Exhibit 10.2
________________________________________________________________________________
SALE AND SERVICING
AGREEMENT
among
TFC AUTOMOBILE RECEIVABLES TRUST 2002-1,
Issuer,
TFC RECEIVABLES CORPORATION V,
Seller,
THE FINANCE COMPANY,
Servicer,
RADIAN ASSET ASSURANCE INC.,
Insurer,
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
Trust Collateral Agent and Backup Servicer,
and
▇▇▇▇▇ FARGO FINANCIAL AMERICA, INC.,
Successor Servicer
Dated as of March 19, 2002
________________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I Definitions ........................................................................... 2
SECTION 1.1. Definitions .................................................................... 2
SECTION 1.2. Other Definitional Provisions .................................................. 21
SECTION 1.3. Usage of Terms ................................................................. 21
SECTION 1.4. Certain References ............................................................. 22
SECTION 1.5. No Recourse .................................................................... 22
SECTION 1.6. Action by or Consent of Noteholders and Certificateholders ..................... 22
SECTION 1.7. Material Adverse Effect ........................................................ 22
ARTICLE II Conveyance of Receivables ............................................................. 23
SECTION 2.1. Conveyance of Receivables ...................................................... 23
SECTION 2.2. Further Encumbrance of Trust Property .......................................... 24
ARTICLE III The Receivables ....................................................................... 25
SECTION 3.1. Representations and Warranties of Seller ....................................... 25
SECTION 3.2. Repurchase upon Breach ......................................................... 25
SECTION 3.3. Custody of Receivables Files ................................................... 26
ARTICLE IV Administration and Servicing of Receivables ........................................... 28
SECTION 4.1. Duties of the Servicer ......................................................... 28
SECTION 4.2. Collection of Receivable Payments; Modifications of Receivables ................ 29
SECTION 4.3. Realization Upon Receivables ................................................... 31
SECTION 4.4. Insurance ...................................................................... 32
SECTION 4.5. Maintenance of Security Interests in Vehicles .................................. 33
SECTION 4.6. Purchase of Receivables Upon Breach of Covenant ................................ 34
SECTION 4.7. Total Servicing Fee; Payment of Certain Expenses by Servicer ................... 35
SECTION 4.8. Servicer's Certificate ......................................................... 35
SECTION 4.9. Annual Statement as to Compliance, Notice of Servicer
Termination Event .............................................................. 36
SECTION 4.10. Independent Accountants' Report ................................................ 36
SECTION 4.11. Access to Certain Documentation and Information
Regarding Receivables .......................................................... 37
SECTION 4.12. Monthly Duties of Backup Servicer and Successor Servicer ....................... 37
SECTION 4.13. Retention and Termination of Servicer .......................................... 40
SECTION 4.14. Fidelity Bond .................................................................. 40
ARTICLE V Trust Accounts and Spread Account; Payments; Statements to
Certificateholders and Noteholders .................................................... 40
SECTION 5.1. Establishment of Trust Accounts and Spread Account. ............................ 40
SECTION 5.2. Reserved ....................................................................... 43
SECTION 5.3. Certain Reimbursements to the Servicer ......................................... 43
SECTION 5.4. Application of Collections ..................................................... 43
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TABLE OF CONTENTS
(continued)
Page
SECTION 5.5. Spread Account ...................................................... 44
SECTION 5.6. Additional Deposits ................................................. 45
SECTION 5.7. Payments ............................................................ 45
SECTION 5.8. Note Payment Account ................................................ 48
SECTION 5.9. [Reserved.] ......................................................... 49
SECTION 5.10. [Reserved.] ......................................................... 49
SECTION 5.11. Statements to Certificateholders and Noteholders .................... 49
SECTION 5.12. Optional Deposits by the Insurer .................................... 51
ARTICLE VI The Note Policy ............................................................. 51
SECTION 6.1. Claims Under Note Policy ............................................ 51
SECTION 6.2. Preference Claims ................................................... 52
SECTION 6.3. Surrender of Policy ................................................. 53
ARTICLE VII RESERVED .................................................................... 53
ARTICLE VIII The Seller .................................................................. 53
SECTION 8.1. Covenants, Representations, and Warranties of Seller ................ 53
SECTION 8.2. Corporate Existence ................................................. 55
SECTION 8.3. Liability of Seller; Indemnities .................................... 56
SECTION 8.4. Merger or Consolidation of, or Assumption of
the Obligations of, Seller .......................................... 57
SECTION 8.5. Limitation on Liability of Seller and Others ........................ 58
SECTION 8.6. Seller May Own Certificates or Notes ................................ 58
ARTICLE IX The Servicer ................................................................ 59
SECTION 9.1. Covenants, Representations, and Warranties of Servicer .............. 59
SECTION 9.2. Liability of Servicer; Indemnities .................................. 62
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or the Trust Collateral Agent .......... 64
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral
Agent and Others .................................................... 65
SECTION 9.5. Delegation of Duties ................................................ 66
SECTION 9.6. Servicer and Trustee Not to Resign .................................. 67
ARTICLE X Default ..................................................................... 67
SECTION 10.1. Servicer Termination Event .......................................... 67
SECTION 10.2. Consequences of a Servicer Termination Event ........................ 69
SECTION 10.3. Consequences of an Insurance Agreement Event of Default ............. 70
SECTION 10.4. Appointment of Successor ............................................ 70
SECTION 10.5. Notification to Noteholders and Certificateholders .................. 72
SECTION 10.6. Waiver of Past Defaults ............................................. 72
SECTION 10.7. Termination of Trustee .............................................. 73
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TABLE OF CONTENTS
(continued)
Page
SECTION 10.8. Successor Servicer .................................................... 73
SECTION 10.9. Termination of Backup Servicer ........................................ 74
SECTION 10.10. Termination of Successor Servicer ..................................... 74
ARTICLE XI Termination .................................................................. 75
SECTION 11.1. Optional Repurchase of Receivables and Redemption of the Notes ........ 75
ARTICLE XII Administrative Duties of the Servicer ........................................ 76
SECTION 12.1. Administrative Duties ................................................. 76
SECTION 12.2. Records ............................................................... 78
SECTION 12.3. Additional Information to be Furnished to the Issuer .................. 78
ARTICLE XIII Miscellaneous Provisions ..................................................... 79
SECTION 13.1. Amendment ............................................................. 79
SECTION 13.2. Protection of Title to Trust .......................................... 80
SECTION 13.3. Notices ............................................................... 82
SECTION 13.4. Assignment ............................................................ 83
SECTION 13.5. Limitations on Rights of Others ....................................... 83
SECTION 13.6. Severability .......................................................... 83
SECTION 13.7. Separate Counterparts ................................................. 83
SECTION 13.8. Headings .............................................................. 84
SECTION 13.9. Governing Law ......................................................... 84
SECTION 13.10. Assignment to Trustee ................................................. 84
SECTION 13.11. Nonpetition Covenants ................................................. 84
SECTION 13.12. Limitation of Liability of Owner Trustee, Trust Collateral
Agent and the Successor Servicer ...................................... 84
SECTION 13.13. Independence of the Servicer .......................................... 85
SECTION 13.14. No Joint Venture ...................................................... 85
SECTION 13.15. Limited Recourse ...................................................... 85
SCHEDULES
Schedule A - Schedule of Receivables
Schedule B - Schedule of Representations and Warranties
Schedule C - Monthly Account Information
EXHIBITS
Exhibit A - Form of Servicer's Certificate
Exhibit B - Form of Deficiency Claim Notice
Exhibit C - Form of Request for Release and Receipt of Documents
Exhibit D - Form of Trustee's Acknowledgement
Exhibit E - The Finance Company Charge-Off Policy
Exhibit F - The Finance Company Allowable Delinquency Policy
Exhibit G - The Finance Company Delinquency Policy
Exhibit H - Investor Certification
iii
SALE AND SERVICING AGREEMENT dated as of March 19, 2002, among
TFC AUTOMOBILE RECEIVABLES TRUST 2002-1, a Delaware business trust (the
"Issuer"), TFC RECEIVABLES CORPORATION V, a Delaware corporation (the "Seller"),
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THE FINANCE COMPANY, a Virginia corporation ("TFC" or, in its capacity as
---
Servicer hereunder, the "Servicer"), RADIAN ASSET ASSURANCE INC., a stock
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insurance company incorporated in the State of New York (the "Insurer"), ▇▇▇▇▇
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FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association (in
its capacity as Trustee, the "Trustee", in its capacity as Trust Collateral
-------
Agent, the "Trust Collateral Agent", in its capacity as Backup Servicer, the
----------------------
"Backup Servicer", and in its capacity as P.O. Box Owner, the "P.O. Box Owner")
--------------- --------------
and ▇▇▇▇▇ FARGO FINANCIAL AMERICA, INC. (in its capacity as Successor Servicer,
the "Successor Servicer").
------------------
WHEREAS, the Issuer has entered into an Indenture dated as of
March 19, 2002, with the Insurer, the Trust Collateral Agent and the Trustee,
pursuant to which the Notes will be issued.
WHEREAS, TFC and the Seller have entered into a Purchase
Agreement dated as of March 19, 2002, to provide for, among other things, the
transfer by TFC to the Seller of all of TFC's right, title and interest in and
to certain receivables on the Closing Date, which the Seller is assigning to the
Trust hereby, and which the Trust will assign to the Trustee, for the benefit of
the Insurer and the Noteholders pursuant to the Indenture. As a precondition to
the effectiveness of the Purchase Agreement, TFC, the Seller, the Insurer, the
Trust Collateral Agent, the Backup Servicer, the P.O. Box Owner, the Successor
Servicer and the Issuer will enter into this Agreement to provide for the
servicing of the Assets;
WHEREAS, the Seller is and will be conveying to the Issuer,
among other things, all of the Seller's rights derived under this Agreement, and
TFC and the Seller each agree that all covenants, representations, warranties
and agreements made by it in the Purchase Agreement with respect to itself or
such receivables shall also be for the benefit of the Trustee, on behalf of the
Noteholders and the Insurer;
WHEREAS, TFC, in its capacity as Servicer, agrees that all
representations, warranties, covenants and agreements made by the Servicer
herein with respect to such receivables shall also be for the benefit of the
Trustee, the Insurer and the Noteholders from time to time;
WHEREAS, for their services under this Agreement, the
Servicer, the Backup Servicer, the Successor Servicer and the Trustee will
receive the compensation described herein or in the Indenture;
WHEREAS, the Issuer desires to purchase a portfolio of
receivables arising in connection with motor vehicle retail installment sale
contracts acquired by The Finance Company directly or indirectly through motor
vehicle dealers;
WHEREAS, the Seller has purchased such receivables from TFC
and is willing to sell such receivables to the Issuer; and
WHEREAS, the Servicer is willing to service all such
receivables;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
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SECTION 1.1. Definitions. Whenever used in this Agreement, the following
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words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
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recognized independent accountants described in Section 4.10.
"Accounting Date" means, with respect to a Payment Date, the
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last day of the Monthly Period immediately preceding such Payment Date.
"Acknowledgement" has the meaning assigned to such term in
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Section 3.3(b).
"Actuarial Method" means the method of allocating a fixed
----------------
level monthly payment on an obligation between principal and interest, pursuant
to which the portion of such payment that is allocated to interest is equal to
the product of (a) 1/12, (b) the fixed annual rate of interest on such
obligation and (c) the outstanding principal balance of such obligation.
"Actuarial Receivable" means a Receivable under which the
--------------------
portion of the payment allocated to interest and the portion of the payment
allocable to principal is determined in accordance with the Actuarial Method.
"Additional Principal Payment Amount" means, with respect to
-----------------------------------
any Payment Date, the lesser of (a) the remaining Available Funds on such
Payment Date (after all payments referred to in clauses (i) through (vi) of the
priority of payments set forth in Section 5.7(a)), and (b) the amount required
to reduce the Note Principal Balance to 75.80% of the Pool Balance at such
Payment Date.
"Administrative Receivable" means, with respect to any Monthly
-------------------------
Period, a Receivable which the Servicer is required to purchase pursuant to
Section 4.6 on the Deposit Date with respect to such Monthly Period.
2
"Affiliate" means, with respect to any specified Person, any
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other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used with
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respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
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"controlled" have meanings correlative to the foregoing.
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"Aggregate Principal Balance" means, with respect to any date
---------------------------
of determination, the sum of the Principal Balances for all Receivables (other
than (i) any Receivable that became a Liquidated Receivable before or during the
related Monthly Period and (ii) any Receivable that became a Purchased
Receivable before or during the related Monthly Period) as of the immediately
preceding Accounting Date.
"Agreement" means this Sale and Servicing Agreement, as the
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same may be amended and supplemented from time to time.
"Allowable Delinquency Policy" means The Finance Company
----------------------------
Allowable Delinquency Policy attached hereto as Exhibit F.
"Amount Available" means, with respect to a Payment Date, the
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sum of (i) the Available Funds for the immediately preceding Determination Date,
plus (ii) the amount on deposit in the Spread Account for the immediately
preceding Determination Date.
"Amount Financed" means, with respect to a Receivable, the
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aggregate amount advanced to the Obligor under such Receivable toward the
purchase price of the Financed Vehicle and any related costs, including amounts
advanced in respect of accessories, insurance premiums, service, car club and
warranty contracts, other items customarily financed by auto lenders as part of
retail automobile installment sale contracts or promissory notes, and related
costs.
"Annual Percentage Rate" or "APR" of a Receivable means the
---------------------- ---
annual percentage rate of finance charges or service charges, as stated in the
related Contract.
"Authorized Officer" means, (i) in the case of the Trustee,
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the Backup Servicer or the Successor Servicer, the chairman or vice-chairman of
the board of directors, the chairman or vice-chairman of the executive committee
of the board of directors, the president, any vice president, assistant
vice-president or managing director, the secretary, any assistant secretary or
any other officer of the Trustee, the Backup Servicer or the Successor Servicer,
as applicable, customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, and (ii) means in the case of TFC, the chief executive
officer, the chief financial officer or the president of TFC.
3
"Auto Center Product" means certain installment sales
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contracts acquired by TFC on an individual basis after TFC has reviewed and
approved the Obligor's credit application.
"Auto Center Program" means TFC's program for acquiring Auto
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Center Product.
"Available Funds" means, with respect to any Determination
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Date, the sum of (i) the Collected Funds for such Determination Date, (ii) all
Purchase Amounts deposited in the Collection Account during the related Monthly
Period, plus Investment Earnings with respect to the Trust Accounts for the
related Payment Date, (iii) following the acceleration of the Notes pursuant to
Section 5.2 of the Indenture, the amount of money or property collected pursuant
to Section 5.4 of the Indenture since the preceding Determination Date by the
Trustee or Controlling Party for distribution pursuant to Section 5.7 hereof,
and (iv) the proceeds of any redemption of the Notes described in Section 11.1
hereof.
"Average Delinquency Ratio" means, with respect to any
-------------------------
Determination Date, the arithmetic average of the Delinquency Ratios (as such
term is defined in the Insurance Agreement) for such Determination Date and the
two immediately preceding Determination Dates.
"Base Servicing Fee" means, with respect to any Monthly
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Period, the fee payable to the Servicer for services rendered during such
Monthly Period, which shall be equal to one-twelfth of the Servicing Fee Rate
multiplied by the Pool Balance as of the close of business on the last day of
the preceding Monthly Period; provided, however, if the Successor Servicer has
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succeeded TFC as the Servicer, with respect to any Monthly Period, the fee
payable to the Successor Servicer for services rendered during such Monthly
Period, shall be equal to the greater of (a) the amount described above and (b)
$15 per Receivable per Monthly Period to be serviced as of the close of business
on the last day of the preceding Monthly Period.
"Basic Documents" means this Agreement, the Certificate of
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Trust, the Trust Agreement, the Purchase Agreement, the Indenture, the Insurance
Agreement, the Certificate to the Trustee, the Premium Letter, the Standby
Processing Agreement, the Stock Pledge Agreement, the Note Purchase Agreement,
the Parent Support Agreement and the Fort ▇▇▇▇ Letters and other documents and
certificates delivered in connection therewith.
"Bulk Product" means installment sales contracts acquired on a
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group basis by TFC through the purchase of a portfolio of performing contracts
from a Dealer's portfolio of existing installment sales contracts.
"Business Day" means a day other than a Saturday, a Sunday or
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other day on which commercial banks located in the states of Delaware, Virginia,
Minnesota or New York, or in the State where any successor to the Servicer is
located, are authorized or obligated to be closed.
4
"Certificate" means a Trust Certificate (as defined in the
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Trust Agreement).
"Certificate Distribution Account" means the account to be
--------------------------------
established and maintained by the Owner Trustee on behalf of the
Certificateholders pursuant to Section 3.5 of the Trust Agreement.
"Certificateholder" has the meaning assigned to such term in
-----------------
the Trust Agreement.
"Charge-Off Policy" means The Finance Company Charge-Off
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Policy attached hereto as Exhibit E.
"Closing Date" means March 19, 2002.
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"Collected Funds" means, with respect to any Determination
---------------
Date, the amount of funds in the Collection Account representing collections on
the Receivables deposited to the Collection Account during the related Monthly
Period, including all Net Liquidation Proceeds collected during the related
Monthly Period (but excluding any Purchase Amounts deposited in the Collection
Account pursuant to Sections 3.2 or 4.6 of this Agreement); provided, however,
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that collections on Receivables deposited to the Collection Account during such
Monthly Period (or any earlier Monthly Period) which are required to be
deposited to the Collection Account during the next succeeding Monthly Period
shall be treated hereunder as "Collected Funds" with respect to such next
---------------
succeeding Monthly Period and not as "Collected Funds" for the Monthly Period
---------------
relating to such Determination Date.
"Collection Account" means the account designated as such,
------------------
established and maintained pursuant to Section 5.1.
"Collection Records" means all manually prepared or computer
------------------
generated records relating to collection efforts or payment histories with
respect to the Receivables.
"Computer Tape" means the computer tapes or other electronic
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media furnished or required to be furnished by the Seller to the Issuer and its
assigns describing certain characteristics of the Receivables.
"Contract" means a motor vehicle retail installment sale
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contract.
"Controlling Party" means (a) the Insurer, so long as no
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Insurer Default shall have occurred and be continuing and (i) there are Notes
outstanding, (ii) any amounts due to the Insurer remain unpaid or (iii) the Note
Policy has not expired according to its terms and (b) in all other cases, the
Security Majority.
"Corporate Trust Office" means (i) with respect to the Owner
----------------------
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust
Administration, and (ii) with respect
5
to the Trustee and the Trust Collateral Agent, the principal corporate trust
office of the Trustee, which at the time of execution of this agreement is Sixth
Street and Marquette Avenue, MAC N9311-161 ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust Services-Asset Backed Administration.
"Cram Down Loss" means, with respect to a Receivable, if a
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court of appropriate jurisdiction in an insolvency proceeding shall have issued
an order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the Scheduled Receivable Payments to be made on such Receivable,
an amount equal to (i) the excess of the principal balance of such Receivable
immediately prior to such order over the principal balance of such Receivable as
so reduced and/or (ii) if such court shall have issued an order reducing the
effective rate of interest on such Receivable, the excess of the principal
balance of such Receivable immediately prior to such order over the net present
value (using as the discount rate the higher of the APR on such Receivable or
the rate of interest, if any, specified by the court in such order) of the
Scheduled Receivable Payments as so modified or restructured. A "Cram Down Loss"
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shall be deemed to have occurred on the date of issuance of such order.
"Cut-Off Date" means the close of business on December 31,
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2001.
"Dealer" means (a) a dealer who sold a Financed Vehicle and
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who originated and assigned the respective Receivable or (b) a third party
(which in no event shall be an Affiliate of TFC) who purchased a Receivable from
a Dealer and who sold such Receivable to TFC under a Dealer Agreement or
pursuant to a Dealer Assignment.
"Dealer Agreement" means an agreement between a Dealer and TFC
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relating to the acquisition of Receivables from such Dealer by TFC.
"Dealer Assignment" means, with respect to a Receivable, the
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assignment executed by a Dealer conveying such Receivable to TFC.
"Dealer Underwriting Guide" means TFC's Credit Approval
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Guidelines used by TFC in the purchase of Receivables under its Point-of-Sale
Program, as amended from time to time.
"Deemed Cured" shall have the meaning specified in the
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Insurance Agreement.
"Deficiency Claim Amount" shall have the meaning set forth in
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Section 5.5.
"Deficiency Claim Date" means, with respect to any Payment
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Date, the fourth Business Day immediately preceding such Payment Date.
"Deficiency Notice" shall have the meaning set forth in
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Section 5.5.
"Delinquency Category" means (a) for Receivables having
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monthly Scheduled Receivable Payments in respect of which the relevant Obligor
shall have failed
6
to make a Scheduled Receivable Payment or a portion thereof on the due date
therefor, the applicable Delinquency Category into which such Receivable falls
based on the number of days delinquent, as described in Exhibit G hereto and (b)
for Receivables not having monthly Scheduled Receivable Payments in respect of
which the relevant Obligor shall have failed to make a Scheduled Receivable
Payment or a portion thereof on the due date therefor, the applicable
Delinquency Category into which such Receivable falls based on the number of
weeks delinquent, as described in Exhibit G hereto.
"Delinquent Receivable" means a Receivable which (a) falls
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into any Delinquency Category (other than the "Current" category), as described
in Exhibit G hereto and (b) is not a Liquidated Receivable.
"Delivery" means as follows with respect to the Trust Account
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Property:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-102(a)(47) of the UCC and are
susceptible of physical delivery, transfer thereof to the Trust Collateral Agent
by physical delivery to the Trust Collateral Agent endorsed to, or registered in
the name of, the Trust Collateral Agent or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of the UCC) transfer
thereof (i) by delivery of such certificated security endorsed to, or registered
in the name of the Trust Collateral Agent or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102 of the UCC) and the making
by such clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the appropriate
securities account of the Trust Collateral Agent by the amount of such
certificated security and the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the Trust
Collateral Agent (all of the foregoing, "Physical Property"), and, in any event,
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any such Physical Property in registered form shall be in the name of the Trust
Collateral Agent; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Trust Account Property to the Trust Collateral Agent or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a securities intermediary that is also a "depository" pursuant to
applicable federal regulations; the making by such securities intermediary of
entries in its books and records crediting such Trust Account Property to the
Trust Collateral Agent's security account at the securities intermediary and
identifying such book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations as belonging to the Trust Collateral
Agent; and such additional or alternative procedures as may hereafter become
appropriate to effect
7
complete transfer of ownership of any such Trust Account Property to the Trust
Collateral Agent, consistent with changes in applicable law or regulations or
the interpretation thereof; and
(c) with respect to any uncertificated security under Article
8 of the UCC and that is not governed by clause (b) above, registration on the
books and records of the issuer thereof in the name of the Trust Collateral
Agent or its nominee or custodian who either (i) becomes the registered owner on
behalf of the Trust Collateral Agent or (ii) having previously become the
registered owner, acknowledges that it holds such uncertificated security for
the Trust Collateral Agent.
"Deposit Date" means, with respect to any Monthly Period, the
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Business Day immediately preceding the related Determination Date.
"Depositor" shall mean the Seller in its capacity as Depositor
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under the Trust Agreement.
"Determination Date" means, with respect to any Monthly
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Period, the fifth Business Day preceding the Payment Date in the next calendar
month.
"Draw Date" means, with respect to any Payment Date, the third
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Business Day (as defined in the Note Policy) immediately preceding such Payment
Date.
"Electronic Ledger" means the electronic master record of the
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retail installment sales contracts or installment loans of the Servicer.
"Eligible Bank" means any depository institution (which shall
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initially be the Trust Collateral Agent) acceptable to the Controlling Party,
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any United States branch or
agency of a foreign bank), which is subject to supervision and examination by
federal or state banking authorities and which at all times (a) has a net worth
in excess of $100,000,000 and (b) has either (i) a rating of P-1 or higher from
Moody's and of A-1+ or higher from Standard & Poor's with respect to short-term
deposit obligations, or (ii) if such institution has issued long-term unsecured
debt obligations, a rating of Aa2 or higher from Moody's and of AA or higher
from Standard & Poor's with respect to long-term unsecured debt obligations.
Such depository institution (other than the Trust Collateral Agent) shall have
been approved in writing by the Controlling Party, acting in its discretion, by
written notice to the Trust Collateral Agent.
"Eligible Deposit Account" means either (a) a segregated
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account with an Eligible Bank or (b) a segregated trust account with the
corporate trust department of a depository institution with corporate trust
powers organized under the laws of the United States of America or any state
thereof or the District of Columbia (or any United States branch or agency of a
foreign bank), provided that such institution also must have a rating of P-1 or
higher from Moody's and of A-1+ or higher from Standard & Poor's with respect to
short-term deposit obligations and must be acceptable to the Controlling Party.
Such Eligible Bank or depository institution (other than the Trust Collateral
Agent) shall
8
have been approved in writing by the Controlling Party, acting in its
discretion, by written notice to the Trust Collateral Agent.
"Eligible Investments" mean book-entry securities, negotiable
--------------------
instruments or securities represented by instruments in bearer or registered
form which in each case shall mature not later than the day immediately
preceding the Payment Date immediately following the date of purchase thereof
and which evidence:
(a) direct interest-bearing obligations of, and interest-bearing
obligations fully guaranteed as to timely payment of principal and interest by,
the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company organized under the laws of the United
States of America or any state thereof or the District of Columbia (or any
domestic branch of a foreign bank) and subject to supervision and examination by
Federal or state banking or depository institution authorities (including
depository receipts issued by any such institution or trust company as custodian
with respect to any obligation referred to in clause (a) above or portion of
such obligation for the benefit of the holders of such depository receipts);
provided, however, that at the time of the investment or contractual commitment
-------- -------
to invest therein (which shall be deemed to be made again each time funds are
reinvested following each Payment Date), the commercial paper or other
short-term senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust company
shall have a credit rating of P-1 or higher from Moody's and of A-1+ or higher
from Standard & Poor's;
(c) commercial paper and demand notes investing solely in commercial
paper (other than commercial paper issued by TFC or any Affiliate) that (i) is
payable in United States dollars and (ii) has, at the time of the investment or
contractual commitment to invest therein, a rating of P-1 or higher from Moody's
and of A-1+ or higher from Standard & Poor's;
(d) investments in money market funds (including funds for which the
Trustee or the Owner Trustee in each of their individual capacities or any of
their respective Affiliates is investment manager or advisor) having a rating of
Aaa from Moody's and of AAA-m or AAAm-G from Standard & Poor's and (other than
funds for which the Trustee or the Owner Trustee in each of their individual
capacities or any of their respective Affiliates is investment manager or
advisor) having been approved in writing by the Insurer;
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of
9
the United States of America, in either case entered into with a depository
institution or trust company (acting as principal) referred to in clause (b)
above of which are rated P-1 by Moody's and A-1+ by Standard & Poor's; and
(g) so long as the Insurer is the Controlling Party, any other
investment which is consistent with the ratings of the Securities and which has
been approved by the Insurer.
