1
EXHIBIT 10.1
(Execution Copy)
INDENTURE AND SERVICING AGREEMENT
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CREDITRUST FUNDING I LLC
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Backup Servicer of the Receivables
and
CREDITRUST CORPORATION,
as Servicer of the Receivables
and
ASSET GUARANTY INSURANCE COMPANY
as Note Insurer
Dated as of September 1, 1998
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CREDITRUST WAREHOUSE NOTES, SERIES 1998-A
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II CREATION OF TRUST ESTATE; CUSTODY OF
RECEIVABLE FILES; REPRESENTATIONS REGARDING
RECEIVABLES; DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.01 Creation of Trust Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.02 Custody Of Receivable Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.03 Acceptance By Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.04 Representations and Warranties of Issuer as to the Receivables. . . . . . . . . . . . . . . . . . 21
SECTION 2.05 Repayment for Receivables Upon Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06 Duties of Servicer as Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07 Instructions; Authority to Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.08 Indemnification of Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.09 Effective Period and Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.10 Agent for Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.11 Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.01 Duties of Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.02 Collection of Receivable Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.03 Covenants of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.04 Purchase of Receivables Upon Breach and Other Events . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.05 Servicing Fee; Payment of Certain Expenses By Servicer. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.06 Monthly Servicer Report; Servicer's Remittance Date Certificate. . . . . . . . . . . . . . . . . 31
SECTION 3.07 Annual Statement as to Compliance; Notice of Default . . . . . . . . . . . . . . . . . . . . . . 32
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SECTION 3.08 Periodic Accountants Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.09 Quarterly Servicer's Compliance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.10 Access to Certain Documentation and Information Regarding. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.11 Reports to Noteholders, the Rating Agency and the Placement Agent. . . . . . . . . . . . . . . . 33
SECTION 3.12 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV THE ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.01 Accounts; Servicer Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.02 Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.03 Additional Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.04 Allocations and Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.05 Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.07 Statements to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.08 Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V THE NOTES AND FUNDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.01 The Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.02 Authentication and Delivery of the Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.03 Registration of Transfer and Exchange of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.04 Mutilated, Destroyed, Lost or Stolen Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.05 Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.06 Access to List of Noteholders' Names and Addresses. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.07 Surrendering of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.08 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.09 Fundings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.10 Conditions Precedent to Each Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.11 Interest Calculations; Interest and Principal Payments . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.12 Repayments of Principal and Reborrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VI THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.01 Representations of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.02 Repayment for Receivables Upon Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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SECTION 6.03 Liability of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.04 Merger or Consolidation of, or Assumption of the Obligations of, the Issuer; Certain Limitations. 58
SECTION 6.05 Limitation on Liability of Issuer and Others. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.06 Issuer May Own Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.07 Covenants of Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VII THE SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.01 Representations of Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.02 Liability of Servicer; Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.03 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer. . . . . . . . . . 68
SECTION 7.04 Limitation on Liability of Servicer and Others. . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.05 Servicer Not to Resign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.06 Backup Servicing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.07 General Covenants of Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VIII SERVICER DEFAULT; EVENTS OF DEFAULT SERVICER EVALUATION EVENT; REMEDIES . . . . . . . . . . . . . . . . . . . 75
SECTION 8.01 Servicer Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.02 Consequences of a Servicer Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 8.03 Backup Servicer to Act; Appointment of Successor Servicer . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.04 Notification to Note Insurer, Noteholders, Rating Agency and Placement Agent. . . . . . . . . . . 80
SECTION 8.05 Waiver of Past Servicer Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 8.06 [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 8.07 Subservicers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 8.08 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.09 Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 8.10 Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . 84
SECTION 8.11 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 8.12 Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 8.13 Trustee May Enforce Claims without Possession of Notes. . . . . . . . . . . . . . . . . . . . . . 85
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SECTION 8.14 Application of Money Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 8.15 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 8.16 Unconditional Rights of Noteholders to Receive Principal and Interest. . . . . . . . . . . . . . 87
SECTION 8.17 Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 8.18 Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 8.19 Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 8.20 Control by Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 8.21 Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 8.22 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 8.23 Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 8.24 Sale of Trust Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 8.25 Action on Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 8.26 No Recourse to Other Trust Estates or Other Assets of the Issuer. . . . . . . . . . . . . . . . . 91
SECTION 8.27 License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE IX THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 9.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 9.02 Trustee's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 9.03 Trustee's Release of Removed Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 9.04 Certain Matters Affecting the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 9.05 Limitation on Trustee's Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 9.06 Trustee May Not Own Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 9.07 Trustee's Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 9.08 Indemnity of Trustee, Backup Servicers and Successor Servicer. . . . . . . . . . . . . . . . . . 97
SECTION 9.09 Eligibility Requirements for Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 9.10 Resignation or Removal of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 9.11 Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 9.12 Merger or Consolidation of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 9.13 Appointment of Co-Trustee or Separate Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 9.14 Representations and Warranties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 9.15 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 9.16 Trustee May Enforce Claims Without Possession of Notes. . . . . . . . . . . . . . . . . . . . . . 102
SECTION 9.17 Suit for Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
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SECTION 9.18 Rights of Noteholders to Direct Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 9.19 Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
ARTICLE X REDEMPTION; PARTIAL PREPAYMENT; FULL REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10.01 Redemption at the Option of the Issuer; Election to Redeem. . . . . . . . . . . . . . . . . . . . 104
SECTION 10.02 Deposit of Redemption Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10.03 Notice of Redemption by the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10.04 Surrendering of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10.05 Partial Prepayment at the Option of the Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 10.06. Full Prepayment at the Option of the Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 10.07. Deposit and Payment of Prepayment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 10.08. Release of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
ARTICLE XI MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.02 Protection of Title to Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 11.03 Limitation of Rights of Noteholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 11.04 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.06 Severability of Provisions; Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 11.07 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 11.08 No Petition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
EXHIBITS
A - Monthly Servicer Report
B - Trustee's Certificate
C - Form of Note
D - Representation Letter
E - Backup Servicer Fields
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This Indenture and Servicing Agreement, dated as of September 1, 1998
(the "Agreement") is executed by and among Creditrust Funding I LLC, as issuer
(the "Issuer"), Norwest Bank Minnesota, National Association, as trustee (in
such capacity, the "Trustee"), and as backup servicer (in such capacity, the
"Backup Servicer"), Creditrust Corporation, as servicer (the "Servicer") and
Asset Guaranty Insurance Company, as note insurer (the "Note Insurer").
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the Noteholders to
the extent provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS.
Except as otherwise provided in this Agreement, whenever used herein,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Accounts" means the Collection Account, the Reserve Account and the
Note Payment Account.
"Accredited Investor" shall have the meaning assigned to such term in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Additional Servicing Fee" means the amount, calculated in accordance
with Section 8.03, which is payable to the Successor Servicer and which exceeds
the amount of the Servicing Fee.
"Adverse Claim" means a lien, security interest, charge, encumbrance
or other right or claim of any Person.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control," when used with respect
to any specified 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 term "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Indenture and Servicing Agreement relating to
Creditrust Warehouse Notes, Series 1998-A dated as of September 1, 1998 among
Creditrust Funding I LLC, as Issuer, Norwest Bank Minnesota, National
Association, as Trustee and Backup Servicer, Creditrust Corporation, as
Servicer, and Asset Guaranty Insurance Company, as Note Insurer, as the same
may be amended or supplemented from time to time.
"Applicants" shall have the meaning specified in Section 5.06.
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"Asset Sale Agreement" means each asset sale agreement or receivables
purchase agreement entered into between Creditrust Corporation and each
Originating Institution in connection with the purchase of Receivables from
such Originating Institution.
"Available Funds" means, with respect to any Payment Date and the next
preceding Determination Date, the sum of (i) the Net Proceeds recovered with
respect to each Receivable and received in the Collection Account during the
Collection Period then most recently concluded, plus (ii) all available funds
on deposit in the Collection Account (other than Net Proceeds of Receivables)
as of the opening of business of the Trustee on such Determination Date.
"Backup Servicer" means Norwest Bank Minnesota, National Association.
"Backup Servicing Fee" means the fee payable to the Backup Servicer
on each Payment Date for services rendered pursuant to this Agreement, which
shall be equal to the greater of $750 per month or an amount per month equal to
one-twelfth of twenty-five basis points (0.25%) per annum times the average
daily Note Balance during the preceding Collection Period.
"Benefit Plan" means with respect to any Person any employee benefit
plan as defined in Section 3(3) of ERISA in respect of which the Person or any
ERISA Affiliate of such Person is, or at any time during the immediately
preceding six years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of Maryland, the State of Minnesota
or the State of New York are required or authorized by law, regulation,
executive order or governmental decree to be closed.
"By-laws" means the bylaws of Issuer.
"Charged-Off Balance" means, with respect to each Receivable, the
original charged-off balance as required to be set forth in the related
Schedule of Receivables.
"Closing Date" means September 29, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Creditrust Warehouse Notes, Series 1998-A Collection Account."
"Collection Period" means, with respect to any Remittance Date,
Determination Date or Payment Date, the period beginning on the first day of
the calendar month immediately preceding the month in which such Remittance
Date, Determination Date or Payment Date
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occurs and ending on the last day of such calendar month; provided, however,
that the initial Collection Period begins on the Closing Date.
"Consumer Account" means any receivable generated on a credit card
account, revolving account, or installment account.
"Controlling Party" means, prior to an Insurer Default, the Note
Insurer, and on and after an Insurer Default, the Noteholders with Voting
Interests in excess of 50% of all outstanding Voting Interests.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Agreement is
located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust Services/Asset-Backed Administration.
"Customary Procedures" means the customary practices, policies,
standards and procedures of the Servicer relating to the acquisition and
collection of comparable defaulted consumer receivables that it services for
itself or others, in each case as in effect on the Closing Date (which include
backup servicing files and disaster recovery plans), as the same may be
modified by the Servicer from time to time thereafter with, in each case,
prompt notice to Note Insurer.
"Determination Date" means, with respect to any Payment Date, the
second Business Day next preceding such Payment Date.
"Eligible Account" means (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by the Required Rating Agencies then providing a long term debt rating
for such institution and in the highest available short term rating category by
the Required Rating Agencies then providing a short term debt rating for such
institution, and that is (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking
laws, (ii) a banking or savings and loan association duly organized, validly
existing and in good standing under the applicable laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, or (iv) a principal subsidiary of a
bank holding company, or (B) a segregated trust account (which shall be a
"special deposit account") maintained in the trust department of a federal or
state chartered depository institution or trust company, having capital and
surplus of not less than $50,000,000, acting in its fiduciary capacity. Any
Eligible Accounts maintained with the Trustee shall conform to the preceding
clause (B). Any Account maintained at an institution other than the Trustee
must be subject to an agreement with such institution among Servicer, Issuer
and Trustee which must be satisfactory to Note Insurer in form and substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" means with respect to any Person (a) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as such Person; (b) a trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with such Person, or (c) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person, any corporation described in clause (a) above or any trade or
business described in clause (b) above.
"Estimated Remaining Collections" means, as of any date of
determination, for any Pool then subject to this Agreement, or the aggregate
amount of all Pools then subject to this Agreement, as applicable, the
Servicer's most recent estimate prior to such date of the remaining amount to
be collected over the remaining estimated life of the applicable Pool or Pools,
in accordance with its standard valuation process for groups of Consumer
Accounts. Unless otherwise agreed to by the Controlling Party and the Servicer,
the most recent estimate of the Estimated Remaining Collections of any Pool at
any time of determination in accordance with Servicer's standard valuation
process shall be the remainder of the Estimated Remaining Collections for such
Pool in effect on the date on which such Pool is acquired by the Issuer minus
the aggregate amount of collections on Receivables of such Pool received in the
Collection Account on or prior to such date of determination.
"Event of Default" shall have the meaning specified in Section 8.08.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facility Fee" means, for each Collection Period during but not after
the Funding Period, an amount equal to (i) the Maximum Facility Amount minus
the average daily Note Balance during the Collection Period, times (ii)
one-eighth of one percent (0.125%) per annum, times (iii) one-twelfth;
provided, that the amount of the Facility Fee shall be prorated for the
Collection Period in which the Closing Date occurs and in which the Funding
Period ends by multiplying (i) the aforesaid amount times (ii) a fraction, the
numerator of which is the number of days in such Collection Period either from
and including the Closing Date or to and including the last day of the Funding
Period, and the denominator of which is the number of days in such month.
"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
"Final Payment Date" shall mean the earlier of (i) the Payment Date
occurring five (5) years after the end of the Funding Period or (ii) the
Payment Date which follows the Payment Date on which all proceeds of a sale of
the Trust Estate pursuant to Section 8.24(f) were distributed.
"First Year Estimated Collectibility" means, with respect to a Pool,
the Seller's written estimate, delivered to the Note Insurer and the Trustee
within two Business Days after the Funding Date relating to such Pool, of the
amount projected to be collected during the first year
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after the date Issuer acquired the Receivables of such Pool in accordance with
Seller's standard valuation process for groups of Consumer Accounts.
"FNMA" means the Federal National Mortgage Association, and its
successors.
"Funding" means an advance by the Noteholders to the Issuer pursuant
to Article V.
"Funding Amount" means, with respect to a Pool and the Funding Date on
which such Pool is acquired by Issuer, the amount requested to be loaned to
Issuer on such Funding Date in respect of such Pool, which in no event shall be
greater than the least of (i) an amount equal to (A) Ninety-five Percent (95%)
of the Purchase Price paid by the Seller to acquire the Receivables of such
Pool, minus (B) any Net Proceeds collected by the Seller from the date it
acquired such Receivables to the date which is three (3) Business Days prior to
such Funding Date, and (ii) an amount equal to the aggregate of Fifty Percent
(50%) of the Estimated Remaining Collections for such Pool; and (iii)
$3,500,000 for such Pool. The Funding Amount with respect to each Pool shall
be calculated in accordance with this definition and shall be the amount
designated as such on the Schedule of Receivables for that Pool.
"Funding Date" means (i) the Closing Date and (ii) thereafter, any
Business Day during the Funding Period on which the Issuer desires to obtain a
Funding in accordance with the terms of this Agreement.
"Funding Date Minimum Amount" means $500,000.
"Funding Period" means the period of time which begins on the Closing
Date and which terminates upon the earlier to occur of (i) the 24th Payment
Date after the Closing Date (the "Scheduled Termination Date"), and (ii) the
occurrence of a Funding Termination Event.
"Funding Termination Event" means any of the following conditions or
events:
(a) the occurrence of the Scheduled Termination Date;
(b) the occurrence and continuation of any Event of Default;
(c) the occurrence and continuation of any Servicer Default;
(d) the 12th Payment Date after the Collection Period in which a
Pool was acquired by the Issuer shall have occurred and there shall not have
been deposited to the Collection Account prior to such date aggregate Net
Proceeds of Receivables of such Pool equal to or exceeding the Funding Amount
with respect to such Pool;
(e) on any Determination Date, with respect to all Pools then
subject to this Agreement (other than Pools which the Issuer has owned for less
than ninety (90) days prior to such Determination Date) (such non-excluded
Pools being the "Relevant Pools"), the sum of the cumulative Net Proceeds
deposited in the Collection Account in respect of the Receivables of all
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Relevant Pools, is less than the sum of the following amounts for each of the
Relevant Pools: an amount equal to sixty percent (60%) of the First Year
Estimated Collectibility for each of the Relevant Pools, multiplied by a
fraction, the numerator of which is the number of months from the date the
Issuer acquired the Pool to the end of the Collection Period preceding such
Determination Date, and the denominator of which is 12;
(f) as of any Determination Date, the Note Balance is greater than
the amount equal to Fifty Percent (50%) of the Estimated Remaining Collections,
after giving effect to any reduction of the Note Balance to be made on the
Payment Date immediately following such Determination Date; or
(g) the redemption of the Notes in full pursuant to Section 10.01.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to
time, and (ii) consistently applied with past financial statements of the
Servicer and its subsidiaries; provided that a certified public accountant
would, insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
"Independent Member" means a member of the Issuer which is a
corporation and (a) which is not (i) an Affiliate of the Seller or the Servicer
or (ii) a holder (directly or indirectly) of any voting securities of any
Affiliate of the Issuer, and (b) which is a wholly owned Affiliate of a company
that provides, in the ordinary course of its business, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.
"Initial Note Balance" means the Funding Amount on the first Funding
Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing 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 bankruptcy, insolvency or other
similar law now or hereafter in effect, or the filing of a petition against
such Person in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, which case remains unstayed
and undismissed within 30 days of such filing, or the appointing of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
ordering of the winding-up or liquidation of such Person's business; or (b) the
commencement by such Person of a voluntary case under any applicable
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
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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 to pay its debts as such debts become due or the
admission by such Person of its inability to pay its debts generally as they
become due.
"Insolvency Proceeding" means any proceeding of the sort described in
the definition of Insolvency Event.
"Insurance Agreement" means the Insurance and Reimbursement Agreement
between the Servicer, the Issuer and Asset Guaranty Insurance Company, dated as
of the Closing Date.
"Insurer Default" means the occurrence of any of the following:
(a) the Note Insurer shall fail to pay when, as and in
the amounts required, any amount payable under the Policy and such failure
continues unremedied for two Business Days; or
(b) (i) the Superintendent of Insurance of the State of
New York (or any Person succeeding to the duties of such Superintendent) (for
the purpose of this paragraph (b), the "Superintendent") shall apply for an
order (A) pursuant to Section 7402 of the New York Insurance Law (or any
successor provisions thereto), directing him to rehabilitate the Note Insurer,
(B) pursuant to Section 7404 of the New York Insurance Law (or any successor
provision thereto), directing him to liquidate the business of the Note Insurer
or (C) pursuant to Section 7416 of the New York Insurance Law (or any successor
provision thereto), dissolving the corporate existence of the Note Insurer and
such application shall not be dismissed or withdrawn during a period 60
consecutive days or a court of competent jurisdiction enters an order granting
the relief sought; (ii) the Superintendent shall determine that the Note
Insurer is insolvent within the meaning of Section 1309 of the New York
Insurance Law; (iii) the Note Insurer shall commence a voluntary case or other
proceeding seeking rehabilitation, liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors; or (iv) an involuntary case or other proceeding
shall be commenced against the Note Insurer seeking rehabilitation,
liquidation, reorganization or other relief with respect to it or its debts
under a bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property and such
case or proceeding is not dismissed or otherwise terminated within a period of
60 consecutive days or a court of competent jurisdiction enters an order
granting the relief sought in such case or proceeding.
"Interest Carryover Shortfall" means, with respect to any Payment
Date, the excess, if any, of (i) the Interest Distributable Amount for such
Payment Date and all prior Payment Dates,
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over (ii) the amount of interest, if any, actually paid to Noteholders on such
Payment Date and all prior Payment Dates.
"Interest Distributable Amount" means, with respect to any Payment
Date, the sum of the amounts for each Note Rate Period during the preceding
Interest Distribution Period equal to the product of (i) the Note Rate and (ii)
the daily Note Balance during each Note Rate Period, to the extent unpaid on
such Payment Date.
"Interest Distribution Period" means, with respect to any Payment
Date, the period of time from the Closing Date to the first Determination Date,
and thereafter from each Determination Date to the next Determination Date.
"Interest Only Payment Date" means the first six (6) Payment Dates to
occur following the first Funding Date and the last date on which at least the
Minimum Repayment Amount with respect to a prepayment by the Issuer pursuant to
Section 10.07 has been paid; provided that a Funding Termination Event has not
occurred on or prior to such date (in which event, the next Payment Date to
occur, as well as all subsequent Payment Dates, shall not be Interest Only
Payment Dates); and provided, further, that if each of the representations and
warranties set forth in clauses 2.04(l)(iii) through 2.04(l)(x) is not true
with respect to the Receivables in all Pools then subject to this Agreement on
any Determination Date which occurs more than sixty (60) days after the Closing
Date and, after the occurrence of any Prepayment Date, which occurs more than
sixty (60) days after such Prepayment Date, then the Payment Date next
following such Determination Date shall not be an Interest Only Payment Date,
provided that any subsequent Payment Date on which such representations and
warranties are true shall be an Interest Only Payment Date if all other
conditions are satisfied.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Issuer" means Creditrust Funding I LLC, in its capacity as issuer of
the Notes pursuant to this Agreement, and each successor thereto (in the same
capacity) pursuant to Section 6.04.
"Issuer Payment Office" means the address designated by the Issuer
from time to time in writing to the parties hereto and to the Noteholders,
which address shall initially be ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇.
"Lien" means any security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"LLC Agreement" means the limited liability company agreement of
Issuer.
"London Banking Day" means any day on which dealings in deposits in
Dollars are transacted in the London interbank market.
"Maximum Facility Amount" means $30,000,000.
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15
"Maximum Principal Amount" means the maximum principal amount of each
Note as set forth in such Note.
"Minimum Repayment Amount" means with respect to the minimum amount
which must be prepaid if Issuer makes a prepayment pursuant to Section 10.05 on
any Prepayment Date, an amount equal to the sum of (i) the Note Balance minus
the Funding Amount with respect to each Pool which is not a Prepaid Pool (the
"Remaining Pools"), plus (ii) an amount equal to (a) eighty percent (80%) of
the Net Proceeds recovered with respect to each Receivable in the Remaining
Pools and received in the Collection Account prior to the date which is three
Business Days prior to the Prepayment Date, minus (b) an amount equal to
interest paid or accrued on the Funding Amount for the Remaining Pools from the
Funding Date for each Remaining Pool to the date which is three Business Days
prior to the Prepayment Date.
"Monthly Servicer Report" means an Officer's Certificate of the
Servicer completed and executed pursuant to Section 3.06, substantially in the
form attached hereto as Exhibit A.
"Nationally Recognized Statistical Rating Agency" Duff & ▇▇▇▇▇▇ Credit
Rating Co., Fitch IBCA, Inc., ▇▇▇▇▇'▇ Investors Service, Inc. and Standard &
Poor's Ratings Services, or any successor thereto.
"Net Proceeds" means, with respect to a Receivable, all monies in
available funds collected, received or otherwise recovered from or for the
account of the related Obligor on such Receivable. Third-Party Fees incurred
in connection with collecting a Receivable will be deducted from collections on
such Receivable by such third parties or by the Servicer on their behalf and
will not constitute Net Proceeds.
"Note" means one of the variable rate Creditrust Warehouse Notes,
Series 1998-A executed by the Issuer and authenticated by the Trustee in
substantially the form attached hereto as Exhibit C.
"Note Balance" shall initially equal, on the first Funding Date, the
Initial Note Balance and, as of any subsequent date of determination, shall
equal the Initial Note Balance plus any subsequent Funding Amounts less all
amounts paid to Noteholders and applied in reduction of the Note Balance
pursuant to Section 4.04(b)(viii)(A) or (B), pursuant to Section 4.04(b)(ix),
pursuant to Section 4.04(b)(x)(A) through (D), inclusive; or pursuant to
Section 10.07.
"Note Insurer" means Asset Guaranty Insurance Company.
"Note Insurer Obligations" means all amounts from time to time payable
to the Note Insurer hereunder, under the Premium Letter or under the Insurance
Agreement, whether constituting principal or interest, whether fixed or
contingent, and howsoever arising (including, without limitation, all
Reimbursement Obligations, and any and all such interest, premiums, fees and
other obligations that accrue after the commencement of an Insolvency
Proceeding, in each such case whether or not allowed as a claim in such
Insolvency Proceeding).
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"Note Insurer Premium" means the premium payable to the Note Insurer
in respect of the Policy, in an amount equal to the greater of (x) the product
of (i) one-twelfth of a per annum rate equal to the Premium Rate and (ii) the
average daily Note Balance during the preceding Collection Period, and (y) the
fixed minimum amount set forth for all premium payments in the Premium Letter.
"Note Payment Account" means the segregated account or accounts, each
of which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Creditrust Warehouse Notes, Series 1998-A, Note Payment Account."
"Note Rate" means (i) the sum of (A) 65 basis points (.65%) plus (B)
the Index Rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) (ii)
divided by 365. The term "Index Rate" means the rate of interest per annum
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
on the Reset Date for a term of one week; provided, however, if more than one
rate is specified on Telerate Page 3750, the applicable rate shall be the
arithmetic mean of all such rates. If, for any reason, such rate is not
available, the term "Index Rate" shall mean the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) on the Reset Date for a term
of one week; provided, however, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates.
"Note Rate Period" means the period of time from the first Funding
Date to the following Thursday, and thereafter each Note Rate Period shall run
from the following Friday to the following Thursday, provided however, that if
Thursday is not a Business Day, the Note Rate Period shall end on the next
preceding day that is a Business Day.
"Note Register" means the register maintained pursuant to Section
5.03.
"Note Registrar" means the Trustee unless a successor thereto is
appointed pursuant to Section 5.03. The Note Registrar initially designates its
offices at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
as its offices for purposes of Section 5.07.
"Noteholder" means the Person in whose name a Note is registered in
the Note Register, except that, solely for the purposes of giving certain
consents, waivers, requests or demands pursuant to this Agreement the interests
evidenced by any Note registered in the name of, or in the name of a Person or
entity holding for the benefit of, the Issuer, the Servicer or any Person
actually known to a Responsible Officer of the Trustee to be controlling,
controlled by or under common control with the Issuer or the Servicer, shall
not be taken into account in determining whether the requisite percentage
necessary to effect any such consent, waiver, request or demand shall have been
obtained.
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"Obligor" on a Receivable means any Person who owes or may be liable
for payments under such Receivable.
"Officer's Certificate" means a certificate signed by a Responsible
Officer of the Issuer or the Servicer, as the case may be, and delivered to the
Trustee and Note Insurer.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or outside counsel to the Person responsible for providing such
opinion, and which opinion shall be reasonably acceptable to the Trustee, the
Note Insurer and the other recipients thereof.
"Original Noteholder" means Banco Santander, S.A., New York Branch.
"Originating Institution" means any of the banking institutions and
merchants that originated any of the Receivables and their assignees.
"Payment Date" means the tenth day of each calendar month or, if such
day is not a Business Day, the next succeeding Business Day, commencing
November 10, 1998.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Permitted Investments" means, at any time, any one or more of the
following obligations and securities:
(i) obligations of, and obligations fully guaranteed as
to timely payment of principal and interest by, the United States or
any agency thereof, provided such obligations are backed by the full
faith and credit of the United States;
(ii) general obligations of, or obligations guaranteed by,
FNMA or any state of the United States or the District of Columbia,
which are then rated the highest available credit rating for such
obligations by the Required Rating Agencies then providing such a
rating;
(iii) certificates of deposit issued by any depository
institution or trust company (including the Trustee) incorporated
under the laws of the United States or of any state thereof, the
District of Columbia and subject to supervision and examination by
banking authorities of one or more of such jurisdictions, provided
that the short-term unsecured debt obligations of such depository
institution or trust company are then rated the highest available
credit rating for such obligations by the Required Rating Agencies
then providing such a rating;
(iv) repurchase obligations held by the Trustee that are
acceptable to the Trustee with respect to any security described in
clauses (i) or (ii) hereof or any other security issued or guaranteed
by any other agency or instrumentality of the United States, in either
case entered into with a federal agency or a depository institution or
trust
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company (acting as principal) described in clause (iii) above,
provided that the party agreeing to repurchase such obligations shall
have the highest available short-term debt rating from the Required
Rating Agencies then providing such a rating; and
(v) freely redeemable shares in money market funds
(including such funds for which the Trustee or an Affiliate of the
Trustee serves as an investment advisor, administrator, shareholder
servicing agent and/or custodian or subcustodian) which invest solely
in the types of instruments and obligations described in clauses (i)
through (iv) above, so long as such funds are then rated in the
highest available rating category for money market funds by the
Required Rating Agencies then providing such a rating and
notwithstanding that (i) the Trustee or an Affiliate of the Trustee
may charge and collect fees and expenses from such funds for services
rendered, (ii) the Trustee charges and collects fees and expenses for
services rendered pursuant to this Agreement and (iii) services
performed for such funds and pursuant to this Agreement may converge
at any time. Each of the Issuer and the Servicer hereby specifically
authorizes the Trustee or an Affiliate of the Trustee to charge and
collect all fees and expenses from such funds for services rendered to
such funds, in addition to any fees and expenses the Trustee may
charge and collect for services rendered pursuant to this Agreement;
provided that each of the foregoing investments above shall mature no later
than the Business Day prior to the Payment Date immediately following the date
of purchase thereof (other than in the case of the investment of monies in
instruments of which the entity at which the related Account is located is the
obligor, which may mature on the related Payment Date), and shall be required
to be held to such maturity; and provided further that each of the Permitted
Investments may be purchased by the Trustee through an Affiliate of the
Trustee; and provided further that no Permitted Investment may be purchased at
a premium.
Permitted Investments are only those which are acquired by the Trustee
in its name and in its capacity as Trustee, and with respect to which (a) the
Trustee has noted its interest therein on its books and records, and (b) the
Trustee has purchased such investments for value without notice of any adverse
claim thereto (and, if such investments are securities or other financial
assets or interests therein, within the meaning of Section 8-102 of the UCC,
without acting in collusion with a securities intermediary in violating such
securities intermediary's obligations to entitlement holders in such assets,
under Section 8-504 of the UCC, to maintain a sufficient quantity of such
assets in favor of such entitlement holders), and (c) either (i) such
investments are in the possession of the Trustee, or (ii) such investments, (A)
if certificated securities and in bearer form, have been delivered to the
Trustee, or in registered form, have been delivered to the Trustee and either
registered by the issuer in the name of the Trustee or endorsed by effective
endorsement to the Trustee or in blank; (B) if uncertificated securities, the
ownership of which has been registered to the Trustee on the books of the
issuer thereof (or another person, other than a securities intermediary, either
becomes the registered owner of the uncertified security on behalf of the
Trustee or, having previously become the registered owner, acknowledges that it
holds for the Trustee); or (C) if securities entitlements (within the meaning
of Section 8-102 of the UCC) representing interests in securities or other
financial assets (or interests therein) held by
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a securities intermediary (within the meaning of said Section 8-102), a
securities intermediary indicates by book entry that a security or other
financial asset has been credited to the Trustee's securities account with such
securities intermediary. No Permitted Investment may be purchased at a
premium.
