSHIP CREDIT CORPORATION
By:
----------------------------
Name:
Title:
B-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLAGSHIP CREDIT CORPORATION,
as Originator and Servicer
AND
FLAGSHIP AUTO LOAN FUNDING LLC 1999-II,
as Purchaser
AND
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
as Issuer
AND
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
AND
COPELCO FINANCIAL SERVICES GROUP, INC.,
as Back-Up Servicer
-------------------------
SALES AND SERVICING AGREEMENT
Dated as of November 1, 1999
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CONVEYANCE OF AUTO LOANS ............................................... 1
SECTION 1.1 Conveyance of Auto Loans ................................ 1
SECTION 1.2 Transfers Intended as Sales; Capital Contribution ....... 3
SECTION 1.3 Further Encumbrance of Series Pool ...................... 3
ARTICLE II THE AUTO LOANS ........................................................ 4
SECTION 2.1 Representations and Warranties of the Originator ........ 4
SECTION 2.2 Repurchase Upon Breach .................................. 11
SECTION 2.3 Custody of Loan Files ................................... 12
SECTION 2.4 Acceptance of Loan Files by Indenture Trustee ........... 13
SECTION 2.5 Access to Loan Files .................................... 14
SECTION 2.6 Substitution of Auto Loans .............................. 15
ARTICLE III ADMINISTRATION AND SERVICING OF AUTO LOANS ........................... 16
SECTION 3.1 Duties of the Servicer .................................. 16
SECTION 3.2 Collection of Auto Loan Payments,
Modifications of Auto Loans ............................. 17
SECTION 3.3 Realization Upon Auto Loans ............................. 17
SECTION 3.4 Insurance ............................................... 18
SECTION 3.5 Security Interests in Vehicles .......................... 18
SECTION 3.6 Additional Covenants of Servicer ........................ 19
SECTION 3.7 Purchase of Auto Loans Upon Breach of Covenant .......... 19
SECTION 3.8 Servicing Fee ........................................... 20
SECTION 3.9 Servicer's Certificate .................................. 20
SECTION 3.10 Annual Statement as to Compliance, Notice of Servicer
Termination Event ...................................... 20
SECTION 3.11 Annual Independent Accountant's Report ................. 21
SECTION 3.12 Access to Certain Documentation and
Information Regarding Auto Loans ....................... 21
SECTION 3.13 Costs and Expenses ..................................... 22
SECTION 3.14 Insurance Policies ..................................... 22
ARTICLE IV THE ORIGINATOR ........................................................ 22
SECTION 4.1 Representations of the Originator ....................... 22
SECTION 4.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Originator .......................... 24
SECTION 4.3 Limitation on Liability of the Originator and Others .... 24
SECTION 4.4 The Originator May Own Notes ............................ 25
SECTION 4.5 Limitation on the Originator ............................ 25
SECTION 4.6 Representation of the Originator Relative to Flagship LLC 26
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SECTION 4.7 Costs ................................................... 26
SECTION 4.8 Indemnification ......................................... 26
ARTICLE V THE SERVICER AND THE BACK-UP SERVICER .................................. 28
SECTION 5.1 Representations of the Servicer ......................... 28
SECTION 5.2 Representations of Backup Servicer ...................... 30
SECTION 5.3 Liability of Servicer; Indemnities ...................... 32
SECTION 5.4 Merger or Consolidation of, or Assumption of
the Obligations of the Servicer and Back-Up
Servicer ................................................ 33
SECTION 5.5 Limitation on Liability of Servicer, Back-Up Servicer and
Others .................................................. 34
SECTION 5.6 Delegation of Duties .................................... 35
ARTICLE VI SERVICER TERMINATION EVENTS ........................................... 36
SECTION 6.1 Servicer Termination Events ............................. 36
SECTION 6.2 Consequences of a Servicer Termination Event ............ 37
SECTION 6.3 Appointment of Successor ................................ 38
SECTION 6.4 Notification to Noteholders ............................. 39
SECTION 6.5 Waiver of Past Defaults ................................. 39
SECTION 6.6 Action Upon Certain Failures of the Servicer ............ 39
ARTICLE VII ADMINISTRATIVE DUTIES OF THE SERVICER ............................... 40
SECTION 8.1 Administrative Duties ................................... 40
SECTION 8.2 Records ................................................. 41
SECTION 8.3 Additional Information to be Furnished to the Issuer .... 41
ARTICLE IX MISCELLANEOUS PROVISIONS .............................................. 41
SECTION 9.1 Amendment ............................................... 41
SECTION 9.2 Protection of Title to Trust ............................ 42
SECTION 9.3 Conveyance of the Auto Loans and the Other
Conveyed Property to the Issuer ......................... 44
SECTION 9.4 Notices ................................................. 44
SECTION 9.5 Assignment .............................................. 45
SECTION 9.6 Limitations on Rights of Others ......................... 45
SECTION 9.7 Severability ............................................ 46
SECTION 9.8 Separate Counterparts ................................... 46
SECTION 9.9 Headings ................................................ 46
SECTION 9.10 Governing Law .......................................... 46
SECTION 9.11 Assignment to Indenture Trustee ........................ 46
SECTION 9.12 Nonpetition Covenants .................................. 46
SECTION 9.13 Limitation of Liability of Indenture Trustee ........... 47
SECTION 9.14 Independence of the Servicer ........................... 47
SECTION 9.15 No Joint Venture ....................................... 47
SECTION 9.16 Limitation of Liability of Owner Trustee ............... 47
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ARTICLE X DEFINITIONS ............................................................ 48
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SALES AND SERVICING AGREEMENT
This SALES AND SERVICING AGREEMENT is made and dated as of November 1,
1999, by and among FLAGSHIP AUTO LOAN FUNDING LLC 1999-II, a Delaware limited
liability company, as purchaser hereunder ("Flagship LLC"), FLAGSHIP CREDIT
CORPORATION, as originator and servicer (the "Originator" or the "Servicer")
hereunder, FIRST UNION NATIONAL BANK, not in its individual capacity, but solely
as Owner Trustee of FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2, as issuer (the
"Issuer"), HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation, as
indenture trustee (in such capacity, the "Indenture Trustee") and COPELCO
FINANCIAL SERVICES GROUP, INC., a Delaware corporation, as Back-Up servicer (in
such capacity, the "Back-Up Servicer").
R E C I T A L S
A. The Originator wishes to sell and assign to Flagship LLC, and Flagship
LLC wishes to purchase from the Originator, all right, title and interest of the
Originator in, to and under the Auto Loans, together with the security interests
held by the Originator in the related Financed Vehicles and the Other Conveyed
Property (such terms and all other capitalized terms used herein having the
meanings ascribed thereto in Article X hereof unless otherwise indicated).
B. Pursuant to the Depositor Purchase Agreement, Flagship LLC will sell and
assign to the Depositor, all right, title and interest of Flagship LLC in, to
and under the Auto Loans, together with the security interests held by Flagship
LLC in the related Financed Vehicles, the Other Conveyed Property and its rights
under the Sales and Servicing Agreement. Pursuant to the Owner Trust Purchase
Agreement, the Depositor will sell and assign to the Issuer, all right, title
and interest of the Depositor in, to and under the Auto Loans, together with the
security interests held by the Depositor in the related Financed Vehicles, the
Other Conveyed Property and its rights under the Depositor Purchase Agreement
(including its rights under this Sales and Servicing Agreement). Pursuant to the
Indenture, the Issuer is granting, inter alia, to the Indenture Trustee, for the
benefit of the holders from time to time of the Notes and the Insurer, a
security interest in all right, title and interest of the Issuer in, to and
under the Auto Loans, the security interests held by the Issuer in the related
Financed Vehicles and the Other Conveyed Property, and its rights under the
Owner Trust Purchase Agreement, the Depositor Purchase Agreement and this Sales
and Servicing Agreement.
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ARTICLE I
CONVEYANCE OF AUTO LOANS
SECTION 1.1 Conveyance of Auto Loans.
In consideration of Flagship LLC's delivery to the Originator on the
Closing Date of the net proceeds from the sale of the Auto Loans and the other
amounts to be distributed from time to time to the Originator in accordance with
the terms of this Agreement, the Originator does hereby sell, transfer, assign,
set over and otherwise convey to Flagship LLC, without recourse (subject to the
obligations set forth herein):
(i) all right, title and interest of the Originator in and to the Auto
Loans listed in Schedule A hereto and all monies received thereunder after
the Cut-off Date and all Actual Recovery Amounts received with respect to
such Auto Loans after the Cut-off Date;
(ii) all right, title and interest of the Originator in and to the
security interests in the Financed Vehicles granted by Obligors pursuant to
the Auto Loans and any other interest of the Originator in such Financed
Vehicles, including, without limitation, the certificates of title related
thereto;
(iii) all right, title and interest of the Originator in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles securing the Auto Loans or the Obligors thereunder;
(iv) all right, title and interest of the Originator in and to related
contracts, including third party contracts and the Originator's rights with
respect to the Auto Loans under its dealer agreements;
(v) all right, title and interest of the Originator in and to refunds
for the costs of extended service contracts with respect to Financed
Vehicles securing Auto Loans, refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle under an Auto Loan or
his or her obligations with respect to a Financed Vehicle and any recourse
to Dealers for any of the foregoing;
(vi) the Loan File related to each Auto Loan;
(vii) all amounts and property from time to time held in or credited
to the Collection Account;
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(viii) 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 or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and Auto Loans, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing; and
(ix) the proceeds of any and all of the foregoing.
SECTION 1.2 Transfers Intended as Sales; Capital Contribution.
(a) It is the intention of the Originator that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the related Auto Loans
and Other Conveyed Property from the Originator to Flagship LLC and the
beneficial interest in and legal title to the related Auto Loans and Other
Conveyed Property shall not be part of the Originator's estate in the event of
the filing of a bankruptcy petition by or against the Originator under any
bankruptcy law. In the event that, notwithstanding the intent of the Originator,
the transfer and assignment contemplated hereby is held not to be a sale, this
Agreement shall constitute a grant of a security interest in the property
referred to in Section 1.1 for the benefit of the Noteholders and the Insurer.
(b) To the extent that the fair market value of the Auto Loans and Other
Conveyed Property sold by the Originator hereunder exceeds the cash purchase
price received therefor, such excess value shall be deemed a capital
contribution by the Originator to Flagship LLC in exchange for its membership
interest in Flagship LLC.
(c) Pursuant to Section 1.1 of this Agreement, the Originator has conveyed
to Flagship LLC all of the Originator's right, title and interest in its rights
and benefits, but none of its obligations or burdens, under certain contracts
agreements including the Originator's rights under third party contracts and
dealer agreements. The Originator hereby represents and warrants to Flagship LLC
that such assignment is valid, enforceable and effective to permit Flagship LLC
to enforce such obligations of the parties thereto.
SECTION 1.3 Further Encumbrance of Series Pool.
(a) Immediately upon the conveyance to Flagship LLC by the Originator of
any item included in the Series Pool pursuant to Section 1.1, all right, title
and interest of the Originator in and to such item in the Series Pool shall
terminate, and all such right, title and interest shall vest in Flagship LLC, in
accordance with the terms hereof.
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(b) Immediately upon the vesting of the Auto Loans in Flagship LLC,
Flagship LLC shall have the sole right to pledge or otherwise encumber, such
Auto Loans. Pursuant to the Depositor Purchase Agreement, Flagship LLC will sell
and assign the Series Pool to the Depositor. Pursuant to the Owner Trust
Purchase Agreement, the Depositor will sell and assign the Series Pool to the
Issuer. Pursuant to the Indenture, the Issuer shall grant a security interest in
the Series Pool to secure the repayment of the Notes.
(c) The Indenture Trustee shall, at such time as there are no Notes
outstanding and all sums due to the Indenture Trustee pursuant to the Indenture
and this Agreement and to the Insurer pursuant to the Transaction Documents,
have been paid, release any remaining portion of the Series Pool to the Issuer
pursuant to the terms of the Indenture.
ARTICLE II
THE AUTO LOANS
SECTION 2.1 Representations and Warranties of the Originator.
(a) The Originator makes the following representations and warranties, as
to the Auto Loans it is selling hereunder, to Flagship LLC, the Depositor, the
Insurer, the Issuer and to the Indenture Trustee for the benefit of the
Noteholders on which the Issuer relies in acquiring the Auto Loans pursuant to
the Owner Trust Purchase Agreement and on which the Insurer relies in issuing
the Policy. Such representations and warranties speak as of the execution and
delivery of this Agreement as of the Closing Date, in the case of the Auto Loans
(other than Substitute Auto Loans), and as of the related date of substitution
in the case of Substitute Auto Loans, but shall survive the sale, transfer and
assignment of the Auto Loans to Flagship LLC and the ultimate pledge thereof to
the Indenture Trustee pursuant to the Indenture.
(i) Eligibility. Each Auto Loan is an Eligible Auto Loan as of the
Closing Date. Each Substitute Auto Loan is an Eligible Auto Loan as of the
date of the related substitution.
(ii) Characteristics of Auto Loans. (A) Each Auto Loan (1) has been
originated in the United States of America by a Dealer, or the Originator,
respectively, for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's or Originator's business, without any fraud or
misrepresentation on the part of such Dealer or the Originator and was
purchased by the Originator in the ordinary course of the Originator's
business and has been fully and properly executed by the parties thereto,
(2) has created a valid, subsisting, and enforceable first priority
perfected security interest in favor of the Originator in the Financed
Vehicle, which security interest has been assigned hereunder by the
Originator to Flagship LLC, which is simultaneously assigning such security
interest to the Depositor, which is simultaneously assigning such security
interest to the Issuer, which is
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simultaneously assigning such security interest to the Indenture Trustee,
and such 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 tax liens or mechanics'
liens which may arise after the Closing Date; provided, however, that the
foregoing shall not be construed as a representation as to whether or not
any of such entities are listed on the certificate of title or similar
instrument relating to such Financed Vehicle, (3) contains customary and
enforceable provisions such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the collateral
of the benefits of the security, (4) provides for contractual level monthly
payments that fully amortize the Amount Financed over the original term
(except for the last payment, which may be different from the level payment
but by no more than 20% of such level payment) and yield interest at the
Annual Percentage Rate, (5) is a Simple Interest Receivable and (6) all
payments on each Auto Loan are required to be made in United States
dollars.
(iii) No Auto Loan has a payment that is more than 31 days overdue as
of the Cut-off Date or the applicable date of substitution, as the case may
be; each Auto Loan has a final scheduled payment date no later than
November 10, 2005; and each Auto Loan was originated on or before the
Cut-off Date and each Substitute Auto Loan was originated before the
applicable date of substitution.
(iv) Schedule of Auto Loans. The information with respect to the Auto
Loans set forth in Schedule A to this Agreement is true and correct in all
material respects as of the close of business on the Cut-off Date or the
related date of substitution, as the case may be, and no selection
procedures adverse to the Noteholders or the Insurer have been utilized in
selecting the Auto Loans.
(v) Compliance with Law. Each Auto Loan, the sale of the Financed
Vehicle and the sale of any physical damage, credit life and credit
accident and health insurance and any extended warranties or service
contracts complied at the time the related Auto Loan was originated or made
and at the execution of this Agreement (or the applicable date of
substitution) complies in all material respects with all requirements of
applicable Federal, State, and local laws, and regulations thereunder,
including, without limitation, usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and
Z, the Soldiers' and Sailors' Civil Relief Act of 1940, State adaptations
of the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws.
(vi) No Government Obligor. None of the Auto Loans are due from the
United States of America or any State or from any agency, department, or
instrumentality of the United States of America or any State.
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(vii) Auto Loans in Force. No Auto Loan has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien granted by the related Auto Loan in whole or in part. As of the
Cut-off Date or date of substitution, as applicable, each Auto Loan will be
in full force and effect in accordance with its terms and neither the
Originator nor any Obligor has or will have suspended or reduced any
payment or obligations due or to become due thereunder by reason of a
default by the other party to such Auto Loan.
(viii) No Waiver. Except as permitted under Section 3.2, no provision
of an Auto Loan has been waived.
(ix) No Amendments. Except as permitted under Section 3.2, no Auto
Loan has been amended or modified.
(x) No Defenses. No right of rescission, setoff, counterclaim or
defense, including the defense of usury, exists or has been asserted or
threatened with respect to any Auto Loan. The operation of the terms of any
Auto Loan or the exercise of any right thereunder will not render such Auto
Loan unenforceable in whole or in part or subject to any such right of
rescission, setoff, counterclaim, or defense.
(xi) No Liens. As of the Cut-off Date (with respect to the Auto Loans
or the related date of substitution for Substitute Auto Loans), (a) there
are no liens or claims existing or which have been filed for work, labor,
storage or materials relating to a Financed Vehicle that shall be liens
prior to, or equal or coordinate with, the security interest in the
Financed Vehicle granted by the Auto Loan and (b) there is no lien against
the related Financed Vehicle for delinquent taxes. None of the Auto Loans
are described, listed or identified on any financing statement (unless any
lien on such Auto Loan has been released) filed against the Originator
other than in connection with this Agreement.
(xii) No Default, Repossession. Except for payment delinquencies
continuing for a period of not more than 31 days as of the Cut-off Date
(with respect to the Auto Loans) or the related date of substitution (with
respect to the Substitute Auto Loans), no default, breach, violation or
event permitting acceleration under the terms of any Auto Loan has
occurred; and no continuing condition that with notice or the lapse of time
would constitute a default, breach, violation or event permitting
acceleration under the terms of any Auto Loan has arisen; and the
Originator shall not waive and has not waived any of the foregoing (except
in a manner consistent with Section 3.2); and no Financed Vehicle shall
have been repossessed as of the Cut-off Date (with respect to the Auto
Loans) or the related date of substitution (with respect to Substitute Auto
Loans). No Auto Loan relates to a Financed Vehicle that has been
repossessed and redeemed by the related Obligor.
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(xiii) Insurance; Other. (A) Each Obligor has obtained insurance
covering the Financed Vehicle as of the execution of the Auto Loan insuring
against loss and damage due to fire, theft, transportation, collision and
other risks generally covered by comprehensive and collision coverage which
is customary to industry practice for the type and age of the Financed
Vehicle covered thereby and is consistent with the Originator's historic
requirements for such coverage, and each Auto Loan requires the Obligor to
maintain an insurance policy naming the Originator and its successors and
assigns as an additional insured, (B) each Auto Loan that finances the cost
of premiums for credit life and credit accident and health insurance is
covered by an insurance policy or certificate of insurance naming the
Originator and its successors and assigns as policyholder (creditor) under
each such insurance policy and certificate of insurance and (C) as to each
Auto Loan that finances the cost of an extended service contract, at
origination, the respective Financed Vehicle which secures the Auto Loan
was covered by an extended service contract.
(xiv) Title. As of the Closing Date (or date of substitution, as
applicable), except as contemplated by the Transaction Documents, no Auto
Loan has been sold, transferred, assigned, or pledged by the Originator to
any Person other than Flagship LLC. Immediately prior to the transfer and
assignment herein contemplated, the Originator had good and marketable
title to each Auto Loan and was the sole owner thereof, free and clear of
all liens, claims, encumbrances, security interests, and rights of others,
and, immediately upon the transfers thereof, by the Originator to Flagship
LLC, by Flagship LLC to the Depositor, and by the Depositor to the Issuer,
the Issuer shall have good and marketable title to each such Auto Loan and
will be the sole owner thereof, free and clear of all liens, encumbrances,
security interests, and rights of others (except for the Indenture Trustee
on behalf of the Noteholders and the Insurer), and the transfer has been
perfected under the UCC. The rights with respect to each Auto Loan are
assignable by the Originator without the consent of any Person other than
consents which will have been obtained on or before the Closing Date or the
date of substitution, as applicable. Pursuant to the Indenture, the
Indenture Trustee on behalf of the Noteholders and the Insurer will have a
first priority perfected security interest in the Auto Loans.
(xv) Lawful Assignment. No Auto Loan has been originated in, or is
subject to the laws of, any jurisdiction under which the sale, transfer,
and assignment of such Auto Loan under this Agreement, including any
repurchase in accordance with the Transaction Documents or pursuant to
transfers of the Notes shall be unlawful, void, or voidable. The Originator
has not entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the Auto Loans.
(xvi) All Filings Made. All filings, notices, transfers and
recordings, including all UCC filings necessary in any jurisdiction to give
the Issuer a first priority perfected ownership interest and the Indenture
Trustee a first priority perfected security interest in the
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Auto Loans and the Other Conveyed Property have been made, taken or
performed and are in full force and effect.
(xvii) Loan File; One Original. The Originator has delivered to the
Indenture Trustee a complete Loan File with respect to each Auto Loan.
There is only one original executed Contract in connection with each Auto
Loan.
(xviii) Chattel Paper. Each Contract in connection with each Auto Loan
constitutes "chattel paper" under the UCC.
(xix) Valid and Binding Obligation of Obligor. Each Auto Loan is the
legal, valid and binding obligation in writing of the Obligor thereunder
and is enforceable in accordance with its terms, except only as such
enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally, and all parties
to such contract had full legal capacity to execute and deliver such
contract and all other documents related thereto and to grant the security
interest purported to be granted thereby. There are no proceedings pending
or, to the best of the Originator's knowledge, threatened wherein the
Obligor or any governmental agency has alleged that any Auto Loan is
illegal or unenforceable.
(xx) Characteristics of Obligors. As of the date of each Obligor's
application for the loan from which the related Auto Loan arises, such
Obligor (a) did not have any material past due credit obligations or any
personal or real property repossessed or wages garnished within one year
prior to the date of such application, unless such amounts have been repaid
or discharged through bankruptcy, (b) was not the subject of any Federal,
State or other bankruptcy, insolvency or similar proceeding pending on the
date of application that is not discharged, (c) had not been the subject of
more than one Federal, State or other bankruptcy, insolvency or similar
proceeding, and (d) was domiciled in the United States. Each Obligor has
paid the entire down payment called for by the Originator's credit and
collection policies. There are no proceedings pending, or to the best of
the Originator's knowledge, threatened, asserting insolvency of any
Obligor.
(xxi) Origination Date. Each Auto Loan has an origination date on or
after July 1, 1997.
(xxii) Maturity of Auto Loans. The original term to maturity of each
Auto Loan is 72 months or less. In the event the original term to scheduled
maturity date of an Auto Loan is in excess of 60 months, the related
Obligor has a FICO Score of at least 580.
(xxiii) Location of Loan Files. A complete Loan File with respect to
each Auto Loan has been or prior to the Closing Date or related date of
substitution, as applicable, will be delivered to the Indenture Trustee at
111 West Monroe Street, Chicago, Illinois 60603.
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(xxiv) Casualty. No Financed Vehicle has suffered a Casualty.
(xxv) Full Amount Advanced. The full amount of each Auto Loan has been
advanced to each Obligor, and there are no requirements for future advances
thereunder. The Obligor with respect to the Auto Loan does not have any
option under the Auto Loan to borrow from any person additional funds
secured by the Financed Vehicle.
(xxvi) Series Pool Characteristics. With respect to the Series Pool
after giving effect to the transfer of any Auto Loan to the Issuer: (A) the
aggregate Principal Balance of Auto Loans relating to used Financed
Vehicles does not exceed 70% of the Outstanding Portfolio Balance; (B) the
aggregate Principal Balances of the Auto Loans related to Obligors located
in one single state does not comprise more than 21.5% of the Outstanding
Portfolio Balance; (C) the aggregate Principal Balance of Auto Loans in the
Series Pool with an original scheduled term to maturity date of the related
Auto Loan in excess of 60 months shall not exceed 66% of the Outstanding
Portfolio Balance; (D) the aggregate Principal Balance of Auto Loans
related to Obligors that have FICO Scores below 500 comprise no more than
1% of the Outstanding Portfolio Balance; (E) the aggregate Principal
Balance of Auto Loans in the Series Pool with FICO Scores below 550 does
not exceed 9% of the Outstanding Portfolio Balance; (F) the aggregate
Principal Balance of Auto Loans in the Series Pool with FICO Scores below
600 does not exceed 30% of the Outstanding Portfolio Balance; (G) has a
maximum Amount Financed of $30,000, except that the aggregate Principal
Balance of the Auto Loans for amounts financed up to $65,000 may represent
up to 2% of the Outstanding Portfolio Balance; and (H) the aggregate
Principal Balance of the Auto Loans with respect to which the related
Obligor has made at least one Scheduled Payment on the related Auto Loan by
the Cut-off Date or the date of substitution, as applicable, shall be at
least 80% of the Outstanding Portfolio Balance.
(xxvii) All documents necessary to (i) permit the Indenture Trustee to
submit the certificates of title for each Financed Vehicle to the
applicable department of motor vehicles for retitling in the name of the
Indenture Trustee as secured party, and (ii) enforce the Indenture
Trustee's rights as secured party to the related Financed Vehicle, have
been delivered to the Indenture Trustee.
(xxviii) Each Auto Loan being acquired by the Indenture Trustee is
substantially similar to one of the Originator's standard form loan
contracts except for immaterial modifications or deviations from the form
loan contracts. Any such modifications or deviations on the form loan
contracts will not have a material adverse effect on the Noteholders or
Insurer and will not reduce the Scheduled Payments or other payments due
under the Auto Loans.
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(xxix) Each Auto Loan was originated by the Originator or a Dealer and
underwritten by the Originator or the Dealer pursuant to agreed upon
underwriting and documentation standards. Each such Dealer's underwriting
and origination criteria meet the Credit and Collection Policies. The
collection practices used by the Originator with respect to each Auto Loan
have been in all material respects legal, proper, prudent and customary in
the automotive financing and servicing business.
(xxx) Each Dealer that originated an Auto Loan for sale to the
Originator has been selected by the Originator based on the Originator's
underwriting criteria, its financial and operating history and record of
compliance with requirements of applicable Federal and state law. The
purchase price for each Auto Loan has been paid in full by the Originator
to the Dealer; there is no other payment due to such Dealer from the
Originator for the purchase of such Auto Loan; such Dealer has no right,
title or interest in or to any Auto Loan; any payment owed to such Dealer
by the Originator is a corporate obligation of the Originator in the nature
of a bonus for amount collected by the Originator in excess of the purchase
price for an Auto Loan. To the best of the Originator's knowledge, no
Dealer has engaged in any conduct constituting fraud or misrepresentation
with respect to the Auto Loans or Other Conveyed Property.
(xxxi) Each such Auto Loan is within its original term and has not had
any extensions that were not reflected on the schedule of Auto Loans.
(xxxii) To the best of the Originator's knowledge, no Obligor is a
Person involved in the business of leasing or selling equipment of a type
similar to the Financed Vehicles.
(xxxiii) No Auto Loan constitutes a "consumer lease" under either (a)
the UCC as in effect in the jurisdiction whose law governs the Auto Loan or
(b) the Consumer Leasing Act, 15 USC 1667.
(xxxiv) The Originator has duly fulfilled all obligations to be
fulfilled on the lender's part under or in connection with the origination,
acquisition and assignment of the Auto Loans and Other Conveyed Property
including, without limitation, giving any notices or consents necessary to
effect the acquisition of the Auto Loans and Other Conveyed Property by the
Indenture Trustee, and has done nothing to impair the rights of the
Indenture Trustee and the Noteholders in payments with respect thereto. The
Originator has obtained all necessary licenses, permits and charters
required to be obtained by the Originator, which failure to obtain would
render any portion of the Transaction Documents unenforceable and would
have a material adverse effect on the Insurer or the Noteholders.
(xxxv) The sales of the Auto Loans and Other Conveyed Property (i)
from Flagship LLC to the Depositor and (ii) from the Depositor to the
Issuer does not violate the
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terms or provisions of any loan or any other agreement to which the
Originator is a party or by which it is bound.
(xxxvi) The sales, transfers, assignments and conveyances of the Auto
Loans and Other Conveyed Property by the Originator pursuant to this Sales
and Servicing Agreement, by Flagship LLC pursuant to the Depositor Purchase
Agreement and by the Depositor pursuant to the Owner Trust Purchase
Agreement are not subject to and will not result in any tax, fee or
governmental charge payable by the Originator, Flagship LLC, the Depositor,
the Issuer or the Indenture Trustee to any federal, state or local
government ("Transfer Taxes") other than Transfer Taxes which have or will
be paid by the Originator as due. In the event that the Depositor, the
Issuer or the Indenture Trustee receives actual notice of any Transfer
Taxes arising out of the transfer, assignment and conveyance of the Auto
Loans and Other Conveyed Property, on written demand by the Depositor, the
Issuer or the Indenture Trustee, or upon the Originator's otherwise being
given notice thereof by the Depositor, the Issuer or the Indenture Trustee,
the Originator shall pay, and otherwise indemnify and hold the Depositor,
the Issuer, the Indenture Trustee, and Insurer harmless, on an after-tax
basis, from and against any and all such Transfer Taxes (it being
understood that the Noteholders, the Indenture Trustee, the Issuer, the
Depositor, and Insurer shall have no obligation to pay such Transfer
Taxes).
(xxxvii) The computer tape from which the selection of the Auto Loans
being acquired on the Cut-off Date was made available to the accountants
that are providing a comfort letter to Insurer and the Noteholders in
connection with any information contained in the Prospectus Supplement, and
such information was complete and accurate as of its date and includes a
description of the same Auto Loans that are described on the Schedule of
Auto Loans and the payments received thereunder as of the Cut-off Date.
(xxxviii) Each Auto Loan satisfied in all material respects the
requirements of the Credit and Collection Policies as in effect as of the
date of purchase of such Auto Loan by the Originator.
(xxxix) Each Auto Loan contains provisions requiring the Obligor to
assume all risk of loss or malfunction of the related Financed Vehicle and
to maintain liability insurance with respect thereto, requiring the Obligor
to pay all sales, use, property, excise and other similar taxes imposed on
or with respect to the related Financed Vehicle and making the Obligor
liable for all payments required to be made thereunder. No Auto Loan
provides for the substitution, exchange or addition of any Financed Vehicle
subject to such Auto Loan. Each Auto Loan requires the Obligor to maintain
the related Financed Vehicle in good and workable order.
(xl) To the best of the Originator's knowledge, each Financed Vehicle
was properly delivered to the related Obligor in good repair, without
defects and in satisfactory
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order, and, to the best of the Originator's knowledge, each Financed
Vehicle is in good operating condition and repair as of the Cut-off Date or
the related date of substitution, as applicable. To the best of the
Originator's knowledge, each Financed Vehicle was accepted by the Obligor
after reasonable opportunity to inspect and test same and no Obligor has
informed the Originator of any defect therein.
(xli) Each Auto Loan does not permit early termination or prepayment
unless the amount to be paid by or on behalf of the Obligor in respect of
such prepayment or termination is at least equal to the Purchase Amount.
SECTION 2.2 Repurchase Upon Breach.
The Servicer, the Depositor, the Insurer or the Indenture Trustee (upon
actual knowledge of a Responsible Officer thereof), as the case may be, shall
inform the other parties to this Agreement and the Insurer promptly, in writing,
upon the actual discovery of any breach of the Originator's representations and
warranties made pursuant to Section 2.1 (without regard to any limitations
therein as to the Originator's knowledge). Unless the breach shall have been
cured by the last day of the first Collection Period following the earlier of
discovery thereof by the Indenture Trustee, the Depositor, the Servicer or the
Insurer or receipt by the Indenture Trustee, the Depositor and the Insurer of
notice from the Originator or the Servicer of such breach, the Originator shall
repurchase such Auto Loan if the value of such Auto Loan or the interests of the
Insurer is materially and adversely affected by the breach as of the last day of
such first Collection Period (or, at the Originator's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Auto Loans set forth in Section
2.1(xxv), and if the interests of the Issuer or Insurer or the Noteholders are
materially and adversely affected by such breach, unless the breach shall have
been cured by the last day of such first Collection Period, the Originator shall
purchase such Auto Loans, such that following such purchase such representation
shall be true and correct with respect to the remainder of the Auto Loans in the
aggregate. In consideration of the purchase of the Auto Loans, the Originator
shall remit the Purchase Amount, in the manner specified in Section 4.06 of the
Indenture. The sole remedy of the Issuer, the Depositor, the Indenture Trustee,
the Noteholders or the Insurer with respect to a breach of representations and
warranties pursuant to Section 2.1 shall be to enforce the Originator's
obligation to purchase such Auto Loans pursuant hereto; provided, however, that
the Originator shall fully indemnify the Indenture Trustee, the Depositor, the
Insurer, the Issuer (as such and the Owner Trustee in its individual capacity)
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. Upon receipt of
the Purchase Amount and written instructions from the Servicer, the Indenture
Trustee shall release to the Originator or its designee the related Loan File
and shall execute and deliver all reasonable instruments of transfer or
assignment, without recourse, as are prepared by the Originator and delivered to
the Indenture Trustee and necessary to vest in the
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Originator or such designee title to the Auto Loan including a certificate of
the Indenture Trustee in the form of Exhibit E-1 (the "Indenture Trustee's
Certificate").
SECTION 2.3 Custody of Loan Files.
(a) In connection with the sale, transfer and assignment of the Auto Loans
and the Other Conveyed Property to Flagship LLC pursuant to this Agreement, the
subsequent sale, transfer and assignment of the Auto Loans and the Other
Conveyed Property by Flagship LLC to the Depositor pursuant to the Depositor
Purchase Agreement, the subsequent sale, transfer and assignment of the Auto
Loans and the Other Conveyed Property by the Depositor to the Issuer pursuant to
the Owner Trust Purchase Agreement and the pledge of the Auto Loans and Other
Conveyed Property by the Issuer to the Indenture Trustee pursuant to the
Indenture, the Indenture Trustee shall act as custodian of the following
documents or instruments in its possession which shall be delivered to the
Indenture Trustee on or before the Closing Date or the related date of
substitution, as the case may be (with respect to each Auto Loan):
(i) the fully executed original of the Contract in connection with
each Auto Loan (together with any agreements modifying the Auto Loan,
including, without limitation, any extension agreements); and
(ii) such documents that the Originator shall keep on file, in
accordance with its customary procedures, evidencing the security interest
of the Originator in the Financed Vehicle or, if not yet received, a copy
of the application therefor showing the Originator as secured party
(collectively, the "Loan Files").
(b) The Servicer will retain the original certificates of title with
respect to all of the Financed Vehicles, which certificates of title are in the
name of the Originator. The Servicer shall segregate such certificates from all
other files it is holding on behalf of itself or any other Person. At the
Servicer's expense and within 90 days of the Closing Date, the Servicer shall
cause a third party reasonably acceptable to the Insurer to audit the files in
which such certificates of title are held. Thereafter, the Insurer shall have
the right to direct the occurrence of such audit. Such audits shall include
procedures reasonably acceptable to the Insurer. Upon the earliest to occur of
(i) an Insurance Agreement Indicator, (ii) the incurrence by Copelco of a net
loss in any fiscal quarter or (iii) the occurrence of an Insolvency Event with
respect to the Originator, at the direction of the Insurer, the Servicer shall
deliver the aforementioned certificates of title to a third party designated by
the Insurer. If upon such direction the certificates of title are not delivered
to such third party within 30 days of receipt by the Servicer of written
instructions from the Insurer, the Servicer shall purchase at the Purchase
Amount all Auto Loans for which certificates of title were not delivered to such
third party by the next occurring Determination Date.
(c) Upon payment in full of any Auto Loan, the Servicer will notify the
Indenture Trustee pursuant to a certificate of an officer of the Servicer (which
certificate shall include a statement to
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the effect that all amounts received in connection with such payments which are
required to be deposited in the Collection Account pursuant to Section 3.2 have
been so deposited) and shall request delivery of the related Loan File to the
Servicer.
(d) The Servicer's re-liening obligation set forth in Section 2.02(s) of
the Insurance Agreement shall be an expense of the Servicer.
SECTION 2.4 Acceptance of Loan Files by Indenture Trustee.
The Indenture Trustee acknowledges receipt of files which the Originator
has represented are the Loan Files for the Auto Loans. The Indenture Trustee has
reviewed such Loan Files and has determined (with the exception of the items
listed on the related "Exception Report") that it has received a Loan File for
each Auto Loan identified in Schedule A to this Agreement. Prior to any date of
substitution, the Originator will cause to be delivered to the Indenture Trustee
the Loan Files for the Substitute Auto Loans to be transferred to the Issuer on
such date of substitution. The Indenture Trustee declares that it holds and will
continue to hold such files and any amendments, replacements or supplements
thereto and all Other Conveyed Property as Indenture Trustee in trust for the
use and benefit of all present and future Noteholders and the Insurer. The
Indenture Trustee agrees to review each Loan File delivered to it no later than
15 days after the Closing Date or date of substitution, as applicable, to
determine whether such Loan Files contain the documents referred to in Sections
2.3(a)(i) and (ii). If the Indenture Trustee has found or finds that a file for
an Auto Loan has not been received, or that a file is unrelated to the Auto
Loans identified in Schedule A to this Agreement or that any of the documents
referred to in Section 2.3(a)(i) or (ii) are not contained in a Loan File, the
Indenture Trustee shall inform the Originator and the Insurer promptly, in
writing, of the failure to receive a file with respect to such Auto Loan (or of
the failure of any of the aforementioned documents to be included in the Loan
File) and shall return to the Originator any file unrelated to an Auto Loan
identified in Schedule A to this Agreement (it being understood that the
Indenture Trustee's obligation to review the contents of any Loan File shall be
limited as set forth in the preceding sentence). Unless such defect with respect
to such Loan File shall have been cured by the last day of the first Collection
Period following discovery thereof by the Indenture Trustee, the Originator
shall repurchase any such Auto Loan as of such last day. In consideration of the
purchase of the Auto Loan, the Originator shall remit the Purchase Amount, in
the manner specified in Section 4.06 of the Indenture. The sole remedy of the
Indenture Trustee, the Depositor, the Issuer, or the Noteholders with respect to
a breach pursuant to this Section 2.4 shall be to require the Originator to
purchase the applicable Auto Loans pursuant to this Section 2.4; provided,
however, that the Originator shall fully indemnify the Indenture Trustee, the
Depositor, the Insurer, the Issuer (as such and the Owner Trustee in its
individual capacity) and the Noteholders and hold any of them harmless against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount
and written instructions from the Servicer, the Indenture Trustee shall release
to the Originator or its designee the related Loan File and shall execute and
deliver all reasonable
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instruments of transfer or assignment, without recourse, as are prepared by the
Originator and delivered to the Indenture Trustee and are necessary to vest in
the Originator or such designee title to the Auto Loan including an Indenture
Trustee's Certificate. As part of the initial audit referred to in Section
2.3(b), such third party, which shall not be the Indenture Trustee, shall make a
list of Auto Loans for which an application for a certificate of title but not
an original certificate of title is included in the Loan File as of the date of
its review of the Loan Files and deliver a copy of such list to the Servicer,
the Depositor, the Indenture Trustee and the Insurer. On the date which is 180
days following the Closing Date (or applicable date of substitution) or, if such
day is not a Business Day, the next succeeding Business Day, such third party
shall inform the Originator and the other parties to this Agreement and the
Insurer of any Auto Loan for which the related Loan File on such date does not
include an original certificate of title and the Originator shall repurchase any
such Auto Loan as of the last day of the current Collection Period.
SECTION 2.5 Access to Loan Files.
The Indenture Trustee shall permit the Servicer and the Insurer access to
the Loan Files at all reasonable times during the Indenture Trustee's normal
business hours and, upon written request of the Servicer, the Indenture Trustee
will provide the Servicer with the Loan File with respect to an Auto Loan by
overnight courier. The Indenture Trustee shall, within two Business Days of the
request of the Servicer or the Insurer, execute such documents and instruments
as are prepared by the Servicer or the Insurer and delivered to the Indenture
Trustee, as the Servicer or the Insurer deems necessary to permit the Servicer,
in accordance with its customary servicing procedures, to enforce the Auto Loan
on behalf of the Issuer and any related insurance policies covering the Obligor,
the Auto Loan or Financed Vehicle so long as such execution does not conflict
with this Agreement and will not cause it undue risk or liability. The Indenture
Trustee shall not be obligated to release any document from any Loan File unless
it receives a trust receipt signed by a Servicing Officer in the form of Exhibit
C to the Indenture (the "Trust Receipt"). Such Trust Receipt shall obligate the
Servicer to return such document(s) to the Indenture Trustee when the need
therefor no longer exists unless the Auto Loan shall be liquidated, in which
case, upon receipt of a certificate of a Servicing Officer substantially in the
form of Exhibit D hereto to the effect that all amounts required to be deposited
in the Collection Account with respect to such Auto Loan have been so deposited,
the Trust Receipt shall be released by the Indenture Trustee to the Servicer.
SECTION 2.6 Substitution of Auto Loans.
(a) Subject to the satisfaction of the requirements set forth in Section
2.6(d) hereof, the Originator shall have the right (but not the obligation) to
substitute Auto Loans ("Substitute Auto Loans") for Charged-off Auto Loans;
provided that, at the time of such substitution and after giving effect to such
substitution, Substitute Auto Loans must in the aggregate (i) be at least equal
in outstanding Principal Balance and at least equal in terms of credit quality
(including FICO Scores) to the Auto Loans being replaced; (ii) not have final
scheduled maturity dates later than the final scheduled maturity dates of the
Auto Loans being replaced and not have original scheduled terms
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to maturity longer than the Auto Loans being replaced; (iii) be Eligible
Substitute Auto Loans; (iv) satisfy all of the representations and warranties
contained in Article II; (v) have APR's at least equal to or greater than the
APR's of the Auto Loans being replaced; (vi) not be secured by a greater
percentage of used Financed Vehicles (as opposed to new Financed Vehicles) than
the Auto Loan being replaced; and (vii) not cause the aggregate outstanding
Principal Balance of Substitute Auto Loans to exceed 10% of the Initial
Portfolio Balance.
(b) Charged-off Auto Loans will continue to be used in the calculation of
all Portfolio Performance Tests and Portfolio Performance Indicators
irrespective of the (i) substitution therefor pursuant to this Section 2.6, and
(ii) whether such Charged-off Auto Loans are removed from the Series Pool.
(c) Each substitution pursuant to this Section 2.6 shall include the right
to receive all amounts received by the Servicer after the end of the preceding
calendar month under each Substitute Auto Loan. At the time of each such
substitution, the Originator shall transfer to the Indenture Trustee all
payments actually received.
(d) By 11:00 A.M. on the third Business Day following each Determination
Date, the Originator shall give written notice to the Servicer of any
substitution pursuant to this Section 2.6 of Substitute Auto Loans. By 11:00
A.M. on the fourth Business Day following each Payment Date, the Originator
shall deliver to the Servicer, the Depositor, the Insurer and the Indenture
Trustee and, to the extent not included in the Servicer's Certificate, the
Indenture Trustee shall promptly deliver to each Rating Agency (i) a supplement
to Schedule A hereto setting forth the information shown thereon for each such
Substitute Auto Loan, (ii) an Officer's Certificate (A) certifying that each
such Substitute Auto Loan is an Eligible Substitute Auto Loan, (B) identifying
each predecessor Auto Loan for which a substitution has been made and (C)
certifying that all conditions precedent to such substitution have been
satisfied and (iii) such additional information concerning such Substitute Auto
Loans as may be needed for the Servicer to prepare its monthly reports pursuant
to Section 3.9 hereof and to otherwise carry out its duties as servicer
hereunder.
(e) The Originator shall promptly deliver to the Indenture Trustee the
original executed counterpart of each Contract and the rest of the Loan File
relative to each Substitute Auto Loan assigned to the Issuer pursuant to this
Section 2.6 and thereupon shall promptly deliver to the Issuer notice of such
delivery to the Indenture Trustee, and upon receipt of such notice the Issuer
shall promptly request the Indenture Trustee to deliver to it the original
executed counterpart of each Contract relating to each predecessor Auto Loan for
which substitution has been made pursuant to this Section 2.6.
(f) Upon any substitution of Auto Loans in accordance with the provisions
of this Section 2.6, the Originator's obligations hereunder with respect to the
predecessor Auto Loan shall cease, but the Issuer and the Servicer shall each
thereafter have the same obligations with respect to
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the Substitute Auto Loans subsequent to such substitution as it has with respect
to all other Auto Loans subject to the terms hereof.
ARTICLE III
ADMINISTRATION AND SERVICING OF AUTO LOANS
SECTION 3.1 Duties of the Servicer.
(a) The Servicer, as agent for the Issuer, the Noteholders and the Insurer
shall manage, service, administer and make collections on the Auto Loans with
reasonable care, using that degree of skill and attention customary and usual
for institutions which service motor vehicle retail installment contracts
similar to the Auto Loans and, to the extent more exacting, that the Servicer
exercises with respect to all comparable automotive auto loans that it services
for itself or others. In performing such duties, the Servicer shall comply with
the Credit and Collection Policies.
(b) The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors on such Auto Loans, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, accounting for collections, furnishing monthly and annual
statements to the Indenture Trustee and the Insurer with respect to payments.
(c) Without limiting the generality of the foregoing, and subject to the
servicing standards set forth in this Agreement, the Servicer is authorized and
empowered by the Issuer to execute and deliver, on behalf of itself, the Issuer
or the Noteholders, any and all instruments of satisfaction or cancellation, or
partial or full release or discharge, and all other comparable instruments, with
respect to such Auto Loans or to the Financed Vehicles securing such Auto Loans
and/or the certificates of title. If the Servicer shall commence a legal
proceeding to enforce an Auto Loan, the Issuer shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Auto Loan to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce an Auto Loan on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Auto Loan, the
Issuer shall, at the Servicer's expense and written direction, take steps to
enforce such Auto Loan, including bringing suit in its name or the name of the
Noteholders. The Servicer shall prepare and furnish, and the Indenture Trustee
shall execute, any powers of attorney and other documents reasonably necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
SECTION 3.2 Collection of Auto Loan Payments, Modifications of Auto Loans.
(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 Auto Loans as and when the same
shall become due and shall follow the Credit and Collection Policies as it
follows with respect to all comparable auto loans that it services for itself
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or others and in such manner as will, in the reasonable judgment of the
Servicer, maximize the amount to be received by the Issuer with respect thereto;
provided, however, that promptly after the Closing Date (or date of
substitution, as applicable) the Servicer shall notify each Obligor to make all
payments with respect to the Auto Loans to the Servicer if not previously
notified by the Servicer. The Servicer will forward the proceeds of such
payments within two Business Days of receipt thereof to the Indenture Trustee
for deposit by the Indenture Trustee to the Collection Account. The Indenture
Trustee upon direction of the Insurer shall give Obligors notice of assignment
of the Auto Loans and issue new payment instructions.
(b) 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 Auto Loan. The Servicer shall allocate
collections between principal and interest in accordance with the customary
servicing procedures it follows with respect to all comparable auto loans that
it services for itself or others and in accordance with the terms of this
Agreement. The Servicer may not grant an extension on an Auto Loan. In no event
shall the Principal Balance of an Auto Loan be reduced by the Servicer, except
in connection with a Cram Down Loss or a settlement in the event the Auto Loan
becomes a defaulted Auto Loan. Notwithstanding anything to the contrary
contained herein, the Servicer shall not agree to any alteration of the interest
rate on any Auto Loan or of the amount of any Scheduled Payment, except in
connection with a Cram Down Loss.
SECTION 3.3 Realization Upon Auto Loans.
(a) The Servicer shall service defaulted Auto Loans in accordance with the
Credit and Collection Policies, and will take all other appropriate and
reasonable collection and recovery actions, including, but not limited to,
repossession in accordance with applicable law. The Servicer shall deposit all
amounts recovered (less the Servicer's reasonable and customary out of pocket
expenses) with respect to defaulted Auto Loans and all Actual Recovery Amounts
in the Collection Account within two Business Days of receipt thereof.
