EXHIBIT 10.29
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SECURITY AGREEMENT
among
FIRST INVESTORS AUTO RECEIVABLES CORPORATION
as Debtor,
ENTERPRISE FUNDING CORPORATION,
as Company,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Collateral Agent,
MBIA INSURANCE CORPORATION,
as Surety Bond Provider,
NATIONSBANK, N.A.,
individually and as Reserve Account Agent,
and
FIRST INVESTORS FINANCIAL SERVICES, INC.,
as Seller
Dated as of October 22, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions...................................... 2
ARTICLE II
GRANT OF SECURITY INTEREST
SECTION 2.1. Grant of Security Interest....................... 25
SECTION 2.2. Additional Receivables........................... 28
SECTION 2.3. Re-▇▇▇▇▇▇▇ Trigger............................... 31
SECTION 2.4. Subrogation...................................... 32
SECTION 2.5. Increase of Note................................. 32
SECTION 2.6. Release of Receivables........................... 33
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEBTOR
SECTION 3.1. Representations and Warranties Concerning
Receivables...................................... 36
SECTION 3.2. Covenants of the Debtor.......................... 43
ARTICLE IV
SERVICING AND ADMINISTRATION
SECTION 4.1. Servicing........................................ 51
SECTION 4.2. Rights After Designation of Successor
Servicer......................................... 52
SECTION 4.3. Responsibilities of the Debtor................... 53
SECTION 4.4. Monthly Debtor's Certificate..................... 53
ARTICLE V
ALLOCATION AND APPLICATION
OF COLLECTIONS; RESERVE ACCOUNT
SECTION 5.1. Collections...................................... 55
SECTION 5.2. Remittances to the Secured Parties............... 57
ARTICLE V-A
THE RESERVE ACCOUNT AND THE RESERVE ACCOUNT AGENT
SECTION 5A.1 Establishment of the Reserve Account............. 58
SECTION 5A.2 Security Interest................................ 59
SECTION 5A.3 Termination of Reserve Account;
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PAGE
Release of Funds................................. 60
SECTION 5A.4 Duties of the Reserve Account Agent.............. 61
SECTION 5A.5 Representations, Warranties and
Covenants of the Reserve Account Agent........... 62
SECTION 5A.6 Liability of the Reserve Account Agent........... 63
SECTION 5A.7 Limitation on Liability of the Reserve
Account Agent and Others......................... 65
ARTICLE VI
TERMINATION EVENTS; SERVICING TERMINATION
SECTION 6.1. Termination Events............................... 66
SECTION 6.2. Wind-Down Events................................. 69
SECTION 6.3. Amortization Events.............................. 69
SECTION 6.4. Remedies......................................... 70
SECTION 6.5 Proceeds......................................... 72
ARTICLE VII
THE COLLATERAL AGENT
SECTION 7.1. Duties of the Collateral Agent................... 72
SECTION 7.2. Compensation and Indemnification of
Collateral Agent................................. 73
SECTION 7.3. Representations, Warranties and
Covenants of the Collateral Agent................ 74
SECTION 7.4. Liability of the Collateral Agent................ 75
SECTION 7.5. Merger or Consolidation of, or
Assumption of the Obligations of,
the Collateral Agent............................. 78
SECTION 7.6. Limitation on Liability of the
Collateral Agent and Others...................... 79
SECTION 7.7. Indemnification of the Secured Parties........... 79
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices, etc..................................... 80
SECTION 8.2. Successors and Assigns........................... 81
SECTION 8.3. Severability Clause.............................. 82
SECTION 8.4. AMENDMENTS; GOVERNING LAW........................ 82
SECTION 8.5. No Bankruptcy Petition Against the
Company or the Debtor............................ 82
SECTION 8.6. Setoff........................................... 83
SECTION 8.7. No Recourse...................................... 83
SECTION 8.8. Further Assurances............................... 83
SECTION 8.9. Other Costs, Expenses and Related
Matters.......................................... 83
ii
SECTION 8.10. Exercise of Rights by Surety Bond
Provider......................................... 84
SECTION 8.11. Counterparts..................................... 84
SECTION 8.12. Headings......................................... 84
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Receivables Schedule
EXHIBIT C Servicing Agreement
EXHIBIT D List of Eligible Investments
EXHIBIT E Credit Guidelines
EXHIBIT F Form of Supplemental Pledge of Additional Re-
ceivables
EXHIBIT G Form of Reassignment of Removed Receivables
EXHIBIT H Form of Monthly Debtor's Certificate
EXHIBIT I Form of Additional Investment Certificate
EXHIBIT J Form of Surety Bond
EXHIBIT K Forms of Contracts
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SECURITY AGREEMENT
SECURITY AGREEMENT (this "AGREEMENT"), dated as of October 22, 1996
among ENTERPRISE FUNDING CORPORATION, a Delaware corporation, as a secured party
(together with its successors and assigns, the "COMPANY"), FIRST INVESTORS AUTO
RECEIVABLES CORPORATION, a Delaware corporation, as debtor (together with its
successors and assigns, the "DEBTOR"), MBIA INSURANCE CORPORATION, a New York
stock insurance company, as a secured party and as Surety Bond Provider (in such
capacity, the "SURETY BOND PROVIDER"), FIRST INVESTORS FINANCIAL SERVICES, INC.,
a Texas corporation (the "SELLER"), NATIONSBANK, N.A., a national banking
association, individually and as reserve account agent (together with its
successors and assigns in such capacity, the "RESERVE ACCOUNT AGENT") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as
collateral agent (together with its successors and assigns in such capacity, the
"COLLATERAL AGENT").
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Agreement, the
Debtor desires to grant a security interest in and to the Receivables and
related property including the Debtor's security interest in the Financed
Vehicles and the Collections derived therefrom during the full term of this
Agreement;
WHEREAS, pursuant to the Insurance Agreement, the Surety Bond
Provider has issued its Surety Bond to provide for the full and timely payment
of all amounts of interest due on and principal of the Note;
WHEREAS, pursuant to the Note Purchase Agreement, the Debtor has
issued the Note to the Company and will be obligated to the holder of such Note
to pay the principal of and interest on such Note in accordance with the terms
thereof;
WHEREAS, the Debtor is granting a security interest in the
Collateral to the Collateral Agent, for the benefit of the Secured Parties, to
secure the payment and performance of the Debtor of its obligations under
this Agreement, the Note, the Note Purchase Agreement and the Insurance
Agreement;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All capitalized terms used herein shall
have the meanings herein specified, and shall include in the singular number the
plural and in the plural number the singular:
"ACCRUED INTEREST COMPONENT" shall mean for any Collection Period,
the Interest Component of all Related Commercial Paper outstanding at any time
during such Collection Period which has accrued from the first day through the
last day of such Collection Period whether or not such Related Commercial Paper
matures during such Collection Period. For purposes of the immediately preceding
sentence, the portion of the Interest Component of Related Commercial Paper
accrued in a Collection Period in which Related Commercial Paper has a stated
maturity date that succeeds the last day of such Collection Period shall be
based on the actual number of days elapsed in such Collection Period during
which Related Commercial Paper was outstanding.
"ADDITION CLOSING DATE" shall mean the date on which a Supplemental
Conveyance conveying an interest in Additional Receivables as of the Addition
Date is delivered by the Debtor to the Company.
"ADDITION CUT-OFF DATE" shall mean the cut-off date with respect to
Additional Receivables to be added as of any Addition Date. The Addition Cut-Off
Date shall be the last day of the Collection Period immediately preceding any
Addition Date.
"ADDITION DATE" shall mean the date as of which Additional
Receivables are to be included as Collateral in accordance with Section 2.2 of
this Agreement.
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"ADDITIONAL AMOUNTS" shall mean (i) any refunds or other payments
under any Extended Service Agreement; (ii) refunds in connection with (a) credit
life policies relating to Financed Vehicles and (b) accident and health policies
relating to Financed Vehicles and (iii) sales tax refunds relating to Financed
Vehicles.
"ADDITIONAL INVESTMENT" shall mean additional advances of funds
evidenced by the Note.
"ADDITIONAL RECEIVABLES" shall mean those Eligible Receivables
designated by the Debtor as additional Collateral and included as Collateral in
accordance with Section 2.2 of this Agreement.
"ADJUSTED LIBOR RATE" means, with respect to any Collection Period,
a rate per annum equal to the sum (rounded upwards, if necessary, to the next
higher 1/100 of 1%) of (A) the rate obtained by dividing (i) the applicable
LIBOR Rate by (ii) a percentage equal to 100% minus the reserve percentage used
for determining the maximum reserve requirement as specified in Regulation D
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) that is applicable to the Liquidity Provider during such
Collection Period in respect of eurocurrency or eurodollar funding, lending or
liabilities (or, if more than one percentage shall be so applicable, the daily
average of such percentage for those days in such Collection Period during which
any such percentage shall be applicable) plus (B) the then daily net annual
assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as
estimated by the Liquidity Provider for determining the current annual
assessment payable by the Liquidity Provider to the Federal Deposit Insurance
Corporation in respect of eurocurrency or eurodollar funding, lending or
liabilities.
"ADMINISTRATIVE AGENT" shall mean NationsBank, N.A., as
administrative agent for the Company.
"AFFILIATE" shall mean, with respect to a Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a
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Person, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" shall mean this Security Agreement, as it may from time
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof.
"AMORTIZATION EVENT" shall have the meaning set
forth in Section 6.3 hereof.
"AMOUNT FINANCED" with respect to a Receivable means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual
rate of finance charges stated in the Receivable.
"AVAILABLE COLLECTIONS" shall mean, with respect to each Remittance
Date, all Collections received by the Servicer, from whatever source, during or
with respect to the prior Collection Period, LESS the fees and expenses of GECC
as Servicer which GECC, pursuant to the Servicing Agreement, is permitted to
withhold from amounts remitted to the Debtor or the Collateral Agent.
"AVAILABLE FUNDS" shall mean, with respect to a Remittance Date, the
sum of (a) Available Collections, (b) Reserve Advances and (c) amounts available
for withdrawal from the Reserve Account on such date.
"BAILEE" means a "Bailee" within the meaning of
Section 9-305 of the Relevant UCC.
"BASE RATE" means, a rate per annum equal to the greater of (i) the
prime rate of interest announced by the Liquidity Provider (or, if more than one
Liquidity Provider, then by NationsBank, N.A.) from time to time, changing when
and as said prime rate changes (such rate not necessarily being the lowest or
best rate charged by the Liquidity Provider (or NationsBank, N.A. as
applicable)) and (ii) the sum of (a) 1.50% and (b) the rate equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business
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Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for such day for such transactions received by the
Liquidity Provider (or, if more than one Liquidity Provider, then by
NationsBank, N.A.) from three Federal funds brokers of recognized standing
selected by it.
"BORROWING BASE" shall mean, at any time, the aggregate Principal
Balance of all Eligible Receivables MINUS the aggregate Principal Balance of all
Eligible Receivables originated by any one Originator to the extent that such
aggregate Principal Balance exceeds 5.0% of the aggregate Principal Balance of
all Eligible Receivables.
"BUSINESS DAY" means any day (excluding Saturday or Sunday) on which
banks are open for business in New York, New York, Charlotte, North Carolina and
Houston, Texas.
"CAP COUNTERPARTY" shall have the meaning specified in Section
3.2(n) of this Agreement.
"CARRYING COSTS" shall mean for any Collection Period the sum of:
(i) the sum of the dollar amount of the Company's obligations for such
Collection Period determined on an accrual basis in accordance with
generally accepted accounting principles consistently applied
(a) to pay interest with respect to Purchased Interests (such
interest to be calculated based on the Adjusted LIBOR Rate, provided
such rate is available and provided that the Surety Bond Provider
has not failed to make any required payment under the Surety Bond,
otherwise, the Base Rate) outstanding at any time during such
Collection Period accrued from the first day through the last day of
such Collection Period whether or not such interest is payable
during such Collection Period;
(b) without duplication of the amounts
described in clause (a) above, to pay interest,
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calculated at the Base Rate, with respect to amounts disbursed by
the Credit Support Provider in respect of Defaulted Receivables, if
the Surety Bond Provider shall have failed to make any required
payment under the Surety Bond in respect of such Defaulted
Receivables, outstanding at any time during such Collection Period
accrued from the first day through the last day of such Collection
Period whether or not such interest is payable during such
Collection Period;
(c) to pay the Accrued Interest Component of Related
Commercial Paper with respect to any Collection Period (it being
understood that to the extent the Company has obtained funding under
the Liquidity Agreement or a Credit Support Agreement, the Company
will not obtain duplicative funding in the commercial paper
markets);
(d) to pay a dealer fee of .05% per annum of the face amount
of Related Commercial Paper issued during such Collection Period;
(e) any past due amounts not paid in clause (a), (b) and (c);
and
(f) to pay the costs of the Company with respect to the
operation of the Yield Protection Provision, which amounts paid
pursuant to this clause (f) shall not exceed 1.00% per annum of the
Net Investment; and
(ii) the Program Fee and Unused Program Fee (the sum of which shall not
exceed .30% per annum of the Net Investment) accrued from the first day
through the last day of such Collection Period whether or not such amount
is payable during such Collection Period.
"CERTIFICATED SECURITIES" means "certificated securities" as defined
in Section 8-102(l)(a) of the New York UCC and Section 8-102(a)(4) of the Texas
UCC which are in the continuous possession in the State of New York by the
Financial Intermediary and the State of Texas by the Financial Intermediary.
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"CLEARING CORPORATION" means The Depository Trust Company.
"CLEARING CORPORATION SECURITIES" means "certificated securities" as
defined in Section 8-102(l)(a) of the New York UCC and Section 8-102(a)(4) of
the Texas UCC which are in the continuous possession in the States of Texas or
New York of the Clearing Corporation or a Custodian Bank.
"CLOSING DATE" shall mean October 22, 1996.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time (including any successor statute), and the regulations promulgated
and the rulings issued thereunder.
"COLLATERAL" shall have the meaning set forth
in Section 2.1 of this Agreement.
"COLLATERAL ACCOUNT" shall mean that certain account of the Company
pledged to secure its obligations to the Liquidity Provider, the Credit Support
Provider
and certain other secured parties.
"COLLATERAL AGENT" shall mean Texas Commerce Bank National
Association, or any successor thereto.
"COLLECTION ACCOUNT" shall mean the account established pursuant to
Section 4.1(b).
"COLLECTION PERIOD" shall mean with respect to any Remittance Date,
the calendar month immediately preceding the month of such Remittance Date (and
with respect to the initial Remittance Date, the time period from the Cut-Off
Date to October 31, 1996).
"COLLECTIONS" shall mean all Principal Collections and Finance
Charge Collections received by the Servicer in respect of the Collateral in the
form of cash, checks, wire transfers or other form of payment.
"COMMERCIAL PAPER" shall mean promissory notes of the Company issued
by the Company in the commercial paper market.
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"COMPANY" shall mean Enterprise Funding Corporation, a Delaware
corporation, together with its successors and assigns.
"CONVEYANCE DATE" shall have the meaning set forth in Section 3.1(a)
hereof.
"CORPORATE TRUST OFFICE" shall mean the office of the Collateral
Agent at which its corporate trust business shall be principally administered,
which office shall be the office specified in Section 8.1 of this Agreement, or
such office at some other address which the Collateral Agent shall designate
from time to time by notice to the Debtor, the Company, the Surety Bond Provider
and the Administrative Agent.
"CREDIT GUIDELINES" shall mean policies and procedures of the
Seller, relating to the operation of the automotive financing business of the
Seller, including, without limitation, the policies and procedures for
determining the creditworthiness of retail automotive installment sales contract
customers, the extension of credit to such customers and relating to the
maintenance of retail automotive installment sales contracts and collection of
retail automotive installment sales contracts, as such policies and procedures
may be amended from time to time and which shall be attached hereto as Exhibit
E.
"CREDIT INSURANCE" shall mean VSI Insurance and any other insurance
with respect to the Receivables upon which the Company and the Seller have
agreed.
"CREDIT SUPPORT AGREEMENT" means any agreement between the Company
and the Credit Support Provider evidencing the obligation of the Credit Support
Provider to provide credit support to the Company in connection with the
issuance of Commercial Paper.
"CREDIT SUPPORT PROVIDER" means the Person or Persons who will
provide credit support to the Company in connection with the issuance by the
Company of its Commercial Paper.
"CUSTODIAN BANK" means a "custodian bank" as defined in Section
8-102(4) of the New York UCC.
8
"CUT-OFF DATE" shall mean September 30, 1996.
"DEBTOR" shall mean First Investors Auto Receivables Corporation and
its successors and assigns.
"DEFAULTED RECEIVABLE" shall mean each Receivable with respect to
which (i) in accordance with the Debtor's Credit Guidelines the Servicer has
determined in good faith that eventual payment in full is unlikely, (ii) the
related Financed Vehicle has been repossessed or (iii) any payment or part
thereof is over 90 days contractually delinquent.
"DELINQUENT RECEIVABLE" shall mean each Receivable (i) as to which
any payment, or part thereof, remains unpaid for more than 30 days from the
original due date for such payment and (ii) is not a Defaulted Receivable.
"DELINQUENCY RATIO" shall mean, with respect to any date of
determination, the ratio (expressed as a percentage) of (i) the aggregate amount
of remaining scheduled payments of principal and interest with respect to all
Receivables which are Delinquent Receivables as of such date to (ii) the
aggregate amount of remaining scheduled payments of principal and interest with
respect to all outstanding Receivables as of such date.
"DETERMINATION DATE" shall mean with respect to any Remittance Date,
the 15th day of the month in which such Remittance Date falls or, if such day is
not a Business Day, the Business Day next succeeding such day.
"DOLLAR," "DOLLARS" and the symbol "$" shall mean lawful money of
the United States of America.
"EFC COLLATERAL AGENT" shall mean NationsBank, N.A. as collateral
agent in respect of the Company's Commercial Paper program.
"ELIGIBLE INVESTMENTS" shall mean each of the investments attached
hereto on the list of investments set forth as Exhibit D, as amended or modified
only with the prior written consent of the Surety Bond Provider, ▇▇▇▇▇'▇ and S&P
and which may include investments for which the Collateral Agent (but not in its
capacity as
9
Collateral Agent) or an Affiliate of the Collateral Agent provides services.