"Person" means any legal person, including any individual,
corporation, partnership, limited liability company, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Placement Agent" means Rothschild Inc.
"Policy" means the Financial Guaranty Insurance Policy issued pursuant
to the Insurance Agreement.
"Pool" means a particular group of Receivables purchased by Seller and
contributed by Seller to Issuer, which must constitute all of the Receivables
purchased under a particular Asset Sale Agreement.
"Pool Information" means all of the information set forth in the
CD-ROM delivered in connection with each Schedule of Receivables.
"Premium Letter" means the letter agreement between the Note Insurer
and the Issuer, dated as of the Closing Date.
"Premium Rate" has the meaning assigned to such term in the Premium
Letter.
"Prepaid Pools" means the Pools designated by Issuer under Section
10.05 or 10.06 to be released upon payment of the Minimum Repayment Amount,
including all of the Receivables then subject to this Agreement which are a
part of such Pools, and all of the property and rights in property described in
Section 2.01(b) which are related to such Receivables.
"Prepayment Amount" means an amount which is paid pursuant to Section
10.05 or 10.06.
"Prepayment Date" means a Business Day on which a Prepayment Amount is
paid.
"Principal Distributable Amount" means, with respect to any Payment
Date, the following: (i) on an Interest Only Payment Date during the Funding
Period, an amount equal to zero; and (ii) at any other time, the amount shall
be the remaining Available Funds as provided in Section 4.04(b)(x).
"Proprietary Information" shall have the meaning specified in Section
9.19.
"Purchase Agreement" means each Purchase and Funding Agreement signed
by a Noteholder.
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"Purchase Price" means the amount paid by Seller to purchase a Pool.
"Purchaser" means Creditrust Funding I LLC, in its capacity as
transferee of the Receivables under the Receivables Contribution Agreement.
"Qualified Institutional Buyer" have the meaning assigned to such term
in Rule 144A under the Securities Act.
"Rating Agency" means Standard & Poor's Rating Services, a division of
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"Receivable" means any Consumer Account identified in a Schedule of
Receivables delivered by Seller to Issuer in connection with the Receivables
Contribution Agreement.
"Receivable File" means the documents described in Section 2.02
pertaining to a particular Receivable.
"Receivables Contribution Agreement" means the Receivables
Contribution Agreement, dated as of the Closing Date, between the Seller and
the Purchaser.
"Record Date" means, with respect to each Payment Date, the last
Business Day of the calendar month immediately preceding the month in which
such Payment Date occurs. Any amount stated "as of a Record Date" or "on a
Record Date" shall give effect to all applications of collections, and all
payments to any party under this Agreement or to the related Obligor, as the
case may be, in each case as determined as of the opening of business of the
Note Registrar on the related Record Date.
"Redemption Amount" means, with respect to a redemption of the Notes
by the Issuer pursuant to Section 10.01, an amount equal to the sum of (i) the
Note Balance as of the date the Issuer elects to redeem the Notes, (ii) all
accrued and unpaid interest on the Notes through the end of the Collection
Period immediately preceding the Payment Date as of which such redemption will
occur, and (iii) all outstanding Note Insurer Obligations then due and payable.
"Reimbursement Obligations" means the sum of (i) each payment made
under the Policy and (ii) interest on any payment made under the Policy from
the date of the payment until the date the Note Insurer is repaid, in full and
in cash, at an annual rate equal to the "Prime Rate" (as hereinafter defined)
plus 1% (calculated on the basis of the actual number of days elapsed in a 360
day year). The term "Prime Rate" means the interest rate published in the
"Money Rates" column in The Wall Street Journal and referred to therein as the
"Prime Rate;" any change in such Prime Rate shall correspondingly change the
interest rate as of the date of any such change.
"Release Payment" means, with respect to any Removed Receivable in
respect of which a payment is made by the Issuer or the Servicer under this
Agreement and as of the Remittance Date on which the "Release Payment" must be
made, the excess, if any, of (i) the product of the original Funding Amount
loaned with respect to the Pool containing such Removed Receivable
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and a fraction, the numerator of which is the Charged-Off Balance of such
Receivable and the denominator of which is the Charged-Off Balance of all the
Receivables in such Pool over (ii) the product of the aggregate amount of all
Net Proceeds collected, received or otherwise recovered on and after such
Funding Date with respect to such Removed Receivable, and a factor equal to
.80; in each case determined as of such Remittance Date.
"Remittance Date" means, with respect to any Payment Date, the third
Business Day next preceding such Payment Date.
"Removed Receivable" means a Receivable which the Servicer is
obligated to acquire pursuant to Section 3.04, or which the Issuer is obligated
to make a payment in respect of, pursuant to Section 2.05 or 6.02, or in the
event the Issuer has elected to make a redemption pursuant to Section 10.01,
all of the Receivables.
"Required Rating Agencies" means with respect to any debtor or
indebtedness the Rating Agency and one other Nationally Recognized Statistical
Rating Agency; provided that none of the other such Nationally Recognized
Statistical Rating Agencies has given a lower rating to the relevant debtor or
indebtedness than the Rating Agency and such other Nationally Recognized
Statistical Rating Agency (in which case, for the avoidance of doubt, such
other nationally recognized statistical rating agency giving the lower rating
shall be one of the "Required Rating Agencies").
"Required Reserve Amount" means the amount required to be deposited in
the Reserve Account on the Closing Date and thereafter maintained in the
Reserve Account for so long as the Notes are outstanding. The amount is
$12,000 on the Closing Date and thereafter until the initial Funding Date, and
after the initial Funding Date the amount is three percent (3%) of the Maximum
Facility Amount.
"Reserve Account" means the segregated account or accounts, each of
which shall be an Eligible Account, established and maintained pursuant to
Section 4.01 and entitled "Norwest Bank Minnesota, National Association, as
Trustee for Creditrust Warehouse Notes, Series 1998-A, Reserve Account."
"Reserve Fund Reimbursement Amount" means, with respect to any Payment
Date, the excess of the Required Reserve Amount over the amount then on deposit
in the Reserve Account.
"Reset Date" means (i) with respect to first Note Rate Period, the
second Business Day preceding the first Funding Date, and (ii) thereafter, each
Tuesday thereafter; provided, however, that if such date is not a Business Day,
the Reset Date shall be the next preceding day that is a Business Day.
"Responsible Officer" means,
(i) when used with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any vice president,
assistant vice president, assistant
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treasurer, assistant secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with such particular subject, and
(ii) when used with respect to the Issuer or the Servicer, the
president or the chief financial officer of the Issuer or the Servicer, as the
case may be.
"Sale" shall have the meaning specified in Section 8.24.
"Schedule of Receivables" means each Schedule of Receivables to the
Receivables Contribution Agreement, including Schedule of Receivables No. 1 and
each subsequent Schedule of Receivables, delivered to the Trustee by the Issuer
in connection with the Receivables Contribution Agreement.
"Scheduled Termination Date" means the 24th Payment Date after the
Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Creditrust Corporation, in its capacity as transferor
of the Receivables under the Receivables Contribution Agreement.
"Servicer" means Creditrust Corporation, in its capacity as servicer
of the Receivables pursuant to this Agreement, and each successor thereto (in
the same capacity) appointed pursuant to Section 8.03.
"Servicer Default" shall have the meaning specified in Section 8.01.
"Servicer's Remittance Date Certificate" means an Officer's
Certificate of the Servicer completed and executed pursuant to Section 3.06 and
delivered to the Trustee, in each case specifying Removed Receivables in
respect of which the making of an Release Payment is required hereunder,
prepared by the Servicer as of the opening of business of the Trustee on each
applicable Remittance Date.
"Servicing Fee" means the fee payable to the Servicer on each Payment
Date, calculated pursuant to Section 3.05, for services rendered during the
related Collection Period, which shall be, for any Payment Date, equal to 20%
of all Net Proceeds collected, received or otherwise recovered from or for the
account of the Obligors during such Collection Period. The term "Servicing
Fee" shall also mean the additional amounts payable to a Successor Servicer for
servicing pursuant to Section 8.03, but only to the extent such amounts do not
exceed the amount calculated in accordance with the preceding sentence; all
amounts in excess thereof are herein called the "Additional Servicing Fee".
"Subservicers" shall have the meaning specified in Section 8.07.
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"Successor Servicer" means any entity appointed as a successor to the
Servicer pursuant to Section 8.03.
"Termination Period" means the period of time beginning at the end of
the Funding Period and terminating on the Payment Date occurring five years
after the last Payment Date occurring in the Funding Period.
"Third-Party Fees" means, with respect to a Receivable and any
Collection Period, the amount of any fees or compensation paid or owed to
unrelated third-parties (generally, contingency fee lawyers) retained or
otherwise engaged by the Servicer under fee or compensation arrangements that
are contingent upon, and determined by reference to, amounts recovered in
respect of the related Receivable.
"Transaction Documents" means, collectively, this Agreement, the
Receivables Contribution Agreement, each Schedule of Receivables, the Notes,
the Policy, the Insurance Agreement, the Premium Letter, each Purchase
Agreement, and each of the other documents, instruments and agreements entered
into in connection with any of the foregoing or the transactions contemplated
thereby.
"Transferee Certificate" means a certificate in the form of Exhibit
D-2 or D-3.
"Transition Fees" shall have the meaning specified in Section 8.02.
"Trust Estate" or "Creditrust Warehouse Notes, Series 1998-A Trust
Estate" means the trust estate established under this Agreement for the benefit
of the Noteholders and the Note Insurer, which consists of the property
described in Section 2.01(b).
"Trust Property" means the property, or interests in property,
constituting the Trust Estate from time to time.
"Trustee" means Norwest Bank Minnesota, National Association, and any
successor trustee appointed pursuant to Section 9.11.
"Trustee Fee" means the fee payable to the Trustee on each Payment
Date for services rendered under this Agreement, which shall be equal to the
greater of $250 per month or an amount per month equal to one-twelfth of 5
basis points (0.05%) per annum times the average daily Note Balance during the
preceding Collection Period.
"Trustee's Certificate" means a certificate completed and executed by
a Responsible Officer of the Trustee pursuant to Section 9.02 or 9.03,
substantially in the form attached hereto as Exhibit B.
"UCC" means the Uniform Commercial Code as in effect in the State of
Maryland.
"United States" means the United States of America.
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"Vice President" of any Person means any vice president of such
Person, whether or not designated by a number or words before or after the
title "Vice President," who is a duly elected officer of such Person.
"Voting Interests" means the aggregate voting power evidenced by the
Notes, corresponding to the outstanding Note Balance of the Notes held by
individual Noteholders; provided, however, that where the Voting Interests are
relevant in determining whether the vote of the requisite percentage of
Noteholders necessary to effect any consent, waiver, request or demand shall
have been obtained, the Voting Interests shall be deemed to be reduced by the
amount equal to the Voting Interests (without giving effect to this provision)
represented by the interests evidenced by any Note registered in the name of,
or in the name of a Person or entity holding for the benefit of, the Issuer,
the Servicer or any Person actually known to a Responsible Officer of the
Trustee to be an Affiliate of either or both of the Issuer and the Servicer.
SECTION 1.02 INTERPRETATION.
Unless otherwise indicated in this Agreement:
(a) reference to and the definition of any document (including
this Agreement) shall be deemed a reference to such document as it may be
amended or modified from time to time;
(b) all references to an "Article," "Section," "Schedule" or
"Exhibit" are to an Article or Section hereof or to a Schedule or an Exhibit
attached hereto;
(c) defined terms in the singular shall include the plural and
vice versa, and the masculine, feminine or neuter gender shall include all
genders;
(d) the words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement;
(e) in the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding";
(f) periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed and references
in this Agreement to months and years shall be to calendar months and calendar
years unless otherwise specified;
(g) accounting terms not otherwise defined herein and accounting
terms partly defined herein to the extent not defined, shall have the
respective meanings given to them under GAAP; and
(e) the headings in this Agreement are for the purpose of
reference only and do not limit or affect its meaning.
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ARTICLE II
CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES;
REPRESENTATIONS REGARDING RECEIVABLES; DISCHARGE
SECTION 2.01 CREATION OF TRUST ESTATE.
(a) Upon the execution of this Agreement by the parties hereto,
there is hereby created for the benefit of the Noteholders and the Note Insurer
the Creditrust Warehouse Notes, Series 1998-A Trust Estate. The Issuer,
pursuant to the mutually agreed upon terms contained in this Agreement, shall
grant a security interest to the Trustee on behalf of the Noteholders and the
Note Insurer, in all of its right, title and interest in and to the Trust
Estate, including, without limitation, Receivables and any proceeds related
thereto, and such other items as shall be specified in this Agreement.
(b) In consideration of the Trustee's delivery to the Issuer of
authenticated Notes, in authorized denominations, in an aggregate amount equal
to the Maximum Facility Amount, the Issuer does hereby grant a security
interest to the Trustee, in trust for the benefit of the Noteholders and the
Note Insurer, in the following property and rights in property, whether now
owned or existing or hereafter acquired or arising, whether tangible or
intangible, and wheresoever located:
(i) all right, title and interest of the Issuer in and to
the Receivables and all monies due thereon or paid thereunder or in respect
thereof (including any fees and charges paid by Obligors) on and after each
Funding Date (including any Release Payments made with respect to Removed
Receivables for which a payment is made by the Issuer pursuant to Section 2.05
or 6.02 or Removed Receivables acquired by the Servicer pursuant to Section
3.04), net of any Third-Party Fees;
(ii) the rights of the Issuer as Purchaser under the
Receivables Contribution Agreement to enforce the obligations of the Seller
thereunder;
(iii) the Collection Account, the Note Payment Account and
the Reserve Account, and all monies, "securities," "instruments," "accounts"
"general intangibles," "chattel paper," "financial assets," "investment
property" (the terms in quotations are defined in the UCC) and other property
on deposit or credited to the Collection Account, the Note Payment Account, and
the Reserve Account from time to time (whether or not constituting or derived
from payments, collections or recoveries received, made or realized in respect
of the Receivables);
(iv) all right, title and interest of the purchaser in, to
and under each Asset Sale Agreement, and all related documents, instruments and
agreements pursuant to which the Seller acquired, or acquired an interest in,
any of the Receivables from an Originating Institution;
(v) all payments due under the Policy;
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(vi) all books, records and documents relating to the
Receivables in any medium, including without limitation paper, tapes, disks and
other electronic media;
(vii) all other monies, securities, reserves and other
property now or at any time in the possession of the Trustee or its bailee,
agent or custodian and relating to any of the foregoing; and
(viii) all proceeds, products, rents and profits of any of
the foregoing and all other amounts payable in respect of the foregoing;
including, without limitation, proceeds of insurance policies insuring any of
the foregoing or any indemnity or warranty payable by reason of loss or damage
to or otherwise in respect of any of the foregoing.
(c) The parties hereto intend that the security interest granted
under this Agreement shall give the Trustee on behalf of the Noteholders and
the Note Insurer a first priority perfected security interest in, to and under
the Receivables, and all other property described in this Section 2.01 as a
part of the Trust Estate and all proceeds of any of the foregoing, in order to
secure the Note Insurer Obligations and the obligations of the Issuer to the
Trustee, the Noteholders and the Note Insurer under the Notes, this Agreement,
the Purchase Agreement, the Insurance Agreement and all of the other
Transaction Documents. The Trustee on behalf of the Noteholders and the Note
Insurer shall have all the rights, powers and privileges of a secured party
under the UCC. The Issuer agrees to execute and file all filings (including
filings under the UCC) and take all other actions reasonably necessary in any
jurisdiction to provide third parties with notice of the security interest
granted pursuant to this Agreement and to perfect such security interest under
the UCC.
(d) The Issuer shall ensure that, from and after the time of the
grant of the security interest in the Trust Estate, the master computer records
(including any back-up archives) maintained by or on behalf of the Issuer that
refer to any Receivable indicate clearly the interest of the Trustee in such
Receivable and that the Receivable is subject to a security interest in favor
of the Trustee. Indication of the interest of the Trustee in a Receivable
shall be deleted from or modified on such computer records when, and only when,
the Receivable has been paid in full or has been acquired, assigned or released
pursuant to this Agreement.
SECTION 2.02 CUSTODY OF RECEIVABLE FILES.
In order to assure uniform quality in servicing the Receivables and to
reduce administrative costs, the Trustee on behalf of the Noteholders and the
Note Insurer, upon the execution and delivery of this Agreement, revocably
appoints the Servicer, and the Servicer accepts such appointment, to act as the
agent of the Trustee as custodian of the following documents to each
Receivable:
(i) the related Asset Sale Agreement;
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(ii) any other documents received from or made available by the
related Originating Institution in respect of such Receivable;
(iii) a copy of the marked computer records indicating the interest
of the Trustee on behalf of the Noteholders and the Note Insurer, as evidenced
by the Schedule of Receivables; and
(iv) any and all other documents that the Issuer or the Servicer,
as the case may be, shall keep on file, in accordance with its customary
procedures, relating to such Receivable or the related Obligor.
SECTION 2.03 ACCEPTANCE BY TRUSTEE.
The Trustee hereby acknowledges its acceptance, on behalf of the
Noteholders and the Note Insurer, pursuant to this Agreement, of the security
interest in and to the Receivables and the other Trust Property granted by the
Issuer pursuant to this Agreement, and declares and shall declare from and
after the date hereof that the Trustee, on behalf of the Noteholders and the
Note Insurer, holds and shall hold such security interest, pursuant to the
trusts set forth in this Agreement.
SECTION 2.04 REPRESENTATIONS AND WARRANTIES OF ISSUER AS TO THE
RECEIVABLES.
The Issuer does hereby make the following representations and
warranties as of each Funding Date except and to the extent otherwise
specifically provided in clause 2.04(l), on which (i) the Trustee is relying in
accepting the Receivables and the other Trust Property which become a part of
the Trust Estate as of such Funding Date; (ii) the Noteholders are relying in
purchasing the Notes and making Fundings; (iii) the Note Insurer is relying in
issuing the Policy; and (iv) the Rating Agency is relying in providing its
rating of the Notes.
(a) Characteristics of Receivables. Each such Receivable is
payable in United States dollars, has been purchased by Creditrust Corporation
from the related Originating Institution under an Asset Sale Agreement with
such Originating Institution in accordance with the Customary Procedures of
Creditrust Corporation and has been subsequently transferred, assigned and
conveyed by the Seller to the Issuer pursuant to the Receivables Contribution
Agreement.
(b) Schedule of Receivables. The information set forth in the
Schedule of Receivables is true and correct in all material respects as of such
Funding Date.
(c) No Government Obligors. None of such Receivables are due from
the United States or any state or local government, or from any agency,
department or instrumentality of the United States or any state or local
government.
(d) Employee Obligors. None of such Receivables are due from any
employee of the Seller (or its predecessor, Oxford Capital Corporation), the
Issuer or any of their respective affiliates.
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(e) Good Title. No such Receivable has been transferred,
assigned, conveyed or pledged by the Issuer to any Person other than the
Trustee. The Issuer has good and marketable title to each Receivable, free and
clear of all Liens and rights of others; the Trustee on behalf of the
Noteholders and the Note Insurer has a first priority perfected security
interest in, each Receivable, free and clear of all Liens and rights of others;
and such security interest has been perfected under the UCC and any other
applicable law.
(f) No Impairment of Rights. As of such Funding Date, the Issuer
has not taken any action that, or failed to take any action the omission of
which, would impair the rights of the Trustee or the Noteholders or the Note
Insurer with respect to any such Receivable; provided, however, that the
writing down of any Receivable balance in accordance with Customary Procedures
shall not be deemed an impairment of the rights of any of the Trustee, the
Noteholders or the Note Insurer.
(g) No Fraudulent Use. As of such Funding Date, no such
Receivable has been identified by the Issuer or reported to the Issuer by the
related Originating Institution as having resulted from fraud perpetrated by
any Person with respect to the related account.
(h) All Filings Made. All filings (including UCC filings)
necessary in any jurisdiction to provide third parties with notice of the
transfer and assignment herein contemplated, and to give the Trustee on behalf
of the Noteholders and the Note Insurer a first priority perfected security
interest in such Receivables shall have been made.
(i) UCC Status. No such Receivable is secured by "real property"
or "fixtures" or evidenced by an "instrument" under and as defined in the UCC.
(j) Location of Receivable Files. As of such Funding Date, each
Receivable File is kept by the Servicer at its offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(k) Pool Status. Each such Receivable is part of a Pool which
satisfies each of the requirements set forth in Section 2.04(l), provided that
such Pools are aggregated with all other Pools to the extent set forth therein.
(l) Pools and Concentration Limits.
Each of the following representations and warranties may be waived
with prior written consent of the Issuer, the Note Insurer and the Rating
Agency:
(i) Each Pool was acquired by the Seller within *
days prior to such Funding Date.
(ii) Each Pool consists solely of Receivables which comply
with the representations set forth in Section 2.04(a) through (k).
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(iii) *
(iv) *
(v) *
(vi) *
(vii) *
(viii) *
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(ix) *
(x) *
Each of the representations and warranties set forth in clauses
2.04(l)(iii) through (x) applies only with respect to the addition of
Receivables to this Agreement which occurs more than sixty (60) days after the
first Funding Date, and after the occurrence of any Prepayment Date, which
occurs more than sixty (60) days after such Prepayment Date.
SECTION 2.05 REPAYMENT FOR RECEIVABLES UPON BREACH.
Upon discovery by the Issuer or the Servicer or upon the actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
representations and warranties of the Issuer set forth in Section 2.04, the
party discovering such breach shall give prompt written notice to the others.
If, as a result of such breach, any Receivable is rendered uncollectible or the
Trustee's rights in, to or under such Receivable or the proceeds thereof are
impaired or such proceeds are not available for any reason to the Trustee free
and clear of any Lien, the Issuer shall repay a portion of the Note Balance
equal to the Release Payment related to such Receivable and, if necessary, the
Issuer shall enforce the obligation of the Seller under the Receivables
Contribution Agreement to reacquire such Receivable from the Issuer, unless
such breach shall have been cured within 30 days after the earlier to occur of
the discovery of such breach by the Issuer or receipt of written notice of such
breach by the Issuer, such that the relevant representation and warranty shall
be true and correct in all material respects as if made on such day, and the
Issuer shall have delivered to the Trustee, the Note Insurer and each
Noteholder an Officer's Certificate describing the nature of such breach and
the manner in which the relevant representation and warranty became true and
correct. This repayment obligation shall pertain to all representations and
warranties of the Issuer contained in Section 2.04, whether or not the Issuer
has knowledge of the breach at the time of the breach or at the time the
representations and warranties were made. The Issuer will be obligated to make
the repayment related to the Receivable as set forth above on the Remittance
Date following the date on which such repayment obligation arises. In
consideration of the release of any such Receivable, on the Remittance Date
immediately following the date on which such repayment obligation arises, the
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Issuer shall remit the Release Payment of such Receivable to the Collection
Account in the manner specified in Section 4.03.
Upon any such repayment, the Trustee on behalf of the Noteholders and
the Note Insurer shall, without further action, be deemed to release its
security interest in, to and under the Removed Receivable so released, all
monies due or to become due with respect thereto after the aforementioned
Remittance Date and all proceeds thereof. The Trustee shall execute such
documents and instruments of release and take such other actions as shall be
reasonably requested by the Issuer to effect the security interest release
pursuant to this Section. The sole remedies of the Trustee, the Noteholders
and the Note Insurer with respect to a breach of the Issuer's representations
and warranties pursuant to Section 2.04 shall be to require the Issuer to make
repayment for the related Receivable pursuant to this Section and to enforce
the Issuer's obligation hereunder to enforce the obligation of the Seller under
the Receivables Contribution Agreement to reacquire such Receivable from the
Issuer. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repayment for
any Receivable pursuant to this Section, except as otherwise provided in
Section 9.02.
SECTION 2.06 DUTIES OF SERVICER AS CUSTODIAN
(a) Safekeeping. The Servicer, in its capacity as custodian,
shall hold the Receivable Files in its possession from time to time on behalf
of the Trustee for the use and benefit of the Note Insurer and all present and
future Noteholders, and maintain such accurate and complete accounts, records
and computer systems pertaining to each Receivable File as shall enable the
Trustee to comply with this Agreement. In performing its duties as custodian,
the Servicer shall act with reasonable care, using that degree of skill and
attention that it exercises with respect to the receivable files of comparable
defaulted receivables that the Servicer services for itself or others. The
Servicer shall conduct, or cause to be conducted, periodic examinations of the
files of receivables owned or serviced by it, which shall include the
Receivable Files held by it under this Agreement, and of the related accounts,
records and computer systems, in such a manner as shall enable the Trustee to
verify the accuracy of the Servicer's record keeping; provided however that the
Trustee shall be under no obligation to verify the accuracy of the Servicer's
record-keeping unless requested to do so in writing by the Note Insurer, the
Noteholders with Voting Interest in excess of 50% or the Rating Agency. Any
such written request shall specify in detail the procedures to be employed by
the Trustee. The Servicer shall promptly report to the Trustee any failure on
its part to hold the Receivable Files and maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Receivable File at its offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, or at such other office as shall be specified to the Trustee and the
Note Insurer by 30 days' prior written notice, provided that the Servicer shall
have taken all actions necessary or reasonably requested by the Trustee or the
Note Insurer to amend any existing financing statements and continuation
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statements, and file additional financing statements and any other steps
reasonably requested by the Trustee or the Note Insurer to further perfect or
evidence the rights, claims or security interests of any of the Trustee or the
Note Insurer under any of the Transaction Documents. The Servicer shall make
available to the Trustee, the Note Insurer and the Noteholders or their duly
authorized representatives, attorneys or auditors the Receivable Files and the
accounts, records and computer systems maintained by the Servicer with respect
thereto upon not less than two Business Days' prior written notice for
examination during normal business hours; provided, however, that the
Noteholders will only be entitled to the access provided in this subclause (b)
in the event of a Servicer Default.
(c) Release of Documents. Upon written instruction from the
Trustee, the Servicer shall release any document in the Receivable Files to the
Trustee or its agent or designee, as the case may be, at such place or places
as the Trustee may designate, as soon as practicable. Nothing in this Section
shall impair the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, which obligation
shall be evidenced by an Opinion of Counsel to such effect, 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. The Servicer shall
not be responsible for any loss occasioned by the failure of the Trustee to
return any document or any delay in doing so.
SECTION 2.07 INSTRUCTIONS; AUTHORITY TO ACT.
The Servicer shall be deemed to have received proper instructions with
respect to the Receivable Files upon its receipt of written instructions signed
by a Responsible Officer of the Trustee. A certified copy of a bylaw or of a
resolution of the board of directors of the Trustee shall constitute conclusive
evidence of the authority of any such Responsible Officer to act and shall be
considered in full force and effect until receipt by the Servicer of written
notice to the contrary given by the Trustee.
SECTION 2.08 INDEMNIFICATION OF CUSTODIAN.
The Servicer, as custodian of the Receivable Files, shall indemnify
the Trustee for any and all liabilities, obligations, losses, compensatory
damages, payments, costs or expenses of any kind whatsoever (including
reasonable attorney's fees and expenses incurred in connection with defending
against any such claim) that may be imposed on, incurred or asserted against
the Trustee as the result of any improper act or omission in any way relating
to the maintenance and custody of the Receivable Files by the Servicer, as
custodian; provided, however, that the Servicer shall not be liable for any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Trustee.
SECTION 2.09 EFFECTIVE PERIOD AND TERMINATION.
The Servicer's appointment as custodian of the Receivable Files shall
become effective as of the Closing Date and shall continue in full force and
effect so long as it is the Servicer under
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this Agreement. If the Servicer shall resign as Servicer pursuant to Section
7.05 or if all of the rights and obligations of the Servicer have been
terminated pursuant to Section 8.02, the appointment of the Servicer as
custodian of the Receivable Files shall immediately terminate. As soon as
practicable after any termination of such appointment, the Servicer shall
deliver the Receivable Files to the Trustee or its agent at such place or
places as the Trustee may reasonably designate.
SECTION 2.10 AGENT FOR SERVICE.
The agent for service for the Issuer shall be its President whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the agent
for service for the Servicer shall be its President whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 2.11 SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(a) an amount sufficient to pay and discharge the outstanding Note
Balance, plus accrued and unpaid interest on the Notes, has been paid to the
Noteholders;
(b) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer;
(c) the Issuer has paid or caused to be paid all Note Insurer
Obligations then outstanding to the Note Insurer;
(d) the obligation of the Note Insurer under the Policy shall have
been terminated; and
(e) the Issuer has delivered to the Trustee an Officers'
Certificate of the Issuer and an Opinion of Counsel each stating that all
conditions precedent herein provided for the satisfaction and discharge of this
Agreement with respect to the Notes and the Policy have been complied with;
then this Agreement and the lien, rights and interests created hereby shall
cease to be of further effect with respect to the Notes, and the Trustee shall,
at the expense of the Issuer, (i) execute and deliver all such instruments as
may be necessary to acknowledge the satisfaction and discharge of this
Agreement with respect to the Notes, (ii) pay, or assign or transfer and
deliver, to the Issuer, all cash, securities and other property held by it as
part of the Trust Estate or other assets remaining after satisfaction of the
conditions specified in clauses (a), (b) and (c) above, and (iii) arrange for
the cancellation, surrender and termination of the Policy pursuant to the terms
thereof and of the Insurance Agreement.