Any of the foregoing Eligible Investments may be purchased by or
through the Trustee or any of its respective Affiliates.
"FDIC" means the Federal Deposit Insurance Corporation.
----
"Final Scheduled Payment Date" means the August 2007 Payment Date.
----------------------------
"Financed Vehicle" with respect to a Receivable, means a new or used
----------------
automobile, van or light duty truck or motorcycle, together with all accessions
thereto, securing an Obligor's indebtedness under the respective Receivable.
"Force-Placed Insurance" has the meaning assigned to such term in the
----------------------
Dealer Underwriting Guide.
"Fort ▇▇▇▇ Letters" has the meaning assigned to such term in the
-----------------
Insurance Agreement.
"GAP" has the meaning assigned to such term in the Dealer
---
Underwriting Guide.
"GE Capital" means General Electric Capital Corporation.
----------
"GE Capital Agreements" means the documents entered into by TFC and
---------------------
GE Capital in connection with the GE Credit Facility.
"GE Capital Receivables" means receivables financed under the GE
----------------------
Credit Facility.
"GE Credit Facility" means the Amended and Restated Motor Vehicle
------------------
Installment Contract Loan and Security Agreement, between TFC and GE Capital,
dated as of March 31, 2001.
"Indenture" means the Indenture dated as of March 19, 2002, among the
---------
Insurer, the Issuer and ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as
Trust Collateral Agent and Trustee, as the same may be amended and supplemented
from time to time in accordance with its terms.
"Independent Accountants" has the meaning assigned to such term in
-----------------------
Section 4.10(a).
10
"Independent Directors" has the meaning assigned to such term in the
---------------------
Seller's Articles of Incorporation.
"Insolvency Event" means, with respect to a specified Person, (a) the
----------------
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insolvency Proceeds" has the meaning assigned to such term in
-------------------
Section 11.1(b).
"Insurance Agreement" means the Insurance and Indemnity Agreement,
-------------------
dated as of March 19, 2002, among the Insurer, the Trust, the Seller, TFC, the
Trustee, the Trust Collateral Agent, the Backup Servicer, the P.O. Box Owner and
the Successor Servicer, as such agreement may be amended, restated, modified or
supplemented from time to time in accordance with its terms; provided that after
the Insurer ceases to be the Controlling Party no effect shall be given to any
amendment or other modification to the Insurance Agreement or any waiver in each
case made on or subsequent to the date the Insurer ceases to be the Controlling
Party not approved in an instrument in writing signed by the Controlling Party
(it being understood and agreed that any waiver with respect to an event of
default or condition that is continuing at the time of such Insurer Default
shall continue to be effective until revoked by the Controlling Party).
"Insurance Agreement Event of Default" (a) so long as the Insurer is
------------------------------------
the Controlling Party, has the meaning specified therefor in the Insurance
Agreement and (b) if the Insurer is not the Controlling Party, means an
"Insurance Agreement Event of Default" set forth in the Insurance Agreement
without giving effect to any amendment or other modification to such agreement
or any waiver of any such "Insurance Agreement Event of Default" in each case
made on or subsequent to the date the Insurer ceases to be the Controlling Party
not approved in an instrument in writing signed by the Controlling Party (it
being understood and agreed that any waiver with respect to an event of default
or condition that is continuing at the time of such Insurer Default shall
continue to be effective until revoked by the Controlling Party); provided,
however, that for the purposes of this Agreement, the "Event of Default" section
set forth in the Insurance
11
Agreement shall survive an Insurer Default, the Term of the Policy (as defined
in the Insurance Policy), the payment in full of all amounts due and owing to
the Insurer under the Insurance Agreement and the termination of such agreement
pursuant to the terms thereof.
"Insurance Policy" means, with respect to a Receivable, any insurance
----------------
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the related Financed Vehicle or the related Obligor.
"Insurer" means Radian Asset Assurance Inc., a stock insurance
-------
company incorporated in the State of New York, or any successor thereto, as
issuer of the Note Policy.
"Insurer Default" shall mean any one of the following events shall
---------------
have occurred and be continuing:
(i) the Insurer fails to make a payment required under the Note
Policy and such failure remains unremedied for two Business Days;
(ii) the Insurer (A) files any petition or commences any case or
proceeding under any provision or chapter of the United States Bankruptcy Code
or any other similar Federal or State law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general assignment
for the benefit of its creditors or (C) has an order for relief entered against
it under the United States Bankruptcy Code or any other similar Federal or State
law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(iii) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (B) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).
"Insurer Optional Deposit" means, with respect to any Payment Date,
------------------------
an amount delivered by the Insurer pursuant to Section 5.12, at its sole option,
other than amounts in respect of a Note Policy Claim Amount to the Trustee for
deposit into the Collection Account.
"Interest Period" means, with respect to any Payment Date, the period
---------------
from and including the Closing Date (in the case of the first Payment Date) or
from and including the most recent Payment Date on which interest has been paid
to but excluding such Payment Date.
12
"Interest Rate" means, with respect to the Notes, 4.23% per annum
-------------
(computed on the basis of a 360-day year of twelve 30-day months).
"Investment Earnings" means, with respect to any Payment Date and a
-------------------
Trust Account, the investment earnings on amounts on deposit in such Trust
Account on such Payment Date.
"Issuer" means TFC Automobile Receivables Trust 2002-1 and any
------
successor thereto.
"Lien" means a security interest, lien, charge, pledge, equity, or
----
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable or the related Financed Vehicle by
operation of law as a result of any act or omission by the related Obligor.
"Lien Certificate" means, with respect to a Financed Vehicle, an
----------------
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
----
Certificate" shall mean only a certificate or notification issued to a secured
-----------
party.
"Liquidated Receivable" means, with respect to a Receivable with
---------------------
respect to which any of the following has occurred: (i) such Receivable becomes
subject to the 180-day Delinquency Category, (ii) 60 days have elapsed since the
date the related Financed Vehicle is repossessed, (iii) the related Financed
Vehicle has been sold following repossession, and (iv) such Receivable has been
written off as uncollectible consistent with the Charge-Off Policy.
"Monthly Period" means, with respect to the first Payment Date, the
--------------
period beginning on the Cut-Off Date and ending on the close of business on
March 31, 2002. With respect to each subsequent Payment Date, the calendar month
preceding such Payment Date. Unless otherwise specified, any amount stated "as
of the close of business of the last day of a Monthly Period" shall give effect
to the following calculations as determined as of the end of the day on such
last day: (i) all applications of collections, and (ii) all payments.
"Monthly Records" means all records, data and other documentation
---------------
maintained by the Servicer with respect to the Receivables, including the
following with respect to each Receivable: the account number; the originating
Dealer; Obligor name; Obligor address; Obligor home phone number; Obligor
business phone number; original Principal Balance; original term; Annual
Percentage Rate; current Principal Balance; current remaining term; origination
date; first payment date; final scheduled payment date; next payment due date;
date of most recent payment; new/used classification; collateral description;
days currently delinquent; number of contract extensions (months) to date;
amount of Scheduled Receivable Payment; current Insurance Policy expiration
13
date (and any documentation evidencing or relating to such Insurance Policy, to
the extent maintained by or on behalf of the Seller or TFC), and past due late
charges.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or its successor.
-------
"Net Liquidation Proceeds" means, with respect to Liquidated
------------------------
Receivables, the sum of (i) proceeds from the disposition of the underlying
Financed Vehicles securing the Liquidated Receivables, less the Servicer's
reasonable out-of-pocket costs, including repossession and resale expenses not
already deducted from such proceeds in connection with the collection of such
Liquidated Receivables, and any amounts required by law to be remitted to the
Obligor, (ii) any insurance proceeds, and (iii) any other monies received from
the Obligor or otherwise.
"Note Factor" means a seven-digit decimal figure equal to the
-----------
outstanding principal amount of Notes divided by the original outstanding
principal amount of such Notes.
"Note Payment Account" means the account designated as such,
--------------------
established and maintained pursuant to Section 5.1.
"Note Percentage" means for any Payment Date, the percentage
---------------
determined by dividing the Note Principal Balance immediately prior to such
Payment Date by the Pool Balance in respect of such Payment Date.
"Note Policy" means the financial guaranty insurance policy issued by
-----------
the Insurer to the Trustee, for the benefit of the Noteholders.
"Note Policy Claim Amount" means, for any Payment Date, the amount
------------------------
specified in Section 6.1(a).
"Note Principal Balance" means, at any time, the original outstanding
----------------------
principal amount of the Notes, reduced by the aggregate amounts previously paid
thereon in respect of principal.
"Noteholder" means the Person in whose name a Note is registered on
----------
the Note Register.
"Noteholders' Interest Carryover Shortfall" means, with respect to
-----------------------------------------
any Payment Date and the Notes, the excess of the Noteholders' Interest Payment
Amount for the preceding Payment Date over the amount in respect of interest
that was actually deposited in the Note Payment Account on such preceding
Payment Date, plus interest on the amount of interest due but not paid on the
preceding Payment Date, to the extent permitted by law, at the Interest Rate
from such preceding Payment Date to but excluding the current Payment Date.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
"Noteholders' Interest Payment Amount" means, with respect to any
------------------------------------
Payment Date, the sum of (x) the Noteholders' Monthly Interest Payment Amount
for
14
such Payment Date and (y) the Noteholders' Interest Carryover Shortfall for such
Payment Date.
"Noteholders' Monthly Interest Payment Amount" means with respect to
--------------------------------------------
any Payment Date, an amount equal to the product of (i) one-twelfth (or, in the
case of the first Payment Date only, a fraction, the numerator of which is equal
to the number of days in the initial Interest Period and the denominator of
which is equal to 360) of the Interest Rate and (ii) the Note Principal Balance
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date) or, in the case of the first
Payment Date only, on the Closing Date.
"Noteholders' Monthly Principal Payment Amount" means, with respect
---------------------------------------------
to any Payment Date, the Noteholders' Percentage of the Principal Payment
Amount.
"Noteholders' Percentage" means (i) for each Payment Date other than
-----------------------
a Payment Date after the date on which the Notes are paid in full, the Note
Percentage and (ii) for any Payment Date after the Payment Date on which the
Notes are paid in full, 0%.
"Noteholders' Principal Carryover Shortfall" means, as of the close
------------------------------------------
of any Payment Date, the excess of the Noteholders' Principal Payment Amount for
the preceding Payment Date over the amount in respect of principal that was
actually deposited in the Note Payment Account on such Payment Date.
"Noteholders' Principal Payment Amount" means (a) with respect to any
-------------------------------------
Payment Date prior to the occurrence of an Event of Default under the Indenture
and acceleration of the Notes (other than the Final Scheduled Payment Date), the
sum of the Noteholders' Monthly Principal Payment Amount for such Payment Date
and the Noteholders' Principal Carryover Shortfall as of the close of the
preceding Payment Date and (b) with respect to any Payment Date following
acceleration of the Notes and on the Final Scheduled Payment Date, the Note
Principal Balance.
"Note Purchase Agreement" means the Note Purchase Agreement among the
-----------------------
Seller, TFC, Westdeutsche Landesbank Girozentrale, London Branch, as the initial
purchaser and WestLB Panmure Securities Inc., as selling agent for the initial
purchaser.
"Notes" has the meaning assigned to such term in the Indenture.
-----
"Obligor" on a Receivable means the purchaser or co-purchasers of the
-------
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by the chairman of
---------------------
the board, the president, any executive vice president, any vice president, any
treasurer or secretary of the Seller, the Issuer or the Servicer, as
appropriate.
"Opinion of Counsel" means an opinion of counsel reasonably
------------------
acceptable to the Controlling Party, in form and substance reasonably acceptable
to the Controlling Party.
15
"Original Pool Balance" means the Aggregate Principal Balance of the
---------------------
Receivables as of the Cut-Off Date which shall be equal to approximately
$79,891,334.
"Seller" means TFC Receivables Corporation V, a Delaware corporation,
------
and its successors in interest to the extent permitted hereunder.
"Other Conveyed Property" means all property conveyed by the Seller
-----------------------
to the Trust pursuant to Section 2.1(b) through (k) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the
------------------
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
-------------
capacity but solely as Owner Trustee under the Trust Agreement, its
successors-in-interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date" means, with respect to each Monthly Period, the
------------
fifteenth day of the following calendar month, or if such day is not a Business
Day, the immediately following Business Day, commencing on April 15, 2002.
"Person" means any individual, corporation, estate, partnership,
------
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
-----------------
definition of Delivery.
"Point-of-Sale Product" means installment sales contracts acquired by
---------------------
TFC on an individual basis after TFC has reviewed and approved the Obligor's
credit application.
"Point-of-Sale Program" means TFC's program for acquiring
---------------------
Point-of-Sale Product.
"P.O. Box Owner" means ▇▇▇▇▇ Fargo Bank Minnesota, National
--------------
Association, or its successor thereto in its capacity as P.O. Box Owner under
the Standby Processing Agreement.
"Pool Balance" means, with respect to the first Monthly Period, the
------------
Aggregate Principal Balance of the Receivables as of the Cut-Off Date, and with
respect to any Monthly Period thereafter, the Aggregate Principal Balance of the
Receivables at the end of the preceding Monthly Period, after giving effect for
such Monthly Period to: (i) all payments received from Obligors, (ii) all
Purchased Receivables purchased by the Seller or Servicer, as applicable, in
each case pursuant to and in accordance with the Basic Documents and (iii) all
Liquidated Receivables, including Cram Down Losses, realized during such Monthly
Period.
16
"Post Office Box" has the meaning assigned to it in the Standby
---------------
Processing Agreement.
"Premium Letter" means the side letter among the Insurer, the Issuer,
--------------
the Seller, the Servicer and the Trust Collateral Agent dated the date of
issuance of the Note Policy in respect of the premium payable in consideration
of the issuance of the Note Policy.
"Premium Supplement" has the meaning assigned to such term in the
------------------
Premium Letter.
"Principal Balance" means, with respect to any Receivable, as of any
-----------------
date, the Amount Financed minus the sum of (i) that portion of all amounts
received on or prior to such date and allocable to principal in accordance with
the terms of the Receivable and (ii) any Cram Down Loss in respect of such
Receivable.
"Principal Payment Amount" means, with respect to any Payment Date,
------------------------
the amount equal to the sum of the following amounts: (i) collections on
Receivables (other than Liquidated Receivables and Purchased Receivables)
received during the related Monthly Period that are allocable to principal,
including full and partial principal prepayments, (ii) the aggregate Principal
Balance of all Receivables (other than Purchased Receivables) that became
Liquidated Receivables during the related Monthly Period, (iii) (A) the portion
of the Purchase Amount allocable to principal of all Receivables that became
Purchased Receivables (other than Liquidated Receivables) as of the last day of
the related Monthly Period and (B) at the option of the Insurer, the aggregate
Principal Balance of those Receivables that were required to be repurchased by
the Seller and/or TFC during the related Monthly Period but were not so
repurchased and (iv) the aggregate amount of Cram Down Losses during the related
Monthly Period (other than in respect of Liquidated Receivables and Purchased
Receivables).
"Purchase Agreement" means the Purchase Agreement between the Seller
------------------
and TFC, dated as of March 19, 2002, pursuant to which the Seller acquired the
Receivables, as such Agreement may be amended from time to time.
"Purchase Amount" means, with respect to a Receivable, the Principal
---------------
Balance, plus all accrued and unpaid interest on the Receivable after giving
effect to the receipt of any moneys collected (from whatever source) on such
Receivable, if any, as of the date of repurchase thereof, plus the amount of any
Cram Down Losses in respect of such Receivable prior to repurchase thereof.
"Purchased Receivable" means a Receivable purchased as of the close
--------------------
of business on the last day of a Monthly Period by the Servicer (if TFC is the
Servicer) pursuant to Section 4.6 or repurchased by the Seller or the Servicer
(if TFC is the Servicer) pursuant to Section 3.2.
"Rating Agency" means Standard & Poor's. If Standard & Poor's, or its
-------------
respective successor, fails to maintain a rating on the Notes, the rating agency
shall be a
17
nationally recognized statistical rating organization or other comparable Person
designated by the Seller and acceptable to the Controlling Party.
"Rating Agency Condition" means, with respect to any action, that the
-----------------------
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to the Rating Agency) prior notice thereof and that Standard & Poor's
shall have notified the Seller, the Servicer, the Insurer, the Trustee, the
Owner Trustee and the Issuer in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes without giving
effect to the existence of the Note Policy.
"Realized Losses" means, with respect to any Receivable that becomes
---------------
a Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means, any Contract listed on Schedule A, which Schedule
----------
may be in an electronic format acceptable to the Insurer, a copy of which shall
be delivered to each of the Insurer, the Trust Collateral Agent, the Backup
Servicer and the Successor Servicer on or before the Closing Date, and with
respect to any such Contract, all of (a) the Scheduled Receivable Payments, (b)
any prepayments made with respect to such Contract, (c) any amounts guaranteed
under such Contracts, (d) any proceeds of any Insurance Policy relating to such
Contract and (e) any recoveries made with respect to such Contract and the right
to receive any payments in respect of the foregoing.
"Receivable Files" means the documents specified in Section 3.3.
----------------
"Record Date" with respect to each Payment Date means the Business
-----------
Day immediately preceding such Payment Date, unless otherwise specified in this
Agreement.
"Registrar of Titles" means, with respect to any state, the
-------------------
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Required Audits" has the meaning assigned to such term in Section
---------------
4.10(a).
"Required Standard of Care" has the meaning assigned to such term in
-------------------------
Section 4.2(a).
"Requisite Amount" has the meaning set forth in the Insurance
----------------
Agreement.
"Rule of 78s Method" means the method under which a portion of a
------------------
payment allocated to earned interest and the portion allocable to principal is
determined according to the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78s."
-----------
18
"Rule of 78s Receivable" means a Receivable under which the portion
----------------------
of a payment allocable to interest and the portion of a payment allocable to
principal is determined in accordance with the Rule of 78s Method.
"Schedule of Receivables" means the schedule of all retail
-----------------------
installment sales contracts and promissory notes originally held as part of the
Trust which is attached as Schedule A.
"Schedule of Representations" means the Schedule of Representations
---------------------------
and Warranties attached hereto as Schedule B.
"Scheduled Receivable Payment" means, with respect to any Monthly
----------------------------
Period for any Receivable, the amount set forth in such Receivable as required
to be paid by the Obligor in such Monthly Period. If after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Monthly Period has
been modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.2(b) and (c), the Scheduled Receivable Payment with respect to such
Monthly Period shall refer to the Obligor's payment obligation with respect to
such Monthly Period as so modified.
"Securities" means the Notes and the Certificates.
----------
"Securities Account Control Agreement" shall have the meaning set
------------------------------------
forth in the Indenture.
"Security Majority" means a majority by Note Principal Balance of the
-----------------
Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Service Contract" means, with respect to a Financed Vehicle, the
----------------
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle.
"Servicer" means The Finance Company, as the servicer of the
--------
Receivables, and each successor Servicer pursuant to Section 10.4.
"Servicer Extension Notice" means the notice specified in Section
-------------------------
4.13.
"Servicer Termination Event" means an event specified in Section
--------------------------
10.1.
"Servicer Termination Side Letter" means the letter from the Insurer
--------------------------------
to the Servicer, TFC and the Trustee dated as of March 19, 2002, with regard to
the renewal of the term of the Servicer's appointment.
"Servicer's Certificate" means an Officers' Certificate of the
----------------------
Servicer delivered pursuant to Section 4.8, substantially in the form of Exhibit
A hereto.
19
"Servicing Fee Rate" means 3.50% per annum.
------------------
"Simple Interest Method" means the method of allocating a fixed level
----------------------
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 days in the calendar year) elapsed since the preceding
payment under the obligation was made.
"Simple Interest Receivable" means a Receivable under which the
--------------------------
portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Spread Account" has the meaning assigned thereto in Section 5.1.
--------------
"Spread Account Property" shall mean the Spread Account, all amounts
-----------------------
and investments held from time to time in the Spread Account (whether in the
form of deposit accounts, Physical Property, book-entry securities,
uncertificated securities or otherwise) and all proceeds of the foregoing.
"Standard & Poor's" means Standard & Poor's Ratings Services, or its
-----------------
successor.
"Standby Processing Agreement" means the Amended and Restated Standby
----------------------------
Remittance Processing Agreement, dated as of March 19, 2002, among Financial
Security Assurance Inc., Royal Indemnity Company, the Insurer, GE Capital,
Westside Funding Corporation, TFC Warehouse Corporation I, TFC, TFC Receivables
Corporation III, TFC Receivables Corporation IV, the Seller, the Trust
Collateral Agent and the P.O. Box Owner.
"Stock Pledge Agreement" means the Stock Pledge and Collateral Agency
----------------------
Agreement, dated as of March 19, 2002, among TFC, the Seller, the Insurer, and
the Trust Collateral Agent.
"Successor Servicer" means ▇▇▇▇▇ Fargo Financial America, Inc., in
------------------
its capacity as successor servicer hereunder and its successors in interest.
"Tangible Net Worth" has the meaning assigned thereto in the
------------------
Insurance Agreement.
"TFC" means The Finance Company, a Virginia corporation.
---
"Total Loss Protection" has the meaning assigned to such term in the
---------------------
Dealer Underwriting Guide.
"Trigger Event" has the meaning assigned thereto in the Insurance
-------------
Agreement.
20
"Trust" means the Issuer.
-----
"Trust Account Property" means the Trust Accounts, all amounts and
----------------------
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
--------------
"Trust Agreement" means the Amended and Restated Trust Agreement,
---------------
dated as of March 19, 2002, between the Seller and the Owner Trustee, as the
same may be amended and supplemented from time to time.
"Trust Collateral Agent" means ▇▇▇▇▇ Fargo Bank Minnesota, National
----------------------
Association, in its capacity as trust collateral agent hereunder, its successors
in interest and any successor Trust Collateral Agent hereunder.
"Trust Officer" means, (i) in the case of the Trust Collateral Agent,
-------------
the chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, assistant vice-president or managing director,
the secretary, any assistant secretary or any other officer of the Trust
Collateral Agent customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, and (ii) in the case of the Owner Trustee, any officer, or
authorized signatory in the corporate trust office of the Owner Trustee or any
agent of the Owner Trustee under a power of attorney with direct responsibility
for the administration of this Agreement or any of the Basic Documents on behalf
of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed pursuant to
--------------
Section 2.1, together with certain monies paid after the Cut-Off Date, the
Collection Account (including all Eligible Investments therein and all proceeds
therefrom), the Spread Account, the Post Office Boxes and certain other rights
under this Agreement.
"Trustee" means the Person acting as Trustee under the Indenture, its
-------
successors in interest and any successor trustee under the Indenture.
"UCC" means the Uniform Commercial Code as in effect in the relevant
---
jurisdiction on the date of this Agreement.
"Westside Funding" means Westside Funding Corporation.
----------------
"Westside Capital Agreements" means the documents entered into by TFC
---------------------------
and Westside Funding in connection with the Westside Credit Facility.
"Westside Capital Receivables" means receivables financed under the
----------------------------
Westside Credit Facility.
21
"Westside Credit Facility" means the Warehouse and Security Agreement
------------------------
dated as of June 28, 2001 by and among TFC Warehouse Corporation I, as Borrower,
TFC, as Servicer and Initial Purchaser, ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, as collateral agent and Westside Funding Corporation, as Lender.
SECTION 1.2. Other Definitional Provisions.
-----------------------------
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture, or, if not defined therein,
in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed hereby
and in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
SECTION 1.3. Usage of Terms. With respect to all terms used in this
--------------
Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
-------
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
any form of the word "include" shall be deemed to be followed by the words
-------
"without limitation"; the words "herein", "hereof" and "hereunder" and other
------------------ ------ ------ ---------
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and Article, Section, Schedule
and Exhibit references,
22
unless otherwise specified, refer to Articles and Sections, Schedules and
Exhibits to this Agreement.
SECTION 1.4. Certain References. Unless the context clearly requires
------------------
otherwise, all references to the Principal Balance of a Receivable as of any
date of determination shall refer to the close of business on such day, or as of
the first day of an Interest Period shall refer to the opening of business on
such day. All references to the last day of an Interest Period shall refer to
the close of business on such day.
SECTION 1.5. No Recourse. Without limiting the obligations of TFC
-----------
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of TFC, its
Affiliates, or of any predecessor or successor of TFC and its Affiliates.
SECTION 1.6. Action by or Consent of Noteholders and Certificateholders.
----------------------------------------------------------
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Noteholders or Certificateholders, such provision shall be
deemed to refer to the Certificateholder or Noteholder, as the case may be, of
record as of the Record Date, immediately preceding the date on which such
action is to be taken, or consent given, by the Noteholders or
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Noteholders or Certificateholders, any Note or Certificate
registered in the name of TFC or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that solely for the purpose of determining
-------- -------
whether a Trust Officer of the Trustee or the Trust Collateral Agent is entitled
to rely upon any such action or consent, only Notes or Certificates which the
Owner Trustee, the Trust Officer of the Trustee or the Trust Collateral Agent,
respectively, actually knows to be so owned shall be so disregarded.
SECTION 1.7. Material Adverse Effect. Whenever used in the Basic
-----------------------
Documents, "Material Adverse Effect" or "material adverse effect" means (i) when
used with respect to any action, event, fact or other matter or thing, means
that such action, event, fact or other matter or thing will, individually or in
the aggregate, have a material adverse effect on (a) the Trust, the Trust
Property or Collateral, (b) the existence, perfection or priority of the
security interests of the Trust Collateral Agent in the Collateral, (c) the
ability of the Trust Collateral Agent on behalf of the Noteholders and the
Insurer to collect on, liquidate, or foreclose against, the Collateral in
accordance with the Indenture, (d) the validity, enforceability, or the
performance of any Person's obligations under, or with respect to, the Basic
Documents, or the validity, enforceability, or performance of any Person's
obligations under or with respect to, or the payment of, the Notes, (e) the
transactions contemplated by the Basic Documents, (f) the business, operations,
condition (financial or otherwise) of the Servicer, the Seller or the Issuer or
(g) the interests, rights and/or remedies hereunder, or otherwise with respect
to the Trust Property, of the Trust Collateral Agent, the Trustee, the Insurer
or any of the Noteholders (which determination shall be made, in each case,
without giving effect to the existence of the Note Policy), and (ii) when used
in relation to or in connection with any Person also means that such action,
event, fact or other matter or thing shall not, individually or
23
in the aggregate, have a material adverse effect on the business, operations,
condition (financial or otherwise) of such Person.