"ELIGIBLE RECEIVABLES" shall mean, as of any day, each Receivable,
including Additional Receivables, of the Debtor:
(a) which is payable in Dollars;
(b) at the time of origination, the Obligor on which has
provided, as its most recent billing address, an address located in the United
States;
(c) which is not a Defaulted Receivable at the time such
Receivable becomes part of the Collater- al;
(d) which has been created in accordance with, or under
standards no less stringent than, the Credit Guidelines which are attached
hereto as EXHIBIT E;
(e) which is not more than 30 days contractually delinquent
from the due date, at the time such Receivable becomes part of the Collateral
(except for no more than 2% of the Principal Balance of any Receivables pledged
on the Closing Date or 1% of the Principal Balance of any Receivables pledged on
any Addition Date, which, in each case, may be 30 to 59 days contractually
delinquent), nor does the Obligor with respect thereto have any other automotive
receivable owing to the Seller which is 60 or more days contractually delinquent
or defaulted at the time of transfer;
(f) which was sold to the Debtor in the ordinary course of the
Debtor's business and which was created as a result of an advance by an
Originator, directly to or for the benefit of an Obligor for the purchase of an
automobile or light truck;
(g) as to which at the time such Receivable first became part
of the Collateral, the Debtor will have good and marketable title thereto and
which is not subject to any Lien or claim or other encumbrance for any work,
labor or materials performed on the related Financed Vehicle which are Liens
prior to, or equal or coordinate with, the security interest in the Financed
Vehicle granted by the Receivable, and as to which, the
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Collateral Agent, for the benefit of the Secured Parties, shall have a valid and
perfected first priority security interest, free and clear of all Liens,
encumbrances, security interests and rights of others;
(h) as to which at the time such Receivable first became part
of the Collateral, to the best of the Seller's knowledge, a bona-fide down
payment has been made;
(i) which provides for level monthly payments (provided that
the payment in the first and last month of the Receivable may be minimally
different from the level payment) that fully amortize the Amount Financed by
maturity and yield interest at the APR;
(j) which provides for, in the event that such Receivable is
prepaid by the Obligor, a prepayment that fully pays the Principal Balance of
such Receivable and any interest accrued through the date of prepayment;
(k) which does not represent either a direct or indirect
obligation of any federal, state or local government entity;
(l) the Obligor of which has not previously defaulted on an
automobile installment sales contract purchased by the Seller at the time such
Receivable becomes part of the Collateral;
(m) which was originated by an Originator approved by the
Seller and which Originator is subject to an Originator Agreement with the
Seller, and which if acquired by the Seller pursuant to a "bulk purchase" from
another Originator has been approved in writing by the Surety Bond Provider;
(n) which has a clear right of reposses- sion on the Financed
Vehicle securing such Receivable;
(o) the purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended;
(p) which is not, at the time such Re- ceivable became part of
the Collateral, subject to any
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right of rescission, cancellation, setoff, claim, coun- terclaim or defense
(including the defense of usury) of the Obligor;
(q) which has a maturity, at the time such Receivable became
part of the Collateral, of 60 months or less and with respect to which the
Obligor thereof has made at least one scheduled payment in full;
(r) which has an APR of at least 13.0%;
(s) the due date for any payment or payments on which has not
been extended as of any date of determination; PROVIDED, that if the Obligor
with respect to a Receivable has made six consecutive payments in full on such
Receivable, such Receivable shall be an Eligible Receivable if it satisfies all
other clauses of this definition and if extensions have been granted on the
payments with respect to such Receivable either (i) in the aggregate for no more
than one month for each twelve months of the original term of such Receivable;
or (ii) no more than twice for periods of one month each during the preceding
twelve calendar months;
(t) which is secured by a valid, subsisting, and enforceable
first priority perfected security interest in favor of the Seller in the related
Financed Vehicle, which security interest has been validly assigned by the
Seller to the Debtor;
(u) which represents the genuine, legal, valid and binding
payment obligation in writing of the Obligor, enforceable by the holder thereof
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally;
(v) which shall have complied with, at the time of its
origination, and shall remain in compliance with, all Requirements of Law;
(w) which had at the time of origination thereof, an
outstanding Principal Balance of not greater than $40,000;
(x) as to which, if originated under the Seller's
Participating Program, a period of at least 12
12
months has elapsed since origination and the Originator of which is not
obligated to repurchase such Receivable in the event of a payment default by the
Obligor;
(y) the Obligor of which is required to make payments to a
lockbox under the control of the Servicer;
(z) which, at the time such Receivable first became part of
the Collateral, has not been waived or modified except as permitted herein by
the Collateral Agent acting upon the written instructions of both the
Administrative Agent and the Surety Bond Provider;
(aa) as to which the Debtor has done nothing, at the time such
Receivable first became part of the Collateral, to impair the rights of the
Surety Bond Provider, the Company or the Collateral Agent therein;
(ab) which is covered by a valid VSI Insurance Policy;
(ac) which constitutes "chattel paper" under and as defined in
Article 9 of the UCC as then in effect in the Relevant UCC State; and
(ad) which was acquired pursuant to an Originator Agreement in
a transaction constituting a bona fide sale in the ordinary course of such
Originator's business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean with respect to the Debtor, at any
time, each trade or business (whether or not incorporated) that would, at the
time, be treated together with the Debtor as a single employer under Section
4001 of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
"EXTENDED SERVICE AGREEMENT" shall mean a service contract covering
repairs to a Financed Vehicle.
"FACILITY LIMIT" shall mean $105,000,000.
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"FEDERAL BOOK-ENTRY SECURITIES" means securities issued by the U.S.
Treasury, FNMA or by FHLMC which are maintained in book-entry form on the
records of the Federal Reserve Bank of Dallas.
"FEE LETTER" shall mean the letter agreement, dated the Closing
Date, between the Company and the Debtor in respect of the payment by the Debtor
of certain fees.
"FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Collection Period, the sum of the following amounts: (i) that portion of all
collections on Receivables allocable to interest, late fees, insufficient funds
check charges and related charges assessed against Obligors, (ii) Liquidation
Proceeds to the extent allocable to interest due thereon in accordance with the
Servicer's customary servicing procedures, (iii) any amounts received by the
Debtor pursuant to any Interest Rate Cap, and (iv) the interest portion of the
amount required to be paid by the Debtor to reduce the principal balance of the
Note and release the lien of the Secured Parties on each Receivable that became
an Ineligible Receivable during the related Collection Period.
"FINANCED VEHICLE" shall mean an automobile or light truck, together
with all accessions thereto, securing an Obligor's indebtedness under the
respective Receivable.
"FINANCIAL INTERMEDIARY" means NationsBank, N.A. and any other
entity acting in the capacity of a "financial intermediary" as defined in
Section 8-313(4) of the New York UCC and as a "securities intermediary" as
defined in Section 8-102(a)(14) of the Texas UCC.
"FINANCIAL INTERMEDIARY SECURITIES ACCOUNT" means a reserve account
which is a securities account maintained by the Financial Intermediary in the
name of NationsBank, N.A. as Reserve Account Agent for Texas Commerce Bank
National Association, as Collateral Agent for the Secured Parties.
"FIRC" shall mean F.I.R.C., Inc., a Delaware corporation.
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"GECC" shall mean General Electric Capital Corporation.
"GOVERNMENTAL AUTHORITY" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GROSS DEFAULT RATIO" shall mean, with respect to each Collection
Period the ratio of (i) the product of (a) 12 and (b) the aggregate Principal
Balance of all Receivables which became Defaulted Receivables during such
Collection Period and (ii) the Borrowing Base as of
the beginning of such Collection Period.
"GUARANTY" shall mean any agreement, undertaking or arrangement by
which any Person guarantees, endorses, or otherwise becomes contingently liable
(whether directly, or indirectly by way of agreement, contingent or otherwise,
or purchase, to provide funds for payment, to supply funds to or otherwise
invest in the debtor, or otherwise to assure the creditor against loss) upon,
the indebtedness, obligation or liability of any Person, or guarantees the
payment of dividends or other distributions upon the stock of any corporation.
"INELIGIBLE RECEIVABLE" shall have the meaning specified in Section
3.1.
"INSTRUMENTS" means "instruments" as defined in Section 9-105 of the
Relevant UCC.
"INSURANCE AGREEMENT" shall mean that certain Insurance Agreement
dated as of October 1, 1996 between the Debtor, the Seller, the Collateral
Agent, the Reserve Account Agent and the Surety Bond Provider.
"INTEREST COMPONENT" shall mean, (i) with respect to any Commercial
Paper issued on an interest-bearing basis, the interest payable on such
Commercial Paper at its maturity (including any dealer commissions) and (ii)
with respect to any Commercial Paper issued on a discount basis, the portion of
the face amount of such Commercial Paper representing the discount incurred in
respect thereof (including any dealer commissions).
15
"INTEREST RATE" shall mean with respect to a Collection Period, a
per annum interest rate which if multiplied by the Net Investment determined as
of the last day of such Collection Period would produce, on the basis of a
360-day year, an amount equal to the Carrying Costs for such Collection Period.
"INTEREST RATE CAP" and "INTEREST RATE CAPS" shall have the meanings
specified in Section 3.2(n).
"LAW" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"LIBOR RATE" means, with respect to any Collection Period, the rate
determined by NationsBank, N.A. ("NATIONSBANK") to be (i) the per annum rate for
deposits in U.S. Dollars for a term of one month which appears on the Telerate
Page 3750 Screen on the day that is two London Business Days prior to the first
day of such Collection Period except, that if such first day of the Collection
Period is not a Business Day, then the first preceding day that is a Business
Day (rounded upwards, if necessary, to the nearest 1/100,000 of 1%), (ii) if
such rate does not appear on the Telerate Page 3750 Screen , the term "LIBOR
Rate" with respect to that Collection Period shall be the arithmetic mean
(rounded upwards, if necessary, to the nearest 1/100,000 of 1%) of the offered
quotations obtained by NationsBank from four major banks in the London interbank
market selected by NationsBank (the "REFERENCE BANKS") for deposits in U.S.
dollars to leading banks in the London interbank market as of approximately
11:00 a.m. (London time) on the day that is two London Business Days prior to
the first day of such Collection Period, unless such first day of the Collection
Period is not a Business Day, in which case, the first preceding day that is a
Business Day or (iii) if fewer than two Reference Banks provide NationsBank with
such quotations, the LIBOR Rate shall be the rate per annum which NationsBank
determines to be the arithmetic mean (rounded upwards, if necessary, to the
nearest 1/100,000 of 1%) of the offered quotations which leading banks in New
York City selected by NationsBank are quoting in the New York interbank market
on such date for deposits in U.S. dollars to the Reference Banks or; if
16
fewer than two such quotations are available, to leading European and Canadian
Banks.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the Uniform Commercial Code (other than any such
financing statement filed for informational purposes only) or comparable law of
any jurisdiction to evidence any of the foregoing.
"LIQUIDATION PROCEEDS" shall mean (i) proceeds of any claim under
any Credit Insurance and (ii) all monies collected in connection with the
disposition of any Financed Vehicle, from whatever source, securing a Defaulted
Receivable, net of the sum of (x) any amounts reasonably expended by the
Servicer in connection with the liquidation of such Financed Vehicle for the
account of the Obligor and (y) any such amounts required by law to be remitted
to the Obligor.
"LIQUIDITY AGREEMENT" shall mean the agreement between the Company
and any Liquidity Provider evidencing the obligation of the Liquidity Provider
to provide liquidity support to the Company in connection with the issuance of
Commercial Paper.
"LIQUIDITY PROVIDER" shall mean the Person or Persons who will
provide liquidity support to the Company in connection with the issuance by the
Company of its Commercial Paper, which, initially, shall be NationsBank, N.A.
"LONDON BUSINESS DAY" any day which is a Business Day and also is a
day on which commercial banks are open for international business (including
dealings in U.S. dollar deposits) in London.
"MONTHLY DEBTOR'S CERTIFICATE" shall have the meaning specified in
Section 4.4.
17
"MOODY'S" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which contributions are or have been made by the
Debtor or any ERISA Affiliate of the Debtor.
"NET DEFAULT RATIO" shall mean the ratio of (i) the product of (a)
12 and (b)(1) the aggregate Principal Balance of all Receivables which became
Defaulted Receivables during such Collection Period minus (2) Liquidation
Proceeds received during the related Collection Period and allocable to
principal and (ii) the Borrowing Base as of the beginning of such Collection
Period.
"NET INVESTMENT" shall mean with respect to any date of
determination, (i) the Original Investment PLUS (ii) the amount of any
Subsequent Funding occurring on or prior to such date LESS (iii) all Collections
distributed to the Noteholder in reduction of the Net Investment pursuant to
Section 5.1 hereof on or prior to such date of determination, (iv) draws from
the Reserve Account distributed to the Noteholder in reduction of the Net
Investment, and (v) draws on the Surety Bond distributed to the Noteholder in
reduction of the Net Investment; PROVIDED HOWEVER, that the Net Investment for
the first day of the first Collection Period shall equal the Original
Investment, and PROVIDED FURTHER, that as to the Surety Bond Provider, draws
made under the Surety Bond will not reduce the principal amount due under the
Note .
"NOTE" shall mean the note issued by the Debtor to the Company
pursuant to Section 2.1 of the Note Purchase Agreement, as the same may be
amended from time to time and any other notes issued in replacement therefor.
"NOTEHOLDER" shall mean the Company as holder of the Note or any
assignee thereof which shall include only the Company, any Liquidity Provider,
or any commercial paper conduit administered by NationsBank, N.A.
"NOTEHOLDER'S PERCENTAGE" shall mean 90%.
"NOTE PURCHASE AGREEMENT" shall mean the Note Purchase Agreement
dated as of October 22, 1996 between the Debtor and the Company, as such
agreement may be
18
amended, modified and supplemented from time to time in accordance with the
terms thereof.
"OBLIGOR" shall mean, for any Receivable, each and every Person who
purchased or co-purchased a Financed Vehicle or any other person who owes
payments under such Receivable.
"OFFICIAL BODY" shall mean any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"ORIGINAL INVESTMENT" shall mean $59,322,154.20.
"ORIGINATOR" shall mean a bank, finance company, car rental company
or factory authorized dealer or its affiliates or any other originator approved
in writing by the Surety Bond Provider which has entered into an Originator
Agreement with the Seller.
"ORIGINATOR AGREEMENT" shall mean the agreement between the Seller
and an Originator relating to the purchase by the Seller of a Receivable.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
other entity succeeding to the functions currently performed by the Pension
Benefit Guaranty Corporation.
"PERSON" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a trust, an
unincorporated association, a joint venture or other entity or a government or
an agency or political subdivision thereof.
"PLAN" shall mean any employee pension benefit plan that (a) is or
has been maintained by the Debtor or any ERISA Affiliate of the Debtor, or to
which contributions by any such Person are or have been required to be made, (b)
is subject to the provisions of Title IV of ERISA and (c) is not a Multiemployer
Plan.
"PLAN EVENT" shall mean (a) the provisions of a notice of intent to
terminate any Plan under Section 4041
19
of ERISA other than in a "standard termination", or the treatment of a Plan
amendment as a distress termination under Section 4041 of ERISA, (b) the receipt
of any notice by any Plan to the effect that the PBGC intends to apply for the
appointment of a trustee to administer any Plan, (c) the termination of any Plan
which may result in a material liability to the Debtor, (d) the withdrawal of
the Debtor or any ERISA Affiliate of the Debtor from any Plan described in
Section 4063 of ERISA which may result in a material liability of the Debtor,
(e) the complete or partial withdrawal of the Debtor or any ERISA Affiliate of
the Debtor from any Multiemployer Plan which may result in a material liability
of the Debtor, (f) a "reportable event" described in Section 4043 of ERISA
(other than a "reportable event" not subject to the provision for 30-day notice
to the PBGC) or an event described in Section 4068(f) of ERISA which may result
in a material liability of the Debtor, and (g) any other event or condition
which under ERISA or the Code may constitute grounds for the imposition of a
lien on the assets of the Debtor in respect of any Plan or Multiemployer Plan
which is not corrected within 30 days.
"POTENTIAL AMORTIZATION EVENT" means an event which, but for the
lapse of time or the giving of notice, or both, would constitute an Amortization
Event.
"POTENTIAL TERMINATION EVENT" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a Termination Event.
"POTENTIAL WIND-DOWN EVENT" means an event which, but for the lapse
of time or the giving of notice, or both, would constitute a Wind-Down Event.
"PRINCIPAL BALANCE" of a Receivable as of the close of business on
the last day of a Collection Period, means the Amount Financed MINUS all
Collections collected by the Servicer to and including such day with respect to
such Receivable and applied by the Servicer in accordance with the Servicer's
customary servicing procedures to reduce the principal balance thereof PROVIDED,
HOWEVER, that the Principal Balance of any Receivable which is a "Defaulted
Receivable" as defined herein shall be zero.
"PRINCIPAL COLLECTIONS" means, for any Remit- tance Date, the sum of
the following amounts with respect
20
to the preceding Collection Period: (i) that portion of all collections on
Receivables allocable to principal, (ii) Liquidation Proceeds attributable to
principal in accordance with the Servicer's customary servicing procedures,
(iii) partial prepayments of any refunded item included in the Amount Financed,
such as extended warranty protection plan costs, or physical damage, credit
life, or disability insurance premiums, and (iv) the principal portion of the
amount paid by the Debtor to reduce the principal balance of the Note and
release the lien of the Secured Parties on each Receivable that became an
Ineligible Receivable during the related Collection Period.
"PRINCIPAL COMPONENT" shall mean with respect to Commercial Paper
(A) in the case of Commercial Paper issued on a discount basis, the amount of
proceeds received by the Company upon the sale thereof and (B) in the case of
Commercial Paper issued on an interest-bearing basis, the face amount thereof.
"PROGRAM FEE" shall mean a fee payable monthly to the Company by the
Debtor, the terms of which are set forth in the Fee Letter.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement, dated as of
October 22, 1996, between the Debtor, as purchaser thereunder, and the Seller,
as seller thereunder, as the same may be amended, modified and supplemented from
time to time in accordance with the terms thereof and hereof.
"PURCHASED INTEREST" shall mean the interest in the Note acquired by
the Liquidity Provider, if any.
"RECEIVABLE" shall mean any retail installment sales contract listed
on the attached Receivables Sched- ule and any indebtedness owed thereunder
(including any Additional Amounts), whether constituting an account, chattel
paper, instrument, mortgage, deed of trust or general intangible, arising out of
or in connection with the sale of new or used cars, or new and used light trucks
including the rendering of services by the Origi- nator or any other party in
connection therewith, under an Extended Service Agreement or otherwise, and
including the right of payment of any finance charges and other obligations of
the Obligor with respect thereto. Not-
21
withstanding the foregoing, once the Collateral Agent has released its security
interest in a Receivable pursuant to Section 2.6 hereof, it shall no longer
constitute a Receivable hereunder.
"RECEIVABLE SCHEDULE" shall mean the schedule of Receivables (which
schedule may be in the form of a computer file or microfiche) attached as
EXHIBIT B to this Agreement, as amended or modified from time to time pursuant
to the terms of this Agreement.
"RELATED COMMERCIAL PAPER" shall mean Commercial Paper the proceeds
of which were used to acquire, or refinance, the Net Investment.
"RELEVANT UCC STATE" shall mean the States of New York and Texas.
"RE-▇▇▇▇▇▇▇ EXPENSE" shall mean all expenses incurred by the Seller
or the Collateral Agent for the purpose of re-titling the Financed Vehicles to
name the Collateral Agent as lienholder on the certificate of title thereto.