Notwithstanding the satisfaction and discharge of this Agreement with
respect to the Notes, the obligations of the Issuer to the Trustee under
Section 9.07, the obligations of the
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Trustee to the Issuer, the Servicer and to the Noteholders and the Note Insurer
under Section 4.04, the obligations of the Trustee to the Noteholders and the
Note Insurer under Section 4.07, and rights to receive payments of principal of
and interest on the Notes, and payment of Note Insurer Obligations, and the
rights, privileges and immunities of the Trustee under Article IX, shall
survive.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01 DUTIES OF SERVICER.
The Servicer, as agent for the Trustee, shall manage, service,
administer and make collections on and in respect of the Receivables with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable defaulted consumer receivables that it
services for itself or others (whether or not the Servicer shall then be
servicing comparable defaulted consumer receivables for itself or others). The
Servicer's duties shall include collecting and posting all payments, responding
to inquiries of Obligors or by federal, state or local government authorities
with respect to the Receivables, investigating delinquencies, implementation of
payment plans, sending payment information to Obligors, reporting tax
information to Obligors in accordance with its customary practices, accounting
for collections, publishing monthly and annual statements to the Trustee with
respect to payments, generating federal income tax information and performing
the other duties specified herein. In performing the above-referenced
services, the Servicer shall perform in accordance with Customary 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 shall
be authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trustee, the Noteholders, the Note Insurer, or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge and all other comparable instruments, with respect to the
Receivables. The Servicer is hereby authorized to commence, in its own name or
in the name of the Issuer or the Trustee, a legal proceeding to enforce a
Receivable or to commence or participate in a legal proceeding (including
without limitation a bankruptcy proceeding) relating to or involving a
Receivable. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trustee and the Issuer shall thereupon be
deemed to have automatically assigned, solely for the purpose of collection on
behalf of the party retaining an interest in such Receivable, such Receivable
and the other property conveyed as part of the Trust Estate pursuant to Section
2.01 with respect to such Receivable to the Servicer for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Trustee and the Issuer 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. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the grounds that it
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shall not be a real party in interest or a holder entitled to enforce such
Receivable, the Trustee on behalf of the Noteholders and the Note Insurer
shall, at the Servicer's expense and written direction, take reasonable steps
to enforce such Receivable. The Servicer shall deposit or cause to be
deposited into the Collection Account, within one Business Day of its receipt
thereof, all Net Proceeds realized in connection with any such action pursuant
to Section 4.02. The Trustee and the Issuer shall furnish the Servicer with any
powers of attorney and other documents 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 3.02 COLLECTION OF RECEIVABLE PAYMENTS.
The Servicer shall make reasonable efforts to collect all payments due
and payable in connection with the Receivables, and shall at all times follow
the Customary Procedures in so doing. The Servicer shall be authorized to write
down the balance of any Receivable in accordance with the Customary Procedures
without the prior consent of the Trustee; provided however, that such
write-down will not affect the rights of the Noteholders or the Note Insurer to
any amounts thereafter collected with respect to such Receivable. The Servicer
may, in accordance with the Customary Procedures, waive any charges or fees
that otherwise may be collected in the ordinary course of servicing the
Receivables.
SECTION 3.03 COVENANTS OF SERVICER.
The Servicer hereby makes the following covenants with respect to each
Receivable on which the Trustee is relying in accepting the Receivables in
trust and authenticating the Notes:
(a) Fulfillment of Obligations. The Servicer shall duly fulfill
all obligations on its part to be fulfilled under or in connection with the
Receivables, shall perform such obligations in accordance with the Customary
Procedures, and shall maintain in effect all licenses and qualifications
required in order to service the Receivables and shall comply in all respects
with all other requirements of law in connection with servicing the
Receivables, the failure to comply with which would have a material adverse
effect on the rights or interests of the Noteholders or the Note Insurer.
(b) No Rescission or Cancellation. The Servicer shall not permit
any rescission or cancellation of the Receivables except as ordered by a court
of competent jurisdiction or other governmental authority; provided, however,
that the writing down of the Receivables balance in accordance with Customary
Procedures shall not be deemed a rescission or cancellation of such
Receivables.
(c) No Impairment. The Servicer shall do nothing to impair the
rights of the Trustee, the Trust Estate, the Noteholders or the Note Insurer
with respect to the Receivables; provided, however, that the writing down of
the Receivables balance in accordance with Customary Procedures shall not be
deemed an impairment of the rights of the Trustee, the Noteholders or the Note
Insurer. The Servicer shall not engage in any pattern of conduct under which
it
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intentionally elects (i) to write down a Receivables balance from an Obligor
rather than writing down amounts due from the same Obligor which are not a part
of the Receivables, or (ii) to apply a payment received from an Obligor to a
Consumer Account which is not a Receivable rather than to a Receivable (unless
expressly instructed to do so by the Obligor), if the Servicer has actual
knowledge that such write-downs or payment applications discriminate against
the Noteholders, or with knowledge that the effect of such intentional election
is to discriminate against the Noteholders.
(d) No Instruments. Except in connection with its enforcement or
collection of the Receivables, the Servicer shall take no action to cause any
Receivables to be evidenced by any instruments (as defined in the UCC) and if
any Receivable is so evidenced (whether or not in connection with such
enforcement or collection), it shall be assigned to the Servicer as provided in
Section 3.04.
SECTION 3.04 REPAYMENT IN RESPECT OF RECEIVABLES UPON BREACH AND
OTHER EVENTS.
Upon discovery by the Issuer or the Servicer or upon the actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
covenants of the Servicer set forth in Section 3.03 that materially and
adversely affects the rights or interests of the Noteholders or the Note
Insurer, the party discovering such breach shall give prompt written notice to
the others. If, as a result of such breach, any Receivables are rendered
uncollectible or the Trustee's rights in, to or under such Receivables or the
proceeds thereof are impaired or such proceeds are not available for any reason
to the Trustee free and clear of any Lien, the Servicer shall acquire from the
Issuer such Receivables, unless such breach shall have been cured within 30
days after the earlier to occur of the discovery of such breach by the Servicer
or receipt of written notice of such breach by the Servicer, such that the
relevant covenant shall be true and correct in all material respects as if made
on such day, and the Servicer shall have delivered to the Trustee a certificate
of a Responsible Officer of the Servicer describing the nature of such breach
and the manner in which the relevant covenant became true and correct. The
Servicer will be obligated to accept the assignment of such Receivables as set
forth above on the Remittance Date following the date on which such assignment
obligation arises. In consideration of the acquisition of any such
Receivables, on the Remittance Date immediately following the date on which
such acquisition obligation arises, the Servicer shall remit the Release
Payment of such Receivables to the Collection Account in the manner specified
in Section 4.03. Upon any such acquisition, and the remitting of the Release
Payment to the Collection Account, the Trustee on behalf of the Noteholders and
the Note Insurer shall, without further action, be deemed to have released its
security interest in, to and under such Removed Receivables, all monies due or
to become due with respect thereto after the aforementioned Remittance Date and
all proceeds thereof. The Trustee shall execute such documents and take such
other actions as shall be reasonably requested by the Servicer to further
evidence such release. The sole remedy of the Trustee, the Noteholders and the
Note Insurer with respect to a breach pursuant to Section 3.03 shall be to
require the Servicer to acquire the related Receivables pursuant to this
Section, except as otherwise provided in Section 7.02, 8.01 or 8.02. The
Trustee shall have no duty to conduct any
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affirmative investigation as to the occurrence of any condition requiring the
acquisition of any Receivable pursuant to this Section except as otherwise
provided in Section 9.02.
SECTION 3.05 SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER.
As compensation for the performance of its obligations hereunder, the
Servicer shall be entitled to receive on each Payment Date the Servicing Fee as
provided in Section 4.04. Except to the extent otherwise provided herein, the
Servicer shall be required to pay from its servicing compensation all expenses
incurred in connection with servicing the Receivables including, without
limitation, recovery and collection expenses related to the enforcement of the
Receivables (other than those specified in the following proviso), payment of
the fees and disbursements of the Rating Agency and independent accountants and
all other fees and expenses that are not expressly stated in this Agreement to
be payable by the Trustee, the Noteholders, the Note Insurer or the Issuer;
provided, however, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trustee, the Noteholders or the Note Insurer arising
under any tax law, including without limitation any federal, state or local
income or franchise taxes or any other tax imposed on or measured by income (or
any interest or penalties with respect thereto or arising from a failure to
comply therewith), except as otherwise expressly provided in this Agreement.
SECTION 3.06 MONTHLY SERVICER REPORT; SERVICER'S REMITTANCE DATE
CERTIFICATE.
(a) On or before 11:00 a.m. New York, New York time on each
Determination Date, the Servicer shall deliver to the Trustee and to the Note
Insurer a Monthly Servicer Report executed by a Responsible Officer of the
Servicer substantially in the form attached hereto as Exhibit A, including a
CD-ROM listing all Receivables subject to this Agreement at the end of such
Collection Period (and setting forth such additional information as requested
by the Trustee, the Note Insurer, the Rating Agency or any Noteholder from time
to time, which information the Servicer is able to reasonably provide)
containing all information necessary to make the payments required by Section
4.04 in respect of the Collection Period and Interest Distribution Period
immediately preceding the date of such Monthly Servicer Report and all
information necessary for the Trustee to send statements to Noteholders and the
Note Insurer pursuant to Section 4.07(a).
(b) On or before 11:00 a.m. New York, New York time on each
Remittance Date on which the Issuer or the Servicer, as applicable, shall be
obligated hereunder to acquire a Removed Receivable, the Servicer shall deliver
to the Trustee and the Note Insurer a Servicer's Remittance Date Certificate
identifying each such Removed Receivable acquired by reference to the related
Obligor's account number (as specified in the Schedule of Receivables), and the
amount of the Release Payment with respect thereto.
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SECTION 3.07 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Note Insurer and the
Trustee, on or before March 31 of each calendar year, beginning in March 1999,
an Officer's Certificate executed by the chief financial officer of the
Servicer, stating that (i) a review of the activities of the Servicer during
the preceding 12-month period ended December 31 (or, in the case of the first
such statement, from the Closing Date through December 31, 1998) and of its
performance under this Agreement has been made under the supervision of the
officer executing the Officer's Certificate, and (ii) to such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement in all material respects 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 Note Insurer and the
Trustee, promptly after having obtained knowledge thereof, but in no event
later than three Business Days thereafter, an Officer's Certificate specifying
the nature and status of any Servicer Default or Event of Default, or other
occurrence which would have a material adverse effect on the rights or
interests of the Note Insurer.
SECTION 3.08 PERIODIC ACCOUNTANTS REPORT.
The Servicer, at its own expense, shall cause ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or
another firm of nationally recognized independent public accountants acceptable
to the Note Insurer (who may also render other services to the Servicer or to
the Issuer) to deliver to the Note Insurer and Trustee a report of agreed upon
procedures acceptable to the Controlling Party with respect to the Servicer's
accounting for matters regarding the Trust Estate including cash receipts,
account posting and remittances to the Accounts during the preceding reporting
period. The first reporting period is from the Closing Date through September
30, 1998, and each subsequent reporting period is each subsequent month
thereafter through December 31, 1998, and thereafter the reporting period shall
be such longer period as the Note Insurer shall determine from time to time by
written notice to the Servicer (with a copy to the Trustee) (and in the absence
of such written notice by the Note Insurer, each subsequent reporting period
shall be each subsequent quarter thereafter). Each such report must be
delivered within forty-five (45) days after the end of each reporting period.
Such report shall also indicate that the firm is independent with respect to
the Issuer and the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants. In the event
such independent public accountants require the Trustee to agree to the
procedures to be performed by such firm in any of the reports required to be
prepared pursuant to this Section 3.08, the Servicer shall direct the Trustee
in writing to so agree; it being understood and agreed that the Trustee will
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and the Trustee has not made any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
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SECTION 3.09 QUARTERLY SERVICER'S COMPLIANCE REPORT.
The Servicer, at its own expense, shall cause ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or
another firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or to the Issuer) to deliver to the
Trustee and the Note Insurer, within thirty days after the end of each calendar
quarter of each year, beginning with the calendar quarter ending in December of
1998, a report concerning the activities of the Servicer during the preceding
calendar quarter to the effect that such accountants have performed agreed-upon
procedures acceptable to the Controlling Party with respect to each of the
Monthly Servicer Reports for the period under review. The report should
specify the procedures performed on such Monthly Servicer Reports (which
procedures should include recalculating all calculations contained in such
Monthly Servicer Reports and taking other pertinent information from supporting
schedules of the Servicer) and any exceptions, if any, shall be set forth
therein. Such report shall also indicate that the firm is independent with
respect to the Issuer and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
In the event such independent public accountants require the Trustee to agree
to the procedures to be performed by such firm in any of the reports required
to be prepared pursuant to this Section 3.09, the Servicer shall direct the
Trustee in writing to so agree; it being understood and agreed that the Trustee
will deliver such letter of agreement in conclusive reliance upon the direction
of the Servicer, and the Trustee has not made any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
SECTION 3.10 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION.
The Servicer shall provide the Note Insurer, the Trustee and the
Noteholders with access to the documentation relating to the Receivables as
provided in Section 2.06(b). In each case, access to documentation relating to
the Receivables shall be afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer.
Nothing in this Section shall impair the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the
Obligors, which obligation shall be evidenced by an Opinion of Counsel to such
effect, 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 3.11 REPORTS TO NOTEHOLDERS, THE RATING AGENCY AND THE
PLACEMENT AGENT.
The Trustee shall provide to the Note Insurer, each Noteholder, the
Rating Agency and the Placement Agent a copy of each (i) Servicer's Remittance
Date Certificate, (ii) Monthly Servicer Report (iii) Officer's Certificate of
annual statement as to compliance described in Section 3.07(a), (iv) Officer's
Certificate with respect to Servicer Defaults and Events of Default, described
in Section 3.07(b), (v) accountants' report described in Section 3.08, (vi)
accountants' report described in Section 3.09, (vii) statement to Noteholders
pursuant to Section 4.07(a), and (viii) Trustee's Certificate delivered
pursuant to Section 9.02 or 9.03.
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SECTION 3.12 TAX TREATMENT.
Notwithstanding anything to the contrary set forth herein, the Issuer
has entered into this Agreement with the intention that for federal, state and
local income and franchise tax purposes (i) the Notes, which are characterized
as indebtedness at the time of their issuance, will qualify as indebtedness
secured by the Receivables and (ii) neither the Trust nor the Trust Estate
shall be treated as an association or publicly traded partnership taxable as a
corporation. The Issuer, by entering into this Agreement, each Noteholder, by
its acceptance of a Note and each purchaser of a beneficial interest therein,
by accepting such beneficial interest, agree to treat such Notes as debt for
federal, state and local income and franchise tax purposes. The Trustee shall
treat the Trust Estate as a security device only, and shall not file tax
returns or obtain an employer identification number on behalf of the Trust
Estate. The provisions of this Agreement shall be construed in furtherance of
the foregoing intended tax treatment.
ARTICLE IV
THE ACCOUNTS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
SECTION 4.01 ACCOUNTS.
The Trustee shall establish and maintain, or cause to be established
and maintained, the Collection Account, the Reserve Account and the Note
Payment Account, each of which shall be an Eligible Account, for the benefit of
the Noteholders and the Note Insurer. All amounts held in the Collection
Account, the Reserve Account or the Note Payment Account shall, to the extent
permitted by this Agreement and applicable laws, rules and regulations, be
invested in Permitted Investments by the depository institution or trust
company then maintaining such Account only upon written direction of the
Issuer, provided, however, in the event the Issuer fails to provide such
written direction to the Trustee, and until the Issuer provides such written
direction, the Trustee shall invest in Permitted Investments satisfying the
requirements of clause (v) of the definition thereof. Investments held in
Permitted Investments in the Accounts shall not be sold or disposed of prior to
their maturity. Earnings on investment of funds in the Collection Account and
Reserve Account shall remain in such Accounts for disposition in accordance
with this Agreement. Earnings on investment of funds in the Note Payment
Account shall be remitted by the Trustee to the Collection Account promptly
upon receipt thereof in the Note Payment Account. Any losses and investment
expenses relating to any investment of funds in any of the Accounts shall be
for the account of the Issuer, which shall deposit or cause to be deposited the
amount of such loss (to the extent not offset by income from other investments
of funds in the related Account) in the related Account immediately upon the
realization of such loss. The taxpayer identification number associated with
each of the Accounts shall be that of the Issuer and the Issuer will report for
federal, state and local income tax purposes the income, if any, earned on
funds in the relevant Account. The Issuer hereby acknowledges that all amounts
on deposit in each Account (including investment earnings thereon) are held in
trust by the Trustee for the benefit of the Noteholders and the Note Insurer,
subject to any express rights of the Issuer set forth herein, and shall remain
at all times during the term of this Agreement under the sole
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dominion and control of the Trustee. Payments from the Collection Account
shall be made only on the Business Day prior to the Payment Date and only to
the Note Payment Account.
SECTION 4.02 COLLECTIONS.
Each of the Servicer and the Issuer shall remit to the Collection
Account all Net Proceeds it receives or otherwise obtains from or on behalf of
the Obligors from or in respect of the Receivables on the next Business Day
after receipt thereof, by ACH transfer from the account into which payments
from or on behalf of Obligors are initially deposited. Other than as
specifically contemplated pursuant to Section 4.03, the Servicer shall not
remit to the Collection Account, and shall take all reasonable actions to
prevent other Persons from remitting to the Collection Account, amounts which
do not constitute payments, collections or recoveries received, made or
realized in respect of the Receivables, and the Trustee will return to Issuer
any such amounts upon receiving written evidence reasonably satisfactory to the
Trustee that such amounts are not a part of the Trust Estate.
SECTION 4.03 ADDITIONAL DEPOSITS.
(a) The following additional deposits shall be made to the
Collection Account, as applicable: (i) the Issuer shall remit the aggregate
Release Payments with respect to Removed Receivables for which a payment is to
be made pursuant to Section 2.05 or 6.02; and (ii) the Servicer shall remit the
aggregate Release Payments with respect to Removed Receivables for which a
payment is to be made pursuant to Section 3.04.
(b) The following deposits shall be made to the Note Payment
Account, as applicable: (i) the Issuer shall remit the Redemption Amount
pursuant to Section 10.02; (ii) the Issuer shall remit such amounts as may be
necessary to pay the Prepayment Amount pursuant to Section 10.07; (iii) the
Note Insurer shall remit any required payment pursuant to the Policy; (iv) the
Trustee shall transfer all Available Funds from the Collection Account to the
Note Payment Account on the Business Day prior to the Payment Date.
(c) All deposits required to be made pursuant to this Section by
the Issuer or the Servicer, as the case may be, may be made in the form of a
single deposit. All deposits required to be made by the Note Insurer, shall be
made in immediately available funds, no later than the date and time required
pursuant to the terms of the Policy.
SECTION 4.04 ALLOCATIONS AND PAYMENTS.
(a) On each Determination Date, the Servicer shall calculate, (i)
the amount of funds on deposit in each of the Accounts and the amount of
Available Funds, and (ii) as applicable, the Trustee Fee, the Backup Servicing
Fee, the Servicing Fee, the Additional Servicing Fee, the average daily Note
Balance for the Collection Period, the Interest Distributable Amount, the
Required Reserve Amount, the Reserve Fund Reimbursement Amount, the aggregate
Principal Distributable Amount, the unpaid Note Balance before and after giving
effect to any Principal
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Distributable Amount, the Prepayment Amount, the Release Payment, the Facility
Fee, and the amount payable by the Note Insurer pursuant to the Policy, which
amounts shall be set forth in the Monthly Servicer Report for the related
Payment Date. The Servicer shall send the Monthly Servicer Report to the
Trustee and the Note Insurer by 11:00 a.m. New York, New York time on each
such Determination Date.
(b) On each Payment Date, the Trustee shall make the following
payments from the applicable Accounts in the following order of priority and in
the amounts set forth in the Monthly Servicer Report for such Payment Date;
provided however, such payments shall be made only to the extent of funds then
on deposit in the applicable Account:
(i) to the Trustee (A) from Available Funds transferred
from the Collection Account to the Note Payment Account, an amount equal to the
sum of the Trustee Fee for such Payment Date, plus all accrued and unpaid
Trustee Fees, if any, for prior Payment Dates, plus all reasonable out of
pocket expenses (but only up to $200,000 during the term of this Agreement) to
which the Trustee is entitled to payment (to the extent expressly set forth
under this Agreement) provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay the
amount described in clause (A) above, the Trustee will withdraw from the
Reserve Account an amount equal to the lesser of the amount then on deposit in
the Reserve Account and the amount of such shortfall for disbursement to the
Trustee in reduction of such shortfall.
(ii) to the Servicer, from the Available Funds transferred
from the Collection Account to the Note Payment Account, an amount equal to the
sum of the Servicing Fee for the related Collection Period, plus all accrued
and unpaid Servicing Fees, if any, for prior Collection Periods (plus an amount
equal to any Transition Fees then owing to the Successor Servicer, if any);
(iii) to the Backup Servicer (A) from Available Funds
transferred from the Collection Account to the Note Payment Account, the Backup
Servicer Fee for such Payment Date, plus all accrued and unpaid Backup Servicer
Fees, if any, for prior Payment Dates, plus all reasonable out of pocket
expenses to which the Backup Servicer is entitled to payment (to the extent
expressly set forth under this Agreement) provided that (B) if Available Funds
transferred from the Collection Account to the Note Payment Account are
insufficient to pay the amount described in clause (A) above, the Trustee will
withdraw from the Reserve Account an amount equal to the lesser of the amount
then on deposit in the Reserve Account and the amount of such shortfall for
disbursement to the Backup Servicer in reduction of such shortfall;
(iv) to the Noteholders, pro rata, based on their
respective Note Balances (A) from Available Funds transferred from the
Collection Account to the Note Payment Account, an amount equal to the sum of
the Interest Distributable Amount for such Payment Date, plus any outstanding
amount of Interest Carryover Shortfall, if any, for prior Payment Dates
provided that (B) if Available Funds transferred from the Collection Account to
the Note Payment Account, are insufficient to pay the amount described in
clause (A) above, the Trustee will withdraw from
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the Reserve Account an amount equal to the lesser of the amount then on deposit
in the Reserve Account and the amount of such interest shortfall for
disbursement to the Noteholders in reduction of such shortfall, and provided
further that (C) if the amount described in clause (A) above remains unpaid
after the application of amounts withdrawn from the Reserve Account in
accordance with clause (B) above, the Trustee will withdraw from the amount
remitted by the Note Insurer to the Note Payment Account for disbursement to
the Noteholders in reduction of such shortfall an amount equal to the lesser of
the amount then on deposit in the Note Payment Account pursuant to a payment by
the Note Insurer and the amount of such interest shortfall;
(v) for so long as no Insurer Default shall have occurred
and be continuing, to the Note Insurer, (A) from Available Funds transferred
from the Collection Account to the Note Payment Account the sum of (x) the Note
Insurer Premium for such Payment Date, plus (y) all accrued but unpaid Note
Insurer Premiums, if any, for prior Payment Dates plus (z) the aggregate amount
of all other Note Insurer Obligations payable to the Note Insurer and
outstanding on such Payment Date, provided that (B) if Available Funds
transferred from the Collection Account to the Note Payment Account are
insufficient to pay the amounts due the outstanding Note Insurer Obligations
then payable, the Trustee will withdraw from the Reserve Account an amount
equal to the lesser of the amount then on deposit in the Reserve Account and
the amount of such shortfall, and remit such lesser amount to the Note Insurer
in reduction of such shortfall;
(vi) to the Reserve Account, from Available Funds
transferred from the Collection Account to the Note Payment Account, an amount
equal to the lesser of remaining Available Funds and the Reserve Fund
Reimbursement Amount for such Payment Date, if applicable;
(vii) to the Successor Servicer, from Available Funds
transferred from the Collection Account to the Note Payment Account, an amount
equal to (A) the Additional Servicing Fee for the related Collection Period,
plus all accrued and unpaid Additional Servicing Fees, if any, for prior
Collection Periods, provided that (B) if Available Funds transferred from the
Collection Account to the Note Payment Account are insufficient to pay the
amount described in clause (A) above, the Trustee will withdraw from the
Reserve Account an amount equal to the lesser of the amount then on deposit in
the Reserve Account and the amount of such shortfall for disbursement to the
Successor Servicer in reduction of such shortfall;
(viii) to the Noteholders, pro rata based on their
respective Note Balances, if such Payment Date is a Payment Date on which the
Issuer is effecting an optional prepayment pursuant to Section 10.05 or 10.06,
(A) any remaining Available Funds transferred from the Collection Account to
the Note Payment Account to the extent of the Prepayment Amount, and (B) if any
portion of the Prepayment Amount is unpaid after payment of the amounts
described in clause (A) above, the Trustee will disburse to the Noteholders for
payment on the Prepayment Amount any amounts deposited in the Note Payment
Account by the Issuer in respect of the Prepayment Amount pursuant to Section
10.07;
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(ix) to the Noteholders, pro rata based on their
respective Note Balances, if such Payment Date is a Payment Date on which the
Issuer is making or is required to make a Release Payment, any remaining
Available Funds transferred from the Collection Account to the Note Payment
Account to the extent of the required Release Payment;
(x) if such Payment Date is not an Interest Only Payment
Date then, to the Noteholders, pro-rata, based on their respective Note
Balances (A) any remaining Available Funds transferred from the Collection
Account to the Note Payment Account, (B) if such Payment Date is the Payment
Date on which the Issuer is effecting an optional redemption of the Notes
pursuant to Section 10.01, and there is an outstanding Note Balance after
payment of the amounts described in clause (A) above, the Trustee will disburse
to the Noteholders for payment on the Note Balance any amounts deposited in the
Note Payment Account by the Issuer in respect of the Redemption Amount pursuant
to Section 10.02, (C) if such Payment Date is the Final Payment Date or the
Payment Date on which the Issuer is effecting an optional redemption of the
Notes pursuant to Section 10.01, and there is an outstanding Note Balance
(after payment of the amounts described in clauses (A) and (B) above, the
Trustee will withdraw from all remaining funds on deposit in the Collection
Account and remit to the Note Payment Account, an amount equal to the lesser of
the amount then on deposit in the Collection Account and the amount of the
outstanding Note Balance and remit such lesser amount to the Noteholders in
reduction of the outstanding Note Balance, (D) if on the Final Payment Date
there is an outstanding Note Balance (after payment of the amounts described in
clauses (A), (B) and (C) above), the Trustee will withdraw from the Reserve
Account an amount equal to the lesser of the amount then on deposit in the
Reserve Account and the amount of the outstanding Note Balance and remit such
lesser amount to the Noteholders in reduction of the outstanding Note Balance,
and (E) if on the Final Payment Date there is an outstanding Note Balance after
all amounts have been withdrawn from the Reserve Account in accordance with
clause (D) above, the Trustee will disburse to the Noteholders for payment on
the Note Balance any amounts deposited in the Note Payment Account by the Note
Insurer;
(xi) to the Noteholders, pro rata, based on their
respective Note Balances (or, at such time as the Note Balance is zero, based
on the Maximum Principal Amount of their respective Notes) from Available Funds
transferred from the Collection Accounts to the Note Payment Account, an
amount equal to the Facility Fee for such Payment Date, plus any outstanding
amount of Facility Fee, if any, for prior Payment Dates; and
(xii) remaining amounts in the following order of priority:
(A) any of the Trustee's reasonable, out of pocket expenses to which the
Trustee is entitled to payment (to the extent expressly set forth in this
Agreement) which have exceeded $200,000 in the aggregate during the term of
this Agreement; then to (B) any amounts which would have been paid to the Note
Insurer under subsection (b)(v) but for the occurrence and continuation of an
Insurer Default; and then (C) to the Issuer.
(c) The Servicer shall on each Payment Date instruct the Trustee
to distribute to each Noteholder of record on the related Record Date by wire
transfer of immediately available funds,
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the amount to be paid to such Noteholder in respect of the related Note on such
Payment Date. The Servicer shall on each Payment Date instruct the Trustee to
distribute to the Note Insurer by wire transfer of immediately available funds,
the amount to be paid to the Note Insurer on such Payment Date.
SECTION 4.05 RESERVE ACCOUNT.
(a) Pursuant to Section 4.01, the Trustee shall establish and
maintain the Reserve Account which shall be an Eligible Account, for the
benefit of the Noteholders and the Note Insurer. Not later than the first
Funding Date, the Issuer shall deposit an amount equal to the Required Reserve
Amount into the Reserve Account. Thereafter, on each Payment Date, to the
extent of funds then on deposit in the Note Payment Account an amount equal to
the lesser of (x) Available Funds remaining on such Payment Date after required
payments pursuant to Section 4.04(b)(i) through (v), and (y) the Reserve Fund
Reimbursement Amount, shall be deposited into the Reserve Account.
(b) Consistent with the limited purposes for which the Reserve
Account is to be established, (x) on each Payment Date, an amount equal to the
aggregate of amounts described in Sections 4.04(b)(i)(B), 4.04(b)(iii)(B),
4.04(b)(iv)(B), 4.04(b)(v)(B) (if no Insurer Default has occurred and is
continuing) and 4.04(b)(vii)(B) and 4.04(b)(x)(D), if any, shall be withdrawn
from the Reserve Account by the Trustee and remitted to the Trustee, the Backup
Servicer, the Noteholders or the Note Insurer (as the case may be) for payment
as described in those Sections, and (y) upon payment of all sums payable
hereunder with respect to the Notes, any amounts then on deposit in the Reserve
Account shall be remitted by the Trustee to the Note Insurer to the extent of
any unpaid Note Insurer Obligations then outstanding, until all such Note
Insurer Obligations are paid in full, and any remaining amounts then on deposit
in the Reserve Account shall be released from the lien of the Trust Estate and
paid to the Issuer.