(b) On behalf of the Issuer, the Noteholders, the Indenture Trustee and the
Insurer, the Servicer shall use its best efforts, consistent with the servicing
procedures set forth herein, to repossess or otherwise convert the ownership of
the Financed Vehicle securing any Auto Loan as to which the Servicer shall have
determined eventual payment in full is unlikely; provided, however, that the
Servicer may elect not to commence such efforts within such time period if in
its good faith judgment it determines either that it would be impracticable to
do so or that the proceeds ultimately recoverable with respect to such Auto Loan
would be increased by forbearance. The Servicer shall follow such customary and
usual practices and procedures as it shall deem necessary or advisable in its
servicing of auto loans, consistent with the standards of care set forth in
Section 3.2, which may include reasonable efforts to realize upon any recourse
to Dealers and selling the Financed Vehicle at public or private sale. The
foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in
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its discretion that such repair and/or repossession will increase the proceeds
ultimately recoverable with respect to such Auto Loan by an amount greater than
the amount of such expenses.
SECTION 3.4 Insurance.
(a) The Servicer, in accordance with the servicing procedures and standards
set forth herein, shall require that (i) each Obligor shall have obtained
insurance covering the Financed Vehicle, as of the date of the execution of the
Auto Loan, insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage and each Auto Loan requires the Obligor to maintain such physical loss
and damage insurance naming the Originator and its successors and assigns as an
additional insured, (ii) each Auto Loan that finances the cost of premiums for
credit life and credit accident and health insurance is covered by an insurance
policy or certificate naming the Originator as policyholder (creditor) and (iii)
as to each Auto Loan that finances the cost of an extended service contract, at
origination, the respective Financed Vehicle which secures the Auto Loan was
covered by an extended service contract.
(b) The Servicer shall use reasonable efforts not to take any action which
would result in noncoverage under any of the insurance policies referred to in
Section 3.4(a) which, but for the actions of the Servicer, would have been
covered thereunder. The Servicer, on behalf of the Issuer, shall take such
reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account
within two Business Days of receipt thereof pursuant to Section 3.2.
SECTION 3.5 Security Interests in Vehicles.
(a) In the event that the assignment of an Auto Loan to the Issuer is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Issuer, and
the Originator is designated as secured party thereon, the Servicer hereby
agrees that the Originator's designation as the secured party on the certificate
of title is in its capacity as Servicer as agent of the Issuer.
(b) To the extent required by Section 2.02(s) of the Insurance Agreement,
the Indenture Trustee and the Servicer shall take or cause to be taken such
action as may be necessary to perfect or re-perfect the security interests in
the Financed Vehicles securing the Auto Loans in the name of the Issuer by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the Opinion of Counsel to the Indenture Trustee and
delivered to the Insurer, which opinion shall be an expense of the Originator,
be necessary or prudent. The Servicer hereby agrees to pay all reasonable
expenses related to such perfection or re-perfection and to take all action
necessary therefor. In that regard, the Servicer hereby makes, constitutes, and
appoints the Indenture
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Trustee, located at the Corporate Trust Office, acting through one or more of
its duly authorized officers, the true and lawful attorney for the Originator,
and the Indenture Trustee is hereby authorized and empowered by the Originator
in the name, place, and stead of the Originator to take any and all steps
required to be performed by the Originator pursuant to this Sales and Servicing
Agreement, including execution of certificates of title or any other documents
in the name and stead of the Originator. The foregoing power of attorney is for
the limited purpose of enabling the Indenture Trustee to comply with this
Section 3.5 of this Sales and Servicing Agreement and shall be effective only so
long as this Sales and Servicing Agreement is in full force and effect. This
power of attorney shall not cover any title documents or other agreements or
documents except those covered by this Agreement. The Indenture Trustee is
authorized to delegate said power of attorney to any person or persons it deemed
appropriate, but only for the limited purposes set forth herein and in
accordance with the requirements of this Sales and Servicing Agreement. The
Originator does hereby intend that this power of attorney be coupled with an
interest and declares this power of attorney to be irrevocable by the Originator
or otherwise, renouncing all right to revoke this power or to appoint any other
Person to perform any of the acts set forth herein.
SECTION 3.6 Additional Covenants of Servicer.
The Servicer shall not release the Financed Vehicle securing each Auto Loan
from the security interest granted by such Auto Loan in whole or in part except
in the event of payment in full by the Obligor thereunder or repossession, nor
shall the Servicer impair the rights of the Noteholders or the Insurer in such
Auto Loans, nor shall the Servicer amend an Auto Loan, except that extensions
and waivers may be granted in accordance with Section 3.2.
SECTION 3.7 Purchase of Auto Loans Upon Breach of Covenant.
Upon actual discovery by any of the Servicer, the Insurer or the Indenture
Trustee of a breach of any of the covenants of the Servicer set forth in Section
3.2(a), 3.4, 3.5 or 3.6, 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 any obligation of the Servicer under this Section
3.7. Unless the breach shall have been cured by the last day of the first
Collection Period following such discovery (or, at the Servicer's election, the
last day of the first following Collection Period), the Servicer shall purchase
any Auto Loan with respect to which the Insurer's or the Indenture Trustee's
interest is materially and adversely affected by such breach. In consideration
of the purchase of such Auto Loan, the Servicer shall remit the Purchase Amount
in the manner specified in Section 4.06 of the Indenture. The sole remedy of the
Indenture Trustee, the Insurer or the Noteholders with respect to a breach of
Section 3.2(a), 3.4, 3.5 or 3.6 shall be to require the Servicer to repurchase
Auto Loans pursuant to this Section 3.7; provided, however, that the Servicer
shall indemnify the Indenture Trustee, the Insurer, the Issuer (as such and the
Owner Trustee in its individual capacity) 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.
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SECTION 3.8 Servicing Fee.
The Servicing Fee for each Payment Date shall be equal to the result of one
twelfth times 2.00% of the Outstanding Portfolio Balance as of the close of
business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date the Servicer will be
entitled to receive a Servicing Fee equal to the result of one-twelfth times
2.00% of the Initial Portfolio Balance as of the Cut-off Date. The Servicing Fee
shall also include all late fees, prepayment charges and other administrative
fees or similar charges allowed by applicable law with respect to Auto Loans,
collected (from whatever source) on the Auto Loans.
SECTION 3.9 Servicer's Certificate.
By 10:00 a.m., Chicago time, on the second Business Day prior to each
Determination Date, the Servicer shall deliver to the Indenture Trustee, the
Insurer, the Rating Agencies and the Originator a Servicer's Certificate
containing all information necessary to make the payments pursuant to Section
4.07 of the Indenture (including, if required, withdrawals from the Spread
Account and a list of all Substitute Auto Loans and Charged-off Auto Loans
replaced therewith) for the Collection Period preceding the date of such
Servicer's Certificate and all information necessary for the Indenture Trustee
to send statements to the Noteholders and the Insurer pursuant to Section 4.10
of the Indenture. Auto Loans to be purchased by the Servicer or to be purchased
by the Originator shall be identified by the Servicer by account number with
respect to such Auto Loan (as specified in Schedule A).
SECTION 3.10 Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Indenture Trustee, the Insurer and
each Rating Agency, on or before March 31 of each year beginning March 31, 2001,
an Officer's Certificate, dated as of December 31 of the preceding year, stating
that (i) a review of the activities of the Servicer during the preceding
12-month period (or, in the case of the first such certificate, the period from
the Cut-off Date to December 31, 2000) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year (or, in the case of
the first such certificate, such longer 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. The Indenture Trustee shall send
a copy of such certificate and the report referred to in Section 3.11 to the
Rating Agencies. The Indenture Trustee shall forward a copy of such certificate
as well as the report referred to in Section 3.11 to each Noteholder.
(b) The Servicer shall deliver to the Indenture Trustee, the Insurer and
each Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two (2) Business Days thereafter, written notice in an
Officer's Certificate of any event which with the
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giving of notice or lapse of time, or both, would become a Servicer Termination
Event under Section 6.1.
SECTION 3.11 Annual Independent Accountant's Report.
The Servicer shall cause a firm of nationally recognized independent
certified public accountants reasonably acceptable to the Insurer (provided that
an Insurer Default has not occurred and is continuing) (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Originator, to deliver to the Indenture Trustee, the Insurer and each Rating
Agency, on or before March 31 of each year beginning March 31, 2001, a report
dated as of December 31 of the preceding year (the "Accountants' Report") and
reviewing the Servicer's activities during the preceding 12-month period (or, in
the case of the first such report, the period from the Cut-off Date to December
31, 2000), addressed to the Board of Directors of the Servicer, the Indenture
Trustee and to the Insurer, to the effect that such firm has examined the
financial statements of the Servicer and issued its report therefor and that
such examination (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances; (2) included tests relating to auto loans serviced for others in
accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers (the "Program"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; and (3)
except as described in the report, disclosed no exceptions or errors in the
records relating to automobile and light truck loans serviced for others that,
in the firm's opinion, paragraph four of the Program requires such firm to
report. The accountant's report shall further state that (1) a review in
accordance with agreed upon procedures was made of three randomly selected
Servicer Certificates; (2) except as disclosed in the report, no exceptions or
errors in the Servicer Certificates were found; and (3) the delinquency and loss
information relating to the Auto Loans and the stated amount of Charged-off Auto
Loans, if any, contained in the Servicer Certificates were found to be accurate.
In the event such firm requires the Indenture Trustee to agree to the procedures
performed by such firm, the Servicer shall direct the Indenture Trustee in
writing to so agree; it being understood and agreed that the Indenture Trustee
will deliver such letter of agreement in conclusive reliance upon the direction
of the Servicer, and the Indenture Trustee makes no independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
SECTION 3.12 Access to Certain Documentation and Information Regarding Auto
Loans.
The Servicer shall provide to representatives of the Indenture Trustee and
the Insurer reasonable access to the documentation regarding the Auto Loans. In
each case, such access shall be afforded without charge but only upon reasonable
request and during normal business hours. Nothing in this Section shall derogate
from the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. On or prior to each
Determination Date, the Servicer will deliver to the Back-Up
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Servicer and the Insurer certain data with respect to the Auto Loans (in
electronic form) used by the Servicer to perform its obligations with respect to
the Auto Loans. The Back-Up Servicer will confirm that such information is
readable by the Back-Up Servicer's systems and will perform certain other
operations and tests with respect to such information.
SECTION 3.13 Costs and Expenses.
During the term of this Agreement, the Servicer shall be responsible for
all costs and expenses incurred in connection with the performance of its duties
hereunder except as otherwise specifically provided for in this Agreement or the
Indenture.
SECTION 3.14 Insurance Policies.
During the term of this Agreement, the Servicer shall maintain or cause to
be maintained a fidelity policy in the maximum amount of $10 million and an
errors and omissions ("E&O") policy in the maximum amount of $2 million.
ARTICLE IV
THE ORIGINATOR
SECTION 4.1 Representations of the Originator.
The Originator makes the following representations which the Insurer shall
be deemed to have relied in executing and delivering the Policy and on which the
Issuer is deemed to have relied in acquiring the Auto Loans and the Indenture
Trustee shall have been deemed to rely upon in executing this Agreement and the
Indenture. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of Auto Loans, and as of each
date of substitution in the case of Substitute Auto Loans, and shall survive the
sale of the Auto Loans to Flagship LLC hereunder, the sale of the Auto Loans by
Flagship LLC to the Depositor pursuant to the Depositor Purchase Agreement, the
sale of the Auto Loans by the Depositor to the Issuer pursuant to the Owner
Trust Purchase Agreement and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Originator has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Auto Loans and the Other
Conveyed Property transferred to Flagship LLC.
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(b) Due Qualification. The Originator 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 qualifications, in each case,
except where failure to do so will not have a material adverse effect on the
Originator or its ability to perform its obligations under this Agreement.
(c) Power and Authority. The Originator has the power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party and to carry out its terms and their terms, respectively; the Originator
has full power and authority to sell and assign the Auto Loans and the Other
Conveyed Property to be sold and assigned to and deposited with Flagship LLC by
it and has duly authorized such sale and assignment to Flagship LLC by all
necessary corporate action; and the execution, delivery and performance of this
Agreement and the Transaction Documents to which the Originator is a party have
been duly authorized by the Originator by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Auto Loans and the Other Conveyed Property,
enforceable against the Originator and creditors of and purchasers from the
Originator; and this Agreement and the Transaction Documents to which the
Originator is a party, when duly executed and delivered, shall constitute legal,
valid and binding obligations of the Originator 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents and the fulfillment of the terms of this
Agreement and the Transaction Documents 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 certificate of incorporation
or by-laws of the Originator, or any indenture, agreement, mortgage, deed of
trust or other instrument to which the Originator is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than the Transaction Documents, or
violate any law, order, rule or regulation applicable to the Originator of any
court or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Originator or any of
its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the Originator's knowledge, threatened against the Originator, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Originator or its properties (A)
asserting the invalidity of this Agreement, the Notes or any of the Transaction
Documents, (B) seeking to prevent the issuance of the Notes or the consummation
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of any of the transactions contemplated by this Agreement or any of the
Transaction Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Originator of its
obligations under, or the validity or enforceability of, this Agreement or any
of the Transaction Documents, or (D) relating to the Originator and which might
adversely affect the federal or state income, excise, franchise or similar tax
attributes of the Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Tax Returns. The Originator has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The chief executive office of the Originator is
at 1 International Plaza, Philadelphia, Pennsylvania, 19113.
SECTION 4.2 Merger or Consolidation of, or Assumption of the Obligations
of, the Originator.
Any Person (a) into which the Originator may be merged or consolidated, (b)
which may result from any merger or consolidation to which the Originator shall
be a party or (c) which may succeed to the properties and assets of the
Originator substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the
Originator under this Agreement, shall be the successor to the Originator
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that, (i) the
Originator shall have received the written consent of the Insurer prior to
entering into any such transaction, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 2.1 shall
have been breached and no Servicer Termination Event, and no event which, after
notice or lapse of time, or both, would become a Servicer Termination Event
shall have occurred and be continuing, (iii) the Originator shall have delivered
to the Indenture Trustee and the Insurer an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, (iv) the Rating Agency Condition shall have been
satisfied with respect to such transaction and (v) the Originator shall have
delivered to the Indenture Trustee and the Insurer an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Indenture
Trustee in the Auto Loans and the Other Conveyed Property and reciting the
details of such filings or (B) no such action shall be necessary to preserve and
protect such interest. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
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(i), (ii), (iii), (iv) and (v) above shall be conditions to the consummation of
the transactions referred to in clauses (a), (b) or (c) above.
SECTION 4.3 Limitation on Liability of the Originator and Others.
The Originator and any director or officer or employee or agent of the
Originator may rely in good faith on the advice of counsel or on any document of
any kind, prima facie properly executed and submitted by any Person respecting
any matters arising under any Transaction Document. The Originator shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.
SECTION 4.4 The Originator May Own Notes.
The Originator and any Affiliate thereof may in its individual or any other
capacity become the owner or pledgee of Notes with the same rights as it would
have if it were not the Originator or an Affiliate thereof, except as expressly
provided herein or in any Transaction Document. Notes so owned by the Originator
or such Affiliate shall have an equal and proportionate benefit under the
provisions of the Transaction Documents, without preference, priority or
distinction as among all of the Notes; provided, however, that any Notes owned
by the Originator or any Affiliate thereof, during the time such Notes are so
owned by them, shall be without voting rights for any purpose set forth in the
Transaction Documents and the Notes shall not be entitled to the benefits of the
Policy. The Originator shall notify the Indenture Trustee and the Insurer
promptly after it or any of its Affiliates become the owner of a Note.
SECTION 4.5 Limitation on the Originator.
The Originator conducts its business solely in its own name through its
duly authorized officers or agents; the Originator maintains and will maintain
its corporate records and books of account separate, and apart from those of
Flagship LLC, the Issuer and the Special Member; the assets of the Originator
(including its funds) are not and will not be commingled with those of the
Issuer, Flagship LLC or the Special Member; the board of directors of the
Originator has held and will hold all appropriate meetings or will properly
execute written consents with respect to all corporate actions taken by the
Originator; the Originator is and will be adequately capitalized in light of its
contemplated business obligations; the Originator has provided and will provide
for its operating expenses and liabilities from its own funds; the Originator
will engage in transactions with the Issuer, Flagship LLC or the Special Member
only on terms and conditions comparable to transactions on an arms-length basis
with unaffiliated persons; the Originator will not guaranty debts of the Issuer,
Flagship LLC or the Special Member; the Originator will not acquire obligations
or securities of, or make loans or advances to, the Issuer, Flagship LLC or the
Special Member; the Originator will treat the transfer to Flagship LLC of the
Auto Loans as a sale or a contribution for tax, accounting and reporting
purposes; the Originator has valid business reasons for selling its
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interests in the Auto Loans and Other Conveyed Property, rather than obtaining a
loan with the Auto Loans and Other Conveyed Property as collateral; and the
Originator will take no action inconsistent with Flagship LLC's ownership of the
Auto Loans, and subsequent transfer to the Depositor and the Depositor's
subsequent transfer to the Issuer including indicating in its records that
ownership of each of the Auto Loans is held by the Issuer, and responding to any
inquiries from third parties by indicating that ownership in the Auto Loans is
held by the Issuer.
SECTION 4.6 Representation of the Originator Relative to Flagship LLC.
The Originator hereby represents that it shall cause the Issuer, Flagship
LLC and the Special Member to (i) be operated in such a manner that it would not
be substantively consolidated in the estate (as such term is used in Section 541
of the Bankruptcy Code) of any Affiliate in the event of a bankruptcy or
insolvency of such Affiliate; (ii) not engage in transactions with any Affiliate
other than as otherwise contemplated by, or permitted under, the Transaction
Documents; (iii) maintain its assets separately from the assets of any
Affiliate; (iv) maintain separate, books and records from any Affiliate; (v) not
guarantee the obligations of, or advance funds to, or accept funds from, any
Affiliate for the payment of expenses or otherwise except by means of capital
contributions or pursuant to contractual documents indicating the consideration
for the receipt of such funds; (vi) conduct all business correspondence and
other communications in its own name, on its own stationery; and (viii) maintain
its corporate records and books of account separate and apart from the
Originator.
SECTION 4.7 Costs. In connection with the transactions contemplated under
the Transaction Documents, the Originator shall promptly pay (or shall promptly
reimburse the Depositor to the extent that the Depositor shall have paid or
otherwise incurred): (a) the fees and disbursements of the Depositor's and the
Originator's counsel; (b) the fees of S&P, Moody's and DCR; (c) any of the fees
of the Indenture Trustee and the fees and disbursements of the Indenture
Trustee's counsel; (d) any of the fees of the Owner Trustee and the fees and
disbursements of the Owner Trustee's counsel; (e) expenses incurred in
connection with printing the Prospectus, the Prospectus Supplement, any
amendment or supplement thereto, any preliminary prospectus and the Notes; (f)
fees and expenses relating to the filing of documents with the Commission
(including without limitation periodic reports under the Exchange Act); (g) the
shelf registration amortization fee of 0.04% of the Note Principal Balance of
the Notes on the Closing Date, paid in connection with the issuance of Notes;
(h) the fees and disbursements for KPMG Peat Marwick, accountants for the
Originators; and (i) all of the initial expenses of the Insurer including,
without limitation, legal fees and expenses, accountant fees and expenses and
expenses in connection with due diligence. For the avoidance of doubt, the
parties hereto acknowledge that it is the intention of the parties that the
Depositor shall not pay any of the foregoing fees and expenses.
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SECTION 4.8 Indemnification. (a) The Originator agrees:
(i) to indemnify and hold harmless the Depositor, each of its
directors, each of its officers who have signed the Registration Statement,
and each of its directors and each person or entity who controls the
Depositor or any such person, within the meaning of Section 15 of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint and several, to which the Depositor or any such person or entity may
become subject, under the Securities Act or otherwise, and will reimburse
the Depositor and each such controlling person for any legal or other
expenses incurred by the Depositor or such controlling person 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 Prospectus,
the Prospectus Supplement or any amendment or supplement to the Prospectus
or the Prospectus Supplement 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 Prospectus, the Prospectus Supplement or any
amendment or supplement to the Prospectus or Prospectus Supplement approved
in writing by the Originator, in light of the circumstances under which
they were made, not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission does
not relate to the Depositor Information. As used herein, the "Depositor
Information" means the information under the caption "Underwriting" in the
Prospectus Supplement. This indemnity agreement will be in addition to any
liability which the Originator may otherwise have; and
(ii) to indemnify and to hold the Depositor 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 Depositor
may sustain in any way related to the failure of the Originator to perform
its duties in compliance with the terms of this Agreement. The Originator
shall immediately notify the Depositor if a claim is made by a third party
with respect to this Agreement, and the Originator 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 Depositor in respect of
such claim.
(b) Promptly after receipt by an indemnified party under this Section 4.8
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 4.8, 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
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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. After notice from the indemnifying party to such indemnified
party of its election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 4.8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party shall not be
liable for the expenses of more than one separate counsel.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.8 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) of this
Section 4.8 in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) subject
to the limits set forth in subsection (a) of this Section 4.8; provided,
however, that 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. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative benefits
received by the Originator on the one hand, and the Depositor on the other, the
Originator's and the Depositor's relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any other
equitable considerations appropriate in the circumstances. The Originator and
the Depositor agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation. For purposes
of this Section 4.8, each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if any who
controls the Depositor within the meaning of Section 15 of the Securities Act,
shall have the same rights to contribution as the Depositor.
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ARTICLE V
THE SERVICER AND THE BACK-UP SERVICER
SECTION 5.1 Representations of the Servicer.
The Servicer makes the following representations on which the Insurer shall
be deemed to have relied in executing and delivering the Policy and on which the
Issuer is deemed to have relied in acquiring the Auto Loans and the Indenture
Trustee shall have been deemed to rely upon in executing this Agreement and the
Indenture. The representations speak as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of Auto Loans, and as of each
date of substitution, in the case of Substitute Auto Loans, and shall survive
the sale of the Auto Loans by the Originator to Flagship LLC, the sale of the
Auto Loans by Flagship LLC to the Depositor, and the sale of the Auto Loans by
the Depositor to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer has been duly organized
and is validly existing as a corporation and in good standing under the laws of
the State of Delaware, with power, authority and legal right to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
shall have, power, authority and legal right to acquire, own and service the
Auto Loans.
(b) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of property or
the conduct of its business (including the servicing of the Auto Loans as
required by this Agreement) requires or shall require such qualification, in
each case, except where failure to do so will not have a material adverse effect
on the Servicer or its ability to perform its obligations under this Agreement.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Transaction
Documents to which it is a party have been duly authorized by the Servicer by
all necessary corporate action.
(d) Binding Obligation. This Agreement and the Transaction Documents to
which the Servicer is a party 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.
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(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents to which the Servicer is a party, and
the fulfillment of the terms of this Agreement and the Transaction Documents to
which the Servicer is a party, shall not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound or any of
its properties are subject, or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than the
Transaction Documents, or violate any law, order, rule or regulation applicable
to the Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or any of its properties.
(f) No Proceeding. There are no proceedings or investigations pending or,
to the Servicer's knowledge, threatened against the Servicer, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Servicer or its properties (A)
asserting the invalidity of this Agreement or any of the Transaction Documents,
(B) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the Transaction
Documents, or (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement, the Notes or any of the
Transaction Documents or (D) relating to the Servicer and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Taxes. The Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The Servicer hereby represents and warrants to
the Indenture Trustee and the Insurer that the Servicer's principal place of
business and chief executive office is, and for the four months preceding the
date of this Agreement has been, located at: 1 International Plaza,
Philadelphia, Pennsylvania 19113.
(j) Year 2000 Compliance. The Servicer covenants that its computer systems
used in servicing the Auto Loans will be modified to operate in a manner such
that on and after January 1, 2000 (i) the Servicer can service the Auto Loans in
accordance with the terms of this Agreement and (ii) the Servicer can operate
its business in substantially the same manner as it is operating on the date
hereof.
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SECTION 5.2 Representations of Backup Servicer.
Back-Up Servicer makes the following representations on which the Insurer
shall be deemed to have relied in executing and delivering the Policy and on
which the Issuer is deemed to have relied in acquiring the Auto Loans and which
the Indenture Trustee shall have been deemed to rely upon in executing this
Agreement and the Indenture. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, in the case of Auto
Loans, and as of each date of substitution, in the case of Substitute Auto
Loans, and shall survive the sale of the Auto Loans by Originator to Flagship
LLC, the sale of Auto Loans by Flagship LLC to the Depositor and the sale of
Auto Loans by the Depositor to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Back-Up Servicer has been duly
organized and is validly existing as a corporation and in good standing under
the laws of the State of Delaware, with power, authority and legal right to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant times,
and shall have, power, authority and legal right to acquire, own and service the
Auto Loans.
(b) Due Qualification. The Back-Up 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
Auto Loans as required by this Agreement) requires or shall require such
qualification, in each case, except where failure to do so will not have a
material adverse effect on the Back-Up Servicer or its ability to perform its
obligations under this Agreement.
(c) Power and Authority. The Back-Up Servicer has the power and authority
to execute and deliver this Agreement and the Transaction Documents to which it
is a party and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Transaction
Documents to which it is a party have been duly authorized by the Back-Up
Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement and the Transaction Documents to
which the Back-Up Servicer is a party shall constitute legal, valid and binding
obligations of the Back-Up 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents to which to the Back-Up Servicer is a
party, and the fulfillment of the terms of this Agreement and the Transaction
Documents to which the Back-Up Servicer is a
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party, shall not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Back-Up Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Back-Up Servicer is a party or by which it is bound or any of its properties are
subject, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than the Transaction Documents, or
violate any law, order, rule or regulation applicable to the Back-Up Servicer of
any court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Back-Up Servicer
or any of its properties.
(f) No Proceeding. There are no proceedings or investigations pending or,
to the Back-Up Servicer's knowledge, threatened against the Back-Up Servicer,
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Back-Up Servicer or
its properties (A) asserting the invalidity of this Agreement or any of the
Transaction Documents to which the Back-Up Servicer is a party, (B) seeking to
prevent the issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents to which the
Back-Up Servicer is a party, or (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Back-Up Servicer of
its obligations under, or the validity or enforceability of, this Agreement, the
Notes or any of the Transaction Documents to which the Back-Up Servicer is a
party or (D) relating to the Back-Up Servicer and which might adversely affect
the federal or state income, excise, franchise or similar tax attributes of the
Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Taxes. The Back-Up Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The Back-Up Servicer hereby represents and
warrants to the Indenture Trustee and the Insurer that the Back-Up Servicer's
principal place of business and chief executive office is, and for the four
months preceding the date of this Agreement has been, located at: 700 East Gate
Drive, Suite 400, Mt. Laurel, New Jersey, 08054-5404.
(j) Year 2000 Compliance. The Back-Up Servicer covenants that its computer
systems used in servicing the Auto Loans will be modified to operate in a manner
such that on and after January 1, 2000 (i) the Back-Up Servicer can service the
Auto Loans in accordance with the terms of this Agreement and (ii) the Back-Up
Servicer can operate its business in substantially the same manner as it is
operating on the date hereof.
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SECTION 5.3 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.
(i) The Servicer shall defend, fully indemnify and hold completely
harmless the Depositor, the Issuer (as such and the Owner Trustee in its
individual capacity), the Indenture Trustee, the Insurer, 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, repossession or operation by the Servicer or any Affiliate
thereof of any Financed Vehicle.
(ii) The Servicer shall fully indemnify, defend and hold completely
harmless the Depositor, the Issuer (as such and the Owner Trustee in its
individual capacity), the Indenture Trustee, the Collateral Agent, the
Insurer, their respective officers, directors, agents and employees and the
Noteholders 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 the Issuer
(as such and the Owner Trustee in its individual capacity), the Indenture
Trustee, the Insurer or the Noteholders through the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its duties
under this Agreement or by reason of reckless disregard of its obligations
and duties under this Agreement.
(iii) The Servicer shall fully indemnify, defend, and hold completely
harmless the Indenture Trustee and the Collateral Agent from and against
all costs, expenses, losses, claims, damages, and liabilities arising out
of or incurred in connection with the acceptance or performance of the
trusts and duties contemplated by the Transaction Documents, if any, except
to the extent that such cost, expense, loss, claim, damage or liability:
(A) shall be due to the willful misfeasance, bad faith, or negligence
(except for errors in judgment) of the Indenture Trustee or (B) relates to
any tax other than the taxes with respect to which the Servicer shall be
required to indemnify the Indenture Trustee. Indemnification under this
Section shall survive the resignation or removal of the or the Indenture
Trustee and the termination of this Agreement or the Indenture, as
applicable, and shall include reasonable fees and expenses of counsel and
other expenses of litigation.
(b) Notwithstanding the foregoing, the Servicer shall not be obligated to
defend, indemnify, and hold harmless any Noteholders for any losses, claims,
damages or liabilities incurred by any Noteholders arising out of claims,
complaints, actions and allegations relating to Section 406 of ERISA or Section
4975 of the Code as a result of the purchase or holding of a Note by such
Noteholder with the assets of a plan subject to such provisions of ERISA or the
Code or the servicing, management and operation of the property included in the
Series Pool.
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(c) For purposes of this Section 5.3, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
Section 5.3) as Servicer pursuant to Section 6.1, 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 6.3.
The provisions of this Section 5.3(c) shall in no way affect the survival
pursuant to Section 5.3(d) of the indemnification by the Servicer provided by
Section 5.3(a).
(d) Indemnification under this Section 5.3 shall survive the termination of
this Agreement and any resignation or removal of Flagship as Servicer and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest.
SECTION 5.4 Merger or Consolidation of, or Assumption of the Obligations of
the Servicer and Back-Up Servicer.
(a) Flagship shall not merge or consolidate into any other person, convey,
transfer or lease substantially all its assets as an entirety to another Person,
or permit any other Person to become the successor to Flagship's business
unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity shall be capable of fulfilling the
duties of Flagship as Servicer contained in this Agreement. Any corporation (i)
into which Flagship may be merged or consolidated, (ii) resulting from any
merger or consolidation to which Flagship shall be a party and in which Flagship
is not the surviving entity, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of Flagship, or (iv) succeeding to the
business of Flagship, in any of the foregoing cases shall execute an agreement
of assumption to perform every obligation of Flagship under this Agreement and,
whether or not such assumption agreement is executed, shall be the successor to
Flagship 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 Flagship from any obligation.
Flagship shall provide prior written notice of any merger, consolidation or
succession pursuant to this Section to the Indenture Trustee, the Noteholders,
the Insurer and each Rating Agency. Notwithstanding the foregoing, Flagship
shall not merge or consolidate with any other Person or permit any other Person
to become a successor to Flagship's business, unless (w) only with respect to
any such transaction that would constitute an Insurance Agreement Indicator
under clauses (7) or (8) of the definition thereof in the Insurance Agreement,
the Servicer shall have received the written consent of the Insurer prior to
entering any such transaction (provided that an Insurer Default has not occurred
and is continuing, in such case and with respect to such Insurance Agreement
Indicators only, upon the written consent of the Indenture Trustee, which
consent of the Indenture Trustee shall not be unreasonably withheld), (x)
immediately after giving effect to such transaction, (1) no representation or
warranty made pursuant to Section 6.1 shall have been breached (for purposes
hereof, such representations and
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warranties shall be deemed made as of the date of the consummation of such
transaction) and (2) no event that, after notice or lapse of time, or both,
would become an Insurance Agreement Indicator shall have occurred and be
continuing, (y) Flagship shall have delivered to the Indenture Trustee, the
Rating Agencies and the Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) Flagship shall have delivered to the Indenture
Trustee, the Rating Agencies and the Insurer an Opinion of Counsel, stating in
the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary to preserve and protect the interest of the Indenture Trustee in
the Auto Loans and the Other Conveyed Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) Any corporation (i) into which the Back-Up Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Back-Up Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Back-Up Servicer, or (iv)
succeeding to the business of the Back-Up Servicer in any of the foregoing cases
(it being understood that any conveyance, transfer or lease of the stock or
assets of FEC Mortgage Corp., Franklin Equity Leasing Co. and Copelco
American-Health Fund, Inc. is not one of the foregoing cases) shall execute an
agreement of assumption to perform every obligation of the Back-Up Servicer
under this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Back-Up 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 (x) nothing contained herein shall be
deemed to release the Back-Up Servicer from any obligation and (y) the Back-Up
Servicer shall have received the written consent of the Insurer prior to
entering into any such transactions (provided that an Insurer Default has not
occurred and is continuing).
SECTION 5.5 Limitation on Liability of Servicer, Back-Up Servicer and
Others.
(a) Neither the Servicer, the Back-Up Servicer nor any of the directors or
officers or employees or agents of the Servicer or Back-Up Servicer shall be
under any liability to the Issuer or the Noteholders, except as provided in this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement; provided, however, that this provision shall not
protect the Servicer, the Back-Up Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties. Flagship ,the Back-Up Servicer and any director, officer, employee or
agent of Flagship or the Back-Up 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.
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SECTION 5.6 Delegation of Duties.
(a) With the prior written consent of the Insurer (provided that an Insurer
Default has not occurred and is continuing), the Servicer may at any time
delegate duties under this Agreement to sub-contractors who are in the business
of servicing automotive loans upon notice of such delegation to the Indenture
Trustee; provided, however, that no such delegation or sub-contracting of duties
by the Servicer shall relieve the Servicer of its responsibility with respect to
such duties; and provided, further that the Servicer may delegate to and
subcontract with collection agencies only with respect to Charged-off Auto Loans
and to repossession agents in the ordinary course of business without notifying
or obtaining the consent of the Insurer.
(b) Subject to the provisions of Section 6.3, neither the Servicer nor the
Back-Up Servicer shall resign from the obligations and duties imposed on it by
this Agreement as Servicer or Back-Up Servicer except upon a determination that
by reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would have a material adverse effect on the Servicer or the Back-Up
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 Back-Up Servicer, as the case may be, to
perform the duties which render it legally unable to act or to delegate those
duties to another Person. Any such determination permitting the resignation of
the Servicer or Back-Up Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered and acceptable to the Indenture Trustee and the Insurer
(unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective until, so long as no Insurer
Default shall have occurred and be continuing, the Back-Up Servicer or, if so
elected by the Insurer, an entity acceptable to the Insurer shall have assumed
the responsibilities and obligations of the Servicer or, if an Insurer Default
shall have occurred and is continuing, the Back-Up Servicer or a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Back-Up Servicer. No resignation of the Back-Up 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 Back-Up Servicer or, if an Insurer
Default shall have occurred and be continuing a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the Back-Up
Servicer.
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ARTICLE VI
SERVICER TERMINATION EVENTS
SECTION 6.1 Servicer Termination Events.
For purposes of this Agreement, each of the following shall constitute a
"Servicer Termination Event":
(a) any failure by the Servicer to deliver to the Indenture Trustee for
payment to the Noteholders any required payment, which failure continues
unremedied for two Business Days (or, in the case of a payment or deposit to be
made no later than a Payment Date, the failure to make such payment or deposit
by such Payment Date); or any failure to deliver to the Indenture Trustee and
the Insurer (i) the Monthly Servicer's Report, by the third Business Day prior
to the related Payment Date or (ii) the annual accountants' report, the annual
statement as to compliance or the statement to the Noteholders, in each case,
within 10 Business Days of the date it is due;
(b) any failure by the Servicer or the Originator duly to observe or
perform in any material respect any other covenant or agreement in the
Transaction Documents which continues unremedied for 30 days after the giving of
written notice of such failure (1) to the Servicer or the Originator, as the
case may be, by the Insurer or by the Indenture Trustee, or (2) to the Servicer
or the Originator, as the case may be, and to the Indenture Trustee and the
Insurer by the holders of Notes evidencing not less than the Note Majority;
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement, which
failure (i) materially and adversely affects the rights of Noteholders
(determined without regard to the availability of funds under the Policy), or of
the Insurer (unless an Insurer Default shall have occurred and be continuing),
and (ii) continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given (1) to the Servicer by the Indenture Trustee or the Insurer or (2) to
the Servicer, the Indenture Trustee and the Insurer by the Holders of Notes
evidencing not less than 25% of the outstanding principal amount of the Notes;
(d) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, or liquidator for the Servicer or the Back-Up Servicer in
any bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(e) The consent by the Servicer or the Back-Up Servicer to the appointment
of a conservator, indenture trustee, receiver or liquidator in any bankruptcy,
insolvency, readjustment of
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debt, marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or the Back-Up Servicer of or relating to substantially
all of its property; or the Servicer or the Back-Up Servicer shall admit in
writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations;
(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 in any material respect as of the time when the same
shall have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Issuer, the Insurer or the
Noteholders and, within 30 days after written notice thereof shall have been
given (1) to the Servicer by the Indenture Trustee or the Insurer or (2) to the
Servicer and to the Indenture Trustee and the Insurer by the Holders of Notes
evidencing not less than 25% of the outstanding principal amount of the Notes;
or
(g) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Indicator or an Insurance Agreement Indenture
Indicator shall have occurred.
SECTION 6.2 Consequences of a Servicer Termination Event.
If a Servicer Termination Event shall occur and be continuing, the
Indenture Trustee at the written direction of the Controlling Party shall
terminate all of the rights and obligations of the Servicer under this
Agreement. The Indenture Trustee shall not be deemed to have knowledge of a
Servicer Termination Event unless it has received written notice thereof. The
Servicer shall be entitled to its pro rata share of the Servicing Fee for the
number of days in the Collection Period prior to the effective date of its
termination. On or after the receipt by the Servicer of such written notice or
upon termination of the term of the Servicer, all authority, power, obligations
and responsibilities of the Servicer under this Agreement, whether with respect
to the Notes or the Other Conveyed Property or otherwise, automatically shall
pass to, be vested in and become obligations and responsibilities of the Back-Up
Servicer (or such other successor Servicer appointed by the Controlling Party;
provided, however, that the successor Servicer (other than Copelco) shall have
no liability with respect to any obligation which was required to be performed
by the terminated Servicer prior to the date that the successor Servicer becomes
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer. The successor Servicer is authorized and
empowered by this Agreement to execute and deliver, on behalf of the terminated
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Auto Loans and the Other Conveyed
Property related documents to show the Issuer as lienholder or secured party on
the related Lien 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, without
limitation, the transfer to the successor Servicer for administration
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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 thereafter received with respect to the Auto Loans and the
delivery to the successor Servicer of all Loan Files that shall at the time be
held by the terminated Servicer 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 Auto Loans and the Other Conveyed Property.
All reasonable costs and expenses (including reasonable attorneys' fees)
incurred by the succeeding servicer, the Indenture Trustee or the Insurer in
connection with transferring any Loan Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 6.2 or otherwise reasonably related to the transfer of Servicing shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. In addition, any successor Servicer
shall be entitled to payment from the immediate predecessor Servicer for
reasonable transition expenses incurred in connection with acting as successor
Servicer, and to the extent not so paid, such payment shall be made pursuant to
Section 4.07(b) of the Indenture. Upon receipt of notice of the occurrence of a
Servicer Termination Event, the Indenture Trustee shall give prompt written
notice thereof to the Rating Agencies and the Insurer. The terminated Servicer
shall grant the Indenture Trustee, the successor Servicer and the Controlling
Party reasonable access to the terminated Servicer's premises at the terminated
Servicer's expense.
SECTION 6.3 Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 6.2, or upon the resignation of the Servicer pursuant to
Section 5.6, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the expiration of
such term, and, in the case of resignation, until the later of (x) the date 45
days from the delivery to the Indenture Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel; provided, however, that the
Servicer shall not be relieved of its duties, obligations and liabilities as
Servicer until a successor Servicer reasonably acceptable to the Insurer
(provided that an Insurer Default has not occurred and is continuing) has
assumed such duties, obligations and liabilities. Notwithstanding the preceding
sentence, if neither the Back-Up Servicer nor any other successor Servicer shall
have assumed the duties, obligations and liabilities of Servicer within 45 days
of the termination, non-extension or resignation described in this Section 6.3,
the Servicer may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment as
successor Servicer, the Back-Up 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. In the event of termination of the Servicer, the Back-Up
Servicer shall assume the obligations of Servicer hereunder on the date
specified in such written
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notice or, in the event that the Insurer shall have determined that a Person
other than the Back-Up Servicer shall be the successor Servicer in accordance
with Section 6.2, until the date of the execution of a written assumption
agreement by such Person to serve as successor Servicer. Notwithstanding the
above, if the Back-Up Servicer shall be legally unable to act as Servicer, and
an Insurer Default shall have occurred and be continuing, the Back-Up 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 Back-Up 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 6.6, no
provision of this Agreement shall be construed as relieving the Back-Up Servicer
of its obligation to succeed as successor Servicer upon the termination of the
Servicer pursuant to Section 6.2, or for the resignation of the Servicer
pursuant to Section 5.6. If upon the termination of the Servicer pursuant to
Section 6.2 or the resignation of the Servicer pursuant to Section 5.6, the
Controlling Party appoints a successor Servicer other than the Back-Up Servicer,
the Back-Up Servicer shall be relieved of its duties hereunder other than any
duties specifically stated to survive.
(b) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder.
SECTION 6.4 Notification to Noteholders.
Upon any termination of, or appointment of a successor to, the Servicer,
the Indenture Trustee shall give prompt written notice thereof to each
Noteholder, the Insurer and to the Rating Agencies.
SECTION 6.5 Waiver of Past Defaults.
The Insurer, or subject to the approval of the Insurer (unless an Insurer
Default shall have occurred and be continuing), a Note Majority may, on behalf
of all the Noteholders, waive any default by the Servicer in the performance of
its obligations under this Agreement and the consequences thereof (except a
default in making any required deposits to or payments from any of the Accounts
in accordance with the terms of this Agreement.) 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 thereto.
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SECTION 6.6 Action Upon Certain Failures of the Servicer.
In the event that the Indenture Trustee shall have knowledge of any
failure of the Servicer specified in Section 6.1 which would give rise to a
right of termination under Article VI, the Indenture Trustee shall promptly
notify the Insurer and the Servicer and, upon the Servicer's failure to remedy
the same after notice, the Indenture Trustee shall give notice thereof to the
Noteholders. For all purposes of this Agreement (including, without limitation,
this Section 6.6), the Indenture Trustee shall not be deemed to have knowledge
of any failure of the Servicer as specified in Sections 6.1(b) through (g)
unless notified thereof in writing by the Servicer, the Insurer or by a
Noteholder. 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 6.1.
ARTICLE VII
[RESERVED]
ARTICLE VIII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 8.1 Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall monitor the
performance of the Issuer and perform all its duties and the duties of the
Issuer under the Indenture (except with respect to payment obligations on the
Notes). The Servicer shall prepare for execution by the Issuer 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 the Indenture, including, without limitation,
pursuant to Sections 2.07, 3.05, 3.07, 3.09, 3.10, 3.17, 7.01(b), 7.03, 11.02,
11.03, 13.01, 13.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Transaction Documents, the Servicer shall perform
such calculations and shall prepare for execution by the Issuer 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 this Agreement
or any of the Transaction Documents or under state and federal tax and
securities laws, and take all appropriate action
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that it is the duty of the Issuer to take pursuant to this Agreement or any
of the Transaction Documents. In accordance with the directions of the
Issuer, the Servicer shall administer, perform or supervise the performance
of such other activities in connection with the Collateral (including the
Transaction Documents) as are not covered by any of the foregoing
provisions.
(ii) Notwithstanding anything in this Agreement or any of the
Transaction Documents to the contrary, the Servicer shall be responsible
for promptly notifying the Indenture Trustee in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of
income) to a Noteholder as contemplated this Agreement. Any such notice
shall be in writing and specify the amount of any withholding tax required
to be withheld by it or the Indenture Trustee pursuant to such provision.
(iii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings shall be in accordance with
any directions received from the Issuer and shall be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
SECTION 8.2 Records.
The Servicer shall maintain appropriate books of account and records
relating to services performed under this Agreement, which books of account and
records shall be accessible for inspection by the Issuer, the Indenture Trustee
and the Insurer at any time during normal business hours.
SECTION 8.3 Additional Information to be Furnished to the Issuer.
The Servicer shall furnish to the Issuer and the Insurer from time to time
such additional information regarding the Collateral as the Issuer or the
Insurer shall reasonably request.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Amendment.
(a) (i) This Agreement may be amended from time to time by the parties
hereto, with the consent of the Indenture Trustee (which consent may not be
unreasonably withheld), with the prior written consent of the Insurer (so long
as no Insurer Default has occurred and is continuing) but without the consent of
any of the Noteholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement, to comply with any changes in the Code, or to make
any other
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provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or the
Insurance Agreement; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Indenture Trustee and the Insurer
affect in any material respect the interests of any Noteholder or the Insurer.
(ii) This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Insurer, the Indenture Trustee, and a Note
Majority for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders; provided, however, that no such amendment
shall (A) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Auto Loans or payments that shall be
required to be made for the benefit of the Noteholders or (B) reduce the
aforesaid percentage of the outstanding principal amount of each Class of Notes,
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all the outstanding Notes affected thereby.
(iii) The Indenture Trustee shall furnish written notification of the
substance of such amendment or consent to each Noteholder promptly after the
execution of any such amendment or consent and to the Rating Agencies prior to
the execution of any such amendment or consent.
(iv) It shall not be necessary for the consent of Noteholders pursuant to
this Section 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
Noteholders provided for in this Agreement) and of evidencing the authorization
of any action by Noteholders shall be subject to such reasonable requirements as
the Indenture Trustee may prescribe.
(v) Prior to the execution of any amendment to this Agreement, the
Indenture Trustee and the Insurer shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
9.1(a)(i) has been delivered. The Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Issuer's or the
Indenture Trustee's, as applicable, own rights, duties or immunities under this
Agreement or otherwise. The Owner Trustee may, but shall not be obligated to,
enter into any such amendment that may affect the rights, duties, liabilities,
benefits or immunities of the Owner Trustee (as such or in its individual
capacity).
(b) Notwithstanding anything to the contrary contained in Section 9.1(a)(i)
above, the provisions of this Agreement relating to (i) the Spread Account
Agreement, the Spread Account, the Requisite Spread Account Amount (as defined
in the Spread Account Agreement), a Portfolio Performance Indicator (as defined
in the Spread Account Agreement) or any component definition of a Portfolio
Performance Indicator and (ii) any additional sources of funds which may be
added to the Spread Account or uses of funds on deposit in the Spread Account,
may be amended in any
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respect by the Originator, the Servicer, the Insurer and the Collateral Agent
(the consent of which shall not be withheld or delayed with respect to any
amendment that does not adversely affect the Collateral Agent) without the
consent of, or notice to, the Noteholders.
(c) Notwithstanding anything to the contrary contained in this Section 9.1,
the Back-up Servicer may be repleced with Copelco Capital Inc. without the
consent of, or notice to, the Noteholders.
SECTION 9.2 Protection of Title to Trust.
(a) The Servicer shall execute and file such financing statements and cause
to be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer and the interests of the Indenture Trustee in the
Auto Loans and in the proceeds thereof. The Servicer shall deliver (or cause to
be delivered) to the Insurer and the Indenture Trustee file-stamped copies of,
or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Originator nor the Servicer shall change its name, identity
or corporate structure in any manner (including the transaction described in
Section 4.1(j), notice of which is hereby acknowledged) that would, could or
might make any financing statement or continuation statement filed in accordance
with paragraph (a) above seriously misleading within the meaning of section
9-402(7) of the UCC, unless it shall have given the Insurer, and the Indenture
Trustee at least five days' prior written notice thereof and shall have promptly
filed appropriate amendments to all previously filed financing statements or
continuation statements. Promptly upon such filing, the Originator or the
Servicer, as the case may be, shall deliver an Opinion of Counsel to the Issuer,
the Indenture Trustee and the Insurer, in form and substance reasonably
satisfactory to the Insurer, stating either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer and the Indenture Trustee in the
Auto Loans, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action shall
be necessary to preserve and protect such interest.
(c) Each of the Originator and the Servicer shall have an obligation to
give the Insurer and the Indenture Trustee at least 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 and shall promptly file any such amendment. The
Servicer shall at all times maintain each office from which it shall service
Auto Loans, and its principal executive office, within the United States of
America.