ARTICLE II
Conveyance of Receivables
-------------------------
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
-------------------------
delivery to the Seller on the Closing Date of the Notes and the Certificates and
the other amounts to be distributed from time to time to the Seller in
accordance with the terms of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
(subject to the obligations set forth herein), all right, title and interest of
the Seller in and to:
(a) the Receivables and all monies paid or payable thereon or in
respect thereof after the Cut-Off Date (including amounts due on or before the
Cut-Off Date but received by TFC, the Seller or the Issuer after the Cut-Off
Date);
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other interest of the Seller in
such Financed Vehicles;
(c) any proceeds and the right to receive proceeds with respect to
the Receivables from claims on any Insurance Policies covering Financed Vehicles
or Obligors, including rebates of insurance premiums relating to the
Receivables, and any proceeds from the liquidation of the Receivables;
(d) all rights of the Seller against Dealers pursuant to Dealer
Agreements or Dealer Assignments;
(e) all rights under any Service Contracts on the related Financed
Vehicles;
(f) the related Receivables Files and any and all other documents
that TFC or any other Servicer keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles;
(g) property (including the right to receive future Net
Liquidation Proceeds) that secures a Receivable and that has been acquired
pursuant to liquidation of such Receivable;
(h) all funds on deposit from time to time in the Trust Accounts
and the Spread Account (including all investments and proceeds thereof) and all
rights of the Issuer therein;
(i) all of its rights and benefits, but none of its obligations or
burdens, under the Purchase Agreement, including the delivery requirements,
representations and
24
warranties and the cure and repurchase obligations of TFC under the Purchase
Agreement;
(j) all rights under the Standby Processing Agreement; and
(k) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing.
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Issuer and the beneficial interest
in and title to the Receivables and the other Trust Property shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy or similar law. In the event that,
notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby is held not to be a sale, this Agreement shall constitute a
grant of a security interest in the property referred to in this Section 2.1 for
the benefit of the Noteholders and the Insurer.
SECTION 2.2. Further Encumbrance of Trust Property.
-------------------------------------
(a) Immediately upon the conveyance to the Trust by the Seller of any
item of the Trust Property pursuant to Section 2.1, all right, title and
interest of the Seller in and to such item of Trust Property shall terminate,
and all such right, title and interest shall vest in the Trust, in accordance
with the Trust Agreement and Sections 3802 and 3805 of the Business Trust
Statute (as defined in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust,
the Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property. Pursuant to the Indenture and contemporaneously with such property
vesting in the Trust pursuant to (a) above, the Trust shall grant a security
interest in the Trust Property to secure the repayment of the Notes and the
obligations owed to the Insurer under the Basic Documents. The Certificates
shall represent the beneficial ownership interest in the Trust Property, and the
Certificateholders shall be entitled to receive distributions with respect
thereto as set forth herein.
(c) Prior to the payment in full of the Notes, the payment of all
amounts due to the Insurer under the Basic Documents, the end of the Term of the
Note Policy (as defined therein) and the surrender of the Note Policy by the
Trust Collateral Agent to the Insurer, the Trust Collateral Agent shall hold the
Trust Property for the exclusive benefit of the Trustee on behalf of the
Noteholders and the Insurer. Following
25
the payment in full of the Notes and the release and discharge of the Indenture,
all covenants of the Issuer under Article III of the Indenture shall, until
payment in full of the Certificates, remain as covenants of the Issuer for the
benefit of the Certificateholders, enforceable by the Certificateholders to the
same extent as such covenants were enforceable by the Noteholders prior to the
discharge of the Indenture. Any rights of the Trustee under Article III of the
Indenture, following the discharge of the Indenture, shall vest in the
Certificateholders.
(d) The Trust Collateral Agent shall, at such time as there are no
Securities outstanding and all sums due to (i) the Trustee or any agent or
counsel thereof pursuant to the Indenture, (ii) the Trust Collateral Agent
pursuant to this Agreement, and (iii) the Insurer under the Basic Documents have
been paid, release any remaining portion of the Trust Property to the Seller.
ARTICLE III
The Receivables
---------------
SECTION 3.1. Representations and Warranties of Seller. The Seller makes the
----------------------------------------
following representations and warranties as to the Receivables and the Other
Conveyed Property on which the Issuer is deemed to have relied in acquiring the
Receivables, upon which the Insurer shall be deemed to rely in issuing the Note
Policy, upon which the Trustee shall be deemed to rely in issuing the Notes and
upon which the Noteholders shall be deemed to rely in purchasing the Notes: the
representations and warranties set forth on the Schedule of Representations
attached hereto as Schedule B are true and correct. Such representations and
warranties speak as of the execution and delivery of this Agreement and as of
the Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Issuer and the pledge thereof to the Trust Collateral Agent
pursuant to the Indenture.
SECTION 3.2. Repurchase upon Breach.
----------------------
(a) The Seller, the Servicer, any Trust Officer of the Trust
Collateral Agent or the Owner Trustee, as the case may be, shall inform each of
the other parties to this Agreement promptly, in writing, upon the discovery of
(i) any breach of the Seller's representations and warranties made pursuant to
Section 3.1 and (ii) any Receivables with respect to which the Acknowledgement
indicates that the Trust Collateral Agent has not received an original Lien
Certificate (or a copy thereof) or application therefor and (iii) any
Receivables identified as exceptions in the follow-up report referred to in
Section 3.3(b) (the Receivables referred to in clause (i) or (ii) above,
"Exceptions"); provided, however, that the failure to give any such notice shall
-------- -------
not derogate from any obligations of the Seller under this Section 3.2. As of
the last day of the first month following the discovery by the Seller or receipt
by the Seller of notice of such breach or Exception which, in either case, has a
Material Adverse Effect on any Receivable, unless such breach or Exception and
the resulting Material Adverse Effect is cured by such date, the Seller shall
have an obligation to repurchase any Receivable in which the interests of the
Noteholders or the Certificateholders or the Insurer are materially and
adversely
26
affected by any such breach or Exception as of such date. The "first month"
-----------
shall mean the calendar month following the calendar month in which notice is
given or discovery occurs. In consideration of and simultaneously with the
repurchase of the Receivable, the Seller shall remit, or cause TFC to remit, to
the Collection Account the Purchase Amount in the manner specified in Section
5.6 and the Issuer and the Trust Collateral Agent shall perform such acts and
execute such assignments, termination statements and other documents as may
reasonably be requested by such person in order to effect such repurchase, it
being understood that the Seller shall undertake the preparation of any such
documents and the payment of any costs associated therewith (including any
required filing fees). The sole remedy of the Issuer, the Owner Trustee, the
Trust Collateral Agent, the Trustee, the Insurer, the Noteholders or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.1 or any Exception shall be the repurchase of Receivables
pursuant to this Section, subject to the conditions contained herein or to
enforce the obligation of TFC to the Seller to repurchase such Receivables
pursuant to the Purchase Agreement. Neither the Owner Trustee, the Trust
Collateral Agent nor the Trustee shall have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase of
any Receivable pursuant to this Section; provided, however, that the Trustee
-------- -------
shall notify the Insurer in writing promptly of any failure by the Seller to
repurchase any Receivables as provided herein to the extent the Trustee has
actual knowledge of such failure.
(b) In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller, the Seller shall
indemnify the Trust, the Trust Collateral Agent, the Trustee, the Successor
Servicer, the Insurer, and the Noteholders and any of their respective officers,
directors, employees or agents against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to such breach. This
indemnity shall survive the termination of this Agreement or the earlier
resignation and removal of the Trustee.
(c) Pursuant to Section 2.1 of this Agreement, the Seller conveyed to
the Trust all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreement
including the Seller's rights under the Purchase Agreement and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of TFC thereunder. The Seller hereby represents and warrants to the
Trust that such assignment is valid, enforceable and effective to permit the
Trust to enforce such obligations of TFC under the Purchase Agreement.
SECTION 3.3. Custody of Receivables Files.
----------------------------
(a) In connection with the sale, transfer and assignment of the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, the Trust Collateral Agent shall act as custodian of the following
documents or instruments, constituting with respect to each Receivable, a
"Receivables File" (which is not inclusive of additional items held by the
Servicer and related to the Receivables and
27
Other Conveyed Property), in its possession to the extent such documents are
delivered to the Trust Collateral Agent:
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including any extension agreements); and
(ii) The original (or a copy if the original is not available) of the
Lien Certificate for each Financed Vehicle and any application therefor and, on
and after July 31, 2002, the original Lien Certificate for each Financed
Vehicle.
(b) The Trust Collateral Agent shall, as soon as practicable after receipt
thereof, (A) conduct a physical inventory of the Receivable Files relating to
the Receivables in order to confirm that the Trust Collateral Agent is in
possession of a Receivable File for each Receivable listed in the relevant
Schedule of Receivables delivered to the Trust Collateral Agent and (B) perform
a review of the Receivable Files relating to such Receivables that would enable
the Trust Collateral Agent to determine that each Receivable File includes (i) a
fully executed original retail installment sales contract or promissory note,
(ii) the Lien Certificate or application therefor, or (iii) a copy of the title
or security instrument for each Financed Vehicle (to the extent not covered by
(ii) above). As evidence of the performance of such inventory and review, within
5 Business Days of the Trust Collateral Agent's receipt of the Receivable Files,
the Trust Collateral Agent shall have delivered to the Owner Trustee, the
Seller, the Servicer and the Insurer, an acknowledgement in the form of Exhibit
D hereto (an "Acknowledgement"). Upon receipt by the Trust Collateral Agent of
what it believes to be all of the original Lien Certificates with respect to the
Receivables (and in no event later than July 31, 2002), the Trust Collateral
Agent shall deliver to the Owner Trustee, the Seller, the Servicer and the
Insurer, a follow-up report to the Acknowledgement referred to above, stating
that it has in its possession and has reviewed original Lien Certificates with
respect to all of the Receivables, stating any exceptions thereto.
(c) Upon payment in full of any Receivable, the Servicer will notify the
Trust Collateral Agent by an Officer's Certificate of the Servicer (which
certificate shall include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.1 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer. From
time to time as appropriate for servicing and enforcing any Receivable, the
Trust Collateral Agent shall, upon written request of an officer of the Servicer
and delivery to the Trust Collateral Agent of a receipt signed by such officer,
each in the form attached hereto as Exhibit C, cause the original Receivable and
the related Receivable File to be released to the Servicer. The Trustee and the
Trust Collateral Agent may rely and shall be protected when acting or refraining
from acting upon any certificate, request or receipt under this Section. The
Servicer's receipt of a Receivable and/or Receivable File shall obligate the
Servicer to return the original Receivable and the related Receivable File to
the Trust Collateral Agent when its need by the Servicer has ceased but in any
event no more than 60 days after delivery to the Servicer unless the Receivable
is repurchased as described in Section 3.2 or 4.6.
28
ARTICLE IV
Administration and Servicing of Receivables
-------------------------------------------
SECTION 4.1 Duties of the Servicer. The Servicer is hereby authorized to
----------------------
act as agent for the Trust and in such capacity shall manage, service,
administer and make collections on the Receivables, and perform the other
actions required by the Servicer under this Agreement. The Servicer agrees that
its servicing of the Receivables shall be carried out with the degree of skill
and attention that the Servicer exercises from time to time with respect to all
comparable motor vehicle receivables that it services for itself or others;
provided, however, that if the Successor Servicer has been appointed Servicer,
-------- -------
the Successor Servicer agrees that its servicing of the Receivables shall be
carried out with the degree of skill and attention of prudent financial
institutions in the industry for the servicing of comparable motor vehicle
receivables; provided, further, that the Servicer shall not materially change
-------- -------
its servicing standards and procedures without the prior written consent of the
Controlling Party unless such changes are required by legal statutes. In
performing such duties, so long as TFC is the Servicer, it shall comply with the
standard and customary procedures for servicing all of its comparable motor
vehicle receivables. The Servicer's duties shall include, without limitation,
collection and posting of all payments, responding to inquiries of Obligors on
the Receivables, investigating delinquencies, reporting any required tax
information to Obligors, monitoring the Receivables and the other Trust Property
(as provided in this Agreement), accounting for collections and furnishing
monthly and annual statements to the Trust Collateral Agent, the Trustee, the
Noteholders and the Insurer with respect to distributions, and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements, the Dealer Assignments, and the Insurance Policies, to
the extent that such Dealer Agreements, Dealer Assignments, and Insurance
Policies relate to the Receivables, the Financed Vehicles or the Obligors;
provided, however, that the Successor Servicer, as successor to the Servicer,
-------- -------
shall not be liable for any amounts owed to any dealer under such Dealer
Agreements or Dealer Assignments, including, but not limited to, participation
and reserves; provided, further, that if the Successor Servicer has been
-------- -------
appointed Servicer, the Successor Servicer shall use its best efforts to
administer and enforce all such rights and responsibilities. To the extent
consistent with the standards, policies and procedures otherwise required
hereby, the Servicer shall follow its customary standards, policies, and
procedures and shall have full power and authority, acting alone, to do any and
all things in connection with such managing, servicing, administration and
collection that it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered by
the Trust to execute and deliver, on behalf of the Trust, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
and with respect to the Financed Vehicles; provided, however, that to the extent
-------- -------
any such instruments relate to a settlement with an Obligor in which the Obligor
is required to pay an amount less than the Principal Balance (together with any
accrued interest) on the related Receivable in exchange for such instrument, the
Servicer shall execute and deliver such instruments only to the extent such
execution and delivery (i) is in the ordinary
29
course of the Servicer's business, (ii) is not done on a wholesale basis and
(iii) would, in the opinion of the Servicer, maximize the return to Trust and
the Noteholders with respect to the related Receivable. The Servicer is hereby
authorized to commence, in it's own name or in the name of the Trust, a legal
proceeding to enforce a Receivable pursuant to Section 4.3 or to commence or
participate in any other legal proceeding (including a bankruptcy proceeding)
relating to or involving a Receivable, an Obligor or a Financed Vehicle. If the
Servicer commences or participates in such a legal proceeding in its own name,
the Trust shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating in
any such proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Trust to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other documents
or instruments in connection with any such proceeding. The Trust Collateral
Agent and the Owner Trustee shall furnish the Servicer with any powers of
attorney and other documents which the Servicer may reasonably request and which
the Servicer deems necessary or appropriate and take any other steps which the
Servicer may deem reasonably necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement.
SECTION 4.2. Collection of Receivable Payments; Modifications of
---------------------------------------------------
Receivables.
-----------
(a) The Servicer (including any successor to the Servicer) shall
manage, service, administer and make collections on the Receivables, and perform
the other obligations of the Servicer under this Agreement and the other
Transaction Documents, in accordance with the respective terms hereof and
thereof, and agrees that it shall carry out its duties and obligations hereunder
and under the Transaction Documents in accordance with the following standards
of care (the "Required Standard of Care"): (i) in the event that the Servicer is
-------------------------
TFC, the Servicer's written credit and collection policies and procedures as in
effect on the date hereof, and as may be amended from time to time in accordance
with the Basic Documents; (ii) in the event that the successor to the Servicer
is the Successor Servicer, customary and usual procedures for financial
institutions which act as third-party servicer for comparable motor vehicle
retail installment sales contracts, and (iii) in the event that the successor to
the Servicer is not the Successor Servicer, the higher of the customary and
usual procedures of financial institutions which service comparable motor
vehicle retail installment sales contracts and such servicer's standard and
customary procedures for the servicing of comparable motor vehicle retail
installment sales contracts. In addition, the Servicer will cooperate with any
successor to the Servicer upon any assumption by such successor to the Servicer
(including, without limitation, the Successor Servicer) of the servicing of
Receivables under this Agreement, in order to enable such successor to the
Servicer to carry out the duties and obligations of the Servicer hereunder, and
will take all such other actions as may be reasonably requested by such
successor to the Servicer from time to time as may be necessary or reasonably
desirable to effect such transfer of servicing duties and obligations. The
Servicer is authorized in its discretion to waive any prepayment charge, late
payment charge or any other similar fees that may be collected in the ordinary
course of servicing any Receivable.
30
(b) The Servicer may at any time agree to (i) a modification or
amendment of a Receivable in order to change the Obligor's regular due date to a
date within 30 days in which such due date occurs, (ii) a modification or
amendment of a Receivable in order to re-amortize the Scheduled Receivable
Payments on the Receivable following a partial prepayment of principal; or (iii)
change the delinquency classification of any Receivable in accordance with the
Allowable Delinquency Policy; provided, however, that no such change shall
-------- -------
extend the due date of any payment on a Receivable for more than two calendar
months in any 12 month period; and, provided, further, that the Servicer shall
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not grant with respect to any Receivable, extensions and/or deferrals (pursuant
to the Charge-Off Policy) which total more than four calendar months in the
aggregate for such Receivable. Notwithstanding anything in the foregoing to the
contrary, the Servicer shall not agree to any extension, amendment or deferral
with respect to any Receivable in respect of which payments are scheduled to be
made on other than a monthly basis.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable in accordance with the terms set
forth in Section 4.2(b).
(d) The Servicer shall use its best efforts to direct Obligors to
send payments in respect of the Receivables, (x) by direct debit of the
Obligor's bank account to the Collection Account or (y) by check, to be made
directly to one or more Post Office Boxes; provided, however, that if the
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Successor Servicer shall assume all of the rights and obligations of the
outgoing Servicer, it may also direct Obligors to make payments in respect of
the Receivables to local branch offices of the Successor Servicer or a bank
account owned by or otherwise controlled by the Trustee. Prior to the making of
an Access Denial Election (as defined in the Standby Processing Agreement), TFC,
acting as the bailee of the Trust, the Insurer, the Trust Collateral Agent, GE
Capital and Westside Funding, shall have access to the mail, checks and other
items directed to the Post Office Boxes and shall process such items in
accordance with the requirements of the applicable GE Capital Agreements (with
respect to the GE Capital Receivables) and Westside Funding Agreements (with
respect to the Westside Funding Receivables) and Basic Documents (with respect
to the Receivables). Immediately upon the effectiveness of an Access Denial
Election, TFC's right of access to the Post-Office Boxes or their contents shall
terminate and, instead, the P.O. Box Owner, acting as the bailee of the Trust,
the Insurer, the Trust Collateral Agent, GE Capital and Westside Funding, shall
thereafter have unrestricted and exclusive access to the mail, checks and other
items directed to the Post Office Boxes and shall process such items in
accordance with the requirements of the Standby Processing Agreement.
(e) Prior to the Closing Date, the Servicer will issue coupon books
or monthly statements to the Obligors (other than Obligors under Receivables
with respect to which automatic allotment is then in effect) under the
Receivables, the GE Capital Receivables and the Westside Funding Receivables
which provide for such Obligors to forward their remittances to (i) one of the
Post Office Boxes or (ii) to such other address as the Controlling Party (with
respect to any Receivables), GE Capital (with respect to any GE Capital
Receivables) or Westside Funding (with respect to the Westside Funding
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Receivables) shall direct, in each of cases (i) and (ii), in accordance with the
applicable requirements of the GE Capital Agreements (with respect to any GE
Capital Receivables), the Westside Funding Agreements (with respect to any
Westside Funding Receivables), and the Basic Documents (with respect to any
Receivables), and the Servicer will continue, not less often than every three
months, to so notify those Obligors who have failed to forward remittances to
the Post Office Boxes, except as permitted under Section 4.2(d).
(f) Notwithstanding the Standby Processing Agreement, or any of the
provisions of this Agreement relating to the Standby Processing Agreement, the
Servicer shall remain obligated and liable to the Trust, the Trust Collateral
Agent and Noteholders for servicing and administering the Receivables and the
Other Conveyed Property in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue thereof.
(g) In the event of a termination of the Servicer pursuant to
Article X hereof, the Successor Servicer or any other successor to the Servicer
shall assume all of the rights and obligations of the outgoing Servicer under
the Standby Processing Agreement subject to the terms hereof. In such event, the
Successor Servicer or any other successor to the Servicer shall, except as
provided herein, be deemed to have assumed all of the outgoing Servicer's
interest therein and to have replaced the outgoing Servicer as a party to the
Standby Processing Agreement to the same extent as if the Standby Processing
Agreement had been assigned to the Successor Servicer or any other successor to
the Servicer, except that the outgoing Servicer shall not thereby be relieved of
any liability or obligations on the part of the outgoing Servicer to the Standby
Processing Agreement. The outgoing Servicer shall, upon request of the Trustee,
but at the expense of the outgoing Servicer, deliver to the Successor Servicer
or any other successor to the Servicer all documents and records relating to
each such Standby Processing Agreement and otherwise use its best efforts to
effect the orderly and efficient transfer of the Standby Processing Agreement to
the Successor Servicer or any other successor to the Servicer.
SECTION 4.3. Realization Upon Receivables.
----------------------------
(a) Consistent with the Required Standard of Care, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, as soon as is practicable after default on such Receivable
but in no event later than the date on which a Receivable has become a
Liquidated Receivable (other than in the case of Financed Vehicles where neither
the Financed Vehicle nor the Obligor can be physically located by the Servicer
(using procedures consistent with the Required Standard of Care) and other than
in the case of an Obligor who is subject to a bankruptcy proceeding); provided,
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however, that the Servicer may elect not to repossess a Financed Vehicle within
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such time period if in accordance with the Required Standard of Care it
determines that the proceeds ultimately recoverable with respect to such
Receivable would be increased by forbearance. The Servicer is authorized to
follow such customary practices and
procedures as it shall deem necessary or advisable, consistent with the Required
Standard of Care which practices and procedures may include reasonable efforts
to realize upon any recourse to Dealers, the sale of the related Financed
Vehicle at public or private sale, the submission of claims under an Insurance
Policy and other actions, including entering into settlements with Obligors, by
the Servicer in order to realize upon such a Receivable. The foregoing is
subject to the provision that, in any case in which the Financed Vehicle shall
have suffered damage, the Servicer shall not expend funds in connection with any
repair or towards the repossession of such Financed Vehicle unless it shall
determine in its discretion that such repair and/or repossession shall increase
the proceeds of liquidation of the related Receivable by an amount greater than
the amount of such expenses. All Net Liquidation Proceeds in respect of a
Financed Vehicle shall be remitted directly by the Servicer to the Collection
Account without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof. The Servicer
shall be entitled to recover all reasonable expenses incurred by it in the
course of repossessing and liquidating a Financed Vehicle. The Servicer shall
recover such reasonable expenses based on the information contained in the
Servicer's Certificate delivered on the related Determination Date. The Servicer
shall pay on behalf of the Trust any personal property taxes assessed on
repossessed Financed Vehicles. The Servicer shall be entitled to reimbursement
of any such tax by retaining such amount from Net Liquidation Proceeds with
respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall
be deemed to be an automatic assignment from the Trust to the Servicer of the
rights under such Dealer Agreement and Dealer Assignment for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment
on the grounds that it is not a real party in interest or a Person entitled to
enforce the Dealer Agreement or the Dealer Assignment, the Owner Trustee and/or
(subject to the protections of the Trust Agreement) the Trustee, at the
Servicer's written direction and expense, or the Seller, at the Seller's
expense, shall take such steps as the Servicer deems reasonably necessary to
enforce the Dealer Agreement or Dealer Assignment, including bringing suit in
its name or the name of the Seller or of the Trust and the Owner Trustee and/or
the Trustee for the benefit of the Noteholders. All amounts recovered shall be
remitted directly by the Servicer as provided in Section 4.2.
(c) The Servicer agrees that prior to delivering any repossessed
Finance Vehicle for sale to any dealer, it shall make such filings and effect
such notices as are necessary to preserve its ownership interest (or security
interest, as the case may be) in such repossessed Financed Vehicle.
SECTION 4.4. Insurance.
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(a) The Servicer (when the Servicer is TFC) shall require (except
for Receivables that are Bulk Product for which insurance is not a requirement),
in accordance with Required Standard of Care, that each Financed Vehicle be
initially insured by the related Obligor under the Insurance Policies referred
to in Paragraph 23 of
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the Schedule of Representations. Each Receivable (except for Receivables that
are Bulk Product for which insurance is not a requirement) requires the Obligor
to initially obtain such physical loss and damage insurance, naming TFC and its
successors and assigns as additional insureds. If the Servicer shall determine
that an Obligor has failed to obtain or maintain either a physical loss and
damage Insurance Policy or the combination of TFC's Total Loss Protection and
GAP coverage covering the related Financed Vehicle which satisfies the
conditions set forth in clause (i)(a) of such Paragraph 23 (including during the
repossession of such Financed Vehicle) the Servicer, in accordance with the
Required Standard of Care, shall enforce the rights of the holder of the
Receivable under the Receivable and require the Obligor to obtain such total
loss coverage insurance in accordance with such standards of care. The Successor
Servicer shall not be obligated to, and does not (i) monitor the placement or
maintenance of such insurance by Obligors or (ii) pay any premium of
force-placed insurance concerning any Financed Vehicle; and, in no event, shall
the Successor Servicer be liable (i) to the extent that insurance was not
maintained by an Obligor or (ii) for the failure to pay any premium of
force-placed insurance with respect to any Financed Vehicle.
(b) The Servicer may ▇▇▇ to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Owner Trustee and/or the Trustee, at the Servicer's written
direction and expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems reasonably necessary to enforce such Insurance
Policy, including bringing suit in its name or the name of the Trust and the
Owner Trustee and/or the Trustee for the benefit of the Noteholders.
SECTION 4.5. Maintenance of Security Interests in Vehicles.
---------------------------------------------
(a) Consistent with the Required Standard of Care, the Servicer
shall take such steps on behalf of the Trust as are necessary to maintain TFC as
the noted lienholder on each Financed Vehicle once such notation has occurred
and maintain perfection of the security interest created by each Receivable in
the related Financed Vehicle, including obtaining the execution by the Obligors
and the recording, registering, filing, re-recording, re-filing, and
re-registering of all security agreements, financing statements and continuation
statements as are necessary to maintain the security interest granted by the
Obligors under the respective Receivables. The Trust hereby authorizes the
Servicer, and the Servicer agrees, consistent with the Required Standard of
Care, to take any and all steps reasonably necessary to re-perfect such security
interest on behalf of the Trust Collateral Agent as necessary because of the
relocation of a Financed Vehicle or for any other reason. In the event that the
assignment of a Receivable to the Trust Collateral Agent is insufficient,
without a notation on the related Financed Vehicle's certificate of title, or
without fulfilling any additional administrative requirements under the laws of
the state in which the Financed Vehicle is located, to
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perfect a security interest in the related Financed Vehicle in favor of the
Trust, the Servicer hereby agrees that either TFC's or the Trust Collateral
Agent's designation as the secured party on the certificate of title is in its
capacity as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
or, if an Insurer Default shall have occurred, upon the occurrence of a Servicer
Termination Event, the Controlling Party may instruct the Trust Collateral Agent
and the Servicer to take or cause to be taken such action as may, in the opinion
of counsel to the Controlling Party, be necessary to perfect or re-perfect the
security interests in the Financed Vehicles securing the Receivables in the name
of the Trust Collateral Agent by amending the title documents of such Financed
Vehicles or by such other reasonable means as may, in the opinion of counsel to
the Controlling Party, be necessary or prudent. TFC hereby agrees to pay all
expenses related to such perfection or reperfection and to take all action
necessary therefor. In addition, prior to the occurrence of an Insurance
Agreement Event of Default or Servicer Termination Event, the Controlling Party
may instruct the Servicer to take or cause to be taken such action as may, in
the opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of the Trust Collateral Agent, including by amending the
title documents of such Financed Vehicles or by such other reasonable means as
may, in the opinion of counsel to the Controlling Party, be necessary or
prudent; provided, however, that if the Controlling Party requests that the
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title documents be amended prior to the occurrence of an Insurance Agreement
Event of Default or a Servicer Termination Event, the out-of-pocket expenses of
the Servicer in connection with such action shall be reimbursed to the Servicer
by the Controlling Party. TFC hereby appoints the Trust Collateral Agent as its
attorney-in-fact to take any and all steps required to be performed by TFC
pursuant to this Section 4.5(b), including execution of certificates of title or
any other documents in the name and stead of TFC, and the Trust Collateral Agent
hereby accepts such appointment. Notwithstanding any provision of this Agreement
to the contrary, the Trust Collateral Agent shall not have any duty or
obligation to pay any of the expenses associated with perfecting or
re-perfecting security interests in the Financed Vehicles.