(c) Amounts held in the Reserve Account shall be invested in
Permitted Investments at the direction of the Issuer as provided in Section
4.01. Such investments shall not be sold or disposed of prior to their
maturity.
(d) The Trustee shall pay to the Issuer on each Payment Date the
amount by which the amount in the Reserve Account exceeds the Required Reserve
Amount, after giving effect to all distributions required to be made from the
Reserve Account or the Note Payment Account on such date.
SECTION 4.06 NOTE PAYMENT ACCOUNT
(a) Pursuant to Section 4.01, the Trustee shall establish and
maintain the Note Payment Account which shall be an Eligible Account, for the
benefit of the Noteholders and the Note Insurer. The Note Payment Account shall
be funded to the extent that (w) the Issuer shall remit the Redemption Amount
pursuant to Section 10.02, (x) the Issuer shall remit all or a portion of the
Prepayment Amount pursuant to Section 10.07, (y) the Note Insurer shall remit
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any required payment pursuant to the Policy, or (z) the Trustee shall remit the
Available Funds from the Collection Account pursuant to Section 4.03.
(b) On each Payment Date, an amount equal to the aggregate of
amounts described in Section 4.04(b) shall be withdrawn from the Note Payment
Account by the Trustee and remitted to the Noteholders and other persons or
Accounts described therein for payment as described in that Section, and upon
payments of all sums payable hereunder with respect to the Notes, any amounts
then on deposit in the Note Payment Account shall be remitted by the Trustee to
the Note Insurer to the extent of any unpaid Note Insurer Obligations then
outstanding, until all such Note Insurer Obligations are paid in full, and any
remaining amounts then on deposit in the Note Payment Account shall be
released from the lien of the Trust Estate and paid to the Issuer.
(c) Amounts held in the Note Payment Account shall be invested in
Permitted Investments at the direction of the Issuer as provided in Section
4.01. Such investments shall not be sold or disposed of prior to their
maturity.
SECTION 4.07 STATEMENTS TO NOTEHOLDERS.
(a) On each Payment Date, the Trustee shall include with each
payment to each Noteholder of record and the Note Insurer the Monthly Servicer
Report furnished pursuant to Section 3.06, setting forth for the related
Collection Period the information provided in Exhibit A.
(b) Within a reasonable period of time after the end of each
calendar year, but not later than the latest date permitted by law, the Trustee
shall mail a statement or statements prepared by the Servicer to the Note
Insurer and each Person who at any time during such calendar year shall have
been a Noteholder that provides the information that the Servicer actually
knows is necessary under applicable law for the preparation of such income tax
returns.
SECTION 4.08 APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Sections 4.02 and
4.03 shall be held in trust and applied by it, in accordance with the
provisions of the Notes, the Insurance Agreement and this Agreement to the
payment to the Persons entitled thereto, of the principal, interest, fees,
costs and expenses for whose payment such money has been deposited with the
Trustee.
ARTICLE IV A
THE POLICY
SECTION 4A.01 THE POLICY. The Servicer and the Issuer agree,
simultaneously with the execution and delivery of this Agreement, to cause the
Note Insurer to issue the Policy to the Trustee for the benefit of the Trust in
accordance with the terms thereof and the Insurance Agreement.
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SECTION 4A.02 CLAIMS UNDER POLICY. (a) If on any Determination
Date the Servicer has reported to the Trustee in the Monthly Servicer Report
that the Servicer has determined that (A) as of the opening of business of the
Trustee on such Determination Date, the amount of Available Funds on deposit in
the Collection Account, together with any amounts on deposit in the Reserve
Account and the Note Payment Account, are insufficient to provide for the
payment in full of the Interest Distributable Amount payable on the related
Payment Date (after giving effect to each payment required to be made prior to
such payment on such Payment Date pursuant to Section 4.04(b)), and/or (B) if
such Payment Date is the Final Payment Date and the Note Balance has not been
reduced to zero prior to such Determination Date, and all amounts then on
deposit in the Collection Account, together with any amounts then on deposit in
the Reserve Account and the Note Payment Account are insufficient to make a
payment to the Noteholders reducing the Note Balance to zero (after giving
effect to each payment required to be made prior to such payment on the Final
Payment Date pursuant to Section 4.04(b)), then by 2:00 p.m., New York time on
such Determination Date, the Trustee shall deliver to the Note Insurer and the
Servicer a completed notice for payment in the form set forth as Exhibit A to
the Policy (the "Notice for Payment"), and shall confirm delivery of such
Notice for Payment, each as specified in the Policy. The Notice for Payment
shall specify the amount of the Interest Deficiency Draw Amount and/or the
Final Principal Deficiency Amount (as each such term is defined in the Policy)
and shall constitute a claim pursuant to the Policy. Upon receipt of any
payments on behalf of the Trust under the Policy, the Trustee shall deposit any
Interest Deficiency Draw Amount and/or Principal Deficiency Draw Amount in the
Note Payment Account. Such amounts shall be distributed pursuant to Section
4.04.
(b) The Trustee shall receive in the Note Payment
Account, as attorney-in-fact of each Noteholder, any payment from the Note
Insurer and disburse the same to each Noteholder, for the purposes and in the
respective amounts required in accordance with the provisions of Section 4.04.
(c) The Trustee shall keep complete and accurate records
of the amount of payments received from the Note Insurer and the Note Insurer
shall have the right to inspect such records at reasonable times upon one
Business Day's prior notice to the Trustee. The statements the Trustee
prepares in the normal course of business with respect to accounts similar in
nature to the Note Payment Account shall fulfill the record requirements of
this Section.
(d) If any of the payments guaranteed by the Policy are
voided (a "Preference Event") pursuant to a final and non-appealable order
under any applicable bankruptcy, insolvency, receivership or similar law in an
Insolvency Proceeding and, as a result of such a Preference Event, the Trustee
is required to return such voided payment, or any portion of such voided
payment, made in respect of the Notes (an "Avoided Payment"), the Trustee shall
furnish to the Note Insurer (x) a certified copy of a final order of a court
exercising jurisdiction in such Insolvency Proceeding to the effect that the
Trustee is required to return any such payment or portion thereof during the
term of the Policy because such payment was voided under applicable law, with
respect to which order the appeal period has expired without an appeal having
been filed (the "Final Order"), (y) an assignment, in form reasonably
satisfactory to the Note Insurer,
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irrevocably assigning to the Note Insurer all rights and claims of the Trustee
relating to or arising under such Avoided Payment and (z) a Notice for Payment
appropriately completed and executed by the Trustee. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Final Order and not to the Trustee directly. The
Trustee is not permitted to make a claim on the Trust or on any Noteholder for
payments made to Noteholders which are characterized as preference payments by
any bankruptcy court having jurisdiction over any bankrupt Obligor unless
ordered to do so by such bankruptcy court.
SECTION 4A.03. SURRENDER OF POLICY. The Trustee shall surrender the
Policy to the Note Insurer for cancellation upon its expiration in accordance
with the terms thereof.
SECTION 4A.04. RIGHTS OF SUBROGATION AND ASSIGNMENT.
(a) The parties hereto agree that to the extent the Note
Insurer makes any payment with respect to the Notes under the Policy, the Note
Insurer shall become subrogated to the rights of the recipients of such
payments to the extent of such payments (including, without limitation, to the
fullest extent permitted by law, all rights of the Trustee and each Noteholder
in the conduct of any related Insolvency Proceeding). In furtherance and not
by way of limitation of the foregoing, and subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Note Insurer, the
Trustee shall assign, and the Noteholders, by reason of their acquisition and
holding of the Notes, shall be deemed to have agreed to the assignment, to the
Note Insurer, of all rights to the payment of interest or principal with
respect to the Notes which are then due for payment, together with all other
rights and remedies of the Trustee or the Noteholders with respect to the Notes
(including, without limitation, all rights of the Trustee and each Noteholder
in the conduct of any related Insolvency Proceeding), to the extent of all
payments made by the Note Insurer with respect to the Notes. The Trustee shall
take all such actions and deliver all such instruments as may be reasonably
requested or required by the Note Insurer to effectuate the purpose or
provisions of the foregoing subrogation and/or assignment. For the avoidance
of doubt, any payment made under the Policy in respect of interest or principal
due under the Notes shall not reduce in any manner the amount of interest or
principal (or the Note Balance) otherwise due hereunder or under the Notes.
(b) The foregoing rights of subrogation and assignment
described in clause (a) above are in all cases in addition to, and not in
limitation of, all equitable rights of subrogation and other rights and
remedies otherwise available to the Note Insurer in respect of payments under
the Policy, and the Note Insurer hereby specifically reserves all such rights
and remedies.
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ARTICLE V
THE NOTES AND FUNDINGS
SECTION 5.01 THE NOTES.
(a) The Notes shall be non-recourse obligations of the Issuer and
the Trust Estate shall be the sole source of payments of principal thereof and
interest thereon. Notwithstanding anything else to the contrary contained
herein, the Notes shall not be considered a general obligation of the Issuer
for any purpose.
(b) The Notes shall be issued on the Closing Date and the Note
Balance shall accrue interest at the Note Rate from and including the first
Funding Date.
(c) The Notes shall be substantially in the form attached hereto
as Exhibit C, and shall be issuable in minimum denominations of $1,000,000 and
integral multiples of $1,000 in excess thereof. The Notes shall each be
executed by the Issuer and authenticated by the Trustee by the manual or
facsimile signature of a Responsible Officer of the Trustee. Notes bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Issuer or the
Trustee shall be valid and binding obligations of the Issuer, notwithstanding
that such individuals or any of them have ceased to be so authorized prior to
the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes. The Notes shall be dated the date of their
authentication.
SECTION 5.02 AUTHENTICATION AND DELIVERY OF THE NOTES.
The Trustee shall cause to be authenticated and delivered to or upon
the order of the Issuer, in exchange for the Receivables and the other property
included in the Trust Estate, simultaneously with the assignment, transfer and
conveyance to the Trustee of the Receivables and the constructive delivery to
the Trustee on behalf of the Noteholders of the Receivable Files and the other
components of the Trust Estate, the Notes duly authenticated by the Trustee, in
authorized denominations equaling in the aggregate the Maximum Facility Amount.
No Note shall be entitled to any benefit under this Agreement or be valid for
any purpose, unless there appears thereon a certificate of authentication
substantially in the form set forth in the form of such Note attached hereto as
Exhibit C, executed by the Trustee by manual or facsimile signature, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered under this Agreement.
SECTION 5.03 REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES.
(a) The Note Registrar shall maintain a Note Register in which,
subject to such reasonable regulations as it may prescribe, the Note Registrar
shall provide for the registration of the Notes and transfers and exchanges
thereof as provided in this Agreement. The Trustee is hereby initially
appointed Note Registrar for the purpose of registering the Notes and transfers
and exchanges thereof as provided in this Agreement. In the event that,
subsequent to the
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Closing Date, the Trustee notifies the Servicer that it is unable to act as
Note Registrar, the Servicer shall appoint another bank or trust company,
agreeing to act in accordance with the provisions of this Agreement applicable
to it, and otherwise acceptable to the Trustee, to act as successor Note
Registrar under this Agreement.
(b) Upon surrender for registration of transfer of any Note at the
Corporate Trust Office, the Issuer shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized denominations of a like
aggregate principal amount.
(c) Notes may be exchanged for other Notes of authorized
denominations of a like aggregate principal amount, at the option of the
related Noteholder upon surrender of the Note to be exchanged at any such
office or agency. Whenever any Note is so surrendered for exchange, the Issuer
shall execute and the Trustee shall authenticate and deliver the Note that the
Noteholder making the exchange is entitled to receive. Every Note presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the Note
Registrar duly executed by the Noteholder thereof or his or her attorney duly
authorized in writing.
(d) No service or other charge shall be made for any registration
of transfer or exchange of Notes by the Trustee or the Servicer, but the
Trustee may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Notes.
(e) Any Notes surrendered for registration of transfer or exchange
shall be canceled and subsequently destroyed by the Trustee.
(f) Each purchaser of a Note or of a beneficial interest therein
shall be deemed to have represented and warranted, by accepting such Note or
beneficial Interest as follows:
(i) it is acquiring the Notes for its own account or for
an account with respect to which it exercises sole investment discretion, and
that it or such account is a Qualified Institutional Buyer or an Accredited
Investor acquiring the Notes for investment purposes and not for distribution;
(ii) it acknowledges that the Notes have not been
registered under the Securities Act and may not be sold except as permitted
below;
(iii) it understands and agrees that such Notes are being
offered only in a transaction not involving any public offering within the
meaning of the Securities Act, such Notes may be resold, pledge or transferred
only (1) to a person who has certified that it is a Qualified Institutional
Buyer that purchases for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the resale, pledge or transfer
is being made in
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reliance on Rule 144A or (2) to an institution that is an Accredited Investor
who has certified to the Issuer and the Trustee;
(iv) it understands that the notification requirements
referred to in clause (iii) above will be satisfied by virtue of the fact that
the following legend will be placed on the Notes, unless otherwise agreed by
the Issuer:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF THIS NOTE IS
SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN THE
INDENTURE AND SERVICING AGREEMENT UNDER WHICH THIS NOTE IS ISSUED (A
COPY OF WHICH IS AVAILABLE FROM THE TRUSTEE UPON REQUEST).
(v) it (x) has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
prospective investment in the Notes; and (y) has the ability to bear the
economic risks of its prospective investment and can afford the complete loss
of such investment; and
(vi) it understands that the Issuer, the Placement Agent
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations, warranties and agreements and agrees that if
any of the acknowledgments, representations, warranties and agreements deemed
to have been made by it by its purchase of the Notes are no longer accurate, it
shall promptly notify the Issuer and the Placement Agent. If it is acquiring
the Notes as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each such
account and it has full power to make the foregoing acknowledgments,
representations, warranties and agreements on behalf of each such account.
(g) No transfer of any Notes shall be made unless that transfer is
made pursuant to an effective registration statement under the Securities Act,
and effective registration or qualification under applicable state securities
laws, or is made in a transaction that does not require such registration or
qualification. If such a transfer is made without registration under the
Securities Act (other than in connection with the initial issuance thereof by
the Issuer, the Placement Agent or the initial purchasers), then the Note
Registrar shall refuse to register such transfer unless it receives (and upon
receipt, may conclusively rely upon) either: (i) a certificate from the
Noteholder desiring to effect such transfer substantially in the form attached
as Exhibit D-1 hereto, and a certificate from such Noteholder's prospective
transferee substantially in the form attached as either Exhibit D-2 hereto or
as Exhibit D-3 hereto; or (ii) an Opinion of Counsel reasonably satisfactory to
the Note Registrar to the effect that such transfer may be made without
registration under the Securities Act (which Opinion of Counsel shall not be an
expense of the Trust Estate or of the Issuer, the Servicer, the Trustee or the
Note Registrar in their respective
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capacities as such), together with the written certification(s) as to the facts
surrounding such transfer from the Noteholder desiring to effect such transfer
and/or such Noteholder's prospective transferee on which such Opinion of
Counsel is based. None of the Issuer, the Trustee or the Note Registrar is
obligated to register or qualify the Notes under the Securities Act or any
other securities law or to take any action not otherwise required under this
Agreement to permit the transfer of any Note without registration or
qualification. Any Holder of a Note desiring to effect such a transfer shall,
and upon acquisition of such a Note shall be deemed to have agreed to,
indemnify the Trustee, the Note Registrar and the Issuer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws In connection with transfer of the Notes, the
Issuer shall furnish upon request of a Noteholder to such Holder and any
prospective purchaser designated by such Noteholder the information required to
be delivered under paragraph (d)(4) of Rule 144A of the Securities Act.
(h) To the extent permitted under applicable law, the Trustee
shall be under no liability to any Person for any registration of transfer of
any Note that is in fact not permitted by this Section 5.03 or for making any
payments due to the Noteholder thereof or taking any other action with respect
to such Noteholder under the provisions of this Agreement so long as the
transfer was registered by the Trustee in accordance with the requirements of
this Agreement.
SECTION 5.04 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
If (i) any mutilated Note is surrendered to the Note Registrar, or the
Note Registrar receives evidence to its satisfaction of the destruction, loss
or theft of any Note, and (ii) there is delivered to the Note Registrar, the
Note Insurer and the Trustee such security or indemnity as may be required by
them to save each of them harmless (the general obligation of an institutional
investor that is investment grade rated being sufficient indemnity), then, in
the absence of notice that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note of like tenor and denomination or ownership interest,
as applicable. In connection with the issuance of any new Note under this
Section, the Issuer or the Trustee may require the payment by the Noteholder
thereof of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
If, after the delivery of such replacement Note or payment with
respect to a destroyed, lost or stolen Note, a bona fide purchaser of the
original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of any such Person, except
a bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.
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SECTION 5.05 PERSONS DEEMED OWNERS.
Prior to due presentation of a Note for registration of transfer, the
Trustee, the Note Registrar and any of their respective agents may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payments pursuant to Section 4.04 and for all other
purposes whatsoever, and neither the Trustee, the Note Registrar nor any of
their respective agents shall be affected by any notice to the contrary.
SECTION 5.06 ACCESS TO LIST OF NOTEHOLDERS' NAMES AND ADDRESSES.
The Note Registrar shall furnish or cause to be furnished to the
Servicer, within 15 days after receipt by the Note Registrar of a written
request therefor from the Servicer, a list of the names and addresses of the
Noteholders as of the most recent Record Date. If three or more Noteholders,
or one or more Noteholders evidencing not less than 25% of the Voting Interests
(hereinafter referred to as "Applicants"), apply in writing to the Trustee, and
such application states that the Applicants desire to communicate with other
Noteholders with respect to their rights under this Agreement or under the
Notes and such application is accompanied by a copy of the communication that
such Applicants propose to transmit, then the Trustee shall, within five
Business Days after the receipt of such application, afford such Applicants
access, during normal business hours, to the current list of Noteholders as
reflected in the Note Register. Every Noteholder, by receiving and holding a
Note, agrees with the Servicer and the Trustee that neither the Servicer nor
the Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Noteholders under this
Agreement, regardless of the source from which such information was derived.
SECTION 5.07 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note with 14 days after receipt of
the final payment received in connection therewith, whether by optional
redemption of the Issuer or otherwise. Each Noteholder, by its acceptance of
the final payment with respect to its Note, will be deemed to have relinquished
any further right to receive payments under this Agreement and any interest in
the Trust Estate. Each Noteholder shall indemnify and hold harmless the
Issuer, the Trustee and any other Person against whom a claim is asserted in
connection with such Noteholder's failure to tender the Note to the Trustee for
cancellation.
SECTION 5.08 MAINTENANCE OF OFFICE OR AGENCY.
The Trustee shall maintain in the City of Minneapolis, Minnesota, an
office or offices or agency or agencies where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Notes and this Agreement may be served. The
Trustee initially shall designate the Corporate Trust Office as its office for
such purposes. The Trustee shall give prompt written notice to the Issuer, the
Servicer and the Noteholders of any change in the location of the Note Register
or any such office or agency.
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SECTION 5.09 FUNDINGS
(a) Each initial Noteholder, by its execution of a Purchase
Agreement and acceptance of a Note, has agreed, and each subsequent Noteholder,
by its execution of a Transferee Certificate and acceptance of a Note, shall
have agreed, on the terms and conditions set forth herein and in the related
Purchase Agreement or Transferee Certificate as applicable, to make Fundings to
the Issuer in the Funding Amount requested by Issuer on each Funding Date in
accordance with this Agreement. Each Funding Date after the first Funding Date
must be the first day of a Note Rate Period unless otherwise agreed by the
Noteholders. On the initial Funding Date, the Noteholders agree to make a
Funding in an amount equal to the Initial Note Balance. The Noteholders shall
not in any event be obligated to make any Funding to the extent it is less than
the Funding Date Minimum Amount. Notwithstanding anything to the contrary in
this Agreement, each Noteholder which signs a Purchase Agreement shall remain
obligated to make all Fundings, upon compliance by Issuer with all conditions
to such Funding, whether or not such Noteholder sells all or any portion of the
Notes to a subsequent Noteholder, and whether or not such subsequent Noteholder
assumes an obligation to make all or a portion of the Fundings; provided,
however, that Issuer shall have not unreasonably withhold its consent to
release any selling Noteholder from its obligation to make Fundings.
(b) The Notes shall be issued in an aggregate principal amount
equal to the Maximum Facility Amount although the Note Balance may at any time
be zero or an amount less than the Maximum Facility Amount. The Noteholders
may endorse on a schedule, which shall be attached to each Note, or record on
their internal records, the date and amount of each Funding made by such
Noteholder and the amount of each payment of principal made by the Issuer with
respect to such Note. The Noteholders are authorized and directed by the
Issuer to make such endorsements or records but each Noteholder's records shall
be effective only if such records are in agreement with the Note Register
maintained by the Note Registrar, absent manifest error in such Note Register.
Failure by any Noteholder to make, or an error by any Noteholder in making,
such endorsement or record with respect to any Funding or principal payments
shall not limit or otherwise affect the obligations of any party hereunder or
under any Note.
(c) Each Noteholder shall remit its pro rata share of the Funding
Amount specified in the Schedule of Receivables (as described in Section 5.11)
by wire transfer in immediately available funds to the wire transfer address
specified in the Schedule of Receivables by 3:00 p.m. on the related Funding
Date subject to the terms hereof and of each Purchase Agreement. Each
Noteholder's pro rata share of a Funding shall be determined by multiplying
the relevant Funding Amount by a fraction, the numerator of which shall be
equal to the Maximum Principal Amount of such Noteholder's Note, as indicated
on the face of such Note, and the denominator of which shall be equal to the
Maximum Facility Amount.
(d) The failure of any Noteholder to remit its pro rata share of
any Funding Amount on any Funding Date shall not relieve any other Noteholder
of its obligation to remit its pro rata share of a Funding Amount on the
related Funding Date. Any non-defaulting Noteholder may, but is not required
to, fund all or a portion of the Funding Amount not funded by the defaulting
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Noteholder. If such non-defaulting Noteholder does not fund all or any portion
of such defaulting Noteholder's pro rata share of the Funding Amount, the
related Funding Amount shall be reduced by the defaulted portion of the Funding
Amount.
(e) Immediately following each Funding or payment of principal of
the Notes, the Trustee shall make an appropriate notation in the applicable
Note Register indicating (i) the amount and date of (A) the Funding or (B)
payment of principal; and (ii) the available Maximum Facility Amount after
giving effect to such Funding or payment of principal.
(f) The Funding Period may be extended at the request of the
Issuer with the prior written consent of the Noteholders, the Backup Servicer
and the Note Insurer upon written notice given by Issuer to the Noteholders,
the Backup Servicer and the Note Insurer no later than six months prior to the
Scheduled Termination Date, and upon confirmation by the Rating Agency of a
rating of BB or higher for the Notes after giving effect to the extension but
without giving effect to the Policy.
SECTION 5.10 CONDITIONS PRECEDENT TO EACH FUNDING
Each Funding is subject to the satisfaction of each condition
precedent set forth herein:
(a) No later than 11:00 a.m. (New York time) on the second
Business Day prior to a Funding Date, the Issuer shall deliver by facsimile
transmission to the Noteholders, the Note Insurer and the Trustee, a Schedule
of Receivables for the Receivables to be contributed to the Issuer by the
Seller on the Funding Date and setting forth information regarding the proposed
Funding. Such delivery shall constitute notice of the Funding and Funding
Amount.
(b) The Schedule of Receivables must comply with the requirements set
forth in the Receivables Contribution Agreement, and shall be signed by the
Issuer and Servicer. All of the Seller's and Issuer's representations and
warranties regarding such Receivables as set forth in the Transaction Documents
must be true and correct.
(c) The Funding Amount shall not be less than the Funding Date
Minimum Amount. After giving effect to such Funding, the Note Balance shall
not exceed the Maximum Facility Amount, and the aggregate Funding Amounts
loaned in the month in which the Funding Date occurs (other than the month in
which the first Funding Date occurs) shall not exceed $7,500,000.
(d) No Event of Default or Servicer Default shall have occurred
and be continuing or shall reasonably be expected to result from such Funding.
(e) The Policy shall be in full force and effect and no Insurer
Default shall have occurred and be continuing.
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(f) The Funding Date shall occur prior to the end of the Funding
Period and no Funding Termination Event shall have occurred or be reasonably
expected to occur as a result of such Funding.
(g) The Rating Agency has not rated the financial strength of the
Note Insurer below BBB.
(h) The Required Reserve Amount is on deposit in the Reserve
Account.
SECTION 5.11 INTEREST CALCULATIONS; INTEREST PAYMENTS
(a) The amount of interest to be paid in respect of the Notes on
each Payment Date in accordance with Section 4.04(b) shall equal the Interest
Distributable Amount. Interest shall be due in arrears on each Payment Date.
(b) On or before 2:00 p.m. (New York time) on the Business Day
prior to the Determination Date, the Original Noteholder shall calculate and
give written notice to the Issuer and the Trustee of the Interest Distributable
Amount for the prior Interest Distribution Period. The determination of the
Interest Distributable Amount by the Original Noteholder shall (in the absence
of manifest error) be final and binding on each Noteholder, and on each of the
parties hereto. If the Original Noteholder is no longer a Noteholder, then the
Servicer shall, on or before 2:00 p.m. (New York time) on the Business Day
prior to the Determination Date, calculate and give written notice to the
Issuer and the Trustee of the Interest Distributable Amount for the prior
Interest Distribution Period.
(c) The Trustee will maintain a record of the Funding Amount for
each Pool, and the average daily Note Balance for each Collection Period as
provided to the Trustee pursuant to Section 4.04(a).
SECTION 5.12 REPAYMENTS OF PRINCIPAL AND REBORROWINGS
On each Payment Date, the Issuer shall make payments in respect to
principal on the Notes in the amount, if any, of the Principal Distributable
Amount for the Notes for such Payment Date. Notwithstanding that the Note
Balance may be reduced to zero, the Notes shall remain outstanding and the
Noteholders shall continue to make Fundings during the Funding Period to the
extent provided in this Agreement. The Issuer shall also have the right to
make prepayments, in whole or in part, of the Note Balance on days other than
Payment Dates, pursuant to the terms of this Agreement.
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ARTICLE VI
THE ISSUER
SECTION 6.01 REPRESENTATIONS OF ISSUER.
The Issuer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The
representations shall speak as of the execution and delivery of this Agreement
and as of each Funding Date and shall survive the grant of a security interest
in the Receivables to the Trustee.
(a) Organization and Good Standing. The Issuer is duly organized
and validly existing as a limited liability company in good standing under the
laws of the State of Delaware, with power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and now has,
power, authority and legal right to acquire, own, hold, transfer, assign and
convey the Receivables.
(b) Due Qualification. The Issuer is duly qualified to do
business as a foreign limited liability company in good standing, and has
obtained all necessary licenses and approvals in Maryland and in all other
jurisdictions in which the ownership or lease of property or the conduct of its
business requires such qualifications, licenses or approvals.
(c) Power and Authority. The Issuer has the power and authority
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party, and to carry out their respective terms; the Issuer has
full power and authority to grant a security interest in the Trust Estate and
has duly authorized such grant to the Trustee by all necessary action; and the
execution, delivery and performance by the Issuer of this Agreement and each of
the other Transaction Documents to which it is a party has been duly authorized
by all necessary action of the Issuer.
(d) Valid Transfers; Binding Obligations. This Agreement
evidences a valid grant of a first priority perfected security interest under
the UCC in the Receivables, and such other portion of the Trust Estate as to
which a security interest may be perfected under the UCC, which is effective
for so long as the Notes or the Note Insurer Obligations remain outstanding,
enforceable against creditors of and purchasers from the Issuer, and each of
the Transaction Documents to which the Issuer is a party constitutes a legal,
valid and binding obligation of the Issuer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally or
by general equity principles.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents and the
fulfillment of the terms of this Agreement and the other Transaction Documents
do not conflict with, result in any breach of any
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of the terms or provisions of, nor constitute (with or without notice or lapse
of time) a default under, the LLC Agreement or Bylaws of the Issuer or any
indenture, agreement or other instrument to which the Issuer is a party or by
which it shall be bound, nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than this Agreement), nor violate any law,
order, rule or regulation applicable to the Issuer of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Issuer or its properties, which
breach, default, conflict, Lien or violation would have a material adverse
effect on the rights or interests of the Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or to the Issuer's knowledge, threatened, against or affecting the
Issuer: (i) asserting the invalidity of this Agreement, the Notes or any of the
other Transaction Documents to which the Issuer is a party, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement, or any of the other Transaction
Documents, (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Issuer of its obligations under, or
the validity or enforceability of, this Agreement, the Notes or any other
Transaction Documents, or (iv) relating to the Issuer and which might adversely
affect the federal income tax attributes of the Notes.
(g) No Subsidiaries. The Issuer has no subsidiaries.
(h) Not an Investment Company. Neither the Issuer nor the Trust
Estate is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act, and none of the
issuance of the Notes, the execution and delivery of the Transaction Documents
to which the Issuer is a party, the acquisition by the Issuer of one or more
Pools of Receivables, or the performance by the Issuer of its obligations under
the Transaction Documents, or the use of the proceeds of the Notes by the
Issuer will violate any provision of the Investment Company Act, or any rule,
regulation or order issued by the Securities and Exchange Commission
thereunder.
(i) No Violation of Securities Act. The Issuer has not offered or
sold, and will not offer or sell, any Notes in any manner that would render the
issuance and sale of the Notes a violation of the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities or "Blue Sky" laws or
require registration pursuant thereto, nor has it authorized, nor will it
authorize, any Person to act in such manner. No registration under the
Securities Act is required for the sale of the Notes as contemplated hereby,
assuming the accuracy of the Purchaser's representations and warranties set
forth in the Purchase Agreement.