(d) The Servicer shall maintain accounts and records as to each Auto Loan
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Auto Loan,
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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 Auto Loan and the amounts from time to time deposited in the Collection
Account in respect of such Auto Loan.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Auto Loans and the Other
Conveyed Property and to the Issuer, the Servicer's master computer records
(including any backup archives) that refer to an Auto Loan shall indicate
clearly the interest of the Issuer in such Auto Loan and the Other Conveyed
Property and that such Auto Loan and the Other Conveyed Property is owned by the
Issuer. Indication of the Issuer's interest in an Auto Loan and the Other
Conveyed Property shall be deleted from or modified on the Servicer's computer
systems when, and only when, the related Auto Loan shall have been paid in full
or repurchased.
(f) If at any time the Originator or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Auto Loan,
shall indicate clearly that such Auto Loan has been sold to Flagship LLC and
ultimately transferred to, and owned by, the Issuer.
(g) The Servicer shall permit the Indenture Trustee, the Back-Up Servicer
and the Insurer and its agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Auto Loan and the Other Conveyed Property.
(h) Upon request, the Servicer shall furnish to the Insurer or to the
Indenture Trustee, within five Business Days, a list of all Auto Loans (by
contract number and name of Obligor) then held by the Issuer, together with a
reconciliation of such list to the Schedule of Auto Loans and to each of the
Servicer's Certificates furnished before such request indicating removal of Auto
Loans from the Issuer.
SECTION 9.3 Conveyance of the Auto Loans and the Other Conveyed Property to
the Issuer.
The Originator acknowledges that Flagship LLC intends, pursuant to the
Depositor Purchase Agreement, to convey the Auto Loans and the Other Conveyed
Property, together with its rights under this Agreement, to the Depositor on the
date hereof, further that the Depositor intends, pursuant to the Owner Trust
Purchase Agreement, to convey the Auto Loans and the Other Conveyed Property,
together with its rights under the Depositor Purchase Agreement, including
Flagship LLC's rights under this Agreement, to the Issuer on the date hereof,
and further that the Issuer intends pursuant to the Indenture to pledge to the
Indenture Trustee the Auto Loans and the Other Conveyed Property, together with
its rights under this Agreement, the Depositor Purchase Agreement and the Owner
Trust Purchase Agreement on the date hereof. The Originator
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acknowledges and consents to such conveyances and waives any further notice
thereof and covenants and agrees that the representations and warranties of the
Originator contained in this Agreement, and the rights of Flagship LLC
hereunder, are intended to benefit the Depositor, the Indenture Trustee, the
Trust, the Noteholders and the Insurer. In furtherance of the foregoing, the
Originator covenants and agrees to perform its duties and obligations hereunder
in accordance with the terms hereof for the benefit of the Depositor, the
Indenture Trustee, the Trust, the Insurer and the Noteholders and that,
notwithstanding anything to the contrary in this Agreement, the Originator shall
be directly liable to the Depositor, the Indenture Trustee, the Issuer, the
Insurer and the Trust (notwithstanding any failure by the Servicer, the Backup
Servicer or Flagship LLC to perform its duties and obligations hereunder or
under any of the other Transaction Documents), and that the Depositor, the Owner
Trustee and the Indenture Trustee may enforce the duties and obligations of the
Originator under this Agreement against the Originator for the benefit of the
Depositor, the Trust, the Noteholders or the Insurer, respectively.
SECTION 9.4 Notices.
All demands, notices and communications upon or to the Originator, the
Issuer, the Back-Up Servicer, the Servicer, the Depositor, the Indenture
Trustee, the Insurer, or the Rating Agencies 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 Prudential Securities Secured Financing Corporation, One New York Plaza,
14th Floor, New York, New York 10292, Attention: Group Head, Asset Backed
Finance Group; (b) in the case of Flagship Credit Corporation or Flagship Auto
Loan Funding LLC 1999-II, 1 International Plaza, Philadelphia, Pennsylvania
19113, Attention: General Counsel; with a copy to Copelco Financial Services
Group, Inc., 700 East Gate Drive, Mount Laurel, New Jersey, 08054, Attention:
General Counsel; (c) in the case of the Issuer or the Owner Trustee, First Union
National Bank, One Rodney Square, 920 King Street, Wilmington, Delaware 19801,
Attention: Corporate Trust Administration; (d) in the case of the Indenture
Trustee or the Collateral Agent, at the Corporate Trust Office; (e) in the case
of the Insurer, to MBIA Insurance Corporation, 113 King Street, Armonk, New York
10504; Attention: Insured Portfolio Management-Structured Finance (Flagship Auto
Receivables Owner Trust 1999-2); (f) in the case of Moody's, to Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York,
New York 10007; (g) in the case of the Back-Up Servicer, to Copelco Financial
Services Group, Inc., 700 East Gate Drive, Mount Laurel, New Jersey, 08054
Attention: General Counsel; (h) in the case of Standard & Poor's Ratings
Services, to Standard & Poor's Rating Services, a Division of The McGraw-Hill
Companies, 55 Water Street, 40th Floor, New York, New York 10041, Attention:
Asset Backed Surveillance Department; and (i) in the case of DCR, to Duff &
Phelps Credit Rating Co., 17 State Street, 12th Floor, New York, New York 10004;
Attention: Asset-Backed Monitoring Group. 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. Any notice so mailed
within the time prescribed in the Agreement shall be conclusively presumed to
have been duly given, whether or not the Noteholder shall receive such notice.
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SECTION 9.5 Assignment.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything to the contrary contained herein, except as provided in
Sections 5.4 and 6.3 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Originator or the Servicer without the prior written consent of the
Indenture Trustee and the Controlling Party.
SECTION 9.6 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 Indenture Trustee and the Noteholders, as
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, 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 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 respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 9.7 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 9.8 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 9.9 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.
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SECTION 9.10 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 9.11 Assignment to Indenture Trustee.
The Originator hereby acknowledges and consents to any mortgage, pledge,
assignment and grant of a security interest by the Issuer to the Indenture
Trustee pursuant to the Indenture for the benefit of the Noteholders and the
Insurer of all right, title and interest of the Issuer in, to and under the Auto
Loans and the Other Conveyed Property and/or the assignment of any or all of
Flagship LLC's, the Depositor's and the Issuer's rights and obligations
hereunder to the Indenture Trustee.
SECTION 9.12 Nonpetition Covenants.
Notwithstanding any prior termination of this Agreement, the Servicer and
the Originator shall not, prior to the date which is one year and one day after
the termination of this Agreement with respect to the Issuer, Flagship LLC, the
Depositor or the Special Member acquiesce, petition or otherwise invoke or cause
the Issuer, Flagship LLC, the Depositor or the Special Member to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer, the Depositor, Flagship LLC or the Special
Member under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer, the Depositor, Flagship LLC or the Special
Member or any substantial part of their respective properties, or ordering the
winding up or liquidation of the affairs of the Issuer, the Depositor, Flagship
LLC or the Special Member.
SECTION 9.13 Limitation of Liability of Indenture Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been executed and delivered by Harris Trust and Savings Bank, not in its
individual capacity but solely as Indenture Trustee and in no event shall Harris
Trust and Savings Bank, have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 9.14 Independence of the Servicer.
For all purposes of this Agreement, the Servicer shall be an independent
contractor and shall not be subject to the supervision of the Issuer, the
Indenture Trustee and Back-Up Servicer with respect to the manner in which it
accomplishes the performance of its obligations hereunder. Unless
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expressly authorized by this Agreement, the Servicer shall have no authority to
act for or represent the Issuer in any way and shall not otherwise be deemed an
agent of the Issuer.
SECTION 9.15 No Joint Venture.
Nothing contained in this Agreement (i) shall constitute the Servicer and
the Issuer as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 9.16 Limitation of Liability of Owner Trustee.
Notwithstanding any provision herein or elsewhere, this Agreement has been
executed by First Union National Bank, not in its individual capacity but solely
in its capacity as Owner Trustee of the Flagship Auto Receivables Owner Trust
1999-2 (the "Trust") and in no event shall First Union National Bank have any
liability (except with respect to its own grossly negligent action or failure to
act) in respect of the representations, warranties or obligations of the Issuer
or the Owner Trustee hereunder or under any other document, as to all of which
recourse shall be had solely to the assets of the Trust, and for all purposes of
this Agreement and each other document, First Union National Bank shall be
entitled to the benefits of the Amended and Restated Trust Agreement of the
Trust.
ARTICLE X
DEFINITIONS
As used in this Sales and Servicing Agreement, the following terms have the
respective meanings set forth below or set forth in the Section hereof or in any
other agreement indicated:
"Accountants' Report" means the report of a firm of nationally recognized
independent accountants described in Section 3.11.
"Accounts" shall have the meaning assigned to such term in the Indenture.
"Actual Recovery Amounts" with respect to a Charged-off Auto Loan, proceeds
from the sale of the related Financed Vehicle, proceeds of the related insurance
policy, proceeds from any dealer agreements and any other recoveries with
respect to such Charged-off Auto Loan and the related Financed Vehicle, net of
reasonable and customary out-of-pocket expenses and amounts so received that are
required to be refunded to the Obligor on such Auto Loan.
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"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition, the term "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the Ownership of voting
securities, by contract or otherwise; and the terms "controlling", "controlled
by" and "under common control with" have meanings correlative to the foregoing.
"Agreement" means this Sales and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Amount Financed" means, with respect to an Auto Loan, the aggregate amount
advanced under such Auto Loan toward the purchase price of the Financed Vehicle
and any related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
"Annual Percentage Rate" or "APR" of an Auto Loan means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Auto Loan" means (a) each retail installment sale contract for a Financed
Vehicle which, as of the Closing Date, is listed on Schedule A hereto (which
Schedule A may be in the form of microfiche or an electronic file delivered to
the Indenture Trustee and Collateral Agent) and all rights and obligations
thereunder except for Auto Loans that shall have become Purchased Auto Loans and
(b) each Substitute Auto Loan.
"Back-Up Servicer" means Copelco, in its capacity as Back-Up Servicer
pursuant to the terms hereof.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.,
Section 547), as amended.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Insurer or commercial banking institutions are authorized or obligated
by law, executive order, or governmental decree to remain closed in
Philadelphia, Pennsylvania, New York, New York or such other city where the
corporate trust office of the Indenture Trustee, the Owner Trustee or the
Insurer is then located.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Charged-off Auto Loan" means, with respect to any Auto Loan, the earliest
to occur of the following (i) 10% or more of any Scheduled Payment on such Auto
Loan is 123 days or more
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delinquent as of such Collection Period, (ii) the related Financed Vehicle has
been repossessed and sold, or (iii) substantially all of the payments thereunder
are deemed uncollectible by the Servicer.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes, as the context requires.
"Class A-1 Notes" has the meaning assigned to such term in the Indenture.
"Class A-2 Notes" has the meaning assigned to such term in the Indenture.
"Class A-3 Notes" has the meaning assigned to such term in the Indenture.
"Class A-4 Notes" has the meaning assigned to such term in the Indenture.
"Closing Date" means November 24, 1999.
"Code" shall have the meaning assigned to such term in the Indenture.
"Collateral" shall have the meaning assigned to such term in the Indenture.
"Collateral Agent" means Harris Trust and Savings Bank, in its capacity as
Collateral Agent under the Spread Account Agreement.
"Collection Account" has the meaning assigned to such term in the
Indenture.
"Collection Period" means any calendar month.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" shall have the meaning assigned to such term in the
Indenture.
"Copelco" means Copelco Financial Services Group, Inc., a Delaware
corporation.
"Corporate Trust Office" means, with respect to the Indenture Trustee and
the Collateral Agent, the principal corporate trust office of the Indenture
Trustee, which at the time of execution of this agreement is located at 311 West
Monroe Street, Chicago, Illinois 60606; Attention: Indenture Trust
Administration.
"Cram Down Loss" means, with respect to an Auto Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on an Auto Loan or otherwise modifying or restructuring
scheduled payments to be made on an Auto Loan, an amount equal to such reduction
in Principal Balance of such Auto Loan or the reduction
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in the net present value (using as the discount rate the lower of the contract
rate or the rate of interest specified by the court in such order) of the
Scheduled Payments as so modified or restructured. A "Cram Down Loss" shall be
deemed to have occurred on the date such order is entered.
"Credit and Collection Policies" means the credit and collection policies
of the Originator in the form delivered to the Insurer on October 13, 1999, as
amended from time to time, provided that such policies may be revised or amended
(i) in any material respect by the Originator only with the consent of the
Insurer or (ii) as required by applicable law and written notice thereof has
been given to the Insurer.
"Cut-off Date" means the close of business on October 31, 1999.
"DCR" means Duff & Phelps Credit Rating Co.
"Dealer" means, with respect to an Auto Loan, the seller of the related
Financed Vehicle, who originated and assigned such Auto Loan to the Originator.
"Delivery" means, when used with respect to property included in the Series
Pool:
the perfection and priority of a security interest in such Account Property
which is governed by the law of a jurisdiction which has adopted the 1994
Revision to Article 8 of the UCC:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(l)(i) of the UCC (other than
certificated securities) and are susceptible of physical delivery, transfer
thereof to the Indenture Trustee by physical delivery to the Indenture
Trustee, indorsed to, or registered in the name of, the Indenture Trustee
or its nominee or indorsed in blank and such additional or alternative
procedures as may hereafter become appropriate to effect the complete
transfer of ownership of any such Account Property to the Indenture Trustee
free and clear of any adverse claims, consistent with changes in applicable
law or regulations or the interpretation thereof;
(b) with respect to a "certificated security" (as defined in Section
8- 102(a)(4) of the UCC), transfer thereof:
(1) by physical delivery of such certificated security to the
Indenture Trustee, provided that if the certificated security is in
registered form, it shall be indorsed to, or registered in the name
of, the Indenture Trustee or indorsed in blank;
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(2) by physical delivery of such certificated security in
registered form to a "securities intermediary" (as defined in Section
8-102(a)(14) of the UCC) acting on behalf of the Indenture Trustee if
the certificated security has been specially endorsed to the Indenture
Trustee by an effective endorsement.
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a securities intermediary which
is also a "depositary" pursuant to applicable federal regulations and
issuance by such securities intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Indenture
Trustee of the purchase by the securities intermediary on behalf of the
Indenture Trustee of such book-entry security; the making by such
securities intermediary of entries in its books and records identifying
such book-entry security held through the Federal Reserve System pursuant
to Federal book-entry regulations as belonging to the Indenture Trustee and
indicating that such securities intermediary holds such book-entry security
solely as agent for the Indenture Trustee; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Account Property to the
Indenture Trustee free of any adverse claims, consistent with changes in
applicable law or regulations or the interpretation thereof;
(d) with respect to any item of Account Property that is an
"uncertificated security" (as defined in Section 8-102(a)(8) of the UCC)
and that is not governed by clause (c) above, transfer thereof:
(1) (A) by registration to the Indenture Trustee as the
registered Owner thereof, on the books and records of the issuer
thereof;
(B) by another Person (not a securities intermediary) who either
becomes the registered Owner of the uncertificated security on behalf
of the Indenture Trustee, or having become the registered Owner
acknowledges that it holds for the Indenture Trustee;
(2) the issuer thereof has agreed that it will comply with
instructions originated by the Indenture Trustee without further
consent of the registered Owner thereof;
(e) with respect to a "security entitlement" (as defined in Section 8-
102(a)(17) of the UCC):
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(1) if a securities intermediary (A) indicates by book-entry that
a "financial asset" (as defined in Section 8-102(a)(9) of the UCC) has
been credited to the Indenture Trustee's "securities account" (as
defined in Section 8-501(a) of the UCC), (B) receives a financial
asset (as so defined) from the Indenture Trustee or acquires a
financial asset for the Indenture Trustee, and in either case, accepts
it for credit to the Indenture Trustee's securities account (as so
defined), (C) becomes obligated under other law, regulation or rule to
credit a financial asset to the Indenture Trustee's securities
account, or (D) has agreed that it will comply with "entitlement
orders" (as defined in Section 8-102(a)(8) of the UCC) originated by
the Indenture Trustee, without further consent by the "entitlement
holder" (as defined in Section 8-102(a)(7) of the UCC), of a
confirmation of the purchase and the making by such securities
intermediary of entries on its books and records identifying as
belonging to the Indenture Trustee of (i) a specific certificated
security in the securities intermediary's possession, (ii) a quantity
of securities that constitute or are part of a fungible bulk of
certificated securities in the securities intermediary's possession,
or (iii) a quantity of securities that constitute or are part of a
fungible bulk of securities shown on the account of the securities
intermediary on the books of another securities intermediary;
(f) in each case of delivery contemplated pursuant to clauses (a)
through (e) use of subsection (ii) hereof, the Indenture Trustee shall make
appropriate notations on its records, and shall cause the same to be made
on the records of its nominees, indicating that such Account Property which
constitutes a security is held in trust pursuant to and as provided in this
Agreement.
"Depositor" means Prudential Securities Secured Financing Corporation.
"Depositor Purchase Agreement" means the Depositor Purchase Agreement dated
as of November 1, 1999 between Flagship LLC and the Depositor.
"Determination Date" means the fifth Business Day preceding the related
Payment Date.
"Eligible Auto Loan" means, with respect to the Cut-off Date, an Auto Loan
that satisfies the following criteria: (a) has an Obligor whose billing address
is in the United States; (b) is not more than 31 days past due; (c) has an APR
of at least 7.00% and not more than 25.00%; and (d) relates to a Financed
Vehicle such that the sum of the age of such Financed Vehicle upon origination
of the Auto Loan and the original term to scheduled maturity of the related Auto
Loan does not exceed 96 months.
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"Eligible Servicer" means a successor servicer acceptable to the Insurer
(so long as an Insurer Default has not occurred and is continuing).
"Eligible Substitute Auto Loan" means, with respect to the end of the
calendar month preceding the related date of substitution, a Substitute Auto
Loan that satisfies the following criteria: (a) has an Obligor whose billing
address is in the United States; (b) has never been more than 31 days past due;
(c) has an APR of at least 7.00% and not more than 25.00%; and (d) relates to a
Financed Vehicle such that the sum of the age of such Financed Vehicle upon
origination of the Auto Loan and the original term to scheduled maturity of the
related Auto Loan does not exceed 96 months.
"ERISA" shall have the meaning specified in Section 2.03c(v) of the
Indenture.
"Exception Report" means, with respect to an Auto Loan and the related Loan
File, a report from the Indenture Trustee indicating a deficiency in such Loan
File.
"FICO Scores" means statistical guidelines used by lenders in various
markets to assess a borrower's credit worthiness and measure the relative degree
of risk represented by such a borrower.
"Financed Vehicle" means a new or used automobile, light truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under an Auto Loan.
"Flagship" means Flagship Credit Corporation.
"Holder" shall have the meaning specified in the Indenture.
"Indemnification Agreement" means the Indemnification Agreement among the
Insurer, the Originator and the Underwriter, dated as of November 1, 1999, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Indenture Trustee" means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor Indenture Trustee under
the Indenture.
"Indenture Trustee's Certificate" has the meaning assigned to such term in
Section 2.2.
"Indenture" means the Indenture dated as of November 1, 1999, between the
Issuer and Harris Trust and Savings Bank, as Indenture Trustee, and Flagship, as
Servicer, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
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"Initial Portfolio Balance" means the aggregate Principal Balance as of the
Cut-off Date of Auto Loans included in the Series Pool as of the Closing Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
Indenture Trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding- up or liquidation or
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, Indenture
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.
"Insurance Agreement" means the Insurance Agreement among the Issuer,
Flagship LLC, Flagship, in its capacities as both the Originator and the
Servicer, the Indenture Trustee and Collateral Agent, the Owner Trustee, the
Special Member, the Depositor, the Back-Up Servicer and the Insurer, dated as of
November 1, 1999, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Insurance Agreement Indenture Indicator" has the meaning assigned to such
term in the Indenture.
"Insurance Agreement Indicator" has the meaning set forth in the Spread
Account Agreement.
"Insurance Policy" means, with respect to an Auto Loan, any insurance
policy benefiting the holder of the Auto Loan providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insurer" means MBIA Insurance Corporation, a stock insurance company
organized and created under the laws of the State of New York, or its successors
in interest.
"Insurer Default" shall mean any one of the following events shall have
occurred and be continuing:
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(i) the Insurer fails to make a payment required under the Policy in
accordance with its terms;
(ii) the Insurer (A) files any petition or commences any case or
proceeding under any applicable federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization to be
adjudicated as bankrupt or insolvent, (B) makes a general assignment for
the benefit of its creditors or (C) has an order for relief entered against
it under any applicable federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or
(iii) a court of competent jurisdiction or other competent regulatory
authority enters a final and nonappealable order, judgment or decree (A)
appointing a custodian, trustee, agent or receiver for the Insurer or for
all or any substantial 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 substantial portion of
the property of the Insurer).
"Issuer" means Flagship Auto Receivables Owner Trust 1999-2.
"Level I Portfolio Performance Indicator" has the meaning set forth in the
Spread Account Agreement.
"Level I Portfolio Performance Tests" means, collectively, the Level I
Delinquency Test, the Level I Cumulative Net Loss Test and the Level I Net Loss
Test (as such terms are defined in the Spread Account Agreement).
"Level II Portfolio Performance Tests" has the meaning set forth in the
Spread Account Agreement.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Auto Loan by operation of law.
"LLC Agreement" means that the Flagship Auto Loan Funding LLC 1999-II
limited liability company agreement dated as of October 5, 1999, including all
amendments thereto.
"Loan Files" means the documents specified in Section 2.3.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Note" shall have the meaning provided in Section 1.1 of the Indenture.
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"Note Majority" has the meaning assigned to such term in the Indenture.
"Obligor" on an Auto Loan means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Auto Loan.
"Officer's Certificate" means a certificate signed by the chairman of the
board, the president, any vice chairman of the board, any vice president, the
treasurer, the controller or assistant treasurer or any assistant controller,
secretary or assistant secretary of Copelco, the Originator or the Servicer, as
appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but need
not be in-house counsel to the Servicer, which counsel shall be reasonably
acceptable to the Indenture Trustee and the Insurer and which opinion shall be
addressed to and acceptable in form and substance to the Indenture Trustee and
the Insurer.
"Originator" means Flagship.
"Other Conveyed Property" means all property conveyed by the Originator to
Flagship LLC pursuant to Sections 1.1(ii) through (ix) of this Agreement.
"Outstanding Portfolio Balance" means the aggregate Principal Balance of
the Auto Loans at any given time.
"Owner Trustee" means First Union National Bank (and any successor thereto
or assign thereof), not in its individual capacity, but solely as Owner Trustee
of the Trust under the Amended and Restated Trust Agreement of the Trust, and
any other Person who shall serve as Owner Trustee of the Trust, not in its
individual capacity, but solely as Owner Trustee.
"Owner Trust Purchase Agreement" means the Owner Trust Purchase Agreement
dated as of November 1, 1999 between the Depositor and the Issuer.
"Payment Date" means, with respect to each Collection Period, the 18th day
of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day, commencing on December 20, 1999.
"Person" means any individual, corporation, estate, partnership, limited
liability company, other entity, joint venture, association, joint stock
company, trust (including any beneficiary thereof), unincorporated organization
or government or any agency or political subdivision thereof.
"Policy" means the Financial Guaranty Insurance Policy issued by the
Insurer for the benefit of the Holders of the Notes issued under the Indenture,
including any endorsements thereto.
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"Portfolio Performance Indicators" means the Level I Portfolio Performance
Indicators and the Insurance Agreement Indicators.
"Portfolio Performance Tests" means the Level I Portfolio Performance Tests
and the Level II Portfolio Performance Tests..
"Principal Balance" of an Auto Loan, as of the close of business on the
last day of a Collection Period means the Amount Financed minus the sum of the
following amounts without duplication: (i) that portion of all Scheduled
Payments actually received on or prior to such day allocable to principal using
the Simple Interest Method; (ii) any payment of the Purchase Amount with respect
to the Auto Loan allocable to principal; (iii) any Cram Down Loss in respect of
such Auto Loan; and (iv) any prepayment in full or any partial prepayment
applied to reduce the principal balance of the Auto Loan.
"Prospectus Supplement" means the prospectus supplement dated November 17,
1999 to the prospectus of the Issuer dated November 8, 1999.
"Purchase Amount" means, with respect to an Auto Loan, the amount, as of
the close of business on the last day of a Collection Period, required to prepay
in full such Auto Loan under the terms thereof including the outstanding
Principal Balance of the related Auto Loans plus all accrued and unpaid interest
and interest to the end of the month of purchase, in the event such Auto Loan
has been repurchased by the Originator, Flagship LLC or by the Servicer pursuant
to the terms of the Transaction Documents.
"Purchased Auto Loan" means an Auto Loan purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 3.7, Section 7.1(a) or Section 4.06 of the Indenture or repurchased by
the Originator or the Servicer pursuant to Section 2.2 or Section 2.4 hereof.
"Rating Agency" means each of Moody's, Standard & Poor's and DCR and any
successors thereof. If no such organization or successor maintains a rating on
the Notes, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the 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 and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Originator, the Servicer, the Insurer
and the Indenture Trustee in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes without regard
to the Policy.
"Responsible Officer" shall have the meaning specified in the Indenture.
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"Schedule of Auto Loans" means the schedule of all retail installment sales
contracts and promissory notes held as part of the Series Pool which is attached
hereto as Schedule A, as amended or supplemented from time to time.
"Scheduled Payment" means, with respect to any Collection Period for any
Auto Loan, the amount set forth in such Auto Loan as required to be paid by the
Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 3.2 or any rescheduling of payments in any
insolvency or similar proceedings).
"Series Pool" has the meaning assigned thereto in the Indenture.
"Servicer" means Flagship Credit Corporation, as the servicer of the Auto
Loans, and each successor Servicer pursuant to Section 6.3.
"Servicer's Certificate" means a certificate completed and executed by a
Servicing Officer and delivered pursuant to Section 3.9, substantially in the
form of Exhibit B.
"Servicer Termination Event" means an event specified in Section 6.1.
"Servicing Fee" has the meaning specified in Section 3.8.
"Servicing Officer" means any Person whose name appears on a list of
Servicing Officers delivered to the Indenture Trustee and the Insurer, as the
same may be amended from time to time.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and the actual number of 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" means an Auto Loan under which the portion of
the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Special Member" means Flagship Special Member, Inc., a Delaware
corporation.
"Spread Account" means the account designated as such, established and
maintained pursuant to the Spread Account Agreement.
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"Spread Account Agreement" means the Spread Account Agreement dated as of
November 1, 1999 among the Insurer, the Issuer and the Indenture Trustee and
Collateral Agent, as the same may be modified, supplemented or otherwise amended
in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, or its successor.
"Substitute Auto Loans" has the meaning assigned to such term in Section
2.6 hereof.
"Transaction Documents" means this Agreement, the Trust Agreement, the
Indenture, the Depositor Purchase Agreement, the Owner Trust Purchase Agreement,
the Spread Account Agreement, the Insurance Agreement, the Indemnification
Agreement, the LLC Agreement, the Guaranty Agreement, and the other documents
and certificates delivered in connection therewith.
"Trust Agreement" has the meaning assigned to that term in the Owner Trust
Purchase Agreement.
"Trust Receipt" has the meaning assigned thereto in Section 2.5.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
"Underwriter" means Prudential Securities Incorporated.
Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) Accounting terms used but not defined or partly defined in this
Agreement, in any instrument governed hereby or in any certificate or other
document made or delivered pursuant hereto, to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
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(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(e) Section, Schedule and Exhibit references contained in this Agreement
are references to Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(f) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(g) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as the same may from time to time be amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments and instruments associated therewith; all
references to a Person include its permitted successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2, as Issuer
By: FIRST UNION NATIONAL BANK, not in
its individual capacity, but solely as Owner
Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
FLAGSHIP AUTO LOAN FUNDING LLC
1999-II, as Purchaser
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
FLAGSHIP CREDIT CORPORATION, as
Originator and Servicer
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity, but solely
as Indenture Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
COPELCO FINANCIAL SERVICES GROUP,
INC., as Back-Up Servicer
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
DEPOSITOR PURCHASE AGREEMENT
between
FLAGSHIP AUTO LOAN FUNDING LLC 1999-II
as Seller
and
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
as Purchaser
----------------------------
Dated as of November 1, 1999
----------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.....................................................1
SECTION 1.2. Usage of Terms..................................................3
SECTION 1.3. Section References..............................................3
SECTION 1.4. Action by or Consent of Noteholders.............................3
SECTION 1.5. No Recourse.....................................................3
ARTICLE II
CONVEYANCE OF THE AUTO LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Auto Loans and the Other Conveyed Property....3
SECTION 2.2. Optional Purchase of All Auto Loans.............................4
SECTION 2.3. Conditions to Depositor's Obligations...........................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Flagship LLC as Seller........5
SECTION 3.2. Representations and Warranties of Prudential as Purchaser.......7
ARTICLE IV
COVENANTS OF FLAGSHIP LLC
SECTION 4.1. Protection of Title of Prudential and the Trust.................9
SECTION 4.2. Other Liens or Interests.......................................10
SECTION 4.3. Costs and Expenses.............................................10
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Liability of Flagship LLC......................................10
SECTION 5.2. Merger or Consolidation of Flagship LLC........................10
SECTION 5.3. Limitation on Liability of Flagship LLC and Others.............11
SECTION 5.4. Conveyance of the Auto Loans and the Other Conveyed Property
to the Issuer..................................................11
SECTION 5.5. Amendment......................................................11
i
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SECTION 5.6. Notices.......................................................12
SECTION 5.7. Merger and Integration........................................12
SECTION 5.8. Severability of Provisions....................................13
SECTION 5.9. GOVERNING LAW.................................................13
SECTION 5.10. Counterparts..................................................13
SECTION 5.11. Nonpetition Covenant..........................................13
SECTION 5.12. Assignment....................................................13
SECTION 5.13. Third-Party Beneficiaries.....................................13
SECTION 5.14. Successors and Assigns........................................13
SCHEDULE A -- Schedule of Auto Loans
SCHEDULE B -- Legal Proceedings
ii
<PAGE>
DEPOSITOR PURCHASE AGREEMENT, dated as of November 1, 1999 (this
"Agreement"), between Flagship Auto Loan Funding LLC 1999-II, a limited
liability company, as seller ("Flagship LLC"), and Prudential Securities Secured
Financing Corporation, a Delaware corporation, as purchaser ("Prudential").
WHEREAS, Flagship LLC has purchased the Auto Loans and the Other Conveyed
Property from Flagship Credit Corporation pursuant to the Sale and Servicing
Agreement.
WHEREAS, Prudential, as Purchaser, has agreed to purchase from Flagship
LLC, as Seller, and Flagship LLC has agreed to sell and transfer to Prudential,
the Auto Loans and the Other Conveyed Property pursuant to this Agreement.
WHEREAS, Prudential will sell, transfer and assign its interest in the Auto
Loans and the Other Conveyed Property to the Issuer pursuant to the Owner Trust
Purchase Agreement, and the Issuer will pledge the Auto Loans and Other Conveyed
Property to the Indenture Trustee pursuant to the Indenture.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
Prudential and Flagship LLC 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:
"Other Conveyed Property" means, with respect to the Auto Loans:
(i) all right, title and interest of Flagship LLC in and to all
monies received with respect to the Auto Loans after the Cut-off Date
and all Actual Recovery Amounts received with respect to such Auto
Loans after the Cut-off Date;
(ii) all right, title and interest of Flagship LLC in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Auto Loans and any other interest of Flagship LLC in
such Financed Vehicles, including, without limitation, the
certificates of title related thereto;
(iii) all right, title and interest of Flagship LLC in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or
<PAGE>
certificates relating to the Financed Vehicles securing the Auto Loans
or the Obligors thereunder;
(iv) all right, title and interest of Flagship LLC in and to
related contracts, including third party contracts and dealer
agreements;
(v) all right, title and interest of Flagship LLC in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles securing Auto Loans, refunds of unearned premiums
with respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle under
an Auto Loan or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers for any of the foregoing;
(vi) the Loan File related to each Auto Loan;
(vii) all amounts and property from time to time held in or
credited to the Collection Account;
(viii) 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 or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and Auto Loans, instruments
and other property which at any time constitute all or part of or are
included in the proceeds of any of the foregoing;
(ix) the rights of Flagship LLC under the Sale and Servicing
Agreement; and
(x) the proceeds of any and all of the foregoing.
"Purchase Amount" means, with respect to an Auto Loan, the amount, as of
the close of business on the last day of a Collection Period, required to prepay
in full such Auto Loan under the terms thereof including the outstanding
Principal Balance of the related Auto Loans plus all accrued and unpaid interest
and interest to the end of the month of purchase, in the event such Auto Loan
has been repurchased by the Originator, the Seller or by the Servicer pursuant
to the terms of the Transaction Documents.
"Purchaser" means Prudential Securities Secured Financing Corporation.
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"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of November 1, 1999 among Flagship LLC, Flagship Credit Corporation, as
originator and servicer, the Issuer, the Indenture Trustee and the Back-up
Servicer.
"Seller" means Flagship Auto Loan Funding LLC 1999-II.
"Trust" means Flagship Auto Receivables Owner Trust 1999-2, the trust
formed under the Trust Agreement.
"Trust Agreement" shall have the meaning assigned to that term in the Sales
and Servicing Agreement.
"Trust Certificates" means the Certificates issued by the Trust pursuant to
the Trust Agreement.
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 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 Flagship Credit Corporation,
Flagship LLC or any Affiliate thereof 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. 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
Flagship Credit Corporation, Flagship LLC,
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Prudential or of any predecessor or successor of Flagship Credit Corporation,
Flagship LLC or Prudential.
ARTICLE II
CONVEYANCE OF THE AUTO LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Auto Loans and the Other Conveyed Property.
(a) Conveyance. Subject to the terms and conditions of this Agreement,
Flagship LLC hereby sells, contributes, transfers, assigns and otherwise conveys
to Prudential, without recourse (but without limitation of its obligations in
this Agreement), and Prudential hereby purchases and accepts, all right, title
and interest of Flagship LLC in and to the Auto Loans listed in Schedule A and
the Other Conveyed Property with respect thereto. It is the intention of
Flagship LLC and Prudential that the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Auto Loans and the Other Conveyed
Property from Flagship LLC to Prudential and the beneficial interest in and
title to the Auto Loans and the Other Conveyed Property shall not be part of
Flagship LLC's estate in the event of the filing of a bankruptcy petition by or
against Flagship LLC under any bankruptcy law. If, notwithstanding the intent of
Flagship LLC and Prudential, the transfer and assignment contemplated hereby is
held not to be a sale and/or contribution, Flagship LLC hereby grants a first
priority security interest to Prudential in the property conveyed pursuant to
this Section 2.1(a), and this Agreement shall be construed so as to further such
intent.
(b) Auto Loans Purchase Amount. Simultaneously with the conveyance of the
Auto Loans and the Other Conveyed Property with respect thereto by Flagship LLC
to Prudential, on the Closing Date, Prudential shall (i) pay to Flagship LLC
$249,062,500.00, and (ii) after giving full effect to the transactions
contemplated by the Owner Trust Purchase Agreement and the conveyance of
property thereunder, sell, assign, transfer, set over and otherwise convey unto
Flagship LLC, without recourse, all of its right, title and interest (legal and
beneficial) in, to and with respect to the Trust Certificates, the Trust
Agreement, the Trust or in property conveyed to the Trust and any and all legal
or equitable rights, choses in action, interests and other forms of property of
any nature whatsoever (if any remain) relating to the Trust and the Trust's
property, such conveyance to be in the form attached as Schedule C.
SECTION 2.2. Optional Purchase of All Auto Loans
(a) (i) On the last day of any Collection Period as of which the
outstanding aggregate principal balance of the Notes shall be less than or equal
to 10% of the initial aggregate principal balance of the Notes, Flagship LLC
shall have the option to purchase all remaining Auto Loans from the Issuer (with
the consent of the Insurer if such purchase would result in a claim on the
Policy or would result in any amount owing to the Insurer under the Insurance
Agreement remaining unpaid).
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To exercise such option, Flagship LLC shall (subject to the proviso below)
deposit in the Collection Account an amount equal to the aggregate Purchase
Amount for such Auto Loans (including Charged-off Auto Loans), plus the
appraised value of any other property held by the Issuer, such value to be
determined by an appraiser mutually agreed upon by Flagship LLC, the Insurer and
the Indenture Trustee, and shall succeed to all interests in and to the Issuer;
provided, however, that the amount to be paid for such purchase shall be
sufficient to pay the full amount of principal and interest, if any, then due
and payable on the Notes and all amounts due to the Insurer under the
Transaction Documents.
(b) Notice of the optional purchase of all the Auto Loans shall be given by
Flagship LLC to the Issuer, the Indenture Trustee, the Depositor, the Insurer
and the Rating Agencies.
SECTION 2.3. Conditions to Depositor's Obligations. It shall be a condition
to the obligations of the Depositor hereunder that all of the conditions to the
obligations of the Underwriter under the Underwriting Agreement shall have been
satisfied.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Flagship LLC as Seller. By
its execution of this Agreement, Flagship LLC makes the following
representations and warranties on which Prudential relies in purchasing the Auto
Loans and the Other Conveyed Property with respect thereto and in transferring
the Auto Loans and the Other Conveyed Property with respect thereto to the
Issuer under the Owner Trust Purchase Agreement. Unless otherwise specified,
such representations and warranties speak as of the Closing Date, but shall
survive the sale, contribution, transfer and assignment of the Auto Loans and
the Other Conveyed Property hereunder, and the sale, transfer and assignment
thereof by Prudential to the Issuer under the Owner Trust Purchase Agreement,
and the subsequent pledge thereof by the Issuer to the Indenture Trustee under
the Indenture. Flagship LLC and Prudential agree that Prudential will assign to
the Issuer all of Prudential's rights and interests under the Agreement and the
Issuer will pledge all of such interests to the Indenture Trustee, and that the
Indenture Trustee will thereafter be entitled to enforce this Agreement directly
against Flagship LLC in the Indenture Trustee's own name on behalf of the
Noteholders and the Insurer.
(a) Organization and Good Standing. Flagship LLC has been duly organized
and is validly existing as a limited liability company in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the Auto Loans
and the Other Conveyed Property transferred to Prudential.
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(b) Due Qualification. Flagship LLC 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 qualifications, in each case,
except where failure to do so will not have a material adverse effect on
Flagship LLC or its ability to perform its obligations under this Agreement.
(c) Power and Authority. Flagship LLC has the power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party and to carry out its terms and their terms, respectively; Flagship LLC
has full power and authority to sell and assign the Auto Loans and the Other
Conveyed Property to be sold and assigned to and deposited with Prudential
hereunder and has duly authorized such sale and assignment to Prudential by all
necessary corporate action; and the execution, delivery and performance of this
Agreement and the Transaction Documents to which Flagship LLC is a party have
been duly authorized by Flagship LLC by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Auto Loans and the Other Conveyed Property,
enforceable against Flagship LLC and creditors of and purchasers from Flagship
LLC; and this Agreement and the Transaction Documents to which Flagship LLC is a
party, when duly executed and delivered, shall constitute legal, valid and
binding obligations of Flagship LLC 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents and the fulfillment of the terms of this
Agreement and the Transaction Documents 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 certificate of formation or
LLC agreement of Flagship LLC, or any indenture, agreement, mortgage, deed of
trust or other instrument to which Flagship LLC is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than the Transaction Documents, or
violate any law, order, rule or regulation applicable to Flagship LLC of any
court or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Flagship LLC or any of its
properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to Flagship LLC's knowledge, threatened against Flagship LLC, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over Flagship LLC or its properties (A)
asserting the invalidity of this Agreement, the Notes or any of the Transaction
Documents, (B) seeking to prevent the issuance of the Notes or the consummation
of
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any of the transactions contemplated by this Agreement or any of the Transaction
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by Flagship LLC of its obligations under, or
the validity or enforceability of, this Agreement or any of the Transaction
Documents, or (D) relating to Flagship LLC and which might adversely affect the
federal or state income, excise, franchise or similar tax attributes of the
Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Tax Returns. Flagship LLC has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The chief executive office of Flagship LLC is
at 1 International Plaza, Philadelphia, Pennsylvania 19113.
SECTION 3.2. Representations and Warranties of Prudential as Purchaser. By
its execution of this Agreement, Prudential makes the following representations
and warranties on which Flagship LLC relies in selling, assigning, transferring
and conveying the Auto Loans and the Other Conveyed Property to Prudential
hereunder. Unless otherwise specified, such representations and warranties speak
as of the Closing Date, but shall survive the sale, contribution, transfer and
assignment of the Auto Loans and the Other Conveyed Property hereunder, and the
sale, transfer and assignment thereof by Prudential to Prudential and the sale,
transfer and assignment thereof by Prudential to the Issuer under the Owner
Trust Purchase Agreement, and the pledge thereof by the Issuer to the Indenture
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. Prudential has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Auto Loans and the Other
Conveyed Property transferred hereunder.
(b) Due Qualification. Prudential 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 qualifications, in each case,
except where failure to do so will not have a material adverse effect on
Prudential or its ability to perform its obligations under this Agreement.
(c) Power and Authority. Prudential has the power and authority to execute
and deliver this Agreement and the Transaction Documents to which it is a party
and to carry out its terms and
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their terms, respectively; Prudential has full power and authority to acquire
the Auto Loans and the Other Conveyed Property to be sold and assigned to and
deposited with the Issuer by it; and the execution, delivery and performance of
this Agreement and the Transaction Documents to which Prudential is a party have
been duly authorized by Prudential by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Auto Loans and the Other Conveyed Property,
enforceable against Prudential and creditors of and purchasers from Prudential;
and this Agreement and the Transaction Documents to which Prudential is a party,
when duly executed and delivered, shall constitute legal, valid and binding
obligations of Prudential 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents and the fulfillment of the terms of this
Agreement and the Transaction Documents 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 certificate of incorporation
or by-laws of Prudential, or any indenture, agreement, mortgage, deed of trust
or other instrument to which Prudential is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than the Transaction Documents, or violate any law,
order, rule or regulation applicable to Prudential of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Prudential or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to Prudential's knowledge, threatened against Prudential, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over Prudential or its properties (A)
asserting the invalidity of this Agreement, the Notes or any of the Transaction
Documents, (B) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the
Transaction Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by Prudential of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Transaction Documents, or (D) relating to Prudential and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
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(h) Tax Returns. Prudential has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The chief executive office of Prudential is at
One New York Plaza, 14th Floor, New York, New York 10292.
In the event of any breach of a representation and warranty made by Prudential
hereunder, Flagship LLC covenants and agrees that Flagship LLC 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 Issuer, or any obligations, notes or other securities
issued by Prudential have been paid in full. Flagship LLC and Prudential agree
that damages will not be an adequate remedy for such breach and that this
covenant may be specifically enforced by Prudential or by the Indenture Trustee
on behalf of the Noteholders and the Insurer.
ARTICLE IV
COVENANTS OF FLAGSHIP LLC
SECTION 4.1. Protection of Title of Prudential and the Trust.
(a) Flagship LLC 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 Prudential under this Agreement, and of the Trust and the Indenture
Trustee under the Indenture and the Sales and Servicing Agreement, in the Auto
Loans and the Other Conveyed Property, and in the proceeds thereof. Flagship LLC
shall deliver (or cause to be delivered) to Prudential, the Owner Trustee, the
Insurer and the Indenture Trustee 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 Flagship LLC
fails to perform its obligations under this subsection, Prudential, the Owner
Trustee or the Indenture Trustee may do so, at the expense of Flagship LLC.
(b) Flagship LLC shall not change its name, identity or corporate structure
in any manner that would make any financing statement or continuation statement
filed by Flagship LLC (or by Prudential, the Trust or the Indenture Trustee on
behalf of Flagship LLC ) in accordance with Section 4.1(a) seriously misleading
within the meaning of the applicable provisions of the UCC or any title statute,
unless Flagship LLC shall have given Prudential, the Owner Trustee, the Insurer
and the Indenture Trustee at least 30 days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
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(c) Flagship LLC shall give Prudential, the Owner Trustee, the Insurer and
the Indenture Trustee at least 30 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. Flagship LLC shall at all times maintain each office from which it
services Auto Loans and its principal executive office within the United States
of America.
(d) If at any time Flagship LLC proposes to sell, grant a security interest
in, or otherwise transfer any interest in automotive receivables (other than the
Auto Loans) to any prospective purchaser, lender or other transferee, Flagship
LLC 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 Auto Loan,
indicate clearly that such Auto Loan is owned by the Trust and pledged to the
Indenture Trustee (unless such Auto Loan has been paid in full or purchased).
(e) Promptly after taking the foregoing actions described in Sections
4.1(b) or (c), Flagship LLC shall deliver to the Indenture Trustee, the Insurer
and the Owner Trustee 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 Auto Loans and the Other Conveyed
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. Flagship LLC 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 Auto Loans, except for the Lien in favor of
Prudential, the Lien in favor of the Issuer, 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 Transaction Documents or (ii) sign or file
under the UCC of any jurisdiction any financing statement that names Flagship
LLC, the Issuer or Prudential as a debtor, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement,
with respect to the Auto Loans, except in each case any such instrument solely
securing the rights and preserving the Lien of Prudential, the Lien of the
Issuer 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
Transaction Documents.
SECTION 4.3. Costs and Expenses. Flagship LLC shall pay all reasonable
costs and disbursements in connection with the performance of its obligations
hereunder and under the Sales and Servicing Agreement and its Transaction
Documents.
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ARTICLE V
MISCELLANEOUS
SECTION 5.1. Liability of Flagship LLC. Flagship LLC shall be liable in
accordance herewith only to the extent of the obligations of this Agreement
specifically undertaken by Flagship LLC and its representations and warranties.
SECTION 5.2. Merger or Consolidation of Flagship LLC. Flagship LLC shall
not merge or consolidate with any other Person or permit any other Person to
become the successor to all or substantially all of Flagship LLC's business or
assets unless the Insurer has given its prior written consent and any such
successor corporation shall execute an agreement of assumption of every
obligation of Flagship LLC under its Transaction Documents and, whether or not
such assumption agreement is executed, shall be the successor to Flagship LLC
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). Flagship LLC
shall provide prompt notice of any merger, consolidation or succession pursuant
to this Section 5.2 to the Owner Trustee, the Indenture Trustee, the Insurer and
each Rating Agency. Notwithstanding the foregoing, Flagship LLC shall not merge
or consolidate with any other Person or permit any other Person to become a
successor to Flagship LLC'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); (ii) Flagship LLC 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 5.2 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with; and (iii)
Flagship LLC 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 Prudential, the Issuer and
the Indenture Trustee in the Auto Loans or (B) no such action shall be necessary
to preserve and protect such interest.
SECTION 5.3. Limitation on Liability of Flagship LLC and Others. Flagship
LLC and any director or officer or employee or agent of Flagship LLC 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. Flagship LLC shall not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 5.4. Conveyance of the Auto Loans and the Other Conveyed Property
to the Issuer. Flagship LLC acknowledges that Prudential intends, pursuant to
the Owner Trust Purchase Agreement, to convey the Auto Loans and the Other
Conveyed Property, together with its respective
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rights under this Agreement, to the Issuer on the date hereof. Flagship LLC
acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of
Flagship LLC contained in this Agreement, and the rights of Prudential
hereunder, are intended to benefit the Indenture Trustee, the Trust, the
Noteholders and the Insurer. In furtherance of the foregoing, Flagship LLC
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, Flagship LLC shall be directly liable to the
Indenture Trustee, the Insurer and the Trust (notwithstanding any failure by the
Servicer, the Backup Servicer or Prudential 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 Flagship LLC under this Agreement against Flagship LLC for the benefit of the
Trust, the Noteholders and the Insurer, respectively.
SECTION 5.5. Amendment.
(a) This Agreement may be amended by Flagship LLC and Prudential without
the consent of any of the Certificateholder or the Noteholders, but with the
consent of the Insurer, (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,
that any such action under this clause (iii) shall not, as evidenced by an
Opinion of Counsel delivered to the Owner Trustee, the Indenture Trustee, the
Insurer and each Rating Agency, adversely affect in any material respect the
interests of the Noteholders or the Insurer.