SECTION 4.6 Purchase of Receivables Upon Breach of Covenant. Upon
-----------------------------------------------
discovery by any of the Servicer, the Seller, a Trust Officer of the Trustee,
the Owner Trustee or an Authorized Officer of the Trustee of a breach of any of
the covenants set forth in Sections 4.5(a) or 9.1(a), the party discovering such
breach shall give prompt written notice to the others and the Insurer; provided,
--------
however, that the failure to give any such notice shall not affect any
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obligation of the Servicer under this Section 4.6. As of the last day of the
calendar month following the calendar month of its discovery or receipt of
notice of any breach of any covenant set forth in Sections 4.5(a) or 9.1(a)
which materially and adversely affects the interests of the Noteholders or the
Insurer in any Receivable (including any Liquidated Receivable) or the related
Financed Vehicle, the Servicer (when the Servicer is TFC) shall, unless such
breach and the resulting Material Adverse Effect shall have been cured in all
material respects, purchase from the Trust the Receivable affected by such
breach and, on the related Deposit Date, the Servicer shall pay the related
Purchase Amount and deposit such Purchase Amount into the Collection Account in
accordance with Section 5.6 hereof. As provided in Section
35
10.4(a), the Successor Servicer shall not have any obligation to purchase any
Receivable pursuant to this Section 4.6. In consideration of and simultaneously
with the purchase of the Receivable, the Issuer and the Trustee shall perform
such acts and execute such assignments, termination statements and other
documents as may reasonably be requested by the Servicer in order to effect such
purchase, it being understood that the preparation of any such documents and the
payment of any costs associated therewith (including any required filing fees)
shall be undertaken by the Servicer. The Trustee shall notify the Controlling
Party promptly, in writing, of any failure by the Servicer to so repurchase any
Receivable to the extent the Trustee has actual knowledge of such failure. It is
understood and agreed that the obligation of the Servicer to purchase any
Receivable (including any Liquidated Receivable) with respect to which such a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available to the
Insurer, the Noteholders, the Owner Trustee or the Trust Collateral Agent under
this Agreement; provided, however, that the Servicer shall indemnify the Trust,
the Insurer, the Owner Trustee, the Trust Collateral Agent, the Trustee, the
Successor Servicer and the Noteholders (and their respective directors,
officers, employees and agents) against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to such breach.
SECTION 4.7. Total Servicing Fee; Payment of Certain Expenses by Servicer.
------------------------------------------------------------
On each Payment Date, the Servicer shall be entitled to receive out of the
Collection Account the Base Servicing Fee and reimbursable amounts for the
related Monthly Period pursuant to Section 5.3. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities under this
Agreement (including taxes imposed on the Servicer, expenses incurred in
connection with distributions and reports made by the Servicer to Noteholders or
the Insurer and all other fees and expenses of the Trust not payable or
reimbursable pursuant to Section 5.3, except taxes levied or assessed against
the Trust, and claims against the Trust in respect of indemnification, which
taxes and claims in respect of indemnification against the Trust are expressly
stated to be for the account of TFC).
SECTION 4.8. Servicer's Certificate. No later than 12:00 noon New York City
----------------------
time on each Determination Date, the Servicer shall deliver, or cause to be
delivered, to the Trustee, the Owner Trustee, the Trust Collateral Agent, the
Backup Servicer, the Insurer, the Noteholders and the Rating Agency, a
Servicer's Certificate executed by a responsible officer or agent of the
Servicer containing among other things, (i) all information necessary to enable
the Trustee to make any withdrawal and deposit required by Section 5.5, to give
any notice required by Section 5.5(b) and to make the distributions required by
Section 5.7, (ii) all information to be provided to Noteholders and the Insurer
specified by Section 5.11 and (iii) a listing of all receivables repurchased by
the Servicer or by the Seller on the related Deposit Date and each Receivable
which became a Liquidated Receivable or which was paid in full during the
related Monthly Period, identified by account number (as set forth in the
Schedule of Receivables). In addition to the information set forth in the
preceding sentence, the Servicer's Certificate shall also contain the following
information: (a) the Delinquency Ratio, Average Delinquency
36
Ratio and Cumulative Net Loss Rate (as such terms are defined in the Insurance
Agreement) for such Determination Date; (b) whether to the knowledge of the
Servicer any Trigger Event has occurred as of such Determination Date; (c)
whether any Trigger Event that may have occurred as of a prior Determination
Date is Deemed Cured as of such Determination Date; (d) whether to the knowledge
of the Servicer an Insurance Agreement Event of Default has occurred; and (e)
such other information reasonably requested by the Insurer or the Noteholders;
provided, however, that such information shall only be required to be included
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in the Servicer's Certificate on any Determination Date to the extent the
request therefor is received by the Servicer on or prior to twenty (20) Business
Days preceding such Determination Date.
SECTION 4.9. Annual Statement as to Compliance, Notice of Servicer
-----------------------------------------------------
Termination Event.
-----------------
(a) The Servicer shall deliver or cause to be delivered to the
Trustee, the Noteholders, the Owner Trustee, the Successor Servicer, the Trust
Collateral Agent, the Rating Agency and the Insurer on or before April 30 (or
120 days after the end of the Servicer's fiscal year, if other than December 31)
of each year, beginning on April 30, 2003, an Officer's Certificate signed by
any responsible officer of the Servicer, dated as of December 31 (or other
applicable date) of the immediately preceding year, stating that (i) a review of
the activities of the Servicer during the preceding 12-month period (or such
other period as shall have elapsed from the Closing Date to the date of the
first such certificate) and of its performance under this Agreement has been
made under such officer's supervision, and (ii) to such officer's knowledge,
based on such review, the Servicer, has fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Owner Trustee,
the Trust Collateral Agent, and the Insurer, promptly after having obtained
knowledge thereof, but in no event later than two (2) Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 10.1(a). The Seller or the Servicer shall deliver to the Trustee,
the Noteholders, the Owner Trustee, the Trust Collateral Agent, the Insurer, the
Servicer or the Seller (as applicable) promptly after having obtained knowledge
thereof, but in no event later than two (2) Business Days thereafter, written
notice in an Officer's Certificate of any event which with the giving of notice
or lapse of time, or both, would become a Servicer Termination Event under any
other clause of Section 10.1.
SECTION 4.10. Independent Accountants' Report.
-------------------------------
(a) The Servicer (when the Servicer is TFC) shall cause a firm of
nationally recognized independent certified public accountants (the "Independent
-----------
Accountants"), who may also render other services to the Servicer or to the
-----------
Seller, to deliver to the Board of Directors of the Servicer, the Trustee, the
Noteholders, the
37
Successor Servicer, the Owner Trustee, the Trust Collateral Agent and the
Insurer (with a copy delivered to the Rating Agency) a report of certain agreed
upon procedures as per Section 4.01(q) of the Insurance Agreement (the "Required
--------
Audits").
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(b) The Successor Servicer (when TFC is not the Servicer) shall
cause the Independent Accountants to perform the Required Audits if so requested
by the Insurer in the exercise of its sole discretion, but in no event shall the
Successor Servicer be obliged to complete such Required Audits and deliver the
related report in less than 120 days after such request. The Controlling Party
shall also have the option to request the Required Audit of the first Servicer's
Certificate of the Successor Servicer within 60 days of the Successor Servicer
replacing the Servicer.
SECTION 4.11. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
Receivables. The Servicer shall provide to representatives of the Trustee, the
-----------
Owner Trustee, the Trust Collateral Agent, the Successor Servicer, the Insurer
and the Noteholders reasonable access to the documentation (including any
computer tapes or files) regarding the Receivables. In each case, such access
shall be afforded without charge but only upon reasonable request and during
normal business hours. Nothing in this Section shall derogate from the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
SECTION 4.12. Monthly Duties of Backup Servicer and Successor Servicer.
--------------------------------------------------------
(a) On or before the Determination Date for each month, the
Servicer will deliver or cause to be delivered to each of the Backup Servicer,
and the Successor Servicer, and upon its written request therefor, the Insurer,
electronic media acceptable to each of the Backup Servicer, the Insurer and the
Successor Servicer, containing the information set forth in Schedule C hereto
with respect to the Receivables as of the preceding Accounting Date, together
with all other information necessary for preparation of the Servicer's
Certificate relating to the immediately succeeding Determination Date and
necessary to determine the application of collections as provided in Section
5.4. The Backup Servicer shall use such electronic media to review each
Servicer's Certificate delivered pursuant to Section 4.8 of this Agreement and
shall:
(i) confirm that such Servicer's Certificate is complete on
its face;
(ii) load the electronic media, and confirm that such
electronic media is in a readable form, and confirm the Pool Balance for the
most recent Payment Date;
(iii) confirm based on the recalculation of the numbers set
forth in the Servicer's Certificate, and comparison to the data provided on the
electronic media, that the Pool Balance, the Aggregate Principal Balance, the
Available Funds, the Base Servicing Fee, the fees payable pursuant to Section
5.7(a)(ii) hereof, the Noteholders'
38
Interest Payment Amount, the Noteholders' Principal Payment Amount, the
Noteholders' Interest Carryover Shortfall, the Noteholders' Principal Carryover
Shortfall and the other required distributions hereunder are accurate;
(iv) confirm the Deficiency Claim Amount, if any; and
(v) confirm based on the recalculation of the numbers set
forth in the Servicer's Certificate and comparison to the data provided on the
electronic media that the Average Delinquency Ratio, Cumulative Net Loss Rate
and Delinquent Receivables (as such terms are defined in the Insurance
Agreement) are accurate.
(b) On or before 12:00 noon (New York City time) on the Business
Day preceding each Payment Date, the Backup Servicer shall deliver or cause to
be delivered to the Insurer, the Servicer and the Trustee a certificate, in form
and substance satisfactory to the Insurer, signed by a Trust Officer, stating
that (i) the Backup Servicer has loaded the electronic media as described in
Section 4.12(a)(ii) on its hardware, (ii) a review of the Servicer's Certificate
for the related Determination Date has been made under such Trust Officer's
supervision, and (iii) to such Trust Officer's knowledge, (x) the electronic
media is in readable form; (y) the data on the electronic media tie to the
related Servicer's Certificate resulting in no discrepancies between them; and
(z) the Servicer's Certificate does not contain any errors. If the preceding
statements cannot be made in the affirmative, the applicable Trust Officer shall
state the nature of any and all anomalies, discrepancies and errors, and
indicate all actions it is currently taking with the Servicer to reconcile
and/or correct the same.
(c) In the event that the Backup Servicer reports any anomalies,
discrepancies and errors such as those described in Section 4.12(b) above, the
Backup Servicer shall request that the Servicer reconcile such discrepancies and
correct such errors prior to 12 noon (New York City time) on the Business Day
preceding the related Payment Date, but in the absence of a reconciliation, the
Servicer's Certificate shall control for the purpose of calculations and
payments with respect to the related Payment Date. If the Backup Servicer and
the Servicer are able to reconcile all discrepancies and correct all errors with
respect to the Servicer's Certificate prior to 5:00 p.m. (New York City time) on
the Business Day preceding the related Payment Date, the Servicer's Certificate
shall be immediately restated by the Servicer and delivered to each of the
Backup Servicer, the Successor Servicer, the Trustee and the Insurer by the
close of business of the Servicer on such day, which restated certificate shall
be deemed to be the Servicer's Certificate for the Determination Date and the
related Payment Date.
(d) If the Backup Servicer and the Servicer are unable to reconcile
all discrepancies and correct all errors, with respect to a Servicer Certificate
by 5:00 p.m. (New York City time) on the Business Day preceding the related
Payment Date, the Servicer shall cause the Independent Accountants, at the
Servicer's expense, to audit the Servicer's Certificate and, prior to the fifth
Business Day, but in no event later than the eighth calendar day, of the
following month, reconcile the discrepancies. The effect, if any, of such
reconciliation shall be reflected in the Servicer's Certificate for such next
succeeding Determination Date.
39
(e) Upon the occurrence and continuation of a Trigger Event while
TFC is acting as Servicer or upon an Insurance Agreement Event of Default while
TFC is acting as Servicer, if so requested by the Controlling Party, the Backup
Servicer shall cause the Independent Accountants, at TFC's expense, to perform
certain agreed upon procedures with regard to the electronic media most recently
delivered to the Successor Servicer and the related Servicer's Certificate to
provide third party confirmation of items specified similar to those specified
in Sections 4.12(a) and (b) above, as deemed necessary by the Controlling Party
in the exercise of its sole discretion. The Backup Servicer, at TFC's expense,
shall cause such agreed upon procedures to be applied to electronic media
delivered under this Section 4.12 in the future, if so requested by the
Controlling Party from time to time, provided, however, that the Controlling
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Party shall not demand such additional third party confirmations if and to
extent that no fewer than three such additional third party confirmations are
deemed by the Controlling Party, in the exercise of its sole discretion, to
indicate a high degree of accuracy with respect to the related Servicer's
Certificate; and the agreed upon procedures specified in this subsection (e) may
be applied in the future, if so requested by the Controlling Party, upon the
occurrence and confirmation of a subsequent Trigger Event or subsequent
Insurance Agreement Event of Default while TFC is acting as Servicer.
(f) Upon the occurrence of an Insurance Agreement Event of Default
or a Servicer Termination Event, if so requested by the Controlling Party or the
Successor Servicer, the Successor Servicer from amounts available under Section
5.7(a)(ii) hereof and with the full cooperation of the Servicer, shall perform a
test conversion of the Servicer's servicing system for the Receivables on a
sample of Receivables as described in Section 10.3(a)(i) hereof; provided;
however, that absent an Insurance Agreement Event of Default or a Servicer
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Termination Event, no more than two (2) test conversions shall be requested by
the Controlling Party or the Successor Servicer in any calendar year.
(g) Other than the duties specifically set forth in this Agreement,
the Backup Servicer and the Successor Servicer shall have no obligations
hereunder, including without limitation to supervise, verify, monitor or
administer the performance of the Servicer. The Backup Servicer and the
Successor Servicer shall have no liability for any actions taken or omitted by
the Servicer (except to the extent such Person had been acting as Servicer). The
Backup Servicer and the Successor Servicer shall have no duties or obligations
hereunder other than those expressly set forth in this Agreement and no implied
duties or obligations shall be read into this Agreement against the Backup
Servicer and the Successor Servicer. Except for reports, information or other
documents provided to the Backup Servicer and the Successor Servicer pursuant to
the specific provisions in this Agreement, any reports, information or other
documents provided to the Backup Servicer, the Successor Servicer or the Trustee
are for informational purposes only and such parties' receipt of any such
information shall not constitute constructive notice of any information
contained therein or determinable from any information contained therein,
including the Issuer, the Seller or the Servicer's compliance with any of its
covenants, representations or warranties hereunder.
40
SECTION 4.13. Retention and Termination of Servicer. TFC hereby covenants
-------------------------------------
and agrees to act as such under this Agreement for an initial term, commencing
on the Closing Date and ending on June 30, 2002, which term shall be extendible
by the Insurer for successive quarterly terms ending on each successive
September 30, December 31, March 31 and June 30, until the Notes are paid in
full; provided, however, that upon the occurrence of an Insurance Agreement
-------- -------
Event of Default or a Servicer Termination Event, such term shall only be
extendible by the Insurer for successive monthly terms ending on the last day of
such successive calendar month. Each such extension notice which may be executed
by the Insurer from time to time (a "Servicer Extension Notice") shall be
-------------------------
delivered by the Insurer to the Trustee and the Servicer. The Servicer hereby
agrees that, as of the date hereof and upon its receipt of any such Servicer
Extension Notice, the Servicer shall become bound, for the initial term
beginning on the Closing Date and for the duration of the term covered by such
Servicer Extension Notice, to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Trustee agrees that
if as of the fifteenth day prior to the last day of any term of the Servicer the
Trustee shall not have received any Servicer Extension Notice from the Insurer,
the Trustee will, within five days thereafter, give written notice of such
non-receipt to the Insurer, the Backup Servicer and the Successor Servicer (or
any alternate successor to the Servicer appointed by the Insurer pursuant to
Section 10.4(f)) and the Servicer and the Servicer's term shall not be extended
unless a Servicer Extension Notice is received on or before the last day of such
term. Notwithstanding anything to the contrary contained herein, if the Insurer
is not the Controlling Party then, unless it has theretofore been terminated,
the term of the Servicer's appointment shall automatically be deemed extended
until the earlier of (x) the date this Agreement is terminated or (y) the date
the Servicer's appointment is terminated pursuant to Section 10.2 or the
Servicer resigns in accordance with Section 9.6.
SECTION 4.14. Fidelity Bond. The Servicer or such successor servicer that
-------------
is performing the servicing duties of the Servicer (unless the successor
servicer is the Successor Servicer), has obtained, and shall continue to
maintain in full force and effect, a fidelity bond of a type and in such amount
as is customary for servicers engaged in the business of servicing automobile
receivables.
ARTICLE V
Trust Accounts and Spread Account; Payments;
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Statements to Certificateholders and Noteholders
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SECTION 5.1. Establishment of Trust Accounts and Spread Account. The Trust
--------------------------------------------------
Collateral Agent, on behalf of the Noteholders and the Insurer, shall establish
and maintain in its own name an Eligible Deposit Account (the "Collection
----------
Account"), bearing a designation clearly indicating that the funds deposited
-------
therein are held for the benefit of the Trust Collateral Agent on behalf of the
Noteholders and the Insurer. The Collection Account shall initially be
established with the Trust Collateral Agent.
(b) The Trust Collateral Agent, on behalf of the Noteholders and
the Insurer, shall establish and maintain in its own name an Eligible Deposit
Account (the
41
"Note Payment Account"), bearing a designation clearly indicating that the funds
--------------------
deposited therein are held for the benefit of the Trust Collateral Agent on
behalf of the Noteholders and the Insurer. The Note Payment Account shall
initially be established with the Trust Collateral Agent.
(c) The Trust Collateral Agent, on behalf of the Noteholders and
the Insurer, shall establish and maintain in its own name an Eligible Deposit
Account (the "Spread Account"), bearing a designation clearly indicating that
--------------
the funds deposited therein are held for the benefit of the Trust Collateral
Agent on behalf of the Noteholders and the Insurer. The Spread Account shall
initially be established with the Trust Collateral Agent.
(d) Funds on deposit in the Collection Account and the Note
Payment Account (collectively, the "Trust Accounts") and the Spread Account
--------------
shall be invested by the Trust Collateral Agent (or any custodian with respect
to funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (when the Servicer is TFC) (pursuant to standing
instructions or otherwise) which, absent any instruction shall be the
investments specified in clause (d) of the definition of Eligible Investments
set forth herein. Other than as permitted by the Rating Agency and the Insurer,
funds on deposit in any Trust Account or the Spread Account shall be invested in
Eligible Investment that will mature so that such funds will be available at the
close of business on the Business Day immediately preceding the following
Payment Date. All Eligible Investments will be held to maturity.
(e) All investment earnings of monies deposited in the Trust
Accounts shall be deposited (or caused to be deposited) by the Trust Collateral
Agent in the Collection Account no later than the close of business on the
Business Day immediately preceding the related Payment Date, and any loss
resulting from such investments shall be charged to the Collection Account. All
investment earnings of monies deposited in the Spread Account shall be deposited
(or caused to be deposited) by the Trust Collateral Agent in the Spread Account
no later than the close of business on the Business Day immediately preceding
the related Payment Date, and any loss resulting from such investments shall be
charged to the Spread Account. The Servicer (when the Servicer is TFC) will not
direct the Trust Collateral Agent to make any investment of any funds held in
any of the Trust Accounts and the Spread Account unless the security interest
granted and perfected in such account will continue to be perfected in such
investment, in either case without any further action by any Person, and, in
connection with any direction to the Trust Collateral Agent to make any such
investment, if necessary, the Servicer shall deliver to the Trust Collateral
Agent an Opinion of Counsel to such effect.
(f) The Trustee shall not in any way be held liable by reason of
any insufficiency in any of the Trust Accounts or the Spread Account resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trust Collateral Agent's negligence or bad faith or its
failure to make payments on such Eligible Investments issued by the Trustee, in
its commercial capacity as principal obligor and not as trustee, in accordance
with their terms.
42
(g) If (i) the Servicer (when the Servicer is TFC) shall have
failed to give investment directions for any funds on deposit in the Trust
Accounts or the Spread Account to the Trustee by 12:00 p.m. Eastern Time (or
such other time as may be agreed by the Issuer and Trust Collateral Agent) on
any Business Day; or (ii) a Default or Event of Default shall have occurred and
be continuing with respect to the Notes but the Notes shall not have been
declared due and payable, or, if such Notes shall have been declared due and
payable following an Event of Default, amounts collected or receivable from the
Trust Property and Spread Account Property are being applied as if there had not
been such a declaration; then the Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts and the Spread
Account in one or more Eligible Investments pursuant to paragraph (d) above.
(h) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof and all such funds, investments, proceeds and income shall be part of
the Trust Property. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Spread Account and in all proceeds
thereof and all such funds, investments, proceeds and income shall be part of
the Spread Account Property. Except as otherwise provided herein, the Trust
Accounts and the Spread Account shall be under the sole dominion and control of
the Trustee for the benefit of the Noteholders and/or the Insurer, as the case
may be. If, at any time, any of the Trust Accounts or the Spread Account ceases
to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf)
shall within five Business Days (or such longer period as to which each Rating
Agency and the Insurer may consent) establish a new Trust Account or Spread
Account, as the case may be, as an Eligible Deposit Account and shall transfer
any cash and/or any investments to such new Trust Account or Spread Account. In
connection with the foregoing, the Servicer agrees that, in the event that any
of the Trust Accounts or the Spread Account are not accounts with the Trustee,
the Servicer shall notify the Trustee in writing promptly upon any of such Trust
Accounts or the Spread Account, as the case may be, ceasing to be an Eligible
Deposit Account.
(i) With respect to the Trust Account Property:
(A) any Trust Account Property or any property in
the Certificate Distribution Account that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts; and, except as
otherwise provided herein, each such Eligible Deposit Account shall
be subject to the exclusive custody and control of the Trust
Collateral Agent, and the Trust Collateral Agent shall have sole
signature authority with respect thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Trust Collateral Agent in
accordance with paragraph (a) of the definition of "Delivery" in
--------
Section 1.1 and shall be held, pending maturity or disposition,
solely by the Trust Collateral Agent or a financial intermediary (as
such term is defined in Section 8-102(a)(14) of the UCC) acting
solely for the Trust Collateral Agent;
43
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" in Section 1.1 and
--------
shall be maintained by the Trust Collateral Agent, pending maturity
or disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article 8 of the UCC and that is not
-----------------------
governed by clause (C) above shall be delivered to the Trust
Collateral Agent in accordance with paragraph (c) of the definition
of "Delivery" in Section 1.1 and shall be maintained by the Trust
--------
Collateral Agent, pending maturity or disposition, through continued
registration of the Trust Collateral Agent's (or its nominee's)
ownership of such security.
Effective upon delivery of any Trust Account Property in the form
of physical property, book-entry securities or uncertificated securities, the
Trust Collateral Agent shall be deemed to have purchased such Trust Account
Property for value, in good faith and without notice of any adverse claim
thereto.
The Trustee shall not enter into any subordination or
intercreditor agreement with respect to the Trust Account Property.
SECTION 5.2. Reserved.
--------
SECTION 5.3. Certain Reimbursements to the Servicer. To the extent that
--------------------------------------
other reimbursable expenses are not recovered pursuant to Section 4.3, the
Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer to have
resulted from mistaken deposits or postings or checks returned for insufficient
funds. The amount to be reimbursed hereunder shall be paid to the Servicer on
the related Payment Date pursuant to Section 5.7(a)(i) upon certification by the
Servicer of such amounts and the provision of such information to the Trustee
and the Controlling Party as may be necessary in the opinion of the Controlling
Party to verify the accuracy of such certification. In the event that the
Controlling Party has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section, the Controlling Party
shall give the Trustee notice to such effect, following receipt of which the
Trustee shall not make a distribution to the Servicer in respect of such amount
pursuant to Section 5.7, or if the Servicer prior thereto has been reimbursed
pursuant to Section 5.7, the Trustee shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding Payment Date.
SECTION 5.4. Application of Collections. All collections for the Monthly
--------------------------
Period shall be applied by the Servicer as follows:
44
With respect to each Simple Interest Receivable (other than a
Purchased Receivable), payments by or on behalf of the Obligor shall be applied
to interest and principal in accordance with the Simple Interest Method. With
respect to each Rule of 78s Receivable and with respect to each Actuarial
Receivable, (other than a Purchased Receivable), payments by or on behalf of the
Obligor shall be applied to interest and principal in accordance with the
Actuarial Method.
SECTION 5.5. Spread Account.
--------------
(a) The Spread Account will be held for the benefit of the
Noteholders and the Insurer. On or prior to the Closing Date, the Issuer shall
deposit or cause to be deposited an amount equal to the 4.00% of the Original
Pool Balance into the Spread Account from the net proceeds of the sale of the
Notes. Thereafter, with respect to any Determination Date after the Closing
Date, the amount required to be on deposit in the Spread Account shall equal the
Requisite Amount.
(b) In the event that the Servicer's Certificate with respect to
any Determination Date (other than the Determination Date preceding the Final
Scheduled Payment Date) shall state that the Available Funds with respect to
such Determination Date is less than the sum of the amounts payable on the
related Payment Date pursuant to clauses (i) through (v) of Section 5.7(a) (such
deficiency or, as applicable, any deficiency determined pursuant to the
immediately succeeding sentence, being a "Deficiency Claim Amount") then on the
-----------------------
Deficiency Claim Date immediately preceding such Payment Date, the Servicer
shall deliver to the Trustee, the Owner Trustee and the Insurer, by hand
delivery, telex or facsimile transmission, a written notice in substantially the
form of Exhibit B attached hereto (a "Deficiency Notice") specifying the
-----------------
Deficiency Claim Amount for such Payment Date. Such Deficiency Notice shall
direct the Trustee to remit from the Spread Account such Deficiency Claim Amount
for deposit in the Collection Account on the related Payment Date. With respect
to the Determination Date next preceding the Final Scheduled Payment Date, the
Deficiency Claim Amount will be calculated in the manner described above, except
that, the calculation will use clauses (i) through (vi) of Section 5.7(a).