"RE-▇▇▇▇▇▇▇ TRIGGER" shall mean:
(a) First Investors Financial Services Group, Inc. (including
its consolidated subsidiaries) stockholders' equity falls below $12,000,000;
(b) any event described in Section 6.1(c) hereof shall occur
with respect to the Seller or the Debtor; or
(c) one or more courts of competent jurisdiction have issued
final, non-appealable orders to the effect that the Collateral Agent does not
have a valid perfected first priority security interest in the Financed Vehicles
securing any Receivable where the aggregate initial Principal Balance of such
affected Receivables is equal to or greater than 5.0% or more of the aggregate
Principal Balance of the Receivables as of the date of such order.
"REMITTANCE DATE" shall mean the 20th day of each month beginning
November 20, 1996, or, if such 20th
22
day is not a Business Day, the next succeeding Business Day.
"REMOVAL DATE" shall have the meaning specified in Section 2.6
hereof.
"REQUIRED RESERVE ACCOUNT BALANCE" shall mean the greater of (i) an
amount equal to the product of (a) 1.00% and (b) the Borrowing Base and (ii) an
amount equal to the product of (x) 0.20% and (y) the greatest Net Investment
since the Closing Date; PROVIDED, HOWEVER, that on and after any Remittance Date
occurring after the occurrence of a Termination Event, there shall be no maximum
limit on the amount required to be on deposit in the Reserve Account.
"REQUIREMENTS OF LAW" for any Person shall mean the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
"RESERVE ACCOUNT" shall mean the account established pursuant to
Section 5A.1 hereof.
"RESERVE ACCOUNT AGENT" shall mean NationsBank, N.A., solely in its
capacity as Reserve Account Agent under this Agreement and the Insurance
Agreement.
"RESERVE ADVANCE" shall mean amounts advanced from the Reserve
Account in accordance with Section 5.1(b) hereof.
"REVOLVING PERIOD" shall mean the period from and including the
Closing Date to, but not including, the Termination Date.
"S&P" shall mean Standard & Poor's Ratings Group, a Division of The
▇▇▇▇▇▇-▇▇▇▇ Companies.
23
"SECURED PARTIES" shall mean the Company and the Surety Bond
Provider.
"SELLER" means First Investors Financial Services, Inc.
"SELLER'S PARTICIPATING PROGRAM" means the program for the purchase
of Receivables from an Originator or group of affiliated Originators, whereby
the Receivables are aggregated into pools from which the Originators are
entitled to receive a portion of the aggregate yield for a specified period in
exchange for the Originator's agreement to repurchase Defaulted Receivables from
the pool during such period.
"SERVICER" shall mean GECC as servicer under the Servicing Agreement
or any successor Servicer acceptable to the Surety Bond Provider.
"SERVICER EVENT OF DEFAULT" has the meaning set forth in the
Servicing Agreement.
"SERVICING AGREEMENT" shall mean the Servicing Agreement, dated as
of October 22, 1996, between GECC, as servicer and the Debtor, as such agreement
may be amended, modified and supplemented from time to time (but only with the
consent of the Surety Bond Provider).
"SUBSEQUENT FUNDING" shall have the meaning specified in the Note
Purchase Agreement.
"SUBSIDIARY" means any corporation more than 50% of the outstanding
voting securities of which shall at any time be owned or controlled, directly or
indirectly, by the Debtor or by one or more Subsidiaries, or any similar
business organization which is so owned or controlled.
"SUPPLEMENTAL CONVEYANCE" shall have the mean- ing specified in
Section 2.2(b)(iii) hereof.
"SURETY BOND" shall mean that certain surety bond, substantially in
the form annexed hereto as EXHIBIT K.
"SURETY BOND PREMIUM" shall have the meaning specified in the
Insurance Agreement.
24
"SURETY BOND PROVIDER" shall mean MBIA Insurance Corporation, a New
York stock insurance company.
"TARGETED MONTHLY PRINCIPAL PAYMENT" shall mean, with respect to
each Remittance Date, the amount necessary to reduce the Net Investment to the
product of (i) the Noteholder's Percentage and (ii) the Borrowing Base.
"TELERATE PAGE 3750 SCREEN" shall mean the display designated as
"Page 3750" on the Telerate Service (or such other page as may replace Page 3750
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purposes of displaying
British Bankers' Association Interest Settlement Rates for U.S. Dollar
deposits).
"TERMINATION DATE" shall mean the earlier of (i) October 21, 1997
unless such date shall be extended by the parties hereto pursuant to a written
document, (ii) the date of termination of the commitment of the Liquidity
Provider under any Liquidity Agreement, (iii) the date of the termination of the
commitment of the Credit Support Provider under any Credit Support Agreement,
(iv) the date designated by the Debtor as the date on which the Revolving Period
shall terminate (which date shall be the last day of a Collection Period)
following not less than 30 Business Days' prior written notice to the Company
and the Surety Bond Provider and the Administrative Agent, and (v) the date on
which any Termination Event has occurred.
"TERMINATION EVENT" shall have the meaning specified in Section 6.1
hereof.
"TRANSFER" or "TRANSFERRED," when used with respect to Eligible
Investments held or to be held in the Reserve Account means:
(i) with respect to each Clearing Corporation Security,
transfer to the Reserve Account Agent will occur upon the latest of: (w)
the making by the Clearing Corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of the Financial
Intermediary by the amount of such Clearing Corporation
25
Security, (x) the sending of a confirmation to the Reserve Account Agent
by the Financial Intermediary of the purchase by the Reserve Account Agent
of such Clearing Corporation Security and (y) the identification by book
entry to the Financial Intermediary Securities Account by the Financial
Intermediary of the Clearing Corporation Securities as belonging to the
Reserve Account Agent, acting for the Collateral Agent, on behalf of the
Secured Parties;
(ii) with respect to each Certificated Security, transfer to
the Reserve Account Agent will occur upon the latest of (x) the sending of
a confirmation by the Financial Intermediary of the purchase by the
Reserve Account Agent of such Certificated Security and (y) the
identification by book-entry to the Financial Intermediary Securities
Account by the Financial Intermediary of such Certificated Security as
belonging to the Reserve Account Agent, acting for the Collateral Agent,
on behalf of the Secured Parties;
(iii) with respect to each Federal BookEntry Security,
transfer to the Reserve Account Agent will occur upon the latest of (x)
the making by the Federal Reserve Bank of Dallas of appropriate entries
transferring the Federal Book-Entry Security on its books and records to
the book-entry account of the Financial Intermediary at the Federal
Reserve Bank of Dallas, (y) the sending of a confirmation by the Financial
Intermediary of the purchase by the Reserve Account Agent of such Federal
Book-Entry Security, and (z) the identification by book-entry to the
Financial Intermediary Securities Account by the Financial Intermediary of
such Federal BookEntry Security as belonging to the Reserve Account Agent,
acting for the Collateral Agent, on behalf of the Secured Parties;
(iv) with respect to Instruments in the possession of the
Bailee, in the State of Texas, the sending of notice to the Bailee by the
Reserve Account Agent of the security interest of the Reserve Account
Agent, acting for the Collateral Agent, on behalf of the Secured Parties
and the sending of an acknowledgment of such notice to the Reserve Account
Agent; and
(v) with respect to any Eligible Inv- estment, by any method
creating a perfected security
26
interest in favor of the Reserve Account Agent, acting for the Collateral
Agent, on behalf of the Secured Parties, provided that the Debtor shall
have delivered an opinion of counsel to the Reserve Account Agent and the
Collateral Agent to the effect that the Reserve Account Agent acting for
the Collateral Agent, on behalf of the Secured Parties, has a valid
perfected first priority security interest in such Eligible Investment .
"TRUST OFFICER" means any officer in the Corporate Trust Office of
the Collateral Agent responsible for the administration of this Agreement.
"UNIFORM COMMERCIAL CODE" OR "UCC" shall mean the Uniform Commercial
Code as adopted in the Relevant UCC State.
"UNUSED PROGRAM FEE" shall mean a fee payable monthly to the Company
by the Debtor, the terms of which are set forth in the Fee Letter.
"VSI INSURANCE" shall mean the blanket collateral protection
insurance policy or policies of insurance underwritten by Agricultural Excess
and Surplus Insurance Company (or any other insurance company acceptable to the
Company) covering each of the installment sales contracts held by the Debtor,
including the Receivables, in the form attached hereto as EXHIBIT J.
"WIND-DOWN EVENT" shall have the meaning speci-
fied in Section 6.2.
"YIELD PROTECTION PROVISION" shall mean the compensation of the
Company by the Debtor with respect to increased taxes, reserves and funding
costs of the Company as described in Section 4.2 of the Note Purchase Agreement.
ARTICLE II
GRANT OF SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY INTEREST. As security for the prompt
and complete payment of the Note and the performance of all of the Debtor's
obligations under the Note, the Note Purchase Agreement, the Insurance Agreement
and this Agreement, the Debtor hereby grants to the Collateral Agent, for the
benefit of the
27
Secured Parties, a security interest in and continuing Lien on all of the
Debtor's right, title and interest in, to and under (i) all Receivables listed
on the date hereof in the Receivables Schedule attached hereto on EXHIBIT B and
all Additional Receivables which become Receivables at any time following the
Cut-Off Date pursuant to Section 2.2, all monies due or to become due with
respect to Receivables, including Additional Receivables, on and after the
Cut-Off Date or Addition Cut-Off Date, as applicable, whether such amounts are
considered accounts, general intangibles or other property, and all monies,
instruments, securities or investments of any type or description on deposit in
or credited to the Collection Account at any time; (ii) the security interests
in the Financed Vehicles granted by Obligors pursuant to the related Receivables
and any accessions thereto; (iii) any proceeds from claims on any physical
damage, credit life, credit disability, VSI Insurance or other insurance
policies covering Financed Vehicles or Obligors and any other Liquidation
Proceeds; (iv) any Interest Rate Cap, including the right to payment under any
such Interest Rate Cap or other hedging arrangement; and (v) the proceeds of any
and all of the foregoing (collectively, the "COLLATERAL"). As security for the
prompt and complete payment of the Note and the performance of all of Debtor's
obligations under the Note, the Note Purchase Agreement, the Insurance Agreement
and this Agreement, the Debtor hereby grants to the Reserve Account Agent for
the benefit of the Collateral Agent for the benefit of the Secured Parties, a
security interest in and continuing Lien on all of Debtor's right, title and
interest in, to and under the Reserve Account and all Eligible Investments,
securities, instruments and other financial assets (as defined in Section
8-102(a)(9) of the 1994 Official Text of the Uniform Commercial Code and the
Texas UCC) credited to the Reserve Account and the proceeds thereof. In
addition, the Debtor hereby assigns to the Collateral Agent all of its rights
under the Purchase Agreement with respect to the Receivables. Notwithstanding
the foregoing assignment, the Debtor does not assign its rights as to any retail
installment sales contracts purchased thereunder other than the retail
installment sales contracts and any other rights relating to Receivables. The
foregoing pledge does not constitute an assumption by the Collateral Agent of
any obligations of the Debtor to Obligors or any other Person in connection with
the Collateral or under any agreement and instrument relating
28
to the Collateral, including without limitation any obligation to make future
advances to or on behalf of such Obligors.
In connection with such pledge, the Debtor agrees to record and
file, at its own expense, financing statements with respect to the Collateral
now existing and hereafter created for the transfer of chattel paper, accounts
and general intangibles (each as defined in Article 9 of the UCC as in effect in
the Relevant UCC State) meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect the first priority
security interest of the Collateral Agent in the Collateral, and to deliver a
file-stamped copy of such financing statements or other evidence of such filing
(which may, for purposes of this Section 2.1, consist of telephone confirmation
of such filing) to the Company on or prior to the Closing Date. In addition, the
Debtor agrees to clearly and unambiguously ▇▇▇▇ its general ledger and all
accounting records and documents and all computer tapes and records to show that
the Receivables have been pledged to the Collateral Agent hereunder.
In connection with the grant of the security interest pursuant to
this Section 2.1, the Debtor agrees to direct GECC as Servicer, on or prior to
the Closing Date, to indicate, on or prior to the Closing Date, clearly and
unambiguously in its computer files described in the preceding paragraph that an
undivided interest in the Receivables created in connection with the Receivables
has been pledged to the Collateral Agent pursuant to this Agreement. The Debtor
shall deliver to the Collateral Agent a computer file or microfiche list
containing a true and complete list of all such Receivables, identified by
account number and principal balance as of the Cut-Off Date. Such file or list
shall be marked as the Receivable Schedule and EXHIBIT B to this Agreement,
delivered to the Collateral Agent as confidential and proprietary information,
and is hereby incorporated into and made a part of this Agreement. The Debtor
agrees to deliver to the Collateral Agent at such times as requested by the
Collateral Agent in connection with a thirdparty's request to review EXHIBIT B,
as provided in the financing statement filed by the Collateral Agent under the
UCC, a computer file or microfiche list containing a true and complete list of
all Receivables, including all
29
Receivables created on or after the Cut-Off Date, in existence as of the later
of (w) the last day of the prior Collection Period, (x) the most recent Addition
Date or (y) the most recent Removal Date by account number and by Principal
Balance as of such day or date. Such updated and revised file or list shall be
marked as the Receivable Schedule and EXHIBIT B to this Agreement, delivered to
the Collateral Agent as confidential and proprietary information, shall replace
the previously delivered Receivable Schedule identified as EXHIBIT B, and shall
be incorporated into and made a part of this Agreement. The Debtor agrees to
direct the Servicer, by the end of each Collection Period to indicate clearly
and unambiguously in its computer files that an undivided interest in the
Receivables has been pledged to the Collateral Agent pursuant to this Agreement.
SECTION 2.2. ADDITIONAL RECEIVABLES.
(a) At any time during the Revolving Period, but no more than
once in any consecutive three month period (unless more frequent additions are
approved by the Collateral Agent acting upon written instructions of each of the
Secured Parties), the Debtor may designate additional Eligible Receivables to be
included as part of the Collateral ("ADDITIONAL RECEIVABLES"); PROVIDED,
HOWEVER, that in the case of an addition done for a purpose other than
preventing the sum of the Borrowing Base plus the amount on deposit in the
Reserve Account from declining below the Net Investment, the date of transfer
(the "ADDITION DATE") shall be as of the opening of business on the first
Business Day of the Collection Period immediately succeeding the Addition
Cut-Off Date with respect to such Additional Receivables. It shall be a
condition precedent to the pledge to the Collateral Agent of any Additional
Receivables that (i) the Debtor shall have provided the Collateral Agent and the
Surety Bond Provider reasonable access to all computer tapes, books, records,
files and documentation relating to the Receivables and the retail installment
sales contracts to be designated as Additional Receivables, (ii) the Debtor
shall have entered into an Interest Rate Cap, which shall be in form and
substance acceptable to the Surety Bond Provider, (iii) after giving effect to
such pledge of Additional Receivables the Net Investment shall not be greater
than the Noteholder's Percentage of the Borrowing Base, (iv) the amount on
deposit in the Reserve Account
30
shall at least equal the Required Reserve Account Balance (calculated as if such
Additional Receivables shall have been pledged to the Collateral Agent), (v) if
any Additional Receivables proposed to be pledged to the Collateral Agent were
acquired by the Seller in a bulk purchase, the Surety Bond Provider shall have
consented in writing to the pledge of such Additional Receivables, and (vi) the
weighted average original term to maturity of each group of Additional
Receivables proposed to be pledged to the Collateral Agent shall be at least one
month greater than the weighted average remaining term to maturity of such group
of Additional Receivables.
(b) Any addition of Receivables as part of the Collateral made
under subsection (a) shall satisfy the following conditions:
(i) On or before the tenth Business Day (the "NOTICE
DATE") prior to the Addition Date, the Debtor shall give the
Administrative Agent, the Surety Bond Provider and the Collateral Agent
written notice that such Additional Receivables will be included as
Collateral as of the Addition Date and specifying the estimated Principal
Balance of such Additional Receivables as of the Addition CutOff Date;
(ii) On or prior to the Addition Closing Date, the
Debtor shall have clearly and unambiguously marked its general ledger and
any computer tapes or other records to show that an undivided interest in
the Additional Receivables has been pledged to the Collateral Agent;
(iii) On or prior to the Addition Closing Date, the
Debtor and the Collateral Agent shall have executed a supplemental
conveyance in substantially the form of EXHIBIT F to this Agreement (the
"SUPPLEMENTAL CONVEYANCE");
(iv) On or prior to the Addition Date, the Debtor shall
have deposited or caused to be deposited in the Reserve Account an amount
necessary to cause the amount on
31
deposit in the Reserve Account to at least equal the Required Reserve
Account Balance (calculated as if such Additional Receivables shall have
been pledged to the Collateral
Agent);
(v) On or prior to the Addition Closing Date, the Debtor
shall have directed the Servicer, on behalf of the Debtor, to (A) clearly
and unambiguously ▇▇▇▇ each computer file containing any Additional
Receivable or any documentation or records relating thereto, and all
computer tapes and records to show that an undivided interest in the
Additional Receivables has been pledged to the Collateral Agent as of the
Addition Date and (B) deliver to the Collateral Agent and each Secured
Party a computer file or microfiche list containing a true and complete
list of all Additional Receivables identified by account number and by
Principal Balance of such Additional Receivables as of the Addition
Cut-Off Date, or a true and complete list of all Receivables, including
the Additional Receivables, identified by account number and by Principal
Balance as of the Addition Cut-Off Date, which computer file or microfiche
list shall be as of the date of such Supplemental Conveyance incorporated
into and made a part of such Supplemental Conveyance and this Agreement;
(vi) The Debtor shall represent and warrant to the
Collateral Agent and the Secured Parties that (w) each Additional
Receivable is, as of the Notice Date, the Addition Date and the Addition
Closing Date, an Eligible Receivable, (x) no selection procedure adverse
to the interests of the Secured Parties was utilized in selecting the
Additional Receivables from the available receivables, (y) such transfer
of Additional Receivables was not made with the intent to hinder, delay,
or defraud any creditor, and (z) (1) the Debtor received reasonably
equivalent value in exchange for such Additional Receivables and (2)(a) as
of the Addition Date, the Debtor is not insolvent and will not be made
insolvent by the transfer
32
of such Additional Receivables (b) the Debtor is not engaged or about to
engage in any business for which the Debtor has unreasonably small capital
and (c) the Debtor does not intend to incur or believe that it will incur
any debts that would be beyond its ability to pay such debts as they
occur; and
(vii) The Debtor shall represent and warrant that, as of
the Addition Closing Date, the Supplemental Conveyance constitutes a grant
of a first priority perfected security interest (as defined in the UCC as
in effect in the Relevant UCC State) in such property to the Collateral
Agent, which is enforceable with respect to the Additional Receivables and
the proceeds (including Liquidation Proceeds) thereof on such Addition
Closing Date. Upon the filing on or prior to the Addition Closing Date of
financing statements of the type described in Section 2.1 with respect to
such Additional Receivables and the proceeds (including Liquidation
Proceeds) thereof, and upon the pledge of such Additional Receivables and
the proceeds thereof (including Liquidation Proceeds), the Collateral
Agent, on behalf of the Secured Parties, shall have a first priority
perfected ownership or security interest in such property, except for
Liens permitted under Section 3.2(e).