(j) Truth and Completeness of Private Placement Memorandum. As of
the Closing Date, the Private Placement Memorandum does not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
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(k) No Violation of Exchange Act or Regulations T, U or X. None
of the transactions contemplated in the Transaction Documents (including the
use of the proceeds from the sale of the Notes) will result in a violation of
Section 7 of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), or any regulations issued pursuant thereto, including Regulations T, U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. The Issuer does not own nor does it intend to carry or purchase
any "margin security" within the meaning of said Regulation U, including margin
securities originally issued by it or any "margin stock" within the meaning of
said Regulation U.
(l) All Tax Returns, True, Correct and Timely Filed. All material
tax returns required to be filed by the Issuer in any jurisdiction have in fact
been filed and all taxes, assessments, fees and other governmental charges upon
the Issuer or upon any of its properties, income of franchises shown to be due
and payable on such returns have been paid. To the best of the Issuer's
knowledge all such tax returns were true and correct and the Issuer knows of no
proposed material additional tax assessment against it nor of any basis
therefor. The provisions for taxes on the books of the Issuer are in
accordance with generally accepted accounting principles.
(m) No Restriction on Issuer Affecting its Business. The Issuer
is not a party to any contract or agreement, or subject to any charter or other
restriction which materially and adversely affects its business nor has it
agreed or consented to cause any of its properties to become subject to any
Lien other than the Lien created hereby.
(n) Perfection of Security Interest. All filings and recordings
as may be necessary to perfect the interest of the Issuer in the Receivables
and such other portion of the Trust Estate as to which a security interest may
be perfected under the UCC, have been accomplished and are in full force and
effect. All filings and recordings against the Issuer required to perfect the
Lien of the Trustee on such Receivables and such other portion of the Trust
Estate as to which a security interest may be perfected under the UCC, have
been accomplished and are in full force and effect. The Issuer will from time
to time, at its own expense, execute and file such additional financing
statements (including continuation statements) as may be necessary to ensure
that at any time, the interest of the Issuer in all of the Receivables and such
other portion of the Trust Estate as to which a security interest may be
perfected under the UCC, and the Lien of the Trustee on all of the Receivables
and such other portion of the Trust Estate as to which a security interest may
be perfected under the UCC are fully protected.
(o) All Taxes, Fees and Charges Relating to Transaction and
Transaction Documents Paid. Any taxes, fees and other governmental charges in
connection with the execution and delivery of the Transaction Documents and the
execution and delivery and sale of the Notes have been or will be paid by the
Issuer at or prior to the Closing Date.
(p) No Requirement that Issuer File a Registration Statement.
There are no contracts, agreements or understandings between the Issuer and any
person granting said person the right to
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require the Issuer to file a registration statement under the Securities Act
with respect to any Notes owned or to be owned by such person.
(q) No Broker, Finder or Financial Adviser Other than Rothschild.
The Issuer or any of its respective officers, directors, employees or agents
has not employed any broker, finder or financial adviser other than Rothschild
Inc. or incurred any liability for fees or commissions to any person other than
Rothschild Inc. in connection with the offering, issuance or sale of the Notes.
(r) Notes Authorized, Executed, Authenticated, Validly Issued and
Outstanding. The Notes have been duly and validly authorized and, when duly
and validly executed and authenticated by the Trustee in accordance with the
terms of this Agreement and delivered to and paid for by each Purchaser as
provided herein, will be validly issued and outstanding and entitled to the
benefits hereof.
(s) Location of Chief Executive Office and Records. The principal
place of business and chief executive office of the Issuer, and the office
where Issuer maintains all of its records, is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; provided that, at any time after the Closing Date, upon
30 days' prior written notice to each of the Servicer, the Note Insurer and the
Trustee, the Issuer may relocate its principal place of business and chief
executive office, and/or the office where it maintains all of its records, to
another location within the United States to the extent that the Issuer shall
have taken all actions necessary or reasonably requested by the Servicer, the
Trustee or the Note Insurer to amend its existing financing statements and
continuation statements, and file additional financing statements and to take
any other steps reasonably requested by the Servicer, the Trustee or the Note
Insurer to further perfect or evidence the rights, claims or security interests
of any of the Servicer, the Trustee or the Note Insurer under any of the
Transaction Documents.
(t) Ownership of the Issuer. One hundred percent (100%) of the
Units of the Issuer are directly owned (both beneficially and of record) by
Creditrust Corporation. Such Units are validly issued, fully paid and
nonassessable and no one other than Creditrust Corporation has any options,
warrants or other rights to acquire Units from the Issuer.
(u) Solvency. The Issuer, both prior to and after giving effect
to each Contribution of Receivables identified in a Schedule of Receivables on
the Closing Date (or on any Funding Date thereafter, as the case may be) (i) is
not "insolvent" (as such term is defined in Section 101(32)(A) of the
Bankruptcy Code); (ii) is able to pay its debts as they become due; and (iii)
does not have unreasonably small capital for the business in which it is
engaged or for any business or transaction in which it is about to engage.
(v) Reporting and Accounting Treatment. For reporting and
accounting purposes, and in its books of account and records, the Issuer will
treat each transfer of Receivables pursuant to the Receivables Contribution
Agreement as an absolute assignment of, Creditrust
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Corporation's full right, title and ownership interest in each such Receivable
and the Issuer has not in any other manner accounted for or treated the
transactions.
(w) Governmental and Other Consents. No consents, approvals,
authorization or orders of, registration or filing with, or notice to any
governmental authority or court is required for the execution, delivery and
performance of, or compliance with, the Transaction Documents by the Issuer,
except such consent, approvals, authorizations, filings and notices that have
already been made or obtained.
(x) Enforceability of Transaction Documents. Each of the
Transaction Documents to which it is a party has been duly authorized, executed
and delivered by the Issuer and constitutes the legal, valid and binding
obligation of the Issuer, enforceable against it in accordance with its terms.
(y) Accuracy of Information. The representations and warranties
of the Issuer in the Transaction Documents are true and correct in all material
respects as of the Closing Date and, except for representations and warranties
expressly made as of a different date, each Funding Date.
(z) Separate Identity. The Issuer is operated as an entity
separate from Creditrust Corporation. In addition, the Issuer:
(i) has its own board of managers,
(ii) has at least one independent member, who is not a direct,
indirect, or beneficial stockholder, officer, director, employee, affiliate,
associate, customer or supplier of any of the Servicer or its Affiliates (other
than, in the case of the Issuer, managers thereof) or relatives of any thereof,
(iii) maintains its assets in a manner which facilitates their
identification and segregation from those of the Servicer,
(iv) has all office furniture, fixtures and equipment necessary to
operate its business,
(v) conducts all intercompany transactions with the Servicer on
terms which the Issuer reasonably believes to be on an arm's-length basis,
(vi) has not guaranteed any obligation of the Servicer or any of
its Affiliates, nor has it had any of its obligations guaranteed by any such
entities and has not held itself out as responsible for debts of any such
entity or for the decisions or actions with respect to the business affairs of
any such entity,
(vii) has not permitted the commingling or pooling of its funds or
other assets with the assets of the Servicer (other than in respect of items of
payment and funds which may be commingled until deposit into the Collection
Account in accordance with this Agreement),
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(viii) has separate deposit and other bank accounts to which neither
the Servicer nor any of its Affiliates has any access and does not at any time
pool any of its funds with those of the Servicer or any of its Affiliates,
except for such funds which may be commingled until deposit into the Collection
Account in accordance with this Agreement,
(ix) maintains financial records which are separate from those of
the Servicer or any of its Affiliates,
(x) compensates all employees, consultants and agents, or
reimburses the Servicer from the Issuer's own funds, for services provided to
the Issuer by such employees, consultants and agents,
(xi) conducts all of its business (whether in writing or orally)
solely in its own name,
(xii) is not, directly or indirectly, named as a direct or
contingent beneficiary or loss payee on any insurance policy covering the
property of the Servicer or any of its Affiliates and has entered into no
agreement to be named as such a beneficiary or payee,
(xiii) acknowledges that the Trustee and the Note Insurer are
entering into the transactions contemplated by this Agreement and the other
Transaction Documents in reliance on the Issuer's identity as a separate legal
entity from the Servicer, and
(xiv) practices and adheres to company formalities such as complying
with its By-laws and resolutions and the holding of regularly scheduled board
of managers meetings.
(aa) ERISA Compliant. The Issuer and all ERISA Affiliates are in
compliance with all applicable federal or state laws, including the rule and
regulations promulgated thereunder, relating to discrimination in the hiring,
promotion or pay of employees, any applicable federal or state wages and hours
law, and the provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") applicable to its business, except where such
noncompliance would not, individually or in the aggregate, have a Material
Adverse Effect. The employee benefit plans, including employee welfare benefit
plans (the "Employee Plans") of the Issuer and all ERISA Affiliates have been
operated in compliance with the Code, all regulations, rulings and
announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations (except to the extent such noncompliance
would not, individually or in the aggregate, have a Material Adverse Effect).
No reportable event under Section 4043(b) of ERISA or any prohibited
transaction under Section 406 of ERISA has occurred with respect to any
employee benefit Plan maintained by the Issuer or any ERISA Affiliate. There
are no pending or, to the Issuer's best knowledge, threatened, claims by or on
behalf of any employee plan, by any employee or beneficiary covered under any
such plan or by any governmental authority or otherwise involving such plans
or any of their respective fiduciaries (other than for routine claims for
benefits). All Employee Plans that are group health plans have been operated
in compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code in all material respects. "Material Adverse Effect"
means, when used in connection
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with the Issuer, any development, change or effect that is materially adverse
to the business, properties, assets, net worth, condition (financial or other),
or results of operations of the Issuer or that reasonably could be expected to
be materially adverse to the prospects of the Issuer. Neither the Issuer nor
any of its ERISA Affiliates have a "defined benefit plan" as defined in ERISA.
SECTION 6.02 REPAYMENT IN RESPECT OF RECEIVABLES UPON BREACH.
Upon discovery by the Issuer or the Servicer (which discovery shall be
deemed to have occurred upon the receipt of notice by a Responsible Officer of
the Issuer or the Servicer) or upon the actual knowledge of a Responsible
Officer of the Trustee of a breach of any of the representations and warranties
of the Issuer set forth in Section 6.01, the party discovering such breach
shall give prompt written notice to the others. If such breach has or would
have a material adverse effect on the rights or interests of the Noteholders or
the Note Insurer with respect to all or a portion of the Receivables, the
Issuer shall repay a portion of the Note Balance equal to the Release Payment
related to such Receivables and, if necessary, the Issuer shall enforce the
obligation of the Seller under the Receivables Contribution Agreement to
reacquire Receivables from the Issuer, unless such breach shall have been cured
within 30 days after the earlier to occur of the discovery of such breach by
the Issuer or receipt of written notice of such breach by the Issuer, such that
the relevant representation and warranty shall be true and correct in all
material respects as if made on such day, and the Issuer shall have delivered
to the Trustee a certificate of any Responsible Officer of the Issuer
describing the nature of such breach and the manner in which the relevant
representation and warranty became true and correct. This repayment obligation
shall pertain to all representations and warranties of the Issuer contained in
Section 6.01, whether or not the Issuer has knowledge of the breach at the time
of the breach or at the time the representations and warranties were made. The
Issuer will be obligated to make the repayment related to such Receivables as
set forth above on the Remittance Date next succeeding the date on which such
repayment obligation arises. In consideration of the release of the
Receivables, on such Remittance Date, the Issuer shall remit the aggregate
Release Payments of the Receivables to the Collection Account in the manner
specified in Section 4.03.
Upon any such repayment, the Trustee on behalf of the Noteholders and
the Note Insurer shall, without further action, be deemed to have released its
security interest in, to and under the Removed Receivables, all monies due or
to become due with respect thereto after the aforementioned Remittance Date and
all proceeds thereof. The Trustee shall execute such documents and instruments
and take such other actions as shall be reasonably requested by the Issuer to
effect the security interest release pursuant to this Section. Notwithstanding
the foregoing, the Controlling Party may by delivery of prior written notice
waive any breach and repayment obligation of the Issuer pursuant to this
Section 6.02. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repayment for
any Receivables pursuant to this Section, except as otherwise provided in
Section 9.02.
SECTION 6.03 LIABILITY OF ISSUER
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The Issuer shall be liable in accordance with this Agreement only to
the extent of the obligations in this Agreement specifically undertaken by the
Issuer in such capacity under this Agreement and shall have no other
obligations or liabilities hereunder.
SECTION 6.04 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE ISSUER; CERTAIN LIMITATIONS.
(a) Merger, Etc. Any corporation or limited liability company
(i) into which the Issuer may be merged or consolidated, (ii) which may result
from any merger, conversion or consolidation to which the Issuer shall be a
party, or (iii) which may succeed to all or substantially all of the business
of the Issuer, which corporation or limited liability company in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Issuer under this Agreement, shall be the successor to the Issuer under
this Agreement without the execution or filing of any document or any further
act on the part of any of the parties to this Agreement, except that if the
Issuer in any of the foregoing cases is not the surviving entity, then the
surviving entity shall execute an agreement of assumption to perform every
obligation of the Issuer hereunder, and the surviving entity shall have taken
all actions necessary or reasonably requested by the Issuer, the Trustee or the
Note Insurer to amend its existing financing statements and continuation
statements, and file additional financing statements and to take any other
steps reasonably requested by the Issuer, the Trustee or the Note Insurer to
further perfect or evidence the rights, claims or security interests of any of
the Issuer, the Trustee or the Note Insurer under any of the Transaction
Documents. The Issuer (1) shall provide notice of any merger, consolidation or
succession pursuant to this Section to the Rating Agency, the Trustee, the Note
Insurer, the Noteholders and the Placement Agent, (2) for so long as the Notes
are outstanding, shall receive from the Rating Agency a letter to the effect
that such merger, consolidation or succession will not result in a
qualification, downgrading or withdrawal of the then-current rating on the
Notes, and (3) shall receive from the Controlling Party its prior written
consent to such merger, consolidation or succession, absent which consent, the
Issuer shall not become a party to such merger, consolidation or succession.
(b) Certain Limitations. (i) The business, activities and
purpose of the Issuer shall be limited as specified in its LLC Agreement.
(ii) So long as any outstanding debt of the Issuer or the
Notes is rated by the Rating Agency, the Issuer shall not issue unsecured notes
or otherwise borrow money unless (A) the Issuer has made a written request to
the Rating Agency to issue unsecured notes or incur indebtedness and such notes
or borrowings are rated by the Rating Agency the same as or higher than the
rating afforded any outstanding rated debt or the Notes, and (B) such notes or
borrowings (1) are fully subordinated (and which shall provide for payment
only after payment in respect of all outstanding rated debt and/or the Notes)
or are nonrecourse against any assets of the Issuer other than the assets
pledged to secure such notes or borrowings, (2) do not constitute a claim
against the Issuer in the event such assets are insufficient to pay such notes
or borrowings, and (3) where such notes or borrowings are secured by the rated
debt or the Notes, are fully
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subordinated (and which shall provide for payment only after payment in respect
of all outstanding rated debt and/or the Notes) to such rated debt or the
Notes.
(iii) The Issuer shall not issue unsecured notes or
otherwise borrow money, or otherwise grant any consensual Lien in favor of any
Person (other than the Lien granted pursuant hereto) absent the prior written
consent of the Controlling Party.
(c) Unanimous Consent. Notwithstanding any other provision
of this Section and any provision of law, the Issuer shall not do any of the
following without the affirmative unanimous vote of all Members of the Issuer
(which includes the Independent Member),
(i) (A) dissolve or liquidate, in whole or in part, or
institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to
the institution of bankruptcy or insolvency proceedings against it, (C) file a
petition seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (D) consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the limited liability company or a substantial part of its
property, (E) make any assignment for the benefit of creditors, (F) admit in
writing its inability to pay its debts generally as they become due, or (G)
take any action in furtherance of the actions set forth in clauses (A) through
(F) above; or
(ii) merge or consolidate with or into any other person or
entity or sell or lease its property and all or substantially all of its assets
to any person or entity; or
(iii) modify any provision of its LLC Agreement or Bylaws.
SECTION 6.05 LIMITATION ON LIABILITY OF ISSUER AND OTHERS.
The Issuer and any manager or officer or employee or agent of the
Issuer may rely in good faith on the advice of counsel or on any document of
any kind, prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement. The Issuer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as Issuer under this Agreement or as the acquirer
of the Receivables under the Receivables Contribution Agreement, and that in
its opinion may involve it in any expense or liability.
SECTION 6.06 ISSUER MAY OWN NOTES.
The Issuer and any Person controlling, controlled by or under common
control with the Issuer may, in its individual or any other capacity, become
the owner or pledgee of one or more Notes with the same rights as it would have
if it were not the Issuer or an affiliate thereof, except as otherwise
specifically provided in the definition of the term "Noteholder." The Notes so
owned by or pledged to the Issuer or such controlling or commonly controlled
Person shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority or distinction as among any of the
Notes, except as set forth herein with respect to,
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among other things, certain rights to vote, consent or give directions to the
Trustee as a Noteholder.
SECTION 6.07 COVENANTS OF ISSUER.
(a) Bylaws and LLC Agreement. The Issuer hereby covenants not to
change, or agree to any change of, its Bylaws or LLC Agreement without (i)
notice to the Trustee, the Rating Agency and the Note Insurer, and (ii) the
prior written consent of the Controlling Party.
(b) Merger of the Issuer, Asset Sales and Purchases. Without the
prior written consent of the Controlling Party, the Issuer shall not merge with
or into or, or transfer or sell all or substantially all of its assets to, or
buy all or substantially all the assets of, any person, except that Issuer may
sell all or substantially all of the Receivables in connection with a
prepayment of all or a portion of the Note Balance, as provided in Section
10.06.
(c) Preservation of Existence. The Issuer hereby covenants to do
or cause to be done all things necessary on its part to preserve and keep in
full force and effect its existence as a limited liability company, and to
maintain each of its licenses, approvals, registrations or qualifications in
all jurisdictions in which its ownership or lease of property or the conduct of
its business requires such licenses, approvals, registrations or
qualifications, except for failures to maintain any such licenses, approvals,
registrations or qualifications which, individually or in the aggregate, would
not have a material adverse effect on the ability of Issuer to perform its
obligations hereunder or under any of the other Transaction Documents.
(d) Compliance with Laws. The Issuer hereby covenants to comply
in all material respects with all applicable laws, rules and regulations and
orders of any governmental authority, the noncompliance with which would have a
material adverse effect on the business, financial condition or results of
operations of the Issuer or on the ability of the Issuer to repay the Notes or
the Note Insurer Obligations, or perform any of its other obligations under
this Agreement or the other Transaction Documents.
(e) Payment of Taxes. The Issuer hereby covenants to pay and
discharge promptly or cause to be paid and discharged promptly all taxes,
assessments and governmental charges or levies imposed upon the Issuer or upon
its income and profits, or upon any of its property or any part thereof, before
the same shall become in default, provided that the Issuer shall not be
required to pay and discharge any such tax, assessment, charge or levy so long
as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the Issuer shall have set aside on its books
adequate reserves with respect to any such tax, assessments, charge or levy so
contested, or so long as the failure to pay any such tax, assessment, charge or
levy would not have a material adverse effect on the ability of the Issuer to
perform its obligations hereunder.
(f) Exercise of Rights Under the Transaction Documents. The Issuer
hereby covenants to exercise its rights as the Purchaser under the Receivables
Contribution Agreement and take such other action in connection with the
Transaction Documents as may be appropriate
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or desirable, taking into account the associated costs, to maximize the
collection of amounts payable to the Trust Estate.
(g) Investments. The Issuer hereby covenants that it will not
without the prior written consent of the Controlling Party, acquire or hold any
indebtedness for borrowed money of another person, or any capital stock,
debentures, partnership interests or other ownership interests or other
securities of any Person, other than the Receivables acquired under any
Receivables Contribution Agreement.
(h) Keeping Records and Books of Account. The Issuer hereby
covenants and agrees to maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing the Receivables in the event of the destruction or loss of the
originals thereof) and keep and maintain, all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the
daily identification of all collections with respect to, and adjustments of
amounts payable under, each Receivable).
(i) Benefit Plan. The Issuer hereby covenants and agrees to
comply in all material respects with the provisions of ERISA, the Code, and all
other applicable laws, and the regulations and interpretations thereunder to
the extent applicable, with respect to each Benefit Plan. Issuer covenants
that it will not:
(i) engage in any non-exempt prohibited transaction
(within the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the Issuer;
(ii) permit to exist any accumulated funding deficiency,
as defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan which is subject to Section 302(q) of ERISA or 412
of the Code; or
(iii) terminate any Benefit Plan of the Issuer or any ERISA
Affiliate so as to result in any material liability to the Issuer or an ERISA
Affiliate.
(j) No Release. The Issuer shall not take any action and shall
use its best efforts not to permit any action to be taken by others that would
release any Person from any of such Person's covenants or obligations under any
document, instrument or agreement included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such document, instrument
or agreement, except in connection with the release of the Prepaid Pools from
this Agreement.
(k) Separate Identity. The Issuer hereby covenants and agrees to
take all actions required to maintain the Issuer's status as a separate legal
entity. Without limiting the foregoing, the Issuer shall:
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(i) conduct all of its business, and make all
communications to third parties (including all invoices (if any), letters,
checks and other instruments) solely in its own name (and not as a division of
any other Person), and require that its employees, if any, when conducting its
business identify themselves as such (including, without limitation, by means
of providing appropriate employees with business or identification cards
identifying such employees as the Issuer's employees);
(ii) compensate all employees, consultants and agents
directly or indirectly through reimbursement of the Servicer, from the Issuer's
bank accounts, for services provided to the Issuer by such employees,
consultants and agents and, to the extent any employee, consultant or agent of
the Issuer is also an employee, consultant or agent of the Servicer, allocate
the compensation of such employee, consultant or agent between the Issuer and
the Servicer on a basis which reflects the respective services rendered to the
Issuer and the Servicer;
(iii) (A) pay its own incidental administrative costs and
expenses from its own funds, (B) allocate all other shared overhead expenses
(including, without limitation, telephone and other utility charges, the
services of shared employees, consultants and agents, and reasonable legal and
auditing expenses) which are not reflected in the Servicing Fee, and other
items of cost and expense shared between the Issuer and the Servicer, on the
basis of actual use to the extent practicable, and to the extent such
allocation is not practicable, on a basis reasonably related to actual use or
the value of services rendered;
(iv) at all times have at least one independent member,
with at least one independent director, and have at least one officer
responsible for managing its day-to-day business and manage such business by or
under the direction of its board of managers;
(v) maintain its books and records separate from those of
any Affiliate;
(vi) prepare its financial statements separately from
those of its Affiliates and ensure that any consolidated financial statement
have notes to the effect that the Issuer is a separate entity whose creditors
have a claim on its assets prior to those assets becoming available to its
equity holders and therefore to any creditors, as the case may be;
(vii) not commingle its funds or other assets with those of
any of its Affiliates (other than in respect of items of payment or funds which
may be commingled until deposit into the Collection Account in accordance with
this Agreement), and not to hold its assets in any manner that would create an
appearance that such assets belong to any such Affiliate, not maintain bank
accounts or other depository accounts to which any such Affiliate is an account
party, into which any such Affiliate makes deposits or from which any such
Affiliate has the power to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity;
(viii) not permit any of its Affiliates to pay the Issuer's
operating expenses;
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(ix) not guarantee any obligation of any of its Affiliates
nor have any of its obligations guaranteed by any such Affiliate (either
directly or by seeking credit based on the assets of such Affiliate), or
otherwise hold itself out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery separate from that
of any Affiliate and have all its officers and employees conduct all of its
business solely in its own name;
(xi) hold regular meetings of its board of managers in
accordance with the provisions of its LLC Agreement and otherwise take such
actions as are necessary on its part to ensure that all corporate procedures
required by its LLC Agreement and By-laws are duly and validly taken;
(xii) respond to any inquires with respect to ownership of
a Receivable by stating that it is the owner of such contributed Receivable,
and, if requested to do so, that the Trustee has been granted a security
interest in such Receivable;
(xiii) on or before March 31 of each year, beginning in
1999, the Issuer shall deliver to the Trustee an Officer's Certificate stating
that Issuer has, during the preceding year, observed all of the requisite
company formalities and conducted its business and operations in such a manner
as required for the Issuer to maintain its separate company existence from any
other entity; and
(xiv) take such other actions as are necessary on its part to ensure
that the facts and assumptions set forth in the non-consolidation opinion
delivered by Issuer's counsel remain true and correct at all times.
(l) Compliance with all Transaction Documents. The Issuer hereby
covenants and agrees to comply in all material respects with the terms of,
employ the procedures outlined in and enforce the obligations of the parties to
all of the Transaction Documents to which the Issuer is a party, and take all
such action to such end as may be from time to time reasonably requested by the
Trustee, and/or the Controlling Party, maintain all such Transaction Documents
in full force and effect and make to the parties thereto such reasonable
demands and requests for information and reports or for action as the Issuer is
entitled to make thereunder and as may be from time to time reasonably
requested by the Trustee.
(m) No Sales, Liens, Etc. Against Receivables and Trust Property.
The Issuer hereby covenants and agrees, except for releases contemplated
hereunder, not to sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, any Lien (other than the Lien created
hereby) upon or with respect to, any Receivables or Trust Estate, or any
interest in either thereof, or upon or with respect to any Account, or assign
any right to receive income in respect thereof. The Issuer shall immediately
notify the Trustee of the existence of any Lien on any Receivables or Trust
Estate, and the Issuer shall defend the right, title and interest of each of
the Issuer and the Trustee in, to and under the Receivables and Trust Estate,
against all claims of third parties.
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(n) No Change in Business. The Issuer covenants that it shall not
make any change in the character of its business.
(o) No Change in Name, Etc. The Issuer covenants that it shall
not make any change to its corporate name, or use any trade names, fictitious
names, assumed names or "doing business as" names.
(p) No Institution of Insolvency Proceedings. The Issuer
covenants that it shall not institute Insolvency Proceedings with respect to
the Issuer or any Affiliate thereof or consent to the institution of Insolvency
Proceedings against the Issuer or any affiliate thereof or take any action in
furtherance of any such action, or seek dissolution or liquidation in whole or
in part of the Issuer or any Affiliate thereof.
(q) No Change in Chief Executive Office or Location of Records.
The Issuer covenants that it shall maintain its principal place of business and
chief executive office, and the office where it maintains all of its records,
at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; provided that, at any time after
the Closing Date, upon 30 days' prior written notice to each of the Servicer,
the Note Insurer and the Trustee, the Issuer may relocate its principal place
of business and chief executive office, and/or the office where it maintains
all of its records, to another location within the United States to the extent
that the Issuer shall have taken all actions necessary or reasonably requested
by the Servicer, the Trustee or the Note Insurer to amend its existing
financing statements and continuation statements, and file additional financing
statements and to take any other steps reasonably requested by the Servicer,
the Trustee or the Note Insurer to further perfect or evidence the rights,
claims or security interests of any of the Servicer, the Trustee or the Note
Insurer under any of the Transaction Documents. As of the Funding Date, each
Receivable File shall be kept by the Issuer at its offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(r) Access to Certain Documentation and Information. The Issuer
shall provide the Note Insurer, the Trustee and the Noteholders with access to
the documentation relating to the Receivables required to be maintained at the
location described in Section 6.07(q). In each case, access to documentation
relating to the Receivables shall be afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Issuer. Nothing in this Section shall impair the obligation of the Issuer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, which obligation shall be evidenced by an Opinion of Counsel to such
effect, and the failure of the Issuer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.
(s) Benefit Plan. The Issuer hereby covenants and agrees to
comply in all material respects with the provisions of ERISA, the Code, and all
other applicable laws, and the regulations and interpretations thereunder to
the extent applicable, with respect to each Benefit Plan. Issuer covenants
that it will not, and it will cause any ERISA Affiliate to not:
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(i) engage in any non-exempt prohibited transaction
(within the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the Issuer or
the Servicer;
(ii) permit to exist any accumulated funding deficiency,
as defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan of the Issuer or any ERISA affiliate which is
subject to Section 302(q) of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Issuer or any ERISA
Affiliate so as to result in any material liability to the Issuer or an ERISA
Affiliate; or
(iv) create any defined benefit plan (as defined in
ERISA).
ARTICLE VII
THE SERVICER
SECTION 7.01 REPRESENTATIONS OF SERVICER.
The Servicer hereby makes the following representations on which the
Trustee is relying in accepting the Receivables in trust and authenticating the
Notes and the Note Insurer is relying in issuing the Policy. The
representations shall speak as of the execution and delivery of this Agreement
and as of each Funding Date and shall survive the grant of a security interest
to the Trustee.
(a) Organization and Good Standing. The Servicer is duly
organized and validly existing as a corporation in good standing under the laws
of the State of Maryland, with corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
now has, corporate power, authority and legal right to acquire, own, hold,
transfer, convey and service the Receivables and to hold the Receivable Files
as custodian on behalf of the Issuer and Trustee.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of
the Receivables as required by this Agreement) requires such qualification,
licenses and approvals except where the failure to be qualified or to obtain
such qualifications, licenses and approvals would not materially and adversely
affect the rights or interests of any of the Noteholders, the Note Insurer or
the Trust Estate.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, and to carry out its terms; and
the execution, delivery and performance of this Agreement has been duly
authorized by the Servicer by all necessary corporate action.