(c) Any Deficiency Notice shall be delivered by 12:00 noon, New
York City time, on the Deficiency Claim Date. The amounts distributed pursuant
to a Deficiency Notice shall be deposited by the Trustee into the Collection
Account pursuant to Section 5.6.
(d) With respect to the Spread Account Property, the Trust
Collateral Agent agrees that, subject at all times to the terms of the
Securities Account Control Agreement:
(i) Any Spread Account Property that is held in deposit
accounts shall be held solely in the name of the Trust Collateral Agent, with
the Trust Collateral Agent. The Spread Account shall be subject to the exclusive
custody and control of the Trust Collateral Agent, and the Trust Collateral
Agent shall have sole signatory authority with respect thereto.
45
(ii) Any Spread Account Property that constitutes Physical
Property shall be delivered to the Trust Collateral Agent, in accordance with
paragraph (a) of the definition of "Delivery" in Section 1.1 and shall be held,
--------
pending maturity or disposition, solely by the Trust Collateral Agent, or a
securities intermediary, as such term is defined in Section 8-102(a)(14) of the
UCC, acting solely for the Trust Collateral Agent.
(iii) Any Spread Account Property that is a book-entry
security held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in Section 1.1 and shall be maintained by the Trust
--------
Collateral Agent, pending maturity or disposition, through continued book-entry
registration of such Spread Account Property as described in such paragraph.
(iv) Any Spread Account Property that is an "uncertificated
--------------
security" under Article 8 of the UCC and that is not governed by clause (iii)
--------
above shall be delivered to the Trust Collateral Agent, in accordance with
paragraph (c) of the definition of "Delivery" in Section 1.1 and shall be
--------
maintained by the Trust Collateral Agent, pending maturity or disposition
through continued registration of the Trust Collateral Agent's or its securities
intermediary's (or its custodian's or its nominee's) ownership of such security,
in its capacity as Trust Collateral Agent.
(v) Effective upon delivery of any Spread Account Property
in the form of physical property, book-entry securities or uncertificated
securities, the Trust Collateral Agent shall be deemed to have purchased such
Spread Account Property for value, in good faith and without notice of any
adverse claim thereto.
(vi) The Trust Collateral Agent shall not enter into any
subordination or intercreditor agreement with respect to the Spread Account
Property.
(e) On or after the occurrence of an Event of Default under the
Indenture and the acceleration of the Notes thereunder or on or after the
occurrence of an Insurance Agreement Event of Default, and upon the written
direction of the Controlling Party, all, or any portion of, amounts on deposit
in the Spread Account shall be applied to pay amounts described in Section 5.6
of the Indenture.
SECTION 5.6. Additional Deposits. TFC and the Seller, as applicable, shall
-------------------
deposit or cause to be deposited in the Collection Account on the Deposit Date:
(a) the aggregate Purchase Amount with respect to Purchased
Receivables;
(b) proceeds of any redemption of the Notes described in Section
11.1 shall be deposited in the Collection Account; and
(c) from the Spread Account, any Deficiency Claim Amount pursuant
to Section 5.5.
46
SECTION 5.7. Payments.
--------
(a) On each Payment Date, the Trustee shall (x) distribute all
amounts deposited by the Insurer pursuant to Section 5.12 as directed by the
Insurer in writing and (y), (based solely on the information contained in the
Servicer's Certificate delivered with respect to the related Determination Date
(as the same may be restated in accordance with and pursuant to Section
4.12(c)), distribute the following amounts from the Collection Account unless
otherwise specified, to the extent of the sources of funds stated to be
available therefor, and in the following order of priority:
(i) from the Amount Available, to the Servicer, the Base
Servicing Fee for the related Monthly Period, and any amounts specified in
Section 5.3, to the extent the Servicer has not reimbursed itself in respect of
such amounts pursuant to Section 5.3 and to the extent not retained by the
Servicer;
(ii) from the remaining Amount Available, pro rata in
accordance with the respective amounts then owed, to the Trustee, Trust
Collateral Agent, Backup Servicer, Successor Servicer, Owner Trustee and P.O.
Box Owner, their accrued and unpaid fees (provided, however, that such fees in
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the aggregate for the Trustee, Trust Collateral Agent, Backup Servicer and the
P.O. Box Owner shall not exceed an amount equal to the greater of (w) the
product of one-twelfth (1/12) of 0.09% times the Pool Balance as of the next
-----
preceding Accounting Date (except in the case of the first Payment Date, such
amount shall be based on the Pool Balance as of the Closing Date and the number
of days between the Closing Date and the first Payment Date) and (x) $2,000; and
provided, further, that such fees in the aggregate for the Successor Servicer
-------- -------
shall not exceed an amount equal to $1,200 per item of electronic media
delivered pursuant to Section 4.12(a)) and expenses, (including, but not limited
to, reasonable attorneys' fees and reasonable transition costs); provided,
--------
however, that in the aggregate (y) such attorneys' fees and transition costs and
-------
expenses for the Trustee, Trust Collateral Agent, Backup Servicer, Successor
Servicer and the P.O. Box Owner shall not exceed an amount equal to $100,000 for
the period commencing on the Closing Date and concluding on the Final Scheduled
Payment Date, and (z) such fees and expenses for the Owner Trustee shall not
exceed $2,500 per annum.
(iii) from the remaining Amount Available and from amounts,
if any, paid under the Note Policy with respect to such Payment Date, to the
Note Payment Account, the Noteholders' Interest Payment Amount;
(iv) prior to the occurrence of an Event of Default under
the Indenture and the acceleration of the Notes, from the remaining Amount
Available, to the Insurer, the premium owing to the Insurer under the Insurance
Agreement (other than the Premium Supplement);
(v) from the remaining Amount Available and from amounts,
if any, paid under the Note Policy with respect to such Payment Date to the Note
Payment Account, the Noteholders' Principal Payment Amount;
47
(vi) from the remaining Amount Available, to the Insurer,
any premium not paid under clause (iv) above (including as a result of the
acceleration of the Notes) and all other amounts owing to the Insurer under the
Insurance Agreement (including the Premium Supplement) and the other Basic
Documents and not previously paid;
(vii) from the remaining Available Funds, to the Note Payment
Account, the Additional Principal Payment Amount, in reduction of the Note
Principal Balance;
(viii) From the remaining Available Funds to the Trust
Collateral Agent for deposit in the Spread Account, the positive difference, if
any, between the Requisite Amount for such Payment Date and the amount on
deposit in the Spread Account (after giving affect to all payments referred to
in clauses (i) through (vii) set forth above);
(ix) from the remaining Available Funds, to the Servicer,
reimbursement for any amounts paid by the Servicer pursuant to Section 6.7 of
the Indenture and Section 4.7 hereof; and
(x) to the Certificate Distribution Account or as otherwise
specified in the Trust Documents, all remaining Available Funds together with
any remaining funds released from the Spread Account due to an excess of funds
in the Spread Account over the Requisite Amount;
provided, however, that following (A) the acceleration of the Notes pursuant to
-------- -------
Section 5.2 of the Indenture, to the extent actually known by an Authorized
Officer of the Trustee, or (B) the receipt of Insolvency Proceeds pursuant to
Section 11.1(b), amounts deposited in the Note Payment Account (including any
such Insolvency Proceeds) shall be paid to the Noteholders pursuant to Section
5.6 of the Indenture.
(b) In the event that the Collection Account is maintained with an
institution other than the Trust Collateral Agent, the Servicer shall instruct
and cause such institution to make all deposits and distributions pursuant to
Section 5.7(a) on the related Payment Date.
(c) Each Certificateholder, by its acceptance of its Certificate
will be deemed to have consented to the provisions of paragraph (a) above
relating to the priority of distributions, and will be further deemed to have
acknowledged that no property rights in any amount of or the proceeds of any
such amount shall vest in such Certificateholder until such amounts have been
distributed to such Certificateholder pursuant to such provisions; provided,
that the foregoing shall not restrict the right of any Certificateholder, upon
compliance with the provisions hereof, from seeking to compel the performance of
the provisions hereof by the parties hereto.
(d) In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that no amounts shall be received by it, nor shall it have any right to receive
any amounts, unless
48
and until such amounts have been distributed pursuant to clause (x) above to
such Certificateholder. Each Certificateholder by acceptance of its Certificate,
further specifically acknowledges that it has no right to or interest in any
monies at any time held in the Spread Account pursuant hereto prior to the
release of such monies as aforesaid, such monies being held in trust for the
benefit of the Noteholders and the Insurer. Notwithstanding the foregoing,
nothing shall be deemed to limit the Certificateholders from receiving any
amounts to which they are entitled from the releases from the Spread Account
pursuant to Section 5.7(a)(x). Notwithstanding the foregoing, in the event that
it is ever determined that the monies held in the Spread Account constitute a
pledge of collateral, then the provisions of this Agreement shall be considered
to constitute a security agreement and the Seller and the Certificateholders
hereby grant to the Trust Collateral Agent for the benefit of the Trustee (for
the benefit of the Noteholders) and the Insurer a first priority perfected
security interest in such amounts, to be applied as set forth in Section 5.5. In
addition, each Certificateholder, by acceptance of its Certificate, as
applicable, hereby appoints the Seller as its agent to pledge a first priority
perfected security interest in the Spread Account, and any amounts held therein
from time to time to the Trust Collateral Agent for the benefit of the Trustee
(for the benefit of the Noteholders) and the Insurer and agrees to execute and
deliver such instruments of conveyance, assignment, grant, confirmation, etc.,
as well as any financing statements, in each case as the Insurer shall consider
reasonably necessary in order to perfect the Trust Collateral Agent's security
interest in the Spread Account.
SECTION 5.8. Note Payment Account.
--------------------
(a) On each Payment Date, the Trustee shall distribute all amounts
on deposit in the Note Payment Account, as such amounts on deposit in the Note
Payment Account are specified on the related Servicer's Certificate, to
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes for principal and interest in the following amounts and in the
following order of priority:
(i) the Noteholders' Interest Payment Amount;
(ii) the Noteholders' Principal Payment Amount and the
Additional Principal Payment Amount until the Outstanding Amount of the Notes is
reduced to zero.
(b) On each Payment Date, the Trustee shall send to each
Noteholder pursuant to a written request the statement provided to the Trustee
by the Servicer pursuant to Section 5.11 hereof on such Payment Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Noteholder, such tax shall
reduce the amount otherwise distributable to the Noteholder in accordance with
this Section. The parties hereto hereby agree to provide to the Trustee the
information any such party may have, if any, with respect to any such
withholding tax. The Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Noteholders sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
49
shall not prevent the Trustee from contesting any such tax in appropriate
proceedings, although the Trustee is under no obligation to so contest absent
direction from the Controlling Party to so contest, and withholding payment of
such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Noteholder shall be
treated as cash distributed to such Noteholder at the time it is withheld by the
Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a payment (such as a
payment to a non-US Noteholder), the Trustee may in its sole discretion withhold
such amounts in accordance with this clause (c). In the event that a Noteholder
wishes to apply for a refund of any such withholding tax, the Trustee shall
reasonably cooperate with such Noteholder in making such claim so long as such
Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses
incurred. Notwithstanding anything to the contrary contained in this Agreement,
neither the Trust Collateral Agent nor the Trustee shall have any liability or
obligation with respect to withholding tax issues unless and until it receives
notification from the Servicer pursuant to Section 12.1(b)(ii).
(d) Payments required to be made to Noteholders on any Payment
Date shall be made to each Noteholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if such
Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Payment Date and such
Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or, if not, by check mailed to such Noteholder at the address of such
holder appearing in the Note Register; provided, however, that, unless Notes
-------- -------
have been issued pursuant to Section 3.13 of the Indenture, with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co. or ▇▇▇▇▇▇ Guaranty Trust
Company of New York), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Notwithstanding the
foregoing, the final payment in respect of any Note (whether on the Final
Scheduled Payment Date or otherwise) will be payable only upon presentation and
surrender of such Note at the office or agency maintained for that purpose by
the Note Registrar pursuant to Section 2.4 of the Indenture; provided, however,
-------- -------
that such presentation and surrender shall be waived with respect to any
Noteholder upon satisfaction by such Noteholder of the indemnity requirements
set forth in Section 2.6 of the Indenture.
SECTION 5.9. [Reserved.]
---------
SECTION 5.10. [Reserved.]
--------
SECTION 5.11. Statements to Certificateholders and Noteholders. (a) On or
------------------------------------------------
prior to each Determination Date, the Servicer shall provide, or cause to be
provided, to the Trustee and the Owner Trustee (with a copy to the Insurer and
the Rating Agency) for the Trustee to forward to each Noteholder of record, and
to each Certificateholder of record, a statement setting forth at least the
following information as to the Notes and the Certificates to the extent
applicable:
50
(i) the amount of such payment allocable to principal of
the Notes and to the Certificate Balance of the Certificates;
(ii) the amount of such payment allocable to interest on or
with respect to the Notes and to the Certificates;
(iii) the amount of such payment allocable to the
Certificates;
(iv) the amount of such payment payable to the Noteholders
withdrawn from the Spread Account or pursuant to a claim on the Note Policy;
(v) the Pool Balance as of the close of business on the
last day of the preceding Monthly Period;
(vi) the aggregate outstanding principal amount of the
Notes, the Note Factor, and after giving effect to payments allocated to
principal reported under (i) above;
(vii) the amount of the Base Servicing Fee and any
reimbursable amounts paid to the Servicer with respect to the related Monthly
Period and/or due but unpaid with respect to such Monthly Period or prior
Monthly Periods, as the case may be;
(viii) the Noteholders' Interest Carryover Shortfall and the
Noteholders' Principal Carryover Shortfall;
(ix) the amount of the aggregate Realized Losses, if any,
for the second preceding Monthly Period;
(x) the aggregate Purchase Amounts for Receivables, if any,
that were repurchased in such period;
(xi) recoveries for the period on charged off and liquidated
accounts; and
(xii) the amount of any deposits to the Collection Account
pursuant to Section 5.12 hereof.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (iv),
(vii) and (viii) above shall be expressed as a dollar amount per $1,000 of the
initial principal balance of the Notes or the initial Certificate Balance, as
applicable.
(b) In addition to the statement required to be delivered under
subsection (a), the Trustee may make available to the Noteholders, the
Certificateholders and the Rating Agency, via the Trustee's Internet Website,
the statement required to be delivered under subsection (a) and, with the
consent or at the direction of the Issuer, such other information regarding the
Notes and/or the Contracts as the Trustee may have in its possession, but only
with the use of a password provided by the Trustee or its agent to such Person
upon receipt by the Trustee from such Person of a certification in the form of
51
Exhibit H; provided, however, that the Trustee or its agent shall provide such
password to the parties to this Agreement, and the Rating Agency without
requiring such certification. The Trustee will make no representation or
warranties as to the accuracy or completeness of such documents and will assume
no responsibility therefor.
(c) The Trustee's Internet Website shall be initially located at
▇▇▇.▇▇▇▇▇▇.▇▇▇ or at such other address as shall be specified by the Trustee
from time to time in writing to the Noteholders and the Certificateholders. In
connection with providing access to the Trustee's Internet Website, the Trustee
may require registration and the acceptance of a disclaimer. The Trustee shall
not be liable for the dissemination of information in accordance with this
Agreement.
SECTION 5.12. Optional Deposits by the Insurer. The Insurer shall at any
--------------------------------
time, and from time to time, with respect to a Payment Date, have the option to
deliver amounts to the Trustee for deposit into the Collection Account for any
of the following purposes: (i) to provide funds in respect of the payment of
fees or expenses of any provider of services to the Trust with respect to such
Payment Date, (ii) to distribute as a component of the Principal Payment Amount
to the extent that the Note Balance as of the Determination Date preceding such
Payment Date exceeds the Pool Balance as of such Determination Date or (iii) to
provide funds to the extent that without such amount a draw would be required to
be made on the Note Policy.
ARTICLE VI
The Note Policy
---------------
SECTION 6.1. Claims Under Note Policy.
------------------------
(a) In the event that the Trustee has received a Deficiency
Notice, or otherwise has actual knowledge or is aware of the existence of a
Deficiency Claim Amount, with respect to any Determination Date, the Trustee
shall determine on the related Draw Date whether the sum of (i) the amount of
Available Funds with respect to such Determination Date (as stated in the
Servicer's Certificate with respect to such Determination Date) plus (ii) the
amount of the Deficiency Claim Amount, if any, available to be distributed by
the Trustee pursuant to a Deficiency Notice delivered with respect to such
Payment Date (as stated in the certificate delivered on the immediately
preceding Deficiency Claim Date by the Trustee pursuant to Section 5.5(b)) plus
(iii) the amount of any Insurer Optional Deposits, would be insufficient, after
giving effect to the payments required by Section 5.7(a), to pay the Scheduled
Payments (as defined in the Note Policy) for the related Payment Date. If the
sum of the amounts set forth in clauses (i) through (iii) above are insufficient
------- --- -----
to pay the Scheduled Payments for such Payment Date, the Trustee shall furnish
to the Insurer no later than 12:00 noon New York City time on the related Draw
Date a completed Notice of Claim in the amount of the shortfall in amounts so
available to pay the Scheduled Payments with respect to such Payment Date (the
amount of any such shortfall being hereinafter referred to as the "Note Policy
-----------
Claim Amount"). Amounts paid by the Insurer under the Note Policy shall be
------------
deposited
52
by the Trustee into the Note Payment Account for payment to Noteholders on the
related Payment Date (or for payment on a later date as set forth in the Note
Policy).
(b) Any notice delivered by the Trustee to the Insurer pursuant to
Section 6.1(a) shall specify the Note Policy Claim Amount claimed under the Note
Policy and shall constitute a "Notice of Claim" under the Note Policy. In
---------------
accordance with the provisions of the Note Policy, the Insurer is required to
pay to the Trustee the Note Policy Claim Amount properly claimed thereunder by
12:00 noon, New York City time, on the later of (i) the third Business Day (as
defined in the Note Policy) following receipt on a Business Day (as defined in
the Note Policy) of the Notice of Claim, and (ii) the applicable Payment Date.
Any payment made by the Insurer under the Note Policy shall be applied solely to
the payment of the Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Insurer and (ii) deposit the
same in the Note Payment Account for disbursement to the Noteholders as set
forth in Section 5.7(a). Any and all Note Policy Claim Amounts disbursed by the
Trustee from claims made under the Note Policy shall not be considered payment
by the Issuer or from the Spread Account with respect to such Notes, and shall
not discharge the obligations of the Issuer with respect thereto. The Insurer
shall, to the extent it makes any payment with respect to the Notes, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Notes by or on behalf of the Insurer, each Noteholder shall be deemed, without
further action, to have directed the Trustee to assign to the Insurer all rights
to the payment of interest or principal with respect to the Notes which are then
due for payment to the extent of all payments made by the Insurer and the
Insurer may exercise any option, vote, right, power or the like with respect to
the Notes to the extent that it has made payment pursuant to the Note Policy. To
evidence such subrogation, the Note Registrar shall note the Insurer's rights as
subrogee upon the register of Noteholders upon receipt from the Insurer of proof
of payment by the Insurer of any Noteholders' Interest Payment Amount or
Noteholders' Principal Payment Amount.
(d) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement, the Noteholders are not
entitled to institute proceedings directly against the Insurer.
SECTION 6.2. Preference Claims.
-----------------
(a) In the event that the Trustee has received a certified copy of a
final, non-appealable order of the appropriate court that any Scheduled Payment
(as such term is defined in the Note Policy) paid on a Note has been avoided in
whole or in part as a preference payment under applicable bankruptcy law, the
Trustee shall so notify the Insurer, shall comply with the provisions of the
Note Policy to obtain payment by the Insurer of such avoided payment, and shall,
at the time it provides notice to the Insurer, comply with the provisions of the
Note Policy to obtain payment by the Insurer and notify Holders of the Notes by
mail that, in the event that any Noteholder's payment is so
53
recoverable, such Noteholder will be entitled to payment pursuant to the terms
of the Note Policy. Upon written request, the Trustee shall furnish to the
Insurer its records evidencing the payments of principal and interest on Notes,
if any, which have been made by the Trustee and subsequently recovered from
Noteholders, and the dates on which such payments were made. Pursuant to the
terms of the Note Policy, the Insurer will make such payment on behalf of the
Noteholder to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Final Order (as defined in the Note Policy) and not to
the Trustee or any Noteholder directly (unless a Noteholder has previously paid
such payment to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy, in which case the Insurer will make such payment to the Trustee for
payment to such Noteholder upon proof of such payment reasonably satisfactory to
the Insurer).
(b) Each Notice of Claim shall provide that the Trustee, on its behalf
and on behalf of the Noteholders, thereby appoints the Insurer as agent and
attorney-in-fact for the Trustee and each Noteholder in any legal proceeding
with respect to the Notes. The Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which an Authorized Officer of
the Trustee has actual knowledge) seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (a "Preference Claim") of any payment made with respect to the
----------------
Notes. Each Holder of Notes, by its purchase of Notes, and the Trustee hereby
agree that so long as an Insurer Default shall not have occurred and be
continuing, the Insurer may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim including, without limitation, (i) the direction of any appeal
of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 6.1(c), the Insurer shall be subrogated to, and each Noteholder and the
Trustee hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trustee and each Noteholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
SECTION 6.3. Surrender of Policy. The Trust Collateral Agent shall
-------------------
surrender the Note Policy to the Insurer for cancellation upon the expiration of
such policy in accordance with the terms thereof.
54
ARTICLE VII
RESERVED
--------
ARTICLE VIII
The Seller
----------
SECTION 8.1. Covenants, Representations, and Warranties of Seller. The
----------------------------------------------------
Seller makes the following representations on which the Insurer shall be deemed
to have relied in executing and delivering the Note Policy, on which the Issuer
is deemed to have relied in acquiring the Receivables, on which the Trustee is
deemed to have relied in issuing the Note and on which the Noteholders are
deemed to have relied in purchasing the Notes. The representations speak as of
the execution and delivery of this Agreement and as of the Closing Date and
shall survive the sale, transfer and assignment of the Receivables to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
The Seller represents, warrants, and covenants:
(a) Organization and Good Standing. The Seller has been duly organized
------------------------------
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, power,
authority and legal right to acquire, own and sell the Receivables and the Other
Conveyed Property transferred to the Trust. The Seller is not organized under
the laws of any other State.
(b) Due Qualification. The Seller is duly qualified to do business as a
-----------------
foreign corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions where the failure to do so would materially and
adversely affect Seller's ability to transfer the Receivables and the Other
Conveyed Property to the Trust pursuant to this Agreement, or the validity or
enforceability of the Receivables and the Other Conveyed Property or to perform
Seller's obligations hereunder and under the Seller's Basic Documents.
(c) Power and Authority. The Seller has the power and authority to
-------------------
execute and deliver this Agreement and its Basic Documents and to carry out its
terms and their terms, respectively; the Seller has full power and authority to
sell and assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Trust by it and has duly authorized such sale
and assignment to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement and the Seller's Basic
Documents have been duly authorized by the Seller by all necessary corporate
action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid
-------------------------------
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers from
the Seller. This
55
Agreement and the Seller's Basic Documents, when duly executed and delivered,
shall constitute legal, valid and binding obligations of the Seller enforceable
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the Basic Documents and the fulfillment of the terms of this
Agreement and the Basic Documents shall not conflict with, result in any breach
of any of the terms and provisions of or constitute (with or without notice,
lapse of time or both) a default under the certificate of incorporation or
by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending
--------------
or, to the Seller's knowledge, threatened against the Seller, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Agreement or any of the Basic Documents, (B)
seeking to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or any of the Basic Documents,
(C) seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement or any of the Basic Documents, or (D)
seeking to adversely affect the federal income tax or other federal, state or
local tax attributes of the Securities.
(g) Approvals. All approvals, authorizations, consents, orders or other
---------
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the consummation of
the transactions contemplated hereby have been or will be taken or obtained on
or prior to the Closing Date.
(h) No Consents. The Seller is not required to obtain the consent of
-----------
any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained.
(i) Chief Executive Office. The chief executive office of the Seller is
----------------------
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
56
(j) Sale of Assets. The Seller will not sell all (or substantially all)
--------------
of its assets, which will not include assets sold in a securitization
transaction such as that contemplated herein, without the prior written consent
of the Insurer, and, if different, the Controlling Party.
SECTION 8.2. Corporate Existence.
-------------------
(a) During the term of this Agreement, the Seller will keep in full
force and effect its existence, rights and franchises as a corporation under the
laws of the jurisdiction of its incorporation and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Agreement, the Basic Documents and each other instrument or agreement necessary
or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain a Board of Directors with not less
than two Independent Directors;
(ii) the Seller shall maintain corporate records and books of
account separate from those of its Affiliates;
(iii) except as otherwise provided in this Agreement, the Seller
shall not commingle its assets and funds with those of its Affiliates;
(iv) the Seller shall hold such appropriate meetings of its Board
of Directors or distribute appropriate unanimous consents in lieu of a meeting
as are necessary to authorize all the Seller's corporate actions required by law
to be authorized by the Board of Directors, shall keep minutes of such meetings
and of meetings of its stockholder(s) and observe all other customary corporate
formalities (and any successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and applicable law);
(v) the Seller shall at all times hold itself out to the public
under the Seller's own name as a legal entity separate and distinct from its
Affiliates;
(vi) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis;
(vii) the Seller shall not incur any indebtedness, other than the
indebtedness contemplated by the Indenture; and
(viii) to the extent that the Seller and any of its stockholders or
affiliates have offices in the same location, there shall be a fair and
appropriate allocation
57
of overhead costs among them, and each such entity shall bear its fair share of
such expenses.
SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be
--------------------------------
liable in accordance herewith only to the extent of the obligations specifically
undertaken under this Agreement by the Seller and the representations made by
the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trust, the Insurer, the Trustee, the Backup Servicer, the
Successor Servicer and the Trust Collateral Agent from and against any taxes
that may at any time be asserted against any such Person with respect to the
transactions contemplated in this Agreement and any of the Basic Documents
(except any federal or other income taxes arising hereunder, including any fees,
late charges, penalty or other similar payment paid to the Owner Trustee, the
Trust Collateral Agent, the Trustee, the Backup Servicer, the Successor Servicer
and the Insurer and any taxes to which the Owner Trustee, the Trust Collateral
Agent or the Trustee may otherwise be subject), including any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Issuer, not including any taxes asserted with
respect to federal or other income taxes arising out of distributions on the
Certificates and the Notes) and costs and expenses in defending against the
same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer, the
Certificateholders, the Backup Servicer, the Successor Servicer and the
Noteholders from and against any loss, liability or expense incurred by reason
of (i) the Seller's willful misfeasance, bad faith or negligence in the
performance of its duties under this Agreement or the Seller's reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's or the Issuer's violation of Federal or state securities laws in
connection with the offering and sale of the Notes and the Certificates but not
any violation of such laws that are attributable in whole to the actions of
Westdeutsche Landesbank Girozentrale, London Branch, WestLB Panmure Securities
Inc., or any Affiliate of either such entity.