SECTION 2.3. RE-▇▇▇▇▇▇▇ TRIGGER. Upon the occurrence of a Re-▇▇▇▇▇▇▇
Trigger, the Seller shall take all steps necessary to cause the certificate of
title or other evidence of ownership of the related Financed Vehicle to be
revised to name the Collateral Agent on behalf of the Secured Parties as
lienholder. Any costs associated with such revision of the Certificate of Title
shall be paid by the Seller and to the extent such costs are not paid by the
Seller such unpaid costs shall be recovered from Available Funds as described in
Section 5.1 hereof.
In addition, with respect to any state in which Obligors are located
with respect to Receivables that account for more than 10% of the initial
aggregate Principal Balance of Receivables, the Seller shall be required
33
to deliver a legal opinion satisfactory to the Surety Bond Provider and counsel
for the Surety Bond Provider and to S&P as to the status of the security
interest of the Collateral Agent, on behalf of the Secured Parties, in the
related Financed Vehicles or cause the certificate of title or other evidence of
ownership of the related Financed Vehicle to be revised to name the Collateral
Agent on behalf of the Secured Parties as lienholder.
Further, in the event that First Investors Financial Services Group,
Inc. (including its consolidated subsidiaries) stockholders' equity falls below
$15,000,000, the Seller shall within 30 days thereof, either (i) deliver to the
Collateral Agent and the Surety Bond Provider opinions of legal counsel, in form
and substance satisfactory to the Surety Bond Provider and counsel to the Surety
Bond Provider, with respect to the laws of each state required by the Surety
Bond Provider, as to the status of the security interest of the Collateral
Agent, on behalf of the Secured Parties, in the related Financed Vehicles or
(ii) the Seller shall cause to be taken all steps necessary to cause the
certificate of title or other evidence of ownership of the related Financed
Vehicle to be revised to name the Collateral Agent on behalf of the Secured
Parties as lienholder. Any costs associated with such revision of the
Certificate of Title shall be paid by the Seller and to the extent such costs
are not paid by the Seller such unpaid costs shall be recovered from Available
Funds as described in Section 5.1 hereof.
SECTION 2.4. SUBROGATION. The parties hereto each acknowledge that,
to the extent of any payment made under the Surety Bond, the Surety Bond
Provider shall be fully subrogated to the extent of such payment, to the rights
of the Noteholder to any moneys paid or payable to such holder in respect of the
corresponding amounts due on such Note. The parties hereto each agree to such
subrogation and each further agrees to execute such instruments and to take such
actions as, in the sole judgment of the Surety Bond Provider, are necessary to
evidence such subrogation and to perfect the rights of the Surety Bond Provider
to receive any moneys paid or payable to the Surety Bond Provider under the
Note, the Note Purchase Agreement, the Insurance Agreement and this Agreement.
34
SECTION 2.5. INCREASE OF NOTE. The Debtor may increase the
outstanding principal amount of the Note only upon satisfaction of the following
conditions:
(i) no Termination Event, no Amortization Event and no Wind-Down
Event shall have occurred and be continuing;
(ii) the Debtor shall have entered into any Interest Rate Cap that
is satisfactory to the Surety Bond Provider, ▇▇▇▇▇'▇ and S&P;
(iii) after giving effect to any such increase, the Net Investment
shall not be greater than the Noteholder's Percentage of the
Borrowing Base;
(iv) after giving effect to any such increase, the sum of the Net
Investment and the interest component of Related Commercial
Paper would not exceed the Facility Limit;
(v) the amount on deposit in the Reserve Account shall at least
equal the Required Reserve Account Balance (calculated as if
such increase in the Note shall have occurred);
(vi) the Surety Bond Provider shall not have failed to make a
payment required to be made under the Surety Bond; and
(vii) the Debtor shall have provided notice to the Collateral Agent
and each of the Secured Parties ten Business Days prior to
such increase.
SECTION 2.6. RELEASE OF RECEIVABLES. On any Business Day, provided
that no Termination Event, Amortization Event or Wind-Down Event shall have
occurred, the Debtor shall have the right to require the Collateral Agent to
release all of the Collateral Agent's right, title and interest in and to all or
certain specified Receivables on the terms and conditions set forth herein (the
effective date of any such release, the "REMOVAL
35
DATE"). It shall be a condition precedent to any such release that (i) after
giving effect to any such release, the Net Investment shall not exceed the
Noteholder's Percentage of the Borrowing Base, such determination to be based on
the most recent Monthly Debtor's Certificate delivered by the Debtor, (ii) such
release does not result in a Termination Event, a Wind-Down Event or an
Amortization Event, (iii) the Debtor shall (y) pay to the Collateral Agent for
payment to the Noteholder on the day of receipt from the Debtor, an amount equal
to the amount necessary, if any, to reduce the Net Investment such that the Net
Investment does not exceed the Noteholder's Percentage of the Borrowing Base
after giving effect to such release and (z) pay to the Collateral Agent for
payment to the Noteholder on the day of receipt from the Debtor, an amount equal
to all unpaid Carrying Costs (including Carrying Costs not yet accrued) to the
extent reasonably determined by the Administrative Agent to be attributable to
that portion of the Net Investment to be reduced as a result of the payment
referred to in clause (y) above, (iv) the Debtor shall have given the Collateral
Agent, the Surety Bond Provider and the Administrative Agent at least five (5)
days prior written notice of its intention to request the release of such
Receivables, (v) all amounts due under the Note Purchase Agreement and the
Insurance Agreement, to the extent accrued to the date of such release or, at
the option of the Collateral Agent, acting upon the written instructions of the
Company and the Surety Bond Provider, acting separately, accrued to such date
and to accrue thereafter, shall have been reimbursed and (vi) such release shall
not materially and adversely affect either Secured Party and (vii) such release
shall include at least $5,000,000 in Principal Balance of Receivables; PROVIDED,
HOWEVER, that there shall be no minimum release amount with respect to
Ineligible Receivables. It is the intention of the parties that, to the extent
the Company is the Noteholder and the Company is funding its interest in the
Note through related Commercial Paper, the Debtor shall pay to the Collateral
Agent such amounts as are required under this Section 2.6 on the Business Day
preceding the maturity date of the Related Commercial Paper issued by the
Company to fund its interest in the Note. The Company agrees to use its
reasonable efforts to reinvest in overnight Eligible Investments any payments
received by the Company from the Debtor in respect of maturing Commercial Paper
36
prior to the Business Day preceding such maturity and remit the proceeds of such
investments to the Debtor.
The amount described in clause (iii)(y) above upon receipt by the
Company shall be applied in reduction of the Net Investment.
The Debtor shall also be obligated to pay to the Collateral Agent,
the Company, the Surety Bond Provider and the Administrative Agent the
reasonable legal fees and expenses of the Collateral Agent, the Surety Bond
Provider, the Administrative Agent and the Company arising in connection with
any such release.
Upon (i) the deposit to the Collection Account and the payment to
the respective parties of the amounts described in this Section, and (ii) the
receipt by the Collateral Agent of a certificate of the Debtor stating that all
conditions precedent contained in this Section 2.6 have been satisfied, the
Collateral Agent shall execute and deliver to the Debtor, at the Debtor's
expense, such documents or instruments as are necessary to terminate the
Collateral Agent's interest in the applicable Receivables and the proceeds
thereof. Any such documents shall be prepared by or on behalf of the Debtor and
shall specifically identify (by loan or account number and outstanding Principal
Balance) the Receivables in which the Collateral Agent's security interest is to
be released.
The Debtor shall deliver to the Collateral Agent, the Surety Bond
Provider and the Administrative Agent a computer file, microfiche list or
printed list containing a true and complete list of all such Receivables to be
released, identified by account number and principal balance as of the Cut-Off
Date or Removal Date. Such file or list, when taken together with the list
provided pursuant to Section 2.1 hereof shall constitute the Receivables
Schedule as of such Removal Date after giving effect to such removal.
37
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEBTOR
SECTION 3.1. REPRESENTATIONS AND WARRANTIES CONCERNING RECEIVABLES.
The Debtor represents and warrants to and covenants with the Collateral Agent
and the Secured Parties as of the Closing Date and, except as otherwise provided
herein, as of each Addition Date relating to the Receivables added to the
Collateral on such Addition Date pursuant to Section 2.2, that:
(a) Immediately prior to the Closing Date or the related
Addition Date, as applicable, (each a "CONVEYANCE DATE") the Seller had a valid
and enforceable first priority security interest in the related Financed
Vehicle, and such security interest had been duly perfected and was prior to all
other present and future liens and security interests (except future tax liens
and liens that, by statute, may be granted priority over previously perfected
security interests) that now exist or may hereafter arise, and the Seller had
the full right to assign such security interest to the Debtor.
(b) On and after the related Conveyance Date, there shall
exist under such Receivable a valid, subsisting, and enforceable first priority
perfected security interest in the related Financed Vehicle (other than, as to
the priority of such security interest, any statutory lien arising by operation
of law after the related Conveyance Date which is prior to such interest) and,
following the grant of all of the Debtor's right, title and interest in and to
such security interest to the Collateral Agent, at such time as enforcement of
such security interest is sought there shall exist in favor of the Collateral
Agent a valid, subsisting, and enforceable first priority perfected security
interest (other than, as to the priority of such security interest, any
statutory lien arising by operation of law after the related Addition Date which
is prior to such interest) in the related Financed Vehicle.
(c) If such Receivable was originated in a state in which
notation of a security interest on the title document for the Financed Vehicle
securing such Receivable is required or permitted to perfect such secu-
38
rity interest, the title document for such Financed Vehicle shows, or if a new
or replacement title document is being applied for with respect to such Financed
Vehicle the title document will show, the Seller as the sole holder of a
security interest in such Financed Vehicle. If such Receivable was originated in
a state in which the filing of a financing statement under the UCC is required
to perfect a security interest in motor vehicles, such filings or recordings
have been duly made and show the Seller as the sole holder of a first priority
security interest in such Financed Vehicle, and in either case the Debtor has
the same rights as the Seller has or would have (if the Seller were still the
owner of a Receivable) against the Obligor and all creditors of the Obligor
claiming an interest in such Financed Vehicles.
(d) Immediately prior to the related Conveyance Date: (i) such
Receivable had not been sold, assigned, or pledged by the Seller to any Person;
(ii) the Seller had good and marketable title thereto free and clear of any
encumbrance, equity, pledge, charge, claim or security interest; (iii) the
Seller was the sole owner thereof and had full right to sell the Receivable to
the Debtor and upon the sale thereof to the Debtor, the Debtor will have good
and marketable title thereto and will own such Receivables free and clear of any
encumbrances. Such Receivable was acquired by the Seller, from an Originator
with which the Seller does business, pursuant to an Originator Agreement between
the Seller and such Originator. Such Originator had full right to assign to the
Seller such Receivable and the security interest in the related Financed
Vehicle. The Seller has full right to sell to the Debtor such Receivable and the
security interest in the related Financed Vehicle. The Collateral Agent, for the
benefit of the Secured Parties, has a valid and perfected first priority
security interest in such Receivable and all proceeds thereof, free and clear of
all Liens, encumbrances, security interests and rights of others.
(e) As of the related Conveyance Date, there is no lien
against the related Financed Vehicle for delinquent taxes.
(f) Such Receivable, and the sale of the Financed Vehicle
securing such Receivable, where applicable, complied, at the time it was made,
and now complies,
39
in all material respects with applicable state and federal laws (and regulations
thereunder), including, without limitation, usury, disclosure and consumer
protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar laws, the Federal Trade Commission Act, and
applicable state laws regulating retail installment sales contracts in general
and motor vehicle retail installment sales contracts and loans in particular,
and the receipt of interest on, and the ownership of, such Receivable by the
Debtor will not violate any such laws and the related Obligor has no right of
rescission or cancellation, claims or defenses, set-offs, or counterclaims of
any kind whatsoever as to or against the contract evidencing a related
Receivable.
(g) The Receivable constitutes the entire agreement between
the Seller (as assignee of the related Originator) and the related Obligor.
(h) At the time of origination of such Receivable, the
proceeds of such Receivable were fully disbursed, and there is no requirement
for future advances thereunder, and all fees and expenses in connection with the
origination of such Receivable have been paid.
(i) As of the related Conveyance Date, there is no default,
breach, violation or event of acceleration existing under any such Receivable
and no event which, with the passage of time or with notice or with both, would
constitute a default, breach, violation or event of acceleration under any such
Receivable. The Seller has not waived any such default, breach, violation or
event of acceleration.
(j) In connection with the purchase of such Receivable, the
Seller required the related Originator to furnish evidence that the related
Financed Vehicle was covered by a comprehensive and collision insurance policy
naming the Seller as loss payee and insuring against loss and damage due to
fire, theft, transportation, collision and other risks generally covered by
comprehensive and collision coverage in an amount equal to the actual cash value
of the related Financed Vehicle.
(k) Such Receivable contains customary and enforceable
provisions such as to render the rights
40
and remedies of the holder thereof adequate for the realization against the
related Financed Vehicle of the benefits of the security.
(l) The collection practices used with respect to such
Receivable have been in all material respects legal, proper, prudent and
customary in the automobile installment sales contract or installment loan
servicing business as applied with respect to obligors with credit standings
comparable to that of the Obligor.
(m) Neither the Obligor on such Receivable nor any of its
Affiliates is the Obligor on a Receivable or Receivables with an aggregate
principal amount greater than $40,000 as of the Conveyance Date.
(n) The related Obligor does not have any other motor vehicle
retail installment sale contracts owing to the Seller which are 60 or more days
contractually delinquent at the Conveyance Date.
(o) No Receivable is due from an Obligor who has defaulted
under a previous Receivable with the Seller.
(p) The Originator that sold such Receivable to the Seller has
entered into an Originator Agreement and such Originator Agreement constitutes
the entire agreement between the Seller and the related Originator with respect
to the sale of such Receivable to the Seller, such Originator Agreement was, at
the time of the origination of such Receivable, in full force and effect and is
the legal, valid, binding and enforceable obligation of such Originator (subject
to applicable bankruptcy and insolvency laws and other similar laws affecting
the enforcement of creditors' rights generally and to principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law); there have been no material defaults by such Originator or by the Seller
under such Originator Agreement; the Seller has fully performed all of its
obligations under such Originator Agreement; the Seller has not made any
statements or representations to such Originator inconsistent with any term of
such Originator Agreement; the purchase price for such Receivable has been paid
in full by the Seller, there is no other payment due to such Originator from the
Seller for the purchase of such Receivable, such Origina-
41
tor has no right, title or interest in or to any Receivable; there is no prior
course of dealing between such Originator and the Seller which will affect the
terms of such Originator Agreement; any additional payment that may be owed to
such Originator by the Seller is a corporate obligation of the Seller.
(q) The Seller has provided to the Servicer the sole original
counterpart of such Receivable as amended, and the related title document or the
application for title document, previously in the possession of the Seller.
(r) Such Receivable constitutes "chattel paper" for purposes
of Section 9-105(1)(b) and 9-308 of the UCC. The Seller's electronic ledgers
have been marked as provided in Section 2.1 and 2.2 of this Agreement with
respect to such Receivable.
(s) Such Receivable was not originated in, nor is it subject
to the law of, any jurisdiction, the laws of which would make unlawful the sale,
transfer or assignment of such document, under this Agreement, including any
repurchase in accordance with this Agreement.
(t) Such Receivable is in full force and effect in accordance
with its respective terms and neither the Seller nor the related Obligor has
suspended or reduced any payments or obligations due or to become due thereunder
by reason of a default by the other party to such Receivable; there are no
proceedings pending, or to the best of the Seller's knowledge, threatened,
asserting insolvency of the related Obligor, there has been no previous default
on such Receivable that resulted in repossession of the related Financed
Vehicle; and there are no proceedings pending, or to the best of the Seller's
knowledge, threatened, wherein the related Obligor or any governmental agency
has alleged that such Receivable is illegal or unenforceable.
(u) Each contract evidencing a Receivable being acquired by
the Debtor is substantially similar to one of the Seller's standard form
contracts attached hereto as EXHIBIT K except for immaterial modifications or
deviations therefrom in accordance with state law which will not have a material
adverse effect on the
42
Secured Parties and will not reduce the scheduled payments thereunder or other
payments due under the Receivables.
(v) The Seller has duly fulfilled all obligations to be
fulfilled on the Seller's part under or in connection with the origination,
acquisition and disposition of such Receivable, including, without limitation,
giving any notices or consents necessary to effect the acquisition of such
Receivables by the Debtor, and has done nothing to impair the rights of the
Collateral Agent or the Secured Parties in such Receivable or payments with
respect thereto. The Seller has obtained all necessary licenses, permits and
charters required to be obtained by the Seller, which failure to obtain would
render any portion of the transaction document unenforceable and would have a
material adverse effect on the Secured Parties.
(w) The Originator that originated such Receivable was
selected by the Seller based on such Originator's financial and operating
history.
(x) As of the Cut-Off Date, the aggregate Principal Balance of
all Receivables was $65,913,504.67.
(y) The contract securing such Receivable arose from a bona
fide sale in the ordinary course of the Originator's business.
(z) Such Receivable represents the sale of goods described in
the contract evidencing the Receivable.
(aa) Such Receivable is exclusive and contains all the terms
and conditions of the related contract.
(ab) To the best of the Debtor's knowledge, all signatures,
names, addresses, telephone numbers, figures and other statements of fact set
forth in the contract evidencing the Receivable are genuine, true and correct.
(ac) To the best of the Debtor's knowledge, no part of the
down payment, or any installment, has been loaned by the Originator to the
related Obligor.
43
(ad) To the best of the Debtor's knowledge, all credit
information provided to the Seller is true and correct and reported as received
from the Obligor.
(ae) To the best of the Debtor's knowledge, the Obligor is in
fact the primary or sole operator of the related Financed Vehicle.
(af) Each Receivable constitutes an Eligible Receivable.
(ag) The sale of the Extended Service Agreement to the related
Obligor complied at the time of such sale with all applicable state and federal
laws (and regulations thereunder), including without limitation, insurance,
usury, disclosure and consumer protection laws, equal credit opportunity, fair
credit reporting, truth-in-lending or other similar laws, the Federal Trade
Commission Act, and applicable state laws regulating extended service agreements
and insurance, and the ownership of such Extended Service Agreement will not
violate any such laws.
(ah) To the best of the Debtor's knowledge, each Extended
Service Agreement and each credit life policy and accident and health policy
relating to a Financed Vehicle or an Obligor is the legal, valid and binding
obligation of each party thereto, and is enforceable in accordance with its
terms.
(ai) To the best of the Debtor's knowledge, the Seller and any
party obligated to perform services under an Extended Service Agreement relating
to a Financed Vehicle, any credit life insurance policy or any accident and
health policy related to a Financed Vehicle or an Obligor have complied with all
licensing, insurance or other laws applicable to them in connection with the
origination, servicing, performance or administration thereof.