(b) This Agreement may also be amended from time to time by Flagship LLC
and Prudential with the consent of the Insurer and a Note Majority (which
consent of any Holder of a Note given pursuant to this Section 5.5(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 Auto Loans, payments that shall be required to be made on any Note,
the interest rate payable on any Note, or (ii) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.
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(c) Prior to the execution of any such amendment or consent under Section
5.5(a) or (b), Flagship LLC shall furnish five days prior written notification
of such amendment or consent to each Rating Agency and the Insurer.
(d) Promptly after the execution of any such amendment or consent under
Section 5.5(b), the Indenture Trustee shall furnish a copy of such amendment or
consent to the Insurer and each Noteholder.
(e) It shall not be necessary for the consent of Noteholders pursuant to
Section 5.5(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 the Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe.
SECTION 5.6. 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 at the address set forth in Section 9.4 of the Sales and Servicing
Agreement. 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 5.7. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement, the Sales and Servicing Agreement and the
Transaction 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 Sales and Servicing Agreement and the
Transaction Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 5.8. 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 5.9. 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.
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SECTION 5.10. 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 5.11. Nonpetition Covenant. Until one year and one day following
the payment in full of all amounts due in respect of the Notes, Flagship LLC
shall not petition or otherwise invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against Prudential
under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of Prudential or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of Prudential.
SECTION 5.12. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 5.2, this Agreement
may not be assigned by Flagship LLC or Prudential.
SECTION 5.13. Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this Article
V, no other Person shall have any right or obligation hereunder except that the
Insurer and the Indenture Trustee shall be express third party beneficiaries of
this Agreement entitled to enforce the provisions hereof as if each were a party
hereto. Nothing in this Agreement, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder and permitted
assigns, any benefit or any legal or equitable right, remedy or claim under this
Agreement.
SECTION 5.14. 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, 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.
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IN WITNESS WHEREOF, the parties have caused this Depositor Purchase
Agreement to be duly executed by their respective officers, effective as of the
day and year first above written.
FLAGSHIP AUTO LOAN FUNDING LLC 1999-
II, as Seller
By:
---------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Purchaser
By:
---------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
SCHEDULE OF AUTO LOANS
On file with the Indenture Trustee.
A-1
<PAGE>
SCHEDULE B
LEGAL PROCEEDINGS
None.
B-1
<PAGE>
SCHEDULE C
ASSIGNMENT
For value received, in accordance with and subject to the Depositor
Purchase Agreement dated as of November 1, 1999 (the "Depositor Purchase
Agreement"), between the undersigned and Flagship Auto Loan Funding LLC 1999-II
("Flagship LLC"), and after giving full effect to the transactions contemplated
by the Owner Trust Purchase Agreement and the conveyance of property thereunder,
the undersigned does hereby sell, assign, transfer, set over and otherwise
convey unto the Seller, without recourse, all of its right, title and interest
(legal and beneficial) in, to and with respect to the Trust Certificates, the
Trust Agreement, the Trust or in property conveyed to the Trust and any and all
legal or equitable rights, choses in action, interests and other forms of
property of any nature whatsoever (if any remain) relating to the Trust and the
Trust's property.
Capitalized terms not defined herein have the meanings set forth in the
Depositor Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed as of November 24, 1999.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
By:
------------------------------------
Name:
Title:
C-2
OWNER TRUST PURCHASE AGREEMENT
between
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
as Seller
and
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2
as Purchaser
----------------------------
Dated as of November 1, 1999
----------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions....................................................1
SECTION 1.2. Usage of Terms.................................................3
SECTION 1.3. Section References.............................................3
SECTION 1.4. Action by or Consent of Noteholders............................3
SECTION 1.5. No Recourse....................................................3
ARTICLE II
CONVEYANCE OF THE AUTO LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Auto Loans and the Other Conveyed
Property.......................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Prudential as Seller.........4
SECTION 3.2. Representations and Warranties of the Issuer as Purchaser......6
ARTICLE IV
COVENANTS OF PRUDENTIAL
SECTION 4.1. Protection of Title of the Issuer and the Trust................8
SECTION 4.2. Other Liens or Interests.......................................9
SECTION 4.3. Costs and Expenses.............................................9
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Liability of Prudential........................................9
SECTION 5.2. [Reserved]....................................................10
SECTION 5.3. Limitation on Liability of Prudential and Others..............10
SECTION 5.4. Conveyance of the Auto Loans and the Other Conveyed Property
to the Issuer.................................................10
SECTION 5.5. Amendment.....................................................10
SECTION 5.6. Notices.......................................................11
SECTION 5.7. Merger and Integration........................................11
SECTION 5.8. Severability of Provisions....................................11
i
<PAGE>
SECTION 5.9. GOVERNING LAW.................................................12
SECTION 5.10. Counterparts..................................................12
SECTION 5.11. Nonpetition Covenant..........................................12
SECTION 5.12. Assignment....................................................12
SECTION 5.13. Third-Party Beneficiaries.....................................12
SECTION 5.14. Successors and Assigns........................................12
SECTION 5.15. Limitation of Liability.......................................13
SCHEDULE A -- Schedule of Auto Loans
SCHEDULE B -- Legal Proceedings
ii
<PAGE>
OWNER TRUST PURCHASE AGREEMENT, dated as of November 1, 1999 (this
"Agreement"), between Prudential Securities Secured Financing Corporation, a
Delaware corporation, as seller ("Prudential") and Flagship Auto Receivables
Owner Trust 1999-2, a trust, as purchaser (the "Issuer").
WHEREAS, Flagship LLC has purchased the Auto Loans and the Other Conveyed
Property from Flagship Credit Corporation pursuant to the Sales and Servicing
Agreement.
WHEREAS, Prudential has purchased the Auto Loans, the Other Conveyed
Property and the rights of Flagship LLC under the Sales and Servicing Agreement
from Flagship LLC.
WHEREAS, Prudential will sell, transfer and assign its interest in the Auto
Loans, the Other Conveyed Property and its rights under the Depositor Purchase
Agreement to the Issuer pursuant to this Agreement, and the Issuer will pledge
the Auto Loans and Other Conveyed Property to the Indenture Trustee pursuant to
the Indenture.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
Prudential and the Issuer 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 Sales and Servicing Agreement (as
defined below). Whenever capitalized and used in this Agreement, the following
words shall have the following meanings:
"Certificate" has the meaning assigned to that term in the Trust Agreement.
"Flagship LLC" means Flagship Auto Loan Funding LLC 1999-II.
"Other Conveyed Property" means, with respect to the Auto Loans:
(i) all right, title and interest of Prudential in and to all
monies received with respect to the Auto Loans after the Cut-off Date
and all Actual Recovery Amounts received with respect to such Auto
Loans after the Cut-off Date;
(ii) all right, title and interest of Prudential in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Auto Loans and any other interest of Prudential in
such Financed Vehicles, including, without limitation, the
certificates of title related thereto;
<PAGE>
(iii) all right, title and interest of Prudential in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles securing the Auto Loans or the Obligors thereunder;
(iv) all right, title and interest of Prudential in and to
related contracts, including third party contracts and dealer
agreements;
(v) all right, title and interest of Prudential in and to refunds
for the costs of extended service contracts with respect to Financed
Vehicles securing Auto Loans, refunds of unearned premiums with
respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle under
an Auto Loan or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers for any of the foregoing;
(vi) the Loan File related to each Auto Loan;
(vii) all amounts and property from time to time held in or
credited to the Collection Account;
(viii) 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 or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and Auto Loans, instruments
and other property which at any time constitute all or part of or are
included in the proceeds of any of the foregoing;
(ix) the rights of Prudential under the Depositor Purchase
Agreement, including (without limitation) the rights of Flagship LLC
under the Sales and Servicing Agreement; and
(x) the proceeds of any and all of the foregoing.
"Purchaser" means Flagship Auto Receivables Owner Trust 1999-2.
"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of November 1, 1999 among Flagship LLC, Flagship Credit Corporation, as
originator and servicer, the Issuer, the Indenture Trustee and the Back-up
Servicer.
"Seller" means Prudential Securities Secured Financing Corporation.
2
<PAGE>
"Trust Agreement" means the trust agreement, dated as of November 1, 1999,
by and between Prudential Securities Secured Financing Corporation and First
Union National Bank, relating to Flagship Auto Receivables Owner Trust 1999-2,
as the same may be amended, supplemented, and/or restated in accordance with its
terms.
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 Sales 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 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 Flagship Credit Corporation,
Flagship LLC or any Affiliate thereof 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. 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
Flagship Credit Corporation, Prudential, the Issuer or of any predecessor or
successor of Flagship Credit Corporation, Prudential or the Issuer.
ARTICLE II
CONVEYANCE OF THE AUTO LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Auto Loans and the Other Conveyed Property.
(a) Conveyance. Subject to the terms and conditions of this Agreement,
Prudential hereby sells, contributes, transfers, assigns and otherwise conveys
to the Issuer, without recourse (but without limitation of its obligations in
this Agreement), and the Issuer hereby purchases and accepts,
3
<PAGE>
all right, title and interest of Prudential in and to the Auto Loans listed in
Schedule A and the Other Conveyed Property with respect thereto. It is the
intention of Prudential and the Issuer that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Auto Loans and the
Other Conveyed Property from Prudential to the Issuer and the beneficial
interest in and title to the Auto Loans and the Other Conveyed Property shall
not be part of Prudential's estate in the event of the filing of a bankruptcy
petition by or against Prudential under any bankruptcy law. If, notwithstanding
the intent of Prudential and the Issuer, the transfer and assignment
contemplated hereby is held not to be a sale and/or contribution, Prudential
hereby grants a first priority security interest to the Issuer in the property
conveyed pursuant to this Section 2.1(a), and this Agreement shall be construed
so as to further such intent.
(b) Auto Loans Purchase Amount. Simultaneously with the conveyance of the
Auto Loans and the Other Conveyed Property with respect thereto by Prudential to
the Issuer, on the Closing Date, the Issuer shall transfer to Prudential the
Notes issued under the Indenture and the Certificates issued under the Trust
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Prudential as Seller. By its
execution of this Agreement, Prudential makes the following representations and
warranties on which the Issuer relies in purchasing the Auto Loans and the Other
Conveyed Property with respect thereto and in pledging the Auto Loans and the
Other Conveyed Property with respect thereto to the Indenture Trustee under the
Indenture. Unless otherwise specified, such representations and warranties speak
as of the Closing Date, but shall survive the sale, contribution, transfer and
assignment of the Auto Loans and the Other Conveyed Property hereunder, and the
subsequent pledge thereof by the Issuer to the Indenture Trustee under the
Indenture. Prudential and the Issuer agree that the Issuer will pledge all of
such interests to the Indenture Trustee, and that the Indenture Trustee will
thereafter be entitled to enforce this Agreement directly against Prudential in
the Indenture Trustee's own name on behalf of the Noteholders and the Insurer.
(a) Organization and Good Standing. Prudential has been duly organized and
is validly existing as a Delaware corporation in good standing under the laws of
the State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Auto Loans and the Other
Conveyed Property transferred to the Issuer.
(b) Due Qualification. Prudential 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 qualifications, in each case,
except where failure to do so will not have a material adverse effect on
Prudential or its ability to perform its obligations under this Agreement.
4
<PAGE>
(c) Power and Authority. Prudential has the power and authority to execute
and deliver this Agreement and the Transaction Documents to which it is a party
and to carry out its terms and their terms, respectively; Prudential has full
power and authority to sell and assign the Auto Loans and the Other Conveyed
Property to be sold and assigned to and deposited with the Issuer hereunder and
has duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
and the Transaction Documents to which Prudential is a party have been duly
authorized by Prudential by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Auto Loans and the Other Conveyed Property,
enforceable against Prudential and creditors of and purchasers from Prudential;
and this Agreement and the Transaction Documents to which Prudential is a party,
when duly executed and delivered, shall constitute legal, valid and binding
obligations of Prudential 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents and the fulfillment of the terms of this
Agreement and the Transaction Documents 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 certificate of incorporation
or by-laws of Prudential, or any indenture, agreement, mortgage, deed of trust
or other instrument to which Prudential is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than the Transaction Documents, or violate any law,
order, rule or regulation applicable to Prudential of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Prudential or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to Prudential's knowledge, threatened against Prudential, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over Prudential or its properties (A)
asserting the invalidity of this Agreement, the Notes or any of the Transaction
Documents, (B) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the
Transaction Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by Prudential of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Transaction Documents, or (D) relating to Prudential and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Notes.
5
<PAGE>
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Tax Returns. Prudential has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The chief executive office of Prudential is One
New York Plaza, 14th Floor, New York, NY 10292.
SECTION 3.2. Representations and Warranties of the Issuer as Purchaser. By
its execution of this Agreement, the Issuer makes the following representations
and warranties on which Prudential relies in selling, assigning, transferring
and conveying the Auto Loans and the Other Conveyed Property to the Issuer
hereunder. Unless otherwise specified, such representations and warranties speak
as of the Closing Date, but shall survive the sale, contribution, transfer and
assignment of the Auto Loans and the Other Conveyed Property hereunder, and the
pledge thereof by the Issuer to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Issuer has been duly organized and
is validly existing as a trust in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Auto Loans and the Other Conveyed
Property transferred hereunder.
(b) Due Qualification. The Issuer 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 qualifications, in each case,
except where failure to do so will not have a material adverse effect on the
Issuer or its ability to perform its obligations under this Agreement.
(c) Power and Authority. The Issuer has the power and authority to execute
and deliver this Agreement and the Transaction Documents to which it is a party
and to carry out its terms and their terms, respectively; the Issuer has full
power and authority to acquire the Auto Loans and the Other Conveyed Property to
be sold and assigned to and deposited with the Issuer by it; and the execution,
delivery and performance of this Agreement and the Transaction Documents to
which the Issuer is a party have been duly authorized by the Issuer by all
necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid sale,
transfer and assignment of the Auto Loans and the Other Conveyed Property,
enforceable against the Issuer and creditors of and purchasers from the Issuer;
and this Agreement and the Transaction Documents to which the Issuer is a party,
when duly executed and delivered, shall constitute legal, valid and
6
<PAGE>
binding obligations of the Issuer 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.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents and the fulfillment of the terms of this
Agreement and the Transaction Documents 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 Trust Agreement, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Issuer is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, other
than the Transaction Documents, or violate any law, order, rule or regulation
applicable to the Issuer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Issuer or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending or,
to the Issuer's knowledge, threatened against the Issuer, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Issuer or its properties (A)
asserting the invalidity of this Agreement, the Notes or any of the Transaction
Documents, (B) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the
Transaction Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Issuer of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Transaction Documents, or (D) relating to the Issuer and which might adversely
affect the federal or state income, excise, franchise or similar tax attributes
of the Notes.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Notes or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) Tax Returns. The Issuer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such taxes
have become due.
(i) Chief Executive Office. The chief executive office of the Issuer is at
c/o First Union National Bank, One Rodney Square, 920 King Street, Wilmington,
Delaware 19801.
In the event of any breach of a representation and warranty made by the Issuer
hereunder, Prudential covenants and agrees that Prudential 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
7
<PAGE>
formed by the Issuer, or any obligations, notes or other securities issued by
the Issuer have been paid in full. Prudential and the Issuer agree that damages
will not be an adequate remedy for such breach and that this covenant may be
specifically enforced by the Issuer or by the Indenture Trustee on behalf of the
Noteholders and the Insurer.
ARTICLE IV
COVENANTS OF PRUDENTIAL
SECTION 4.1. Protection of Title of the Issuer and the Trust.
(a) Prudential 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 Issuer under this Agreement, and of the Trust and the Indenture
Trustee under the Indenture and the Sales and Servicing Agreement, in the Auto
Loans and the Other Conveyed Property, and in the proceeds thereof. Prudential
shall deliver (or cause to be delivered) to the Issuer, the Owner Trustee, the
Insurer and the Indenture Trustee 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 Prudential
fails to perform its obligations under this subsection, the Issuer, the Owner
Trustee or the Indenture Trustee may do so, at the expense of Prudential.
(b) Prudential shall not change its name, identity or corporate structure
in any manner that would make any financing statement or continuation statement
filed by Prudential (or by the Issuer, the Trust or the Indenture Trustee on
behalf of Prudential ) in accordance with Section 4.1(a) seriously misleading
within the meaning of the applicable provisions of the UCC or any title statute,
unless Prudential shall have given the Issuer, the Owner Trustee, the Insurer
and the Indenture Trustee at least 30 days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Prudential shall give the Issuer, the Owner Trustee, the Insurer and
the Indenture Trustee at least 30 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. Prudential shall at all times maintain each office from which it
services Auto Loans and its principal executive office within the United States
of America.
(d) If at any time Prudential proposes to sell, grant a security interest
in, or otherwise transfer any interest in automotive receivables (other than the
Auto Loans) to any prospective purchaser, lender or other transferee, Prudential
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 Auto Loan, indicate clearly
that such Auto
8
<PAGE>
Loan is owned by the Trust and pledged to the Indenture Trustee (unless such
Auto Loan has been paid in full or purchased).
(e) Promptly after taking the foregoing actions described in Sections
4.1(b) or (c), Prudential shall deliver to the Indenture Trustee, the Insurer
and the Owner Trustee 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 Auto Loans and the Other Conveyed
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. Prudential 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 Auto Loans, except for the Lien in its favor, the
Lien in favor of the Issuer, 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 Transaction Documents or (ii) sign or file under
the UCC of any jurisdiction any financing statement that names Prudential,
Flagship LLC or the Issuer as a debtor, or sign any security agreement
authorizing any secured party thereunder to file any such financing statement,
with respect to the Auto Loans, except in each case any such instrument solely
securing the rights and preserving its Lien, the Lien of the Issuer 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 Transaction Documents.
SECTION 4.3. Costs and Expenses. Prudential shall pay all reasonable costs
and disbursements in connection with the performance of its obligations
hereunder and under the Sales and Servicing Agreement and its Transaction
Documents.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Liability of Prudential. Prudential shall be liable in
accordance herewith only to the extent of the obligations of this Agreement
specifically undertaken by Prudential and its representations and warranties.
SECTION 5.2. [Reserved]
SECTION 5.3. Limitation on Liability of Prudential and Others. Prudential
and any director or officer or employee or agent of Prudential 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. Prudential shall not be under any obligation
9
<PAGE>
to appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 5.4. Conveyance of the Auto Loans and the Other Conveyed Property
to the Issuer. Prudential acknowledges that the Issuer intends, pursuant to the
Indenture, to convey the Auto Loans and the Other Conveyed Property, together
with its respective rights under this Agreement, to the Indenture Trustee on the
date hereof. Prudential acknowledges and consents to such conveyance and waives
any further notice thereof and covenants and agrees that the representations and
warranties of Prudential contained in this Agreement, and the rights of the
Issuer hereunder, are intended to benefit the Indenture Trustee, the Trust, the
Noteholders and the Insurer. In furtherance of the foregoing, Prudential
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, Prudential shall be directly liable to the Indenture
Trustee, the Insurer and the Trust (notwithstanding any failure by the Servicer,
the Backup Servicer or the Issuer to perform its duties and obligations
hereunder or under the Sales and Servicing Agreement), and that the Owner
Trustee and the Indenture Trustee may enforce the duties and obligations of
Prudential under this Agreement against Prudential for the benefit of the Trust,
the Noteholders and the Insurer, respectively.
SECTION 5.5. Amendment.
(a) This Agreement may be amended by Prudential and the Issuer without the
consent of any of the Certificateholder or the Noteholders, but with the consent
of the Insurer, (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, that any such
action under this clause (iii) shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee, the Indenture Trustee, the Insurer and each
Rating Agency, adversely affect in any material respect the interests of the
Noteholders or the Insurer.
(b) This Agreement may also be amended from time to time by Prudential and
the Issuer with the consent of the Insurer and a Note Majority (which consent of
any Holder of a Note given pursuant to this Section 5.5(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 Auto
Loans, payments that shall be required to be made on any Note, the interest rate
payable on any Note, or (ii) reduce the aforesaid percentage
10
<PAGE>
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent under Section
5.5(a) or (b), Prudential shall furnish five days prior written notification of
such amendment or consent to each Rating Agency and the Insurer.
(d) Promptly after the execution of any such amendment or consent under
Section 5.5(b), the Indenture Trustee shall furnish a copy of such amendment or
consent to the Insurer and each Noteholder.
(e) It shall not be necessary for the consent of the Noteholders pursuant
to Section 5.5(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 the Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe.
SECTION 5.6. 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 at the address set forth in Section 9.4 of the Sales and Servicing
Agreement. 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 5.7. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement, the Sales and Servicing Agreement and the
Transaction 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 Sales and Servicing Agreement and the
Transaction Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 5.8. 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 5.9. 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
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OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 5.10. 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 5.11. Nonpetition Covenant. Until one year and one day following
the payment in full of all amounts due in respect of the Notes, neither
Prudential nor the Trust shall petition or otherwise invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against the other party, Flagship LLC or Flagship Special Member, Inc. under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 5.12. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in the Transaction Documents,
this Agreement may not be assigned by Prudential or the Issuer.
SECTION 5.13. Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this Article
V, no other Person shall have any right or obligation hereunder except that the
Insurer and the Indenture Trustee shall be express third party beneficiaries of
this Agreement entitled to enforce the provisions hereof as if each were a party
hereto. Nothing in this Agreement, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder and permitted
assigns, any benefit or any legal or equitable right, remedy or claim under this
Agreement.
SECTION 5.14. 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, 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.
SECTION 5.15. Limitation of Liability. Notwithstanding any other provision
herein or elsewhere, this Agreement has been executed and delivered by First
Union National Bank, not in its individual capacity, but solely in its capacity
as Owner Trustee of Flagship Auto Receivables Owner Trust 1999-2 (the "Trust"),
in no event shall First Union National Bank have any liability (except with
respect to its own grossly negligent action or failure to act) in respect of the
representations, warranties, or obligations of the Trust hereunder or under any
other document, as to all if which recourse shall be had solely to the assets of
the Trust, and for all purposes of this Agreement and
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<PAGE>
each other document, First Union National Bank shall be entitled to the benefits
of the Amended and Restated Trust Agreement of the Trust.
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Owner Trust Purchase
Agreement to be duly executed by their respective officers, effective as of the
day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Seller
By:
-----------------------------
Name:
Title:
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2, as Purchaser
By: FIRST UNION NATIONAL BANK,
not in its individual
capacity, but solely as
Owner Trustee
By:
-----------------------------
Name:
Title:
<PAGE>
SCHEDULE A
SCHEDULE OF AUTO LOANS
On file with the Indenture Trustee.
A-1
<PAGE>
SCHEDULE B
LEGAL PROCEEDINGS
None.
B-1
SPREAD ACCOUNT AGREEMENT,
dated as of November 1, 1999,
by and among
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2, as Issuer
MBIA INSURANCE CORPORATION
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee and as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Page
||
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.........................................2
Section 1.02. Rules of Interpretation.............................8
ARTICLE II
THE COLLATERAL
Section 2.01. Grant of Security Interest by the Issuer............8
Section 2.02. Priority............................................9
Section 2.03. Issuer Remains Liable...............................9
Section 2.04. Delivery and Maintenance of Collateral..............9
Section 2.05. Termination and Release of Rights..................10
Section 2.06. Non-Recourse Obligations of Issuer.................11
ARTICLE III
SPREAD ACCOUNT
Section 3.01. Establishment of Spread Account; Initial Deposit into
Spread Account; Maintenance of Spread Account......12
Section 3.02. Investments........................................12
Section 3.03. Payments; Priority of Payments.....................13
Section 3.04. General Provisions Regarding Spread Accounts.......14
Section 3.05. Reports by the Collateral Agent....................15
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers.............................15
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Section 4.02. Performance of Duties..............................16
Section 4.03. Limitation on Liability............................16
Section 4.04. Reliance upon Documents............................17
Section 4.05. Successor Collateral Agent.........................17
Section 4.06. Indemnification....................................19
Section 4.07. Compensation and Reimbursement.....................19
Section 4.08. Representations and Warranties of the Collateral
Agent..............................................19
Section 4.09. Waiver of Setoffs..................................20
Section 4.10. Control by the Controlling Party...................20
ARTICLE V
COVENANTS OF THE ISSUER
Section 5.01. Preservation of Collateral.........................20
Section 5.02. Notices............................................20
Section 5.03. Waiver of Stay or Extension Laws; Marshalling of
Assets.............................................21
Section 5.04. Noninterference, etc...............................21
Section 5.05. Issuer Changes.....................................21
ARTICLE VI
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party...................22
Section 6.02. Controlling Party's Authority......................22
Section 6.03. Rights of Secured Parties..........................23
Section 6.04. Degree of Care.....................................23
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ARTICLE VII
REMEDIES UPON DEFAULT
Section 7.01. Remedies upon a Default............................23
Section 7.02. Waiver of Default..................................24
Section 7.03. Restoration of Rights and Remedies.................24
Section 7.04. No Remedy Exclusive................................24
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Further Assurances.................................24
Section 8.02. Waiver.............................................24
Section 8.03. Amendments; Waivers................................25
Section 8.04. Severability.......................................25
Section 8.05. Nonpetition Covenant...............................25
Section 8.06. Notices............................................26
Section 8.07. Term of this Agreement.............................27
Section 8.08. Assignments; Third-Party Rights; Reinsurance.......28
Section 8.09. Consent of Controlling Party.......................28
Section 8.10. Consents to Jurisdiction...........................28
Section 8.11. Limitation of Liability............................29
Section 8.12. Determination of Adverse Effect....................29
Section 8.13. Headings...........................................29
Section 8.14. TRIAL BY JURY WAIVED...............................29
Section 8.15. Governing Law......................................29
Section 8.16. Counterparts.......................................29
iii
<PAGE>
Section 8.17. Limitation of Liability............................30
||
iv
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SPREAD ACCOUNT AGREEMENT
SPREAD ACCOUNT AGREEMENT, dated as of November 1, 1999 (this "Agreement"),
by and among Flagship Auto Receivables Owner Trust 1999-2, a trust (the
"Issuer"), MBIA Insurance Corporation, a stock insurance company organized and
created under the laws of the State of New York, or its successors in interest
(the "Insurer") and Harris Trust and Savings Bank, an Illinois banking
corporation, in its capacity as indenture trustee (the "Indenture Trustee") and
as collateral agent (the "Collateral Agent" or "Indenture Trustee and Collateral
Agent").
RECITALS
1. Flagship Auto Receivables Owner Trust 1999-2, (the "Issuer") was formed
pursuant to a Trust Agreement, dated as of November 1, 1999 (the "Trust
Agreement"), by and between Prudential Securities Secured Financing Corporation
("Prudential"), as depositor and First Union National Bank, as owner trustee.
2. Pursuant to the Sales and Servicing Agreement dated as of November 1,
1999 (the "Sales and Servicing Agreement") by and among Flagship Auto Loan
Funding LLC 1999-II, a Delaware limited liability company, as purchaser
("Flagship LLC"), Flagship Credit Corporation, as originator and servicer
("Flagship"), the Issuer, Harris Trust and Savings Bank, an Illinois banking
corporation, as indenture trustee (the "Indenture Trustee") and Copelco
Financial Services Group, Inc., as Back-up Servicer (the "Back-up Servicer"),
Flagship sold to Flagship LLC all of its right, title and interest in and to the
Auto Loans (as defined therein) and Other Conveyed Property (as defined therein)
that comprise the Series Pool (as defined therein).
3. Pursuant to the Depositor Purchase Agreement dated as of November 1,
1999 (the "Depositor Purchase Agreement") by and between Flagship LLC, as seller
and Prudential, as purchaser, Flagship LLC sold to Prudential all of its right,
title and interest in and to the Auto Loans and the Other Conveyed Property that
comprise the Series Pool and the rights of Flagship LLC under the Sales and
Servicing Agreement.
4. Pursuant to the Owner Trust Purchase Agreement dated as of November 1,
1999 (the "Owner Trust Purchase Agreement") by and between Prudential, as seller
and the Issuer, as purchaser, Prudential sold to the Issuer all of its rights,
title and interest in and to the Auto Loans and the Other Conveyed Property that
comprise the Series Pool and all of the rights of Prudential under the Depositor
Purchase Agreement.
5. Pursuant to the Indenture dated as of November 1, 1999 (the "Indenture")
by and among the Issuer, the Indenture Trustee and Flagship, as servicer, the
Issuer pledged all of its right, title and interest in and to the Series Pool
(as defined in the Indenture) to the Indenture Trustee on behalf of the
Noteholders (as defined in the Indenture).
6. The Issuer and Flagship requested that the Insurer issue the Policy (as
defined
<PAGE>
in the Indenture) to the Indenture Trustee to guarantee payment of the Insured
Payments (as defined in the Policy) on each Payment Date (as defined in the
Indenture), in respect of the Notes (as defined in the Indenture).
7. In partial consideration of the issuance of the Policy, the Issuer,
Flagship and the Servicer have agreed that the Insurer shall have certain rights
as Controlling Party, to the extent set forth in the Transaction Documents, with
respect to the Series Pool.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless defined in this Agreement, capitalized
terms used in this Agreement shall have the meaning assigned to such terms in
the Sales and Servicing Agreement or the Indenture, as identifiable from the
context in which such term is used. The following terms shall have the following
respective meanings:
"Actual Recovery Amounts" with respect to a Charged-off Auto Loan, proceeds
from the sale of the related Financed Vehicle, proceeds of the related insurance
policy, proceeds from any dealer agreements and any other recoveries with
respect to such Charged-off Auto Loan and the related Financed Vehicle, net of
reasonable and customary out-of-pocket expenses and amounts so received that are
required to be refunded to the Obligor on such Auto Loan.
"Authorized Officer" has the meaning assigned to such term in the
Indenture.
"Charged-off Auto Loan" means, with respect to an Auto Loan, the earliest
to occur of the following: (i) 10% or more of any Scheduled Payment on such Auto
Loan is 123 days or more delinquent as of the end of such Collection Period,
(ii) the related vehicle has been repossessed and sold or (iii) substantially
all of the payments thereunder are deemed uncollectible by the Servicer.
"Collateral" has the meaning assigned to such term in Section 2.01 hereof.
"Collateral Agent" means, initially Harris Trust and Savings Bank, in its
capacity as collateral agent on behalf of the Secured Parties, including its
successors in interest, until a successor Person shall have become the
Collateral Agent pursuant to Section 4.05 hereof, and thereafter "Collateral
Agent" shall mean such successor Person.
"Collection Account" has the meaning assigned to such term in the
Indenture.
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"Controlling Party" means the Person designated as the Controlling Party at
such time pursuant to Section 6.01 hereof.
"Cram Down Loss" means with respect to an Auto Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on an Auto Loan or otherwise modifying or restructuring
payments to be made on an Auto Loan, an amount equal to such reduction in
principal balance of such Auto Loan or the reduction in the net present value
(using as the discount rate the lower of the contract rate or the rate of
interest specified by the court in such order) of the payments as so modified or
restructured. A Cram Down Loss shall be deemed to have occurred on the date such
order is entered.
"Cumulative Net Loss Rate" means, as of any Determination Date, the
quotient of the aggregate amount of Net Losses with respect to the Auto Loans
from the Cutoff Date to the last day of the related Collection Period, divided
by the Initial Portfolio Balance.
"Default" means (i) if the Insurer is then the Controlling Party, any
Insurance Agreement Indicator and (ii) if the Indenture Trustee is then the
Controlling Party, any Event of Default under Section 7.01 of the Indenture.
"Deficiency Claim Amount" has the meaning assigned to such term in the
Indenture.
"Deficiency Notice" has the meaning assigned to such term in the Indenture.
"Delinquency Ratio"means the aggregate Principal Balance of Auto Loans with
part or all of one or more contractual payments 31 days or more past due as of
the last day of the related Collection Period (other than Charged-off Auto Loans
and, from and after the 25th Collection Period, Auto Loans for which the related
Obligor has paid during the preceding six Collection Periods an aggregate amount
not less than the sum of six monthly payments) expressed as a percentage of the
Outstanding Portfolio Balance as of the last day of the related Collection
Period.
"Delivery" has the meaning assigned to such term in the Sales and Servicing
Agreement.
"Draw Date" means with respect to any Payment Date, the third Business Day
immediately preceding such Payment Date.
"Eligible Account" has the meaning assigned to such term in the Indenture.
"Eligible Investments" has the meaning assigned to such term in the
Indenture.
"Final Termination Date" means the date that is the later of (i) the
Insurer Termination Date and (ii) the Indenture Trustee Termination Date.
"Holder" shall have the meaning specified in the Indenture.
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"Indenture" means the Indenture dated as of November 1, 1999, among the
Issuer, the Servicer and the Indenture Trustee.
"Indenture Trustee" means Harris Trust and Savings Bank, not in its
individual capacity but as Indenture Trustee under the Indenture, or any
successor Indenture Trustee under the Indenture.
"Indenture Trustee and Collateral Agent Fee" has the meaning assigned to
such term in the Indenture.
"Indenture Trustee Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Indenture Trustee or
the Noteholders under the Indenture.
"Indenture Trustee Termination Date" means the date which is the latest of
(i) the date on which the Indenture Trustee shall have received, as Indenture
Trustee for the holders of the Notes, payment and performance in full of all
Indenture Trustee Secured Obligations and (ii) the date on which all payments in
respect of the Notes shall have been made and the Indenture shall have been
satisfied and discharged pursuant to the terms of Article VI of the Indenture.
"Initial Portfolio Balance" means the aggregate Principal Balance of Auto
Loans included in the Series Pool as of the Closing Date.
"Initial Spread Account Amount" means an amount equal to 3% of the Initial
Portfolio Balance.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by, a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
"Insurance Agreement Indicator" has the meaning set forth in the Insurance
Agreement.
4
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"Insurer Secured Obligations" means all amounts and obligations which may
at any time be owed to or on behalf of the Insurer (or any agents, accountants
or attorneys for the Insurer) under the Insurance Agreement or under any
Transaction Document, regardless of whether such amounts are owed now or in the
future, whether liquidated or unliquidated, contingent or noncontingent.
"Insurer Termination Date" means the date which is the latest of (i) the
date of the expiration of the Policy and the cancellation and return thereof to
the Insurer, (ii) the date on which the Insurer shall have received payment and
performance in full of all Insurer Secured Obligations and (iii) the latest date
on which any payment referred to above could be avoided as a preference or
otherwise under the United States Bankruptcy Code or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, as specified in an Opinion of Counsel delivered to the
Collateral Agent, the Insurer and the Indenture Trustee.
"Issuer" means Flagship Auto Receivables Owner Trust 1999-2.
"Level I Cumulative Net Loss Test" means, for any Collection Period
specified below, a Cumulative Net Loss Rate greater than or equal to the
percentage set forth opposite such Collection Period:
Collection Period Cumulative Net Loss
----------------- Percentage Level
----------------
Sixth through Eighth 1.35
Ninth through Eleventh 1.70
Twelfth through Fourteenth 3.05
Fifteenth through Seventeenth 4.40
Eighteenth through Twentieth 5.60
Twenty-First through Twenty-Third 6.60
Twenty-Fourth through Twenty-Sixth 7.50
Twenty-Seventh through Twenty-Ninth 8.30
Thirtieth through Thirty-Second 8.90
Thirty-Third and thereafter 9.30
"Level I Delinquency Test" means, for any Determination Date, the
arithmetic average of the monthly Delinquency Ratios for the four previous
Collection Periods is greater than or equal to 6.65%.
"Level I Net Loss Test" means, for any Determination Date, the arithmetic
average monthly Net Loss Rates for the four previous Collection Periods is
greater than or equal to 8%.
"Level I Portfolio Performance Indicator" means any violation of any of the
Level I Delinquency Test, the Level I Cumulative Net Loss Test or the Level I
Net Loss Test.
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"Level I Portfolio Performance Tests" means the Level I Delinquency Test,
the Level I Cumulative Net Loss Test and the Level I Net Loss Test.
"Level II Cumulative Net Loss Test" means, for any Collection Period
specified below, a Cumulative Net Loss Rate greater than the percentage set
forth opposite such Collection Period:
Collection Period Cumulative Net Loss
----------------- Percentage
----------
Sixth through Eighth 1.75
Ninth through Eleventh 2.40
Twelfth through Fourteenth 3.70
Fifteenth through Seventeenth 5.35
Eighteenth through Twentieth 6.85
Twenty-First through Twenty-Third 8.05
Twenty-Fourth through Twenty-Sixth 9.15
Twenty-Seventh through Twenty-Ninth 10.05
Thirtieth through Thirty-Second 10.75
Thirty-Third and thereafter 11.30
"Level II Delinquency Test" means, for any Determination Date, the
arithmetic average of the monthly Delinquency Ratios for the four previous
Collection Periods is greater than 8.08%.
"Level II Net Loss Test" means, for any Determination Date, the arithmetic
average monthly Net Loss Rates for the four previous Collection Periods is
greater than 10%.
"Level II Portfolio Performance Tests" means, collectively, the Level II
Delinquency Test, the Level II Cumulative Net Loss Test and the Level II Net
Loss Test.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that may attach to a Financed Vehicle by operation of law.
"Net Losses" means, for any Collection Period, the amount, if any, by which
(a) the sum of (i) the aggregate Principal Balance of all Auto Loans which
became Charged-off Auto Loans during such Collection Period, plus accrued and
unpaid interest thereon to the end of the related Collection Period, plus (ii)
the aggregate of all Cram Down Losses that occurred during the related
Collection Period, exceeds (b) the Actual Recovery Amounts received during the
related Collection Period in respect of all Charged-off Auto Loans.
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"Net Loss Rate" means, with respect to any Collection Period, the product,
expressed as a percentage, of (i) twelve and (ii) a fraction, the numerator of
which equals Net Losses for such Collection Period and the denominator of which
equals the Outstanding Portfolio Balance on the last day of the preceding
Collection Period.
"Non-Controlling Party" means, at any time, the Secured Party that is not
the Controlling Party at such time.
"Notes Target Amount" has the meaning assigned to that term in the
Indenture.
"Opinion of Counsel" means a written opinion of counsel (which may be
in-house counsel) addressed to and reasonably acceptable, as to form, substance
and issuing counsel, to the Controlling Party and the Indenture Trustee and
Collateral Agent.
"Overcollateralization Amount" means, as of any Payment Date, the excess of
the Outstanding Portfolio Balance as of the end of the preceding Collection
Period over the outstanding principal balance of the Notes (after giving effect
to all payments on the Notes on such Payment Date).
"Policy" has the meaning assigned to such term in the Indenture.
"Preference Amount" means any amount previously distributed to a Noteholder
on the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"Preference Claim" shall have the meaning specified in Section 5.02(b) of
the Indenture.
"Released Funds Principal Payment Amount" shall have the meaning assigned
to such term in the Indenture.
"Requisite Spread Account Amount" will equal the Initial Spread Account
Amount on the Closing Date, and thereafter, as of any Determination Date, after
giving effect to all payments to be made on the related Payment Date, will be an
amount equal to the greater of (a) the lesser of (i) 3% of the Initial Portfolio
Balance and (ii) 5% of the Outstanding Portfolio Balance as of the end of the
preceding Collection Period, and (b) the greater of (i) 1% of the Initial
Portfolio Balance and (ii) an amount such that the sum of (A) the funds on
deposit in the Spread Account (after all payments and withdrawals from the
Spread Account on such Payment Date) and (B) the Overcollateralization Amount is
greater than 2% of the Initial Portfolio Balance.
"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of the date hereof by and among Flagship as originator and servicer,
Flagship LLC, as purchaser, the Issuer, the Indenture Trustee, and Copelco
Financial Services Group, Inc as back- up servicer.
7
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"Secured Obligations" means, collectively, the Insurer Secured Obligations
and the Indenture Trustee Secured Obligations.
"Secured Parties" means, with respect to the Collateral, each of the
Indenture Trustee, in respect of the Indenture Trustee Secured Obligations, and
the Insurer, in respect of the Insurer Secured Obligations.
"Security Interests" means the security interests and Liens in the
Collateral granted pursuant to Section 2.01 hereof.
"Series Pool" has the meaning assigned to such term in the Indenture.
"Special Member" has the meaning assigned to that term in the Indenture.
"Spread Account" means the account designated as such, established and
maintained pursuant to Article III of this Agreement.
"Transaction Documents" has the meaning assigned to such term in the
Indenture.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code in
effect in the relevant jurisdiction, as the same may be amended from time to
time.
Section 1.02. Rules of Interpretation. The terms "hereof," "herein" or
"hereunder," unless otherwise modified by more specific reference, shall refer
to this Agreement in its entirety. Unless otherwise indicated in context, the
terms "Article," "Section," "Appendix," "Exhibit" or "Annex" shall refer to an
Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The
definition of a term shall include the singular, the plural, the past, the
present, the future, the active and the passive forms of such term.
ARTICLE II
THE COLLATERAL
Section 2.01. Grant of Security Interest by the Issuer. In order to secure
the performance of Secured Obligations, to the extent provided herein, the
Issuer hereby pledges, assigns, grants, transfers and conveys to the Collateral
Agent, on behalf of and for the benefit of the Secured Parties, a lien on and
security interest in (which lien and security interest is intended to be prior
to all other Liens), all of its right, title and interest in and to the
following (all being collectively referred to herein as the "Collateral" and
constituting Collateral hereunder):
(a) the Spread Account established pursuant to Section 3.01 hereof, and
each other account owned by the Issuer and maintained by the Collateral Agent
(including, without limitation, the Initial Spread Account Deposit related
thereto and all additional monies, checks, securities, investments and other
documents from time to time held in or evidencing any such accounts);
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(b) all of the Issuer's right, title and interest in and to investments
made with proceeds of the property described in clause (a) above, or made with
amounts on deposit in the Spread Account; and
(c) all distributions, revenues, products, substitutions, benefits, profits
and proceeds, in whatever form, of any of the foregoing whether now owned or
hereafter acquired.
Section 2.02. Priority. The Issuer intends the security interests in favor
of the Secured Parties to be prior to all other Liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, in favor of the Collateral Agent, for the benefit of the Secured
Parties, a first lien on and a first priority, perfected security interest in
the Collateral including, without limitation, the filing of a UCC-1 financing
statement relating to the Collateral. Subject to the provisions hereof
specifying the rights and powers of the Collateral Agent at the direction of the
Controlling Party from time to time to control certain specified matters
relating to the Collateral, each Secured Party shall have all of the rights,
remedies and recourse with respect to the Collateral afforded a secured party
under the Uniform Commercial Code, and all other applicable law in addition to,
and not in limitation of, the other rights, remedies and recourse granted to
such Secured Parties by this Agreement or any other law relating to the creation
and perfection of liens on, and security interests in, the Collateral.
Section 2.03. Issuer Remains Liable. The Security Interests are granted as
security only and shall not (i) transfer or in any way affect or modify, or
relieve either the Issuer from, any obligation to perform or satisfy, any term,
covenant, condition or agreement to be performed or satisfied by the Issuer
under or in connection with this Agreement, the Insurance Agreement or any other
Transaction Document to which it is a party or (ii) impose any obligation on any
of the Secured Parties or the Collateral Agent to perform or observe any such
term, covenant, condition or agreement or impose any liability on any of the
Secured Parties or the Collateral Agent for any act or omission on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made in connection therewith, except, in each case, to the
extent provided herein and in the other Transaction Documents.
Section 2.04. Delivery and Maintenance of Collateral.
(a) Safekeeping. The Collateral Agent agrees to maintain the Collateral
received by it (or evidence thereof, in the case of book-entry securities in the
name of the Collateral Agent) and all records and documents relating thereto at
the office of the Collateral Agent specified in Section 8.06 hereof or such
other address within the State of Illinois as may be approved by the Controlling
Party. The Collateral Agent shall keep all Collateral and related documentation
in its possession separate and apart from all other property that it is holding
in its possession and from its own general assets and shall maintain accurate
records pertaining to the Eligible Investments and Spread Account included in
the Collateral in such a manner as shall enable the Collateral Agent and the
Secured Parties to verify the accuracy of such record-keeping. The Collateral
Agent's books and records shall at all times show that the Collateral is held by
the Collateral Agent as agent of the Secured
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Parties and is not the property of the Collateral Agent. The Collateral Agent
will promptly report to each Secured Party and the Issuer any failure on its
part to hold the Collateral as provided in this Section 2.04(a) and will
promptly take appropriate action to remedy any such failure.
(b) Access. The Collateral Agent shall permit each of the Secured Parties,
or their respective duly authorized representatives, attorneys, auditors or
designees, to inspect the Collateral in the possession of or otherwise under the
control of the Collateral Agent pursuant hereto at such reasonable times during
normal business hours as any such Secured Party may reasonably request upon not
less than one Business Day's prior written notice. The costs and expenses
associated with any such inspection will be paid by the party making such
inspection.
(c) All Collateral shall be transferred to the Collateral Agent on behalf
of the Secured Party in a manner consistent with the definition of "Delivery"
set forth in the Sales and Servicing Agreement.
(d) Notwithstanding anything to the contrary herein, the Collateral Agent:
(A) is and will be acting on behalf of the Secured Parties as a securities
intermediary under Article 8 of the UCC and a "bailee" (as such term is used in
Section 9-305 of the UCC) in connection herewith; (B) shall establish and
maintain the Spread Account for the benefit of the Secured Parties as a holder
of a security interest in the Collateral and the Spread Account; (C) shall treat
all of the assets in the Spread Account (other than cash) as financial assets
under Article 8 of the UCC; (D) shall not hold, or exercise control (within the
meaning of Article 8 of the UCC) over, the Collateral and/or the Spread Account
for the benefit of any person or entity other than the Secured Parties; (E) has
received notice of the Secured Parties' interest in the assets contained and/or
to be contained in the Spread Account; (F) shall take instructions only from the
Secured Party constituting the Controlling Party hereunder (without any consent
of and notwithstanding any alternate direction of the Issuer) with respect to
the Spread Account and/or the Collateral, including, without limitation, all
instructions with respect to the acquisition, transfer and disposition of assets
in the Spread Account and the proceeds thereof.
Section 2.05. Termination and Release of Rights
(a) On the Insurer Termination Date, the rights, remedies, powers, duties,
authority and obligations conferred upon the Insurer pursuant to this Agreement
in respect of the Collateral shall terminate and be of no further force and
effect and all rights, remedies, powers, duties, authority and obligations of
the Insurer with respect to such Collateral shall be automatically released;
provided that any indemnity provided to the Insurer herein shall survive such
Insurer Termination Date. If the Insurer is acting as Controlling Party on the
related Insurer Termination Date, the Insurer agrees, at the expense of the
Issuer, to execute and deliver such instruments as the successor Controlling
Party may reasonably request to effectuate such release, and any such
instruments so executed and delivered shall be fully binding on the Insurer and
any Person claiming by, through or under the Insurer.
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(b) On the Indenture Trustee Termination Date, the rights, remedies,
powers, duties, authority and obligations, if any, conferred upon the Indenture
Trustee pursuant to this Agreement in respect of the Collateral shall terminate
and be of no further force and effect and all such rights, remedies, powers,
duties, authority and obligations of the Indenture Trustee with respect to such
Collateral shall be automatically released; provided that any indemnity provided
to the Indenture Trustee herein shall survive such Indenture Trustee Termination
Date. If the Indenture Trustee is acting as Controlling Party on the related
Indenture Trustee Termination Date, the Indenture Trustee agrees, at the expense
of the Issuer, to execute and deliver such instruments as the Issuer may
reasonably request to effectuate such release, and any such instruments so
executed and delivered shall be fully binding on the Indenture Trustee.
(c) On the Final Termination Date, the rights, remedies, powers, duties,
authority and obligations conferred upon the Collateral Agent and each Secured
Party pursuant to this Agreement shall terminate and be of no further force and
effect and all rights, remedies, powers, duties, authority and obligations of
the Collateral Agent and each Secured Party with respect to the Collateral shall
be automatically released. On the Final Termination Date, the Collateral Agent
agrees, and each Secured Party agrees, at the expense of the Issuer, to execute
such instruments of release, in recordable form if necessary, in favor of the
Issuer as the Issuer may reasonably request, to deliver any Collateral in its
possession to the Issuer, and to otherwise release the lien of this Agreement
and release and deliver to the Issuer the Collateral.