(c) The Seller shall indemnify, defend and hold harmless the Owner
Trustee, the Trustee, the Backup Servicer, the Successor Servicer and the Trust
Collateral Agent and their respective officers, directors, employees and agents
from and against any and all costs, expenses, losses, claims, damages and
liabilities arising out of, or incurred in connection with the acceptance or
performance of the trusts and duties set forth herein and in the Basic Documents
except to the extent that such cost, expense, loss, claim, damage or liability
shall be due to the willful misfeasance, bad faith or gross negligence (except
for errors in judgment) of the Backup Servicer, the Successor Servicer, the
Owner Trustee, the Trustee or the Trust Collateral Agent.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee, the Trustee, the Backup Servicer, the Successor
Servicer or the Trust Collateral Agent and the termination of this Agreement or
the Indenture or the
58
Trust Agreement or the Custodian Agreement, as applicable, and shall include
reasonable fees and expenses of counsel and other expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are made thereafter shall collect
any of such amounts from others, such Person shall promptly repay such amounts
to the Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
----------------------
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
(x) has a certificate of incorporation containing provisions relating to
limitations on business and other matters substantially identical to those
contained in the Seller's certificate of incorporation and (y) executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) the Seller shall have received the
-------- -------
written consent of the Controlling Party prior to entering into any such
transaction, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.1 shall have been breached
and no Servicer Termination Event, and no event which, after notice or lapse of
time, or both, would become a Servicer Termination Event shall have happened and
be continuing, (iii) the Seller shall have delivered to the Owner Trustee, the
Trust Collateral Agent, the Trustee and the Controlling Party an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iv) the Rating Agency
Condition shall have been satisfied with respect to such transaction, (v) the
Seller shall have delivered to the Owner Trustee, the Trust Collateral Agent,
the Trustee and the Controlling Party an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Trust Collateral
Agent, the Owner Trustee and the Trustee, respectively, in the Receivables and
reciting the details of such filings or (B) no such action shall be necessary to
preserve and protect such interest, and (vi) immediately after giving effect to
such transaction, no Insurance Agreement Event of Default and no event that,
after notice or lapse of time, or both, would become an Insurance Agreement
Event of Default shall have occurred and be continuing; provided, further,
-------- -------
notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii), (iii), (iv), (v)
and (vi) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b) or (c) above.
SECTION 8.5. Limitation on Liability of Seller and Others. The Seller
--------------------------------------------
and any director or officer or employee or agent of the Seller may rely in good
faith on the written advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document. The Seller shall not be under any obligation
to appear in, prosecute or defend any legal action
59
that shall not be incidental to its obligations under this Agreement, and that
in its opinion may involve it in any expense or liability.
SECTION 8.6. Seller May Own Certificates or Notes. The Seller and any
------------------------------------
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates; provided, however, that any Notes or Certificates
-------- -------
owned by the Seller or any Affiliate thereof, during the time such Notes or
Certificates are owned by them, shall be without voting rights for any purpose
set forth in the Basic Documents and will not be entitled to the benefits of the
Note Policy. The Seller shall notify the Owner Trustee, the Trustee, the Trust
Collateral Agent and the Insurer in writing promptly after it or any of its
Affiliates become the owner or pledgee of a Certificate or a Note.
ARTICLE IX
The Servicer
------------
SECTION 9.1. Covenants, Representations, and Warranties of Servicer.
------------------------------------------------------
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Trust
Collateral Agent relies in accepting the Receivables, on which the Trustee
relies in authenticating and issuing the Notes, on which the Owner Trustee
relies in executing the Certificates, on which the Insurer relies in issuing the
Note Policy and on which the Noteholders rely in purchasing the Notes. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date and shall survive the sale of the Receivables to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
(a) The Servicer covenants as to the Receivables:
(i) Liens in Force. The Financed Vehicle securing each Receivable
--------------
shall not be released in whole or in part from the security interest granted by
the Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(ii) No Impairment. The Servicer shall do nothing to impair the
-------------
rights of the Trust, the Insurer or the Noteholders in the Receivables, the
Dealer Agreements, the Dealer Assignments, the Insurance Policies or the Other
Conveyed Property;
(iii) No Amendments. The Servicer shall not extend or otherwise
-------------
amend the terms of any Receivable, except in accordance with Section 4.2;
(iv) Restrictions on Liens. The Servicer shall not (i) create,
---------------------
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or
60
permit in the future (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of, any Lien or restriction on transferability
of the Receivables except for the Lien in favor of the Trust Collateral Agent
for the benefit of the Noteholders and the Insurer, the Lien imposed by the
Indenture in favor of the Trust Collateral Agent for the benefit of the
Noteholders and the Insurer, and the restrictions on transferability imposed by
this Agreement or (ii) sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement which names TFC, the Seller or the Servicer
as a debtor (or sign any security agreement authorizing any secured party
thereunder to file such financing statement) with respect to the Receivables,
except in each case any such instrument solely securing the rights and
preserving the Lien of the Trust Collateral Agent, for the benefit of the
Noteholders and the Insurer; and
(v) Servicing of Receivables. The Servicer (including any
------------------------
successor to the Servicer) shall manage, service, administer and make
collections on the Receivables, and perform the other obligations of the
Servicer under this Agreement and the other Transaction Documents in accordance
with the Required Standard of Care. In addition, the Servicer will cooperate
with any successor to the Servicer upon any assumption by such successor to the
Servicer (including, without limitation, the Successor Servicer) of the
servicing of Receivables under this Agreement, in order to enable such successor
to the Servicer to carry out the duties and obligations of the Servicer
hereunder, and will take all such other actions as may be requested by such
successor to the Servicer from time to time as may be necessary or reasonably
desirable to effect such transfer of servicing duties and obligations.
(b) The Servicer (and the Successor Servicer, as the successor to
the Servicer, with respect to clauses (ii), (iii), (iv), (v), (vi), (vii),
(viii), (ix) and (xii) below, when it is the successor to the Servicer)
represents, warrants, and covenants:
(i) Representations and Warranties. The representations and
------------------------------
warranties set forth in paragraphs 19 and 20 of the Schedule of Representations
attached hereto as Schedule B are true and correct, provided that such
representations and warranties contained therein and herein shall not apply to
any entity other than TFC;
(ii) Organization and Good Standing. The Servicer has been
------------------------------
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to own
its properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant times,
and now has, power, authority and legal right to enter into and perform its
obligations under this Agreement and each of the Basic Documents to which it is
a party;
(iii) Due Qualification. The Servicer is duly qualified to do
-----------------
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) requires or shall require such
qualification;
61
(iv) Power and Authority. The Servicer has the power and
-------------------
authority to execute and deliver this Agreement and its Basic Documents and to
carry out its terms and their terms, respectively, and the execution, delivery
and performance of this Agreement and the Servicer's Basic Documents have been
duly authorized by the Servicer by all necessary corporate action;
(v) Binding Obligation. This Agreement and the Servicer's
------------------
Basic Documents shall constitute legal, valid and binding obligations of the
Servicer enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally and
by equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law;
(vi) No Violation. The consummation of the transactions
------------
contemplated by this Agreement and the Servicer's Basic Documents, and the
fulfillment of the terms of this Agreement and the Servicer's Basic Documents,
shall not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Servicer, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the Servicer is
a party or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than this
Agreement, or violate any law, order, rule or regulation applicable to the
Servicer of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or any of its properties, or any way materially adversely affect the
interest of the Insurer, the Noteholders or the Trust in any Receivable or
affect the Servicer's ability to perform its obligations under this Agreement;
(vii) No Proceedings. There are no proceedings or
--------------
investigations pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the Servicer
or its properties (A) asserting the invalidity of this Agreement or any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement or any of
the Basic Documents, or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement or any
of the Basic Documents or the business, operations, condition (financial or
otherwise) or prospects of the Servicer or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of the
Securities;
62
(viii) Approvals. All approvals, authorizations, consents,
---------
orders or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution and delivery by the Servicer of this Agreement and the
consummation of the transactions contemplated hereby have been or will be taken
or obtained on or prior to the Closing Date;
(ix) No Consents. The Servicer is not required to obtain the
-----------
consent of any other party or any consent, license, approval or authorization,
or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained;
(x) Chief Executive Office. The chief executive office of
----------------------
TFC is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
(xi) Net Worth. The Servicer (when the Servicer is TFC)
---------
shall not permit its Tangible Net Worth, at any time, calculated as of the close
of the Servicer's then most recently concluded fiscal quarter and commencing
with the quarter beginning on January 1, 2002, to be less than the sum of (i)
$40,000,000 plus (ii) 50% of the net earnings (after taxes) of the Servicer for
the period commencing on January 1, 2002 and ending at the end of the Servicer's
then most recently concluded fiscal quarter (treated for this purpose as a
single accounting period). For purposes of this clause, if net earnings of the
Servicer for any period shall be less than zero, the amount calculated pursuant
to clause (ii) in the immediate preceding sentence for such period shall be
zero;
(xii) Arm's Length Transactions. All transactions and
-------------------------
dealings between the Servicer and its Affiliates will be conducted on an
arm's-length basis;
(xiii) Civilian Portfolio. The Servicer (when the Servicer is
------------------
TFC) shall cause, with respect to each calendar quarter ending before January of
2003, the fraction (stated as a percentage) (A) the numerator of which is the
aggregate outstanding principal balance of Receivables serviced by the Servicer
as determined as of the close of business of the last day of the most recently
concluded calendar quarter, and in respect of which the Obligors are not
military personnel and (B) the denominator of which is the aggregate outstanding
principal balance of all such Receivables serviced by the Servicer as determined
as of the close of business of the last day of such calendar quarter, not to
exceed for such calendar quarter the percentage set for opposite such Monthly
Period on Schedule 2 attached under the Insurance Agreement and under the
----------
heading "Civilian Percentage Limit".
(xiv) Lines of Credit. TFC will not permit its non-expired
---------------
lines of credit, including, without limitation, such financing arrangements as:
commercial paper conduits, warehousing facilities and revolving loans, to be
less than $75,000,000; and
63
(xv) Sale of Assets. The Servicer (when the Servicer is TFC)
--------------
will not sell all (or substantially all) of its assets, other than as
specifically contemplated herein, a whole-loan sale, or similar financing
transaction, without the prior written consent of the Insurer.
SECTION 9.2. Liability of Servicer; Indemnities.
----------------------------------
(a) The Servicer (in its capacity as such) shall be liable
hereunder only to the extent of the obligations in this Agreement specifically
undertaken by the Servicer and the representations made by the Servicer and to
the extent not covered in Section 3.04 (Indemnification) of the Insurance
Agreement;
(b) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee, the Backup
Servicer, the Successor Servicer, the Insurer, their respective officers,
directors, agents and employees, and the Noteholders from and against any and
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising out
of or resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle;
(c) The Servicer (when the Servicer is TFC) shall indemnify,
defend and hold harmless the Trust, the Trustee, the Trust Collateral Agent, the
Owner Trustee, the Backup Servicer, the Successor Servicer, the Insurer, their
respective officers, directors, agents and employees and the Noteholders from
and against any taxes that may at any time be asserted against any of such
parties with respect to the transactions contemplated in this Agreement,
including any sales, gross receipts, tangible or intangible personal property,
privilege or license taxes (but not including any federal or other income taxes,
including franchise taxes asserted with respect to, and as of the date of, the
sale of the Receivables and the Other Conveyed Property to the Trust or the
issuance and original sale of the Securities) and costs and expenses in
defending against the same, except to the extent that such costs, expenses,
losses, damages, claims and liabilities arise out of the negligence or willful
misconduct of such indemnified parties;
(d) The Servicer (when the Servicer is not TFC, the Successor
Servicer or the Trust Collateral Agent) shall indemnify, defend and hold
harmless the Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee,
the Backup Servicer, the Successor Servicer, the Insurer, their respective
officers, directors, agents and employees and the Noteholders from and against
any taxes with respect to the sale of Receivables in connection with servicing
hereunder that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement, including any sales,
gross receipts, tangible or intangible personal property, privilege or license
taxes (but not including any federal or other income taxes, including franchise
taxes asserted with respect to, and as of the date of, the sale of the
Receivables and the Other Conveyed Property to the Trust or the issuance and
original sale of the Securities) and costs and expenses in defending against the
same;
64
(e) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee, the Backup
Servicer, the Successor Servicer, the Insurer, their respective officers,
directors, agents and employees and the Noteholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Trust, the Trustee, the Trust Collateral Agent, the Owner
Trustee, the Backup Servicer, the Successor Servicer, the Insurer or the
Noteholders, by reason of the negligence, willful misfeasance, or bad faith of
the Servicer in the performance of its duties under this Agreement or by reason
of reckless disregard of its obligations and duties under this Agreement;
(f) The Servicer (when the Servicer is TFC) shall indemnify,
defend and hold harmless the Owner Trustee, the Trustee, the Backup Servicer,
the Successor Servicer and the Trust Collateral Agent and their respective
officers, directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities arising out of, or incurred in
connection with the acceptance or performance of the trusts and duties set forth
herein and in the Basic Documents except to the extent that such cost, expense,
loss, claim, damage or liability shall be due to the willful misfeasance, bad
faith or gross negligence (except for errors in judgment) of the Backup
Servicer, the Successor Servicer, the Owner Trustee, the Trustee, and/or the
Trust Collateral Agent;
(g) TFC shall indemnify, defend and hold harmless the Trust, the
Trustee, the Trust Collateral Agent, the Owner Trustee, the Backup Servicer, the
Successor Servicer, the Insurer, their respective officers, directors, agents
and employees and the Noteholders from and against any loss, liability or
expense incurred by reason of the violation by Servicer or Seller of federal or
state securities laws in connection with the registration or the sale of the
Securities except for violations of such laws by Westdeutsche Landesbank
Girozentrale, London Branch, WestLB Panmure Securities Inc., or any Affiliate of
either such entity; and
(h) Indemnification under this Article shall survive the
termination of this Agreement and will survive the early resignation or removal
of any of the parties hereto and the Trustee, the Backup Servicer, the Successor
Servicer, and the Trust Collateral Agent and shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.
Notwithstanding any other provision of this Agreement, the obligations of the
Servicer shall not terminate or be deemed released upon the resignation or
termination of TFC as the Servicer and shall survive any termination of this
Agreement.
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, the Servicer or the Trust Collateral Agent.
----------------------------------------------
(a) The Servicer shall not merge or consolidate with any other person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or
65
permit any other Person to become the successor to the Servicer's business
unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity, there shall be no material
adverse effect upon the ability of the surviving entity to fulfill its duties
contained in this Agreement. Any corporation (i) into which the Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
the Servicer shall be a party, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; provided,
--------
however, that nothing contained herein shall be deemed to release the Servicer
-------
from any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section 9.3(a) to the Owner
Trustee, the Trust Collateral Agent, the Noteholders, the Insurer and the Rating
Agency. Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business, unless (w) the Rating Agency Condition
shall have been satisfied, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 9.1 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no event
that, after notice or lapse of time, or both, would become an Insurance
Agreement Event of Default shall have occurred and be continuing, (y) the
Servicer shall have delivered to the Owner Trustee, the Trust Collateral Agent,
the Rating Agency and the Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 9.3(a) and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) TFC shall have delivered to the Owner Trustee,
the Trust Collateral Agent, the Rating Agency and the Insurer an Opinion of
Counsel, stating in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary to preserve and protect the interest of the Trust
Collateral Agent in the Receivables and the Other Conveyed Property and reciting
the details of the filings or (B) no such action shall be necessary to preserve
and protect such interest.
(b) Any Person (i) into which the Trust Collateral Agent, the Backup
Servicer or the Successor Servicer may be merged or consolidated, (ii) resulting
from any merger or consolidation to which the Trust Collateral Agent, the Backup
Servicer or the Successor Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Trust
Collateral Agent, the Backup Servicer or the Successor Servicer or (iv)
succeeding to the business of the Trust Collateral Agent, the Backup Servicer or
Successor Servicer in any of the foregoing cases shall be the successor to the
Trust Collateral Agent, the Backup Servicer or the Successor Servicer, as the
case may be, under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties to this Agreement, anything
in this Agreement to the contrary notwithstanding. In the event that the
resulting entity does not meet the
66
eligibility requirements set forth in Section 6.11 of the Indenture, the Trust
Collateral Agent, upon the written request of the Insurer, shall resign. Nothing
contained herein shall be deemed to release the Trust Collateral Agent from any
obligation.
SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral Agent
-----------------------------------------------------------
and Others.
----------
(a) Neither TFC, the Seller, the Trust Collateral Agent, the Backup
Servicer, the Successor Servicer, the Trustee nor any of the directors or
officers or employees or agents of TFC, the Seller, the Trustee, the Backup
Servicer, the Successor Servicer or the Trust Collateral Agent shall be under
any liability to the Trust or the Noteholders, except as provided in this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement; provided, however, that this provision shall not
-------- -------
protect TFC, the Trustee, the Trust Collateral Agent, the Backup Servicer, the
Successor Servicer or any such person against any liability that would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence (excluding
errors in judgment) in the performance of duties, reckless disregard of
obligations and duties under this Agreement or any violation of law by TFC, the
Seller, the Trustee, the Trust Collateral Agent, the Backup Servicer, the
Successor Servicer or such person, as the case may be; provided further,
-------- -------
however, that this provision shall not affect any liability to indemnify the
-------
Trust Collateral Agent, the Trustee, the Backup Servicer, the Successor Servicer
and the Owner Trustee for costs, taxes, expenses, claims, liabilities, losses or
damages paid by the Trust Collateral Agent, the Backup Servicer, the Successor
Servicer, the Trustee and the Owner Trustee, in their individual capacities.
TFC, the Trust Collateral Agent, the Backup Servicer, the Successor Servicer,
the Trustee and any director, officer, employee or agent of any such entity may
rely in good faith on the written advice of counsel or on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement. The Trust Collateral Agent, the Backup
Servicer and the Successor Servicer shall not be required to expend or risk
their 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
the repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(b) Notwithstanding anything herein to the contrary, the Trust
Collateral Agent, the Backup Servicer (in its capacity as Backup Servicer, but
not in the event it becomes successor to the Servicer) and the Trustee shall not
be liable for any obligation of the Servicer contained in this Agreement, and
the Owner Trustee, the Seller, the Insurer and the Noteholders shall look only
to the Servicer to perform such obligations.
(c) The parties expressly acknowledge and consent to ▇▇▇▇▇ Fargo Bank
Minnesota, National Association acting in the possible multiple capacities of
Backup Servicer, P.O. Box Owner, Trust Collateral Agent and Trustee. ▇▇▇▇▇ Fargo
Bank Minnesota, National Association may, in such dual or other capacity,
discharge its separate functions fully, without hindrance or regard to conflict
of interest principles,
67
duty of loyalty principles or other breach of fiduciary duties to the extent
that any such conflict or breach arises from the performance by ▇▇▇▇▇ Fargo Bank
Minnesota, National Association of express duties set forth in this Agreement in
any of such capacities, all of which defenses, claims or assertions are hereby
expressly waived by the other parties hereto, and the Noteholders except in the
case of the negligence and willful misconduct by ▇▇▇▇▇ Fargo Bank Minnesota,
National Association.
SECTION 9.5. Delegation of Duties. The Servicer may delegate duties under
--------------------
this Agreement to an Affiliate thereof, with the prior written consent of the
Controlling Party. The Servicer also may at any time perform through
sub-contractors the specific duties of (i) repossession of Financed Vehicles,
(ii) tracking Financed Vehicles' insurance and (iii) pursuing the collection of
deficiency balances on certain Liquidated Receivables, in each case, without the
written consent of the Insurer or the Noteholders and may perform other specific
duties through such sub-contractors in accordance with Servicer's customary
servicing policies and procedures, without the prior written consent of the
Insurer or the Noteholders; provided, however, that no such delegation or
-------- -------
sub-contracting of duties by the Servicer shall relieve the Servicer of its
responsibility with respect to such duties. So long as the Insurer is the
Controlling Party, neither TFC nor any party acting as Servicer hereunder shall
appoint any subservicer hereunder without the prior written consent of the
Insurer and the Trust Collateral Agent.
SECTION 9.6. Servicer and Trustee Not to Resign.
----------------------------------
(a) Subject to the provisions of Section 9.3, the Servicer shall not
resign from the obligations and duties imposed on it by this Agreement as
Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer, and the Controlling Party does not
elect to waive the obligations of the Servicer to perform the duties which
render it legally unable to act or to delegate those duties to another Person.
Any such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered and acceptable to
the Trust Collateral Agent, the Owner Trustee and the Controlling Party. No
resignation of the Servicer shall become effective until the Successor Servicer
or an entity acceptable to the Controlling Party shall have assumed the
responsibilities and obligations of the Servicer.
(b) The Trustee and any successor Trustee may resign under this
Agreement at any time upon 30 days prior written notice by so notifying the
Servicer, the Owner Trustee and the Insurer; provided, however that such
-------- -------
resignation shall not be effective until a successor to the Trustee shall have
accepted appointment as successor Trustee.
68
ARTICLE X
Default
-------
SECTION 10.1. Servicer Termination Event. For purposes of this Agreement,
--------------------------
each of the following shall constitute a "Servicer Termination Event":
--------------------------
(a) Any failure by the Servicer to deliver, or cause to be delivered,
to the Trustee any proceeds or payments required to be so delivered under the
terms of this Agreement, the Notes or any other Basic Document to which it is a
party (including deposits of the Purchase Amount pursuant to Section 3.2 and
Section 4.6) that continues unremedied for a period of one (1) Business Day
after the earliest to occur of (x) the date on which written notice is received
by the Servicer from the Trustee or (unless an Insurer Default shall have
occurred and be continuing) the Insurer, (y) discovery of such failure by an
Authorized Officer of the Servicer or (z) a period of ten (10) Business Days;
(b) Failure by the Servicer to deliver, or cause to be delivered, to
the Trustee and the Insurer the Servicer's Certificate by the Determination Date
prior to the related Payment Date that continues unremedied for a period of one
(1) Business Day or failure on the part of the Servicer to observe its covenants
and agreements set forth in Section 9.3(a) or in Section 4.12(f); or
(c) Failure on the part of the Servicer duly to observe or perform any
other covenant, agreement or obligation (including, any financial obligation) of
the Servicer set forth in this Agreement (or, as to TFC, if TFC is the Servicer,
the Purchase Agreement, the Notes or any other Basic Documents to which it is a
party), which failure (i) would have a material adverse effect on the
Noteholders (determined without regard to the availability of funds under the
Note Policy), the Insurer (unless an Insurer Default shall have occurred and be
continuing) or the Trust Property, and (ii) if capable of remedy, continues
unremedied for a period of 30 days after the earlier to occur of (x) the date on
which written notice of such failure, requiring the same to be remedied, shall
have been received by an Authorized Officer of the Servicer from the Trust
Collateral Agent or the Insurer (or, if an Insurer Default shall have occurred
and be continuing by any Noteholder or group of Noteholders evidencing not less
than 25% of the principal balance of the Notes) or (y) the discovery of such
failure by an Authorized Officer of the Servicer; or
(d) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer (or if TFC or an
Affiliate of the TFC is the Servicer, the TFC) in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or another present or
future, federal bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Servicer (or if TFC or an Affiliate of the TFC is the Servicer, the TFC)
or of any substantial part of its property or ordering the winding up or
liquidation of the affairs of the Servicer (or if TFC or an Affiliate of the TFC
is the Servicer, the TFC) or the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or
69
state bankruptcy, insolvency or similar law and such case is not dismissed
within 60 days; or
(e) The commencement by the Servicer (or if TFC or an Affiliate of the
TFC is the Servicer, the TFC) of a voluntary case under the federal bankruptcy
laws, as now or hereafter in effect, or any other present or future, federal or
state, bankruptcy, insolvency or similar law, or the consent by the Servicer (or
if TFC or an Affiliate of the TFC is the Servicer, the TFC) to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer (or if TFC or an
Affiliate of the TFC is the Servicer, the TFC) or of any substantial part of its
property or the making by the Servicer (or if TFC or an Affiliate of the TFC is
the Servicer, the TFC) of an assignment for the benefit of creditors or the
failure by the Servicer (or if TFC or an Affiliate of the TFC is the Servicer,
the TFC) generally to pay its debts as such debts become due or the admission by
the Servicer of its inability to pay its debts generally as they become due or
the taking of corporate action by the Servicer (or if TFC or an Affiliate of the
TFC is the Servicer, the TFC) in furtherance of any of the foregoing; or
(f) Any representation, warranty or certification made by the Servicer
in this Agreement or any other Basic Document or any certificate, report or
other writing delivered pursuant hereto or thereto shall prove to be incorrect
in any material respect as of the time when the same shall have been made, and
(i) the incorrectness of such representation, warranty or certification has a
material adverse effect on the interests or rights of the Trust, the Insurer or
the Noteholders in the Trust Property, including the Receivables and, (ii) if
capable of remedy, continues unremedied for a period of 30 days after the
earlier to occur of (x) discovery thereof by an Authorized Officer of the
Servicer or (y) the delivery of written notice thereof shall have been given to
the Servicer by the Trustee or the Insurer (or, if an Insurer Default shall have
occurred and be continuing by any Noteholder or group of Noteholders evidencing
not less than 25% of the principal balance of the Notes); or
(g) an Insurance Agreement Event of Default shall have occurred; or
(h) The existence in any audit of the Servicer required to be provided
hereunder of a material exception which may have a material adverse effect on
the Noteholders, the Trust Property or the Controlling Party, as determined
under Section 1.7 by the Insurer in the reasonable exercise of its judgment; or
(i) The Servicer (if TFC is the Servicer) shall fail to pay any
principal, premium or interest on any indebtedness in excess of $1,000,000 (the
"Indebtedness") or greater, when the same becomes due and payable (whether by
------------
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue uncured and unwaived after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness; or any other default under any agreement or instrument relating to
any such Indebtedness of the Servicer or any other similar event, shall occur
and shall continue uncured and unwaived after the applicable grace period, if
any, specified in such agreement or instrument if the effect of such
70
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(j) So long as an Insurer Default shall not have occurred and be
continuing and (a) there are Notes outstanding, (b) any amounts due to the
Insurer remain unpaid or (c) the Note Policy has not expired in accordance with
its terms, the Insurer shall not have delivered a Servicer Extension Notice
pursuant to Section 4.13; or
(k) So long as TFC is the Servicer hereunder, the failure of TFC
Enterprises, Inc. to own 100% of the capital stock of the Servicer.
SECTION 10.2. Consequences of a Servicer Termination Event. If a Servicer
--------------------------------------------
Termination Event shall occur and be continuing, the Trustee shall, if so
directed by the Controlling Party, by notice given in writing to the Servicer,
terminate the rights and obligations of the Servicer under this Agreement
subject to the compensation, rights of reimbursement, indemnity and limitation
on liability to which the Servicer is then entitled and the rights of indemnity
to which the Trust, the Trustee, the Trust Collateral Agent, the Owner Trustee,
the Backup Servicer, the Successor Servicer, the Insurer and the Noteholders are
then entitled, in each case pursuant to Sections 9.2 and 9.4 hereof.