(aj) The Collateral Agent will be entitled to receive all
amounts due to an Obligor or lienholder upon cancellation by an Obligor of an
Extended Service Agreement or any credit life insurance policy and accident and
health insurance policy relating to a Financed Vehicle or an Obligor; and
44
(ak) All rights (but not obligations) of the Seller under each
Extended Service Agreement and any credit life insurance policy and accident and
health insurance policy relating to a Financed Vehicle or an Obligor have been
assigned by the Seller to the Debtor, and subsequently assigned by the Debtor to
the Collateral Agent for the benefit of the Secured Parties.
With respect to any Receivable for which any representation or
warranty made by the Debtor set forth in Section 3.1 above shall be or shall
have been untrue as of the last day of the prior Collection Period (each, an
"Ineligible Receivable") the Debtor shall be obligated to pay to the Collateral
Agent, for application in accordance with Section 5.1 as if such amounts
constituted Available Collections for such Remittance Date, the principal
balance plus accrued interest at the applicable APR on each such Ineligible
Receivable. Such payment shall be made on the Business Day preceding the next
Remittance Date. After the payment of such amount in respect of any Receivable,
the lien of the Collateral Agent in any such Receivable shall be released.
SECTION 3.2. COVENANTS OF THE DEBTOR
The Debtor hereby covenants to the Collateral Agent and the Secured
Parties, so long as any amounts shall be outstanding under the Note, the Note
Purchase Agreement or the Insurance Agreement or the Surety Bond is in effect,
that:
(a) CORPORATE EXISTENCE. The Debtor will preserve and maintain
its existence as a corporation duly organized and existing under the laws of the
jurisdiction of its incorporation and will remain duly qualified as a foreign
corporation under the laws of each other jurisdiction in which the failure to so
qualify would have a material adverse effect on the ability of the Debtor to
perform its obligations under this Agreement, the Note, the Note Purchase
Agreement, the Insurance Agreement or the Purchase Agreement.
(b) LOSSES, ETC. In any suit, proceeding or action brought by
the Collateral Agent or any Secured Party for any sum owing thereto, the Debtor
will save, indemnify and keep the Collateral Agent and the Secured Parties
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction of liability whatsoever
of the Obligor under such Receivable, arising out of a breach by the Debtor of
any
45
obligation under the related Receivable or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such Obligor or
its successor from the Debtor, and all such obligations of the Debtor shall be
and remain enforceable against and only against the Debtor and shall not be
enforceable against the Collateral Agent or any Secured Party.
(c) COMPLIANCE WITH LAW. The Debtor will comply, in all
material respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority applicable to the Receivables or any
part thereof; PROVIDED, HOWEVER, that the Debtor may contest any act, rule,
regulation, order, decree or direction in any reasonable manner which will not
materially and adversely affect the rights of the Collateral Agent in the
Receivables or the collectability of the Receivables.
(d) NO INSTRUMENTS. The Debtor will take no action to cause
any Receivable to be evidenced by any instru- ment (as defined in the UCC as in
effect in the Relevant UCC State).
(e) NO LIENS. Except for the conveyances contemplated
hereunder, the Debtor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on any
Receivable or any interest therein; the Debtor will notify the Collateral Agent
and the Surety Bond Provider of the existence of any Lien on any Receivable
immediately upon discovery thereof; and the Debtor shall defend the right, title
and interest of the Collateral Agent on behalf of the Secured Parties in, to and
under the applicable Receivables against all claims of third parties claiming
through or under the Debtor; PROVIDED, HOWEVER, that nothing in this Section
3.2(e) shall prevent or be deemed to prohibit the Debtor from suffering to exist
upon any of the Receivables any Liens for municipal or other local taxes and
other governmental charges if such taxes or governmental charges shall not at
the time be due and payable or if the Debtor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(f) NOTICE TO COLLATERAL AGENT. The Debtor will advise the
Collateral Agent and the Surety Bond Provider promptly, in reasonable detail,
(i) of any Lien asserted or claim made against any of the Receivables, (ii) of
the occur-
46
rence of any breach by the Debtor of any of its representations, warranties and
covenants contained herein and (iii) of the occurrence of any other event which
would have a material adverse effect on the Collateral Agent's security interest
on behalf of the Secured Parties in the Receivables or the collectability
thereof, or which would have a material adverse effect on the interests of the
Secured Parties.
(g) BOOKS AND RECORDS. The Collateral Agent and the Secured
Parties and their agents and representatives shall at all times have full and
free access during normal business hours to all the computer tapes, books,
correspondence and records of the Debtor insofar as they relate to the
Receivables, and the Collateral Agent and its agents and representatives and the
Surety Bond Provider may examine the same, take extracts therefrom and make
photocopies thereof, and the Debtor agrees to render to the Collateral Agent and
the Surety Bond Provider or its agents and representatives, at the Debtor's cost
and expense, such clerical and other assistance as may be reasonably requested
with regard thereto. The Debtor hereby assigns to the Collateral Agent and its
agents and representatives and the Surety Bond Provider all rights the Debtor
has or shall have to examine computer tapes, books, correspondence and records
relating to Receivables serviced by the Servicer or any successor servicer
thereto. Each of the Collateral Agent and the Surety Bond Provider acknowledges
that in exercising the rights and privileges conferred in this Section 3.2(g)
it, or its agents and representatives, may from time to time obtain knowledge of
information and practices set forth in such computer tapes, books,
correspondence and records (whether in the possession of the Debtor or the
Servicer) of a confidential nature and in which the Debtor has a proprietary
interest. The Collateral Agent and the Secured Parties agree that all such
information, practices, books, correspondence and records are to be regarded as
confidential information and that (i) it shall retain in strict confidence and
shall use its best efforts to ensure that its representatives retain in strict
confidence and will not disclose without the prior written consent of the Debtor
any or all of such information, practices, books, correspondence and records
furnished to them and (ii) it will not, and will use its best efforts to ensure
that its agents and representatives will not, make any use whatsoever (other
than for the purposes contemplated by this Agreement) of any of such
information, practices, computer tapes, books, correspondence and records
without the prior written consent of the Debtor, unless such information (i) is
generally available to the public, (ii) is
47
required by law to be disclosed or is requested by any Governmental Authority
having authority over the Surety Bond Provider, the Company, any Liquidity
Provider or Credit Support Provider or (iii) is requested by ▇▇▇▇▇'▇ or S&P in
connection with their rating of the Related Commercial Paper or the implied
rating of the facility.
(h) ADMINISTRATIVE PROCEDURES. The Debtor will maintain and
implement administrative operating procedures (including, without limitation, an
ability to recreate records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain all documents,
books, records and other information customarily maintained in the servicing of
sub-prime auto loans.
(i) UCC FILINGS. The Debtor shall execute and file such
continuation statements and any other documents requested by the Company, the
Surety Bond Provider or the Collateral Agent or which may be required by law to
fully preserve and protect the interest of the Company, the Surety Bond
Provider, and the Collateral Agent hereunder in and to the Receivables.
(j) CHANGE OF LOCATION. The Debtor will not (i) without
providing 30 days' notice to the Company the Surety Bond Provider, and the
Collateral Agent and without filing such amendments to any previously filed
financing statements as the Collateral Agent or the Surety Bond Provider may
require, (A) change the location of its principal executive office or the
location of the offices where the records relating to the accounts are kept, and
(B) change its name, identity or corporate structure in any manner which would,
could or might make any financing statement or continuation statement filed by
the Debtor in accordance with this Agreement seriously misleading within the
meaning of Section 9- 402(7) of the UCC or any applicable enactment of the UCC.
(k) FURTHER ASSURANCES. The Debtor shall deliver to the
Company, the Surety Bond Provider, and the Collateral Agent within 90 days of
the first anniversary of the Closing Date and each anniversary thereafter an
opinion of independent counsel to the Debtor, dated as of a date during such
90-day period, either (a) stating that, in the opinion of such counsel, (1) such
action has been taken with respect to the recording, registering, filing,
re-recording, re-registering and re-filing of financing statements, continuation
statements or other instruments or documents as is necessary
48
to preserve and protect the interest of the Collateral Agent and the Secured
Parties in and to the Receivables and reciting the details of such action or
referring to prior opinions of counsel in which such details are given, and (2)
all financing statements, continuation statements and any other necessary
documents have been executed and filed that are necessary fully to preserve and
protect the perfected interest of the Collateral Agent and the Secured Parties
in and to the Receivables, and reciting the details of such filings or referring
to prior opinions of counsel in which such details are given, or (b) stating
that, in the opinion of such counsel, no such action is necessary to preserve
and protect such interest.
(l) REPORTING. The Debtor will furnish, or cause to be
furnished to the Administrative Agent, the Surety Bond Provider, and the
Collateral Agent (unless otherwise provided to the Collateral Agent):
(i) NOTICE OF TERMINATION EVENT, AMORTIZATION EVENT,
WIND-DOWN EVENT, POTENTIAL TERMINATION EVENTS, POTENTIAL AMORTIZATION
EVENT OR POTENTIAL WIND-DOWN EVENT. As soon as possible and in any event
within five days of becoming aware of the occurrence of each Termination
Event, Amortization Event, Wind-Down Event, or each Potential Termination
Event, Potential Amortization Event or Potential Wind-Down Event
hereunder, or each Servicer Event of Default (as defined in the Servicing
Agreement) or FIARC Event of Default (as defined in the Servicing
Agreement) under the Servicing Agreement, a statement of the chief
financial officer or chief accounting officer of the Debtor setting forth
details of such Termination Event, Amortization Event, Wind-Down Event,
Potential Termination Event, Potential Amortization Events or Potential
Wind-Down Event, Servicer Event of Default or FIARC Event of Default and
the action which the Debtor proposes to take with respect thereto.
(ii) CHANGE IN CREDIT GUIDELINES. Within 10 days after
the date of any material change in or amendment to the Credit Guidelines,
a copy of the Credit Guidelines then in effect indicating such change or
amendment. Any change that will materially and adversely affect the Surety
Bond Provider shall be approved in writing by the Surety Bond Provider.
49
(m) The Debtor shall not, without the prior written consent of
the Collateral Agent and the Surety Bond Provider,
(i) engage in any business or activ- ity other than
those set forth in Article III of the Debtor's Certificate of
Incorporation;
(ii) incur any indebtedness, or assume or guaranty an
indebtedness of any other entity, other than any indebtedness contemplated
by Article IV of the Debtor's Certificate of Incorporation, which
indebtedness shall be subordinated to all other obligations of the Debtor;
(iii) without the affirmative vote of 100% of the
members of the Board of Directors of the Debtor, institute proceedings to
be adjudicated bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition
seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the corporation or a substantial part of its
property, or make any assignment for the benefit of creditors, or admit in
writing its inability to pay its debts generally as they become due, or
take corporate action in furtherance of any such action.
(iv) The Debtor shall at all times (a) to the extent the
Debtor's office is located in the offices of the Seller or any Affiliate
of the Seller, pay fair market rent for its executive office space located
in the offices of the Seller or any Affiliate of the Seller, (b) maintain
the Debtor's books, financial statements, accounting records and other
corporate documents and records separate from those of the Seller or any
other entity, (c) not commingle the Debtor's assets with those of the
Seller or any other entity (it being understood that certain Collections
on Receivables owned by the Debtor may be temporarily commingled with
collections on other receivables serviced by the Seller); (d) act solely
in its corporate name and through its own authorized officers and agents,
(e)
50
make investments directly or by brokers engaged and paid by the Debtor or
its agents (provided that if any such agent is an Affiliate of the Debtor
it shall be compensated at a fair market rate for its services), (f)
separately manage the Debtor's liabilities from those of the Seller or any
Affiliates of the Seller and pay its own liabilities, including all
administrative expenses, from its own separate assets, and (g) pay from
the Debtor's assets all obligations and indebtedness of any kind incurred
by the Debtor. The Debtor shall abide by all corporate formalities,
including the maintenance of current minute books, and the Debtor shall
cause its financial statements to be prepared in accordance with generally
accepted accounting principles in a manner that indicates the separate
existence of the Debtor and its assets and liabilities. The Debtor shall
(i) pay all its liabilities, (ii) not assume the liabilities of the Seller
or any Affiliate of the Seller, and (iii) not guarantee the liabilities of
the Seller or any Affiliate of the Seller. The officers and directors of
the Debtor (as appropriate) shall make decisions with respect to the
business and daily operations of the Debtor independent of and not
dictated by any controlling entity.
(v) The Debtor shall only amend, alter, change or repeal
its Certificate of Incorporation as in effect on the date hereof with the
prior written consent of the Collateral Agent and the Surety Bond
Provider.
(n) The Debtor shall have at all times in effect an interest
rate cap agreement or agreements (each an "INTEREST RATE CAP" and collectively
the "INTEREST RATE CAPS") with a financial institution or institutions ("CAP
COUNTERPARTIES") provided that (i) any such Cap Counterparty shall be approved
by the Surety Bond Provider, ▇▇▇▇▇'▇ and S&P, (ii) such Cap Counterparty shall
have irrevocably and unconditionally agreed that, prior to the date which is one
year and one day after the payment in full of the Note and the Commercial Paper,
it will not institute against, or join any other Person in instituting against,
the Company, the Seller or the Debtor any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States, any state of the United States or any other
jurisdiction, (iii) the form and
51
substance of any such Interest Rate Cap shall be acceptable to the Surety Bond
Provider, ▇▇▇▇▇'▇ and S&P, (iv) all amounts payable by the Cap Counterparty
thereunder shall be required to be paid by such counterparty directly to the
Collection Account, (v) such Interest Rate Cap shall provide that the Cap
Counterparty acknowledges that the Debtor's rights thereunder shall have been
irrevocably assigned to, and a security interest therein has been granted to,
the Collateral Agent for the benefit of the Secured Parties, (vi) the strike
rate of any Interest Rate Cap shall be not more than 8.5%, and (vii) such
Interest Rate Cap shall cover at least 100% of the Net Investment and must be in
effect for at least as long as the latest maturing Receivable securing the Net
Investment.
(o) CREDIT GUIDELINES. The Debtor shall not amend, modify or
supplement its Credit Guidelines in any manner which would materially and
adversely affect the Surety Bond Provider.
(p) EXTENDED SERVICE AGREEMENTS. The Debtor will not amend,
and shall not permit any amendment to any Extended Service Agreement relating to
any Financed Vehicle which would adversely affect its ability and right to
receive refunds under such contracts, or which would adversely affect
the position of the Surety Bond Provider.
(q) THE NOTE. The Debtor will not amend, and shall not permit
any amendment to the Note, except in accordance with the Note Purchase
Agreement, except with the consent of the Company and the Surety Bond Provider.
52
ARTICLE IV
SERVICING AND ADMINISTRATION
SECTION 4.1. SERVICING. (a) Pursuant to the Servicing Agreement, the
Debtor has contracted with General Electric Capital Corporation ("GECC") to act
as servicer to manage, collect and administer each of the Receivables. Until
such time as GECC is terminated as servicer under the Servicing Agreement,
references to the Servicer herein shall refer to GECC as servicer under the
terms of the Servicing Agreement. In the event of a Servicer Event of Default
pursuant to Section 8.01 of the Servicing Agreement, the Debtor, shall upon the
written direction of the Surety Bond Provider, or may, with the consent of the
Surety Bond Provider, terminate GECC as Servicer thereunder, but in any event
shall notify ▇▇▇▇▇'▇ and S&P of such Servicer Event of Default. The Surety Bond
Provider shall also have the right to remove the Servicer for cause, which shall
include the material breach of any obligation or covenant under the Servicing
Agreement. Upon the termination of GECC as servicer of the Receivables pursuant
to either Section 8.01 or Section 9.02 of the Servicing Agreement, the Surety
Bond Provider, shall have the right to appoint a successor servicer and the
Debtor shall enter into a servicing agreement with such successor servicer in
form and substance acceptable to the Surety Bond Provider, with such successor
servicer acceptable to the Surety Bond Provider at such time. Such appointment
shall be subject to the consent of the Debtor, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, that if a Termination Event shall have
occurred and be continuing, or an event has occurred which, but for the passage
of time or the giving of notice would constitute a Termination Event, Wind-Down
Event or Amortization Event, the consent of the Debtor shall not be required.
Such servicing agreement shall specify the duties and obligations of such
successor servicer, and all references herein to the Servicer shall be deemed to
refer to such successor servicer.
(b) There shall be established on the Closing Date and
maintained, for the benefit of the Secured Parties, in the trust department of
the Collateral Agent, a segregated account (the "COLLECTION ACCOUNT"), bearing a
designation clearly indicating that all of the funds deposited therein are held
for the benefit of the Secured Parties. Funds on deposit in the Collection
Account (other than investment earnings) shall be invested by the Collateral
Agent at the direction of
53
the Debtor in Eligible Investments that will mature so that such funds will be
available prior to the next succeeding Remittance Date, except that in the case
of funds representing Collections with respect to a succeeding Collection
Period, such Eligible Investments may mature so that such funds will be
available no later than the Business Day prior to the Remittance Date for such
Collection Period. Any funds on deposit in the Collection Account to be so
invested shall be invested solely in Eligible Investments. On each Remittance
Date, all interest and earnings (net of losses and investment expenses) on funds
on deposit in the Collection Account shall be available to make any payments
required hereunder and shall be distributed pursuant to the priorities set forth
in Section 5.1.
(c) The Debtor shall cause GECC as servicer under the
Servicing Agreement to deposit all Collections in the Collection Account no
later than ten (10) Business Days after the end of the related Collection Period
(LESS the fees and expenses of GECC as Servicer which GECC, pursuant to the
Servicing Agreement, is permitted to withhold from amounts remitted to the
Debtor or the Collateral Agent), but in any event, on or before the 14th day of
the month following the related Collection Period.
SECTION 4.2. RIGHTS AFTER DESIGNATION OF SUCCESSOR SERVICER. At any
time following the designation of a Servicer (other than GECC) pursuant to
Section 4.1 as a result of the occurrence of a Servicer Event of Default
pursuant to Section 8.01 of the Servicing Agreement:
(i) The Collateral Agent and the Surety Bond Provider
may direct that payment of all amounts payable under any Receivable be
made directly to the Collateral Agent or its designee.
(ii) The Debtor shall, at the Collateral Agent's or the
Surety Bond Provider's request and at the Debtor's expense, give notice of
the Collateral Agent's interest in the Receivables to each Obligor and
direct that payments be made directly to the Collateral Agent or its
designee.
(iii) The Debtor shall, at the Collateral Agent's or the
Surety Bond Provider's request, (A) assemble all of the records relating
to the Collateral, including all Receivables files, and
54
shall make the same available to the Collateral Agent and the Surety Bond
Provider at a place selected by the Collateral Agent and the Surety Bond
Provider or its designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting collections of
Collateral in a manner acceptable to the Collateral Agent and the Surety
Bond Provider and shall, promptly upon receipt, remit all such cash,
checks and instruments, duly endorsed or with duly executed instruments of
transfer, to the Collateral Agent or its designee.
(iv) The Debtor hereby authorizes the Collateral Agent
to take any and all steps in the Debtor's name and on behalf of the Debtor
necessary or desirable, in the determination of the Collateral Agent, to
collect all amounts due under any and all of the Collateral with respect
thereto, including, without limitation, endorsing the Debtor's name on
checks and other instruments representing Collections and enforcing the
Receivables.