Section 2.06. Non-Recourse Obligations of Issuer. Notwithstanding anything
herein or in the other Transaction Documents to the contrary, the parties hereto
agree that the obligations of the Issuer hereunder shall be recourse only to the
extent of amounts released to the Issuer pursuant to priority SECOND of Section
3.03 (b) of this Agreement and retained by the Issuer in accordance with the
next sentence. The Issuer agrees that it shall not declare or make any payment
to Flagship LLC or Flagship except in accordance with the Transaction Documents.
Nothing contained herein shall be deemed to limit the rights of the Noteholders
under any other Transaction Document.
ARTICLE III
SPREAD ACCOUNT
Section 3.01. Establishment of Spread Account; Initial Deposit into Spread
Account; Maintenance of Spread Account.
(a) On or prior to the Closing Date, the Collateral Agent shall establish,
at its office or at another depository institution or trust company an Eligible
Account, designated, "Spread Account -- Harris Trust and Savings Bank, as
Collateral Agent for MBIA Insurance Corporation and Harris Trust and Savings
Bank, as Indenture Trustee Re: Flagship Auto Receivables Owner Trust 1999-2,
Asset-Backed Notes Series 1999-2" (the "Spread Account"). The Spread Account
shall be maintained by the Collateral Agent at all times separate and apart from
any other account of Flagship, the Servicer or the Issuer. The Spread Account
shall be maintained at the same depository
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institution (which depository institution may be changed from time to time in
accordance with this Agreement). If the Spread Account ceases to be an Eligible
Account, the Collateral Agent shall, within five Business Days, establish a new
Eligible Account.
(b) No withdrawals may be made of funds in the Spread Account except as
provided in Section 3.03 of this Agreement. Except as specifically provided in
this Agreement, funds in the Spread Account shall not be commingled with any
other moneys. All moneys deposited from time to time in the Spread Account and
all investments made with such moneys shall be held by the Collateral Agent as
part of the Collateral.
(c) On the Closing Date, the Seller shall provide to the Collateral Agent
for deposit into the Spread Account an amount equal to the Initial Spread
Account Amount.
(d) On each Payment Date, after giving effect to all payments to be made on
the related Payment Date, the Collateral Agent shall cause to be maintained in
the Spread Account an amount equal to the Requisite Spread Account Amount in
accordance with Article IV of the Indenture.
Section 3.02. Investments.
(a) Funds which may at any time be held in the Spread Account shall be
invested and reinvested by the Collateral Agent, at the written direction (which
may include, subject to the provisions hereof, general standing instructions) of
the Issuer (unless a Default shall have occurred and be continuing, in which
case at the written direction of the Controlling Party if it so elects) or its
designee received by the Collateral Agent by 1:00 P.M. New York City time on the
Business Day prior to the date on which such investment shall be made, in one or
more Eligible Investments in the manner specified in Section 3.02(b) and (c). If
no written direction with respect to any portion of such Spread Account is
received by the Collateral Agent, the Collateral Agent shall invest such funds
overnight in Eligible Investments listed in paragraph (f) of Eligible
Investments, provided that the Collateral Agent shall not be liable for any loss
or absence of income resulting from such investments.
(b) Each investment made pursuant to this Section 3.02 on any date shall
mature not later than the Business Day immediately preceding the Payment Date
next succeeding the day such investment is made or payable on demand, provided
that any investment of funds in the Spread Account maintained with the
Collateral Agent in any investment as to which the Collateral Agent is the
obligor, if otherwise qualified as an Eligible Investment may mature on the
Payment Date next succeeding the date of such investment.
(c) Subject to the other provisions hereof, the Collateral Agent 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 Collateral Agent or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment
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to the Collateral Agent in a manner which complies with Section 2.04 and the
requirements of the definition of "Eligible Investments."
(d) If amounts on deposit in any Spread Account are at any time invested in
an Eligible Investment payable on demand, the Collateral Agent shall (i)
consistent with any notice required to be given thereunder, demand that payment
thereon be made on the last day such Eligible Investment is permitted to mature
under the provisions hereof and (ii) demand payment of all amounts due
thereunder promptly upon receipt of written notice from the Controlling Party to
the effect that such investment does not constitute an Eligible Investment.
(e) All moneys on deposit in a Spread Account, together with any deposits
or securities in which such moneys may be invested or reinvested, and any gains
from such investments, shall constitute Collateral hereunder subject to the
Security Interests of the Secured Parties.
(f) Subject to Section 4.03 hereof, the Collateral Agent shall not be
liable by reason of any insufficiency in Spread Account resulting from any loss
on any Eligible Investment included therein except for losses attributable to
the Collateral Agent's failure to make payments on Eligible Investments as to
which the Collateral Agent, in its commercial capacity, is obligated. All income
or loss on investments of funds in the Spread Account shall be reported by
Flagship as taxable income or loss.
Section 3.03. Payments; Priority of Payments.
(a) On or before each Draw Date, the Collateral Agent will make the
following calculations on the basis of information (including, without
limitation, the amount of any Deficiency Claim Amount) received pursuant to
Article V of the Indenture from the Servicer, provided, however, that if the
Collateral Agent receives written notice from the Insurer, the Indenture
Trustee, the Issuer or the Servicer of the occurrence of an Insurance Agreement
Indicator, such notice shall be determinative for the purposes of determining
the Requisite Spread Account Amount:
First, determine the amounts to be on deposit in the Spread Account on
the next succeeding Payment Date which will be available to satisfy any
Deficiency Claim Amount;
Second, determine (i) the amounts, if any, to be paid from the Spread
Account with respect to the Deficiency Claim Amount and (ii) whether,
following payment from the Spread Account to the Indenture Trustee for
deposit into the Collection Account, a Deficiency Claim Amount will
continue to exist;
Third, if a Deficiency Claim Amount will continue to exist following
the payment from the Spread Account contemplated by paragraph second above,
determine the amount, if any, to be distributed to the Indenture Trustee.
This determination shall be made in accordance with the payment priority
scheme set forth in Section 3.03(b) below.
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On such Draw Date, the Collateral Agent shall deliver a certificate to the
Indenture Trustee with respect to the Deficiency Notice, stating the amount, if
any, to be distributed to the Indenture Trustee on the next Payment Date in
respect of such Deficiency Claim Amount.
(b) On each Payment Date, if the Indenture Trustee has received a
Deficiency Notice, the Collateral Agent shall make the following payments in the
following order of priority:
FIRST, if there exists a Deficiency Claim Amount, from the Spread
Account, to the Indenture Trustee for deposit in the Collection Account the
amount of such Deficiency Claim Amount (to the extent available in such
Spread Account); and
SECOND, any funds in the Spread Account in excess of the Requisite
Spread Account Amount, after making the withdrawals therefrom required by
priority FIRST of this Section 3.03(b) will be applied in the following
order of priority:
(i) to the payment of the Released Funds Principal Payment
Amount;
(ii) to the payment of any Re-liening Expenses, to the extent not
paid by the Servicer or by Copelco pursuant to the Guaranty Agreement;
(iii) to any successor servicer, the Insurer, the Indenture
Trustee and Collateral Agent, any items payable to them that were not
paid under clauses (i) and (vi) of Section 4.07(a) of the Indenture;
and
(iv) to the holder(s) of the Certificates, any remaining funds in
the Spread Account in excess of the Requisite Spread Account Amount.
The Released Funds Principal Payment Amount will be paid to the Noteholders,
sequentially first to holders of the Class A-1 Notes until the Class A-1 Notes
are paid in full, then to the holders of the Class A-2 Notes until the Class A-2
Notes are paid in full, then to the holders of the Class A-3 Notes until the
Class A-3 Notes are paid in full and thereafter to the holders of the Class A-4
Notes until the Class A-4 Notes are paid in full.
Section 3.04. General Provisions Regarding Spread Accounts.
(a) Promptly upon the establishment (initially or upon any relocation) of
the Spread Account hereunder, the Collateral Agent shall advise the Issuer and
each Secured Party in writing of the name and address of the depository
institution or trust company where the Spread Account has been established (if
not at Harris Trust and Savings Bank or any successor Collateral Agent in its
commercial banking capacity), the name of the officer of the depository
institution who is responsible for overseeing the Spread Account, the account
number and the individuals whose names appear on the signature cards for the
Spread Account. The Issuer shall cause each such depository institution or trust
company to execute a written agreement, in form and substance reasonably
satisfactory to the Controlling Party, waiving, and the Collateral Agent by its
execution of this Agreement hereby waives (except to the extent expressly
provided herein), in each case to the extent permitted under applicable law, (i)
any banker's or other statutory or similar Lien, and (ii) any right of set-off
or other similar right under applicable law with respect to the Spread Account
and agreeing, and the Collateral Agent by its execution of this
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Agreement hereby agrees to notify the Issuer and each Secured Party of any
charge or claim against or with respect to such Spread Account. The Collateral
Agent shall give the Issuer and each Secured Party at least ten Business Days'
prior written notice of any change in the location of the Spread Account or in
any related account information. Anything herein to the contrary
notwithstanding, unless otherwise consented to by the Controlling Party in
writing, the Collateral Agent shall have no right to change the location of the
Spread Account
(b) Upon the written request of the Controlling Party or the Issuer and at
the expense of the Issuer, the Collateral Agent shall cause, at the expense of
the Issuer, the depository institution at which any Spread Account is located to
forward to the requesting party copies of all monthly account statements for the
Spread Account.
(c) If at any time the Spread Account ceases to be an Eligible Account, the
Collateral Agent shall notify the Controlling Party of such fact and shall
establish within 5 Business Days of such determination, in accordance with
paragraph (a) of this Section, a successor Spread Account thereto, which shall
be an Eligible Account, at another depository institution acceptable to the
Controlling Party
(d) No passbook, certificate of deposit or other similar instrument
evidencing a Spread Account shall be issued, and all contracts, receipts and
other papers, if any, governing or evidencing the Spread Account shall be held
by the Collateral Agent.
Section 3.05. Reports by the Collateral Agent. The Collateral Agent shall
report to the Issuer, the Insurer, the Indenture Trustee (unless the Indenture
Trustee is the same party as the Collateral Agent) and the Servicer on a monthly
basis no later than each Payment Date with respect to the amount on deposit in
the Spread Account and the identity of the investments included therein as of
the last day of the related Collection Period, and shall provide accountings of
deposits into and withdrawals from the Spread Account, and of the investments
made therein, upon the request of the Issuer, the Insurer or the Servicer.
ARTICLE IV
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers. Subject to the terms and conditions
hereof, each of the Secured Parties hereby appoints Harris Trust and Savings
Bank as the Collateral Agent with respect to the Collateral, and Harris Trust
and Savings Bank hereby accepts such appointment and agrees to act as Collateral
Agent with respect to the Collateral, for the Secured Parties, to maintain
custody and possession of such Collateral (except as otherwise provided
hereunder) and to perform
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the other duties of the Collateral Agent in accordance with the provisions of
this Agreement. Each Secured Party hereby authorizes the Collateral Agent 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 Collateral Agent by the terms
hereof, together with such actions, rights, remedies, powers and privileges as
are reasonably incidental thereto. The Collateral Agent shall act (and shall be
completely protected in so acting) upon and in compliance with the written
instructions of the Controlling Party delivered pursuant to this Agreement
promptly following receipt of such written instructions; provided that the
Collateral Agent shall not act in accordance with any instructions (i) which are
not authorized by, or in violation of the provisions of, this Agreement, (ii)
which are in violation of any applicable law, rule or regulation or (iii) for
which the Collateral Agent has not received reasonable indemnity. Receipt of
such instructions shall not be a condition to the exercise by the Collateral
Agent of its express duties hereunder, except where this Agreement provides that
the Collateral Agent is permitted to act only following and in accordance with
such instructions.
Section 4.02. Performance of Duties. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and the other Transaction Documents to which the Collateral Agent is a party or
as directed by the Controlling Party in accordance with this Agreement. The
Collateral Agent shall not be required to take any discretionary actions
hereunder except at the written direction and with indemnification satisfactory
to it from the Controlling Party.
Section 4.03. Limitation on Liability. Neither the Collateral Agent nor any
of its directors, officers 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 Collateral Agent shall be liable for its negligence, bad faith or
willful misconduct; nor shall the Collateral Agent be responsible for the
validity, effectiveness, value, sufficiency or enforceability against the Issuer
of this Agreement or any of the Collateral (or any part thereof).
Notwithstanding any term or provision of this Agreement, the Collateral Agent
shall incur no liability to the Issuer or the Secured Parties for any action
taken or omitted by the Collateral Agent in connection with the Collateral,
except for the negligence or willful misconduct on the part of the Collateral
Agent, and, further, shall incur no liability to the Secured Parties except for
negligence or willful misconduct in carrying out its duties to the Secured
Parties. Subject to Section 4.04, the Collateral Agent shall be completely
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 Collateral Agent to be genuine and to have been duly
executed by the appropriate signatory, and (absent actual knowledge to the
contrary) the Collateral Agent shall not be required to make any independent
investigation with respect thereto. The Collateral Agent 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 Transaction Documents. The Collateral Agent may consult with
counsel selected by it with due care, 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
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written advice of such counsel. The Collateral Agent shall not be under any
obligation to exercise any of the remedial rights or powers vested in it by this
Agreement or to follow any direction from the Controlling Party unless it shall
have received reasonable security or indemnity satisfactory to the Collateral
Agent against the costs, expenses and liabilities which might be incurred by it.
Section 4.04. Reliance upon Documents. In the absence of bad faith or
negligence on its part, the Collateral Agent shall be entitled to 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 4.05. Successor Collateral Agent. (a) Merger. Any Person into which
the Collateral Agent 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 Collateral
Agent is a party, shall (provided it is otherwise qualified to serve as the
Collateral Agent hereunder and is acceptable to the Insurer) be and become a
successor Collateral Agent hereunder and be vested with all of the title to and
interest in the 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 Secured
Parties in the Collateral.
(b) Resignation. The Collateral Agent and any successor Collateral Agent
may resign only (i) 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 Collateral Agent as evidenced by an opinion of
Counsel delivered to the Insurer, and the Controlling Party does not elect to
waive the Collateral Agent's obligation to perform those duties which render it
legally unable to act or elect to delegate those duties to another Person, or
(ii) with the prior written consent of the Controlling Party. The Collateral
Agent shall give not less than 60 days' prior written notice of any such
permitted resignation by registered or certified mail to the other Secured Party
and the Issuer; provided, that such resignation shall take effect only upon the
date which is the latest of (i) the effective date of the appointment of a
successor Collateral Agent acceptable to the Insurer (provided that an Insurer
Default has not occurred and is continuing) and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof, (ii)
delivery of the Collateral to such successor to be held in accordance with the
procedures specified in Article II hereof, and (iii) receipt by the Controlling
Party of an Opinion of Counsel to the effect described in Section 5.05.
Notwithstanding the preceding sentence, if by the contemplated date of
resignation specified in the written notice of resignation delivered as
described above no successor Collateral Agent or temporary successor
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Collateral Agent has been appointed Collateral Agent or becomes the Collateral
Agent pursuant to subsection (d) hereof, the resigning Collateral Agent may
petition a court of competent jurisdiction in New York, New York for the
appointment of a successor acceptable to the Insurer (provided that an Insurer
Default has not occurred and is continuing). Notwithstanding anything herein to
the contrary, if the Indenture Trustee and Collateral Agent are the same party
and the Indenture Trustee resigns under the Indenture, the Collateral Agent may
resign in accordance with the procedures for resignation of the Indenture
Trustee under the Indenture.
(c) Removal. The Collateral Agent may be removed by the Controlling Party
at any time, with or without cause, by an instrument or concurrent instruments
in writing delivered to the Collateral Agent, the other Secured Party and the
Issuer. A temporary successor may be removed at any time to allow a successor
Collateral Agent to be appointed pursuant to subsection (d) below. Any removal
pursuant to the provisions of this subsection (c) shall take effect only upon
the date which is the latest of (i) the effective date of the appointment of a
successor Collateral Agent acceptable to the Insurer (provided that an Insurer
Default has not occurred and is continuing) and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof, (ii)
delivery of the Collateral to such successor to be held in accordance with the
procedures specified in Article II hereof and (iii) receipt by the Controlling
Party of an Opinion of Counsel to the effect described in Section 5.05.
(d) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Collateral Agent. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to each Secured Party and the Issuer an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Collateral Agent to be held in accordance with the procedures specified in
Article II hereof, whereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights,
powers, duties and obligations of its predecessor. Such predecessor shall,
nevertheless, on the written request of either Secured Party or the Issuer,
execute and deliver an instrument transferring to such successor all the
estates, properties, rights and powers of such predecessor hereunder. In the
event that any instrument in writing from the Issuer or a Secured Party is
reasonably required by a successor Collateral Agent to more fully and certainly
vest in such successor the estates, properties, rights, powers, duties and
obligations vested or intended to be vested hereunder in the Collateral Agent,
any and all such written instruments shall, at the request of the temporary or
permanent successor Collateral Agent, be forthwith executed, acknowledged and
delivered by the Issuer. The designation of any successor Collateral Agent and
the instrument or instruments removing any Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Collateral and, to the
extent required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
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Section 4.06. Indemnification. To the extent set forth in Section 4.07(a)
of the Indenture, the Issuer shall fully indemnify the Collateral Agent, its
directors, officers, employees and agents for, and hold the Collateral Agent,
its directors, officers, employees and agents completely harmless against, any
loss, liability or expense (including the reasonable costs and expenses of
defending against any claim of liability) arising out of or in connection with
the Collateral Agent's acting as Collateral Agent hereunder, except such loss,
liability or expense as shall result from the negligence, bad faith or willful
misconduct of the Collateral Agent or its officers or agents. The obligation of
the Issuer under this Section shall survive the termination of this Agreement
and the resignation or removal of the Collateral Agent. The Collateral Agent
covenants and agrees that the obligations of the Issuer hereunder and under
Section 4.07 shall be limited to the extent provided in Section 2.06, and
further covenants not to take any action to enforce its rights to
indemnification hereunder with respect to the Issuer and to payment under
Section 4.07 except in accordance with the provisions of Section 8.05, or
otherwise to assert any Lien or take any other action in respect of the
Collateral or the Auto Loans and Other Conveyed Property that comprise the
Series Pool until the Final Termination Date.
Section 4.07. Compensation and Reimbursement. To the extent set forth in
Section 4.07(a) of the Indenture, the Issuer agrees for the benefit of the
Secured Parties and as part of the Secured Obligations to pay to the Collateral
Agent, on each Payment Date, the Indenture Trustee and Collateral Agent Fee for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a collateral trustee)
and to reimburse the Collateral Agent pursuant to Section 4.07(b) of the
Indenture for any reasonable and out of pocket expenses (including reasonable
legal fees and expenses) incurred in connection with the duties contemplated
herein.
Section 4.08. Representations and Warranties of the Collateral Agent. The
Collateral Agent represents and warrants to the Issuer and to each Secured Party
as follows:
(a) Due Organization. The Collateral Agent is a banking corporation, duly
organized, validly existing and in good standing under the laws of Illinois and
is duly authorized and licensed under applicable law to conduct its business as
presently conducted.
(b) Corporate Power. The Collateral Agent has all requisite right, power
and authority to execute and deliver this Agreement and to perform all of its
duties as Collateral Agent hereunder.
(c) Due Authorization. The execution and delivery by the Collateral Agent
of this Agreement and the other Transaction Documents to which it is a party,
and the performance by the Collateral Agent 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 Collateral Agent, or the
performance by the Collateral Agent, of this Agreement and such other
Transaction Documents.
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(d) Valid and Binding Agreement. The Collateral Agent has duly executed and
delivered this Agreement and each other Transaction Document to which it is a
party, and each of this Agreement and each such other Transaction Document
constitutes the legal, valid and binding obligation of the Collateral Agent,
enforceable against the Collateral Agent in accordance with its terms, except as
(i) such enforceability may be limited by bankruptcy, insolvency, reorganization
and similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
Section 4.09. Waiver of Setoffs. The Collateral Agent hereby expressly
waives any and all rights of set off that the Collateral Agent may otherwise at
any time have under applicable law with respect to any Spread Account and agrees
that amounts in the Spread Accounts shall at all times be held and applied
solely in accordance with the provisions hereof.
Section 4.10. Control by the Controlling Party. The Collateral Agent 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 Default shall
have occurred and be continuing, the Collateral Agent shall act upon and comply
with notices and instructions given by the Controlling Party alone in the place
and stead of the Issuer.
ARTICLE V
COVENANTS OF THE ISSUER
Section 5.01. Preservation of Collateral. Subject to the rights, powers and
authorities granted to the Collateral Agent and the Controlling Party in this
Agreement, the Issuer shall take such action as is necessary and proper with
respect to the Collateral in order to preserve and maintain such Collateral and
to cause (subject to the rights of the Secured Parties) the Collateral Agent to
perform its obligations with respect to such Collateral as provided herein
including, without limitation, filing UCC-1's on the Spread Account and
investments therein. The Issuer will do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, such instruments of
transfer or take such other steps or actions as may be necessary, or required by
the Controlling Party, to perfect the Security Interests granted hereunder in
the Collateral, to ensure that such Security Interests rank prior to all other
Liens and to preserve the priority of such Security Interests and the validity
and enforceability thereof. Upon any delivery or substitution of Collateral, the
Issuer shall be obligated to execute such documents and perform such actions as
are necessary to create in the Collateral Agent for the benefit of the Secured
Parties a valid first Lien on, and valid and perfected, first priority security
interest in, the Collateral so delivered and to deliver such Collateral to the
Collateral Agent, free and clear of any other Lien, together with satisfactory
assurances thereof, and to pay any reasonable costs incurred by any of the
Secured Parties or the Collateral Agent (including its agents) or otherwise in
connection with such delivery.
Section 5.02. Notices. In the event that the Issuer acquires knowledge of
the occurrence and continuance of any Insurance Agreement Indicator or Event of
Default under the Indenture or of any
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event of default or like event, howsoever described or called, under any of the
Transaction Documents, the Issuer shall immediately give notice thereof to the
Collateral Agent and each Secured Party.
Section 5.03. Waiver of Stay or Extension Laws; Marshalling of Assets. The
Issuer covenants, to the fullest extent permitted by applicable law, that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any appraisement, valuation, stay, extension
or redemption law wherever enacted, now or at any time hereafter in force, in
order to prevent or hinder the enforcement of this Agreement or any absolute
sale of the Collateral or any part thereof, or the possession thereof by any
purchaser at any sale under Article VII of this Agreement; and the Issuer, to
the fullest extent permitted by applicable law, for itself and all who may claim
under it, hereby waives the benefit of all such laws, and covenants that it will
not hinder, delay or impede the execution of any power herein granted to the
Collateral Agent, but will suffer and permit the execution of every such power
as though no such law had been enacted. The Issuer, for itself and all who may
claim under it, waives, to the fullest extent permitted by applicable law, all
right to have the Collateral marshaled upon any foreclosure or other disposition
thereof.
Section 5.04. Noninterference, etc. The Issuer shall not (i) waive or alter
any of its rights under the Collateral (or any agreement or instrument relating
thereto) without the prior written consent of the Controlling Party; or (ii)
fail to pay any tax, assessment, charge or fee levied or assessed against the
Collateral, or to defend any action, if such failure to pay or defend may
adversely affect the priority or enforceability of the Issuer's right, title or
interest in and to the Collateral or the Collateral Agent's lien on, and
security interest in, the Collateral for the benefit of the Secured Parties; or
(iii) take any action, or fail to take any action, if such action or failure to
take action will interfere with the enforcement of any rights under the
Transaction Documents.
Section 5.05. Issuer Changes.
(a) Change in Name, Structure, etc. The Issuer shall not change its name,
identity or corporate structure unless it shall have given each Secured Party
and the Collateral Agent a least 60 days' prior written notice thereof, shall
have effected any necessary or appropriate assignments or amendments thereto an
filings of financing statements or amendments thereto.
(b) Relocation of the Issuer. The Issuer shall not change its principal
executive office unless it gives each Secured Party and the Collateral Agent at
least 90 days' prior written notice of any relocation of its principal executive
office. If the Issuer relocates its principal executive office or principal
place of business from Delaware, the Issuer shall give prior notice thereof to
the Controlling Party and the Collateral Agent and shall effect whatever
appropriate recordations and filings are necessary and shall provide an Opinion
of Counsel to the Controlling Party and the Collateral Agent, to the effect
that, upon the recording of any necessary assignments or amendments to
previously-recorded assignments and filing of any necessary amendments to the
previously filed financing or continuation statements or upon the filing of one
or more specified new financing
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statements, and the taking of such other actions as may be specified in such
opinion, the security interests in the Collateral shall remain, after such
relocation, valid and perfected.
ARTICLE VI
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party. From and after the Closing
Date until the Insurer Termination Date, the Insurer shall be the Controlling
Party and shall be entitled to exercise all the rights given the Controlling
Party hereunder. From and after the Insurer Termination Date until the Indenture
Trustee Termination Date, the Indenture Trustee shall be the Controlling Party.
Notwithstanding the foregoing, in the event that an Insurer Default shall have
occurred and be continuing, the Indenture Trustee shall be the Controlling Party
until the applicable Indenture Trustee Termination Date. If prior to an Insurer
Termination Date the Indenture Trustee shall have become the Controlling Party
as a result of the occurrence of an Insurer Default and either such Insurer
Default is cured or for any other reason ceases to exist or the Indenture
Trustee Termination Date occurs, then upon such cure or other cessation or on
such Indenture Trustee Termination Date, as the case may be, the Insurer shall,
upon notice thereof being duly given to the Collateral Agent, again be the
Controlling Party.
Section 6.02. Controlling Party's Authority.
(a) The Issuer hereby irrevocably appoints the Collateral Agent, and any
successor to the Collateral Agent appointed pursuant to Section 4.05, its true
and lawful attorney, with full power of substitution, in the name of the Issuer,
the Secured Parties or otherwise, but (subject to Section 2.06) at the expense
of the Issuer, to the extent permitted by law to exercise, at any time and from
time to time while any Insurance Agreement Indicator has occurred but at all
such times at the direction of the Controlling Party, any or all of the
following powers with respect to all or any of the Collateral: (i) to demand,
sue for, collect, receive and give acquittance for any and all monies due or to
become due upon or by virtue thereof, (ii) to settle, compromise, compound,
prosecute or defend any action or proceeding with respect thereto, (iii) to
sell, transfer, assign or otherwise deal with the same or the proceeds thereof
as fully and effectively as if the Collateral Agent were the absolute owner
thereof, and (iv) to extend the time of payment of any or all thereof and to
make any allowance or other adjustments with respect thereto.
(b) With respect to the Notes and the related Collateral, each Secured
Party hereby irrevocably and unconditionally constitutes and appoints the
Collateral Agent, and any successor to such Collateral Agent appointed pursuant
to Section 4.05 from time to time, as the true and lawful attorney-in-fact of
the Secured Parties, 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 Collateral Agent as well as in the name, place and
stead of such Secured Party such acts, things and deeds for and on behalf of and
in the name of the Secured Parties under this Agreement which the Secured
Parties could or might do or which may be necessary, desirable or convenient in
the
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Collateral Agent's sole discretion with the prior written consent of the
Controlling Party or at the direction of the Controlling Party to effect the
purposes contemplated hereunder and, without limitation, exercise full right,
power and authority to take, or defer from taking, any and all acts with respect
to the administration of the Collateral, and the enforcement of the rights of
the Secured Parties hereunder, on behalf of and for the benefit of the Secured
Parties, as their interests may appear.
Section 6.03. Rights of Secured Parties. With respect to the Notes and the
related Collateral, the Non-Controlling Party at any time expressly agrees that
it shall not assert any rights that it may otherwise have, as a Secured Party
with respect to the Collateral, to direct the maintenance, sale or other
disposition of the Collateral or any portion thereof, notwithstanding the
occurrence and continuance of any Default or any non-performance by the Issuer
of any obligation owed to such Secured Party hereunder or under any other
Transaction Document, and each party hereto agrees that the Collateral Agent, at
the direction of the Controlling Party shall be the only Person entitled to
assert and exercise such rights.
Section 6.04. Degree of Care.
(a) Controlling Party. Notwithstanding any term or provision of this
Agreement, the Collateral Agent shall incur no liability to the Issuer for any
action taken or omitted by the Collateral Agent in connection with the
Collateral, except for any negligence, bad faith or willful misconduct on the
part of the Collateral Agent and, further, shall incur no liability to the Non-
Controlling Party except for a breach of the terms of this Agreement or for
negligence, bad faith or willful misconduct in carrying out its duties, if any,
to the Non-Controlling Party. The Collateral Agent shall be completely 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 believed by the
Collateral Agent to be genuine and to have been duly executed by the appropriate
signatory, and (absent manifest error or actual knowledge to the contrary) the
Collateral Agent shall not be required to make any independent investigation
with respect thereto. The Collateral Agent shall, at all times, be free
independently to establish to its reasonable satisfaction the existence or
nonexistence, as the case may be, of any fact the existence or nonexistence of
which shall be a condition to the exercise or enforcement of any right or remedy
under this Agreement or any of the Transaction Documents.
(b) The Non-Controlling Party. The Non-Controlling Party shall not be
liable to the Issuer for any action or failure to act by the Controlling Party
or the Collateral Agent in exercising, or failing to exercise, any rights or
remedies hereunder.
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ARTICLE VII
REMEDIES UPON DEFAULT
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Section 7.01. Remedies upon a Default. If a Default has occurred, the
Collateral Agent shall, at the direction of the Controlling Party, take whatever
action at law or in equity as may appear necessary or desirable in the judgment
of the Controlling Party to collect and satisfy all Secured Obligations,
including, but not limited to, foreclosure upon the Collateral and all other
rights available to secured parties under applicable law or to enforce
performance and observance of any obligation, agreement or covenant under any of
the Transaction Documents.
Section 7.02. Waiver of Default. The Controlling Party shall have the sole
right, to be exercised in its complete discretion, to waive any Default by a
writing setting forth the terms, conditions and extent of such waiver signed by
the Controlling Party and delivered to the Collateral Agent, the other Secured
Party and the Issuer. Any such waiver shall be binding upon the Non-Controlling
Party and the Collateral Agent. Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific event or
occurrence which gave rise to the Default so waived and not to any other similar
event or occurrence which occurs subsequent to the date of such waiver.
Section 7.03. Restoration of Rights and Remedies. If the Collateral Agent
has instituted any proceeding to enforce any right or remedy under this
Agreement, and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Collateral Agent, then and in
every such case the Issuer, the Collateral Agent and each of the Secured Parties
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Secured Parties shall continue as though no such proceeding
had been instituted.
Section 7.04. No Remedy Exclusive. No right or remedy herein conferred upon
or reserved to the Collateral Agent, the Controlling Party or either of the
Secured Parties is intended to be exclusive of any other right or remedy, and
every right or 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, in equity or otherwise (but, in each case, shall be subject to
the provisions of this Agreement limiting such remedies), and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Controlling Party, and the exercise of or the beginning
of the exercise of any right or power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any other right,
power or remedy.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Further Assurances. Each party hereto shall take such action
and deliver such instruments to any other party hereto, in addition to the
actions and instruments specifically provided for herein, as may be reasonably
requested or required to effectuate the purpose or provisions of this Agreement
or to confirm or perfect any transaction described or contemplated herein.
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Section 8.02. Waiver. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and stop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Agreement
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect.
Section 8.03. Amendments; Waivers. No amendment, modification, waiver or
supplement to this Agreement or any provision of this Agreement shall in any
event be effective unless the same shall have been made or consented to in
writing by each of the parties hereto and each Rating Agency shall have
confirmed in writing that such amendment will not cause a reduction or
withdrawal of a rating on the Notes without regard to the Policy; provided,
however, that, notwithstanding the foregoing, for so long as the Insurer shall
be the Controlling Party, any amendments, modifications, waivers or supplements
hereto, or to the Collateral or Spread Account or to any requirement hereunder
to deposit or retain any amounts in such Spread Account or to distribute any
amounts therein as provided in Section 3.03 shall be effective if made or
consented to in writing by the Insurer, the Issuer and the Collateral Agent (the
consent of which shall not be withheld or delayed with respect to any amendment
that does not adversely affect the Collateral Agent) but shall in no
circumstances require the consent of the Indenture Trustee or the Noteholders.
Section 8.04. Severability. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by the Collateral Agent, or any of the Secured Parties,
hereunder is unavailable or unenforceable shall not affect in any way the
ability of the Collateral Agent or any of the Secured Parties to pursue any
other remedy available to it or them (subject, however, to the provisions of
this Agreement limiting such remedies).
Section 8.05. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, each of the parties hereto agrees that it shall not, prior to
one year and one day after the Final Scheduled Maturity Date, acquiesce,
petition or otherwise invoke or cause the Issuer, Flagship LLC, the Depositor or
the Special Member to invoke the process of the United States of America, any
State or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government for the purpose of commencing or sustaining a case by or against
the Issuer, Flagship LLC, the Depositor or the Special Member under a Federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
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liquidator, assignee, Indenture Trustee, custodian, sequestrator or other
similar official of the Issuer, Flagship LLC, the Depositor or the Special
Member or all or any part of its respective property or assets or ordering the
winding up or liquidation of the affairs of the Issuer, Flagship LLC, the
Depositor or the Special Member. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.
Section 8.06. Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Issuer:
Flagship Auto Receivables Owner Trust 1999-2
c/o First Union National Bank
One Rodney Square
920 King Street
Wilmington, Delaware 19801
with a copy to
General Counsel of Flagship Credit Corporation
1 International Plaza
Philadelphia, Pennsylvania 19113
(ii) If to the Insurer:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management - Structured
Finance (Flagship Auto Receivables Owner
Trust 1999-2)
(in each case in which notice or other communication to the
Insurer refers to a Default or a claim on the Policy or in which
failure on the part of the Insurer to respond shall be deemed to
constitute consent or acceptance, then with a copy to the
attention of the General Counsel marked to reflect "Urgent
Materials Enclosed")
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(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Indenture Trust Administration
(iv) If to the Collateral Agent:
Harris Trust and Savings Bank,
111 West Monroe Street, Lower Level West
Chicago, Illinois 60603
Attention: Document Custody Unit
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, NY, 10007
Attention: ABS Monitoring Department
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services
55 Water Street, 40th Floor
New York, NY, 10041
Attention: Asset-Backed Surveillance Department
(vii) If to Duff & Phelps:
Duff & Phelps Credit Rating Co.
17 State Street, 12th Floor
New York, NY, 10004
Attention: Asset-Backed Monitoring Group
A copy of each notice given hereunder to any party hereto shall also
be given to (without duplication) the Insurer, the Issuer, the
Indenture Trustee and the Collateral Agent. Each party hereto may, by
notice given in accordance herewith to each of the other parties
hereto, designate any further or different address to which subsequent
notices shall be sent.
Section 8.07. Term of this Agreement. This Agreement shall take effect on
the Closing Date and shall continue in effect until the Final Termination Date.
On the Final Termination Date, this Agreement shall terminate, all obligations
of the parties hereunder shall cease and terminate and
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the Collateral, if any, held hereunder and not to be used or applied in
discharge of any obligations of the Issuer in respect of the Secured Obligations
or otherwise under this Agreement, shall be released to and in favor of the
Issuer, provided that the provisions of Sections 4.06, 4.07 and 8.05 shall
survive any termination of this Agreement and the release of any Collateral upon
such termination.
Section 8.08. Assignments; Third-Party Rights; Reinsurance.
(a) This Agreement shall be a continuing obligation of the parties hereto
and shall (i) be binding upon the parties and their respective successors and
assigns, and (ii) inure to the benefit of and be enforceable by each Secured
Party and the Collateral Agent, and by their respective successors, transferees
and assigns. The Issuer may not assign this Agreement, or delegate any of its
duties hereunder, without the prior written consent of the Controlling Party.
(b) The Insurer shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with respect to
the Policy issued in connection with the Notes, upon such terms and conditions
as the Insurer in its discretion determines, and each such participant or
reinsurer shall be entitled to the benefit of any representation, warranty,
covenant and obligation of each party (other than the Insurer) hereunder as if
such participant or reinsurer was a party hereto and, subject only to such
agreement regarding such reinsurance or participation, shall have the right to
enforce the obligations of each such other party directly hereunder; provided,
however, that no such reinsurance or participation agreement or arrangement
shall relieve the Insurer of its obligations hereunder, under the Transaction
Documents to which it is a party or under the Policy. In addition, nothing
contained herein shall restrict the Insurer from assigning to any Person
pursuant to any liquidity facility or credit facility any rights of the Insurer
under this Agreement or with respect to any real or personal property or other
interests pledged to the Insurer, or in which the Insurer has a security
interest, in connection with the transactions contemplated hereby.
Section 8.09. Consent of Controlling Party. In the event that the
Controlling Party's consent is required under the terms hereof or under the
terms of any Transaction Document, it is understood and agreed that, except as
otherwise provided expressly herein, the determination whether to grant or
withhold such consent shall be made solely by the Controlling Party in its sole
discretion.
Section 8.10. Consents to Jurisdiction. Each of the parties hereto
irrevocably submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York, any court in the state of
New York located in the city and county of New York, and any appellate court
from any thereof, in any action, suit or proceeding brought against it and
related to or in connection with this Agreement, the other Transaction Documents
or the transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion, as
a defense or otherwise in
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any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or any of the other Transaction
Documents or the subject matter hereof or thereof may not be litigated in or by
such courts. The Issuer hereby irrevocably appoints and designates Harris Trust
and Savings Bank, as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. The Issuer agrees that service of such
process upon such Person shall constitute personal service of such process upon
it. Subject to Section 8.05, nothing contained in this Agreement shall limit or
affect the rights of any party hereto to serve process in any other manner
permitted by law or to start legal proceedings relating to any of the
Transaction Documents against the Issuer or its property in the courts of any
jurisdiction.
Section 8.11. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) Harris Trust and Savings Bank is executing
this Agreement not in its individual capacity but solely in its capacities as
collateral agent and trustee of the Issuer pursuant to the Indenture and (b) in
no case whatsoever shall Harris Trust and Savings Bank be personally liable on,
or for any loss in respect of, any of the statements, representations,
warranties, covenants, agreements or obligations of the Issuer hereunder, all
such liability, if any, being expressly waived by the parties hereto.
Section 8.12. Determination of Adverse Effect. Any determination of an
adverse effect on the interest of the Secured Parties or the Noteholders shall
be made without consideration of the availability of funds under the Policy.
Section 8.13. Headings. The headings of sections and paragraphs and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this Agreement and shall not affect its construction or
interpretation.
Section 8.14. TRIAL BY JURY WAIVED. EACH OF THE PARTIES HERETO WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY, BY AMONG OTHER THINGS, THIS
WAIVER.
Section 8.15. Governing Law. This agreement shall be construed in
accordance with the laws of the state of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
30
<PAGE>
Section 8.16. Counterparts. This Agreement may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 8.17. Limitation of Liability. Notwithstanding any other provision
herein or elsewhere, this Agreement has been executed and delivered by First
Union National Bank, not in its individual capacity, but solely in its capacity
as Owner Trustee of the Issuer, and in no event shall First Union National Bank
have any liability (except with respect to its own grossly negligent action or
failure to act) in respect of the representations, warranties, or obligations of
the Issuer or the Owner Trustee hereunder or under any other document, as to all
of which recourse shall be had solely to the assets of the Issuer, and for all
purposes of this Agreement and each other document, First Union National Bank
shall be entitled to the benefits of the Amended and Restated Trust Agreement of
the Issuer.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth on the first page hereof.
FLAGSHIP AUTO RECEIVABLES OWNER
TRUST 1999-2
as Issuer
By: FIRST UNION NATIONAL BANK, not in
its individual capacity, but solely as Owner
Trustee
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
S-1
<PAGE>
IN WITNESS WHEREOF, the undersigned officers have caused this Spread
Account Agreement to be executed as of the day and year first above written.
MBIA INSURANCE CORPORATION,
as Insurer
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
S-2
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
S-3
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $250,000,000 POLICY NO. 30856
Flagship Auto Receivables Owner Trust 1999-2
$117,000,000 6.420% Class A-1 Notes
$60,000,000 6.705% Class A-2 Notes
$43,000,000 6.835% Class A-3 Notes
$30,000,000 6.900% Class A-4 Notes
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment
of the premium and subject to the terms of this Note Guaranty Insurance Policy
(this "Policy"), hereby unconditionally and irrevocably guarantees to any Owner
that an amount equal to each full and complete Insured Payment will be received
from the Insurer by Harris Trust and Savings Bank, or its successors, as
indenture trustee for the Owners (the "Indenture Trustee"), on behalf of the
Owners, for distribution by the Indenture Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Indenture
Trustee, whether or not such funds are properly applied by the Indenture
Trustee. Insured Payments shall be made only at the time set forth in this
Policy, and no accelerated Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole option
of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Issuer, the Trust or
the Indenture Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on the
Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (a) a certified copy of the order requiring the return of a
preference payment, (b) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (c) an assignment in such form as
is reasonably required by the Insurer, irrevocably assigning to the Insurer all
rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (d) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
<PAGE>
The Insurer will pay any other amount payable hereunder no later than 12:00
noon, New York City time, on the later of the Payment Date on which the related
Deficiency Amount is due or the second Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer, or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent"), of a Notice (as described below), provided that if
such Notice is received after 12:00 noon, New York City time, on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder, it shall be deemed not
to have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Indenture Trustee and the Indenture Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners
by wire transfer of immediately available funds in the amount of the Insured
Payment less, in respect of Insured Payments related to Preference Amounts, any
amount held by the Indenture Trustee for the payment of such Insured Payment and
legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be subrogated to
the rights of each Owner to receive payments under the Obligations to the extent
of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture dated as of November 1, 1999 among Flagship
Auto Receivables Owner Trust 1999-2 as the Issuer, Flagship Credit Corporation,
as Servicer, and Harris Trust and Savings Bank, as Indenture Trustee, without
regard to any amendment or supplement thereto, unless such amendment or
supplement has been approved in writing by the Insurer.
"Business Day" means any day other than (a) a Saturday or a Sunday (b) a
day on which the Insurer is closed or (c) a day on which banking institutions in
New York City or in the city in which the corporate trust office of the
Indenture Trustee under the Agreement is located are authorized or obligated by
law or executive order to close.
"Deficiency Amount" means (a) for any Payment Date, any shortfall in the
sum of Available Funds plus amounts on deposit in the Spread Account to pay the
related Noteholders' Interest Payment Amount, and (b) on the related Final
Scheduled Maturity Date, any shortfall in the sum of Available Funds plus
amounts on deposit in the Spread Account to pay the outstanding principal amount
of the related Class of Notes (after taking into account all distributions to be
made on such Payment Date).
2
<PAGE>
"Insured Payment" means (a) as of any Payment Date, any Deficiency Amount
and (b) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by facsimile substantially in the form of Exhibit A attached hereto, the
original of which is subsequently delivered by registered or certified mail,
from the Indenture Trustee specifying the Insured Payment which shall be due and
owing on the applicable Payment Date.
"Owner" means each Noteholder (as defined in the Agreement) who, on the
applicable Payment Date, is entitled under the terms of the applicable Notes to
payment under the Policy.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be made
at the address listed below for the Fiscal Agent or such other address as the
Insurer shall specify in writing to the Indenture Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Indenture Trustee in
writing.
THIS POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE CONSTRUED
UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF.
The insurance provided by 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 cancelable for any reason. The premium on this Policy is
not refundable for any reason, including payment, or provision being made for
payment, prior to maturity of the Obligations.
3
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 24th day of November 1999.
MBIA INSURANCE CORPORATION
By
-------------------------------
Title
-------------------------------
Attest:
By
-----------------------------------
Secretary
4
<PAGE>
EXHIBIT A
TO NOTE GUARANTY INSURANCE
POLICY NUMBER: 30856
NOTICE UNDER NOTE GUARANTY
INSURANCE POLICY NUMBER: 30856
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF INDENTURE TRUSTEE],
as trustee (the "Indenture Trustee"), hereby certifies to State Street Bank and
Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Note Guaranty Insurance Policy Number: 30856 (the
"Policy") issued by the Insurer in respect of the $250,000,000 Flagship Auto
Receivables Owner Trust 1999-2 $117,000,000 6.420% Class A-1 Notes $60,000,000
6.705% Class A-2 Notes $43,000,000 6.835% Class A-3 Notes $30,000,000 6.900%
Class A-4 Notes (the "Obligations"), that:
(a) the Indenture Trustee is the indenture trustee under the Indenture
dated as of November 1, 1999, among Flagship Auto Receivables Owner Trust
1999-2 as Issuer, Flagship Credit Corporation, as Servicer, and Harris
Trust and Savings Bank, as Indenture Trustee for the Owners;
(b) the amount due under clause (a) of the definition of Deficiency
Amount for the Payment Date occurring on [_________________] (the
"Applicable Payment Date") is $[_________________];
(c) the amount due under clause (b) of the definition of Deficiency
Amount for the Applicable Payment Date is $[_________________];
(d) the sum of the amounts listed in paragraphs (b) and (c) above is
$[_________________] (the "Deficiency Amount");
(e) the amount of previously distributed payments on the Obligations
that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with
a final nonappealable
<PAGE>
order of a court having competent jurisdiction is $[_________________] (the
"Preference Amount");
(f) the total Insured Payment due is $[_________________], which
amount equals the sum of the Deficiency Amount and the Preference Amount;
(g) the Indenture Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set forth
in (d) above to be applied to the payment of the Deficiency Amount for the
Applicable Payment Date in accordance with the Agreement and for the dollar
amount of the Insured Payment set forth in (e) above to be applied to the
payment of any Preference Amount; and
(h) the Indenture Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Policy:
[INDENTURE TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company
Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice under the Policy as of the [___] day of [_________], [____].