SECTION 10.3. Consequences of an Insurance Agreement Event of Default.
-------------------------------------------------------
(a) If an Insurance Agreement Event of Default shall occur and be
continuing, the Trustee shall, if so directed by the Controlling Party, by
notice given in writing to the Servicer:
(i) direct the Servicer to deliver to the successor to the
Servicer its Collection Records and its Monthly Records with respect to a random
sample of 100 Receivables within 15 days after demand therefor and a computer
tape containing as of the close of business on the date of demand all of the
data maintained by the Servicer in computer format in connection with servicing
such Receivables; and/or
(ii) terminate the rights and obligations of the Servicer under
this Agreement.
SECTION 10.4. Appointment of Successor.
------------------------
(a) On and after the time the Servicer receives a notice of
termination pursuant to Sections 10.2 or 10.3, upon non-extension of the
servicing term as referred to in Section 4.13, or upon the resignation of the
Servicer pursuant to Section 9.6:
(i) the Successor Servicer (unless the Insurer shall have
exercised its option pursuant to Section 10.4(f) to appoint an alternate
successor Servicer) shall be the successor in all respects to the Servicer in
its capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination
71
provisions relating thereto placed on the Servicer by the terms and provisions
of this Agreement except as otherwise stated herein; and
(ii) all authority, power, obligations and responsibilities
of the Servicer under this Agreement, except as otherwise set forth herein,
whether with respect to the Notes, the Certificates or the Other Conveyed
Property or otherwise, automatically shall pass to, be vested in and become
obligations and responsibilities of the Successor Servicer (or such other
successor to the Servicer appointed by the Controlling Party in its sole and
absolute discretion pursuant to Section 10.4(f));
provided, however, that any successor to the Servicer shall have (i) no
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liability with respect to any obligation which was required to be performed by
the terminated Servicer prior to the date that such successor to the Servicer
becomes the Servicer or any claim of a third party based on any alleged action
or inaction of the terminated Servicer, (ii) no obligation to perform any
repurchase or advancing obligations, if any, of the Servicer, (iii) no
obligation to pay any taxes required to be paid by the Servicer, (iv) no
obligation to pay any of the fees and expenses of any other party involved in
this transaction (except for those of any person to whom such successor to the
Servicer delegates its duties pursuant to Section 9.5), (v) no liability or
obligation with respect to any indemnification obligations of any prior servicer
including the Servicer, (vi) not been deemed to have made any of the
representations and warranties of the Servicer, and (vii) no liability to the
extent that the information necessary for servicing the Receivables in
accordance with the Required Standard of Care has not been provided to the
Successor Servicer by the Servicer.
(b) Any successor to the Servicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(c) If a successor to the Servicer is acting as Servicer hereunder, it
shall be subject to term-to-term servicing as referred to in Section 4.13 and to
termination under Sections 10.2 or 10.3 upon the occurrence of any Servicer
Termination Event or Insurance Agreement Event of Default applicable to it as
Servicer.
(d) Any successor to the Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the Other Conveyed Property and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise.
(e) The terminated Servicer agrees to cooperate with any successor to
the Servicer in effecting the termination of the responsibilities and rights of
the terminated Servicer under this Agreement, including the transfer to such
successor to the Servicer for administration by it of all cash amounts that
shall at the time be held by the terminated Servicer for deposit, or have been
deposited by the terminated Servicer, in the Collection Account or thereafter
received with respect to the Receivables and the delivery
72
to such successor to the Servicer of all Receivable Files, Monthly Records and
Collection Records and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable such successor to
the Servicer to service the Receivables and the Other Conveyed Property
(including, without limitation, any and all documentation concerning the related
Insurance Policies). If requested by the Controlling Party, any successor to the
Servicer shall direct the Obligors to make all payments under the Receivables
directly to such successor to the Servicer (in which event such successor to the
Servicer shall process such payments in accordance with Section 4.2), or to a
Post Office Box established by such successor to the Servicer at the direction
of the Controlling Party, at the terminated Servicer's expense. The terminated
Servicer shall grant the Trustee, the Backup Servicer, the Trust Collateral
Agent, any successor to the Servicer and the Controlling Party reasonable access
to the terminated Servicer's premises at the terminated Servicer's expense.
(f) The Insurer, or in the event that an Insurer Default shall have
occurred and be continuing, a Security Majority, may exercise at any time its
right to appoint as successor to the Servicer a Person other than the Person
serving as successor to the Servicer at the time, and (without limiting its
obligations under the Note Policy) shall have no liability to the Successor
Servicer, TFC, the Seller, the Person then serving as successor servicer, any
Noteholders or any other Person if it does so. Notwithstanding the above, if any
successor to the Servicer shall be legally unable to act as Servicer, and an
Insurer Default shall have occurred and be continuing, a Security Majority may
petition a court of competent jurisdiction to appoint a successor to the
Servicer. Pending appointment pursuant to the preceding sentence, such successor
Servicer shall act as successor Servicer unless it is legally unable to do so,
in which event the outgoing Servicer shall continue to act as Servicer until a
successor has been appointed and accepted such appointment.
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(g) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under this Agreement if the Servicer had not
resigned or been terminated hereunder. In addition, any successor Servicer shall
be entitled to reasonable transition expenses incurred in acting as successor
Servicer payable by the outgoing Servicer, and to the extent such transition
expenses have not been paid by the outgoing Servicer, such expenses payable
pursuant to this Agreement shall not exceed $100,000 in the aggregate.
(h) Notwithstanding the Successor Servicer's becoming the successor in
all respects to the Servicer in its capacity as servicer under this Agreement
and the transactions set forth or provided for in this Agreement, the Backup
Servicer shall be required to prepare the Servicer's Certificate and deliver the
same in order to enable the Successor Servicer to perform its obligations under
Section 4.8.(i).
(i) Notwithstanding anything contained in this Agreement to the
contrary, the Successor Servicer is authorized to accept and rely on all of the
accounting records (including computer records) and work of the prior Servicer
relating to the Contracts (collectively, the "Predecessor Servicer Work
Product") without any audit or other examination thereof, and the Successor
Servicer shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Servicer. If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, "Errors") exist
in any Predecessor Servicer Work Product and such Errors make it materially more
difficult to service or should cause or materially contribute to the Successor
Servicer making or continuing any Errors (collectively, "Continued Errors"), the
Successor Servicer shall have no duty, responsibility, obligation or liability
for such Continued Errors; provided, however, that the Successor Servicer agrees
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to use its best efforts to prevent further Continued Errors. In the event that
the Successor Servicer becomes aware of Errors or Continued Errors, it shall,
with the prior consent of the Controlling Party use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and to prevent future Continued Errors. The
Successor Servicer shall be entitled to recover its costs thereby expended in
accordance with Section 4.7.
SECTION 10.5. Notification to Noteholders and Certificateholders. Upon any
--------------------------------------------------
termination of, or appointment of a successor to the Servicer, any successor
Servicer shall give prompt written notice thereof to each Noteholder. Any
successor Servicer shall also give courtesy copies of such notice to the Rating
Agency.
SECTION 10.6. Waiver of Past Defaults. The Controlling Party may, on behalf
-----------------------
of all Noteholders and Certificateholders, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
Termination Event arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto. Written notice of such
waiver shall be given promptly to the Rating Agency.
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SECTION 10.7. Termination of Trustee. If any of the following events occur
----------------------
and shall be continuing, the Controlling Party, upon notice to the Noteholders,
may terminate all of the duties of the Trustee under this Agreement:
(i) the Trustee shall cease to meet the eligibility
requirements for the Trustee as set forth in Section 6.11 of the Indenture and
shall fail to resign after written request therefor by the Controlling Party,
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or state
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, shall have entered
a decree or order granting relief or appointing a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or similar official)
for the Trustee or for any substantial part of the Trustee's property, or
ordering the winding-up or liquidation of the Trustee's affairs.;
(iii) an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the Trustee
and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal
or state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator (or other
similar official) for the Trustee or any substantial part of the Trustee's
property, or makes any assignment for the benefit of creditors or fails
generally to pay its debts as such debts become due or takes any corporate
action in furtherance of any of the foregoing;
(v) the Trustee has failed to perform its duties hereunder,
and such failure has a material adverse effect on the Insurer or the
Noteholders; and
(vi) the Trustee otherwise becomes incapable of acting.
On or after the receipt by the Trustee of such written notice, all
authority, power, obligations and responsibilities of the Trustee under this
Agreement, whether with respect to the Notes, the Certificates or the Other
Conveyed Property or otherwise, automatically shall pass to, be vested in and
become obligations and responsibilities of such successor Trustee appointed by
the Controlling Party.
SECTION 10.8. Successor Servicer.
------------------
(a) The Successor Servicer shall perform such duties and only such
duties as are specifically set forth in this Agreement with respect to the
assumption of any servicing duties and no implied covenants or obligations shall
be read into this Agreement against the Successor Servicer.
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(b) In the absence of bad faith or negligence on its part, the
Successor Servicer may conclusively rely as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Successor Servicer and conforming to the requirements of this
Agreement; but in the case of any such certificates or opinions, which by any
provision hereof are specifically required to be furnished to the Successor
Servicer, the Successor Servicer shall be under a duty to examine the same and
to determine whether or not they conform to the requirements of this Agreement.
(c) The Successor Servicer shall have no liability for any
actions taken or omitted by the Servicer.
(d) The Successor Servicer shall be entitled to all of the
benefits and immunities afforded the Trustee pursuant to Section 6.2 of the
Indenture.
SECTION 10.9. Termination of Backup Servicer. If the Backup Servicer shall
------------------------------
fail to duly observe or perform any of its covenants, agreements or obligations
set forth in this Agreement which failure (i) would have a material adverse
effect on the Noteholders (determined without regard to the availability of
funds under the Note Policy), the Insurer (unless an Insurer Default shall have
occurred and be continuing) or the Trust Property, and (ii) if capable of
remedy, continues unremedied for a period of 30 days after the earlier to occur
of (x) the date on which written notice of such failure, requiring the same to
be remedied, shall have been received by an Authorized Officer of the Backup
Servicer from the Insurer (or, if an Insurer Default shall have occurred and be
continuing by any Noteholder or group of Noteholders evidencing not less than
25% of the principal balance of the Notes) or (y) the discovery of such failure
by an Authorized Officer of the Backup Servicer, the Insurer (or, if an Insurer
Default shall have occurred and be continuing, any Noteholder or group of
Noteholders evidencing not less than 25% of the principal balance of the Notes)
may terminate all of the duties of the Backup Servicer under this Agreement. Any
removal pursuant to the provisions of this Section 10.09 shall take effect only
upon the appointment of a successor to the Backup Servicer and the acceptance in
writing by such successor to Backup Servicer of such appointment and of its
obligation to perform its duties hereunder in accordance with the provisions
hereof.
SECTION 10.10. Termination of Successor Servicer. If the Successor Servicer
---------------------------------
(prior to becoming the successor to the Servicer) shall fail to duly observe or
perform any of its covenants, agreements or obligations set forth in this
Agreement which failure (i) would have a material adverse effect on the
Noteholders (determined without regard to the availability of funds under the
Note Policy), the Insurer (unless an Insurer Default shall have occurred and be
continuing) or the Trust Property, and (ii) if capable of remedy, continues
unremedied for a period of 30 days after the earlier to occur of (x) the date on
which written notice of such failure, requiring the same to be remedied, shall
have been received by an Authorized Officer of the Successor Servicer from the
Insurer (or, if an Insurer Default shall have occurred and be continuing by any
Noteholder or group of Noteholders evidencing not less than 25% of the principal
balance of the Notes) or (y) the discovery of such failure by an Authorized
Officer of the Successor Servicer, the Insurer (or, if an Insurer Default shall
have occurred and be continuing, any
76
Noteholder or group of Noteholders evidencing not less than 25% of the principal
balance of the Notes) may terminate all of the duties of the Successor Servicer
under this Agreement. Any removal pursuant to the provisions of this Section
10.10 shall take effect only upon the appointment of a successor to the
Successor Servicer and the acceptance in writing by such successor to Successor
Servicer of such appointment and of its obligation to perform its duties
hereunder in accordance with the provisions hereof. In no event shall ▇▇▇▇▇
Fargo Bank Minnesota, National Association be appointed as the Successor
Servicer.
ARTICLE XI
Termination
-----------
SECTION 11.1. Optional Repurchase of Receivables and Redemption of the
--------------------------------------------------------
Notes.
-----
(a) On the last day of any Monthly Period after which the Pool
Balance declines to 15% or less of the Original Pool Balance, the Seller shall
have the option to (i) redeem all of the Notes in an amount sufficient to pay
the full amount of principal and interest then due and payable on the Notes and
the Certificates plus all fees and expenses due and owing; and (ii) obtain the
Trust Property, if any, in its capacity as the sole Certificateholder. To
exercise such option, the Seller or the Servicer shall deposit pursuant to
Section 5.6 in the Collection Account an amount equal to (x) the sum of the
unpaid principal amount of such Notes plus accrued and unpaid interest thereon
on the date of repurchase, plus (y) all amounts accrued and owing to the Insurer
on the date of repurchase, plus (z) the appraised value of any other property
held by the Trust, if any, such value to be determined by an appraiser mutually
agreed upon by the Servicer, the Insurer and the Trustee, and shall succeed to
all interests in and to the Trust. If the Seller or the Servicer exercises such
option pursuant to this Section 11.1(a), the Servicer or the Seller shall comply
with the notice requirements in Section 10.1(a) of the Indenture.
(b) Upon any redemption of the Notes pursuant to Section 9.1 of
the Trust Agreement, the Servicer shall instruct the Trustee to deposit the
proceeds from such redemption after all payments and reserves therefrom
(including the expenses of such redemption) have been made (the "Insolvency
----------
Proceeds") in the Collection Account.
--------
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Trustee, the Trust Collateral Agent, the
Insurer and the Rating Agency as soon as practicable after the Servicer has
received notice thereof.
(d) Following the satisfaction and discharge of the Indenture, the
payment in full of the principal of and interest on the Notes, the payment of
all amounts due to the Insurer under the Insurance Agreement and to the Trustee
and Trust Collateral Agent under the Indenture and this Agreement, the end of
the Term of the Note Policy (as defined therein) and the surrender of the Note
Policy by the Trust Collateral Agent to the Insurer, the Certificateholders will
succeed to the rights of the Noteholders hereunder and
77
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trust Collateral Agent pursuant to this Agreement.
ARTICLE XII
Administrative Duties of the Servicer (When the Servicer is TFC)
----------------------------------------------------------------
SECTION 12.1. Administrative Duties.
---------------------
(a) Duties with Respect to the Indenture. The Servicer shall perform
------------------------------------
all its duties and the duties of the Issuer under the Basic Documents. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Basic Documents.
The Servicer shall monitor the performance of the Issuer and shall advise the
Owner Trustee when action is necessary to comply with the Issuer's duties under
the Basic Documents. The Servicer shall prepare for execution by the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer to prepare, file or deliver pursuant to the Indenture. In
furtherance of the foregoing, the Servicer shall take all necessary action that
is the duty of the Issuer to take pursuant to the Basic Documents. In connection
with the foregoing, the Servicer shall be deemed an agent of the Issuer,
authorized to act (including with respect to the execution of documents) on its
behalf.
(b) Duties with Respect to the Issuer.
---------------------------------
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to this Agreement or any of the Basic Documents or under state and
federal tax and securities laws, and at the request of the Owner Trustee shall
take all appropriate additional action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Basic Documents, including pursuant to
Sections 2.6 and 2.11 of the Trust Agreement. In accordance with the directions
of the Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with the
Collateral (including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Trustee in the event that any withholding
tax is imposed on the Issuer's payments (or allocations of income) to an Owner
(as defined in the Trust Agreement) as contemplated by this Agreement. Any such
notice shall be in writing and
78
specify the amount of any withholding tax required to be withheld by the Owner
Trustee or the Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for performance of
the duties of the Issuer or the Seller set forth in Section 5.1(a), (b), (c) and
(d) of the Trust Agreement with respect to, among other things, accounting and
reports to Owners (as defined in the Trust Agreement); provided, however, that
-------- -------
once prepared by the Servicer, the Depositor shall retain responsibility under
Section 5.1(b) of the Trust Agreement for the distribution of the Schedule K-1s
necessary to enable each Certificateholder to prepare its federal and state
income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Servicer under this Agreement
or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions with
or otherwise deal with any of its Affiliates; provided, however, that the terms
-------- -------
of any such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Servicer's opinion, no less
favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of
-----------
the Seller, all tax returns, tax elections, financial statements and such annual
or other reports of the Issuer as are necessary for preparation of tax reports
as provided in Article V of the Trust Agreement, including Forms 1099 and 1066.
All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the
-----------------------
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Insurer of the proposed action and the Owner Trustee and, with
respect to items (i), (ii), (iii), (iv) and (v) below, the Insurer shall not
have withheld consent or provided an alternative direction. For the purpose of
the preceding sentence, "non-ministerial matters" shall include:
-----------------------
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(iii) the amendment, change or modification of this Agreement
or any of the Basic Documents;
79
(iv) the appointment of successor Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture; and
(v) the removal of the Trustee or the Trust Collateral
Agent.
(e) Exceptions. Notwithstanding anything to the contrary in this
----------
Agreement, except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (i) make any payments to the Noteholders or Certificateholders under the
Basic Documents, (ii) sell the Trust Property pursuant to Section 5.5 of the
Indenture, (iii) take any other action that the Issuer directs the Servicer not
to take on its behalf or (iv) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) The Successor Servicer or any successor Servicer shall not be
responsible for any obligations or duties of the Servicer under Section 12.1.
SECTION 12.2. Records. The Servicer shall maintain appropriate books of
-------
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer,
the Trustee and the Trust Collateral Agent at any time during normal business
hours.
SECTION 12.3. Additional Information to be Furnished to the Issuer. The
----------------------------------------------------
Servicer shall furnish to the Issuer, the Insurer, the Noteholders, the Trustee
and the Trust Collateral Agent from time to time such additional information
regarding the Collateral as the Issuer, the Insurer, the Noteholders, the
Trustee or the Trust Collateral Agent shall reasonably request.
ARTICLE XIII
Miscellaneous Provisions
------------------------
SECTION 13.1. Amendment.
---------
(a) This Agreement may be amended from time to time by the parties
hereto, with the consent of the Trustee and the Owner Trustee (which consent
shall not be unreasonably withheld), with the prior written consent of the
Insurer, and, if different, the Controlling Party (which consent shall not be
unreasonably withheld) and with prior written notice to the Rating Agency, to
cure any ambiguity, to correct or supplement any provisions in this Agreement,
to comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action shall not adversely affect in any material
-------- -------
respect the interests of any Noteholder or Certificateholder; and provided
--------
further, however, that if no Insurer Default has occurred and is continuing and
------- -------
(a) there are Notes outstanding, (b) any amounts due to the Insurer remain
unpaid or (c) the Note Policy has
80
not expired in accordance with its terms, such action shall not materially
adversely affect the interests of the Insurer.
This Agreement may also be amended from time to time by the
parties hereto, with the prior written consent of the Insurer (and, if
different, the Controlling Party), the consent of the Trustee and the Owner
Trustee, the consent of the Holders of Notes evidencing not less than a majority
of the outstanding principal amount of the Notes, the consent of the Holders (as
defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the Certificate Balance (which consent of such Holders of Notes and
Certificates given pursuant to this Section 13.1 or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such Securities and of any Security issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Security) and with prior written
notice to the Rating Agency for the purpose of adding any provisions to or
changing in any manner any provisions to or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (i)
-------- -------
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (ii) reduce the aforesaid percentage of the outstanding principal amount of
the Notes and the Certificate Balance, the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes and the Holders (as defined in the Trust Agreement) of all the
outstanding Certificates; and provided, further, that if no Insurer Default has
-------- -------
occurred and is continuing and (a) there are Notes outstanding, (b) any amounts
due to the Insurer remain unpaid or (c) the Note Policy has not expired in
accordance with its terms, such action shall not materially adversely affect the
interest of the Insurer.
Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Noteholder and to the Rating Agency.
The manner of obtaining such consents (and any other consents
of Noteholders or Certificateholders provided for in this Agreement) and of
evidencing the authorization of any action by Noteholders or Certificateholders
shall be subject to such reasonable requirements as the Trustee or the Owner
Trustee, as applicable, may prescribe, including the establishment of record
dates.
The Owner Trustee, the Trust Collateral Agent and the Trustee
may, but shall not be obligated to, enter into any amendment which affects the
Issuer's, the Owner Trustee's, the Trust Collateral Agent's or the Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
Prior to the execution of any amendment to this Agreement, the
Trustee and the Trust Collateral Agent shall be entitled to receive or rely upon
an Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this
81
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied.
(b) Notwithstanding anything to the contrary contained in subsection
13.1(a) above, the provisions of this Agreement relating to (i) the Spread
Account, the Requisite Amount, a Trigger Event or any component definition of a
Trigger Event and (ii) any additional sources of funds which may be added to the
Spread Account may be amended in any respect by the Seller, the Servicer, the
Insurer and the Trust Collateral Agent without the consent of the Noteholders or
the Certificateholders.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Noteholder and to the Rating Agency.
SECTION 13.2. Protection of Title to Trust.
----------------------------
(a) The Seller shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Issuer and the interests of the Trust Collateral
Agent and the Insurer in the Receivables and the Other Conveyed Property and in
the proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Insurer, the Owner Trustee and the Trust Collateral Agent file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Seller nor TFC, in its capacity as Servicer, shall
change its name, identity, jurisdiction of organization or corporate structure
in any manner that would, could or might make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of (S). 9-506 of the UCC, nor otherwise change its
organization of organization, unless it shall have given the Insurer, the Owner
Trustee, the Trust Collateral Agent and the Trustee at least sixty days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements. Promptly
upon such filing, the Seller or TFC, in its capacity as Servicer, as the case
may be, shall deliver an Opinion of Counsel in form and substance reasonably
satisfactory to the Insurer, the Trust Collateral Agent and the Trustee, stating
either (A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the interest
of the Trust and the Trust Collateral Agent in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) no such action shall be necessary to preserve and
protect such interest. Neither the Seller nor TFC shall become or seek to become
organized under the laws of more than one jurisdiction.
(c) Each of the Seller and TFC, in the capacity as Servicer, shall have
an obligation to give the Insurer, the Owner Trustee, the Trust Collateral Agent
and the Trustee at least 60 days' prior written notice of any relocation of its
principal place of business, chief executive office or jurisdiction of
organization if, as a result of such
82
relocation, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing statement and shall promptly file any such amendment. The Servicer
shall at all times maintain each office from which it shall service Receivables,
and the Seller shall at all times maintain its principal place of business and
chief executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer (when the Servicer is TFC) shall maintain or cause to
be maintained, a computer system so that, from and after the time of sale under
this Agreement of the Receivables to the Issuer, such master computer records
(including any back-up archives) that refer to a Receivable shall indicate
clearly the interest of the Trust in such Receivable and that such Receivable is
owned by the Trust. Indication of the Trust's interest in a Receivable shall be
deleted from or modified on such computer systems when, and only when, the
related Receivable shall have been paid in full or repurchased by TFC or the
Seller. In the event the Successor Servicer is appointed as Servicer, the
Successor Servicer shall maintain the accounts on its computer system relative
to the Receivables in a series of isolated and partitioned branches. The branch
definition of the Servicer will be such that any and all Receivables within each
branch will be property of the Trust, and may not be deleted from or modified on
the Successor Servicer's computer system except for when the related Receivable
has been paid in full or repurchased.
(f) If at any time the Seller or TFC shall propose to sell, grant a
security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust unless such Receivable has been paid in full or repurchased by TFC or the
Seller.
(g) Upon request, the Servicer shall furnish or cause to be furnished to
the Insurer, the Owner Trustee or to the Trustee, within five Business Days, a
list of all Receivables (by contract number and name of Obligor) then held as
part of the Trust, together with a reconciliation of such list to the Schedule
of Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust. The Trustee shall hold
any such list and Schedule of Receivables for examination by interested parties
during normal business hours at the Corporate Trust Office upon reasonable
notice by such Persons of their desire to conduct an examination.
83
(h) TFC shall deliver to the Insurer, the Owner Trustee, the Trust
Collateral Agent and the Trustee simultaneously with the execution and delivery
of this Agreement and, if required pursuant to Section 13.1, of each amendment,
an Opinion of Counsel stating that, in the opinion of such counsel, in form and
substance reasonably satisfactory to the Insurer, either (A) all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trust and the Trust
Collateral Agent in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (B)
no such action shall be necessary to preserve and protect such interest or (C)
any action which is necessary to preserve and protect such interest during the
following 12-month period.
Each Opinion of Counsel referred to in clause (A), (B) or (C) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(i) The Servicer shall permit the Trustee, the Trust Collateral Agent,
the Insurer and their respective agents, during regular business hours and upon
reasonable advance notice, to inspect and make copies of the records regarding
any Receivables or any other portion of the Receivables.
SECTION 13.3. Notices. All demands, notices and communications upon or to
-------
the Seller, the Servicer, the Owner Trustee, the Trustee, the Trust Collateral
Agent, the Insurer or the Rating Agency under this Agreement shall be in
writing, personally delivered, or mailed by certified mail, or sent by confirmed
telecopier transmission and shall be deemed to have been duly given upon receipt
(a) in the case of the Seller to TFC Receivables Corporation V, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, (b) in the case
of the Servicer, to The Finance Company, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇.,
Williams, Mullen, ▇▇▇▇▇, ▇▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (c) in the case of the Issuer or the Owner Trustee, to
Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust Administration,
Telecopier # ▇▇▇-▇▇▇-▇▇▇▇, (d) in the case of the Trustee, the Trust Collateral
Agent or the Backup Servicer, to ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, Sixth Street and Marquette Avenue, MAC #N9311-161 ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Corporate Trust Services-Asset Backed Administration,
Telecopier # (▇▇▇) ▇▇▇-▇▇▇▇, (e) in the case of the Successor Servicer, to ▇▇▇▇▇
Fargo Financial America, Inc., ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Telecopier # (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇; with a copy to ▇▇▇▇▇
Fargo Financial, Inc. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Telecopier #
(▇▇▇) ▇▇▇-▇▇▇▇, Attention: General Counsel, (f) in the case of the Insurer, to
Radian Asset Assurance Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Chief Risk Officer (in each case in which notice or other
communication to the Insurer refers to a Servicer Termination Event, a claim on
a Policy, a Deficiency Notice pursuant to Section 5.5 of this Agreement or with
respect to which failure on the part of the Insurer to respond shall be deemed
to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the
84
attention of each of the General Counsel and the Head-Financial Guaranty Group
and shall be marked to indicate "URGENT MATERIAL ENCLOSED") Telecopier # (212)
------------------------
682-5377, and (g) in the case of Standard & Poor's, to Standard & Poor's Ratings
Group, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Asset Backed Surveillance
Department, Telecopier # (▇▇▇) ▇▇▇-▇▇▇▇. Any notice required or permitted to be
mailed to a Noteholder or Certificateholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Certificate
Register or Note Register, as applicable. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder or Noteholder shall receive such
notice.