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(d) Binding Obligations. This Agreement and each of the other
Transaction Documents to which the Servicer is a party constitutes a legal,
valid and binding obligation of the Servicer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally or by general principles of equity.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and each of the other Transaction Documents and
the fulfillment of the terms of this Agreement and each of the other
Transaction Documents does not conflict with, result in any breach of any of
the terms and provisions of, nor constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of the Servicer,
or conflict with or breach any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement or other instrument to which the Servicer is a party or by
which it shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than this Agreement); nor violate, any
law, order, rule or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties; which breach, default, conflict, Lien or violation would have, or
would have, a material adverse effect on the rights or interests of the
Noteholders or the Note Insurer.
(f) No Proceedings. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or to the Servicer's knowledge, threatened, against or affecting the
Servicer: (i) asserting the invalidity of this Agreement, the Notes, or any of
the other Transaction Documents, (ii) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by this
Agreement or any of the other Transaction Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Notes or any of the other Transaction
Documents, or (iv) relating to the Servicer and which might adversely affect
the federal income tax attributes of the Notes.
(g) No Subsidiaries. As of the Closing Date, Servicer has no
subsidiaries, other than the Issuer, Creditrust Mortgage Corporation, and
Creditrust SPV2, LLC.
(h) Not an Investment Company. The Servicer is not an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act, and none of the issuance of the Notes,
the execution and delivery of the Transaction Documents to which the Servicer
is a party, or the performance by the Servicer of its obligations thereunder,
will violate any provision of the Investment Company Act, or any rule,
regulation or order issued by the Securities and Exchange Commission
thereunder.
(i) Year 2000. The Servicer believes it has replaced or modified
all of its material computer systems and business applications software so that
its computer systems would
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properly utilize dates beyond December 31, 1999 ("Year 2000 Compliant") and
does not believe that any further material expenditures will be necessary to
make these systems Year 2000 Compliant.
SECTION 7.02 LIABILITY OF SERVICER; INDEMNITIES.
(a) Obligations. The Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken by the
Servicer under this Agreement and shall have no other obligations or
liabilities under this Agreement. Such obligations shall include the
following:
(i) the Servicer shall indemnify, defend and hold
harmless the Trustee, the Note Insurer and the Trust Estate from and against
any taxes that may at any time be asserted against the Trustee or the Trust
Estate with respect to the transactions contemplated in this Agreement or any
of the other Transaction Documents, including, without limitation, any sales,
gross receipts, general corporation, tangible or intangible personal property,
privilege or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the transfer of the Receivables to the Trust, the
issuance and original sale of the Notes, or asserted with respect to ownership
of the Receivables, or federal or other income taxes arising out of payments on
the Notes) and costs and expenses in defending against the same;
(ii) the Servicer shall indemnify, defend and hold
harmless the Trustee, the Trust Estate, the Noteholders and the Note Insurer
from and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, and was imposed upon the Trustee, the Trust Estate, any
Noteholder or the Note Insurer through the negligence, willful misfeasance or
bad faith of the Servicer in connection with the transactions contemplated by
this Agreement and the other Transaction Documents, or by reason of the breach
by the Servicer of any of its representations, warranties or covenants
hereunder or under any of the other Transaction Documents; and
(iii) the Servicer shall indemnify, defend and hold
harmless the Trustee from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained in this Agreement,
except to the extent that such cost expense, loss, claim, damage or liability:
(A) shall be due to the willful misfeasance, bad faith or negligence of the
Trustee, (B) shall arise from the breach by the Trustee of any of its
representations or warranties set forth in Section 9.14, (C) relates to any tax
other than the taxes with respect to which either the Issuer or the Servicer
shall be required to indemnify the Trustee, or (D) shall arise out of or be
incurred in connection with the performance by the Trustee of the duties as the
Backup Servicer under this Agreement.
(b) Expenses. Indemnification under this Section 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 Section and the recipient thereafter collects any of
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such amounts from others, the recipient shall promptly repay such amounts
collected to the Servicer, without interest, so long as no amounts are
outstanding to the Trustee.
(c) Survival. The provisions of this Section shall survive
the resignation or removal of the Servicer or the Trustee and the termination
of this Agreement.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Successor Servicer shall have no liability or obligation with
respect to any Servicer indemnification obligations of any prior Servicer.
Upon assuming its role as Successor Servicer, the Successor Servicer shall be
responsible only for the indemnification obligations set forth in 7.02(a)(ii).
SECTION 7.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER.
Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) which may result from any merger, conversion or
consolidation to which the Servicer shall be a party, or (iii) which may
succeed to all or substantially all of the business of the Servicer, which
corporation in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer under this Agreement, 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; provided, however, that (i) such merger, consolidation or conversion
shall not cause a Servicer Default and (ii) prior to any such merger,
consolidation or conversion the Servicer shall have provided to the Trustee and
the Noteholders a letter from the Rating Agency indicating that such merger,
consolidation or conversion will not result in the qualification, reduction or
withdrawal of the rating then assigned to the Notes by the Rating Agency. The
Servicer shall provide notice of any merger, consolidation or succession
pursuant to this Section to the Trustee, the Noteholders, the Note Insurer, the
Rating Agency and the Placement Agent.
SECTION 7.04 LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
(a) Neither the Servicer nor any of its directors, officers,
employees or agents shall be under any liability to the Note Insurer, the
Trustee 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, or for errors in judgment; provided however, that this provision
shall not protect the Servicer or any such person against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence of the Servicer in connection with the transactions contemplated by
this Agreement and any of the other Transaction Documents, or the breach by the
Servicer of any of its representations, warranties or covenants hereunder or
under any of the other Transaction Documents. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
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(b) Except as provided in this Agreement, the Servicer shall not
be under any obligation to appear in, prosecute, or defend any legal action
that shall not be incidental to its duties to service the Receivables in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability; provided, however, that the Servicer may undertake any
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement and the
interests of the Noteholders under this Agreement.
(c) The Servicer and any director, officer, employee or agent of
the Servicer may rely in good faith on the advice of counsel or on any document
of any kind, prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
SECTION 7.05 SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.03, Creditrust Corporation
shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon determination that the performance of
its duties under this Agreement shall no longer be permissible under applicable
law. Notice of any such determination permitting the resignation of Creditrust
Corporation shall be communicated to the Trustee, the Note Insurer, the
Noteholders and the Rating Agency at the earliest practicable time and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Noteholders concurrently with or promptly
after such notice. No such resignation shall become effective until the Backup
Servicer or a Successor Servicer shall have assumed the responsibilities and
obligations of Creditrust Corporation in accordance with Sections 8.02 or 8.03.
SECTION 7.06 BACKUP SERVICING.
(a) Norwest Bank Minnesota, National Association is hereby
appointed to act as Backup Servicer with respect to this Agreement and the
transactions contemplated hereby and by the other Transaction Documents. The
Backup Servicer hereby acknowledges that the format of and information
contained on the computer diskette or other acceptable data format to be
supplied by the Servicer pursuant to Section 7.06(b) below is compatible with
and can be read by the computer systems maintained by the Backup Servicer and
that all tests necessary to confirm such compatibility and readability have
been made.
(b) The Servicer agrees to provide monthly to the Backup Servicer
a computer diskette with all information necessary for the Backup Servicer to
perform all of the servicing obligations of the Servicer under this Agreement.
The Servicer further agrees to provide all updates with respect to its computer
processing necessary for the Backup Servicer to maintain a continuous ability
to fulfill the role of Successor Servicer under this Agreement.
(c) The Backup Servicer shall assume its duties as Successor
Servicer in accordance with Sections 8.02 and 8.03 except upon determination
that the Backup Servicer is legally unable to perform the duties of the
Servicer under this Agreement as provided in Section 8.03.
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(d) On or before 11 a.m., New York, New York time on each
Determination Date, the Servicer will deliver to the Backup Servicer a computer
diskette (or other electronic transmission) in a format acceptable to the
Backup Servicer containing the fields listed in Exhibit E hereto, which fields
contain information with respect to the Receivables as of the close of business
on the last day of the related Collection Period. The Backup Servicer shall
not be obligated to verify the information contained in such transmission or
the Monthly Servicer Report.
(e) Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder, including
without limitation to supervise, verify, monitor or administer the performance
of the Servicer. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer. The duties and obligations of the Backup
Servicer shall be determined solely by the express provisions of this Agreement
and no implied covenants or obligations shall be read into this Agreement
against the Backup Servicer. The Backup Servicer shall not be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers (other than in the ordinary course of the performance of such
duties or the exercise of such 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.
(f) Neither the Backup Servicer nor any of its directors,
officers, employees or agents shall be under any liability to any of the
parties hereto, except as specifically provided in this Agreement, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or for errors in judgment; provided however, that this provision
shall not protect the Backup Servicer against any misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement. The Backup Servicer and any of
its directors, officers, employees or agents may rely in good faith on the
advice of counsel or on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising under this
Agreement.
SECTION 7.07 GENERAL COVENANTS OF SERVICER.
Creditrust Corporation covenants and agrees that from the Closing Date
until it is no longer the Servicer hereunder:
(a) Board. Servicer will maintain an independent board of
directors with a majority of "qualified outside directors" (as defined in the
NASD Rules for National Market Designations).
(b) Stockholder's Equity. Servicer shall not permit its
Stockholder's Equity as required to be shown on its financial statements to be
less than the sum of (i) $1,750,000 plus (ii) 75% of the net earnings of the
Servicer for the period commencing on January 1, 1998 and ending at the end of
the Servicer's then most recent fiscal quarter (treated for this purpose as a
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single accounting period). For purposes of this section, if net earnings of
the Servicer for any period shall be less than zero, the amount calculated
pursuant to clause (ii) above for such period shall be zero.
(c) Related Person Transaction. Without the prior written consent
of the Controlling Party, Servicer shall not enter into any Related Person
Transaction other than on terms that are no less favorable to Servicer than
those that would have been obtained in a comparable transaction by Servicer
with a non-Related Person. The term "Related Person" means, as to Servicer,
any shareholder, director, officer or employee thereof or any relative thereof.
The term "Related Person Transaction" means, (i) any sale, lease, transfer or
other disposition of Servicer's property to any Related Person, or (ii) the
purchase, lease or other acquisition by Servicer of any property from any
Related Person, or (iii) the making of any contract, agreement, understanding,
loan, advance, guarantee, or other credit support with or for the benefit of
any Related Person.
(d) Sale of Assets. Without the prior written consent of the
Controlling Party, Servicer shall not convey, sell, lease, license, transfer or
otherwise dispose of, in one transaction or in a series of transactions, all or
substantially all of its assets, other than with respect to securitization
transactions of its receivables.
(e) Bankruptcy. Servicer shall not take any action in any
capacity to file any bankruptcy, reorganization or Insolvency Proceedings
against Issuer, or cause Issuer to commence any reorganization, bankruptcy
proceedings, or Insolvency Proceedings under any applicable state or federal
law, including without limitation any readjustment of debt, or marshaling of
assets or liabilities or similar proceedings.
(f) Legal Existence. Servicer shall do or cause to be done all
things necessary on its part to preserve and keep in full force and effect its
existence as a corporation in the jurisdiction of its incorporation, and to
maintain each of its licenses, approvals, registrations or qualifications in
all jurisdictions in which its ownership or lease of property or the conduct of
its business requires such licenses, approvals, registrations or
qualifications; except for failures to maintain any such licenses, approvals,
registrations or qualifications which, individually or in the aggregate, would
not have a material adverse effect on the ability of Servicer to perform its
obligations hereunder or under any of the other Transaction Documents.
(g) Compliance With Laws. Servicer shall comply in all material
respects, with all laws, rules and regulations and orders of any governmental
authority applicable to its operation, the noncompliance with which failures
which would have a material adverse effect on the business, financial condition
or results of operations of the Servicer or on the ability of the Servicer to
perform its obligations hereunder or under any of the other Transaction
Documents.
(h) Taxes. Servicer shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Servicer or upon
its income and profits, or upon any of its property or any part thereof, before
the same shall become in default, provided that Servicer shall not be required
to pay and discharge any such tax, assessment, charge or levy so long as the
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validity or amount thereof shall be contested in good faith by appropriate
proceedings and Servicer shall have set aside on its books adequate reserves
with respect to any such tax, assessment, charge or levy so contested, or so
long as the failure to pay any such tax, assessment, charge or levy would not
have a material adverse effect on the ability of the Servicer to perform its
obligations hereunder.
(i) Financial Statements. Servicer shall maintain its financial
books and records in accordance with GAAP. Servicer shall furnish to the Note
Insurer and the Trustee:
(i) Quarterly Statements. As soon as available and in
any event within 45 days after the end of each of the calendar quarters of each
fiscal year of the Servicer, the consolidated balance sheet of the Servicer and
the related statements of income, shareholders' equity and cash flows, each for
the period commencing at the end of the preceding fiscal year and ending with
the end of such fiscal quarter, prepared in accordance with GAAP consistently
applied; and
(ii) Annual Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the Servicer, the
balance sheets of the Servicer and the related statements of income,
shareholder's equity and cash flows for the fiscal year then ended, each
prepared in accordance with GAAP consistently applied and reported on by a firm
of nationally recognized independent public accountants.
In the case of each of subsections 7.07(c) and (d) above, the
consent of the Controlling Party referred to therein shall not be unreasonably
delayed or unreasonably withheld.
(j) Compliance with all Transaction Documents. The Servicer
hereby covenants and agrees to comply in all material respects with the terms
of, employ the procedures outlined in and enforce the obligations of the
parties to all of the Transaction Documents to which the Servicer is a party,
and take all such action to such end as may be from time to time reasonably
requested by the Trustee, maintain all such Transaction Documents in full force
and effect and make to the parties thereto such reasonable demands and requests
for information and reports or for action as the Servicer is entitled to make
thereunder and as may be from time to time reasonably requested by the Trustee.
(k) No Change in Chief Executive Office or Location of Records.
The Servicer covenants that it shall maintain its principal place of business
and chief executive office, and the office where it maintains all of its
records, at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; provided that, at any
time after the Closing Date, upon 30 days' prior written notice to each of the
Issuer, the Note Insurer and the Trustee, the Servicer may relocate its
principal place of business and chief executive office, and/or the office where
it maintains all of its records, to another location within the United States
to the extent that the Servicer shall have taken all actions necessary or
reasonably requested by the Issuer, the Trustee or the Note
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Insurer to amend its existing financing statements and continuation statements,
and file additional financing statements and to take any other steps reasonably
requested by the Issuer, the Trustee or the Note Insurer to further perfect or
evidence the rights, claims or security interests of any of the Issuer, the
Trustee or the Note Insurer under any of the Transaction Documents. As of the
Funding Date, each Receivable File shall be kept by the Servicer at its offices
at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(l) Maintenance of Insurance. The Servicer hereby covenants and
agrees to maintain one or more policies of "all-risk" property and general
liability insurance with financially sound and reputable insurers, providing
coverage in scope and amount which is at least consistent with the scope and
amount of such insurance coverage obtained by prudent and similarly situated
Persons in the same jurisdiction and the same business as Servicer.
(m) Separate Identity. The Servicer hereby covenants and agrees to
take all actions required to maintain the Issuer's status as a separate legal
entity. Without limiting the foregoing, the Servicer shall:
(i) cause Issuer to conduct all of its business, and make
all communications to third parties (including all invoices (if any), letters,
checks and other instruments) solely in its own name (and not as a division of
any other Person), and require that its employees, if any, when conducting its
business identify themselves as such;
(ii) cause Issuer to compensate all employees, consultants
and agents directly or indirectly through reimbursement of the Servicer, from
the Issuer's bank accounts, for services provided to the Issuer by such
employees, consultants and agents and, to the extent any employee, consultant
or agent of the Issuer is also an employee, consultant or agent of the
Servicer, allocate the compensation of such employee, consultant or agent
between the Issuer and the Servicer on a basis which reflects the respective
services rendered to the Issuer and the Servicer;
(iii) cause Issuer to (A) pay its own incidental
administrative costs and expenses from its own funds, (B) allocate all other
shared overhead expenses (including, without limitation, telephone and other
utility charges, the services of shared employees, consultants and agents, and
reasonable legal and auditing expenses) which are not reflected in the
Servicing Fee, and other items of cost and expense shared between the Issuer
and the Servicer, on the basis of actual use to the extent practicable, and to
the extent such allocation is not practicable, on a basis reasonably related to
actual use or the value of services rendered;
(iv) cause Issuer to at all times have at least one
independent member, with at least one independent director, and have at least
one officer responsible for managing its day-to-day business and manage such
business by or under the direction of its board of managers;
(v) cause Issuer to maintain its books and records
separate from those of any Affiliate;
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(vi) cause Issuer to prepare its financial statements
separately from those of its Affiliates and ensure that any consolidated
financial statement have notes to the effect that the Issuer is a separate
entity whose creditors have a claim on its assets prior to those assets
becoming available to its equity holders and therefore to any creditors, as the
case may be;
(vii) cause Issuer to not commingle its funds or other
assets with those of any of its Affiliates (other than in respect of items of
payment or funds which may be commingled until deposit into the Collection
Account in accordance with this Agreement), and not to hold its assets in any
manner that would create an appearance that such assets belong to any such
Affiliate, not maintain bank accounts or other depository accounts to which any
such Affiliate is an account party, into which any such Affiliate makes
deposits or from which any such Affiliate has the power to make withdrawals,
and not act as an agent or representative of any of its Affiliates in any
capacity;
(viii) not permit any of its Affiliates to pay the Issuer's
operating expenses;
(ix) not permit Issuer to guarantee any obligation of any
of its Affiliates nor have any of its obligations guaranteed by any such
Affiliate (either directly or by seeking credit based on the assets of such
Affiliate), or otherwise hold itself out as responsible for the debts of any
Affiliate;
(x) cause Issuer to maintain at all times stationery
separate from that of any Affiliate and have all its officers and employees
conduct all of its business solely in its own name;
(xi) hold regular meetings of its board of managers in
accordance with the provisions of its LLC Agreement and otherwise take such
actions as are necessary on its part to ensure that all company procedures
required by its LLC Agreement and By-laws are duly and validly taken;
(xii) cause Issuer to respond to any inquires made directly
to it with respect to ownership of a Receivable by stating that it is the owner
of such contributed Receivable, and, if requested to do so, that the Trustee
has been granted a security interest in such Receivable; and
(xiii) cause Issuer to take such other actions as are
necessary on its part to ensure that the facts and assumptions set forth in the
non-consolidation opinion delivered by Issuer's counsel remain true and correct
at all times.
(n) Benefit Plan. The Servicer hereby covenants and agrees to
comply in all material respects with the provisions of ERISA, the Code, and all
other applicable laws, and the regulations and interpretations thereunder to
the extent applicable, with respect to each Benefit Plan. Servicer covenants
that it will not, and it will cause any ERISA Affiliate to not:
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(i) engage in any non-exempt prohibited transaction
(within the meaning of Code Section 4975 or ERISA Section 406) with respect to
any Benefit Plan which would result in a material liability to the Servicer;
(ii) permit to exist any accumulated funding deficiency,
as defined in Section 302(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan of the Servicer or any ERISA affiliate which is
subject to Section 302(q) of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of the Servicer or any
ERISA Affiliate so as to result in any material liability to the Servicer or an
ERISA Affiliate; or
(iv) create any defined benefit plan (as defined in
ERISA).
ARTICLE VIII
SERVICER DEFAULT; EVENTS OF DEFAULT
SERVICER EVALUATION EVENT; REMEDIES
SECTION 8.01 SERVICER DEFAULT.
For purposes of this Agreement, each of the following shall constitute
a "Servicer Default":
(a) any failure by the Servicer to deliver to the Trustee or the
Note Insurer the Monthly Servicer Report for the related Collection Period, or
any failure by the Servicer to make any payment, transfer or deposit, or
deliver to the Trustee any proceeds or payment required to be so delivered
under the terms of the Notes, this Agreement or any of the other Transaction
Documents to which it is a party, or to make any payment of the Note Insurer
Obligations on the day when due, in each case that continues unremedied for a
period of one Business Day after the earlier to occur of (x) discovery by a
Responsible Officer of the Servicer, or (y) the date on which written notice
has been given to the Servicer by the Trustee or the Controlling Party or to
the Trustee, the Note Insurer and the Servicer by Noteholders evidencing not
less than 25% of the Voting Interests; or
(b) any failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in the
Notes, this Agreement, the Insurance Agreement, or any of the other Transaction
Documents to which the Servicer is a party, which failure (i) would have a
material adverse effect on the rights or interests of the Note Insurer, the
Noteholders, the Trustee or the Trust Estate and (ii) continues unremedied for
a period of 30 days after the earlier to occur of (x) discovery by a
Responsible Officer of the Servicer or (y) the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Controlling Party or the Trustee, or to the Trustee, the Note
Insurer and the Servicer by Noteholders evidencing not less than 25% of the
Voting Interests; or the Servicer delegates its duties under the Notes, this
Agreement, the Insurance Agreement or any of the other
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Transaction Documents to which it is a party, except as specifically permitted
pursuant to Section 8.07, and such delegation continues unremedied for a period
of 15 days after written notice, requiring such delegation to be remedied,
shall have been given to the Servicer by the Trustee or the Controlling Party,
or to the Trustee, the Note Insurer and the Servicer by Noteholders evidencing
not less than 25% of the Voting Interests; or
(c) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the appointment
of a trustee in bankruptcy, conservator, receiver or liquidator for the
Servicer in any bankruptcy, insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of their respective affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 30 consecutive days; or
(d) the consent by the Servicer to the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or substantially all of its
property, or the Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(e) any representation, warranty or certification made by
Creditrust Corporation in this Agreement, the Insurance Agreement or in any
other Transaction Document to which it is a party, or in any certificate
delivered pursuant to this Agreement, the Insurance Agreement or in any other
Transaction Document to which it is a party, proves to have been incorrect when
made, which (i) would have a material adverse effect on the rights of the
Noteholders, the Note Insurer or the Trust Estate, respectively (without regard
to any amount deposited in the Reserve Account), and (ii) if capable of remedy,
continues unremedied for a period of 30 days after the earlier to occur of (x)
discovery by a Responsible Officer of the Servicer or (y) the date on which
written notice thereof, requiring the same to be remedied, shall have been
given to the Servicer by the Controlling Party or the Trustee or to the
Trustee, the Note Insurer and the Servicer by Noteholders evidencing not less
than 25% of the Voting Interests; or
(f) The failure by the Servicer to make any required payment in
excess of $100,000 on any obligation of Servicer, other than Servicer's
obligations to make payment on account of trade accounts payable which are in
dispute in the normal course of business, within 2 Business Days after Servicer
has received written notice from any such creditor of Servicer's failure to
make such payment; or
(g) Beginning on January 1, 1999, and on the first date of each
month thereafter, for the preceding three calendar months (including any
portion of the month in which the first Funding Date occurs), the weighted
average current payment plan for the Receivables for which a repayment plan has
been agreed upon is less than 50% of the weighted average Charged-Off Balance
related to such Receivables; or
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(h) Servicer suffers the loss, suspension or other material
impairment of any required license or permit in any State of the United States
(or the District of Columbia) where Obligors are located which, in the
aggregate for such State (or the District of Columbia), accounts for more than
$50,000,000 in the initial Charge-Off Balances of Receivables, unless such
loss, suspension or impairment is cured within 60 days after any Responsible
Officer of the Servicer has knowledge of such loss, suspension or material
impairment; or
(i) Either ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ terminates or shall
have terminated his respective employment with the Servicer, or become disabled
for a period of three consecutive months or more, or die and a replacement
reasonably satisfactory to the Controlling Party has not been appointed within
90 days after such death, termination or disability; or
(j) ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall (i) cease to be Chief Executive Officer or
Chairman of the Board of Servicer, unless a replacement reasonably satisfactory
to the Controlling Party is appointed within 90 days thereafter, or (ii) engage
in material business activities other than the management of Servicer; or
(k) There occurs any reduction of ▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ personal
investment in Servicer below an amount equal to 51% of the outstanding common
stock of Servicer, or such lesser amount as may be acceptable to the
Controlling Party;
(l) Servicer sells, transfers, pledges or otherwise disposes of
any of its membership interest in Issuer, whether voluntarily or by operation
of law, foreclosure or other enforcement by a Person of its remedies against
the Servicer, except pursuant to a merger, consolidation or a sale of all or
substantially all the assets of Servicer in a transaction not prohibited by
this Agreement; provided, however, that the Servicer may pledge its membership
interest in the Issuer to a secured lender (x) in connection with a pledge of
all or substantially all of the assets of the Servicer to secure indebtedness
owed to such lender for borrowed money, or (y) with the prior written consent
of the Note Insurer;
(m) the existence of an event of default (or similar event which
permits the acceleration of the obligations) and the expiration of any
applicable cure period in (i) any securitization transactions to which
Creditrust Corporation or any of its Affiliates is a party, or (ii) any
obligation of Creditrust Corporation or any of its Affiliates for the repayment
of borrowed money with a principal balance then exceeding $100,000;
(n) the existence in any audit of Servicer of a material
exception, as determined by the Note Insurer in the reasonable exercise of its
judgment.
Notwithstanding the foregoing, the cure periods referred to in each of
clauses (a), (f), (h) and (i) above may be extended for an additional period of
five Business Days each, or such longer period not to exceed 30 Business Days
as may be acceptable to the Controlling Party, if such delay or failure was
caused by an act of God or other similar occurrence. Upon the occurrence of
any such event the Servicer shall not be relieved from using its best efforts
to
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perform its obligations in a timely manner in accordance with the terms of this
Agreement and the Servicer shall provide the Trustee, the Note Insurer, the
Rating Agency, the Placement Agent and the Noteholders prompt notice of such
failure or delay by it, together with a description of its effort to so perform
its obligations. The Servicer shall notify the Trustee and the Note Insurer in
writing of any Servicer Default that it discovers within one Business Day of
such discovery. The Trustee shall have no duty or obligation to determine
whether or not a Servicer Default has occurred.
SECTION 8.02 CONSEQUENCES OF A SERVICER DEFAULT.
(a) If a Servicer Default shall occur and be continuing, so long
as such Servicer Default has not been cured or waived pursuant to Section 8.05,
the Trustee shall, upon the direction of the Controlling Party, and may (with
the written consent of the Controlling Party), at its discretion, by notice
then given in writing to the Servicer and the Note Insurer terminate all (but
not less than all) of the rights and obligations of the Servicer, as Servicer
under this Agreement and the other Transaction Documents, and in and to the
Receivables and proceeds thereof. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Receivables, the Transaction
Documents or otherwise, shall, without further action, pass to and be vested
in the Backup Servicer pursuant to and under this Section or such Successor
Servicer as may be appointed under Section 8.03; and, without limitation, the
Backup Servicer or such Successor Servicer shall be hereby authorized and
empowered to execute and deliver, on behalf of the predecessor 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 related documents, or otherwise. The
predecessor Servicer shall cooperate with the Backup Servicer or the Successor
Servicer, as applicable, in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including, without
limitation, the transfer to the Backup Servicer or the Successor Servicer, as
applicable, for administration by it of all cash amounts that shall at the time
be held by the predecessor Servicer for deposit with respect to the
Receivables, or have been deposited by the predecessor Servicer in the Accounts
with respect to the Receivables or thereafter received by the predecessor
Servicer with respect to the Receivables. All reasonable costs and expenses
(including attorneys' fees) incurred in connection with transferring the
Receivable Files to the Backup Servicer or the Successor Servicer, as
applicable, and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid first, pursuant to Section 4.04(b)(ii),
and second, by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses; provided, however, that the amount of
such costs and expenses shall not exceed $75,000 (the amount of such costs and
expenses are referred to herein as the "Transition Fees").
(b) In addition to the remedial provisions set forth in clause (a)
above, and not by way of limitation of any remedies to which any of the
Trustee, the Note Insurer or the Noteholders are entitled upon the occurrence
of a Servicer Default, the Issuer and the Servicer acknowledge and agree that,
so long as a Servicer Default shall occur and be continuing, and such Servicer
Default
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has not been cured or waived pursuant to Section 8.05, the Trustee shall, upon
the direction of the Controlling Party and may (with the written consent of the
Controlling Party), at its discretion, by notice then given in writing to the
Servicer and the Note Insurer, direct the Servicer (or Backup Servicer or
Successor Servicer as the case may be) to (x) deposit all checks and other
items of collections received in respect of Receivables directly into an
Account immediately upon receipt, and/or (y) instruct each Obligor to remit all
collections in respect of receivables directly to an Account designated for
such purpose.
SECTION 8.03 BACKUP SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER.
On and after the time the Servicer receives a notice of termination
pursuant to Section 8.02 or tenders its resignation pursuant to Section 7.05,
the Backup Servicer shall, by an instrument in writing, assume the rights and
responsibilities of the Servicer in its capacity as Servicer under this
Agreement and the Insurance Agreement and the transactions set forth or
provided for in this Agreement and the Insurance Agreement, and shall be
subject to all the responsibilities, restrictions, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions of this
Agreement and the Insurance Agreement; provided, however, that the Backup
Servicer shall not be liable for any acts, omissions or obligations of the
Servicer prior to such succession or for any breach by the Servicer of any of
its representations and warranties contained in this Agreement, in the
Insurance Agreement or in any related Transaction Document. As compensation
therefor, the Backup 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, plus any additional amounts determined
in the manner set forth below, if no such notice of termination or resignation
had been given. Notwithstanding anything herein to the contrary, Norwest Bank
Minnesota, National Association shall not resign from the obligations and
duties imposed on it as Backup Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of Norwest Bank Minnesota, National Association
shall be communicated to the Trustee, the Noteholders, the Note Insurer, and
the Rating Agency at the earliest practicable time and any such determination
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Trustee and the Noteholders concurrently with or promptly after such notice.