[NAME OF INDENTURE TRUSTEE], as
Indenture Trustee
By
-------------------------------------
Title
-------------------------------------
a-2
EXECUTION COPY
================================================================================
MBIA INSURANCE CORPORATION,
as Insurer
FLAGSHIP CREDIT CORPORATION
as Originator and as Servicer
FLAGSHIP AUTO LOAN FUNDING LLC 1999-II,
as Seller
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
as Issuer
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor
FLAGSHIP SPECIAL MEMBER, INC.
as Special Member
FIRST UNION NATIONAL BANK,
not in its individual capacity but solely as Owner Trustee
COPELCO FINANCIAL SERVICES GROUP, INC.
as Back-up Servicer and as Guarantor
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee and as Collateral Agent
INSURANCE AGREEMENT
$250,000,000
Flagship Auto Receivables Owner Trust 1999-2
$117,000,000 6.420% Class A-1 Notes
$60,000,000 6.705% Class A-2 Notes
$43,000,000 6.835% Class A-3 Notes
$30,000,000 6.900% Class A-4 Notes
Dated as of November 1, 1999
================================================================================
<PAGE>
ARTICLE I
<TABLE>
<CAPTION>
<S> <C> <C>
DEFINITIONS......................................................................................................1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representation and Warranties of the Servicer, the Seller, the Originator, the
Guarantor, the Special Member and the Issuer...................................................9
Section 2.02. Affirmative Covenants of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer.................................................................13
Section 2.03. Negative Covenants of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer.................................................................21
Section 2.04. Representations, Warranties and Covenants of Indenture Trustee, the Collateral Agent
and Back-up Servicer..........................................................................22
Section 2.05. Representations and Warranties of the Depositor...............................................24
Section 2.06. Affirmative Covenants of the Depositor........................................................27
Section 2.07. Negative Covenants of the Depositor...........................................................30
Section 2.08. Representations, Warranties and Covenants of the Owner Trustee................................30
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. Issuance of the Policy........................................................................31
Section 3.02. Payment of Fees and Premium...................................................................33
Section 3.03. Reimbursement and Additional Payment Obligation...............................................34
Section 3.04. Indemnification; Limitation of Liability......................................................36
Section 3.05. Payment Procedure.............................................................................39
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement...............................................39
Section 4.02. Further Assurances and Corrective Instruments.................................................40
Section 4.03. Obligations Absolute..........................................................................40
Section 4.04. Assignments; Reinsurance; Third-party Rights..................................................42
Section 4.05. Liability of the Insurer......................................................................43
Section 4.06. Parties Will Not Institute Insolvency Proceedings.............................................43
Section 4.07. Indenture Trustee, the Collateral Agent, Issuer, Back-up Servicer, Originator, the
Depositor, the Seller, the Owner Trustee, the Guarantor, the Special Member and
Servicer To Join in Enforcement Action........................................................43
Section 4.08. Subrogation...................................................................................43
</TABLE>
ii
<PAGE>
ARTICLE V
DEFAULTS; REMEDIES
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.01. Defaults......................................................................................43
Section 5.02. Remedies; No Remedy Exclusive.................................................................45
Section 5.03. Waivers.......................................................................................46
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc...............................................................................46
Section 6.02. Notices.......................................................................................46
Section 6.03. Severability..................................................................................49
Section 6.04. Governing Law.................................................................................49
Section 6.05. Consent to Jurisdiction.......................................................................49
Section 6.06. Consent of the Insurer........................................................................50
Section 6.07. Counterparts..................................................................................50
Section 6.08. Headings......................................................................................50
Section 6.09. Trial by Jury Waived..........................................................................50
Section 6.10. Limited Liability.............................................................................51
Section 6.11. Entire Agreement..............................................................................51
</TABLE>
iii
<PAGE>
INSURANCE AGREEMENT
This INSURANCE AGREEMENT (this "Insurance Agreement"), is dated as of November
1, 1999 by and among FLAGSHIP CREDIT CORPORATION, as Originator, (together with
their permitted successors and assigns the "Originator") and in its capacity as
Servicer under the Sales and Servicing Agreement described below (together with
its permitted successors and assigns the "Servicer"), FLAGSHIP AUTO LOAN FUNDING
LLC 1999-II, as Seller (the "Seller"), FLAGSHIP AUTO RECEIVABLES OWNER TRUST
1999-2, as Issuer, (the "Issuer"), PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor, (the "Depositor"), FLAGSHIP SPECIAL MEMBER, INC., as
Special Member (the "Special Member"), FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Owner Trustee (the "Owner Trustee"), COPELCO
FINANCIAL SERVICES GROUP, INC. in its capacity as Back-up Servicer (the "Back-up
Servicer") and in its capacity as Guarantor (the "Guarantor"), and HARRIS TRUST
AND SAVINGS BANK, in its capacity as Indenture Trustee (the "Indenture Trustee")
and in its capacity as Collateral Agent (the "Collateral Agent").
WHEREAS, the Indenture dated as of November 1, 1999 by and among the
Issuer, the Servicer and the Indenture Trustee (the "Indenture") relating to the
$250,000,000 Flagship Auto Receivables Owner Trust 1999-2 $117,000,000 6.420%
Class A-1 Notes $60,000,000 6.705% Class A-2 Notes $43,000,000 6.835% Class A-3
Notes $30,000,000 6.900% Class A-4 Notes (the "Securities") provides for, among
other things, the issuance of asset-backed notes, and the Insurer has issued its
note guaranty insurance policy (the "Policy") that guarantees certain payments
due from the Issuer on the Securities; and
WHEREAS, the Insurer shall be paid an insurance premium pursuant to the
Indenture and the details of such premium are set forth herein; and
WHEREAS, the Servicer, the Guarantor, the Seller, the Depositor, the
Originator and the Issuer have undertaken certain obligations in consideration
for the Insurer's issuance of the Policy;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall have the meanings provided herein
for all purposes of this Insurance Agreement, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate. Unless the
context clearly requires otherwise, all capitalized terms used herein and not
otherwise defined in this Article I shall have the meanings assigned to them in
the Indenture. All words used herein shall be construed to be of such gender or
number, as the circumstances require. This "Insurance Agreement" shall mean this
Insurance
<PAGE>
Agreement as a whole and as the same may, from time to time hereafter,
be amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import refer to
this Insurance Agreement as a whole and not to any particular paragraph, clause
or other subdivision hereof, unless otherwise specifically noted.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a
day on which the Insurer is closed or (iii) a day on which banking institutions
in New York City or in the city in which the corporate trust office of the
Indenture Trustee under the Indenture is located are authorized or obligated by
law or executive order to close.
"Change of Control" means, with respect to Flagship a change from Copelco
possessing the power to direct or cause the direction of the management and
policies of Flagship, through the ownership of voting securities, unless (i)
such control is held by Itochu International, Inc. and (ii) Itochu
International, Inc. owns a larger percentage of voting securities of Copelco
than any other shareholder.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Collateral" means the property of the Issuer pledged to the Indenture
Trustee pursuant to the Indenture.
"Collateral Agent" means initially Harris Trust and Savings Bank and any
successor appointed pursuant to the Spread Account Agreement.
"Commission" means the Securities and Exchange Commission.
"Commitment" means the letter of commitment from the Insurer to Flagship
dated November 22, 1999.
"Copelco" means Copelco Financial Services Group, Inc.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"Default" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Default.
"Depositor Purchase Agreement" means the Depositor Purchase Agreement dated
as of November 1, 1999 among the Seller and the Depositor as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Event of Default" means any event of default specified in Section 5.01
hereof.
"Flagship" means Flagship Credit Corporation.
2
<PAGE>
"Financial Statements" means, with respect to the Guarantor, the Originator
and the Servicer, the balance sheets and the statements of income, retained
earnings and cash flows and the notes thereto which have been provided to the
Insurer.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"Guaranty Agreement" means the Guaranty dated as of November 1, 1999 by the
Guarantor.
"Indemnification Agreement" means the Indemnification Agreement dated as of
November 17, 1999 among the Insurer, the Originator and the Underwriter as the
same may be amended or supplemented from time to time in accordance with the
terms thereof.
"Indenture Trustee" means Harris Trust and Savings Bank, an Illinois
banking corporation, as indenture trustee under the Indenture, and any successor
to the Indenture Trustee under the Indenture.
"Insurance Agreement Indenture Indicator" means the occurrence of any of
the following events:
(1) a demand for payment under the Policy;
(2) an Insolvency Event relating to Copelco, any Subsidiary or the
Issuer;
(3) the Issuer becomes taxable as an association (or publicly traded
partnership taxable as a corporation) for federal or state income tax
purposes;
(4) the sum of the amount of Available Funds with respect to any
Payment Date plus the amount (if any) available from the Spread Account is
less than the sum of the amounts described in clauses (i) through (vi)
under Section 4.07(a) in the Indenture.
(5) the occurrence of a Servicer Termination Event under the Sales and
Servicing Agreement; and
(6) any failure by the Servicer, the Seller, the Originator, Copelco
or the Issuer to observe or perform in any material respect any other
covenants, representations, warranties or agreements in the Sales and
Servicing Agreement, the Indenture or any of the other Transaction
Documents, which failure continues past any applicable cure period, if any,
set forth in the related Transaction Documents.
The Insurer shall have the right in its sole discretion without the
consent of any of the Noteholders or the Indenture Trustee to waive any
Insurance Agreement Indenture Indicator. In addition, upon the occurrence
of an Insurance Agreement Indenture Indicator, the Insurer shall have the
right in its sole discretion to notify the Indenture Trustee in writing
that such Insurance Agreement Indenture Indicator constitutes an Event of
Default under the Indenture pursuant to Section 7.01 (a)(iii) of the
Indenture.
3
<PAGE>
"Insurance Agreement Indicator" means the occurrence of any one of the
following events:
(1) for any Determination Date, the average of the Delinquency Ratio
for the four previous months exceeds 8.08%;
(2) for any Determination Date, the average of the Net Loss Rate for
the four previous months exceeds 10%.
(3) for any Determination Date in a given time period set forth in the
table below, the Cumulative Net Loss Percentage exceeds the level specified
for such point in time:
----------------------------------------------------------------------
Time Period Cumulative Net Loss Percentage
----------------------------------------------------------------------
Closing through June 2000 1.75%
----------------------------------------------------------------------
July 2000 through September 2000 2.40%
----------------------------------------------------------------------
October 2000 through December 2001 3.70%
----------------------------------------------------------------------
January 2001 through March 2001 5.35%
----------------------------------------------------------------------
April 2001 through June 2001 6.85%
----------------------------------------------------------------------
July 2001 through September 2001 8.05%
----------------------------------------------------------------------
October 2001 through December 2002 9.15%
----------------------------------------------------------------------
January 2002 through March 2002 10.05%
----------------------------------------------------------------------
April 2002 through June 2002 10.75%
----------------------------------------------------------------------
After June 2002 11.30%
----------------------------------------------------------------------
(4) Copelco fails to maintain Tangible Capital Funds at all times in
an amount equal to or in excess of the sum of (a) $200,000,000 plus (b)
seventy-five percent (75%) of its net income after December 31, 1997 (not
reduced by any net loss), as reported on Copelco's income statements, and
to be computed and tested against Copelco's quarterly financial statements;
(5) Copelco incurs Total Liabilities, including contingent liabilities
in the form of letters of credit and other credit supports arising from
asset securitization and indebtedness for borrowed money, in excess of
seven (7) times Tangible Capital Funds and to be computed and tested
against Copelco's quarterly Financial Statements;
(6) Copelco fails to maintain, on a rolling four quarter basis, a
minimum ratio of (a) income before taxes (but after extraordinary items)
plus total interest expense to (b) total interest expense, of at least 1.25
to 1, to be computed and tested against Copelco's consolidated statements
of income;
(7) Itochu International, Inc. or any Person rated not less than
"BBB-" by S&P and "Baa3" by Moody's fails to own a larger percentage of
voting securities of Copelco than any other shareholder;
4
<PAGE>
(8) a Change in Control of Flagship;
(9) a failure by Copelco or Flagship to provide to the Insurer
quarterly un-audited financial statements within 60 days of the end of each
quarter and audited annual financial statements within 135 days of the end
of each fiscal year. Such reporting shall include consolidating statements,
be prepared by a nationally recognized independent accounting firm
acceptable to the Insurer and contain no qualified opinions;
(10) a failure by Copelco or Flagship to deliver an annual budget to
the Insurer within 135 days of the end of each fiscal year;
(11) a failure by Copelco to deliver to the Insurer a quarterly
covenant compliance certificate which shall include a calculation of each
required covenant, signed by the Vice President - Finance of Copelco or
other authorized senior Copelco officer;
(12) a failure by Copelco to deliver to the Insurer a copy of any
amendment, modification, restatement or supplement of Copelco's Revolving
Bank Facility or any new agreement in replacement of or in addition to the
Revolving Bank Facility within 45 days of such execution thereof.
(13) the occurrence of a Servicer Termination Event or Insurance
Agreement Indenture Indicator;
(14) an Insolvency Event relating to Copelco, any Subsidiary or the
Issuer;
(15) a failure by Copelco or the Servicer to perform or observe any
provision of the Transaction Documents, including the furnishing of reports
and making payments when due, which is not cured within the applicable cure
period, if any, set forth in the related Transaction Documents;
(16) a default under any of the Transaction Documents which is not
cured within the applicable cure period, if any, set forth in the related
Transaction Documents;
(17) the cessation of a valid perfected first priority security
interest in the Auto Loans in favor of the Indenture Trustee; and
(18) a demand for payment under the Policy.
The Insurer shall have the right in its sole discretion without the consent of
any of the Noteholders or Indenture Trustee to waive or amend any Insurance
Agreement Indicator; provided, however, that with respect to the occurrence of
any event described in clauses (4) through (8) above, such waiver or amendment
shall not be unreasonably withheld if the occurrence of such event does not have
a material adverse effect on the Notes or the rating of the Notes without regard
to the Policy.
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"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended.
"Itochu International Affiliate" shall have the meaning set forth in the
Revolving Bank Facility.
"Late Payment Rate" means, for any date of determination, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days, calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Liabilities" shall have the meaning ascribed to such term in Section
3.04(a) hereof.
"Losses" means (a) any actual out-of-pocket loss paid by the Insurer or its
respective parents, subsidiaries and affiliates or any shareholder, director,
officer, employee, agent or any "controlling person" (as such term is used in
the Securities Act) of any of the foregoing, and (b) any actual out-of-pocket
costs and expenses paid by such party, including reasonable fees and expenses of
its counsel, to the extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (a) the business, financial condition, results of operations
or properties of such Person taken as a whole or (b) the ability of such Person
to perform its obligations under any of the Transaction Documents.
"Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
the Insurer.
"Obligor" means the original obligor under each Auto Loan, including any
guarantor of such obligor and their respective successors.
"Offering Document" means the Prospectus dated November 8, 1999, the
preliminary Prospectus Supplement dated November 8, 1999 and the final
Prospectus Supplement dated November 17, 1999, (and any amendment or supplement
thereto) and any other offering document in respect of the Securities prepared
by the Seller, the Depositor, the Servicer, the Originator or the Issuer that
makes reference to the Policy.
"Opinion Facts and Assumptions" means the facts and assumptions contained
in the insolvency opinion dated November 24, 1999 by Mayer Brown & Platt insofar
as they relate to the Originator, the Seller, the Depositor, the Special Member
and the Issuer.
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"Owner Trust Purchase Agreement" means the Owner Trust Purchase Agreement
dated as of November 1, 1999 among the Issuer and the Depositor as the same may
be amended or supplemented from time to time in accordance with the terms
thereof.
"Owners" means registered holders of Securities.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, limited
liability company, partnership or other organization or entity (whether
governmental or private).
"Premium" means the premium payable in accordance with Section 3.02 hereof.
"Premium Percentage" shall have the meaning ascribed to such term in
Section 3.02 hereof.
"Revolving Bank Facility" means the Amended and Restated Credit Agreement
dated October 27,1998.
"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of November 1, 1999 among the Originator, the Servicer, the Seller, the
Issuer, the Back-up Servicer and the Indenture Trustee as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Securities" shall have the meaning set forth in the first "Whereas" clause
above.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by the Insurer.
"Subordinated Debt" means unsecured debt to the extent not due and payable
prior to, or subject to scheduled prepayments prior to, the "Revolving
Termination Date" (as defined in the Revolving Bank Facility); provided,
however, that debt from an Itochu International Affiliate shall not be included
in Subordinated Debt.
"Subsidiary" shall mean a corporation or other entity the shares of stock
or other equity interests of which having ordinary voting power (other than
stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
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which is otherwise controlled, directly or indirectly through one or more
intermediaries or both, by Copelco.
"Tangible Capital Funds" means, as of the time of determination, Tangible
Net Worth plus Subordinated Debt.
"Tangible Net Worth" means Total Assets less Total Liabilities computed in
accordance with generally accepted accounting principles, less the aggregate net
amount of the following items to the extent, if any, that they were included in
Total Assets or deducted from Total Liabilities in computing shareholders'
equity:
(a) All licenses, patents, copyrights, trade names, trademarks,
goodwill or any premium paid in excess of the book value of purchased
assets, experimental or organizational expense, unamortized debt discount
and expense, and all other assets which under generally accepted accounting
principles are deemed intangible;
(b) Any write-up of assets (other than current assets) made after the
date of the Revolving Bank Facility;
(c) All assets located outside the United States of America as defined
in the Revolving Bank Facility; and
(d) Deferred assets other than prepaid insurance and taxes.
Any receivables from an Itochu International Affiliate arising under any
tax sharing arrangement shall only be included in the calculation of Tangible
Net Worth as a deduction from Total Assets if the existing bank group for the
Revolving Bank Facility fails to approve an amendment to such agreement to
exclude this amount.
"Term of the Insurance Agreement" shall be determined as provided in
Section 4.01 hereof.
"Total Assets" means the total assets of Copelco and its Subsidiaries
computed on a consolidated basis in accordance with generally accepted
accounting principles.
"Total Liabilities" means the total liabilities of Copelco and its
Subsidiaries (other than debt that is issued by a special purpose subsidiary
that is nonrecourse to Copelco), including, without limitation, deferred taxes,
computed on a consolidated basis in accordance with generally accepted
accounting principles.
"Transaction" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"Transaction Documents" means this Insurance Agreement, the Commitment, the
Indenture, the Sales and Servicing Agreement, the Trust Agreement, the Depositor
Purchase Agreement, the Owner Trust Purchase Agreement, the Guaranty Agreement,
the Indemnification
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Agreement, the Spread Account Agreement, the Offering Document, the Securities
and the Underwriting Agreement.
"Trust Agreement" means the Trust Agreement dated as of November 1, 1999
among the Depositor, the Originator and the Owner Trustee as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underwriter " means Prudential Securities Incorporated.
"Underwriting Agreement" means the Underwriting Agreement between the
Originator, the Depositor and the Underwriter with respect to the offer and sale
of the Securities, as the same may be amended from time to time.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATION AND WARRANTIES OF THE SERVICER, THE SELLER,
THE ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer,
the Seller, the Originator, the Guarantor, the Special Member and the Issuer,
respectively, represent, warrant and covenant as of the Date of Issuance, each
as to those matters relating to itself, as follows:
(a) Due Organization and Qualification. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer are each a
corporation, owner trust, or limited liability company duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization. Each of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer is duly
qualified to do business, is in good standing and has obtained all
licenses, permits, charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as currently
conducted and as described in the Offering Document and the performance of
its obligations under the Transaction Documents in each jurisdiction in
which the failure to be so qualified or to obtain such approvals would
render any Transaction Document unenforceable in any respect or would have
a material adverse effect upon the Transaction, the Owners or the Insurer.
(b) Power and Authority. Each of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer has all
necessary power and authority to conduct its business as currently
conducted and, as described in the Offering Document, to execute, deliver
and perform its obligations under the Transaction Documents and to
consummate the Transaction.
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(c) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Servicer, the Originator, the Seller, the
Guarantor, the Special Member and the Issuer have been duly authorized by
all necessary action and do not require any additional approvals or
consents of, or other action by or any notice to or filing with, any
Person, including, without limitation, any governmental entity or the
Servicer's, the Seller's, the Originator's, the Guarantor's, the Special
Member's or the Issuer's stockholders or members, which have not previously
been obtained or given by the Servicer, the Originator, the Guarantor, the
Special Member or the Issuer.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Transaction Documents:
(i) conflicts with or results in any breach or violation of any
provision of the organizational documents of the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer or any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to the
Servicer, the Seller, the Guarantor, the Originator, the Special
Member or the Issuer or any of their material properties, including
regulations issued by an administrative agency or other governmental
authority having supervisory powers over the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer;
(ii) constitutes a default by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer under or a
breach of any provision of any loan agreement, mortgage, indenture or
other agreement or instrument to which the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer is a party
or by which any of its or their respective properties, which are
individually or in the aggregate material to the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer, is or
may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer, except as contemplated by
the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Servicer, the Seller, the Originator, the
Guarantor, the Special Member, the Issuer or any of its or their
subsidiaries, or any properties or rights of the Servicer, the Originator,
the Seller, the Guarantor, the Special Member, the Issuer or any of its or
their subsidiaries, pending or, to the Servicer's, the Seller's, the
Originator's, the Guarantor's, the Special Member's or the Issuer's
knowledge after reasonable inquiry, threatened, which in any case could
reasonably be expected to result in a Material Adverse Change
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with respect to the Servicer, the Seller, the Originator, the Guarantor,
the Special Member or Issuer.
(f) Valid and Binding Obligations. The Securities, when executed,
authenticated and issued in accordance with the Indenture, and the
Transaction Documents (other than the Securities), when executed and
delivered by the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer, will constitute the legal, valid and binding
obligations of the Servicer, the Seller, the Originator, the Guarantor, the
Issuer and the Special Member, as applicable, enforceable in accordance
with their respective terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles and
public policy considerations as to rights of indemnification for violations
of federal securities laws. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer will at any
time in the future deny that the Transaction Documents constitute the
legal, valid and binding obligations of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer, as applicable.
(g) Financial Statements. The Financial Statements of the Guarantor,
the Originator and the Servicer, copies of which have been furnished to the
Insurer, (i) are, as of the dates and for the periods referred to therein,
complete and correct in all material respects, (ii) present fairly the
financial condition and results of operations of the Guarantor, the
Originator and the Servicer as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements, there has been no
Material Adverse Change in respect of the Servicer, the Guarantor or the
Originator. Except as disclosed in the Financial Statements, the Servicer,
the Guarantor and the Originator are not subject to any contingent
liabilities or commitments that, individually or in the aggregate, have a
material possibility of causing a Material Adverse Change in respect of the
Servicer, the Guarantor or the Originator.
(h) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer in the conduct
of its business violates any law, regulation, judgment, agreement, order or
decree applicable to any of them that, if enforced, could reasonably be
expected to result in a Material Adverse Change with respect to the
Servicer, the Originator, the Seller, the Guarantor, the Special Member or
the Issuer. The Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer are not in breach of or in default under any
applicable law or administrative regulation of its respective jurisdiction
of incorporation or organization, or any department, division, agency or
instrumentality thereof or of the United States or any applicable judgment
or decree or any loan agreement, note, resolution, certificate, agreement
or other instrument to which the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer is a party or is otherwise
subject which, if enforced, would have a material adverse effect on the
ability of the Servicer, the Seller, the Originator, the Guarantor, the
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Special Member or the Issuer, as the case may be, to perform its respective
obligations under the Transaction Documents.
(i) Taxes. The Servicer, the Guarantor, the Seller, the Originator,
the Special Member and the Issuer and the Servicer's, the Seller's, the
Originator's, the Guarantor's, the Special Member's and the Issuer's parent
company or companies have filed prior to the date hereof all federal and
state tax returns that are required to be filed and paid all taxes,
including any assessments received by them that are not being contested in
good faith, to the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the aggregate, would not
result in a Material Adverse Change with respect to the Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer.
(j) Accuracy of Information. Neither the Transaction Documents nor
other information relating to the Auto Loans, the operations of the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer (including servicing or origination of loans) or the financial
condition of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer (collectively, the "Documents"), as amended,
supplemented or superseded, furnished to the Insurer by the Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
contains any statement of a material fact by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or Issuer which was untrue or
misleading in any material adverse respect when made. None of the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the Issuer
has any knowledge of circumstances that could reasonably be expected to
cause a Material Adverse Change with respect to the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer. Since the
furnishing of the Documents, there has been no change or any development or
event involving a prospective change known to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer that would
render any of the Documents untrue or misleading in any material respect.
(k) Compliance With Securities Laws. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
Without limitation of the foregoing, the Offering Document does not contain
any untrue statement of a material fact and does not omit to state a
material fact necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the information in
the Offering Document set forth under the headings "The Policy" and "The
Insurer" or the consolidated financial statements of the Insurer
incorporated by reference in the Offering Document. Neither the offer nor
the sale of the Securities has been or will be in violation of the
Securities Act or any other federal or state securities laws. The Issuer is
not required to be registered as an "investment company" under the
Investment Company Act.
(l) Transaction Documents. Each of the representations and warranties
of the Servicer, the Seller, the Originator, the Guarantor, the Special
Member and the Issuer
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contained in the Transaction Documents is true and correct in all material
respects, and the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer hereby make each such representation and
warranty to, and for the benefit of, the Insurer as if the same were set
forth in full herein.
(m) Solvency; Fraudulent Conveyance. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer are solvent
and will not be rendered insolvent by the Transaction and, after giving
effect to the Transaction, none of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer will be left
with an unreasonably small amount of capital with which to engage in its
business, nor does the Servicer, the Seller, the Originator, the Guarantor,
the Special Member or the Issuer intend to incur, or believe that it has
incurred, debts beyond its ability to pay as they mature. None of the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer contemplates the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer or any of their assets. The amount of consideration being
received by the Issuer upon the sale of the Securities to the Underwriter
constitutes reasonably equivalent value and fair consideration for the
interest in the Auto Loans evidenced by the Securities. The Originator is
not transferring the Auto Loans to the Seller, the Seller is not
transferring the Auto Loans to the Depositor, the Depositor is not
transferring the Auto Loans to the Issuer, the Issuer is not pledging the
Collateral to the Indenture Trustee and the Issuer is not selling the
Securities to the Underwriter, as provided in the Transaction Documents,
with any intent to hinder, delay or defraud any of the Seller's, the
Seller's, the Originator's or the Issuer's creditors.
(n) Principal Place of Business. The principal place of business of
Flagship is located in Philadelphia, Pennsylvania, the principal place of
business of the Seller is located in Philadelphia, Pennsylvania, the
principal place of business of the Guarantor is located in Mount Laurel,
New Jersey, the principal place of business of the Issuer is located in
Wilmington, Delaware and the principal place of business of the Special
Member is located in Philadelphia, Pennsylvania.
(o) Opinion Facts and Assumptions. The Opinion Facts and Assumptions
insofar as they relate to the Seller, the Originator, the Special Member
and the Issuer are true and correct as of the Date of Issuance.
Section 2.02. AFFIRMATIVE COVENANTS OF THE SERVICER, THE SELLER, THE
ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer hereby
agree that during the Term of the Insurance Agreement, and to the extent each of
the following applies to it, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer
shall not be in
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default under the Transaction Documents and shall comply with all material
requirements of any law, rule or regulation applicable to it. None of the
Servicer, the Guarantor, the Seller, the Originator, the Special Member or
the Issuer shall agree to any amendment to or modification of the terms of
any Transaction Documents unless the Insurer shall have given its prior
written consent.
(b) Corporate Existence. The Servicer, its successors and assigns, the
Seller, its successors and assigns, the Originator, its successors and
assigns, the Guarantor, its successors and assigns, the Special Member, its
successors and assigns, and the Issuer, its successors and assigns, shall
maintain their respective existence and shall at all times continue to be
duly organized under the laws of their respective jurisdictions of
organization and duly qualified and duly authorized (as described in
section 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its organizational documents.
(c) Financial Statements; Accountants' Reports; Other Information. The
Servicer, the Seller, the Originator, the Guarantor, the Special Member and
the Issuer shall keep or cause to be kept in reasonable detail books and
records of account of their assets and business, including, but not limited
to, books and records relating to the Transaction. The Servicer, the
Guarantor and the Originator shall furnish or cause to be furnished to the
Insurer:
(i) Annual Financial Statements. As soon as available, and in any
event within 135 days after the close of each fiscal year of the
Servicer, the Guarantor and the Originator, the audited consolidated
balance sheets of the Servicer, the Guarantor and the Originator and
their subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of income, changes in shareholders'
equity and cash flows for such fiscal year, all in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared
in accordance with generally accepted accounting principles
consistently applied and accompanied by the audit opinion of the
Servicer's, the Guarantor's and the Originator's independent
accountants (which shall be nationally recognized independent public
accounting firms acceptable to the Insurer) and by the certificate
specified in Section 2.02(e) hereof.
(ii) Quarterly Financial Statements. As soon as available, and in
any event within 60 days after each of the first three fiscal quarters
of each fiscal year of the Servicer, the Guarantor and the Originator,
the unaudited consolidated balance sheets of the Servicer, the
Guarantor and the Originator and their subsidiaries as of the end of
such fiscal quarter and the related unaudited consolidated statements
of income, changes in shareholders' equity and cash flows for such
fiscal quarter, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with generally
accepted accounting principles
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consistently applied and accompanied by the certificate specified in
Section 2.02(e) hereof.
(iii) Initial and Continuing Reports. On or before the Closing
Date, the Servicer will provide the Insurer a copy of the magnetic
tape to be delivered to the Indenture Trustee on the Closing Date
setting forth, as to each Auto Loan, the information required under
the definition of Schedule of Auto Loans attached as Exhibit A to the
Sales and Servicing Agreement. Thereafter, the Servicer shall deliver
to the Insurer not later than 12:00 noon, New York City time, on each
Payment Date the report required by Section 3.9 of the Sales and
Servicing Agreement.
(iv) Computer Diskette. Beginning in February 2000, the Servicer
will deliver to the Insurer on a quarterly basis a computer diskette
containing a quarterly summary of the information provided to the
Insurer pursuant to clause (iii) of this Section 2.02(c) and also
containing information similar to the information provided in the
Schedule of Auto Loans delivered to the Indenture Trustee pursuant to
the Sales and Servicing Agreement and described in Schedule A of the
Sales and Servicing Agreement.
(v) Certain Information. Upon the reasonable request of the
Insurer, the Servicer, the Guarantor, and the Originator shall
promptly provide copies of any requested proxy statements, financial
statements, reports and registration statements which the Servicer,
the Guarantor or the Originator files with, or deliver to, the
Commission or any national securities exchange.
(vi) Other Information. Promptly upon receipt thereof, copies of
all schedules, financial statements or other similar reports delivered
to or by the Servicer, the Originator, the Guarantor, the Special
Member or the Issuer pursuant to the terms of the Sales and Servicing
Agreement, promptly upon request, such other data as the Insurer may
reasonably request.
(vii) Quarterly Covenant Compliance Certificate. Copelco shall
deliver to the Insurer, concurrently with the delivery of the
financial statements required pursuant to clauses (i) and (ii) of this
Section 2.02(c), one or more certificates signed by an officer of
Copelco, authorized to execute such certificates on behalf of Copelco,
setting forth each of the calculations under the definition of
"Insurance Agreement Indicators" hereunder for the related quarter and
stating that to the best of such individual's knowledge following
reasonable inquiry, no Insurance Agreement Indicator has occurred, or
if an Insurance Agreement Indicator has occurred, specifying the
nature thereof.
(viii) Annual Budget. As soon as available, and in any event
within 135 days after the close of each fiscal year of the Servicer,
the Guarantor and the Originator, the annual budget of the Servicer,
the Guarantor and the Originator for the next succeeding fiscal year.
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All financial statements specified in clause (i) of this Section
2.02(c) shall be furnished in consolidated form for the Servicer and all
its subsidiaries in the event the Servicer shall consolidate its financial
statements with its subsidiaries, for the Guarantor and all its
subsidiaries in the event the Guarantor shall consolidate its financial
statements with its subsidiaries, and for the Originator and its
subsidiaries in the event the Originator shall consolidate its financial
statements with its subsidiaries unless the Originator's financial
statements are consolidated with those of the Servicer or the Guarantor,
the Servicer's financial statements are consolidated with those of the
Originator or the Guarantor, or the Guarantor's financial statements are
consolidated with those of the Servicer or the Originator.
The Insurer agrees that it and its agents, accountants and attorneys
shall keep confidential all financial statements, reports and other
information delivered by the Servicer, the Originator, the Guarantor, the
Special Member or the Issuer pursuant to this Section 2.02(c) to the extent
provided in Section 2.02(f) hereof.
(d) Corporate Formalities. The Issuer, the Seller and the Special
Member shall have at least annual meetings of the members or the
shareholders, as applicable, and at least annual board of director meetings
(in each case, or written consents in lieu of the same) and shall prepare
income and franchise tax returns as appropriate. The Issuer, the Seller and
the Special Member shall deliver to the Insurer copies of the minutes of
such meetings upon written request and such tax returns promptly upon
filing but in no event later than August 31 of each year, beginning in
2000. Each of the Issuer, the Seller and the Special Member shall observe
all corporate or other formalities necessary to preserve its status a
separate legal entity. The Issuer, the Seller and the Special Member agree
that they shall not modify, alter or amend their respective organizational
documents without the prior written consent of the Insurer.
(e) Compliance Certificate. The Servicer, the Guarantor and the
Originator shall deliver to the Insurer, concurrently with the delivery of
the financial statements required pursuant to Section 2.02(c)(i) and (ii)
hereof, one or more certificates signed by an officer of the Servicer, an
officer of the Guarantor and an officer of the Originator authorized to
execute such certificates on behalf of the Servicer, the Guarantor and the
Originator stating that:
(i) a review of the Servicer's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred or, if
a Default or Event of Default has occurred, specifying the nature
thereof and, if the Servicer has a right to cure pursuant to the
related Transaction Documents, stating in reasonable detail
(including, if applicable, any supporting calculations) the steps, if
any, being taken by the Servicer to cure such Default or Event of
Default or to otherwise comply with the terms of the agreement to
which such Default or Event of Default relates;
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(iii) the attached financial statements submitted in accordance
with Section 2.02(c)(i) or (ii) hereof, as the case may be, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Servicer, the
Guarantor, and the Originator as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied; and
(iv) the Servicer has in full force and effect a blanket fidelity
bond (or direct surety bond) and an errors and omissions insurance
policy in accordance with the terms and requirements of Section 3.14
of the Sales and Servicing Agreement.
(f) Access to Records; Discussions With Officers and Accountants. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Servicer, the Guarantor, and the Originator shall, upon the reasonable
request of the Insurer, permit the Insurer or its authorized agents:
(i) to inspect the books and records of the Servicer, of the
Guarantor and of the Originator as they may relate to the Securities,
the obligations of the Servicer, of the Guarantor or of the Originator
under the Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Servicer, of the Guarantor or of the Originator with the chief
operating officer and the chief financial officer of the Servicer, of
the Guarantor, or of the Originator, as the case may be; and
(iii) with the Servicer's, the Guarantor's or the Originator's
consent, as applicable, which consent shall not be unreasonably
withheld, to discuss the affairs, finances and accounts of the
Servicer, the Guarantor or the Originator with the Servicer's, the
Guarantor's or the Originator's independent accountants, provided that
an officer of the Servicer, the Guarantor or the Originator shall have
the right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Servicer, the Guarantor or the Originator. The books and records of the
Servicer shall be maintained at the address of the Servicer designated
herein for receipt of notices, unless the Servicer shall otherwise advise
the parties hereto in writing. The books and records of the Guarantor shall
be maintained at the address of the Guarantor designated herein for receipt
of notices, unless the Guarantor shall otherwise advise the parties hereto
in writing. The books and records of the Originator shall be maintained at
the address of the Originator designated herein for receipt of notices,
unless the Originator shall otherwise advise the parties hereto in writing.
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The Insurer agrees that it and its shareholders, directors, agents,
accountants and attorneys shall keep confidential any matter of which it
becomes aware through such inspections or discussions (unless readily
available from public sources), except as may be otherwise required by
regulation, law or court order or requested by appropriate governmental
authorities or as necessary to preserve its rights or security under or to
enforce the Transaction Documents, provided that the foregoing shall not
limit the right of the Insurer to make such information available to its
regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants.
(g) Notice of Material Events. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer shall be
obligated (which obligation shall be satisfied as to each if performed by
the Servicer, the Seller, the Originator, the Guarantor, the Special Member
or the Issuer) promptly to inform the Insurer in writing of the occurrence
of any of the following to the extent any of the following relate to it:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation or rule making or disciplinary proceeding by or against
the Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer that (A) would likely be required to be disclosed
to the Commission or to the Servicer's, the Guarantor's, the Seller's,
the Originator's, the Special Member's or the Issuer's shareholders or
members, as applicable, or (B) would likely result in a Material
Adverse Change with respect to the Servicer, the Guarantor, the
Seller, the Originator, the Special Member or the Issuer, or the
promulgation of any proceeding or any proposed or final rule which
would result in a Material Adverse Change with respect to the
Servicer, the Guarantor, the Seller, the Originator, the Special
Member or the Issuer;
(ii) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation in any federal, state or local court or before any
arbitration board, or any such proceeding threatened by any government
agency, which, if adversely determined, would have a material adverse
effect on the Issuer, the Owners, the Special Member or the Insurer;
(iii) any change in the location of the Servicer's, the
Guarantor's, the Seller's, the Originator's, the Special Member's or
the Issuer's principal office or any change in the location of the
Servicer's, the Guarantor's, the Seller's, the Originator's, the
Special Member's or the Issuer's books and records;
(iv) the occurrence of any Default or Event of Default or of any
Material Adverse Change;
(v) the commencement of any proceedings by or against the
Servicer, the Guarantor, the Seller, the Originator, the Special
Member or the Issuer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a
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receiver, liquidator, conservator, trustee or similar official shall
have been, or may be, appointed or requested for the Servicer, the
Guarantor, the Seller, the Originator, the Special Member or the
Issuer or any of its or their assets; or
(vi) the receipt of notice that (A) the Servicer, the Guarantor,
the Seller, the Originator, the Special Member or the Issuer is being
placed under regulatory supervision, (B) any license, permit, charter,
registration or approval which are material for the conduct of the
Servicer's, the Guarantor's, the Seller's, the Originator's, the
Special Member's or the Issuer's business is to be or may be suspended
or revoked, or (C) the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer is to cease and desist any
practice, procedure or policy employed by the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer.
(h) Financing Statements and Further Assurances. The Servicer will
cause to be filed all necessary financing statements or other instruments,
and any amendments or continuation statements relating thereto, necessary
to be kept and filed in such manner and in such places as may be required
by law to preserve and protect fully the interest of the Indenture Trustee
in the Collateral. The Servicer, the Seller, the Originator, the Guarantor,
the Special Member and the Issuer shall, upon the request of the Insurer,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within 10 days of such request, such
amendments hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents. In addition, each of the Servicer,
the Seller, the Originator, the Guarantor, the Special Member and the
Issuer agrees to cooperate with S&P and Moody's in connection with any
review of the Transaction that may be undertaken by S&P and Moody's after
the date hereof and to provide all information reasonably requested by S&P
or Moody's.
(i) Maintenance of Licenses. The Servicer, the Guarantor, the Seller,
the Originator, the Special Member and the Issuer, respectively, or any
successors thereof shall maintain or cause to be maintained all licenses,
permits, charters and registrations which are material to the conduct of
its business.
(j) Redemption of Securities. The Issuer shall instruct the Indenture
Trustee, upon redemption or payment of all of the Securities pursuant to
the Indenture or otherwise, to furnish to the Insurer a notice of such
redemption and, upon a redemption or payment of all of the Securities, to
surrender the Policy to the Insurer for cancellation.
(k) Disclosure Document. Each Offering Document delivered with respect
to the Securities shall clearly disclose that the Policy is not covered by
the property/casualty insurance security fund specified in Article 76 of
the New York Insurance Law.
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(l) Servicing of Auto Loans. The Servicer shall perform such actions
with respect to the Auto Loans as are required by or provided in the Sales
and Servicing Agreement. The Servicer will provide the Insurer with written
notice of any change or amendment to any Transaction Document as currently
in effect.
(m) Maintenance of Collateral. On or before each November 1 beginning
in 2000, so long as any of the Securities are outstanding, the Servicer
shall furnish to the Insurer and the Indenture Trustee an officers'
certificate either stating that such action has been taken with respect to
the recording, filing, rerecording and refiling of any financing statements
and continuation statements as is necessary to maintain the interest of the
Indenture Trustee created by the Indenture with respect to the Collateral
and reciting the details of such action or stating that no such action is
necessary to maintain such interests. Such officers' certificate shall also
describe the recording, filing, rerecording and refiling of any financing
statements and continuation statements that will be required to maintain
the interest of the Indenture Trustee in the Collateral until the date such
next officers' certificate is due. The Servicer will use its best efforts
to cause any necessary recordings or filings to be made with respect to the
Collateral.
(n) Closing Documents. The Servicer, the Seller, the Originator, the
Guarantor, the Special Member and the Issuer shall provide or cause to be
provided to the Insurer a bound volume or volumes of the Transaction
Documents and an executed original copy of each document executed in
connection with the Transaction within 60 days after the date of closing.
Upon the request of the Insurer, the Servicer, the Guarantor, the Seller,
the Originator, the Special Member and the Issuer shall provide or cause to
be provided to the Insurer a copy of each of the Transaction Documents on
computer diskette, in a format acceptable to the Insurer.
(o) Preference Payments. With respect to any Preference Amount (as
defined in the Policy), the Servicer shall provide to the Insurer upon the
request of the Insurer:
(i) a certified copy of the final nonappealable order of a court
having competent jurisdiction ordering the recovery by a trustee in
bankruptcy as voidable preference amounts included in previous
distributions under Section 4.07 of the Indenture to any Owner
pursuant to the United States Bankruptcy Code, 11 U.S.C.ss.ss. 101 et
seq., as amended (the "Bankruptcy Code");
(ii) an opinion of counsel satisfactory to the Insurer, and upon
which the Insurer shall be entitled to rely, stating that such order
is final and is not subject to appeal;
(iii) an assignment in such form as reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of
the Servicer, the Indenture Trustee and any Owner relating to or
arising under the Auto Loan against the debtor which made such
preference payment or otherwise with respect to such preference
amount; and
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(iv) appropriate instruments to effect (when executed by the
affected party) the appointment of the Insurer as agent for the
Indenture Trustee and any Owner in any legal proceeding relating to
such preference payment being in a form satisfactory to the Insurer.
(p) Flagship To Hold Common Stock of Special Member. Flagship shall
hold, either directly or indirectly, all of the common stock of the Special
Member during the Term of the Insurance Agreement. Flagship shall not sell,
pledge or otherwise transfer such stock without the prior written consent
of the Insurer.
(q) Membership Interest of the Seller and Beneficial Ownership of the
Issuer. Flagship shall hold, either directly or indirectly, all of the
membership interest in the Seller and the Special Member during the Term of
the Insurance Agreement. Flagship shall not sell, pledge or otherwise
transfer such interest without the prior written consent of the Insurer.
The Seller shall maintain the beneficial ownership of the Issuer and shall
not transfer any certificate issued by the Issuer without the prior written
consent of the Insurer.
(r) Year 2000 Program. The Servicer has taken, all steps reasonably
necessary and appropriate to prevent any problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to
the Insurer such information and reports as the Insurer may reasonably
request from time to time with respect to such steps as have or will be
taken with respect thereto.
(s) Reliening. The Servicer agrees that, upon the occurrence of any
event set forth in clauses (4), (5), (6), (7), (8), (9), (11), (14), (15),
(17) or (18) of the definition of "Insurance Agreement Indicator", the
Indenture Trustee at the written direction of the Insurer may take or cause
to be taken such actions as may, in the reasonable opinion of the Insurer
or the Indenture Trustee with the consent of the Insurer, be necessary to
perfect or re-perfect the security interest in the Vehicles in the name of
the Issuer, including by amending the title documents of the Vehicles. The
Servicer hereby agrees to pay all expenses reasonably related to such
perfection or re-perfection and to take all action reasonably necessary
therefor and shall not be entitled to reimbursement therefor. If such
expenses are not paid within 15 days after delivery of any invoice for such
expenses to the Servicer, such expenses shall be paid pursuant to Section
4.07 (a)(x) of the Indenture. If such expenses are paid by the Indenture
Trustee they may be reimbursed pursuant to Section 4.07(a)(x) without
regard to the Annual Indenture Trustee Expense Cap. The Insurer may, in its
sole discretion, pay such costs and any such amounts shall be included in
Reimbursement Amounts owed to the Insurer pursuant to Section 4.07 of the
Indenture.
(t) BDO Seidman Review. Three months after closing, at the expense of
Flagship, BDO Seidman shall perform the following procedures:
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(i) verify that Flagship is not granting any extensions on the
Auto Loans;
(ii) for the prior twelve months, verify the monthly trend data
relating to the number of days from repossession of a Financed Vehicle
to auction of such Financed Vehicle;
(iii) verify that the Actual Recovery Amounts on the Auto Loans
are reported as of the time of disposition of the Financed Vehicle in
an amount equal to the actual proceeds of sale, the actual proceeds
from insurance, the actual proceeds from any dealer agreements or the
actual proceeds from any other disposition of the Financed Vehicle, as
applicable, and that no estimations are used as to the amount of
proceeds received from the disposition of the Financed Vehicle;
(iv) BDO Seidman shall repeat the "Account Testing" procedures
reported in the October 27, 1999 report and shall verify that all
Charged-off Auto Loans are properly reported on the Servicer's
Certificate required by the Servicing Agreement and in Flagship's
account records; and
(v) verify Flagship's ability to track recency statistics.
Section 2.03. NEGATIVE COVENANTS OF THE SERVICER, THE SELLER, THE
ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer,
respectively, hereby agree that during the Term of the Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing:
(a) Impairment of Rights. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer shall take any
action, or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in clause (b)
of the definition of Material Adverse Change with respect to the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the
Issuer, or may materially interfere with the enforcement of any rights of
the Insurer under or with respect to the Transaction Documents. The
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer shall give the Insurer written notice of any such action or
failure to act on the earlier of (i) the date upon which any publicly
available filing or release is made with respect to such action or failure
to act or (ii) promptly prior to the date of consummation of such action or
failure to act. The Servicer and the Originator shall furnish to the
Insurer all information requested by it that is reasonably necessary to
determine compliance with this Section (a).
(b) Adverse Selection Procedure. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer shall not use
any adverse selection procedure in selecting Auto Loans to be transferred
to the Indenture Trustee from the outstanding auto loans that qualify under
the Sales and Servicing Agreement for inclusion in the Collateral.
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(c) Waiver, Amendments, Etc. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer shall waive,
modify or amend, or consent to any waiver, modification or amendment of,
any of the terms, provisions or conditions of any of the Transaction
Documents without the prior written consent of the Insurer.
(d) Auto Loan Agreements; Charge-off Policy. Except as otherwise
permitted in the Sales and Servicing Agreement, the Servicer and the Issuer
shall not alter or amend any Auto Loan, or with respect to the Servicer its
respective collection policies or their respective charge-off policies in a
manner that materially adversely affects the Insurer unless the Insurer
shall have previously given its consent, which consent shall not be
withheld unreasonably.
Section 2.04. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INDENTURE TRUSTEE,
THE COLLATERAL AGENT AND BACK-UP SERVICER. Each of the Indenture Trustee, the
Collateral Agent and the Back-up Servicer represents and warrants to, as of the
Date of Issuance, and covenants with the other parties hereto, each as to those
matters relating to itself, as follows:
(a) Due Organization and Qualification. The Indenture Trustee, the
Collateral Agent and the Back-up Servicer are each a corporation or banking
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation. Each of the Indenture
Trustee, the Collateral Agent and the Back-up Servicer is duly qualified to
do business, is in good standing and has obtained all licenses, permits,
charters, registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described in the
Offering Document and the performance of its obligations under the
Transaction Documents in each jurisdiction in which the failure to be so
qualified or to obtain such approvals would render any Transaction Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction, the Owners or the Insurer.
(b) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Indenture Trustee, the Collateral Agent and
the Back-up Servicer have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents of, or other
action by or any notice to or filing with, any Person, including, without
limitation, any governmental entity or the Indenture Trustee's, the
Collateral Agent's or the Back-up Servicer's stockholders, which have not
previously been obtained or given by the Indenture Trustee, the Collateral
Agent or the Back-up Servicer, as applicable.
(c) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Indenture Trustee, the Collateral Agent or the
Back-up Servicer, the consummation of the transactions contemplated thereby
or the satisfaction of the terms and conditions of the Transaction
Documents:
(i) conflicts with or results in any breach or violation of any
provision of the certificate or articles of incorporation or bylaws of
the Indenture Trustee, the Collateral Agent or the Back-up Servicer or
any law, rule, regulation, order,
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writ, judgment, injunction, decree, determination or award currently
in effect having applicability to the Indenture Trustee, the
Collateral Agent or the Back-up Servicer or any of their material
properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over the
Indenture Trustee, the Collateral Agent or the Back-up Servicer,
respectively;
(ii) constitutes a default by the Indenture Trustee, the
Collateral Agent or the Back-up Servicer under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Indenture Trustee, the Collateral
Agent or the Back-up Servicer is a party or by which any of their
respective properties, which are individually or in the aggregate
material to the Indenture Trustee, the Collateral Agent or the Back-up
Servicer, is or may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Indenture Trustee, the Collateral Agent
or the Back-up Servicer, except as contemplated by the Transaction
Documents.
(d) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Indenture Trustee, the Collateral Agent, the
Back-up Servicer or any of their subsidiaries, or any properties or rights
of the Indenture Trustee, the Collateral Agent, the Back-up Servicer or any
of their subsidiaries, pending or, to the Indenture Trustee, the Collateral
Agent's or the Back-up Servicer's knowledge after reasonable inquiry,
threatened, which in any case would reasonably be expected to result in a
Material Adverse Change with respect to the Indenture Trustee, the
Collateral Agent or the Back-up Servicer, respectively.