SECTION 4.3. RESPONSIBILITIES OF THE DEBTOR. Anything herein to the
contrary notwithstanding, the Debtor shall (i) perform all of its obligations
under the Receivables to the same extent as if a security interest in such
Receivables had not been granted hereunder and the exercise by the Collateral
Agent of its rights hereunder shall not relieve the Debtor from such obligations
and (ii) pay when due any taxes, including without limitation, any sales taxes
payable in connection with the Receivables and their creation and satisfaction.
Neither the Collateral Agent nor any Secured Party shall have any obligation or
liability with respect to any Receivable, nor shall any of them be obligated to
perform any of the obligations of the Debtor thereunder.
SECTION 4.4. MONTHLY DEBTOR'S CERTIFICATE. On each Determination
Date, the Debtor shall deliver to the Administrative Agent, the Surety Bond
Provider and the Collateral Agent a certificate in substantially the form of
EXHIBIT H attached hereto (the "MONTHLY DEBTOR'S CERTIFICATE") for the related
Collection Period. The Monthly Debtor's Certificate shall have attached thereto
the certificate of the Servicer with respect to the Receivables relating to the
immediately preceding Collection Period (which for so long as GECC is the
Servicer shall be in the form specified in Section 4.09 of the
55
Servicing Agreement). The Company shall provide (or cause the Administrative
Agent to provide) to the Debtor, by the 10th day of the calendar month following
the Collection Period to which such Monthly Debtor's Certificate relates,
information relating to the amount of each obligation of the Company which
comprises Carrying Costs for such Collection Period. The Monthly Debtor's
Certificate shall specify whether a Termination Event, an Amortization Event or
Wind-Down Event is deemed to have occurred with respect to the Collection Period
preceding such Determination Date. Upon receipt of the Monthly Debtor's
Certificate, the Collateral Agent shall rely (and shall be fully protected in so
relying) on the information contained therein for the purposes of making
distributions and allocations as provided for herein.
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ARTICLE V
ALLOCATION AND APPLICATION
OF COLLECTIONS; RESERVE ACCOUNT
SECTION 5.1. COLLECTIONS. (a) On each Remittance Date, the
Collateral Agent shall determine by reference to the Monthly Debtor's
Certificate the Available Collections for the prior Collection Period and shall
withdraw such amount from the Collection Account and allocate and pay such
amount in the following order of priority:
(i) to the Reserve Account to repay Reserve Advances;
(ii) to pay to the Collateral Agent all fees and
expenses due pursuant to Section 7.2 (a) hereof and then to pay the
servicing fee due to any successor Servicer;
(iii) to the Noteholder, an amount equal to Carrying
Costs for the related Collection Period;
(iv) to the Noteholder, to pay the Targeted Monthly
Principal Payment;
(v) to the Surety Bond Provider, the Surety Bond
Premium, including any overdue Surety Bond Premium, accrued interest
thereon plus any amounts owed under the Surety Bond or the Insurance
Agreement;
(vi) to the Surety Bond Provider, the aggregate amount
of any previously unreimbursed draws on the Surety Bond, plus accrued
interest thereon at the rate provided in the Insurance Agreement;
(vii) prior to the occurrence of a Termination Event, to
the Reserve Account, the amount necessary to increase the amount on
deposit in the Reserve Account to the Required Reserve
Account Balance;
(viii) to the Collateral Agent, FIRST, the amount to be
applied by the Collateral
57
Agent to pay any and all Re-▇▇▇▇▇▇▇ Expenses then due and payable which
have not been previously paid by or on behalf of the Debtor, and SECOND,
all amounts due the Collateral Agent pursuant to Section 7.2 (b) hereof;
(ix) after the occurrence of a Termination Event or on
any Remittance Date on which the product of the Noteholder's Percentage
and the Borrowing Base is less than or equal to 5.0% of the Facility
Limit, the remainder to the Noteholder to reduce the Net Investment;
(x) to the Noteholder or any other appropriate party, an
amount equal to any other amounts owed thereto under the Note Purchase
Agreement (other than amounts due under the Note, with the exception of
costs incurred in the enforcement of the Note), other amounts due thereto
under this Agreement, and unreimbursed Carrying Costs with respect to
prior Collection Periods; and
(xi) all remaining amounts shall be distributed by the
Collateral Agent to a bank account designated by the Debtor for further
distribution.
(b) In the event that, on any Business Day other than a
Remittance Date, the Debtor does not have sufficient funds to pay the Interest
Component of matured or maturing Related Commercial Paper due and payable on
such day, the Reserve Account Agent, acting upon written instructions of the
Administrative Agent, shall make an advance from the Reserve Account in an
amount equal to such costs due and payable on such day (a "RESERVE ADVANCE") and
pay to the Company the amount of such advance. To the extent that amounts
available in the Reserve Account are insufficient to cover such costs, the
Debtor shall be obligated to make a payment to the Collateral Agent, for
distribution to the Company, in an amount equal to such remaining shortfall.
Amounts required to be remitted pursuant to this Section 5.1(b) to the Company
shall be remitted in immediately available funds to the Collateral Account no
later than 12:00 noon, New York City time, on the date due. To the extent that
amounts available in the Reserve Account are insufficient to cover such costs
and the Debtor fails to make a payment to the Reserve Account Agent in the
amount of such shortfall, the Administrative Agent shall make
58
a demand for payment under the Surety Bond in accordance with its terms. The
Administrative Agent shall be entitled to direct the Collateral Agent to make a
demand for payment upon the Debtor for shortfalls reasonably expected to occur
in the amount available to be withdrawn from Reserve Account pursuant to this
Section 5.1(b), provided, that any such demands shall be (i) based on the
maturity schedule of Related Commercial Paper and (ii) shall be made not more
than four Business Days prior to the scheduled maturity date of the Related
Commercial Paper to which such expected shortfall relates. The Debtor shall
deposit to the credit of the Reserve Account, on the Business Day following any
such demand, the amount of such requested payment.
(c) If the Available Collections in respect of a Remittance
Date are insufficient to pay the sum of the amounts to be distributed on such
Remittance Date pursuant to clauses (ii) through (iv) of Section 5.1(a) and
clause (viii) of Section 5.1(a), the Debtor shall notify the Reserve Account
Agent of such shortfall and the Reserve Account Agent shall cause the withdrawal
of the amount of such shortfall from the Reserve Account, to the extent of
amounts on deposit therein, and remit the proceeds of such withdrawal to the
Collateral Agent and the Collateral Agent shall apply such amount to the payment
of the items described in clauses (ii), (iii), (iv) and (viii) of Section
5.1(a), on the related Remittance Date and in that order of priority. The
Administrative Agent shall be entitled to direct the Collateral Agent to make a
demand for payment upon the Debtor for shortfalls reasonably expected to occur
in the amount available to be withdrawn from Reserve Account on any Remittance
Date pursuant to this Section 5.1(c), provided, that any such demands shall be
(i) based on the information contained in the related Monthly Debtor's
Certificate and (ii) shall be made not more than four Business Days prior to the
scheduled maturity date of the Related Commercial Paper to which such expected
shortfall relates. The Debtor shall deposit to the credit of the Reserve
Account, on the Business Day following any such demand, the amount of such
requested payment.
(d) If on any Remittance Date Available Collections and
amounts available to be withdrawn from the Reserve Account are insufficient to
pay the sum of the amounts to be distributed pursuant to clauses (ii) through
(iv) and (viii) of section 5.1 (a), the Administrative Agent shall review the
terms of the Surety Bond, and if a demand for payment may be made thereunder for
any such shortfall, the
59
Administrative Agent shall make a demand thereunder in accordance with the terms
of the Surety Bond.
SECTION 5.2. REMITTANCES TO THE SECURED PARTIES. On each Remittance
Date, the Collateral Agent shall remit Available Collections to each Secured
Party in accordance with the provisions of Section 5.1. The foregoing
notwithstanding, the final remittance in respect of the Note shall be made in
the applicable manner specified above only upon presentation and surrender of
the Note at the office of the Debtor specified by it in the notice of such final
remittance or repurchase.
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ARTICLE V-A
THE RESERVE ACCOUNT AND THE RESERVE ACCOUNT AGENT
SECTION 5A.1 ESTABLISHMENT OF THE RESERVE ACCOUNT.
(a) APPOINTMENT OF RESERVE ACCOUNT AGENT. The Collateral Agent
on behalf of the Secured Parties hereby appoints NationsBank, N.A. to act as
Reserve Account Agent on behalf of the Collateral Agent on behalf of the Secured
Parties hereunder, and NationsBank, N.A. accepts such appoint- ment.
(b) ESTABLISHMENT OF RESERVE ACCOUNT. On or before the Closing
Date, the Debtor shall establish a segregated account, which shall be entitled
"Reserve Account of NationsBank, N.A. as Reserve Account Agent for the benefit
of Texas Commerce Bank National Association as Collateral Agent for Enterprise
Funding Corporation and MBIA Insurance Corporation" (the "RESERVE ACCOUNT").
Subject to the terms hereof, the Reserve Account Agent for the benefit of the
Collateral Agent for the benefit of the Secured Parties shall possess all right,
title and interest in and to all funds deposited from time to time in the
Reserve Account. Notwithstanding the foregoing, the Reserve Account Agent shall
not withdraw any funds from, or otherwise exercise control over, the Reserve
Account except as provided in this Agreement and the Reserve Account Agent
acknowledges that all amounts on deposit in the Reserve Account shall be held by
the Reserve Account Agent for the benefit of the Collateral Agent for the
benefit of the Secured Parties.
(c) DEPOSITS TO AND WITHDRAWALS FROM THE RESERVE ACCOUNT. On
or prior to the Closing Date, the Debtor shall deposit or cause to be deposited
in the Reserve Account, the Required Reserve Account Balance. The Debtor shall
deposit into the Reserve Account all amounts which are required to be deposited
therein by this Agreement. The Reserve Account Agent shall promptly withdraw
from the Reserve Account all amounts required to be withdrawn therefrom pursuant
to Section 5.1(b) and 5.1(c) hereof, and shall either (i) pay such amounts to
the Company (in the case of withdrawals pursuant to Section 5.1(b)) or (ii)
remit such amounts to the Collateral Agent (in the case of withdrawals therefrom
pursuant to Section 5.1(c)).
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Prior to the occurrence of a Termination Event and to the
extent that amounts on deposit in the Reserve Account on any Remittance Date,
after giving effect to any required withdrawals therefrom on such day, exceed
the Required Reserve Account Balance, such excess amounts shall be withdrawn
from the Reserve Account by the Reserve Account Agent and be deposited by the
Reserve Account Agent in the Collection Account and shall constitute part of
Available Funds for the next succeeding Remittance Date.
(d) INVESTMENT OF FUNDS ON DEPOSIT IN THE RESERVE ACCOUNT.
(i) Funds on deposit in the Reserve Account shall be invested
in Eligible Investments by or at the written direction of the
Debtor, provided that if a Termination Event shall have
occurred, such investments shall be limited to the Eligible
Investments set forth in items A, B and C of Exhibit D hereto.
Any such written directions shall specify the particular
investment to be made and shall certify that such investment
is an Eligible Investment and is permitted to be made under
this Agreement.
(ii) All investments of amounts on deposit in the Reserve
Account shall be accomplished in a manner so as to cause such
investments to be Transferred to the Reserve Account Agent
and, if required by applicable law or any amendment thereto,
to be maintained by the Reserve Ac- count Agent through
continued registration of the Reserve Account Agent's
ownership of such investments, so as to continously establish
"control" (as defined in Section 8-106 of the 1994 Official
Text of Article 8 of the Uniform Commercial Code and the Texas
UCC) thereof by the Reserve Acoount Agent; provided that in-
vestments need not be Transferred to the Re- serve Account
Agent in accordance with each action set forth in the
definition of "Trans- ferred", if as a result of the
effectiveness in the State of New York of the 1994 Official
Text of Article 8 of the Uniform Commercial Code, or
otherwise, such action is no longer required to perfect the
security interest of the Reserve Account Agent. The Reserve
Account Agent
62
agrees that, without the prior consent of the Surety Bond
Provider, it shall not accept for credit to the Reserve
Account any investment as to which it has knowledge of any
adverse claim thereto. NationsBank, N.A. hereby agrees (and
any other Financial Intermediary holding the Reserve Account
shall so agree) to comply with all Entitlement Orders (as
defined in Section 8-102(a)(8) of the 1994 Official Text of
the Uniform Commercial Code and the Texas UCC) received by it
from the Reserve Account Agent.
(iii) Funds on deposit in the Reserve Account on the Closing
Date and thereafter shall be so invested in Eligible
Investments that mature such that sufficient amounts of such
funds or the proceeds thereof will be available for withdrawal
pursuant to Section 5.1(b) on the maturity date of Related
Commercial Paper and for remittance to the Collateral Agent
pursuant to Section 5.1(b); in any event the maturity of any
Eligible Investment shall not exceed 30 days. No Eligible
Investment may be liquidated or disposed of prior to its
maturity. All proceeds of any Eligible Investment shall be
deposited in the Reserve Account. Investments may be made on
any date (provided such investments mature in accordance with
the preceding sentence), only after giving effect to deposits
to and withdrawals from the Reserve Account on such date. Not
later than 5:00 p.m. (New York time) on the Business Day prior
to each Remittance Date, all interest and earnings (net of
losses and investment expenses, if any) accrued since the
previous Remittance Date (or since the Closing Date in the
case of the first Remittance Date) on funds on deposit in the
Reserve Account shall be withdrawn by the Reserve Account
Agent and remitted to the Collateral Agent to be applied
pursuant to Section 5.1 of this Agreement in accordance with
the Monthly Debtor's Certificate. Realized losses, if any, on
amounts invested in Eligible Investments shall be charged
against undistributed investment earnings on amounts on
deposit in the Reserve Account.
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(iv) The Debtor and the Surety Bond Provider shall each
provide the Reserve Account Agent on the date hereof and from
time to time upon request an incumbency certificate or the
substantial equivalent with respect to each officer of the
Debtor and the Surety Bond Provider, respectively, that is
authorized to provide instructions relating to investments in
Eligible Investments.
SECTION 5A.2 MAINTENANCE OF ELIGIBLE INVESTMENTS. Eligible
Investments shall be maintained by the Reserve Account Agent in such manner as
may be necessary to maintain the first priority perfected security interest in
favor of the Reserve Account Agent, as the secured party on behalf of the
Collateral Agent on behalf of the Secured Parties. NationsBank, N.A. agrees (and
any other Financial Intermediary holding the Reserve Account shall so agree)
that it shall not agree to comply with Entitlement Orders (as defined in Section
8-102(a)(8) of the 1994 version of the Official Text of Article 8 of the Uniform
Commercial Code and the Texas UCC) with respect to the Reserve Account given to
it by any Person other than the Reserve Account Agent.
All amounts or property credited to the Reserve Account shall be
subject to the lien of the Reserve Account Agent, for the Collateral Agent on
behalf of the Secured Parties, until released or withdrawn from the Reserve
Account.
SECTION 5A.3 TERMINATION OF RESERVE ACCOUNT; RELEASE OF FUNDS. If
and to the extent that all amounts owed by the Debtor to the Secured Parties
hereunder, under the Note Purchase Agreement, the Insurance Agreement and the
Note have been paid in full, any amounts on deposit in the Reserve Account shall
be released to the Debtor. In the event that thereafter the Debtor shall request
that the Noteholder increase its Net Investment, it shall be a condition
precedent thereto that the Reserve Account be funded in an amount equal to the
Required Reserve Account Balance after giving effect to any Receivables added to
the Collateral in connection with such increase in the Net Investment.
SECTION 5A.4 DUTIES OF THE RESERVE ACCOUNT AGENT. The Reserve
Account Agent, both prior to the occurrence of a Termination Event, Amortization
Event or Wind-Down Event hereunder and after an Amortization Event or Wind-Down
Event shall have been cured or waived, shall undertake to perform such
64
duties and only such duties as are specifically set forth in this Agreement. The
Reserve Account Agent shall at all times after the occurrence of a Termination
Event, Amortization Event or Wind-Down Event which has not been cured (except in
the case of a Termination Event) or waived exercise such of the rights and
powers vested in it pursuant to this Agreement using the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs.
The Reserve Account Agent shall only resign if it shall (i) become
incapable of acting as Reserve Account Agent in accordance with the terms of
this Agreement, (ii) be adjudicated insolvent or bankrupt or otherwise become
subject to any bankruptcy, insolvency, reorganization or liquidation proceeding,
(iii) be no longer qualified as the Reserve Account Agent as such term is
defined in the agreement governing its responsibility as Reserve Account Agent
or otherwise be subject to replacement pursuant to or such agreement governing
its responsibility as Reserve Account Agent or (iv) materially breach any of the
provisions of this Agreement; PROVIDED, FURTHER, that, without the consent of
the Company and the Surety Bond Provider, such resignation shall not be
effective until a successor Reserve Account Agent acceptable to the Surety Bond
Provider shall have accepted appointment as Reserve Account Agent hereunder and
shall have agreed to be bound by the terms of this Agreement.
Except as otherwise provided herein, the Reserve Account Agent shall
not resign from the obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Reserve Account Agent could take to make the performance of its duties
hereunder permissible under applicable law. Any such determination permitting
the resignation of the Reserve Account Agent shall be evidenced as to clause (i)
above by an opinion of counsel to such effect delivered to the Secured Parties.
No resignation of the Reserve Account Agent shall become effective until a
successor Reserve Account Agent approved by the Secured Parties shall have
assumed the responsibilities and obligations of the Reserve Account Agent
hereunder. In the event that the long-term debt rating of the Reserve Account
Agent assigned by ▇▇▇▇▇'▇ and S&P is reduced below Baa3 and BBB-, respectively,
the Surety Bond Provider may remove the Reserve Account Agent and appoint a
successor Reserve Account Agent.
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SECTION 5A.5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
RESERVE ACCOUNT AGENT. The Reserve Account Agent agrees to make the following
representations, warranties and covenants.
(i) ORGANIZATION AND GOOD STANDING. The Reserve Account Agent
is a national banking association duly organized, validly existing and in good
standing under the laws of the United States of America, and has full corporate
power, authority and legal right to conduct its business as such business is
presently conducted, and to execute, deliver and perform its obligations under
this Agreement and the Insurance Agreement.
(ii) DUE AUTHORIZATION. The execution, delivery, and
performance of this Agreement and the Insurance Agreement have been duly
authorized by the Reserve Account Agent by all necessary corporate action on the
part of the Reserve Account Agent.
(iii) BINDING OBLIGATION. This Agreement and the Insurance
Agreement each constitutes a legal, valid and binding obligation of the Reserve
Account Agent, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect,
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(iv) NO CONFLICT. The execution and delivery of this Agreement
and the Insurance Agreement by the Reserve Account Agent, and the performance of
the transactions contemplated hereby and thereby and the fulfillment of the
terms hereof and thereof applicable to the Reserve Account Agent, will not
conflict with, violate, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a default
under, any Requirement of Law applicable to the Reserve Account Agent or any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Reserve Account Agent is a party or by which it is bound.