In the event the Backup Servicer is unable or unwilling so to act, it shall
appoint or petition a court of competent jurisdiction to appoint any
established institution having a net worth of not less than $50,000,000 and
whose regular business includes the servicing of consumer receivables as a
successor servicer (a "Successor Servicer"). In connection with such
appointment and assumption, or the assumption by the Backup Servicer of the
status of Successor Servicer, the Backup Servicer may make such arrangements
for the compensation of such Successor Servicer (including itself) out of
payments on or in respect of the Receivables as determined in accordance with
the next sentence. Any Successor Servicer appointed pursuant to this Section
8.03 must have, and must certify that it has, computer systems that will be
used in its duties as Servicer which will properly utilize dates beyond
December 31, 1999, and shall be entitled to compensation equal to the greater
of (A) the Servicing Fee and (B) the current "market
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rate" paid for servicing receivables similar to the Receivables which rate
shall be determined by averaging bids obtained from not less than three
entities experienced in the servicing of receivables similar to the Receivables
and that are not Affiliates of the Trustee, the Backup Servicer, the Servicer
or the Issuer and are reasonably acceptable to the Note Insurer; provided
however, that no such compensation shall be in excess of an amount acceptable
to the Controlling Party and the Rating Agency and provided that if the
Successor Servicer is an Affiliate of the Trustee, such fees will not exceed
the greater of the Servicing Fee or the lowest of the three bids obtained as
provided in this sentence. The Backup Servicer and such Successor Servicer
shall take such action, consistent with this Agreement, as shall be necessary
to effectuate any such succession. The Backup Servicer shall not be relieved
of its duties as Successor Servicer under this Section until the newly
appointed Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer under this Agreement.
SECTION 8.04 NOTIFICATION TO NOTE INSURER, NOTEHOLDERS, RATING
AGENCY AND PLACEMENT AGENT.
Upon a Responsible Officer of the Trustee obtaining actual knowledge
of (i) the occurrence of a Servicer Default and the expiration of any cure
period applicable thereto or (ii) any termination of, or appointment of a
successor to, the Servicer pursuant to this Agreement, the Trustee shall give
prompt written notice thereof to Noteholders at their respective addresses
appearing in the Note Register and to the Rating Agency, the Note Insurer and
the Placement Agent.
SECTION 8.05 WAIVER OF PAST SERVICER DEFAULTS.
The Trustee shall at the direction of the Controlling Party waive any
Servicer Default or other default by the Servicer in the performance of its
obligations hereunder and its consequences, except a default in making any
required deposits to or payments from the Accounts in accordance with this
Agreement or in respect of a covenant or provision of this Agreement that under
Section 11.01 cannot be modified or amended without the consent of each
Noteholder. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
SECTION 8.06 [DELETED]
SECTION 8.07 SUBSERVICERS.
(a) The Backup Servicer may, at its own expense, enter into
subservicing agreements with subservicers (the "Subservicers") for the
servicing and administration of all or any part of the Receivables. References
in this Agreement to actions taken or to be taken by the Backup Servicer in
servicing and managing the Receivables include actions taken by a Subservicer
on behalf of the Backup Servicer. Each Subservicer shall be authorized to
transact business in the
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state or states in which the related Receivables it is to service or manage are
situated, if and to the extent required by applicable law to enable the
Subservicer to perform its obligations hereunder and under the applicable
subservicing agreement. Each subservicing agreement shall be upon such terms
and conditions as are not inconsistent with this Agreement and as to which the
Backup Servicer and the Subservicer have agreed. For purposes of this
Agreement, the Backup Servicer shall be deemed to have received any payment
when the Subservicer receives such payment. The Backup Servicer shall notify
the Trustee, the Issuer, the Note Insurer and the Rating Agency in writing
promptly upon the appointment of any Subservicer.
(b) As part of its servicing activities hereunder, the Backup
Servicer, for the benefit of the Trustee, the Note Insurer and the Noteholders,
shall enforce the obligations of each Subservicer under the related
subservicing agreement. Such enforcement, including, without limitation, the
legal prosecution of claims, termination of subservicing agreements and pursuit
of other appropriate remedies, shall be in accordance with the servicing
standards set forth herein. The Backup Servicer shall pay the costs of such
enforcement at its own expense and shall be reimbursed therefor only from (i) a
general recovery resulting from such enforcement only to the extent, if any,
that such recovery exceeds all amounts due in respect of the related
Receivables, or (ii) a specific recovery of costs, expenses or attorneys fees
against the party against whom such enforcement is directed.
(c) Notwithstanding any subservicing agreement any of the
provisions of this Agreement relating to agreements or arrangements between the
Backup Servicer and a Subservicer, or reference to actions taken through a
Subservicer or otherwise, the Back-up Servicer shall remain obligated and
liable to the Trustee, the Note Insurer and the Noteholders for the servicing,
managing, collecting and administering of the Receivables and the other assets
included in the Trust Estate in accordance with the provisions of Section 2.1
without diminution of such obligation or liability by virtue of such
subservicing agreement or arrangements or by virtue of indemnification from a
Subservicer and to the same extent and under the same terms and conditions as
if the Backup Servicer alone were servicing, managing, collecting and
administering the Receivables and the other assets included in the Trust
Estate.
SECTION 8.08 EVENTS OF DEFAULT.
"Event of Default" wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest, premiums or any other
amounts due and owing on any Note or in respect of the Note Insurer Obligations
(which default continues for a period of two Business Days) or failure to pay
the Notes or the Note Insurer Obligations in full on or before the Final
Maturity Date;
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(b) the Note Insurer is required to make a payment under the
Policy;
(c) if the Issuer shall breach or default in the due observance of
the covenants of the Issuer set forth in Section 6.07;
(d) if the Issuer shall breach, or default in the due observance
or performance of, any other of its covenants in this Agreement, which breach
or default would have a material adverse effect on the rights or interests of
the Note Insurer or the Noteholders, and such default shall continue for a
period of 30 days after the earlier to occur of (x) discovery by a Responsible
Officer of the Servicer or (y) the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Note Insurer or the Trustee, or to the Trustee, the Note
Insurer and the Servicer by Noteholders evidencing not less than 5% of the
Voting Interests;
(e) if any representation or warranty of the Issuer made in this
Agreement or any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to have been breached in any material respect
as of the time when the same shall have been made or deemed made, which breach
would have a material adverse effect on the rights or interests of the Note
Insurer or the Noteholders, and such breach shall continue for a period of 30
days after the earlier to occur of (x) discovery by a Responsible Officer of
the Servicer or (y) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the Note
Insurer or the Trustee, or to the Trustee, the Note Insurer and the Servicer by
Noteholders evidencing not less than 25% of the Voting Interests;
(f) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary 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 appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
30 consecutive days; or
(g) the commencement by the Issuer 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 Issuer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or of any substantial part of its property or the making
by the Issuer of an assignment for the benefit of creditors or the failure by
the Issuer generally to pay its debts as such debts become due or the taking of
corporate action by the Issuer in furtherance of any of the foregoing;
(h) the Note Balance exceeds zero on the Scheduled Termination
Date;
(i) the occurrence and continuation of a Servicer Default;
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(j) The IRS or the PBGC shall have filed notice of one or more
Adverse Claims against the Servicer, the Issuer or any of their ERISA
Affiliates under ERISA or the Code, which constitutes a Lien on the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by such Servicer, Issuer, or the ERISA
Affiliate (as the case may be) in a transaction with respect to which the
Controlling Party has given its prior written approval; or
(k) The Issuer or the Trust Estate shall have become subject to
registration as an "investment company" within the meaning of the Investment
Company Act as determined by a court of competent jurisdiction in a final and
non-appealable order.
SECTION 8.09 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every
such case, so long as such Event of Default has not been cured or waived
pursuant hereto, the Trustee shall, upon the direction of the Controlling
Party, and may with the written consent of the Controlling Party, at its
discretion, by notice then given in writing to the Issuer, the Servicer and the
Note Insurer, declare all of the Notes to be immediately due and payable and
upon on any such declaration such Notes, in an amount equal to the Note Balance
of such Notes, together with accrued and unpaid interest thereon to the date of
such acceleration, and together with all unpaid Trustee Fees, Backup Servicing
Fees, and Servicing Fees, shall become immediately due and payable.
At any time after such a declaration of acceleration of maturity of
the Notes has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Note Insurer by written notice to the Issuer and the Trustee, may
rescind and annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all payments of principal of, and interest on, all
Notes and all other amounts which would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had not
occurred; and
(ii) all sums paid by the Trustee hereunder and the
reasonable compensation, expenses and disbursements of the Trustee, its agents
and counsel; and
(b) all Events of Default, other than the nonpayment of the
principal of Notes which have become due solely by such acceleration, have
been cured or waived as provided in Section 8.21.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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SECTION 8.10 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
Subject to the following sentence, if an Event of Default occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Note Insurer and the Noteholders by any
proceedings the Trustee deems appropriate to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Agreement or in aid of the exercise of any power granted herein, or
enforce any other proper remedy. Any proceedings brought by the Trustee on
behalf of the Note Insurer or the Noteholders or by the Note Insurer or any
Noteholder against the Issuer shall be limited to the preservation, enforcement
and foreclosure of the liens, assignments, rights and security interests under
this Agreement and the other Transaction Documents and no attachment, execution
or other suit or process shall be sought, issued or levied upon any assets,
properties or funds of the Issuer, other than the Trust Estate relative to the
Notes in respect of which such Event of Default has occurred. If there is a
foreclosure of any such liens, assignments, rights and security interests under
this Agreement, by private power of sale or otherwise, no judgment for any
deficiency upon the indebtedness represented by the Notes may be sought or
obtained by the Trustee or any Noteholder against the Issuer. The Trustee
shall be entitled to recover the costs and expenses expended by it pursuant to
this Section 8.10 including reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 8.11 REMEDIES.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee (subject to
Section 8.24, to the extent applicable) shall, at the direction of the
Controlling Party, and may (with the written consent of the Controlling Party)
at its discretion, do one or more of the following:
(a) institute proceedings for the collection of all amounts then
payable on the Notes, or under this Agreement or under any of the other
Transaction Documents, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Issuer monies adjudged due, subject in
all cases to the provisions of Section 8.10;
(b) in accordance with Section 8.24, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute proceedings from time to time for the complete or
partial foreclosure of this Agreement with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Trustee, the Note Insurer or the Noteholders hereunder; and
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(e) refrain from selling the Trust Estate and apply all Available
Funds pursuant to Section 8.14.
SECTION 8.12 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Issuer for the payment of any
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise to:
(a) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and the Note Insurer
Obligations and file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Noteholders allowed in such
Proceeding, and
(b) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such proceeding is hereby authorized by each Noteholder and the Note
Insurer to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Noteholders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 9.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder or the
Note Insurer any plan of reorganization, arrangement, adjustment or composition
affecting any of the Notes or the rights of any Noteholder or the Note Insurer,
or to authorize the Trustee to vote in respect of the claim of any Noteholder
or the Note Insurer in any such Proceeding.
SECTION 8.13 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES.
All rights of action and claims under this Agreement or any of the
Notes or any of the other Transaction Documents may be prosecuted and enforced
by the Trustee without the possession of any of the Notes or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the
Noteholders in respect of which such judgment has been recovered and shall be
paid as provided in Section 8.14.
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SECTION 8.14 APPLICATION OF MONEY COLLECTED.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to such Notes
pursuant to this Article or otherwise and any other monies that may then be
held or thereafter received by the Trustee as security for such Notes shall be
treated like Available Funds and applied as provided in Section 4.04(b).
SECTION 8.15 LIMITATION ON SUITS.
No Noteholder shall have any right to institute any proceedings,
judicial or otherwise, with respect to this Agreement, or for the appointment
of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Noteholder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Noteholders representing not less than 25% of the Voting
Interests shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Noteholders have offered to the Trustee indemnity in full
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Note Insurer (so long as
no Insurer Default is then in effect) or the Noteholders representing more than
50% of the Voting Interests; and
(f) for so long as no Insurer Default is then in effect, the Note
Insurer shall have given its written consent to the Trustee to the pursuit by
the Trustee of such remedies.
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Agreement, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders, each
representing less than 50% of the Voting Interests, and the Trustee shall not
have received any conflicting or inconsistent requests and indemnity from the
Note Insurer at such time, the Trustee in its sole discretion may determine
what action, if any, shall be taken notwithstanding any other provision herein
to the contrary.
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SECTION 8.16 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST.
Subject to the provisions in this Agreement (including Section 8.10)
limiting the right to recover amounts due on a Note to recovery from amounts in
the Trust Estate, the Noteholder shall have the right to the extent permitted
by applicable law, which right is absolute and unconditional, to receive
payment of principal of and interest on such Note on the Final Payment Date and
to institute suit for the enforcement of any such payment and such right shall
not be impaired without the consent of such Noteholder.
SECTION 8.17 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, the Note Insurer or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Noteholder, then and in every
such case the Issuer, the Trustee, the Note Insurer and the Noteholders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
proceeding had been instituted.
SECTION 8.18 RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee,
to the Note Insurer or to the Noteholders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 8.19 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, of the Note Insurer or of any
Noteholder to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee, to the Note Insurer or to the Noteholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Note Insurer or by the Noteholders, as the case may be.
SECTION 8.20 CONTROL BY CONTROLLING PARTY.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that:
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(a) such direction shall not be in conflict with any rule of law,
with this Agreement or any inconsistent direction of the Note Insurer hereunder
(unless at such time there shall be an Insurer Default in effect);
(b) any direction by Noteholders (if the Note Insurer is not the
Controlling Party) to the Trustee to undertake a Sale of the Trust Estate shall
be by the Noteholders representing the percentage of the outstanding Note
Balance of the Outstanding Notes specified in Section 8.24(b)(i), unless
Section 8.24(b)(ii) is applicable; and
(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; provided, however, that,
subject to Section 9.01, the Trustee need not take any action which it
determines might involve it in liability or be unjustly prejudicial to the
Noteholders not consenting.
SECTION 8.21 WAIVER OF PAST DEFAULTS.
The Controlling Party may on behalf of the Noteholders of all the
Notes waive any past default hereunder and its consequences, except a default:
(a) in the payment of any installment of principal of or interest
on, any Note; or
(b) in respect of a covenant or provision hereof which under
Section 11.01 cannot be modified or amended without the consent of the
Noteholders.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Agreement; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 8.22 UNDERTAKING FOR COSTS.
All parties to this Agreement agree, and each Noteholder by his
acceptance of a Note hereunder shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Agreement, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 8.22 shall not apply to any suit
instituted by the Trustee or the Note Insurer, to any suit instituted by any
Noteholder, or group of Noteholders representing more than 10% of the Voting
Interests, or to any suit instituted by any Noteholder for the enforcement of
the payment of principal of or interest on any Note on the Final Maturity Date.
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SECTION 8.23 WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension of law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants in, or the performance of, this Agreement; and the Issuer (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 8.24 SALE OF TRUST ESTATE.
(a) The power to effect any sale (a "Sale") of any portion of the
Trust Estate pursuant to Section 8.11 shall not be exhausted by any one or more
Sales as to any portion of the Trust Estate remaining unsold, but shall
continue unimpaired until the entire Trust Estate shall have been sold or all
amounts payable on the Notes and under this Agreement with respect thereto, and
all Note Insurer Obligations, shall have been paid. The Trustee may from time
to time postpone any public Sale by public announcement made at the. time and
place of such Sale.
(b) To the extent permitted by law, the Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(i) the Controlling Party shall consent to, or direct the
Trustee to make such Sale; or
(ii) to the extent that an Insurer Default is then in
effect, the proceeds of such Sale would be not less than the sum of all amounts
due to the Trustee hereunder and the entire amount which would be distributable
to the Note Insurer and the Noteholders, in full payment thereof in accordance
with Section 8.14, on the Payment Date next succeeding the date of such Sale,
together with any amounts then owing to the Note Insurer.
The purchase by the Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or disposition thereof for
purposes of this Section 8.24(b).
(c) Unless the Controlling Party has otherwise consented or
directed the Trustee, at any public Sale of all or any portion of the Trust
Estate at which a minimum bid equal to or greater than the amount described in
paragraph (ii) of subsection (b) of this Section 8.24 has not been established
by the Trustee and no Person bids an amount equal to or greater than such
amount, the Trustee shall prevent such sale and bid an amount at least $1.00
more than the highest other bid in order to preserve the Trust Estate.
(d) In connection with a Sale of all or any portion of the Trust
Estate:
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(i) any of the Noteholders or the Note Insurer may bid
for and purchase the property offered for Sale, and upon compliance with the
terms of sale may hold, retain and possess and dispose of such property,
without further accountability, and may, in paying the purchase money therefor,
deliver any of the Notes or claims for interest thereon in lieu of cash up to
the amount which shall, upon distribution of the net proceeds of such Sale, be
payable thereon, and such Notes, in case the amounts so payable thereon shall
be less than the amount due thereon, shall be returned to the holders thereof
after being appropriately stamped to show such partial payment;
(ii) the Trustee may bid for and acquire the property
offered for Sale in connection with any public Sale thereof, and, in lieu of
paying cash therefor, may make settlement for the purchase price by crediting
the gross Sale price against the sum of (A) the amount which would be
distributable to the Noteholders and the Note Insurer as a result of such Sale
in accordance with Section 8.14 on the Payment Date next succeeding the date of
such Sale and (B) the expenses of the Sale and of any proceedings in connection
therewith which are reimbursable to it, without being required to produce the
Notes in order to complete any such Sale or in order for the net Sale price to
be credited against such Notes, and/or the Note Insurer Obligations, and any
property so acquired by the Trustee shall be held and dealt with by it in
accordance with the provisions of this Agreement;
(iii) the Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Trust
Estate in connection with a Sale thereof;
(iv) the Trustee is hereby irrevocably appointed the agent
and attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(e) Notwithstanding anything in this Agreement to the contrary, if
an Event of Default specified in Section 8.08(a) is the Event of Default, or
one of the Events of Default, on the basis of which the Notes have been
declared due and payable, then the Trustee shall, at the direction of the
Controlling Party, or may, in its discretion (together with the written consent
of the Controlling Party), sell the Trust Estate without compliance with this
Section 8.24.
(f) This Section 8.24(f) only applies during such time as the
Rating Agency has rated the financial strength of the Note Insurer below BBB-.
If, during such time, an Event of Default has occurred and is continuing such
that the Trustee has the right to effect a Sale, then notwithstanding any
provision of this Agreement to the contrary, the Note Insurer hereby agrees
that the Noteholders with Voting Interests in excess of 50% of all outstanding
Voting Interests shall have the right to direct the Trustee to sell all or
substantially all the Trust Estate pursuant to
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this Agreement and applicable law, whether or not the Note Insurer is the
Controlling Party at such time. If the Note Insurer is the Controlling Party,
then it shall direct the Trustee to effect such a Sale of all or substantially
all of the Trust Estate promptly upon receiving written direction to do so from
the Noteholders with Voting Interests in excess of 50% of all outstanding
Voting Interests.
SECTION 8.25 ACTION ON NOTES.
The Trustee's right to seek and recover judgment under this Agreement
shall not be affected by the seeking, obtaining or application of any other
relief under or with respect to this Agreement. Neither the Lien of this
Agreement nor any rights or remedies of the Trustee, the Note Insurer or the
Noteholders shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate.
SECTION 8.26 NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF
THE ISSUER.
The Trust Estate granted to the Trustee as security for the Notes
serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
SECTION 8.27 LICENSE
Servicer hereby licenses to each "Qualified Successor Servicer"
(hereinafter defined) on a non-exclusive basis, a copy of the Servicer's
"Mozart" software currently in use by Servicer for the collection of accounts
by Servicer, solely for the limited purpose of collecting the Receivables. The
licensee shall have no right to copy the software or sub-license or assign this
license except to another "Qualified Successor Servicer". The licensee shall
not be obligated to pay any royalty or other fee to Servicer for such license.
The term "Qualified Successor Servicer" means any Successor Servicer (or
Subservicer thereto) which has not, nor has any Affiliate thereof, within the
two year period immediately prior to its appointment as Successor Servicer (or
Subservicer, as the case may be), purchased accounts for the purpose of
collecting them and retaining all or a portion of the proceeds for itself. The
Qualified Successor Servicer shall sign a confidentiality agreement reasonably
satisfactory to Servicer in form and substance under which it agrees to
maintain the confidentiality of the software.
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ARTICLE IX
THE TRUSTEE
SECTION 9.01 DUTIES OF TRUSTEE.
(a) The Trustee, both prior to and after the occurrence of a
Servicer Default, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. The Trustee shall exercise such of
the rights and powers vested in it by this Agreement and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; provided,
however, that if the Trustee in its capacity as Backup Servicer assumes the
duties of the Servicer pursuant to Section 8.02 or 8.03, the Trustee in
performing such duties shall use the degree of skill and attention customarily
exercised by a servicer with respect to defaulted consumer receivables that it
services for itself or others.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Agreement shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, its own bad faith or its own willful misfeasance; provided,
however, that:
(i) prior to the occurrence of a Servicer Default
actually known to a Responsible Officer of the Trustee, and after the curing or
waiving of all such Servicer Defaults that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this Agreement,
no implied rights or obligations shall be read into this Agreement against the
Trustee, the permissive right of the Trustee to do things enumerated in this
Agreement shall not be construed as a duty and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in performing its
duties in accordance with the terms of this Agreement; and
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken in good faith in
accordance with
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(A) the direction or consent of the Note Insurer
(to the extent that an Insurer Default is not then in effect), or
(B) the direction of Noteholders evidencing not
less than 25% of the Voting Interests (unless a different percentage
is otherwise specifically set forth herein with respect to any
applicable action), together with the written consent of the Note
Insurer (to the extent that an Insurer Default is not then in effect),
in each case relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement.
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties under this Agreement, or in the exercise of any of its rights or powers,
if there shall be reasonable grounds for believing that the repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee in its capacity as Backup
Servicer shall be the successor to, and be vested with the rights, duties,
powers and privileges of, the Servicer in accordance with the terms of this
Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or to impair the value of any
Receivable.
(f) All information obtained by the Trustee regarding the Obligors
and the Receivables, whether upon the exercise of its rights under this
Agreement or otherwise, shall be maintained by the Trustee in confidence and
shall not be disclosed to any other Person, unless such disclosure is required
by this Agreement or any applicable law or regulation.
SECTION 9.02 TRUSTEE'S CERTIFICATE.
On or as soon as practicable after each date on which the Servicer or
Issuer acquires Removed Receivables, the Trustee, upon receipt of written
notice of such acquisition, shall submit to the Servicer or the Issuer, as
applicable, a Trustee's Certificate (substantially in the form attached hereto
as Exhibit B), identifying the acquirer and the Receivables so acquired,
executed by the Trustee and completed as to its date and the date of this
Agreement, and accompanied by a copy of the Monthly Servicer Report and the
Servicer's Remittance Date Certificate for the related Collection Period. The
Trustee's Certificate submitted with respect to such Payment Date shall
operate, as of such Payment Date, as an assignment without recourse,
representation or warranty, to the Issuer or the Servicer, as the case may be,
of all the Trustee's right, title and interest in and to such Removed
Receivable and to the other property conveyed to the Trust Estate pursuant to
Section 2.01 with respect to such Removed Receivable, and all
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security and documents relating thereto, such assignment being an assignment
outright and not for security.
SECTION 9.03 TRUSTEE'S RELEASE OF REMOVED RECEIVABLES.
With respect to all Removed Receivables, the Trustee shall, by a
Trustee's Certificate (substantially in the form attached hereto as Exhibit B)
release, all the Trustee's right, title and interest in and to each Removed
Receivable and the other property included in the Trust Estate pursuant to
Section 2.01 with respect to such Removed Receivable, and all security and any
documents relating thereto; and the Issuer or the Servicer, as applicable,
shall thereupon own each such Removed Receivable, and all such related
security and documents, free of any further obligation to the Trustee or the
Note Insurer or the Noteholders with respect thereto. If in any enforcement
suit or legal proceeding it is held that the Servicer may not enforce a Removed
Receivable on the ground that it is not a real party in interest or a holder
entitled to enforce such Removed Receivable, the Trustee on behalf of the Note
Insurer and the Noteholders shall, at the Servicer's written direction and
expense, take such reasonable steps as the Trustee deems necessary to enforce
the Removed Receivable, including bringing suit in the Trustee's name or the
names of the Note Insurer or of the Noteholders.
SECTION 9.04 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 9.01:
(i) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any advice
of counsel or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it under
this Agreement in good faith and in accordance with such advice of counsel or
Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or in relation to this
Agreement, at the request, order or direction of the Note Insurer or any of the
Noteholders pursuant to the provisions of this Agreement, unless the Note
Insurer or any such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby (the general obligation of an institutional
investor that is investment grade rated being sufficient indemnity); nothing
contained in this Agreement shall, however, relieve the Trustee of the
obligations, upon the occurrence of a Servicer Default actually known to a
Responsible Officer of the Trustee (that shall not have been cured or waived),
to exercise such of the rights and powers vested in it by
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this Agreement, and to use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(v) prior to the occurrence of a Servicer Default and
after the curing or waiving of all Servicer Defaults that may have occurred,
the Trustee shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, Consent order, approval, bond or other paper or
document, unless requested in writing to do so by the Note Insurer or the
Noteholders evidencing not less than 25% of the Voting Interests; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Issuer or, if paid by the Trustee, shall be
reimbursed by the Issuer upon demand; and nothing in this clause shall derogate
from the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors; and
(vi) the Trustee may execute any of the trusts or powers
under this Agreement or perform any duties under this Agreement either directly
or by or through agents or attorneys or a custodian and shall not be liable or
responsible for the misconduct or negligence of any of its agents or attorneys
or a custodian appointed with due care by the Trustee.
(b) No Noteholder will have any right to institute any proceeding
with respect to this Agreement, unless such Noteholder shall have given to the
Trustee written notice of default and shall have obtained the prior written
consent of the Note Insurer to the institution of such proceeding (in the event
that no Insurer Default is in effect at such time) and (i) the Servicer Default
arises from the Servicer's failure to remit collections or payments when due or
(ii) Noteholders evidencing not less than 25% of the Voting Interests have made
written request upon the Trustee to institute such proceeding in its own name
as Trustee thereunder, and have offered to the Trustee reasonable indemnity,
and the Trustee for 30 days has neglected or refused to institute any such
proceedings.
SECTION 9.05 LIMITATION ON TRUSTEE'S LIABILITY.
The Trustee makes no representations as to the validity or sufficiency
of this Agreement or of the Notes (other than the certificate of authentication
thereon, as applicable), or of any Receivable or related document. The Trustee
shall have no obligation to perform any of the duties of the Issuer or the
Servicer unless explicitly set forth in this Agreement. The Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and
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enforceability of any security interest in any Receivable, or the perfection
and priority of such a security interest or the maintenance of any such
perfection and priority, or for or with respect to the efficacy of the Trust
Estate or its ability to generate the payments to be paid to Noteholders and
the Note Insurer under this Agreement, including without limitation the
existence and contents of any Receivable or any computer file or other record
thereof; the validity of the assignment of any Receivable to the Trustee or of
any intervening assignment; the completeness of any Receivable; the performance
or enforcement of any Receivable; the compliance by the Issuer or the Servicer
with any covenant or the breach by the Issuer or the Servicer of any warranty
or representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any noncompliance therewith or any breach
thereof, any investment of monies by the Issuer or any loss resulting therefrom
(it being understood that the Trustee shall remain responsible as Trustee for
any property that it may hold as part of the Trust Estate); the acts or
omissions of the Issuer, the Servicer or any Obligor; any action of the
Servicer taken in the name of or as the agent of the Trustee; or any action by
the Trustee taken at the instruction of the Servicer; provided however, that
the foregoing shall not relieve the Trustee of its obligation to perform its
duties under this Agreement. Except with respect to a claim based on the
failure of the Trustee to perform its duties under this Agreement or based on
the Trustee's negligence, willful misconduct or bad faith, no recourse shall be
had for any claim based on any provision of this Agreement, the Notes or any
Receivable or assignment thereof against the institution serving as Trustee in
its individual capacity. The Trustee shall not have any personal obligation,
liability or duty whatsoever to any Noteholder, the Note Insurer or any other
Person with respect to any such claim, and any such claim shall be asserted
solely against the Trust Estate or any indemnitor who shall furnish indemnity
as provided in this Agreement. The Trustee shall not be accountable for the
use or application by the Issuer of the Notes or the proceeds thereof, if any,
or for the use or application of any funds paid to or collected by the Servicer
in respect of the Receivables. The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder (unless the Trustee in its capacity as Backup
Servicer shall have become the Successor Servicer) or to prepare or file any
Securities and Exchange Commission filing with respect to the Notes or to
record this Agreement.
The Trustee shall have no responsibility to determine whether any
Funding Termination Event specified in clauses (e) or (f) of the definition of
"Funding Termination Event" has occurred, or to determine whether any of the
conditions precedent to a Funding have occurred except to the extent that a
Responsible Officer of Trustee has knowledge that any such conditions have not
been satisfied.
The recitals contained in this Agreement and in the Notes, except the
certificates of authentication on the Notes, shall be taken as the statements
of the Issuer, and the Trustee assumes no responsibility for their correctness
or completeness. The Trustee makes no representations as to the validity or
condition of any Trust Estate or any part thereof, or as to the title of the
Issuer thereto or as to the security afforded thereby or hereby, or as to the
validity or
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genuineness of any securities at any time pledged and deposited with the
Trustee hereunder or as to the validity or sufficiency of this Agreement or the
Notes. The Trustee shall not be accountable for the use or application by the
Issuer of the Notes or the proceeds thereof or of any money paid to the Issuer
under any provisions hereof.
The Trustee will not be responsible for any losses incurred in
connection with investments in Permitted Investments made in accordance with
the terms of this Agreement, other than losses arising out of the Trustee's
negligence, bad faith or willful misconduct.