(e) Valid and Binding Obligations. The Transaction Documents to which
they are parties, when executed and delivered by the Indenture Trustee, the
Collateral Agent and the Back-up Servicer, will constitute the legal, valid
and binding obligations of the Indenture Trustee, the Collateral Agent and
the Back-up Servicer, as applicable, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
None of the Indenture Trustee, the Collateral Agent or the Back-up Servicer
will at any time in the future deny that the Transaction Documents
constitute the legal, valid and binding obligations of the Indenture
Trustee, the Collateral Agent and the Back-up Servicer, as applicable.
(f) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Indenture Trustee, the
Collateral Agent or the Back-up Servicer in the conduct of their business
violates any law, regulation, judgment, agreement, order or decree
applicable to the Indenture Trustee, the Collateral Agent or the Back-up
Servicer that, if enforced, would reasonably be expected to result in a
Material
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Adverse Change with respect to the Indenture Trustee, the Collateral Agent
or the Back-up Servicer, respectively. None of the Indenture Trustee, the
Collateral Agent or the Back-up Servicer is in breach of or in default
under any applicable law or administrative regulation of its respective
jurisdiction of organization, or any department, division, agency or
instrumentality thereof or of the United States or any applicable judgment
or decree or any loan agreement, note, resolution, certificate, agreement
or other instrument to which the Indenture Trustee, the Collateral Agent or
the Back-up Servicer is a party or is otherwise subject which, if enforced,
would have a material adverse effect on the ability of the Indenture
Trustee, the Collateral Agent or the Back-up Servicer, as the case may be,
to perform its respective obligations under the Transaction Documents.
(g) Transaction Documents. Each of the representations and warranties
of the Indenture Trustee, the Collateral Agent and the Back-up Servicer,
respectively, contained in the Transaction Documents is true and correct in
all material respects, and the Indenture Trustee, the Collateral Agent and
the Back-up Servicer hereby makes each such representation and warranty to,
and for the benefit of, the Insurer as if the same were set forth in full
herein.
(h) Compliance and Amendments. The Indenture Trustee, the Collateral
Agent and the Back-up Servicer, respectively, shall comply in all material
respects with the terms and conditions of the Transaction Documents to
which it is a party and the Indenture Trustee, the Collateral Agent and the
Back-up Servicer shall not agree to any amendment to or modification of the
terms of any of the Transaction Documents to which it is a party unless the
Insurer shall otherwise give its prior written consent.
Section 2.05. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The
Depositor represents, warrants and covenants as of the Date of Issuance, as
follows:
(a) Due Organization and Qualification. The Depositor is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Depositor is duly qualified to do
business, is in good standing and has obtained all licenses, permits,
charters, registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as described in the
Offering Document and the performance of its obligations under the
Transaction Documents in each jurisdiction in which the failure to be so
qualified or to obtain such approvals would render any Transaction Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction, the Owners or the Insurer.
(b) Power and Authority. The Depositor has all necessary corporate
power and authority to conduct its business as currently conducted and, as
described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Depositor have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents of, or other
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action by or any notice to or filing with, any Person, including, without
limitation, any governmental entity or the Depositor's stockholders, which
have not previously been obtained or given by the Depositor, other than
consents, approvals, notices and filings which would not have a material
adverse effect on the Depositor or its ability to perform its obligations
under any of the Transaction Documents.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Depositor, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Transaction Documents:
(i) conflicts with or results in any breach or violation of any
provision of the certificate of incorporation or bylaws of the
Depositor or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having
applicability to the Depositor or any of its material properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Depositor;
(ii) constitutes a default by the Depositor under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Depositor is a party or by which
any of its respective properties, which are individually or in the
aggregate material to the Depositor, is or may be bound or affected;
or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Depositor, except as contemplated by the
Transaction Documents;
except, in the case of any of the foregoing, where such conflicts breaches,
violations, defaults or liens would not have a material adverse effect on
the Depositor or its ability to perform its obligations under any of the
Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Depositor or any of its subsidiaries, or any
properties or rights of the Depositor or any of its subsidiaries, pending
or, to the Depositor's knowledge after reasonable inquiry, threatened,
which in any case could reasonably be expected to result in a Material
Adverse Change with respect to the Depositor.
(f) Valid and Binding Obligations. The Transaction Documents (other
than the Notes) to which the Depositor is a party, when executed and
delivered by the Depositor, will constitute the legal, valid and binding
obligations of the Depositor, enforceable against the Depositor,
respectively, in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles and public policy considerations as to rights
of indemnification for violations of federal securities laws. The Depositor
will not at any time in the future deny
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that the Transaction Documents to which it is a party constitute the legal,
valid and binding obligations of the Depositor.
(g) Accuracy of Information. Neither the Transaction Documents nor
other information relating to the Depositor, as amended, supplemented or
superseded, furnished to the Insurer by the Depositor contains any
statement of a material fact by the Depositor which was untrue or
misleading in any material adverse respect when made. The Depositor has no
knowledge of circumstances that could reasonably be expected to cause a
Material Adverse Change with respect to the Depositor.
(h) Transaction Documents. Each of the representations and warranties
of the Depositor contained in the Transaction Documents is true and correct
in all material respects, and the Depositor hereby makes each such
representation and warranty to, and for the benefit of, the Insurer as if
the same were set forth in full herein.
(i) Solvency; Fraudulent Conveyance. The Depositor is not insolvent
and will not become insolvent as a result of the transfer of the Auto
Loans. The Depositor does not intend to incur or believe that it will incur
debts beyond the Depositor's ability to pay as such debts mature. The
transfer of Auto Loans by the Depositor is not and will not be made with
actual intent to hinder, delay or defraud any Person. The assets of the
Depositor do not constitute unreasonably small capital to carry out its
business as conducted.
(j) Principal Place of Business. The principal place of business of
the Depositor is located in New York, New York.
(k) Opinion Facts and Assumptions. The Opinion Facts and Assumptions
insofar as they relate to the Depositor are true and correct as of the Date
of Issuance.
(l) No Material Event of Default. There is no material event of
default on the part of the Depositor under any agreement involving
financial obligations which would materially adversely impact the financial
conditions or the operations of the Issuer or the obligations of the
Depositor under any document associated with this Transaction.
Section 2.06. AFFIRMATIVE COVENANTS OF THE DEPOSITOR. The Depositor hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Further Assurances. The Depositor shall, upon the request of the
Insurer, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, within 10 days of such request,
such amendments hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents. In addition, the
Depositor agrees to cooperate with S&P and Moody's in connection with any
review of the Transaction that may be undertaken by S&P and Moody's after
the date hereof and to provide all information reasonably requested by S&P
or Moody's.
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(b) Maintenance of Licenses. The Depositor or any successors thereof
shall maintain or cause to be maintained all licenses, permits, charters
and registrations which are material to the conduct of its business to the
extent also material to the obligations of the Depositor under the
Transaction Documents.
Section 2.07. NEGATIVE COVENANTS OF THE DEPOSITOR. The Depositor hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. The Depositor shall not take any action if
such action may reasonably be expected to interfere with the enforcement of
any rights of the Insurer under or with respect to the Transaction
Documents.
(b) Waiver, Amendments, Etc. The Depositor shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
terms, provisions or conditions of any of the Transaction Documents without
the prior written consent of the Insurer.
Section 2.08. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OWNER
TRUSTEE. The Owner Trustee hereby represents and warrants as follows:
(a) Representations and Warranties. As of the Date of Issuance, each
of the representations and warranties of the Owner Trustee set forth in the
Transaction Documents to which it is a party is true and correct in all
material respects and the Owner Trustee makes each such representation and
warranty to, and for the benefit of, the Insurer as if the same were set
forth in full herein.
(b) Compliance and Amendments. The Owner Trustee shall comply in all
material respects with the terms and conditions of the Transaction
Documents to which it is a party and the Owner Trustee shall not agree to
any amendment to or modification of the terms of any of the Transaction
Documents to which it is a party unless the Insurer shall otherwise give
its prior written consent.
(c) Principal Place of Business. The principal place of business of
the Owner Trustee is located in Charlotte, North Carolina.
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. ISSUANCE OF THE POLICY. The Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) Payment of Initial Premium and Expenses. The Insurer shall have
been paid, by the Servicer, the Seller, the Originator and the Issuer, that
portion of a nonrefundable Premium payable on the Date of Issuance, and the
Servicer shall agree to
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reimburse or pay directly other fees and expenses identified in Section
3.02 hereof as payable.
(b) Transaction Documents. The Insurer shall have received a fully
executed copy of the Commitment and a copy of each of the Transaction
Documents, in form and substance satisfactory to the Insurer, duly
authorized, executed and delivered by each party thereto.
(c) Certified Documents and Resolutions. The Insurer shall have
received a copy of (i) the organizational documents of the Servicer, the
Seller, the Depositor, the Originator, the Special Member and the Issuer,
(ii) the resolutions of the Seller's, the Depositor's the Originator's and
the Issuer's Board of Directors authorizing the sale of the Auto Loans and
(iii) the execution, delivery and performance by the Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member
and the Issuer of the Transaction Documents and the transactions
contemplated thereby, certified by the Secretary or an Assistant Secretary
of the Servicer, the Seller, the Depositor, the Originator, the Guarantor,
the Special Member and the Issuer (which certificate shall state that such
certificate or articles of incorporation or organization, bylaws and
resolutions are in full force and effect without modification on the Date
of Issuance).
(d) Incumbency Certificate. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of the Servicer, the
Seller, the Depositor, the Originator, the Guarantor the Special Member and
the Issuer certifying the names and signatures of the officers of the
Servicer, the Seller, the Depositor, the Originator, the Special Member and
the Issuer authorized to execute and deliver the Transaction Documents and
that shareholder consent to the execution and delivery of such documents is
not necessary.
(e) Representations and Warranties; Certificate. The representations
and warranties of the Servicer, the Depositor, the Seller, the Originator,
the Guarantor, the Special Member and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct as of
the Date of Issuance as if made on the Date of Issuance, and the Insurer
shall have received a certificate of appropriate officers of the Servicer,
the Depositor, the Seller, the Originator, the Guarantor, the Special
Member and the Issuer to that effect.
(f) Opinions of Counsel.
(i) Brian Meyers, Esq., General Counsel of Flagship Credit
Corporation shall have issued his favorable opinion, in form and
substance acceptable to the Insurer and its counsel, regarding the
corporate existence and authority of the Servicer, the Special Member,
the Seller and the Originator.
(ii) Spencer N. Lempert Esq., General Counsel of Copelco shall
have issued his favorable opinion, in form and substance acceptable to
the Insurer and its counsel, regarding the corporate existence and
authority of the Guarantor.
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(iii) Fred Robustelli, Esq., Associate General Counsel of
Prudential Securities Incorporated shall have issued his favorable
opinion, in form and substance acceptable to the Insurer and its
counsel, regarding the corporate existence and authority of the
Depositor.
(iv) The law firm of Morris, James, Hitchens & Williams, LLP
shall have issued it favorable opinion, in form and substance
acceptable to the Insurer and its counsel, regarding the corporate
existence and authority of the Issuer.
(v) The law firm of Mayer, Brown & Platt shall have furnished its
opinions, in form and substance acceptable to the Insurer and its
counsel, regarding (A) the sale of the Auto Loans, (B) the tax
treatment of payments on the Securities under federal tax laws, and
(C) the validity and enforceability of the Transaction Documents
against the Servicer, the Special Member, the Originator, the
Guarantor, and the Issuer.
(vi) The Insurer shall have received such other opinions of
counsel, in form and substance acceptable to the Insurer and its
counsel, addressing such other matters as the Insurer may reasonably
request. Each opinion of counsel delivered in connection with the
Transaction shall be addressed to and delivered to the Insurer.
(g) Approvals, Etc. The Insurer shall have received true and correct
copies of all approvals, licenses and consents, if any, including, without
limitation, any required approval of the shareholders or members of the
Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer, required in connection with the Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it
is sought to restrain or prohibit or to obtain damages or other relief in
connection with the Transaction Documents or the consummation of the
Transaction.
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the transactions
contemplated by any of the Transaction Documents illegal or otherwise
prevent the consummation thereof.
(j) Issuance of Ratings. Receipt from S&P and Moody's of the highest
(A) long-term rating on the Class A-1, Class A-2, Class A-3 and Class A-4
Notes.
(k) No Default. No Default or Event of Default shall have occurred.
(l) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions requested by the Insurer or
its counsel as may be reasonably necessary to effect the Transaction,
including, but not limited to, evidence
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satisfactory to the Insurer and its counsel that the conditions precedent,
if any, in the Transaction Documents have been satisfied.
(m) Conform to Documents. The Insurer and its counsel shall have
determined that all documents, certificates and opinions to be delivered in
connection with the Securities conform to the terms of the Transaction
Documents.
(n) Compliance With Commitment. All other terms, conditions and
requirements of the Commitment shall have been satisfied.
(o) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriter's
obligation to purchase the Securities shall have been satisfied.
(p) Underwriting Agreement. The Insurer shall have received copies of
each of the documents, and shall be entitled to rely on each of the
documents, required to be delivered to the Underwriter pursuant to the
Underwriting Agreement.
(q) Guaranty Agreement. The Guarantor shall have executed the Guaranty
Agreement, which shall be acceptable, in form and substance, to the
Insurer, and an original executed copy of such Guaranty Agreement shall
have been delivered to the Insurer.
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) Legal and Accounting Fees. The Servicer, the Seller, the
Originator and the Issuer shall pay or cause to be paid, on the Date of
Issuance, reasonable legal fees and disbursements incurred by the Insurer
in connection with the issuance of the Policy and any fees of the Insurer's
auditors in accordance with the terms of the Commitment. Any fees of the
Insurer's auditors payable in respect of any amendment or supplement to the
Offering Document or any other Offering Document incurred after the Date of
Issuance shall be paid by the Servicer, the Seller, the Originator and the
Issuer on demand.
(b) Premium. In consideration of the issuance by the Insurer of the
Policy, the Insurer shall be entitled to receive the Premium as and when
due in accordance with the terms of the Commitment (i) in the case of
Premium due on or before the Date of Issuance, directly from the Servicer,
the Seller, the Originator and the Issuer and (ii) in the case of Premium
due after the Date of Issuance, first, pursuant to the Indenture, and
second, to the extent the amounts in subclause first are not sufficient,
directly from the Servicer. The Premium shall be calculated according to
paragraph 1 of the Commitment for the amount due on or before the Date of
Issuance and paragraph 1 of the Commitment for the amount due on each
Payment Date. The Premium paid hereunder or under the Indenture shall be
nonrefundable without regard to whether the Insurer makes any payment under
the Policy or any other circumstances relating to the Securities or
provision being made for payment of the Securities prior to maturity. The
Servicer, the Seller, the Originator, the Issuer and the Indenture Trustee
shall make all payments of
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Premium to be made by them by wire transfer to an account designated from
time to time by the Insurer by written notice to the Servicer, the Seller,
the Originator, the Issuer and the Indenture Trustee.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
(a) In accordance with the priorities established in Section 4.07 of
the Indenture the Insurer shall be entitled to reimbursement for any
payment made by the Insurer under the Policy, which reimbursement shall be
due and payable on the date that any amount is to be paid pursuant to a
Notice (as defined in the Policy), in an amount equal to the amount to be
so paid and all amounts previously paid that remain unreimbursed, together
with interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed amounts representing
interest) from the date such amounts became due until paid in full (after
as well as before judgment), at a rate of interest equal to the Late
Payment Rate.
(b) Notwithstanding anything in Section 3.03(a) hereof to the
contrary, the Servicer, the Guarantor and the Originator agree to reimburse
the Insurer as follows: (i) from the Originator and the Guarantor for
payments made under the Policy arising as a result of the Originator's
failure to repurchase any Auto Loan required to be repurchased pursuant to
Section 2.2 or 2.4 of the Sales and Servicing Agreement, together with
interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed amounts representing
interest) from the date such amounts became due until paid in full (after
as well as before judgment), at a rate of interest equal to the Late
Payment Rate, (ii) from the Servicer, for payments made under the Policy,
arising as a result of (A) the Servicer's failure to deposit into the
Collection Account any amount required to be so deposited pursuant to the
Sales and Servicing Agreement or (B) the Servicer's failure to repurchase
any Auto Loan required to be repurchased under Section 3.7 of the Sales and
Servicing Agreement or Section 4.06 of the Indenture, together with
interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect to any unreimbursed amounts representing
interest) from the date such amounts became due until paid in full (after
as well as before judgment), at a rate of interest equal to the Late
Payment Rate and (iii) from the Guarantor, for payments made under the
Policy (or pursuant to Sections 2.02(s) of this Insurance Agreement or
Section 6.2 of the Sales and Servicing Agreement) arising as a result of
the Guarantor's failure to make payment pursuant to the Guaranty Agreement,
together with interest on any and all amounts remaining unreimbursed from
the date such amounts became due until paid in full (after as well as
before judgment), at a rate of interest equal to the Late Payment Rate.
(c) The Servicer, the Guarantor, the Seller and the Originator agree
to pay to the Insurer as follows: any and all charges, fees, costs and
expenses that the Insurer may reasonably pay or incur, including, but not
limited to, attorneys' and accountants' fees and expenses, in connection
with (i) any accounts established to facilitate payments under the Policy
to the extent the Insurer has not been immediately reimbursed on the date
that any amount is paid by the Insurer under the Policy, (ii) the
enforcement, defense or
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preservation of any rights in respect of any of the Transaction Documents,
including defending, monitoring or participating in any litigation or
proceeding (including any insolvency or bankruptcy proceeding in respect of
any Transaction participant or any affiliate thereof) relating to any of
the Transaction Documents, any party to any of the Transaction Documents,
in its capacity as such a party, or the Transaction including a reasonable
allocation of compensation and overhead attributable to the time of
employees of the Insurer spent in connection with the actions described in
this clause (ii), (iii) any amendment, transfer of servicing, reliening,
consent, waiver or other action with respect to, or related to, any
Transaction Document, whether or not executed or completed including any
reasonable fee as a condition to executing any waiver or consent proposed
in respect of any of the Transaction Documents, or (iv) preparation of
bound volumes of the Transaction Documents.
(d) The Servicer, the Seller, the Originator, the Guarantor and the
Issuer agree to pay to the Insurer as follows: interest on any and all
amounts described in subsections (b), (c), (e) and (f) of this Section 3.03
from the date payable or paid by such party until payment thereof in full,
and interest on any and all amounts described in Section 3.02 hereof from
the date due until payment thereof in full, in each case payable to the
Insurer at the Late Payment Rate per annum.
(e) The Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer agree to pay to the Insurer as follows: any
payments made by the Insurer on behalf of, or advanced to, the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the
Issuer, respectively, including, without limitation, any amounts payable by
the Servicer, the Seller, the Originator, the Guarantor, the Special Member
or the Issuer pursuant to the Securities or any other Transaction
Documents.
(f) Following termination of the Indenture pursuant to Section 12.01
thereof, the Seller agrees to reimburse the Insurer for any Insured
Payments required to be made pursuant to the Policy subsequent to the date
of such termination.
All such amounts are to be immediately due and payable without demand.
Section 3.04. INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Issuer,
the Seller, the Originator, the Guarantor, the Special Member, the Servicer
and any successors thereto agree to pay, and to protect, indemnify and save
harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each person, if any, who controls the Insurer within the meaning
of either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against any and all claims, Losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs
or reasonable expenses (including, without limitation, reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) or obligations whatsoever paid by the
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Insurer (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the
Transaction Documents by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or in any amendment
or supplement thereto or in any preliminary offering document, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement
or omission or allegation thereof based upon information set forth in
the Offering Document under the captions "The Policy" and "The
Insurer", or in the financial statements of the Insurer, including any
information in any amendment or supplement to the Offering Document
furnished by the Insurer in writing expressly for use therein that
amends or supplements such information (all such information being
referred to herein as "Insurer Information");
(ii) to the extent not covered by clause (i) above, any act or
omission of the Seller, the Originator, the Guarantor, the Servicer,
the Special Member or the Issuer, or the allegation thereof, in
connection with the offering, issuance, sale or delivery of the
Securities other than by reason of false or misleading information
provided by the Insurer in writing for inclusion in the Offering
Document as specified in clause (i) above;
(iii) the misfeasance or malfeasance of, or negligence or theft
committed by, any director, officer, employee or agent of the
Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer;
(iv) violation by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any federal or state
securities, banking or antitrust laws, rules or regulations in
connection with the issuance, offer and sale of the Securities or the
transactions contemplated by the Transaction Documents;
(v) violation by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any federal or state
laws, rules or regulations relating to the Transaction, including
without limitation the maximum amount of interest permitted to be
received on account of any loan of money or with respect to the Auto
Loans;
(vi) breach by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any of its
obligations under this Insurance Agreement or any of the other
Transaction Documents; and
(vii) breach by the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer of any representation or
warranty on the part of the Servicer, the Seller, the Originator, the
Special Member or the Issuer
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contained in the Transaction Documents or in any certificate or report
furnished or delivered to the Insurer thereunder.
This indemnity provision shall survive the termination of this
Insurance Agreement and shall survive until the statute of limitations has
run on any causes of action which arise from one of these reasons and until
all suits filed as a result thereof have been finally concluded.
(b) The Originator and the Guarantor agree to indemnify the Depositor,
the Indenture Trustee, the Issuer and the Insurer for any and all
Liabilities incurred by the Indenture Trustee, the Depositor, the Issuer
and the Insurer due to any claim, counterclaim, rescission, setoff or
defense asserted by an Obligor under any Auto Loan subject to the Federal
Trade Commission regulations provided in 16 C.F.R. Part 433.
(c) Any party which proposes to assert the right to be indemnified
under this Section 3.04 will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against the Servicer, the Depositor,
the Seller, the Originator, the Guarantor, the Special Member or the Issuer
under this Section 3.04, notify the Servicer, the Seller, the Originator,
the Depositor, the Guarantor, the Special Member or the Issuer of the
commencement of such action, suit or proceeding, enclosing a copy of all
papers served. In case any action, suit or proceeding shall be brought
against any indemnified party and it shall notify the Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer of the commencement thereof, the Servicer, the Depositor, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
shall be entitled to participate in, and, to the extent that it shall wish,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the Servicer, the Depositor, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer to
such indemnified party of its election so to assume the defense thereof,
the Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall not be liable to such indemnified party
for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to
employ its counsel in any such action the defense of which is assumed by
the Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer in accordance with the terms of this
subsection (c), but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of counsel by such
indemnified party has been authorized by the Servicer, the Depositor, the
Seller, the Originator, the Special Member or the Issuer. The Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer shall not be liable for any settlement of any action or claim
effected without its consent.
(d) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Indenture
Trustee and the Collateral Agent agree to pay, and to protect, indemnify
and save harmless, the Insurer and its officers, directors, shareholders,
employees, agents, including each person, if any,
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who controls the Insurer within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities and
Exchange Act of 1934, as amended, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) or obligations whatsoever
of any nature arising out of the breach by the Indenture Trustee and the
Collateral Agent of any of its respective obligations under this Insurance
Agreement or under the Indenture. This indemnity provision shall survive
the termination of this Insurance Agreement and shall survive until the
statute of limitations has run on any causes of action which arise from one
of these reasons and until all suits filed as a result thereof have been
finally concluded.
(e) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Back-up
Servicer agrees to pay, and to protect, indemnify and save harmless, the
Insurer and its officers, directors, shareholders, employees and agents,
including each person, if any, who controls the Insurer within the meaning
of either Section 15 of the Securities Act of 1933, as amended, or Section
20 of the Securities and Exchange Act of 1934, as amended, from and against
any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or
obligations whatsoever of any nature arising out of the breach by the
Back-up Servicer of any of its obligations under this Insurance Agreement
or under the Sales and Servicing Agreement. This indemnity provision shall
survive the termination of this Insurance Agreement and shall survive until
the statute of limitations has run on any causes of action which arise from
one of these reasons and until all suits filed as a result thereof have
been finally concluded.
Section 3.05. PAYMENT PROCEDURE. In the event of any payment by the
Insurer, the Indenture Trustee, the Servicer, the Seller, the Originator, the
Special Member, the Guarantor and the Issuer agree to accept the voucher or
other evidence of payment as prima facie evidence of the propriety thereof and
the liability therefor to the Insurer. All payments to be made to the Insurer
under this Insurance Agreement shall be made to the Insurer in lawful currency
of the United States of America in immediately available funds at the notice
address for the Insurer as specified in Section 6.02 hereof on the date when due
or as the Insurer shall otherwise direct by written notice to the other parties
hereto. In the event that the date of any payment to the Insurer or the
expiration of any time period hereunder occurs on a day which is not a Business
Day, then such payment or expiration of time period shall be made or occur on
the next succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of payment or
expiration date. Payments to be made to the Insurer under this Insurance
Agreement shall bear interest at the Late Payment Rate from the date when due to
the date paid.
ARTICLE IV
FURTHER AGREEMENTS
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Section 4.01. EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT. This
Insurance Agreement shall take effect on the Date of Issuance and shall remain
in effect until the later of (a) such time as the Insurer is no longer subject
to a claim under the Policy and the Policy shall have been surrendered to the
Insurer for cancellation and (b) all amounts payable to the Insurer by the
Servicer, the Indenture Trustee, the Collateral Agent, the Back-up Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer or from
any other source under the Transaction Documents and all amounts payable under
the Securities have been paid in full; provided, however, that the provisions of
Sections 3.02, 3.03, 3.04 and 4.06 hereof shall survive any termination of this
Insurance Agreement.
Section 4.02. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
(a) Excepting at such times as a default in payment under the Policy
shall exist, none of the Servicer, the Indenture Trustee, the Collateral
Agent, the Back-up Servicer, the Owner Trustee, the Depositor, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer shall grant
any waiver of rights under any of the Transaction Documents to which any of
them is a party without the prior written consent of the Insurer, and any
such waiver without the prior written consent of the Insurer shall be null
and void and of no force or effect.
(b) To the extent permitted by law, the Servicer, the Indenture
Trustee, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the
Depositor, the Seller, the Originator, the Special Member, the Guarantor
and the Issuer agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments as the
Insurer may reasonably request and as may be required in the Insurer's
judgment to effectuate the intention of or facilitate the performance of
this Insurance Agreement.
Section 4.03. OBLIGATIONS ABSOLUTE.
(a) The obligations of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller, the
Originator, the Special Member, the Guarantor and the Issuer, respectively,
hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement under all
circumstances irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to any of the
Transaction Documents, the Securities or the Policy;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that the Servicer, the Indenture Trustee, the
Collateral Agent, the Back-up Servicer, the Owner Trustee, the Seller,
the Originator, the Special Member,
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the Guarantor or the Issuer may have at any time against the Insurer
or any other Person;
(iv) any document presented in connection with the Policy proving
to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) any payment by the Insurer under the Policy against
presentation of a certificate or other document that does not strictly
comply with terms of the Policy;
(vi) any failure of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller,
the Originator, the Special Member, the Guarantor or the Issuer to
receive the proceeds from the sale of the Securities; or
(vii) any breach by the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the
Guarantor, the Seller, the Originator or the Issuer of any
representation, warranty or covenant contained in any of the
Transaction Documents.
(b) The Servicer, the Indenture Trustee, the Collateral Agent, the
Owner Trustee, the Back-up Servicer, the Seller, the Originator, the
Guarantor, the Special Member, the Issuer and any and all others who are
now or may become liable for all or part of the obligations of the
Servicer, the Indenture Trustee, the Collateral Agent, the Owner Trustee,
the Back-up Servicer, the Seller, the Originator the Guarantor, the Special
Member or the Issuer under this Insurance Agreement agree to be bound by
this Insurance Agreement and (i) to the extent permitted by law, waive and
renounce any and all redemption and exemption rights and the benefit of all
valuation and appraisement privileges against the indebtedness and
obligations evidenced by any Transaction Document or by any extension or
renewal thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest;
(iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of any payment hereunder, except as required by the Transaction
Documents; (iv) waive all rights of abatement, diminution, postponement or
deduction, or any defense other than payment, or any right of setoff or
recoupment arising out of any breach under any of the Transaction Documents
by any party thereto or any beneficiary thereof, or out of any obligation
at any time owing to the Servicer, the Indenture Trustee, the Collateral
Agent, the Owner Trustee, the Back-up Servicer, the Seller, the Originator,
the Guarantor, the Special Member or the Issuer; (v) agree that its
liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff,
counterclaim or the liability of any other Person for the payment hereof;
(vi) agree that any consent, waiver or forbearance hereunder with respect
to an event shall operate only for such event and not for any subsequent
event; (vii) consent to any and all extensions of time that may be granted
by the Insurer with respect to any payment
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<PAGE>
hereunder or other provisions hereof and to the release of any security at
any time given for any payment hereunder, or any part thereof, with or
without substitution, and to the release of any Person or entity liable for
any such payment; and (viii) consent to the addition of any and all other
makers, endorsers, guarantors and other obligors for any payment hereunder,
and to the acceptance of any and all other security for any payment
hereunder, and agree that the addition of any such obligors or security
shall not affect the liability of the parties hereto for any payment
hereunder.
(c) Nothing herein shall be construed as prohibiting the Servicer, the
Indenture Trustee, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer from pursuing any rights or remedies it may
have against any other Person in a separate legal proceeding.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. None
of the Servicer, the Indenture Trustee, the Collateral Agent, the Owner
Trustee, the Back-up Servicer, the Seller, the Originator, the Guarantor,
the Special Member or the Issuer may assign its rights under this Insurance
Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Insurer. Any assignment made in violation of this
Insurance Agreement shall be null and void.
(b) The Insurer shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as
the Insurer may in its discretion determine; provided, however, that no
such participation or reinsurance agreement or arrangement shall relieve
the Insurer of any of its obligations hereunder or under the Policy.
(c) In addition, the Insurer shall be entitled to assign or pledge to
any bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of the Insurer in connection therewith any
rights of the Insurer under the Transaction Documents or with respect to
any real or personal property or other interests pledged to the Insurer, or
in which the Insurer has a security interest, in connection with the
Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right,
remedy or claim, express or implied, upon any Person, including,
particularly, any Owner, other than the Insurer against the Servicer, the
Indenture Trustee, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer, and all the terms, covenants, conditions,
promises and agreements contained herein shall be for the sole and
exclusive benefit of the parties hereto and their successors and permitted
assigns. Neither the Indenture Trustee, the Collateral Agent nor
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<PAGE>
any Owner shall have any right to payment from any Premiums paid or payable
hereunder or under the Indenture or from any other amounts paid by the
Servicer, the Indenture Trustee, the Collateral Agent, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer pursuant to Section 3.02, 3.03 or 3.04 hereof.
(e) The Servicer, the Seller, the Depositor, the Originator, the
Issuer, the Back-up Servicer, the Owner Trustee, the Guarantor, the Special
Member and the Indenture Trustee, the Collateral Agent agree that the
Insurer shall have all rights of a third-party beneficiary in respect of
the Indenture and each other Transaction Document to which it is not a
signing party and hereby incorporate and restate their representations,
warranties and covenants as set forth therein for the benefit of the
Insurer.
Section 4.05. LIABILITY OF THE INSURER. Neither the Insurer nor any of its
officers, directors or employees shall be liable or responsible for (a) the use
that may be made of the Policy by the Indenture Trustee or for any acts or
omissions of the Indenture Trustee in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to the Insurer (or
its Fiscal Agent) in connection with any claim under the Policy, or of any
signatures thereon, even if such documents or signatures should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged (unless
the Insurer shall have actual knowledge thereof). In furtherance and not in
limitation of the foregoing, the Insurer (or its Fiscal Agent) may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
Section 4.06. PARTIES WILL NOT INSTITUTE INSOLVENCY PROCEEDINGS. So long as
this Agreement is in effect, and for one year plus one day following its
termination, none of the parties hereto will file any involuntary petition or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceedings under any federal or state
bankruptcy or similar law against the Seller, the Depositor, the Issuer or the
Special Member.
Section 4.07. INDENTURE TRUSTEE, THE COLLATERAL AGENT, ISSUER, BACK-UP
SERVICER, ORIGINATOR, THE DEPOSITOR, THE SELLER, THE OWNER TRUSTEE, THE
GUARANTOR, THE SPECIAL MEMBER AND SERVICER TO JOIN IN ENFORCEMENT ACTION. To the
extent necessary to enforce any right of the Insurer in or remedy of the Insurer
under any Auto Loan, the Indenture Trustee, the Collateral Agent, the Issuer,
the Back-up Servicer, the Seller, the Owner Trustee, the Depositor, the
Originator, the Guarantor, the Special Member and the Servicer agree to join in
any action initiated by the Indenture Trustee or the Insurer for the protection
of such right or exercise of such remedy.
Section 4.08. SUBROGATION. To the extent of any payments under the Policy,
the Insurer shall be fully subrogated to any remedies against the Issuer, the
Seller, the Originator, the Guarantor or the Servicer or in respect of the Auto
Loans available to the Indenture Trustee under the Transaction Documents. The
Indenture Trustee acknowledges such subrogation and, further, agrees to execute
such instruments prepared by the Insurer and to take such reasonable actions as,
40
<PAGE>
in the sole judgment of the Insurer, are necessary to evidence such subrogation
and to perfect the rights of the Insurer to receive any moneys paid or payable
under the Indenture.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. DEFAULTS. The occurrence of any of the following events shall
constitute an Event of Default hereunder:
(a) any representation or warranty made by the Servicer, the Indenture
Trustee, the Collateral Agent, the Owner Trustee, the Back-up Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
hereunder or under the Transaction Documents, or in any certificate
furnished hereunder or under the Transaction Documents, shall prove to be
untrue or incomplete in any material respect;
(b)(i) the Servicer, the Indenture Trustee, the Collateral Agent, the
Back-up Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer shall fail to pay when due, beyond any cure period
provided for therein, any amount payable by the Servicer, the Indenture
Trustee, the Collateral Agent, the Back-up Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer hereunder or
(ii) a legislative body has enacted any law that declares or a court of
competent jurisdiction shall find or rule that any Transaction Document is
not valid and binding on the Servicer, the Indenture Trustee, the
Collateral Agent, the Back-up Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer;
(c) the occurrence and continuance of an "Event of Default" under the
Indenture (as defined therein);
(d) any failure on the part of the Servicer, the Indenture Trustee,
the Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller, the
Originator, the Special Member, the Guarantor or the Issuer contained in
this Insurance Agreement or in any other Transaction Document which
continues unremedied for a period of 30 days with respect to this Insurance
Agreement, or, with respect to any other Transaction Document, beyond any
cure period provided for therein, after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to
the Servicer, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer, as applicable, by the Insurer (with a copy to the Indenture
Trustee) or by the Indenture Trustee (with a copy to the Insurer);
(e) decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any
present or future federal or
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state bankruptcy, insolvency or similar law or the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Servicer, the Seller, the Originator,
the Guarantor, the Special Member or the Issuer and such decree or order
shall have remained in force undischarged or unstayed for a period of 90
consecutive days;
(f) the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall consent to the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer or of or
relating to all or substantially all of the property of either;
(g) the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of or otherwise voluntarily commence a case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar statute,
make an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations;
(h) the occurrence and continuance of a "Servicer Termination Event"
under the Sales and Servicing Agreement as defined herein;
(i) the failure of the Seller, the Originator or the Issuer to comply
with, or maintain the accuracy of, the Opinion Facts and Assumptions; or
(j) the occurrence of an Insurance Agreement Indicator as defined
herein.
Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE.
(a) Upon the occurrence of an Event of Default, the Insurer may
exercise any one or more of the rights and remedies set forth below:
(i) exercise any rights and remedies under the Transaction
Documents in accordance with the terms of the Transaction Documents or
direct the Indenture Trustee to exercise such remedies in accordance
with the terms of the Transaction Documents; or
(ii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due
under the Transaction Documents or to enforce performance and
observance of any obligation, agreement or covenant of the Servicer,
the Indenture Trustee, the Collateral Agent, the Owner Trustee, the
Back-up Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer under the Transaction Documents.
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(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under the Transaction Documents or existing at law or in
equity. No delay or omission to exercise any right or power accruing under
the Transaction Documents upon the happening of any event set forth in
Section 5.01 hereof shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In
order to entitle the Insurer to exercise any remedy reserved to the Insurer
in this Article, it shall not be necessary to give any notice other than
such notice as may be required in this Article V.
Section 5.03. WAIVERS.
(a) No failure by the Insurer to exercise, and no delay by the Insurer
in exercising, any right hereunder shall operate as a waiver thereof. The
exercise by the Insurer of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein to the
Insurer are declared in every case to be cumulative and not exclusive of
any remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting
forth the terms, conditions and extent of such waiver signed by the Insurer
and delivered to the Servicer, the Indenture Trustee, the Collateral Agent,
the Owner Trustee, the Back-up Servicer, the Seller, the Originator the
Guarantor, the Special Member and the Issuer. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Event of Default so
waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC. This Insurance Agreement may be amended,
modified or terminated only by written instrument or written instruments signed
by the parties hereto. The Servicer agrees to promptly provide a copy of any
amendment to this Insurance Agreement to the Indenture Trustee, S&P and Moody's.
No act or course of dealing shall be deemed to constitute an amendment,
modification or termination hereof.
Section 6.02. NOTICES. All demands, notices and other communications 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 the recipient as follows:
(a) To the Insurer:
MBIA Insurance Corporation
113 King Street
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Armonk, NY 10504
Attention: Insured Portfolio Management-Structured Finance (IPM-SF)
(Flagship Auto Receivables Owner Trust 1999-2)
Telecopy No.: (914) 765-3810
Confirmation: (914) 765-3781
(in each case in which notice or other communication to the Insurer
refers to an Event of Default, a claim on the 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 each of
the general counsel and the Insurer and shall be marked to indicate
"URGENT MATERIAL ENCLOSED.")
(b) To the Originator:
Flagship Credit Corporation
1 International Plaza
Philadelphia PA 19113
Attention: General Counsel
Telecopy No.: (610) 595-0469
Confirmation: (610) 521-8100
(c) To the Servicer:
Flagship Credit Corporation
1 International Plaza
Philadelphia PA 19113
Attention: General Counsel
Telecopy No.: (610) 595-0469
Confirmation: (610) 521-8100
(d) To the Indenture Trustee and the Collateral Agent:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago IL 60606
Attention: Corporate Trust Services--Indenture Trust Administrator
Telecopy No.: (312) 461-3525
Confirmation: (312) 461-4662
(e) To the Seller:
Flagship Auto Loan Funding LLC 1999-II
1 International Plaza
Philadelphia PA 19113
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<PAGE>
Attention: General Counsel
Telecopy No.: (610) 595-0469
Confirmation: (610) 521-8100
(f) To the Back-up Servicer and Guarantor:
Copelco Financial Services Group Inc.
700 East Gate Drive, Suite 400
Mount Laurel, NJ 08054
Attention: General Counsel
Telecopy No.: (609) 273-9288
Confirmation: (609) 231-9600
(g) To the Special Member:
Flagship Special Member, Inc.
1 International Plaza
Philadelphia PA 19113
Attention: General Counsel
Telecopy No.: (610) 595-0469
Confirmation: (610) 521-8100
(h) To the Issuer:
Flagship Auto Receivables Owner Trust 1999-2
c/o First Union National Bank
One Rodney Square
920 King Street
Wilmington DE 19801
Attention: Corporate Trust Administrator
Telecopy No.: (302) 888-7544
Confirmation: (302) 888-7539
(i) To the Depositor:
Prudential Securities Secured Financing Corporation
c/o Prudential Securities Incorporated
One New York Plaza, 14th Floor
New York, NY 10292-1000
Attention: Group Head Asset-Backed Finance Group
Telecopy No.: (212) 778-7401
Confirmation: (212) 778-1000
(j) To the Owner Trustee:
First Union National Bank
One Rodney Square
920 King Street
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<PAGE>
Wilmington DE 19801
Attention: Corporate Trust Administrator
Telecopy No.: (302) 888-7544
Confirmation: (302) 888-7539
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. SEVERABILITY. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CHOICE OF LAW PROVISIONS.
Section 6.05. CONSENT TO JURISDICTION.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District
of New York and any court in the State of New York located in the City and
County of New York, and any appellate court from any thereof, in any
action, suit or proceeding brought against it and to or in connection with
any of the Transaction Documents or the transactions contemplated
thereunder or for recognition or enforcement of any judgment, and the
parties hereto hereby irrevocably and unconditionally agree that all claims
in respect of any such action or proceeding may be heard or determined in
such New York state court or, to the extent permitted by law, in such
federal court. The parties hereto agree that a final judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. To the extent permitted by applicable law, the parties hereto hereby
waive and agree not to assert by way of motion, as a defense or otherwise
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the related documents or the
subject matter thereof may not be litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
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(c) Except as provided in Section 4.06 herein, nothing contained in
this Insurance Agreement shall limit or affect the Insurer's right to serve
process in any other manner permitted by law or to start legal proceedings
relating to any of the Transaction Documents against any party hereto or
its or their property in the courts of any jurisdiction.
Section 6.06. CONSENT OF THE INSURER. Except as otherwise provided, in the
event that the consent of the Insurer is required under any of the Transaction
Documents, the determination whether to grant or withhold such consent shall be
made by the Insurer in its sole discretion without any implied duty towards any
other Person.
Section 6.07. COUNTERPARTS. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. HEADINGS. The headings of Articles and Sections and the Table
of Contents contained in this Insurance Agreement are provided for convenience
only. They form no part of this Insurance Agreement and shall not affect its
construction or interpretation. Unless otherwise indicated, all references to
Articles and Sections in this Insurance Agreement refer to the corresponding
Articles and Sections of this Insurance Agreement.
Section 6.09. TRIAL BY JURY WAIVED. Each party hereto hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (a) certifies that no representative, agent or
attorney of any party hereto has represented, expressly or otherwise, that it
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it has been induced to enter into the Transaction
Documents to which it is a party by, among other things, this waiver.
Section 6.10. LIMITED LIABILITY. No recourse under any Transaction Document
shall be had against, and no personal liability shall attach to, any officer,
employee, director, affiliate or shareholder of any party hereto, as such, by
the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise in respect of any of the Transaction
Documents, the Securities or the Policy, it being expressly agreed and
understood that each Transaction Document is solely a corporate obligation of
each party hereto, and that any and all personal liability, either at common law
or in equity, or by statute or constitution, of every such officer, employee,
director, affiliate or shareholder for breaches by any party hereto of any
obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Insurance Agreement.
Section 6.11. ENTIRE AGREEMENT. The Transaction Documents and the Policy
set forth the entire agreement between the parties with respect to the subject
matter thereof, and this Insurance Agreement supersedes and replaces any
agreement or understanding that may have existed between the parties prior to
the date hereof in respect of such subject matter.
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Section 6.12. LIMITATION OF LIABILITY. Notwithstanding any other provision
herein or elsewhere, this Agreement has been executed and delivered by First
Union National Bank, not in its individual capacity, but solely in its capacity
as Owner Trustee of the Issuer, and in no event shall First Union National Bank
have any liability (except with respect to its own grossly negligent conduct or
failure to act) in respect of the representations, warranties or obligations of
the Issuer hereunder or under any other documents as to all of which recourse
shall be solely to the assets of the Issuer, and for all purposes of the
Agreement and each other document, First Union National Bank shall be entitled
to the benefits of the Trust Agreement.
[Remainder of page intentionally blank; signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION,
as Insurer
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP CREDIT CORPORATION
as Originator and as Servicer
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP AUTO LOAN FUNDING LLC
1999-II, as Seller
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
as Issuer
By: First Union National Bank, as Owner Trustee
solely and not in its individual capacity,
By
-----------------------------------------
Title
-----------------------------------------
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP SPECIAL MEMBER, INC.,
as Special Member
By
-----------------------------------------
Title
-----------------------------------------
<PAGE>
COPELCO FINANCIAL SERVICES GROUP, INC.,
as Back-up Servicer and as Guarantor
By
-----------------------------------------
Title
-----------------------------------------
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
By
-----------------------------------------
Title
-----------------------------------------
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Owner Trustee
By
-----------------------------------------
Title
-----------------------------------------
<PAGE>
HARRIS TRUST AND SAVINGS BANK, as
Collateral Agent
By
-----------------------------------------
Title
-----------------------------------------
EXECUTION COPY
================================================================================
MBIA INSURANCE CORPORATION,
as Insurer
FLAGSHIP CREDIT CORPORATION
as Originator
and
PRUDENTIAL SECURITIES INCORPORATED
as Underwriter
INDEMNIFICATION AGREEMENT
$250,000,000
Flagship Auto Receivables Owner Trust 1999-2
$117,000,000 6.420% Class A-1 Notes
$60,000,000 6.705% Class A-2 Notes
$43,000,000 6.835% Class A-3 Notes
$30,000,000 6.900% Class A-4 Notes
Dated as of November 17, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions......................................................1
Section 2. Representations and Warranties of the Insurer....................3
Section 3. Agreements, Representations and Warranties of the Underwriter....4
Section 4. Agreements, Representations and Warranties of the Originator.....4
Section 5. Indemnification..................................................5
Section 6. Notice To Be Given...............................................6
Section 7. Contribution.....................................................8
Section 8. Notices..........................................................9
Section 9. Governing Law, Etc..............................................10
Section 10. Insurance Agreement; Underwriting Agreement; Indenture, Sales
and Servicing Agreement.........................................10
Section 11. Limitations.....................................................10
Section 12. Counterparts....................................................10
Section 13. Nonpetition.....................................................10
<PAGE>
INDEMNIFICATION AGREEMENT
This Agreement, dated as of November 17, 1999, is by and among MBIA
INSURANCE CORPORATION (the "Insurer"), as the Insurer under the Note Guaranty
Insurance Policy (the "Policy") issued in connection with the Offered Notes
described below, FLAGSHIP CREDIT CORPORATION (the "Originator") and PRUDENTIAL
SECURITIES INCORPORATED (the "Underwriter").
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Indenture (as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the Insurer,
the Originator and the Underwriter.
"Indemnified Party" means any person entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any person required to provide indemnification
pursuant to Section 5 below, as the context requires.
"Indenture" means the Indenture dated as of November 1, 1999 between
Flagship Credit Corporation, as Servicer, Flagship Auto Receivables Owner Trust
1999-2 as the Issuer, and Harris Trust and Savings Bank, as Indenture Trustee,
without regard to any amendment or supplement thereto, unless such amendment or
supplement has been approved in writing by the Insurer.
"Insurance Agreement" means the Insurance Agreement, dated as of November
1, 1999, by and among the Originator, the Servicer, Flagship Auto Receivables
Owner Trust 1999-2, as Issuer, Flagship Auto Loan Funding LLC 1999-II, as
Seller, Prudential Securities Secured Financing Corporation, as Depositor, First
Union National Bank, as Owner Trustee, Flagship Special Member, Inc., as Special
Member, Copelco Financial Services Group Inc., as Back-up Servicer and as
Guarantor, and Harris Trust and Savings Bank, as Trustee and as Collateral Agent
"Insurer Party" means the Insurer and its respective parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
<PAGE>
"Losses" means (i) any actual out-of-pocket loss paid by the party entitled
to indemnification or contribution hereunder and (ii) any actual out-of-pocket
costs and expenses paid by such party, including reasonable fees and expenses of
its counsel, to the extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Offered Notes" means the $250,000,000 Flagship Auto Receivables Owner
Trust 1999-2 $117,000,000 6.420% Class A-1 Notes $60,000,000 6.705% Class A-2
Notes $43,000,000 6.835% Class A-3 Notes $30,000,000 6.900% Class A-4 Notes
issued pursuant to the Indenture.
"Originator Party" means the Originator, and its parents, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any post
effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the preliminary Prospectus Supplement dated
November 8, 1999 and the final Prospectus Supplement dated November 17, 1999,
each of the Depositor in respect of the Offered Notes (and any amendment or
supplement thereto) and any other offering document in respect of the Offered
Notes prepared by the Depositor, the Originator or the Seller that makes
reference to the Policy.
"Registration Statement" means the registration statement on Form S-3 of
the Depositor relating to the Offered Notes.
"Servicer" means Flagship Credit Corporation, as Servicer.