SECTION 5A.6 LIABILITY OF THE RESERVE ACCOUNT AGENT. (a) The Reserve
Account Agent shall be liable in accordance herewith only to the extent of the
obligations spe-
66
cifically undertaken by the Reserve Account Agent in such capacity herein. No
implied covenants or obligations shall be read into this Agreement against the
Reserve Account Agent and, in the absence of bad faith on the part of the
Reserve Account Agent, the Reserve Account Agent may conclusively rely on the
truth of the statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Reserve Account Agent and conforming
to the requirements of this Agreement.
(b) The Reserve Account Agent shall not be liable for an error
of judgment made in good faith unless it shall be proved that the Reserve
Account Agent shall have been negligent in ascertaining the pertinent facts.
(c) The Reserve Account Agent shall not be liable with respect
to any action taken, suffered or omitted to be taken in good faith in accordance
with this Agreement or at the direction of the Collateral Agent or a Secured
Party relating to the exercise of any power conferred upon the Reserve Account
Agent under this Agreement.
(d) The Reserve Account Agent shall not be charged with
knowledge of any Termination Event, Wind-Down Event or Amortization Event unless
an officer directly involved with the administration of the Reserve Account
obtains actual knowledge of such event or the Reserve Account Agent receives
written notice of such event from the Debtor, the Company, the Surety Bond
Provider or the Administrative Agent, as the case may be.
(e) The Reserve Account Agent shall not be required to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability shall not be
reasonably assured to it.
(f) The Reserve Account Agent may rely and shall be protected
in acting or refraining from acting upon any resolution, officer's certificate,
any Monthly Debtor's Certificate, certificate of auditors, or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties.
67
(g) The Reserve Account Agent may consult with counsel and any
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it under this Agreement
in good faith and in accordance with such opinion of counsel.
(h) The Reserve Account Agent shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement or to
institute, conduct or defend any litigation under this Agreement or in relation
to this Agreement, at the request, order or direction of a Secured Party or the
Collateral Agent pursuant to the provisions of this Agreement, unless a Secured
Party shall have offered to the Reserve Account Agent reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; nothing contained in this Agreement, however, shall relieve
the Reserve Account Agent of its obligations, upon the occurrence of a
Termination Event, a Wind-Down Event or Amortization Event (that shall not have
been cured (except with respect to a Termination Event) or waived), to exercise
such of the rights and powers vested in it by this Agreement, and to use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(i) The Reserve Account Agent shall not be liable for any
action taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement.
(j) Prior to the occurrence of a Termination Event, Wind-Down
Event or Amortization Event and before the Reserve Account Agent has received
notice of such Termination Event, Wind-Down Event or Amortization Event and
after the curing (except with respect to a Termination Event) or waiver of any
Wind-Down Event or Amortization Event that may have occurred, the Reserve
Account Agent shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing so to do by a Secured Party; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Reserve Account
Agent of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation shall be, in the opinion of the Reserve Account
Agent, not reasonably assured by the Debtor,
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the Reserve Account Agent 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 Debtor or, if paid by the Reserve
Account Agent, shall be reimbursed by the Debtor upon demand from funds
available pursuant to Section 5.1(a)(x) hereof.
SECTION 5A.7 LIMITATION ON LIABILITY OF THE RESERVE ACCOUNT AGENT
AND OTHERS. The directors, officers, employees or agents of the Reserve Account
Agent shall not be under any liability to the Reserve Account Agent, any Secured
Party or any other Person hereunder or pursuant to any document delivered
hereunder, it being expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration for, the execution
of this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the
directors, officers, employees and agents of the Reserve Account Agent against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. Except as provided in
Section 5A.4, the Reserve Account Agent shall not be under any liability to any
Secured Party or any other Person for any action taken or for refraining from
the taking of any action in its capacity as Reserve Account Agent pursuant to
this Agreement whether arising from express or implied duties under this
Agreement; PROVIDED, HOWEVER, that this provision shall not protect the Reserve
Account Agent against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Reserve Account Agent may rely in good faith on any document of any kind
PRIMA FACIE properly executed and submitted by any Person respecting any matters
arising hereunder. The Reserve Account Agent shall not be under any obligation
to appear in, prosecute or defend any legal action which is not incidental to
its duties to administer the Reserve Account in accordance with this Agreement
which in its reasonable opinion may involve it in any expense or liability.
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ARTICLE VI
TERMINATION EVENTS; SERVICING TERMINATION
SECTION 6.1. TERMINATION EVENTS. The occurrence of any one of the
following events shall be a "TERMINATION EVENT" under this Agreement:
(a) failure on the part of the Debtor to pay or disburse when
due the amounts provided for herein;
(b) failure (i) by the Debtor, to observe or perform any term,
covenant, condition or agreement set forth in ▇▇▇▇▇▇▇▇ ▇.▇(▇), (▇), (▇), (▇),
(▇), (▇), (▇), (▇), (▇), (▇), and (n) of this Agreement or (ii) of any
representation or warranty of the Debtor, the Seller or the Servicer contained
herein or, in the Note Purchase Agreement, the Purchase Agreement or the
Servicing Agreement to be true and correct in all material respects on any day
when made or deemed made hereunder, or (iii) by the Debtor to observe or perform
any other term, covenant, condition or agreement provided for herein or in the
Note, the Note Purchase Agreement, the Servicing Agreement, the Purchase
Agreement or the Interest Rate Cap (other than a term addressed in clause (i)
above) which, in the case of clause (ii) above continues for a period of thirty
(30) days after the earlier of (u) the date on which written notice of such
breach shall have been given to the Debtor, the Seller or the Servicer, by the
Company, the Surety Bond Provider or the Collateral Agent, (v) the date on which
the Debtor became aware of such breach or (w) the date on which the Debtor
exercising reasonable care should have become aware of such breach, or which, in
the case of clause (iii) above continues for a period of thirty (30) days after
the earlier of (x) the date on which written notice of such failure shall have
been given to the Debtor by the Company, the Surety Bond Provider, or the
Collateral Agent, (y) the date on which the Debtor became aware of such failure
or (z) the date on which the Debtor exercising reasonable care should have
become aware of such failure;
(c) the Debtor, the Seller or the Servicer shall consent to
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Debtor, the Seller or the Servicer, as the
case may be, or of or relating to all or substantially all of its property, or a
decree or order of a court or agency or
70
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator 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
Debtor, the Seller or the Servicer, as the case may be, and such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
or the Debtor, the Seller or the Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take advantage
of an applicable insolvency or reorganization statute, make any assignment for
the benefit of its creditors or voluntarily suspend payment of its obligations;
or the Debtor, the Seller or the Servicer, as the case may be, shall become
unable for any reason to pledge Collateral to the Collateral Agent in accordance
with the provisions of this Agreement;
(d) (i) the Net Investment exceeds 91.0% of the sum of the
Borrowing Base PLUS the amount on deposit in the Reserve Account for 30
consecutive days; (ii) the Net Investment PLUS the aggregate interest component
of all Related Commercial Paper issued to fund or refinance the Net Investment
equals or exceeds the Facility Limit or (iii) the Net Investment at any time
equals or exceeds the sum of the Borrowing Base plus the amount on deposit in
the Reserve Account;
(e) the Debtor shall enter into any merger, consolidation or
conveyance transaction regardless of the surviving entity, or the Servicer shall
enter into any merger, consolidation or conveyance transaction whereby it is not
the surviving entity;
(f) any material adverse change in the operations of the
Servicer which materially adversely affects the ability of the Servicer to
service the Receivables or to perform its obligations under the Servicing
Agreement (or any other agreement pursuant to which the Servicer is acting as
servicer of the Receivables);
(g) there shall be a payment default by the Seller or the
Debtor under any material agreement for borrowed money to which the Seller or
the Debtor is a Party or there shall be a Servicer Event of Default under the
Servicing Agreement;
71
(h) the Delinquency Ratio averaged over any three consecutive
Collection Periods shall equal or exceed 6.00%;
(i) the Gross Default Ratio averaged over any three
consecutive Collection Periods shall equal or exceed 12.00%;
(j) the Collateral Agent shall fail for any reason to have a
valid and perfected first priority security interest in the Receivables and the
proceeds thereof;
(k) there shall be a material breach by the Seller of its
obligations under the Purchase Agreement;
(l) on and after the Remittance Date next following the fourth
Collection Period after the Closing Date, the annualized Net Default Ratio
averaged over any three consecutive Collection Periods is greater than or equal
to 5.00%;
(m) (i) a final judgment for the payment of money in excess of
$1,000,000 shall have been rendered against the Seller by a court of competent
jurisdiction and the Seller shall not have either: (1) discharged or provided
for the discharge of such judgment in accordance with its terms, or (2)
perfected a timely appeal of such judgment and caused the execution thereof to
be stayed (by supersedeas or otherwise) during the pendency of such appeal or
(ii) the Seller shall have made payments of amounts in excess of $1,000,000 in
settlement of any litigation;
(n) the weighted average APR of the Loans is less than 17.5%;
(o) the weighted average remaining term to maturity on the
Receivables is greater than 45 months;
(p) a draw is made under the Surety Bond;
(q) the Surety Bond Provider shall have given notice that an
event of default has occurred and is continuing under the Insurance Agreement;
(r) the term of the Surety Bond is not of the term required by
the Company (which term shall be at least
72
equal to the term of the latest maturing Receivable in the facility plus 90
days);
(s) the Servicer's long-term debt rating falls below A-/A3 and
a successor servicer acceptable to the Surety Bond Provider is not in place
within 60 days;
(t) the long-term debt rating of any active provider of an
Interest Rate Cap is below A-/A3 and a successor to such provider acceptable to
the Surety Bond Provider is not in place or collateral acceptable to the Surety
Bond Provider has not been posted, in each case, within 10 business days;
(u) the outstanding principal balance of Receivables
originated under the Seller's Participating Program exceeds 10% of the Borrowing
Base;
(v) the facility no longer carries a shadow rating of at least
BBB- from S&P or at least Baa3 from ▇▇▇▇▇'▇; and
(w) the occurrence of a Wind-Down Event which is not cured
within 35 days.
SECTION 6.2. WIND-DOWN EVENTS. The occurrence and continuation of
any one of the following events shall be a "WIND-DOWN EVENT" under this
Agreement:
(a) the Liquidity Provider or the Credit Support Provider
shall have notified the Company that an event of default has occurred under the
Liquidity Agreement or the Credit Support Agreement, respectively;
(b) the Company's Commercial Paper shall no longer be rated at
least "A-2", in the case of S&P, and at least "P-2", in the case of ▇▇▇▇▇'▇;
(c) a downgrade in the claims-paying rating of the Surety Bond
Provider below "Aa" or "AA" by either ▇▇▇▇▇'▇ or S&P.
SECTION 6.3. AMORTIZATION EVENTS. The occurrence and continuance of
any one of the following events shall be an "AMORTIZATION EVENT" under this
Agreement:
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(a) at any time the Net Investment exceeds 89.0% of the sum of
the Borrowing Base PLUS the amount on deposit in the Reserve Account and such
condition continues uncured;
(b) the First Investors Financial Services Group, Inc.
consolidated stockholders equity falls below $15,000,000 as reported on a Form
10-Q or Form 10-K;
(c) the semi-annual due diligence by the Surety Bond Provider
(or its designee) uncovers Receivables representing more than 10% of the sample
which display material adverse non-compliance with the Seller's Credit
Guidelines;
(d) the departure of any two of the following executives from
the Seller: ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, if a replacement
for such individual(s) acceptable to the Surety Bond Provider is not made within
90 days;
(e) GECC, as Servicer, is no longer obligated to service new
Loans originated by the Seller;
(f) the Seller changes its existing loan verification
procedures in any material respect and its new procedures are not acceptable to
the Surety Bond Provider;
(g) there occurs any material adverse change to the Seller's
Credit Guidelines, unless such change is approved by the Surety Bond Provider;
(h) the Delinquency Ratio for the Seller's total managed
portfolio averaged over any three consecutive Collection Periods shall equal or
exceed 8.5%; and
(i) on and after the Remittance Date next following the fourth
Collection Period after the Closing Date, the annualized Net Default Ratio for
the Seller's total managed portfolio averaged over any three consecutive
Collection Periods is greater than or equal to 5.0%.
SECTION 6.4. REMEDIES. If a Termination Event as specified in
Section 6.1 shall have occurred, the Collateral Agent, at the written direction
of Surety Bond Provider shall, or the Company may, with the consent of the
Surety Bond Provider, declare by written notice to the Debtor any date as the
date upon which the Note shall become due and payable and,
74
the Collateral Agent shall have all of the rights and remedies provided to a
secured creditor under the UCC by applicable law in respect thereto. In
addition, the Company shall have the right to cease issuing Related Commercial
Paper. The Company may, at its option, determine that its Carrying Costs with
respect to the Net Investment after the occurrence of a Termination Event are
calculated by reference to the Adjusted LIBOR Rate, if available and if the
Surety Bond Provider has not failed to make a required payment under the Surety
Bond, otherwise, the Base Rate PLUS 2.0%. There shall be no Subsequent Funding
upon the occurrence of any Termination Event or Potential Termination Event or
during the continuance of any Wind-Down Event, Potential Wind-Down Event,
Amortization Event or Potential Amortization Event. The payment by or on behalf
of the Debtor to the Noteholder of an amount such that after such payment the
Net Investment is below 89.0% of the sum of the Borrowing Base plus the amount
on deposit in the Reserve Account shall cure any Amortization Event described in
Section 6.3(a).
No waiver of any Termination Event, Potential Termination
Event, Wind-Down Event, Potential Wind-Down Event, Amortization Event or
Potential Amortization Event shall be effective without the prior written
consent of the Surety Bond Provider.
If the Note is declared due and payable in accordance with
this Section 6.4, the Collateral Agent shall, at the direction of the Surety
Bond Provider, and may, with the consent of the Surety Bond Provider, do any one
or more of the following:
(a) take all necessary action to foreclose upon the
Collateral;
(b) retain in satisfaction of any amounts owing from the
Debtor all amounts otherwise payable to the Debtor pursuant to this Agreement to
the extent necessary to pay in full all amounts (including principal and
interest) (i) due and payable under the Note, (ii) due and payable by the Debtor
under the Note Purchase Agreement, and (iii) all amounts due and payable by the
Debtor under the Insurance Agreement;
(c) pursue any available remedy by proceeding at law or in
equity including complete or partial foreclosure of the lien upon the Collateral
and sale of the Collateral or
75
any portion thereof or rights or interest therein as may appear necessary or
desirable (i) to collect amounts owed pursuant to the Note and any other
payments then due and thereafter to become due under the Note or (ii) to enforce
the performance and observance of any obligation, covenant, agreement or
provision contained in this Agreement to be observed or performed by the Debtor;
or
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Collateral Agent on behalf of the Secured Parties.
SECTION 6.5. PROCEEDS. The proceeds from the sale, disposition or
liquidation of the Receivables pursuant to Section 6.4 above shall be treated as
Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions governing allocations set forth herein.
ARTICLE VII
THE COLLATERAL AGENT
SECTION 7.1. DUTIES OF THE COLLATERAL AGENT. The Secured Parties
hereby appoint Texas Commerce Bank National Association to act solely on their
behalf as Collateral Agent hereunder, and Texas Commerce Bank National
Association hereby accepts such appointment. The Collateral Agent, both prior to
the occurrence of a Termination Event, Amortization Event or Wind-Down Event
hereunder and after an Amortization Event or Wind-Down Event shall have been
cured or waived, shall undertake to perform such duties and only such duties as
are specifically set forth in this Agreement. The Collateral Agent shall at all
times after the occurrence of a Termination Event, Amortization Event or
Wind-Down Event which has not been cured (except in the case of a Termination
Event) or waived exercise such of the rights and powers vested in it pursuant to
this Agreement using the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs.
All Collections received by the Collateral Agent from the Servicer
or otherwise will, pending remittance to the Secured Party entitled thereto, be
held in trust by the Collateral Agent for the benefit of the Secured Parties and
together with all other payment obligations of the Debtor
76
hereunder owing to the Secured Parties shall be payable to the Secured Parties
in accordance with the provisions of Article V hereof.
The Collateral Agent shall only resign if it shall (i) become
incapable of acting as Collateral Agent in accordance with the terms of this
Agreement, (ii) be adjudicated insolvent or bankrupt or otherwise become subject
to any bankruptcy, insolvency, reorganization or liquidation proceeding, (iii)
be no longer qualified as the Collateral Agent as such term is defined in the
agreement governing its responsibility as Collateral Agent or otherwise be
subject to replacement pursuant to or such agreement governing its
responsibility as Collateral Agent or (iv) materially breach any of the
provisions of this Agreement such Agreement or PROVIDED, FURTHER, that, without
the consent of the Company and the Surety Bond Provider, such resignation shall
not be effective until a successor Collateral Agent acceptable to the Surety
Bond Provider shall have accepted appointment as Collateral Agent hereunder and
shall have agreed to be bound by the terms of this Agreement.
Except as otherwise provided herein, the Collateral Agent shall not
resign from the obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Collateral Agent could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Collateral Agent shall be evidenced as to clause (i) above by
an opinion of counsel to such effect delivered to the Secured Parties.
Notwithstanding the foregoing, the Collateral Agent may resign if, after demand
therefor, it does not receive payment of any compensation due from the Debtor
pursuant to the letter agreement described in Section 7.2. No resignation of the
Collateral Agent shall become effective until a successor Collateral Agent
approved by the Secured Parties shall have assumed the responsibilities and
obligations of the Collateral Agent hereunder.
This Agreement shall be administered in the Corporate Trust Office
of the Collateral Agent. The Collateral Agent shall maintain fidelity bond
coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the administration of Collections covering such
actions and in such amounts as the Collateral Agent be-
77
lieves to be reasonable in light of industry standards from time to time.
SECTION 7.2. COMPENSATION AND INDEMNIFICATION OF COLLATERAL AGENT.
(a) The Collateral Agent shall be compensated for its activities hereunder and
reimbursed for reasonable out-of-pocket expenses (including (i) securities
transaction charges not waived due to the Collateral Agent's receipt of a
payment from a financial institution with respect to certain Eligible
Investments, as specified by the Debtor and (ii) the compensation and expenses
of its counsel and agents) pursuant to a separate letter agreement between the
Collateral Agent and the Debtor. All such amounts shall be payable from funds
available therefor in accordance with Section 5.1(a)(ii) hereof with any
increase in such amounts to be approved by the Surety Bond Provider. Subject to
the terms of such letter agreement, the Collateral Agent shall be required to
pay the expenses incurred by it in connection with its activities hereunder from
its own account. Notwithstanding any other provisions in this Agreement, the
Collateral Agent shall not be liable for any liabilities, costs or expenses of
the Debtor arising under any tax law, including without limitation any Federal,
state or local income or franchise taxes or any other tax imposed on or measured
by income (or any interest or penalties with respect thereto or from a failure
to comply therewith).