SECTION 9.06 TRUSTEE MAY NOT OWN NOTES.
The Trustee in its individual or any other capacity may not become the
owner or pledgee of Notes. The Trustee in its individual or any other capacity
may deal with the Issuer and the Servicer in banking transactions, with the
same rights as it would have if it were not the Trustee.
SECTION 9.07 TRUSTEE'S FEES AND EXPENSES.
The Trustee shall be entitled to reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution
of the trusts created by this Agreement and in the exercise and performance of
any of the powers and duties of the Trustee under this Agreement, which shall
equal the Trustee Fee, paid as provided in Section 4.04, and payment or
reimbursement for all reasonable expenses and disbursements (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ) incurred or made by the Trustee in
defense of any action brought against it in connection with this Agreement
except any such expense or disbursement as may arise from its negligence,
willful misfeasance or bad faith or that is the responsibility of Noteholders
under this Agreement. Additionally, the Servicer, pursuant to Section 7.02,
shall indemnify the Trustee with respect to certain matters.
SECTION 9.08 INDEMNITY OF TRUSTEE, BACKUP SERVICERS AND SUCCESSOR
SERVICER.
Upon the appointment of a Backup Servicer or a Successor Servicer
pursuant to Section 8.02 or 8.03, such Backup Servicer, Successor Servicer and
the Trustee and their respective agents and employees shall be indemnified by
the Trust Estate and held harmless against any loss, liability, or expense
(including reasonable attorney's fees and expenses) arising out of or incurred
in connection with the acceptance of performance of the trusts and duties
contained in this Agreement to the extent that (i) the Successor Servicer,
Backup Servicer or the Trustee, as the case may be, shall not be indemnified
for such loss, liability or expense by the Servicer pursuant to Section 8.02 or
8.03; (ii) such loss, liability, or expense shall not have been incurred by
reason of the Successor Servicer's, the Backup Servicer's or the Trustee's
willful misfeasance, bad faith or negligence; and (iii) such loss, liability or
expense shall not have been incurred by reason of the Successor Servicer's, the
Backup Servicer's or the Trustee's breach of its respective representations and
warranties pursuant to Sections 8.02, 8.03, 9.09 and 9.14, respectively.
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The Successor Servicer, the Backup Servicer and/or the Trustee shall
be entitled to the indemnification provided by this Section only to the extent
all amounts due the Servicer, the Note Insurer and all Noteholders pursuant to
Section 4.04 have been paid in full and all amounts required to be deposited in
the Reserve Account with respect to any Payment Date pursuant to Section 4.05
have been so deposited.
SECTION 9.09 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
Except as otherwise provided in this Agreement, the Trustee under this
Agreement shall at all times be a corporation having its corporate trust office
in the same state (or the District of Columbia or the Commonwealth of Puerto
Rico) as the location of the Corporate Trust Office as specified in this
Agreement; organized and doing business under the laws of such state (or the
District of Columbia or the Commonwealth of Puerto Rico) or the United States;
authorized under such laws to exercise corporate trust powers; having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authorities; and shall have the highest
available long-term unsecured debt rating by the Required Rating Agencies then
providing such a rating or be otherwise acceptable to the Rating Agency and the
Controlling Party, as evidenced by a letter to such effect from the Rating
Agency (which acceptance may be evidenced in the form of a letter, dated on or
shortly before the Closing Date, assigning an initial rating to the Notes) and
the Note Insurer (as applicable).
If the Trustee shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 9.10.
SECTION 9.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the
trusts created by this Agreement by giving at least 30 days' prior written
notice thereof to the Servicer and the Noteholders. Upon receiving such notice
of resignation, the Servicer shall promptly appoint a successor Trustee
acceptable to the Noteholders by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to
the successor Trustee. If no successor Trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.09 and shall fail to resign after
written request therefor by the Servicer or the Controlling Party, or if at any
time the Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the
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purpose of rehabilitation, conservation or liquidation, then the Controlling
Party may remove the Trustee. If the Trustee is removed under the authority
of the immediately preceding sentence, the Servicer shall promptly appoint a
successor Trustee acceptable to the Controlling Party, by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee, and pay all fees owed to the
outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.11. The Servicer shall give the Rating Agency, the
Placement Agent, the Note Insurer and the Noteholders notice of any such
resignation or removal of the Trustee and appointment and acceptance of a
successor Trustee.
SECTION 9.11 SUCCESSOR TRUSTEE.
Any successor Trustee appointed as provided in Section 9.10 shall
execute, acknowledge and deliver to the Servicer and to its predecessor Trustee
an instrument accepting such appointment under this Agreement, and thereupon
the resignation or removal of the predecessor Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement; and the Servicer and
the predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations. No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.09. Upon acceptance of appointment
by a successor Trustee as provided in this Section, the Servicer shall mail
notice of the successor of such Trustee under this Agreement to all Noteholders
at their addresses as shown in the Note Register and shall give notice by mail
to the Rating Agency and the Placement Agent and the Note Insurer. If the
Servicer fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Servicer.
SECTION 9.12 MERGER OR CONSOLIDATION OF TRUSTEE.
Any corporation (i) into which the Trustee may be merged or
consolidated, (ii) which may result from any merger, conversion, or
consolidation to which the Trustee shall be a party or (iii) which may succeed
to all or substantially all the corporate trust business of the Trustee, which
corporation executes an agreement of assumption to perform every obligation of
the Trustee under this Agreement, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
9.09, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding. Notice of any such merger shall be given by the Trustee to
the Rating Agency, the Placement Agent and the Noteholders and the Note
Insurer.
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SECTION 9.13 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee, jointly with the Trustee or separate trustee or separate trustees,
of all or any part of the Trust Estate, and to vest in such Person, in such
capacity and for the benefit of the Noteholders and the Note Insurer, such
title to the Trust Estate, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case a Servicer Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee under this Agreement shall
be required to meet the terms of eligibility as a successor trustee pursuant to
Section 9.09 and no notice of a successor Trustee pursuant to Section 9.11 and
no notice to Noteholders or the Note Insurer of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.11.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee under this Agreement or as successor to the
Servicer under this Agreement), the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement;
(iii) the Servicer and the Trustee acting jointly (or
during the continuation of a Servicer Default, the Trustee alone) may at any
time accept the resignation of or remove any separate trustee or co-trustee;
and
(iv) the Trustee shall remain primarily liable for the
actions of any separate trustees and co-trustee.
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Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Section. Each separate trustee and co-trustee, upon its
acceptance of the mats conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, including, but not limited to, every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed with the Trustee and a
copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee
its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement
on its behalf and in its name. If any separate trustee or co-trustee shall
die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in this Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties under this Agreement.
SECTION 9.14 REPRESENTATIONS AND WARRANTIES OF TRUSTEE.
The Trustee hereby makes the following representations and warranties
on which the Issuer and the Noteholders are relying:
(i) Organization and Good Standing. The Trustee is a
national banking association duly organized, validly existing and in good
standing;
(ii) Power and Authority. The Trustee has full power,
authority and right to execute, deliver and perform this Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of this Agreement;
(iii) No Violation. The execution, delivery and
performance by the Trustee of this Agreement (a) shall not violate any
provision of any law governing the banking and tug powers of the Trustee or, to
the best of the Trustee's knowledge, any order, writ, judgment, or decree of
any court, arbitrator, or governmental authority applicable to the Trustee or
any of its assets, (b) shall not violate any provision of the charter or
by-laws of the Trustee, and (c) shall not violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any Lien on any properties included in the
Trust Estate pursuant to the provisions of any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or Lien could reasonably be expected to materially and adversely affect the
Trustee's performance or ability to perform its duties under this Agreement or
the transactions contemplated in this Agreement;
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(iv) No Authorization Required. The execution, delivery
and performance by the Trustee of this Agreement shall not require the
authorization, consent, or approval of, the giving of notice to, the filing or
registration with, or the taking of any other action in respect of, any
governmental authority or agency regulating the banking and corporate trust
activities of the Trustee; and
(v) Duly Executed. This Agreement shall have been duly
executed and delivered by the Trustee and shall constitute the legal, valid,
and binding agreement of the Trustee, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights
generally or by general principles of equity.
SECTION 9.15 TAX RETURNS.
In the event the Trustee shall be required to file tax returns on
behalf of the Trust Estate, the Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust Estate and shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee, upon request, shall furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust
Estate, and shall, upon request, execute such returns.
SECTION 9.16 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES.
All rights of action and claims under this Agreement or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
Trustee. Any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses and disbursements of the Trustee, its
agents and counsel, be for the ratable benefit of the Note Insurer and the
Noteholders in respect of which such judgment has been obtained, in the order
of priority specified in Section 4.04(b)(I).
SECTION 9.17 SUIT FOR ENFORCEMENT.
If a Servicer Default shall occur and be continuing, the Trustee, in
its discretion may, subject to the provisions of Section 9.01, proceed to
protect and enforce its rights and the rights of the Note Insurer and the
Noteholders under this Agreement by a suit, action or proceeding in equity or
at law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable
or other remedy as the Trustee, being advised by counsel, shall deem most
effectual to protect and enforce any of the rights of the Trustee, the Note
Insurer or the Noteholders.
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SECTION 9.18 RIGHTS OF NOTEHOLDERS TO DIRECT TRUSTEE.
The Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided however,
that subject to Section 9.01, the Trustee shall have the right to decline to
follow any such direction if the Trustee being advised by counsel determines
that the action so directed may not lawfully be taken, or if the Trustee in
good faith shall, by a Responsible Officer of the Trustee, determine that the
proceedings so directed would be illegal or subject it to personal liability or
be unduly prejudicial to the rights of the Note Insurer or Noteholders not
parties to such direction; provided, further, however, that nothing in this
Agreement shall impair the right of the Trustee to take any action deemed
proper by the Trustee and which is not inconsistent with such direction by the
Noteholders.
SECTION 9.19 CONFIDENTIAL INFORMATION.
The Trustee acknowledges that, in the course of meeting its respective
duties and obligations under this Agreement, it may obtain information relating
to the Servicer or the Issuer which is of a confidential and proprietary nature
("Proprietary Information"). Such Proprietary Information may include, but is
not limited to, non-public trade secrets, know how, invention techniques,
processes, programs, schematics, software source documents, data, and financial
information. The Trustee shall at all times, both during the term of this
Agreement and for a period of three (3) years after its termination, keep in
trust and confidence all such Proprietary Information, and shall not use such
Proprietary Information other than in the course of its duties under this
Agreement, nor shall the Trustee disclose any such Proprietary Information
without the written consent of the Servicer or the Issuer unless legally
required to disclose such information. The Trustee further agrees to
immediately return all Proprietary Information (including copies thereof) in
its possession, custody, or control upon termination of this Agreement for any
reason.
The Trustee shall not disclose, advertise or publish the existence or
the terms or conditions of this Agreement without prior written consent of the
Servicer or the Issuer. Notwithstanding the foregoing, this Section 9.19 shall
not prohibit disclosure of information that is required to be disclosed by the
Trustee pursuant to federal or state laws or regulation. In particular the
Trustee agrees that it shall not, without the prior consent of the Servicer or
the Issuer, disclose the existence of this Agreement or any of the terms herein
to any Person other than counsel to the Trustee or an employee or director of
the Trustee with a need to know in order to implement this Agreement and only
if such employee or director or counsel agrees to maintain the confidentiality
of this Agreement. The parties hereto agree that the Servicer and/or the
Issuer shall have the right to enforce these nondisclosure provisions by an
action for specific performance filed in any court of competent jurisdiction in
the State of Maryland.
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ARTICLE X
REDEMPTION; PARTIAL PREPAYMENT; FULL REPAYMENT
SECTION 10.01 REDEMPTION AT THE OPTION OF THE ISSUER; ELECTION TO
REDEEM.
The Issuer shall have the option to redeem the Notes in full on any
Payment Date. The election of the Issuer to redeem the Notes pursuant to this
Section shall be evidenced by delivery to the Trustee no later than the tenth
day of the month preceding the month in which the Payment Date as of which such
redemption will be effected occurs of an Officer's Certificate of the Issuer
stating the Issuer's intention to redeem the Notes and specifying the
Redemption Amount therefor. No prepayment premium or penalty is payable with
respect to any such redemption.
SECTION 10.02 DEPOSIT OF REDEMPTION AMOUNT.
In the case of any redemption pursuant to Section 10.01, the Issuer
shall, on or before the Remittance Date preceding the Payment Date on which
such redemption is to be effected, deposit in the Note Payment Account pursuant
to Section 4.03 an amount equal to the Redemption Amount and shall thereafter
succeed to all interests in and to the Trust Estate subject to Section 2.11.
The Redemption Amount shall be paid as provided in Section 4.04(b).
SECTION 10.03 NOTICE OF REDEMPTION BY THE TRUSTEE.
Upon receipt of notice from the Issuer of its election to redeem the
Notes pursuant to Section 10.01 and deposit by the Issuer of the Redemption
Amount pursuant to Section 10.02, the Trustee shall provide notice of
redemption of the Notes by first class mail, postage prepaid, mailed no later
than the Business Day following the date on which such deposit was made, to the
Note Insurer at its address herein and to each Noteholder at such Noteholder's
address as listed in the Note Register. Notice of redemption of Notes shall be
given by the Trustee in the name and at the expense of the Issuer, as
applicable.
SECTION 10.04 SURRENDERING OF NOTES.
Each Noteholder shall surrender its Note within 14 days after receipt
of the final payment due in connection therewith. Each Noteholder, by its
acceptance of the final payment with respect to its Note, will be deemed to
have relinquished any further right to receive payments under this Agreement
and any interest in the Trust Estate. Each Noteholder shall indemnify and hold
harmless the Issuer, the Trustee, the Note Insurer and any other Person against
whom a claim is asserted in connection with such Noteholder's failure to tender
the Note to the Trustees for cancellation.
SECTION 10.05 PARTIAL PREPAYMENT AT THE OPTION OF THE ISSUER.
The Issuer shall have the option to partially prepay the Note Balance
on any Business Day which is the last day of a Note Rate Period, and to obtain
a release of the Trustee's security interest from one or more of the Pools,
provided that Issuer shall receive a portion of the
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proceeds necessary to effect such prepayment from proceeds of a transfer of the
Receivables in such Pools in a securitization transaction. The Pools to be
released on such partial prepayment must be all Pools then subject to this
Agreement but at Issuer's option need not include any Pools made subject to
this Agreement within 70 days prior to the proposed Prepayment Date. The
Prepayment Amount must be equal to the Minimum Repayment Amount. The election
of the Issuer to partially prepay the Notes pursuant to this Section shall be
evidenced by delivery to the Trustee and the Noteholders and the Note Insurer
no later than three Business Days preceding the date on which such prepayment
will be effected of an Officer's Certificate of the Issuer stating the Issuer's
intention to partially prepay the Notes, specifying the Minimum Repayment
Amount therefor and the portion payable to each Noteholder, identifying the
Prepaid Pools, and identifying the securitization transaction which will
provide proceeds to the Issuer in order to effect the prepayment. No
prepayment premium or penalty is payable with respect to any such prepayment.
SECTION 10.06. FULL PREPAYMENT AT THE OPTION OF THE ISSUER.
The Issuer shall have the option to prepay in full the Note Balance on
any Business Day which is the last day of a Note Rate Period, and to obtain a
release of the Trustee's security interest from all Pools then subject to this
Agreement, without redeeming the Notes and without terminating the obligation
of the Noteholders to make Fundings. The election of the Issuer to prepay the
Note Balance in full pursuant to this Section shall be evidenced by delivery to
the Trustee and the Noteholders and the Note Insurer no later than three
Business Days preceding the date on which such prepayment will be effected of
an Officer's Certificate of the Issuer stating the Issuer's intention to prepay
the Note Balance in full and specifying the Prepayment Amount therefor and the
portion payable to each Noteholder. No prepayment premium or penalty is
payable with respect to any such prepayment.
SECTION 10.07. DEPOSIT AND PAYMENT OF PREPAYMENT AMOUNT.
In the case of any prepayment pursuant to Section 10.05 or 10.06, the
Issuer shall by the Prepayment Date, deposit in the Note Payment Account
pursuant to Section 4.03 an amount equal to the Prepayment Amount, or if the
Prepayment Date is also a Payment Date, then the Issuer shall deposit in the
Note Payment Account an amount in excess of the amount already on deposit in
the Note Payment Account necessary to pay the Prepayment Amount. The
Prepayment Amount shall be paid by the Trustee to the Noteholders on the
Prepayment Date, pro rata based on their respective Note Balances. The
Servicer shall on the Prepayment Date instruct the Trustee to distribute to
each Noteholder of record on the Record Date prior to the Prepayment Date by
wire transfer of immediately available funds, the amount to be paid to such
Noteholder in respect of its Note on such date.
SECTION 10.08. RELEASE OF SECURITY INTEREST.
Whenever an amount sufficient to pay the Prepayment Amount has been
paid to the Noteholders in connection with a partial prepayment or a prepayment
in full, and the Issuer has
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delivered to the Trustee an Officer's Certificate of the Issuer stating that
all conditions precedent herein for the release of the security interest in the
Prepaid Pools have been complied with, then this Agreement and the lien, rights
and interests created hereby shall cease to be of further force and effect with
respect to the Prepaid Pools, and the Trustee shall, at the expense of the
Issuer, execute and deliver all such instruments as may be necessary to
acknowledge the satisfaction and discharge of this Agreement with respect to
such Prepaid Pools. Without limiting the generality of the foregoing, the
Trustee will sign and deliver to the Issuer an undertaking in such form as the
Issuer may request (i) which evidences the release of the Trustee's security
interest in the Prepaid Pools subject only to the receipt by the Trustee in the
Note Payment Account of an amount to be specified in such undertaking, which
amount must be at least equal to the Prepayment Amount, and (ii) under which
the Trustee agrees to sign and deliver such termination statements as
the Issuer may request which terminate of record the Trustee's security
interest in the Prepaid Pools.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01 AMENDMENT.
(a) This Agreement may be amended by the Issuer, the Servicer and
the Trustee, without the consent of the Note Insurer or any of the Noteholders,
(i) to cure any ambiguity, to correct or supplement any provision in this
Agreement which may be inconsistent with any other provision of this Agreement,
to add, change or eliminate any other provision of this Agreement with respect
to matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement or to add or provide for any
credit enhancement (other than the Policy) provided that any such action shall
not, as evidenced by an Officer's Certificate of the Issuer delivered to the
Trustee and the Note Insurer by the Issuer, adversely affect in any material
respect the interests of the Note Insurer or the Noteholders, and (ii) to
change the Required Reserve Amount or the manner in which the Reserve Account
is funded in the event the Required Reserve Amount exceeds 25% of the then
outstanding Note Balance; provided, however, that the Required Reserve Amount
will not be reduced to below 25% of the outstanding Note Balance without
consent of all Noteholders and the Note Insurer; provided further, (x) that any
such action shall not, as evidenced by an Officer's Certificate of the Issuer
delivered to the Trustee and the Note Insurer by the Issuer, adversely affect
in any material respect the interests of the Note Insurer or the Noteholders;
and (y) that in connection with any amendment pursuant to clause (ii) above the
Servicer shall deliver to the Trustee a letter from the Rating Agency to the
effect that such amendment will not cause the then-current rating on the Notes
to be qualified, reduced or withdrawn.
(b) This Agreement may also be amended from time to time by the
Issuer, the Servicer and the Trustee, and the Note Insurer, with the consent of
Noteholders evidencing not less than 66 2/3% of the Voting Interests (which
consent of any Noteholder given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such
Noteholder and on all future holders of such Note and of any Note issued upon
the
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transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of such Noteholders;
provided, however, that no such amendment shall (i) except as otherwise
provided in Section 11.01 (a), reduce in any manner the amount of, or delay the
timing of, any payments that shall be required to be made on any Note or
deposits of amounts to be so paid or the Required Reserve Amount of the Reserve
Account without the consent of each Noteholder (provided that an amendment of
the terms of a Servicer Default shall not be deemed to be within the scope of
this clause (i)); (ii) change the definition or the manner of calculating the
interest accrued on the Notes without the consent of the Noteholders; (iii)
reduce the aforesaid percentage of the Voting Interest required to consent to
any such amendment, without the consent of all Noteholders; or (iv) adversely
affect the rating of the Notes by the Rating Agency without the consent of
Noteholders (but excluding for purposes of such calculation and action all
Notes held by the Issuer, the Servicer or any of their affiliates) evidencing
not less than 50% of the Voting Interests.
(c) Prior to the execution of any amendment or consent thereto
pursuant to this Section 11.01, the Trustee shall furnish written notification
of the substance of such amendment or consent to the Rating Agency and the
Placement Agent.
(d) Promptly after the execution of any amendment or consent
thereto pursuant to Section 11.01(b), the Trustee shall furnish written
notification of the substance of such amendment or consent to each Noteholder.
It shall not be necessary for the consent of Noteholders pursuant to Section
11.01(b) to approve the particular form of any proposed amendment or consent,
but it shall be sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the authorization by
Noteholders of the execution thereof shall be subject to such reasonable
requirements as the Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
(f) There will be no change in the identity of the Servicer, the
Backup Servicer or the Trustee without the prior written consent of the
Controlling Party, subject to the rights of the Backup Servicer and the Trustee
to resign in accordance with the provisions of this Agreement.
SECTION 11.02 PROTECTION OF TITLE TO TRUST ESTATE.
(a) Either of the Issuer or the Servicer or both shall execute and
file such financing statements and cause to be executed and filed such
continuation and other statements, all in such manner and in such places as may
be required by law fully to preserve, maintain and protect the
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interests of the Note Insurer, the Noteholders and the Trustee under this
Agreement in the Receivables and in the proceeds thereof. Each of the Issuer
and the Servicer shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided,
above, as soon as available following such filing.
(b) Neither the Issuer nor the Servicer shall change its name,
identity or organizational 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 Section 9-402(7)
of the UCC, unless it shall have given the Trustee at least 10 days' prior
written notice thereof and shall have filed within 30 days after such change
appropriate amendments to all such previously filed financing statements or
continuation statements.
(c) Each of the Issuer and the Servicer shall give the Trustee at
least 10 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing statement or continuation statement or of any new financing
statement, and shall within 30 days after such relocation file any such
amendment or new financing statement. The Servicer shall at all times maintain
each office from which it services Receivables and its principal executive
office within the United States.
(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, if applicable) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Accounts (or any
of them) in respect of such Receivables.
(e) The Servicer shall maintain its computer records so that, from
and after the time of transfer, assignment and conveyance under this Agreement
of the Receivables to the Trustee, the Servicer's master computer records
(including any back-up archives) that refer to any Receivables indicate clearly
the interest of the Trustee in such Receivables and that the Receivable is held
by the Trustee on behalf of the Note Insurer and the Noteholders. Indication
of the Trustee's interest in a Receivable shall be deleted from or modified on
the Servicer's computer records when, and only when, the Receivable has been
paid in full, acquired or assigned pursuant to this Agreement.
(f) If at any time Issuer or Servicer propose to assign, convey,
grant a security interest in, or otherwise transfer any interest in defaulted
consumer receivables to any prospective purchaser, lender or other transferee,
the Servicer shall give to such prospective acquirer, lender or other
transferee computer tapes, records or print-outs (including any restored from
back-up archives) that, if they refer in any manner whatsoever to any
Receivable, indicate clearly that such Receivable has been transferred,
assigned and conveyed and is owned by the
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Trustee unless such Receivable has been paid in full, acquired or assigned
pursuant to this Agreement.
(g) The Servicer shall permit the Trustee and its agents, upon not
less than two Business Days' prior written notice and during normal business
hours, to inspect, audit and make copies of and abstracts from the Servicer's
records regarding any Receivables then or previously included in the Trust
Estate. Nothing in this Section shall impair 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.
(h) Upon request, the Servicer shall furnish to the Trustee and/or
the Note Insurer, within five Business Days of such request, a list of all
Receivables (by account number and name of Obligor) then held as part of the
Trust Estate.
(i) The Servicer shall deliver to the Trustee, promptly after the
execution and delivery of each amendment to any financing statement, an Opinion
of Counsel stating that, in the opinion of such Counsel, either (i) all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trustee in
the Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) no such action is
necessary to preserve and protect such interest.
SECTION 11.03 LIMITATION OF RIGHTS OF NOTEHOLDERS.
(a) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust Estate, nor entitle its legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust
Estate, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Noteholder shall have any right to vote (except as
expressly provided in this Agreement) or in any manner otherwise control the
operation and management of the Trust Estate, or the obligations of the parties
to this Agreement, nor shall anything set forth in this Agreement, or contained
in the terms of the Notes, be construed so as to constitute the Noteholders
from time to time as partners or members of an association; nor shall any
Noteholder be under any liability to any third person by reason of any action
pursuant to any provision of this Agreement.
(c) No Noteholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Noteholder previously shall have given to the Trustee a written
notice of default and of the continuance thereof and have obtained the consent
of the Note Insurer to the institution of such action, suit or proceeding (to
the extent that
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there shall be no Insurer Default in effect at such time), as hereinbefore
provided, and unless Noteholders evidencing not less the 25% of the Voting
Interests shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Agreement and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses, and liabilities to be incurred therein or thereby,
and the Trustee, for 30 days after its receipt of such notice, request and
offer of indemnity, shall have neglected or refused to institute any such
action suit, or proceeding and during such 30-day period, no request or waiver
inconsistent with such written request has been given to the Trustee pursuant
to this Section or Section 9.04; it being understood and intended, and being
expressly covenanted by each Noteholder with every other Noteholder and the
Trustee, that no one or more Noteholders shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of
this Agreement to affect, disturb, or prejudice the rights of the other
Noteholders, or to obtain or seek to obtain priority over or preference to any
other Noteholder, other than as provided in this Agreement, or to enforce any
right under this Agreement, except in the manner provided in this Agreement and
for the equal, ratable, and common benefit of all Noteholders. For the
protection and enforcement of the provisions of this Section, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 11.04 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and the obligations, rights and remedies of
the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 11.05 NOTICES.
All demand, notices and communications under this Agreement shall be
in writing, and either personally delivered, mailed by certified mail, return
receipt requested, or sent by facsimile transmission, and shall be deemed to
have been duly given upon receipt (i) in the case of the Issuer or the
Servicer, to the agent for service as specified in Section 2.10 of this
Agreement, or at such other address as shall be designated by the Issuer or the
Servicer in a written notice to the Trustee; (ii) in the case of the Trustee,
at the Corporate Trust Office; (iii) in the case of the Rating Agency at ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇, and (iv) in the case of the Note Insurer,
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (Fax: (212)
▇▇▇-▇▇▇▇). Any notice required or permitted to be mailed to a Noteholder shall
be given by first class mail, postage prepaid, at the address of such
Noteholder as shown in the Note Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Noteholder shall receive such notice.
SECTION 11.06 SEVERABILITY OF PROVISIONS; COUNTERPARTS.
(a) If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid or
unenforceable in any jurisdiction, then such covenants, agreements, provisions
or terms shall be deemed severable from the
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remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement or the Notes, or the rights of the Noteholders.
(b) This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall constitute but one and the same instrument.
SECTION 11.07 ASSIGNMENT.
Notwithstanding anything to the contrary contained in this Agreement,
except as provided in Sections 6.04 and 7.03 and as provided in the provisions
of this Agreement concerning the resignation of the Servicer, this Agreement
may not be assigned by the Issuer or the Servicer without the prior written
consent of the Note Insurer and Noteholders evidencing not less than 66 2/3%
of the Voting Interests.
SECTION 11.08 NO PETITION.
Each of the Servicer and the Trustee and the Note Insurer covenants
and agrees that prior to the date which is one year and one day after the
termination of this Agreement, it will not institute against, or join any other
Person in instituting against, the Issuer any bankruptcy, reorganization
arrangement, insolvency or liquidation proceeding or other proceedings under
any federal or state bankruptcy or similar law. Notwithstanding the foregoing,
nothing herein shall be deemed to prohibit the Trustee from filing proofs of
claim or otherwise participating in any such proceeding instituted by another
person. This Section 11.08 shall survive the termination of this Agreement or
the termination of the Servicer or the Trustee, as the case may be, under this
Agreement.
SECTION 11.09 NOTEHOLDER DIRECTION.
Notwithstanding anything to the contrary contained in this Agreement,
provided the Trustee has sent out notices to Noteholders in accordance with
this Agreement, the Trustee may act as directed by a majority of the
outstanding Noteholders (but only to the extent the Noteholders are entitled
under this Agreement to so direct the Trustee with respect to such action)
responding in writing to the request contained in such notice; provided,
however, that Noteholders representing at least 66-2/3% of the outstanding
principal balance of the Notes as of the time such notice is sent to
Noteholders must have responded to such notice from the Trustee. In addition,
the Trustee shall not have any liability to any Noteholder with respect to any
action taken pursuant to such notice if the Noteholder does not respond to such
notice within the time period set forth in such Notice.
SECTION 11.10 NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS.
Other than as specifically set forth in this Agreement, any reports,
information or other documents provided to the Trustee are for purposes only of
enabling the sending party to comply
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with its document delivery requirements hereunder and the Trustee's receipt of
any such information shall not constitute constructive or actual notice of any
information contained therein or determinable from any information contained
therein, including the Issuer or the Servicer's compliance with any of its
covenants, representations or warranties hereunder.
* * * *
[ signatures appear on next page ]
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IN WITNESS WHEREOF, the parties have caused this Indenture and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
CREDITRUST FUNDING I LLC,
as Issuer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CREDITRUST CORPORATION,
as Servicer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and C.E.O.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee and as Backup Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
ASSET GUARANTY INSURANCE
COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission
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