"Special Member" means Flagship Special Member, Inc.
"Underwriting Agreement" means the Underwriting Agreement by and between
the Originator, the Seller and the Underwriter, dated November 17, 1999.
"Underwriter Party" means the Underwriter and its parent, subsidiaries
(including the Depositor) and affiliates and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Act) of any
of the foregoing.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE INSURER. The Insurer
represents and warrants to the Underwriter and the Originator as follows:
2
<PAGE>
(a) Organization and Licensing. The Insurer is a duly incorporated and
existing New York stock insurance company licensed to do business in the
State of New York and is in good standing under the laws of such state.
(b) Corporate Power. The Insurer has the corporate power and authority
to issue the Policy and execute and deliver this Agreement and the
Insurance Agreement and to perform all of its obligations hereunder and
thereunder.
(c) Authorization; Approvals. The Policy, this Agreement and the
Insurance Agreement have been duly authorized, executed and delivered. No
further approvals or filings of any kind, including, without limitation,
any further approvals of or further filings with any governmental agency or
other governmental authority, or any approval of the Insurer's board of
directors or stockholders, are necessary for the Policy, this Agreement and
the Insurance Agreement to constitute the legal, valid and binding
obligations of the Insurer.
(d) Enforceability. The Policy, when issued, and this Agreement and
the Insurance Agreement will each constitute legal, valid and binding
obligations of the Insurer, enforceable in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of
the bankruptcy, insolvency or reorganization of the Insurer and to general
principles of equity and subject, in the case of this Agreement, to
principals of pubic policy limiting the right to enforce the
indemnification provisions contained herein.
(e) Financial Information. The consolidated financial statements of
the Insurer as of December 31, 1998 and December 31, 1997 and for the three
years ended December 31, 1998 incorporated by reference in the Prospectus
Supplement (the "Insurer Audited Financial Statements"), fairly present in
all material respects the financial condition of the Insurer as of such
date and for the period covered by such statements in accordance with
generally accepted accounting principles consistently applied. The
consolidated financial statements of the Insurer and its subsidiaries as of
June 30, 1999 incorporated by reference in the preliminary Prospectus
Supplement and as of September 30, 1999 incorporated by reference in the
final Prospectus Supplement (the "Insurer Unaudited Financial Statements")
present fairly in all material respects the financial condition of the
Insurer as of such date and for the period covered by such statements in
accordance with generally accepted accounting principles applied in a
manner consistent with the accounting principles used in preparing the
Insurer Audited Financial Statements, and, since September 30, 1999 there
has been no material change in such financial condition of the Insurer
which would materially and adversely affect its ability to perform its
obligations under the Policy.
3
<PAGE>
(f) Insurer Information. The information in the Prospectus Supplement
as of the date hereof under the captions "The Policy" and "The Insurer" and
"Note Guaranty Insurance Policy" in Exhibit A thereto (the "Insurer
Information") is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus for a registrant under
the Securities Act of 1933, in connection with the public offer and sale of
securities of such registrant. Within such limited scope of disclosure, the
Insurer Information does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or its operations or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Policy or the Insurance Agreement.
Section 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER.
The Underwriter represents and warrants to and agrees with the Insurer that the
statements in the Prospectus Supplement made in reliance upon and in conformity
with written information relating to the Underwriter furnished specifically for
use in the preparation of the Prospectus Supplement, (referred to herein as the
"Underwriter Information"), are true and correct in all material respects. The
parties each agree and acknowledge that the Underwriter Information is limited
to the information under "Underwriting" in the Prospectus Supplement.
Section 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR.
The Originator represents, warrants to and agrees with the Insurer, the
Depositor and the Underwriter as follows:
(a) Registration Statement. The information in the Registration
Statement, the Prospectus and the Prospectus Supplement, other than the
Insurer Information and the Underwriter Information, is true and correct in
all material respects and does not contain any untrue statement of a fact
that is material or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Due Organization and Qualification. The Originator is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. The Originator is duly qualified
to be business and is in good standing in each jurisdiction in which
failure to be so qualified would render any Transaction Document
unenforceable in any respect or would have a material adverse effect upon
this transaction, the Noteholders or the Insurer.
4
<PAGE>
(c) Corporate Power. The Originator has the corporate power and
authority to execute and deliver this Agreement, the Sales and Servicing
Agreement and the Insurance Agreement and to perform all of its obligations
hereunder and thereunder in all material respects.
(d) Authorization; Approvals. The execution, delivery and performance
of this Agreement, the Sales and Servicing Agreement and the Insurance
Agreement by the Originator has been duly authorized by all necessary
corporate proceedings. No further approvals or filings of any kind,
including, without limitation, any further approvals of or further filing
with any governmental agency or other governmental authority, or any
approval of the Originator's board of directors or stockholders, are
necessary for this Agreement, the Sales and Servicing Agreement and the
Insurance Agreement to constitute the legal, valid and binding obligations
of the Originator.
(e) Enforceability. This Agreement, the Sales and Servicing Agreement
and the Insurance Agreement will each constitute legal, valid and binding
obligations of the Originator, enforceable in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of
the bankruptcy, insolvency or reorganization of the Originator and to
general principles of equity and subject, in the case of this Agreement, to
principals of pubic policy limiting the right to enforce the
indemnification provisions contained herein.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Originator's knowledge,
threatened against it at law or in equity or before any court, governmental
agency, board or commission or any arbitrator which, if decided adversely,
would materially and adversely affect its condition (financial or
otherwise) or its operations, taken as a whole, or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Underwriting Agreement, the Sales and Servicing Agreement or
the Insurance Agreement.
Section 5. INDEMNIFICATION.
(a) The Insurer hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Originator Party and each Underwriter Party against any and all Losses
incurred by them with respect to the offer and sale of any of the Offered
Notes and resulting from the Insurer's breach of any of its representations
and warranties set forth in Section 2 of this Agreement.
(b) The Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the
5
<PAGE>
Offered Notes and resulting from the Underwriter's breach of any of its
representations and warranties set forth in Section 3 of this Agreement.
(c) The Originator hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Notes and resulting from the
Originator's breach of any of its representations and warranties set forth
in Section 4 of this Agreement.
(d) Upon the incurrence of any Losses 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 6. NOTICE TO BE GIVEN.
(a) Except as provided in Section 7 below with respect to
contribution, the indemnification provided herein by the Indemnifying Party
shall be the exclusive remedy of each Indemnified Party for the Losses
resulting from the Indemnifying Party's breach of a representation,
warranty or agreement hereunder; 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.
(b) 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 facsimile notice of such action or claim reasonably
promptly after receipt of written notice thereof.
(c) Upon request of the Indemnified Party, the Indemnifying Party
shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. The Indemnifying Party may, at its
option, at any time upon written notice to the Indemnified Party, assume
the defense of any proceeding and may designate counsel reasonably
satisfactory to the Indemnified Party in connection therewith, provided
that the counsel so designated would have no actual or potential conflict
of interest in connection with such representation. Unless it shall assume
the defense of any proceeding, the Indemnifying Party shall not be liable
for any settlement of any proceeding, effected without its written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party
from and against any loss or liability by reason of such settlement or
judgment. The Indemnifying Party shall be entitled to participate in the
defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, each Indemnified Party.
6
<PAGE>
(d) The Indemnified Party will have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel will
be at the expense of such Indemnified Party unless (i) the employment of
counsel by the Indemnified Party at the Indemnifying Party's expense has
been authorized in writing by the Indemnifying Party, (ii) the Indemnifying
Party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action or (iii) the named parties to any such action include the
Indemnifying Party on the one hand and, on the other hand, the Indemnified
Party, and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
(in which case if such 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 such Indemnified Party's
behalf), in each of which cases the reasonable fees and expenses of counsel
(including local counsel) will be at the expense of the Indemnifying Party,
and all such fees and expenses will be reimbursed promptly as they are
incurred. In the event that any expenses so paid by the Indemnifying Party
are subsequently determined not to be required to be borne by the
Indemnifying Party hereunder, the party which received such payment shall
promptly refund to the Indemnifying Party the amount so paid by such
Indemnifying Party. Notwithstanding the foregoing, in connection with any
one action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, the Indemnifying Party shall not be liable for the fees and
expenses of more than one counsel for all Originator Parties, more than one
counsel for all Underwriter Parties and more than one counsel for all
Insurer Parties, as applicable.
(e) The Indemnified Parties shall cooperate with the Indemnifying
Parties in resolving any event which would give rise to an indemnity
obligation pursuant to Section 5 hereof in the most efficient manner.
(f) No settlement of any such claim or action shall be entered into
without the consent of each Indemnified Party who is subject to such claim
or action, on the one hand, and each Indemnifying Party who is subject to
such claim or action, on the other hand; provided, however, that the
consent of such Indemnified Party shall not be required if such settlement
fully discharges, with prejudice against the plaintiff, the claim or action
against such Indemnified Party.
(g) 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 materially prejudicial to any legal pleadings, grounds,
defenses or remedies in respect thereof or the Indemnifying Party's
financial liability hereunder, and then only to the extent of such
prejudice.
7
<PAGE>
Section 7. CONTRIBUTION.
(a) To provide for just and equitable contribution if the
indemnification provided by the Insurer is determined to be unavailable for
any Underwriter Party (other than pursuant to Section 5 or 6 of this
Agreement), or if the indemnification provided by the Underwriter is
determined to be unavailable for any Insurer Party (other than pursuant to
Section 5 or 6 of this Agreement), the Insurer and the Underwriter shall
contribute to the aggregate costs of liabilities arising from any breach of
their respective representations and warranties set forth in this Agreement
on the basis of the relative fault of all Insurer Parties and all
Underwriter Parties.
(b) To provide for just and equitable contribution if the
indemnification provided by the Insurer is determined to be unavailable for
any Originator Party (other than pursuant to Section 5 or 6 of this
Agreement), or if the indemnification provided by the Originator is
determined to be unavailable for any Insurer Party (other than pursuant to
Section 5 or 6 of this Agreement), the Insurer and the Originator shall
contribute to the aggregate cost of liabilities arising from any breach of
their respective representations and warranties set forth in this Agreement
on the basis of the relative fault of all Insurer Parties and all
Originator Parties.
(c) Notwithstanding anything in this Section 7 to the contrary, (i)
the Insurer shall not be required to contribute an amount in excess of the
amount by which the total of the insurance premiums that have been received
by the Insurer under the Insurance Agreement exceeds the amount of any
damages that the Insurer has otherwise been required to pay in respect of
any breach by the Insurer of the representations and warranties contained
in Section 2 hereof, and (ii) the Underwriter shall not be required to
contribute an amount in excess of the amount by which the total
underwriting fees, discounts and commissions received by the Underwriter
exceeds the amount of any damages that the Underwriter has otherwise been
required to pay in respect of any breach by the Underwriter of the
representations and warranties contained in Section 3 hereof.
(d) The relative fault of each Indemnifying Party, on the one hand,
and of each Indemnified Party, on the other hand, shall be determined by
reference to, among other things, whether the breach of, or alleged breach
of, any of its representations and warranties set forth in Section 2, 3 or
4 of this Agreement relates to 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.
(e) The parties agree that the Insurer shall be solely responsible for
the Insurer Information and for the Insurer Financial Statements, that the
Underwriter shall be solely responsible for the Underwriter Information and
that the Originator shall be responsible
8
<PAGE>
for all other information in the Registration Statement, the Prospectus and
in the Prospectus Supplement.
(f) 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.
(g) 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 Underwriter Party, any
Originator Party or any Insurer Party, (ii) the issuance of any Offered
Notes or the Policy or (iii) any termination of this Agreement.
(h) 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 8. NOTICES. All notices and other communications provided for under
this Agreement shall be addressed to the address set forth below as to each
party or at such other address as shall be designated by a party in a written
notice to the other party.
(a) If to the Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management--
Structured
Finance (IPM-SF)
(b) If to the Originator: Flagship Credit Corporation
1 International Plaza
Philadelphia PA 19113
Attention: General Counsel
(c) If to the Underwriter: Prudential Securities Incorporated
One New York Plaza
New York, NY 10292
Attention: Joseph Donovan
Section 9. GOVERNING LAW, ETC. This Agreement shall be deemed to be a
contract under the laws of the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflicts of laws provisions. This Agreement may not be assigned by any
party without the express written consent of each other party.
9
<PAGE>
Amendments of this Agreement shall be in writing signed by each party. This
Agreement shall not be effective until executed by each of the Insurer, the
Originator and the Underwriter.
Section 10. INSURANCE AGREEMENT; UNDERWRITING AGREEMENT; INDENTURE, SALES
AND SERVICING AGREEMENT. This Agreement in no way limits or otherwise affects
the indemnification obligations of the Originator under (a) the Insurance
Agreement, (b) the Underwriting Agreement (c) the Indenture or (d) the Sales and
Servicing Agreement. To the extent that this Agreement conflicts with or does
not address the relative rights of the Underwriter and Originator as between
themselves as set forth in the Underwriting Agreement, the Underwriting
Agreement shall govern.
Section 11. LIMITATIONS. Nothing in this Agreement shall be construed as a
representation or undertaking by the Insurer concerning maintenance of the
rating currently assigned to its financial strength by Moody's Investors
Service, Inc. ("Moody's") and/or Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. ("S&P") or any other rating agency
(collectively, the "Rating Agencies").
Section 12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
Section 13. NONPETITION. So long as the Insurance Agreement is in effect,
and for one year following its termination, none of the parties hereto will file
any involuntary petition or otherwise institute any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceeding under any
federal or state bankruptcy or similar law against the Depositor, the Seller,
the Issuer or the Special Member.
[Remainder of this page intentionally left blank.]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized, all as of the date first above written.
MBIA INSURANCE CORPORATION
By
------------------------------
Title
------------------------------
FLAGSHIP CREDIT CORPORATION,
as Originator
By
------------------------------
Title
------------------------------
PRUDENTIAL SECURITIES INCORPORATED,
as Underwriter
By
------------------------------
Title
------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Flagship Credit Corporation, relating to Flagship Auto Receivables Owner Trust
1999-2, of our report dated February 2, 1999, on our audits of the consolidated
financial statements of MBIA Insurance Corporation and Subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998. We also consent to the reference to our Firm under the
caption "Experts".
November 8, 1999
- --------------------------------------------------------------------------------
Deal Name: FLAGSHIP 99-2
Cut Off Date: 10/31/99
Collateral: Fixed Auto Loans
Size: $270,270,700.73
Auto Loan Summary Report
- --------------------------------------------------------------------------------
Number of Loans: 16,411
Aggregate Unpaid Principal Balance: $270,270,700.73
Aggregate Original Principal Balance: $280,949,653.16
Weighted Average Gross Coupon: 14.86%
Gross Coupon Range: 8.390% - 24.000%
Average Unpaid Principal Balance: $16,468.87
Average Original Principal Balance: $17,119.59
Maximum Unpaid Principal Balance: $34,068.62
Minimum Unpaid Principal Balance: $0.03
Maximum Original Principal Balance: $35,385.11
Minimum Original Principal Balance: $2,500.00
Weighted Average Stated Rem Term: 62.956
Stated Rem Term Range: 9.000 - 72.000
Weighted Average Age: 3.633
Age Range: 0.000 - 28.000
Weighted Average Original Term: 66.589
Original Term Range: 18.000 - 72.000
Weighted Average Borrower FICO: 636.932
Borrower FICO Range: 424.000 - 852.000
- --------------------------------------------------------------------------------
<PAGE>
GROSS COUPON
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Gross Coupon # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
8.00% < to <= 8.50% 2 0.01 8.452 44.66 6.24 $21,303.77
8.50% < to <= 9.00% 17 0.10 8.908 57.18 3.36 $258,524.42
9.00% < to <= 9.50% 10 0.06 9.404 56.07 3.49 $171,959.32
9.50% < to <= 10.00% 164 0.99 9.842 61.19 4.25 $2,682,408.62
10.00% < to <= 10.50% 167 1.07 10.348 63.76 2.84 $2,898,576.35
10.50% < to <= 11.00% 222 1.43 10.885 62.59 3.56 $3,866,896.49
11.00% < to <= 11.50% 399 2.69 11.340 63.85 3.63 $7,279,193.57
11.50% < to <= 12.00% 618 4.18 11.832 64.62 3.29 $11,293,678.67
12.00% < to <= 12.50% 712 4.85 12.295 65.19 3.41 $13,099,042.55
12.50% < to <= 13.00% 1,027 6.59 12.857 63.34 3.04 $17,818,012.30
13.00% < to <= 13.50% 1,357 8.37 13.364 62.55 3.53 $22,609,028.65
13.50% < to <= 14.00% 1,317 8.58 13.836 64.59 3.05 $23,188,534.11
14.00% < to <= 14.50% 1,238 8.19 14.296 64.97 3.51 $22,126,680.70
14.50% < to <= 15.00% 1,220 7.62 14.822 63.73 3.06 $20,599,402.34
15.00% < to <= 15.50% 909 5.56 15.363 63.45 3.68 $15,015,711.48
15.50% < to <= 16.00% 1,325 8.03 15.870 62.56 4.14 $21,712,954.00
16.00% < to <= 16.50% 1,334 7.65 16.367 62.59 3.47 $20,669,014.60
16.50% < to <= 17.00% 1,167 6.69 16.876 61.51 3.75 $18,074,907.19
17.00% < to <= 17.50% 736 4.40 17.379 63.45 4.37 $11,889,576.77
17.50% < to <= 18.00% 1,905 10.25 17.939 60.89 4.05 $27,714,643.40
18.00% < to <= 18.50% 133 0.73 18.322 60.88 3.69 $1,984,836.72
18.50% < to <= 19.00% 115 0.57 18.846 58.09 5.38 $1,534,951.15
19.00% < to <= 19.50% 45 0.22 19.326 55.43 6.15 $603,682.36
19.50% < to <= 20.00% 177 0.78 19.931 50.21 8.05 $2,119,641.86
20.00% < to <= 20.50% 31 0.14 20.240 54.13 2.89 $376,735.59
20.50% < to <= 21.00% 34 0.14 20.937 48.45 8.94 $373,354.82
21.00% < to <= 21.50% 5 0.02 21.279 41.94 13.48 $47,862.51
21.50% < to <= 22.00% 14 0.05 21.956 41.35 13.69 $128,561.61
22.00% < to <= 22.50% 7 0.03 22.329 45.57 12.66 $80,049.28
22.50% < to <= 23.00% 3 0.01 22.994 42.81 13.57 $23,538.69
23.50% < to <= 24.00% 1 0.00 24.000 40.00 20.00 $7,436.84
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORIGINAL LOAN AMOUNT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Original Loan Amt # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
0 < to <= 5,000 20 0.03 16.270 31.63 3.36 $75,749.35
5,000 < to <= 10,000 1,075 3.17 15.588 50.24 4.30 $8,554,328.60
10,000 < to <= 15,000 5,082 22.87 15.430 58.24 3.92 $61,804,038.52
15,000 < to <= 20,000 5,597 34.71 15.035 63.28 3.54 $93,824,003.44
20,000 < to <= 25,000 3,344 26.46 14.564 65.89 3.56 $71,524,131.18
25,000 < to <= 30,000 1,127 10.88 13.976 67.68 3.30 $29,398,299.55
30,000 < to <= 35,000 161 1.82 12.917 67.79 3.71 $4,922,274.68
35,000 < to <= 40,000 5 0.06 11.463 64.60 4.98 $167,875.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CURRENT LOAN AMOUNT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Current Loan Amt # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
0 < to <= 5,000 96 0.10 16.002 33.73 6.96 $263,669.29
5,000 < to <= 10,000 1,423 4.47 15.755 50.35 5.32 $12,067,766.60
10,000 < to <= 15,000 5,341 25.03 15.396 58.47 4.09 $67,648,115.53
15,000 < to <= 20,000 5,512 35.43 14.935 63.75 3.51 $95,767,929.67
20,000 < to <= 25,000 2,998 24.46 14.516 66.54 3.32 $66,111,409.71
25,000 < to <= 30,000 934 9.27 13.905 68.16 2.98 $25,043,620.02
30,000 < to <= 35,000 107 1.25 12.726 68.84 2.83 $3,368,189.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ORIGINAL MATURITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Original Maturity # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
12 < to <= 24 21 0.04 15.570 20.45 2.90 $117,386.60
24 < to <= 36 141 0.37 15.320 31.70 3.70 $987,983.21
36 < to <= 48 635 2.34 15.460 42.90 4.01 $6,332,073.31
48 < to <= 60 6,215 31.57 15.352 55.58 4.20 $85,311,983.10
60 < to <= 72 9,399 65.68 14.603 67.42 3.35 $177,521,274.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
REMAINING TERM
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Remaining Term # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
0 < to <= 12 3 0.00 18.491 10.73 14.74 $8,561.40
12 < to <= 24 34 0.07 16.426 20.84 7.73 $180,800.62
24 < to <= 36 214 0.60 16.310 32.97 8.75 $1,632,319.28
36 < to <= 48 881 3.46 15.938 43.59 7.72 $9,344,244.81
48 < to <= 60 6,338 32.86 15.210 56.40 3.96 $88,802,114.52
60 < to <= 72 8,941 63.01 14.607 67.77 3.19 $170,302,660.10
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
State # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
AE (*) 2 0.02 14.072 64.34 5.67 $43,583.87
AK 3 0.01 13.189 53.88 5.48 $33,417.11
AL 11 0.07 14.115 64.33 6.42 $198,356.29
AR 35 0.23 15.409 64.34 3.67 $627,085.59
AZ 645 4.28 15.256 65.27 3.61 $11,557,842.72
CA 1,087 7.48 14.531 64.13 3.62 $20,223,821.09
CO 70 0.44 14.943 63.52 3.40 $1,180,615.88
CT 6 0.03 16.116 53.14 5.27 $69,420.28
DC 83 0.53 15.148 61.89 3.91 $1,437,937.79
DE 227 1.31 15.635 61.92 4.48 $3,549,940.29
FL 1,012 5.66 14.649 60.96 3.41 $15,298,708.27
GA 1,276 8.39 14.949 64.82 3.49 $22,680,177.60
IA 3 0.02 17.157 64.72 4.17 $57,278.95
ID 1 0.01 12.000 65.00 7.00 $20,469.10
IL 7 0.04 15.639 65.02 5.12 $112,363.44
IN 25 0.16 14.461 67.06 0.84 $420,240.83
KS 85 0.48 14.508 60.37 4.10 $1,288,809.81
KY 5 0.03 14.776 62.54 2.63 $78,940.51
LA 55 0.37 14.524 64.74 4.65 $992,259.17
MA 2 0.01 15.670 64.34 5.12 $26,860.94
MD 1,784 10.76 14.992 61.27 4.70 $29,093,614.92
MI 24 0.13 14.743 57.80 6.54 $338,278.48
MN 3 0.02 14.828 67.68 1.55 $57,257.88
MO 91 0.62 14.226 64.78 3.48 $1,664,890.89
MS 4 0.03 13.311 67.64 2.05 $86,720.47
MT 1 0.01 14.000 62.00 4.00 $19,858.55
NC 3,435 21.25 14.716 64.26 3.23 $57,423,590.94
ND 2 0.02 14.687 66.21 5.79 $41,864.50
NE 1 0.00 14.100 50.00 4.00 $11,362.18
NJ 397 2.29 14.796 60.44 4.55 $6,192,158.54
NM 5 0.03 16.127 61.49 4.39 $82,604.55
NV 6 0.04 15.524 59.34 6.03 $97,946.19
NY 536 2.97 15.714 60.86 4.59 $8,037,426.04
OH 10 0.05 15.139 60.14 4.55 $148,518.72
OK 1,191 7.44 15.111 64.07 3.39 $20,095,581.21
OR 2 0.01 16.254 64.37 4.00 $28,387.87
PA 637 3.63 15.136 60.63 4.03 $9,798,016.59
RI 1 0.00 13.800 68.00 4.00 $12,438.76
SC 734 4.25 15.325 62.48 3.52 $11,488,930.95
SD 1 0.01 16.450 53.00 7.00 $18,171.02
TN 124 0.81 13.854 65.92 1.21 $2,198,320.12
TX 2,184 12.65 14.604 61.77 3.33 $34,183,047.68
VA 564 3.22 14.648 61.41 3.43 $8,713,879.24
WA 7 0.04 14.816 64.25 3.99 $113,869.45
WI 1 0.01 20.000 55.00 5.00 $13,748.34
WV 20 0.12 14.077 62.48 3.80 $314,578.15
WY 4 0.03 15.813 66.47 1.76 $71,164.29
Puerto Rico 2 0.01 17.849 52.99 7.01 $26,344.68
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Military Address
<PAGE>
BORROWER FICO RANGE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
FICO # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
400 < to <= 425 1 0.01 18.000 55.00 5.00 $15,030.19
425 < to <= 450 2 0.01 16.106 51.53 8.47 $28,380.69
450 < to <= 475 11 0.04 18.191 50.70 8.44 $114,310.33
475 < to <= 500 40 0.19 17.528 51.92 7.08 $512,401.86
500 < to <= 525 115 0.51 16.934 51.09 7.19 $1,384,180.12
525 < to <= 550 508 2.26 16.939 51.04 7.62 $6,118,263.33
550 < to <= 575 738 3.52 16.550 53.25 5.55 $9,516,200.07
575 < to <= 600 2,324 13.33 16.733 61.51 4.32 $36,025,997.33
600 < to <= 625 3,494 21.14 16.191 63.41 3.53 $57,144,531.94
625 < to <= 650 3,871 24.79 14.743 64.32 3.27 $66,995,661.97
650 < to <= 675 2,701 17.62 13.548 64.57 3.22 $47,610,235.39
675 < to <= 700 1,206 7.72 13.158 64.00 3.19 $20,866,671.73
700 < to <= 725 696 4.55 11.969 64.39 3.04 $12,300,392.81
725 < to <= 750 369 2.35 11.810 64.24 2.88 $6,350,069.16
750 < to <= 775 202 1.22 11.958 63.46 2.94 $3,284,427.45
775 < to <= 800 90 0.51 11.642 61.97 2.96 $1,384,760.22
800 < to <= 825 31 0.16 12.684 61.91 2.75 $445,271.12
825 < to <= 850 11 0.06 11.298 64.24 2.38 $159,778.98
850 < to <= 875 1 0.01 12.190 54.00 6.00 $14,136.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VEHICLE TYPE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Type # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
New 5,238 38.15 14.580 66.85 3.61 $103,100,940.81
Used 11,173 61.85 15.037 60.55 3.65 $167,169,759.92
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MODEL YEAR OF VEHICLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Current
Year # Loans % Pool WAC WA Rem Term WA Age Balance
<S> <C> <C> <C> <C> <C> <C>
1992 1 0.00 22.990 12.00 24.00 $3,550.38
1993 19 0.04 17.452 21.72 10.19 $95,742.73
1994 89 0.22 15.669 31.01 5.70 $607,443.96
1995 564 2.03 16.028 42.14 6.88 $5,482,047.32
1996 2,958 14.70 15.360 55.24 3.88 $39,739,999.04
1997 3,733 21.18 14.871 60.65 3.48 $57,255,726.45
1998 3,270 19.88 15.027 64.48 4.08 $53,732,122.71
1999 5,037 36.04 14.608 66.89 3.59 $97,402,624.24
2000 740 5.90 14.143 69.89 1.03 $15,951,443.90
- ------------------------------------------------------------------------------------------------------------------------------------
Total: 16,411 100.00% 14.863 62.96 3.63 $270,270,700.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORIGINATION DATE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Total Current
Origination Date # Loans % Pool Balance
<S> <C> <C> <C>
June 1997 1 0.00 $7,469.50
July 1997 5 0.01 $36,131.90
September 1997 4 0.02 $43,752.91
October 1997 6 0.02 $44,133.17
November 1997 14 0.05 $142,057.18
December 1997 42 0.16 $441,112.12
January 1998 19 0.07 $189,758.81
February 1998 27 0.10 $275,609.56
March 1998 20 0.08 $219,514.41
April 1998 36 0.14 $388,603.96
May 1998 25 0.11 $285,377.61
June 1998 21 0.09 $248,905.20
July 1998 33 0.15 $399,326.59
August 1998 32 0.15 $407,214.91
September 1998 36 0.17 $451,731.14
October 1998 49 0.23 $621,472.47
November 1998 55 0.26 $703,961.74
December 1998 179 1.02 $2,762,896.75
January 1999 499 2.85 $7,691,642.88
February 1999 788 4.57 $12,355,289.31
March 1999 1,249 7.43 $20,080,857.29
April 1999 2,024 11.85 $32,032,177.75
May 1999 2,267 13.70 $37,021,192.47
June 1999 2,068 12.79 $34,564,925.37
July 1999 1,978 12.45 $33,644,533.01
August 1999 1,998 12.62 $34,101,873.55
September 1999 1,787 11.47 $30,996,277.60
October 1999 1,149 7.44 $20,112,901.57
- -------------------------------------------------------------------------------------------------
Total: 16,411 100.00% $270,270,700.73
=================================================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Deal Name: FLAGSHIP 99-2
Cut Off Date: 10/31/99
Collateral: Fixed Auto Loans
Size: $257,620,719.36
Auto Loan Summary Report - Initial Pool
- --------------------------------------------------------------------------------
Number of Loans: 15,617
Aggregate Unpaid Principal Balance: $257,620,719.36
Aggregate Original Principal Balance: $267,813,321.60
Weighted Average Gross Coupon: 14.847%
Gross Coupon Range: 8.390% - 24.000%
Average Unpaid Principal Balance: $16,496.17
Average Original Principal Balance: $17,148.83
Maximum Unpaid Principal Balance: $34,068.62
Minimum Unpaid Principal Balance: $0.03
Maximum Original Principal Balance: $35,385.11
Minimum Original Principal Balance: $2,500.00
Weighted Average Stated Rem Term: 62.977
Stated Rem Term Range: 9.000 - 72.000
Weighted Average Age: 3.639
Age Range: 0.000 - 28.000
Weighted Average Original Term: 66.616
Original Term Range: 18.000 - 72.000
Weighted Average Borrower FICO: 636.983
Borrower FICO Range: 444.000 - 852.000
- --------------------------------------------------------------------------------
<PAGE>
GROSS COUPON
- --------------------------------------------------------------------------------
Total Current
Gross Coupon # Loans % Pool Balance
8.00% < to <= 8.50% 2 0.01 $21,303.77
8.50% < to <= 9.00% 16 0.09 $241,584.96
9.00% < to <= 9.50% 9 0.06 $146,580.34
9.50% < to <= 10.00% 160 1.01 $2,610,032.00
10.00% < to <= 10.50% 160 1.09 $2,800,731.65
10.50% < to <= 11.00% 211 1.43 $3,676,769.45
11.00% < to <= 11.50% 382 2.71 $6,986,220.88
11.50% < to <= 12.00% 589 4.18 $10,775,979.83
12.00% < to <= 12.50% 680 4.88 $12,580,890.17
12.50% < to <= 13.00% 977 6.60 $17,005,966.80
13.00% < to <= 13.50% 1316 8.49 $21,872,179.62
13.50% < to <= 14.00% 1271 8.69 $22,395,740.92
14.00% < to <= 14.50% 1185 8.23 $21,205,835.92
14.50% < to <= 15.00% 1150 7.55 $19,463,157.33
15.00% < to <= 15.50% 863 5.54 $14,266,627.48
15.50% < to <= 16.00% 1248 7.97 $20,524,722.45
16.00% < to <= 16.50% 1291 7.75 $19,973,187.58
16.50% < to <= 17.00% 1103 6.66 $17,146,980.19
17.00% < to <= 17.50% 701 4.39 $11,314,736.86
17.50% < to <= 18.00% 1758 9.93 $25,579,318.06
18.00% < to <= 18.50% 131 0.76 $1,953,619.29
18.50% < to <= 19.00% 113 0.59 $1,513,260.05
19.00% < to <= 19.50% 42 0.22 $569,086.15
19.50% < to <= 20.00% 173 0.80 $2,073,104.55
20.00% < to <= 20.50% 30 0.14 $358,633.85
20.50% < to <= 21.00% 28 0.12 $301,691.87
21.00% < to <= 21.50% 5 0.02 $47,862.51
21.50% < to <= 22.00% 14 0.05 $128,561.61
22.00% < to <= 22.50% 5 0.02 $55,377.69
22.50% < to <= 23.00% 3 0.01 $23,538.69
23.50% < to <= 24.00% 1 0.00 $7,436.84
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
ORIGINAL LOAN AMOUNT
- --------------------------------------------------------------------------------
Total Current
Original Loan Amt # Loans % Pool Balance
0 < to <= 5,000 19 0.03 $72,117.12
5,000 < to <= 10,000 1,030 3.18 $8,184,029.21
10,000 < to <= 15,000 4,796 22.62 $58,271,588.32
15,000 < to <= 20,000 5,306 34.55 $88,995,525.17
20,000 < to <= 25,000 3,227 26.79 $69,018,703.09
25,000 < to <= 30,000 1,073 10.86 $27,988,606.36
30,000 < to <= 35,000 161 1.91 $4,922,274.68
35,000 < to <= 40,000 5 0.07 $167,875.41
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
CURRENT LOAN AMOUNT
- --------------------------------------------------------------------------------
Total Current
Current Loan Amt # Loans % Pool Balance
0 < to <= 5,000 95 0.10 $260,037.06
5,000 < to <= 10,000 1,355 4.46 $11,477,136.38
10,000 < to <= 15,000 5,029 24.70 $63,638,445.56
15,000 < to <= 20,000 5,253 35.44 $91,308,383.06
20,000 < to <= 25,000 2,889 24.73 $63,716,593.40
25,000 < to <= 30,000 889 9.26 $23,851,933.99
30,000 < to <= 35,000 107 1.31 $3,368,189.91
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
<PAGE>
ORIGINAL MATURITY
- --------------------------------------------------------------------------------
Total Current
Original Maturity # Loans % Pool Balance
12 < to <= 24 21 0.05 $117,386.60
24 < to <= 36 138 0.37 $965,276.07
36 < to <= 48 619 2.40 $6,174,405.09
48 < to <= 60 5,856 31.19 $80,348,629.23
60 < to <= 72 8,983 65.99 $170,015,022.37
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
REMAINING TERM
- --------------------------------------------------------------------------------
Total Current
Remaining Term # Loans % Pool Balance
0 < to <= 12 3 0.00 $8,561.40
12 < to <= 24 33 0.07 $177,168.39
24 < to <= 36 208 0.61 $1,573,480.91
36 < to <= 48 848 3.50 $9,007,499.04
48 < to <= 60 5,979 32.51 $83,745,699.53
60 < to <= 72 8,546 63.31 $163,108,310.09
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION
- --------------------------------------------------------------------------------
Total Current
State # Loans % Pool Balance
AE (*) 2 0.02 $43,583.87
AK 3 0.01 $33,417.11
AL 11 0.08 $198,356.29
AR 35 0.24 $627,085.59
AZ 645 4.49 $11,557,842.72
CA 1,087 7.85 $20,223,821.09
CO 70 0.46 $1,180,615.88
CT 6 0.03 $69,420.28
DC 83 0.56 $1,437,937.79
DE 227 1.38 $3,549,940.29
FL 1,012 5.94 $15,298,708.27
GA 1,276 8.80 $22,680,177.60
IA 3 0.02 $57,278.95
ID 1 0.01 $20,469.10
IL 7 0.04 $112,363.44
IN 25 0.16 $420,240.83
KS 85 0.50 $1,288,809.81
KY 5 0.03 $78,940.51
LA 55 0.39 $992,259.17
MA 2 0.01 $26,860.94
MD 1,784 11.29 $29,093,614.92
MI 24 0.13 $338,278.48
MN 3 0.02 $57,257.88
MO 91 0.65 $1,664,890.89
MS 4 0.03 $86,720.47
MT 1 0.01 $19,858.55
NC 3,278 21.18 $54,571,626.16
ND 2 0.02 $41,864.50
NE 1 0.00 $11,362.18
NJ 397 2.40 $6,192,158.54
NM 5 0.03 $82,604.55
NV 6 0.04 $97,946.19
NY 536 3.12 $8,037,426.04
OH 10 0.06 $148,518.72
OK 1,191 7.80 $20,095,581.21
OR 2 0.01 $28,387.87
RI 1 0.00 $12,438.76
SC 734 4.46 $11,488,930.95
SD 1 0.01 $18,171.02
TN 124 0.85 $2,198,320.12
TX 2,184 13.27 $34,183,047.68
VA 564 3.38 $8,713,879.24
WA 7 0.04 $113,869.45
WI 1 0.01 $13,748.34
WV 20 0.12 $314,578.15
WY 4 0.03 $71,164.29
Puerto Rico 2 0.01 $26,344.68
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
(*) Military Address
<PAGE>
BORROWER FICO RANGE
- --------------------------------------------------------------------------------
Total Current
FICO # Loans % Pool Balance
425 < to <= 450 1 0.01 $16,434.26
450 < to <= 475 11 0.04 $114,310.33
475 < to <= 500 39 0.20 $502,748.49
500 < to <= 525 110 0.51 $1,325,678.78
525 < to <= 550 485 2.26 $5,809,882.87
550 < to <= 575 699 3.51 $9,044,972.82
575 < to <= 600 2,213 13.32 $34,317,625.68
600 < to <= 625 3,306 21.00 $54,111,871.02
625 < to <= 650 3,697 24.87 $64,066,544.76
650 < to <= 675 2,589 17.75 $45,739,095.95
675 < to <= 700 1,140 7.67 $19,763,740.20
700 < to <= 725 657 4.53 $11,673,662.55
725 < to <= 750 354 2.38 $6,124,392.77
750 < to <= 775 192 1.22 $3,140,669.89
775 < to <= 800 88 0.53 $1,354,141.13
800 < to <= 825 28 0.16 $400,661.05
825 < to <= 850 7 0.04 $100,150.77
850 < to <= 875 1 0.01 $14,136.04
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
VEHICLE TYPE
- --------------------------------------------------------------------------------
Total Current
Type # Loans % Pool Balance
New 4,959 38.18 $98,349,177.20
Used 10,658 61.82 $159,271,542.16
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
MODEL YEAR OF VEHICLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Current
Year # Loans % Pool Balance
1992 1 0.00 $3,550.38
1993 19 0.04 $95,742.73
1994 87 0.23 $594,641.08
1995 543 2.04 $5,265,480.25
1996 2,816 14.67 $37,794,535.99
1997 3,594 21.37 $55,061,189.88
1998 3,101 19.79 $50,971,493.26
1999 4,763 36.04 $92,841,545.20
2000 693 5.82 $14,992,540.59
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
- --------------------------------------------------------------------------------
ORIGINATION DATE
- --------------------------------------------------------------------------------
Total Current
Origination Date # Loans % Pool Balance
June 1997 1 0.00 $7,469.50
July 1997 5 0.01 $36,131.90
September 1997 3 0.01 $32,892.17
October 1997 6 0.02 $44,133.17
November 1997 13 0.05 $129,721.24
December 1997 39 0.16 $410,844.54
January 1998 18 0.07 $180,105.44
February 1998 27 0.11 $275,609.56
March 1998 19 0.08 $206,596.12
April 1998 33 0.14 $355,916.33
May 1998 23 0.10 $267,797.51
June 1998 21 0.10 $248,905.20
July 1998 32 0.15 $390,136.58
August 1998 31 0.15 $397,543.96
September 1998 36 0.18 $451,731.14
October 1998 48 0.24 $611,315.83
November 1998 53 0.26 $667,632.97
December 1998 170 1.02 $2,638,719.15
January 1999 475 2.85 $7,335,458.36
February 1999 742 4.53 $11,674,103.14
March 1999 1,174 7.40 $19,054,708.07
April 1999 1,918 11.81 $30,420,648.11
May 1999 2,169 13.80 $35,540,609.31
June 1999 1,974 12.81 $33,002,374.04
July 1999 1,910 12.64 $32,574,048.03
August 1999 1,932 12.80 $32,965,962.97
September 1999 1,724 11.61 $29,902,793.56
October 1999 1,021 6.91 $17,796,811.46
- --------------------------------------------------------------------------------
Total: 15,617 100.00% $257,620,719.36
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Deal Name: FLAGSHIP 99-2
Cut Off Date: 10/31/99
Collateral: Fixed Auto Loans
Size: $12,649,981.37
Auto Loan Summary Report - Prefunding Pool
- --------------------------------------------------------------------------------
Number of Loans: 794
Aggregate Unpaid Principal Balance: $12,649,981.37
Aggregate Original Principal Balance: $13,136,331.56
Weighted Average Gross Coupon: 15.173%
Gross Coupon Range: 8.750% - 22.400%
Average Unpaid Principal Balance: $15,931.97
Average Original Principal Balance: $16,544.50
Maximum Unpaid Principal Balance: $29,337.00
Minimum Unpaid Principal Balance: $3,632.23
Maximum Original Principal Balance: $29,999.28
Minimum Original Principal Balance: $4,363.35
Weighted Average Stated Rem Term: 62.520
Stated Rem Term Range: 24.000 - 72.000
Weighted Average Age: 3.518
Age Range: 0.000 - 25.000
Weighted Average Original Term: 66.039
Original Term Range: 30.000 - 72.000
Weighted Average Borrower FICO: 635.883
Borrower FICO Range: 424.000 - 844.000
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<PAGE>
GROSS COUPON
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Total Current
Gross Coupon # Loans % Pool Balance
8.50% < to <= 9.00% 1 0.13 $16,939.46
9.00% < to <= 9.50% 1 0.20 $25,378.98
9.50% < to <= 10.00% 4 0.57 $72,376.62
10.00% < to <= 10.50% 7 0.77 $97,844.70
10.50% < to <= 11.00% 11 1.50 $190,127.04
11.00% < to <= 11.50% 17 2.32 $292,972.69
11.50% < to <= 12.00% 29 4.09 $517,698.84
12.00% < to <= 12.50% 32 4.10 $518,152.38
12.50% < to <= 13.00% 50 6.42 $812,045.50
13.00% < to <= 13.50% 41 5.82 $736,849.03
13.50% < to <= 14.00% 46 6.27 $792,793.19
14.00% < to <= 14.50% 53 7.28 $920,844.78
14.50% < to <= 15.00% 70 8.98 $1,136,245.01
15.00% < to <= 15.50% 46 5.92 $749,084.00
15.50% < to <= 16.00% 77 9.39 $1,188,231.55
16.00% < to <= 16.50% 43 5.50 $695,827.02
16.50% < to <= 17.00% 64 7.34 $927,927.00
17.00% < to <= 17.50% 35 4.54 $574,839.91
17.50% < to <= 18.00% 147 16.88 $2,135,325.34
18.00% < to <= 18.50% 2 0.25 $31,217.43
18.50% < to <= 19.00% 2 0.17 $21,691.10
19.00% < to <= 19.50% 3 0.27 $34,596.21
19.50% < to <= 20.00% 4 0.37 $46,537.31
20.00% < to <= 20.50% 1 0.14 $18,101.74
20.50% < to <= 21.00% 6 0.57 $71,662.95
22.00% < to <= 22.50% 2 0.20 $24,671.59
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Total: 794 100.00% $12,649,981.37
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ORIGINAL LOAN AMOUNT
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Total Current
Original Loan Amt # Loans % Pool Balance
0 < to <= 5,000 1 0.03 $3,632.23
5,000 < to <= 10,000 45 2.93 $370,299.39
10,000 < to <= 15,000 286 27.92 $3,532,450.20
15,000 < to <= 20,000 291 38.17 $4,828,478.27
20,000 < to <= 25,000 117 19.81 $2,505,428.09
25,000 < to <= 30,000 54 11.14 $1,409,693.19
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Total: 794 100.00% $12,649,981.37
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CURRENT LOAN AMOUNT
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Total Current
Current Loan Amt # Loans % Pool Balance
0 < to <= 5,000 1 0.03 $3,632.23
5,000 < to <= 10,000 68 4.67 $590,630.22
10,000 < to <= 15,000 312 31.70 $4,009,669.97
15,000 < to <= 20,000 259 35.25 $4,459,546.61
20,000 < to <= 25,000 109 18.93 $2,394,816.31
25,000 < to <= 30,000 45 9.42 $1,191,686.03
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Total: 794 100.00% $12,649,981.37
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<PAGE>
ORIGINAL MATURITY
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Total Current
Original Maturity # Loans % Pool Balance
24 < to <= 36 3 0.18 $22,707.14
36 < to <= 48 16 1.25 $157,668.22
48 < to <= 60 359 39.24 $4,963,353.87
60 < to <= 72 416 59.34 $7,506,252.14
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Total: 794 100.00% $12,649,981.37
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REMAINING TERM
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Total Current
Remaining Term # Loans % Pool Balance
12 < to <= 24 1 0.03 $3,632.23
24 < to <= 36 6 0.47 $58,838.37
36 < to <= 48 33 2.66 $336,745.77
48 < to <= 60 359 39.97 $5,056,414.99
60 < to <= 72 395 56.87 $7,194,350.01
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Total: 794 100.00% $12,649,981.37
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GEOGRAPHIC DISTRIBUTION
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Total Current
State # Loans % Pool Balance
NC 157 22.55 $2,851,964.78
PA 637 77.45 $9,798,016.59
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Total: 794 100.00% $12,649,981.37
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BORROWER FICO RANGE
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Total Current
FICO # Loans % Pool Balance
400 < to <= 425 1 0.12 $15,030.19
425 < to <= 450 1 0.09 $11,946.43
475 < to <= 500 1 0.08 $9,653.37
500 < to <= 525 5 0.46 $58,501.34
525 < to <= 550 23 2.44 $308,380.46
550 < to <= 575 39 3.73 $471,227.25
575 < to <= 600 111 13.50 $1,708,371.65
600 < to <= 625 188 23.97 $3,032,660.92
625 < to <= 650 174 23.16 $2,929,117.21
650 < to <= 675 112 14.79 $1,871,139.44
675 < to <= 700 66 8.72 $1,102,931.53
700 < to <= 725 39 4.95 $626,730.26
725 < to <= 750 15 1.78 $225,676.39
750 < to <= 775 10 1.14 $143,757.56
775 < to <= 800 2 0.24 $30,619.09
800 < to <= 825 3 0.35 $44,610.07
825 < to <= 850 4 0.47 $59,628.21
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Total: 794 100.00% $12,649,981.37
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<PAGE>
VEHICLE TYPE
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Total Current
Type # Loans % Pool Balance
New 279 37.56 $4,751,763.61
Used 515 62.44 $7,898,217.76
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Total: 794 100.00% $12,649,981.37
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MODEL YEAR OF VEHICLE
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Total Current
Year # Loans % Pool Balance
1994 2 0.10 $12,802.88
1995 21 1.71 $216,567.07
1996 142 15.38 $1,945,463.05
1997 139 17.35 $2,194,536.57
1998 169 21.82 $2,760,629.45
1999 274 36.06 $4,561,079.04
2000 47 7.58 $958,903.31
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Total: 794 100.00% $12,649,981.37
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ORIGINATION DATE
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Total Current
Origination Date # Loans % Pool Balance
September 1997 1 0.09 $10,860.74
November 1997 1 0.10 $12,335.94
December 1997 3 0.24 $30,267.58
January 1998 1 0.08 $9,653.37
March 1998 1 0.10 $12,918.29
April 1998 3 0.26 $32,687.63
May 1998 2 0.14 $17,580.10
July 1998 1 0.07 $9,190.01
August 1998 1 0.08 $9,670.95
October 1998 1 0.08 $10,156.64
November 1998 2 0.29 $36,328.77
December 1998 9 0.98 $124,177.60
January 1999 24 2.82 $356,184.52
February 1999 46 5.38 $681,186.17
March 1999 75 8.11 $1,026,149.22
April 1999 106 12.74 $1,611,529.64
May 1999 98 11.70 $1,480,583.16
June 1999 94 12.35 $1,562,551.33
July 1999 68 8.46 $1,070,484.98
August 1999 66 8.98 $1,135,910.58
September 1999 63 8.64 $1,093,484.04
October 1999 128 18.31 $2,316,090.11
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Total: 794 100.00% $12,649,981.37
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