(b) The Debtor shall indemnify the Collateral Agent, its officers,
directors, employees and agents for, and hold it harmless against any loss,
liability or expense incurred without willful misconduct, gross negligence or
bad faith on its part, arising out of or in connection with (i) the acceptance
or administration of this Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under this Agreement and (ii) the
negligence, willful misconduct or bad faith of the Debtor in the performance of
its duties hereunder. All such amounts shall be payable in accordance with
Section 5.1(a)(viii) hereof. The provisions of this Section 7.2 shall survive
the termination of this Agreement.
SECTION 7.3. REPRESENTATIONS, WARRANTIES AND COVE- NANTS OF THE
COLLATERAL AGENT. The Collateral Agent agrees to make the following
representations, warranties and covenants, and further agrees that the Secured
Parties shall be deemed to
78
have relied upon such representations, warranties and covenants in accepting
their interest in the Receivables.
(a) ORGANIZATION AND GOOD STANDING. The Collateral Agent is a
national banking association duly organized, validly existing and in good
standing under the laws of the United States of America, and has full corporate
power, authority and legal right to own its properties and conduct its business
as such properties are presently owned and such business is presently conducted,
and to execute, deliver and perform its obligations under this Agreement.
(b) DUE AUTHORIZATION. The execution, delivery, and
performance of this Agreement have been duly authorized by the Collateral Agent
by all necessary corporate action on the part of the Collateral Agent.
(c) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Collateral Agent, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights in general
and except as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(d) NO CONFLICT. The execution and delivery of this Agreement
by the Collateral Agent, and the performance of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof applicable to the
Collateral Agent, will not conflict with, violate, result in any breach of any
of the terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, any Requirement of Law applicable to the
Collateral Agent or any indenture, contract, agreement, mortgage, deed of trust
or other instrument to which the Collateral Agent is a party or by which it is
bound.
SECTION 7.4. LIABILITY OF THE COLLATERAL AGENT. (a) The Collateral
Agent shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Collateral Agent in such capacity
herein. No implied covenants or obligations shall be read into this Agreement
against the Collateral Agent and, in the absence of bad faith on the part of the
Collateral Agent, the Collateral Agent may conclusively rely on the truth of the
statements and
79
the correctness of the opinions expressed in any certificates or opinions
furnished to the Collateral Agent and conforming to the requirements of this
Agreement.
(b) The Collateral Agent shall not be liable for an error of
judgment made in good faith by a Trust Officer, unless it shall be proved that
the Collateral Agent shall have been negligent in ascertaining the pertinent
facts.
(c) The Collateral Agent shall not be liable with respect to
any action taken, suffered or omitted to be taken in good faith in accordance
with this Agreement or at the direction of a Secured Party relating to the
exercise of any power conferred upon the Collateral Agent under this Agreement.
(d) The Collateral Agent shall not be charged with knowledge
of any Termination Event, Wind-Down Event or Amortization Event unless a Trust
Officer assigned to the Collateral Agent's Corporate Trust Office obtains actual
knowledge of such event or the Collateral Agent receives written notice of such
event from the Debtor, the Company, the Surety Bond Provider or the
Administrative Agent, as the case may be.
(e) Without limiting the generality of this Section 7.4, the
Collateral Agent shall have no duty (i) to see to any recording, filing or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest in
the Receivables or the Financed Vehicles, or to see to the maintenance of any
such recording or filing or depositing or to any recording, refiling or
redepositing of any thereof, (ii) to see to any insurance of the Financed
Vehicles or Obligors or to effect or maintain any such insurance, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any Lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Receivables, (iv) to confirm or verify the contents of
any reports or certificates of the Servicer or the Debtor delivered to the
Collateral Agent pursuant to this Agreement believed by the Collateral Agent to
be genuine and to have been signed or presented by the proper party or parties
or (v) to inspect the Financed Vehicles at any time or ascertain or inquire as
to the performance or observance of any of the Debtor's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of books, records, files and comput-
80
er records relating to the Receivables under the Servicing Agreement.
(f) The Collateral Agent shall not be required to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if there shall be reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability shall not be
reasonably assured to it, and none of the provisions contained in this Agreement
shall in any event require the Collateral Agent to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer under
this Agreement.
(g) The Collateral Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, officer's certificate, any
Monthly Debtor's Certificate, certificate of auditors, or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(h) The Collateral Agent may consult with counsel and any
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it under this Agreement
in good faith and in accordance with such opinion of counsel.
(i) The Collateral Agent shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement or to
institute, conduct or defend any litigation under this Agreement or in relation
to this Agreement, at the request, order or direction of the Company pursuant to
the provisions of this Agreement, unless the Company shall have offered to the
Collateral Agent reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby; nothing contained in
this Agreement, however, shall relieve the Collateral Agent of its obligations,
upon the occurrence of a Termination Event, a Wind-Down Event or Amortization
Event (that shall not have been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
81
(j) The Collateral Agent shall not be liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement.
(k) Prior to the occurrence of a Termination Event, Wind-Down
Event or Amortization Event and before the Collateral Agent has received notice
of such Termination Event, Wind-Down Event or Amortization Event and after the
curing (except with respect to a Termination Event) or waiver of any Termination
Event, Wind-Down Event or Amortization Event that may have occurred, the
Collateral Agent shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing so to do by a Secured Party; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Collateral Agent of
the costs, expenses or liabilities likely to be incurred by it in the making of
such investigation shall be, in the opinion of the Collateral Agent, not
reasonably assured by the Debtor, the Collateral Agent 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 Debtor or, if paid by the Collateral Agent, shall be reimbursed by the
Debtor upon demand.
(l) The Collateral Agent may execute any of the trusts or
powers hereunder or perform any duties under this Agreement either directly or
by or through agents or attorneys or a custodian. The Collateral Agent shall not
be responsible for any misconduct or negligence of any such agent or custodian
appointed with due care by it hereunder.
SECTION 7.5. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE COLLATERAL AGENT. The Collateral Agent shall not consolidate
with or merge into any other corporation or convey or transfer its properties
and assets substantially as an entirety to any Person, unless:
(i) the corporation formed by such consolidation or into
which the Collateral Agent is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Collateral Agent
substantially as an entirety shall be a corporation organized and existing
under the laws of the United States of America or any State or the Dis-
82
trict of Columbia and, if the Collateral Agent is not the surviving
entity, shall expressly assume, by an agreement supplemental hereto,
executed and delivered to the Secured Parties in form satisfactory to the
Secured Parties, the performance of every covenant and obligation of the
Collateral Agent hereunder; and
(ii) the Collateral Agent has delivered to the Secured
Parties an officer's certificate and an opinion of counsel each stating
that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 7.5 and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 7.6. LIMITATION ON LIABILITY OF THE COLLATERAL AGENT AND
OTHERS. The directors, officers, employees or agents of the Collateral Agent
shall not be under any liability to the Collateral Agent, any Secured Party or
any other Person hereunder or pursuant to any document delivered hereunder, it
being expressly understood that all such liability is expressly waived and
released as a condition of, and as consideration for, the execution of this
Agreement; PROVIDED, HOWEVER, that this provision shall not protect the
directors, officers, employees and agents of the Collateral Agent against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. Except as provided in Section
7.4, the Collateral Agent shall not be under any liability to any Secured Party
or any other Person for any action taken or for refraining from the taking of
any action in its capacity as Collateral Agent pursuant to this Agreement
whether arising from express or implied duties under this Agreement; PROVIDED,
HOWEVER, that this provision shall not protect the Collateral Agent against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Collateral Agent may rely in
good faith on any document of any kind PRIMA FACIE properly executed and
submitted by any Person respecting any matters arising hereunder. The Collateral
Agent shall not be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its duties to administer the Collections
and the Collection
83
Account in accordance with this Agreement which in its reasonable opinion may
involve it in any expense or liability.
SECTION 7.7. INDEMNIFICATION OF THE SECURED PARTIES. The Collateral
Agent shall indemnify and hold harmless the Company from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the duties of
the Collateral Agent or by reason of reckless disregard of obligations and
duties of the Collateral Agent hereunder or by reason of the acts, omissions or
alleged acts or omissions of the Collateral Agent pursuant to this Agreement.
The provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES, ETC. Except where telephonic instructions or
notices are authorized herein to be given, all notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be sent by facsimile transmission
with a confirmation of the receipt thereof and shall be deemed to be given for
purposes of this Agreement on the day that the receipt of such facsimile
transmission is confirmed in accordance with the provisions of this Section 8.1.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 8.1, notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses indicated below, and, in the case
of telephonic instructions or notices, by calling the telephone number or
numbers indicated for such party below:
84
If to the Company:
Enterprise Funding Corporation
c/o Merrill ▇▇▇▇▇ Money Markets Inc.
World Financial Center - South Tower
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(with a copy to the Administrative Agent)
If to the Debtor:
First Investors Auto Receivables
Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Collateral Agent:
Texas Commerce Bank National Association
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Global Trust Services-First
Investor Auto Receivables Corporation
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Administrative Agent:
NationsBank N.A.
NationsBank Corporate
Center - 10th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇-▇▇▇-▇▇-▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Investment Banking
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
85
If to the Surety Bond Provider:
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Insured Portfolio
Management - SF
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Debtor, the Collateral Agent, the Secured Parties, the Seller and their
respective successors and assigns and shall inure to the benefit of the Debtor,
the Servicer, the Collateral Agent, the Secured Parties, the Seller and the
Company and their respective successors and permitted assigns including any
Liquidity Provider; PROVIDED that the Debtor shall not assign any of its rights
or obligations hereunder without the prior written consent of the Collateral
Agent acting upon written instruction of each of the Secured Parties. The Debtor
and the Collateral Agent hereby acknowledge that the Company has granted a
security interest in all of its rights hereunder to the EFC Collateral Agent. In
addition, the Debtor hereby acknowledges that the Company may at any time and
from time to time assign all or a portion of its rights hereunder to the
Liquidity Provider pursuant to the Liquidity Agreement. Except as expressly
permitted hereunder or in the agreements establishing the Company's commercial
paper program, the Company shall not assign any of its rights or obligations
hereunder without the prior written consent of the Debtor.
SECTION 8.3. SEVERABILITY CLAUSE. Any provisions of this Agreement
which are 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 8.4. AMENDMENTS; GOVERNING LAW. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER (I) MAY NOT BE CHANGED ORALLY
BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH
ENFORCEMENT IS SOUGHT AND (II) SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES
86
HEREUNDER AGREE THAT THEY WILL NOT AMEND, MODIFY, WAIVE, OR TERMINATE ANY
PROVISION OF THIS AGREEMENT WITHOUT THE WRITTEN CONSENT OF EACH PARTY.
SECTION 8.5. NO BANKRUPTCY PETITION AGAINST THE COMPANY OR THE
DEBTOR. The Debtor and each of the other parties hereto covenant and agree that,
and each such Person agrees that they shall cause any successor Servicer
appointed pursuant to Section 4.1 to covenant and agree that, prior to the date
which is one year and one day after the payment in full of all Commercial Paper
issued by the Company it will not institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law. The Company, the Secured Parties, the Seller
and the Collateral Agent hereby agree that they shall not institute against, or
join any other Person in instituting against, the Debtor any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law unless one year
and one day has passed following the final payment on the Note.
SECTION 8.6. SETOFF. The Debtor hereby irrevocably and
unconditionally waives all right of setoff that it may have under contract
(including this Agreement), applicable law or otherwise with respect to any
funds or monies of the Debtor at any time held by or in the possession of the
Collateral Agent or Reserve Account Agent.
SECTION 8.7. NO RECOURSE. Except as otherwise expressly provided in
this Agreement, it is understood and agreed that the Debtor shall not be liable
for amounts due under this Agreement, the Note, the Insurance Agreement or the
Note Purchase Agreement, except to the extent of the Collateral. The preceding
sentence shall not relieve the Debtor from any liability hereunder with respect
to its representations, warranties, covenants and other payment and performance
obligations herein described.
SECTION 8.8. FURTHER ASSURANCES. The Debtor agrees to do such
further acts and things and to execute and deliver to the Secured Parties, the
Administrative Agent or the Collateral Agent such additional assignments,
agreements, powers and instruments as are required by the Collateral Agent or
the Surety Bond Provider to carry into effect the purposes of this Agreement or
to better assure and confirm unto the
87
Collateral Agent or the Surety Bond Provider its rights, powers and remedies
hereunder.
SECTION 8.9. OTHER COSTS, EXPENSES AND RELATED MATTERS. (a) The
Debtor agrees, upon receipt of a written invoice, to pay or cause to be paid,
and to save the Collateral Agent and the Secured Parties harmless against
liability for the payment of, all reasonable out-of-pocket expenses (including,
without limitation, attorneys', accountant's and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or employees of the
Collateral Agent) incurred by or on behalf of the Collateral Agent (i) in
connection with the negotiation, execution, delivery and preparation of this
Agreement and any documents or instruments delivered pursuant hereto and the
transactions contemplated hereby (including, without limitation, the perfection
or protection of the Collateral Agent's interest in the Collateral) and (ii)
from time to time (a) relating to any amendments, waivers or consents under this
Agreement, (b) arising in connection with the Collateral Agent's or the Secured
Parties' or their agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the Collateral Agent's
security interest in the Collateral under this Agreement), or (c) arising in
connection with any audit, dispute, disagreement, litigation or preparation for
litigation involving this Agreement.
SECTION 8.10. EXERCISE OF RIGHTS BY SURETY BOND PROVIDER. All rights
granted to the Surety Bond Provider pursuant to this Agreement shall terminate
during the pendency of a payment default by the Surety Bond Provider under the
Surety Bond or during the pendency of a Surety Insolvency (as defined in the
Insurance Agreement as in effect on the date hereof) and during such time the
Surety Bond Provider's rights may be exercised by the Company, PROVIDED,
HOWEVER, the Surety Bond Provider's rights shall be reinstated in full,
immediately upon the cure of such default.
SECTION 8.11. COUNTERPARTS. This Agreement may be executed in any
number of copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
SECTION 8.12. HEADINGS. Section headings used in this Agreement are
for convenience of reference only and shall not affect the construction or
interpretation of this Agree- ment.7
88
IN WITNESS WHEREOF, the Debtor, the Company, the Surety Bond
Provider, the Reserve Account Agent, the Collateral Agent and the Seller and,
solely with respect to Sections 5A.1 and 5A.2 hereof, NationsBank, N.A., in its
individual capacity, have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the day and year first above
written.
FIRST INVESTORS AUTO RECEIVABLES
CORPORATION
as Debtor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
Title:
FIRST INVESTORS FINANCIAL SERVICES, INC.
as Seller
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.
Title:
ENTERPRISE FUNDING CORPORATION,
as Company
By: /s/ ▇▇▇▇▇▇ ▇. HAVATT
Name: ▇▇▇▇▇▇ ▇. Havatt
Title: Vice President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
as Collateral Agent
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
and Trust Officer
NATIONSBANK, N.A., individually and
as Reserve Account Agent
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
89
MBIA INSURANCE CORPORATION
as Surety Bond Provider
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Secretary
90
EXHIBIT A
[Form of Note]
October 22, 1996
$105,000,000
Reference is hereby made to that certain Note Purchase Agreement
dated as of October 22, 1996 (as amended, supplemented or otherwise modified in
accordance with the terms thereof and in effect from time to time, the "NOTE
PURCHASE AGREEMENT") by and between First Investors Auto Receivables
Corporation, a Delaware corporation (the "ISSUER") and Enterprise Funding
Corporation, a Delaware corporation (the "COMPANY") and to that certain Security
Agreement dated as of October 22, 1996 (as amended, supplemented or otherwise
modified and in effect from time to time, the "SECURITY AGREEMENT") by and among
the Issuer, the Company, First Investors Financial Services, Inc., as seller,
Texas Commerce Bank National Association, as collateral agent, NationsBank,
N.A., as reserve account agent and MBIA Insurance Corporation. All capitalized
terms used but not defined herein shall have the meanings assigned thereto in
the Note Purchase Agreement or the Security Agreement.
FOR VALUE RECEIVED, the Issuer hereby promises to pay to the order
of the Company at the principal office of the Company at World Financial Center
- South Tower, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ a principal sum
equal to ONE HUNDRED FIVE MILLION DOLLARS ($105,000,000.00), in lawful money of
the United States of America and in immediately available funds.
The date and amount of each Funding extended by the Company to the
Issuer under the Note Purchase Agreement, and each payment of principal thereof,
shall be recorded by the Company on its books and, prior to any transfer of this
Note (or, at the discretion of the Company, at any other time), endorsed by the
Company on the schedule attached hereto or any continuation thereof. Although
the stated principal amount of this Note is as stated above, this Note shall be
enforceable only with respect to the Issuer's obligation to pay the principal
hereof only to the extent of the unpaid principal amount
A-1
of the Fundings outstanding under the Note Purchase Agreement at the time such
enforcement shall be sought.
Interest on the outstanding principal amount of this Note shall
accrue at the rate or rates necessary for the payment to the holder hereof, on
the dates provided for in the Security Agreement, of Carrying Costs payable to
the holder hereof on such date or dates, and shall be payable in accordance with
the priorities set forth in the Security Agreement.
Principal in an amount equal to the Targeted Monthly Principal
Payment will be due and payable on each Remittance Date, and such amounts shall
be payable in accordance with the priorities set forth in Section 5.1 of the
Security Agreement. On each Remittance Date, principal in an amount equal to the
principal balance of each Receivable determined during the prior Collection
Period to be an Ineligible Receivable shall be due and payable hereunder.
The entire outstanding principal amount of this Note and accrued
interest thereon will be due and payable on the Remittance Date occurring in the
calendar month following the third calendar month in which the latest maturing
Receivable (determined as of the Termination Date) is scheduled to mature
(without regard to extensions subsequently granted on any Receivable by the
Issuer or any servicing agent).
After the occurrence of a Termination Event, the holder hereof may
(with the prior written consent of the Surety Bond Provider, subject to the
terms of the Security Agreement) declare all amounts due hereunder to be
immediately due and payable.
The Issuer's obligation to make payments hereunder shall be a
limited recourse obligation of the Issuer, payable solely from the Collateral;
provided, however, that the foregoing shall not affect the right of the
Administrative Agent on behalf of the holder hereof to make a demand for payment
under the Surety Bond of amounts due hereunder, in accordance with the
provisions thereof.
The Issuer shall pay all costs of collection of any amount due
hereunder when incurred, including without
A-2
limitation, reasonable attorney's fees and expenses, and including all costs and
expenses actually incurred in connection with the pursuit by the holder of any
of its rights or remedies referred to herein or in the Security Agreement or the
protection of or realization upon collateral, and all such costs shall be
payable in accordance with Section 5.1(a)(x) of the Security Agreement.
The Issuer waives presentment, notice of dishonor, protest and other
notice or formality with respect to this Note.
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THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
FIRST INVESTORS AUTO
RECEIVABLES CORPORATION
By:
Name:
Title:
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AMOUNT OF AMOUNT OF PRINCIPAL NOTATION
DATE OF FUNDING REPAYMENT OUTSTANDING BY
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