SECTION 13.4. Assignment. This Agreement shall inure to the benefit of and
----------
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 8.4 and 9.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Trust Collateral Agent, the Trustee and the Insurer (or if an
Insurer Default shall have occurred and be continuing, the Holders of Notes
evidencing not less than 66% of the principal amount of the outstanding Notes).
SECTION 13.5. Limitations on Rights of Others. The provisions of this
-------------------------------
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Certificateholders (including the Seller), the Trustee, the Owner Trustee
(including in its individual capacity) and the Noteholders, as third-party
beneficiaries. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 13.6. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts. This Agreement may be executed by the
---------------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8. Headings. The headings of the various Articles and Sections
--------
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAWS
85
BUT OTHERWISE WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges and
---------------------
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trust Collateral Agent pursuant to the Indenture for the
benefit of the Noteholders and the Insurer of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment and delegation
of any or all of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 13.11. Nonpetition Covenants.
----------------------
(a) Notwithstanding any prior termination of this Agreement, the
Servicer and the Seller shall not, prior to the date which is one year and one
day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date that is one year and one day after the
termination of this Agreement with respect to the Seller, acquiesce to, petition
or otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Seller or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Seller.
SECTION 13.12. Limitation of Liability of Owner Trustee, Trust Collateral
----------------------------------------------------------
Agent and the Successor Servicer.
--------------------------------
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed on behalf of the Issuer by Wilmington Trust Company
not in its individual capacity but solely in its capacity as Owner Trustee of
the Issuer and in no event shall Wilmington Trust Company in its individual
capacity or, as Owner Trustee, have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of the Trust Agreement. In no event shall
Wilmington Trust
86
Company be deemed to have assumed any duties of the Issuer under the Delaware
Business Trust Statute, common law, or the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by ▇▇▇▇▇ Fargo Bank Minnesota,
National Association, not in its individual capacity but solely as Trust
Collateral Agent and as Backup Servicer and in no event shall ▇▇▇▇▇ Fargo Bank
Minnesota, National Association, in its individual capacity have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by ▇▇▇▇▇ Fargo Financial America, Inc.
not in its individual capacity but solely as Successor Servicer and in no event
shall ▇▇▇▇▇ Fargo Financial America, Inc., in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
SECTION 13.13. Independence of the Servicer. For all purposes of this
----------------------------
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trust Collateral Agent or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this Agreement (i)
----------------
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 13.15. Limited Recourse. Notwithstanding anything to the contrary
----------------
contained in this Agreement, the obligations of each of the Seller and Issuer
under this Agreement are solely the corporate obligations of the Seller or the
trust obligations of Issuer, as applicable, and shall be payable by the Seller
or Issuer, as applicable, solely as provided in this Section 13.15 Each of the
Seller and the Issuer shall only be required to pay (a) any fees, expenses,
indemnities or other liabilities that it may incur under this Agreement to the
extent it has funds available therefor on the date of such determination and (b)
any expenses, indemnities or other liabilities that it may incur under this
Agreement only to the extent it receives funds designated for such purposes or
to the extent it has funds available therefor. In addition, no amount owing by
any of the Seller or Issuer hereunder (other than principal and interest in
respect of the Notes) in excess of the liabilities that it is required to pay in
accordance with the preceding sentence shall
87
constitute a "claim" (as defined in Section 101(5) of the Bankruptcy Code)
against it. No recourse shall be had for the payment of any amount owing
hereunder or for the payment of any fee hereunder or any other obligation of, or
claim against, the Seller or the Issuer arising out of or based upon this
Agreement against any stockholder, employee, officer, agent, director or
authorized person of the Seller or affiliate thereof or any stockholder,
employee, officer, director, incorporator or Affiliate thereof; provided,
--------
however, that the foregoing shall not relieve any such person or entity of any
-------
liability they might otherwise have as a result of fraudulent actions or
omissions taken by them. The obligation of the parties under this Section 13.15
shall survive termination of this Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
88
IN WITNESS WHEREOF, the parties hereto have caused this Sale and Servicing
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.
TFC AUTOMOBILE RECEIVABLES
TRUST 2002-1
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as Owner
Trustee on behalf of the Trust
By:______________________________________
Name:
Title:
TFC RECEIVABLES CORPORATION V
By:______________________________________
Name: ▇▇▇▇▇▇ ▇. Tray
Title: President
THE FINANCE COMPANY, in its individual
capacity and as Servicer
By:______________________________________
Name:
Title:
RADIAN ASSET ASSURANCE INC.
By:______________________________________
Name:
Title:
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual capacity
but solely as Trustee, Trust Collateral Agent,
Backup Servicer and as P.O. Box Owner
By:______________________________________
Name:
Title:
▇▇▇▇▇ FARGO FINANCIAL AMERICA, INC., not in
its individual capacity but solely as
Successor Servicer
By:______________________________________
Name:
Title:
SCHEDULE A
SCHEDULE OF RECEIVABLES
[See Schedule A Of Purchase Agreement]
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
1. Characteristics of Receivables. Each Receivable (A) was originated by a
------------------------------
Dealer for the retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business in accordance with either (i) TFC's credit policies or (ii)
credit policies which were reviewed by TFC prior to a purchase of a Receivable
by TFC and such Dealer had all necessary licenses and permits to originate
Receivables in the state where such Dealer was located, was fully and properly
executed by the parties thereto was purchased by TFC from such Dealer under an
existing Dealer Agreement or pursuant to a Dealer Assignment, was validly
assigned by such Dealer to TFC pursuant to the Dealer Agreement or the Dealer
Assignment, was validly assigned by TFC to the Seller, and was validly assigned
by the Seller to the Trust and pledged by the Trust to the Trust Collateral
Agent, (B) contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral security, (C) is a Receivable which provides for level Scheduled
Receivable Payments (provided that the payment in the first Monthly Period and
the payment in the final Monthly Period of the Receivable may be minimally
different from the normal period and level payment) which, if made when due,
shall fully amortize the Amount Financed over the original term, (D) provides
for, in the event that the related Contract is prepaid, a prepayment that fully
pays the principal balance of such related Contract and includes accrued but
unpaid interest through the date of prepayment at a rate at least equal to the
annual percentage rate, (E) has not been amended or rewritten, or collections
with respect to which deferred or waived, other than as evidenced in the
Receivable File relating thereto, (F) that is a military Receivable, has an
original term of eleven (11) to forty-eight (48) months or that is a civilian
Receivable, has an original term of eleven (11) to sixty (60) months, (G) has
been acquired by TFC and, if a monthly pay contract, is not more than thirty
(30) days delinquent and the related Obligor does not have other Receivables
owing to TFC that are more than thirty (30) days delinquent or defaulted, (H)
has been acquired by TFC and, if a non-monthly-pay contract, is not more than
thirty (30) days delinquent nor is it defaulted based on TFC's methodology in
effect for converting non-monthly pay Receivables to a daily delinquency
equivalent as such methodology is described in Schedule 1 of the Insurance
Agreement nor does the Obligor have other Receivables owing to TFC that are more
than thirty (30) days delinquent or defaulted, (I) has a final Scheduled
Receivable Payment due no less than eight (8) months before the Final Scheduled
Payment Date, (J) has an annual percentage rate of not less than 9.99%, (K) has
a remaining Principal Balance of not more than $20,064, (L) has not been
extended beyond its original term, except in keeping with TFC's stated policies
and procedures for deferments contained in the August 1, 1992 memo attached as
part of Exhibit E hereto, which allows for up to two, one-month deferments in
any twelve month period not to exceed up to four, one-month deferments over the
life of a monthly-pay contract, (M) satisfies, the requirements under TFC's
Credit Guidelines as in effect on August 31, 1999 in all material respects
(except with respect to (a) changes associated with certain memorandums
previously delivered to the Insurer related to allowing total loss protection
instead of comprehensive vehicle insurance and (b) a new lending program called,
Special E4 Program), including but not limited to, down-payment provisions, (N)
was
purchased through an approved Dealer of TFC, (O) is due from a U.S. citizen in
the case of military Receivables and a U.S. resident in the case of civilian
Receivables and is denominated in U.S. dollars, (P) meets, in all material
respects, all applicable requirements of federal, state, and local laws and
regulations, and (Q) is not subject to any right of setoff by the Obligor.
2. No Fraud or Misrepresentation. Each Receivable (A) was originated by a
-----------------------------
Dealer, (B) was sold by the Dealer to TFC and (C) was sold by TFC to the Seller
and by the Seller to the Trust without any fraud or misrepresentation in any
case.
3. Compliance with Law. All requirements of applicable federal, state and
-------------------
local laws, and regulations thereunder (including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the ▇▇▇▇-▇▇▇▇▇▇▇▇ Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief
- -
Act of 1940, as amended, each applicable state Motor Vehicle Retail Installment
Sales Act, and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and other consumer credit laws and equal credit opportunity
and disclosure laws) in respect of the Receivables, the Financed Vehicles and
the sale of any physical damage, credit life and credit accident and health
insurance and any extended service contracts, have been complied with in all
material respects by TFC and the Seller, as applicable, and each Receivable, the
sale of the Financed Vehicle evidenced by each Receivable and the sale of any
physical damage, credit life and credit accident and health insurance and any
extended service contracts complied at the time it was originated or made in all
material respects and now complies in all material respects with all applicable
legal and regulatory requirements.
4. Origination. Each Point-of-Sale Receivable was originated in the
-----------
United States and materially conforms to all requirements of the "Dealer
------
Underwriting Guide" applicable to such Receivable at the time assigned to TFC,
------------------
at the time of such assignment.
5. Binding Obligation. Each Receivable represents the genuine, legal,
------------------
valid and binding payment obligation of the Obligor thereon, enforceable by the
holder thereof in accordance with its terms, except (A) as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (B) as such Receivable may be
modified by the application after the Cut-Off Date of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended; and all parties to each Receivable had
full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.
6. No Government Obligor. No Obligor is the United States of America or
---------------------
any State or any agency, department, subdivision or instrumentality thereof.
2
7. Obligor Bankruptcy. At the Cut-Off Date, no Obligor had been the
------------------
subject of a current bankruptcy proceeding.
8. Schedule of Receivables. The information set forth in the Schedule of
-----------------------
Receivables has been produced from the Electronic Ledger and was true and
correct in all material respects as of the close of business on the Cut-Off Date
as delivered on the Closing Date.
9. Marking Records. By the Closing Date, the Seller will have caused the
---------------
portions of the Electronic Ledger relating to the Receivables to be clearly and
unambiguously identified to show that the Receivables have been sold to the
Seller by TFC and resold by the Seller to the Trust in accordance with the terms
of the Sale and Servicing Agreement.
10. Computer Tape. The Computer Tape made available by the Seller to the
-------------
Trust Collateral Agent on the Closing Date was complete and accurate as of the
Cut-Off Date and includes a description of the same Receivables that are
described in the Schedule of Receivables.
11. Adverse Selection. No selection procedures adverse to the Noteholders
-----------------
or the Insurer were utilized in selecting the Receivables from those receivables
owned by TFC which met the selection criteria contained in the Sale and
Servicing Agreement.
12. Chattel Paper. The Receivables constitute tangible chattel paper
-------------
within the meaning of the UCC as in effect in the State of New York, Delaware,
Virginia and Minnesota.
13. One Original. There is only one original executed copy of each
------------
Receivable.
14. Receivable Files Complete. There exists a Receivable File pertaining
-------------------------
to each Receivable and such Receivable File contains, without limitation,
subject to any exceptions which may appear on any exception report delivered by
the Trust Collateral Agent, (a) a fully executed original of the Receivable and
(b) the original Lien Certificate or application therefor together with an
assignment of the Lien Certificate executed by TFC to Purchaser, and an
assignment of the Lien Certificate executed by Purchaser to the Trustee. Each of
such documents which is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All blanks on any form described in
clauses (a) and (b) above have been properly filled in and each form has
otherwise been correctly prepared. Notwithstanding the above, a copy of the
complete Receivable File for each Receivable, which fulfills the documentation
requirements of the Dealer Underwriting Guide as in effect at the time of
purchase is in the possession of the Servicer or its bailee.
15. Receivables in Force. No Receivable has been satisfied, subordinated
--------------------
or rescinded, and the Financed Vehicle securing each such Receivable has not
been released from the lien of the related Receivable in whole or in part. No
terms of any Receivable have been waived, altered or modified in any respect
since its origination, except by
3
instruments or documents identified in the Receivable File. No Receivable has
been modified as a result of application of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended.
16. Lawful Assignment. No Receivable was originated in, or is subject to
-----------------
the laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Receivable under this
Agreement or pursuant to transfers of the Securities. The Seller has not entered
into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Receivables.
17. Good Title. No Receivable has been sold, transferred, assigned or
----------
pledged by Seller to any Person other than the Purchaser; immediately prior to
the conveyance of the Receivables to Purchaser pursuant to this Agreement,
Seller was the sole owner thereof and had good and marketable title thereto,
free of any Lien, claim or encumbrance of any Person, except Liens with respect
to GE Capital and Westside Funding, which liens of GE Capital and Westside
Funding have been released (as of the Closing Date), and, upon execution and
delivery of this Agreement by Seller, Purchaser shall have good and indefeasible
title to and will be the sole owner of such Receivables, free of any Lien
(except as described above) other than the Lien of the Trust Collateral Agent.
No Dealer has a participation in, or other right to receive, proceeds of any
Receivable. Seller has not taken any action to convey any right to any Person
that would result in such Person having a right to payments received under the
related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.
18. No Other Interest. Other than the transfer of the Receivables to the
-----------------
Issuer under this Agreement and the security interest granted to the Trustee for
the benefit of the Issuer Secured Parties pursuant to the Indenture, the Seller
has not pledged, assigned, sold, granted a security interest in, or otherwise
conveyed any of the Receivables. The Seller has not authorized the filing of, or
is aware of any financing statements against the Seller that include a
description of collateral covering the Receivables other than any financing
statement relating to the sale to the Issuer hereunder or the security interest
granted to the Trustee (for the benefit of the Issuer Secured Parties) under the
Indenture or that has been released or terminated.
19. Security Interest in Financed Vehicle. Each Receivable created or will
-------------------------------------
create a valid, binding and enforceable first priority security interest in
favor of TFC or the Trust Collateral Agent in the Financed Vehicle with right of
repossession, subject to the terms thereof and applicable law. The Lien
Certificate and original certificate of title for each Financed Vehicle show, or
if a new or replacement Lien Certificate is being applied for with respect to
such Financed Vehicle the Lien Certificate will be received no later than July
31, 2002, and will show TFC or the Trust Collateral Agent named as the original
secured party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which the
Lien Certificate has not yet been returned from the Registrar of Titles, TFC has
received written evidence from the related Dealer that such Lien Certificate
showing TFC or the Trust Collateral Agent as first lienholder has been applied
for and (i) TFC's security
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interest has been validly assigned to Purchaser pursuant to the Purchase
Agreement and (ii) Purchaser's security interest has been validly assigned by
Purchaser to the Trust pursuant to this Agreement and (iii) the Trust's security
interest has been validly pledged to the Trust Collateral Agent pursuant to the
Indenture. Immediately after the sale, transfer and assignment thereof by
Purchaser to the Trust, each Receivable will be secured by an enforceable and
perfected first priority security interest in the Financed Vehicle in favor of
the Trustee as secured party, which security interest is prior to all other
Liens upon and security interests in such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any lien for
taxes, labor or materials affecting a Financed Vehicle arising subsequent to the
Cut-Off Date). As of the Cut-Off Date there were no Liens or claims for taxes,
work, labor or materials affecting a Financed Vehicle which are or may be Liens
prior or equal to the Liens of the related Receivable.
20. All Filings Made. The Seller has caused, or will have caused not later
----------------
than three Business Days after the Closing Date, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security interest in
the Receivables granted by the Issuer to the Trustee (for the benefit of the
Issuer Secured Parties) under the Indenture
21. No Impairment. Neither TFC nor the Seller has done anything to convey
-------------
any right to any Person that would result in such Person having a right to
payments due under the Receivable or otherwise to impair the rights of the
Trust, the Insurer, the Trustee, the Trust Collateral Agent and the Noteholders
in any Receivable or the proceeds thereof.
22. Receivable Not Assumable. No Receivable is assumable by another Person
------------------------
in a manner which would release the Obligor thereof from such Obligor's
obligations to the Seller with respect to such Receivable.
23. No Default. As of the Cut-Off Date, no Receivable was in default and
----------
no condition existed or event occurred that constituted a default, breach,
violation or event permitting acceleration under the terms of any Receivable,
and there has been no waiver of any of the foregoing. As of the Cut-Off Date no
Financed Vehicle had been repossessed.
24. Insurance. At the time of origination of each Receivable that is
---------
Point-of-Sale Product, the related Financed Vehicle was covered by an Insurance
Policy which was (i) in an amount at least equal to the lesser of, excluding any
deductible, (a) its maximum insurable value or (b) the principal amount due from
the Obligor under the related Receivable, (ii) naming TFC and its successors and
assigns as loss payee and (iii) insuring against loss and damage due to fire,
theft, transportation, collision and other risks generally covered by either a
physical loss and damage Insurance Policy or the combination of TFC's Total Loss
Protection and GAP coverage. No Financed Vehicle is insured under a policy of
Force-Placed Insurance on the Cut-Off Date.
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25. Certain Characteristics of Receivables. (i) No Receivable was more
--------------------------------------
than 30 days past due as of the Cut-Off Date; (ii) no funds have been advanced
by the Seller, the Servicer, any Dealer, or anyone acting on behalf of any of
them in order to cause any Receivable to qualify under subclause (i) of this
clause 25; (iii) the Principal Balance of each Receivable set forth in the
Schedule of Receivables is true and accurate as of the Cut-Off Date.
26. [Reserved].
27. Military Assistance Corporation. As of the Closing Date, Fort ▇▇▇▇
-------------------------------
National Bank ("FKNB") has been directed by TFC, and evidence of FKNB's
----
acknowledgment has been received to directly transfer to the Collection Account
all amounts received by it pursuant to the Military Assistance Corporation
("MAC") program.
---
28. Annual Percentage. As of the Cut-Off Date, no more than 1.63% of the
-----------------
Receivables (by Principal Balance) have annual percentage rates of less than 13%
and the weighted average annual percentage rate for the entire pool is no less
than 18.22%.
29. Creation of Security Interest. This Agreement creates a valid and
-----------------------------
continuing security interest (as defined in UCC Section 1-201) in the
Receivables in favor of the Issuer, which security interest is prior to all
other Liens (other than the security interest in favor of the Trustee (for the
benefit of the Issuer Secured Parties) under the Indenture), and is enforceable
as such as against creditors of and purchasers from the Seller.
30. No Notations. None of the tangible chattel paper that constitute or
------------
evidence the Receivables has any marks or notations indicating that they have
been pledged, assigned or otherwise conveyed to any Person other than TFC, the
Issuer and the Trustee (for the benefit of the Issuer Secured Parties).
31. No Waiver. The Seller shall provide the Ratings Agency and the Insurer
---------
with prompt written notice of any breach of any representation or warranty
contained in paragraphs 12, 17-20 and 29-30 above, and the Trustee shall not,
without obtaining a confirmation of the then-current rating of the Notes (as
determined after any adjustment or withdrawal of the ratings following notice of
such breach) or the consent of each Noteholder, consent to a waiver of any
material breach of any such representations or warranties.
6
SCHEDULE C
MONTHLY ACCOUNT INFORMATION
7
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
[See Attached Pages]
EXHIBIT B
FORM OF DEFICIENCY CLAIM NOTICE
[Date]
▇▇▇▇▇ Fargo Bank Minnesota, National Association, as Trust Collateral Agent
Sixth Street and Marquette Avenue
MAC N9311-161
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Wilmington Trust Company, as Owner Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Radian Asset Assurance Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Sale and Servicing Agreement, dated as of March 19, 2002 (the
"Agreement") among Radian Asset Assurance Inc. (the "Insurer"), TFC
--------- -------
Auto Receivables Trust 2002-1, (the "Issuer"), TFC Receivables
------
Corporation V (the "Seller"), The Finance Company (the "Servicer"),
------ --------
▇▇▇▇▇ Fargo Bank Minnesota, National Association, as Trust Collateral
Agent, Backup Servicer and P.O. Box Owner, and ▇▇▇▇▇ Fargo Financial
America, Inc., as Successor Servicer.
------------------------------------
Ladies and Gentlemen:
Reference is hereby made to Section 5.5(a) of the Agreement.
Capitalized terms not defined herein shall have the meanings ascribed thereto in
the Agreement.
Pursuant to Section 5.5(a) of the Agreement, please note the following
information with respect to the Payment Date which is to occur on
_______________:
Deficiency Claim Amount: $______________________
Note Policy Claim Amount: $______________________
The Trust Collateral Agent shall remit such Deficiency Claim Amount
specified above for deposit into the Collection Account pursuant to Section 5.6
of the Agreement on the next Draw Date which is to occur on _________________.
Sincerely,
THE FINANCE COMPANY, as Servicer
By:___________________________
Name:
Title:
2
EXHIBIT C
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: ▇▇▇▇▇ Fargo Bank Minnesota, National Association
Re: Sale and Servicing Agreement (the "Servicing Agreement"),
dated as of March 19, 2002 among Radian Asset Assurance
Inc. (the "Insurer"), TFC Receivables Corporation V (the
-------
"Seller"), TFC Automobile Receivables Trust 2002-1 (the
"Trust"), The Finance Company individually and in its
capacity as Servicer (the "Servicer"), ▇▇▇▇▇ Fargo Bank
Minnesota, National Association, as Trust Collateral
Agent, Backup Servicer and P.O. Box Owner, and ▇▇▇▇▇ Fargo
Financial America, Inc., as Successor Servicer.
---------------------
In connection with the administration of the Receivables
held by you as the Trust Collateral Agent, we request the release, and
acknowledged receipt, of the Receivable and related Receivable File described
below, for the reason indicated.
Obligor's Name, Customer Account Number and Vehicle Identification Number
-------------------------------------------------------------------------
1. Receivable Paid in Full. All amounts received in
connection with such payments have been deposited into the Collection Account as
required pursuant to Section 3.3(b) of the Servicing Agreement
2. Receivable Purchased from Trust pursuant to Section 3.2 or
4.6 of the Servicing Agreement.
3. Receivable is being serviced or subject to enforcement
of rights and remedies pursuant to Section 3.3(b) of the Servicing Agreement.
4. Other (explain) ____________________________________
If item 1 or 2 above is checked, and if all or part of the
Receivable or Receivable File was previously released to us, please release to
us any additional documents in your possession to the above specified
Receivable.
If Item 3 or 4 above is checked, upon our return of all of the
above documents to you as the Trust Collateral Agent, please acknowledge your
receipt by signing in the space indicated below and returning this form.
THE FINANCE COMPANY
as Servicer
By: __________________________________________________________
Name: ________________________________________________________
Title: _______________________________________________________
Date: ________________________________________________________
DOCUMENTS RETURNED TO THE TRUST COLLATERAL AGENT:
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
(Trust Collateral Agent)
By:___________________________________________________________
Name:_________________________________________________________
Title: _______________________________________________________
Date: ________________________________________________________
2
EXHIBIT D
TRUST COLLATERAL AGENT'S ACKNOWLEDGEMENT
▇▇▇▇▇ Fargo Bank Minnesota, National Association (the "Trust
-----
Collateral Agent"), holds on behalf of the Noteholders certain "Receivable
---------------- ----------
Files," as described in the Sale and Servicing Agreement, dated as of March 19,
-----
2002 (the "Sale and Servicing Agreement"), among Radian Asset Assurance Inc., as
----------------------------
Insurer, TFC Automobile Receivables Trust 2002-1, TFC Receivables Corporation V,
as Seller, The Finance Company, as Servicer, ▇▇▇▇▇ Fargo Bank Minnesota,
National Association, as Trustee, as Trust Collateral Agent, as Backup Servicer,
and as P.O. Box Owner, and ▇▇▇▇▇ Fargo Financial America, Inc., as Successor
Servicer, hereby acknowledges receipt of the Receivable File for each Receivable
listed in the Schedule of Receivables attached as Schedule A to said Sale and
Servicing Agreement except as noted in the Exception List attached as Schedule I
hereto.
IN WITNESS WHEREOF, ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, has caused this acknowledgement to be executed by its duly
authorized officer as of this ____ day of _______________, 2002.
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trust Collateral
Agent
By:_________________________________
Name:
Title:
EXHIBIT E
THE FINANCE COMPANY CHARGE-OFF POLICY
EXHIBIT F
THE FINANCE COMPANY ALLOWABLE DELINQUENCY POLICY
EXHIBIT G
THE FINANCE COMPANY DELINQUENCY POLICY
EXHIBIT H
INVESTOR CERTIFICATION
▇▇▇▇▇ Fargo Bank Minnesota,
National Association
Sixth Street and Marquette Avenue
MAC N9311-161
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Services - Asset-Backed Administration
TFC Receivables Corporation V
In accordance with Section 5.11(b) of the Sale and Servicing
Agreement (the "Agreement"), with respect to the Notes (the "Notes"), the
undersigned hereby certifies and agrees as follows.
1. The undersigned is a beneficial owner of
$____________ in principal balance of the Notes.
2. The undersigned is requesting a password pursuant
to Section 5.11(b) of the Agreement for access to certain
information (the "Information") on the Trustee's website.
3. In consideration of the Trustee's disclosure to
the undersigned of the Information, or the password in
connection therewith, the undersigned will keep the
Information confidential (except from such outside persons as
are assisting it in connection with the related Notes, from
its accountants and attorneys, and otherwise from such
governmental or banking authorities or agencies to which the
undersigned is subject), and such Information will not,
without the prior written consent of the Trustee, be otherwise
disclosed by the Undersigned or by its officers, directors,
partners, employees, agents or representatives (collectively,
the "Representatives") in any manner whatsoever, in whole or
in part.
4. The undersigned will not use or disclose the
Information in any manner which could result in a violation of
any provision of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as
amended, or would require registration of any Certificate
pursuant to Section 5 of the Securities Act.
5. The undersigned shall be fully liable for any
breach of this agreement by itself or any of its
Representatives and shall indemnify the Issuer, the Servicer
and the Trustee for any loss, liability or expense incurred
thereby with respect to any such breach by the undersigned or
any of its Representatives.
6. Capitalized terms used by not defined herein
shall have the respective meanings thereto in the Agreement.
In Witness Whereof, the undersigned has caused its name to be
signed hereby by its duly authorized officer, as of the day and year written
above.
_________________________________
Beneficial Owner
By: _____________________________
Title: __________________________
Company: ________________________
Phone: __________________________
4